May 24, 2021 | Change, Strategy
The product lifecycle is a well understood concept. Introduction, growth, maturity, decline, illustrated usually with a nice even normal curve, which almost never reflects what happens in the real world.
Despite its distance from the real world, it remains a central core of many strategic planning exercises.
However, it is not the only cycle to impact on the commercial sustainability of enterprises.
The life cycle of enterprises is shortening radically. Many of the dominating companies in the Dow Jones top 100 were not there 20 years ago. A number had not even been born. The emergence of tech companies into the top of share market valuation has been astonishingly quick, as has the demise of many of those that were the standard bearers 20 years ago.
The hand-over has been driven by the emergence of a host of new business models. No matter how great your product, loyal your customers, deep your IP and brand protection, how actively marketed, when the business model erodes, everything else goes with it.
Amazon killed off bookstores in quick time. The bookstore business model became obsolete as they watched. Air BnB is an entirely new business model to that successfully leveraged by hotels for 50 years, themselves a business model that killed off the local tavern as a place a traveller could get a meal, a drink, and a bed. Perhaps the most telling is the end of encyclopaedias, which seemed to happen in the blink of an eye. Microsoft first launched their Encarta digital encyclopaedia on CD in 1993. Encarta was itself disrupted and destroyed by Wikipedia in 2001.
The leadership challenge is how to manage the portfolio of eroding and potentially emerging business models that will support growth in the future, while also managing the contracting and often conflicting lifecycles of their product and product development portfolios.
The leadership of enterprises spends the bulk of its time in one way or another searching to maximise the leverage it can build from finite resources. So, what happens when someone comes along and suggests that they take some of those resources, and allocate them to some new thing, that is inefficient, scrappy, and will deliver lower returns, if any at all, than the existing business? It gets canned, few managers will proceed, it is against the existing ethos of maximising efficiency.
The net result is that the incumbent enterprise tend to ‘pass’ on taking up the very things that will replace them.
I have a client, an emerging SME in a market that is in its early stages, growing rapidly, with very few ‘rules’ beyond the expectations set by the incumbent industry players, backed by regulation. At some point the pressure to revise the regulations will become irresistible, and the dominant existing business and manufacturing model will become compromised almost overnight.
I was in the dairy industry in the leadup to deregulation in NSW. I clearly remember the resistance to change, and the resulting organisational and financial chaos when it did arrive. The chickens did not just come home to roost, they crapped all over the pre-deregulation incumbents, and none of the major businesses survived in any form that resembled the pre-deregulation organisation.
The evolution of often competing business and product models happening in real time, creating a raft of organisational, cultural, and financial conflicts is unprecedented. It will also open up opportunities galore for the agile, and crevasses for those less nimble to stumble into.
The demand for strategic creativity and an action-oriented culture have never been greater.
May 9, 2021 | Change, Governance, rant
As I look at the current state of the economy from my spot as a boomer who has largely lived my life in times of peace and easy excess, it is becoming clear to me that there are two tracks at work.
The first is the one along which is driving those who work for a wage, pay taxes in the absence of choice, and struggle to feed, house and educate the kids. In the decreasing incidence of the traditional nuclear family, both parents tend to work, often multiple jobs, and seemingly get nowhere.
The second is those who own stuff. Specifically, property and shares. They are doing OK in the enormous inflation of price that has occurred.
The problem for our society and the glue of community is that the latter group are living on what economists call ‘rent’.
Income from ‘rent’ comes from what you own, rather than what you produce. In the absence of producing greater income ‘producing’ than from ‘owning’ you get what we have now, a two-speed economy.
It further seems to me that the system is weighted towards those who own, so can charge rent. Our tax system and increasingly education system which is the gateway to ownership is increasingly weighted towards ‘rental’ at the expense of ‘production’ by those in control. The controlling group are themselves renters, and so set the rules favourable to them, rather than being equitable to all.
This is not a simple challenge for us to address. It has been a long time in the making, and will be a long time in the fixing, which makes it unlikely to be fixed in the absence of strong political leadership that is able and willing to look beyond the current electoral cycle.
The economic problem posed by renters is that they tend to double down on what is producing the income today. In other words, optimising the short term at the expense of the long term, which is messy, uncertain, and therefore subject to greater risk. Risk minimisation is core to a renters mindset. That is why small enterprises are more innovative and less risk averse, they have much less to lose, and are reaching for the point where they can become renters, a much easier life.
When looked at through such a lens, the source of the current malaise in this country is obvious. Too many renters, owning way more than their ‘fair share’ of the largess we have inherited.
I wonder what constitutes a ‘fair share’? This is not something you can legislate, and in any event, the legislature is controlled by renters, so no joy there. In a democracy, we the great unwashed are supposed to be able to bring about change via the ballot box, but that seems unlikely in the short term. Again, the game is rigged to exclude anything other than very gradual change from the edges, and that is too hard for the renters to think about and accept the minor risk it might entail. The outcome of the last federal election when the Labor party put a few anti renter ideas on the table, they were scuppered. To my mind this was the result of incredibly poor marketing rather than the ideas being lousy.
I am first and foremost a strategist, one who looks at the big picture and articulates the principals by which the resource allocation and tactical decisions are made. As such, I propose two principals by which the foundations of our economy, and therefore the society we should be aiming for are sourced.
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- Education. Make this more accessible to all, from preschool to advanced tertiary, and everything in between. We need not only the scientists, doctors, and managers, that make the industries and services we want work, but the plumbers and toolmakers who actually make things that produce income. It is that latter group that have been killed off by policy decisions based on something other than the long term good of the community.
- Funding. It is a simple matter that the aspiration above needs to be paid for, somehow. Increasingly the tax burden is supported by the ‘workers’ while the renters get a pass. This simply must change. Not a proposition easily accepted by those who will ‘lose’. It will be resisted with all the resources at the disposal of the renters, and their allies. First target should be the multinational corporations that infest our industries, who reduce their tax, legally, to close to zero by a mix of entirely legal strategies, usually involving transfer payments to head offices domiciled in places where the rates are lower. This is an international problem, not just ours, so the benefit is that others need our cooperation as much as we need theirs, and the economies of the Bahamas and Cook Islands can be assisted in other ways to play their role in a fairer world economy. Then there are multiple soft targets in our domestic tax system that need to be progressively addressed so the balance is reweighted towards those making, at the expense of those renting.
We need to share the largess of the golden goose more widely by re-weighting the distribution of the gold, rather than the ownership of the goose.
It is Sunday morning, and clearly, I am dreaming!
Apr 16, 2021 | Analytics, Change, Operations
‘Digitisation’ like many other ‘ation’ words has become a cliché, thrown around with no specific meaning that is consistent and generally understood.
It has many parts, ‘Industry 4.0’, IoT, AI, AR, and so on, but what do you have to do to ‘Digitise’? It is way more than upgrading your ERP and CRM systems, it requires wholesale change from the way most businesses have evolved.
Following is a partial list, gleaned from those with whom I work, and the experience that has come from those interactions.
Have a goal. Like any journey, digitisation is nothing without a goal, something to work towards and measure progress against.
Leaders walk the walk. Again, generic advice for any behaviour you want to see in an organisation, it will be absent unless the leadership displays it. An enterprise that aspires to ‘digitise’ when the leadership stubbornly refuses to digitise themselves, will not see much progress down the ranks.
Recognise digital is a culture, not a set of tools. Tweaking current business models and tool sets will not be enough, there needs to be a change in the way the enterprise engages with the world and manages itself.
Customers first. Success has always come to those who put customers first, but it has never been as apparent and such a source of competitive advantage as it is now. When a customer can actually see you putting them first, or not, they are able to make quick choices. They will either become your extended marketing team, or if not happy with you, potentially do a lot of damage.
Do not adapt, adopt. Adding bits on, making a hybrid, as you would when you extend your house, will not work. You must design the digital experience inside and out from the ground up with the objective as the guiding light.
Employee power. We are talking about harnessing the intellectual power and motivation of stakeholders, and particularly employees in this exercise, without whom, it is no better than window dressing. Empowering employees is a core part of the culture change required; they go hand in hand.
Collaboration and co-creation. Progress is increasingly being achieved by ecosystems, rather than enterprises on their own. Figuring out how you collaborate to compete is necessary.
Kill the legacy. Legacy systems only hold you back, you must be prepared to move them on as you would an old piece of equipment in the factory. Often legacy systems work well, you are comfortable with them, but they no longer offer the key ingredient to digitisation, the ability to communicate with other systems and deliver useable, leverageable data.
Make it measurable. As in any project, being able to measure progress towards the goal, ensures resources are allocated appropriately, and that accountabilities are clear is essential to progress.
None of this is easy. Anyone who tells you it is has never done it. It is however essential, and like everything that is new, it pays to take small steps first, gain some confidence, understand better the costs and benefits, find some skilled help, and keep moving forward.
Header cartoon credit: Dilbert once again delivers enduring wisdom.
Apr 13, 2021 | Change, Governance, Strategy
When should you let go of the sunk cost that is not performing?
How do you decide when to quit, walk away from an investment? It is as important a decision as the one you made when planning where to allocate your resources in the first place.
Strategic quitting is the flip side of strategic planning.
Realistically, you have only a limited amount of resource to be allocated. Determining the priority for those allocations includes being able to stop proceeding with some, and redirect. This acknowledges the opportunity costs often swept under the corporate carpet.
It is not being a quitter, it is sensible strategic leadership
The good thing about being at the point of strategic quitting is that you have actually done things, and hopefully learned from them. Therefore the next action you take should be better informed.
I am sick and tired of the fluff around strategic planning, what we need is less of it, and more strategic doing!!
Strategic quitting is a fundamental part of strategic success, embrace it.
Apr 6, 2021 | Change, Strategy
If a problem can be solved with money, then arguably, it is not really a problem!!
Most companies, especially big ones try money before they try creativity and thinking from first principals.
To my mind, this is one of the reasons that smaller companies are inherently more creative, they must be. They simply do not have the money to throw at a problem. They have to be scrappy, to hustle, experiment, and invent a way to address the problem without a pile of money.
One of the several strategies big companies deploy to manage their Innovation programs, is to be very sensitive to the activities of start-ups, even invest in a few. When one of the small bets looks like a winner, buy them out.
Solves the innovation problem for them, short term. It offers a big payday for founders, so may be good for them as well. Problem is that many such innovative start-ups that have been purchased are suffocated by the culture that prevented the big acquiring company innovate out of its own optimised way of thinking.
Being innovative requires being sub optimal, scrappy, unsure, and often wrong. Which executive in a big company is going to go to their boss and ask to be put in charge of something that might not work, will disrupt the existing status quo, require investment and time, and probably fail? On top of that, these volunteer intrapreneurs in large companies want to be paid as they would be on the optimised and secure world of the corporate behemoth.
Counter intuitively, it turns out that the lack of money can be a competitive advantage small companies have over big ones. The challenge is to keep the effort going in the face of the never-ending bills that arrive to be paid immediately.
Header cartoon credit: Scott Adams and Dilbert on Innovation. Right again!
Mar 30, 2021 | Change
March 30, 2009 was the date of the first post on the StrategyAudit site.
I did not know where the second was coming from, but they seemed to emerge from the conversations I have, problems clients and others face, and the observation of what is going on around me.
March 2009 seems a lifetime ago.
Digital had yet to get a stranglehold on our lives, Facebook was still a benign force delivering connectivity we had not previously dreamed about. Its pernicious impact was still well in the future. Barack Obama had just been inaugurated as the 44th, and first black president of the US, and Kevin Rudd the 26th prime Minister had just passed the halfway mark to being deposed by Julia Gillard, before being very briefly resurrected in 2013.
Statistically, half of the almost 2000 posts on this site are below average, on any metric you choose to use. Readership, impact, shared numbers, interest, longevity, all fit somewhere on the normal curve.
That is just the maths of it.
It does not mean there is no value in the below average ones, just that they have failed to generate sufficient traction to move up the ladder. In some cases, that is just the result of a poor headline, which often directs a post I thought was of value to the trash heap. Sometimes the topic is of little interest to others despite tickling my interest, and occasionally, the post truly deserves to be at the bottom of the class.
The very first post was titled ‘Cash is the KPI‘. Not a thrilling headline, but it remains a theme through the following 1,966 posts. Small businesses, the ones I talk to, and from time to time, work with, often forget that cash is the lifeblood of their business. You can go broke with a great looking P&L when you run out of cash.
Unfortunately, I have seen it too often. The accounting profession, focussed as they are on compliance often fail to do the simple analysis of the management accounts their clients need, along with a clear explanation and a plan. Small business owners often do not understand accounting jargon, and remain in the dark too long, and sometimes until too late.
There are a number of other posts that day in and day out generate page views, shares, and occasionally, a phone call or email that leads to a mutually beneficial commercial relationship. I observe that many of those in that last category started slowly, but built over time, and keep building.
12 years seems a long time, but gone in a flash.
