Is Anzac day still relevant?

Is Anzac day still relevant?

Apr 25, 2018 | Personal Rant

Today is Anzac Day, 2018. 102 years after the photo above was taken, and my daughters 33rd birthday.

All are significant.

It seems to me that Anzac Day is a day when Australians can, for one day a year, have a common view about something, about where we came from.

On those beaches in Turkey were men from many nations fighting under the Australian flag for something  they did not understand,  had not expected, for which they would pay a very heavy price, and which would end in withdrawal rather than face defeat.

As a boy, it seemed to me that Anzac Day had had its day, there seemed to be little interest, beyond the blokes who had been there using it as a reason to catch up with mates, and keep the breweries solvent.

Many ex-servicemen however would not go anywhere near it, my father being one. He was in the Air Force, and did a bit of hiking in New Guinea keeping clandestine radar stations working in the humidity, and would not talk about any of it, and certainly did not want to be reminded every April 25.

In the mid 70’s I worked for Contiki as a courier on camping tours in Europe and Russia. While we went past Gallipoli on one of the tours, a stop was not on the itinerary, something I felt was wrong, so went there anyway. Very few of the 20 something’s on those tours knew anything about the campaign beyond the name, but the place is haunted, and by the time we had spent a bit of time wandering around the Lone Pine memorial, with me telling the few stories I knew, they were all infected.

Now Anzac Day has a renewed place in the Australian psyche, irrespective of your origins. I have friends born overseas who see it as a foundation of their commitment to their new country, and I doubt if there is a 20 something who cannot relate at least a bit of the history.

To my beautiful daughter, born into a lucky country on a significant day 33 years ago. She makes a contribution to the future of the place as a paediatric physiotherapist, by giving kids opportunities they would not otherwise have, a bit like those who landed on the beaches at Gallipoli, just somewhat less dangerous.

Happy birthday Jenn, and have a great Anzac day.

 

Is marketing’s greatest failure in the boardroom?

Is marketing’s greatest failure in the boardroom?

Apr 23, 2018 | Change, Governance, Leadership

There have been libraries written about strategy, and particularly marketing strategy. There are now multitudes of tools and templates available to develop and implement, but the gap between the development and successful implementation of marketing strategy is huge, and hard to navigate.

Marketing is a functional silo on an organisation chart, as is Sales, Operations, Finance, HR, but unlike the others, marketing deals with unknowns, the future, whereas all the other functions deal with the past, or what is immediately in front of them.

Marketing is about the future, long term commercial sustainability, and its effectiveness is really hard to measure, other than in hindsight. There are lots of measures for things that have happened, which are the result of often many combinations of actions taken some time ago, so the measures are unable to change anything, just give insights to what worked and what did not.

As the senior marketing person in a very large business 30 years ago, I found myself often talking about advertising, segmentation, positioning, graphic design, and all the rest, around the board table, which either put others to sleep, or elicited opinions, usually uninformed, about the detail. However, when I talked revenue I had their attention.

Marketing is all about revenue, particularly future revenue. The other stuff is the paddling under the surface that enables the generation of the revenue, but the real measure of marketing effectiveness is revenue and margins over time.

In every business I have ever had anything to do with, marketing expenditure is treated as an item in the P&L. By definition, items in the P&L are expenses or past sales revenue. This is inconsistent with the notion of marketing being about building the foundations of future revenue.

The closest analogy is a piece of capital equipment, they are always purchased to fill one of two roles, sometimes both:

  • Increase the volumes available too be sold,
  • Increase the productivity of the processes.

Those purchases are recorded in the journals, posted to the appropriate ledger account and reported in the cash flow statements, and the balance sheet, not the P&L. The greater irony is that capital items are depreciating assets, whereas marketing  investments, when done well are appreciating assets, unrecorded anywhere except the P&L as an expense until the business is sold, when the accountants start talking about ‘Goodwill’ being the difference between the realisable value of the physical assets, and the liabilities on the books.

There is a structural paradox here. We treat a potentially appreciating asset differently to one that can only depreciate, just because it is hard to measure.

This challenge of measurement is the biggest one marketing people have to hurdle. The turnover of marketers in senior roles is the fastest amongst the functional heads in large corporations because we generally do not recognise the essential long term business building nature of marketing investments. We treat it as an expense to be cut at the slightest cloud on the profitability horizon, and the marketing people with it.

One of the challenges here is that to achieve these long term outcomes, marketing requires the co-operation and  collaboration of all the other functions, without the organisational authority to direct. The CMO has to be a leader across functions. He/she has to build the respect and co-operation of other functional leaders, often at odds with their short term function specific performance measures.

25 years ago, I and my marketing team, failed to convince the board of the then Dairy Farmers Co-Operative to invest the required capital in new equipment to launch a new brand of flavoured milk. It was to be packaged in plastic bottles, with a screw cap, to be sold at a very considerable premium to the products then only available in the gable top cartons, and we proposed to sell it to different consumers. Nobody had done this before, we were banking on tapping into a market completely under-serviced by existing packaging and branding. The Operations Manager at the time believed in the project, and put his neck on the line by committing  his R&M budget to refurbish some older gear in the absence of capital approval, and I ‘stole’ the required advertising funds from another brand.  We launched Dare Flavoured milk, and it delivered the fastest return on investment I have ever seen, and 25 years later, it is still going strong, delivering revenue and margins to the now overseas owners of the business.

If marketers started talking about revenue generation, rather than the more common ‘marketing-speak’ like positioning, segmentation, and all the insider jargon generated by digital, they will be taken much more seriously around the board table. Building support amongst other functions to acknowledge the long term impacts of intelligent marketing, is necessary for long term prosperity, and the only real measure of marketing effectiveness.

The management task is all about getting the most out of the assets and capabilities of your business, and it is marketing management that carries the usually unarticulated responsibility to drive the collaboration necessary to achieve the best outcomes.

This task has four dimensions:

Operational management, strategic management, Financial management, and performance ,management.

Strategic management is all about the manner in which you address your market opportunities and challenges, and has a long term focus on commercial sustainability.

Operational management is the manner in which you deploy and utilise the assets of the business on a day to day basis to add value that customers are prepared to pay for.

The financial management of a business provides the basis for the assessment of success, or failure. It is a scorecard that is capable of comparison, across activities, business functions and timeframes.

Lack of a good financial management framework is a bit like walking blindfolded into a minefield, you might be lucky for a while, but eventually you get blown up.

Financial management is far more than just running the numbers, and ensuring compliance with the tax and corporate rules, it is about being in a position to make the choices that need to be made across the business every day, that shape not just today, but build the resilience necessary for commercial longevity. Understanding the numbers is a core part of every management job, not just of the financial people.

Performance management. Performance management is all about getting the most out of the assets and capabilities your business has, and can purchase in, maximising the productivity of the assets of all types you have deployed.

Manufacturing is the backbone of the economy, and is not taken sufficiently seriously by current national leadership. While we migrate to an economy whose GDP is less dependent on ‘hard’ assets, to one that emphasises ‘services’ we fail to adequately factor in the foundations that manufacturing delivers. In our age of ‘digitisation’ the value coming from increasing productivity is ill defined by the measures employed in the past. We need a new suite of measures, based on the old, but adapted to reflect the reality of a changed world. This is particularly as it is now an international race, without the protection of geography, and less of the artificial protection of regulation, despite the regular hiccups that result from populist politics, and just keeping up requires a substantial effort and investment.

 

 

 

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