Where is the gap to be filled in retail?

Where is the gap to be filled in retail?

Mar 8, 2019 | Customers, Marketing, retail

The range of retail format options is huge and multifaceted.

At one end of the continuum you have pure on-line retailers,  to full service bricks and mortar retail at the other, and everything in between.

It is the ‘everything in between’ where the development is happening, and the opportunity lies.

Apple ‘Zigged’ when everyone else was ‘Zagging’ and spent a decade and billions of dollars opening retail stores. While they are now the most successful retailer in the world on a turnover/square foot basis, the reason was more about brand building over the long term than just retail revenue. Brilliant.

Amazon has been the catalyst to the on-line gold-rush, but you have to ask yourself are they are retailer, or a data business first? They started as a retailer, simply using a different channel, but to enhance their position they have evolved into a data company that uses on line channels to sell and deliver product.  With Amazon Go, they have combined bricks and mortar retail with their data capabilities, which can only become more important as they evolve their purchase of Whole Foods.

Meanwhile, B&M retail is either hunkering down, cutting costs, and generally moaning about how on-line sales are cutting their margins, or investing in their businesses, some by increasing service levels, others by setting about ‘digitising’ to compete.

Any way you look at it, the gap is in the middle.

That gap will be rapidly filled by deploying digital tools already available, or in development, based it seems on two rapidly converging technologies:

  • Facial recognition, powered by our on line profiles and pattern recognition software, and
  • Location definition powered by our devices and GPS.

Amazon Go is able to recognise and record stock movements from the shelf to your shopping basket, and back, as it happens, and debit your card with the purchase. It is a small step to use facial recognition as you approach a store, or product category while inside the store, and match that with your previous purchase patterns to make exclusive, and immediate offers to you tailored to your history.   You do not need to be Amazon go to deploy the second part of that scenario, you just need the facial recognition and location data connected to your purchase history, and perhaps purchase intent identified by browsing history.

This combination of location, facial recognition, purchase history and browsing patterns will be the game changer in the current gap.

The question to be answered is how we as members of the public and consumers feel about this complete exposure of what has been to date private. On the one hand we seem to want the convenience and immediacy it can deliver, but on the other, remain very wary of offering up our privacy to the unknown forces that can tap the data in ways never expected or sanctioned.

However, I suspect the horse has bolted, and the gap will rapidly  be filled!

Photo credit: Kristian Dye via Flikr

Get stronger, then get bigger

Get stronger, then get bigger

Mar 6, 2019 | Change, Customers, Management, Strategy

Most businesses find themselves on the ‘get bigger or get out’ merry go round. Unfortunately, one of the characteristics of merry go rounds is that unless you hold on, centrifugal force  will throw you off.

Also, the faster you go, the more likely you are to be thrown off, and as you slip towards the edge, the momentum grows making it that much harder to reverse the trend.

The alternative choice is to get stronger, rather than just bigger.

This usually means you say ‘No’ to a lot of tempting, but short term ‘opportunities’ that will arise, as most will dilute the focussed and differentiated value you can deliver to your ideal customers.

The dual question therefore is: How do you get ‘stronger,’ and what does stronger actually mean?

To me, strong means a number of things.

  • You are commercially resilient,
  • Customers, employees, and suppliers are all aligned to your values and strategy,
  • You have a strong brand amongst your customer base who want what you have because you are the only one who has it, and
  • Your competitors employees wish they worked for you

In short, you have a ‘moat’ around your business that repels all boarders and pretenders, and resists the siren song that suggests the grass is always greener somewhere else .

When you have all that, you can get bigger, it will happen almost without you driving size, as the strength will attract suppliers, customers, and those great employees with energy and ideas. 

 

What is the difference between an Elevator Pitch and a Value Proposition, and when to use them?

What is the difference between an Elevator Pitch and a Value Proposition, and when to use them?

Mar 4, 2019 | Communication, Management

Good question, but the challenge seems to be overwhelming for some of those who most need to be clear on the differences, and when and how to use them.

I spent most of Thursday and Friday last week at the ‘Emergence‘ conference in Sydney, an event designed to boost the start-up scene in Sydney by bringing together investors, start-ups and industry experts. A similar event was held in Brisbane on Monday and Tuesday.

A terrific couple of days, with one significant blemish.

Most of the founders who had the opportunity to present to an audience of several hundred investors, and service providers of many types, blew it! Completely blew it.

Has nobody told these talented engineers and designers that you only get one chance to make a first impression?

The elevator pitch.

This is a very simple, compelling to your ideal customer, one sentence distillation of why  they should buy from you, or more often, just keep talking to you. It is not easy to craft, largely because in one sentence, you have to leave out a lot. Every stakeholder should be able to recite this in their sleep, and should do so at every opportunity when meeting people.  The purpose is to pique interest, and to extract the follow up questions, that can be answered by the delivery of the value proposition, which may lead to a further and deeper conversation.

I did not hear one compelling elevator pitch in the two days. Not one!

Use the elevator pitch when you have 30 seconds, any extra time you may be given is just a huge bonus not to be wasted.

The Value Proposition.

Your Value proposition is a more detailed articulation of why someone would engage in business with you. Still concise, focused, but designed to get to the core of who the product is designed to help,  how that will happen, and what results can be expected. You know the delivery has been successful when there are follow up questions that enable you to go into a bit more detail about the problem you are solving, and the beneficial outcomes of use.

Again, last week, there was an almost complete absence of a Value Proposition. In its place, we were given lists of names of notable people who were involved, how many degrees they had, what the technology entailed,  and some detailed project plans and milestones. In most cases, little that would encourage further engagement, although for a few, there was considerable value hidden amongst the verbiage, poor delivery, and technical jargon.

Use it when you have 15 minutes, along with a pitch deck that leaves the listener with no option but to be engaged. The best outcome to be achieved from such a line-up of consecutive pitches is that the audience remembers nothing but yours, and the individuals feel compelled to follow up!

If I was the organiser, it would be mandatory for those pitching to spend a bit of time with someone who could help them assemble their deck, and then get their message across. Either that, or hide the ego, and get someone with presentation expertise to do the preparation and delivery.

For all of that, the exercise was a great success, and warrants support from those with an interest in nurturing a successful start-up ecosystem, and that should be everybody.

Time can only be productive, or wasted. Which will it be?

Time can only be productive, or wasted. Which will it be?

Feb 27, 2019 | Customers, Marketing, Operations

Time is our only truly non renewable asset, and it is absolutely finite. Therefore it makes sense to use it as wisely as possible.

In a management context, in measuring a process, time has two dimensions.

  • Clock time. Start to finish, how long does a task take to go from one end of the process to another.
  • Event time. How long does it take to go through the activities necessary to complete the process.

It might take a bank 3 days to process your loan application, clock time, but the event time may only be the few minutes it takes to check your credit history, current income and automatically calculate your ability to repay the loan. Event time.

In most cases, customers are only aware of the clock time, and when it extends beyond what they think is reasonable, they become cranky with you.

The difference between the two is the opportunity for improvement, and to ensure customers only get cranky with your competitors.

 

The 5 types of cost in your business.

The 5 types of cost in your business.

Feb 25, 2019 | Management, Operations

Cost is a part of every business, you have to incur them in order to deliver a product.

For most, the extent of cost management is via the Profit and Loss account in the monthly reports, and by the comparison of expenditure to budget.

Both are  by themselves inadequate, and miss three of the generators of cost from which great benefit can be derived by intelligent management. In addition, just cutting costs with no regard to the role the cost incurred plays in the generation of revenue and margin, often results in greater costs in the long term, almost always only indirectly connected to the cost cutting. A former corporate employer engaged in a ‘re-engineering’ exercise which was code for reducing headcount. Short term there was a benefit, but the hidden costs incurred as tasks were not done, and the survivors left as soon as they had another job, incurring recruiting and training costs for the replacement employees,  were considerable.

The nature of the costs vary, but there are 5 classes that occur in every business. To one extent or another, they are a part of the profit equation.

Profit = Revenue – Cost

Direct or marginal cost.

Direct costs, as the name implies, are driven directly by the production process. In most manufacturing environments these are recorded as the Cost of Goods Sold.

Indirect costs, or overhead.

These are the costs incurred to keep the doors open, disconnected directly from revenue generation. Rent, insurance, management wages and salaries, for instance are necessary, but not connected directly  to the generation of revenue.  

Opportunity costs.

Nobody has enough resources to do everything they would like, no matter how big and profitable you may be. Therefore choices must be made, option A instead of option B. Opportunity costs are those benefits forgone as a result of those choices. They are rarely definitive costs, although calculations done that lead to making those choices such as Internal Rate of Return, and discounted cash flow forecasts, make some attempt to do so. 

Transaction costs.

Transaction costs are similarly challenging to identify, as they are generally invisible amongst the general overheads. However, focusing attention on transaction costs can yield considerable savings. For example, a client of mine had 5 suppliers of the key raw material for his operations, each supplying across a wide range of specification variations, and each having about a 20% share of my clients purchases. Each of the 5 relationships consumed time of the purchasing, operations and accounting personnel, as they managed the paperwork, reconciled mistakes, and maintained the human contact. Over a short period we engaged in a process to reduce the number of suppliers, one that would supply most of the required product, and a second as backup. Not only did we get a much better deal on price, but it quickly became evident that the time consumed by staff engaged in the day to day was reduced by a huge amount, leaving them free to undertake more productive and personally satisfying activities.    

Short cut costs

As with transaction costs, short cut costs are hidden, perhaps even more so. Taking short cuts almost always results in longer term higher costs in remediation. You might make the short term budget, or target, but at the expense of the long term. It is a bit like losing weight, take the quick way out by ‘starving’ yourself, and you might get a short term result, but unless you change your eating habits, once the short  term pressure is off, your weight will start to go back on, slowly. In a factory, short cuts usually lead to waste generated elsewhere, which are often just as hidden. Doing a patch up job on a machine to keep it running today, can lead to a major breakdown tomorrow that closes the factory for a week. These costs are rarely attributed to their real cause, and as a result, keep happening. The best cost  is the unproductive one you just eliminated!

There is a 6th cost, only sometimes seen with then benefit of hindsight: Opportunity cost. While your resources were tied up, particularly your strategic attention, an opportunity emerged that was not seen, or for which you did not have the resources.