5 questions that might save Australian manufacturing

5 questions that might save Australian manufacturing

 

The news that Murray Goulburn would be acquired by Canadian dairy giant Saputo, taking out the largest of the few remaining Australian owned  FMCG manufacturing businesses is not welcome, while probably an inevitable  result of the failure of Australian management and our institutions to meet the challenges of change and globalisation. It leads me to consider what is next for manufacturing and specifically FMCG manufacturing in this country.

It is not a pretty sight, coming on top of the final closure of the car industry a few weeks ago.

Having said that, manufacturing that will be profitable and provide the foundations of our economy for the rest of the 21st century will look nothing like the manufacturing we grew up with, so my greater concern than the demise of what we had, is how grossly unprepared we seem to be for what is coming.

The tsunami currently washing around our ankles seems to have three  characteristics:

  • The gigantic increases in the volume of data available to us, should we be willing and able to collect, communicate, analyse and leverage it via the analytics and business intelligence tools emerging in parallel.
  • New forms of machine/human interface being driven by touch and voice.
  • New ways of transferring the digital tsunami into the physical world, by means such as robotics, artificial intelligence,  augmented reality, and additive manufacturing.

It seems to me that we are ready for none of these except in isolated pockets, inhabited by a few really smart people unwilling to be drowned, and prepared to bet the farm on the future.

So, the questions to be faced by those who will either survive, or more likely emerge from the rubble (assuming the ‘policy-makers’ do not stuff it up entirely) may be something like the following:

1. How can we capture and make better use of information. The currency of the 21st century is information, but by itself, it is just lead in the saddlebags. What counts are the insights and leaps of logic that can be gained from the information that leverages it into useful knowledge that can be monetised.

2. Which strategic questions should we be asking ourselves? Which questions will offer the opportunity to make the right choices and develop the insights into what may happen next, as the value of using the past as an indicator of the future is long gone?.

3. What might the new business models look like? It is certain that the business models of the past are as redundant as a Model T in an F1 race, so we need to be actively developing and testing a new breed.

4. What sort of capabilities will be needed to compete sustainably? Where are we going to find, train, and retain the people with those vital capabilities? The tools and technology are increasingly becoming commoditised, the people who use them will be the differentiator. At the core of this question is how we manage the education of our kids. it seems to me that education is viewed as a cost to the budget, a line item to be argued and manipulated with a short term focus, rather than as an investment in future prosperity, which by definition will be generational. We need to teach our kids to think, to be critical and analytical, while trusting their instincts and domain knowledge, and if we fail in that, we will have failed completely.

5. How do we collaborate? This question has caused many sleepless nights to date and we still have no real idea beyond the clichés and academic prognostications. Australians are lousy at collaboration, we see the bloke next door as the enemy, or at least someone to be avoided, you certainly do not invite them to dinner, and to date your daughter. However, we need to get over this and be prepared even to collaborate with competitors in some areas, and the regulators need to get used to the idea by taking a broader view of the definition of competitive advantage.

All this is a long way from the demise of the Australian FMCG industry, as I have variously  chronicled in these pages, but it is also tangled up with our collective failure to see the future through any lens that gave us the insights necessary to dodge the hand grenade of change, and take advantage of the subsequent explosion.

Only by questioning the status quo, recognising it will not be an indicator of the future, and genuinely setting out to make the often radical changes necessary will Australian owned manufacturing survive as a significant contributor to our continued prosperity.

 

 

 

 

 

 

 

 

How do you make change when nobody really wants it?

How do you make change when nobody really wants it?

Making change is about the hardest thing any leader has to do. I specify leader, as in my experience, managers cannot effect change, the best they can do is optimise the status quo.

Regularly, I am faced with situations where change simply has to be made, where there is recognition that the status quo is no longer viable, where there is verbal acknowledgement that it is necessary, but insufficient commitment to the hard stuff that needs to be done, so it does not happen, in any meaningful and lasting way. There is no situation I have seen where at least some of those involved would rather not change, and when they are in a ‘blocking’ position, it can get messy very quickly.

There is only two ways:

  1. Fast and bloody, the ‘Chainsaw Al’ approach which can deliver short term results but long term usually destroys value.
  2. Bit by bit, building on what has gone before, adjusting the small things that may not have worked so well.

Behaviour is about the most elastic thing I have seen, you can change it, like stretching an elastic band, but take the pressure off, and the elastic goes back to the original shape. The challenge is to make the adjusted shape the default, so that when the pressure is taken off, the shape does not change.

Mostly that is all about how you design and manage behaviour.

When I have seen change work, behaviour has been overtly managed in a number of ways:

  • Progressive. While people are clear about the need for change, and the end point, the actual changes to behaviour are progressive, in small doses, and the easier ones are done first. This enables you to bed in the foundations of the change, and build the habit that change is actually not as painful as could be expected, and the benefits make the pain worthwhile.

 

  • Track progress. While changes happen progressively, tracking progress overtly builds in the confidence that the next step will not be the end of the world, and look how far we have come! As I watch my kids play video games, I am surprised at the compulsion that emerges from the overt tracking of progress through the stages of a game, how it becomes almost addictive. I speculate that this behavioural characteristic is not isolated to video games.

 

  • Offer rewards. This can be tricky and backfire, as the reward must be associated with the changed behaviour and the human outcomes of that behaviour. Offering rewards, that are not connected do not result in further motivation, and I have seen them counter-productive as they alter behaviour to chase the rewards, rather than the outcome. The best example is the difference between offering public acknowledgement of great work done (almost irrespective of the outcome) Vs offering money for a change. People may chase the money, but it will rarely result in the changed behaviour becoming a part of the status quo.

The take-out is that, as in selling where most people like to buy, but hate to be sold to, most people will resist being controlled, but are happy to be guided, mentored, to be led.

When you need an experienced hand to help, give me a call.

 

Photo credit: Brad Rose.

 

Too many slices and the loaf disappears: Is this the end of Australian FMCG?

Too many slices and the loaf disappears: Is this the end of Australian FMCG?

What the hell have we been thinking?

Some time ago I mused that the slow death of the Australian FMCG manufacturing base was akin to nicking a slice off a cut loaf, one at a time. At any specific time you do not really notice the difference, but looked at over a period, the loss is obvious.

Well, it seems that someone nicked the Food industry loaf, and all we have left are the crumbs.

A report released last week by Food Navigator reveals Australia’s top 10 FMCG suppliers.

Not one of them is  owned by Australians.

Let me say that again: Not one is owned by Australians!

Over time I have worked for two businesses on the list, and at the time, both were aggressively and proudly Australian, wearing the national flag on their shoulders, and in their advertising, and both were in their way successful despite themselves.  However, dismay at some of the nonsense that went on is a primary reason I have been self-employed for the last 22 years.

I struggle to think of many substantial companies still domestically owned, Bega, Patties Pies and San Remo come to mind, but we are then down to the minnows.

All these multinationals will rightly say that they pay lots of taxes, employ lots of Australians, both directly, and indirectly, and that they have Australian best interests at heart.

Bullshit.

It is true they employ many people, and it is true that they pay unavoidable taxes, like GST, local government rates, and collect from their employees PAYE, but do they carry the full weight of their ‘moral obligations’ to the communities they live in via income taxes?  The reality is that have their own best interests at heart, or at least, most of them do. Transfer pricing, creative funding, corporate domicile on low tax environments, and all the rest of the shenanigans revealed again, by the Paradise Papers in the past weeks or so are widespread. It should not come as a surprise to anybody when these large companies make decisions in their interests, not in those of Australians and Australia.

This is like renting a house. You are allowed to live in it, under certain conditions,  but you have no control over the property, someone else makes all the key decisions. The renters best interests are not a factor in the determination of the owners best interests.

We tell ourselves we are a food bowl, and we are, but without any access to the markets at all. We no longer even have any brands for direct contact with consumers (Vegemite is a rare example, purchased back from Kraft last year by Bega, hooray). We are therefore nothing other than commodity suppliers in a price driven world. Not being a low cost producer, without the umbrella of brands and control of the operational infrastructure that can deliver genuine value to consumers, we are inevitably going to be screwed, with the benefits of ownership exported.

Coles and Woollies have ‘conspired’ to destroy the domestic suppliers and their brands by limiting ranges, replacing proprietary brands with house brands, sourced from wherever is convenient and cheap, realising short term margin gains at the expense of long term prosperity, both theirs and that of the communities they serve.  They have also lost in the process the cover of brands at a time where there is a huge retail  disruption looming: Amazon, online ordering, AI, ‘Ubered’ home delivery, and all the rest.

It seems to me the two retail gorillas will now reap the poison crop they sowed as an outcome of their short term,  one dimensional and absolutely unimaginative strategies.  Taking on Amazon with that mind-set is suicide, as if we know anything about Amazon, it is that they do not play by the existing rules. They make up a new set, and  the incumbents are left to wonder in their wake.

Food manufacturing used to be our biggest manufacturing industry, and we have given it away, or at least the benefits of ownership of it, for next to nothing. It is not even as if for the most part the interlopers paid a premium for control, they just waited until the numbers were so crap that they could take it for a song. The most recent example, Murray Goulbourn is a classic case in point, as are two of my previous corporate employers, Dairy Farmers and Goodman Fielder. Both reasonably large, reasonably successful businesses stuffed by poor management decisions until they became unsuccessful smaller ones, that could be scooped up out of Multinational petty cash.

Our kids will pay a heavy price for the short sighted and incompetent management of their fathers and grandfathers. (Cannot help wondering if their grandmothers and mothers would  have done a better job)

Our so called leaders mumble abut populist causes, ignoring the difficult and challenging long term choices that need to be made, which are usually by definition, not populist. It took a crisis to get them to consider ‘power policy’ in their quiet, moments when not looking after their own jobs in the face of failing to check if they are technically Australians, but it is 25 years too late. ‘Manufacturing policy’ discussions are pretty thin on the ground, now the motor industry has folded their tents, and more specific ‘Food Industry Policy’ discussions are as rare as sightings of the  Tasmanian tiger. Rumoured but carrying very little real credibility.

There has been very little of much value about any policy setting that might help us control and leverage our own agricultural and manufacturing capabilities that would enable us to feel confident we can feed ourselves, and others in the region into the medium term. The horse has bolted, and we are left with a pile of shit in the stables.

Sadly, few in power seem to be too concerned with the demise of our ability to control our own food supply, value adding and distribution.

If nothing else, we may have discovered an innovative solution to the national obesity problem.

 

8 drivers of empathy that deliver sales success.

8 drivers of empathy that deliver sales success.

Selling is not for everyone, it is a hard gig that requires that you are able to understand and deal with rejection. All the most successful sales people recognise that the process is not about them, but is all about the prospect.

Even the most likely prospect who will buy, may not be ready to buy right now, so timing and follow up are key components of success. However, the best indicator of success at sales has always been the ability to build empathy, and employ subtle persuasion, by whatever means you can, on top of a solid sales foundation. When the planets align, empathy can lead to engagement that sometimes leads to the transaction.

Having the ability to put yourself in the shoes of your prospect and see things through their eyes is the route to empathy.  It is a skill not many have naturally, but can be learnt.

When you are the prospect, the subject of someone else’s efforts to herd you towards that sales transaction, consider the things you might expect from the sales hopeful:

  • They treat your time with great respect
  • They recognise that the risks of change outweigh the maintenance of the status quo by a large amount therefore there must be some compelling reason to make a switch.
  • They assume that your expertise is valuable, and that you have no obligation to answer question after question aimed at understanding your business. They do their homework before bothering you.
  • They understand that there is a buying process in place in your organisation, and that it will be followed in almost all circumstances.
  • They understand that the purchase decision for anything new, or that requires change will go through a number of tests and barriers. It is their job to supply you with all the information and arguments you might need in their absence, to carry the decision internally. Obtaining buy in from others in the organisation for a change, is a challenging task, and even if you are well on board with the change, you will probably need their help to bring others in the organisation, sometimes more removed from the consequences of the decision, and sometimes directly impacted, to the same conclusion.
  • They understand that your actions will be driven by your best interests, in all its forms, not theirs
  • They understand your purchase patterns, as well as the process, and do not set out to disrupt them, rather work with them, which usually means the process takes longer than they would like on the odd occasion you decide to make the change.
  • They understand that the incumbent supplier is unlikely to just stand around and let their business be taken by an alternative supplier, so they are ready for the debate.

 

If they did all these things, would you be persuaded?

When you need help with any of this stuff, let me know.

Illustration credit; shchambers.com

8 Reasons not to change.

8 Reasons not to change.

We all understand the power of ‘Not broken, don’t fix’ sort of thinking. When things are going OK, even if that is not as well as you would expect, the temptation to leave the status quo in place is compelling.

No risk in that is there.

I see reasons not to change all the time, and find that change is easiest when all concerned see that there is simply no option, and even then, it is sometimes hard, as any improvement is put down to the status quo delivering as it always has, not to the changes made.

Here are the reasons I hear most often, each with their own variation.

  • We are doing OK, do not rock the boat, there are sharks out there.

Counterargument. The success to date is no indicator of  success into the future, in fact we do know that the future will not look like the past, so we better get on with shaping our own future or we will end up being shark-shit.

  • We are really busy getting stuff done, in order to make these changes, there is a whole bunch of work we do not have the resources or time to do.

Counterargument.  If we are so busy getting stuff done, that is a sure sign that what we are doing is suboptimal. In a world where knowledge is king, unless we are sufficiently curious to think about and try new stuff we will just get busier, and busier, and end up  not seeing the wall before we hit it.

  • We tried that, and it did not work.

Counterargument. It may  not have worked, but do we understand why it did not, and how with the benefit of hindsight we would go about it a second time? Perhaps things have changed sufficiently for it or a variation of it to work today.

  • If we improve what we are doing just a little bit, we will have a huge improvement, so let’s concentrate on that.

Counterargument. Having in place a process of continuous improvement is great but not enough to be sustainably successful. Continuous improvement is a core management responsibility, not an option, or reason for celebration, as at best it optimises existing processes, which may be poor process in the first place. The challenge is to seek new ways of achieving the result that create new sources of value, or indeed, create a new result.

  • Our customers do not seem to think that we need to do it that way

Counterargument. Customers usually see things in their existing context, and so long as the product or service you provide continues to be competitive, often see no reason to change or push you for improvement. However, when an alternative supplier turns up with a better solution, they will move. Steve Jobs famously quipped that he never asked customers what they wanted, simply because they did not know, and Henry Ford observed that if he asked customers what they wanted, the answer would be a faster horse. Don’t get caught having the best horse stables in town when the residents are all driving cars.

  • Change is risky, what if it all goes to hell?.

Counterargument. Change is risky, and it can easily go pear-shaped, so the smart managers avoid betting the farm while changing as quickly as practical and possible.

  • What if we are wrong?

Counterargument. Being wrong can and does happen, indeed, being wrong some of the time is a part of learning how to improve. The key is to plan the changes, understand the outcomes required, monitor the outcomes as they emerge, and be prepared to make adjustments quickly as necessary.  You could also ask yourself ‘what if we are right, but did nothing. What would be the cost of that inaction?

  • We do not have the skills or experience to make these sorts of changes

Counterargument. Few do when they start, that is what change is all about, and what makes it so challenging. What is required is a dose of leadership, someone who inspires the idea that change is necessary, communicates the need widely, then is seen to be ‘walking the walk’ and leading it. Besides, there are plenty of advisors out there with a lot of experience  and knowledge,  pick someone who can help by guiding, mentoring and advising.

Initiating and managing change is the biggest challenge a leader faces. It impacts on every corner and crevice of their business. Most shy away, and very few are able to see all the forces at work themselves. Change is necessarily collaborative and highly ‘leadership sensitive’. An appropriate dispassionate and experienced outside resource, often teams of them, always add value to the process.

Header cartoon credit: Hugh McLeod at gaping Void.

5 realities we Australians should  be thinking about.

5 realities we Australians should  be thinking about.

This is a personal rant motivated by the continuing  sight of politicians pontificating about stuff that does not matter and either ignoring much of the stuff that does, or presenting as facts, suppositions and bullshit that is supposed to make their case and cover their culpability for inaction  and stupidity.

Not a bad start.

However, much as it is good to blame someone else for the things frustrating the hell out of us, it is not entirely their fault.

We live, for those who have not noticed, well into the 21st century.  Our institutions were designed and evolved in the 19th and 20th centuries. Most would accept the notion that change has never been faster or more all-encompassing as in the last 20 years, so why are we surprised that  the institutions have failed to keep up?

So, let me just have a look at an area I am at least partially familiar with after 40 years of operating in it, the current state of small business, and the relationship they have to the economic well being of the communities they serve. Nothing about the stupid non binding vote on same sex marriage, nothing about the nonsense of setting out to build submarines of a hybrid and bodgied  design over which we have no control, and cannot crew anyway in the name of saving a few government seats, nothing about the hysteria and confusion about what is means to be an Australian citizen, …. Need I go on?

There is a general recognition that small business is the backbone of the economy, employing 5 million (the data is 2 years old, which tells you something about our institutions) people and contributing billions in tax, in other words, they carry the weight of the economy, but the statistics do not tell us all we need to understand, as they, like everything else, were designed to give information on the 20th century economy, not the 21st.

A few examples.

  • Micro entrepreneurs are everywhere. There are hundreds of thousands of Australians making a bit on the side via eBay, Etsy, and Amazon, buying and selling stuff that never gets counted. This is a new breed of entrepreneur, and they are operating almost under the radar. The tools that enable this sort of activity did not exist 20 years ago.

 

  • The net is ubiquitous. The enabler of the previous point, the net, has also enabled thousands to start new businesses, often on the side, simply because the cost of failure is now so low, as the cost of entry has shrunk to a fraction of what it was 20 years ago. Many of these businesses fail, perhaps even most,  but that no longer means penury for  the entrepreneur, he/she simply picks up and has another go. Few of my children’s friends and colleagues expect to work for a corporation all their lives, then retire, as my generation did, although many of us are radically rethinking that at  the moment. They expect to get some experience, at somebody else’s expense, then  leverage that into their own business.

 

  • The tax base is hiding. The goldmine of PAYE tax is rapidly disappearing, as individuals go into business for themselves, rather than working for corporations, and often, as well as working for corporations. This gives access to all sorts of reasonable deductions of expenses not available to a PAYE employee. While we have a spending problem in this country, pollies spending to get themselves re-elected, or massively overspending to correct the failures of the past (look at the Sydney road and rail systems for any evidence you need of this) we also have a revenue problem. The GST was a sensible step, compromised as it was, and is, by politics, but the whole tax and welfare system needs a radical rethink, which simply will not happen until we are faced with a true crisis. On top of all that is the simple reality that paying tax has become optional for the large multinationals around the globe who have the reach and resources to structure their affairs towards minimisation. it may not be illegal, but it sure as hell is immoral, and the price we ‘ordinary taxpayers’ are all paying, and will continue to pay unless we, and other international tax institutions figure out that we need to collaborate to stop it. Perhaps we should summon the ghost of Kerry Packer to deliver another broadside.

 

  • Baby Boomers are not ‘retiring’. The so called baby boomers, of which I am one, are not retiring, they may be cutting back, but often they are starting businesses, setting out to use their experience and lifetime wisdom in some useful way. The retirement age is a function of a world where we worked physically much harder than we do now, and the body gave out just before we kicked the bucket. Now the body is not giving out, and when it does we go in for renovations to keep on going. The  only bucket we are interested in  is the list of stuff we still want to do.

 

  • Manufacturing is not dead, it has just changed shape. The 20th century manufacturing model is dead, but is being replaced by a highly technical, globally connected combination of technologies from electronics to additive and 3D manufacturing, which employs just a few highly qualified and motivated people. Yet, our industrial institutions still believe we have big factories full of people doing repetitive tasks. Worse still, our education systems are still geared to mass production of kids who can recite rather than think, and this is despite the disastrous rebalancing of education towards university at the expense of trade skills. While we need less people digging holes, we need more who can design, fabricate, and operate a complex piece of machinery or electronics, and we are not training them in sufficient numbers, or giving them the self belief that valuable and rewarding work does not necessarily equate to sitting in an air conditioned office driving a mouse.

 

All of this simply means that opportunity multiplies, as the institutions that supposedly govern us sit idly by at best, but get in the way most of the time, more often than not by accident. The status quo for which they were designed has been chucked out, trashed, and is significantly irrelevant now, rapidly becoming utterly irrelevant  and a wet blanket on progress without real and immediate change.