Jul 10, 2024 | Innovation, Leadership
Roger Federer is the greatest tennis player I have seen in a long life of watching and playing the game. He may have been overtaken by Djokovic as the winner of the most grand slams, which seems to be the public benchmark of the GOAT, but he will remain the greatest to me.
His greatness is not just on the court, where everything seemed effortless. It extends to his demeanour and humility off the court.
In a recent commencement speech at Dartmouth College, he gave the graduates a critical piece of wisdom that applies widely to life:
“Perfection is impossible. In the 1526 singles matches I played in my career, I won almost 80% of those matches.
Now, I have a question for you.
What percentage of points do you think I won in those matches?
Only 54%.
In other words, even top-ranked tennis players win barely more than half of the points they play. When you lose every second point on average, you learn not to dwell on every shot.
You teach yourself to think, okay, I double-faulted … it’s only a point. Okay, I came to the net, then I got passed again; it’s only a point. Even a great shot, an overhead backhand smash that ends up on ESPN’s top 10 playlist. That, too, is just a point.
And here’s why I’m telling you this. When you’re playing a point, it has to be the most important thing in the world, and it is. But when it’s behind you, It’s behind you. This mindset is really crucial because it frees you to fully commit to the next point and the next point after that, with intensity, clarity, and focus’.
Those words resonated with me.
They resonated, not just because I lose way more than 50% of the points I play these days, and must accommodate that in my competitive brain, but because it applies to the way we all should live our lives.
It certainly applies to those I work with, where an obsession with the past often clouds the next move, and the one after that.
We need to understand why what we did worked out differently to the plan, and learn to adjust both on the run, and over time as we alter the mechanics and drivers of activity. Beyond that, the past is irrelevant. It is the past, unchangeable, immutable.
By contrast, what we do with the lessons of the past is crucial.
Jul 5, 2024 | Change, Governance, retail
The undertaking by Opposition leader Dutton, supported by the Nationals leader Littleproud, to break up the retail gorillas Woolworths and Coles is absurd. It is a gross example of stupid, short term populism and fear mongering that exhibit either utter ignorance of the current and proposed laws, how the supermarket supply chains work, or scary levels of ignorance.
Perhaps it is all of these mixed up in a broth of complete ‘short-termism’.
It seems to me that facts and long-term benefit to the economy and communities play no role in this ill-conceived appeal to populist, thoughtless ‘policy’.
Such a breakup is far more likely to increase retail prices to consumers, it will certainly not result in any reduction.
Let me be clear about the failures of this proposal, at least as I see them.
Supply chain mechanics.
- The current voluntary code of practice, and the proposed mandatory standards relate to the chains and their suppliers. In a minority of cases are these suppliers also the manufacturers of the consumer product, as well as being the farmer, and all the associated and necessary middlemen that provide the supply chain with the ‘Oil’ that makes it work. Therefore, the policy if implemented would do nothing for the small scale ‘farmers’ who are often held up as victims of retailer power.
- Scale breeds scale. Suppliers of fruit and veg have over time, built scale to squeeze out transaction costs from the supply chain. The Australian Fresh Produce Alliance is a small group of very large ‘consolidators’ that between them control roughly half the $9 billion fresh fruit and vegetable market. These businesses are farmers only in the sense that they might own, contract, or represent hundreds of individual farming locations. Several of the major players are owned overseas. A breakup of Coles and Woollies would only encourage them to increase prices, as the suppliers would then have greater scale than the chains, and would use it.
- The small, independent farmers of commodity fruit and veg is a part of the past. Believing otherwise is fantasy. Where those who choose to farm a small holding have opportunities are in specialty produce sold through channels other than chain retailers.
Legal considerations.
- Any breakup would involve legal action, probably to the high court. I doubt the retailers would take a breakup order as anything other than an order to self-destruct. This would be resisted fiercely.
- The mandatory Code recommended by Dr Emerson, and widely accepted is only marginally more useful than the current voluntary code. It still requires that suppliers lodge complaints. Whilst there are now to be penalties applicable by arbitration, the likelihood of complaints remains low, despite the ‘protections’ articulated in recommendations 3, 4 and 5.
- The scale of penalties proposed by Dr Emerson is absurd. If the threat of implementation was real, nobody in their right mind would invest in retail of any scale. Imposition of the maximum penalty would send the retailer concerned broke. Assuming they are just ‘regulatory scarecrows’ with little legally independent investigation and enforcement power, they represent little of any real deterrent value, while adding friction to the supply chain. Friction generates costs, which will be recovered from consumers.
Competition falsehood.
- Coles and Woolworths do currently have somewhere around 65% market share of retail FMCG sales. That percentage is being eroded by Aldi, as it opens more stores and successfully takes market share.
- In regional areas of NSW and Vic particularly, but also SA and WA, there are a number of strong independent retailers. Drakes, Ritchie’s, IGA, and others are all competing successfully against Coles and Woollies. None would be able to buy disassembled bits of the gorillas, and even if they were, what would that do to the objective of decreasing retail prices? It would more likely put upward pressure on prices as the purchaser sought a return on the investment.
- It you were to breakup either of the retail gorillas, who is a likely buyer? I cannot think of any, except perhaps Walmart, who are also smart enough to assess the sovereign risk as being considerable, so they would not put anything like the expected value of the broken up businesses on the table.
- Some time ago, under Graham Samuel, the ACCC forced the removal of contractual exclusivity of Coles and Woollies in shopping centres under Section 47 of the Competition and Consumer act 2010. That move was a very sensible one, and has resulted in Aldi opening a number of stores in shopping centres in opposition to Coles and Woollies. (An extension to cover ‘land-banking’ might be a useful consideration.)
- While Coles and Woolworths are immensely powerful, they are far from the only distribution channel that exists. In a court they would point out the multibillion dollar and still fragmented food service channel, as well as the independent specialist retailers who continue to provide opportunities for small scale farming.
A final thought. Every Australian with a superannuation fund: i.e. most of us, would have Woollies and Coles in their portfolio, knowingly or otherwise. These shares have been good investments in terms of capital gain, and throw decent tax effective dividends. A breakup would threaten those investments.
For the Opposition leader to propose legislation, should they be elected to government, to break up Woolworths and Coles is nothing but an idiotic, populist, ill-considered appeal to voters without the knowledge to dismiss it with the contempt it deserves.
It is also an astonishing dismissal of one of the cores of the conservative parties: to limit the intervention of government in the workings of the economy.
We Australians deserve better from our ‘leaders’ than opportunistic and destructive policy statements.
Jul 2, 2024 | AI, Change, Strategy
AI is the latest new shiny thing in everybody’s sightline.
It seems to me that AI has two faces, a bit like the Roman God Janus.
On one hand we have the large language models or Generatively Pre-trained Transformers, and on the other we have the tools that can be built by just about anyone to do a specific task, or range of tasks, using the GPT’s.
The former requires huge ongoing capital investments in the technology, and infrastructure necessary for operations. There are only a few companies in the position to make those investments: Microsoft, Amazon, Meta, Apple, and perhaps a few others should they choose to do so. (in former days, Governments might consider investing in such fundamental infrastructure, as they did in roads, power generation, water infrastructure)
At the other end of the scale are the tools which anybody could build using the technology provided by the owners of the core technology and infrastructure.
These are entirely different.
Imagine if Thomas Edison and Nikola Tesla between them had managed to be the only ones in a position to generate electricity. They sold that energy to anybody who had a use for it from powering factories, to powering the Internet, to home appliances.
That is the situation we now have with those few who own access to the technology and anybody else who chooses to build on top of it.
The business models that enabled both to grow and prosper are as yet unclear, but becoming clearer every day.
For example, Apple has spent billions developing the technology behind Siri and Vision Pro, neither of which has evolved into a winning position. In early June (2024) Apple and OpenAI did a deal to incorporate ChatGPT into the Apple operating system.
It is a strategic master stroke.
Apple will build a giant toll booth into the hyper-loyal and generally cashed up user base of Apple. Going one step further, they have branded it ‘Apple Intelligence’. In effect, they have created an ‘AI house-brand.’ Others commit to the investment, and Apple charges for access to their user base, with almost no marginal cost.
Down the track, Apple will conduct an auction amongst the few suppliers of AI technology and infrastructure for that access to their user base. To wrangle an old metaphor, they stopped digging for gold, and started selling shovels.
Masterstroke.
It means they can move their focus from the core GPT technology, to providing elegant tools to users of the Apple ecosystem, and charge for the access.
What will be important in the future is not just the foundation technology, which will be in a few hands, but the task specific tools that are built on top of the technology, leveraging its power.
Jun 28, 2024 | Leadership
Performance is always enhanced when there is skin in the game.
I only work with SME’s, for the very simple reason that those in charge have skin in the game. The process of creating the environment where significant improvement to financial operational and strategic performance can be achieved requires change, and change is hard. When you own the business, and you decide that change is necessary to achieve the goals, you can drive those changes, and most people will follow. In a large business, most of the senior management still get paid, even when the train goes off the rails. They may lose a bonus here and there, but usually not, as they set the rules themselves.
It is a situation I dislike.
In the case of marketing, the lack of accountability for outcomes is more pronounced than in other functions. There is a mystique, a black box, and marketers have convinced themselves, and others that success is about long-term brand building, therefore they cannot be held accountable for results today.
Nonsense.
Marketing should be accountable for margins, absolute and percentages, today and tomorrow. Then they have some skin in the game and will act accordingly.
The upside of the greater accountability is that those in the corner office will take them more seriously than they have in the past.
The turnover of senior marketing personnel is faster than any other function. CEO’s are usually accountants, lawyers or engineers, and they quickly get sick of marketers talking in cliches, making vague promises, then delivering creative excuses when the outcomes fail to materialise.
Accept accountably for revenue and margins, and that uncertainty goes away.
As Steve Jobs put it, you need to ‘own the results‘.
Header credit: NZ Herald State of origin 2,.2024
Jun 24, 2024 | AI, Change
We’re all familiar with the standard XY graph. It shows us a point on 2 dimensions.
AI does a similar thing except that it has millions, and more recently, trillions, of dimensions.
Those dimensions are defined by the words we write into the instructions, built upon the base of raw data to which the machine has access.
The output from AI is a function of the data that the particular AI tool has been ‘trained’ on and accesses to respond to the instructions given.
Every letter, word, and sentence, generated is a probability estimate given what has been said previously in the database of what the next word, sentence, paragraph, chapter, and so on, will be.
Generative pre-training of digital models goes back into the 1990’s. Usually it was just called ‘machine learning’, which plays down the ability of machines to identify patterns in data and generate further data-points that fit those patterns. The revolution came with the word ‘transformer’, the T in ChatGPT. This came from the seminal AI paper written inside Google in 2017 called ‘Attention is all you need’.
The simple way to think about a transformer, is to imagine a digital version of a neural network similar to the one that drives our brains. We make connections, based on the combination of what we see, hear, and read, with our own domain knowledge history and attitudes acting as guardrails. A machine simulates that by its access to all the data it has been ‘trained on’, and applies the instructions we give it to then assemble from the data the best answer to the question asked.
The very first paper on AI was written by Alan Turing in 1950 was entitled ‘Computing machinery and intelligence’. He speculated on the possibility of creating machines that think, introducing the concept of what is now known as the ‘Turing Test.’
The original idea that drove the development of the transformer model by Google was a desire to build a superior search capability. When that was achieved, suddenly the other capabilities became evident.
Google then started thinking about the ramifications of releasing the tool, and hesitated, while Microsoft who had been also investing heavily through OpenAI, which started as a non-profit, beat them to a release date, forcing Google to follow quickly, stumbling along the way.
Since the release of ChatGPT3 on November 20, 2022, AI has become an avalanche of tools rapidly expanding to change the way we think about work, education, and the future.
Header cartoon credit: Tom Gauld in New Scientist.
