Aug 20, 2013 | Collaboration, Demand chains, Marketing, retail, Strategy
This is a far longer post than normal, motivated by some very sensible feedback from the previous post. Bear with me.
The “tools” that add value to management of any supply chain, playing a role in the transformation into a demand chain are relatively simple to list, but extremely difficult to implement.
I have seen, and worked with many over the years, largely based in agriculture, but the lessons are widely applicable.
The difficulty of implementation is why there are so few successful agricultural demand chains, but those that are in place, at least the ones I am aware of, deliver enormous long term value.
In addition, the classification of something as a “tool” usually creates debate, as it can also be an “outcome” of a successful initiative.
For example, is the “Shakedowns” brand of baby carrots from Bolthouse Farms in the US a marketing tool, or an outcome of a successful marketing and demand chain initiative? Truth is, that it is both, but the debate can become excited.
Following are what I see as the six key components that are the characteristic foundations of successful initiatives, but having them in place is not a panacea, as like any tool, the use remains in the hands of people of varying skill, motivation, and outlook.
- Appropriate scale, and the supporting processes to manage that scale. The scale and supporting processes needed to be successful in the local growers market are very different to those necessary to be successful in Woolworths, Tesco, or a major food service distributor. It is not just a matter of size, it is largely a matter of alignment. At one extreme we have growers market customers, who value product provenance to the point of wanting to communicate with the grower personally, and to know all about a particular piece of produce, and price is not all that relevant, so long as it delivers value. At the other end by contrast, a supermarket customer is way more focused on price, availability and convenience. To be successful with a supermarket chain, you need:
- Working capital reserves, as the margins are thin and payment terms long.
- Data capability. Supermarkets are run by data, and category management, and not having the capability is as good as going to a shootout with a penknife.
- Low cost. A necessity if you are to survive the pressure on operating margin, and marketing investment necessary to combat increasing penetration of housebranded substitutes.
- Operational scale to be able to service a chain nationally, or at least throughout a state.
None of these factors matter a whit in the local farmers market.
- Chain Transparency. Transparency drives accountability, surfaces market and improvement opportunities to every point in the chain. Of increasing importance, transparency also delivers product provenance. This is critical in a farmers market, and branding initiative, and rapidly becoming a marketing tool in supermarkets, but more importantly, is a critical component of controlling a chain. Without transparency, you cannot have control beyond your immediate domain, and thanks to the net there are now fine tools available to suit every situation, the standard setter being an Australian home grown product offered by GFA .
- Collaborative structures and processes. Arbitrage margins are made possible in a supply chain by a combination of lack of transparency and a culture resulting from the old way of “information is power”. This dying a difficult death, but dying it is as the communication tools now available provide the opportunity to collaborate as never before, and as a result the nature of organizations is evolving rapidly. A great example is the wool supply chain, 2 years from sheeps back to a consumer article, a production process that involves at least 7 product transformations which are typically highly competitive, and involve inventory, risk, and time, all of which add substantial cost. A collaborative structure that creates a forum of all the chain players can cut that time, risk, and cash tied up by a factor of 2/3. The poster boy in Australia is Woolconnect, a collaboration all the way through the chain that delivers product from farm to the consumer in 4 months. This did not come about easily, or quickly, but as a result of the vision and determination of a few people over 15 years.
- Contract capable. Customers need certainty, they need to be able to rely on undertakings given, and part of that is a single contract capable party with whom you do business. In simpler times, a handshake was sufficient, and as relationships evolve, it sometimes evolves back to that level, but for the most part, certainty involves a contract. Weather that is with an individual, Pty Ltd company, a co-operative or public company is not relevant, it is simply an agreement with consequences.
- Business model. Success requires the combination of a sustainable commercial business model with an attractive value proposition to the end user, and all points in the value chain. The “business model” represents the combination of all the points where costs and revenues are generated through the chain, mixed with where and how “value” is created. “Value” is the key component in a business model, often missed with traditional thinking. The business model also incorporates a capability to balance supply and demand transparently through the whole chain, not just at any individual point in the chain. Amazon creates value not only by selling books cheaply, but by having an inventory hundreds of times bigger than any bookstore, and offering a crowd sourced rating system. What they cannot offer is the personal and often emotional experience some have with browsing in a good bookstore. The supply chain models and resulting business models are very different quantitatively, and they create value in a different manner. I suspect there are enough bibliophiles for bookshops to survive and prosper against Amazon, but they will no longer be in every shopping location as we have been used to, and will not be a shop-front for recent releases and best sellers, but will be something entirely different.
- Marketing. There are as many definitions of marketing as there are consultants and academics. Mostly they talk about the “4 P’s” the mediums for communication, the need to focus, but my take is both simpler, and more strategic. To me, marketing is all about the definition, building, leveraging and protection of competitive advantage. The way enterprises go about this task is almost infinitely varied, and over the last few years has become increasingly fragmented and confused. However, really good marketing always has a simple, clear articulation of a value proposition that motivates action.
You got this far, well done.
Perhaps it should be an e-book, as there is plenty more to say.
Aug 15, 2013 | Branding, Change, Marketing
I talk to a lot of farmers, and have done so for a long time. Not much has changed over that time, it is just that there are less farmers, bigger farms, and corporatised farming, with deep capital resources is taking over from the family farming enterprise.
The topics of conversation however remain the same:
The weather
The banks
Cost increases imposed by shiny-pants in office towers who never see a farm
The Aussie $
Regulatory and interest group interference
The value chain duopolies: grain handlers, logistics providers, processing works, and supermarkets.
How little they get from the value of the end product.
When you lay it all out, there are some things a farmer cannot control, but there are others that they could, should they choose to do so. However, to date, they have largely chosen not to, or paid a levy so some industry body can do it for them. Generally the results of this strategy have been pretty poor, the biggest beneficiaries being researchers, bureaucrats, those who control a choke point in the supply chain, and paper bag manufacturers.
Now however, the time has come for farmers to take control of the supply chains that they feed, and turn them into something different where they can extract the margins that accrue to those who make markets.
Not an easy task, not a short term task, and not one without cost and risk, but one that must be done if Australian farming beyond corporatised broad acre grain and perhaps beef, is to remain commercially sustainable. The tools and capabilities are now far more easily available, it just takes the vision, guts, determination and patience to make it happen.
Aug 15, 2013 | Uncategorized
Narcissism and the web just appear to go together.
People seem compelled to post “selfies”, even the pollies are now doing it, perhaps in an effort to appear “hip” in this crashingly boring and shallow election campaign.
Most web sites just talk about themselves, almost all have an “about us” page, photos of the factory, artistically arranged product shots, silly slogans dreamt up by a junior in the ad agency, or worse, the MD’s wife, but is that narcissism, or just a complete misunderstanding of the role of a website?
I think that the silly, self-indulgent behavior of teenagers and “selfies” is less about themselves than it is about fitting in, whilst the “Ruddster” is just a narcissist of the first order, Tony by contrast is too self conscious, so he just rates as a dill with an ego.
Why don’t we all get serious and use the tools we have as they should be used. Social media tools to communicate, albeit in an unnatural manner, websites to deliver information, frame debates, ask questions and deliver answers, blogs to seek alternative views and explore ideas.
Narcissism is ugly, pointless, and repelling, the opposite of engaging, which is what the web tools of various types can do when used well.
Aug 12, 2013 | Uncategorized
In any B2B sales situation of a complex product, the prospect is usually shopping for a solution to a problem, rather than shopping for a product, although most conversations I see still seem to be about a product.
This idea that a potential customer is product shopping rather than problem solving leads to the conclusion that alternative products are commodities, and all that differentiates is the applicability of your commodity to the solution of the problem.
It holds then that the more information you have about the problem faced, the more likely you are to be successful at building the case for your solution.
Clearly, customers do not see all purchases as solutions to problems. Often buyers just repurchase product X because it worked in the past, quick, and saves the risk of being wrong.
Therefore, it is incumbent on the seller to understand the context of use sufficiently well to be able to point out where your option will not just solvethe problem, but do so better than any alternatives. The pitch then has the chance of being persuasive, as the problem has been articulated, rather than just having the buyer leaping to a solution.
In most cases these days, the early part of the sales job has been replaced by the search capability of the net, in most cases a buyer believes they have most of the information they need to make a decision, with just a few details outstanding, predominantly price.
The sales job therefore is to make that last little bit really compelling, differentiating the pitch from all the rest.
This challenge of articulating the problem, rather than competing on product specifications holds true for the SME around the corner, as much as it does for multination enterprises.
Aug 8, 2013 | Governance, Leadership, Marketing, Personal Rant
I have come to the conclusion that the crop of marketing and strategy development people looking after the current crop of Canberra wallies are about as useful as Harold Holts flippers.
After watching a host of political advertising last night, even on the ABC, (heaven help us, is there no refuge) I realised as well that:
- I am either a cynical old bastard, or the marketing and strategy people who “advise” our pollies think we are all truly, truly stupid enough to believe the patronising, paternalistic slogans they are delivering after the shenanigans of the last decade, and that,
- We are all so cynical, and feel so betrayed by our so called political leaders, simply because of years of shitty marketing.
Well, I am a marketing consultant, so you would expect that may influence the way I see things.
Consider what both leaders of the big parties are doing, although I do not exclude the dills from the edges who are at least as loopy.
After a decade of slight of hand, ducking responsibility, blame shifting, non-core promises, and outright bullshit, they now tell us what they are going to do, and expect us to believe it, and run to the ballot box in joy.
They tell us what they are going to do this time around, (while pouring scorn on the other lot, with access to exactly the same information), but do not tell us how they are going to do it, or why it is important.
This is a commodity sales pitch based on the political equivalent of sticker price, and we all know that commoditization and brand building, which necessarily includes trust based on behavioral standards are mutually exclusive.
Where is the value proposition?
When you think of really great marketing, it is based on explaining “Why“. The classic Apple ‘Think Different” commercial which set the tone of Apple brand building until very recently. Owning an “Apple” meant something, it conveyed a Why. It is not a computer, or an ipod, ipad, it is an “Apple”. Surely there are enough examples of great marketing around that they could have learnt something?
Is it so hard for someone to at least try to articulate the “why” they deserve our vote, the value they put on it, and how they will use it to build a better place for us, and our children?
