Is Amazon Go the supermarket of the future?

Is Amazon Go the supermarket of the future?

Jan 25, 2018 | Innovation, retail, Strategy

Amazon has been experimenting since December 2016 with a concept store ‘Amazon Go” in Seattle. It has been a ‘Beta’ store, open only to Amazon employees, as they set about solving the obvious wrinkles in an environment with no cashiers, and no self-serve cashier machines, just a ‘walk in walk out’  App that manages the whole process.

Oh wonder of wonders, no queues!

Amazon Go opened to the public  on Monday this week. The key question is what are they going to do with it?.

It seems to me there are two basic strategic choices:

  • Roll it out via their own stores, an Amazon Go expansion,  and/or via Whole Foods, which gives them an immediate footprint of 470 stores in areas with higher income, and tech savvy consumers
  • Sell the technology to other retailers,  just as they have with Amazon Web Services.

Of course, they are also able to do both. Amazon is perhaps the most agile large enterprise the world has ever seen, able to manage multiple lines of concurrent innovation that would choke every other business.

For what it is worth, my bet is that Amazon will progressively roll out the technology into selected Whole Foods stores, the ones surrounded by higher urban densities, in what will be a ‘mass beta’ of the technology, then sell the technology to others as they have done with AWS. This would enable them to capture a slice of the installation costs as well as ongoing software subscription revenue and a percentage of sales.

A goldmine amidst a disrupted retail business model and consumer experience. Not since the first Piggly Wiggly supermarket was opened in 1916 have we seen the potential for retail disruption on such a scale, and at such speed as I suspect we will see.

I do not know what is happening in the executive suites of Coles and Woolies, but if they are not deeply concerned about their current business model in the face of this coming Amazon tsunami, they are truly short sighted.  My instinct is that the strategic deficit of Coles and Woolies is just too wide to be easily bridged by the tactical stuff they have both used with varying success for the last 30 years. It is not as if they are alone, major retailers worldwide will be in trouble, Tesco, Wal-mart, Carrefore,  and all the rest will be on life support with them without radical change. I suspect the only one capable of that scale of change is Wal-Mart, run by a Kiwi expat Greg Foran, who missed out on the top job at Woolies a few years ago.

I have previously suggested that Amazon might reach out to Harris Farm as a way to build a footprint in Australian retail, by leveraging the lessons that will emerge from Whole Foods. This now seems even more likely than it was 6 months ago when Whole Foods was acquired.

Amazon is going gorilla hunting.

Addendum April 2024  It seems the answer to the question, asked way back in 2017 is ‘NO’ According to this report in 2024, the technology, even with the addition of AI which has exploded onto the scene since December 2022, the AI is really a bunch of Indians sitting at desks annotating video feeds. https://www.businessinsider.com/amazons-just-walk-out-pullback-shows-ai-way-to-go What a let-down!!!!

 

 

 

Optimising does not always deliver results: Re-frame.

Optimising does not always deliver results: Re-frame.

Dec 13, 2017 | Change, Innovation, Strategy

Lean thinking, and the lean toolkit have changed the manufacturing landscape around the world. The elimination of waste in processes is now standard practice in every successful business, and the tools of Lean, 5 why, 5S, and all the rest play a key role, and have been successfully migrated into functional areas outside operational ones.

However, like any tool, you have to have the right one in your hand to effectively address the situation in front of you, and lean tools are not always the best ones.

Lean is largely about optimising the existing processes by elimination of steps that add  no value, the elimination of waste.

However, when applied to strategy development they are not useful in many circumstances.

Had the Taxi industry applied a 5 why analysis to their industry, they would not have come up with something like Uber. They would have cleaner taxis, drivers who know their way around, quicker response times, and a way to address the shift changeover lag. To come up with an Uber required the industry to reframe the source of value they create for customers, who want to get from point A to Point B in the least possible time, at the least possible cost, while being kept fully informed. A 5 why or alternative popular tools like a SWOT would not have given them the answers that led to Uber, they needed to reframe the industry entirely from the perspective of the customer.

The problems of the taxi industry were not solved by Uber, they entirely reframed the value proposition to customers.

Innovation is a particular challenge for lean thinkers, as it is always messy, risky, ambiguous, and a long way from optimised. However, it is an essential part of commercial evolution, without which we would end up in a homogenised world.

How boring would that be?

Photo credit Jon Swansan Via Flikr

8 unfortunate realities facing every small business entrepreneur

8 unfortunate realities facing every small business entrepreneur

Oct 3, 2017 | Customers, Innovation, Small business

Every time I turn around I see another ad touting the ‘laptop lifestyle’. Travel, work occasionally, and have the money rolling in, just because you have invested in yourself and bought a course from a self-styled guru.

Of course it does happen, but very occasionally, and each time it does the person has met a number of key hurdles.

When you think about it the rules of  business apply irrespective of the size or nature of your business.

There has to be a market. Nothing succeeds without customers, and customers do not come to you simply because you are following your passion, which is the usual pitch. I would  love to be able to make lots of money by splitting my time between surfing, tramping through mountain streams in search of that elusive rainbow trout, and drinking lots of expensive wine, but have not found anybody willing to fund me as yet. From time to time, an entrepreneur creates a market, the magic can happen, but if your name is not Steve Jobs, Peter Theil, or Richard Branson, do  not count on it.

You have to create value. Being paid is simply a by-product of creating value for someone else. It does  not matter what the product is, someone will only pay for it when they see that they will get something out of it greater than the cost to them.

You need  to pay the bills. Every business has expenses, some are discretionary, others are overheads, that show up irrespective of any revenue generation. Those bills need to be paid, you need to eat, and the kids need a roof. This reality is the one that stops many from following the whacky advice to ‘follow your dreams’ and luckily so. However, the business management task is to reduce expenses, particularly the fixed expenses as much as possible, while still generating the revenue and absolute margins.

There is a lesson in every set-back. Life is a learning experience, and failing to learn from every situation you find yourself in is short-changing yourself. As a young product manager I also had to cover the sales territories of the NSW reps when they were on leave. Every couple of months I had to take 2-3 weeks out of what I believed was a busy and useful schedule to go around stores and sell to people who really did not want to see me, I hated it, but learnt more in those months than I realised, and now insist that all marketing people I hire have a period ‘on the road’.

Time is your most important asset. Time is our only truly non-renewable resource, and yet it is so easy to waste. Professionals tend to organise their time more productively than amateurs, they spend time practising, honing their skills, so that when the time comes they perform on cue.. We all see ourselves as photographers, as we now all have a camera in our pockets. However you can always tell an amateur shot from a professional one, the pro is better in a whole range of subtle ways, simply because the professional has spent the time to practise, and learn the skills.

Be different and be a master. Success rarely comes to those who are the same as everyone else. It comes to those who are different,  who have a unique take, and who are the masters of  their craft. In the digital world, the mantra I use is ‘pick your niche and own it‘ or as Steve Martin says, ‘be so good they cannot ignore you‘

Evolve and adapt. For most of human history, the past has been a pretty good indicator of the future, change happened slowly. Not so any more, relying on the past to forecast the future is a sure way to be wrong. Owners of small businesses have the power to move quickly, adapt their processes, learn by trial and error while their larger competitors are still at lunch. Of course, they do not have the depth of resources to be wrong too often, so it is a Darwinian process.

There are no silver bullets. We humans usually look for the easy way, and this is the hook used to sell us the silver bullet that turns out to be lead. You can get lucky, who you know does count, but the old adage that the harder I work the luckier I get holds.

Apart from these challenging realities, being an entrepreneur is really a doddle!

The excruciating paradox for the innovator.

The excruciating paradox for the innovator.

Aug 17, 2017 | Innovation

Successful innovation generally comes from being small, with little baggage, no institutional ‘downside’ and few inhibitors to the ability to be truly agile in response to weak feedback signals from customers. Innovation is also a consumer of cash, rather than a generator, although that fact of history is being rewritten by the plummeting cost of tech. Usually the innovators have the will, but do not have the cash, the big companies have that.

So, to be successful, as a rule, you at least have to be able to think and act like a small enterprise, but have the resources of a big one.

Back in my early corporate days I worked for Cerebos Australia, then a modest sized, but hugely profitable offshoot of a British multinational . When I joined, Cerebos marketed Cerola Muesli , with considerable success, but margin was hard to get. In the process of creating new products, we created a muesli bar, a mobile, healthy snack that could go into  a lunchbox, and being made of muesli ingredients, was guilt free, or at least, less guilty than a candy bar.

We cobbled together a  bit of gear to add to the production muesli line, and successfully trialled the products to modest outcomes in market research. With the great benefit of hindsight, the encouraging but modest research outcomes were the result of asking people about something they had not seen, so had no context or frame of reference. Nobody to that time had seen a muesli bar, and did not really understand what it was, or more importantly, the value it could deliver.

I did the work, produced a business plan, and was committed to the launch, but the top end of the volume projections I was comfortable to put my name against were below those required to generate the rate of return demanded by Cerebos, and given the perceived risk,  setting out to create a totally new category, was too large, the project was binned before birth.

Then, several years later, when Uncle Toby’s launched their version, which was a close match to the products we had developed, the volumes they achieved in the first 6 months bettered my most optimistic 3 year projections  by a considerable margin.

Creating a sales forecast for an entirely new product, is a function of research, insight, optimism, wishful thinking, and plain lies, all mixed up into a set of projections. Often the most important ingredient is the insight and domain knowledge , but the only thing you know for sure is that the forecasts will be wildly inaccurate. Mostly those inaccuracies reflect the optimism which fails to materialise, but from time to time, great projects are left in the dust, and it is only with hindsight that we wonder why they could not see what now seems obvious.

Innovation inside a large company is challenging. They became big and successful by doing a few things well,  time after time. By improving operational efficiency, they leverage the mathematics of scale and scope. By contrast, anything innovative is messy, risky, and not subject  to rigorous quantitative analysis: there are no hard numbers, just instinct, dodgy projections, and belief.

Perhaps that is why the successful VC’s around do not, as is commonly believed, fund the true start-ups at start-up. Those are funded by the ‘Trinity of F’:  Friends, Family and Fools. The VC comes in when the proof of concept is at least partly there, and they do not invest in the business plan, weighed down by mindless excel projections, wishful thinking, and desperation to snag some money to keep up the car payments, they invest in the people.

 

Is it schizophrenia or just something in the cactus?

Is it schizophrenia or just something in the cactus?

Jun 30, 2017 | Branding, Innovation, Marketing

For years consumer markets have been relentlessly commoditised by retailers who hold the power over the distribution, and who not unreasonably, have sought ways to divert the proprietary margins available from manufacturers pockets into their own. Short term thinking, but that seems to be the world we live in.

Largely retailers have won the game, and branded FMCG products are now becoming an increasing rarity, and mostly where they survive, it is on the back of trade deals and residual strength of brands built by smart and visionary marketing in yesteryear. In liquor there are still many brands, but unbeknownst to most consumers, many of them are just housebrands infused with the wine industry hyperbole that seems to be expected.

The impact on category innovation is yet to be really seen, but I suspect it will stumble further, as by my observation of the shelves, it has done over the past few years.

There however, is the schizophrenia.

Every now and again, a product emerges that runs against the trend.

Consumers are increasingly concerned with the integrity of the supply chains that deliver products to their mouths, so on the fringes there are some very expensive products, usually in alternative distribution that use long lists of adjectives to describe their products: organic, hand- made, all natural, crafted, you have seen them all. Occasionally they are genuinely ‘new’ products, but mostly they are better quality, low volume versions of the commodities available on supermarket shelves.Sometimes they work, and consumers pay a significant premium for  the story that supports the claims, but generally the promise given by the adjectives is taken on trust by consumers.

Technology will increasingly have a role in this as magic like Blockchain emerges that can both guarantee the integrity of products supply chain, and make it absolutely transparent. Suddenly the hyperbole can be subjected to rational scrutiny.

In 2013 George Clooney and a few of his mates wanted their own brand of tequila. Why not, they can afford whatever they want, (but why Tequila??) anyway, the brand they chose and subsequently built,  ‘Casamigos’ has just been bought by Diageo for $US1 billion, around 1.3 Billion Aussie. Not bad in four years!

I do not drink tequila, and the term ‘Super Premium Tequila’  seems to me to be an absolute oxymoron, although perhaps I am unduly influenced by one very bad night involving a bottle of the stuff and a lemon tree while at University.

For $1.3 billion I could be persuaded to give tequila a second chance. Is this growth and purchase of such a highly personalised brand another signpost that consumers are demanding a whole set of new experiences from the items they buy, or is it just something in the cactus?

 

 

 

 

 

9 places to dig for great ideas

9 places to dig for great ideas

Jun 21, 2017 | Innovation, Leadership, Marketing

Ideas are the fodder of our lives these days. Gone are the days of physical labour, even in the professions where labour is necessary, construction, agriculture, and others, the application of technology, the result of ideas is everywhere.

So how do you come up with the ideas that make your life more productive and  comfortable .

Look at it the other way, rather than just hoping that a great idea comes in a flash in the shower, think about the habits and practises that you need to undertake in order to improve the probability that  the ideas will emerge.

Feed your subconscious with the fodder it needs to consume in order that it is able to grow  the ideas.

Curiosity.

Questions are the source of most ideas, and we do  not ask enough of them, I suspect because we have been trained from an early age to think that asking questions is a signpost to  ignorance. Think about how your kids learnt, they asked endless questions, just because they were curious.

What if? why? How does that work? When?

Be a kid again, and ask questions, and from the answers, you will  not only learn, you will have the opportunity to have ideas presented to you on a plate.

Brain-dumping and re-ordering.

Consumption of the idea fodder is half the battle, the other half is to find ways to fit it all together in different ways, apply it to a variety of contexts, and problems. In other words, forcing yourself to regurgitate what we see in other forms really works. The story of the development of the post it note is a classic in re-ordering.

Have an idea corral.

Ideas come when they come, and not necessarily when you want them to come. In fact, I have often found that they come at the most awkward times, stimulated by something I see, hear or read, not when I am sitting down trying to bring it on. As a result you need some sort of corral in which to capture these fragments, and ideas before they disappear. There are now many digital tools, but you can still use the old fashioned notebook. I use both, a notebook, and OneNote on my computer to capture the stuff that pops into my head, almost never when I expect and want it to.

Conspicuous consumption.

Ideas are the result of what you consume, the more volume and variety of consumption, the more likely that something useful will emerge. This is not to encourage you to watch more cooking or renovation shows on TV, although they do count, it is to encourage you to widen the reach and increase the quality of that consumption. With the wealth of information at your fingertips, there is no longer any excuse not to scratch the curiosity itch.

Articulate your ideas.

Listening to an idea in your head, is different somehow to speaking it out loud. Saying them out loud, particularly to an audience, even if it is your dog, but even better a few friends, a small network group,  those at the pub, whatever it is, speaking out loud helps order the ideas, and subjects them to the discipline of the crowd. As a kid I was a reasonable tennis player, a modicum of talent that was well coached, and combined with a competitive attitude, I was OK. However, when I started coaching, it made me a better player, as I had to articulate all that I had learnt from my coach, and from competition to those I was coaching. In the process, my own game improved considerably, as I applied the lessons articulated.

Devils advocate.

The most productive commercial relationship I ever had was with a bloke to whom I reported for quite a long time, in two different companies. The course of our debates was always coloured by the presence of the devil. Even if we agreed, one of us would take the contrary point and argue it, and the inevitability was that the outcome  was better than the starting point.  The point is not to win the argument, but to use the different points of view and perspectives productively to arrive at better outcomes.

Think backwards.

Ideas are only any good when they do something useful. Normally that is to solve a problem for someone, so rather than beating your head against a wall trying to come up with ideas, try and identify problems, then think backwards to  the solution. I suspect Uber did not emerge as an idea, it evolved as a solution to the problems associated with the taxi industry as it was in most of the  developed  world. Thinking about the solutions to a problem will always generate ideas. When running a workshop, I would never go in and ask for ideas, you go in and spend some time defining the nature of a problem, and only then go looking for solutions.

Randomise.

Routine is the enemy of ideas, routine allows you to go through the motions without thought, by rote, and it is in the disruption of routine that ideas may emerge. Go to lunch in different places, exercise at different times and in different manners, seek a variety of physical and emotional environments to spark a variety of different thoughts.

Be a changeling

Never believe that the best idea is the first one you have , be prepared to be wrong, to include new information or elements that adjust the original. Do not however, mistake the agility of accepting new information with being unable to make up your mind. Those who get great ideas are in my experience the most disciplined of people despite the sometimes chaotic appearance.

Never forget that ideas come from our ability as human beings to make connections all sorts, in all sorts of ways. Imagination, the creation of ideas, then being able to do something with them, is what makes us human.