5 things you need to change an industry

5 things you need to change an industry

May 27, 2019 | Change, Innovation, Small business

Today, I will be engaged in a workshop with a client who has a small business on the leading edge of a large, conservative, price driven industry, with established supply chains and relationships, that is about to get a kick in the guts.

We have to map out how a bootstrapped small business can be a catalyst for that kick, and ultimately benefit strategically and financially from the changes they will drive.

Not an easy task, with a considerable  number of unknowns.

This session is an exercise in identifying the key business processes required, and starting the process of building them out, while keeping the wolf from the door. It is also an opportunity to consider the modest number of macro factors from which will emerge the drivers of the growth we are planning for.

Strategy.

In order to make good choices at this early stage, we need to be able to see the whole game, at least our version of what it will be. This is making some bets on what the future of this industry might look like, figuring how we might change it, and assembling the resources to make it happen.

Timing.

Timing of the commercialisation of innovations is a critical and under considered factor in every industry that undergoes change. It is often not the first into the game that ends up the winner, but it is always the one who is best able to recognise the  inflexion points as they occur, and shape them to their benefit. Apple did not introduce the first MP3 player, but changed the world when they lunched theirs. Tesla is not the first electric car, to find that you need to go back well over  100 years, to  Thomas Parker’s vehicles, amongst several.

Value chain influence.

Every business operates in an eco-system of some sort, where there are others upon whom they rely for components, communication, services, and all sorts of items that together make up the differentiated product offering being created.  When you are a small business, without financial or technical resources of any great depth, just a vision of the future and a huge dose of passion, the challenge is to exercise influence over your value chain, way out of proportion to the financial and organisational muscle you can assemble.

Deliberate Design.

In this homogeneous world, looking great is essential, but being great is way more than looking great. It is the attention to the detail, certainty and transparency of processes, and emotional engagement that can be generated that really counts. This means that deliberate design of everything you do is a necessity. Deliberate design also involves the characteristic of stability, and creativity evolves out of stability, because you are able to hypothesise, experiment,  and quickly adopt what works, while discarding what does not. 

Audacity and belief.

Actually believing you can change the direction and nature of an established industry, with little more than the shirt on your back is audacious. It is not just thinking big, it is being prepared to do the work, and take the risks to make it happen.

It is going to be fun!!

The header photo is of one of Parkers vehicles outside his home in Wolverhampton, about 1895. Parker is in the middle.

 

Electric Vehicle manufacturing: The prospects for Australia.

Electric Vehicle manufacturing: The prospects for Australia.

Apr 29, 2019 | Change, Innovation, Leadership

One of the more fanciful of a grab bag of fanciful bullshit surrounding the ‘debate’ on electric cars a fortnight ago was the assertion that South Australia could become a world centre of electric vehicle manufacturing.

It seems superficially logical, all those car assembly and supplier plants sitting idle, and all those manufacturing skills being wasted as the former  employees become unemployed baristas. However the entry barriers to successful manufacturing and export, and infrastructure requirements for domestic market penetration beyond central suburban areas, are significant.

GM in the US is quietly packing its bags on EV development and manufacturing to shore up profits, particularly in the light of the halving of federal Green House Gas ( GHG ) subsidies. The Californian ZEV credits scheme to encourage electric vehicles, which contributed greatly to the initial research momentum may not be enough by itself to maintain the momentum.  Tesla, the poster boy of electric vehicles is walking a financial tightrope, despite its undoubted success in the market.

Labor appears to have done a bit of homework, if reports are correct, so perhaps there is hope. However, it seems to me the core of electric vehicles, where Australia has some level of competitive ability that can be protected and leveraged is the R&D solving the storage problems, subsequent battery production, and lithium mining and processing.

Lithium, the base of current battery technology is not easily available. However, Australia has considerable Lithium resources, well behind Chile and China, but carrying more sovereign certainty despite the regulatory and political hurdles.

Let’s hope the flights of oratorical fancy yet to come in this election campaign are founded on fact and solid strategic thinking, rather than what sounds good in front of a populist audience.

Anyone for a debate on Adani? (some facts and consistency of argument would be nice)

 

 

Can ‘Platforms’ replace assets?

Can ‘Platforms’ replace assets?

Mar 18, 2019 | Innovation, Strategy

The new commercial behemoths of the 21st century, Google, Facebook, Amazon, et al, are all ‘Platform’ businesses. They leverage technology to create connections up and down value chains, replacing as they have businesses that have hard assets that make stuff.

They are facilitators, not producers.

When was the last time you ate a steak produced by a ‘facilitator’?

In order to produce the stuff we need to live and prosper, we need hard, productive, assets. Bits and algorithms help to leverage the hard assets, to build their productivity, but to believe they will replace them is to believe we can eat them and live.

Amazon may not produce the goods they sell, but somebody does, and it is these ‘somebodies’ Amazon relies on, as do the rest of us, to live. 

 

Is Amazon at it again, remaking retail in their own image.

Is Amazon at it again, remaking retail in their own image.

Mar 11, 2019 | Innovation, retail, Strategy

Amazon launched their ‘Dash’ button in 2015 in an experiment with Procter and Gambles Tide detergent, the monster of the category in North America. It is a one touch, one product order and delivery system that has succeeded, expanding to a range of 350 Sku’s in the middle of 2017 (latest numbers I could find)

Now Amazon  has withdrawn the Dash button from ‘service’. I guess the role played by the buttons is being overtaken by voice operated loyalty systems, largely Amazon Prime and Alexa, and on top, they were recently declared illegal in Germany for breaching consumer laws.

Killing off a successful service that was still growing at a very fast rate, but that was being replaced by a newer set of technologies is a logical move, but one only a company with the power of Amazon, who also owned the replacing technology space, would contemplate.

Clearly, Amazon  is now a technology and data business first, and being a retailer, where they started, is a very long second. 

They know more about many of us, our habits, preferences, and foibles than we know ourselves, and have that knowledge stored for analysis, retrieval and action by emerging AI functionality. They also know that we are not looking for a wide range of choice, despite what we say, that just confuses us and actually reduces purchase. We instead want certainty. 

Put all that together with the now 472 FMCG Distribution locations (450 in the US) Amazon has via the purchase of Whole Foods,  and you have the potential for Amazon to anticipate what we might buy, shape it by adding usage tips, recipes, and thoughtful additions, all in a box that delivers to your door. It combines operational and logistic efficiencies with maximum margin to Amazon while wowing customers.  

Suddenly the withdrawal of the dash button makes more sense than ever, as in the supply chain of the very near future, it would have been just another point of friction.

Meanwhile, Coles and Woolies are tarting up their Deli sections in stores my now three year old granddaughter will probably never visit to do her shopping as an adult.

 

 

 

 

 

 

 

A simple measure of innovation

A simple measure of innovation

Sep 26, 2018 | Innovation

 

Innovation is a challenging term to define. One man’s innovation is another’s line extension.

About the only thing that is clear is that innovation is not R&D, the creation of original knowledge. Innovation is the process that takes that knowledge and turns it into a saleable product.

To my mind, innovation has two dimensions upon which it can be measured that accommodates all the various definitions I have heard.

  1. The degree to which the ‘innovation’ creates new demand. This is not a competitive term, it is utterly dependent on the degree to which the pie is made bigger. Let’s consider Uber, often cited as the biggest innovation in personal transport history. Is it new? No, taxis have been around for as long as there have been wheeled vehicles, Wells Fargo started as a sort of taxi company. What Uber did was make taxis more accessible, which no doubt did increase the size of the pie a little, but not much.
  2. The degree to which the ‘innovation’ creates new value. Again, to use Uber, it did deliver considerable new value, in that you did  not have to wait for ages for a taxi to turn up, they are clean, and you can provide feedback. On the other hand, the taxi regulations, bloated, ill used, and anti-competitive as they are, were there for a reason, supposedly to ensure both the safety of passengers, and that the drivers knew their way around. That they fail regularly in both measures is one of many reasons Uber was able to steal so much market share by adding new value.

So, it is a simple matter of using that beloved tool of consultants, the two dimensional graph, and plotting the position along these two simple parameters. Usually that task is not as simple as the idea,

 

 

Economies of technology, not of scale, will be the drivers of success in the future

Economies of technology, not of scale, will be the drivers of success in the future

Jul 20, 2018 | Change, Innovation, Strategy

 

8 years ago I did a research project that required me to have a look at the future of intensive horticulture. As a part of that project I spent a month in the UK looking at what was happening, and was astonished to see the beginning of a production ‘flip’.

Horticulture is relatively intense compared to other forms of farming, but it still required lots of land, water, and labor. In the UK I discovered technology was in the early stages of taking over. Innovators had ‘flipped’ the model and were producing vegetables in capital and IT intensive greenhouses. The day I visited one of the leaders, Barfoots of Botley in 2010, they were completing the commissioning of the first 3 anaerobic digesters  at their main farm in Sussex, using the green waste from produce grown in greenhouses which was already powering the indoor growing beds and packing shed.

In the 8 years since, the progress has been amazing. AeroFarms in the US has attracted significant venture funding, and is one of those changing the face of agriculture by bringing it back to where the population lives, and Barfoots has expanded geometrically.

In Australia we have  very few  examples of this sort of innovation. One is Green Camel farms at Cobbitty on Sydney’s southern outskirts, which has combined greenhouse production of organic herbs and tomatoes with an aquaculture infrastructure producing barramundi in a closed loop system.

The point is that agriculture, like all other industries is being disrupted by technology in ways almost unforeseeable a decade ago.

Technology and capital intensity is replacing scale as the defining feature of success.

Lean Manufacturing seeks ever smaller production runs delivering an even flow of finished product matched to customer demand, as it evolves, eliminating WIP and finished goods inventories while delivering customer specific finished products with minimum lead times.

The days of huge integrated manufacturing plants cranking out product at volume to reduce costs by finding the economies of scale are gone.

Equally, production volumes from thousands of acres of open farmland will be replaced by a vertical capital intensive farm in a disused warehouse somewhere  in the inner city, close to consumers. Bit hard with livestock, but what are feedlots if not capital intensive small footprint farms?

Irrespective of the manufacturing environment, and I see agriculture as just another form of manufacturing, with inputs, WIP, risks, lead times, and all the rest, ‘de-scaled’ manufacturing will become the model our grandchildren will be familiar with. They will probably also be making engine parts in their bedrooms on desktop printers, it will be as normal as CAD software is today.

Header photo: Aerofarms towers

PS. After reading the post, a friend in the business sent me this link to the Panasonic vertical farm in Singapore. The more I dig around, the more convinced I become of the speed and volume of changes about to hit the supply chains of horticulture.