Feb 25, 2014 | Branding, Change, Collaboration, Demand chains, Marketing, retail
A pilot program I have been recently involved with, setting out to assist the evolution of a” Sydney Harvest” brand of local produce has not delivered the results hoped for.
After years of agitation by produce growers in the Sydney basin, beset as they are by aggressive competition from the chain stores, lack of scale and high operating costs as a result of being in semi urban areas, governed by urban concerns, the pilot was created. It was a collaboration between a small number of Sydney basin growers, and specialist retailers aimed at delivering the freshest and best possible produce to those discerning and demanding customers who choose to shop at the specialist produce outlets.
The value proposition was simple : “You know it is fresh, because it come from down the road, you know the retailer, and here is the grower, guaranteeing product provenance and farming practice sustainability”.
In considering the reporting of the exercise, part of the shortcoming of the pilot was that there was little commitment beyond the verbal from the participants, even though the verbal commitment was strong. This is very common in the early stages of collaborative exercises, everyone says “yes” and waits for others to do the lifting. The emergence or otherwise of a “champion” someone who takes on the challenges at a visceral level, can be the main bellwether of success.
Watching a presentation by Seth Godin last night, he articulated just the situation we had.
There was no “connection” between the participants beyond the superficial, the human connection was not there.
Godin calls Connection “The asset of the future” and in a connected world, it would be hard to argue against this proposition. He further identified 4 pre-conditions of connection occurring.
- Co-Ordination. There was co-ordination in this pilot, but it was managed from the outside, by me, there was little skin in the co-ordination part of the game by participants.
- Trust. Trust evolves over time as a result of behaviour, it is never given, it has to be earned. In this case, we underestimated hugely the role to be played by trust, and the preconditions necessary for its evolution.
- Permission. Seth is talking about permission being given by the subject of a marketing effort, so this pilot is a different set of circumstances, nevertheless, whilst” permission” was given in the sense that all signed up to the pilot knowing exactly what was going to happen, and the role they were expected to play, when it went away, nobody missed it. The “permission” whilst given was nothing more than a superficial “OK”
- Exchange of ideas. In this case, whilst there was superficial buy in, the subsequent behaviour did not include interaction amongst the participants. They were too busy and pre-occupied with the normal business to put the time aside to exchange ideas, and get to know on a human level the other participants ,exchange ideas and experiences, and learn from each other.
This stuff is really, really, hard, and the only way we learn is by jumping in and having a go.
Oct 22, 2013 | Change, Demand chains, Marketing, Strategy
The success of the last 250 years in western economies is based on the economies of scale. Harnessing technology to deliver greater productivity per unit of input, capital, labour, and raw material.
All industries have been disrupted from the cottage stage to industrial, and the change has spawned industries unimaginable even to our fathers.
Agriculture has been no different, “factory farming” is the standard, even it is it still outside in a paddock.
It now would appear to me that there are the beginnings of a reverse disruption, accompanied and enabled by the removal of organisational and arbitrage barriers enabled by the web. Words and phrases like “Local” “sustainability ” fresh” “product provenance” and “demand driven” keep on coming through. A small but increasing number of consumers are seeking out products that deliver these promises, and a few specialist retailers are suddenly seeing the emergence of a consumer group who will not be seduced by the giant retail chains.
A semantic disruption?
Agriculture in the Sydney basin has been under pressure from development for the last 50 years, and with some exceptions concentrated in intensive industries, has become increasingly marginal. There is not much left to meet the demands of this consumer driven semantic disruption as it evolves. However, those who are left, both producers and specialist retailers, have an opportunity to alter their business to leverage the emerging disruption.
Oct 1, 2013 | Category, Customers, Demand chains, Marketing, retail
It is pretty trite to point out, again, that the reason businesses survive is to satisfy customers.
In fresh produce markets, this has been pretty much forgotten as the share of the consumers dollar that ends up in the farmers pockets has progressively dropped over the last 50 years from around 50% to now 10% for the lucky ones.
This is below in many cases the cost of production, so there goes food security, at least at the prices we have become used to!
This squeezing of farmers has evolved as retailers have built scale, and managed their logistics to deliver margin from produce, and consumers have favored convenience and price over product “eatability”.
Now however, it may be that the worm is turning.
Some consumers, certainly a marketable proportion, are turning back to favour freshness, product provenance, and taste, and are finding those characteristics in farmers markets, direct home delivery, and the few specialist retailers who have survived. These consumers are driving the evolution of a transparent “demand chain” which is putting some leverage back into the hands of farmers, if they can figure out how to remove the impediments to transparency, and the ticket clippers who inhabit the chain.
The tools of the web are slowly turning the supply chain of old into a demand chain, a supply process that responds to consumer demand, preferences, and habits. Farmers being able to communicate with those who consume their produce, and respond accordingly disappeared when we moved en masse to the cities, as no longer were we living in the small communities that enabled the communication.
Now however, that ability is back, so use it, and eat better!
Sep 26, 2013 | Branding, Demand chains, Marketing, Strategy
A couple of days ago I did a presentation at the University of Western Sydney to a group of academics, farming advocates and farmers. The presentation addressed the challenges of agriculture in Australia close to the major cities, specifically Sydney. Peri-urban agriculture to invoke the jargon.
In preparing the presentation, it seemed sensible to define the genesis of the challenges faced by peri-urban agriculture to ensure that we were addressing the right problems, not the symptoms of the problem. I came to the conclusion that there are 6 forces at play here that need to be considered as we deliberate about any remedial action:
Retailer power. Australian food retailing is the most centralised in the world, effectively a duopoly. This scale of operations enables considerable efficiency, and coupled with an aggressive strategy to reduce transaction costs in the supply chain, small suppliers have been squeezed into the 25% not controlled by the majors, and alternative channels like food service.
Food security. This is not just some jingoistic response to Chinese ownership of land, although you are forgiven for thinking that, it is more about the capacity of Australia to feed itself in the face of a dying industry sector. When you look at the data, we export lots of “food”, but look closer and most of it is commodity grains and meat, the other side of the equation, processed food, we are a net importer, reflecting the decimation of the processing industry, and what is left is largely owned internationally.
Urbanisation. Our cities are sprawling, gobbling up land that has fed us for 200 years, and the pace in increasing. To my mind, it is at its roots, an economic argument between the immediate value of a series of short term transactions that turn land into housing estates, and the long term value of land as a productive asset that just keeps on producing. This equation, the data driven ROI calculations of the developers Vs the more qualitative long term value of land as a producer of food for decades and longer, usually falls on the side of the developers. We really need an analytical framework that does a better job of putting a quantitative floor underneath the long term value of being able to feed ourselves, and that value is reflected in the somehow. It is not just a matter of price, Value is a much wider, more encompassing term. Perhaps the current debate around Coal Seam gas ripping into agricultural land will drive some of this analysis.
Agricultural land as a social asset. This notion can be a bit controversial, but bear with me. Humans evolved over millions of years to live on, and “off” the land in small groups, not congregating in cities disconnected from agriculture and foraging. 200 years ago this changed pretty rapidly in the now developed world, and the trend is accelerating. In the developing world, 2/3rds of the world, the move has been explosive for the last 50 years. What anthropological impacts this is having we can only speculate, but my contention is that this disconnection is at the root of much of the social dislocation we are seeing around us. Assuming this notion has any validity, it gives a social perspective to the use of the land around us.
Emerging consumer concerns. Consumers are the beneficiary of the huge amounts of information now available to them, and they are using that information to make their own decisions in defiance of much marketing orthodoxy. They are informed, cynical, and self reliant, and we now see a strong undercurrent of individual decision making based on freshness, product provenance, sustainability of farming practices, taste, and an individual view of value. This is requiring a revolution in marketing thinking, and is being reflected in the growth of channels outside the retail duopoly, farmers markets, farm to home delivery, and resurgence of specialist fresh retailers. The 25% left over after the duopoly share is taken appears to be reversing, and rather than becoming 24%, is more likely to become 26%.
Information transparency. The explosion of our capacity to capture, organise, analyse, and transmit data is as significant a development as the printing press, and harnessing of steam in the impact on our lives. That capacity has turned supply chains where growers simply grow, and throw the produce over the fence, hoping someone buys it and pays them a fair price, to a demand chain where the drivers of demand, what consumers want, is now transparent. The whole chain can be now reconfigured to reflect that demand, and costs are only incurred where that add value is greater than the cost.
The strategies to be employed if you want to navigate through he shoals of the 6 forces outlined above can be broken into three:
- Increase the perceived “value” of products in consumers eyes.
- Engage consumers.
- Outflank the retail duopoly.
In other words, build a brand.
Easy to say, hard to do, and to be done, it needs to be commercially sustainable, not something that relies on public funding.
Sep 16, 2013 | Change, Collaboration, Demand chains, Operations, Strategy
Most of the really great innovation that happens has as a core component, a re-definition of what the future should look like.
From Orville and Wilbur Wright, to Henry Ford, Martin Luther King and Steve Jobs, the words they used explained why they were doing something, and how they believed it would change the future.
They defined what the future would should look like, and the similarity to the present was only by exception. Then they got on with delivering.
On a more mundane level, lets consider the future of agriculture as a component of our modern lives. We have cities now that were unthinkable a generation ago, Tokyo’s urban area contains 37 million people, Jakarta 27 million, Seoul 23 million, and so on down the list.
Mans evolution seems to be grounded at the points where he first domesticated some animals to serve as hunters, food, and companions, then domesticated wild grains, and settled down to grow them rather than moving and harvesting as they went. A similarly monumental change is happening around us now, as we leave the land and cram into cities. Initially we fed ourselves with factory farming monocultures replacing natural environments, and we are only just starting to realise the ecological impact of this social change as a few experiments in “rewilding” progress.
This increasing disconnection from our roots I believe is being felt at a subconscious level, and we are reacting, demonstrated by the sudden popularity of cooking and gardening shows in the media, the growth of farmers markets, “pick your own” trails run by local farmers, the resurgence of specialist retailers who provide product provenance, and the nascent groundswell of interest in urban agriculture.
Degraded urban areas are being re-greened, and the thinkers amongst us are slowly recognising the extent and power of the changes, and reporting the changes, as with the” Urban food security, urban resilience and climate change” report.
So what next?
Technology will play a huge role in enabling “vertical” agriculture, a capital and technology intensive idea, but the bridging stage is to retain agriculture as an integral part of our urban landscape rather than removing it under the short term pressure for housing and industrial development.
The exciting part of all this is not just the revolutionary agricultural practices that will emerge, but the opportunities for the ancillary industries and services to evolve, providing jobs, education, and some reconnection with our evolutionary ancestors, whose DNA is hard-wired in us, but recently ignored to our social cost.
Sep 5, 2013 | Customers, Demand chains, Marketing
Creating a demand chain out of an environment forged by a competitive and opaque supply chain mentality is no small task.
This change is particularly challenging in agriculture where there is considerable regulatory and interest group oversight and thousands of years of trading DNA pre-digital.
However, why should the agricultural supply chain be immune to the collaborative revolution spawned by the availability of digital data sweeping every other industry. Clearly, agriculture should not, so those who can conceive the future will have the opportunity to own it.
The characteristics of successful collaborative ventures appear to be similar irrespective of the market they operate in. Accommodation to car hire to books, where there is a market that can benefit from information, a logistic chain that is suboptimal, and a supplier base that opens up to change, the characteristics of a successful demand chain are similar.
- They are Transparent. End to end, the availability, costs, and value add is clear to all who can benefit from the knowledge.
- They are collaborative. Each component of the chain recognizes that their individual best interests are best served by serving the best interests of the chain.
- They are consumer centric. Delivering to consumers is at the core of the drivers of the chain. Sometimes this requires re-engineering of an existing chain, in effect innovating the delivery of an existing product or service, but increasingly emerging are value propositions made possible by new technology, driving development of demand chains that would not have been possible just a few years ago, like airbnb, Lyft, and Zappos.
Each of these characteristics adds to the capacity of the chain to reflect demand back through the chain, igniting the activity required to fill the demand.
