Is this statement a turning point in Corporate Culture?

Is this statement a turning point in Corporate Culture?

Aug 28, 2019 | Communication, Governance, Leadership

In 1970, Milton Friedman wrote an article for the New York Times  that set the tone for enterprise management and culture from that time. His argument was that the role of the executive was to conduct the affairs of his employer: ‘in accordance with their desires, which is generally to make as much money as possible while conforming to their basic rules of society both those embodied in law and those embodied in ethical custom’

The executives ‘social responsibility’ was to act in the best interests of his employer. By doing otherwise, he is making a judgement about what others outside his employer may wish to spend their money on, and making that choice is outside his responsibility. To do otherwise is to accept the socialist view that political mechanisms, rather than market mechanisms, are the more appropriate way to allocate scarce resources to their best use.

Last week, the ‘Business Roundtable,’ an association of the CEO’s of many of Americas leading  companies released an update, signed by181 of those CEO’s. Titled ‘Statement on the purpose of a corporation’ it committed their leaders to: ‘lead their corporations for the benefit of all stakeholders, customers, employees, suppliers, communities, and shareholders’. 

In todays world, remarkably different from that of the 1970’s, such a statement makes sense, not just as a statement of intent, but as a driving value. Who now does not want to build customer loyalty by looking beyond the transaction currently on the table, and the battle for talent is now mobile, transparent and global, so being acknowledged as a great employer builds competitive advantage.

In Australia, the content of Royal Commissioner Haynes report should tell us all we need to know about the cultural changes necessary in many of our largest corporations. While the government procrastinates and prevaricates, hoping the fence gets a bit more comfortable after their surprise election win, perhaps we, as those charged with the responsibility of managing and directing those corporations, will have gained a little wisdom.  

For the fabric of our communities, let’s hope so.

The header cartoon, courtesy of Tom Fishburne was published to poke fun at the hypocrisy evident in much of the corporate PR speak about sustainability. However, it struck me as also being a metaphor for the Business Roundtable statement, given the pressures of Wall Street, and entrenched ‘short termism’,although I hope I am wrong.

 

Sustainability in blogs used.

 

Not all data is created equal

Not all data is created equal

Aug 16, 2019 | Governance, Management

We seem to believe, sometimes accurately, that the lack of data points is indicative of a less than a reliable outcome.

We also think that the more data points the better, but then we  tend to ignore the outliers, while privately acknowledging that is where change, and key insights, first emerge.

At other times, we are paralysed by the lack of data, or have so much of it we use misleading analyses to make our lives easier. The use of averages is a prime example, often resulting in absolutely misleading conclusions.

There was plenty of information about the distribution of icebergs in the North Atlantic in April 1912. However, the only data point that really counted, was that of the lookout on the foredeck of the Titanic.

Captain Smith was motivated by the race to set a new record for the Trans-Atlantic crossing time, and reassured by the information that there were ‘probably’ no icebergs so far south, he piled on the speed.

Whoops, missed the one really important data point.

The lesson: Not all data is born equal, and it is the insights that come from the analysis that really counts.

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The cost of failing to build brands

The cost of failing to build brands

Aug 12, 2019 | Branding, Customers, Governance, Marketing

 

Direct marketing is highly tactical, it is a one on one communication from the marketer to the consumer. Within the boundaries of some limitations, the outcome of direct marketing can be quantified with a considerable level of confidence.

You either got a response, or you did not. It is tactical, short term, and transactional.

Because it is so responsive to short term quantification, and our digital lives are all about quantification, these tactical elements are now predominant. However, there is no evidence that tactical activity alone will build a brand, and plenty that an overuse of tactical stuff will actually destroy a brand.

By contrast, building a brand takes time, investment, a great strategy, and the nerve to continue in the face of debatable real time data, and short term expediency.

Just look at what has happened to proprietary brands in supermarkets. They have been destroyed by the power of the retailers demanding tactical promotional dollars, which is code for retailer margin protection. This has been given by suppliers, usually reluctantly, at the expense of brand building, simply because it is easier and expedient in the short term to comply.

Consider Meadow Lea. At its height, Meadow Lea had a 23% market share at premium prices in a crowded and growing margarine market. The great advertising supported by a range of customer focussed promotional activity that had built the brand, was stopped in favour of tactical retailer price promotions. Now, 20 years later, Meadow Lea is just a label on a few Sku’s in the chiller cabinet.

Imagine you are the marketing manager of a branded product, you have a finite marketing budget. You need to convince the CEO, who is an engineer or an accountant, that it is better to keep advertising for  the long term health of the brand, than give in to powerful retailer demands for various forms of retailer margin supplementation, which will retain distribution in the short term. This has been a very hard argument to win for all but a very few FMCG marketers. With the benefit of hindsight, it has been a vital one that was lost.  

Had the argument been won, and a balance between the two been found, what would have been the difference to the revenue and margins of both retailers and Meadow Lea Foods?? Most probably in the hundreds of millions of dollars, and consumers would have benefitted by  continued value innovation in the spreads  category, which has been stagnant for years.

 

 

6 characteristics to look for when assembling an advisory board

6 characteristics to look for when assembling an advisory board

Jul 31, 2019 | Governance, Leadership

Small and medium businesses need outside assistance in order to build the depth of capability that is required to compete effectively on the big stage that we now have.

I often advocate they have some sort of ‘Advisory board’ that delivers the guidance and experience to make a difference.

So, what sort of people should you look for to go onto that board? It is easy to suggest it be set up, but very hard to find the right people, particularly for SME’s with limited networks and resources to go and find these people.

Here are some of the characteristics that it seems to me are needed on such a board. It will be rare to find them all in one individual, and two brains are always better than one anyway, so look for some diversity at the same time. Of course, these are the personality traits you should look for, and are on top of the technical ones you may need, finance, engineering, marketing, and so on.

  • They spend a lot of time ensuring that the right questions are asked, rather than jumping to the answers.
  • They work from the challenge backwards to the current, rather than from the current forward. I call it hindsight planning when developing strategy, but it is also a mindset that ensures the problem being considered is adequately defined.
  • They are looking to learn themselves, from the competitive and  strategic problems they see, the people they encounter, and the differing options that emerge from considering a problem. The last thing you want is someone who already knows all the answers!.
  • They are biased towards action, rather than riding the status quo. Being prepared to take action, and sometimes be wrong, able to concede the mistake and move on again is a vital personal capability to seek.
  • They treat your resources, as if they were their own.
  • Underlying everything they do is the recognition that only by creating value for someone else can you move forward: Personally and commercially.

An alternative to an advisory board, is membership of one of the emerging ‘executive roundtable’ services, of which there are several. These ‘tables’ assemble the executives of non competing businesses into groups of 7 to 11, chaired by an experienced advisor and chair, and they act as each others advisory board. This model has the added advantage of addressing the hidden cost of the CEO of a medium sized business, loneliness. It is often a very lonely place, and such a table has a powerful social aspect as well as delivering great commercial value.

Everybody needs informed, and neutral advice and a sounding board to make better decisions. 

 

 

Long term planning is dead, long live long term thinking

Long term planning is dead, long live long term thinking

Jul 3, 2019 | Change, Governance, Strategy

 

Planning for the long term is a game for losers.

In a world where we have difficulty planning what will happen next month, locking yourself into a long term plan, which allocates resources, and makes binding decisions about the required capabilities, and how to build and deploy them, is crazy.
By contrast, long term thinking, retaining your perspective for the longer term, but being able to be agile in the shorter term, makes way more sense.

The makeup of the top 100 companies has changed dramatically in the past 10 years, and is unrecognisable from the top 100 of 1990. This should give us a clue.

Corporations of the 20th century grew by building scale, marketing, operational, geographic and financial. In the quest for scale they also built silos, bureaucracies, and cultures of  personal safety, risk aversity, and dependence on what worked in the past to  continue to work into the future.

Successful corporations now must be much more agile and responsive to change, even when they  are huge. The necessary process of devolving both authority and responsibility down the tree to where the interaction with operations really happens, makes them look more like a collection of smaller businesses than a corporate monolith.

The new model works. Perhaps the greatest example of this management about-face, while not of a commercial corporation, is the change in the US military retold  in Stanley McCrystal’s great book Team of Teams .

It is unstated, but the current political argument in Australia about the tax cuts legislation is an example of the failure of long term thinking. It substitutes a flimsy long term plan for intelligent long term thinking. Even worse, it is long term planning with an objective that is political, rather than economic or responsible. It is a wedge job on the opposition, and is a great example of why we do not trust politicians, and politics. We know such a long term plan, legislating for something as fundamentally important as a tax framework is nonsense. However, we accept the value of long term thinking, recognising the need to consider the manner in which tax rates make us competitive with other economies, at the same time as raising the revenue to deliver the community outcomes we all demand.

 

 

 

What price experience?

What price experience?

Jul 1, 2019 | Branding, Governance, Strategy

It seems to me that the development of robust, lasting, measureable and implementable strategy and marketing has gone to the dogs.

We are infested with short term rubbish that reflects the lack of experience of those doing the developing, and lack of understanding of those doing the commissioning, obsessed as they are with the short term.

Last week, Bloomberg revealed that the software in the Boeing 737 Max was outsourced to a bunch of recent graduates in India. Unfortunately, we all know the result of that exercise.

Not only were hundreds killed in the two crashes that followed, but the brand ‘Boeing’ took a dive with them.

How is that for the ROI on a few bob saved on experience!

You cannot put an old head on a young dog, all they do is yap.