21 Lessons from a manufacturing turnaround

21 Lessons from a manufacturing turnaround

 

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.

 

 

How to develop some of that vital  ‘fingerspitzengefuhl’

How to develop some of that vital  ‘fingerspitzengefuhl’

 

Fingerspitzengefuhl is a German word that translates poorly (I am told, my German is marginal at best) meaning literally ‘finger tip feel’. The real meaning is the intuitive sense that develops in some people with deep domain knowledge, experience and expertise. Somehow, they just know when something ‘feels right’.

In this day of the metrics tsunami, this sense of deep understanding should be easy to find, or at least much easier than it was, but I find in my travels that it actually seems harder to find. Very few seem to have developed it, and those that have seem to effortlessly outplay their competition.

It occurred to  me that this is because the metrics we are trying to untangle only give us half the information.

Why, not what.

They all tell us what happened, that is what algorithms do, they record the events. Very rarely do I see people digging around to find out why they happened. In the ‘old days’ pre-digital, there were few metrics that were easy to come by, so we spent much more time understanding the why something had happened.

Outcomes, not Activities

Our metrics report on all sorts of activities, but do a less effective job of telling us the outcomes of a specific activity, in identifying the real cause and effect chains in place. There are now simply so many options that the causal chains are more obscured than they ever were. However, digging them out is gold, as it enables huge productivity gains in your marketing investments.

Yours and theirs.

Most metrics concentrate on measuring the success, or otherwise, of your own investments, with scant regard paid to understanding the returns your competition is generating from theirs. Commerce is a competitive sometimes Darwinian game, and knowing your opposition better than  they know themselves offers huge competitive rewards. Understanding how they will react to something you do enables you to wrong foot them, catch them off guard, sneak in their back door, and generally knock them around.

None of this comes without effort, it requires deep commitment to understanding, and often breaking with the status quo, but  the rewards are there for the bold. You will develop ‘fiingerspitzengefuhl’ and everyone else will marvel at your insight, and ability to out think and out manoeuvre  your competitors.

For SME’s, ‘fingerspitengefuhl’ is both the source of their competitive advantage and competitive disadvantage. On one hand, they are by their nature much closer to the customers than a larger business, unencumbered by the friction of a bureaucracy, and  therefore have the potential to be more agile and responsive. On the other, they are so busy working to keep the bills paid, without the support mechanisms of a larger business, that they never lift their heads to see what is going on around them.

Need some help? Give me a call.

Header credit: Michelangelo on the ceiling of the Sistine Chapel.

 

The ‘Change Quadrant’

The ‘Change Quadrant’

‘Death and taxes are the only certainties in life’. Perhaps this used to be true, but no longer, there is now a third certainty:

Change.

Like it or not, it is happening around you right now.

Those charged with the responsibility of running enterprises, managers and Directors, have to be able to lead change, taking all stakeholders with them.

Clearly not all are capable of changing themselves, let alone leading anyone else.

It seems to me that people react to the prospect and fact of change in one of 4 differing ways.

Change avoiders.

There are those who are rooted in the past. Whatever the status quo may be,  it is not as good as it has been in the past, so they are positively motivated to ensure that you do not move further away from this past nirvana they see

Only when there is no choice. These people will not welcome change, they want nothing to be different, and will only change at the end of a pointed stick, and often then only when it is too late, the train has left the station, then they complain about missing it.

Change followers.

There are those who want to be led, they are open to change , as long as somebody else does it for them, and ensures their life is easy. Generally they are happy to tag along and take the benefits of change, and make the contributions to the change so long as they are assisted to it.

Change troublemakers.

This is what they are seen as, but these are often the ones who actually make it happen, the ones who treat the risks and challenges of change as a personal opportunity to make a mark.

Change embracers.

This group seeks change all the time as some sort of stimulant, sometimes as an antidote to everything else that is annoying them in their lives. They are often counter productive as they forget that change does need to be allowed to evolve, and bed itself down, or it fails to take hold.

 

These four groups fall neatly into a quadrant, and you do need elements of all four in a change project,  as when well managed, all have something to offer. In assembling a team to develop and implement change, a careful selection of the ‘change profile’ of all potential members should be considered in order to get the blend that best matches the sorts of outcomes you anticipate, and the nature of  the task. Knowing yourself, which group you fall into is a pretty important first step.

Cartoon credit: Hugh McLeod at gapingvoid.com 

Economies of technology, not of scale, will be the drivers of success in the future

Economies of technology, not of scale, will be the drivers of success in the future

 

8 years ago I did a research project that required me to have a look at the future of intensive horticulture. As a part of that project I spent a month in the UK looking at what was happening, and was astonished to see the beginning of a production ‘flip’.

Horticulture is relatively intense compared to other forms of farming, but it still required lots of land, water, and labor. In the UK I discovered technology was in the early stages of taking over. Innovators had ‘flipped’ the model and were producing vegetables in capital and IT intensive greenhouses. The day I visited one of the leaders, Barfoots of Botley in 2010, they were completing the commissioning of the first 3 anaerobic digesters  at their main farm in Sussex, using the green waste from produce grown in greenhouses which was already powering the indoor growing beds and packing shed.

In the 8 years since, the progress has been amazing. AeroFarms in the US has attracted significant venture funding, and is one of those changing the face of agriculture by bringing it back to where the population lives, and Barfoots has expanded geometrically.

In Australia we have  very few  examples of this sort of innovation. One is Green Camel farms at Cobbitty on Sydney’s southern outskirts, which has combined greenhouse production of organic herbs and tomatoes with an aquaculture infrastructure producing barramundi in a closed loop system.

The point is that agriculture, like all other industries is being disrupted by technology in ways almost unforeseeable a decade ago.

Technology and capital intensity is replacing scale as the defining feature of success.

Lean Manufacturing seeks ever smaller production runs delivering an even flow of finished product matched to customer demand, as it evolves, eliminating WIP and finished goods inventories while delivering customer specific finished products with minimum lead times.

The days of huge integrated manufacturing plants cranking out product at volume to reduce costs by finding the economies of scale are gone.

Equally, production volumes from thousands of acres of open farmland will be replaced by a vertical capital intensive farm in a disused warehouse somewhere  in the inner city, close to consumers. Bit hard with livestock, but what are feedlots if not capital intensive small footprint farms?

Irrespective of the manufacturing environment, and I see agriculture as just another form of manufacturing, with inputs, WIP, risks, lead times, and all the rest, ‘de-scaled’ manufacturing will become the model our grandchildren will be familiar with. They will probably also be making engine parts in their bedrooms on desktop printers, it will be as normal as CAD software is today.

Header photo: Aerofarms towers

PS. After reading the post, a friend in the business sent me this link to the Panasonic vertical farm in Singapore. The more I dig around, the more convinced I become of the speed and volume of changes about to hit the supply chains of horticulture.

7 Books every marketer should read.

7 Books every marketer should read.

 

I am a voracious reader, have been all my life, all sorts of stuff from fiction, biographies, and books of ideas, to technical journals that challenge me to come to an even basic understanding. Perhaps it is because I am a bit of a dreamer, but also intensely curious, and reading feeds both.

As a management contractor and consultant, reading also gives me the foundation upon which to build the activities I recommend, sometimes implement, and write about incessantly on this blog.

However, there are a very few books that I go back to again and again, some that I read, remember, and refer to from time to time, some that get read and put aside as interesting, and many that do not get finished, as the message is simply not of the interest I assumed from the name, cover blurb and often the endorsements.

When asked which are the ‘go to’ books on the areas in which I practice, strategy, marketing, sales, and business improvement, it is a very small list. These few have added to both the width and depth of my thinking on my area of professional expertise. They are the standouts among a library of terrific books.

‘Influence: The psychology of persuasion’ by Robert Cialdini.

I first read this book probably 25 years ago, and have used the insights it offered ever since as a foundation for all my thinking related to marketing and selling. My current dog eared and scribbled on copy, probably the third or fourth I have had (I tend to lend them, but books are not boomerangs) is again on loan to someone I was trying to help.

 

‘Spin Selling’ by Neil Rackham’

Spin Selling is another oldie but goodie I first read over 20 years ago. There have been thousands of books written on all aspects of the sales process,  and while I have not read anything like all of them, none of those I have read goes even close to laying out the sales process as well as this one. Even in this digital age, nothing like the time when it was written, the principals remain, because they are about human behavior, not just creating a transaction.

 

‘The Goal’ by Eliyahu Goldratt.

The Goal is an unusual book, a text book written as a novel. I first came across it a very long time ago trying to get my head around making operational improvements in a ‘broken’ factory. The lessons in the book have subsequently become entrenched in the writings around the TPS, Lean and 6 Sigma improvement movements around the world.

It is not a marketing book, it is one that describes the improvement challenges in the manufacturing environment we see evolving in front of us, and the means by which those challenges can be met. As such, it is applicable to marketing, which should be as welcoming of continuous improvement as any other process. Besides, it is a good read!

Goldratt is a mathematician, and philosopher who first proposed the mathematical equations that now make up game theory, not a marketer. This makes, again, the point that great marketing always has a quantitative base, if you look hard enough to find it. .

 

‘Team of Teams’ Gen. Stanley McChrystal

I love this book, as it describes the manner in which General McChrystal turned the command and control culture of the US army on its head in the face of fierce opposition in Iraq that did not follow the ‘rules of war’ by which the US army had evolved. It was unthinkable that an apparently disorganised and leaderless bunch of terrorists (or freedom fighters, depending on your perspective) could, and did , render the overwhelming might of the US military redundant. This book provides a blueprint for every organisation to follow as it sets about reconfiguring its activities to meet the challenges of a fragmenting and information rich world.

A very useful addition is a follow up called “One Mission’ written by Chris Fussell, who was McChrystal’s offsider in Iraq, and collaborator in the writing of Team of Teams. It describes how the team of teams methodology has been translated into the world of business.

 

‘Playing to win’ by A.G. Lafley and Roger Martin.

This book builds on the work of Michael Porter, who wrote the seminal book on competitive strategy way back in 1980. There have been libraries written about strategy, how to develop, deploy, manage, and account for it, and some are very good, well known books of great value. None however come close to this book first published in 2013, for a practical and useable model by which to manage the complex strategic processes necessary for success. For me, this model goes hand in hand with Business Model Generation (below) which looks more specifically at designing a business model that will best deliver a strategy.  Both require iteration and deep analysis of your business, its objectives and competitive environment.

 

‘Business Model Generation’ by Alexander Osterwalder.

There has been a slew of offshoots from this book, which presented for the first time the idea of a  ‘Business Model Canvas’. This idea evolved from the work and writing of many scholars and practitioners, especially those involved in the ‘Lean Startup’ movement that evolved into the book of that name written by  Eric Ries.  The Business Model Canvas is  now a tool I use in virtually every strategy assignment as a means to visualise in a simple way all the key components of an effective business model. It is not just for startups, but for every business that is seeking to critically analyse their current and evolving business models, and that should be everyone.

 

‘Pre-Suasion’ by Robert Cialdini.

I bought this book on the basis of ‘Influence’ but quietly wondered what more Dr. Cialdini could possibly say that would add to the depth of his first masterpiece. It is a very recent book, published in late 2016, which I have just finished for the first of what will be many readings. The amazing thing is that so many of the ideas when written down make so much common sense, but I had never really considered them, most being just so ordinary as to escape notice.  This is potentially the most important marketing book of the last 20 years. As marketers struggle with the homogenisation of markets, and increasing challenges of building a brand in the face of customer and media fragmentation, the ideas in this book may make the vital difference between success and failure.

The challenge in compiling such a list is what you leave out. Amongst the piles of dross, there are some gems that deserve your attention. Simon Sineks ‘Start with Why’ upon which his seminal TED talk is based, Stephen Pinkers ‘How the mind Works’, Daniel Kahnemans ‘Thinking fast and Slow, and Ray Dalios ‘Principals’ are just a few.

I still prefer to read a physical book, or journal, in hand. I find it hard to write thoughts as they occur on a screen, and the physical connection is for me, an important element. My view is that so long as you remain curious, and feed the curiosity, you will uncover a few books which for you represent the list you recommend to others. This is just mine.

 

Happy reading!

Header: courtesy Jay Cross via Flikr

 

The ethical underpinning of strategy & marketing is being eroded.

The ethical underpinning of strategy & marketing is being eroded.

 

Marketing is about adding value, finding innovative ways to solve problems.  Sometimes marketers set out to ‘solve’ problems that around the BBQ would be termed a ‘1st world’ problem.

‘Which dog manicurist’ rates in my mind as such a problem, the subject of a conversation I was unfortunately involved in at a local dog park a few weeks ago.

However, sometimes extremes are pushed.

An extreme example perhaps, but the fiasco surrounding breastfeeding at the recent World Health Organisation meeting in Geneva convened in the belief that there was a consensus informed by science to be ratified, shines a light on the ethical challenges we face.

For some, mostly our wives and mothers,  it is a highly emotional question, to breastfeed or not, substituting formula for the real thing. It seems that the 1st world is returning to breastfeeding as the developing world turns to formula, believing it is a sign of maturity, sophistication, something to which they aspire.

To me the answer to breastfeed or not is blindingly obvious.

We evolved as mammals, breastmilk evolved with us, and is therefore uniquely suited to the nurture and development of a baby. The high jacking of breastfeeding by those flogging formula for profit is to my mind an unethical, indeed immoral act of marketing strategy.

Formula is terrific for those who for one reason or another, cannot feed. Back in the day the baby would have either died, or been passed on to  someone who could, a ‘wet-nurse’ for nourishment.

The sight of the WHO being managed by those with an agenda favouring formula for profit over the natural product appals me.

Where has our moral compass been hidden?

Locally, the marketing for profit before ethics brigade have taken over in the financial services industry, insurance, urban development, and a host of other sectors, and we are all the poorer for it.

Bit by bit the fabric of our communities is being ripped apart, the evolutionary power of Dunbar’s number thrown against the wall of technology as the power to communicate and collaborate erodes what made us human in the first place.

Somewhere, somehow we have to find the tipping point, and start to recognise that all that is new is not necessarily good.