NewCo Shift Forum Dialogs, in Partnership with Work Market
Diego Scotti CMO, Verizon, gives us an earful on the Yahoo and AOL deals, challenging Google and Facebook, and how best to run a massive marketing organization
Diego Scotti commands one of the largest marketing spends in the world as CMO of Verizon. He joined us at NewCo Shift to discuss how Verizon, once merely a massive carrier brand, is shifting into overdrive, becoming not only a major content and advertising player (through its acquisitions of both AOL and Yahoo!), but also a pure technology brand (the jury is out on that one, but I’d not bet against them in the long run). Scotti is also an innovator in his approach to management — since taking over the helm of Verizon’s marketing machine, he’s forced his agencies into a diversity audit, created “Challenger Boards” that rip his marketing plans apart, and instituted new programs that address the fundamental “pipeline problem” in STEM education for minorities. Below is the full video interview and text, edited for clarity.
John Battelle: Diego Scotti is responsible for a brand that’s in massive transformation. 10 years ago, 5 years ago even, Verizon’s brand was, “We connect you to the network really well.”
Then they bought AOL (and then Yahoo, a deal which closed after this conversation). It’s very interesting to think of a very large Fortune 100 company that is going through a transformation where their brand is changing from, “We connect you to the network,” to something completely different.
Diego, You’re responsible for Verizon’s brand. That includes buying Super Bowl ads, which we all saw on Sunday. How has the brand changed in the last few years since the decision to become more than a network company?
Diego Scotti: We are in a moment of tremendous transformation. I would say that the transformation is happening simultaneously in two big areas.
The first one is, like you said, when you ask any consumer what Verizon stands for, the first word or phrase that comes to mind is network reliability. That has worked for us during the last 15 years in the formation of the company. Now, as you said, as we start expanding into new businesses, that definition needs to evolve. We need to go from network to technology.
Everybody that says the word “Verizon” in a few years from now, we want them to think about technology. It’s interesting because what you read in the papers is usually more of, like you said, our expansion into the media and entertainment business, but a tremendous area of development for the company is everything around IoT, telematics — We have now the largest global business in telematics, which is, “How do we track the movement over everything from cars to people to data, etc.” Virtual reality, augmented reality. We really need to step into technology in a different way.
The second transformation happening simultaneously, and you referenced that a little bit, is what’s happening on the wireless industry. Highly saturated, 98 percent of the people in this country have some sort of cell phone. So with the four biggest carriers, it has become really a game of market share gains. Our brand needs to be as vibrant and compelling as possible to compete in an environment that has become extremely, extremely competitive. Competitors are pushing us to a race to the bottom in terms of it’s about price, price, price, and how cheap can you get your service?
The balance that we’re trying to achieve is, “How do we compete effectively to expand the brand in these two very important areas?”
One way is to outspend the other guy with your media budget so that you have a greater share of voice and a greater share of mind. When you ran your Super Bowl ads, I’m sure you had a strategy. But you also, and now we’ve been doing this for almost 10 years, you had a social media war room ready for however people might react. Did you expect that your competitors would start taking to social media to critique your Super Bowl ads? Because you ended up in a running gun fight with your competitors over social media, which then got picked up and written about in real time by the media. It became a big story, which was the fact that, whoever was manning your Twitter handle was in a fight with whoever was manning Sprint and T-Mobile’s Twitter handle.
A few thoughts on that because what you’re saying is a good example of how complex and also exciting marketing has become. I wish it was as easy as outspending your competition, as it used to be in terms of budgets. We literally have the highest spending in marketing, but we’re not complacent, meaning, I don’t think that guarantees success. That’s number one.
Number two, in my mind, is we have great activation. We are sponsors of NFL. We had a great activation in Houston, an all-around exclusive access to our customers with different activities that we had. But we decided not to run commercials during the Super Bowl. That was a conscious decision because we wanted to see how we could achieve the same level of engagement and connection without spending $25 million, like one of our competitors did, for example.
You managed to be all over the Super Bowl without actually being…
I don’t know, but what I can tell you is I didn’t spend $25 million on the Super Bowl. The third point that I was going to make is that it’s an interesting balance. If you look at all of the advertising that was run by our competitors, it was all using Verizon as the foil.
One, because we are the biggest carrier, so everybody’s attacking us to steal customers. It’s interesting because I was looking at some of the data or perceptions coming out of the spots in the Super Bowl. Some of the T-Mobile spots were actually really about Verizon because they talk about Verizon so much.
I don’t know if that strategy works for our competitors. What I tell is you that our strategy is, every time that somebody points out something that is a lie or is deceiving for consumers, we’re going to stand for the truth and for our facts. On (Super Bowl) Sunday, did we go a little bit too far in terms of getting into that? I think so. Part of me thinks I don’t want to lower ourselves to that level.
How does it work? Whoever the team is in the war room during the Super Bowl sees the ad of your competitor. Do they clear the tweet with you?
We were very, very prepared. We went into the Super Bowl knowing what our competitors were going to do, which is also silly. I never like to tell you my strategy before I launch my strategy. That’s a little bit silly in how the Super Bowl ads get released earlier these days.
So we knew what they were doing. We were ready to respond, and then to respond to their responses. And, yeah, I was right there. I was right there. That’s what I’m saying, I was talking to some of the folks of my team early this morning. I would say, “Well, you know, I think we got 80 percent right. Maybe 20 percent that needs improvement in terms of how we could do it next time.”
We definitely drove them crazy, which it was a thing in and of itself.
That probably made you feel pretty good. You came over from a diverse background. You haven’t been a lifer in telecoms by any measure. You were in financial services, media, and retail. When you came, you instituted a number of policies that, as a person with arguably the largest budget in media, that makes you a popular man in the media business. But you instituted a Challenger Board for every part of your strategy. Tell us what that is and how it works.
Because of the complexity that we were discussing before in terms of how marketing operates these days, and I’m a firm believer both in terms of me, personally, as well as the marketing team, is that you can’t do it alone. That is now more important than ever.
We have implemented really a new way of collaborating with people across the ecosystem that is very different to how big companies like ours usually work. For example, we have this monthly meeting that is called a cabinet meeting, which is a little bit of a funny name.
We get together with the presidents or the CEOs of our key agencies once a month to discuss the issues about Verizon. Some of these agencies compete against each other with other clients. Some of them share work or disciplines. When they come into that room at that level, they’re not part of an agency. They’re part of the Verizon team.
That’s a great example of really putting collaboration at the center because they are forced and their compensation relates to that. They are forced to collaborate and to put the best ideas forward for Verizon.
The Challenger Board is another example of what we’ve done because I feel like the biggest problem that people in roles like mine and in big companies is you become a little bit isolated from what really happens in the marketplace. You start believing your own BS. So we created this group that we meet every quarter. It’s a group that is formed by ex-CMOs, ex-agency people, creative people, some of our partners, and it rotates. The sole purpose of the Challenger Board is, I come and present our plans for the next six months. The only thing that I ask them is just, poke holes in it, what we’re not doing right, what we should be doing better. It’s interesting because they’re not vested on the success.
Do they rip it apart?
They rip it apart. It’s very uncomfortable, I must say. Now that I’ve gone through a few of them, when I first thought about that idea, I thought, “Well, this is going to be easy.” It turned to be more difficult than I thought because they were doing their job. They were challenging.
I cannot point to one thing that we have done since we instituted the Challenger Board a year and a half ago, I cannot point to one thing that we have done that it hasn’t been impacted by the feedback from the Challenger Board.
Another thing you did is you turned around and challenged your agencies. The agencies are not only super important because they really do an extraordinary amount of work on your behalf. It’s a lot of money. The agencies all live off of that. You told your agencies that they were failing at diversity and that you would not work with them if they didn’t fix it. A lot of people talk about diversity, but you actually implemented a policy. Can you talk about that?
Yeah, diversity is very important for me. I’m from Argentina. I’ve been now here for 20 years, but I believe in the power of diversity to drive better ideas and to grow companies. Verizon is one of the most diverse companies in the country. We can always do better. When we looked at our agencies, and this is about the industry in general, many agencies still these days are very much run by white, middle-aged men.
You don’t find a lot of females in positions of leadership, let alone diversity in terms of race, Hispanics, African Americans, etc. That was highly disturbing to me. It’s because of principle, but also because, if we need to address the needs and engage with this very diverse customer base that we have, we have 130 million customers in America, if we need to engage with them, we need to be able to understand and have the perspectives that come only from a diverse set of people working in our agencies.
The first thing that we did is we said, I wanted every agency to come every month and present their numbers, where they stood. It was very interesting because what we knew was the reality. Very few women in positions of leadership, same thing with African Americans and Hispanic.
The question is, to your point, what do we do? We keep talking about it. We keep hoping that this is going to change or we do something? We instituted already three big programs that we’re working on. The first one is we are now demanding that every agency that is covering positions in leadership, that means VP level and above, in any of the Verizon teams need to include females in the final set of candidates that they present to us.
I want to interview them. I want to see those candidates. I want to make sure that we are considering, that we are always hiring the best candidate, but that especially the minorities are being included on the slates.
The second, we decided to partner with our agencies on their programs that support diversity coming to work for them. We are investing with them on that.
The third piece, which is one of the things that I’m the most excited, is we are creating the first mentorship and internship program that it connects agencies with clients. The way we’re going to do this is, and this is a Verizon-sponsored plan, we’re going to call it Ad Fellows.
It’s launching in a few months from now. What’s going to happen is we’re going to get students to do a rotational program for six months in two of our agencies and on Verizon, so a media agency, a creative agency, and then the client side. The goal is that we get these kids to understand, “What does it mean to work on the client side? What does it mean to work on the media side?” understanding the ecosystem. We’re going to focus on minority and diverse candidates for that program.
From the tech business, as they call it, the pipeline challenge that you’re addressing.
Exactly. If we don’t start there, it’s very difficult to get the right candidates when these kids grow up. I’m excited about that because, again, there’s a lot of talk on this, but I wanted to make sure that we are doing, not only talking.
One of the challenges that really large companies have is, when you’re hiring your own key talent, particularly younger people are interested in working for a company that means something, that ladders to something more than, “We’ve got the best network, the best widget, or we can give you free lunch and foosball.”
They actually want their work to mean something in the world that might make the world a better place. Is this something at the C-Suite level you guys discuss and respond to?
Yes, we’re very focused on this, again, for two reasons. One because it’s the right thing to do, but also because of what you’re saying.
In our workforce, and especially the younger generations, to your point, are now demanding that companies have heart in addition to a wallet. For us, it’s very important. What is important is connecting it back to the essence of the brand and who we are, which is technology.
Our main area of focus is education as it relates to technology. You would ask, “Well, for everything that you can pick that you’re going to focus on, why education?”
It goes back to the point about diversity and catching these kids when they’re young. The issue today and you go to a lot of places even in this country in which you see millions of kids that have no access to technology. They have no access to the Internet. They have no ability to learn those skills that are going to then translate into a successful career.
We started five years a program that now we have schools in every single state in the union that we take those schools for a full period of two years. We don’t only give technology to the kids, but we have developed a curriculum that includes hands-on learning through technology, including virtual reality, including even doing your homework through your tablet. These kids have a different connection to technology that it would enable whatever they’re going to do later on. We have invested close to $150 million in the last few years. We have another big investment for the next few.
Again, to my point about the diversity example before, it’s very hands-on. We don’t want to give money away. We want it to make a difference.
Today, actually, we’re launching this program called We Need More. Today, when you go to these schools and you ask kids, “What do you want to be?” the answer that you get is, “I want to be the next LeBron. I want to be the next Selena Gomez. I want to be…” The things that they aspire to, that connect with success are those things. Those kids have never been exposed to the hundreds of different types of jobs in STEM — scientists, engineers, astronauts, you name it.
They’ve never been exposed to those jobs. We need more means. We need less LeBrons, less Selena Gomez, less of those, and we need more of you. I mentioned those names because they are part of this campaign because they see, as well, that they have a positive influence on kids. At the same time, it shouldn’t be the only.
Not everybody can be LeBron.
It’s very exciting. We need more.
Are you going to close the Yahoo deal or is the data breach in the way?
Listen, we’ve said this very publicly, which is we’re still evaluating the impacts.
It’s taking you a long time to evaluate.
It’s a big, big impact and not so easy to solve. It will be closed soon hopefully.
You hope it will be closed. You’re still…
Closed meaning that we will come up with a conclusion of what the impact was.
Soon. You’ll know soon. Let’s assume that you do close the deal, living in the hypothetical world. You’re going to become a massively-scaled competitor to the duopoly in the United States and the world for marketers.
Google and Facebook are the only two companies that are actually growing in digital marketing in terms of their share and their revenues. Overall, the rest of the industry is shrinking.
No one can really challenge that. Twitter’s not big enough. Snapchat’s still too early. If you get there, you’d become the third way. Is that the strategy?
Yes, that’s the strategy.
[laughter]
Listen, there’s no doubt that will give us tremendous scale. I also believe that more and more, content is king. It’s at the center of the conversation. For us, given that we are developing a strategy that is around content from AOL or “The Huffington Post” to any of the verticals, be in finance or whatever that people are interested in, we have to insure that we allow consumers to connect with that content in the easiest way possible.
When you think about Google in terms of search, when you think about Facebook and social interaction, there’s not really a player that has put content at the center of the equation. That’s what we will be challenging ourselves to do.