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 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.

The essential template for profitable management of key, Strategically important customers.

The essential template for profitable management of key, Strategically important customers.

One of the current marketing buzzwords is ‘ABM,’ or Account Based Marketing. It is heralded as the panacea for all B2B sales challenges, generally with the caveat that you buy their software.

What utter Bollocks.

Allocating resources against important, and potentially important customers is about the oldest strategy in sales. I am pretty sure that Cato the grain merchant took Decimus, the biggest baker in Rome to that hot little restaurant in the forum for lunch and a few vinos in 200BC.

Certainly, the whole storyline of that great series ‘Madmen’ is focussed on the acquisition, holding onto and squeezing money out of an ‘Account’. In the early nineties, as a newly minted consultant, I successfully marketed a sales training program I called ‘SKAM’ or Strategic Key Account Management’.

The acronym always got at least a wry grin, and depending on circumstances, I would sometimes substitute ‘Planning’ for ‘Management’

So, to ABM.

The only thing that is new about it is that there is now a slew of software vendors promising to automate and make easy the age-old tasks of sales. There is no doubt that the software can deliver significant productivity benefits, but those benefits are absolutely dependent on doing the basics well, having a solid foundation of sales and marketing disciplines, and that has not changed. After all, if you automate a crap process, all you do is get buried in more crap quicker.

So, to the template.

Define ‘Strategically important’

Pretty obviously the first step is to define just what strategically important means in your context. To many it is those top customers, the 20% that generate the 80% of sales revenue and even more importantly, margin. It is worth remembering however, that each of those top customers were at some point, just a prospect, or a small and therefore easy to ignore customer, that grew. Really smart businesses define clearly a profile of their next group of strategically important customers, and allocate the resources to ensure that they grow to the potential they appear to have.

Have a clear strategy.

This goes hand in hand with the previous point. Without a clear strategy, the result of making often challenging choices about which markets, which types of customers, geographic locations, industry segments, technology base and many others, you will not be in a position to create a definition of what ‘strategically important’ means in your context. The default is almost always the biggest, but as noted, current size is a lagging indicator.

Articulate your value proposition.

Again, this is utterly dependent on the first two steps being done well, as what may be valuable to one customer, will not be to another, and you do  not want to waste precious resources trying to talk to and sell to people who do not care, or have no need for what you can offer.

Create a prioritised prospect hit list.

This is a list of potential customers who fit the general profiles from the first three points. There are many ways to do this, and no one right way, but almost universally it will involve the collection and analysis of publicly available data, from which some conclusions can be drawn.

Progressively execute on, and renew the hit list. 

This is where the rubber hits the sales road, and where most marketing and sales automation cuts in, and often creates significant complication before the benefits can be seen. it is also often the first point of call for many, a huge mistake made by those seduced by the siren song of automation.

Selling is a process based on psychology and understanding the prospective customer in as much detail as possible. We all like to buy, but generally hate to be sold to. Therefore selling is about gaining the attention, and progressively, trust, that you have a solution to the problem the prospect faces, that delivers value, however value is defined in the circumstances that apply to the sale and ongoing relationship.

Rinse and repeat.

As noted, sales is a process, and the more you treat it like a process, a set of steps to be followed that enable feedback loops, learning and improvement at every stage the better.

When you find you need some wisdom gained from extensive experience to be applied, a bespoke program to be developed, or just have some of the gobbledygook and jargon explained, call me.

 

 

 

 

The getting of wisdom

The getting of wisdom

As I get older, the world seems smaller, more complicated, but smaller. This is not just the technology we all now have that has shrunk all the boundaries of our world over the last 20 years, putting the all the  information anyone has ever had at our fingertips, that is different.

It is one thing to have all  the information, it is quite another to be able to make sense of it.

There has been a progression from data to information, to knowledge that has been recognised and widely leveraged, but now there is another level to the cake, wisdom.

We all have access to the same information, can find those who have the knowledge to use it, but it is wisdom, born of experience and breadth of thinking that delivers the wisdom now so rare, but so sorely needed.

I like very much the philosophy of Charlie Munger who talks about mental models, ways of assembling knowledge and sifting through it, reorganising it to be seen from different perspectives that offer a different view. The more mental models you can bring to bear on a topic and body of knowledge, the greater the chance that there will be some insight that emerges unexpected from the model.

Charlie speaks of his mental models, and their source often, a man of few words, leaving most of them to his mate of 50 years Warren Buffet. However, in 1994 he wrote what has become a staple of business thinking , his ‘Worldly wisdom’ speech.

As a kid, we learnt stuff by experience, and using mnemonics,  devices to assist us to remember things. Rhymes, associations, colours can all play a role. Wisdom seems to me to be the opposite end of the mnemonic, the ability to see connections between seemingly unconnected pieces of information, and it is our mental models that enable these connections to be made.

By contrast what we have often these days are unrelated facts presented as a cause and effect, or a set of actions that worked in one place being expected to work in another, which may seem similar, but at a deeper level are not sufficiency similar to enable the actions to deliver the same outcomes.

We tend to be a society that believes, or wants to believe  in miracles, perhaps cargo cults, because it is easier than doing the hard thinking yards.

As someone who gives advice for a living, it is incumbent on me to have a clear framework from which to distil the information to have into advice that is tailored to the needs of those being advised. As often as not, the advice is not heeded, or taken in parts which sometimes hurts, as it reflects poorly on the end result, but it is the reality of making real change.

To be able to deliver the unwelcome news with confidence that it will hold, I need to have a range of mental models, models that come from the work done over 45 years in marketing, sales, operations, leadership, logistics and accounting, and be able to filter the information in front of me through the range of models in a routine and organised manner. Each model gives a slightly different interpretation of the facts, a different slant that requires consideration, so that each outcome is slightly different to the past, but best fitted to the situation to hand.

When you need a bit of wisdom, give me a call, perhaps I can help.

 

 

The three drivers of an effective StrategyAudit 

The three drivers of an effective StrategyAudit 

 

For the last 22 years since leaving corporate life, I have worked at the intersection of Revenue generation, Operations and Performance improvement of medium sized manufacturing businesses.

My entry point is almost always sales and marketing. Businesses are struggling, and see the solution as more sales, so they look for someone who can wave a magic sales wand, and generate more revenue out of the ether.

Almost never happens that way.

Originally I studied to become an accountant. I got a piece of paper, that that never made me an accountant. Luckily, I realised my mistake before it was too late, and moved across into marketing, in the days before anyone had really heard of it. Mostly they still do not know what it is, but these days, at least they have heard of it.

I found it was easy, and I was very  good at it, so had a corporate career starting in marketing and sales that covered all functional roles, except accounting, including general management with bottom line accountability for a substantial divisional business, reporting to the group MD .

However, I was a lousy employee, because while I got stuff done, made lots of money, I was a pest who would not play the corporate game of bullshit to the left, arse cover to the right, and never admit it when you  may be wrong.

So, 22 years ago I hung my shingle as a contractor, intellectual capital for hire, wisdom on 2 feet, and promised myself, ‘no more corporate bullshit’.

I believe that unless we actually make stuff, physically produce the products others want to buy, because it adds value to their lives in some way, generally by solving a problem of some sort, we will be stuffed in the long term.

After all, how many baristas do we really need?

My corporate and subsequent experience in revenue generation, which is what I choose to call Sales and marketing, operations, numbers, logistics, and general management of manufacturing businesses gives me a platform of experience that small and medium manufacturers in this country are sorely lacking, for a range of reasons.

I look for 3 things when I go into a business as an advisor, contractor, saviour, and occasionally ‘head-kicker’.

When you go to the doctor for a check-up, feeling a bit off, he checks your blood pressure, temperature, looks in your eyes and down your throat, anything not within the normal range, he digs one level deeper.

That is what I do when assessing a business.

I look for three things:

  • Business Architecture.
  • Rhythm & Flow
  • Culture

Get these three things right, and aligned, and there will  be superior performance.

A StrategyAudit business improvement project is all about these three things, and the manner in which they can be defined, analysed and brought together to deliver the improved performance required.

So, let me explain them, or at least my view of them.

 

Business Architecture.

This is where most people and advisors spend most of their time, where all the things you can get data on reside, so to some extent they are predictable, and as improvement is made, you can see it in the numbers.

It is relatively simple, but I see it as a pyramid, which I will explain.

Architecture is how the business is built, and managed. A business is like a building, it needs  foundations, upon which the infrastructure of  the business is built.

This pyramid broken up into the four segments reflects the sequence I follow to drive improvement programs.

Foundations.

This is the stuff that no matter what else you do, the foundations must be in place for success.

A lot of it is ‘underground’ as most foundations are, nevertheless, without a solid foundation, whatever else you build, it will  not last.

Operational accounts: cash flow, P&L, Break even calculations, your ‘Why’, regulatory requirements, Business Model, Resource availability and capability, and CASH,

Different businesses require different foundation structures.

If you are going into child care, the regulatory stuff is very challenging, not so challenging if you want to be a business coach.

However, one is absolutely essential, the number one in every foundation, one word: Cash.

It is also true that the foundations wear out, become depreciated, and without renewal, which is a continuous process, you will still fail.

The advent of digital has changed forever a number of these elements and I would contend is continuing to change them. However, the reality is that the principals remain the same, it is just that the speed at which everything happens has accelerated at unprecedented rates, and continues to do so.

Revenue generation.

Marketing & sales by another name, which brushes off the silo mentality prevalent to date, and highlights the importance.

Everybody knows that no business survives without sales, but the key is to be able to generate revenue by creating value for someone else, at a cost that for them is less than the value they receive, but for you is greater than the cost to provide it.

You would be astonished to see how many businesses did not know their cost of sales, or used some ancient absorption costing method pushed by accountants that became redundant as Jesus moved to the Bethlehem first grade side.

Customer profiling, lead generation and conversion, NPD & C, customer service, Key account management, value proposition, advertising, market research,  and the many other outward facing activities fall into this bucket.

Leverage & scalability

This is where the fun really starts.

Once the foundation is in place, and the revenue generation machine is humming along, you can realistically start to think about leveraging and scaling the successful operations you already have.

Leveraging and scaling existing operational and process capabilities into new markets, addressing the needs of new customers, and perhaps launching genuinely new products will deliver great rewards when done well. It is where mergers, acquisitions, and joint ventures become contributors to business value rather than consumers of value. There is still risk involved, but from a solid base, growth can be substantial delivering great rewards.

Sustainability.

Sustainability occurs when the supporting three levels are working well, and working together. Most owners of medium sized businesses look forward to the day when they can take 6 months off, and come back to the business still humming along, not missing them at all.

The much touted ‘laptop lifestyle’ touted by get rich quick internet salesmen always allude to the day when you can be anywhere in the world with the laptop, and just check in, perhaps do a bit between sips of Pimms beside the tropical pool. This may be the objective, but it is rarely attained without the grind of building the business architecture.

 

Rhythm & Flow.

Rhythm & Flow is all about how  the management processes work to facilitate the delivery of value to customers in a commercially sustainable manner.

The development and deployment of strategy, the conversion of a lead to an order, the operational processes that manufacture products, the Customer facing processes, and so on, are all optimised when the flow is even and predictable.

Business might be organised vertically, but the processes that generate leads, service customers, and build products are all horizontal, cross functional. Your customers are not interested on your structure, unless they want to see the CEO to complain. They are more interested on getting the product they ordered on time, in spec, and at the price they expected, all horizontal processes.

At the intersection of the processes and organisational silo boundaries, you always get interruptions to the smooth flow of information and product, and a bit like rapids in a river, the intersection creates a little pool of chaos, too many of them and all you have is whitewater.

You would all have heard of Henry Winslow Taylor, and scientific management. While Taylors views of the people involved at an operational level are absolutely wrong, his ideas on the standardisation and optimisation of the flow through a factory are absolutely right, and are the basis of all our manufacturing now.

Henry Ford did not invent the production line, he used Taylor’s ideas to streamline the flow through his factory. Look closely at  the Toyota Production System, credited with revolutionising modern manufacturing, and you will see it has Taylor’s fingerprints all over it.

I seek to identify anything that interrupts the flow, creates a rapid, as in a river, which is just a small piece of chaos, and remove it, restoring a smooth flow.

 

Culture.

Culture is where it really gets interesting.

Culture is the way we do things around here, the mindset of the business, as reflected in the way people go about doing their jobs, setting their priorities, interacting with customers, suppliers, and their co-workers.

Culture trumps everything else, and is hard to define, almost impossible to predict, and minor irritations in one place can have major ramifications elsewhere.

The butterfly effect.

Measuring culture in any short term way is a waste of time, but over the long term, the value becomes obvious.

It is a bit like motherhood.

We all know we individually benefit, and society benefits when parenting is done well, but how do you measure it?

You cannot over the short term, but the impact is obvious over the long term.

The way I do it is to engage at all levels in as many ways as possible, finding my way into the nooks and crannies that exist in every business, to really understand how it all works, what people think, why they think and behave as they do, and evolve some strategies for improvement.

This is not meant to be a comprehensive review, it just represents the headlines from which a StrategyAudit investigation starts. Every assignment is different, every set of recommendations is tailored towards the solutions for  the specific problems and opportunities encountered during the investigation, and every change program tailored to the needs and capabilities of the organisation.

Cartoon credit: Hugh McLeod at Gapingvoid.com

Is being ‘sticky’ the key to success.

Is being ‘sticky’ the key to success.

Those flogging business coaching to the owners of medium sized businesses seem to focus on one of the oldest sales techniques in the book, the ‘Before &  After’ pitch.

Describe the current situation, and make it as down and dirty as possible, then describe the new world, the joy of the state achieved by the application of their great coaching/technology/process, whatever it is they are selling.

No mention of the challenge in the middle, abracadabra, all is well, just $109/month, less than the cost of coffee and a roll every day and you are on your way to the ‘laptop lifestyle’.

Tangled up in the bullshit, never articulated, at least  to my hearing is a very valid notion, that of ‘Critical Mass’.

The critical mass in a nuclear reaction is the point at which the process becomes self- sustaining. It may take only a nanosecond, but there is that critical point, below which the process is not self-sustaining, and past which, it is.

At what point does a cloud, which is just an accumulation of moisture, suddenly change from being a cloud to dropping rain?

For small business owners, the point of critical mass, from where the business is self-sustaining, is usually that point from where they can take time out of the business, and enjoy the financial rewards of success.  The road to that point will be different in every case, and most in my experience never actually consider what the elements of critical mass may be in their particular business, and how they might influence them.

I think it might be about how ‘sticky’ you can become.

‘Sticky’ is not a term often seen in any form of business writing, it is more usual in kids books, but how is this for a definition:

‘Stickiness’ in business is the function of: Share of Wallet  X Propensity of customers to advocate for you.

The stickier you are, the more likely you will be to have your customers buy from you everything you can reasonably provide, and then go one step further and tell their friends, peers, and wider networks.

If you are  not sticky enough, you will be sub self-sustaining, but pass that sticky test, and the business will sustain itself, with some ongoing tweaking, which is different from the 80 hour weeks most small  business owners put in, to make a living, but often  not have a life.

 

Cartoon credit: Hugh McLeod and Gapingvoid.com.