Dec 8, 2020 | Customers, Innovation
Everyone wants ‘innovation’.
Fair enough, unless we innovate, we stand still, and get killed in the rush.
However, in my experience, it is not the number or quality of ideas that is the limiting factor, it is the execution of those ideas that limits us.
We do not need more ideas, we need more of them to see the light of day. Even if they fail, you will learn, and hopefully do better next time.
It is also necessary to define what you mean by ‘innovation’.
To some, an innovation is a change of pack design, to others, it means the development of an entirely new application of some basic science. Most fall somewhere in the middle.
To my mind, anything that results in new value being created can be classed as an innovation.
Then you get those who refer to innovators as disrupters, further clouding the landscape.
For example, Uber is often cited as a disrupter, a source of disruptive innovation. Do they create new value? Yes, a bit, but there have been taxis around since the Romans were building on the seven hills, so that is not new. What is new is the app that puts the ordering, payment and progress of the Uber to your pick up point in one place. The disruptive element is that the previous cosy registration systems of most cities and their taxi services have been thrown away, so what has been disrupted is something that added no value. The exception to this is the London Black taxi service, where ‘The knowledge’ is a huge barrier to entry, while delivering sustained certainty of high quality service.
I also do not like the ‘fail fast fail often’ crowd, as that becomes an excuse for a lack of due diligence.
What I do like is a stream of disciplined experiments, aimed at testing the veracity of a hypothesis, which becomes a platform for improvement.
In some markets this experimentation is easy, in others, it is extremely hard.
Similarly, in some contexts it is easy, and in others very hard.
For example, the successful tech companies are running A/B experiments all the time on their websites, making evolutionary changes to their algorithms constantly.
By contrast, if you want to test market a new consumer retail FMCG product aimed at mass distribution, you have a real problem. The choice is South Australia, or Western Australia, which some might say are not representative anyway. Testing your product in farmers markets, food service, or your wife’s friends remains an option, but rarely a good model for supermarket distribution.
Red herrings abound!
Do not let them distract you from the hard work of creating new value for customers.
Nov 18, 2020 | Innovation, Marketing
Almost every piece of advice about selling, including a lot on this site, contains in one way or another, the notion that in order to be successful, you have to solve a problem for the buyer.
In other words, scratch the itch and the itch will go away.
We all know that is not always true, the itch often remains, just a bit relieved, or satisfied for the moment, perhaps to return.
There is a further step you can take.
Frame the proposal as an investment, something that will deliver ongoing value, rather than just be the antidote to an itch, the solution to a problem.
Many years ago I worked for Cerebos in Australia. One of the now disappeared brands we had was Cerola muesli, back in the days when muesli was a bit unusual. The breakfast cereal market was nowhere near as fragmented and competitive as it is today. Cerola was doing OK, generating increasing sales at good margins, albeit a minnow in comparison to the major cereals on the market.
With the support of the then marketing manager, I worked up a proposal to spend a significant chunk of money to manufacture and market a ‘muesli bar,’ a snack product that would sit between the perceived goodness of breakfast cereals, and convenience and taste of a confectionary bar. A wholesome breakfast on the run, and snack. I had a lot of subjective material, trends that seemed to be converging, gaps in consumer behaviour that may accommodate such a product, an admittedly dodgy bit of limited market research done with prototypes made by hand in the lab, and a strong conviction.
My failure to convince the MD at the time was total, and quick. No way would he accept such a proposal in the absence of strong quantitative reasons, little risk, and certainty of a quick return.
Nine months after getting my arse kicked for proposing something so dumb, Uncle Toby’s came out with their version of a muesli bar, and cleaned up.
The lesson I took away from that disappointment was that framing a proposal to spend money to a profit sensitive MD is like suggesting we stick a few holes in the bottom of the boat, and hope they do not let in any water. Instead, the proposal should have been framed as an opportunity to turbo charge the motor we already had, an investment in a profitable future. Such a framing would have had a way better chance of gaining the support of the MD.
A second lesson I took, which was the outcome of youthful arrogance and stupidity, is that you never say ‘I told you so’ to someone who does not like to be told.
Oct 22, 2020 | Change, Innovation, Strategy
We are all looking for ways to increase the competitive leverage we can bring to bear. It is tough to find the sources of that leverage, and then apply it effectively in aggressive and often homogenised markets. However, there is a thought process that few have ever heard of that delivers such an outcome.
Observe, Orient, Decision, Action, or ‘OODA Loop’ is a competitive thought process articulated by Col. John Boyd, the maverick American fighter pilot, engineer, and scientist, who revolutionised the practise of aerial warfare’, and indeed warfare full stop. His nickname in the Airforce was ‘40 second Boyd,’ reflecting his bet, that he could beat any other pilot in a simulated dogfight in under 40 seconds. It is said, nobody ever collected from him.
Observe: is more than just seeing what is around, it is a process of absorbing all the information available, and synthesising it with the context from which the information emerged. For example, while the 2008 financial meltdown was a surprise to most, the signs of financial fragility were there, for those who were looking for the right messages, hidden in plain sight amongst the hyperbole and emotion of what appeared to be a never ending bubble.
Orient: is a process of applying domain knowledge and experience with the observations made. Continuing the 2008 meltdown example, those few traders who saw the mismatch between the mortgages being written, and the ability of those who were getting them to repay the loans, oriented themselves to take advantage when the bubble did burst. Such a meltdown seemed obvious to the few who were looking, when they observed the mismatch between the assumption of ever increasing prices, employment uncertainty, and the herd mentality that prevails.
Decide: Based on the observe and orient phases, choices need to be made, risks assessed,
and a decision taken.
Act: This is simply executing on the decision, from which point, the cycle starts again.
Boyd’s OODA loop is a framework for creating tactical advantage. As he put it: ‘To enable you to operate inside the oppositions ability to respond’.
The ability to respond is driven by the speed with which you are able to collect and analyse information, to come up with a tactical response, and implement, absorb feedback, reorient and go again. Given that the decision is almost always based on ambiguous and incomplete information, the tendency is to hesitate, seek other information, look for alternatives, seek reassurances and permission, this all takes time.
Boyd saw the winning process as increasing the tempo of the cycle, thereby getting ‘inside’ the oppositions ability to respond effectively, leaving them vulnerable, and beaten. The example he continuously used was the ‘kill ratio’ of US fighter jets ‘dogfighting’ against the Russian MIGs in Korea, which was 12:1, being whittled down to almost 1:1 by the end of the Vietnam war. Partly this was the result of better training of the MIG pilots, but significantly it was because the quicker, lighter MIGS, although less well armed and protected, could get ‘inside’ the manoeuvrable envelope of the US fighters, and shoot them down.
For an SME competing against larger, better resourced competitors, being able to move quickly and decisively, orienting assets and resources towards that opportunity, actively leveraging it, then ensuring that the lessons that emerge are incorporated into a learning loop, delivers victory.
Case Study.
In 1985 the yoghurt market in Australia was in its infancy. Australians did not consume much yoghurt, it was a fringe product, consumed by a small number, with limited retail distribution, manufactured by local state based dairies, largely as a means to give shelf life to raw milk, that promised better margins than butter, cheese, or dried milk powder.
French brand Yoplait was launched from a modern purpose built plant in Victoria, and changed all that almost overnight. The market boomed, as a result of a good product, and better advertising and marketing by Yoplait, which completely dominated the booming market nationally in a very short time.
Ski yoghurt was produced under licence in several states by local dairies, and prior to Yoplait was a significant brand amongst the group of brands available in the then small market.
After the Yoplait launch, Ski was relegated to relative insignificance nationally.
The licensee in NSW, Dairy Farmers Co-Operative Ltd, took the aggressive step of investing in a new dairy foods plant in western Sydney, closing the 100 year old plant located in the inner Sydney suburb of Ultimo. Part of the investment was to produce yoghurt by a continuous process, packaged into form fill and seal cups to compete with Yoplait.
Over the course of the next 6 years, Ski overtook Yoplait, by firstly taking over the licences in every state, to deliver operational scale to the Sydney plant, then embarking on a series of product and packaging innovations, backed by marketing support, that created a tempo of very successful new product launches that Yoplait, being controlled by a French company working through a licensee, and having an inflexible manufacturing plant could not match.
Ski inserted itself well inside the operational speed of the Yoplait licensee, executing product launch after product launch, some minor, some very major, that altered the dynamics of the industry, and was able to dictate the terms on which the marketing battle for consumers minds was played.
The battle was won on the basis of that agility in product development, and ability to bring products to market quickly, and be on to the next thing before Yoplait had time to respond.
Subsequently, both brands lost focus, ceased to invest in the long term health of their brands and innovation, instead, drinking from the sugar hit of tactical price promotion demands by supermarket chains, they shrivelled in size and no doubt profitability.
Sep 16, 2020 | Governance, Innovation, Strategy
A short while ago I felt very sad, and uplifted at the same time.
Weird.
I was watching my 4 year old granddaughter play , keeping herself company in her own fantasy world, jumping from one thing to another without any hesitation, no sense of self consciousness, but following a ‘logic’ only she could see, hear and feel.
Creativity being expressed in a totally natural way.
I am pretty sure most people have seen this, at some point, and felt uplifted. Then I realised, that in a few months, she would be going to school, and that joy of random thought, learning by experience, feeling absolutely free from judgement was about to hit the wall.
School works with a set of disciplines. Numbers, regulated behaviour, nominated time slots for scheduled activities the kids did not choose. It teaches organisation, discipline, and a ‘top down’ awareness to these rapidly developing brains consistent with what ‘conventional wisdom’ has decreed as appropriate for the future life kids will lead.
Who knows anything about the future life of my granddaughter?
Watching her, I also recalled that I had seen the previous week the announcement of the death of Sir Ken Robinson. That made me sad again, all over,
For those few on the planet who do not know who Sir Ken was, just google ‘the most watched TED talk’ for a dose of his verbal and philosophical magic.
Asking how schools kill creativity in kids, and how to fix it, was his life’s crusade. His TED talk at the time of writing has 69 million views, several of which have been mine, and a much larger number have been those I have persuaded, cajoled and pushed to watch.
Here, in front of me was the living reason he took on the world of education academia.
It also occurred to me in those minutes of reflection, that over time, my granddaughter may be pushed into doing the things she was good at, in preference to the things those she liked to do.
That is how the world now works.
Most people have things they are good at, but do not particularly like doing. I certainly have. To meet the outside markers of success, most go with those things, and use their free time for the things they really like doing. In those times, hours seem to pass like minutes; somehow, you have entered what some would call ‘a flow state’ where time seems compressed, and the output, is just for its own sake.
Joyous.
Wouldn’t it be fantastic if the things we like become the things we spend our days doing to earn a living?
Imagine living your life in a state of ‘Flow’
My granddaughter was in a state of flow playing, and it seems like my duty to extend that as far as possible.
A lucky few get to feel it for themselves every day, and as a result, have a chance of both being as happy as they can be, and changing the world.
Sep 4, 2020 | Change, Innovation
Robust ecosystems have points of balance; change is incremental, competitive, and evolutionary, leading to a revised point of balance.
When a species becomes dominant, that dominance becomes the source of weakness over time, as evolution requires responses to changing circumstances. A dominating player in any system resists change, as that involves increased levels of short term risk, and dominating players are generally risk averse.
Occasionally, an unpredicted catalyst appears, throwing the rules against the wall. Established incumbents fail to evolve quickly enough to accommodate the changes and survive. This is as real a process in commercial life as it is in the natural world.
The introduction of rabbits and the cane toad into Australia’s ecosystems have had the same impact on the pre-existing status quo as has the evolution of the microchip has had on the commercial world. The microchip unleashed a series of innovations for which the pre-2000 economic ecosystem was unable to recover. The now dominating players were little more than single cell commercial organisms, and many did not exist, at the change of the centuries.
Commercial ecosystems are no different. There will be times of consolidation based on the strength of the balance sheet of the dominating players. This becomes the source of weakness as they become locked into the status quo which produced them.
It is pretty clear to me that there are 4 stages in the commercial development of a market:
- Start-up stage. One player emerges, that effectively redefines a market in some way, followed up quickly by a series of fast followers. This is normally generated by some sort of catalyst, unanticipated by market incumbents, and leads to what is seen at the time as unprecedented periods of growth. Think Ford, General Electric, and those around the move from the vacuum valve to the microchip, from Allan Turing during the war to Gordon Moore in 1965.
- Scaling stage. The new players fight for dominance, with most of them going to the wall, while a small number, scale and consolidate to a position of dominance, if not monopoly. Think social media, web browsers, mobile computing.
- Leverage for profit. The new ‘kings’ leverage their dominant position for maximum returns, optimising processes, and minimising risk in pursuit of profitability. Facebook, Google, Microsoft and Amazon are all following this pattern.
- The cycle repeats. A catalyst appears that changes the rules of the game, again. Some may survive in a different form, others will disappear.
This is a Darwinian process applied to our economic and commercial ecosystems. Charles Darwin’s much quoted musing in the header applies as much to commercial systems as it does to natural ones.
The speed of change, enabled by digital technology has concentrated the cycle time from decades to a few years, and now arguably, a few weeks. It took 30 years for the vacuum tube to morph into scalable microchips, a decade for the early versions of the net to enable distributed computing, and a couple of years for that to create a system that might support new communication tools. Then, Facebook created a new model that blitzed the competition and led to absolute domination of a new ecosystem. A similar story led to Amazon, and Google, while Microsoft, the monopoly operating system player of the 80’s and 90’s, threatened with anti-trust breakup, evolved with incredible speed and agility into something new.
In the last few months we have seen examples of businesses and institutions that have evolved at a pace unimaginable a year ago, to face the challenges of Covid.
It may be fanciful, but it seems to me that market dominance contains the seeds of the dominators own destruction. This is a pattern followed not just by companies from Wedgewood, the British East India Co, Ford, GE, Microsoft, but to countries. Rome, China, Britain, and dare I say it, the US, while China is rebounding.
I speculate that this is the result of the crushing of opposition, and resulting lack of ‘genetic’ diversity that occurs as short term risk is minimised while profitability is maximised. Lack of diversity in the commercial DNA leads to commercial vulnerability, just as in the natural world
Ford ‘invented’ the modern version of the production line, (the Venetians had it first in the 1500’s) but could only make one type of car, so GM ran over the top of them with choice. Kodak dominated photos, but they defined themselves in a particular way, and despite being the ones who invented the virus that would kill them, digital photography, they failed to evolve. Same story with Blockbuster. They absolutely dominated global video rental, defining themselves as video rental stores. The then CEO John Antioco put in place a strategy that anticipated the growth of subscription streaming services. Blockbuster even had the opportunity to buy Netfliks at a give-away price at the time. However, the board, dominated as it was by those whose sole interest was short term profitability, got rid of Antioco, and the strategy that may have saved them as a significant if not dominating player. They actively rejected the opportunity to evolve, signing their own death warrant.
On each occasion, in each domain, there has been some sort of catalyst that has led to the demise of the dominating enterprise.
It seems to me that this current Corona crisis is another such Darwinian catalyst?
We have already seen many businesses struggling, and many ‘hitting the wall’ and I suspect there will be many more, while some, mostly smaller and more agile businesses are doing very well. Question is, will a few of the dominating enterprises fail the test of rapid evolution, and disappear?
I am prepared to bet that many will, and be replaced by businesses we have not yet heard of, that are able to deploy digital tools in almost real time. Just look at the manner in which Zoom has been able to harness the opportunity, blowing away incumbents like Microsoft.
Dec 6, 2019 | Innovation, Leadership
Telling the future is a practise best left to the circus tent, but as strategists we are doing it all the time.
The question is not how to avoid being wrong, which means you do exactly nothing, but how do you both increase your odds of being right, and be able to pick very early when you are going to be wrong.
The leadership task to be able to play in the future is to decrease the natural discomfort people have with change, to seek ways to reduce the power of the status quo, look for opposing views that deviate from those that currently drive decision making, and ensure there is diversity of ideas and types in the environment.
Building a resilient marketing and innovation culture is at the core of this challenge. This recent Gartner report covers the challenges well, observing:
‘Innovation is well funded and maturing as a marketing discipline. CMO’s are dedicating head count to innovation and leaning on ecosystems to help accelerate initiatives. despite the progress, obstacles remain, most notably risk-averse corporate cultures’.
None of this is easy. It requires active engagement with the threats you see on the horizon, not just from your immediate environment, but from the wider field that may influence your enterprise in the future. It is being able to see threats as the opportunities they can be.
As a leader in this sort of change environment you have to be able to make it safe to be wrong, to encourage the pursuit of rabbits down burrows, to learn quickly, and adjust on the run, unlearn the ways that have been successful in the past, and replace them with less proven ideas and processes.
To my mind, curiosity, the absence of fear, and the leveraging of data, are the key ingredients in all this.
Curiosity is a word that encompasses all sorts of things, from critical thinking to creativity and discovery skills, and so called ‘design thinking’ which is just a fancy term for starting with a clean sheet of paper to design something new from scratch, completely from the end users perspective, while leveraging the best parts of what currently exists. To make all this happen in an organisation also requires that there is a collegial culture, as nobody can do it on their own, you need teams and networks of collaborators to succeed in todays world.
The second component of predicting the unpredictable is data. Data can reveal patterns, correlations, cause an effect relationships that when seen through a new lens can deliver imaginative insights. It is also true that we have no chance of predicting what an individual might do tomorrow, but assemble a number of similar people together, and we can have a very clear picture of what the majority of them might do tomorrow, and a calculation of the odds of outliers.
The third, which Hugh McLeod nails, again, in the www.gapingvoid.com header cartoon. Innovation is the absence of fear, and only in the absence of fear can we be sufficiently curious and empowered to predict the unpredictable, and bet on it.
