In the second post of this series on the evolution of the CMO industry, I’ll talk more about the first and most important question posed in Clarkston’s CMO Capability Maturity Model. What is your value proposition today and where are you betting it should be in the future? Every other question and decision will be projected forward from this starting point. In the book The Discipline of Market Leaders, authors Michael Treacy and Fred Wiersema provide a time-tested framework that is especially helpful for assessing the evolving needs of CMOs and the value proposition they provide to their customers. Treacy and Wiersema assert that a company should define itself and then line up its investments, structures, and capabilities around three alternative disciplines:

• Operational Excellence
• Product Leadership
• Customer Intimacy

Their premise is that you cannot succeed by being all things to all people but rather, that companies win by providing an unsurpassed offering in a specific dimension of value.  Ask yourself the following questions about your strategy:

• Will you offer the lowest price within our markets?
• Will you offer the best capabilities and continually innovate?
• Will you tailor our capabilities and services to fit customer needs?

In assessing your own situation, you must  understand that there is no right answer. But you also need to understand that there are implications about the type of business you will do and the way you need to look in order to do it profitability and competitively. If you are going to be the low cost provider, be the low cost provider. But understand that you need to offer volume and scale in your assurance of quality and supply. If you are going to be more capability and innovation focused, understand that this has specific implications for the type of people you hire, how you train, and even how you devise your incentive programs. It is my opinion that as CMOs evolve from what they do today to what they will need to do in the future, they will create hybrid operating models. They must be adept at delivering high volume commodity capabilities, using this legacy work to fund more high value customer driven innovations and customer specific offerings.

We all need to remember that CMOs operate in a highly regulated and highly complex environment. It’s not easy to do and it’s even more difficult to change. There are other industry examples of this type of transformation (e.g., food, tobacco) where companies have implemented segmented operating models to foster both legacy offerings and future innovations. The most forward thinking CMOs will look to learn from these examples, avoiding pitfalls and capitalizing on lessons learned. So Step 1 in Clarkston’s CMO Capability Maturity Model is to determine where you are, and where you want to be, in the continuum from commodity commercial manufacturer to full service discovery / development / delivery partner. Then once your direction is set, you have a good shot at determining what you need to do to get there along the other dimensions of the model including:

• Revenue Engine
• Scientific Expertise
• Manufacturing / Packaging Capabilities
• Commercial Services Capabilities
• Market / Regulatory / Compliance Expertise
• Quality Assurance / Quality Control
• Other Value Added Services

All of which will be discussed in subsequent blog posts over the next several weeks. Until then, if you would like more information on the Capability Maturity Model or would like to discuss how to apply it to one or more areas within your CMO please do not hesitate to contact me at JoeD@clarkstonconsulting.com.