Sep 27, 2023 | Leadership, Strategy
Intuition is widely misunderstood, often it is seen as a ‘gift’, a rare ability to generate ‘insight’ into a situation.
Over my long commercial life, I have come to a different conclusion. Intuition can be generated and managed when it is recognised that it is the outcome of a process, like most things. This process may be qualitative, and cumulative over a long period, but it remains a process. Again, over that long life I have seen it as the result of ‘environmental research’.
This is the combination of directed qualitative and quantitative research, thinking, wide reading, and engagement with people from as wide a palette as you can find. About the best source of what most would call ‘wisdom’ will come from talking to customers and consumers. Why are they buying product X instead of product Y , understanding the usually automatic trade-offs made subconsciously. What are they buying it instead of, how will it be used, how do they measure the ‘value’ of the purchase. I call it ‘Environmental research’
Do the data thing first, which avoids, or at least moderates and minimises the confirmation bias, seeing only the things that conform what you already believe.
Do this well, and your intuition will improve, while you may not even be aware of the improvement. It is a process, data first, hypothesise, test, look again to reform the hypotheses, and test. Looks a lot like the scientific method!
Sep 15, 2023 | Branding, Strategy
Qantas is at the centre of a political, legal, and social bunfight.
On Tuesday 13th, (Sept 2023) Qantas lost an appeal in the High Court, being found guilty of sacking almost 1,700 Qantas workers illegally, replacing them with staff from labour hire businesses. This whack across the corporate chops comes behind outrage at Qantas selling tickets on flights they had already cancelled, lost baggage, failure to refund ticketholders, last minute cancellations of flights, and lousy service inflight and on the ground.
Alan Joyce is the prime target of the outrage, having just walked away a few months early with a pile of cash in salary and bonuses. Then there was another pile from the sale of shares at a time when he must have known the ACCC was investigating ticket sales, but the investing public did not. By most definitions, a clear case of insider trading.
Yet, in all this, should he shoulder all the blame?
Throughout his long tenure Joyce has aggressively cut costs by making radical and most ‘unQantas-like’ choices. Always he has had the support of the Qantas board. It is reasonable to assume the board endorsed all the strategies Joyce has implemented to cut costs, as well as waving through his compensation packages over the years. The chairman at least, must have also agreed to the $17 million share sale into a buyback scheme in the first week of June.
The Qantas board have clearly tied Joyce’s package to short term profitability with little regard for much else. It is therefore understandable albeit morally bankrupt, for him to optimise his personal wealth, arguably at the expense of the long-term commercial health of Qantas. As Peter Drucker observed ‘You get what you measure’.
The board is, or should be, the voice of shareholders. Qantas would be held in the portfolios of most superannuation fund managers in Australia. Therefore, we are all shareholders who will benefit from the profitability of Qantas. We have already benefited from the negotiations that squeezed $2.7 billion in various forms of support from the government over the covid period.
The morality of the governance of Qantas can be questioned, and the courts have found them guilty of illegally sacking workers, for which they (and us as shareholders) will pay a large price. There should be accountability and retribution for this sad state of affairs to be handed out. Some should go to Joyce, but a substantial majority of it should be directed to a board that has failed in its governance role as the guardians of the long term health of the business.
Note: I do not know Joyce, although did meet him once at a function, and did not like him at all. Probably because I was of no use to him, so he was abrupt (bloody rude) as he moved on to a juicier target across the room. Good riddance.
Header credit: cartoon by Lewis, from a Pinterest board by Janice Bell
Sep 13, 2023 | Innovation, Marketing, Strategy
Creativity comes from somewhere; the challenge is always to understand and manage the process and the people. This applies equally to every type of creativity, from painting, writing poetry, formulating the mathematical representations of our physical world, to designing a bridge or a house, or imagining something entirely new.
Creativity is never just a Eureka moment under the shower with no pre-work as the catalyst. It requires the frameworks provided by the pre-work to enable the catalyst to emerge.
For the pre-work to be able to provide a solid framework within which the catalyst can emerge requires years of study, experience, and lessons learned from the ideas discarded or failed, on top of the few that might succeed.
Specialise.
This leads to focus, and deep knowledge, and an ability to apply well above commodity pricing. When a service or creative product is in short supply, the price goes up. Creative people seek problems to solve, and ideas to explore, which is great, but counterproductive to finding the price that will optimise your time. Be committed to the niche, and the specialisation this niche requires will open the opportunities for other ideas and new problems to be solved.
Specialisation really only happens with the benefit of experience, which happens over time. Define clearly what are you going to do, and who do you do it for, and being very clear to both yourself and those in the market what you will not do. For SME’s this is always a very difficult series of choices to make.
By specialising, you also end up emasculating competition, as they cannot do what you can. For those who want what you provide, there is no option.
Address questions of money early.
We tend not to talk about money, it makes us uncomfortable, and creativity is very personal, not about money. However, making a living providing a creative product is why you are in business. You must be able to talk about it to make it, and talking about it delivers credibility.
Do not be scared of silence.
Nature abhors a vacuum, so the best way after delivering a ‘price-bomb’ is to embrace silence.
When selling, if you fill the void, you tend to say something that reduces the impact of the bomb.
It is uncomfortable, but you get used to it.
State the number and shut up. You will gain a lot of information from the silence. Often it saves yourself from yourself, while offering an ‘out’ for those potential customers looking for a commodity product and price to remove themselves early, before you invest much of your valuable time.
How to measure value in the conversation.
There is no easy way to measure value in a conversation, but there is no substitute to a conversation that seeks to find ways for people to exchange value, in whatever form that value takes. The answer is to discover sources of irritation, complexity, or desire the client would like to address, and propose ways to achieve that outcome. Therefore, identifying quantitatively the impacts of the problem, and the results of your solution will increase the value of your offer. The larger the problem being faced, the greater the value of the creative process.
Say ‘No’ a lot.
As Warren Buffet notes: the difference between successful people and really successful people is that really successful people say no to almost everything.
We all want more what we do not, or cannot have. Saying No increases the desirability of your offer.
Anchoring against desired guaranteed value.
If I could guarantee you an extra million dollars in profit, would you be prepared to pay half as compensation? This is a closed question, but it is an anchoring question at the high end of the range. You can work backwards from that, in terms of risk and the nature of the guarantee. This strategy is used all the time, often without us noticing. Energy retailers seem to be always guaranteeing savings on your power bills when you buy from them, knowing that few will do the measurement, and it is a hypothetical measurement in any event. This tactic can be used in many ways. For example, usually you cannot guarantee value when selling to a bureaucrat, as they cannot pay for value, they pay for certainty against a budget. Therefore, you can offer guarantees of delivery date, or performance, any factor that is quantitative.
Value is entirely subjective. At the heart of value is the trade, where you are both happy. Your costs have nothing to do with the value. People do not want your time, or your deliverables, they want the solutions to their situation that you can deliver.
To conduct a value conversation, you need to have the right questions, not the answers. Ask the questions, and the answers will evolve.
Header credit: Me. As you can see, graphic art is not part of my creative armoury.
Sep 4, 2023 | Change, Innovation, Strategy
If strategy is all about choice, and I strongly contend that is so, the challenge for responsible management is to imagine first what those choices may be.
This ambiguous mindset requiring choices to be made with less than full information never happens by itself, as it makes people uncomfortable. It must be pushed, being uncomfortable must be made a significant part of the status quo, making change along with its risks and downsides a normal part of the culture.
Ask yourself what could be true in five years?
Chances are you will not get much right, but the process of thinking about and resetting the status quo to a state ready and able to welcome change will be immensely valuable.
In 1985, few predicted that microprocessors would be everywhere, from rockets to fridges, from phones to toys.
In 1995 few predicted the Internet would become ubiquitous, and in 2005 few predicted their kids would get all the news they could consume, and wanted to consume, from social platforms.
Ask yourself what could be true that would alter the shape and dynamics of your industry.
Step forward and embrace the possibility of those changes occurring in the way you manage your business. By so doing irrespective of how accurate you have been, the business will be much better able to respond to and leverage the change.
Aug 23, 2023 | Strategy
The libraries written about strategy, the advice, templates, ‘revolutionary’ ideas, and all the rest, have made ‘strategy’ a cliché that means little to most of those trying to run a small business.
How do you get the time to understand, let alone implement all the sage advice given?
The absence of an explicit strategy, something against which you can measure the impact of decisions being made, means you are always at the mercy of immediacy.
Decisions are almost always taken in the absence of full information, and therefore lack certainty. The best we can do is consider probabilities, based on data, domain knowledge, and experience. Having an unambiguous strategy which is understood by all who need to make operational and tactical decisions, irrespective of the level and type of those decisions, removes at least some of the uncertainty. Importantly, it also gives you a means to measure the impact of the choices being made.
The presence of an explicit strategy offers a framework against which to measure any decision being contemplated. This applies equally to the ‘corner office’ decisions, as it does to the operational decisions daily on a factory floor, or office.
‘Will this choice deliver a result that adds to the achievement of the long-term goal?
When the answer is ‘yes’: proceed, with the appropriate due diligence. When the answer is ‘No,’ irrespective of how attractive the opportunity appears in the short term, you should not proceed.
So, how do you fashion a robust strategy?
There are many tools and templates around that will help the thought processes. However, relying on them to give you the answers is a mistake. The best they can do is prompt the questions that need to be answered. Developing a robust strategy, requires a measure of ‘Strategic thinking’, not an easy skill to develop.
Such thinking evolves from consideration of the interaction of the capabilities and aspirations of your business, those of the opposition and potential opposition, and trends in the marketplace likely to impact demand, supply, and how it is satisfied.
‘Strategic thinking’ should not be a once in a year exercise, as it often is. The most successful enterprises find ways to build such thinking into their every-day activities. While the strategic objectives should not change much, they are the core of long-term resource allocation choices that drive the direction of the enterprise. The means by which they are achieved can change as the conditions and context of the market evolve.
As a framework for such thinking, the following six questions should be regular agenda items, and subjected to critical analysis on an ongoing basis.
- Which markets are we focussed on, and spending resources to reach?
- Which products and services are we delivering to customers?
- How are we going to deliver those products to customers, and receive payment?
- Why would a customer buy from us and not someone else?
- What are the few capabilities at which we need to excel to be able to deliver unique value in that market?
- How do we improve operational and financial performance over time?
Each of these six questions have many layers that a diligent and strategically aligned management will pursue.
Success, as well as failure, generally comes incrementally, bit by bit. However, both are also compounding, each outcome building on the back of the previous. Having a framework against which to measure the outcomes of decisions, and then adjust and/or double down quickly, makes a huge difference to the long-term outcome.
Decisions all compound until reversed, and as Einstein observed: ‘Compounding is the most powerful force in the universe.’
To simplify even further, every operative in an SME should ask themselves 3 simple questions every day, as they make the daily tactical choices necessary to get the work done.
- To whom will this action add value?
- How will it add that value?
- By what means do we get a return from that value?
There, Strategy development in a blog post.
Header credit: a very old cartoon by Hugh McLeod before he became famous and corporatised.
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
