podcast | June 8, 2015
Case Study: The Digital Transformation of McGraw-Hill’s Textbook Business
If so, click here and listen to this podcast. It is an interview with Chris Marjara, the CMO of McGraw-Hill Education. McGraw-Hill Education has been publishing print textbooks for 125 years. Today, the company provides e-learning digital technology solutions to educators. Chris, who has spent 20 years marketing software solutions, was hired by McGraw-Hill to lead the marketing team through this business model transformation. With 5,000 employees in 44 countries, this is no easy task.
By listening to this podcast, you will hear directly from Chris how to:
If you are a CMO who has been asked to transform a marketing department, click here to learn from a peer how to do so.
Speaker: Welcome to the SBI Podcast, offering CEOs, sales, and marketing leaders ideas to make the number.
Greg Alexander: Good morning, good afternoon, good evening everybody. This is Greg Alexander, CEO and co-founder of SBI, a sales and marketing consultancy dedicated to helping you make your number. You are listening to the weekly podcast series and today I have an outstanding guest, Chris Marjara, who is the Chief Marketing Officer of McGraw-Hill Education, which employs 5,000 people in 44 countries in pursuit of better learning outcomes for students, educators and administrators via e-learning solutions.
Prior to his current role as CMO at McGraw-Hill Education, Chris spent 20+ years leading marketing teams at some great companies such as BEA Systems and Kronos. Chris resides in the United Kingdom and received his education at Middlesex University. He is also a fellow of the UK Chartered Institute of Marketing. Now that we have established Chris’s rather extensive qualifications, let’s have some fun with him. Chris speaks fluent German, so Chris, say, “Good luck making your number” in German to our mostly American audience.
Greg Alexander: Fantastic. I saw that in your LinkedIn profile and had to work that in here.
Chris Marjara: No worries. That was a bit of an outfield question. I have to dig deep into the memories of my days back in good old Germany.
Greg Alexander: Well you did great. All right, I was really excited to see that you agreed to be on the show because I think what it is that you’re trying to do right now is a fascinating use case. Let me set this up for the audience a little bit. As I understand it, you were trying to help McGraw-Hill Education go from a tradition text book publisher to a digital solutions company. Is that correct?
Chris Marjara: That’s correct.
Greg Alexander: Many of our listeners run marketing teams for companies trying to reinvent themselves to stay relevant in the digital age. Before I jump into my questions, Chris, can you frame up for the audience in maybe a few sentences or so, what you were hired to do and how it is going so far?
Chris Marjara: Sure, not a problem Greg. The real challenge here at McGraw-Hill is the outline there is to go, I think it’s really changing business models from an old textbook print book publishing model to a e-learning digital solution technology provider. That is a huge transformation in anyone’s world. McGraw-Hill Education has a 125 year history out there and in the last couple of years we’re really seeing the digital transformation of education picking up pace all the way around the world, not only in North America but in the UK and Australia, even Latin America and increasing in lots of parts of Asia. It is a dramatic change in education that is improving student outcomes for all levels of students K12 to K20 to even postgraduates of students of professional development as well, so it’s a very exciting time.
Greg Alexander: Yeah, no doubt. You know, I don’t think there’s an industry in the world right now that’s not getting disrupted by technology so when I think about text book publishing in a 125 year old company in the middle of this transformation, and I think about it from a marketing perspective, I was really intrigued to have you on the show. Let’s jump into it a little bit and let’s discuss the elephant in the room: budget.
Chris Marjara: Let’s go straight in there. No, I mean coming from a software and IT marketing background, that was probably one of the biggest challenges that I’ve faced is really to get my hands around the marketing organization and budget was the key part of this. Traditional publishers do not spend a significant part of their revenues on marketing but as you move to become more of a technology and solutions provider, that game changes and increasingly we’re devoted to more of our efforts around investing in the right talent, the right people as well as the new customer centric processes that you need as well as the marketing and sales elimination. Technology that can really help us scale at a global level. It’s a pretty dramatic transformation and we’re having to make some pretty tough choices.
Greg Alexander: Mm-hmm (affirmative).
Chris Marjara: What do we stop doing from the traditional channels of book publishing, and what do we need to start changing and spending more money in terms of reaching our customers and prospective customers directly, creating our direct channels to market, as well as completely repositioning the brand from a book publisher to a learning science company.
Greg Alexander: Mm-hmm (affirmative). You know, with regard to budget, I have a very specific question. In the work that I do with my clients, my experience has been that companies trying to reinvent themselves, they need a big marketing budget to do so, but long tenured executives married to the old business model are reluctant to invest. Have you experienced this, and if so, have you overcome it? What advice would you give to our listeners if they’re dealing with that?
Chris Marjara: Yeah, absolutely. It’s not an easy journey to go, but I think you’ve got to paint the vision of where you’re going and how you’re going to get there, and particularly for the CFOs, it’s about demonstrating real value at the end of the day. The new sales and marketing systems that we’re putting in place will really provide the foundation for a global scalable model. What we inherited here when I arrived was so much a federated model of pretty much doing their own thing in their regions, very decentralized.
It was very tough to get a global view of sales and marketing and how we improve the efficiency and effectiveness of those dollars being spent globally. It’s a hard, uphill task. It’s never easy to go to the CFO, CEO to demand that we need to be spending more in these areas. You’ve got to prove your worth and prove the value every step of the way. You know, we are a private equity owned company since the last couple of years, so again, they’re very much used to seeing business cases put together that really, that you can believe in and with the right track record of the individuals that are in place to transform and make those changes, that’s how we’re signing up for this.
Greg Alexander: Okay. What was the stimulus? When I think about this company, McGraw-Hill Education, and I think about them going out and hiring a CMO from the software industry like yourself, that’s a pretty bold move. What happened in the business that gave them the confidence to go hire somebody from outside of the industry to come in and transform their company?
Chris Marjara: Yeah, that’s a significant change that we’ve seen throughout all of the other functions. I was lucky enough to come in sort of pretty much after the first 12 months of being private equity owned and new CEO on board, new president of the international division as well. They’re really looking at where we want to end up and what’s the end of the journey for us, and that dimension is increasingly becoming a platform technology provider to the education industry. Guess what? You need to hire people with those types of backgrounds and skills. There’s talent within the organization, but with such a dramatic business model change, I think everyone recognized that you needed to get proven experience of that software technology world.
It’s not just on the marketing side but the sales side and even more importantly and crucially, on the product development side. We have a chief digital officer that is really transforming our new product development process and how we develop the right types of digital solutions. There is a very interesting parallel there between the marketing world and where the education software world is heading, and that’s one to one, personalized, tailored, education experiences, or learning experiences, that really, there’s a good correlation between the journey that marketing has gone through towards that one to one personalized, tailored right content at the right place at the right time. I really draw upon that analogy to what we’re trying to do in the learning space now.
Greg Alexander: Mm-hmm (affirmative). Okay, we’re going to take a quick break. I want to make the audience aware of the new SBI Magazine. There’s an article in that magazine, written by Jack Whalen, who’s a VP of Marketing in Phillip 66. He discusses how he’s using digital marketing to transform the oil and gas industry, which is similar to what Chris is talking about here today, in trying to transform the textbook industry. Here’s how you can learn more about the magazine and get a copy.
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Greg Alexander: Okay, welcome back everybody. This is Greg Alexander, CEO and co-founder of SBI, and today I’m talking to Chris Marjara, who is the Chief Marketing Officer of McGraw-Hill Education. Right before the break we were having a conversation around how to justify budget, especially inside of a company that’s going through a transformation, and Chris, right around the time that this episode is going to air, it’ll be mid-year, and many CMOs will have to prove the marketing budget was spent wisely in the first half of the year before they can spend it for the second half. How does the CMO know if the first half budget worked and generated a return and therefore make the recommendation to continue with the conviction and spend in the second half?
Chris Marjara: You’ve got to look at those forward looking indicators. Revenue in this particular industry is very seasonal when you’re looking at the university entrance points throughout the year and they do differ around the world as well, so it’s not the traditional say September intake that we’re used to in the western world, but it does change. In terms of justifying continue or increasing to spend, you’ve got to look at your pipeline.
You’ve got to be able to demonstrate and look at your lead demand waterfall and the conversion rates that you’re getting there, so all of those forward looking indicators that can give you confidence along the way, that you ultimately get to your revenue goal at the end of the season or the end of the year. That’s how I’m pretty much setting up the system. To give us not only that marketing source revenue and pipeline information, but prior to that, the key metrics as far as our campaign analysis is going and our demand generation activities and whether we’re reaching the required set of leads and how we’re converting them to pipeline.
Greg Alexander: These forward looking indicators, I’m assuming that they weren’t in place before your arrival. Is that correct?
Chris Marjara: That’s correct. Coming from a print publishing world, it was very much a channel and B to C type model and increasingly as we’re selling software solutions, it is becoming far more of a traditional B to B play, and there we’re really transforming the sales and marketing system to become and implement what I would see best in class is via driven sales processes that are aligned to how the customer is buying and also looking at that complete customer experience or complete life cycle of the customer from not only that buying cycle, but post-sales to customer usage and adoption.
A lot of the solutions they’re putting out there are now SaSS and Cloud based solutions, so you need to ensure you’re getting usage. Once you’ve got the usage, then you’ve got to try and get advocacy and really get some key ambassadors and the advocates in place that will recommend the solutions. I’m a big believer that advocacy is going to be a key driver of demand generation. Back in the day, getting your customers to doing the selling for you, that is absolutely the case now, even more so in the digital and social media world that we’ve placed ourselves in.
Greg Alexander: I had a client tell me the other day, “This is old wine in a new bottle.”
Chris Marjara: Couldn’t agree more. Couldn’t agree more.
Greg Alexander: Getting your customers to sell for you, advocacy, that’s been a best practice forever. It’s just done digitally now, where before it was done word of mouth, right?
Chris Marjara: Yeah, word of mouth marketing and we’ve just got the new tool set, new toolkit to go in and exploit that online and probably more scaled around the world. Obviously the ring that I have is very much on the international side, so it’s how do we do this at scale in the different markets with the different cultures that we’re seeing in the different parts of the world?
Greg Alexander: On practice, staying on the topic of budget, we typically see 4 budget methodologies, budget setting methodologies. I want to run each of those 4 by you and get your reaction to each. Maybe share with me some pros and cons of each. It’s highly situational, of course, but I want to get these out there and just get your perspective on them. The one that we most commonly see as a budget setting method is simply a percentage of revenue, which is some fixed amount expressed as a percentage, so if you’re a $100 million company, you spend $10 million on marketing, then you have 10% spent. What are your thoughts on that, Chris? Your pros and cons on that approach?
Chris Marjara: That’s a traditional method of calculating marketing spend, but it all depends on the context of the marketplace. If you’re a brand new technology looking to make new entrance into a new area, clearly you’re going to be spending a significant amount more to acquire customers in the new education spaces, as it were. In a mature market, with an established competition, established product, then it’s how do you take share away from your competition and their more established model, so it does depend on the type of demand type and the marketplace, and the market dynamics. That is a proven model out there and it’s the one that you typically have to look at, because a lot of the ratios around sales and marketing spend as a proportion of revenue are aligned to set industries and certain stages of maturation of those industries.
Greg Alexander: Mm-hmm (affirmative). I agree with you. I think it is useful to look at, but I think it has to be placed in the proper context and that was some good advice as to how to do that. Okay, let’s go to another common one that I see, which is competitive benchmarking, and this is establishing a peer group of companies that are reasonable to compare yourself to and then understanding how much the peer group is spending in marketing and seeing what your spend is. Is it greater than, less than, et cetera? Chris, what are your thoughts on that, pros and cons?
Chris Marjara: Yeah, I think that’s an equally valued one, but you’ve got to take in to account that it’s all about the context, what about the competitive market shares that are there for that peer group, what type of again, industry are we talking about? Is it a mature industry? Is it one that is on the verge of a brand new innovation and technology and its function? You can look at first mover advantage in coming in there and outspending your competition to get that first mover advantage. It’s all about the context, but traditionally, more mature markets, even in the software industry where I came from, that was a, again, another key ratio that I looked at to be able to, again, build a business case to either increase or how do we drive more efficiency from our current market spend if we were spending more or less than the competition?
Greg Alexander: Yeah. I like this one as well. However, I advocate benchmarking at the program level. Somebody can always outspend you. It’s a question of do you have the budget allocated correctly across the programs and intelligently spending can give somebody an advantage and I think that’s the benefit of competitive benchmarking. We’re going to take a quick break. When we come back from the break, I’m going to ask Chris to comment on the 2 remaining types of budget setting methods: the affordability method and the objective method. However, we recently just recorded a podcast with Tim Huffmyer, who is the CFO of Black Box, which is a billion dollar technology company. He discusses how the CFO and the CMO should be working together to create this marketing budget. If you’re new to the podcast or if you missed the Tim Huffmyer podcast, I think you’ll get a lot out of it. We’ll be right back.
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Greg Alexander: Okay, welcome back everybody. This is Greg Alexander, CEO of SBI and today I’m joined with Chris Marjara, who is the CMO of McGraw-Hill Education and right before the break we were talking about the 4 forms of setting marketing budgets. Up to this point we’ve spoke about the percentage of revenue method. We just concluded our conversation on competitive benchmarking. We’re now going to move to the affordability method. This is typically used by companies in trouble, and it is as it sounds. What can we afford? I’d like to spend X, Y, Z, but is it affordable based on the P&L, et cetera. Chris, do you have any thoughts or comments on the affordability method?
Chris Marjara: Yeah. It is a case of making consumption choices. You’ve got to have a business strategy in place and a plan that the whole organization, sales, marketing and product, executing against, and you’ve got to be able to set yourself up for success. If that means that through the analysis, you need to be spending more to achieve your goals and objectives, then you’ve got to stop doing some other stuff. But when you’re in survival mode, it’s extremely tough and that’s what it comes down to in my experience, is very much making very tough consumption choices around every single dollar that’s being spent. There’s no easy way out. You’ve got to be able to correctly to drive ultimately and increase the sales and market share.
Greg Alexander: What makes this one particularly hard is earlier in the conversation you talked about how important it was to analyze forward looking metrics. If you’re going to embrace the affordability budgeting method, that’s even more important because you have to have conviction to continue to spend. Answering the question, “Can we afford this?” can only happen by looking at data.
Chris Marjara: Yep.
Greg Alexander: When it comes to very important things like brand building, you mentioned that you were rebranding McGraw-Hill Education to be a digital provider, and sometimes it’s difficult, especially for finance people, to measure the impact that a brand may have on a income statement. How do you handle that one?
Chris Marjara: Yeah. It’s where we’re now absolutely in the middle of a complete brand transformation, reworking our whole value proposition and company positioning narrative, messaging, and we’re having to do the groundwork, foundational work, investing in getting all of that content together and then rolling that up first off internally, and then ultimately externally to our customers. The brand building has got to be tied together with demand generation as well, and it’s that linkage there that I think when you don’t have the large million dollar budget, every dollar that you’re spending on demand generation, there’s got to be some brand building elements there in there as well. At some stage, you’ve got to go in your way and make the case to get that up front investment to do that heavy lifting work. Then on an ongoing basis, you need to tie that very closely to demand generation activity.
Greg Alexander: Mm-hmm (affirmative). All right. That takes us to our 4th and final type of budgeting that I see, which is my personal favorite, and it’s called objective based budgeting. Sometimes this is referred to as zero based budgeting, and it says here that here’s a list of objectives that we’re trying to get done and here’s what it’s going to cost to do that. We don’t start with any preconceived notions, we should invest this much or that much. It’s what are we trying to do? How is the marketing strategy reflective of the corporate strategy? Are these mission critical objectives? If so, they need to be properly funded, and I think this is an excellent way of doing budgets. Unfortunately, it’s not common. Chris, what’s your opinion on zero based budgeting or objective based budgeting?
Chris Marjara: I’m a big fan of it and a big believer of it, and I think the opportunity to drive that type of new thinking with a blank piece of paper every year or every couple of years, it happens when you are going through these transformations where you need to look at doing things very differently than you’ve done in the past, new capabilities, new ways of communicating with your end users. It’s what I hinted at before. We’re having to make, within McGraw-Hill Education, very tough consumption choices. What are we going to stop doing? For example, complimentary copies of books. A large proportion of the promotional spend was spent conducting that type of activity. Now, we’re converting that to e-sampling and sparing up a lot of those funds to be able to do more effective demand generation activities, brand building activities, and measuring the hell out of all of those programs.
Greg Alexander: Mm-hmm (affirmative). That’s a very interesting example. Free copies of books versus e-sampling of books. My first uneducated thought is e-sampling’s a lot more cost effective than free copies of books, but then I started thinking to myself, “Well, geez, maybe not, maybe there’s some stand-up costs to get to the ability to provide somebody an e-sample.” Is e-sample more cost effective and is that why you did it or is it more effective and that’s why you did it?
Chris Marjara: It’s definitely more cost effective, and we’re looking very closely at the trials in terms of effectiveness. We have still a very conservative audience, who typically still want to touch and feel or see the books and the chapters in the books, so it isn’t a flick of the switch. We’ll just turn it off. It’s a gradual evolution in weaning our audience off of a very traditional model that they’ve seen in the past. It is a case of dialing it down and dialing out the more, the different types of communications, other key channels that we’re looking to now develop through digital marketing activities. It all comes back to measuring the effectiveness of everything that we’re doing and that will then tell us whether it’s working or not.
Greg Alexander: You said something there that’s really interesting. I want to ask a follow-up question, which is you’re in a very traditional industry and you come from the software industry and were progressive in your previous stops. You probably have a bag of tricks, so to speak, that you want to implement. However, you have to be careful that the industry that you’re now in, what will their receptivity of these new forms of digital marketing be? How do you assess that ahead of time?
Chris Marjara: Testing and proving it out and learning. One of the key things that I’ve learned with this particular industry is that the best practices, we’ve seen some great case studies, references of uses of our new technology and the impact that they’ve had on student outcomes, but it is still … Teaching is a very individual, personal experience, and there are no set standards, even though lots of governments want to put in core standards. Teaching methods and methodology is up to the teachers ultimately, how they want to organize their lessons, what materials they want to use. It’s a very one to one environment and it’s a very private environment. No one has really opened up and shared those experiences widely.
Now that we’ve got technology and big data even, coming into play, where the use of technology is helping professors, instructors, teach and assess the progress of their classroom. The good teachers did this of course intuitively, or through regular quizzes, regular tests and knew students were performing well, which weren’t. Now you can, with the use of the software and the data and the dashboard, get that in real time, and that’s the big advantage. It’s a huge transformation and it’s going to be a journey. It’s not something that everyone is biting each other’s arms off to get at the moment. We’ve seen great pockets of adoption, but what I’m learning is that it’s going to take a lot more than just best practices and case studies to get all of the different players in place up to the same level of appreciation of the impact that the software can have.
Greg Alexander: Mm-hmm (affirmative). We’re going to take a quick break. When we come back from the break, I’m going to ask Chris to wrap up all of his advice today into an action plan on something that you can implement after listening to this. I wanted to draw your attention to a recent blog post that seems to be doing very well. It has a provocative title: Is Your CMO the Real Deal? If you don’t already subscribe to the blog, here’s how to subscribe.
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Greg Alexander: Okay, welcome back everybody. This is Greg Alexander, CEO and co-founder of SBI and we’re talking with Chris Marjara, who is the Chief Marketing Officer of McGraw-Hill Education. We just had a detailed conversation around transforming a company that has been around for 125 years into an organization that’s trying to stay relevant for the next 125 years through digital technologies. We spent a lot of our time on the issue of budget: Getting it, reallocating it, spending it correctly, and we tried to apply some science to the setting of a budget. We reviewed the 4 common ways to do that. What I want to do now is wrap up with some type of action plan.
If you’ve just spent the last 30 minutes listening to Chris and myself on this podcast, you might be wondering, “What do I do right now?” I have some thoughts on that, which I’ll lead with here, and then I’ll give Chris some time to collect his thoughts and maybe suggest a few tactical things that somebody can go do. If you are a CMO working for a company trying to execute a pivot, as Chris is, and you need to modernize the marketing team to do so, to be honest, my recommendation is just do what Chris does, which is invest your marketing budget wisely, for there is only so much money available. If you need help bringing some science to the budgeting process, one resource, there’s many but one is our site, which is salesbenchmarkindex.com.
If you click on the “About Us” section, and you click on “Our Services,” you’ll see a service offering titled Budget Planning. If you click on that, we present to you our methodology. We provide some definitions around these 4 budget setting methodologies themselves and some tools, so that might be helpful for you. Chris, let me turn my attention to you. Outside of that, I’m sure that you’re constantly educating yourself on these things. If you were somebody listening to this podcast and dealing with what you were dealing with maybe a year ago, first entering this challenge, what advice would you give them?
Chris Marjara: It’s really working closely with the team, the leadership team, to spell out and have a vision of where the organization is going. Effectively, the marketing team has to be the change agent within the organization and make sure that that transformation, the repositioning of the organization, people understand, because the brand is made up of … Every single employee is the brand ambassador. You need to really have that clear vision articulated and formulated and rolled out through your employees, then ultimately to the marketplace.
That’s the starting point and bring the rest of the leadership team with you to execute against that vision. Of course, you’ve got to go through and assess the talent within the organization. Where do you need to bring in new blood, new people, new capabilities, to really look at the new digital marketing systems infrastructure and processes that can ultimately turn you into a data driven organization that is truly geared out to deliver a superior customer experience?
Greg Alexander: Mm-hmm (affirmative). You know, I really want to thank you. Based on your track record, you could be a CMO in any company that you wanted to be, and you’ve demonstrated great courage here by taking your skills and going into an industry that needs to be transformed. A lot of people would run away from that and they would stick to what they’ve done in their lifetime because it’s easier and it’s less work. We’re all benefiting from that by being able to watch from a distance what it is that you’re doing. I’ll speak on behalf of myself and the SBI team, and all the members who are listening to you right now. We’re all rooting for you, and we wish you much continued success.
Chris Marjara: Thank you very much, Greg. Very much appreciated.
Greg Alexander: Okay. Take care.
Chris Marjara: Take care. Bye-bye.
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