Indifference is the killer of businesses.

Indifference is the killer of businesses.

Dec 7, 2017 | Branding, Change, Marketing, Small business

 

Successful small and medium sized businesses are always on the lookout for opportunities, which can be a problem.

All businesses, and especially small ones do not have the operational and management ‘bandwidth’ to take on too many opportunities, they lose focus and end up being mediocre in the market that made them successful in the first place, as they compromise in order to enable the coverage.

In this terrific cartoon and accompanying commentary, Tom Fishburne relates the contrasting stories of the Mini, one of the most successful cars ever designed, and the Pontiac Aztec, voted one of the worst ever, despite being in front of the demand curve at the time and therefore in a great position to be truly successful.

The problem can usually be distilled down to indifference.

People buy things to solve a problem, scratch an itch. Sometimes that is a simple thing associated with what will I eat tonight, and sometimes it is a personal thing associated with self-image. When it is the latter, creating a situation where there is indifference, where the purchase decision is not driven by a strong emotion, you will end up failing.

Strategy is all about making choices. It is not just a matter of determining what you will do, it is also a matter of determining what you will not do. It is this  latter dimension of choice that always causes the most problems in coming to a conclusion, there is always that bit of green on the other side of the fence.

‘Find a niche and own it’ should be the mantra of every business, but particularly every small business. Be very, very good at a few things rather than average at a number of things.

A former client has a dominating position in a niche servicing the underground coal market in Australia. A dying market if ever there was one. There are several strategic options: expanding into underground coal internationally, and/or expanding into adjacent hard rock mining operations leveraging some of their technology that is relevant to the challenges faced. As there are limited funds available, choices need to be made. Not easy.

One of my mates is a baker, a creative and driven bloke who has successfully built a business servicing the ‘high end’ market in a major city. His business partners now want to expand by expanding operational capacity in order to service the ‘medium’ market  where there is indeed far more volume, but also more competitors with spare capacity, so it becomes a question of price.

Over 40 years of marketing, I have never seen a situation where the dilution of the value proposition benefits the marketer. Customers are not silly, they make judgements on a range of rational and emotional considerations, and they do not consider your operational and financial priorities in those judgements.

 

Cartoon credit”: is again a wonderful Tom Fishburne production

 

The strategic wisdom of Donald Rumsfeld

The strategic wisdom of Donald Rumsfeld

Dec 5, 2017 | Leadership, Strategy

Strategy is all about making choices, often difficult ones in situations where you are setting out to assemble the resources and capabilities to deal with the future.

In days past, those who claimed to be able to tell the future were burned at  the stake, so be very careful!.

In order to have any chance of being in the right ballpark, it is essential that you are able to assemble a list of possible outcomes that will impact on your businesses, and then prioritise them by some weighting system that gives relative weights to how likely they are to occur, and how significant might the impact be.

There are also considerations of internal and external forces. Internal you  can control, external, the best you can do is anticipate and respond.

The key to all of this is asking intelligent, informed and searching questions that reveal a picture of the future to which you can respond.

We have all seen what has become a cliché first uttered by US secretary of State for Defence Donald Rumsfeld:

‘There are known knowns. There are things we know that we know. There are known unknowns. That is to say, there are things that we now know we don’t know. But there are also unknown unknowns. There are things we do not know we don’t know.’

While he was widely lampooned, there is a logic to it, when you break it down.

A robust strategy process addresses all of these, and the better the questions, the more likely that you will uncover the things that others miss, which is after all the essence of differentiation.

In assembling the agenda for a strategic session, it  is worth assembling the list of questions that will at least get the conversations going.

There are questions to which you already know  the answers, so are not worth asking, again.

There are questions that have no clear answer, which are well worth debating

There are questions that we do not really want to ask, the potential answers are too confronting in one way or another. Very valuable.

There are also those questions that may reveal themselves in the debate, and general creative conversations that emerge in these situations. With great attention to the detail, and sometimes a modicum of luck, these are recognised for the nuggets they may be, but are always really easy to miss as you proceed through an agenda

There are questions we do not think to ask, and do  not see. The danger here is that your competitors do see them, think to ask them then come up with an answer that creates competitive circumstances outside your control.

None of this happens by chance.

Effective questioning takes a lot of preparation, deep consideration of the circumstances, and generally the application of some ‘mental models‘ to stimulate the process. The most common ones being a SWOT, Porters 5 forces, and more recently variations on the Business Model Canvas, and Clayton Christianson’s ‘Jobs to be done‘. I use all of them, as each approaches the challenges from a different perspective, and often uncover differing ideas from each that stimulates lines of thought and question that would have otherwise been missed, and adds some wisdom to the process.

There is a German word: ‘fingerspitzengefuhl’ which refers to the instinct that comes with domain knowledge, explained in this fascinating Taylor Pearson post. it is this instinct, this curiosity, fed by domain knowledge that enables the exposure of the things we do not know we do not know.

‘Rumsfelian’ would be easier to say.

 

 

 

 

 

The evolving Push & Pull of the supermarket business model.

The evolving Push & Pull of the supermarket business model.

Nov 30, 2017 | Change, Marketing, retail, Strategy

Established supermarkets around the world work from a pretty similar, well-honed playbook. The current business model of supermarket retailers is all about scale and leverage applied to their supply chains, and offer of range and price to consumers. While there are many variations in the detail, in principal  they  are pretty much the same, a ‘Push’ business model.

By contrast, the rapidly evolving ‘E-Tailers’ exemplified by Amazon and Alibaba are pull models, relying on customer engagement to activate the sales process.

When you look  closely at the business models of Amazon and Alibaba, the gorillas in the E-tailing space, there are significant differences. Amazon still at some point in the chain physically handles the products they are selling, and they do often take ownership at some point, while Alibaba at no time touches or owns the products, all they provide is a platform for the exchange to take place, and they make a commission on the transaction.

The established retailers are driven by the core assumption of the 20th Century that price of the product, range, and location of the store will be the dominant factors in determining customer loyalty, which are both supply chain factors. By contrast, the models of the e-tailers are truly customer centric. The value chain is driven by the demands of the customer, which can be influenced, if not completely managed once enough data on the individual is available.

The difference from a strategic perspective is the technology required to drive them both.

It seems to make sense that the existing supermarkets will be setting out to match the customer centricity advantages of their digital competitors, while retaining the advantages bestowed by their control of the supply chain.

How do they do that?

Not easy, but increasingly becoming not just possible, but a reality. By combining their supply chain knowledge with the customer information being collected on store cards, the geolocation capabilities of mobile devices, and social ‘Big data’, supermarkets could find themselves in a position to ‘flip’ some of their revenue from Push to Pull.

Imagine the situation where Mrs Bloggs is driving on her way to pick up the kids at after school care  having finished work at her part time job.  She sometimes stops at the supermarket to do a top up shop for the household commodities, and to buy some fresh produce to cook for dinner. The supermarket  data base knows this routine, and what Mrs Bloggs usually buys from the information collected via the store card she uses.

The algorithms in the store database sends a message to Mrs Bloggs informing her of the price discount they have on a product she may not usually buy, but which they have a surplus at her local store, and the dinner prep bundle for a meal for which she sometimes buys the ingredients. In one case, there will be no discount, why discount something that is a normal sale, keep that discount dollar for a situation where it will generate incremental sales, or can be charged back to a supplier.   The alternative offer is discounted based on the stock turn and availability of the product that needs to be sold quickly. The algorithm also sends a complementary message to Bill and Betty Bloggs, waiting to be picked up, as it knows Mrs Bloggs is driving, so kid pester power is engaged.

Push to Pull.

The strategic development of our grocery markets has been cyclical.

I can still remember as a very young boy going with Mum to a number of stores to buy the groceries. In each one there was a counter and someone who took the order and assembled it from stock to which the customers had no access.  Then came the steady development of the supermarket, which increasingly leveraged the scale of the stores and their control of the supply chains to push product at consumers, and making a margin from the suppliers via retail shelf ‘rental’ and pocketed promotion fees.

The emergence of Amazon et al over the last decade has put some power back in the hands of the consumers, and they are using it, with many households now combining a visit to the supermarket with various forms of on line purchase and delivery. We are going back to the one on one model, but replacing the trip to the store, pantry management, and all the other things my mother used to do, with technology.

Those combinations will continue to evolve, driven by consumers.

Pull winning out over push.

 

Amazons Australian warehouse is finally open: so what?

Amazons Australian warehouse is finally open: so what?

Nov 28, 2017 | Change, retail, Strategy

 

So, Amazon opened its first fulfilment warehouse in Australia last Thursday, to the sounds of the incumbent retailers either telling us that they will have no effect, or just not acknowledging the appearance of a giant shadow on the landscape.

Back in 2015, Whole Foods founder John Mackey waved off Amazon, observing that groceries were a step too far for them. Pity for him he was absolutely wrong, and now works for Jeff Bezos

Does that sound like Gerry Harvey recently?

It seems to me that the most valuable warehouse Amazon has is not  the new behemoth outside Melbourne, but the data warehouse that has been capturing our digital footprints for the last decade.

Last Christmas, my wife of 35 years was moaning that she did not know what to get me, while Amazon was regularly making suggestions of things I might like, and they were usually pretty good suggestions based on the data they collected. In one sense at least, Amazon knows me better than my wife.

Scary, but just another example of the value of data.

Via Amazon Web Services, the biggest in the cloud services business, and growing like crazy, Amazon has their hands around the throats of a huge pile of data on all of us. Add to that the data facebook, Linkedin, Pinterest, Twitter, and all the rest have on us that can be leveraged, and the world of boring old retail in a shop is no longer.

Harvey Norman has a current market capitalisation of $A4.3 billion, Coles about 18 Billion, and Woolworths 35 Billion, and all are struggling. Amazon has a current capitalisation of almost $US1.6 Trillion, (a trillion is a million, million, I had to look it up to be sure) and rising steadily,

Amazon is more than a huge retailer, it is a collection of businesses and dreams that spans a huge range of activities and interests of Jeff Bezos, who has built this giant in 21 years from a simple book selling landing page in 1996.

We always think about on line as being about convenience and price, but it is more than that, it is an immersive experience, we are becoming ‘digital natives’. Our addiction to the screens and devices is advancing at a rapid rate. Nir Eyal documents the means by which we become ‘addicted’ to technology, but as a suggestion, ask your teenager to switch of the notifications on their phone, and there would be a revolution.

So, digital has become immersive, but is that not the real and under-utilised competitive advantage that Bricks and Mortar retail currently has? You can go into a store, touch, feel, try on the stuff, see how it looks in real life, it is a tactile experience.

What will happen as AI and VR explodes onto the scene, you may be able to try on clothes at home, change sizes, colours, combinations, how immersive will that be??

The reality is  that Amazon could buy Woolies and Coles out of petty cash and barely notice the bump in their cash flow. The same could be said about Alibaba, China’s answer to Amazon, that is in fact bigger on most measures, but is an entirely different business model, so is unlikely to venture into the space Amazon is carving out.

Last Thursday was no more than just another day, the opening of Amazons warehouse, just another small brick in the wall Amazon is building. We all knew the opening was coming, but it is just that the pace is picking up, and the retail incumbents are being left behind, as our lives change.

 

Photo credit: Tony Webster via Flikr.

What is the most common question in marketing?

What is the most common question in marketing?

Nov 27, 2017 | Branding, Strategy

How do we build  this brand?

This question leads to all sorts of strategies and tactics that are all aimed at engaging consumers in some way, to get them to prefer the brand and sometimes even buy  and recommend to their friends.

Marketers cannot decide what the term ‘brand’ means. I just googled ‘What is a brand’ and got 290 million responses.  This post by Heidi Cohen lists 30 definitions from very reputable sources, several of them with ‘gurus’ status. All are correct,(at least in my mind) in some way, but they are all different.  None of them reflect the reality that a brand is an outcome in peoples minds, not a thing. Fundamental to most of this thinking is that It is assumed that the word ‘Brand’ is a verb: To brand.

Wrong.

A brand is an outcome of a huge range of activities that impact, usually unnoticed by consumers and potential consumers, that together mix up and deliver an outcome for the individual that when all amalgamated result in what we conveniently call a ‘brand’.

If you are setting out to build a brand, have a clear view of the outcome  you want, but then align the activities so they all contribute in some  small way, incrementally, to the achievement, to the  journey towards what a customer will call a brand.

These observations by marketing professor Mark Ritson on the repositioning of Burberry is exactly on the money.  The new branding guru assumes that the Burberry brand is a thing, and asset albeit intangible that is separate to everything around it, and able to be ‘managed’ as you would a piece of machinery.

Wrong again.

Burberry like every other brand is an outcome of a host of activities that impact on the way customers, and non-customers see the brand, and describe it in the terms Clayton Christianson refers to it in the context of  the Job to be done.

Brand building is a strategic exercise, taking resources, wisdom, and the power to make long term decisions that stick. It is not a task to be undertaken by the junior brand manager, their job is to execute tactically and contribute data, ideas, and competitive intelligence, not play games with the biggest asset most companies own.

Harley Davidson is one of the best known, most deeply seated brands around. While there have been some hiccups along the way, Harley has been utterly consistent in its promise to riders since the beginning. The promise and its delivery continues to evolve, but in a way that recognises that its huge value is the primary asset of the business.