Mar 3, 2023 | Strategy
Strategy is an exercise of informed fortune telling.
What will happen if we do this? Is that better than if we do that? How will others react, do the ducks really all align the way they seem to?
A thousand questions we set out to answer, to allocate our resources to best leverage the outcomes we plan/hope will emerge.
It is a messy business, full of uncertainty, mistakes, dead ends, and outright failures, most of which we hear little about. Instead we hear a lot about the few successful exercises in strategy, the few that work as hoped, or as is usually the case, not as planned, but great outcomes.
We read about the success because people are able to analyse them with the benefit of hindsight, which delivers to those developing the strategy, a sense of prescient certainty that they almost never deserve. Fact is, your strategy will never be spot on, the magic is in the ability to adjust tactically on the run, while achieving the outcome for which you planned.
The strategic process benefits greatly from being subjected to informed and critical thinking being applied to the inputs, both quantitative and qualitative. The greater the level of critical thought and diverse thinking that can be brought to bear on a strategic challenge the better.
The context of strategy implementation is always different to the context in which you do the planning, simply because it is the future, and things evolve in unpredictable ways.
I expect that in about 12 months there will be a rush of erudite papers and articles reporting on successful Corona instigated transformations. Strategic initiatives that make the protagonists look like they had great foresight others lacked. in fact, in most cases they will have ended up with the lollies despite being as confused and muddled as the rest of us during the lolly fight.
They had the benefit of hindsight to clean up their bedrooms before anyone came along for a look.
Strategy is messy because in development, it lacks hindsight.
Mar 1, 2023 | Collaboration, Lean, Operations
Our supply chains are suddenly under great scrutiny given the frailties surfaced by Covid. Calls for a greater proportion of domestic procurement are now more common than ever, but is domestic availability the only answer?
Most supply chains are actually run by procurement and logistics people. While there is senior management oversight, the actual purchase choices are routinely made in lower levels of most organisations. To affect change, this is where we need to start, in the bowels of the organisation.
The KPIs of procurement personnel are generally around invoice cost, as it is easy to track. In future, the decision should be more about security of supply, and total procurement cost, which are much harder to measure, and availability which is relatively easy to measure, but in my experience is often ignored.
The huge caveat of course is that the CEO must give ‘permission’ for the procurement people to go off the reservation, and make the necessary changes, and risk buying other than from ‘IBM’.
We also need deep supply chain mapping that captures the dynamics of the chain, and all the transaction costs that apply, as well as the visible financial costs.
The KPI’s of procurement must change if we are to build the resilience of our supply chains.
- Collaborative DIFOT analyses through the chain
- Switch KPI focus from cost savings, usually measured against the invoice cost, to give greater weight to availability.
- Tracking of the drivers of cost, quality and delivery throughout the supply chain.
- Quantifying transaction and opportunity costs, (particularly of management time) at all points through the chain.
- Measures of resilience such as alternative, qualified, and immediately capable suppliers, utilising differing logistics
Together these measures will give you a measure of the resilience of your supply chain, or its ability to recover competitive performance after a failure. The greater the number of nodes in a chain, the greater the risks, which become amplified as you move further way from direct control.
Local suppliers will have to be prepared for the scrutiny of their sourcing. Company A, procuring from Company B, where there are sub-assemblies necessary will want to stress check the suppliers to company B as part of their procurement processes. This will take supply chain transparency to a whole new level. To this point the concerns have been mostly about cost and the time in the chain. In future, it will go much deeper, digging into a range of items that deliver resilience and reliable quality.
The speed of recovery of your supply chain after the inevitable disruption will be key to competitive performance.
Feb 27, 2023 | Uncategorized
It seems over the last year or two, I see MG’s everywhere. Not the snappy sports cars of my youth, MGB, and MGA, nor the MGTC or TF of my youthful fantasies, but boxy little SUV’s that look pretty much like every other boxy little SUV on the road.
The thought was prompted by a conversation with a friend ‘consulting’ his son as he considered buying his first car. Dads first choice was a Toyota Camry, reputed to be ‘bullet-proof’ but boring. Perfect he thought, until told there was a 2-year waiting list. Besides, his son would not want his friends to see him in a Camry.
The wait for a new MG was 3-4 weeks. Tempting, but MG? Built in China, owned by an anonymous Chinese conglomerate. Does a little Chinese SUV deserve the MG moniker?
MG has a long and storied history.
It started as a promotional item for the Morris dealership in Oxford in the 1920’s, which is where the name came from: Morris Garages. MG bounced around the dissolution of the British motor industry, being successively owned by BMC, British Leyland, and the MG Rover Group until that final entity went to the scrapheap in 2005. The Nanjing Auto group bought it from the receiver, which later merged with the Chinese conglomerate Shanghai Automotive Industry Corporation, SAIC. The first models from SAIC carrying the MG badge emerged in 2011, after a very large engineering and production investment.
My sense that MG’s were everywhere was not wrong. The trend in sales is up, strongly. In December 2022, MG sold more new cars in Australia than both Mitsubishi and Hyundai. 5,194 to Mitsubishi’s 4,927, and Hyundai’s 4,434, a first. While both outsold MG in the full year, it seems only matter of time before MG overtakes them on that metric as well. Its rise has been meteoric, from 3,000 cars in 2018 to 49,582 in 2022.
Before we wax lyrical about the power of the brand, and the equity it may retain from the long ago glory days, it might pay to look at some of the facts that underpin such a stellar performance from a very basic marketing perspective.
Product.
The product seems pretty good. Even that well known sceptic John Cadogan has a nice word to say about the value delivered, which he rightly points out is an equation with quality on one side, and price on the other. I am the last person to comment on aesthetics with any authority, but to me it looks OK. If you trawl owner websites, you may get the impression that the quality leaves something to be desired, with a number of recurring shortcomings. However, you get what you pay for, and MG seems to be a practical price driven offering, burnished by all the cheap bling touted as features by the PR.
Price.
Against its obvious competitors, MG has a substantial price advantage. They may be buying market share, but it is clearly working. Add in the 7 year warranty, and the price package is winning fans. Combined with the OK product, the ‘Value’ is clearly being seen.
Place.
There are currently 153 MG dealerships around the country. Most are multiple shops, but who really cares? That number combined with the sales numbers means you can have some confidence in the availability of spares, and resale value, and you do not have to travel too far to go and sit in one, and try before you buy.
Promotion.
Here is where MG have done a surprisingly good job. Surprising to me because most car marketers seem to get carried away by their own bullshit, failing to see the offer through the eyes of a potential customer. MG has combined the brand building job with the short term sales activation job better than any car brand I can remember. It helps that they seem to have buckets of money, but it is easy to waste a lot of that, which they have not done.
The local ads run on TV position the product clearly, young, aspirational, and skewed towards female. A look on YouTube, shows some pretty slick UK based ads featuring among others Benedict Cumberbatch adding British cred and male sophistication to the Australian ads. This is long term brand building material. MG has a 5-year significant sponsorship deal with South Sydney Rugby league, and the PR and short-term sales activation machine has been cranked up to ‘high’. For anyone in their target market looking to buy a car, MG is hard to miss. The offers are simple, go across the range, and will encourage at least consideration.
Strategically, MG is on a well-trodden path worn first by the Japanese, followed by the Koreans. Start with a narrow range at the lower end of the market with cheap, mass market cars full of bling, long warranty periods and extensive investment in customer facing infrastructure like dealers and spare parts inventory. Then, progressively move up the quality and price scale, while expanding the range as they get better at designing and building cars. What took the Japanese 40 years, took the Koreans 20 years, seems to have taken MG only 5 to have made big inroads.
When will we see an MG F1 team?
Toyota had a shot at F1 between 2002 and 2009, and while not a winner, did generate credibility. BMW has a long history with good results in F1 from the 50’s to withdrawal in 2009, while Mercedes upped its game in 2010. Since 2014 Mercedes has won every drivers and constructors championship, an unprecedented record at the extreme automotive cutting edge, where fractions of a second are the difference between winning and being an also ran. Mercedes in this time has also won in the car sales race, at least in Australia where they closed a big gap, then overtook class rival BMW in 2018, and have not looked back. This seems a natural progression for MG to follow, and any success at all would rewrite the global perception of Chinese engineering.
My conclusion is that MG is a bit more than just a label transposed onto an entry level range of cars with none of the ‘gravitas’ associated with the MG brand of old. It is a genuinely good effort to build a brand from the ground up, taking a helping hand from whatever MG heritage may have survived the implosion of the British motor industry. Worked everywhere into their marketing material is the MG logo, unchanged from the 1920’s creating a link, they hope, to the values they wish to rebuild. If nothing else, the combination of low price, long warranty, brand recognition, and lots of bling in a unit that delivers good value for not a lot of money is a good mix for customers. It also indicates to me that they are here for the long term, as it will take a while to recover the very substantial investment that has been, and continues to be made.
BTW, my friends son ended up buying a 2004 Jaguar, built while Jag was owned by Ford. Bit of a risk on parts and reliability, but a nice car at half the price of a new MG, and not a Chinese label in sight.
Feb 24, 2023 | Change, Innovation
Hemmingway observed in ‘The sun also rises’ that ‘the future comes slowly, then all at once’.
He has been proven right many times.
Since the release in November last year, ChatGPT has proven the future of AI is here, all at once.
That reality leads to the key question: so, what now?
We often look back on the spread of electrification as a template for thinking about the digitisation of our economies. It is a fair representation except for one small detail, which makes all the difference.
Electrification was a process that proceeded sequentially, piece by piece added as efficiency improved. From the beginning of the digital age, and the recognition of the reality of Moore’s Law, this has changed.
The driver of change has been compounding, each stage building on the previous, with increasing speed. While this has been seen by most as just normal improvement, the cumulative impact has been far greater.
Einstein noted that the most powerful force in the universe is compounding. Imagining the impact of compounding is really hard, makes my head hurt. To imagine it, there is still no better metaphor than the old rice on the chessboard fable.
The emperor promised someone (probably an ancient consultant) a payment in rice on a progressive scale, calculated as doubling for each of the 64 squares on a chessboard. 1, 2,4,8,16,32, and so on. It seemed like a good deal to the emperor who was clearly not mathematically minded.
By the 31st square, payment topped a billion grains of rice, enough to cover your average ancient town square. That is where the problems started as payment kept on doubling, quickly outstripping the total world production of rice.
The tipping point is somewhere around square 25, where the rice was a couple of wheelbarrows full, then seemingly suddenly, it became a vast amount.
Such has been the case with digitisation.
We have been watching its progression since Gordon Moore wrote his 1965 article predicting a doubling of the number of circuits on a single chip every 18 months. A bit like the emperor, we have watched and suddenly it seems we have reached a tipping point led by ChatGPT and its sibling DALL-E. Hot on Chats heels came ‘Bard’ from Google, although stumbling at the launch last week, and no doubt Amazon and Apple are close behind.
The difference we face to that faced by the emperor, is that had he used his abacus, he could have predicted the outcome of his agreement, as it is calculable, to a point. What happens now with the compounding of AI is not so predictable. What we do know is that it will be a disruptive force coming at us with compounding speed and power.
This power to increase the speed, accuracy, and therefore efficiency of the processes we digitise will extract a range of very high tolls. These will be the increased risk of personal data being available and almost inevitably used against us, amplification of bias, ever increasing complexity of the systems we will come to absolutely rely on but not understand how they do what they do, and a complete ‘rework’ of work. This revision of work will make the changes from the cottage industries pre industrial revolution look like minor adjustments by comparison, and will happen at lightning speed.
Of concern to me is that only a few have the scale necessary to ‘train’ these systems. Microsoft, Amazon, Google, and Apple have that scale, which will serve to entrench their dominance in the space. Theoretically governments also have the scale, but will be hobbled by concerns unshared by commercial players.
Within a decade, every current job, those that remain, will be almost unrecognisable, and there will be new jobs we cannot yet predict taking their place. What will remain is the human element of creativity, that capability that distinguishes human beings from all other species, the ability to do something completely new.
The good news is that we will still need engineers, architects, doctors, plumbers, and bricklayers, but the shape of their day will be nothing like it is today.
When digital photography took off, putting a quality camera in every pocket, most thought it was the end of photography as a profession. Not so. What became quickly obvious was that there was a clear distinction between the real, creative skills of the elite photographers, and those of the ordinary. The pareto distribution of photographic skill applied, and those that survived as professionals had more time and better tools with which to capture and express their images. This will be repeated in every job across the economy.
Unanswered is the question of how we educate our kids to thrive in a work environment we are unable to visualise.
Header credit: Dall-E. The instruction I gave Dall-E was ‘Surrealist impression of the change from cottage industry to knowledge work’ This was one of 12 generated in about 30 seconds. Look closely at the face.
Feb 22, 2023 | Customers, Marketing
Few would disagree that the very best way to find a new customer, to build a business, is to have existing happy customers refer you to their networks.
Even anonymous referrals are better than nothing. How often have you looked up a service provider on social media, and looked at the ratings? Recognising they may be from friends, fools, and their mother, they are still a guide.
Happy customers will refer automatically.
Sadly this is not the case in a proactive sense. Happy customers may give you a wrap when they happen to be talking about whatever problem you solved for them with their friends and colleagues. That is not the same as proactively being an advocate for your product. You have to ask them to refer you, and the manner of asking is crucial.
Customers do not like referring.
In my experience, happy customers do like referring you, but as noted, they have to be asked. The psychological drive of reciprocity comes in here. When you have met and hopefully exceeded the expectations of a customer, they will feel obliged to at least be nice to you. Asking for a referral is a very easy way for them to be nice.
It is OK to pay for a referral.
No, it is not. Paying for a referral is almost an insult. Most people do not like to benefit personally from a referral where there is a friend or acquaintance involved, as it is their credibility at stake.
Potential customers do not believe in referred products.
Yes, they do. When someone who is trusted delivers a referral, that referral takes on an element of the trust that is in the relationship. Both parties know that trust will be damaged if a referral does not ‘pan out’ as promised, so they are careful. This is entirely different to the so called ‘influencer marketing’ that infests digital platforms. These influencers are no different to the talking heads we used to see all the time in ads in earlier times.
Assuming a referral will lead to a sale.
Many things must be aligned for a sale to eventuate, all a referral does is give you a credible foot in the door, the right to have that first conversation in the sales process. You still need to do the hard yards. You still need the sales process.
In a world where the first and must win commercial battle is for the attention of your potential customer, the presence of a credible referral is like getting a 20 metre start in a 100metre race.
