How do you become a local overnight success?

Jan 6, 2020 | Change, Strategy

 

The great irony of the moment is that we have never been so ‘connected’ but so alone.

We are both connected and isolated by the digital tools that have emerged. This contradiction is slowly leading to the emergence of hyper-local initiatives that have the objective of reversing this trend, at least in their communities, and recovering some of the human contact at the core of our humanity.

I have spent a bit of time recently thinking about this challenge, as it seems to me that  ‘going local’ rather than reflecting the ‘go Global’ mantra is a strategy with real opportunities as we enter a new decade. The idea just ‘feels right’, an antidote to the relentless focus on breadth of relationships typified by ‘digital friends,’ at the expense of the depth of the relationships with a small number (Dunbar’s number) we evolved with.

The foundation question is: can it be commercially sustainable?

Hopefully a number of modest efforts I see around me currently underway with a small scale finished product in a limited geography will give some answers. The broader question, of what it requires to be ‘locally’ successful in a globalising world has caught my attention.

Following are 6 factors that seem to be worth your consideration.

Purpose. It is just a necessary for a micro geographic effort to  have a clear and attractive purpose articulated,  as it is for a global aspirant. Just because you are focussing attention just down the street does not absolve you of the necessity of articulating why that person down the road should care.

Business model. As for purpose, a commercially viable business model is required that is sustainable from the locality. Scaling is always a question, and the business model should be fit for purpose which includes the possibility of scaling, but first, it must be locally sustainable. Build your business model with this notion of locality scaling in mind from the outset, so should it become a viable option, you are ready.

Have a compelling value proposition. Marketing is about stories articulating the value to be delivered to which the audience relates. Without one, local or global, you are just another urger flogging a product. However, at a local level, where word of mouth is ultimately the determinant of success, it is even more vital.

Community engagement. Targeting a specific community with a product requires that you engage on a very personal level. You simply do  not have the luxury of numbers to service the revenue needed to run the business, so engagement on all sorts of levels is necessary. Gaining acknowledgement, engagement and  credibility in the community you are seeking to serve is essential. I suspect there is a tipping point that may become evident only with the benefit of hindsight.

Sustainable competitive advantage. Success locally will breed copycats originating in kitchens and garages around the locality. Price will be their only competitive weapon, to  be successful, there must be something else, not easily copied, that adds value. Competitive advantage is essential in any business, but sometimes in a larger scale, the urgency will be covered by the available numbers of possible customers. On a local level, this camouflage is not available to you.

Access. Communities work on reciprocity, the mutual benefit that comes from collaborating, and  trusting other parties in the community. Facilitating this communication and accountability loop will be  a foundation of success over the long term.

Becoming a success in any context is never an overnight thing. How often have we seen someone called ‘overnight success’ come after a decade or more of toil?.

 

 

 

January 1, 2020. An introspective.

Jan 1, 2020 | Personal Rant, Strategy

 

It is the end of another year, in fact a decade.

‘What have I achieved’ seems to be a fair question.

For 24 years I have worked as a ’boutique’ consultancy. Some may think this is  just another word for ‘one man band,’ and they would be correct, however, there is a difference between my situation, and that of many ‘one man bands’

I chose it.

24 years ago, I took a strategic decision that after having a corporate career that ended abruptly, and then failed to restart, that I would  not play the corporate game again.

As I searched for a job that would both satisfy my aspirations and curiosity, while supporting a young family, people were coming to me for advice, and assistance. For 12 months or so I obliged while focussing on the job search, before the penny dropped.

I liked it  this way.

No corporate framework that dictated my life, over which I had limited control.

No fixed income that just demanded presence, along with sweat and actions that were not necessarily adding value.

No responsibility for things, processes, or people I had not chosen.

No position of institutional power and influence.

No institutional resources available to be deployed with no personal financial commitment.

No built in structures by which to manage my days, weeks and months.

On my own, utterly irrelevant to most passers-by.

On the other hand:

The kids have grown up, are educated, and pursuing worthwhile and satisfying careers

The house is paid off,

And, perhaps most importantly, my time is my own to deploy as I see fit against my personal priorities that deliver intellectual and financial returns to my family.

Over that 24 years, there have been times of plenty, and times of drought. A range of former and current clients in all sorts of industries, facing all sorts of challenges where I have been able to add value, several contract general management stints, partly proving to myself that I can still manage and lead effectively inside an institutional framework (although my dislike of silly rules and deluded people just gets another boost) but through everything, is the strong thread of doing only things that added value directly. No politics, no corporate bullshit, and, plenty of satisfaction.

As a side gig, the StrategyAudit blog, now a decade old has in excess of 1,800 posts, some of which are many years old, but still attract readers and commentary day in and day out. Those posts and the research material behind them is a bank of intellectual capital that is irreplaceable to me, and of considerable value to those who have taken the time to read, follow, and often comment on them.

I turn 68 in a few days, but do  not  feel it, and while I may look a bit weathered, most are surprised, and I am told, I generally do not act my age. However, that has been a continuing response since I was about 10. I can still hear my old dad intoning: ‘For heavens sake, act your age’

Meanwhile, Australia’s east coast burns after decades of self-serving neglect, an  institutional tin ear turned towards the science,  and decisions that reflect the political view that long term planning is limited by the electoral cycle.

In spite of the fire inspired gloom, and for some, desperation, of this new years day, have a happy and prosperous 2020, and I look forward to the coming decade.

Own your digital real estate, or slowly disappear in 2020.

Dec 22, 2019 | Change, Governance, Social Media, Strategy

It is getting harder and harder to be seen in the tsunami of stuff posted on various digital platforms.

The platform owners are wholesalers of eyeballs, their business is monetised by being the choke point between those who create material, and those who may benefit from seeing it.

Since the purchase of LinkedIn by Microsoft, the changes being made to generate a return on the $US26 billion paid have all been designed to build the case for monetising the access to the other side of the equation.

I have no problem with the principal, being paid for value delivered. However, for a small consultancy, wanting to inform, educate, demonstrate expertise, and add value, the costs can become significant.

There is an option.

Be really good, be different, and be of value to the few who really care.

Everything posted on the various ‘social’ platforms is first posted on my own digital home base, a point of distribution I own, so make the rules by which I operate, www.Strategyaudit.com.au . The alternative is to rely on platforms others own, where they make the rules by which you have to play.

For those who sometimes find value in what I write, subscribe to the posts on the site, rather than waiting to see them on LinkedIn or some other place, because you will miss most of  them.

Once subscribed, you have the option of reading them, or just skimming and moving on, the choice is yours, not that of an algorithm designed to extract rent for the privilege.

If the posts become less than valuable, unsubscribe. Easy.

For many years now the path has become increasingly clear: to be seen, you must own your own your digital real estate, not rent it from someone else. 

The recent changes in the LinkedIn algorithms have halved the number of people who see what I post, and moved them geographically. A set of eyeballs in Sydney is for me terrific, New York or Mumbai is of less value.

At some point soon I will simply stop posting outside my own digital real estate, relying on that oldest of marketing tools, word of mouth, to spread the word. At least then I know that those who see the stuff really care, perhaps learn, and might start a useful conversation, which is why I do it.

This is the last post for 2019. I hope it has been a good year for you.

As I sit here in Sydney, ringed by fire, and observe the impotence of the public governance  we have somehow inherited, the hubris and self interest that prevents sensible debate and change across our economy and social services, I can only believe we are at a tipping point. I remain an optimist, and hope against hope that 2020 sees the awakening of a feeling that we have to not only demand change for the better, but dig in and generate it, one by one, until it becomes unstoppable.

Merry Christmas, and I will see you next year

How to think critically about your essential investments in marketing

Dec 9, 2019 | Governance, Marketing, Strategy

 

Marketing is almost always seen as an operating expense rather than an investment in the future.

This reality poses an absurd paradox.

We treat investments in capital equipment for our businesses, and various financial instruments for our own wealth generation,  as items on a balance sheet. By contrast, we treat marketing investments, and particularly those made in various forms of communication, as discretionary items recorded in the profit and loss account as an expense.

Why do we make this distinction?

Both forms of investment have as their motivator, the generation of future cash flow. Just because it is a bit harder to calculate the return on marketing investment than it is to calculate the return on an investment in capital equipment, or financial instruments, should not be a deterrent to the effort.

Nothing is more critical to the long term commercial health of an enterprise than the investment in marketing. What could be more important than identifying, communicating, creating transactions and building relationships with customers, that generate future revenue and cash flow?.

There are 3 basic strategies considered by financial investors

Index investment.

This is a passive, low cost, average but relatively safe return strategy, sticking to stocks that reflect the particular index against which the performance measures will be applied. The most usual are the S&P and ASX 200 indices.

Arbitrage investment.

Essentially this is a short term strategy that assumes the investor is smarter than the market, able to recognise mispricing before anyone else, and their IT programs. It involves a lot of buying and selling of stocks, and often commodity contracts, essentially bets on the short term movement of price. Over the long term, there is plenty of research around that indicates that the performance is around the major stock indices. This is also a high cost strategy, in that the constant trading incurs transaction fees, usually not included in the published performance metrics.

Value investment.

Investing for value is a strategy that involves taking a long term view of the businesses in which you invest. This means you engage deeply, not just with the numbers, but with the management and culture, as well as taking a view of the marketplace in which they compete. It is a ‘filtering’ strategy, one where a lot of research boils down the potential targets to a very few, in which you take a significant position. It is a focussing of resources at the specific points where you see there is long term returns available, and are prepared to accept the vagaries of the short term focussed market gyrations.

If you apply a similar frame to the manner in which businesses make investments in marketing, there is a remarkable similarity.

Index marketing.

Doing what everyone else is doing, being average, a follower, and risk minimiser. It also ensures you do not stand out from the crowd, which in a cut-throat marketing world means nobody notices or cares about you, so perhaps you should save your money.

Arbitrage marketing.

Those following this strategy are just applying tactical actions to situations they see, there is no underpinning strategy, just advertising and promotion, usually driven by a budget that has to be spent, and KPI’s that measure the activity, rather than the harder to measure  outcomes of the activity. The driving word is ‘campaign’. A string of tactical activities will be seen as a campaign, and usually there is little flow from one campaign to another. This tendency has been accelerated to stupid proportions by digital, where the cycle time of a campaign, limited as they have been, has reduced from months to days. No longer are we looking for the strategic ‘big idea’ that will engage and motivate customers over a long period, we are looking for 10 ideas for the Facebook and Instagram posts in the next 24 hours.

Value marketing.

Successful marketing requires a solid strategy, well executed with a long term perspective. Over time, you will fiddle with the details as you become more familiar with the minutiae involved, and you fine tune the application of funds as you learn, but it is a multi-year commitment, not a 6 month campaign, and certainly not a few ‘cat photos’ on Instagram. Such ‘cat photos’ may be a tiny part of the tactical execution, but are never a component of the strategy. This takes time, resources, and most importantly, a laser focus on what is important to  the selected group of primary customers. Over time, you communicate your value proposition that defines why they should do business with you, rather than someone else, and do so at a price that delivers you a premium return, while delivering them premium value.  Then you retain their business, increasing your share of wallet, innovating, reducing customer churn, all of which delivers sustainable cash flow.

If any of the above arguments holds true, then it must be that the measures we use to make decisions about our financial selves should be able to be adapted to the investments we make in marketing.

Step one is to see it as a long term investment in prosperity, and not a short term expense to be reported and forgotten, hidden in a monthly P&L.

Step two is to have a robust, well thought out strategy, that is able to optimise tactically in real time.

Step three is to implement and learn relentlessly, seeking the elusive cause and effect chains that must exist between marketing activity and cash flow.

 

Cartoon credit: Scott Adams and Dilbert reflecting on investment strategies.

 

 

 

Succeed, then start. Strategic lessons from a gardener.

Succeed, then start. Strategic lessons from a gardener.

Dec 2, 2019 | Innovation, Strategy

My sister is a gardener, a producer of a prolific mass of colour and edible plants year round. It takes work, time, and planning, but as they say, the proof is in the pudding.

By contrast, most businesses I work with have a strategic process that starts with a workshop, or some sort of off site involving senior management, sometimes a few more junior and high potential managers, and perhaps an after dinner speaker to liven things up.

Generally the outcome is pretty bland, little more than an articulation of what the CEO or board thought they wanted when walking in on day 1.

Contrast that to my sister.

She does not do her gardening by digging.

She is constantly absorbing ideas and lessons from those around her who are also gardeners, what worked, what did not, and why. She absorbs information from wherever it comes, and then sets up trials to see small scale outcomes before making any commitment to turn over a chunk of her extensive gardens to something different. When all that comes together, she has something different and surprising, she will take the leap and expand the planting, continuing to learn as she goes.

She has a good idea of the outcomes before she commits the time, energy and cost that it takes to commit a chunk of her garden to this new thing, because it has worked in a real world test.

Not so the strategic processes of most. 

There is little energy spent thinking about the strategic, competitive and regulatory environment in which they must succeed, little time and effort spend learning from others, and little appetite for small scale trials that might give the game away to competitors.

My sister succeeds on micro scale before investing in the macro, and it is a continuous process,  not one that takes place at a specific window of time in spring, but rolls continuously through the year.

Perhaps gardening is a better metaphor for strategic development than it would appear at first glance.

As an aside, the current drought in the country town where she lives has delivered some nasty and unexpected surprises. All are being met with a mindset that will see the important parts of her garden survive and thrive again as rain reappears, as it will. She will have learnt much from the experience.

Where to now for the bashed-up dairy industry?

Nov 12, 2019 | Governance, Strategy

 

There is an awful lot of hand-wringing going on amongst politicians, bureaucrats of various types, and industry pontificators about the state of the dairy industry. Sadly, it has been going on for as long as I have been an observer, which is a long time!

The current drought has been a disaster for the industry, but is not the cause of the long term decline. For 30 years, smaller family farms all over the place have been going to the wall, and those left are mostly just surviving as a result of the margin squeeze, caused by concurrent cost increases and downward price pressure, as well as short term thinking and often mismanagement throughout the supply chain.

This is not a recipe for long term industry health.

25 years ago I was booted out of a senior role in one of the largest businesses in the industry. I had consistently voiced disapproval of industry policy (this was before the inevitable de-regulation in NSW) and of some aspects of the management of my employer. They were as sick of me, as I was of them, so there I was, after a decade of delivering growth and profit, on the footpath with a young family.

After a frustrating search for another job, I emerged as a strategy consultant, never again to be required to act against my best instincts and experience.

Very recently I was asked to prepare a proposal for a body in the industry, and while I had little belief it would proceed, did some on the ground research to uncover the changes that had occurred in the 25 years since I had left active participation, upon which too base my recommendations.

Sadly, I could have almost written the list below 25 years ago.

The drivers of the industry have not changed much, nor has the lack of strategic response. Each factor has impacts on others, and the compounding impact has been significant, and probably terminal for most small operations in the absence of substantive and therefore unlikely change.  The reduction in numbers of family dairy  farm operations over the last 25 years leads to the conclusion that there will be very few, if any, left in another decade.

The list following is not weighted, or in any particular order.

Scale.

The big are getting bigger, sometimes vertically integrating through the chain, and the small are being squeezed out. This applies to all steps in the supply chain, farmers, processors, and retailers. In this environment, scale becomes the primary driver, delivering financial returns at the expense of other considerations. Product quality becomes ‘averaged’. The smaller operations cannot compete on price/cost, and do not attract a commercial reward for the higher quality they are able to deliver. A few have been able to find a niche that does value a superior product, but most have had no option other than to accept the price on offer, irrespective of costs incurred or quality delivered.

Capability.

Over a very long period we have hollowed out our scientific, management, and innovation capability in dairy, as well as allowing it to be taken into overseas ownership. The management focus of larger players is on international prices and commodity trading, rather than domestic demand responsiveness, market development and innovation. As a result, the whole industry has been commoditised. You can buy milk, a natural, nutritious product at your local supermarket for $1.10 a litre, while in the isle next door, water, virtually free from the taps sells for multiples of $1.10 a litre. A gross failure of industry and enterprise marketing, and not one that can be fixed with nonsensical regulation.

Financial depth.

Small farming operations do not have the financial capacity to expand beyond their dairy boundaries, and usually do not have the depth to even utilise existing technology to optimise current operations. This precludes both investing in potential productivity improvements on farm, and moving further into the supply chain to capture some of the value added margins that are potentially available.

Education.

The emerging generation of potential dairy farmers has nowhere to go to learn.  There is no longer any dairy education in Australia, which means that there will not only be a degradation of the management capability of existing industry participants, there will be no new blood coming in, and there will be no process or product innovation. This factor applies throughout the supply chain, but is particularly evident in dairying operations. There are a number of ‘cottage industry’ training courses around, such as cheese making courses. These only teach the ‘how,’ without any reference to the ‘why’ things happen. To a significant degree they also substitute for real education in the public mind, which makes it easier to close down the real education that has the potential to add long term industry value. Most of us would agree to the notion that education is a core foundation of long term success, and yet we have stood aside while it has been raped and thrown out into the street.

Scientific foundation.

The scientific base upon which all else is built has been discarded, not just degraded, discarded. Werribee, formerly the centre of dairy science is an uninhabited ghost-town, and as noted tertiary education in all its forms in dairy technology has been discontinued.  If I wanted my kids to do a degree in dairy technology, they would have to commute to New Zealand.

Food security.

Along with other parts of the food supply chain, Dairy has been sold off to international entities. We no longer control our own food supplies, the manufacturing capability is largely overseas, and local production increasingly in the hands of Multinationals who make decisions on their commercial needs, which are not necessarily aligned with the best interest of Australians.

Water security.

The current drought is a disaster but is not more than a nasty reminder that, in the driest continent on earth, we have allowed water security to diminish, and sub-optimal use to be made of the resource available. This impacts all aspects of primary production and has had a profound impact on the ecological and environmental management of the land.

‘Metro’ farming.

Dairy farming (and intensive farming generally) evolved close to population centres, often on the best land. That land is now more valuable as a short-term development opportunity than it is as a long-term producer of food, and so is largely sold off as ‘bedrooms’ to the population centres, pushing farming to more marginal and logistically costly areas.

Power.

Australia is a substantial net exporter of power, yet we have very high power prices by comparison to other developed economies. This is a failure of public policy over a long period. For dairy farmers, it has proved to be a real problem as they need a lot of power to drive refrigeration and their operational plant. Power costs alone are driving small operators out of the industry.

Survival mode.

Small farmers are in ‘survival mode’ working long hours for little financial return. This leaves little in the ‘kitty’, financial, time, or energy, to undertake the challenges of change on their own. They desperately need an infrastructure that supports and rewards their efforts. Rebuilding this infrastructure is not a short term ‘fix-it now’ press release response, it needs bipartisan political support across a number of  portfolios and geographies.

Demographics.

The average age of dairy farmers is now approaching retirement age (25 years ago it was 56 and it does not seem to have reversed). These people are retiring, selling the farms, and their children and grandchildren are not going to follow on. This loss of farming wisdom may seem minor in the scheme of things, but in the long term will diminish us all, as we try and address the increasing environmental challenges facing us.

 

The egg that is the dairy industry cannot be unscrambled, but there is some hope that a reasonable omelette can still be made. However the chefs seem to be out to lunch, and the apprentices do not know what to do, or how to do it. Only going right back to the basics, removing the politics of power and influence, of all types,  and rebuilding from the foundations up, has any hope of there being much more than a few corporate farms and the odd family with a couple of cows left in a few years.