Sep 30, 2020 | Branding, Marketing
Any marketing activity falls somewhere on a continuum between tactical and strategic.
Most are trying to generate activity and profit today, as well as investing in your brand for the long term.
Getting the balance wrong is delivering your brand to the slaughterhouse.
The competitive world we live in now puts increasing pressure on tactical activity, at the expense of strategic. No marketing budget is infinite, therefore choices are made, every day between the tactical and strategic.
As the pressure has increased over the 45 years I have been doing this, I observe the move towards tactical, reflected in almost every product category I can think of. Once you get addicted to the tactical, it is like crack cocaine, very hard to break away.
You learn that throwing money at the problem solves it, for now, so when it comes around again, you repeat the action. It worked last time, and the long term is somebody else’s problem.
As a young marketer in FMCG, the ‘Friday afternoon call’ was a constant threat. A buyer from one of the supermarket gorillas who needed to put some cash into their co-op advertising pool for the week would phone. They would open the conversation by saying the sales manager was out, and he had a problem only I could solve by committing to a promotion of some sort that involved a Co-Op advertising payment. To decline, it was made clear, threatened the distribution of the brand concerned in his chain, and he was sure the Sales manager would not thank me for that. By the way, it was 4.45 pm, and the ‘opportunity’ closed in 5 minutes, so he needed an immediate answer.
The ultimate in tactical activity.
There was not an outcome of any value to the business I worked for from accepting this blackmail, just a downside to be avoided. We might have delivered a few extra pallets of product, but the net price we could invoice was often below anything that was sensible. Also, it consumed resources that had been earmarked for activity that would build brand equity for the long term.
Meadow Lea margarine in the late 70’s had four times the market share of its nearest competitor, in a booming and crowded margarine market. This share was based not just on a very good product, coupled with aggressive and smart sales management, but on consistent, and brilliant brand building activity over a sustained period. A decade later, after the business had been acquired by people who did not understand the dynamics of a brand, Meadow Lea had crawled back to the pack. The total size of the market had also shrunk.
The reason was the move from strategic investment in the brand to tactical activity to keep retail buyers happy.
Digital has injected steroids into this tactical explosion.
Marketers, so called only because that is what is on the door of their office, take the easy way out, and go tactical at the expense of strategic.
Don’t get me wrong, tactical impact is very important, but in isolation from the considerations of the strategic, it is brand suicide. There must be a balance between the activity necessary for today, and the activity now necessary to ensure the long term health of the brand, and in turn, its ability to deliver commercial sustainability.
Want the immediate hit? Spend all your resources on tactical activity.
Want to live a long and profitable life? Make sure you leave some for later.
Sep 28, 2020 | Leadership, Management, Small business
Every business starts small. The biggest on the planet all started somewhere, in a garage, dorm room, lab, somewhere between the ears of the entrepreneur.
Most fail, or at best deliver a return that would have been dwarfed by the interest on the same investment in a bank account.
Some however, do succeed.
We all see the ones that do, they are shoved down our throats all the time as the heroes, the ones who made it, and we are asked the question, if they can, why can’t you?
There seems to me to be a pretty consistent sequence of growth, a sequence that holds true across all sorts of products and services, geographies, technologies, and circumstances.
Cheering.
This is the first stage, it seems to be all enthusiasm, cheering from the sidelines, jumping up and down, wishing for stuff to happen. What it is really about when you are in the midst of it all is hard grind, chaos, and cash.
At the beginning, you work your arse off, seemingly 24/7, with no letup. Everything that gets done depends on you doing it, you don’t do it, it does not get done. Simple. It is messy, usually chaotic, as pressures come from every direction, your attention is demanded by each, which is why the 24/7, and still there is little forward progress. Then there is cash. As you start, nothing is more important than cash. More start-ups go broke for lack of cash than every other reason combined. Managing your cash is simply the most important thing you must do.
Planning & doing.
Assuming you survive the cheering stage, you will have come to the point where you have a little more head time to be used considering: ‘what next’. You probably have a very small number of employees, and perhaps some outsourced services, like accounting and IT.
Answering the ‘what next’ question will be eating at your guts, as for sure, you do not want to continue as you have been. Your kids are growing up without you, your partner becoming a stranger, you have not had a weekend with your mates for ages, so you look forward to a different future. So, you stumble into some planning. It is never as easy as filling in some generic template, of which there are plenty making alluring promises, it is more about the graft of figuring out how to accumulate and allocate the resources necessary to grow. While the game is still about cash, it has also become about profit, what is left for reinvestment at the end of the month, quarter, and year.
You plan your products and services, the foundation stuff you need to get right, like the legal and regulatory things that must be done, understand the financial and strategic pressures that are present, and settle for the moment on a business model: the means by which you will turn your chaos into sustainable profitability.
However, a plan, no matter how good it may be at telling the future, envisioning new products, markets and customers, needs one further ingredient.
It needs to be implemented.
Plans that do not get implemented are usually called dreams. You will also recognise the reality of the muttering of generals throughout the ages that while planning is essential, nothing ever goes exactly to plan, so you must be ready to be agile tactically, while consistent strategically.
Building & growing.
The essential ingredients to building and growing an enterprise, on top of the financial resources that enable that growth are twofold.
You need people to do the work, and you need processes for them to follow, and over time, optimise.
The task of being the entrepreneur has changed from one of management, to one of leadership. You are no longer as engaged in tactical activity. Tactical implementation is being done by others in a manner that is transparent to overview, and with KPI’s based on outcomes. The task now is about the people doing the work, from the daily tactical stuff to the functional management. Your role is to lead all these people, and ensure that the processes being deployed deliver on the plan. It is all about the productivity of resources deployed, people and financial, delivered via the processes that evolve.
Anyone who thinks this is easy has never done it.
Anyone who stands on the sidelines and cheers for you might be a cheerleader, supporter, and beneficiary, but they are not a coach. A coach delivers the models and means by which the success is generated, which is much more than cheering, as it involves getting dirty from time to time, being challenging at all times, and ensuring you are looking beyond the tactical that threatens to consume you at all times.
At each point in this growth pattern, there is a single question that you can ask that will give you an answer to the question of growth potential contained in any tactical decision:
‘Does this scale?’
Many small business owners do not ask this question, so end up selling their time for money: and there is only a limited time in any day. Therefore, if you are about to invest in tactical activity of any type, ask that simple question: Does this scale?
If the answer is yes, fine. If it is no, think again.
When you are looking for a coach with the scars to prove experience, browse through the posts on the StrategyAudit site, and then you might want to give me a call.
Sep 23, 2020 | Analytics, Management, Operations
When you want superior performance, implement a number of key cross functional metrics.
Gaining agreement on a set of metrics that genuinely track a projects cross functional performance is not a simple task. KPI’s are usually focussed on functional performance, whereas optimal performance requires that cross functional dependencies are reflected in the KPI’s put in place.
The standard response of functional management to such an idea is that if they cannot control a process, how can they be held accountable for its performance?
To get over this reasonable question requires that there is agreement across three domains, and collaboration around the tactical implementation of a processes improvement.
Let us use a reduction of Working Capital requirements as an example, requiring 4 steps.
Agreement on strategic objectives, and accompanying KPI’s.
The strategic objective becomes making the enterprise more resilient, and therefore able to adjust to unforeseen shocks. One of the strategies agreed is the reduction of Working capital. There are many parts that make up working capital, inventory being a major one in a manufacturing environment. As the joint objective is to make the enterprise more resilient, it is agreed that Inventory levels must be reduced.
Agreement on what ‘success’ looks like.
The absence of an outcome that signals success means that any improvement will do. There are numerous measures that can be applied, how much, when, what outcomes, compliance to standards, variation from the mean, and many others. In this case, a reduction of inventory levels by 15% without compromising customer service, is the agreed metric of success. Agreement across functions that this is a sensible measure will deliver the opportunity for cross functional alignment, and will contribute to delivering the strategic objective of resilience.
Agreeing on tactical diagnostics.
Tactical diagnostics are aimed at tracking and optimising the short term performance detail of the components of the agreed objective. Which parts of a project are working as expected, and which are not. You can make the changes in these on the run, experiment, learn, adjust. It is usually not necessary to have these on the high level dashboard, they are for the teams and individuals responsible for the execution of a strategy to determine the best way of doing them. What is critical at the tactical level, is that those involved clearly understand the wider objective, and their role in achieving it.
Application of the diagnostics.
As the old saying goes, ‘what gets measured, gets done’. In this case, to reduce inventory without compromising customer service, requires the co-ordination of many moving parts, some of which will need some sort of a scoreboard to track progress on the tactical improvements. For example, transparency of raw materials inventory and incoming delivery schedules to those doing production planning, matching production to real demand, improving forecast accuracy, managing DIFOT levels, levelling production flow between work stations, and many others. These should be made visual to the teams engaged in the work, at the place where the work gets done.
For all this to work, the KPI’s need to be simple, visual, apparent to everyone, and as far as possible dependently cross functional. In other words, build mutual KPI’s that reflect both sides of a challenge.
For example, stock availability and inventory levels. Generally those responsible for selling do some of the forecasting, so they always want inventory, manufactured yesterday, to be available when a customer needs it. As a result of uncertainty, they tend to over forecast to ensure stock availability when an order arrives. By contrast, Operations tends to like to do long runs of products to satisfy productivity KPI’s, so you end up running out of stock of the fast movers, while having too much stock of the slow lines.
The solution is to make the sales people responsible for inventory levels, and the operations people responsible for stock availability. In that way, they collaborate to achieve the optimum mix of production and inventory. This mutuality ensures functional collaboration at the tactical level, leading to making decisions for which they are jointly accountable.
You are in effect, forcing cross functional collaboration where it does not naturally exist in a traditional top down management model.
None of this is easy. If it was, everybody would be doing it. That is the reason you should be on this journey, it is hard, and so delivers competitive sustainability.
Sep 21, 2020 | Leadership, Marketing
Warren Buffets side-kick Charlie Munger repeats a story in his 2007 USC Law School commencement address which he tells often. The key part is from minute 28, that I think absolutely applies to the practice of marketing.
“I frequently tell the apocryphal story about how Max Planck, after he won the Nobel Prize, went around Germany giving the same standard lecture on the new quantum mechanics.
Over time, his chauffeur memorized the lecture and said, “Would you mind, Professor Planck, because it’s so boring to stay in our routine. [What if] I gave the lecture in Munich and you just sat in front wearing my chauffeur’s hat?” Planck said, “Why not?” And the chauffeur got up and gave this long lecture on quantum mechanics. After which a physics professor stood up and asked a perfectly ghastly question.
The Planck stand-in speaker said, “Well I’m surprised that in an advanced city like Munich I get such an elementary question. I’m going to ask my chauffeur to reply.”
The point is that knowing the name of something, does not mean you understand it.
As it is with the practice of marketing.
Many out there know the names, the jargon and new age tools with fancy labels. Unfortunately, that is not enough to be truly useful. You have to know how they work, how they interact with each other, and ultimately, how their use adds value to those with whom you are engaging.
Real knowledge and wisdom comes with doing the work, earning the right to make the claim of expertise over time gathering the experience necessary for insight.
The brother of this dictum is simplicity. Those who really understand how something works are able to go to the heart of it, and explain it in simple terms such that a non expert will understand. To quote, again, Einstein: ‘Everything should be made as simple as possible, no simpler”
Albert was not the best mathematician around, he could not even get a job teaching at undergraduate level in a university. His enormous ability was imagination, and the capacity to explain hugely complex ideas in simple terms. He could sort out the important from the unimportant, determining what was necessary to an outcome, and what was superfluous, and come up with what he called ‘mental models’ that demonstrated the explanation in simple terms to others. The mathematics was a secondary skill to the creative insights that led to the need to develop the mathematics that explained it.
Again, as it is with marketing.
Header cartoon courtesy Tom Gauld at TomGauld.com
Sep 18, 2020 | Change, Governance
Gas, it seems is the way forward, according to the Prime Minister.
It seems to me that the conflicted debate about the evolution of our energy sources between fossil fuels and renewables, who wins and who loses, is more about the deployment of capital, and the beneficiaries of that deployment, than anything else. Platitudes about consumer energy prices, offering manufacturing the opportunity to have power at competitive rates is all very fine, and correct, just a few decades slow in coming.
For the whole of the 20th century, the geopolitical landscape around the world was driven by fossil fuels, and perhaps to a lesser extent other extractive industries.
The enterprises, public and private, made their owners and leaders rich by extracting profits, most often rewarding themselves for the largess provided by geography and to a lesser extent, politics and luck. They were, and continue to be an extraordinarily powerful force, often below eye level of the general public. Communities and the individuals in them have benefited from these industries, but not nearly as much as those that control them.
Now, the economic worm has turned, and renewables are becoming rapidly more economically viable, the extractive fossil fuel industries are being squeezed. As the battle for market share has intensified, we see the price of oil has dropped dramatically, and productive assets and their supply chains are being increasingly stranded.
The current oil price is around $40/barrel and under significant downward pressure, while at the same time, extraction is increasingly capital intensive, as the ‘easy oil’ is running out. This combination of downward price pressure, increasing competition from other energy sources, and increasing capital intensity is a harbinger of a wave of bankruptcy as the higher cost wells are closed as uneconomic. I am old enough to recall the very real concern about ‘Peak Oil’ back in the seventies, when the world was supposed to be running out of the stuff. Now the price in dollars is almost the same as it was 30 years ago.
Ref https://tradingeconomics.com/commodity/crude-oil
Listen to the discussion of the modest resurgence of US manufacturing, the low price of fuels comes up, particularly natural gas as the driver. Gas is now at about 2.40/MMBtu, the same price it was back in the early nineties, a sixth of the price 15 years ago, having undergone a roller coaster ride.
This would appear to me to be commercially unsustainable. Gas is (as I understand it) even more capital intensive than oil, as gas wells generally do not have a long life before the resource is exhausted, and therefore need a return in a very short time frame to justify the investment risk.
This is before the environmental risk is considered. I have absolutely no expertise in this area, but have heard a very knowledgeable source describing the fracking process as: ‘being like locking the exit doors in a multi story building , and yelling fire, then watching where the leaks occur as the pressure builds’. In areas of sensitive geology, this is unlikely to have any positive impacts at all, particularly after the gas has been released, and the gas company moved elsewhere to repeat the exercise.
(Gas is measured in BTU’s, or British Thermal Units, which is the quantity of heat content in a fuel. 1 BTU is the quantity of heat required to heat a pound of water by 1 degree Fahrenheit when the water temperature is at 39 degrees Fahrenheit. A MMBtu is 1 million BTU’s)
Then there is coal, a similar roller coaster, and currently below the prices of 20 years ago. There are many grades of coal, some less price sensitive than others, but they all share similar characteristics as being dirty, and now cheap, under the cost of production of all but the most productive mines.
Then you have the cost of renewables, dropping by huge amounts over the last decade, photovoltaic by over 80%, less for wind .
(CSP is concentrated solar power) Graph https://www.irena.org/newsroom/articles/2020/Jun/How-Falling-Costs-Make-Renewables-a-Cost-effective-InvestmEnt
Of course the numbers depend a bit on who you use as a source, and what sort of granularity on the data you are seeking, but the trends are unmistakeable.
At some point, fossil fuels will become completely uneconomic, and we are probably not far from that point. When that happens, investment will cease, the ownership of these entities will pack up, having extracted all the returns that can, and move on. What will be left is the massive clean-up bill.
Who will be paying the clean-up bill?
We will, taxpayers, the public, from whom the fossil fuels industries have already extracted super profits from the jointly ‘owned’ resources.
I am not a green lefty by any means, but am concerned at the legacy being left to my children and more specifically my grandchildren. It is them that will carry the greatest burden of the clean-up.
There are many people with the chops necessary to speak on these topics from a point of expertise, I am little more than a concerned observer. However, the science is unequivocal, and there are paths to improvement.
Barry Jones when Minister for science in the Hawke government keynoted with Al Gore in a 1984 an ‘Ozone layer’ summit in London, sponsored by the darling of conservatives, Maggie Thatcher. This led to the Montreal Protocol, an international agreement to ban the manufacture and distribution of CFC’s. They were replaced by HCFC’s, which did less damage, and have been subsequently replaced again by chemicals with even less impact. Perhaps I am being cynical, but I see the profits of chemical companies driving this change, rather than the need to act for the general long term good. Nevertheless, the science has been undisputed by experts for almost 40 years.
It seems that so far, there are insufficient numbers in the halls of political power listening to scientists, unless it suits them to do so, as in the current Corona crisis.
I cannot believe it is because they are stupid, or blind, rather that they comply with that wry observation made in varying forms by several including Upton Sinclair: ‘It is useless to argue with a man whose opinion is based upon a personal or pecuniary interest’
Somehow, we need to poke a lighted stick up the arses of those who continue to push for the retention of fossil fuels as a core of our energy mix and export income. In the absence of any action to make change, we will be in even deeper trouble than I think we are.
