Michael Treff | A Mid-Year Update From the B2B Front Lines

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1:39CMO Confidential is a program that takes you inside the drama, the decisions, and the politics that go with being the head of marketing at any company in what is one of the most scrutinized jobs in the executive suite. I'm Mike Linton, the former Chief Marketing Officer of Best Buy, eBay, Farmers Insurance, and Ancestry.com. Here today with my guest, Michael Treff. Hello. Hello. Today's topic, a mid-year update from the B2B front lines. Now, Michael is the CEO of Code & Theory, an agency that combines creatives with engineers to bring clients' answers at the intersection of technology and creativity.

2:19Under his leadership, the company has grown to over 2 ,000 people and has received numerous awards. They were recently recognized, in fact, as one of Fast Company's most innovative companies for the second year in a row. That's a huge amount of innovation in my book. Full disclosure, we met at the A &A B2B conference in 2024, where I was really impressed by his business insights across not just the agency business, but also the whole marketplace, and he has become a recurring guest. In his first appearance on the show, we learned that he played in a rock and roll band called Baby Teeth, or I guess it was a punk band, and after his second show, he agreed to become our B2B correspondent.

3:05So buckle up for show number three. Welcome back, Michael. Thank you so much, Mike. It's always a pleasure to be here. I love our conversations. Thanks for having me back. Oh, it's so much fun. So let's start like we always do with an overview of the B2B marketplace. There's so much political and cultural change. And, you know, I mean, we always talk about AI, but how are companies dealing with all of the uncertainty and all the rock and roll in the business world? Yeah, I mean, it's a great question. And the answer is that it's all over the place. We see all different flavors and all different variants of how companies are dealing with this.

3:44It does feel like, and correct me if I'm wrong, but it does feel like the uncertainty train has been with us for quite some time now. It's like a permanent train. Yeah, I don't see it slowing down anytime soon. I mean, when you think about it and step back, just in the past, even like five, six years, like essentially COVID, you had COVID, then you had the economic fallout of that, then you had the boom coming out of that when everything came back, then you had a new election cycle, then you have international instability and conflict, then now you have AI and technological revolution. Like that is a lot for anyone to deal with.

4:18And whether you're dealing with end consumer businesses or B2B businesses, that's a huge plate. But in B2B, that's even more. That's even amplified. Consumer demand, consumer need goes with the economy. B2B, you're making longer bets. You're betting on the future of your business, the future of your products and services, the future of your clients. You're betting on different ways to do business and how your operations work. You're betting on what technology is going to win and not win because it's going to be very disruptive to both how I and my company work or my clients end up what they need from me.

4:50And so this kind of uncertainty we see playing out across the entire landscape. And really, it comes down to like a few big questions that people are trying to figure out. Maybe that's a good place to start. Like question one, and we always talk about technology with us and I promise it won't be the only thing, but like how is this technology going to truly change things? And you know what? I've spent a lot of years experimenting and now I kind of want to see some ROI. Like we like to say - You predicted that in the last show, you said this is the ROI reckoning And then lo and behold, there was a massive over a thousand point market correction really based on, hey, I'm not sure this thing is going to pay out like I thought it might.

5:30Totally. And that's like a very important thing, because if I'm trying to figure out what to do in the B2B world, like understanding how the investments in technology to do better product development, to do better services, to market better with my customers, to shorten the funnel on purchase decisions, to do more personalization. I made all these bets and now I want to see it happen. And maybe I'm not seeing it happen yet. So there's a lot of uncertainty around that. There's a lot of uncertainty around how customers are going to behave. What are their buying habits going to be? How are those cycles changing?

6:04What are the touch points that are changing? We've seen more than ever in our research, our primary research, and also anecdotally with our clients that the old distribution points for the relationship, email and events, and paid media and what used to be ABM marketing. It's not necessarily paying off as much as it used to because the whole journey has been so disrupted by AI, by agents, by chat environments, by the GPT environments, et cetera, by the models, that so much of that journey has changed. And then the third piece of uncertainty that I see a lot of our clients dealing with is the decision makers are changing, not just for their clients, but for within their own organizations.

6:48You know, I think I've mentioned this on the last, one of the last episodes, but like the role of the CFO, the CTO, the CIO, and the CMO used to be very different. It used to be very siloed. They worked kind of independently. And like, yes, they came together in executive meetings and big decisions. But in the day-to-day operations of running a marketing organization, B2B, they didn't necessarily all come together. Now, they kind of all come together. Like, I can't do what I want to do as the CMO without the right data. So I need my CIO. And I can't make that operational without my CTO, who's going to make sure that the technology enables us to do it.

7:20And then I have my CFO here who wants to see, back to the ROI point, in on everything. And so all of a sudden, I have a totally different set of daily collaborators. And that's like an uncertainty for me. And there's no roadmap. for what you're supposed to do, because what I would say is all the old roadmaps, and we've talked about this, but you can see it more clearly every month that there is no roadmap, and there's not even that many good book examples. So you're making it up as you go. And the people that are making it up as they go, how are they, you know, what advice would you give them?

7:56And then how are the agencies managing in this space of uncertainty? Because sometimes you bring your agency in and some people just shut their agencies out. Tell me about all those dynamics. Oh, these are great questions. Okay. So let's take, let's take the first one on how do you navigate when there's no chart? Like, there's no map, you gotta rip it up. You gotta pivot. Like to me, that is a very simple answer and almost impossible to execute. The simple answer is you have to change your culture. Your culture has to be one about acceptance to live in the gray, about being okay to pivot when the pivot is called for, really believing in something today.

8:36And then tomorrow you uncover new information or the world changes a little bit. You got to be okay to pivot that. And that is all that whitewater being comfortable in the whitewater and not ever thinking that the river was not going to be whitewater. That is an excellent metaphor. One that I just should point out to the listeners, one that is very apropos given how you spent your last weekend on a boat in a regatta. Just saying. We are taking a short break from this show for a word from our sponsor, Typeface.

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10:03Now back to our discussion. But that is true. That's exactly right. And most organizations, especially B2B organizations that have been so focused for so long on like a traditionalism of how things are done. Like a noted, understanding, clear, crisp structure. Now there's no structure. And so the thing is, if you get paralyzed in whitewater, you get swamped. Exactly. And so, you know, the answer is that it's, you have to change your culture to be okay with Gray and Pivot and Whitewater and all these metaphors for sure. Doing that is really hard. It requires new people. It acquires like acceptance of failure and you're going to make mistakes.

10:44And that's just not normal for a lot of organizations. So the execution piece of that is really hard. How it translates to agencies for your second question. I believe this is like the era of the reckoning for the services business. Sounds like a deep movie. The grudge reckoning. Okay. It's going to be a scary movie for some and a very good movie for some. So we'll see. But I really believe that. I believe that there's a new model, and everyone likes to talk about their models, and the new agency model and the new services and payment models. But really, it's very simple. I don't believe there's a future that isn't the combination of selling for an agency business, selling services, the things you do.

11:28And the services will change dramatically because of technology and as we move forward. selling technology and software. I think that's got to be intertwined. And you see that more and more where you're seeing, you know, even the RFP landscape, like I want to buy services and I expect technology and other technology like software to be a part of that service package. And then also I have a fundamental bet that the idea, and this might be new for some of your listeners, but the idea of a forward deployed team. So it used to be a thing called forward deployed engineers. And that was, you take these engineers who are like part consultants, part business strategist, part change management lead, and an engineer by trade.

12:07And you put them into a client organization, like the software companies do this and the technology companies do this. And they help you get value out of your technology. They help you with your transformation and operations. They help you with understanding use cases and workflows. They can really be like a change agent embedded in your organization. They used to be called FDEs. And I believe that that's a concept that can go wider. You can really have forward deployed experts of any discipline. I might have a forward deployed creative, a forward deployed engineer, a forward deployed product manager, a forward deployed change management leader.

12:41And the idea is that if you take services, technology and software, and forward deployed embedded teams that are part consultant, part discipline expertise, part change management, part operations, you will win. And so for agencies, most agencies don't have all those. Big order for so many agencies. Exactly. Most agencies don't. This is like you have to go completely from basketball to football or something kind of. Yes. You've got to rethink this because it's always been people and cost plus. And now it's a totally different roadmap. And then also with the agencies, you see like the purchase of LiveRamp and everything else.

13:23Yeah. You know, what's going on there? and is all that stuff working? And what is all that designed to do, what you just said, or is something else? Well, it's all, great question. It's all related, but I think they're more about, the live ramp acquisition to me is a philosophical one. And we can, let's talk about that for a second. We're going to go deep now, everybody. There's a first philosophical B2B discussion we've had. Unfortunately, I was a failed philosopher out of college, but like, we'll start, we'll try here. I believe there are two ways the world is there's two choices for how you want to as a service business and live ramp being part of this you want to like run your your holding company or your business way one is to do what has always happened which is try to build these walled gardens of data of technology of people these these very walled gardens and the acquisition of live ramp is kind of that I mean it's really a play to build a walled garden that gives me a competitive, not me, but that gives the acquirer the competitive advantage because I have all this data set and I can use it the way.

14:28And regardless of what these companies say in the press of if it's going to stay open, we'll keep third party clients on it, we'll separate the data. The truth is that was acquired to create a moat in a closed world. I don't believe that is the way of the future. I fundamentally, to my core, the same way I believe it's services and technology and software and forward deploy teams, I believe this. If you're not open and you're not interoperable, If you're not accepting that there's going to be client data, third-party data, agency and hold co-created data, and all that's going to have to play together.

14:58If you don't believe that synthetic data sets are part of it, if you don't believe that clients are going to be on all different types of tools, like what's happening right now in AI and technology is the ability to create and deploy software has been accelerated. And the tools that are going to run marketing operations and CRM and all these other platforms, Yes, the traditional players are still going to advance in that, and they're going to have a huge lead in the enterprise game. But there's going to be disruption in that category. You see it in the market. There's going to be disruption there.

15:29And never have consumers had as much power as they have today. Correct. So if that's the case. They have so much power, and they can get information before the brands can give it to them. Exactly. And they can choose what information they find. Yes. And so the data game is really interesting on top of this massive power shift. And then B2B, the power shift must be enormous. Exactly. And so to the point on these acquisitions and LiveRamp and this, it's like, again, back to philosophy. If you believe in an open world where the tools are going to change, the data sets are going to change, the way data is used is going to change.

16:08It needs to be interoperable. And clients want it to sit in their Martech stack, not in the Holdco's Martech stack. I believe that is the future and there's no way around that. Do you believe the future is going to be, I don't care where the data comes from, I just need it faster than you or better than you? Or is it going to be, I have better data than you and that lets me win? Great question. Hard answer. Sure. I believe there's a bit of both. So I believe the biggest problem that we've heard in the last, whatever, 10 years, was I have so much data, but I don't know what to do with it. Like, it's not actionable.

16:49Like, I keep compiling it, but I'm not really using it. So I don't understand why I keep compiling all of it. And that was kind of true for a long time. Technology has changed. Now it's kind of easy for me to aggregate it. It's much easier for me to make it useful than it ever has been. There's still a lot of complexity and work in that. But then there's the idea of like synthetic data sets that are statistically very similar to organic data sets. Give us an example of a good synthetic data set that you can talk about. Yeah, perfect. Okay, great. And I'll give a real example. We recently built a tool with Adobe.

17:23Adobe is a big partner of ours. We build custom technology with them. We call them solutions. The first solution we built was something called Creative Intelligence System. It takes real data and synthetic data, and it creates like synthetic audiences and personas for you to test creative against before you launch it. So it's like, oh, if I can have pre-optimized creative, awesome. And we ran a lot of tests like against real data sets, you know, transactional data and psychological data, first party data, consumption data, purchase data. and then we ran tests against synthetic data, which is AI generated like fake synthetic data sets based on all of those things, but then optimized for what we're trying to do.

18:03And they were pretty identical in terms of outcome. And then when you put those things together is where you get real unlock. Because the ability to constantly optimize the data, constantly create new tests, constantly create new personas, have data learned from data, et cetera, gives you a real advantage. So that's the speed part. But the other part of this is like, when you're talking about whose data is going to win, like, I don't know the answer, because I don't know how much acceleration there's going to be in the synthetic data world. It's always going to be some combination of like, actual factual first party human data.

18:36Yes. But as more and more of the creative decisions and more and more of the media decisions happen agentically, like happen without humans and they happen in real time and they happen based on signals and things like dynamic creative optimization are driving a lot of the work. Like there's no question that the ability for data to learn from data without humans being involved in that will make it faster and more productive. I just don't know how long it's going to take to reinvent that chain. Hey, so let's talk about the clients in this game because all the stuff you just talked about makes perfect sense.

19:11And you talked about culture earlier. But one of the things about some clients and some agencies is they're still saying there's a human part of this and a cultural part of this and this has to be this. and many of our guests have suggested that being a courageous marketer in this space is going to be challenging either you're not going to take enough risk or you're going to take too much risk or you're you're going to take a bunch of risk your company doesn't understand yeah how yeah you advise clients to be thinking about this because let's say i buy everything you set. And I actually do. But then if you're going back to a traditional B2B company in particular, and a sales force that's very traditional, there's a whole bunch of stuff in the way for all the stuff you just said.

20:05Tell me about clients and how they're thinking about it. Well, it's a whole spectrum again. I know that's like my default answer, but some are really adapting to the fact that - Yeah, we're on the spectrum today. We're totally on the spectrum today. There's no question that some clients are very traditional and have traditional outlooks. And they're like, it's very slow to adapt and have a wait and see attitude. And the business is fine today. And okay, that's their culture. That's their leadership style. Others are like, you know, we got to move faster. We, this is like modernity is happening.

20:37Things are changing. We have to accept that. And we have to move faster. And they're trying to push the organization forward. And then some, usually organizations that sit more on the cutting edge of technology, I mean, to be frank, because they're creating the technology that's causing all these disruptions, they've already accepted this. I mean, you see it. You see it in some of the demands that are being put out there for change from highest CEO level executive leadership at huge companies where they want X percentage of the work to be automized by this. They want X percentage of the code to be AI-generated code, right?

21:09There are mandates being put out. What I would say, and what I advise our clients on, is you got to be realistic about your organization, but you also have to be intellectually honest about where the world is. And I believe just like there will be a reckoning for the service industry in the next, I'm going to get the time wrong, one year, three years, but somewhere, five years, there will be the same for normal business. And you will see an acceleration of winners and losers in the business world moving forward with those that adapt to the future and those that don't. And I really believe that.

21:48And so it's about being honest about your organization and its culture. It's about being honest on where you are on your change curve. And it's about being honest about how far you can push before you break, but always trying to push. How do you know if you're honestly being honest? especially when you look at your team and you look at your culture and you say i want to push to the edge but not break it how do you how do you know where the edge is great question uh there's a incredible new york hip-hop song back in the day from eric b and rakim that talks about this that i played at every nick game we'll talk about that later but the question like the answer is it's really hard to know, which might explain why CMO tenureship is so short.

22:35A lot of CEOs are quitting too. Exactly. I believe that it is not up to one person. And if you act as a singular entity, you will lose. I believe that to find the answer to your question on where is the edge and how far can I push and what can I do? It is a collaborative question and a collaborative answer that requires that C-suite to come together. That's what I was talking about earlier. There's always new voices. Yeah, and this goes back to your thing of, I'm not operating my function anymore. I'm operating a collective group of functions collaboratively to move the company. And if I don't do that, the other functions may just not do anything for me.

23:15Right. Or we'll move boats in different directions. And when it's time to bring it all together, it won't work. It won't work. Hey, and you just presented at the ANA a little bit ago in Chicago. What did you talk about there? So funny. So I had the honor and the privilege of speaking with Rachel Thornton from Adobe. She's a CMO, specifically on the enterprise side of the business. And we talked about a lot of these questions, actually. We talked about the change in the B2B world and the change in the consumer, like the buyer journey and how we have to think about things like sales enablement completely differently.

23:49We talked about organizational change in the world of technology and AI and what that looks like. Obviously, Adobe right at the forefront of that. takeaways of what they should do from that? Yeah. Well, I think the first thing, I mean, it's similar to what we were talking about. I mean, the first thing is you got to take an honest assessment of where you are and where you need to go. A second thing you got to do is really lean in to cross collaboration across discipline and across the executive suite. The third thing that is really important that everyone forgets is that you really, it's ultimately at the end of the day, this is still about customers.

24:22And you have to spend a lot of time understanding how to better service your customers you know customers today need different things than they did a while ago a while ago they needed the meetings they needed the event and they needed you to come to the meeting with them and they needed like materials a certain way and it could be you know a static document that took months to prepare well that's not true anymore they need real-time support they need real-time materials they need to convince a much broader suite of the company who's now part of their collaboration set about a purchase. And so the way that sales and consultative sales are happening are vastly different, but it starts with knowing the customer and people sometimes, especially today in this world of change, are so focused on like their own organization or their technology.

25:02Yeah, they're inside out, that outside in. Yeah, exactly. And like, you know, what is the best design principles in the world? They start with user-centric design. Yes, by design. So when you look at all the B2B marketing out there, what are the biggest mistakes folks are making? And it's, you know, other than, you know, we've already talked about Adobe, but what are some of the leading companies doing that others could listen to this show and emulate? You know, it's an excellent question. I think it's a very hard one. I really like having you on the show. You're really good for the interviewer.