The critical key to reliable forecasting: Be less wrong.

Mar 18, 2020 | Change, Management, Uncategorized

The critical key to reliable forecasting: Be less wrong.

Thomas Bayes. 1701 – 1761

The key to good forecasting, that magic elixir most of us take, is not to be right, but to be increasingly less wrong.

We know the future will be different, being less wrong about that difference is better than consuming resources trying to be right, because you never will be.

For a decade, several decades ago, as marketing manager of a very significant business, I did a weekly sales record for about 50 SKU’s, by hand. It was in the late eighties, early nineties, the days before this was made easy.

Every Monday morning, I took about 15 minutes to record the sales on a sheet, with a 5 week rolling average, and a 5 week rolling forecast. Every month I did the same, but it took a little longer, as there were comparisons to the relevant quarter the year before, and budget, which took about 45 minutes.

In 10 years, I only ever got one forecast right, but was usually very close. Nobody took any notice at all of the forecasts of the sales force, despite them being part of the sales KPI’s. When manufacturing had choices to make about factory utilisation and what not to make, they came to me, and ignored the rest.

This was simply the building of a qualitative knowledge over time.

We routinely defer to ‘Bayesian’ statistics, a theorem proposed by English statistician Thomas Bayes in 1763, that dealt with the probability of a future event, and how that probability becomes more certain with the addition of information relevant to the outcome. We see Bayesian thinking all around us all the time. Every time we see an outcome to an action, and adjust before we repeat the action, we are using Bayesian thinking. Artillery is the obvious example. Use one cannon to get as close as you can, observe the degree to which you are long or short of the target, and adjust accordingly. When you land one on the target is when all the other cannons in the group adopt the same settings and blast away.

In business, we can spent inordinate amounts of time and energy trying to get the last 5% accuracy, when it would be far better to take a decision, and move ahead knowing that the chances are you will be wrong, but able to adjust and accommodate the degree of ‘wrongness’ with far less effort. This is the basis of continuous improvement, Plan, Do, Check, Act.

Bayesian theory at work, every day.

Has ‘The Bug’ created an organisational crossroad?

Mar 16, 2020 | Change, Strategy

My eldest son has been talking to his employer for some time about remote working.

He and his family wanted to get out of Sydney, with its attendant challenges, and have a simpler lifestyle.

Problem has been, the simpler lifestyle also limits the job opportunities, particularly in the relatively narrow field where he has developed experience and expertise.

He conducted an experiment, both for himself and his employer, by working remotely for 6 weeks, from Tasmania. His boss was happy, as was he, and so the idea flourished to the point where he sold his unit a couple of weeks ago, just after his boss’s boss informed them that remote working was not on the agenda, and not acceptable.

This was all before the great dunney paper rush motivated by ‘The bug’ over the past few weeks.

I wonder if the attitude has changed? I know Geoff and his family are committed, and in the absence of a job, will move anyway and try their luck, cashed up as they are.

What does Geoff’s employer have to do to make remote working a part of the way they work?

They have to undergo a digital transformation, supported by a cultural one. In a global company in a regulated market, this is not easy. In fact, the only easy thing about it is to kick the can down the road, so it is someone else’s problem to solve.

However, Millennials are not the same as us baby boomers. They are looking for something more, and are very mobile, risk takers, and unlikely to stay with an employer who does not meet, or even try to meet their needs.

I have prepared a list of the elements Geoff’s employer needs to think about, if they are to transform, and have the chance at retaining the training, commitment and intelligence Geoff, and his cohort bring to the table.

Change of this nature requires leadership and overt commitment from the very top, cascaded through the organisation. This means that there is a mandate to change from the top, and the necessary resources and leadership are made available. When change is slow, or not forthcoming, the leadership needs to remove the roadblocks, ensuring the ball keeps rolling, building momentum.
All stakeholders need to understand the reasons for the change, and the value that is created by the outcome. In the absence of an articulated reason for the change, it will stutter.
Organisation structures need to change from vertical siloes to cross functional collaboration. While this is organisationally and operationally difficult, it is logical, as the customer does not care which part of the organisation addresses their needs, they just care that it is done in a timely, reliable and efficient manner. Organisation structures have to evolve to reflect the customer journey, they can no longer dictate how that journey will be fulfilled. Siloed organisation structures generate ‘transactional friction’ for customers, and the millennials amongst them generally will no longer tolerate it, so they will go elsewhere.
These changes are not a digital transformation, they are an organisational transformation that uses the evolving digital tools to add value to customers. Too many become obsesses with the tools, when it is the outcome that counts.
Transformation of any type ultimately boils down to the people, it is them who will engage and push the cultural transformation needed, it just requires the permission and tools to do so.
Somebody, somewhere, has to build and approve the business case for all this. Change is risky and potentially expensive, but is a necessary part of commercial sustainability. In the absence of a business case that finds a way to articulate the desired outcome, in a manner that everyone understands, the change process will grind to a halt under the weight of the status quo.

The bug may be the catalyst that kick starts remote working. If I was a share market punter, I would be tumbling all my spare cash into businesses whose product was enabling this move. Zoom, for example, as well as the integrated cloud systems, Microsoft, Cisco, Zoho, et al. My son is well down in the pecking order of a very large corporation, and seemingly irrelevant to the success or otherwise of the organisation, but losing him, and others like him, will slowly rot the business from the core.

Header cartoon courtesy Mike Luckovitch

Canberra bubbles bumble on

Mar 12, 2020 | Governance, rant

#Scottyfrommarketing blew it again on Tuesday morning, (March 10) further demonstrating why he had to move out of marketing, where you need a modicum of common sense, into politics, where common sense appears to be a liability.

He was speaking at the Financial Review business forum in Sydney, looking at the strategic challenges that face us. Amongst his words was an exhortation for business to keep people employed, to keep temporary and casual workers on the payroll despite not having work, for the good of the nation, to help them feel like they were proper Australians.

If he had any common sense he would have known, and as PM, should have known, that those running businesses do so for reason other than patriotism, indeed, they have a fiduciary responsibility to deliver returns to shareholders.

As an alternative to his naive and fluffy exhortation, he should have pointed out the costs of rehiring and retraining employees, the hidden transaction costs, adverse behavioural impact of survivor syndrome on employers, and the opportunity costs involved in cyclical staff management. Produce a few statistics from one of the many bureaucracies tracking this stuff, accompanied by a few real case studies, and the impact would have been significant. As it was, the impact was nothing more than further confirmation that the PM is not dialled into the real world.

I noted, ‘again’, in the opening sentence for a reason. It was not the failed responses to the fires, wooden recognition that there might be a problem emerging from climate change, or the astonishing revelations emerging from the shallow end of the pork barrel pool. It was driven by the stupidity of turning away from the opportunities offered by the rapid evolution of the world economy from fossil fuel to renewables.

Australia has plenty of space for mass solar panels, the resources required to produce batteries for storage, and the opportunity to be at the forefront of developing Hydrogen as a renewable energy source. It has just been too expensive in the past, and requires a lot of energy, to date supplied by fossil fuels. It will not be so in the future. But unfortunately, our scientific resources have been decimated, and what is left, directed elsewhere by ideologues and ‘flat earthers’.

Having sent brickbats in his direction, it is fair to be even handed.

This morning the PM announced the expected response to the virulent growth of the Corona virus. To me it appeared to be measured, sensible, and appropriate, and to be fair, again, the PM appears to be in front of the game this time. Perhaps #scottyfrommarketing is finally listening to those with some expertise in the arena he intends to flap his gums about.

Header cartoon courtesy Mark David and Independent Australia

An extreme case of Marketing Alchemy: Bananas!

Mar 11, 2020 | Branding, Marketing

Italian artist Maurizio Cattelan may have set a new world record. He taped a banana to a wall in an art exhibition in Florida on December 7, 2019, which was then sold for $120,000 (US) dollars.

The buyers, Billy and Beatrice Cox acknowledged the absurdity, but supported the impact the taped banana had on conversations about art. As a marketer, I am in awe of the process by which Cattelan turned a perfectly ordinary banana, into a cash cow.

Marketing alchemy at work.

A competitive artist at the exhibition ensured the banana would not go off, by eating it. An act of sabotage, or extension of the publicity the ‘thingo’ (I have difficulty calling it art, or even exhibit) generated.

Nevertheless, it is a massive demonstration of the contextual impact on the perceived value of an object.

You can buy an Eric Clapton signature Stratocaster for a couple of grand, new, or had you been at Christies in New York on June 24, 2004, you would have seen Eric’s Stratocaster (nicknamed ‘Blackie) that was the mainstay of his playing during the heydays of ‘Cream’, sold for $959,500. Better value than a banana, at least you could have resold it, rather than have some goose run up and eat it.

All this proves, once again, that utility has little to do with value.

Update: November 2024. The monkeys have really come out to play. The original buyers of this ‘art’ the Cox’s sold it subsequently for 184k, on-sold twice more for 150k and 230k. It has now been sold again at an auction in new York for 6.2 million according to a video in X. (which I always believe to be the truth..???). The absurdity of this is disturbing, Every few days the thingo has a new banana added, presumably to keep the ‘art’ fresh. I have never heard of such marketing alchemy as this! https://tinyurl.com/w7ma9fvx

5 essential factors to build a B2B sales pipeline that delivers consistent revenue.

Mar 9, 2020 | Customers, Sales

Selling B2B is a complex activity. Success takes time, effort, and persistence.

Therefore, to be truly productive, it requires the discipline of a repeatable process that is also measurable and scalable.

In order to achieve this outcome, there are 5 factors you should be building into your planning cycles.

Have a very clear view of your target customer profiles.

You cannot be all things to all people, you have to tailor the value proposition you communicate to the problems and aspirations of the target you are approaching. Many businesses have a number of key targets, keeping them clearly separate, with separate value propositions is essential.

For example, one of my clients is a printer, not a large business, but one that has a very wide range of services available internally, from original artwork, to various forms of printing, die cutting, assembly and decoration. They have two primary verticals they target .

The first is businesses involved in trade shows. Typically, those businesses leave their printing and stand design needs to the last, and that can cost a lot of money, leads to conflict and suboptimal outcomes. Given they have everything required under the one roof, the time from briefing to delivery is way shorter and usually cheaper than the business managing the various facets themselves.
The second is small and medium sized clubs, those with limited internal marketing and design resources, but a need for a lot of work done to a consistent theme. Again, keeping the work in house ensures a quality outcome at a competitive price.

Demonstrate your expertise.

There are as many ways to do this as there are stars in the sky, pick a few that are particularly relevant to your customers, and focus on them. Almost inevitably the best way is to give away information, in such a way that the receiver recognises that the information you have given is valuable, and if it is for free, how much more is there to be gained by working with you?. This might be in the form of blog posts, webinars, conference presentations, and many others, The best however, is having your current customers refer business to you, either directly, or via testimonials in one form or another. People trust other people, they will discount your own claims, simply because they recognise the self-interest.

Observe the 3 second rule.

Every sales call, conversation, post on your website, whatever the material, the most important part of it is the headline. If you cannot grab the attention of the audience with your headline, draw them into the body of the material so they can become more engaged in some way, they will be gone. You have 3 seconds of their attention, after which you have to earn every further second. This is particularly true in a sales phone call, that most dreaded of mediums. Be direct, and specific. ‘Hi, this is (your name) from (company name) we are expert at helping companies like yours with (target pain point) by (specific promise), and would like to take no more than 10 minutes to see how we might be able to assist you’. There are many variations to this, but simple, to the point, and outcome specific works, while making it as hard as possible to say ‘no’ to the next step in the process, which is often a meeting.

Remove the risk.

For a potential customer, doing business with you the first time has some risk. Irrespective of your pitch, the social proof you may have, and the relationship you might have built during the sales process, the decision to go with you rather than the alternative will be seen as having some element of risk. When you remove the risk, put them in a place where they have nothing to lose, why would they not go with you? Most businesses have some sort of after sales service, replacement, or quality guarantee in place. When a customer is dissatisfied, there is some mechanism to address the problem, so why not make it explicit, a part of your offer, remove the risk. The potential cost is already factored into your price, it is just that you hope nobody uses it because you always have satisfied customers. Remove the risk from making the choice to go with you, and your sales will zoom!

It is easier to get more from a current customer than it is to find a new one.

How often we forget this, and devote resources too hunting out new customers, when there is potentially more business for you in the current client roster, their associated companies, and perhaps those to whom your current clients are happy to offer referrals. This requires that you build relationships over time, and those relationships are based on trust, mutual benefit, and importantly, your performance over time. My favourite measure of sales effectiveness is ‘share of wallet‘. It is a demanding measure, it forces you to develop intimacy with your customers business, as well as understanding your own capabilities very well, so you can determine what is inside the wallet, and what is outside, and therefore not productive to chase.

Call me when the experience I have can help address these challenges.