May 3, 2023 | Marketing, Strategy
Every person on the planet has a frame through which they view the world, built on their life experience, education, background and interests. Unconsciously we all bring these biases into the process of planning our businesses.
If you ask an accountant how to best address the climate crisis, they will give you a response that has an accounting and numeric base, ask the same question of an ecologist, economist, entomologist, or marketer, and you will get different answers, informed by their own unconscious biases.
So, how do we filter them out of our planning, which almost all of the time focusses on the opportunity, the impact of our innovation?
Business planning while having a place for risk assessment, always in my experience lends it far less weight than the opportunity.
In order to ‘de-bias the plan, ask yourself three questions, the first of which is strategist Roger Martin’s claimed most important question:
- What would have to be true? This forces you to consider the drivers of success in the situation being addressed in the plan.
- What future event could sink the plan?
- What would help us if the plan does sink: i.e., what is plan B that avoids commercial demolition?
Anticipating competitive action and planning to accommodate the impact is a necessary part of every plan. This is perhaps the most common failure amongst marketing plans I have seen, including my own.
A long time ago I was with Cerebos, one of the brands I managed was Cerola muesli, at that time a successful brand, and I was keen to expand the brand footprint. I saw a gap in the market between muesli and corn flakes. This was 40 years ago, and there was not the wide choice we have now. We developed a halfway product we called ‘Cerola Light and Crunchy.’ I wrote a marketing plan that had as its first step a test market in Adelaide.
In that plan, well thought out and detailed as it was, I failed to sufficiently consider any of the three questions.
At first, we did remarkably well. The logic we employed was well accepted, the retailer sell-in easily achieved targets, and consumer off-take was strong after the initial burst of advertising. Then in came Kellogg’s with a look-a-like product, ‘Just Right,’ and their resources just blew us away. Light &Crunchy never had a chance in the face of the weight of the competitive reaction by Kellogg’s, and we retreated, recognising the reality that we simply did not have what it took to poke a bear and expect to get away unscathed.
I never made that mistake again, and the only consolation I have is that ‘Just Right’ has survived and prospered, so at least my marketing logic was sound.
I do not agree with the conclusion in the header cartoon that you should roll over and play dead in the face of bear-like opposition. However, it is true that if you poke a bear, you had better do it in such a way that you have some sort of advantage that they cannot replicate.
Header cartoon credit: Tom Fishburne at marketoonist
May 1, 2023 | Change, Governance, Strategy
Strategy is all about choice: what we will not do is at least as important as what we will do.
When you dig a level deeper into the generic ‘will I or won’t I’, you come to the question of how do you make what are almost always difficult choices between options in the absence of full information.
At a top level, that choice is driven by two factors:
Cost structure.
There is always a cost to delivering product. Understanding the cost drivers associated with your product and business model is essential. You will then be able to make informed choices about how best to minimise those costs without compromising the value you deliver to customers.
Value creation.
Selling a product of any type depends on a buyer seeing the value created by their purchase as being greater than the cost of the purchase. ‘Value’ is a very personal term. The value of an expensive watch is not in the ability of that watch to tell the time, it resides in a range of psychological drivers that drive individual behaviour and choice.
Until recently, most of the costs involved were of a physical nature, now they are increasingly behavioural. Similarly with value creation, in the past it was the utility you got out of a physical purchase, but physical utility has been usurped by digital and emotional utility.
Understanding both is critical to success.
Apr 19, 2023 | Change, Strategy
Many times, I have expressed the view that we train dogs, but we must educate people.
The critical difference is the ability to solve problems from the mundane to gordian complexity, and to plan, turning reactive into proactive. These both require critical thinking and creative skills.
Neither of these are available, yet, and perhaps never will be in an AI chatbot.
Rather than banning the emerging wave of AI tools, we should embrace them.
The challenge is twofold.
Teachers who spend their days in front of students are overworked and underpaid for the long-term value they are being asked to deliver, at least in this country. Asking them to rethink the way they are organising their lesson plans and manage the intellectual development of students is a big ask. Many will not willingly take on the task without help and appropriate training, as they have lives outside their roles as teachers.
Asking the education bureaucracy and academia to change their spots is at least as challenging. Most have built their careers on the perpetuation of the status quo in one way or another.
However, the case for change is compelling.
Rather than focussing outrage on the sudden availability of answers to questions, we should be rethinking the process of asking the questions. Anyway, what is different here to when Google first hit the streets? The easy availability of answers to questions, and essays on everything from an easy recipe to string theory, should force us to consider the ways this technology makes the classroom more interactive. It delivers the opportunity for personalised plans that match each kids abilities, and removes the burden of admin that seems to have built up inexorably.
Many good teachers leave the profession after a few years seeking to make their living in less demanding but more financially rewarding ways. Perhaps this AI revolution is a part solution to that problem?
As a final rock into the pond, if an AI tool makes the production of an answer too easy, requiring little or no student understanding, should we throw out the tool, or revise the question?
What if the assignment was to generate an AI response to the assignment, to which the students annotated their commentary on the relevance, effectiveness, accuracy and utility of the points in the AI generated answer? Teachers would also give marks on the prompts used by the students, another marker to understanding.
That would be education.
AI will, or should be, a boon to educators. They need to think creatively about how it will be used, rather than throwing their hands in the air and banning them.
King Canute found the hands in the air strategy did not work.
Header credit; King Canute fighting chatbots courtesy Dall-E, as envisaged by Sal Dali
Apr 17, 2023 | Change, Innovation, Strategy
Over the years I have helped a number of start-ups. Almost all have been single or a few people who have a drive to start something they own, where they can call the shots, and be away from the dead hand of corporate bureaucracy. Sometimes this has been a formal assignment, more often, the result of a series of casual conversation in cafes, networking meetings, and at BBQ’s.
Across these conversations, there have been some consistent themes,
They focus too much on the little things that do not matter much in the long run.
Logo, company name, design of the proposed website, details that do not make or break a new business. At the early stages, these things can be easily changed, modified, and often are dumped.
What this does is take the attention away from what really does matter. Clearly defining the product and/or service to be provided, who is the most likely ‘ideal’ customer, why they should buy from you rather than elsewhere, and how they communicate with them about the value they can deliver without wasting resources. These are the things that matter. Their common characteristic is that they are qualitative, hard to measure, and they evolve.
Evolution happens on auto pilot, make it positive.
Things change, often they change while you are not looking, and only become evident with the benefit of hindsight, by which time it is sometimes too late to do much. The other side of the coin is that evolution also applies to the good things. The task of a new company is to set the guiderails so that the good stuff outweighs the bad. Alignment of all personnel and outside stakeholders is vital in this process, as the pressures will be coming from all sides. And like a child learning to walk, you need to have some of those guiderails in place, or you will wander off in random directions. I call it having a robust, deeply considered strategy.
Imposter syndrome always plays a role.
Unless you are a sociopath, imposter syndrome will grab you from time to time, you will feel out of your depth, wondering why everyone is looking to you for direction and confirmation. It will feel like that first time on a big public stage, dread about what is to come. When you look back, assuming you have done the preparation, you will recognise it for what it really is, a test, and a great learning opportunity.
Spreadsheets are liars.
Most businesses start with some sort of plan, most often articulated via a business plan template and a few spreadsheets. If you are looking for outside finance, these will be mandatory. However, I have never seen a spreadsheet or written plan that accurately reflects what actually happens. Most are nice, comfortable extrapolations of continuous growth along a predictable path. The growth of every successful business looks like a game of snakes and ladders. 3 steps forward, and whoopsie, 2 backwards. The trick is to ensure the steps upward and forward outweigh the falls. Sometimes this simply does not happen, and the snake hole swallows those who fall into it. Spreadsheets never allow for the ‘snake-holes’
Internal Vs External.
Most start-up failure comes from two sources. Firstly, from the lack of cash management. To my mind, there is no greater sins that not being proactive with cash, a simple set of disciplines often ignored. The second is because they have neglected the management of their customers by looking inwards, managing the inevitable personal and process friction that occurs, rather than looking at how they can add value to their customers. Customers do not care about your internal challenges, they are paying you to release them from theirs.
People are your greatest asset, and liability.
A business without people is just a scrawl on a piece of paper. A ‘micro-business’ which is what almost every business is at birth, can be strangled by one poor choice. Equally, that one choice can be the making of you. In the early days, when everyone is acting in all sorts of roles, you need people who are self-reliant, resilient, and happy to ‘muck in’. They are very hard to find, and even harder to keep when you do find them. Equally, when you think you have found the one, only to realise they are not as advertised, which is what they were doing during the interview, remove them quickly. A wrong employee at an early stage can become toxic very quickly. Sometimes that person is great at what they do, are seen by others to be vital, but they are a pain in the arse for some reason. Experience tells me that the benefits of what they are good at are usually outweighed by the hidden costs of them not being aligned with the rest of the team, and its objectives.
Being seduced by opportunity.
That old cliché of working in the business instead of on the business is almost always true in the early days. You will be swamped from all sides by problems as well as opportunities, both of which will radically dilute, if you allow it to, that characteristic of successful start-ups: focus. Plan for what comes next, focus your very limited resources on the key drivers of that outcome, and eliminate everything else. This is never easy, but is absolutely necessary.
None of this is easy, if it was, everybody would be doing it.
The failure rate of start-ups from the corner coffee shop to high-tech gizmos is very high.
Finding the right sort of outside ‘reality check’ advice and input that delivers true value is perhaps the eighth challenge, which so many get wrong, but which can change the outcome dramatically.
Header credit: Arrived via my new AI mate Dall-E
Mar 29, 2023 | Change, Governance, Strategy
The government’s $15 Billion National Reconstruction Fund faces a range of strategic and management dilemmas.
The Treasurer Jim Chalmers set out the governments priorities in his essay ‘Capitalism after the crisis’ in February. He called for focus on three things:
- An orderly energy and climate transition of the economy
- A more resilient and adaptable economy
- A focus on growth hand in hand with equality of opportunity.
The response has been roughly equal from those who see his views as the defining principles for development of the economy from the poor relations role currently played amongst the OECD, to those who condemn his views for their generality and naivety.
Given these seem to be about equal, he must be close to the mark.
The dilemma in the deployment of any ambitions public program is governance.
The opposition condemns it, claiming that it will achieve no useful outcome, being just a huge a magnet for rent-seekers. I guess they should know how to recognise a snout-ready trough when they see one. The government seems to dismiss this concern as something that can easily be managed, and while it is an admirable sentiment, the ‘yes minister’ syndrome will play a big role. Again, the very difficult middle path seems to be the ideal outcome.
From my experience running a tiny, micro version of this initiative 25 years ago there are some lessons to be learnt and applied, or at the very least, considered in the design of the management and operational infrastructure:
- There needs to be an accountable board made up of mix of experienced and wise people from outside the vested interests, committed to the outcome of moving Australia up the various ‘industrial complexity’ scorecards.
- It needs to be separated from the bureaucracy and run its own management processes, and grant budgets that are multi-year. Tying the operational and grant budgets to an annual calendar dictated by allocations in the national budget is to ensure its failure as a strategic tool. This choice will be difficult for any government, and will probably precipitate another bureaucratic turf war.
- A company limited by guarantee is one structure that can be useful. This does not in any way compromise the accountability of the management for the financial governance of the ‘business’. The shareholders would likely be Federal government, via Dept. of Industry, CSIRO, and one of the credible business associations with a wide cross-industry membership.
- The board would be chaired by a credible figure like Proff. Roy Green. Board members will represent the shareholders, and include several non-aligned members familiar with the areas of strategic focus from the perspective of the evolving technology, financial constraints and opportunities, business development, and strategic marketing expertise.
- The first job of such a board must be the definition of the strategic priorities of the ‘business’. These are one step down from the general outline in the Treasurers essay and take the form of a priority list of industry sectors that will be eligible to receive funding. Within this pathway there must be some discretion, as predicting the future is a challenging task, and you never know what will bob up in the development process that deserves support. The parameters of ‘deserve support’ should be at the discretion of the board, but widely agreed.
- Staffing and budgeting of the ‘business’ must be from outside the bureaucracy. Bureaucratic rules and conventions need to be taken only selectively when they clearly add value to the process. It is quite likely there will be very qualified people currently within the bureaucracy, who may elect to take a leave of absence from those roles to take up one with the business. This could be regarded as a secondment, but the management of the personnel concerned must be at the discretion of the management of the ‘business’.
- Non-profit, research institutes, and quangos are not eligible for funding unless in collaboration with a viable commercial operator. The business will play a pivotal and catalytic role in putting these two pieces of the puzzle together in ways that may lead to funding.
- Dictate to collaborative bureaucracies that they are required to collaborate and co-operate with the ‘business’. This is not to ensure primacy, but to ensure collaboration within the boundaries of commercial in confidence. The business must be ‘cross departmental’ and seen as a neutral player there only to be a ‘compounder’ of public resources.
$15 Billion is a big chunk of money, although dwarfed by the magnitude of the challenge facing the country. This sort of approach should have been implemented 30 years ago, but better late than never, so long as it is done right!
Header credit: Knicked from the NRF website
Mar 6, 2023 | Governance, Strategy
The first is to have a monopoly, preferably a regulated one, such as a public asset that has been privatised.
Sydney’s Kingsford Smith airport was flogged off by the government to a private operator who makes obscene profits, not just from the landing rights, but parking, retail concessions, and every other opportunity to gouge. What are your options… catch a train to Singapore?
The second is to be in a market where the person shelling out the money for your product is not the decision maker in the purchase.
The Australian publicly funded pharmaceutical benefits scheme is such an opportunity. Once on the list, the pharma companies sell to the doctors, persuade them to prescribe their magic to their patients, who pay a consistent subsidised cost, whatever the price of the drug to the public purse. Perhaps inconsistently, I am in favor of this scheme, despite the obvious rorting potential it delivers, just disturbed by the lack of governance and oversight. During the height of the Covid pandemic, champagne must have been popping in the boardrooms of Pfizer et al as the governments delivered a marketing nirvana.
I am always caught between amazed laughter and despair when I hear a politician whining in the lead-up to an election about the prices of some commodity, the ownership of which they have flogged off to private enterprise, who then proceeds to make an outrageous profit, because they can. When the buyer is a multinational, you often see that profit disappear, as corporate financial engineering kicks in, and the tax havens suddenly appear as key corporate players.
Just look at what has happened to power prices since the privatisation of the poles and wires, the toll costs of driving from the western suburbs to the cities east, both done in a strategic vacuum for short term political gain.
The reason given was to free up capital to apply against community priorities of education and health. This is a fine aspiration, unmatched by the outcomes.
No matter what words are used, what they have done is subsidise private profit from the public purse.
The Northern beaches hospital at French’s Forest is a prime example. The NSW state government poured 2 billion dollars into the hospital and surrounding infrastructure, in a so called partnership with Healthscope, then an ASX listed company, and all but closed the alternatives in the area, Mona Vale and Manly hospitals. Subsequently, Healthscope was acquired by Canadian group, Brookfield, that featured in the Panama and Paradise papers as protagonists in tax avoidance via trusts located in tax havens. Meanwhile, chaos reigns in the hospital and public health outcomes are compromised.
So much for the competition, community outcomes, and for the tax on the resulting profits.
What a great way to make a bob!
