Can Marketing Save a Sinking Business? The WeWork Story
Even if you’re not working in the high-tech stratosphere, you must have heard about the WeWork fiasco.
This highly covered news item raised serious questions about WeWork’s true financial profitability and diminished its appeal among investors. The company spiraled from a $47 billion valuation to talks of bankruptcy within 6 weeks, while its founder and CEO was removed from his position.
Some reshuffling in the WeWork leadership and an injection of funding from its main backer, Softbank, has managed to keep the company afloat.
But the commercial real-estate company’s future is still unclear.
Don’t be mistaken; the WeWork story is not an isolated incident.
In the past few years, a handful of technology IPOs have shown an over-valuation by investment bankers and—subsequently—a significant fall in trading price.
The question is: what—if anything—could WeWork and similar tech startups do differently to strengthen their businesses and boost their IPO viability?
In my opinion, marketing holds the key to the solution.
So let’s review the WeWork story of demise together. I’ll pinpoint the intersections where a helping hand from the CMO or marketing director could have possibly turn things around.
Ready to dive in?
IPO Timing – Be Prepared to Open Your Shop for Inspection
As soon as WeWork filed its IPO paperwork in August 2019, releasing its financial statements to the public, the secret was revealed. As a result, the company immediately faced intense scrutiny from investors and the media.
Because while the company brought in revenues of $1.8 billion in 2018, its losses for that year totaled $1.9 billion.
In other words, it was clear that the company was not profitable.
WeWork did not try to gloss over this. Instead, management decided to postpone the IPO to September. In the meantime, scrutiny shifted from its finances to its CEO, Adam Neumann. It appeared he was spending company money superfluously. The “party guy” image put a taint on the WeWork brand.
So how can marketing help companies avoid the WeWork trap?
When planning an IPO, it would be wise to run a clean ship from day one and make sure that the business is self-sufficient and profitable.
But establishing how the company presents its business in the prospectus is just as important. This is where branding comes into play. And it’s the moment for us marketers to shine.
Scott Pinkner, managing director at DFIN, suggests that companies should be investing just as much into how they present their business and its unique value as they do on the disclosure requirements.
“Rather than providing just the company’s nuts and bolts, a well-done prospectus should convey something more powerful and persuasive: that the transition from a plucky start-up to a professional, confident IPO-ready company is complete.”
This is where a savvy marketing team can play a central role. We are responsible for telling the company story in the most compelling and persuasive way possible. And while we’re at it, we can spruce up the prospectus with eye-catching visuals, branded colors, fonts and images, and even unique material selection.
There is an unquestionable link between a brand’s value in the eyes of consumers and shareholder value, according to InterBrand (a division of Omnicom which runs an annual ranking of the best global brands).
It makes sense then that CMOs, as the “brand custodians,” should play a central role in driving the business forward by improving brand value.
But how exactly can we go about strengthening the brand?
The 2019 Best Global Brands report gives a list of attributes that companies should strive for:
- Clarity – over its values and positioning
- Commitment – an internal belief in the brand
- Governance – an effective operating model for deploying the brand strategy
- Responsiveness – the ability to constantly evolve the brand in response to the market
- Authenticity – a defined story and a deep set of values
- Relevance – for the target market
- Differentiation – as perceived by consumers
- Consistency – the ability to deliver what it promises across touchpoints
- Presence – the degree to which consumer and influencers speak positively about the brand
- Engagement – the ability to foster a strong sense of identification with the brand
Don’t Scale Before Your Time – How a Marketing Plan Can Help
One of the key elements in building a business that may be ripe for IPO one day is scalability. You should be able to show investors that the business can grow and be profitable.
But scaling too quickly can easily lead to your downfall if you’re burning through more cash than you’re making.
We’ve seen it happen in the WeWork story; the company had already invested billions into real estate while admitting that they would not be making enough revenue to turn a profit on these investments.
This is why it’s so important to develop a scalable business model from the get-go. Here too, marketing comes equipped with the expertise and methodologies to help the company establish a solid plan.
A big part of planning has to do with mapping out the company’s growth trajectory, says Peter Cohan, author of “Scaling Your Startup.”
The company must decide on:
- Where its revenues will come from
- What its market share goals are
- Which customer groups to target
- How to manage production, sales, and services
- How to create marketing partnerships
And a myriad of other fundamental aspects of the business.
Marketers can deliver invaluable insights into this process. We know how to do the research and crunch the data, we have insider knowledge about who the customers are, and we can definitely align customer needs with the goals of the organization.
Let’s face it; we know how to actively grow the customer base and build plans for penetrating new markets better than anyone else in the company.
“Market analysis is key to building a viable business model,” says Business Planner Tim Berry. You need to know as much as you can about your target market. Marketers are not only pros at getting this information, we are also equipped with the capacity to measure and quantify the market, break it down into specific segments, and identify trends that could influence the company’s offering in the future.
The Business Model – Let the CMO Lead the Charge
WeWork’s former CEO, Adam Neumann, has been painted as having quite a bit of hubris, and perhaps this also contributed to the company’s downfall. While it became clear that the business model wasn’t working, and that WeWork was ultimately losing money, perhaps what was missing was a partner in planning. And that could easily be the company’s CMO.
CMOs should play a more significant role in driving a company’s business strategy. That’s because customer-centricity is a major business driver in today’s digital economy, and who’s better positioned to understand and respond to customer demand than marketing?
In fact, a 2017 study by KPMG showed a direct link between organizations that focus on customer centricity and business growth. It found that companies who demonstrated Customer Experience (CX) leadership achieved double the revenue growth, and 5 times the profit growth (EBITA).
Marketers have all the customer data at their fingertips. And we can integrate these insights into fine-tuning the nature of the company’s products and services. Marketers also use technology like artificial intelligence (AI) to predict customer behavior, segment, and target customers in a personalized manner, and drive deeper engagement across channels.
Social media has also become a key strategic growth weapon. And here too, marketing is leading the charge. According to the 2019 CMO Survey, 88.2% of companies use social media to build brand awareness, 60.1% use it to acquire new customers, and 64.7% use it to introduce new products and services.
KPMG analysts go even further to suggest that the skill set possessed by today’s CMOs (and their ability to drive business growth) puts them in a perfect position to become the next CEO. If that’s the case, CMOs should, without a doubt, act as the CEO’s wing-person and play a central role in formulating the business model. This could make a huge difference when it comes time to take the company to IPO.
So, What Have We Learned from the WeWork Story?
When it comes to building a successful and scalable business—companies shouldn’t underestimate their marketing function. Marketing should be an integral part of establishing the organization’s business plan.
A savvy CMO can develop a strong brand that tells the company’s story and highlights its unique value to the market. They can also create a scalable business model that will allow the business to grow in a profitable manner.
All of these factors are especially critical for tech startups to take into consideration before going to IPO. Giving marketing a central role in the planning stages can work wonders in building the business and establishing a good reputation, which will help woo investors further down the line. And, even when things are looking down, marketing can and should be called in to help restore the company brand and sway public support.