Has Woolworths done enough?

Has Woolworths done enough?

Jul 29, 2016 | Governance, Leadership, Management

I have been around long enough to see Coles and Woolworths swap places a couple of times. It seems that just like most blood sports, there is room only for one at a time at the top. This is understandable given that between them they have 70% plus of grocery sales, depending on whose numbers you use.

While Woolworths are still on top by most measures, Coles are rising like a phoenix from the ashes, and Woolies are desperately trying to halt the slide they embarked on several years ago.

Mondays announcement of job cuts, store closures, and a $967 million write-down has been a while coming, and must be a bitter pill following on the heels of the decision to exit the Masters hardware business after  incurring significant losses.

They have been progressively winding down the Thomas Dux, business, which in my view will prove to be a short sighted decision, symptomatic of the strategic malaise that has haunted Woolies after a decade of stellar performance.

The announcement also indicated 4 of the ‘Metro’ branded stores will close, presumably because they do not deliver the required return. While those stores, like Thomas Dux, might not be performing to expectations, they should both be seen as experiments at the edge, in anticipation of the acknowledged trends slowly transforming our lifestyle. In the case of Dux, a desire by a small but growing number of consumers for the unusual, products of superior quality, with clear provenance, and for Metro, the convenience for commuters, and CBD dwellers.   The potential strategic research value of both, assuming they were well managed (which Dux was not towards the end) would be well worth the slightly less than benchmark returns, as in reality the absolute numbers would be tiny.

Nipping on everyone’s heels is Aldi, whose success over the last 15 years or so has been substantial. There are now 423 stores, and Aldi is currently opening 4 or 5 new ones a month. The Aldi business model is hard for Woolies and Coles to beat with their current set-up, so they probably should stop trying, and find another way. 1000 Aldi Sku’s vs 12-20,000 in Woolies and Coles keeps Aldi  transaction costs low, as does the uncomplicated trading terms with suppliers. In store, Aldi pay far fewer staff very well by comparison, and by observation lead and motivate them very well, benefiting from the resultant productivity. Meanwhile they generate store traffic with the low prices, and quirky weekly specials that promise to be sold out quickly, creating a sense of shopper urgency. In addition, their fixed overheads on stores would be much lower than the two gorillas due to the smaller floor space, and less expensive locations.

After all the financial engineering is done, I trust that Woolworths management and more importantly the front line staff will remember that it is the little things in the stores  that really counts to their customers as they spend their money. They could  not care less about the head office  shenanigans, they can always go down the road when they see better value for their ‘hard-earned’.

 

 

 

How desperately does politics need a strategic makeover?

How desperately does politics need a strategic makeover?

Jul 27, 2016 | Change, Leadership

The train smash that doubled as the recent Australian  federal election, and more tellingly, the ‘cluster-intercourse’ (politeness overcame me) that is the US presidential race have something in common.

They both lack any sort of the foundations for prosperity that we demand, indeed, regulate for, in our corporations.

In a corporation, when you do  not deliver the results, shareholders move their money elsewhere. Not so in Government.

In a corporation, when the leadership fails to deliver promised results they  get fired. Not so in Government, although some do carry the can for the rest, usually on a Last In First Out basis.

In a  corporation, if you tell a lie to shareholders, you can go to gaol. Not so in government.

In a corporation, when you do  not adequately articulate a realistic and achievable financial plan, bankers will not lend you money. Not so in Government.

In a corporation, when there is a noisy minority mouthing nonsense, you ignore them, or make polite fun of  them. Not so in Government, indeed, it seems that the noisy minority often successfully drives the agenda.

How have we allowed this to happen, after all it is supposed to be a democracy, although sometimes I wonder, as who in their right mind would vote for any of the above.

A year ago, the notion that an ego driven billionaire with no experience in government, little affinity to anything beyond his own interests, and little apparent relationship with the truth would be the US President was a laughable prospect. Now he is one of two in a race to the finish.

No laughing matter anymore is it?

How has this happened?

It seems to me that Trump has succeeded wildly where the Liberal party in Australia failed.

He has mastered the tools of immediacy marketing, social media platforms, particularly Twitter, and leveraged the fact that our journalistic capacity has been so  gutted, along with the attention span of the electorate, that the capacity for sensible and measured comment and debate has been removed. Have you noticed that everything anyone on the Democratic party side says gets a Trump response, often an outrageous one, on twitter within 5 minutes. The media picks it up, and in the absence of anyone on the newsrooms not playing Pokemon Go, reprints it in entirety as news. Then a few huff and puff for 24 hours and it is  forgotten or replaced by the next piece of shambolic inconsistent nonsense. By contrast, the Democrats take a day or so when they are awake to comment on the next of Mr Trumps blatherings, and are not nearly as colourful and entertaining when they do so.

And I have not even mentioned Britain’s new Foreign Minister Boris Johnson, whose mastery of the entertaining absurd rivals that of Mr Trump.

The simple fact is that you do not get headlines with measured, thoughtful analysis of the facts, together with projections that are never favourable to everyone, but you do get headlines with sensational brain-farts that disappear almost as fast as they are produced.

Headlines are now news, there seems to be no demand for substance in excess of 140 characters.

However, that current state is no excuse for not trying. Without the effort to reform from the grass roots the way we select our leaders, and demand from them some level of quality in the political and economic debate, on top of a reasonable degree of integrity and transparency, we are all in deep doo-doo, and it is getting progressively deeper the longer we allow this to keep happening.

4 questions every business owner should ask themselves. Now.

4 questions every business owner should ask themselves. Now.

Jul 25, 2016 | Change, Governance, Leadership, Strategy

In principal, business is simple, sell something for more than it costs you too produce it. After that it gets more complicated, but is always tangled up with the word “Value”

It is a word with many meanings to different people in different contexts.

How do we create value?

Value, like beauty in the eye of the beholder, is in the eye of the user. Value means different things to different people in different circumstances, and figuring out how to add value to that customer under those circumstances is the secret sauce of success. The key to value identification is always to be able to see the offer you are making through the eyes of the customer.

How do we deliver value?

‘Value’ is only valuable when it delivers a benefit. If you have the only part in town that will fix a problem, that part only has value installed, it is no good in your toolbox.

The means by which you deliver value varies, and the business models available have exploded. Supermarkets have an entirely different model to a grocery home delivery service. While the products may be the same, and from time to time the customers the same, the circumstances under which they are used will never be he same.  AirbnB would not have been possible 10 years ago, two sided markets were simply too cumbersome except in capital intensive applications like a stock exchange. Similarly, the availability of digital versions of books, along with the spoken and traditional print versions deliver the value of a book in different ways.

How do we capture value?

Business is about getting paid for  the value delivery more than it cost you to provide it. Again, digital changed the game, just ask anyone in the newspaper business. Deep consideration of the most appropriate business model is required if you are to capture all the available value, and leave your customers happy enough  to go again.

Will it be the same tomorrow?

Almost certainly not.

And the day after tomorrow, there will have been substantial change. How you react to or better, anticipate the change will be the measure of how commercially sustainable your business really is.

One more really important thing to remember.

Businesses are inanimate collections of assets and processes that can do nothing by themselves. They need people to make them work, to create the environment that accommodates the four factors above. The old cliche of people being our most important asset has never been truer than in this current environment of accelerating change.

Is technology killing advertising, and ruining our lives?

Is technology killing advertising, and ruining our lives?

Jul 20, 2016 | Governance, Leadership, Marketing

A while ago I asked the question ‘Is the net killing marketing creativity‘ and came to the conclusion that the instant gratification now apparently demanded in all phases of our lives has indeed killed creativity.

Perhaps tritely I put it down to the not so bright amongst the marketing fraternity taking the easy way out, because it was the only one they could see.

However, the question does require some greater consideration.

That technology has overtaken us is indisputable, giving us the potential for focus and reach in addition to great  performance metrics, but creativity requires more than just speed. It requires subtlety, deep understanding of those with whom you are communicating, a capacity to see yourself through the eyes of others, and a willingness to be different and take risks.

It is in these latter areas that advertising is failing, badly.

For the uninitiated, ‘Martech’ seems to have caught on as the phrase of the moment, very intelligently pushed by my colleague Scott Brinker on the Chief Martech blog.

A subset of the Martech environment is the ‘Adtech’ tools, which have automated advertising, the most obvious but far from the only manifestation of creativity. Whether it  be on line or in an analogue environment, only the means of delivery has changed, not the need to engage, entice, intrigue and advise readers.

The ad industry has certainly been damaged, although great swathes of it have just got what they deserved, being mediocre purveyors of wasted investment, and unwilling to see the writing on the wall, although it was their wall.

The technology has been abused, and consumers have turned off it all, and the evidence for  that is everywhere.

Over 400 million people, 22% of smart phone owners use ad blockers to insulate themselves from advertising, and the number is currently higher on desk-top devices.

Web advertising has evolved quickly into the digital version of the crap that fills your letterbox, direct response, discount coupons, price promos, untargeted rubbish. Where is the recognition that advertising has a higher purpose, it is an investment in the long term, things called ‘brands’.

Remember them?

And as for advertisers, they are slowly waking up to the fact that up to 40% of their ads are being seen only by robots, and last I looked they do not buy much. In addition, the media placement is now often done by so called ‘programmatic buying’ which is a way of removing the insight and intuition of people from the process, saving money and pocketing the difference. While sellers tout the value of programmatic buying, and in some circumstances it does have merit, the major benefit is their pockets, not the advertisers marketing outcomes.

More fool the marketers I guess, they are getting what they deserve.

I will show my colors here, as little investigative reporting as we have come to know it being done in the digital space. Where would Australians be without people like Kate McClymont of Sydney’s SMH who almost single handedly, and against great odds provided the impetus that led to the conviction of Eddie Obeid for fraud, and exposed the predation of members of the Catholic church clergy in Newcastle that led to the current Royal Commission. Google and Facebook have no interest in this sort of journalism, paid for by advertising, and benefiting the society we live in.

As for consumers, we have had our privacy thrown against the digital wall. My kids seem less concerned than me, but nevertheless, I am bothered by the implications, as well as those bloody ads for stuff I do not want that follow me wherever I digitally go.

And as for the digital security of us all, when hackers find 138 holes in the pentagon web sites, good luck with the security of your google account.

9 point plan to create your business model

9 point plan to create your business model

Jul 18, 2016 | Governance, Management, Small business

One of the major things most small and medium businesses give little thought to, and which can have a major impact on their financial outcomes is their business model.

There has been much written over the years, huge volumes of academic and consultant driven tomes , full of jargon and long words. Mostly, the owners of small and medium sized businesses,  starved of time as they are, have not read or absorbed this stuff, and even if they have, the day to day struggle has taken over.

The options open to construct a business model vary with every business, and every set of circumstances. Trying to copy what somebody ese is doing will only go so far, the great value is in tailoring the elements to best suit your objectives,  resources and competitive circumstances.

Thinking about it in this business model framework can be enormously valuable.

Most recently, Alexander Osterwalder wrote a book called ‘Business Model Generation’ that outlined a framework that simplifies all thing you  need to think about, without the jargon.

That framework has 9 elements

Business model canvas

Customer segments. Any successful marketing is dependent on defining your primary customer segments. These days you can go further, and in my view need to go further for SME’s, to having a detailed customer persona, perhaps several of them, to better enable the direction of marketing communication directly to the needs of very finely defined customers.

Value proposition. Defining the value you add to your target market is fundamentally important. If you cannot articulate the value, why would you reasonably expect anybody else to understand it? Value comes in many forms, simplicity, performance, design, degree of customisation, risk reduction, and many more, including the default, Price. However, if you define your value proposition in terms of price, you have already lost.

Channels. How do you communicate with your customers and potential customers, and then deliver on your value proposition? This item is a combination of the logistics and operational side of the business,  with the marketing and sales sides.

Customer relationships. What type of relationship do you have, or want to have with customers, and how might they want to deal with you. Are they intimate and personal, or automated over the web, collaborative or purely transactional? The choices will be driven by the alignment with your value proposition and customers.

Revenue streams. No business can survive without revenue, it is perhaps the only constant of business as well as the public and non profit sectors. Determining the best way for you to be paid for the successful delivery of your value proposition to your customers is a major item in the model construction. Is it purely cash, or licencing, franchising, what sort of trading terms will apply, are you seeking recurrent income as for membership?. Obviously the price you charge is a major decision, but prices should be driven by the model, and your competitive profile, not by costs, or a guess.

Key resources.  Every business requires resources of many types to grease the wheels of the business model. Defining what they are and how they interact is really fundamental, as they are the enabler of the value proposition, and without alignment to the value proposition you will have sub optimal performance. The key resources can be physical, human, intellectual, financial, whatever is required to deliver on the value proposition.

Key activities. There will also be a few key activities. Things that simply have to be done to make the business model work. Production operations if you are a manufacturing business, problem solving if you are a consulting business, and stock management if you are a retailer. They make the rest possible.

Key partnerships. These are the networks of suppliers that make the business model work. Who they are, what they contribute to the value proposition, how they how yoou choose to interact with them all make a significant difference to the manner of business model performance.

Cost structures. Finally, what are the costs incurred to operate and sustain the business model, those that are fixed, those that are variable, and how they might swing between these two. What are the economies of scale and scope that may apply under different circumstances?

 

I have used this canvas, and some of the iterations that have evolved in workshops with medium sized businesses with considerable success.

What you realise  very quickly  is that there is no right answer, and no  easy path. There are cause and effect chains that operate across the board, changing one thing always has a string of impacts. The best way to manage all this and come to some actionable conclusions is with a directed brainstorm that records the ideas and cause and effect chains, followed  by an experiment or research of some type that involves real customers.

What I call “getting out of the building”