Aug 22, 2022 | Marketing
‘Marketing’ means many different things to different people. Therefore, a conversation that seeks to allocate marketing resources in the optimal manner is bound to be flawed.
To a plant manager, ‘marketing’ means the money spent to generate orders to keep his plant running, to an accountant, it is an expense code in the profit and loss, to a scientist it is an occasionally needed extravagance so people can see their brilliance, and to many marketing people it is going to lunch a lot.
It is none of these things, and all of them.
That is the problem.
So called marketers have for so long shovelled so much jargon, hyperbole, misunderstanding, fortune-telling, and flatulent bullshit onto the pile that they have forgotten, if they ever understood, the purpose is to find and serve customers.
We can only find our way back by taking advice from Aristotle, by identifying the foundational proposition and assumptions shape the investment. In other words, to define it from first principles, or, to quote Aristotle: ‘The first basis from which a thing is known’
In this case, the first principle stems from Peter Drucker’s immortal pronouncement ‘The purpose of a business is to create and keep a customer’
Marketing is, or should be, the leader in that task, and everyone has a responsibility for a part of the equation.
Header: Once again, I thank Dilbert and his mentor Scott Adams for the insight
Aug 19, 2022 | Innovation
Usually the term ‘gestation period’ the time between conception and birth, is used for mammals, but it is just as relevant for innovation.
In the animal world, it is a fixed and consistent period for each species, varying from the 12 days it takes the Virginian opossum, to 22 months for the Indian elephant.
The definitional complications of using the term for commercial innovation come from the uncertainty in fixing the time of conception and birth.
The best definition I have seen of innovation is the one used by Sir Ken Robinson: ‘Innovation is an original idea that has value’. It is however just one of many.
Is that new flavour of product ‘A’ touted by the marketing department really an innovation, or just a line extension?
Is that fascinating scientific phenomena observed for the first time an innovation, or just something interesting to scientists that is waiting around for a commercial use to be created?
I remember seeing for the first time in 2006 the TED presentation by Jeff Han of the multi-touch interface. He had fun playing with it on the stage, but seemed unsure of the direction to commercialisation. Since then, the technology has been incorporated in every smartphone. Was the gestation started when Eric Johnson published a paper and was granted a patent in 1969, when Bell Labs Bob Boie first created the transparent multi-touch interface in 1984, when the PhD student in Jeff Han’s lab mastered the maths to make images interactive, or when Apple decided to apply the technology to the first touchscreen iPhone in 2007.
The gestation of market changing ‘Innovation’ is typically long, much longer than is easily recognised when you look at the end product.
The angst created by the sudden emergence of mRNA vaccines for Covid is widespread. However, it is misleading when you know that the mRNA molecule was first theorised in the early fifties, isolated in the lab in 1961, and worked on continuously at a low level by some major players, particularly after CRISPR technology was developed. Covid was just the catalyst that enabled 70 years of work to be brought to market at a speed that appeared to be unprecedented.
On the other hand, the marketing team I led in the late 90’s brought ‘Dare’ flavoured milk to market in 12 weeks. While it was and remains a commercial success, there was nothing new involved, just a smart rearrangement of existing packaging and market positioning in the large and then undeveloped flavoured milk market.
Aug 17, 2022 | Customers, Marketing
In many major companies, there has been a number of new positions created in the last decade to try and accommodate the changes in the strategic and competitive environment.
Among them has been the ‘Chief Revenue Officer’ (CRO)
In some cases, this reflects the need for increased collaboration and sometimes convergence of marketing and sales. In others, it is just the fashion, the latest management fad.
This seems to be particularly the case in businesses where another of those-acronym driven fads has evolved, ABM, (Account Based Marketing)
The barriers to the integration of Marketing and Sales are high, deeply set into the functional status quo of most organisations, and resistant to change. However, the emergence of digital tools has accelerated the trend, and the recent Covid challenges have been a catalyst for further and quicker evolution than would otherwise have been the case.
For years I have been advocating ‘Alignment’ of marketing and sales to the needs of specific customers, and ways to achieve that outcome.
Removing the Marketing and Sales labels has proved to be useful to the integration. The emerging combined function recognises that the responsibility of each is simply Revenue Generation, or ‘RevGen’
The first substantial consulting assignment I had, well over 20 years ago introduced my client, a domestically owned multinational supplier of ingredients to the food industry, to Strategic Key Account Management. (Try the acronym, always got a chuckle)
We went through a process of identifying the specific needs of key customers, and tailored our marketing and sales effort, to the expressed and often jointly uncovered needs of customers, with whom we engaged in the process.
Those workshops and subsequent implementation efforts are as relevant now as they were 20 years ago, probably more so. It has just been renamed Revenue Generation.
SKAM required that the marketing and sales personnel collaborated and engaged customers at decision making levels to identify how my client could add value to their customers businesses. The core assumption was that only by doing one or more of the following, could we be successful.
- Assisting our customers to increase their sales,
- Actively reducing their costs or
- Increasing their productivity.
We set ourselves the task of identifying how we could achieve at least one of those three things, preferably two, and focussed our efforts on delivering those outcomes.
Predictably, it was a successful initiative. Customers loved the collaboration. Inventory levels reduced, as customer service levels and responsiveness increased, generating increased trading profits.
I had a coffee with one of the managers from that business, now a very senior bloke in a multinational organisation a couple of weeks ago, during which he told me that he still uses the three-part test, and insists his team use it. The longevity of the idea, and the impact it has had is gratifying!
Header comes from the extensive StrategyAudit slide bank.
Aug 15, 2022 | Leadership, Strategy
Strategy is an exercise of informed fortune telling.
What will happen if we do this? Is that better than if we do that? How will others react, do the ducks really all align the way they seem to?
A thousand questions we set out to answer to allocate our resources to best leverage the outcomes we plan/hope will emerge.
It is a messy business, full of uncertainty, mistakes, dead ends, and outright failures, most of which we hear little about. Instead, we hear a lot about the few successful exercises in strategy, the few that work as hoped, or as is usually the case, not as planned, but great outcomes.
We read about the success because people can analyse them with the benefit of hindsight, which delivers to those developing the strategy, some level of prescient certainty that they almost never deserve. Fact is, your strategy will never be spot on, the magic is in the ability to adjust on the run, while achieving the outcome for which you planned.
The strategic process benefits from being subjected to informed and critical thinking being applied to the inputs, both quantitative and qualitative. The greater the level of critical thought and diverse thinking that can be brought to bear on a strategic challenge the better.
The context of strategy implementation is always different to the context in which you do the planning, simply because it is the future, and things evolve in unpredictable ways.
I expect that in about 12 months there will be a rush of erudite papers and articles reporting on successful Corona instigated transformations. These will make the protagonists look like they had great foresight others lacked, when in fact, while they ended up with the lollies, they were as confused and muddled as the rest of us during the lolly fight.
They had the benefit of hindsight to clean up their bedrooms before anyone came along for a look.
Strategy is messy because it lacks hindsight
Aug 10, 2022 | Innovation, Leadership, Strategy
When are the funds for an innovation initiative generally available?
At the beginning of a project.
When are the funds for an innovation project generally needed?
Increasingly towards the commercialisation, or completion of a project.
To me, this usual pattern of financial resource availability is arse about.
At the initiation of a project, the resource needs are peoples time, lab space, and the commitment from senior management., The need for financial resources is usually limited. However, it is this time that projects need to gather momentum, which means financial resources and forecast outcomes are included in budgets, and formal planning processes. The best way to ensure a project is supported is to ‘boost’ the promised returns and shorten the lead times.
Unfortunately, this locks in expectations that have impacts on the way projects proceed.
A project that promises 25% IRR in 18 months will almost always win the resources race over a project that forecasts 30% IRR in 5 years. This sort of financial analysis is how choices are usually made, ignoring the strategic implications of the differing projects. This is because we have not found a way yet to reliably tell the future, and immediacy is a powerful motivator.
On top of that you have the favouring of evolutionary ‘innovation’ over ‘revolutionary’ innovation.
Most successful businesses become successful by incrementally improving products and processes over time, and are prepared to spend money to keep the evolution going. The challenge of this is that it crowds out the revolutionary innovation, the ones that have the potential to change markets, rather than just do more of the same but just a bit better.
The examples of these abound.
When I was working for Cerebos in the early 80’s, we marketed a muesli under the brand ‘Cerola’. It was in the days when there were only a few breakfast cereals on the market, unlike today. Similarly, confectionary was less fragmented. We came up with the notion of a muesli bar, a ‘healthier’ snack than anything then available, with the convenience and taste of confectionary for kids lunch boxes. We did extensive product development, several pilot plant trials, and a little market research. In the early stages I had done a forecast profit and loss, timeline, and we had established the capital costs necessary for the changes to the existing muesli line. These were included in the Cerebos budgets as project ‘M’. The numbers were modest, but at the time, pushed as far as I felt comfortable. When it came to the final go/no go decision, the project was binned, as the forecast IRR based on my modest sales forecasts did not meet the hurdle. A year later, Uncle Toby’s came out with pretty much the same product and positioning, and did my annual sales forecast in the first month. Opportunity missed, and lesson learnt.
Kodak, that well known exemplar of the missed opportunity, not only invented the digital camera in 1975, they brought out the first viable digital SLR, the Kodak DCS-100 in 1991. While it was bulky, and expensive, it was the first. In 1994 Kodak supplied Apple with the ‘Apple QuickTake’ manufactured in China to a Kodak design. Also in 1994, Kodak brought out the NC2000 designed for photo-journalists.
So, Kodak did not miss the digital camera revolution, they led it, but simply failed to see beyond the boundaries of the photography business model as it had evolved over the previous century. They saw innovation as an evolutionary process, not revolutionary, as that carried the risk that their existing hugely profitable model would become redundant. None of the senior management over that time wanted to fund the risk of shooting the cash cow upon which they all depended.
Cerebos by contrast were shackled by a short-term focus on an unrealistic financial expectation that ignored the strategic value of the opportunity to generate sales, and also to open a new market that carried and solidified the Cerola brand.
In both cases, a huge opportunity that emerged from the fringes of their markets were subjected to a muddle headed and front-loaded financial calculation, ignoring the strategic implications of the opportunity.
Header source: The extensive StrategyAudit ‘slide bank’ built up over 30 years.
