Aug 9, 2023 | Change, Operations, Strategy
Almost every SME I visit or work with needs to one degree or another to be moving down the path towards ‘digitisation’.
For some, this means considering how the sudden appearance of LLM trained AI will impact on their competitive position, for others, it is still how to write a simple excel macro, and move bookkeeping from Mavis in the corner to a cloud package.
Just what does ‘digitisation’ mean?
For most of my clients it means automating some or all of the existing processes driven by bits of unconnected software and spreadsheets, liberally connected by people handing things over.
It is usually a real mess, and the evidence of incomplete solutions, misinformation, and shattered hopes lie everywhere.
The world is digitising at an accelerating rate, so keeping up is not only a competitive imperative, it is a strategic challenge. To survive you must evolve at least the same rate, just to keep up.
On of my former clients is a printing business, an SME with deep capabilities in all things ‘printing’ that enabled the company to be very successful, in the past. Their capabilities are terrific, highly competitive, if we were still in 1999.
If I use them as a metaphor for most I work with, there is a consistent pattern.
They do not see digitisation as an investment in the future, rather it is seen as an expense. This means that the challenges are not considered to be strategic. There is no consideration of the application of digital to their product offerings, beyond the digital printing machines, services beyond those that made them successful 20 years ago, and their business models, beyond what is demanded by the two biggest customers, who between them deliver well over 35% of revenue.
They have not considered digitisation of operational processes, beyond a 20 year old ERP system, which has not been updated in any meaningful way for a decade, and they still only use a portion of the capability. The reason for this is simply a lack of internal capability and awareness, and the lack of cash to invest for the long term.
They have not modified their organisational and operational culture. No digitisation effort can succeed without the support of an operating culture that encourages ongoing change. Organisational processes can be modified by decree, but they will not stick. It takes everyone in the boat to be pulling in the same direction, in unison, to make the forward progress proposed by the digitisation nirvana. This takes leadership, and a willingness to be both vulnerable internally, and a strong ability to absorb the stuff from outside. You need to ‘get out of the building’ not to smell the roses, but to see the lie of the land, and understand where the opportunities and challenges are hiding.
The recognition of the critical necessity of change is where you get given one point out of a possible 10. The other 9 are reserved for taking action. A daunting prospect for most.
Following are the 5 steps necessary to become ‘match fit’.
- Map the existing operational processes so you know what you are changing. The starting point!
- Map and change the mindset of the people, so everyone understands the extent of the challenge to the business, and to them personally. This will prove very tough for some, so expect push-back.
- Take small and incremental steps along a path that all understand leads to a digital future, which means that a lot of collaborative planning has been done. Look for some low hanging fruit where early wins are likely.
- Ensure that there are the necessary opportunities for all stakeholders, but particularly employees to grow and change with you. Those that choose not to, also choose to work elsewhere. There are no free rides.
- Ensure the resources of time and money are allocated uncompromisingly to the long-term outcomes. It is just too easy to put aside something that is important but not urgent for something that may seem to be urgent, but is not important to the transformational effort.
Most need outside help to get this done. Usually that help in the early stages is not found amongst software vendors who have a dog in the fight. It is amongst those who have ‘been there, done that’. It will also be a resource hungry beast, but assuming you feed it, and you have the right mix of project management and technical capabilities, the investment will generate returns quickly, just not tomorrow.
Header cartoon credit: Tom Gauld
Aug 4, 2023 | Governance, Strategy
Every year the American History Business Centre a non-profit run by Gary Hoover, puts out a chart that updates the market capitalisation of Americas top 20 public companies.
The 2023 version has just arrived in my inbox.
I find the path of the evolution astonishing, even in the relatively short time since the turn of the century to now.
A few things that pop out, at least to me.
- The acceleration in the rate of increase since 2000
- The absolute dominance of the Tech giants Apple, Microsoft, Alphabet and Amazon, that has driven the market cap, especially since 2010. The growth rate is so fast that the numbers are already out of date. Apple broke the 3 trillion dollar mark, the first to do so, in January. It has bounced around that benchmark a bit, but is today is 3.011T.
- The emergence of Tesla from nowhere 5 years ago to 7th today, a market cap bigger than the other US carmakers combined, who outsell Tesla by a big margin. However, Tesla unit sales have taken off with the opening of Chinese manufacturing, delivering 710k units worldwide in 2022.
- The absolute contrast to Australia’s top 20, dominated by financial institutions and commodities.
Have a look at the graphs in the link, and consider the implications for the competitive position and ‘re-industrialisation’ of this country.
The most recent Harvard economic complexity report puts Australia at 93 on the list, bracketed by Uganda at 92, and Pakistan at 94. Stellar company indeed.
The government appears to be taking the problem seriously, with the $15 Billion National Reconstruction Fund announced in the October 2022 budget, but is it enough, and is the support the right kind of support required to stimulate the domestic economy to build the complexity that will act as an insulator to the types of global disruptions that seem now both inevitable and more frequent?
While we are distracted by short term political wrangling, point scoring and pushing of social agendas that are truly relevant only to minorities, the big-ticket items, those that will determine the shape of the country over the coming decades, go begging.
Our so-called leaders lack the vision, commitment, and coconuts to take a hard look at what needs to be done, and then get on and do it, short term political polling be damned.
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 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 10, 2023 | Change, Strategy
As a kid in the sixties, some of my friends had extensive record collections, mostly albums, but also singles of the ‘hits’ from albums. The Beatles dominated, Sgt Pepper’s Lonely Hearts Club Band selling millions of copies when released in 1967, and was still selling millions into the 70’s.
In 1963 Phillips introduced the compact cassette, portable, and it offered the choices of fast forward and replay. I can remember carefully taping favourite songs from the radio to make personalised ‘playlists’. Sales built rapidly, then took off when the Sony Walkman was introduced in the early 80’s.
Meanwhile, Philips had been developing the CD, born in their labs in 1974, and by 2000, held 96% of all sales of recorded music.
Again, parallel development was happening, and the digital audio format called MP3 was born in the late 90’s. This format enabled the conversion of music into a digital file that could be shared. Up popped Napster and similar sites, from which you could download music for free, in breach of copyright, but free.
Meanwhile Apple had made MP3 players sexy by putting ‘A thousand songs in your pocket’ with the iPod. The music industry, tightly held by a small number of large corporations sued, and won, but it was a pyrrhic victory, as Pandoras music box had been opened. As a side note, the sight of an industry body suing to ensure that their product was not distributed is a touch unusual.
Then along came Apple, again, with iTunes and its multifunctional devices we still call phones, followed by more streaming devices and services. Spotify changed the face of the industry, again, and the fight became the more traditional marketing fight for your attention, and money
You can follow a similar path with the development of the movie industry, motor cars, aeroplanes, computers, electricity, and many others.
The point is, the seeds of destruction are planted well before the visible disruption occurs. The timelines we typically think about when considering disruptive innovations are much longer when you step back and look at the lead-up changes that prepared the ground for the disruption.
What is happening in your industry that could bite you on the arse?
