21 Lessons from a manufacturing turnaround

21 Lessons from a manufacturing turnaround

Aug 28, 2018 | Branding, Change, Leadership, Marketing, Strategy

 

I was asked the question ‘what did you learn from the turnaround of the GPD‘ a while ago, and was persuaded to present on it.

The GPD was the ‘General Products Division’ of the Dairy Farmers Co-Operative Ltd. It produced all the dairy products you manufacture with milk, which were at the time (mid 80’s) unregulated, while the stuff you put on your cereal in the mornings was regulated to the wahzoo. The GPD  was spun out of the much larger milk business so it could be run as a business, and not an outpost to absorb the milk not required in the regulated market.

Various aspects of that journey have been in these pages before, but I had never contemplated the question in depth and from a height, at the same time.

I started with the business just after it had been set up, then called the ‘By-Products Division’ and in the early stages of building a new ‘state of the art’ factory in Western Sydney.

The division was commercial road kill.  I know that as I did the first P&L by hand, (calculator, 18 column ledger sheets, pencil and rubber)  from scraps of information gathered and constructed from a variety of sources, and a lot of observation.

From that position, turning over $32 million, losing somewhere between $6 & $8 million, with the heavy commitment of the half finished high tech plant nobody knew how to run, 8 years later it was turning $162 million and making good money, with much improvement still to be done. It was a very substantial turnaround, not without its share of drama and missteps,  moments of joy and ‘what the hell just happened’. It was a journey that involved everybody in the business, at first reluctantly, then enthusiastically, had built astonishing momentum that was really only obvious to those on the inside.

Then it was stuffed up by a stupid decision to re-incorporate the business back into the milk business in order to ‘spread the successful commercial DNA‘  in preparation for the inevitable deregulation of white milk.

Over the first 6 years I carried responsibility for the Logistics, and part of  the sales, in addition to the marketing role I was hired for, and for  the last 2 years that the GPD was a separate entity, I was the GM. My ideal job at that time in my life.

Over the eight years, the business and its processes was totally reorganised, the  culture completely turned around, and we launched a string of successful market leading products, all of which contributed to the success.

So what did I learn, in no particular order?

  • You have to engage all employees, at all levels in the journey. They must understand their role and importance in that journey and to each other.
  • When you make a blue, recognise it early, correct and move on. Chasing a sunk investment that is not working is a terrible mistake to make.
  • Never look back with nostalgia, just for the lessons as input for what is next.
  • Price is not a measure of customer value, it is simply a means to express it that is understood, and unfortunately, usually misunderstood. Price only really matters when all other things are equal.
  • No business can be all things to all people.
  • Look after your small customers, one day they might be your big ones.
  • Standards of performance and behaviour have to be both present, well understood, transparent, and meticulously followed by those who set the tone.
  • The greater the general level of transparency the better. Hiding bad news never works, and brushing over problems just lets them fester and get worse. ‘Nip it in the bud’ is always a good piece of advice.
  • A managers job is to support the efforts of their staff, not the other way around. Successful companies extend trust to all employees at all levels, and deals with those who breach that trust openly, and absolutely consistently.
  • Breaching trust is very different to making a mistake. ‘Good’ mistakes are the result of initiative, trial and error implemented with due diligence, and are essential for learning.
  • Continuous investment in product and brand development is necessary, and even more important when times are tough. A great mistake is to see this investment as an expense item in the P&L, available to be managed to deliver a short term result. A powerful brand does not happen overnight, is the outcome of many thousands of small actions and improvements, as well as the obvious external marketing activity,  and it is the greatest asset any business can have.
  • The culture of the place is very hard to describe to an outsider, but clear to an insider. It is a mix of rules, experiences, stories, relationships, habits, and is more complex than any family.
  • Have in place a robust and well understood strategic process which serves as a framework for all decision making at all levels. When an opportunity presents itself, no matter how attractive it may seem, if it is outside the framework, leave it alone.
  • Have in place a robust but simple set of KPI’s intimately connected to the strategy, cascaded through every level, and proactively managed.
  • Never compete with a stronger competitor on their ground.
  • As far as possible, fund growth from cash flow. Long term debt is sometimes necessary, but can turn toxic when the best interests of the lender and the business diverge.
  • Be prepared to kill your favourite children and sacred cows, just be careful to ensure they are not golden geese in disguise.
  • Look for diversity in the thinking styles of people, and encourage that diversity of thought to bubble through and influence the whole business.
  • Treat employees as you would a trusted associate, not a piece on a chess board to be moved around at will. That trust will pay huge dividends in morale, productivity and loyalty
  • Institutionalise regular interaction and conversations across functions and up and down the company, without the impediment of formal roles.
  • Continuous improvement in everything should be so ingrained that people feel its absence keenly.

My final two years in Dairy Farmers were as GM Marketing of the much larger entity that now included the former GPD. While the business continued to be successful, the pace of change and improvement stalled under the dead weight of the still regulated milk business. After  two years, the MD of the business reached the end of his tether with me, constantly being a thorn in his side demanding change, and I with him, so one morning we parted company. The irony is that during this time, I (and the marketing team) launched the single most successful product I ever launched, the last in a long list of successful product launches as an employee. However, the means by which I had to subvert the ‘rules’ to do so were the nail in my corporate coffin.

Another two years on after my exit, the business was flogged off, ultimately to a Japanese brewer, at what I regarded as a fraction of its long term value. A sad end indeed to an iconic Australian food manufacturing business, and perhaps a metaphor for the whole food industry.

 

 

Convergence of Governance and Marketing in Financial Services

Convergence of Governance and Marketing in Financial Services

Aug 22, 2018 | Governance, Marketing

The shocking revelations from the Royal Commission continue to flow.

Last week it was NAB’s turn in the hot seat, and they did not fail to add to the building dismay and absolute disgust being felt.

The Governance Institute defines governance as:

Governance encompasses the system by which an organisation is controlled and operates, and the mechanisms by which it, and its people, are held to account. Ethics, risk management, compliance and administration are all elements of governance.

This seems to be an OK definition to me, with the obvious omission of any reference to the customer, the ones who put the money on the table in the first place. I had a quick look on the AICD site, and could not find any sort of definition, which seemed a bit odd.  A google search for ‘marketing governance’ turned up a lot of self-serving fluff and cliché, but not much of value I could see in a quick scan.

Being simplistic, the revelations from the Royal Commission all seem to point to some very poor governance of the marketing function. Perhaps not surprising, as so few seem to have thought constructively about it. (myself included beyond the implications on strategy and resource allocation)

Besides the apparent breaches of the law, certainly breaches of ethical behaviour, and absolute failure of a culture to reflect in any way the promises made by the organisations to their customers, there is clearly no governance of marketing in the Financial Services industry.

If there was, we would not be paying commissions on sales, continuing to extract trailing fees, charging for services not delivered, lying, and even charging dead people for advice.

Effective marketing over the long term relies on ensuring that customers remain customers, that the lifetime value of a customer is not just respected, but revered.

The barriers to exit in Financial services are high, largely because of the low level of financial literacy and the sheer complication in this area. This is made worst by the blizzard of regulatory changes, industry jargon, sheer disinformation, and malevolence  that abounds around a trough the size of the compulsory superannuation money pot.

It may be fine to put barriers to exit in place, customers hate them, but understand the reason, but then to screw customers behind the barriers to exit amidst the fog of disinformation and jargon, is a gross failure of marketing governance.

The responsibility of marketing lies with the representation of the customer inside the business. We talk about customer journeys, then stop at the first sales transaction. Has nobody in Financial Services thought of lifetime customer value, and acted as if they cared?

Here endith the rant!

Header credit: Once again, to Hugh McLeod at gapingvoid.com, who must have seen the Australian Royal Commission coming when he penned this cartoon years ago.  This seemed like the perfect opportunity to use it!

9 ways to ‘stack the deck’ to win that vital tender

9 ways to ‘stack the deck’ to win that vital tender

Jul 25, 2018 | Marketing, Operations, Sales, Uncategorized

 

The better prepared the tender, the better the chance of winning.

Hard to disagree with that statement, but then what makes for a better prepared tender?

While price has a role to play, it is only the deciding factor when all else is equal. Your task as a tenderer is to ensure that all else is not equal, and that your tender represents the best value to the enterprise wanting something  done. Then  you have stacked the deck!

A friend of mine is a senior engineer in a very large building contractor, one of those who is changing the skyline of Sydney on an almost daily basis.

The stress is killing him.

There is the constant need to keep the work flow of projects moving, identifying, preparing and winning tenders, then there is the stress that really kicks in as the construction side of the business tries to extract profit out of a ‘successful’ tender.

Talking to him I was reminded of Albert Einstein’s quote that ‘If I had an hour to fix a life defining problem, I would spend the first fifty minutes defining the problem, the rest is just maths’

When preparing a tender, the filling of the form is the maths. You have to get it right, all questions answered with quality copywriting, no spelling or punctuation errors, professional layout, but still just maths.

The key to winning is not in the maths, that is just table stakes, it is in the manner in which the vision of the contractor is reflected in the documents, the manner in which the tender you submit reflects value in the eyes of the judges. Each judge in the process will have a different definition of ‘Value’. The accountants will focus on cost, the engineers on the durability, regulatory and engineering integrity, the architects in the manner in which the construction reflects the aesthetic and functional innovations contained in their design, and the stakeholders in the return on investment, which is a function of both price to build and price that the construction can generate from buyers and users.

When you spend an extra $1 on the build that generates an extra $2 on the market value, the extra investment is a great one.

So what makes for a winning tender, that is also commercially successful as the job is completed?

Seems to me that the best measure is the degree to which the tenderer comes back and offers some sort of inside running for the next big project because of your performance in the last one or two

Tendering against someone who has that sort of inside running is usually a waste of time and money.

In the case of public infrastructure tenders, where price is a more important factor, you also have to manage the added complication of the nature of the bureaucratic processes and the politics of  the day.

Just ask Acciona, the Spanish firm who contracted to build the Sydney light rail project, which has become another infrastructure debacle. They seem to have taken the arguably inadequate tender docs literally, failed to do their own due diligence, quoted a price and time line, then found themselves in a billion dollar slanging match with the government.

When was the last time you saw a really complicated project RFQ that reflected all the complications that evolved during the construction?

So, how to stack the deck in your favour?

Perhaps a better way of putting it is to answer the question: ‘How can I quote the highest reasonable price, and still win the tender?

Know more about the project than the principal.

Understand what is really being requested. Most tender documents are dry tick the box type things that have nothing of the ‘humanity’ to which most projects are setting out to make a contribution. Focus on the humanity, and vision, not just the yes/no questions.

Understand the ‘vision’ of the principal.

Better yet, shape the vision, so that you can shape the guidelines of the tender docs to best suit your distinctive capabilities

Have relationships with all the ‘functional Buyers’ in the process.

It is always the case that there are a variety of roles played inside a tender process. Engineering, regulatory affairs, financial, architectural, and project management all will have a differing perspective of the end result, and the best route to get there. There is also always someone with the final call, a right of veto. Understanding the nuances of these functional variations, and accommodating them in the manner in which you approach both the documentation and the informal conversations that occur is vital.

Anticipate and leverage ‘Buyers’ personal inclinations.

The ‘buyers’ in the process, in addition to the functional bias, will have personal and emotional views about the best tender. Some will be for you, some against you, some ambivalent, and sometimes there is one prepared to ‘coach’ you on the side when you are a their preferred candidate. Being sensitive to these views, and leveraging them is often of critical importance.

Identify information holes.

No RFQ is ever complete, so identifying the ‘information holes’ not only gives you added credibility, it also gives you the opportunity to get a jump on competitors

Articulate any obvious shortcomings you may have.

Rarely would a tenderer be an absolutely perfect fit for a job, there will always be compromises that can be used as objections by those who may have an alternative favoured candidate. The best way to deal with objections is to raise them yourself, and deal with them. Once dismissed in this way, they generally cease to be valid objections.

Be proud of price.

Remember the old cliché ‘Nobody ever got fired for buying IBM’? It still applies. Human beings are always concerned with their own best interests, which correlates strongly to making as few mistakes as possible. Most are wary of the cheapest price, there is always a catch, either in the fine print, exclusions, or poorer quality, so there is always room to justify a reasonable price that delivers value but not at the rock bottom.

Tenders are competitions.

As in any competitive situation, the more you know about your competition, the better able you are to address their strengths and capitalise on their relative weaknesses. A tender process is not all about you, and your response, it is also about your response relative to the others in the race.

Attention to detail.

It is so obvious that it should not be in this list, but nevertheless, is often overlooked. Spelling and grammatical mistakes abound, as do simple editing errors, inadequately or unanswered questions, and an absence of simple but elegant and memorable graphic design. Make sure you do not repeat these mistakes of your competitors.

 

When you lose, as is inevitable from time to time, make sure you invest the time and effort in understanding why you lost, learn the lessons so the next time you are a step ahead.

Photo: industry.nsw.gov.au

 

 

Is data killing marketing creativity?

Is data killing marketing creativity?

Jul 18, 2018 | Branding, Marketing

The credibility of marketing in the boardroom fails the test to be quantitative, simply because it is about the future, about predicting  human behaviour and designing experiences and communications that they will relate to.

We hope.

Businesses are run on data, ‘what is the ROI’ may be the most common question around the board table. When the answer is ‘I do  not know’ or a set of fluffy clichés about customer experience, the accountants, lawyers and engineers who run the joint go to sleep.

Therefore marketers have embraced the availability of digital tools like a drowning man grabbing a floater, any floater will do, and now we are drowning in data.

Problem is the foundations of  the data are shaky, but because it passed the data sniff test, it gets a nod.

The result is boring, risk averse, creatively dead, communication and  marketing programs.

This is great for those few who remain undaunted by the data, who build on a creative platform, using data as one of a number of tools to hone the impact, simply because the competition is so bland.

Where something is unknown , rather than speculating, imagining, and creating, we deliver a dump truck of irrelevant data to fill the hole in the hope that no one asks the key question about its validity. ‘Because it is numbers, it must be right’ seems to be the default position.

The best marketers  today use data, they leverage data, they do not love it, do not allow it to drive the output, just to inform it. They remain creative.

So, my answer to the question posed in the headline is “mostly yes”. However, for those who have figured out how to use data to inform their creativity rather than to drive it, the good times are here. It is much easier to stand out in the sea of mediocrity that now exists for those very few who can harness and direct the power of data rather than being consumed by it.

Cartoon credit: my thanks, again, to Tom Fishburne www.marketoonist.com

 

What is the future of FMCG brand loyalty?

What is the future of FMCG brand loyalty?

Jul 16, 2018 | Branding, Marketing, retail

 

A few things have happened in the last few weeks that made me ask that question.

  • Coles MD John Durkan articulated a clear strategy for house brands, to build them at the expense of proprietary brands. I cannot help wondering if his successor will follow through.
  • I received a package from Amazon full of books, ordered in front of the new GST regime that came in on June 1, and it was covered with ads for Amazon Prime, which is now arguably the most successful loyalty program on the planet. At the time I was surprised, but then a day or two later, I realised they had launched in Australia.
  • Another small supplier to FMCG, a formerly successful business in a country town that had been around for 25 years, with a small but seemingly loyal consumer base, quietly packed it in. In the scheme of things a relatively insignificant event, unless you happen to be one of the people who have worked there for ages, and now find yourself unemployed and unlikely to be re-employed in your home town.

There is  no doubt the trend towards house brands across all categories of consumer spending will continue as retail supply chains become more transparent and global. Consumers are in a position to make judgements on the value they receive based on information from a variety of sources, not just on a label. Combined with the increasing necessity to pro-actively manage their spending, why would they not go for a cheaper item that delivered similar characteristics to a proprietary brand?

The driver of the change is digital. It is revolutionising the way consumers shop, by delivering them information that disrupts existing brand equity relationships. Consumers are now way less tied emotionally to brands, simply because they no longer have to be in order to feel confident about themselves and the quality they will get.

The ‘brand trust’ needed in the past has been replaced by access to information.

Retailers from FMCG to all forms of specialty retail see this. They are setting out to replace the consumer preference for product brands with a preference for their retail brand. Pretty much a strategic no-brainer when you think about it, but hard to deploy, simply because consumers do like some choice, and they recognise the retailers self interest in housebrands.

Mr Durkan points out that in some categories, the Coles house brands have a 50% market share, and seems to wrongly equate that number to consumer preference. In fresh produce, this number would be more like 95%, (I do not have numbers, this is a guess based on what I see) simply because Coles, (and Woolies) have not allowed proprietary produce brands onto their shelves, with very few exceptions, almost from the beginning.

This is not  driven by consumers, this is driven by  the strategy to capture the proprietary margin. If you are a shareholder, particularly of Woolies over the last decade, it has been a good outcome, but for a shopper, not so good. When was the last time you bought a plum in Coles that did not taste suspiciously like a cricket ball?

In FMCG retail, the driver of the change has not been digital, that is just an enabler, the real driver is Aldi, whose growth has hit the gorillas hard, and they have yet to find an answer. Aldi is a retailer, just like Coles and Woolies, but with a limited range, all housebrands, with a very few selected exceptions  like Vegemite and a few Arnott’s lines. This is not digital, it is a different business model, and neither of the gorillas has met Aldi on their own ground.

It is easy to be smart with hindsight, but here goes.

Woolworths responded to Harris Farm, and the move towards ‘specialty and fresh’ with Thomas Dux, initially very successfully, then screwed the pooch by not keeping it separate. Had they persisted, they could have built a very profitable and sustainable business, on a different platform to Woolworths.

The same opportunity offered itself in discount retail. It was not as if there were no precedents! I am old enough to remember ‘Jack the Slasher’ stores that stirred the pot  probably  35 years ago, Franklins, Jewel, and others. Discounters do work, they do attract customers. Aldi has just done it better than its forebears by eliminating transaction costs, and keeping overheads at a minimum.

The problem Coles and Woolies have is one of identity.

They are used to being all things to all people, and cannot conceive of a situation where consumers reject the idea. By eliminating proprietary brands, they are also eliminating one of the paths to differentiation and some level of intimacy with their customers, which will turn out to be a  bad mistake.

My view is that it is much harder now to develop a brand that builds and retains consumer loyalty than it has ever been, but then greater rewards will go to those who succeed. Those that do succeed will do so outside the ever decreasing  reach of the current retail gorillas, who will become increasingly challenged by both technology and new channels to the consumer.

 

7 Books every marketer should read.

7 Books every marketer should read.

Jul 13, 2018 | Change, Marketing

 

I am a voracious reader, have been all my life, all sorts of stuff from fiction, biographies, and books of ideas, to technical journals that challenge me to come to an even basic understanding. Perhaps it is because I am a bit of a dreamer, but also intensely curious, and reading feeds both.

As a management contractor and consultant, reading also gives me the foundation upon which to build the activities I recommend, sometimes implement, and write about incessantly on this blog.

However, there are a very few books that I go back to again and again, some that I read, remember, and refer to from time to time, some that get read and put aside as interesting, and many that do not get finished, as the message is simply not of the interest I assumed from the name, cover blurb and often the endorsements.

When asked which are the ‘go to’ books on the areas in which I practice, strategy, marketing, sales, and business improvement, it is a very small list. These few have added to both the width and depth of my thinking on my area of professional expertise. They are the standouts among a library of terrific books.

‘Influence: The psychology of persuasion’ by Robert Cialdini.

I first read this book probably 25 years ago, and have used the insights it offered ever since as a foundation for all my thinking related to marketing and selling. My current dog eared and scribbled on copy, probably the third or fourth I have had (I tend to lend them, but books are not boomerangs) is again on loan to someone I was trying to help.

 

‘Spin Selling’ by Neil Rackham’

Spin Selling is another oldie but goodie I first read over 20 years ago. There have been thousands of books written on all aspects of the sales process,  and while I have not read anything like all of them, none of those I have read goes even close to laying out the sales process as well as this one. Even in this digital age, nothing like the time when it was written, the principals remain, because they are about human behavior, not just creating a transaction.

 

‘The Goal’ by Eliyahu Goldratt.

The Goal is an unusual book, a text book written as a novel. I first came across it a very long time ago trying to get my head around making operational improvements in a ‘broken’ factory. The lessons in the book have subsequently become entrenched in the writings around the TPS, Lean and 6 Sigma improvement movements around the world.

It is not a marketing book, it is one that describes the improvement challenges in the manufacturing environment we see evolving in front of us, and the means by which those challenges can be met. As such, it is applicable to marketing, which should be as welcoming of continuous improvement as any other process. Besides, it is a good read!

Goldratt is a mathematician, and philosopher who first proposed the mathematical equations that now make up game theory, not a marketer. This makes, again, the point that great marketing always has a quantitative base, if you look hard enough to find it. .

 

‘Team of Teams’ Gen. Stanley McChrystal

I love this book, as it describes the manner in which General McChrystal turned the command and control culture of the US army on its head in the face of fierce opposition in Iraq that did not follow the ‘rules of war’ by which the US army had evolved. It was unthinkable that an apparently disorganised and leaderless bunch of terrorists (or freedom fighters, depending on your perspective) could, and did , render the overwhelming might of the US military redundant. This book provides a blueprint for every organisation to follow as it sets about reconfiguring its activities to meet the challenges of a fragmenting and information rich world.

A very useful addition is a follow up called “One Mission’ written by Chris Fussell, who was McChrystal’s offsider in Iraq, and collaborator in the writing of Team of Teams. It describes how the team of teams methodology has been translated into the world of business.

 

‘Playing to win’ by A.G. Lafley and Roger Martin.

This book builds on the work of Michael Porter, who wrote the seminal book on competitive strategy way back in 1980. There have been libraries written about strategy, how to develop, deploy, manage, and account for it, and some are very good, well known books of great value. None however come close to this book first published in 2013, for a practical and useable model by which to manage the complex strategic processes necessary for success. For me, this model goes hand in hand with Business Model Generation (below) which looks more specifically at designing a business model that will best deliver a strategy.  Both require iteration and deep analysis of your business, its objectives and competitive environment.

 

‘Business Model Generation’ by Alexander Osterwalder.

There has been a slew of offshoots from this book, which presented for the first time the idea of a  ‘Business Model Canvas’. This idea evolved from the work and writing of many scholars and practitioners, especially those involved in the ‘Lean Startup’ movement that evolved into the book of that name written by  Eric Ries.  The Business Model Canvas is  now a tool I use in virtually every strategy assignment as a means to visualise in a simple way all the key components of an effective business model. It is not just for startups, but for every business that is seeking to critically analyse their current and evolving business models, and that should be everyone.

 

‘Pre-Suasion’ by Robert Cialdini.

I bought this book on the basis of ‘Influence’ but quietly wondered what more Dr. Cialdini could possibly say that would add to the depth of his first masterpiece. It is a very recent book, published in late 2016, which I have just finished for the first of what will be many readings. The amazing thing is that so many of the ideas when written down make so much common sense, but I had never really considered them, most being just so ordinary as to escape notice.  This is potentially the most important marketing book of the last 20 years. As marketers struggle with the homogenisation of markets, and increasing challenges of building a brand in the face of customer and media fragmentation, the ideas in this book may make the vital difference between success and failure.

The challenge in compiling such a list is what you leave out. Amongst the piles of dross, there are some gems that deserve your attention. Simon Sineks ‘Start with Why’ upon which his seminal TED talk is based, Stephen Pinkers ‘How the mind Works’, Daniel Kahnemans ‘Thinking fast and Slow, and Ray Dalios ‘Principals’ are just a few.

I still prefer to read a physical book, or journal, in hand. I find it hard to write thoughts as they occur on a screen, and the physical connection is for me, an important element. My view is that so long as you remain curious, and feed the curiosity, you will uncover a few books which for you represent the list you recommend to others. This is just mine.

 

Happy reading!

Header: courtesy Jay Cross via Flikr