Dec 17, 2014 | Change, Customers, Strategy
“Only the paranoid survive”. Andy Gove
We spend heaps of time setting out to satisfy customers, do what is right for them, to ensure our success, no argument, but is it enough?
To add another dimension to your competitive efforts, ask yourself the simple question “what would really hurt the opposition?”
If the answer is clear, you probably should do it to them before they either do it to you, or address the weakness.
It does not matter if you are BHP or a local business, there is a always a strong Darwinian trait displayed by those who are successful.
In my past, I spend a significant amount of time in the dairy industry, lots of lessons, but amongst them one that demonstrates the essential truth of commercial Darwinism.
My major competitor made an inordinate amount of their total profit from one product in one state, a situation that had evolved over many years, and seemed unassailable. The margins they made on this product would have funded a substantial amount of activity elsewhere that was causing us grief. The board of the dairy co-operative I worked for would not allow me to aggressively attack that profit pool, not being prepared to lose a little bit in order to assist the competitor lose a lot.
They were concerned at retaliatory action, correctly, but the capacity to retaliate would have been limited by the impact on their profits of a successful attack by us, and the fact that our business did not have any equivalent weak point that made us way less vulnerable. My view at the time, and still, was that the real reason they were unprepared to be aggressive was that it was not “gentlemanly” and the dairy industry in those days, which was still evolving from a lot of smaller co-operatives, carried some of the competitive baggage of being a co-operative.
Gentlemen did not do those things!
Competitively stupid decision, and an opportunity lost, but all this had nothing to do with the customer, beyond setting out to disrupt the comfortable relationship they had with my competitors brand in South Australia.
Some years after I left the business, my erstwhile target, having addressed their competitive weaknesses, successfully mounted a successful hostile takeover of the my previous employer, who still acted as though the competitive market place was somewhere that gentlemen met to have afternoon tea.
Sometimes we lose sight of the playing field as we play the game, we talk about competitive advantage, but often just in the context of the customer, and the value they receive, but forget the flip side of competitive advantage, finding a way to belt your competitor over the head.
Legally of course, and within the boundaries of acceptable behaviour, but nevertheless, a belting.
Dec 15, 2014 | Change, Governance, Leadership, Strategy
With thanks to Tom Fishburne. http://tomfishburne.com.s3.amazonaws.com/site/wp-content/uploads/2014/05/140505.pivot_.jpg
Strategy is one of those alters of organisation to which almost everyone offers lip service, and once a year in the planning cycle, receives mass genuflection. That does not mean we believe, just that it is a part of the duty of organisations, and as such, fails to deliver to its potential.
Over the years as a corporate employee and consultant, I have seen strategy implementations fail, sometimes with spectacular results. Usually however, strategy just whimpers in the corner, ignored and derided, but every now and again, I have been privileged to see, and be a part of successful strategic exercises. Below is a list of the most frequent sources of the failures I have seen, the good part of such a list is that taking the opposite gives you a list of what you need to do to succeed.
- Failing to understand that reality is not always what people tell themselves, self talk is too often tangled up with self delusion and adherence to the status quo. Recognising the hard realities as they actually are rather than the way you would like them to be is a remarkably common delusion.
- Believing self serving optimism and hubris are substitutes for achievable goals. It is OK, indeed admirable to work towards the BHAG, but allowing ego, management power based on the position rather than the person, and “group-think” into the room , and it becomes a different beast.
- Not seeing “Capability inflation” for the damming flaw that it is. Virtually everyone sees themselves as better than average at whatever it is they are doing, which simply does not work. Capability like everything else in life is spread across some sort of “normal” curve, in which the only thing that really changes is the height of the average, in relation to the spread of scores.
- Not recognising that competitors do not always react in an orderly and predictable manner, they are not a party too your strategies, and rarely react in wholly predictable ways.
- The factors often seen as “differentiators” are very often just the table stakes to be in the game. Asking management what are the “differentiators”, what characteristics makes any enterprise different, or its products different, and you usually get back a list of things that are just a cost of doing business, just like a watch has to tell accurate time before it is a watch.
- Failure to recognise and adjust for unintended consequences quickly. Usually this occurs because it is not in the plan, and plans are after all prepared by the bosses, performance measures are tied to the plan, and it is a great adornment on the shelf. (my time contracting to the Public Sector sees this blatant ignoring of unintended consequences justified by all sorts of complicated and cliché ridden language developed as an art form)
- Failure to believe. For a senior management to formulate spruik, and go through the motions of articulating and implementing a strategy, then not “living” it themselves means the strategy is doomed to failure. People watch what you do far more than they listen to what you say. Saying you believe is not enough.
- Underestimating the importance of “people“, their attitudes, fears, relationships, egos, and behavioural norms.
- Failing to recognise the elasticity of the status quo. Its durability in the face of logic, common sense and the blinding obvious (to outsiders) is just remarkable.
- Failing to understand and manage the essential paradox of “predictable” and “Innovation” . Customers like predictability, they come to rely in it, but they also expect their suppliers to be at the “cutting edge” to be finding innovative solutions to their problems, and the jobs to be done by their products. Nobody has managed this paradox as well as Apple over the last 20 years. Their products are all predictable easy to use, look great, and perform beautifully, yet they are always at the cutting edge, innovating with everything they do.
- Failing to recognise the sources and likelihood of disruption, and preparing as if it was about to happen. The commercial technical and competitive environment in which a strategy has to succeed is increasingly being disrupted in very hard to predict ways. Strategy is about the basic choices that make up the business model, and those are no longer models that are predictable across decades, they are evolving almost daily. A quick look through Jerry Owyangs presentations, writings and data bases outlining the collaborative economy is all the evidence of the shifts happens that are needed, but just think a few words: Air BnB, Uber, Amazon, iTunes.
- Failing to understand that loyalty cannot be built by money, and material benefits, loyalty is to people, and is very local. it must be earned by displaying and genuinely feeling respect, awareness and interest in individuals. Dunbar’s number plays a huge, largely unrecognised role in organisations. 150 people is about the maximum we can have relationships with on a face to face basis, and the smaller the group, the more intense the potential of the relationships that exist. In this context, loyalty is local, people relate to, work with, and support those who are a part of their local “tribe” against all those outside their tribes. This can often mean other divisions from the same business, or even the other function living down the hall. Believing this local loyalty can be leveraged or changed without real hard work is a common trap for strategists, particularly those entering a strategy that calls for organisation al change, renewal, and in the case of M&A activity.
- Failing to understand that data is inherently ambiguous, and swings between being of some value and intensely dangerous. It all depends on the assumptions that drive the analysis, wrong assumptions render the analysis at best misleading. Is that upswing in sales due to the insightful marketing campaign, or the failure of a competitor to deliver due to problems in the factory? Bet I know most marketing people will say.
- Thinking Strategy and culture are one and the same thing, with perhaps just a few nuances for each. Whilst they must be considered together, they must be managed as separate but mutually reinforcing entities, A degree of inconsistency here will see a strategy fail, as culture is always stronger. Attempts to change culture to align with strategy, rather than recognising the the power and reliance of culture, are doomed to failure, it is simply too elastic to be easily changed. There are really only two ways to change culture. The first is bit by bit, with a leader who demonstrates the behavior required, and is unprepared to accept compromises. The second is to fire almost everybody, if not everybody, and start again.
- Failure to recognise any of the above for what it really is, and calling it something politically more acceptable, thus ignoring the failure, and worse, taking no steps to correct the sources of that failure.
I would be interested in other sources of strategic failure you have witnessed, or been a part of, I am sure there are many I have missed.
Dec 10, 2014 | Uncategorized
Courtesy www.milehightreefarm.com
The third in the series outlining the 10 ways small businesses can beat the supermarket gorillas at their own game, by aggressively executing on category management.
Read the first here, the second here.
What better time is there for small businesses trying to make a mark with consumers and those key gatekeepers, retailers, than Christmas?
The 5 rules that normally apply to category marketig still do, but in the heat of the season, the quick and the smart can find a bit of extra leverage.
Any time of change is a time of opportunity, and Christmas ranging is one of the biggest changes retailers go through in the manner in which they allocate their shelf space, as they seek to maximise their seasonal sales. Doesn’t matter what market retailers are in, from fashion to food, car accessories to handbags, pre Christmas sales are critical to the annual numbers.
Meeting customer needs, and maximising the value of the retail shelf -space is what category management is all about.
Just think about the space supermarkets allocate to hams from the beginning of December. Where does that space come from? How do they allocate it across differing brands, sizes and types of ham? and if you are a ham producer, how can you get a slice, and if you sell some of the products that give up shelf space, to hams, how do you make up for the lack of shelf exposure?
6 simple strategies to employ to maximise sales:
- Know the relay schedule, and if possible be involved in the planning discussions. Most chain retailers, particularly supermarkets will have a lead supplier who has the inside running because they have all the data, and better access to the decision makers, but that doesn’t mean you cannot participate.
- Understand the volumes and margins of all products in the category, and manage your recommendations to the retail buyer with his objectives in mind, maximising the absolute margins that come from the shelf space, rather than just concentrating on your margins. Retail buyers are not there to look after your margins, only theirs.
- Understand the sales that come from differing shelf positions, and the impact of differing placements for differing Sku’s. Eye level is always best, but is high better than low? What about the type of shelf grouping, by size, brand, flavour, which combination is the best for you, and the retailer? Retailers will generally have a layout in place, but are often willing to experiment, from which you can both learn.
- Recognise the importance of the retailers profit model, particularly for bricks and mortar: Volume X Item gross margin = gross profit. Going one step further, dividing by the shelf space allocation gives a return on the space, and being really fancy, you can weight the value of the shelf space for a number I call RRRE. (Return on Retail Real Estate).
- To some degree, the discipline of the planogram that covers the other 11 months of the year will be put aside in favour of the short term outcome, knowing once the Xmas frenzy is over, they can revert to the plan, it is a great opportunity for those who can grasp it. Encourage field staff to be creative, a stack of bananas or Christmas pudding near the custard, French mustard next to the hams, dried fruit into he flour category with some cake recipes, A scarf from next door with your handbags, the potential for cross selling at Christmas is limited only by imagination.
- Christmas is a terrific time of the year, family, friends, social opportunities on steroids. At the same time, as the pressure comes off a bit because all the key decisions have been made, it is a great time to work on the relationships, plant the seeds that will deliver next year, and build your category management profile with your customers. After all, your competition is probably at the bar thinking the game is over. Whoops.
When you think that perhaps some external wisdom might be useful, lets have a chat.
Dec 9, 2014 | Customers, Marketing, Small business
Know your customer. www.strategyaudit.com.au
One of the absolute foundations of successful commercial activity is to be able to define your primary “customer” in considerable detail. The more the better.
Years ago I watched as market researcher asked a group to define the brand we were researching as if it was a person walking through the door. The insights gained were enormous, and it is a practise I have used ever since.
However, like most good ideas, they evolve with use.
I now use a quadrant, with the customer in the middle.
- Demographics. This is as far as most go, defining customers by age, sex, financial and social measures, with or without children, homeowners or renters, and so on. Necessary, easy, but very limited analysis.
- External drivers. What are the things in the environment over which the customer does not have control, that impact on their behaviour. Answering this question requires choices to be made, as a 30 year old single woman working full time will behave entirely differently to her married twin sister who is at home looking after a couple of rug-rats, and you must choose which you want to appeal to. The range of variables to be considered is huge, as are the potential responses.
- Internal factors. The sorts of things that people can manage and respond to for themselves, their goals, aspirations, questions they face, and the choices they will be making in their lives. Understanding the psychology and personality of your customers helps you talk to them. No surprise there, because you can talk about they things that value and like to talk about.
- “Who” are they? The fourth quadrant is the behavioural picture you can draw by understanding the nuances and interactions of the first three. Jumping to this quadrant without intensively interrogating the first three will almost inevitably leave holes, but having said that, this quadrant does evolve as you iterate in marketing activity and understand better the behavioural changes that come from differing combinations of messages and service delivery.
I like to be at the point in this process where you can actually visualise the person, and associate them with someone you know well, someone whose behaviour you can anticipate. At that point, the communications you are writing, irrespective of the means of delivery, you can have that person you know well in your mind, and write for them.
The definition of your primary customers should be a constant on marketing agendas. It can easily become complicated by market structures and many other factors, so should be consistently under active consideration. Several of my clients are small businesses who sell to retailers of various types. By necessity, they need to consider both the retailer, who is in fact their customer and to whom the sell, and the consumers, to whom they market as separate.
Dec 8, 2014 | Customers, Marketing, Small business
1932 Rolls Royce Phantom 11
I bang on about “Value” a lot, in all sorts of contexts, and using all sorts of examples and metaphors.
Defining the components of value is challenging, as value to every individual is different in differing contexts.
Value can be described as the difference between the price of an item or service, and the utility the buyer derives from delivery of those goods or services. It is made up of a myriad of variables, speed and reliability of service, timeliness, design, warranties, intrinsic cost of the components, and many, many others unique to the individual and the circumstances they face.
The core challenge of an analysis of Value is that price is quantitative, but everything else is qualitative. Every persons calculation of value will vary according to the relevant factors and the weighting allocated in any set of circumstances.
So what?
Well, the conclusion must be that defining the behavioral characteristics of your target market as closely as you possibly can is essential to maximising the mix of factors to be delivered that the customer will count positively in their calculation of “value”.
Specifying the factors that they will include in a calculation of quality, and understanding the weighting they may allocate in differing circumstances will significantly assist you to craft messages that will engage them in some way.
Often the value derived from an item is in the way of a reward, the pleasure derived from use. A $15,000 KIA is just about as reliable a set of wheels for a journey from point A to Point B these days, but wouldn’t that journey be far more pleasurable in a Ferrari, or BMW, or 1932 Phantom 11 Roller?
There is value in the pleasure, and the imagery usage delivers, and often it is way more important than any quantitative utility derived from use, it is just hard to define.
Assisting with the process of defining the behavior drivers of customers, a Customer Value Audit, is a core part of the StrategyAudit process, going as close as possible to quantifying the components of value for each individual.
PS. Spooky. Bernadette Jiwa, a really accomplished marketing thinker, even though she is a “sand-groper” today posted on Value, as I did. A thought provoking example, and I cannot but wonder at the co-incidence.
Great minds Bernie??
