Mar 21, 2024 | Collaboration, Governance, Marketing, retail, Strategy
Collaboration between competitors is illegal, but tough to prove. It is also the natural state of affairs in an oligopoly.
When a competitive market evolves over time into an oligopoly, the focus of management attention of the remaining oligopolists moves from the customer to the competitor. With the resources available to an oligopolist in any decent sized market, they will know in considerable detail the strategies, internal processes, pricing, and resource allocation choices made by their competitors almost as quickly as they happen.
Supermarket competition in Australia has evolved in this manner. It has turned from ruthless competition for customers 40 years ago, to ruthless collaboration between the two major players now.
Collaboration is illegal, and I am sure that the leaders of the two supermarket gorillas are not setting prices together, or collaborating in other ways that would be contrary to the competition laws in this country. However, given there are only two of them, and they have the resources to watch the other very carefully, there is a sort of quasi co-operation that emerges.
It is driven by the commonality of their activities: The need for shareholder returns, driven by market share acquisition costs, both fixed and variable. They work aggressively on both, and if they did not, the senior management would be fired. In addition, directors have legislated fiduciary responsibilities under the Corporations act in relation to shareholder interests and importantly, returns.
We must also remember that via our superannuation funds, we are all shareholders in Coles and Woolworths.
Once again, just like the ‘housing crisis’, we have short term populist press release driven band-aids being suggested. They are touted as the remedy for long term strategic choices made in the past that to some, have turned sour.
The time for institutional concern about the increasing power of supermarket chains was when they were assembling the scale they now have. All of the take-overs and mergers that have happened have been waved through by the ACCC. This is despite commentary at the time about the impact of the lessening of competition for the consumers dollar.
Now it is too late, other remedies must be found, which do not include a forced break-up. Apart from the immorality of retrospectively applying new rules to the conduct of business, there is no logical or practical way to break apart either of the supermarket chains.
We should stop bleating, and get on with life, while ensuring we do not make the same mistake again.
Header credit: Gapinvoid.com. The cartoon put a huge amount of meaning into a simple graphical form. Thanks Hugh!!
Mar 19, 2024 | Governance, Marketing
Recently at a meeting of SME’s, I found myself in a conversation about accessing government grants, initiated by a guest speaker. She was a very impressive woman with significant experience delivering grants from the Department of Industry.
The notable omission was, in my opinion, a view that reflected the experience of someone contemplating investing the time and energy into an application should consider.
Full disclosure: I ran a small grant funding business called Agri Chain Solutions as a contractor for almost 3 years from 1999 to 2002. It was a company limited by Guarantee, with a commercial board, and ranks as the only time I am aware of that a task has been outsourced by the federal Bureaucracy in this manner. The department concerned, then called Agriculture, Forestry, Fisheries Australia (AFFA) was implacably opposed to the exercise, and only complied after express instruction from John Howard, as the then new PM.
Following is a list of the irritations you can expect.
- Ambiguous guidelines, and sometimes they appear to be on roller-skates as you seek clarification.
- Unusable templates, seemingly designed to frustrate applicants.
- Bureaucratic time and commercial time do not match. The process will always take longer and consume more resources than you think would be possible as you initiate the process.
- The revolving door of ‘officials’ who will manage your application, through to the approval and then implementation. You will constantly be covering the same ground, again, and again, as departmental personnel rotate.
- Commercial in confidence: it does not exist.
- Rounds and the money has run out. For ease of management, most grant programs operate in ’rounds’, and when the money for that round has been allocated, bad luck. You could reapply in the next round. This system disregards overall merit, replacing it with merit in a particular round. The result is weak projects in less competitive rounds are sometimes approved, when in later more competitive rounds, highly meritorious projects miss out.
- The effect of influence of competitive rent seekers. Who you know is always important.
- The time taken to prepare without any indication of the probability of success usually challenges resources of SME’s. This leaves the field open to larger companies with the staff, who probably need the grants less.
- Having inexperienced young bureaucrats believing they’re important, and can dictate to you particularly in grant implementation.
- Recognise at the outset that an application will take a long time, consume significant resources, and you may not be successful. When you are not successful, the reasons for the failure may never be clear.
- Grants are taken into account as revenue, and therefore if you make a profit, you pay tax on it.
- Finally, what is important to you is usually absolutely irrelevant to those responsible for assessing and progressing your application for ‘their’ money. They are just people with their own baggage, ideas, perceptions, ambitions, and worries. Your application amongst all the others in the pile hardly rates on their radar.
Header credit: Cartoon by Tom Gauld from New Scientist magazine.
Feb 26, 2024 | AI, Governance
The astonishing ability of the new AI tools to increase productivity relies on being able to ‘learn’ by mining pools of data, then detecting and projecting responses based on statistical outcomes of that mining.
The next step, Generative AI, Generative Artificial Intelligence, is the point at which the artificial systems can reason, much as we do. This happens by making ‘neurological’ connections between apparently disconnected data, depth of domain knowledge and experience, breadth of more general knowledge that provides a ‘thinking canvas’ and context. These add up to instinctive responses we sometimes describe as pure ‘gut feel’.
There is however, a middle point.
‘Deep mind’ is a research unit now owned by Google. Their models evolved as AlphaGo and subsequently AlphaZero. These models cracked the barrier that seemed uncrackable, the ‘4-minute mile’ of computing. By beating the best humans at the complex game of Go, it demonstrated the ability of an algorithm to replicate in some form, the neural networks we have in our brains. In short, it can learn from its own experience, not reliant on outside data.
Crossing this Rubicon opens whole new territories to be explored.
It is in effect a ‘rolling probability’ calculation, each step using an estimation of the outcome of the previous calculation to deliver an adjusted outcome, in an ongoing process.
This is how we learn: from our experience.
As a kid I remember my younger cousin crawling towards a campfire surrounded by rocks. The immediate response of most was to grab him to prevent him getting burnt. However, my aunt stopped us, pointing out he would not be badly hurt by the mildly heated rocks surrounding the fire. However, when he touched a heated rock, it would create a memory-response loop that connected the fire to a modest hurt, thus ensuring he would automatically adjust his behaviour, and not go near another fire.
That incident stuck in my memory, and it reflects the way these AI tools are evolving rapidly towards ‘thinking’.
The dystopian view is that such developments over a few decades will see the machines take over. I prefer to think that we humans will find a way, as we always have, to overcome such threats. I guess my great grandchildren might know the right answer.
The header was created with help from DALL-E in about 3 minutes using a short series of prompts.
E&OE: A few hours after posting this post, I stumbled across this post on Medium that might bring forward the passing of the Turing test by a machine back into my lifetime. It records the evolution and current state of Googles 1.5 Pro tool, claiming it is to Current ChatGPT4 what a Model T is to a Ferrari.
The pace of change is astonishing, logarithmic, which makes it hard to comprehend by normal people..
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Feb 21, 2024 | AI, Change, Governance, Strategy
Often, I hear the term ‘Digital Strategy’ used as if it were an end result, some discrete set of activities to be completed.
To my mind, this is a misuse of the term.
As it is usually used, ‘Digital’ is all about the devices, the technology, whereas the value in digital is elsewhere. It is in the ability to get things done, differently, more quickly, efficiently, and in a distributed manner by those best able to complete the activity with the minimum of organisational friction.
It is about the business models enabled, the understanding of customers, ability to visualise the unseen, and communicate it clearly. It is not about the RFID tags, VR, and all the other enablers of digital, it is the outcomes that count.
Your strategy may be enabled by digital, but you do not need a digital strategy any more than you need a telephone strategy. They are both just tools to be leveraged.
Management of these changes is confronting, there is not a lot of precedent to go by. This is particularly the case now following the explosion of AI onto the scene. There is a lot of advice around, often delivered by those with a stake in selling you another product or service. However, it seems to me that there are a few simple parameters worth considering.
Functional Silo thinking is poison. The communication enabled by digital is inherently cross functional, better reflecting the way customers and suppliers see us and want to interact. Functional silos have little to do with optimised outcomes anymore. They have outlived their purpose and value.
One step at a time. While the pace of change is getting faster, and the pressure to keep up increasing, we all know what happens when we try and run down a hill really fast, we end up arse over tit. Matching the speed of change to the pace that your enterprise can absorb the change is pretty sensible. Of course, if you are the slowest in the competing pack, it may be better to get out while you can.
Digital is a team game. Hand balling digital responsibility to the IT people is a mistake. You will end up getting what they think you need, which is rarely what you really need. The real challenge is engagement of people not really focussed on digital. The primary example is in the space of marketing automation. Suddenly it exploded, way beyond the capabilities and experience of most marketing people, who are nevertheless now investing more in tech than the IT people. It is essential that the right capabilities are built in the right places. Finally, everyone affected, which is everyone, needs to be in on the secret, with all the options, challenges, and opportunities transparent. The unknown is the father of all sorts of ugly children.
Think long term. Digital transformations are not just about which software you will install to automate a process. Is more about what the business may look like in 5, 10 years, and what steps do you need to take over that time to reman relevant. Technology, much of which may not yet be available, will play a vital role in that evolution, but they remain tools of the evolution, rather than the main game.
Header credit: My thanks to Tom Gauld in New Scientist.
Jan 26, 2024 | Change, Governance, Leadership
January 26 again, and out come the strident calls for it to be changed, in one of many ways, as well as the equally strident voices calling for no change.
To me it seems to be just nonsensical chatter.
In any event, January 26 is a confection. Prior to 1935 it was generally known as ‘first landing day’, which it was not, or Foundation Day, which rates as a ‘maybe’. It was only in 1935 that all jurisdictions used the label ‘Australia Day’. If we must change it to satisfy the noisy few who get hot under the collar, the sensible option would be May 9, which is the day the first federal parliament met in Melbourne in 1901.
We should be discussing more important things.
Climate change leading to floods, fire, with pestilence to follow. Another mouse plague perhaps? The impacts of climate change are there for all to see. They are more pronounced than the most pessimistic scientific opinion of a decade ago, and yet at the government level, little is being done beyond lip service and press releases. Private capital is making all of the relatively modest investment occurring, I suspect contrary to our long term best interests.
Covid has not gone away. What about the next pandemic, are we prepared better than we were when Covid announced itself to the world? I see few if any steps that act as ‘insurance’ against the impact of the next pandemic. Press releases will not stop it, when it arrives.
Generative AI has changed our world. I confess to being excited and confused at the same time by the explosion of AI. It is such a game-changer, it feels a bit like watching the industrial revolution happening at warp speed. Depending on who you listen to, true AI, meeting Alan Turing’s test will emerge anywhere between a decade hence, and ‘probably never.’
We are now in a knowledge economy. This is a term thrown around for years, but for the first time for me at least, it really sticks. It begs the question: what is the basic unit of production in the knowledge economy? How do we measure it, organise for it, pay for it in an equitable and sustainable manner, and critically, how do we optimise the utility of the time we allocate to any task.
The impact of the last digital revolution was articulated by Moore’s law, the compounding time frame of which was 18 months. If we apply the same logic to AI, the compounding time frame seems to be about a week. This will result, if it continues, in a logarithmic acceleration of AI tools surging way ahead of the hardware that delivers the physical outcomes. Therefore, the processes that currently consume the time of people will be in the gun, with the hardware lagging. Instinct, experience, in a phrase, knowing where to look to join the dots will be the critical leverageable capability for the good jobs and career paths.
The pressures the explosion of AI brings to the foundations of our country are profound. In our public discourse, these challenges are not being touched on in any way. We prefer to argue about the current but completely unimportant populist nonsense that is irrelevant to the country we leave to our grandchildren.
As an aside to any discussion of AI, there should be conversation about the coming deluge of litigation surrounding copyright. As Newton observed of his breakthrough ideas, he ‘Stood on the shoulders of giants’. Did that standing involve plagiarism under our current laws? Did Da Vinci’s most famous illustration, ‘Vitruvian man’ involve breach of ‘copyright’ of the work of Roman engineer Marcos Vitruvius Pollio? (I ignore for the sake of the debate that the sunset in copyright would have well and truly expired on Vitruvius’s original work). Creativity is a collaborative and experimental process always using the shoulders of others. How we align that reality to the current copyright laws designed for a non-AI world will be a lawyers feast, and a nightmare for the rest of us in the coming year.
The Geriatric election in the US will be impacted by AI. Putin is a capitalist, reputed to be the richest man in the world, but nobody knows where all the money (or bodies) hide. However, he does understand ROI. He can spend $10 billion getting his red headed, narcissistic, sociopathic mate re-elected, and cut off the supplies to the Ukraine that way, or spend $100 billion crushing the armies of the Ukraine, and wearing all the current contributors, distracted as they are by the conflagration in Gaza, down to the point where they back away. While the US election is half a world away, and totally out of our control, the outcome will have an impact on our economy, foreign relationships, and perhaps our way of life.
Our foreign policy is conflicted as never before. We have the China hawks yelling at the doves, while China is our major trading partner, upon whose goodwill our current standard of living rests. In parallel, we are committed to a program of procurement of nuclear powered submarines to protect us from that same vital trading partner. When/if they arrive, they will operate in shallow seas to our north, entirely inappropriate for nuclear powered boats that require very deep water in which to ‘hide.’ That ignores the probability that by the time they arrive, there will be sub detector drones available in Bunnings, and the barrier of building from nothing a nuclear industry to support them was not, after all, insurmountable.
Meanwhile, there is armed conflict in Europe and the Middle East, both of which have the potential to suck us deeper into a morass that makes Afghanistan look like a Sunday school picnic.
The taxation system is a dogs breakfast needing urgent and complete reconstruction. Such a sensible step is way beyond the reach of either of the major political parties, driven as they are by institutions that demand maintenance of the status quo for their own selfish reasons. The lack of voter appetite for change, despite the obvious gaping holes in the system ensures that no real change will happen until there is a genuine crisis.
Last week the PM reaffirmed the legislated tax cuts would come into force as legislated. This was a surprise to me, as I believed there would be changes, aimed more at the bottom end of the income scale. On Monday he flipped, and let everyone know there will be some changes, which will consume much of the political capital he has left. Despite being very modest cosmetic changes, nobody will be satisfied. The various aid and welfare agencies will be wondering aloud, where this government lost its social conscience, as the changes will not go far enough, and the opposition will run around yelling, again, that the sky is falling. Michele Bullock will have pencil poised, ready to point out that inflation will not be helped by the injection of money into the economy.
The housing crisis, one of our own making, will not go away irrespective of how many press releases and Band-Aids are sent around. It is a systemic challenge driven over the last 25 years, and treating it as anything but is a nonsense. Commentator Alan Kohler, who has a way of deconstructing the babble of economists, bureaucrats and politicians into common sense wrote a quarterly essay that contains plenty of sensible comment. If you have an hour, this webinar is useful. Alternatively, this precis on the Michael West media site gives a very good summary in a relatively short read.
Meanwhile the alternative Prime Minister is urging retailers to stock piles of Australia Day ‘merch’ that does not sell. This trivial matter, which is none of his business anyway, is not a contribution to the acknowledgement that we live in a great place, currently celebrated on January 26. It is just a shallow, meaningless, populist, and cynical appeal to grab a fleeting headline, and enrage some who live at the shallow end of the gene pool.
A decade on from this 2013 Australia day post, the observation that in the future, the core challenges to our society I saw then, education, research capability, diminishing manufacturing capability, and the flogging off of our national estate remain. Absolutely unchanged.
Have we not learnt anything?
Jan 1, 2024 | Governance, Strategy
I cannot believe another year has gone by. The older I get, the faster time seems to go.
As I considered how to articulate the emerging landscape that will be 2024, two headline items screamed at me.
Strategy, and governance.
Without a solid, deeply considered and articulated strategy, you resemble a flock of sheep, moving here and there in response to the latest and closest barrier or threat.
Without a thoughtful governance process, performance measurement and improvement are simply out of reach.
From running the local café to running the country, these two driving parameters remain the guardrails of progress.
A year ago Strategy and Governance were on my mind as I wrote a 2023 new year post that used the removal of Dave Rennie as Wallabies coach, and reinstatement of Eddie Jones as the example.
A lot of water has gone under the bridge since. It seems both strategy and governance were not on the agenda of anyone in the administration of Rugby. The Wannabees were bundled out in the preliminary rounds of the World Cup, then Eddie walking away from a five year contract. The lessons I suggested they learn from tennis Canada ignored. Who knows what is now concerning the new management of Rugby. Whatever it is, there seems to be scant concern at the long term health of the game.
Rugby is in trouble at all levels, in the myriad of ways that a lack of strategy and governance exhibit. Stakeholders shooting off in differing directions, poor competitive performance, the grasping of new shiny things supposed to fix everything, (eg Joseph Suaali) turmoil in leadership ranks, strapped for cash, but long on promises of better times to come, and previously loyal ‘customers’ turning away.
Is this just a failure of strategic intelligence, being able to develop and stick to a challenging long term strategy, an abject failure of governance, or both?
January 1 also sees copyright on a number of major creative works coming to an end. Significant among them is the first cartoon feature that synchronised the sound with the animated visuals. Steamboat Willie, the cartoon that saw the emergence of Mickey Mouse heads the list, with a range of works becoming free of copyright.
The release of Steamboat Willie, while being just 7 minutes long, was one of those seminal moments that led to an explosion of creativity and technical innovation. As it was with the 1991 release of the HTML software that created the www by Tim Berners-Lee, and release of ChatGPT by OpenAI in November 2022, the world crossed an inflection point and nothing would be the same again.
We look back on 2023, and hope that 2024 will be an improvement, coming from what we learnt from the mistakes of 2023.
Sensibly we should ask ourselves a series of questions:
- What did I get right, what did I get wrong, and what were the drivers for those choices?
- What did I miss that I should have seen?
- What did I see that others may not have seen?
- How will I progress personally and professionally in 2024
If you genuinely ask yourself those questions, deeply consider the answers, and act on them, chances are 2024 will be better than 2023.
Happy new year.
Header: Mickey Mouse as depicted in Steamboat Willie in 1928.
