Have we reached a moral watershed with private data?

Have we reached a moral watershed with private data?

Apr 20, 2018 | Governance, Leadership

Privacy has been a question on the table for some time, pretty much since the dawn of the digital age. However, there has always been a deep paradox between what was generally said, indeed legislated for, and what we did.

The aspect rarely considered is the moral one.

For a moral stance to be effective, it must be proactive, rather than  reactive.

Legislation is reactive, protecting us against ourselves, usually because we are unable or too stupid to protect ourselves, and in this country  we have a library of laws just about discrimination, just a small sector of the regulation of how we live our lives.

This is the case with the digital privacy conundrum. Well meaning, clogging the system with legislative plaque, much of which is ineffective, and getting in the way of people having to make moral and usually sensible decisions,

Where is the moral line in the sand as regards our personal data and the social platforms we all use?

There is a difference between selling data, which none of the better known platforms like Facebook would do, and enabling that data to be used in a manner that you have at least tacitly agreed to by its provision. It may be a fine line to some, but the line is there, as the choice to give the data is yours, only you can make it.

Most do  not seem to realise, or choose to ignore the fact that the free platforms they use are not really free. The price is access to their personal data which the platform uses to target advertising, which they need to make it free.

While we struggle to share potentially life saving information in domains like healthcare, in case our friends found out we had a cold, we lavished personal and often highly sensitive information onto digital platforms, for use as a way to attract advertisers, so they can blast us with specific and personalised messages to buy their stuff. The first situation is as stupid as the second.

When faced with a problem of Gordian proportions, never trust the guy with a simple answer, especially when they have something to sell you. Unravelling the knot we have got ourselves into with privacy is such a Gordian knot.

The many data breaches and sheer commercialisation of our data, highlighted with the Facebook/Cambridge analytica fiasco recently have perhaps brought things to  a head, but it just keeps on coming. Grindr’s problems over the past week with data security and just plain lying, are just another in a long line, that will keep on coming as long as we post stuff.

Corporations, and their directors have to navigate a way through this maze of inconsistency, public good Vs individual rights, and the primal urge to legislate that seems to drive what passes for political discourse.

A  simple test for individuals: If you would not want to see it on the front page of the Sydney Morning Herald (showing my age there) do not post it!

 

Photo credit: Angelo DeSantis via Flikr

 

The two crucial leading indicators of business performance.

The two crucial leading indicators of business performance.

Apr 18, 2018 | Governance, Management, Small business

‘Simplicity is the ultimate sophistication’. So said Steve Jobs and he was not only right, but just one of a long line of people saying similar things.

Aristotle, Marcus Aurelius, Mark Twain, and my personal favourite, a marketing guru of great stature, although known for other things, who said ‘Everything should be as simple as possible, no simpler’. Albert Einstein.

It is also very useful to have a few simple but reliable forecast measures that give you a ‘heads-up’ about rough waters ahead.

Therefore when doing a StrategyAudit of a business, I try to distil everything down to its most simple form. That way not only can most (including me) understand it, but there is less room for error, misunderstanding, evasion, finger pointing, and all  the rest that goes on.

Two words capture the essence of a successful business, irrespective of size, structure, location and market. Having done many StrategyAudits, using a whole range of tools, some simple, some pretty sophisticated, there are just two words that underpin everything.

‘Cash’ and ‘Flow’.

Let me explain.

Cash.

Cash is the lifeblood of every business. Every activity, in one way or another is connected to the consumption or generation of cash. When you are doing something that is not contributing in a positive way to cash generation, even if it costs cash (such as advertising), stop. It does not matter how grand the vision, how well meaning the mission, how creative the advertising, how innovative the products, unless it generates cash in excess of its cost, stop.

So, I look at the cash. How it is managed, committed, deployed, forecast, leveraged, and disbursed.

The three fundamental parts of an accounting system are the cash flow statements, Profit and Loss statement, and Balance Sheet.  Both the P&L and Balance Sheet can be ‘managed,’ just look at Enron, Dick Smith, FAI insurance, State Bank of SA, One-Tel, and a host of others for proof. However, look closely at the Cash Flow, and without sophisticated fraud, it cannot be ‘managed’, and if there is fraud, a close look will reveal it fairly quickly to an experienced eye.

Probably the easiest way of judging the health of a business is to look at free cash flow. Cash coming in – cash going out, excluding capital expenditure. If positive, at least there is some hope, negative, start resuscitation immediately, or run for the lifeboats. This assumes a reasonable period of time. My recommendation to most clients is a rolling 13 weeks. Long enough to be somewhat immune from the day to day stuff, but short enough to give a fair indication of the overall health of the place quickly while giving enough time for any necessary corrective action.

Every business I work with is strongly encouraged to do a weekly rolling 13 week cash flow forecast. Those that resist strongly usually end up former clients for one reason or another. Once set up, the routine makes it easy, takes little time, and removes a whole lot of stress.

Flow.

This is probably a bit unexpected, but when you think about it, every business is made up of many processes, sub processes, and sub, sub processes. Draw a ‘map’ of your sale to cash process, and there are a number of steps, preparation and dispatch of the order, proof of delivery, invoicing, supporting book-keeping steps, and debt collection. Similarly, all the processes in your business have stages, points at which there are necessary interventions, potential changes, interruptions, delays, mistakes, rework, and a myriad of admin things and performance measures that need to be completed.

Keep drawing process maps and see how they become entangled, are dependent and interdependent, and can create uncertainty, opacity, and opportunity for error, as well as being necessary to get the work done.

I think about flow as you would a river. Water flows smoothly and predictably while there is no interference, but insert a rock, or bend, or shallow bits, and there is interruption to the flow. The greater the interruption, the more unpredictable the flow, and the more energy is required to move the water through. The velocity of the water through a part of the river is a measure of the productivity of that part, and again, the greater the interruption, the less the productivity.

I therefore look at the ‘flow’ of processes through the business, and seek to simplify, and accelerate all of them by removing the ‘rapids’. It is an incremental and never ending task, but one that delivers great financial and emotional rewards. In most cases, there has been little process mapping done, so that becomes a priority in any improvement project, but the current state of the ‘Flow’ is a very good indicator of the health of the business.

When you need a bit of help considering these two crucial performance indicators, give me a call.

Is Facebooks ‘moat’ the best ever built?

Is Facebooks ‘moat’ the best ever built?

Apr 16, 2018 | Change, Marketing, Strategy

 

Building a moat seems an odd metaphor in a strategy and marketing post. Some explanation of moats may help.

My personal definition of marketing has been ‘The identification, development, protection and leveraging of competitive advantage’. Not a textbook definition, but one that has worked for me. In other words, build a ‘moat’ as a foundation block of your strategy.

Warren Buffet, who deserves to be listened to any time he chooses to speak, coined the term ‘economic moat‘ to describe his investment philosophy. Find an asset that has a ‘wide moat’, the wider the better, but is undervalued, and get  inside where the power of the moat can be employed to extract what economists call ‘economic rent’ or to us simple people, returns better than the average return on capital in that  industry.

Theory is that when such a valuable asset is identified, competitors will come in, and by the nature of competition  bring the return on capital back to the average. The game therefore is to be in front of the pack.

Moats are built in many ways. They can be wider, deeper, more turbulent, on the other side of a desert, be inside a ring of outer-moats, and so on. Point is, when there is gold in the castle, the barbarians will try and find a way to bridge the moat, and be prepared to spend proportionally to the size of the pile of gold in the castle.

Once you have a great moat built, which takes time, effort, and a lot of resources, defence becomes easier. However, defence is also static, the initiative is ceded to the opposition, so a wise moat owner busily uses some of the gold to build another moat somewhere out of the eye line of the barbarians. Unfortunately, most moat owners are so focused on the defence of  their current pot of gold that they hoard it, instead of leveraging it out of sight.

Kodak had a moat, a great one, deep, wide, incredibly well defended, but they left the side door to  their lab open so that the barbarians knocked off their own weapon, the digital camera, and used it against them. Better for Kodak to have taken the digital camera they developed down the road a bit and built another castle with a moat.

Same with Blockbuster. They even had the opportunity to buy Netflix, for what amounted to pocket money, but declined. Their moat got drained, and the barbarians came in the front gate.

All the noise around Facebook over the last month since the Cambridge Analytica fiasco surfaced was focussed last week on the sight of Mark Zuckerberg in the early stages of moat defence. Facebooks moat is perhaps  the best thought out, strongest, and best defended moat ever built. Not only are  the defences of Facebook itself daunting, but the pot of gold has been used to build a series of moats around Facebooks castle that are themselves defended with a series of interlocking moats.  66 of them since 2005, when Facebook itself was a start-up. Many we have never heard of, but all added to the Facebook moat system in some strategic way. A few however, have huge  moats themselves, still being built, and offering interlocking fields of defensive fire to the kings castle.  Instagram, WhatsApp, Oculus, were large acquisitions, on top of the impressive list of offensive and defensive tools developed in the Facebook labs and deployed strategically.

The US senate has been questioning Zuckerberg for a couple of days, and with some exceptions, making turkeys of themselves.  Senator Hatch has been a prime turkey, demonstrating breathtaking ignorance by asking how the business model worked,(1.30 into the video) and being unaware of the presence of ads as the revenue generator. The comparison between the questioners and Zuckerberg was so great the share price of Facebook went back up, delivering Zuckerberg a cool $3 billion for a few hours ‘work’

While you can build a deeper moat with that sort of loot, the real point is that the barbarians will now keep on attacking, using the regulators as their weapons of choice, and I suspect in time, as Zuckerberg himself acknowledged, they will be successful in getting a few across the moat. I suspect the barbarian scouts will look at the rules coming into force in the EU in May, the ‘General Data Protection Regulation’ (GDPR) which will mandate the manner in which consumer data is managed. It requires that consumer consent to the collection of data be explicit, that they have the right to be ‘forgotten’ and have the right to manage their own data portability.

Money and history is on the side of the  Zuck, he does not seem likely to make the mistakes Blockbuster and Kodak amongst many, made, despite the barbarians finding some potentially potent weapons. I cannot help but wonder if the turkeys are up to standard for the game that will be played.

 

Photo credit: Malcolm Gardner via flikr. Bodium Castle Cornwall

 

What have Facebook and Marjory Stoneman Douglas got in common?

What have Facebook and Marjory Stoneman Douglas got in common?

Apr 12, 2018 | Change, rant

Beyond the usual menu of war and pestilence in the Middle East, and which celebrity is bonking which, that usually dominate the headlines, two very significant items have emerged over the last short period.

  • The reaction of students at the Marjory Stoneman Douglas High School in Parkland Florida after the shooting on February 14 that killed 17 students, and wounded 17 more.
  • Facebooks relationship with the truth and your personal data.

Both have the potential to be tipping points, but the question is can they really generate sufficient traction to  result in lasting change.

The students at the MSD High school seem too have generated a response not seen before. The ‘March for our lives‘ rallies across the US, end even here in Australia are mobilising sentiment against the idiots who claim their unfettered right to own guns is inalienable, as never before. This shooting, terrible as it was, is just one of a very long line of mass shootings in the US, each met with political weasel words and sorrow for the victims, but nothing more.

But something has changed. Somehow.

Enough people seem to be prepared to say ‘enough‘ that some sensible changes may happen that will save a few lives.

Facebook has had its bum spanked by the only people who really count, those cloistered manipulators hiding in Wall Street, and a few high profile advertisers. The current congressional hearings may make for dramatic headlines, but unless regulation with teeth emerges, they will be just window dressing and a forum for congress members to get their names in the media.

The Facebook IPO in  May 2012 was at the time one of the biggest ever, valuing the company at 104 billion, $38 a share, to the surprise of many pundits, myself included. Since the IPO, immediately after which the $38 a share seemed very generous, Facebook has cracked the advertising monetisation code  and the share price was $185 as Cambridge Analytica emerged last week, then dropped like a stone to $162 before recovering a bit, wiping billions off the market value, and prompting Mark Zuckerberg to apologise in what seemed to be a pretty genuine manner.

The question is, will either be sufficiently sustainable to  generate change?

I think ‘Maybe’ on both counts.

US Attorney General Sessions has proposed a formal ban on ‘Bump Stocks’ the device that turns a normal semi-automatic weapon to become a machine gun, used with such effect in the Las Vegas shooting last year. A small but sensible step in the right direction, but perhaps more tellingly, businesses, large and small, are now publicly shunning the NRA, and adding their voice to the calls for change.

Momentum is building.

Facebook, as well as all other platforms for digital advertising,  has been under increasing pressure for some time, so much so that Zuckerberg released his new years resolution to ‘Clean up Facebook‘ on January 5. Early in 2017 P&G CMO Mark Pritchard took a huge swipe at the digital advertising industry in his address to the IAB, and there has been some changes emerging as a result, driven by other big advertisers taking Pritchards advice on board.

My view.

The ball is rolling on both counts, and momentum is building. Change will come slowly, and for some painfully, but common sense and decency will win in the end.

 

 

 

 

 

 

 

 

6 customer service clichés deconstructed.

6 customer service clichés deconstructed.

Apr 11, 2018 | Customers, Marketing

It seems that every time I pony up for another insurance bill, I get one of those customer satisfaction surveys emailed within 24 hours, asking a few inane questions about my ‘experience’ and the level of service I received.

There is no room to say it was at best nondescript, often crap, that insurance is a cost I resent, am  suspicious of, and just hope that I never have to find out (again) if the after the disaster facts are actually as the advertising blurb promises.

Customer satisfaction indeed.

Normally I just ignore them, as responding only seems to encourage. (a bit like voting)

However, a recent emailed questionnaire got me thinking about what customer satisfaction really is, and how we go about creating and retaining such an ephemeral and personal idea.

Is it enough that we ‘satisfy’ our customers, and if so, what does that actually mean?

‘Delight our customers’ is a phrase that seems to have made it onto a few mission statements over the recent past. Is that one better than ‘satisfy’ or just more hyperbole?

Jeff Bezos famously demands that there be an empty chair in every meeting, a reminder that everything Amazon does is aimed at customer satisfaction. Reed Hastings has built Netflix from a minor irritation to Blockbuster into a digital entertainment behemoth by being ‘customer obsessed.’

If we are to be truly customer focussed, what should all  the common clichés really mean?

‘We listen to what our customers tell us’

Really? I listen to what my aging mother tells me, but do I follow the advice? Rarely these days. It should mean that we understand not just the words, but  the intent, and we use the information to test, and retest the delivery of our value proposition.

‘We obsess about customer satisfaction’

Most obsessions I have seen are all about the obsessor, rather than the obsessee. (are they really words?). It makes some feel better to tell ourselves we are obsessed with customer satisfaction, it justifies those long workshop sessions in a nice location. Most times when I go out and ask customers what they think of the level of service they receive, it falls short of satisfactory, let alone obsessional, and is markedly lower than the score businesses give themselves when asked the same question. It is easy to pass this off as delusional, but the reality is that customers rarely think about service until they experience it, and then only when it fails them. By contrast, companies are genuinely thinking about service consistently because it is important to them, but in an abstract way.

‘We understand what the customer expects of us’.

That is great, but also a bit unusual, as different customers almost always are looking for different things. In B2B businesses, it is essential that you understand the detail of a customer, and potential customers business processes so that you can really tailor your offering. A bit harder in B2C, but it is still true that individuals are seeking a range of different things that add up to ‘satisfaction’ in their minds. The real task is to create a situation where the customer sticks with you through thick and thin, simply because they believe you are better than any alternative.

‘We put customers in front of profits’

This gets trotted out regularly, without any understanding of the implications. The reason we have customers is ultimately, to make profits, and without profits, there will be no customer service at all. There has to be a balance, but it is true that satisfied customers lead to higher profits, it is a hard balance to get right.

‘The customer is always right’

The old perennial, and it has always been nonsense. However, treating customers with respect, humility and giving them the opportunity to be right is a great strategy. The most common example used is the retail  chain Nordstroms in the US. As the story goes, take a car tyre into Nordstroms and demand your money back because it was not up to expectations, and they will give it to you, despite not selling tyres. Perhaps it should be ‘The right customer is always right,’ to reflect the reality that there are some customers who are more trouble than they are worth, and you hope they go to your opposition.

‘The quality of our products speaks for itself’

No it does not! You need to speak for it. The base expectation of any customer is that the product you provide will deliver the outcome you promise. That is quality. A Hyundai will get you reliably from point A to Point B, does that mean it is the same quality as a Bentley, which will also get you reliably from A to B?. The answer to that question will most often be ‘No’  but then defining the ‘Value’ delivered by the extra few hundred grand to buy the Bentley becomes a different conversation entirely, with different customers.

Creating great experiences for customers brings them back for more, delivering revenue at much a reduced cost  than if you had to find a new customer. Share of Wallet and Lifetime Customer Value are the most undervalued measures of sales effectiveness, and also the most effective.