Oct 20, 2023 | Innovation, Management
Investing in dead horses sounds like a pretty dumb idea, but it happens all the time.
Projects, ideas, products, people, that have little or no probability of returning revenue and margin from the continuing investment should be stopped. Not only do you save the money and management distraction, but you have the opportunity to leverage the freed-up capacity against the opportunities otherwise passed over.
Opportunity Cost flipped to be just Opportunity.
Over the years I have seen many projects that have persisted long past any reasonable time, never seeming to move forward, but never getting the chop.
When resources have been invested in a project, particularly when it has a favoured place in the psyche of some manager, killing it is often hard, resources just get budgeted, absorbed, and ultimately wasted.
Voltaire observed that: ‘Perfect is the enemy of good’ This leads to the idea of Minimum Viable Product (MVP), getting an idea out to the market in some form to test if it really has sufficient traction to deserve the allocation of resources over alternative uses. ‘Ship and Iterate’ should be the cry, assuming that each time you iterate, you learn from the outcomes, and better understand the commercial reality you confront.
Prudent investors and managers take a ‘portfolio approach’.
They know that not all initiatives are equal. Differences abound in the resources they consume, the opportunity offered, and the odds that the opportunity as visualised will become reality.
Daniel Kahneman established quantitatively that we value what we stand to lose much more than what we stand to gain. This is the magic power of continuing to invest to avoid accepting a sunk cost. Flogging a dead horse by another name.
Stop investing in dead horses, they will not come back to life no matter how hard you wish it were different.
Oct 13, 2023 | Governance, Innovation, Strategy
Australia has a problem, a big one. Our KAP Gap is huge and becoming ‘huger’ by the month.
Knowledge-Attitudes-Practise gap is the difference between what people say they will do, and what they actually do.
At some level, we understand what needs to be done, but are so cemented into the good life that we cannot see our way to absorb the pain necessary if our grandchildren are to continue to enjoy the fruits of this country.
How do Australians respond to the reality of the latest Harvard Complexity report which records a slip from 60th in 2000, to 93rd in 2021? Being sandwiched between the manufacturing goliaths of Uganda and Pakistan is hardly a point of pride. (Perhaps we are getting used to it, given the slip of Australian rugby from the top tier to a nation ranged with the minnows of world rugby, but that is another post)
There is a notable reluctance to embrace change. Inevitably, change makes some uncomfortable, so we substitute a fuzzy slogan. There needs to be meat on the bones of an effective slogan that resonates on a deeply personal level, or it remains just fuzzy words. This applies equally to big changes as it does to the little ones we are asked to make every day, it is just that the latter are rarely seen and measured.
How is it that we are still seen as a wealthy nation?
I have an acquaintance who is wealthy, always has been, but he is a lazy sod, pretending to work, being involved in stuff that amuses him. Luckily for him, his father and grandfather were of a different sort. They accumulated wealth from hard work, taking risks, and learning from their mistakes. My acquaintance is wealthy because he is lucky in his parentage, just as Australia is lucky in its abundance of stuff we can dig up and flog that the rest of the world wants.
Little of that nasty four letter word ‘Work’ involved.
Tomorrow, as this is written, there will be a referendum. Irrespective of the view you hold, and the way you will vote, it is hard to argue that the policy choices, and their implementation has not been at an acceptable level to date. You only need to look at the ‘Gap’ between first Australian incarceration rates, suicides, domestic violence, education, and others to come to that conclusion. What this vote will have articulated is the willingness of the Australian population to accept that change is necessary. It may not always be good for everyone, and indeed, will never receive complete agreement of the detail. However, if we reject all change, we also reject all opportunity, which is rarely a good strategy.
Oct 6, 2023 | Culture, Innovation, Leadership
Metrics increasingly drive our commercial lives.
We need the metrics to ensure that we are focused on the outcome, it drives the resource allocation choices that must be made.
Usually, we face a series of binary choices, do A or B, then X or Y. This is comfortable for us, our brains are triggered by binary, friend or foe, run towards or run away, is it a stick or a snake? Evolutionary psychology at work.
In the short/medium term this works well, it ensures focus on what is deemed currently to be important. However, it actively excludes stuff that is ‘interesting’ but not necessarily useful now. Those require us to accept risk, experiment, be comfortable with failure, all the things that our evolutionary psychology has bred out of us. Next time you want to spend some resources on something because it is ‘interesting’ but outside the plan, good luck getting that formally approved. You will have to be prepared to be an outlier, renegade, argue against what has gone before, and you know what happens to many of those who do that.
Breakthroughs only occur when someone forges a path towards the unknown because it is for some reason, interesting to them. It will always be inconsistent with the status quo, it will always be out in the fringes, messy, usually unseen by most, but that is where the breakthrough gold hides.
To see these outlier factors requires critical thinking, a disapproval of the safe optimised way forged by the status quo. By definition, you cannot plan for the unexpected. However, you can create a culture where critical thinking is encouraged, and fed into the processes that together can become a renewed status quo.
These interesting things do not comply with the way we create plans and budgets. They are long term; they do not accommodate the plans associated with most of the daily activities we undertake. They are the source of long-term breakthrough; they are often the result of serendipity. Penicillin was not developed because Fleming had an objective to develop an antibiotic. The product category ‘antibiotic’ did not exist. Serendipity took place, then it took 15 years and a war to become commercialised.
How many breakthroughs can you think of that emerged from a plan? They always come through long experimental slog, underpinned by critical thinking.
My conclusion is That critical Thinking and planning are not mutually exclusive, but are uncomfortable bed-mates. in the absence of the encouragement and culture that makes uncomfortable relationships possible, they will not survive together.
Header credit: It is a reproduction by Hugh McLeod of the wonderful copy written by the creative team at Chiat Day advertising for Apple after Steve Jobs returned.
Sep 13, 2023 | Innovation, Marketing, Strategy
Creativity comes from somewhere; the challenge is always to understand and manage the process and the people. This applies equally to every type of creativity, from painting, writing poetry, formulating the mathematical representations of our physical world, to designing a bridge or a house, or imagining something entirely new.
Creativity is never just a Eureka moment under the shower with no pre-work as the catalyst. It requires the frameworks provided by the pre-work to enable the catalyst to emerge.
For the pre-work to be able to provide a solid framework within which the catalyst can emerge requires years of study, experience, and lessons learned from the ideas discarded or failed, on top of the few that might succeed.
Specialise.
This leads to focus, and deep knowledge, and an ability to apply well above commodity pricing. When a service or creative product is in short supply, the price goes up. Creative people seek problems to solve, and ideas to explore, which is great, but counterproductive to finding the price that will optimise your time. Be committed to the niche, and the specialisation this niche requires will open the opportunities for other ideas and new problems to be solved.
Specialisation really only happens with the benefit of experience, which happens over time. Define clearly what are you going to do, and who do you do it for, and being very clear to both yourself and those in the market what you will not do. For SME’s this is always a very difficult series of choices to make.
By specialising, you also end up emasculating competition, as they cannot do what you can. For those who want what you provide, there is no option.
Address questions of money early.
We tend not to talk about money, it makes us uncomfortable, and creativity is very personal, not about money. However, making a living providing a creative product is why you are in business. You must be able to talk about it to make it, and talking about it delivers credibility.
Do not be scared of silence.
Nature abhors a vacuum, so the best way after delivering a ‘price-bomb’ is to embrace silence.
When selling, if you fill the void, you tend to say something that reduces the impact of the bomb.
It is uncomfortable, but you get used to it.
State the number and shut up. You will gain a lot of information from the silence. Often it saves yourself from yourself, while offering an ‘out’ for those potential customers looking for a commodity product and price to remove themselves early, before you invest much of your valuable time.
How to measure value in the conversation.
There is no easy way to measure value in a conversation, but there is no substitute to a conversation that seeks to find ways for people to exchange value, in whatever form that value takes. The answer is to discover sources of irritation, complexity, or desire the client would like to address, and propose ways to achieve that outcome. Therefore, identifying quantitatively the impacts of the problem, and the results of your solution will increase the value of your offer. The larger the problem being faced, the greater the value of the creative process.
Say ‘No’ a lot.
As Warren Buffet notes: the difference between successful people and really successful people is that really successful people say no to almost everything.
We all want more what we do not, or cannot have. Saying No increases the desirability of your offer.
Anchoring against desired guaranteed value.
If I could guarantee you an extra million dollars in profit, would you be prepared to pay half as compensation? This is a closed question, but it is an anchoring question at the high end of the range. You can work backwards from that, in terms of risk and the nature of the guarantee. This strategy is used all the time, often without us noticing. Energy retailers seem to be always guaranteeing savings on your power bills when you buy from them, knowing that few will do the measurement, and it is a hypothetical measurement in any event. This tactic can be used in many ways. For example, usually you cannot guarantee value when selling to a bureaucrat, as they cannot pay for value, they pay for certainty against a budget. Therefore, you can offer guarantees of delivery date, or performance, any factor that is quantitative.
Value is entirely subjective. At the heart of value is the trade, where you are both happy. Your costs have nothing to do with the value. People do not want your time, or your deliverables, they want the solutions to their situation that you can deliver.
To conduct a value conversation, you need to have the right questions, not the answers. Ask the questions, and the answers will evolve.
Header credit: Me. As you can see, graphic art is not part of my creative armoury.
Sep 4, 2023 | Change, Innovation, Strategy
If strategy is all about choice, and I strongly contend that is so, the challenge for responsible management is to imagine first what those choices may be.
This ambiguous mindset requiring choices to be made with less than full information never happens by itself, as it makes people uncomfortable. It must be pushed, being uncomfortable must be made a significant part of the status quo, making change along with its risks and downsides a normal part of the culture.
Ask yourself what could be true in five years?
Chances are you will not get much right, but the process of thinking about and resetting the status quo to a state ready and able to welcome change will be immensely valuable.
In 1985, few predicted that microprocessors would be everywhere, from rockets to fridges, from phones to toys.
In 1995 few predicted the Internet would become ubiquitous, and in 2005 few predicted their kids would get all the news they could consume, and wanted to consume, from social platforms.
Ask yourself what could be true that would alter the shape and dynamics of your industry.
Step forward and embrace the possibility of those changes occurring in the way you manage your business. By so doing irrespective of how accurate you have been, the business will be much better able to respond to and leverage the change.
Aug 28, 2023 | Innovation, Marketing, Small business
Many of the impediments to starting a new business have been removed over the last 20 years.
You no longer have to hire an accountant to register the business, hunt around for premises, hire a bookkeeper, find an advertising agency, build a product prototype, spend days designing the letterhead, understanding the regulations and weaving your way through them, and doing the hundreds of other tasks necessary to start a business.
They can all be done with digital tools from your kitchen table, or outsourced to someone who has the specific expertise necessary, from their kitchen table.
What used to take time, money and most importantly the energy of budding entrepreneurs can no longer be used as an excuse for not moving forward.
The wheat has been sifted from the chaff by the digital winds.
That just leaves the toughest challenge, the one that in most cases motivated the thinking in the first place, the one that separates the dreamers from the ‘doers’.
How do you identify and generate traction with those prepared to part with their money to buy your product or service?
When they have bought from you once, how do you keep them coming back, or better still, turning your product into a subscription service?
This always was the hardest part of the entrepreneurial journey.
It always will be.
However, these days there are far less excuses not to have a go than there were 20 years ago.
