Nov 22, 2024 | Branding, Marketing, Strategy
Brands are not built by superficial ‘Brand-building’ marketing activity. Ever.
They are built by doing hundreds of small things that matter to customers and those who aspire to be customers, well, time after time, after time. In this way, customers learn to trust the performance and value delivered. Then they become apostles for the brand amongst their friends and acquaintances who might similarly benefit.
The brand becomes much more than a label with a product attached. It holds a ‘Position’ in the mind of those who have truly consumed the whole experience.
Advertising is simply a reminder of what they already know and understand.
From time to time, a brand building ad comes along that tweaks the understanding of what is possible. Such an ad builds on the foundation, and perhaps adjusts it a bit in a desired direction. However, it remains an adjustment, a ‘refresh’, a polishing of the emotional response of adherents to reflect the evolution of circumstances.
Radically changing the foundation is a short road to oblivion.
As a young bloke, a long time ago now, I lusted after an XK150. The body design, feeling of success and freedom, and the snarl coming from that exquisite straight six designed in the 40’s and lasting well into the 70’s as the pinnacle of engineering was utterly seductive. That lust was never totally replaced by a similar lust for its genetic descendant, the E-Type, but it came very close.
Even now, 65 years later, that visceral pull of ‘Jaguar’ remains.
It is undimmed by time and the rubbish cars produced as Jaguar was handed around, owner to owner, like a parcel with frayed wrapping, at a kids birthday party.
Has this latest iteration to the Jaguar brand finally killed the goose?
My kids, and grandchildren have no connection at all with Jag. As my peers who did have that connection drop off the perch, any remaining brand equity from those glory days will die with them.
What a waste.
Mark Ritson in his column on the rebranding (death?) of Jaguar put the blind stupidity of the urge to ignore heritage better than I ever could.
It is possible that the visceral connection felt by some could be rebuilt from the crumbling foundations of Jaguar of the 50’s, and 60’s?
I suspect so, but that is from the perspective of someone in the thrall of that connection.
What would I have given to have been asked to contribute to the rebuilding of an icon of my youth. The effort may not have been successful, but I guarantee it would not have killed it off as comprehensively as this deluded nonsense now assaulting us will.
Nov 20, 2024 | Communication, Management, Strategy
When thinking about selling your business ensure you spend time and effort identifying the intangible components that could contribute up to 90% of the value of the sale
Almost 6 years ago I wrote a post that identified intangible value at 87% of the Standard and Poor’s index. An update to that index done by Ocean Tomo now puts the number at 90%. While this is a small increase only, it is off an extraordinarily high base, and the index is based on 2020 numbers. Given the run of technology stocks over the last couple of years, I hazard a guess that the number is now well over 90%. It is the last 10% that is, as everyone knows, the hardest to capture.
This is a considerably greater percentage than the other major stock market indices. For example the European S&P at 75%, Shanghai Shenzhen index is at 44%, and the Nikkei sits at 32%.
This wide disparity comes from the makeup of the indices.
The US S&P top ten contains nine technology businesses the outlier being Berkshire Hathaway. In order, on Nov 16, 2024, the top ten and their share of the index is:
NVIDIA 7.2%. Apple 6.8%, Microsoft 6.2% Amazon 3.8%, Meta 2.5%, Alphabet 2.1%, Tesla 1.8%, Broadcom 1.7%, Berkshire Hathaway 1.7%.
Even amongst these behemoths, there is a strong skew to the top three. This top ten constitute 35.4% of the total value of the 500 companies in the S&P index. The Pareto Principle at work, again.
The trend is also clear amongst the other major indices. From much lower bases, they are all heading towards the increasing valuation of intangibles in the total value of their stock.
Ignoring this trend and failing to respond is leaving money on the table.
Over the last few years, I have consulted on several projects where small businesses have been sold. In each case, the sale has been made at a considerable premium to the standard industry multiples that would usually be applied. The driver of the premium has been the effort put into identifying and articulating the value of intangibles to the purchaser. I’ve called it finding the ‘Rembrandts in the roof’, a phrase I picked up somewhere after reading of a dusty Rembrandt was discovered and authenticated in the roof of an old house in Amsterdam 30 years ago.
Are you actively looking to identify and quantify your hidden Rembrandts?
Nov 18, 2024 | Governance, Innovation, Leadership, Strategy
The latest economic complexity rankings put out by Harvard were recently released. Australia dropped from 93 in the world to 102. One place ahead of Yemen, one behind that manufacturing innovator, Senegal.
I had missed the report until an article in the auManufacturing LinkedIn group brought it to my attention.
The best that can be said about Australia’s drop from 93 in the previous ranking to 102 in this current ranking is that we have made possible the performance of the 101 countries that are above us.
This includes such stunners as Bangladesh at 100, Honduras at 97, Uganda at 96, and the home of Voodoo, ranking as one of the world’s poorest countries, Benin at 99.
To be fair, the ranking methodology struggles to adequately quantify the benefits accrued by services in its calculations. This compromises the ranking of Australia which has an advanced but hard to count services sector, while exporting mostly commodities, which is easy to count.
Nevertheless, while politicians are ensuring the public debate (aka playground squabbles) is around irrelevancies like the chairman’s lounge, long term challenges in education, aged care, housing, equality of opportunity, and economy wide productivity go uncontested.
Take education for instance.
This is a very substantial sector generating billions in economic activity by educating the children of our Asian neighbours. Many see it as a road to residence, which will benefit our economy doubly, as they have paid for their own education. However, many return home, enabling the ‘connections’ highlighted in the report as critical to complexity to be made. Meanwhile, for our own kids, we have continued to make getting an education more expensive to the point where it is becoming unaffordable in the absence of parental support.
In our wisdom, we are in the process of ringbarking this pathway to complexity.
How stupid can we be?
I recall in 1980 then Singapore PM Lee Kuan Yew warning that Australia was destined to become the ‘White trash of Asia’. It seems his warning is coming to pass.
PS. November 22. This ‘Visual Capitalist’ graph of the 30 largest exporters came into my feed today, adding some flesh to the bones of the index. The make-up of exports of several of them should lead to some deep thought. For example, Holland, Switzerland, Belgium, even the battered UK, where there are no hydrocarbons or minerals in the mix, outrank our commodity driven export mix. This is a solid indicator of the ‘complexity’ to which we should be building.
Nov 15, 2024 | Governance, Leadership, Management
We tend to think that the person on the top of the pyramid has the power to do whatever they wish within the boundaries of reason and the law.
To some extent this is true but there remains only five tools they can use.
Volume.
Price.
Costs.
Culture.
Strategy.
Everything in a business stems from these five fundamental tools when they are focused laser-like on customers..
A leader that has at their fingertips a few simple metrics that reflect these five tools, and focuses attention on the drivers will be successful.
The first three are quantitative. The fourth, culture, is much harder to define quantitatively. However, there are measures that will deliver insight, such as staff churn, Surveys into items such as psychological safety, diversity of training, thought, and experience, and team collaborative success.
Strategy is also qualitative, in that it cannot be measured except in hindsight, by which time, it becomes useful only as a lesson, and driver of future strategic choices.
The combination of culture and strategy, when they are mutually reinforcing, and aligned is a potent combination, that drives the quantitative allocation of resources, measured in outcome by revenue, price and costs.
Header generated by the newest shiny thing in a subsection of the toolbox: AI.
Nov 13, 2024 | Branding, Innovation, Strategy
One of the five costs in your business, in most cases, under recognised, under managed, and misunderstood, is Opportunity cost.
Doing A, means we cannot do B.
It is not always such a binary choice.
Opportunity cost is impossible to calculate with any precision, as it is forecasting the outcome of something you did not do, an opportunity forgone. It is however a critical component of any consideration of the manner in which the available capital of a business is deployed.
It is also driven by the strategy, which is another calculation of the shape of the future, and how you can optimise the leverage your resources deliver.
Commonly used models like discounted cash flows and the more demanding internal rate of return calculations are commonly used by accountants to make the choices between differing capital allocation options. Unfortunately, they both rely on cash forecasts, which are at best fragile. When the strategy calls for ‘innovation’ cash forecasts are usually over-optimistic, and the timing is wrong, so that beyond a ‘pin the tale on the donkey’ analysis, often grossly misleading. Such techniques favour doing more of the same, with at best incremental improvements. Deploying capital towards riskier uses means these calculations are less and less valid, putting off the risk averse amongst management, which is most of them.
We have a fantastic example facing us right now.
Intel used to be the dominating producer of semiconductors. ‘Intel inside’ remains one of the best known and respected brands around, and yet, Intel has fallen radically from grace.
Since the glory days, when they dominated the market, and had customers lining up to place orders years in advance, they are now struggling for relevance. The value of the business as reflected in the share market has plummeted, along with their market share in a market that continues to explode in volume and value.
Arguably, Intel should still be in the position now held by Nvidia, current market cap 3.64 trillion, and rising like a kite in a hurricane. Intel, while still worth over a billion dollars, is small by comparison.
Any calculation of the opportunity cost of strategic choices made in the past by Intel would make shareholders kick their cats. Intel delivered astronomical profitability resulting from then CEO Andy Gove making the choice to move away from memory chips and pioneer the semiconductor market. The emergence of the PC in the 90’s made Intel one of the biggest and most profitable businesses ever seen. They then missed the move to chip sets designed to enhance gaming, which doubled as the enablers of the exploding AI market.
At least Intel shareholders can feel better, as the missed opportunity club is a very large one, with some distinguished members.
Note: the graph in the header is the Intel stock price. $1 in 2000 is now worth $1.83 adjusted for inflation. In other words, the current year low price of $19/share is worth just over $10 in 2000 dollars after inflation. This is in a market Intel used to dominate, and that has exploded over the last 5 years, with Nvidia grabbing the chocolates. That is the opportunity cost intel has suffered.
