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.

 

5 questions that might save Australian manufacturing

5 questions that might save Australian manufacturing

Nov 23, 2017 | Change, Management

 

The news that Murray Goulburn would be acquired by Canadian dairy giant Saputo, taking out the largest of the few remaining Australian owned  FMCG manufacturing businesses is not welcome, while probably an inevitable  result of the failure of Australian management and our institutions to meet the challenges of change and globalisation. It leads me to consider what is next for manufacturing and specifically FMCG manufacturing in this country.

It is not a pretty sight, coming on top of the final closure of the car industry a few weeks ago.

Having said that, manufacturing that will be profitable and provide the foundations of our economy for the rest of the 21st century will look nothing like the manufacturing we grew up with, so my greater concern than the demise of what we had, is how grossly unprepared we seem to be for what is coming.

The tsunami currently washing around our ankles seems to have three  characteristics:

  • The gigantic increases in the volume of data available to us, should we be willing and able to collect, communicate, analyse and leverage it via the analytics and business intelligence tools emerging in parallel.
  • New forms of machine/human interface being driven by touch and voice.
  • New ways of transferring the digital tsunami into the physical world, by means such as robotics, artificial intelligence,  augmented reality, and additive manufacturing.

It seems to me that we are ready for none of these except in isolated pockets, inhabited by a few really smart people unwilling to be drowned, and prepared to bet the farm on the future.

So, the questions to be faced by those who will either survive, or more likely emerge from the rubble (assuming the ‘policy-makers’ do not stuff it up entirely) may be something like the following:

1. How can we capture and make better use of information. The currency of the 21st century is information, but by itself, it is just lead in the saddlebags. What counts are the insights and leaps of logic that can be gained from the information that leverages it into useful knowledge that can be monetised.

2. Which strategic questions should we be asking ourselves? Which questions will offer the opportunity to make the right choices and develop the insights into what may happen next, as the value of using the past as an indicator of the future is long gone?.

3. What might the new business models look like? It is certain that the business models of the past are as redundant as a Model T in an F1 race, so we need to be actively developing and testing a new breed.

4. What sort of capabilities will be needed to compete sustainably? Where are we going to find, train, and retain the people with those vital capabilities? The tools and technology are increasingly becoming commoditised, the people who use them will be the differentiator. At the core of this question is how we manage the education of our kids. it seems to me that education is viewed as a cost to the budget, a line item to be argued and manipulated with a short term focus, rather than as an investment in future prosperity, which by definition will be generational. We need to teach our kids to think, to be critical and analytical, while trusting their instincts and domain knowledge, and if we fail in that, we will have failed completely.

5. How do we collaborate? This question has caused many sleepless nights to date and we still have no real idea beyond the clichés and academic prognostications. Australians are lousy at collaboration, we see the bloke next door as the enemy, or at least someone to be avoided, you certainly do not invite them to dinner, and to date your daughter. However, we need to get over this and be prepared even to collaborate with competitors in some areas, and the regulators need to get used to the idea by taking a broader view of the definition of competitive advantage.

All this is a long way from the demise of the Australian FMCG industry, as I have variously  chronicled in these pages, but it is also tangled up with our collective failure to see the future through any lens that gave us the insights necessary to dodge the hand grenade of change, and take advantage of the subsequent explosion.

Only by questioning the status quo, recognising it will not be an indicator of the future, and genuinely setting out to make the often radical changes necessary will Australian owned manufacturing survive as a significant contributor to our continued prosperity.

 

 

 

 

 

 

 

 

How do you make change when nobody really wants it?

How do you make change when nobody really wants it?

Nov 21, 2017 | Change, Leadership

Making change is about the hardest thing any leader has to do. I specify leader, as in my experience, managers cannot effect change, the best they can do is optimise the status quo.

Regularly, I am faced with situations where change simply has to be made, where there is recognition that the status quo is no longer viable, where there is verbal acknowledgement that it is necessary, but insufficient commitment to the hard stuff that needs to be done, so it does not happen, in any meaningful and lasting way. There is no situation I have seen where at least some of those involved would rather not change, and when they are in a ‘blocking’ position, it can get messy very quickly.

There is only two ways:

  1. Fast and bloody, the ‘Chainsaw Al’ approach which can deliver short term results but long term usually destroys value.
  2. Bit by bit, building on what has gone before, adjusting the small things that may not have worked so well.

Behaviour is about the most elastic thing I have seen, you can change it, like stretching an elastic band, but take the pressure off, and the elastic goes back to the original shape. The challenge is to make the adjusted shape the default, so that when the pressure is taken off, the shape does not change.

Mostly that is all about how you design and manage behaviour.

When I have seen change work, behaviour has been overtly managed in a number of ways:

  • Progressive. While people are clear about the need for change, and the end point, the actual changes to behaviour are progressive, in small doses, and the easier ones are done first. This enables you to bed in the foundations of the change, and build the habit that change is actually not as painful as could be expected, and the benefits make the pain worthwhile.

 

  • Track progress. While changes happen progressively, tracking progress overtly builds in the confidence that the next step will not be the end of the world, and look how far we have come! As I watch my kids play video games, I am surprised at the compulsion that emerges from the overt tracking of progress through the stages of a game, how it becomes almost addictive. I speculate that this behavioural characteristic is not isolated to video games.

 

  • Offer rewards. This can be tricky and backfire, as the reward must be associated with the changed behaviour and the human outcomes of that behaviour. Offering rewards, that are not connected do not result in further motivation, and I have seen them counter-productive as they alter behaviour to chase the rewards, rather than the outcome. The best example is the difference between offering public acknowledgement of great work done (almost irrespective of the outcome) Vs offering money for a change. People may chase the money, but it will rarely result in the changed behaviour becoming a part of the status quo.

The take-out is that, as in selling where most people like to buy, but hate to be sold to, most people will resist being controlled, but are happy to be guided, mentored, to be led.

When you need an experienced hand to help, give me a call.

 

Photo credit: Brad Rose.

 

Too many slices and the loaf disappears: Is this the end of Australian FMCG?

Too many slices and the loaf disappears: Is this the end of Australian FMCG?

Nov 16, 2017 | Change, Governance, Leadership, rant, Strategy

What the hell have we been thinking?

Some time ago I mused that the slow death of the Australian FMCG manufacturing base was akin to nicking a slice off a cut loaf, one at a time. At any specific time you do not really notice the difference, but looked at over a period, the loss is obvious.

Well, it seems that someone nicked the Food industry loaf, and all we have left are the crumbs.

A report released last week by Food Navigator reveals Australia’s top 10 FMCG suppliers.

Not one of them is  owned by Australians.

Let me say that again: Not one is owned by Australians!

Over time I have worked for two businesses on the list, and at the time, both were aggressively and proudly Australian, wearing the national flag on their shoulders, and in their advertising, and both were in their way successful despite themselves.  However, dismay at some of the nonsense that went on is a primary reason I have been self-employed for the last 22 years.

I struggle to think of many substantial companies still domestically owned, Bega, Patties Pies and San Remo come to mind, but we are then down to the minnows.

All these multinationals will rightly say that they pay lots of taxes, employ lots of Australians, both directly, and indirectly, and that they have Australian best interests at heart.

Bullshit.

It is true they employ many people, and it is true that they pay unavoidable taxes, like GST, local government rates, and collect from their employees PAYE, but do they carry the full weight of their ‘moral obligations’ to the communities they live in via income taxes?  The reality is that have their own best interests at heart, or at least, most of them do. Transfer pricing, creative funding, corporate domicile on low tax environments, and all the rest of the shenanigans revealed again, by the Paradise Papers in the past weeks or so are widespread. It should not come as a surprise to anybody when these large companies make decisions in their interests, not in those of Australians and Australia.

This is like renting a house. You are allowed to live in it, under certain conditions,  but you have no control over the property, someone else makes all the key decisions. The renters best interests are not a factor in the determination of the owners best interests.

We tell ourselves we are a food bowl, and we are, but without any access to the markets at all. We no longer even have any brands for direct contact with consumers (Vegemite is a rare example, purchased back from Kraft last year by Bega, hooray). We are therefore nothing other than commodity suppliers in a price driven world. Not being a low cost producer, without the umbrella of brands and control of the operational infrastructure that can deliver genuine value to consumers, we are inevitably going to be screwed, with the benefits of ownership exported.

Coles and Woollies have ‘conspired’ to destroy the domestic suppliers and their brands by limiting ranges, replacing proprietary brands with house brands, sourced from wherever is convenient and cheap, realising short term margin gains at the expense of long term prosperity, both theirs and that of the communities they serve.  They have also lost in the process the cover of brands at a time where there is a huge retail  disruption looming: Amazon, online ordering, AI, ‘Ubered’ home delivery, and all the rest.

It seems to me the two retail gorillas will now reap the poison crop they sowed as an outcome of their short term,  one dimensional and absolutely unimaginative strategies.  Taking on Amazon with that mind-set is suicide, as if we know anything about Amazon, it is that they do not play by the existing rules. They make up a new set, and  the incumbents are left to wonder in their wake.

Food manufacturing used to be our biggest manufacturing industry, and we have given it away, or at least the benefits of ownership of it, for next to nothing. It is not even as if for the most part the interlopers paid a premium for control, they just waited until the numbers were so crap that they could take it for a song. The most recent example, Murray Goulbourn is a classic case in point, as are two of my previous corporate employers, Dairy Farmers and Goodman Fielder. Both reasonably large, reasonably successful businesses stuffed by poor management decisions until they became unsuccessful smaller ones, that could be scooped up out of Multinational petty cash.

Our kids will pay a heavy price for the short sighted and incompetent management of their fathers and grandfathers. (Cannot help wondering if their grandmothers and mothers would  have done a better job)

Our so called leaders mumble abut populist causes, ignoring the difficult and challenging long term choices that need to be made, which are usually by definition, not populist. It took a crisis to get them to consider ‘power policy’ in their quiet, moments when not looking after their own jobs in the face of failing to check if they are technically Australians, but it is 25 years too late. ‘Manufacturing policy’ discussions are pretty thin on the ground, now the motor industry has folded their tents, and more specific ‘Food Industry Policy’ discussions are as rare as sightings of the  Tasmanian tiger. Rumoured but carrying very little real credibility.

There has been very little of much value about any policy setting that might help us control and leverage our own agricultural and manufacturing capabilities that would enable us to feel confident we can feed ourselves, and others in the region into the medium term. The horse has bolted, and we are left with a pile of shit in the stables.

Sadly, few in power seem to be too concerned with the demise of our ability to control our own food supply, value adding and distribution.

If nothing else, we may have discovered an innovative solution to the national obesity problem.