Jul 31, 2023 | Innovation, Strategy
Strategy development is driven by the need to make difficult choices with less than complete information. The successful see a problem to solve before anyone else realises there is a problem, and reap the rewards.
When you think you have all the information you need to make a risk-less choice, my advice would be to look again. Either the path you are contemplating is tactical rather than strategic, or you are simply following some orthodoxy that will not lead you anywhere new or different.
The great and unusual skill is in nurturing the capability to generate an insight that makes a difference. It is challenging to see a situation as presenting a problem to be solved that others did not see, until you have solved it. Then they rush to follow, often commoditising your insight in the process. The classic case here is iTunes, a solution to a problem nobody saw until Apple made it obvious there was a goldmine hiding behind the fence. Apple built a first mover advantage, and by not stopping the innovation process, ensured competitors followed without catching up. Competition just added to the breadth and depth of the market Apple continues to dominate.
Every major behaviour changing innovation I can think of has solved a problem that either nobody else saw or had failed to solve. In the latter case, Thomas Edison and the light bulb are the classic case. Many people had been working on solving the problem of the filaments burning out with a flash when a charge was applied, but it was Edison who came out with the solution first, and is therefore remembered as the ‘inventor’ of the light bulb.
Anybody for a faster horse?
Jul 28, 2023 | Change, Innovation, Strategy
So, Elon Musk surprised everyone, again, by killing Twitter and launching X.
Whatever X is.
Everyone in the marketing, strategic and management world generally seems to have had a go, except me, so here goes.
He must be effing crazy!
(Psst.. He is, but is it crazy smart or just crazy?)
Twitter had a range of problems, magnified since Elon sent the previous owners an offer to buy the joint for an absurdly large chunk of change. It was so large that the then board almost killed themselves racing to sign before he changed his mind and halved the offer. This might have been closer to the value, albeit still overly generous.
Having failed to wriggle out of the offer to buy, he then cut staff numbers 80% from the staff of 7500. Meanwhile ad revenue continued to tank, the rate just increased, dramatically.
Surprisingly, twitter still worked.
Estimates of the value of the twitter brand pre-execution vary a lot, but commonly vary between 5 and $6 billion. That is a lot to just flush down the dunney for no apparent reason.
Competitors must be rejoicing, particularly Meta that just launched ‘Threads’ as a twitter competitor, only to find the gorilla in the garden has been turned into a gnome.
Musk, and everyone else in this space has watched what WeChat has achieved in China, and into the Chinese diaspora, and wanted to emulate it. Given the original source of Musk’s wealth was PayPal, he would be in as good a space as anyone to make that happen. That makes sense, but why sacrifice twitter in preference to starting a separate company?
It simply does not make sense.
There are a few other things that do not make sense, until they did.
Re-useable rockets were not possible, until he did it.
Tesla electric cars at volume did not make sense until he did it.
Tesla as a public company would never make it, until it did. (Tesla now has a market value more than all other US manufacturers and Toyota combined, and continues to climb)
Gigabattery factories did not make sense until he did it.
Distributed recharging infrastructure did not make sense until Tesla reached scale and persuaded Detroit to sign up, a fortnight ago.
Based on his history, betting against Musk is a mugs game, no matter how little sense it makes to the rest of us.
Jul 26, 2023 | Change, Innovation
Differentiation has regularly been trotted out as the core of success. In the absence of some sort of differentiation to a target market, all you have is price. It is an argument that I have used for 50 years.
Problem is, it is only half the story.
Differentiation must come from somewhere.
Usually, we tend to stop at some sort of mechanical or electronic additional feature, seeing those as desirable for the customer. If we are to follow Clayton Christianson’s theories, the absence of those same features that just clutter up the product from a different but unrecognised market might be the key.
In either case, there is a missing element in the usual articulation surrounding the development of a differentiator that in some way adds value to a customer.
Insight.
What is it that makes us realise that the current product configuration, business or distribution model, pricing and feature matrix is inadequate?
From somewhere comes an insight: ‘a clear, deep, and sometimes sudden understanding of a complicated problem or situation, or the ability to have such an understanding’.
Fortunately for the few who are thought leaders rather than the followers of the newest model, idea or shiny thing, insight will not come from any of these. It may come from observing the behaviour of the real outliers, and an understanding of the unusual things that drive their behaviour, or it might come from a diverse set of brains coming at a difficult problem from a range of differing perspectives. It may come from connecting a few practises that exist in other places with an unmet need, or opportunity in an unrelated field. The point is, it will not come from an effort to collect and analyse historical data that is presented to a 3-day offsite strategy session as the basis for their strategic discussions, the objective of which is to produce a glossy strategic plan.
Insight. The question remains how do you mould the culture of your enterprise such that it is able to produce this usually hidden key to success?
Header cartoon credit: Dilbert and Scott Adams.
Jul 24, 2023 | Innovation, Strategy
Innovation sessions typically involve an expensive consultant who has some sort of manicured track record exhorting the group to ‘Be creative, let your mind wander, nothing is silly, think outside the box’ sorts of session.
That does not work very well, except of course for the consultant.
What is usually missing from these sessions is diversity. Not of gender, but of expertise, training, experience, and knowledge gained in seemingly unrelated areas.
Pose a difficult problem to an accountant, and you will usually get a numerical answer. Pose the same question to an environmentalist, and you will get a different, but entirely valid answer. People see problems and their potential solutions through the perspective of their training, domain knowledge and experience.
Imagine you are running an innovation session for Australia’s new space agency. Chances are you will have 25 rocket scientists in the room. All will be applying their skills and knowledge to the problem to be solved. Would you rather add another rocket scientist to that group, which may not add much to the 25 already there, or a biologist, musician, or surgeon, any of whom may not know anything about rocket science, but just may have a solution to your problem that comes from an entirely different field.
The best solutions to really difficult problems are more likely to come from asking better questions of different people, than from just asking more of the same ones directed to the same people.
Header cartoon credit: the great Gary Larson with thanks.
Jul 20, 2023 | Change, Customers, Innovation
Contrary to the myth, the customer is not always right.
However, the customer should always be heard.
You learn a lot from customers, particularly the ones who leave, are dissatisfied and complain, or who exist at the fringes of your market, or even in a market you had not considered.
As a marketer I have always advocated the notion that the good stuff happens on the fringes. As the saying goes, ‘every good idea starts as a heresy’, so hearing the heresy is a core part of being able to respond to new stuff.
There are a lot of tools the hear what is being said on the fringes, tools to track every interaction with your brands, good and bad, and everyone should be heard.
Years ago, I tried to persuade the people in the pork industry’s peak body that they should be spending some time and marketing resources engaging with those growing organic, and heritage breeds of pigs, and got laughed out of the place. They noted that 99.9% of the pork grown was the result of intensive farming, where cost was the absolute driver.
The real competition to the domestic industry was located in those well-known cheap labour countries of Denmark and Canada, and these fringe Australian organic and heritage growers were irrelevant. Besides, the existing major Australian producers were contributing most of the industry marketing funding via matched levy.
Those few loonies with different ideas out on the fringes with tiny volumes only contributed a dribble to the kitty funding advertising and a nice lifestyle for employees in Canberra. This is close to the sources of part of their funding, and political power, but totally removed from growers and the markets they served, but very comfortable.
As a result, an opportunity for growth and profitability has been missed.
Or has it?
Jul 5, 2023 | Change, Demand chains, Innovation, Strategy
All the recent focus of industry development, Control of IP, and sovereign manufacturing, has been on High tech.
Should we, or perhaps why don’t we, look to areas where we have dropped the ball in the past, but still have the opportunity to shape world markets, built capability, and diversify our economy.
Should we be looking at some of the obvious, but perhaps boring stuff that can make a significant difference, and where we already have a huge head start.
This race towards the newest shiny thing is fun, generates a lot of press releases, is exciting, attracts attention, as well as capital and competition, but is it the whole game?
In years gone past, Australia supplied a huge percentage of the world’s wool.
We grew it, and processed it through the many stages to the production of yarn, and exported the highly value added product to the world.
No more.
We have been supplanted as the number 1 producer by, you guessed it, China. We proudly, for now, occupy second place in the production stakes. China also is the biggest importer of Australian greasy wool, which they then process and gain the huge value add that the processing stages contribute.
I do not have all the numbers, but the current mean fibre diameter of the Australian clip is 20.8 microns, (AWPFC numbers) which is significantly less that the average of other major producers. At the extreme, production of wool at 13-15 microns is very small, requiring very considerable skill, animal husbandry, and investment in genetics. However, that investment is returned with huge price premiums paid by high end fashion manufacturers. That fine wool sells at auction for up to and sometimes more than $150/kilo, 15 times the average.
Australia’s share of world fine wool production is upward of 80%.
Why is it beyond our capability to capitalise on such a premium position, based as it is on 150 years of experience, a continuing production advantage in the preferred raw product, and many millions of dollars on R&D?
Australian Wool Innovation has been pissing around for the 30 years I have been watching, and from time to time dipping a toe into the water. They have wasted growers money and matched funding from the public purse, while failing to build a sustainable industry value chain that builds Australia’s competitive position. Making excuses, and generally having a fine old time has been the outcome of their efforts.
Having just read the latest strategic plan I can find, that sorry situation is not going to change.
As part of the National Reconstruction Fund, should we revisit old friends like wool that despite the best efforts of the last 40 years, we have failed to kill off? Surely that level of resilience requires some examination and consideration for rebuilding the supply chains that delivered many of the foundations of the prosperity we still enjoy. Such an effort would tick 5 of the 8 priority areas nominated in the reconstruction fund legislation.
13 years ago in a post I asked ‘Where next for wool‘. The question needs to be asked again, and this time we should be expecting some sensible answers.
The header graph is the average price of greasy wool over time. You can see the impact of the wool industry pricing model that ended in tears in July 1995, leaving a huge inventory of unsold wool that screwed the market for a decade. As with all averages, the graph hides the huge opportunity that has been facing us for years, which we continue to ignore.
