Why does ‘Hindsight Planning’ really work?

Why does ‘Hindsight Planning’ really work?

May 6, 2019 | Communication, Small business, Strategy

For years I have used a process I call ‘Hindsight planning’ with clients to conceive then execute  a strategy that delivers sustainable prosperity. 

Put simply, rather than planning forward, as it usually occurs, from an  analysis of the current situation towards a goal,  I seek to have them articulate the goal in great depth, and from a range of perspectives so that they ‘internalise’ the goal as if it has been achieved. They have absorbed an  emotional attachment to the goal as if it was the current reality, rather than a goal.

I always thought it was a bit of a semantic trick, but it turns out I was wrong.

Hindsight planning is rooted in psychology.

Daniel Kahneman in his book ‘Thinking, Fast & Slow’ said it best: ‘Once you adopt a new view of the world, or a part of it, you immediately lose much of your ability to recall what you used to believe before your mind changed’

In other words, hindsight planning is more than a semantic trick, it is a process of replacing the current reality with a new one, that just happens to be the goal you set out to achieve. Once you believe the new reality, it is easier to look backwards and articulate the things you did right, and those you did poorly, the resources you needed, the timing, capabilities, and all the other things that require assembly for the achievement of a stretch goal.

When you need help with this challenging idea, call me, and challenge me to do for you what I have done for others.

Header Photo: the last known photo of the Titanic as it left Queenstown Ireland, on April 12th 1912. A little but of hindsight would have gone a long way!!

How to assess the value of information

How to assess the value of information

May 1, 2019 | Governance, Strategy

The term ‘monetisation’  is thrown around like confetti at a wedding. It almost always refers in one way or another to the process of squeezing money out of information of some sort. The real key to monetisation success is to identify who may have value created for them by  the access to, and use of, the information and the outcomes it can bring.

Think about the differences between an X-ray and a CT scan.

An X-ray is a one dimensional ‘picture’, and you only see the bones with any clarity. It is the ‘first port of call’ in a diagnosis, offering a limited view of the location and orientation of a skeletal injury. By contrast, a CT (computed tomography ) scan is multidimensional. You see not just the bones, but the soft tissue as well, and you can see it from a variety of perspectives. it is a far more complete picture.

This is a fine analogy for the value of information.

Financial information is just like an x-ray. It cannot tell you much beyond a one dimensional analysis of a current situation, and it is incomplete. A strategic analysis of information is more like a CT scan, you can see a dramatically increased information set, and examine it from a range of perspectives. This depth of information can deliver understanding and insight about the connections and interrelationships that exist. 

An x-ray capability is relatively simple and cheap, whereas a CT scan is more complex and requires a far greater commitment of resources to deliver that far more detailed picture.  CT scanning equipment costs in the region of 3 times as much as an X-ray set up, and in use, delivers perhaps 100 times the radiation of an x-ray. Not something to  be undertaken without due consideration. A CT scan also requires a far better trained staff than an x-ray, generating greater operational and fixed costs. 

So it is with the information you gather and analyse in your business.

Information is the currency of success these days. Various studies identify in excess of  80% of the market valuation of listed companies coming from intangible assets. Considering this fact,  it makes sense to have an information strategy.

Leaving the IT department to develop such a strategy fails to recognise the importance of information as an essential foundation of success.

Our standard accounting processes include an asset register, on which all assets are recorded, often down to the pens and pencils in the stationary cupboard, but I have yet to see one that puts a rationally articulated value on the information held in the data files of an enterprise. Is it just because it is hard to do, or is it because there is  no place for it on our balance sheets and in our statutory accounts?

There appears to me to be 4 parameters for considering the value of your data.

  • Leading indicator: a source of information about what may happen
  • Lagging indicator: a record of what has happened
  • Focus is improvement of management discipline
  • Focus is creating new value for stakeholders

Creating metrics for each of these is challenging.

Metrics are usually financial, and then usually only one dimensional, based entirely on the costs incurred as recorded. This data is available in some form in every business, but only tells a part of the story. There are opportunities to record and measure costs in other ways.

Elsewhere I have considered the 5 types of cost in every business, direct, indirect, opportunity, transaction, and short cut costs, and noted the challenges of putting numbers to some of them.

Financial data can also be ‘fattened up’ by consideration of  several other parameters:

  • The value of the information by understanding the costs that would be incurred if it was suddenly unavailable.
  • What someone else might pay for it, particularly a competitor
  • The extent to which this information contributes to the bottom line.

For example, these metrics could be considered in the context of the value of the customer and lead information in your CRM, how much does that information deliver to margins? These days that is often a readily available metric.

The additional valuation parameter is strategic:

  • How complete is the information in delivering a picture of how the competitive environment in which you compete is evolving?
  • How does that information inform your strategic decision-making, and what would be the costs of not having it measured considering the 5 costs?
  • How does the information articulate the key drivers of performance?
  • How well does the information contribute to the strategic outcomes being sought?

Tackling this challenge of quantifying intangibles, recognising the truth of Peter Drucker’s throwaway that ‘what gets measured gets done‘ is not easy, and not cheap, but like the difference between an X-ray and a CT scan, the results are worth the effort when done well.

Header photo from: https://www.oceantomo.com/2015/03/04/2015-intangible-asset-market-value-study/. This is the second time I have used this graphic to make a crucial point about the value of intangibles in your business.

What is the one skill no SME can do without?

What is the one skill no SME can do without?

Mar 28, 2019 | Marketing, Strategy

Simple answer, rarely given at first: Writing quality copy!

Quality copy, in whatever form it is delivered,  gets inside someone’s head, it joins in and contributes to the conversation already happening, and influences the outcomes that evolve.

Everything we do in an enterprise is in one way or another directed towards the objective of getting someone to do something. It therefore follows that we need to be able to communicate with them clearly, in their words, saying things they either want to hear, or are receptive to hearing which may lead to an action.

This does not happen by accident, it only happens when time is invested in the writing process, and importantly, the preparation that happens before the pen is lifted. From writing a simple email, to communicating the most complex message by any number of media, the rules are pretty much the same, only the time invested will vary.

It is also true that we humans relate to, understand, and remember stories, so tell one! Do not just deliver a bunch of words, data and illustrations, create a memorable narrative.

There are 4.5 million copy templates out there, available via Dr. Google. Scrape away the jargon, fancy words, and promises of millions of dollars if you will just do this one thing, and there is a very common thread running through most of them that offer any real value. That thread comes down to  a few simple to say, but very hard to implement rules.

  • Audience. Know who you are talking to
  • Objective. Know exactly what it is you want to say, and why.
  • Action. Communicate what Action you want them to take as a result of reading (or listening)
  • Impression. What is the lasting impression you are seeking to place in the mind of the reader.

A simple acronym: A.O.A. I. That makes it 4.5 million and one!

An email will differ from website copy, and both will be different to a sales letter,  and to a major verbal presentation, but all will follow those simple rules, with the obvious variations in the manner in which they are executed.

Common to all are a few further observations I will make.

  • Every successful communication starts with a draft, that can always be improved. The more complex the communication, the greater the potential for improvement. Usually this is achieved by cutting words and selecting them more carefully to better communicate the meaning, motivate the desired action, and leave the lasting impression. For example, despite the following two sentences being quantitatively the same, almost everyone will feel substantially more favourable towards  the first:

‘This milk is 95% fat free‘ . Versus, ‘This milk contains 5% fat‘.

The pursuit of clarity, brevity, and maximum impact  are voracious consumers of the writers time, but always offer a return on the investment. Variously credited, but I believe correctly to Samuel Clemens (Mark Twain) is a note to his wife while visiting Australia in 1895. ‘Darling, I wrote you a long letter because I did not have the time to write you a short one’

  • In written communications, spelling and grammar are essential skills. Not because of some preoccupation with the past, but because the rules of spelling and grammar evolved to assist in delivering clarity. Spellcheck is a good first start, but it misses a lot, particularly grammar, and the construction of sentences to deliver clarity. When writing anything, from a simple email to a book, in the absence of a person playing the role of editor, read it out aloud to yourself, saying every word as it is written.  There is a tool in Word, called ‘Speak’ which I have on my quick access toolbar, which reads back your copy in ‘computer voice’. While it is far from perfect, no matter how careful I have been, listening back to  ‘Speak’ always highlights something that can be improved.
  • Verbal communication, from a simple elevator pitch, to a major speech, should always evolve from a written draft. ‘Winging it’ is almost always a very bad idea! Once you have an elevator pitch, it can be memorised, repeated, and ‘tweeked’. Writing any communication the first time is always hard, as you have to decide what to leave out. Doing a brain dump of everything you know  about a topic will just lead to a bored, and disengaged audience.
  • Verbal communication in front of an audience also imposes another set of choices that need to be made in addition to the choice of words. That is how those words are to be delivered. Speaking naturally, including all the intonation and body language as you would to a single person, is always best, but with caution. Colloquial and ‘expressive’ language that may be acceptable one to one, may not be in front of an audience. This is a judgement to be made each time, usually somewhat dependent on the audience. Practise helps, as does the recognition that it is natural to be nervous, and importantly, working on the written drafts until you know  the content intimately, removes a lot of the self imposed pressure.

While the basic rules will remain consistent, the formats used will differ markedly. A sales letter will  look different to the copy on a website, which will be different to the presentation you do to an audience. However, the basic AOAI framework will help in the writing of the copy that is the foundation of delivering the message.

In addition to my simplistic A.O.A.I. template, there are many others of value from successful writers, as noted, roughly similar. The following two I commend, which come from books I have read and re-read on several occasions.

R.O.A.M. Readers, Objective, Action, iMpression. Josh Bernoff, ‘Writing without Bullshit’.

P.A.S.T.O.R. Person Problem Pain; Amplify; Story, Solution System; Transformation, Testimony; Offer; Response. Ray Edwards. ‘How to write copy that sells’.

When you need help developing and articulating your strategy, and figuring out how to implement, call me.  0410 627 318

What have you got to lose?

Where is the similarity between strategy development  and ‘Two-Up’

Where is the similarity between strategy development  and ‘Two-Up’

Mar 21, 2019 | Strategy

Strategy is all about making choices, which market, which customer type, which channel, and so on. Many marketers do this sort of analysis almost on autopilot, when it is in fact the core of a robust strategy, and should be the subject of rigorous consideration.

Sitting behind the choices made, mostly without much fanfare, is the basis on which the choices have been made:

Expected value!.

What is the expected value of choice A

What is the expected value of choice B.

Expected value = Anticipated outcome – Risk

Once you have articulated the value, the choice becomes clearer.

It just gets complicated when you also need to consider the expected value of the following choices that need to be made. A strategy is a series of choices, all separate, but the final outcome is a result of the interdependencies of the choices made.

A part of the process of putting a number on the expected value is the expected risk. Again, this is a cumulative process.

Think about the essential Australian game of two-up. You are betting on the outcome of the flip of two coins, there is only three potential outcomes, a pair of heads, a pair of tails, or a head and tail, which is a foul throw, and is repeated.  It is possible to get a run of heads or tails, and in a modest number of throws, a marked bias towards one or the other. However, over a larger number of throws, the maths takes over and it ends up 50:50.  In this case, the range of outcomes is known, the probability of one or the other after the re-throw of ‘odds’  is exactly 50%.

I watched a mate at University (scary, 45 years ago) win next semesters fees in a run of ‘heads;’ in a two up game in Dubbo. 9 in a row, the odds are .5 X.5 X .5 X and so on, 1 in approx 19,500. Every time he spun the coins everyone was betting that the next fair throw would be tails, but the odds of each throw are exactly the same, 50:50, it is the probability of there being 9 heads throws in a row that is the really long odds, as you would need to make the bet on 9 consecutive heads before the first throw, to get the return from that outcome. In my mates case, he just kept on betting the ring each time that there would be another heads, 50:50 each time, until he had enough.

Building a strategy is similar, there are some knowns that can be calculated, there are some things that can be added in with some level of probability, and there are the random, incalculable events that can throw an unexpected result.

Trick is to know which is which, and calculate the expected value of any set of circumstances as best you can, always being prepared to accommodate the unexpected, that seems to always happen at the worst possible time.

I am tempted to also make the comparison to the state election to be held on Saturday. A choice of two, with the real possibility of a dud throw, which unfortunately cannot be re-thrown for another 4 years, but that may be inappropriate.

Photo credit: Two up at the Ypres front, 23 December 1917, Australian  war memorial.

 

 

Can ‘Platforms’ replace assets?

Can ‘Platforms’ replace assets?

Mar 18, 2019 | Innovation, Strategy

The new commercial behemoths of the 21st century, Google, Facebook, Amazon, et al, are all ‘Platform’ businesses. They leverage technology to create connections up and down value chains, replacing as they have businesses that have hard assets that make stuff.

They are facilitators, not producers.

When was the last time you ate a steak produced by a ‘facilitator’?

In order to produce the stuff we need to live and prosper, we need hard, productive, assets. Bits and algorithms help to leverage the hard assets, to build their productivity, but to believe they will replace them is to believe we can eat them and live.

Amazon may not produce the goods they sell, but somebody does, and it is these ‘somebodies’ Amazon relies on, as do the rest of us, to live. 

 

Is Amazon at it again, remaking retail in their own image.

Is Amazon at it again, remaking retail in their own image.

Mar 11, 2019 | Innovation, retail, Strategy

Amazon launched their ‘Dash’ button in 2015 in an experiment with Procter and Gambles Tide detergent, the monster of the category in North America. It is a one touch, one product order and delivery system that has succeeded, expanding to a range of 350 Sku’s in the middle of 2017 (latest numbers I could find)

Now Amazon  has withdrawn the Dash button from ‘service’. I guess the role played by the buttons is being overtaken by voice operated loyalty systems, largely Amazon Prime and Alexa, and on top, they were recently declared illegal in Germany for breaching consumer laws.

Killing off a successful service that was still growing at a very fast rate, but that was being replaced by a newer set of technologies is a logical move, but one only a company with the power of Amazon, who also owned the replacing technology space, would contemplate.

Clearly, Amazon  is now a technology and data business first, and being a retailer, where they started, is a very long second. 

They know more about many of us, our habits, preferences, and foibles than we know ourselves, and have that knowledge stored for analysis, retrieval and action by emerging AI functionality. They also know that we are not looking for a wide range of choice, despite what we say, that just confuses us and actually reduces purchase. We instead want certainty. 

Put all that together with the now 472 FMCG Distribution locations (450 in the US) Amazon has via the purchase of Whole Foods,  and you have the potential for Amazon to anticipate what we might buy, shape it by adding usage tips, recipes, and thoughtful additions, all in a box that delivers to your door. It combines operational and logistic efficiencies with maximum margin to Amazon while wowing customers.  

Suddenly the withdrawal of the dash button makes more sense than ever, as in the supply chain of the very near future, it would have been just another point of friction.

Meanwhile, Coles and Woolies are tarting up their Deli sections in stores my now three year old granddaughter will probably never visit to do her shopping as an adult.