The ‘Marketing Alchemy’ that reversed the value of gold and iron.

The ‘Marketing Alchemy’ that reversed the value of gold and iron.

Jul 29, 2019 | Marketing, Strategy

1813, in Prussia, princess Marianne convinced people to turn in their gold jewelry to fund the war against France, and be given an iron replica in return. The replica jewelry was stamped with the words ‘Gold gab ich fur Eisen’ which means ‘I gave gold for iron’. Substitute iron jewelry produced by the Royal Berlin Foundry became the symbol of not just wealth and status, but of patriotism, .

Gold has an intrinsic value, it can be used, and reused, but its real value is in the belief we share that it has value in other ways, beauty, a symbol of wealth, luxury, status, and all the rest of the stuff we value.

The status of iron replica  jewelry was conjured to become higher than that of the gold originals.

Possession of gold signals things, but those signals can be reversed, because they are all about perception. It just takes a  bit of psychology, mixed in with the change of context and perception, achieved by marketing.

Marketing Alchemy.

The Prussians must have a skill for this stuff, despite their dour characterisation.

Frederick the Great achieved the opposite effect with his bit of alchemy with spuds. Frederick, who ruled Prussia from 1740 to 1786, was concerned that his people had only one source of carbohydrate, wheat. In a conflict, which he was pretty good at inciting, wheat fields could be devastated, and take a long time to be replaced, meanwhile his people would starve. The antidote was potatoes, which would provide a quick growing and reliable alternative  source, but Prussians would not eat potatoes, under any circumstances. After all, dogs would  not eat them, why should people?

Fred tried every form of coercion that he, as an absolute monarch, could dream up, but nothing worked. Then he found some magic marketing alchemy somewhere, and had his gardeners plant a potato garden which he decreed as Royal potatoes, reserved exclusively for the tables of royalty. He put a guard around his garden, but quietly he instructed the guards to be slack, and not enforce the security. This meant that the locals could nick in and knock off some royal potatoes pretty much without any real risk, while defying the king.

The net result was that potatoes quickly became a staple in the German diet.

Marketing alchemy at work!

Devising this sort of marketing alchemy is not easy, and is not always sensible at first glance. It is always different, counterintuitive, and will have more than its fair share of knockers. ‘It will never work’ they chorus, usually because they cannot see out of their status quo box. When you need some alchemy in your business, call an alchemist.

Header photo: iron jewelry in the Victoria and Albert Museum, London

 

 

The challenges of tension in the evolution of business Strategy

The challenges of tension in the evolution of business Strategy

Jul 24, 2019 | Strategy

 

I want to talk about tension.

The tension present in every commercial and private decision we make, and action we take.

If you focus exclusively on the short term, you will make mistakes, go out of business.

If you focus exclusively on the long term, you will do too little, and go out of business.

You must find a midpoint, one that ensures the bills are paid today, while ensuring that the business has the foundations to prosper into the future.

Current vs Future. The Quantitative with the Qualitative.

Tactics, the short term stuff is powered by data.

Strategy, the long term stuff is powered by insight.

Insight is informed by data, but does  not come exclusively from it. Insight comes from a wide range of sources, many not easily or readily available without a lot of work, time and experience, but nevertheless, absolutely necessary.

In effect, insight is identifying the ‘Why’ stuff happens, while working on the ‘what’ you are doing.

I am going to take this opportunity to ‘come out’ in this safe environment, and reveal a secret I have been hiding for all my adult life.

I am a …. Commercial schizophrenic. 

On one hand, I love the numbers, the investigation, analysis, KPI’s, analytics, the opportunity to dig down and see connections, trends, and find the hidden gems that can be leveraged to deliver value. On the other, I am a frustrated creative.  I cannot draw a line with a ruler, play a note, or hold a tune, and am in envious awe of those who can.

Numbers tend to numb the sense of curiosity, scepticism, and uncertainty, they imply something that is quantitative, and therefore black and white, no room for debate, misunderstanding, or discussion. The absence of numbers, without a credible story as to why, implies not enough work has been done,  and we are therefore wary.

The challenge of measurement in life and commerce is a major one. What to measure, how to measure it, and how to ensure that the measurements lead to some sort of action, without which, the exercise is useless. 

However, the core of the paradox of measurement is that some really fundamental things evade measurement. We are able to measure the past, and get results, biased, context driven, and short of understanding of the behaviours that gave us the measures. However, we have no idea how to measure the future, quantify what had not yet happened. All we know for sure is that it will be different to the past, so extrapolation is at best misleading, at worst totally and terminally wrong.

There is a great tension between the attraction of the seeming objectivity, safety and rationality of numbers, representing a continuation of the past, and the range of assumptions, beliefs, and projections that represent any vision of what the future might look like, and how it will impact on you.

Our brains are always seeking the easy and quick way out, jump to a conclusion to save cogitative energy, and when they see numbers, they automatically give them credibility they often do not deserve. Being creative  by contrast is the exact opposite. There are no rules, the idea matters, creative energy, unquantifiable and harder to generate a quick conclusion, just gets in the way. 

Strategy development is about developing a model of what the future might look like, then assembling and deploying appropriate resources in preparation for its arrival. 

Data is a representation of the past, a quantification of what has happened. It is always easier to assume that the future will look like the past, so we tend to just extrapolate. We also need to be able to react instantaneously, instinctively, to danger and opportunity. This is a function of evolution, where to survive we had to rely on our instincts, instant reactions, typified by ‘flight or fight’ which we are all familiar with. Our ‘fast’ brain drives us, and it takes an effort to override that instant response with something considered. 

I do not like snakes, at all. Nasty slithery things. However, I watched my youngest son when he was much younger play with a carpet snake at one of those touist trap reptile parks, knowing, rationally it was absolutely harmless, but would I touch it…NO. Irrational, emotional, and my rational brain gave up trying to get me to touch the bloody thing despite knowing it was so safe that I would let my son play with it.

Schitzo in the head!

My go-to marketing guru is Albert Einstein, also a reasonable physicist. Among his musings is this: Not everything that matters can be measured, and not everything that can be measured matters’ 

When you need a schitzo with insight born of tough and long experience to help you play with your snakes, let me know.

 

Header photo courtesy of Geoff Ridenour www.ridenourphoto.com

 

 

Solving the paradox of marketing measurement.

Solving the paradox of marketing measurement.

Jul 22, 2019 | Branding, Marketing, Strategy

A bigger brain than mine observed that ‘You get what you measure’. This has been proven to be true time after time.

Our lives are run by those who make the rules based on what has been, simply because it is easy to quantify.

However, what do you do when you want an outcome you cannot measure?

Like ‘good parenting’. We all know the kid benefits, as does the family, and community, from good parenting, but what is the measure?   It is particularly challenging if you choose to try and measure good parenting in real time.

Like ‘Culture’.

We all want a great culture, but how is it measured? There are consultants flogging all sorts of snake-oil dressed up in pretty graphs and dashboards, but I am yet to see one that is of any demonstrable value.

Like ‘Great marketing’. ‘I will know it when I see it’ is simply not good enough!  How do you predict which marketing strategy will be great, and which will be a steaming pile of crap?

If a PhD candidate was to compare the balance sheet valuation to the market cap of the top 1000 listed companies of 1998, I would bet my house that there would be a far closer correlation then, than a similar comparison done in 2018. In those 20 years, capital markets learned to factor into their valuations the future value of intangible assets. 

Facebook paid 19 Billion, yes Billion US in 2014 for WhatsApp, when it was owned and run by 12 people in a garage, supported by a VC investment. At the time it was seen as an insane price by most pundits, the same ones who are now saying it was the purchase of the century.

Intangibles now make up a significant proportion of the market cap of most successful companies, and where do Intangibles come from?

Marketing!!

But what is the measure?

We can see the value with the great benefit of hindsight, but hindsight is not available to us as we do the planning.

So, the question becomes: ‘How do we generate quantitative links between cause and effect?‘

 Such links will provide the connections between Foresight and Hindsight, so we can learn and accumulate wisdom as we go, make resource allocation decision based on what should happen, rather than what we hope may happen, or even worse, an assumption that the future will look just like the past?

Even then, we need to remember the sage words of Einstein who knew a bit about measuring things, when he said ‘Not all things that are important can be measured’

 

Header cartoon courtesy of Hugh McLeod at www.gapingvoid.com

Rethinking the construction of retail strategy

Rethinking the construction of retail strategy

Jul 11, 2019 | Change, retail, Strategy

 

As Bricks and Mortar stores, (B&M) except those run by on line monsters, Apple, Amazon, and a few others flounder, retail needs to rethink itself.

Easy to say, hard to do.

It is hugely ironic that the most successful B&M retailer on the planet, by the retail industry’s own measure, margin/square foot, is now Apple, and I suspect Amazon is not too far behind. 

Rent is the 3rd biggest cost in most retailers P&L, after staff and Inventory. Rent is in effect the  cost of distribution, or the major part of it, and is always raised as a cost that on line retailers do not have, which is their competitive advantage, along with convenience.

Of course, on line retailers do have distribution costs, increasingly absorbed in the price paid by the customer, or cunningly disguised as some form of membership, as with the sensationally successful Amazon Prime.

Distribution is the battle ground of retail. Reshaping the traditional retail model by cutting out the retail store, and delivering by some combination of post/courier/pigeon.  However, B&M retailers have gutted themselves by electing, on mass, to walk away from their primary competitive advantage: stores, and the relationships they can create and nurture with customers.

The competitive advantage of a store is that a customer can go in, look at, touch, try on the merchandise, and talk to a person, who hopefully has some level of product knowledge, and is able to build a rapport. This is a hugely potent competitive advantage if used well, but instead of using it, most retailers are cutting back their investment in stores, staff, and product knowledge, cowed by the spectre of on line price competition.

It is like a golfer, who when comfortably ahead, stops using his driver because his competitor is better at using his putter, so he uses his putter to compete, on what becomes uneven terms.

Stupid.

If retailers looked at rent, inventory carrying costs, and most importantly the cost of customer facing staff,  as the cost of customer acquisition and retention, they may make startlingly different strategic choices. They become items in their marketing budget, which can be subject to creative experimentation, and customer service and retention  optimisation, rather than a cost to be minimised.

I suggest that this seemingly  simple change in mindset, would lead to a huge change in their capacity to compete and succeed.

Bring out the driver again lads, stop playing the whole game with your putters!

 

 

 

If leadership is like gardening, is Jeff Bezos is the supreme gardener?

If leadership is like gardening, is Jeff Bezos is the supreme gardener?

Jul 8, 2019 | Strategy

Gardening may be an unusual metaphor for business building, but it works on a number of levels.

My grandfather was a keen, and hugely knowledgeable gardener, with a marvellous array of plants, edible, original, and decorative, coming together in a display that Henri Matisse would have been proud of, all year round.

As a young boy, drafted into digging some of his evil smelling concoctions into  the gardens with the spade he kept just for me,  he used to tell me he had only three jobs in the garden:

  1. Shape the environment in which the gardens (front and back were distinctly different) lived to best serve the plants he might want
  2. Plant the seeds at the right time, in the right numbers, in the best spots possible
  3. Nurture the shoots, giving them every opportunity and assistance to grow, but being prepared to dig them out when they failed to thrive, or a better use for the ground emerged.

This sounds very like what Bezos is doing with Amazon, the business, exemplified by the creation of Amazon Spheres, the gardens, at the Seattle headquarters. 

 

Long term planning is dead, long live long term thinking

Long term planning is dead, long live long term thinking

Jul 3, 2019 | Change, Governance, Strategy

 

Planning for the long term is a game for losers.

In a world where we have difficulty planning what will happen next month, locking yourself into a long term plan, which allocates resources, and makes binding decisions about the required capabilities, and how to build and deploy them, is crazy.
By contrast, long term thinking, retaining your perspective for the longer term, but being able to be agile in the shorter term, makes way more sense.

The makeup of the top 100 companies has changed dramatically in the past 10 years, and is unrecognisable from the top 100 of 1990. This should give us a clue.

Corporations of the 20th century grew by building scale, marketing, operational, geographic and financial. In the quest for scale they also built silos, bureaucracies, and cultures of  personal safety, risk aversity, and dependence on what worked in the past to  continue to work into the future.

Successful corporations now must be much more agile and responsive to change, even when they  are huge. The necessary process of devolving both authority and responsibility down the tree to where the interaction with operations really happens, makes them look more like a collection of smaller businesses than a corporate monolith.

The new model works. Perhaps the greatest example of this management about-face, while not of a commercial corporation, is the change in the US military retold  in Stanley McCrystal’s great book Team of Teams .

It is unstated, but the current political argument in Australia about the tax cuts legislation is an example of the failure of long term thinking. It substitutes a flimsy long term plan for intelligent long term thinking. Even worse, it is long term planning with an objective that is political, rather than economic or responsible. It is a wedge job on the opposition, and is a great example of why we do not trust politicians, and politics. We know such a long term plan, legislating for something as fundamentally important as a tax framework is nonsense. However, we accept the value of long term thinking, recognising the need to consider the manner in which tax rates make us competitive with other economies, at the same time as raising the revenue to deliver the community outcomes we all demand.