5 questions that might save Australian manufacturing

5 questions that might save Australian manufacturing

Nov 23, 2017 | Change, Management

 

The news that Murray Goulburn would be acquired by Canadian dairy giant Saputo, taking out the largest of the few remaining Australian owned  FMCG manufacturing businesses is not welcome, while probably an inevitable  result of the failure of Australian management and our institutions to meet the challenges of change and globalisation. It leads me to consider what is next for manufacturing and specifically FMCG manufacturing in this country.

It is not a pretty sight, coming on top of the final closure of the car industry a few weeks ago.

Having said that, manufacturing that will be profitable and provide the foundations of our economy for the rest of the 21st century will look nothing like the manufacturing we grew up with, so my greater concern than the demise of what we had, is how grossly unprepared we seem to be for what is coming.

The tsunami currently washing around our ankles seems to have three  characteristics:

  • The gigantic increases in the volume of data available to us, should we be willing and able to collect, communicate, analyse and leverage it via the analytics and business intelligence tools emerging in parallel.
  • New forms of machine/human interface being driven by touch and voice.
  • New ways of transferring the digital tsunami into the physical world, by means such as robotics, artificial intelligence,  augmented reality, and additive manufacturing.

It seems to me that we are ready for none of these except in isolated pockets, inhabited by a few really smart people unwilling to be drowned, and prepared to bet the farm on the future.

So, the questions to be faced by those who will either survive, or more likely emerge from the rubble (assuming the ‘policy-makers’ do not stuff it up entirely) may be something like the following:

1. How can we capture and make better use of information. The currency of the 21st century is information, but by itself, it is just lead in the saddlebags. What counts are the insights and leaps of logic that can be gained from the information that leverages it into useful knowledge that can be monetised.

2. Which strategic questions should we be asking ourselves? Which questions will offer the opportunity to make the right choices and develop the insights into what may happen next, as the value of using the past as an indicator of the future is long gone?.

3. What might the new business models look like? It is certain that the business models of the past are as redundant as a Model T in an F1 race, so we need to be actively developing and testing a new breed.

4. What sort of capabilities will be needed to compete sustainably? Where are we going to find, train, and retain the people with those vital capabilities? The tools and technology are increasingly becoming commoditised, the people who use them will be the differentiator. At the core of this question is how we manage the education of our kids. it seems to me that education is viewed as a cost to the budget, a line item to be argued and manipulated with a short term focus, rather than as an investment in future prosperity, which by definition will be generational. We need to teach our kids to think, to be critical and analytical, while trusting their instincts and domain knowledge, and if we fail in that, we will have failed completely.

5. How do we collaborate? This question has caused many sleepless nights to date and we still have no real idea beyond the clichés and academic prognostications. Australians are lousy at collaboration, we see the bloke next door as the enemy, or at least someone to be avoided, you certainly do not invite them to dinner, and to date your daughter. However, we need to get over this and be prepared even to collaborate with competitors in some areas, and the regulators need to get used to the idea by taking a broader view of the definition of competitive advantage.

All this is a long way from the demise of the Australian FMCG industry, as I have variously  chronicled in these pages, but it is also tangled up with our collective failure to see the future through any lens that gave us the insights necessary to dodge the hand grenade of change, and take advantage of the subsequent explosion.

Only by questioning the status quo, recognising it will not be an indicator of the future, and genuinely setting out to make the often radical changes necessary will Australian owned manufacturing survive as a significant contributor to our continued prosperity.

 

 

 

 

 

 

 

 

The right tool is still not enough 

The right tool is still not enough 

Oct 30, 2017 | Change, Governance, Management

A huge impediment to effective and ultimately successful marketing is our obsession with the tools, especially the new and shiny ones.

My father was a very keen golfer who practised and sweated for years to get his handicap down to 20. One of his mates was a very good golfer, could easily do a round within 5 strokes of par with Dads clubs.

Same tools, different user.

Marketing tools are no different.

While every tool has its limitations, you would not use a sand wedge off a tee except perhaps on a very short uphill par 3, the skill of the user also has a profound impact on the outcome.

A tool is just an item that gives you leverage, able to do more with less, how much more depends on the skill of the user.

Every business uses a range of tools to deliver leverage, it is the means by which they scale. However, just having the tools deployed and at your disposal is nowhere near enough. The winners are those who extract the most value from them.

 

 

The getting of wisdom

The getting of wisdom

Oct 16, 2017 | Governance, Leadership, Management, Strategy

As I get older, the world seems smaller, more complicated, but smaller. This is not just the technology we all now have that has shrunk all the boundaries of our world over the last 20 years, putting the all the  information anyone has ever had at our fingertips, that is different.

It is one thing to have all  the information, it is quite another to be able to make sense of it.

There has been a progression from data to information, to knowledge that has been recognised and widely leveraged, but now there is another level to the cake, wisdom.

We all have access to the same information, can find those who have the knowledge to use it, but it is wisdom, born of experience and breadth of thinking that delivers the wisdom now so rare, but so sorely needed.

I like very much the philosophy of Charlie Munger who talks about mental models, ways of assembling knowledge and sifting through it, reorganising it to be seen from different perspectives that offer a different view. The more mental models you can bring to bear on a topic and body of knowledge, the greater the chance that there will be some insight that emerges unexpected from the model.

Charlie speaks of his mental models, and their source often, a man of few words, leaving most of them to his mate of 50 years Warren Buffet. However, in 1994 he wrote what has become a staple of business thinking , his ‘Worldly wisdom’ speech.

As a kid, we learnt stuff by experience, and using mnemonics,  devices to assist us to remember things. Rhymes, associations, colours can all play a role. Wisdom seems to me to be the opposite end of the mnemonic, the ability to see connections between seemingly unconnected pieces of information, and it is our mental models that enable these connections to be made.

By contrast what we have often these days are unrelated facts presented as a cause and effect, or a set of actions that worked in one place being expected to work in another, which may seem similar, but at a deeper level are not sufficiency similar to enable the actions to deliver the same outcomes.

We tend to be a society that believes, or wants to believe  in miracles, perhaps cargo cults, because it is easier than doing the hard thinking yards.

As someone who gives advice for a living, it is incumbent on me to have a clear framework from which to distil the information to have into advice that is tailored to the needs of those being advised. As often as not, the advice is not heeded, or taken in parts which sometimes hurts, as it reflects poorly on the end result, but it is the reality of making real change.

To be able to deliver the unwelcome news with confidence that it will hold, I need to have a range of mental models, models that come from the work done over 45 years in marketing, sales, operations, leadership, logistics and accounting, and be able to filter the information in front of me through the range of models in a routine and organised manner. Each model gives a slightly different interpretation of the facts, a different slant that requires consideration, so that each outcome is slightly different to the past, but best fitted to the situation to hand.

When you need a bit of wisdom, give me a call, perhaps I can help.

For context, vital in the consideration of Wisdom, the blurry photo is of a group of islanders in the Pacific at the end of the war. People on remote islands had become used to planes going overhead and dropping supplies to the troops. When the war ended, so did the dropping of supplies, an outcome not anticipated or understood by islanders. Physicist Richard Feynman gave it the name we all know: ‘Cargo Cult ‘in a speech in 1948. 

 

The three drivers of an effective business improvement project 

The three drivers of an effective business improvement project 

Sep 26, 2017 | Governance, Management, Strategy

 

For the last 22 years since leaving corporate life, I have worked at the intersection of Revenue generation, Operations and Performance improvement of medium sized manufacturing businesses.

My entry point is almost always sales and marketing. Businesses are struggling, and see the solution as more sales, so they look for someone who can wave a magic sales wand, and generate more revenue out of the ether.

Almost never happens that way.

Originally I studied to become an accountant. I got a piece of paper, but that did not make me an accountant. Luckily, I realised my mistake before it was too late, and moved across into marketing, in the days before anyone had really heard of it. Mostly they still do not know what it is, but these days, at least they have heard of it.

I found it was easy, and I was very  good at it, so had a corporate career starting in marketing and sales that covered all functional roles, except accounting, including general management with bottom line accountability for a substantial divisional business, reporting to the group MD .

However, I was a lousy employee, because while I got stuff done, made lots of money, I was a pest who would not play the corporate game of bullshit to the left, arse cover to the right, and never admit it when you  may be wrong.

So, 22 years ago I hung my shingle as a contractor, intellectual capital for hire, wisdom on 2 feet, and promised myself, ‘no more corporate bullshit’.

I believe that unless we actually make stuff, physically produce the products others want to buy, because it adds value to their lives in some way, generally by solving a problem of some sort, we will be stuffed in the long term.

After all, how many baristas do we really need?

My corporate and subsequent experience in revenue generation, which is what I choose to call Sales and marketing, operations, numbers, logistics, and general management of manufacturing businesses gives me a platform of experience that small and medium manufacturers in this country are sorely lacking, for a range of reasons.

I look for 3 things when I go into a business as an advisor, contractor, saviour, and occasionally ‘head-kicker’.

When you go to the doctor for a check-up, feeling a bit off, he checks your blood pressure, temperature, looks in your eyes and down your throat, anything not within the normal range, he digs one level deeper.

That is what I do when assessing a business.

I look for three things:

  • Business Architecture.
  • Rhythm & Flow
  • Culture

Get these three things right, and aligned, and there will  be superior performance.

A StrategyAudit business improvement project is all about these three things, and the manner in which they can be defined, analysed and brought together to deliver the improved performance required.

So, let me explain them, or at least my view of them.

 

Business Architecture.

This is where most people and advisors spend most of their time, where all the things you can get data on reside, so to some extent they are predictable, and as improvement is made, you can see it in the numbers.

It is relatively simple, but I see it as a pyramid, which I will explain.

Architecture is how the business is built, and managed. A business is like a building, it needs  foundations, upon which the infrastructure of  the business is built.

This pyramid broken up into the four segments reflects the sequence I follow to drive improvement programs.

Foundations.

This is the stuff that no matter what else you do, the foundations must be in place for success.

A lot of it is ‘underground’ as most foundations are, nevertheless, without a solid foundation, whatever else you build, it will  not last.

Operational accounts: cash flow, P&L, Break even calculations, your ‘Why’, regulatory requirements, Business Model, Resource availability and capability, and CASH,

Different businesses require different foundation structures.

If you are going into child care, the regulatory stuff is very challenging, not so challenging if you want to be a business coach.

However, one is absolutely essential, the number one in every foundation, one word: Cash.

It is also true that the foundations wear out, become depreciated, and without renewal, which is a continuous process, you will still fail.

The advent of digital has changed forever a number of these elements and I would contend is continuing to change them. However, the reality is that the principals remain the same, it is just that the speed at which everything happens has accelerated at unprecedented rates, and continues to do so.

Revenue generation.

Marketing & sales by another name, which brushes off the silo mentality prevalent to date, and highlights the importance.

Everybody knows that no business survives without sales, but the key is to be able to generate revenue by creating value for someone else, at a cost that for them is less than the value they receive, but for you is greater than the cost to provide it.

You would be astonished to see how many businesses did not know their cost of sales, or used some ancient absorption costing method pushed by accountants that became redundant as Jesus moved to the Bethlehem first grade side.

Customer profiling, lead generation and conversion, NPD & C, customer service, Key account management, value proposition, advertising, market research,  and the many other outward facing activities fall into this bucket.

Leverage & scalability

This is where the fun really starts.

Once the foundation is in place, and the revenue generation machine is humming along, you can realistically start to think about leveraging and scaling the successful operations you already have.

Leveraging and scaling existing operational and process capabilities into new markets, addressing the needs of new customers, and perhaps launching genuinely new products will deliver great rewards when done well. It is where mergers, acquisitions, and joint ventures become contributors to business value rather than consumers of value. There is still risk involved, but from a solid base, growth can be substantial delivering great rewards.

Sustainability.

Sustainability occurs when the supporting three levels are working well, and working together. Most owners of medium sized businesses look forward to the day when they can take 6 months off, and come back to the business still humming along, not missing them at all.

The much touted ‘laptop lifestyle’ touted by get rich quick internet salesmen always allude to the day when you can be anywhere in the world with the laptop, and just check in, perhaps do a bit between sips of Pimms beside the tropical pool. This may be the objective, but it is rarely attained without the grind of building the business architecture.

 

Rhythm & Flow.

Rhythm & Flow is all about how  the management processes work to facilitate the delivery of value to customers in a commercially sustainable manner.

The development and deployment of strategy, the conversion of a lead to an order, the operational processes that manufacture products, the Customer facing processes, and so on, are all optimised when the flow is even and predictable.

Business might be organised vertically, but the processes that generate leads, service customers, and build products are all horizontal, cross functional. Your customers are not interested on your structure, unless they want to see the CEO to complain. They are more interested on getting the product they ordered on time, in spec, and at the price they expected, all horizontal processes.

At the intersection of the processes and organisational silo boundaries, you always get interruptions to the smooth flow of information and product, and a bit like rapids in a river, the intersection creates a little pool of chaos, too many of them and all you have is whitewater.

You would all have heard of Henry Winslow Taylor, and scientific management. While Taylors views of the people involved at an operational level are absolutely wrong, his ideas on the standardisation and optimisation of the flow through a factory are absolutely right. They formed the basis of the Toyota production System, which has led the transformation of manufacturing around the world over the last 35 years.

I seek to identify anything that interrupts the flow, creates a rapid, as in a river, which is just a small piece of chaos, and remove it, restoring a smooth flow.

 

Culture.

Culture is where it really gets interesting.

Culture is the way we do things around here, the mindset of the business, as reflected in the way people go about doing their jobs, setting their priorities, interacting with customers, suppliers, and their co-workers.

Culture trumps everything else, and is hard to define, almost impossible to predict, and minor irritations in one place can have major ramifications elsewhere.

The butterfly effect.

Measuring culture in any short term way is a waste of time, but over the long term, the value becomes obvious.

It is a bit like motherhood.

We all know we individually benefit, and society benefits when parenting is done well, but how do you measure it?

You cannot over the short term, but the impact is obvious over the long term.

The way I do it is to engage at all levels in as many ways as possible, finding my way into the nooks and crannies that exist in every business, to really understand how it all works, what people think, why they think and behave as they do, and evolve some strategies for improvement.

This is not meant to be a comprehensive review, it just represents the headlines from which a StrategyAudit investigation starts. Every assignment is different, every set of recommendations is tailored towards the solutions for  the specific problems and opportunities encountered during the investigation, and every change program tailored to the needs and capabilities of the organisation.

Cartoon credit: Hugh McLeod at Gapingvoid.com

Who do we sue?

Who do we sue?

Sep 15, 2017 | Governance, Management

I had never thought of the question ‘Who do we sue’ as being of strategic importance until a few weeks ago.

Having coffee with a friend who has worked for a long time for a US  multinational corporation that developed and commercialised a very useful chemical component technology, long since copied by low cost manufacturers  in China, he explained it.

While my friends employer retains a significant market share in the US, everywhere else it has almost disappeared, although perhaps ironically, pockets do remain in Asia.

His analysis was that the nature of US corporations is that they like to know who to sue should something go wrong. This was the one and only reason his employer retained their US market share. Their US customers knew their chances of success in suing a Chinese supplier in the event that something  went wrong were somewhere between none and a snowflakes chance.

Therefore they continued to pay double the component price to his US owned employer as a sort of unstated insurance.

They knew who to sue.

 

11 growth strategies for small businesses

11 growth strategies for small businesses

Aug 23, 2017 | Leadership, Management, Small business

The last 23 years of working with, reconstructing, and observing small businesses in all sorts of situations has resulted in a pile of insights on many areas of business. A common fact or is the desire to grow, even when in the darkest times, almost all businesses aspire to grow. This is not ego, or self-delusion, it is simply a general acknowledgement that to stand still is to be overtaken.

Grow or get trampled.

The common factor of those that have successfully grown is that they do not follow any recipe, there is no guaranteed growth map, but it is clear that they have all combined some common elements in different ways to succeed.

Be different.

Every successful business I have seen has done something different to those around them, with whom they compete on a day to day basis. Being part of the crowd results at best, at being on the top of the ‘average’ range. Differentiation in the manner that they deliver value to their customers is perhaps  the most common element of success I have seen. It need not be a major thing at first glance, but combined with some of the following elements, differentiation becomes a powerful driver of growth.

Great product.

As the old advertising  saying goes, ‘The customer is not stupid, she is your wife’ . There is no situation where an average product can sustain above average performance. All the clichés and PR gloss in the world will not do any more than get a first sale, after that the product has to deliver value greater than available alternatives. It is the form of that value that differs dramatically, and value does not always mean technical quality, it means fit for purpose.

Growth is a relentless master.

Growth never happens in isolation of focus, effort and commitment. Every sustainable growth business I have seen, or read about, has somewhere in its DNA, a focus on growth, in a way that seizes opportunity, makes it work, learns from what does not work, and goes again. It can apply this focus while ensuring that the every-day operations, the ones that pay the bills today, are well taken care of.

Marketing is shaped by the need.

Too often marketing is seen as a formulaic process that just requires the appropriate level of investment and capability to be successful. Wrong. Every situation requires a differing mix of marketing elements, and there are no two situations where the template will just ‘work’. Just ‘doing marketing’ will not lead to growth, the marketing has to be connected to the intended customers viscerally or it just becomes another of the millions of messages to which we are all subjected every day.

Find a niche and own it.

Whether you are the corner store of Apple, you cannot be all things to all people, in one way or another, you need to focus on those to whom you can deliver superior value. The evaluation of your target niche, the motivations of those at the bottom of the niche who are likely to be your best, stickiest, long term customers, then delivering value to them, is a key to growth. Once you have consolidated your niche, widen it a bit, seek adjacencies, look for novel uses of your capabilities in other niches, but never forget the niche.

Growth is long term.

Nothing useful happens overnight. Growth happens as a result of patience, commitment, and an ability to remain focussed on the goals, even when the short term stuff looks dark, or there is some compelling distraction. While it is fine to experiment, sustainable growth comes from building smaller success over time, not from frequent changes in direction. When looked at in hindsight, successful growth always has some elements of compounding small success present. Remember the fable of  the wise adviser who wanted nothing but compounding grains of rice on his chessboard, each square having double the grains of rice of the previous.

Seek leverage.

Identifying the means by which you can apply leverage to the assets you can deploy always pays dividends. Often this means combining your marketing with the behaviour  drivers of those in your niche to deliver some unique value, bit just as often is means ensuring that the basic processes that deliver the cash every day are robust, and repeatable. Having Standard Operating Procedures that are a part of  the operational DNA saves huge amounts of time and energy better applied to activities outside the mundane . Successful growth engines always have their core processes working well, and those growth activities seeking the points of greatest leverage.

Insights not data.

These days we run the risk of being overwhelmed with data, unlike when I started in business, when quality data was a rare beast, hard won. Today there is just so much data that the real skill is sorting it out and finding the hidden gems that offer insights you can leverage.  Data guru Avinash Kaushik calls it ‘data puking’ which is in my view a fine description. The metaphor I use is going into a library, without any idea what you might be looking for. You end up overwhelmed by the choice, with little chance of finding the right book.

Recognise your ecosystem.

What makes successful businesses successful is an ability to mix and match the best options for  their target customers, in ways that best deliver leverage for both parties. Growth is a two way street, no business can be sustainably successful unless their customers and suppliers are also successful. The task is to make the pie bigger so everyone benefits, not to take a bigger share of a static pie.

No silver bullets.

Growth comes from hard work, focus, determination, commitment, and not from luck or circumstances. My old dad used to say, the harder I work  the luckier I get. And that has been echoed by every successful person I have ever come across. It is never left to chance, it is a managed, deliberate process of making choices between alternative applications of limited available resources, being proved right more often than not, and learning from the times when you are wrong.

Clarity.

Finally, and perhaps most importantly, is clarity. We are in a world that is intensively competitive for the attention of those we may be able to serve. It does not matter if you are the corner store, or a multinational, your marketing challenge is to gain, then hold attention of those we can best serve, while we relate to them the reasons their best interests are best served, their challenges overcome, by working with you. The first test is to ask a few of your employees, close friends, and current customers what problem you solve, looking for a consistent and clear response. In its absence you have some work to do.

A lot of this is common sense, an increasingly rare thing in a complex world.