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What’s Next for the CMO?

What’s Next for the CMO?

15th Aug 2018

CMO

Panel Discussion, Taken from our Ascot CMO Event, October 12th 2017

Speakers

Prosper Williams, Visiting Professor, CASS Business School (Moderator)

Jon Geldart, Executive Director, Grant Thornton

Alessandro De Stasio, Group Head of Acquisition, GVC Holdings plc.

Both of you are being very disruptive for CMOs in your roles. What exactly are you seeing that is making you so bullish and unequivocal?

Jon Geldart, Executive Director, Grant Thornton-

 

What you may not be aware of is the $5.5 billion spent last year online in terms of FinTech in China. There are other disruptors in the marketplace such as Lenovo, Bank of China, Offo and Ali Baba.

 

The reason I am so bullish about China is that wherever I go I find young entrepreneurs. The old established ways of developing brands in the west were to do your research, build your brand in your country and then go global. The Chinese go ‘I’ll just cut out the middleman and just go global.’

 

And they are able to raise finance via what we would call Angel Finance or by going to the market for much wider finance. Financing in China is all about family so you don’t see bank loans in the same way as you do over here. Family and friends put money in on the basis of losing or winning and take enough bets to earn lots of money.

We are all here all wondering and trying to be ready for the new regulations coming in. What is the rule in China around Data Protection?

Jon Geldart-

 

There are very strict rules of lore in China, but the rules of lore aren’t case based, it’s principle based. And the principle is ‘you can’t bet’, so no one does officially. You may see people playing cards in a park and betting but there’s no online betting unless you go to Macau which is why Macau is so strong.

 

Many of China’s previous leaders have been keen on anti-corruption, trying to nail ‘the tigers and the flies’ on corruption and unfortunately gaming has taken a hit on that because they see it as bad so people don’t do it. Although, there are some very large Chinese gaming companies which are outside China.

What are some of the trends you are seeing from a gaming/gambling perspective?

Alessandro De Stasio, Group Head of Acquisition, GVC Holdings plc.-

 

Well gambling has always been one of the most advancing industries internet-wise, so is basically an early adopter of every new tech. Probably over the last period it is losing a bit of the brightness and acceleration of technology that we are not ready yet to implement. AI is for sure one of the main topics of discussion in the company but integration is not so feasible because of data.

 

We already possess the insights, but the main question is still what data is needed to create those insights.

Do you feel there are constraints in terms of the industry you operate in around the data itself? Also, there is a lot of physical nuance to what goes on in gambling. How do you see the convergence of online/offline and developing products for customers that leverage the benefits of both?

Alessandro De Stasio-

 

It sounds a bit shallow but gambling, especially online, is all data based. Everything for us is 1s and 0s. The integration between the physical and the online operation has been around for a while now. So from this point of view, the progress of the product are in the advanced stage.

 

Other current trends include VR; it’s not a secret that many operators are launching VR games. It is an industry that is trying to assimilate all the marketing keywords that we can understand today.

From your perspective, with China’s massive population explosion, what’s going on with the online/offline paradigm there, with clear distinctions between China and the West?

Jon Geldart-

 

I travel a lot and send 2 weeks in China and 2 weeks in the UK in rotation. In China, they don’t know what right or wrong is. If you say ‘that’s not the way we do things’, they will look at you slightly oddly and ask ‘well, why can’t you?’

 

China as you know is the largest market for everything with a 1.4 billion population of which, depending on which numbers you believe, about 350 million are in the middle class. And the leader of China is focused on two drivers.

 

One is to make China into a middle income country, which means $1000 GDP per head. When you have 720 million people still in an agrarian based economy, that’s quite tough and it means huge disparity between the rich and poor. You have people who can by a car from a vending machine and you have people who are really struggling on a dollar a day.

 

That doesn’t mean that you can’t make any money though, as people in Africa will know, where delivery of small sachets of products at under a dollar can earn a lot of money. It’s just a question of scale.

 

You maybe aware that there are very few landlines in China and they have just jumped to 4G. So I can take a phone call or video call from my apartment, down the elevator, take the subway and go to work without losing the call. Or I can travel from Beijing to Shanghai on the train without losing the call. And it won’t be expensive.

 

So the inter-connectivity between demand and delivery and the ability to be able to interact with people is so slick compared to the UK. One of the issues that we raise in the IOD is around connectivity. How can we expect the young people who are the future of your organisations not to wanna go to London, because they have no choice.

 

So if you can provide the right connectivity at the levels we are seeing in China, which are possible, you don’t have to move to London and you can have businesses running everywhere.

 

So it’s about our willingness to do things that are extraordinary. All we need to see is an increase in speed. Not just speed of delivery, but speed of getting the right people with the right skills in the right place. You can do that in China now, but from Manchester to Leeds. So we in the UK are woefully behind and marketers who think they aren’t are very mistaken, because it’s not just about the data you have, it’s about the ability to deliver the product.

 

So there are some fundamentals that I think we can learn from the East, particularly from China about getting the infrastructure right. Then you can deliver products and services in a way that’s dynamic, interesting and engaging. I would say that part of the role of the board is not just to lobby business but to lobby government, because if you haven’t got the support or infrastructure, we won’t succeed.

You mentioned VR and using that to interact with customers. Where do you see that going, particularly for gaming and gambling? What is the long term vision for it?

Alessandro De Stasio-

 

It’s the next step that I think everyone that produces content is working on. So for us it will be an extension of our product offer.

 

Gambling is based on fuel, you are the supplier of content, the players are operating the product and the process is exactly the same for building a new product. For VR, we now have new engineers and managers same as any other department.

 

I think the next big VR project will take a couple years to come. I have seen myself one supplier working on testing recently. What is scary to me as a marketer is that it is a new data source to analyse, because the layer of data that you can actually build on in a VR experience by feeling it. So it’s basically a new touchpoint like the laptop, mobile phone or controller.

 

I would say that as a marketer our main goal is to find the insight to give to the create team to give them the chance to create the story. It doesn’t matter if it comes from VR or from the data, basically as a leader of marketing in any organisation, we should find the right way to read, build the insight and then actually build the brief for the storytelling.

 

Then this can be applied at a really high level such as brand level, so we can tell the story of the brand, or escalating at a lower level.

What are some of the micro-elements that you are seeing out there in China that we can bring into our organisations today?

Jon Geldart-

 

Take the byte sharing Offo. A very simple idea in three parts; one is to reduce pollution in Beijing by being good citizens, another is to get people fit again and the last is to make money. And they have recently stated that they want to go global and raise capital on the international capital markets. They’ve said they don’t expect to make a lot of money but they will re-invest it into the business.

 

Now the lesson for me on one level is that they didn’t start with the money. You might say ‘oh, of course they did’, but these are wealthy people anyway so they don’t need the money. What they want is the political connection, which is why being good citizens is very helpful, which isn’t so far away from where we are in the UK by the way.

 

Then being able to do something about the health of the nation is altruistic, but it also makes us money. We in the UK tend to go the other way; how can we make money? How will it helps us to support our citizens? So we start with us, then our clients, then our client’s environments, then to social. They just go backwards in their thinking. They start with ‘is this going to be a good idea for society?’

 

Secondly, they use that QR code. So I can go to a bike in the street, I can open the app, it will automatically find where I am using geo-positioning, it will read the QR code and it will instantly send me a four digit code which I key in and the bike will unlock. It then tracks me using geo-positioning     and tell me at the end how far I’ve gone and charge you.

 

The principle then is that by using the QR code, they get data and they are then using that data to do what the governments wants them to do which is get the bikes off the streets at night. Bike will literally pile up in certain areas and at midnight someone will come along, pile up the bikes and takes them to where his phone tells them where they need to be to be used the next day.

 

Really simple, very pragmatic, very hands on and on point. Is this data gonna be useful for me to do what I want to do? And all over China they are doing this. So using the data practically in an instant is what I have seen them use.

 

So reverse engineering the thinking, using QR codes smartly, using information data efficiently and then what they are doing is behind all this, they are giving employment. The person transporting the bikes around the city is now employed, the steel required to make millions of bikes is supporting the economy, the distribution networks they had to set up in order to do that. The whole thing has been thought through.

 

All they did when they started was think it through at a very small scale and then they scaled it. They started in a small city and they plan to scale it to the world. These guys will make billions before they get found out because the model is too good to be true.

 

The thing that encapsulates China is that it is relentless. The appetite for delivering extraordinary customer service at the highest level means they only get the smartest, most anally retentive individuals to work for them. It’s all about using, very thoughtfully, the best brains to deliver the simplest deliverables. And as we all know delivering something simple is far more complicated than delivering something complicated.

 

And that’s what I think the Chinese are extremely good at. I would say that the Chinese economy is run on two things: becoming a middle income company and going global, which is not about taking over the world but simply having China’s rightful place in the world.

 

The whole of the Chinese economy is like driving a rally car; it’s about driving on the break. To drive a four wheel car very fast and balance it, you have your foot flat on the accelerator and you balance it on the brake. They are going a 9 million miles an hour and they balance the entire thing on the brake.

 

That’s why all the pundits get very worried about a potential housing crash, overheating the economy or a banking crisis, but I know some of the big names in the banking industry and it’s not gonna crash. So those who are waiting for it to crash, don’t hold your breath because the government won’t let it crash.

 

The Chinese president’s new plan will include the golden nuggets that will have appeared in his previous plan that will see the change in the world. If you look back to the previous plan five years ago, there was one thing that struck me at the time which was ‘the commitment to ecological balance’ on the subject of green energy, of which China is now the world leaders, they will make it the lowest cost and they will extract the maximum about of money.

 

I do get worried about being enthusiastic about China but I feel I am just realistic. I live there and I see it everyday. The one problem they have is an aging population and that’s where they need to be worried about India which is the next place to worry about.

 

By 2020 in India, there will be millions entering the workforce which will be China’s worry, which is why they are building the biggest infrastructure project ever and putting more money into Pakistan rail to combat the rise of India.

 

Alessandro De Stasio-

 

It looks like China is the perfect market. Anything can be the market leader in an instant, but my question is which are the hidden costs in terms of social capital, human rights and regulation. I don’t think anyone here ever thought to build a car vending machine. When I worked for an agency in Italy, we proposed the idea of selling a car on Amazon, but there are issues around registration etc.I don’t want to say it is easy to play that game because of regulations or lack of.

 

Jon Geldart-

 

I know there a lots of things about China that are wrong and the Chinese know this. So living in China is like living in a cage, but it’s only if you touch the edge of the cage that you get electrocuted and it’s a very big cage. So those people at the edge who are pushing the boundaries in China do get their hands cut off.

 

In amongst all of that, they actually do have a social welfare system but only if you’ve worked for the government. They don’t pay as much attention as we do to social welfare. I’ve done some work for the Ministry of Finance in China and their position is ‘yeah, we know it’s not perfect, but we have 1.4 billion people to manage.’

 

And they do believe that the system they have is good and I got a lot of flack over Brexit, but we have a democracy so we have to live with the decision that was made. What China is very acutely aware of and genuinely aware and worried of is revolution. So you don’t want a disaffected population, so they spend a lot of effort managing the population positively.

 

But when you are in the centre of the cage and certainly if you are middle class, you are very happy right now. They don’t do polls for the government, but on a straw poll of around 1000 people, generally the middle class are super happy with the government. The poor, which is around 700 million, are broadly happy. They may have experienced poverty, trauma, turmoil or difficulty, but underneath it all they very much believe that they are Chinese and have an intense pride in that in spite of everything.

 

So it is very much the opposite of the UK and living in China you have to accept that it’s not perfect, but life is not perfect anywhere. That’s not to say that people shouldn’t call them out on stuff, which is difficult to do when you are in the country because you will lose your visa, but that’s an ethical thing that I have to cope with. I feel I can do more good by being in the country so I have to live with it.

 

So what I regard my task to be is to at least tell the truths about China and to raise to people that it doesn’t have to be like you thought it was. And if you do have the enthusiasm to do things differently, go to China, find a partner and just talk to them and literally within a couple of weeks I guarantee you will be astonished by what you didn’t know.

 

And I think a lot of people in marketing are not taking the trouble at a low cost to themselves to go and find out. So my challenge to you as marketers, which I think is the next step for marketing, is that the ‘what next’ is already here. You can go to Indonesia and see the ‘what what next’, but go to China and see the ‘what next’.

 

And I would say despite all the negativity and disbelief that’s around, it is happening. And when they say ‘it can’t be done that way’, they will say ‘why not?’

Audience Question- One thing I see coming through in all the discussion that I have within the industry is eSports and competitive gaming which can earn you a lot of money. How do you see the gaming and gambling world taking to that?

 

Alessandro De Stasio-

 

In China, the betting on eSports is huge with the market being around $20 billion a year. On the flipside, the west is not investing much at all and if someone is investing it is just as a supplementary product. It won’t be the focus of gambling at least for a while, probably due to lack of vision.

 

The problem with gambling is that it is a highly regulated industry and a lot of different financial rules in many countries. I think China is a market that everyone is looking at but it means that you will not be able to in the stock market. There are gateways like Macau and Singapore that are open, but there is the trade off.

Audience Question- If you were advising a company who had a product or service and they wanted to expand into China, is it better to take what you have and adapt or rip it up and start from scratch?

Jon Geldart-

 

Until about last year, all the good money was in investing to go into China. Now, the money is on China’s investment out of China. So the answer is have a good brand, get a Chinese investor and scale it in China and be super sensitive and focused about what that scalability is.

 

For example, a friend of mine believes absolutely that Raspberries are the next thing and super fruits in China are really important because of health concerns, one child families etc.

 

What he did was come over to the UK, saw how fruit was grown and has taken that back to China with investment on the back of investing a small amount of money in a fruit growing operation in Southern England, gone to Western China where there’s nothing, done a deal with an organisation with lots of land to rent a piece of land.

 

Put up polyurethane tents up to cut out wind and he’s hired local people to fertilise the soil to grow raspberries all year round. But he is only interested in the emerging elite in Shanghai and when I asked why, to which he said ‘well there are 20 million people in Shanghai, which is more than in Australia’.

 

If he can sell in Shanghai, Beijing and Hong Kong alone, that’s 60 million people, which is more as the UK. So he is being super focused and by doing so, you don’t have to deal with one of the big issues in China which is provincial law, which is different for every province in China. So you need a relationship with the local government but it is very easy to make money if you go into a very super focused area.

 

I would say to anyone going in Beijing ‘have no more than two meetings a day’ because traffic will eat you up, but you will do a lot of business in those two meetings. Be super focused and very granular about what you are trying to do and the market you are in.

 

The deals I am doing now are UK brands, some quite small and linking them with a Chinese investor and scaling what they have into China.

 
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