Leadership lessons from the greatest marketers in history

Leadership lessons from the greatest marketers in history

I do not go to church, do not believe in the god of the Bible, Koran, or any other narrative that offers a solution to the failures of our humanity.

I have however, been in awe of their collective and individual capacity for marketing.

Let’s just take the three Abrahamic religions, Christianity, Islam, and Jew. They are old, old, have persisted, evolved, and successfully transitioned through the ages to remain a major point of faith for hundreds of millions of loyalists.

Great marketing, tapping into the emotional drivers of our behaviour.

In all three, the 10 commandments are central.

The Islamic form is a little different to the Christian and Jewish, but the sentiments about what constitutes a ‘good’ life line up almost exactly.

If god was all powerful, all consuming, why would he/she (to be politically correct) restrict the delivery of rules to just those 10? Why not go further, and ensure we did not stuff up the environment, or congregate in dirty cities, or give us the rules for building a house, and a million other things?

Instead, we got a framework within which to make our own decisions, a set of guidelines about what constituted acceptable behaviour in a civilised community. Within the boundaries of the guidelines, we could behave as we wished to deliver the outcome of a ‘good life’, one that contributed to those around us, as well as to ourselves.

Sounds a bit like a successful strategic framework, does it not?

Less is more.

Lead.

Are you a day trader or a marketer?

Are you a day trader or a marketer?

It is a paradox to me that we treat investments in capital equipment for our businesses and various financial instruments for our own wealth generation, as items on a balance sheet. By contrast, we treat marketing investments, and particularly those made in various forms of communication, as discretionary items recorded in the profit and loss account as an expense.

Nothing is more critical to the long term commercial health of an enterprise than the investment in marketing. Identifying, communicating, creating transactions and building relationships with customers.

There are 3 basic strategies considered by financial investors

  1. Index investment. This is a low risk strategy, sticking to stocks that reflect the particular index against the performance measures that will be applied. The most usual are the reserve bank interest rates, and the top 200 stocks.
  2. Arbitrage investment. Essentially this is a short term strategy that assumes the investor is smarter than the market. It involves a lot of buying and selling of stocks, essentially bets that the short term is higher or lower than the current. Over the long term, there is plenty of research around that indicates that the performance is around the major stock indices. This is also a high cost strategy, in that the constant trading incurs transaction fees, usually not included in the published performance metrics.
  3. Value investment. Investing for value is a strategy that involves taking a long term view of the businesses in which you invest. This means you engage deeply, not just with the numbers, but with the management and culture, as well as taking a view of the marketplace in which they compete. It is a ‘filtering’ strategy, one where a lot of research boils down the potential targets to a very few, in which you take a significant position. It is a focussing of resources at the specific points where you see there is long term returns available, and are prepared to accept the vagaries of the short term focussed market gyrations.

If you apply a similar frame to the manner in which businesses make investments in marketing, there is a remarkable similarity.

  1. Index marketing. Doing what everyone else is doing, being average, a follower, and risk minimiser. It also ensures you do not stand out from the crowd, which in a cut-throat marketing world means nobody notices or cares about you, so perhaps you should save your money.
  2. Arbitrage marketing.  Those following this strategy are just applying tactical actions to situations they see, there is no underpinning strategy, just advertising and promotion, usually driven by a budget that has to be spent, and KPI’s that measure the activity, not the harder to measure  outcomes of that activity. The driving word is ‘campaign’. A string of tactical activities will be seen as a campaign, and usually there is little flow from one campaign to another. This tendency has been accelerated to stupid proportions by digital, where the cycle time of a campaign, limited as they are, has reduced from months to days. No longer are we looking for the ‘big idea’ that will engage and motivate customers over a long period, we are looking for 10 ideas for the Facebook and Instagram posts in the next 24 hours.
  3. Value marketing. Successful marketing requires a solid strategy, well executed with a long term perspective. Over time, you will fiddle with the details as you become more familiar with the minutiae involved, and you fine tune the application of funds as you learn, but it is a multi-year commitment, not a short campaign, and certainly  not a few ‘cat photos’ on Instagram. Such ‘cat photos’ may be a tiny part of the tactical execution, but are never a component of the strategy. This takes time, resources, and most importantly, a laser focus on what is important to the selected group of primary customers. Over time, you communicate your value proposition that defines why they should do business with you rather than someone else, and do so at a price that delivers you a premium return, while delivering them premium value.  Then you retain their business, increasing your share of wallet, innovating, reducing customer churn, all of which delivers sustainable returns. 

 

If any of the above arguments hold true, then it must be that the measures we use to make decisions about our financial selves should be able to be adapted to the investments we make in marketing.

Step one is to see it as a long term investment in prosperity, and not a short term expense to be reported and forgotten, hidden in a monthly P&L.  

Step two is to have a robust, well thought out, and agile strategy.

Step three is to implement relentlessly.

None of this is easy, there are no templates of any value around that you can just download and apply. The requirement for success is the wisdom that comes with long and deep experience, not some superficial knowledge of the advertising algorithms in Facebook.

 

Header cartoon credit xkcd.com

 

 

directors; do you understand your rights and obligations?

directors; do you understand your rights and obligations?

 

There are a lot of SME’s around that are now in unexpected and unplanned financial trouble. For some it will be terminal with a potentially huge impact on personal assets, as well as those of the businesses they run.

 

Many owners of SME’s do  not fully understand their rights and obligations, often despite having an accountant that does their compliance and advises on financial structuring.

 

In particular, many owners of SME’s do  not understand the obligations they have under the Corporations Act as directors of their company.

 

This was brought home to me in a conversation yesterday with a casual acquaintance who I thought would be pretty well informed.

 

Following is a simple checklist, if in any doubt, ask your accountant the question. now is not the time to be dodging asking those questions because of the cost.

 

Insolvent trading.

 

It is illegal to trade while insolvent, and doing so risks personal and criminal liability. It is a black and white test: ‘Are you able to pay debts as and when they become due’?  For manufacturing businesses the answer is often tangled up in the valuation of inventory, and the state of your debtors ledger and revenue forecasts.

 

Can you collect what is owed to you, what can you reasonablly expect to sell, and how much cash do you have on hand.

 

Solvency is based on the expected cash flow, the result of these calculations. If you are not solvent, you are, by definition insolvent.

 

Directors duties.

 

As a director, which most will be, there are duties imposed by the Corporations act, and ignorance is not a defence.

 

You are required to act in good faith, with due diligence, and not improperly use information gained as a result of your privileged position. When solvency is in question, you are further required to look after the best interests of creditors.

 

In order to carry out these duties, you need to be fully aware if the financial position of the business, and have a management plan that addresses the problems. If in any doubt at all, ensure your accountant is completely informed and able to offer their expert advice.

 

What to do?

 

If your conclusion is that you are, or may be insolvent, a voluntary administrator can be appointed. The effect of this is to voluntarily relinquish control of the financial management of the business to an outsider, whose responsibility is to ensure creditors, in a defined order are paid. It does however, limit the liability of  the director after the day of the appointment. This option leaves you with more options than a wind up order instigated by a creditor, or group of creditors.

 

Premature appointment of a voluntary administrator is sometimes a temptation, so there has been recent changes to the Corporations act to allow a ‘Safe harbour’ which offers directors protection against personal liability of an insolvent trading claim. There are conditions attached to such protection:

 

  • Tax records are up to date.
  • All employee entitlements are up to date.
  • There is a concrete, stress tested plan to trade out of the difficulties, that does not include optimistic forecasts and hopes that ‘something’ will turn up.

From March 25th as part of the governments response to the Corona induced problems, the ‘Safe harbour’ provision have been extended. You are now allowed to incur debts in the course of ordinary trading for the next 6 months, and the thresholds for issuing statutory demands have been increased. This is  not a ‘get out of gaol’ card, simply a recognition of the reality of the current situation, and other director duties are not impacted. For details talk to your accountant.

 

The plan.

 

As noted, hope and rosy projections do not constitute a plan. There has to be specific actions taken to stabilise the financial situation, that will necessitate some challenging decisions about asset disposal, restructuring of operations and perhaps personnel, and managing the manner in which further costs are incurred. Together these should offer a concrete pathway to rebuilding the financial capacity of the business to trade its way out of insolvency.

 

The obvious elements of the plan will be:

 

  • Assessment and reordering of the cost base. Removing, reducing and deferring as much cost as possible, both fixed costs like rent, and discretionary costs like planned capital investments, and revenue generation activities that do not have a short term payoff.
  • Ensuring you have accessed government and provider assistance
  • Communication with all stakeholders. Employees, funders, suppliers, regulators, landlords and key customers.
  • Aggressively managing your cash conversion time by extending by agreement, payment terms to creditors and chasing debtors, early, politely, and often. This is just managing your working capital. The cash flow forecast is the essential tool for doing this. every change you make should be reflected in the cash flow forecasts.

 

The key ‘takeaway’ is to manage your cash.

 

 

 

Have we only ourselves to blame for ‘The Bug?’

Have we only ourselves to blame for ‘The Bug?’

We have a political situation of our own making.

It is very hard to convince people to invest against the possibility of something that may happen at some time in the future. The cost of the investment is immediate and measurable, the benefit unknown, and perhaps some time in the future.

In a democracy it is very hard to get people to vote for something they cannot see and feel, immediately. We moan, and I am a chief moaner, about the lack of foresight and planning evident, that has enabled the bug to run riot through our economies, but do we only have ourselves to blame?

There are three types of actions that can be taken by any organisation, public or otherwise.

  1. Reactive. These are decisions and actions taken after an event.
  2. Responsive. Actions and decisions taken as events are unfolding
  3. Pre-emptive. Actions and decisions taken in anticipation of an event designed to mitigate the impact.

If we were to categorise the performance of our various governments over the past 12 months, I would say that in relation to the fires that started in September last year, they were reactive, and even that is being very kind. The floods, now almost forgotten in February, the response was again reactionary, and sadly lacking substance. In relation to the Corona bug, they seem to have done better and been responsive, taking decisive action as events unfolded, and being prepared to adjust the response as more data becomes available.

Coming out of this, I would like to see some sort of pre-emptive actions taken to mitigate the impacts of the next catastrophe, whether it be another bug, fire, flood, or financial meltdown. As a country we have to build our operational resilience, meaning the ability to invest so that the impacts do not drown us.

Do this, and we will be a much stronger nation. Alas, in a democracy this is really hard, as it requires a collective desire to invest now without any idea of the outcome or payback, and electorates are not good at this.

This difference neatly explains the quick and substantial reaction to the current Corona crisis, but our almost total of lack planning and investment to mitigate the impact of climate change.

The current idea of a location app on our phones is a great example of the dilemma we face.

It makes absolute sense that we are able to track the movements of people in the face of a highly infectious disease, to see with whom they interact, even by chance, so that we can throw a ring fence around the bug. Most would probably agree,  but the downside is that we do not trust the politicians and ‘forces of evil’ to turn the thing off, and leave it off, when the crisis is over, thereby impinging on our rights to privacy.

In a democracy, like , this will probably mean a very good idea is thrown away. However, I bet that in a different system, it would be embraced, as public sentiment would not matter, and is kept private anyway as a means to stay out of the spotlight, which can be a dangerous place to be.

 

Header cartoon: courtesy David Rowe, AFR.

 

 

How do you lead effectively in a crisis?

How do you lead effectively in a crisis?

 

By definition, a crisis is something that has to be managed weekly, if not daily. There is no time for long winded discussions about strategy, competitive reviews, investments in technology transformations, the newest shiny idea someone has. While these are profoundly important they are the framework against which to measure the daily and weekly performance to the plan that will, if implemented, deliver commercial life. If you do not have such a framework, you will be in far greater trouble than you may otherwise have been. However, ensuring that at least the day to day decisions you now make are consistent with each other, and lead to a simple, single objective will be a good start.

 

The leadership style in this case of a crisis is different from the  strategic leadership necessary to position for the long term. Churchill failed as a leader in every situation other than the crisis in which Britain found itself in 1939, in which he excelled. He communicated the objective, to beat the Nazis, nothing else mattered, and everything was measured against that single objective.

 

There are many examples from more recent times. Steve Jobs taking over Apple a few weeks from bankruptcy, and turning it around into the cash powerhouse it is today. Jeff Bezos buying the Washington Post as a personal investment (as distinct from one Amazon made) as the corpse was about to be lowered into the ground, and remaking it as a journalistic powerhouse.  Alan Mulally doing the double act, leading  Boeing  through the tragedy of 9/11, then repeating the dose by saving a dead man walking Ford, during a time further made challenging by the 2008 financial crash. You might even add Kevin Rudd to the list, ensuring Australia escaped that 2008 crash relatively unscathed.

So, how do you do it?

Simple to say, hard to do: 2 rules only:

  • Have a plan with a simple, single objective
  • Work the plan relentlessly. This means daily, weekly, monthly review and rework of the plan at every level of implementation and accountability.

 

The plan has to be articulated at the macro level, and progressively broken down into the micro, so that the role of every person, and element of the plan, plays in the achievement of the objective is transparent.

I call it a ‘nested plan,’ best visualised by the typical organisation structure diagram. It replaces the names in the pyramid with objectives, and the cascading individual plans and personnel accountabilities required to achieve the cascading objectives, culminating in the overall objective at the top.

 

Every plan review meeting, from the shop floor to the executive suite should follow a consistent format, which enables single minded focus on the single objective. That format should be something like:

  • Department plan
  • Plan status
  • Forecast
  • Opportunities and risks
  • Period over period summary, qualitative as well as quantitative
  • Status of any items requiring attention from outside the power or capability of the meeting group.

Best practice for meetings of this type is well documented, following well understood principals of psychology and accountability, but in summary:

  • The above format, or your version of it, acts as the agenda
  • The plan status is delivered by the responsible person, or multiple persons.
  • The review is not a forum for resolving problems, just articulating them. Resolution is outside the meetings, but reported back.
  • There is a consistent format to individual presentations, again following the format above.
  • Never shoot the messenger of bad news, allocate a priority to defining the problem and accountability for suggesting solutions, to be reported in the subsequent meetings.
  • Concise questions that serve to clarify and quantify are encouraged from all participants.
    Meetings are open to any from outside the specific group who may have a valuable or even different perspective to offer.
  • Meetings are absolutely transparent to all.

There will be resistance to the implementation, people are not generally used to the levels of accountability and transparency a system of this type delivers. However, once you get it rolling, it builds a momentum of its own, as people take responsibility for their part in delivering the objective.

 

The header photo is of the priorities set by Alan Mulally on taking the reins at Ford. For the whole of his tenure, the process above was relentless implemented, and Ford came though the 2008 crash not requiring any government assistance, and went on to regain its significant and profitable position in the auto industry.

Hind-sighting the Corona-demic.

Hind-sighting the Corona-demic.

 

In 6 months time, when things have sorted themselves out, and we are moving into a post corona world, what will have changed?

 

It is very hard to imagine, but discounting the potential for some sort of apocalypse, there will be a new normal at some point, but that will look very different to the ‘normal’ of just a few months ago.

 

Following are a few thoughts, what can you add?

 

Digital transformation has accelerated.

 

Necessity is the mother of invention, and a massive catalyst for change. The communication tools that were available but widely resisted have suddenly become the status quo, and we wonder why we were so reluctant.

 

Items like corporate travel, fancy offices, position in an organisation structure, will all become less important, as they will be seen as a reflection of ego rather than  necessity, an ego swept away by corona, as working from anywhere other than a central office becomes more the norm. This transformation in digital communication will act as a catalyst for other changes enabled by new technology.

 

The role of deep expertise.

 

Suddenly, the people we trust are those with deep expertise, who do not apparently have a dog in the fight. Scientists have been telling policy makers, and the public for 25 years that climate change is happening, is a huge threat to our way of life, and needs to be addressed. They have been largely ignored. No climate change scientist has been listened to outside their scientific circles sufficiently to drive significant change.

 

The ‘Bug’ has brought into stark relief the complexity of our world. Interconnected economically, socially, and by a myriad of communication channels, it is not a simple place. We humans like simplicity, and in the face of complexity, revert to existing beliefs as a substitute for consuming the cognitive energy to understand and form new ones. This human tendency has led to the increasing polarisation and emotion of positions taken on a range of public questions, the opposed sides yelling at each other.

 

Just as suddenly, we have The Chief Health Officer, Professor Brendan Murphy front and centre, providing the scientific expertise to the government to make more general decisions about how to deal with the crisis. I doubt Professor Murphy would offer too many deep economic analyses, he leaves that to others (who may or may not know what they are talking about). However, we trust Professor Murphy, measured, consistent, offering what is obviously deep expertise in a narrow field. You could make similar observations about ABC spokesperson, Dr  Norman Swann, probably better known than professor Murphy or his deputy, Professor Kelly. My pinup boy in this regard is American Dr. Anthony Fauci, Director of the National Institute of Allergy and Infectious Diseases (NIAID) with his deep expertise has been able to correct Trumpian exhortations on the spot, publicly, and keep his job. (perhaps there is hope after all)

 

Hopefully this new found respect for expertise lasts after the Corona cloud has moved on.

 

Existential crises become accepted challenges.

 

Few recognised the potential for this crisis, despite many warnings in the form of SARS, Mars, Swine flu, Ebola, just to name a few on the last decade. The obvious exception is Bill Gates, who predicted exactly what has happened in a TED talk in 2015. However, now it is clear that we have reached a stage where something must be done, the too hard basket has overflowed. Climate change, equality of opportunity, universal health, mass migrations resulting from fundamentalism, and the concentration of economic and military power, will all be back on the economic and political agenda. We will start demanding some action rather than flowery words, and kicking the can down the road for the next lot to deal with. As noted above, we need to listen to the experts.

 

Dunbar’s number

 

We will recognise that the 10,000 friends we have on Facebook are as useless as an umbrella in a cyclone, but those few close to us, with whom we have a human relationship of real depth are priceless. The theories of British anthropologist Robin Dunbar will become widely known and understood, as we revert to smaller genuine communities. Perhaps I am a silly optimist, thinking the malignant part of Facebook et al will be restrained, but you can only hope.

 

Economics and politics

 

This could be a very long list. Our economic and political systems have been changed forever, there is no going back to PCD (Pre Corona Days), I hope.

 

While the economy has tanked, and there are dire predictions about how the bill will be paid by our children, and grandchildren, we are still alive, mostly working productively, and things are getting better.

 

We might even be seeing some advantages as the politics becomes more respectful, both of people and facts, and actually indulging in some forward planning, an element absolutely missing from our body politic since, well, perhaps since the days of Keating and Hawke.

 

New jobs have been created by small pieces of manufacturing coming back to domesticity, although the unemployment rate is still a number that seemed unimaginable a year ago. We might also have a real number, instead of the nonsense of the definition of ‘Employed’ being an hour of paid work a week, the bureau of Stats taking advantage of the cover offered by the crisis to update the definition.

 

People my age will have had their superannuation reserves diminished by both the withdrawals necessary to pay the bills, and the tanking of the share market, as well as there being a whole new wave of over 50 unemployed looking for a way to pay the bills. This all means we will be working longer, and there will be a rash of over 50’s entrepreneurial activity, where those previously hide bound corporate types, now unemployed,  try  their hand at something new.

 

The government, now saddled with a range of new costs that will become part of the status quo very quickly, will be desperately looking for ways to wind them back. For example, free child care, and a ‘living wage’ will be major topics of political conversation, as they are high on the list of must haves for the political left, but are ‘socialist evil’ in the eyes of the political right. It is always easy to give stuff away, particularly in a crisis as we will have just passed, but extremely challenging to remove that stuff from voters in the lead up to an election, which will by then be on the horizon.

 

As a community we are now demanding changes to the buck passing that goes on between the states and Feds in relation to who is responsible for what. We are working under a constitution that has served us well,  but sensible change that reflects the entirely different environment we are now in, is firmly in the too hard basket. If the Christmas fires did not highlight this enough to force changes, the lunacy of the Ruby Princess, and the subsequent finger pointing should have. It was more than just the everyday political incompetence we have come to expect, it was a gross failure of  the governance processes of the nation.

 

As an additional treat, there is toilet paper and pasta back on supermarket shelves available for purchase whenever we venture out.

 

Commercial intervention by governments.

 

The political decisions taken to address the cries for assistance from many large corporate enterprises, will have significant ramifications across the economy as the smoke from the bug clears. The obvious current example is Virgin, currently holding out their hand for a public bailout. However, they will be one of many that are in trouble, and likely to bring all the pressure they can to bear on the public purse, to which many have contributed little over the years, repatriating any profits to tax havens. Beyond all considerations that relate to a particular set of circumstances surrounding an individual enterprise, I think there needs to be a consistent application of policy based on a foundation that articulates a philosophy that reflects the national will and character.

 

This philosophical foundation has been sadly absent for many years, usurped by short term political expediency, and the resulting disengagement of voters from rational public discourse.

 

Section 51 of the constitution gives the power to acquire property on just terms from any state or person, over whom the parliament has the power to make laws. Somewhere in there lies a solution, enabling the parliament to acquire the business of such enterprises, but not the company. This would prevent the obvious outcome of a corporate bailout, which in effect subsidises profits by removing part of the risk for which shareholders are paid, while socialising the risk of losses.

 

Instinctively we may not like the government owning businesses, but it seems to be a better solution than putting money in the pockets of billionaires living in the Bahamas, oil rich potentates and in some cases, dictatorial governments.

 

Healthcare.

 

Notwithstanding the comment above relating to public and private responsibilities, the health Minister popped up last Tuesday (March 31) and in effect, and temporarily, renationalised hospitals. Health and its increasing costs has been a thorn in the side and budgets of every government since Bob Hawke’s in the eighties, and getting worse. The  financially motivated parties in the health system jockey for a place at the huge and deep trough to the detriment of the community.

 

Meaningful reform and modernisation has been on the ‘way too bloody hard’ list for 20 years. Now, suddenly when we consider the welfare of sick people, before the dogfight over money, reform becomes easier. Let’s hope some of it has stuck after the smoke cleared.

 

Unions and government talking constructively.

 

Who would have seen this coming? Just over a year ago, the current Canberra incumbents won an election by warning us of a socialist apocalypse should Mr Shorten take residence in the Lodge in Canberra, and for weekends, Kirribilli House in Sydney.  I can hear Mr Shortens teeth grinding from here, but hopefully the dialogue has continued.

 

Social distancing.

 

We have become used to a larger space being ‘ours’ and others will reflexively give it to us to a greater extent than before. There may even be some level of civility re-emerge, and incidents of things like road rage will have reduced.

 

1st world indulgences

 

Many of us have what we sometimes laughingly call first world problems, such as not having a choice of three varieties of condiment at the supermarket, or the failure of the nail salon to open before 8.30 am. They have been swept away, and we will recognise them for what they are, indulgences of a privileged society, and they may become less important. In short, simple things will have become more important.

 

We will all be wiser

 

The fear and panic that gripped us for those few months of March, April and into May, will be seen as an embarrassing over reaction driven by emotions we are not used to having on general display. We will all assure ourselves that next time should there be one, and we will largely accept that there will be, we will all act more sensibly.

 

I will look back over the next Christmas break and review these observations, and give my self a mark. As an optimist, I hope a few of them are on the money.