How many baristas do we need to drive growth?

How many baristas do we need to drive growth?

Coffee shops seem to be the harbinger of our growth patterns, they are popping up everywhere, staffed by baristas (has that become a profession?) with cutting edge hairstyles and tattoos. They all add to the GDP numbers in some tiny way, but are they all we need?

When you look at economic history, sustainable growth always comes from manufacturing, not services. Ok, some comes from agriculture, as we all need to eat, and I guess someone has to grow, transport and roast the coffee, but it pales into insignificance beside the society changing impacts of manufacturing.

When growth happens, it is as a result of manufacturing, and the changes that manufacturing drive.

Look at the culture changing manufacturing innovations of the past: The printing press,  steam engine, and the first wave of automation in the 70’s.

Now we are moving inexorably into the next wave, of  Virtual Reality, Machine learning, advanced robotics, additive manufacturing, and the changes will be profound.

In the past, we have always looked for productivity by building scale. In a manufacturing operation, the more you make of any one item, the longer the runs, the lower the marginal costs.

However, we are now approaching the point where we can create the next big change, shape the major technologies emerging.

Manufacturing robots that can be programmed to do the tasks that are not just the repetitive tasks they currently do, but the robots will start to learn, it is happening now

The next step is not just better smart products, but customised specialist products that combine the abilities of robots and additive manufacturing  to immediately create the products that you need.

The outcomes are that factories will move back closer to markets, they will be smaller more flexible and reduce the time frames of the chain, the products will be much cleaner and better for the environment, and will create growth in areas hard to imagine as I sit here in the middle of 2017

This does not happen by rote, we need to teach the new stuff at the universities, and importantly we need to teach these kids how to think critically and analytically so they have the intellectual tools to adapt, and we need to engage with the changes to ensure they are accommodated within our economies

The new manufacturing revolution will drive manufacturing and  consumption back to the smaller regions. China will become as expensive as Australia in 10 years, and the trade patterns will follow and I suspect  will accelerate regionally with lower barriers and shorter transit times,  rather than being international

We are reaching the point where increasingly challenging manual tasks can be taken by robots. This delivers a potentially huge productivity increase, but it also delivers one of the key questions of the 21st century: what happens to those displaced? Particularly skilled workers in their middle and later lives when retraining might sound nice, but has proven to be a mirage despite  the billions thrown at it.

However, there is a confluence of hardware and software happening at Moore’s law speed. The take-off will vary by sector and by economy, logically it will occur first in high cost developed nations and filter down

This will lead to a productivity surge, further reducing the disparity of costs between economies, leading to a change in the ‘offshoring’ that has occurred. It will no longer  be better to outsource  to China, outsource it to the bloke down the road, where when  necessary you can get our hands around his throat, and/or collaborate in a meaningful way that is very hard across borders, languages and cultures.

So how do you prepare for this?

Understand and be engaged with the developments occurring in your and adjacent domains globally. This is a big call, but putting aside some time for the reading and understanding of the relevant material by authorities and the those on the leading edge can make it a highly productive expenditure of that most valuable resource.

Normally I dislike the term benchmarking, as it leads to copying processes and programs that worked for others, but by the time you have implemented, usually less than 100% effectively, the trend setters have moved on so you are always playing catch up. However, in the case of keeping current, recognising the things the leaders are doing is pretty important, and modelling the best bits that suit  you can be very worthwhile.

Prepare your stakeholders, particularly the employees for the  changes to come. There  is nothing  so unsettling as uncertainty itself so my advice is to communicate extensively, encourage feedback and comment as well as input to the conversations.

Prepare the organisation for the changes that will evolve in the business models and supporting areas such as capital and human capability development.

As a final note, those that will survive do not have the luxury of time. The  average life of enterprises is shortening annually, it is really a commercial Darwinian process, and incumbents who are not willing or able to adapt quickly will go the way of ‘Lonesome George,’ the last of the Pinta island sub species of Galapagos turtles that dies almost on camera with David Attenborough.

 

Have you ever had a conversation with a ‘chatbot’?

Have you ever had a conversation with a ‘chatbot’?

Not sure?

I do not blame you, they have suddenly become very smart indeed.

A few weeks  ago I had a cause to submit a problem I was having with a web service via their  website. A very helpful bloke came back to me almost immediately with a response, and we interacted as he worked me step by step through the problem, to a solution. Very well done, except the solution did  not work, so I jumped back on and went through it again, with a different, very polite digital helper, referring back to the previous conversation, which he called up, and asked a few slightly different questions, and proposed  a slightly different solution, which did work.

About half way through the second conversation, it occurred to me that I was probably ‘talking’ to a very good ‘chatbot’.

My brain tells me I was talking to a highly developed set of algorithms, my heart tells me it was really two people who really cared about my problem and were committed to helping me fix it.

A  so called ‘chatbot’ is a demonstration of the advances made in machine learning we keep hearing about, and seeing via Apples Siri, and her sisters, and the various messaging apps, translation and transcription services popping up seemingly everywhere.

It is pretty clear that they are rapidly taking over in all sorts of areas, almost by stealth, simply because they are becoming so good, so quickly, and we are welcoming the invasion, if we see it.

I am currently working with a client with a series of significant challenges, one of which I realised while thinking about this post, is perfectly suited to a chatbot. Might take a while, and be way beyond the current scope of their thinking, but watch this space.

 

 

Can you shrink your way to prosperity?

Can you shrink your way to prosperity?

There is the old story of the successful large business becoming an unsuccessful smaller one. Usually it is accompanied by stories of missed opportunities, poor strategies and a focus on cost cutting.

The poster boy for this transformation in my personal experience is Goodman Fielder, for whom I have worked on two occasions. First as a youthful marketing person in the glory days, when Meadow Lea was changing the spreads market by congratulating its consumers for their choice of margarine, and later as a General Management contractor tarting up one of their smaller business units for sale, as it shrunk its way to near oblivion.

To be successful in any commercial arena means that you have created value for someone else. It is a simple truism of business that only be creating value do you attract customers, the support of your value chains, and as a result, revenue.

Businesses do have the tendency to attract overheads, the way a boat attracts barnacles. They attach themselves to the structures and they slow you down, reduce manoeuvrability, and can eventually sink you. You cannot be prosperous while carting around the commercial equivalent of a barnacle covered hull. Cleaning off the commercial barnacles may result in some size reduction initially, but it also increases the potential to add value, agility, and sensitivity to the needs of your markets, so growth is the outcome when the cleaning is done well.

Growth is part of our DNA, it is a mind-set necessary for success.

Who would want to work for, or deal with a company that was overtly focused on squeezing out the maximum dollars from a transaction and relationship? You know the motivation is about their interests, so It would be easy to believe the service, quality, and longevity would be compromised by such a focus.

By contrast, who would not want to engage with a company growing quickly, innovating, and delivering value to customers, and offering opportunity to its employees.

Cost cutting is one thing, using your resources wisely to create value is another, and they are profoundly different.

Photo credit Wes Iverson https://www.flickr.com/photos/62425933@N04/7398646344/

 

The tragedy of ‘doing a Fairfax’

The tragedy of ‘doing a Fairfax’

The once great Fairfax media empire, once a fearless protector of our democracy, on Wednesday announced a further rationalisation in an effort to save $30 million.

This is another in a long list of ‘Adjustments’ and programs which have  become code for making editorial staff redundant.

The Fairfax announcement of 30 million in cost savings, promises to turn the Fairfax publications into  ‘genuine digital businesses with the capabilities and cost base to best operate in the current media environment’.

This is code for no more news that we should be hearing, and more mindless nonsense about footballers hammies, bar brawls, and steamy affairs with soapie stars.

How do such stories give us the intellectual depth and investigative rigour needed to keep the forces of greed, self indulgence, neglect, corruption, and sheer criminality  at bay?

From a commercial perspective, it is reasonable that a private organisation follow the market that it needs to service in order to survive, but that survival, assuming it happens in this case, comes at a long term cost to the community it serves.

Lord Beaverbrook, amongst many colourful quotes is credited with something like ‘my papers give the public what they want, which is not necessarily what they need’.  At this time, never has a truer word been said.

In 2016 Fairfax saved $15 million by cutting 120 editorial jobs, on top of the 1200 saved in 2012, which included the closure of a number of its printing operations. Saving another $30 million will see the cleaner writing the editorials.

If this was just another business going broke, and struggling for its identity and survival in a disrupted industry, it would be one thing, but this is Fairfax, a group that for 180 years has kept those who seek to govern us honest, or as honest as they can be, and has exposed the corrupt and venal amongst us to fearless scrutiny.

It has been clear for decades that people bought newspapers for the classified advertising, the cars, jobs and houses being sold turned into a ‘river of gold’ for the newspaper proprietors, who invested a bit of the river back into the public good.

Now the rivers have dried up, the public good is being left to fend for itself.

Therein lies the tragedy, it can’t without help.

In the absence of an accountable and fearless press, we are all in trouble.

Without Fairfax, and the determination and commitment of Kate McClymont and others like her, we would not have the current  Royal Commission into the Institutional abuse of our kids, and Eddie Obeid and his cronies, like Sir Lunchalot would still be running the state for their personal benefit, to our collective cost.

The lesson for the rest of us is that you ignore the tsunami of change that is coming at you at your peril, and collectively unless we find ways to replace that which is lost in some way, our children will pay a very big price indeed.

 

The 4 levels of a successful business improvement project 

The 4 levels of a successful business improvement project 

My clients are mostly small and medium sized manufacturing businesses. They usually come to me when they are in a spot of bother, as word does get around.

Over a period of over 20 years of working with these businesses, a process has evolved. It is repeatable scalable, and can be applied to any business of any size. This is not because it is a complex set of algorithms that account for every contingency, just the opposite. It is a simple way of approaching a performance improvement project, that recognises the beauty of Einstein’s quote that “everything should be made as simple as possible, no simpler’

It is not rocket science, it is common sense, first principals.

My entry point is usually strategy, marketing & sales, or as I prefer to call it, ‘Revenue Generation’. The functional distinction these days between marketing and sales is utterly redundant. It never was relevant to customers, it just made the organisation chart easier to understand.

When someone is in trouble, and that is where I usually come in, the standard call is ’get more sales’. However, 9/10 times I see other things that need fixing, so in order to do that, I go back to the foundations, to the first principals of business.

In the end, Business is pretty simple, make and sell something for more than it costs you, and ensure the value to the purchaser is greater to them than the cost, and all will be well.

An improvement project can be treated as being in four parts, or levels, and each will contain numerous sub projects and elements that need to be addressed.

However, they need to be addressed in some sort of logical order, starting with the most urgent, as well as those that will deliver some quick returns. The quick wins are not just for commercial and financial reasons, it is because any change will inevitably be disturbing and potentially disruptive, so having a few quick wins makes the pain of change go away, or at least be more palatable.

Foundation.

These are the things that no matter what else you do, absolutely need to be done.

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

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

  • Basic financials. Cash management is essential, as cash is the oxygen of business. No business should be without weekly cash flow forecasting. The Profit and Loss statement measures your trading outcomes. It is less immediate than cash management, and gives a better picture of the items that are consuming and generating cash, so they can be managed appropriately. The P&L should be done monthly, along with the relevant performance measures against expectations in whatever form they have been articulated, usually a budget. The balance sheet is a picture at a moment in time of the performance of the business in creating or consuming wealth for its owners. These three basic financial measures are a part of the statutory accounts of any registered business, but a fourth that is not, is a simple measure of the break-even point in a business. At what point in trading do you go from loss in a period to profit. Knowing your break-even point is a bit like knowing when swimming if your nose and mouth are in the water, or out of it.
  • ‘Why’. Being able to articulate the purpose of your business is a huge competitive and cultural benefit that shapes the evolution it will go through. For those who have not stumbled across the various writings of Simon Sinek, it is time to start.
  • Business model. This is the means by which you turn your product into money. The foundations of a wholesaler will be different to those of a retailer, or on line supplier of products. The way you build the foundations will similarly be different. Different business models do not easily mix in the one business. Barnes and Noble should have invented Amazon, not been put out of business by them. Similarly, Blockbuster was in the prime position to invent Netfliks, not become their victim.
  • Regulatory requirements. These are a do it or be prosecuted choice, which for most is no choice at all, but you would be surprised how many businesses I walk into that are (mostly) unknowingly breaking the law. If you are running a child care centre, better get the regulatory stuff sorted!
  • Operational capability. Setting out to run a business, you need to be able to deliver a product of reliable quality, on time, and in budget, that delivers value to the customer. Pretty simple, but I have seen many business plans that seem to think that a product will come about like manna from heaven, just because it is ordered.

The advent of digital has changed forever the manner in which you approach a number of these elements and I would contend, is continuing to change them, almost weekly. I was tempted to put digital capability as one of the Foundation elements, but digital is a bit like breathing, you do it or you are history.

 

Revenue generation.

Commonly called Marketing & Sales, but as noted the distinction is redundant.

No business survives without revenue, and it is my view that all  the processes aimed at generating that revenue, directly or indirectly, should be seen through the one lens.

Marketing is a huge topic, way too much for a single blog post, but there are some basics that should be clear.

What is the profile of your ideal customer, How do you find and engage them?

What is the value proposition, how will the customer make the choice between your product and the alternatives, How will you go about building a brand, what are your best distribution channel options, which communication channels and platforms do you use,  which customer profiling methodology, lead generation and conversion, NPD & C, customer service, Strategic key Account Management, value proposition, advertising, market research,  and so on and on and on.

I ‘bounce’ between revenue generation and the foundation activities. While you have to have the foundations in place, you also have to be generating revenue to pay for the investment, one without the other is still a ‘fail’. Therefore there is a continuous and parallel improvement in both, it is not sequential, it is a parallel journey.

One of the traps of all the digitisation that has taken place in the revenue generation space is the sudden availability of new shiny toys to play with. Each in its own way promises to deliver at least some part of the silver bullet you are seeking. The temptation to chase the newest shiny tool is overwhelming for many, but also equally daunting for many others. The right mix is somewhere in the middle, as usual.

Identify the tools that solve your problems in the manner that best suits your strategic and financial objectives and limitations,  without losing sight of the foundations of your business, and you will be OK. Being seduced by the tools is as bad as ignoring them.

 

Leverage & Scalability

This is where the fun really starts.

We all understand the concept of leverage, of doing more with less. The tools available in the revenue generation space give you leverage in your current markets. They also provide the opportunity to leverage capabilities outside your immediate markets and customers. This sort of leverage can be applied geographically, to adjacent markets and customers, in new value propositions, new technologies, and to gain a decisive advantage over competitors.

Having built a stable and profitable business by solid achievement in the foundations and revenue generation stages, you will free up the time to enable the leveraging and scaling of your processes, assets,  capabilities, collaborative demand chains, and importantly spread your process improvement successes wider.

 

Sustainability.

Commercial sustainability is the rarely stated, but often considered objective of all this commitment. The best metaphor for this stage is nature. As the environment changes, the organism evolves to accommodate and leverage the changes to its benefit, and this happens without added effort. It is commercial evolution at work.

This is the vision painted by so many of those trying to get into your pockets, of the 4 hour work week, taken remotely while on an island paradise collecting magically recurrent income. It never happens, at least I have never seen it. Even those who claim to be making millions via the web selling all sorts of dreams, are doing more than they tell you. It is true that web based products, a new  commercial option still only a decade old have made a huge impact, and there are a few who have made it big, but they are as rare as those who made it big in manufacturing in the last century were. Nevertheless, having a goal of sustainability in your sights, and working towards it will see your business prosper, and you will be able to enjoy the fruits of that prosperity.

So what now?

You can only do a very small number of things at once.

Therefore where I start is with a ‘StrategyAudit’ where I go looking for the holes then prioritise them into an action plan, and gain some sort of agreement  that the plans will be followed. A realistic assessment of the current situation is an absolutely crucial first point of any improvement project that offers the genuine chance of enhanced performance.

 

Decision time for manufacturers of ‘disposable’ items.

Decision time for manufacturers of ‘disposable’ items.

I have used the term ‘disposable’ to mean that the consumers investment is low, so purchase risk is limited. Buy one and find it does not deliver, and little is lost.

Over the weekend I had a casual conversation with an acquaintance who runs a small business selling such a line of disposable consumer products into a niche via specialist chain retailers, many branches being franchised, so are somewhat independent.

His problem is that he is being overrun by the scale of the retailers who take his ideas and have them fabricated in China under another brand at prices he is having increasing trouble matching.  In any event, they also control shelf space, so he is at their mercy.

Not an uncommon problem.

My rather glib response was that he was trying to sell to the wrong people. His current customers, the retailers, were not actually his customers, in fact they were more like adversaries. His real customers were the ones who had a need that his products fulfilled, and the retailers were just a logistical barrier to be managed and overcome.

The retailers see the only value in his products as a range they should carry as an occasional addition to the customer basket  at the cheapest price that meet their margin requirements. For them there is no investment in the success of the product, and little downside.

To the real consumers however,  the question of whether they outlay $8 or $11 for the items is largely irrelevant once the buying decision, often impulse, has been made. There is little brand awareness or preference involved, there has been only modest marketing investments made, the sales come from demonstrating the utility of  the product.

My advice: Set up an online shop, and actively market to the identifiable groups of customers who would benefit from using his products.

As he has a limited budget, and little brand recognition, this is potentially a make or break decision, not to be taken lightly.

Retailers will be even more disinclined to stock his products when they see him actively competing with them on line, but on the other hand, his sales volumes have been dropping steadily for some time, and the costs of doing business are increasing, so the end game is in sight.

The flip side is that the product is ideally suited to selling on line, the value is demonstrable, it is easily sent via the post, and the margin freed up by selling direct would be considerable.

A change of this nature would be uncomfortable, but I suggest the only way the business will continue to prosper, and have any value when the current owner decides it is time to retire.

Does yours fit the consumer definition of ‘Disposable?”

If so, what are you doing about it?