21 Lessons from a manufacturing turnaround

21 Lessons from a manufacturing turnaround

Aug 28, 2018 | Branding, Change, Leadership, Marketing, Strategy

 

I was asked the question ‘what did you learn from the turnaround of the GPD‘ a while ago, and was persuaded to present on it.

The GPD was the ‘General Products Division’ of the Dairy Farmers Co-Operative Ltd. It produced all the dairy products you manufacture with milk, which were at the time (mid 80’s) unregulated, while the stuff you put on your cereal in the mornings was regulated to the wahzoo. The GPD  was spun out of the much larger milk business so it could be run as a business, and not an outpost to absorb the milk not required in the regulated market.

Various aspects of that journey have been in these pages before, but I had never contemplated the question in depth and from a height, at the same time.

I started with the business just after it had been set up, then called the ‘By-Products Division’ and in the early stages of building a new ‘state of the art’ factory in Western Sydney.

The division was commercial road kill.  I know that as I did the first P&L by hand, (calculator, 18 column ledger sheets, pencil and rubber)  from scraps of information gathered and constructed from a variety of sources, and a lot of observation.

From that position, turning over $32 million, losing somewhere between $6 & $8 million, with the heavy commitment of the half finished high tech plant nobody knew how to run, 8 years later it was turning $162 million and making good money, with much improvement still to be done. It was a very substantial turnaround, not without its share of drama and missteps,  moments of joy and ‘what the hell just happened’. It was a journey that involved everybody in the business, at first reluctantly, then enthusiastically, had built astonishing momentum that was really only obvious to those on the inside.

Then it was stuffed up by a stupid decision to re-incorporate the business back into the milk business in order to ‘spread the successful commercial DNA‘  in preparation for the inevitable deregulation of white milk.

Over the first 6 years I carried responsibility for the Logistics, and part of  the sales, in addition to the marketing role I was hired for, and for  the last 2 years that the GPD was a separate entity, I was the GM. My ideal job at that time in my life.

Over the eight years, the business and its processes was totally reorganised, the  culture completely turned around, and we launched a string of successful market leading products, all of which contributed to the success.

So what did I learn, in no particular order?

  • You have to engage all employees, at all levels in the journey. They must understand their role and importance in that journey and to each other.
  • When you make a blue, recognise it early, correct and move on. Chasing a sunk investment that is not working is a terrible mistake to make.
  • Never look back with nostalgia, just for the lessons as input for what is next.
  • Price is not a measure of customer value, it is simply a means to express it that is understood, and unfortunately, usually misunderstood. Price only really matters when all other things are equal.
  • No business can be all things to all people.
  • Look after your small customers, one day they might be your big ones.
  • Standards of performance and behaviour have to be both present, well understood, transparent, and meticulously followed by those who set the tone.
  • The greater the general level of transparency the better. Hiding bad news never works, and brushing over problems just lets them fester and get worse. ‘Nip it in the bud’ is always a good piece of advice.
  • A managers job is to support the efforts of their staff, not the other way around. Successful companies extend trust to all employees at all levels, and deals with those who breach that trust openly, and absolutely consistently.
  • Breaching trust is very different to making a mistake. ‘Good’ mistakes are the result of initiative, trial and error implemented with due diligence, and are essential for learning.
  • Continuous investment in product and brand development is necessary, and even more important when times are tough. A great mistake is to see this investment as an expense item in the P&L, available to be managed to deliver a short term result. A powerful brand does not happen overnight, is the outcome of many thousands of small actions and improvements, as well as the obvious external marketing activity,  and it is the greatest asset any business can have.
  • The culture of the place is very hard to describe to an outsider, but clear to an insider. It is a mix of rules, experiences, stories, relationships, habits, and is more complex than any family.
  • Have in place a robust and well understood strategic process which serves as a framework for all decision making at all levels. When an opportunity presents itself, no matter how attractive it may seem, if it is outside the framework, leave it alone.
  • Have in place a robust but simple set of KPI’s intimately connected to the strategy, cascaded through every level, and proactively managed.
  • Never compete with a stronger competitor on their ground.
  • As far as possible, fund growth from cash flow. Long term debt is sometimes necessary, but can turn toxic when the best interests of the lender and the business diverge.
  • Be prepared to kill your favourite children and sacred cows, just be careful to ensure they are not golden geese in disguise.
  • Look for diversity in the thinking styles of people, and encourage that diversity of thought to bubble through and influence the whole business.
  • Treat employees as you would a trusted associate, not a piece on a chess board to be moved around at will. That trust will pay huge dividends in morale, productivity and loyalty
  • Institutionalise regular interaction and conversations across functions and up and down the company, without the impediment of formal roles.
  • Continuous improvement in everything should be so ingrained that people feel its absence keenly.

My final two years in Dairy Farmers were as GM Marketing of the much larger entity that now included the former GPD. While the business continued to be successful, the pace of change and improvement stalled under the dead weight of the still regulated milk business. After  two years, the MD of the business reached the end of his tether with me, constantly being a thorn in his side demanding change, and I with him, so one morning we parted company. The irony is that during this time, I (and the marketing team) launched the single most successful product I ever launched, the last in a long list of successful product launches as an employee. However, the means by which I had to subvert the ‘rules’ to do so were the nail in my corporate coffin.

Another two years on after my exit, the business was flogged off, ultimately to a Japanese brewer, at what I regarded as a fraction of its long term value. A sad end indeed to an iconic Australian food manufacturing business, and perhaps a metaphor for the whole food industry.

 

 

What SME’s can learn from Apples trillion dollar milestone

What SME’s can learn from Apples trillion dollar milestone

Aug 6, 2018 | Branding, Small business, Strategy

On Thursday last week, Apple became the first trillion dollar company in market capitalisation.

I was not even sure what a trillion is.

A ‘Trillion’ is different in the US count to the British system which we in Australia follow.

In the US system a trillion is one thousand times one billion.

In the British system, a trillion is one million times one billion.

Apple when it passed the US Trillion mark on Thursday at a stock price of $207.04 per share, was a company worth 1 with 12 zeros following it. $1,000,000,000,000.

Long way to go to be a British trillion, but nevertheless, a heap of money. (pity they pay so little tax on Australian revenues). Just for a little context, the US Federal  budget in 2015 was $3.8 Trillion, and was 21% of the US GDP. Therefore, Apples market valuation is now roughly 25% of the US federal budget.

So, what can a simple local SME, the businesses I work with, learn from this astonishing performance? Broke to a trillion in 20 years.

Yes, Apple was as good as broke in 1997 when Apple brought back Steve Jobs by buying his NeXT business to get their hands on the operating system, because windows was killing the MacOS as it was at the time.

The Apple board terminated then CEO Gil Amelio and put Jobs back in charge, and he changed everything.

So, to the question, what can the local SME’s learn from this?

A lot it seems to me.

Strategy.

You have to be able to take a ‘helicopter’ view of the market you are in, its adjacencies, and likely future influencers.  Jobs did this several times, seeing the potential impact of MP3 players, then teaming that device up with software iTunes, then moving again with the iPhone and iPad. Each time he saw what was potentially possible, and made it happen. As a local business, this helicopter view is just as valuable to you as it was to Jobs in 1997, and subsequently.

Timing is everything.

Jobs was able to see what was becoming possible before anyone else, and leverage the change. He was not the first in any of the individual technologies, but he put them together in a different way to leverage the multiplier effects. However, each wave was enabled by the one before, so timing was crucial.

Control of your value chain.

Customers are not looking for components, they are looking for the best solutions to their problems. Apple controls its value chain with an iron hand, delivering to their customers a unique experience in a ‘must-have’ package. They do not manufacture any of the core components, they just arrange for it to be all put together. In the evolving commercial world we are all facing, one of the most important words will be ‘Control’. Apple has proven to be a master of control, and has benefited accordingly.

Great design sells.

Dell, and HP, and all the rest could have done what Apple did, but they failed to do so. They designed and sold solid, reliable commodities, that all looked, performed  and felt the same, Apple designed something different that delivered an experience. The evidence is clear. Apple has roughly 15% unit market share of smartphone units sold, but holds 85% of smartphone profitability. This astonishing performance is the result of great design and branding over a long time, and the control exercised over the supply chain and tech eco system.

Dream.

It is usually just fluff to talk about ‘dreaming big’, creating your own BEHAG, (Big Hairy Audacious Goal) but occasionally, someone does it. Dreaming is a key part of the process, but dreaming by itself does not get anything done.

 

As an aside, one of the members of my local tennis club is a long term Apple employee in Australia, who has Apple shares as a part of his salary package. He has been issued shares progressively over the years, all of which have been sold to pay for  the expenses of living, mortgages, school fees, all the stuff we all face along the way. The first shares he was issued were at forty cents each. A very long way from the $208 closure on Thursday, and yes, he was crying!

 

When you need help thinking about all this stuff, even if you do not aspire to be the next Apple, call me.

 

Is data killing marketing creativity?

Is data killing marketing creativity?

Jul 18, 2018 | Branding, Marketing

The credibility of marketing in the boardroom fails the test to be quantitative, simply because it is about the future, about predicting  human behaviour and designing experiences and communications that they will relate to.

We hope.

Businesses are run on data, ‘what is the ROI’ may be the most common question around the board table. When the answer is ‘I do  not know’ or a set of fluffy clichés about customer experience, the accountants, lawyers and engineers who run the joint go to sleep.

Therefore marketers have embraced the availability of digital tools like a drowning man grabbing a floater, any floater will do, and now we are drowning in data.

Problem is the foundations of  the data are shaky, but because it passed the data sniff test, it gets a nod.

The result is boring, risk averse, creatively dead, communication and  marketing programs.

This is great for those few who remain undaunted by the data, who build on a creative platform, using data as one of a number of tools to hone the impact, simply because the competition is so bland.

Where something is unknown , rather than speculating, imagining, and creating, we deliver a dump truck of irrelevant data to fill the hole in the hope that no one asks the key question about its validity. ‘Because it is numbers, it must be right’ seems to be the default position.

The best marketers  today use data, they leverage data, they do not love it, do not allow it to drive the output, just to inform it. They remain creative.

So, my answer to the question posed in the headline is “mostly yes”. However, for those who have figured out how to use data to inform their creativity rather than to drive it, the good times are here. It is much easier to stand out in the sea of mediocrity that now exists for those very few who can harness and direct the power of data rather than being consumed by it.

Cartoon credit: my thanks, again, to Tom Fishburne www.marketoonist.com

 

What is the future of FMCG brand loyalty?

What is the future of FMCG brand loyalty?

Jul 16, 2018 | Branding, Marketing, retail

 

A few things have happened in the last few weeks that made me ask that question.

  • Coles MD John Durkan articulated a clear strategy for house brands, to build them at the expense of proprietary brands. I cannot help wondering if his successor will follow through.
  • I received a package from Amazon full of books, ordered in front of the new GST regime that came in on June 1, and it was covered with ads for Amazon Prime, which is now arguably the most successful loyalty program on the planet. At the time I was surprised, but then a day or two later, I realised they had launched in Australia.
  • Another small supplier to FMCG, a formerly successful business in a country town that had been around for 25 years, with a small but seemingly loyal consumer base, quietly packed it in. In the scheme of things a relatively insignificant event, unless you happen to be one of the people who have worked there for ages, and now find yourself unemployed and unlikely to be re-employed in your home town.

There is  no doubt the trend towards house brands across all categories of consumer spending will continue as retail supply chains become more transparent and global. Consumers are in a position to make judgements on the value they receive based on information from a variety of sources, not just on a label. Combined with the increasing necessity to pro-actively manage their spending, why would they not go for a cheaper item that delivered similar characteristics to a proprietary brand?

The driver of the change is digital. It is revolutionising the way consumers shop, by delivering them information that disrupts existing brand equity relationships. Consumers are now way less tied emotionally to brands, simply because they no longer have to be in order to feel confident about themselves and the quality they will get.

The ‘brand trust’ needed in the past has been replaced by access to information.

Retailers from FMCG to all forms of specialty retail see this. They are setting out to replace the consumer preference for product brands with a preference for their retail brand. Pretty much a strategic no-brainer when you think about it, but hard to deploy, simply because consumers do like some choice, and they recognise the retailers self interest in housebrands.

Mr Durkan points out that in some categories, the Coles house brands have a 50% market share, and seems to wrongly equate that number to consumer preference. In fresh produce, this number would be more like 95%, (I do not have numbers, this is a guess based on what I see) simply because Coles, (and Woolies) have not allowed proprietary produce brands onto their shelves, with very few exceptions, almost from the beginning.

This is not  driven by consumers, this is driven by  the strategy to capture the proprietary margin. If you are a shareholder, particularly of Woolies over the last decade, it has been a good outcome, but for a shopper, not so good. When was the last time you bought a plum in Coles that did not taste suspiciously like a cricket ball?

In FMCG retail, the driver of the change has not been digital, that is just an enabler, the real driver is Aldi, whose growth has hit the gorillas hard, and they have yet to find an answer. Aldi is a retailer, just like Coles and Woolies, but with a limited range, all housebrands, with a very few selected exceptions  like Vegemite and a few Arnott’s lines. This is not digital, it is a different business model, and neither of the gorillas has met Aldi on their own ground.

It is easy to be smart with hindsight, but here goes.

Woolworths responded to Harris Farm, and the move towards ‘specialty and fresh’ with Thomas Dux, initially very successfully, then screwed the pooch by not keeping it separate. Had they persisted, they could have built a very profitable and sustainable business, on a different platform to Woolworths.

The same opportunity offered itself in discount retail. It was not as if there were no precedents! I am old enough to remember ‘Jack the Slasher’ stores that stirred the pot  probably  35 years ago, Franklins, Jewel, and others. Discounters do work, they do attract customers. Aldi has just done it better than its forebears by eliminating transaction costs, and keeping overheads at a minimum.

The problem Coles and Woolies have is one of identity.

They are used to being all things to all people, and cannot conceive of a situation where consumers reject the idea. By eliminating proprietary brands, they are also eliminating one of the paths to differentiation and some level of intimacy with their customers, which will turn out to be a  bad mistake.

My view is that it is much harder now to develop a brand that builds and retains consumer loyalty than it has ever been, but then greater rewards will go to those who succeed. Those that do succeed will do so outside the ever decreasing  reach of the current retail gorillas, who will become increasingly challenged by both technology and new channels to the consumer.

 

How much do I need to spend on marketing my new business?

How much do I need to spend on marketing my new business?

May 22, 2018 | Branding, Marketing, Small business

This ‘How much’ question was posed to me recently in a networking group by a young professional who had just left the comfort of a large corporate firm to strike out on her own with a business partner. My answer: ‘Depends’. There is never a right answer to  this question, every situation is different, but there are a few foundation things that should be considered, and they all involve some sort of trade-off.

Time.

Time is our only truly non-renewable resource, so it makes sense to use it as productively as possible, depending on your definition of productive. For this new firm, while they have clients, they also have more time than they had working as corporate ‘slaves’ in a bigger firm, so they can choose to use it for marketing, developing their professional competence, which is after all an investment in their future, or they may even go to the pub. Early on it makes sense to invest some of the excess time in building their marketing and sales processes so that they can ‘feed’  the pipeline of potential clients.

Money.

Nobody, no matter how big, has sufficient money in the marketing budget to do all they would like. Therefore it is a matter of priorities and choices. Never easy. It is also true that the way you see marketing makes a potentially huge difference. Seen as nothing more than a necessary expense, it is just a chunk of money going out the door. Seen as an investment, marketing becomes something different, by definition. While it costs money now, it is an investment in future prosperity. By gaining clients that will continue to deliver revenue over a longer period, without having to spend on getting them through the door again in the first place, the initial investment will deliver great returns. My answer is also always tied up  in the need to use available money as productively as possible, which means that before you spend a zac on the communication end of the marketing spectrum, make sure you have the definition of  the ideal customer and your value proposition in place, so you can accurately target both the potential clients and your messages.

Expertise.

Expertise you can buy in, but it is dangerous to buy in expertise in a situation where you do  not know enough to adequately make the choice between alternatives.  This applies  perhaps more than anything else the strategic/marketing end of  the service continuum, simply because there is rarely one right answer, and  there are no external professional standards to be met. This means that a  marketing professional may just be highly professional about marketing their  business, but hopeless at marketing yours. If you buy in expertise before you know what expertise you really need, you risk getting a plumber when you need a carpenter. Alternatively, you can buy in the expertise to assist define just what it is you do need before you make the investment in marketing activity. The instinct these days is to talk to a so called ‘digital marketer’ whose business it is to sell you digital marketing services, whether or not that is the best use for your money. It pays to be sure, do some serious introspection before you jump. This is not usually an instinctive thing for most, in this case they are lawyers, not marketers, and marketing remains a ‘dark art’ outside their experience and expertise. Marketing has to be at the front of your mind, not just during the start-up phase, but for ever more. While the specific activity that drives client engagement can be turned up or down according to the capacity available to service the business, marketing is a key part of the DNA of every successful business.

Create processes.

Everything in business is a part of a process, no matter how big or small it may be. Therefore the things that are repetitive should be ‘routinised’ as much as possible so they happen with minimum resources, and optimum performance. In other words, they are a productive use of the time and money allocated. Just as providing a professional service requires a process to be followed, so it is with marketing activity. You can automate just about everything these days, which is where a mistake is often made, as automating a rubbish process just leaves you with automated rubbish. There is  no substitute for mapping out what you want to achieve, and the best way to achieve it, piloting and refining, before you automate. Remember also  that automation by definition, removes the ability to be agile in the face of something not considered in the automation phase.

Prioritise ruthlessly.

We only have so much capacity, spreading it thinly just ensures nothing gets done properly. Far better to do less things, well. Therefore, I absolutely subscribe to, and work with clients to prioritise their investment of time money and expertise. You can do this in any number of ways, two of which I like and use. The first is the well known urgent/not important matrix,

 

 

 

 

 

The second is an aggressively culled priority list. Record the top 20 priorities you have in front of you. Prioritise 1 to 20. Draw a line under number 4, or 5, and discard the rest into a ‘carpark’ of some sort, not to be considered at the moment, but too be kept aside, as being in your top 20, there is some importance to be attributed. Ensure that as a part of  the process you have performance measures built in so that you know which parts of your marketing are working, in which case you double down, and which are not in which case you stop, and either save the investment or use it in the doubling down.

Finally.

Find activities you are happy to do, that you can feel proud of, and do  them. You are in business for yourself, being happy is often hard as the pressures can be substantial, so make the effort to find the elements  of the wider role you have taken on, and do those that you enjoy, are good at, and which add value to your business, and outsource the rest, having done sufficient research to ask good questions of potential suppliers.

Three critical success factors of a newsletter.

Three critical success factors of a newsletter.

May 10, 2018 | Branding, Communication, Strategy

A colleague has a newsletter, he emails it to his list on an irregular basis as he has something he  thinks of interest to say. When I unsubscribed, he rang me, angry that I had done so, after all I am known personally, and have an interest in  the topic.

Compiling a newsletter can be a hugely valuable tool in the marketing armoury, I subscribe to several that are on my ‘must read’ list. However, my time is limited, and my inbox stuffed with rubbish, the unintended consequence of being curious in this digital age.

Apart from some basic errors, like an absolute lack of any visual attraction, and questionable editing, I pointed out he has ignored some of the marketing basics that simply have to be covered in this day of competitive tsunamis of information coming at us from all angles. So I gave him some gratuitous advice based on what makes me wait for those few newsletters I value.

Respect my Time.  Time is the only totally none renewable resource we have, I do not want to waste any of it, and the demands on it have multiplied geometrically over the last decade. Therefore, I prune from the bottom. If you want a ‘sticky’ audience for your newsletter, treat your audiences time as being way more valuable than your own, and they might stick around.

Create Value. The corollary to not wasting peoples time, is to deliver great value. If all you are doing is regurgitating other people’s stuff, how does that add value? It is also true that people value different things, so your newsletter has to be a source of value across a few domains in which your readers live, and not all of it will have a commercial value. Considering the sources of value to your primary potential reader, and being sure you can consistently deliver,  should be a foundation step before you contemplate allocating the resources necessary to build a newsletter.

Create a community.  The advice of all the pundits is to ‘Build your list’. Rubbish. If all you have are email addresses, you are no different to every other hopeful spammer out there. The value of the list you have is not in the  numbers, but in what the receivers do with the information you send them. I would rather have a community of 100, that waits for the next newsletter, consumes the content, comments, shares, and feels like their time has been well spent, than a list of a million, 90% of which get caught up in the spam folder.

None of these three are easy, in fact, they will consume considerable resources, way  more than their short term value would indicate is sensible. However, if you are in for the long term, great, a newsletter can be constructed and encouraged to evolve that will be ‘sticky’ in a sea of mundane crap.

Newsletters such as the John Deere publication  ‘The Furrow’ survive because the follow these unspoken rules. ‘The Furrow’ have been serving a their readers since the 1895, the Michelin Guide since 1900, just two examples of newsletters that have become synonymous with content  marketing success delivering brand longevity.