Jan 6, 2025 | AI, Strategy
This time of year is filled with self-congratulatory posts, the ‘Ten best posts of the year’ types. All of them I see, use as the measure the number of views, shares, and other external measures to rank them.
I am going to be different.
The posts I put up come from two places.
Firstly, the experiences I see amongst my group of clients and similar, mainly but not exclusively, SME manufacturers. Some are service providers of various types, but all are SME’s. Sadly, none who can or would pay the consultant rates routinely scooped up by institutional consultants with large offices filled with eager MBA’s who have not experienced anything beyond a sophisticated student piss-up.
Secondly, from the frustrations I feel as I scan and negotiate the economic technical and commercial environment, being the antennae for those few clients who put up with my garrulous nature disguised as wisdom, and wide and deep commercial experience.
The published posts are the outcomes of the usually conflicting ideas, opinions, and reading of that landscape, that goes on in my brain. I write to sort it out, at least a bit.
The tsunami of AI generated ‘content’ combined with the continuing evolution of the algorithms means my meagre readership has eroded over the last year or so, going down by 30-50%, depending on your starting point.
Part of me wants to tear my hair out, what little is left, but the reality is that writing these posts is a selfish activity. I benefit from the exercise, and if that spreads to a few others, great, if not, too bad.
Therefore, my list is of the 10 posts that reflect the original thinking, research and wisdom of the years I bring, or try to bring to everything published, but which got almost no traction at all. In other words, the best of the 2024 that were also the most ignored.
In no particular order beyond the month in which they appeared.
- Is another government review an answer to our slide down the complexity rankings? https://wp.me/p5fjXq-3hd December. This is fairly recent, so perhaps there is time yet for it to get traction. Yeah…maybe not. We are a complacent bunch, and it seems no number of words, moaning, and harsh critique by a few will shake us out of that state. It needs a bloody good crisis!
- The large, uncalculated cost in your business. November. https://wp.me/p5fjXq-3ge I have never seen an adequate review of Opportunity cost in any strategic or planning document. Yet, it should be a significant factor in any resource allocation choice, as resources are finite. I guess it is too hard? Years ago I made an attempt when arguing for a long term commitment to brand advertising as an investment. I argued that rather than treating advertising as a short term variable expense in the P&L, it should be seen as an investment in future profitability. My analysis, based on the flimsy empirical evidence available at the time, opinion, and case studies clearly showed the long term benefit to profitability. While there were many arguable points, I was unaware of the key, deciding consideration. The MD was planning to retire early, and so was completely disinterested in the long term profit at the expense of the short term, upon which his bonus was calculated.
- Positioning: The secret weapon of aspiring market leaders. November. https://wp.me/p5fjXq-3g2 . Positioning is an old fashioned marketing idea, widely misunderstood by todays ‘marketers’. It is not just a catchy slogan, it is a strategic framework, a statement of how value is added, that drives resource allocation choices.
- The increasing value of intangibles. November. Again. (I must have been taking something in November) https://wp.me/p5fjXq-3gv The evolution of our economy from a base that requires hard, tangible assets to one that is based on services has a flip side. The value of an enterprise is now almost wholly dependent on intangibles. This is the value ascribed to your customer base and relationships, documented and managed processes, capacity to innovate, strength of the ‘management bench’ strategic position in a market, and many others. None of these appear in a balance sheet. Traditional accounting fails monumentally at reflecting the value of a business as a result.
- Institutional memory as the critical component of future success. September. https://wp.me/p5fjXq-3eV As life has sped up, become remote, is increasingly locked into screens and the tools accessed by screens, we are in great danger of losing the institutional memory that prevents us from repeating mistakes. When we lose the memory, we are more likely than ever to ensure that history repeats itself.
- Breaking up supermarkets: A really stupid idea. July. https://wp.me/p5fjXq-3ej ‘Colesworth’ has been on the receiving end of much negative, and in my view, totally unwarranted comment. They are regularly accused of ‘price gouging’ by uninformed commentators, politicians seeking an easy target, and simply those in the queue waiting to pay the increasing costs of a weekly shop. The negative commentary demonstrates conclusively the ignorance of those commenting on the drivers and dynamics of the supply chains that exist to serve supermarket customers. Almost as an aside, it should be understood that every Australian with a managed superannuation fund is a stakeholder in one, and mostly both, Coles and Woolworths. In other words, if you are unfortunate enough to be in a queue of 10 people waiting to pay the checkout bill, 9 of them are stakeholders in whichever ‘Colesworth’ store you are in.
- Strategy does not include execution. May. https://wp.me/p5fjXq-3dj Most management groups I have seen, and been a part of, undertake some sort of ‘Strategic planning’ exercise. In that process, 10% of the time is spent on strategy, the rest is spent on execution, or ‘budgeting’ as the usual shorthand. Not only does this grossly underestimate the challenges of genuine ‘strategy’ development, it conflates two profoundly different processes. It is like trying to mix oil and water, stir all you like, they will remain separate, and using them together makes both way less effective.
- Four strategic tasks for the owner of a successful SME. March. https://wp.me/p5fjXq-3cu Every business I deal with wants to scale for a whole range of reasons that all boil down to the simple truth that scale delivers options and further growth and profitability. Most fail. They might survive, but they survive as an SME that requires the owner to be in the weeds on a weekly, and usually daily basis. That is not success, that is buying yourself a job, that usually comes with stress, and less financial rewards than are achievable elsewhere.
- Revolution by Digital: a survival necessity. February. https://wp.me/p5fjXq-3bd In February the impact of AI was just being felt and seen for the first time by many. Few had done any more than play with the early version of ChatGPT, and most of them had come to the conclusion that AI was little more than another cog in the hype-cycle. Digital to most was still a vague term that led to added cost and confusion. A year later, and it is dawning on most that ‘Digital’ meaning the adoption of AI into their enterprises is a life and death choice.
- The two most important words in Strategy. January. https://wp.me/p5fjXq-3aY Libraries have been filled with well intentioned, academically sound analyses of strategy, along with a big lump of flimsy, self-serving stories of success. The latter group always fail to articulate the many hundreds of times their magic strategy potion had failed, only reflecting on the successes, and then they are often as much good luck as good management. In my world, there are two words that summarise a credible effort to build a strategy that will offer the guardrails and macro performance measures of a viable long term strategy. Imagination, and Possibilities. Application of these two drivers of human behaviour in concert will lead to strategic conclusions worth the paper they will end up being written on. Absence of either, and at best you have a budget.
That is my ten most unfairly ignored posts for the year.
I had a lot to choose from. Over 150 mostly ignored posts, all coming from my observations of the strategic, competitive, and regulatory constraints under which we, and most specifically my few clients operate.
None have been spawned, copied, or revamped from the tsunami of stuff spewing from AI generators. Every word is mine, and mine alone. The commentary on AI, of which there is a fair bit, is again mine. My comments reflect the importance and potential of the geometrically compounding impact of AI, and my frustration at the apparent lack of interest evident amongst the business sectors I seek to work with to improve performance by leveraging the potential of AI.
It has been a tough job picking the top ten ignored posts. This blog generates very little traction, although the feedback from those few who are regular readers is encouraging.
As a last observation, I add the first post I wrote after ChatGPT was launched on November 30, 2022. Published on December 19th 2022, just two weeks later, the post asked the first question everyone asks, ‘will it take my job‘? Progressively over the first few months of 2023, I added 20 addendums to the post as I stumbled across more and more tools, use cases and understood better the implications of AI. By then, there was general awareness, and hundreds of newsletters that did a better job of keeping track of this digital tsunami as it surges across our lives, so I called ‘time’ on the post. I have however come to the conclusion that AI will not take jobs, but individuals that use Ai will take the jobs of those who do not.
Dec 16, 2024 | AI, Leadership
The characteristics of leadership we expect from the local nonprofit or sporting club, to the largest businesses in the country, to the Prime Minister, are pretty much the same.
Trust.
We need to trust them. Trust is earned by the behaviour we observe, never just given. It is also incremental, built over time, but is also fragile, and can be brought down in a minute by one bad example. The test, if there is such a thing is whether we believe that the private conversations the ‘leader’ is having are the same as the public ones, and would they be prepared to say those private things on the 6 O’clock news. By this test, many in prominent so called ‘leadership’ roles in this country fail. Dismally.
Dependability.
This has many forms, from delivering on the big promises made, to turning up on time for an appointment with the local hairdresser. In any leadership role, no matter the size, when a real leader finds themselves from time to time unable to deliver, they do not walk away from the fact, they acknowledge the failure, learn from it, and move on. To many, this is the essence of leadership, to me, in it’s simplest form, it is just common courtesy painted on a wider canvas.
Competence.
Someone placed in a leadership role, who is an example of the Peter principal is corrosive to the rest of the organisation. Those being led must believe that the leader is someone they can follow, and learn from. That does not mean they never make a mistake, it does not mean they are never unsure of themselves, or exhibit human frailties, it just means that we believe that they have the wisdom, skills and experience to get the job done.
Humanity.
We are herd animals, we rely on those around us for safety, and security. We have evolved and prospered as a species because we are able to collaborate and care for one another and rely on our neighbours in times of stress and crisis. In short, we care about others. Someone in a leadership position who does not care about those being led, is not a leader, at best they are a manager, dispensable and easily replaced.
When an individual displays these four characteristics, followers just seem to appear.
Header by DALL-E, who cannot be made to spell correctly no matter how hard I try to get its digital brain cells to listen!!
NOTE: Before posting this, I saw I had written an almost identical post a few years ago. While the four parameters are the same, the way I expressed them is a bit different. So, rather than scrapping it, as i have done before when realising i am repeating myself, I elected to post it anyway. Repeating a good idea is rarely a bad thing.
Aug 16, 2024 | AI, Governance, Strategy
AI is the newest, shiniest thing we have seen since, well, perhaps ever, at least in the speed with which it has overtaken consciousness.
ChatGPT was released to the ‘wild’ in November 2022. In commercial terms, yesterday.
In that time, it has overtaken discussion, business planning, capability questions, and profoundly changed the face of stock markets.
An amazing outcome for a technology without a business model.
The committed AI infrastructure spending over the next year by the big 5 LLM builders, OpenAI, Amazon, Microsoft, Amazon and Google is over $200 billion. Depending on your sources, this might vary a bit, but may even be on the low side. It does not count the billions being spent by everybody else, largely on setting about leveraging the ‘infrastructure’ delivered by the LLM’s.
Again, depending on your sources, the revenues being generated over the next year by AI suppliers, both of the infrastructure and tools rapidly becoming available is probably $20 billion.
Nowhere in history has there been a tsunami of investment of this size and speed in the absence of a solid business model. There is no clear way forward to generating a return on that investment.
This is the equivalent to a goldrush, except, in a gold rush if you were the lucky one to find those elusive nuggets, you had some idea what they were worth, and an established way of monetising the metal.
Nothing of the sort exists with AI.
I have done plenty of capital proposals in my time, some with forecasts that bordered on the wildly optimistic because I believed a change of some sport would be generated by the object of that Capex. In my wildest dreams, I have never proposed anything like the ratio of capex to current revenue exhibited by this investment.
There is confusion around the term ‘Trillion’. Historically, the US and UK definitions differed, the UK version being 10^18, 1,000 times larger than the US trillion which is to the power of 12, or one million million. I explain this for clarity and comparative purposes.
On current stock market valuations (August 2024) Nvidia, a business few had heard of a year ago, is the most valuable company on earth with a valuation of US3.2Trillion. They trade places regularly with Apple for the No. 1 spot. Currently Apple is number 2, also at a rounded 3.2 trillion, but a few tens of millions behind Nvidia. Microsoft is third with 3.1 trillion, followed by Amazon at 1.9, and Meta at 1.3. The comparison I wanted to highlight is with the GDP of Australia, of US1.7 trillion. Australian GDP is just over half the market valuation of Nvidia and Apple, a sobering thought.
An investment of 200 billion against current revenues of 20 billion is simply the biggest financial gamble in the history, by a logarithmic amount.
The people running these massive businesses are not stupid. They see and are betting their companies (and they are ‘their’ companies, as control is in a very few hands) on massive returns, which means in turn that the fabric of everything we see and do must change, very quickly. The business models will change, and they will not be just everybody subscribing for modest monthly amounts to the latest LLM model. There will have to be whole new industries being ‘invented’ with successful business models in place for there to be a return on the capex being deployed.
The windows of opportunity that will open, and close just as quickly, over the next decade are immense.
No wonder there is a gold rush, it is just the location of the gold still in question.
Aug 8, 2024 | AI, Management
AI promises a multitude of productivity benefits for all enterprises.
For the thousands of SMEs competing with much larger rivals, AI offers the potential for easily accessible, reliable, and credible data on an unprecedented scale.
One such opportunity lies in market research, which has often been out of reach for SMEs due to its high cost.
AI systems are sophisticated probability machines. Given a base to ‘learn’ from and a set of instructions, AI can predict the next letter, word, sentence, illustration, piece of code, or conclusion. Feed it the right data to learn from, prompt that ‘learning’ with instructions, and the probability machine goes to work.
‘Synthetic data’ is the analysed outcome of a well-articulated AI search for relevant data from publicly available sources, potentially enhanced by data from a company’s own resources.
For instance, an FMCG supplier might need ‘attitude and usage’ research to support ranging of a new product in major retailers. Traditionally, they might spend $100-200k on a combined qualitative and quantitative market research project, which could take several months to complete.
Way out of the reach of most SME’s.
Alternatively, they could invest $15-25k in an AI application to scan social media, relevant publicly available statistics, and their own sales and scan data. This AI-generated ‘synthetic data’ might not be quite as accurate as a well-designed and executed market research study. However, it could be produced quickly, relatively cheaply, and be sufficiently accurate to provide compelling market insights and consumer behaviour forecasts.
Suddenly, opportunities previously out of reach for SME’s can be leveraged. Combined with their shorter decision cycles and less risk averse nature, SME’s now have the potential to haul back some of the ground they have lost to deeper pocketed large businesses.
Header illustration is via a free AI tool. it took less than 30 seconds to brief and deliver.
Jul 30, 2024 | AI, Leadership
Increasingly, we must distinguish between ‘content’ created by some AI tool, masquerading as thought leadership and advice, and the genuine output of experts seeking to inform, encourage debate and deepen the pool of knowledge.
I’m constantly reminded as I read and hear the superficial nonsense spread around as serious advice, of the story Charlie Munger often told of Max Planck and his chauffeur.
Doctor Planck had been touring Europe giving the same lecture on quantum mechanics to scientific audiences. His constant chauffeur had heard the presentation many times, and had learnt it by heart. One night in Munich, he suggested that he give the lecture while Doctor Planck acting as the chauffeur sat in the audience, resting.
After a well received presentation a question from a professor was asked to which the chauffeur responded, ‘I am surprised that in an advanced city like Munich, I get such an elementary question. I am going to ask my chauffeur to respond’.
It is hard at a superficial level to tell the difference between a genuine expert, and someone who has just learned the lines.
To tell the difference between those two you must
- Dig deeper to determine the depth of knowledge, where it came from. Personal stories and anecdotes are always a good market of originality.
- Understand how the information adjusts to different circumstances, and contexts. An inability to articulate the ‘edge’ situations offers insight to the depth of thinking that has occurred.
- Look for the sources of the information being delivered. Peer reviewed papers and research is always better than some random Youtube channel curated for numbers to generate ad revenue.
- Consider the ‘tone of voice’ in which the commentary is delivered. AI generated material will be generic, bland, average. By contrast, genuine originality will always display the verbal, written and presentation characteristics of the originator.
- Challenge the ‘expert’ to break down the complexity of the idea into simple terms that a 10 year old would understand.
These will indicate to you the degree of understanding from first principles, the building blocks of knowledge, that the ‘Guru’ has.
The header is a photo of Max Planck in his study, without his chauffeur.
Jul 22, 2024 | AI, Strategy
Our brains work on 3 levels.
At the most basic is the ‘reptilian brain.’ This is the ancient wiring that is common with every other animal. It monitors and manages the automatic things that must happen for life. Our instincts, temperature control, heart rate, respiration reproductive drives, everything necessary for the survival of the animal.
The limbic system. This manages our emotional lives, fear, arousal, memories, it is where we store our beliefs. It in effect provides the framework through which we look to make sense of the world.
The Neo cortex, the newest part of our brain that differentiates us from other animals. It is where we make choices, it controls our language, imagination, and self-awareness.
This three-part picture is a metaphor. The parts of the brain do not act independently, but in an entirely integrated manner, each having an impact on the others, and receiving input from the others.
Consider the parts of this complex interconnected and interdependent neuro system that is replaceable by AI. There is not all that many of them, beyond the extrapolation of language and imagery from what is in the past.
Despite the hype, we have a long way to go before artificial sentience will be achieved, if it is possible. (Expert opinion varies from ‘Within the decade’ to ‘Never’).
However, who cares?
The productivity gains from AI are present in some form in every current job, and the numbers of new jobs that will emerge are huge. Nobody had conceived of the job of ‘prompt engineer’ 3 years ago!
These new jobs in combination with the renewal of those currently available, will deliver satisfaction, and a standard of living out kids will thank us for.
Sadly, there is always a flip side. In this case it is the dark downsides we all see emerging from social media, which will also be on steroids, and the social dislocation that will occur to those on the sharp end of the changes in jobs.
How we manage that balance will be the challenge of the 2030’s.
Image by Canva.com
