Jul 22, 2020 | Change, Leadership, Strategy
As we hesitantly, with stumbles, come out of this lockdown, we will see the landscape has changed. For some, it will be a land of opportunity, for others, a wasteland.
Rather than seeing it as a calamity, those who choose to see it as an opportunity, will be able to look and see that what has actually happened is that the lockdown has dramatically accelerated many trends that were already slowly impacting on our lives. They were all evident before to those who were looking, now they are in ample evidence to everyone who is not completely blind.
The more obvious ones, are:
‘Digitisation’.
So called digitisation has taken off, whatever digitisation means in your context. Suddenly ‘digital’ is the new normal. From remote control of factories to grannies interacting with their grandchildren via Zoom, nobody has been immune.
Remote work
Working from home, cafes, the car, has been developing for a decade. Suddenly, it has been accepted as an alternative to expensive office space in central locations. What will probably evolve is some combination of decentralised ‘meeting places’ and working from home, serviced offices, and cafes. The trend has been pushed along a decade in 5 months.
Retail delivery services.
Similarly have been pushed ahead a decade. Everything from the local restaurant to the supermarket, and department store now have to be geared up to deliver, or lose the sale. This will change the nature of retail from transactional to more ‘showrooming’, a trend harnessed by Apple a decade ago while everyone else was cutting retail prices and locations in order to save money. However, retail shop fronts will become more important than ever as a means to communicate with customers, rather than just being a point of sale.
The end of ‘purpose’ marketing.
The focus of marketing, at least by corporate marketers, will have pivoted from the banality of the ‘purpose driven’ marketing of the last few years. In the absence of a compelling idea, marketers deluded themselves that people really cared about their empty statements of ‘purpose’. Your potential and current customers will be demanding evidence that the statements carry weight in the behaviour of those seeking their money.
Politics.
Politicians have had a huge wakeup call. We voters really hate the division and spite of the practise of politics as usual pre corona. We long for some evidence that those elected to lead, actually do so, rather than just taking the trappings of office for their own benefits. The pressures on politicians and the political orthodoxy that has dominated to date will have to be revised. The basic assumptions about what services government provides, and from who and how, the necessary funds are raised to pay for them, have moved.
Not since 1939 have our politicians been confronted with the profoundly difficult choices that now face. I wonder if they are up to the challenge?
The economy.
The economy has suffered a major stroke, one for which substantial rehab over a long period will be required. It would be naive to believe it will recover to look much like the pre stroke version, but recover it will, over time. For those willing and able to push the boundaries, there will be opportunity everywhere, from the remaking of supply chains, to the potential of rebirth of sophisticated niche manufacturing, and new export markets. Digitisation of just about everything that has been accelerated massively, will demand investment and different business models and enterprise capabilities. These will offer great opportunity as well as what for many will be a terminal challenge. None of this will be easy, but it will happen.
As we ‘wake up’ from the corona coma, there will be an inclination to revert back to the known, and comfortable. Succumbing to that urge will be a mistake, as we have all been forced to move on, to push the edges of our comfort zones. The economic and social climate has changed dramatically, and those that seek the comfort of the Pre Corona status quo will find themselves isolated, and falling behind their competitors.
Picking your way through all this will take effort, experience and careful planning. When you need the injection of those skills, give me a call.
Jul 17, 2020 | Change, Strategy
‘Pivot’ has been the word of the year so far.
Cafes have ‘pivoted’ to takeaway, fitness centres ‘pivoted’ to on line classes, supermarkets ‘pivoted’ to home delivery, entertainers ‘pivoted’ to all sorts of variations of on line delivery, and so on.
Huge changes to the business models of many businesses amidst the chaos.
Now things are starting to go back to some sort of normal activity, although the signs of a re-emergence of the Bug are alarming.
The entrepreneurs amongst us are thinking about the bits of the emerged business models to keep, adjust, or throw away.
It seems that while there is a new normal emerging, for many the challenge is not to slip back into the old ways, but to see the coming months as the second start-up for their business.
It may have been forced on them, but there is silver in the cloud.
New business models, new relationships and types of relationship, a wider recognition that communication is the core of success, and that customers are looking for value from all sorts of new sources.
This coming period for most will be much more than just a re-opening, it will have many of the elements of a start-up. For others, it will be the sad walk to the under-taker. It is unlikely there will be too many businesses remaining unchanged.
Header photo credit: Peter Orr photography
Jul 15, 2020 | Change, Strategy
Crises always drive rapid change, and this Corona crisis will prove to be no different. Many enterprises will flounder and disappear, but others will emerge, not just to take the place of the dead, but to build value in different ways.
The law of diminishing returns that had held true for most of the 19th and 20th centuries turned around, beginning in the 1990’s with the flattening of productivity increases. Slowly, scale had become its own worst enemy, as it outgrew the ability of the corporate bureaucracies that evolved to operate productively.
Manufacturing became organisationally top heavy, and productivity improvement became very hard to extract in anything more than small steps.
Even harder to find is relative productivity improvement. When everyone is increasing productivity at around the same rate, along a predictable curve, there is no net competitive improvement.
We had the early stages of the digital revolution in the mid 1990’s, culminating in the enormous profits of the so called ‘unicorns’ that emerged in the early 2000’s. These defied the rules of diminishing returns, and grew on the back of network effects and negligible marginal costs. In the process, they made their owners multi billionaires and rock stars.
Perhaps we have reached a tipping point, where the dollars flowing from the digitisation of our lives is starting to reach its limits?
Despite the enormous wealth and power delivered by the digital platforms, they still supply only a small part of what we need, and do not supply any of the basics, food, shelter, or clothing. They just make these things easier to get, and sometimes cheaper.
However, the application of digital capability to the manufacturing processes that deliver the things we need to live, may be in the nascent stages of reversing some of those limitations of scale.
Over the last decade, most of the unicorn wannabee’s have floundered, with a few notable exceptions. Their market valuation tanked, and in the recent case of WeWork, blowing up in spectacular fashion. Meanwhile, the market value of manufacturing businesses, those that produce the things we need to live, have not been as affected. However, when compared to the valuations of the digital platforms, their performance looks tepid at best. This comparison has sucked the life out of manufacturing investment, as investors seek quick wins.
Productivity increases, soaring in the latter quarter of the 20th century have flattened out, despite the ubiquity of software.
It was not supposed to happen like this.
Partly this flattening is because the barriers to entry have been radically reduced, and in many cases, removed. Meanwhile the benefits have moved very slowly from the owners of the software to those that use it.
Our productivity will rise again, as digital tools are developed and deployed into the production of the physical things we need and want to live comfortable lives.
The future is digital, but the emphasis will be in different places.
The evidence is all around if we look.
Tesla is just a car, re-imagined with a digital heart, Apple became the most valuable company in the world by adding a physical retail arm to their digital portfolio, and Amazon purchased the physical supply chain of Whole foods for US$16.5 billion, and got their money back overnight with the increase in their stock value.
Locally, the response to the Corona bug in manufacturing forums has been all about the deploying of digital capability to the production of physical things. This is together with the recognition of the importance of a sovereign manufacturing capability.
We are, maybe, approaching a huge inflection point.
A few weeks ago, I watched the Prime Minister speak at the National Press Club. If even a modest part of the rhetoric converts into action, we will be better off. When talking about the technical education system, he used the same phrase several times: ‘Why pour more money into a dud system?’ This is an overt acknowledgement that the current system is absolutely broken, and needs to be fixed if manufacturing jobs, with the social stability they generate, are to re-emerge.
What do you think?
Jun 17, 2020 | Analytics, Change
To measure anything in a meaningful way, you need some sort of baseline.
To say you have a 20% increase in market share sounds impressive, but if your starting point is a 5% share, it is less so. By contrast, if your starting point is 40% in a competitive market, a 20% increase is a great effort.
Setting this baseline from which to measure change can be extremely difficult. Finding a simple measure that captures the impact of a wide range of variables while adequately reflecting the whole story is never as easy as it sounds.
Look at Australia’s published rate of unemployment. Whatever it is on any given date, it is an extrapolated survey that includes a definition of ’employment’ as: 1 hour of paid work a week. Clearly nonsense, but what is the real measure? How do you gather reliable data that offers actionable insights into segments of the population which are subject to a myriad of differing drivers?
Climate scientists faced this problem when setting out to determine the rate at which the decay of vegetable matter, which emits CO2 during the decomposition process, was adding to the store of CO2 in the atmosphere.
This is an enormously complex problem, driven by variations in temperature, humidity, type of vegetation, and the state of vegetation, particularly as it relates to permafrost slowly becoming less permanent.
The measurement solution came to two scientists as they struggled to assemble reliable data from the varied sources, collected in varied ways, around the world. They buried two teabags in the same location. One which decayed quickly at first, then much more slowly, and the other that decayed in the opposite manner.
By establishing the quantitative impact of differing conditions on the two teabags, a reliable measure of the rate of decomposition can be calculated. That calculation holds irrespective of the location, establishing a baseline from which the amount of CO2 being emitted by decaying vegetable matter from that location, can be derived.
Subsequently, they have engaged with interested people around the world using the same two teabag types. By pooling data, they had arrived at a means to calculate with considerable accuracy, how much CO2 was being emitted by the process of decomposition of vegetation globally.
They had The Teabag Index.
Economists use a similar measure of purchasing power of currencies across the world, by converting the local price of a Big Mac into US dollars. This is pretty obviously called the Big Mac Index, and has proved to be a pretty reliable indicator for over 30 years.
Sometimes the best solutions to complex problems lie in being creative about finding a simple solution. This is rarely obvious, but sometimes hiding in plain sight.
What is your teabag index?
It will be those few simple numbers that are a reliable macro indicator of the performance of your business.
Jun 3, 2020 | Change, Leadership
Have you seriously considered the implications of the apparent recognition that remote working can, and will, be a greater part of the employment mix in a post corona world?
There is a loud noise that ‘everything will change’ reverberating, an echo chamber of that view amplified by digital tools. It seems to me that human beings are simply insufficiently flexible to change ‘everything,’ although it seems the trend towards remote work has been accelerated a decade by the bug.
I have worked remotely and in offices, mixed about in a pretty random fashion for 25 years. The recent past has brought into focus some of the factors that I think are worth consideration.
‘Industrial’ management, the norm for the last 100 years, made in the image of Frederick Winslow Taylor assumes that in the absence of close supervision, little work of value will be done. At the extreme other end of the scale, you have enterprises like ‘Automattic’ the parent company of WordPress, that has remote workers around the world, and no head office of any type beyond the current location of Matt Mullenweg, the CEO and co-founder. It is a continuum on which we all fall somewhere, and it is evolving quickly.
The change in management style to remote will be for some, too much, as it adds several dimensions to the task that many managers are simply not up to doing.
Managing remotely adds a number of challenging dimensions:
Tools are needed that are not familiar or easily learnt by many, so simplicity is key. In addition there is a host of newer challenges to be addressed relating to the provision of the tools from software to the hardware, and the security questions hanging over everything digital.
Behavioural norms established in an office environment have been thrown out the window. Suddenly, we need to consider things like the interruptions of children, the family dog, and flexible working hours. In particular, the move to being available at all hours which was evolving as a result of the digital connectivity we had while still working from an office, has been supercharged. Suddenly, working 24/7 risks becoming the norm, unrestrained by reasonable office hours. All of these, and many others indicate that a very different way of measuring performance will be required.
‘Meetings’ from the casual gathering around the coffee machine in the morning, to the established and regular formal meetings deliver a rhythm to the day that is suddenly absent, and needs to be replaced somehow. The formal meetings can be done using one of the many tools, but the casual, unplanned meetings that happen in an office, that can be hugely valuable, present a different challenge.
Culture. The glue that holds the workplace together, will undergo radical surgery. Human beings evolved in small groups that looked after themselves by looking after each other. While this has eroded somewhat over the last 250 years, the need to be ‘together’ is nevertheless hardwired into our collective DNA. I suspect this will be the largest hurdle for management of the remote corporations to address.
Recognise the ‘God Syndrome’ and kill it. I cannot help but wonder if the challenge of leading remote teams is no more than a light being shone on existing failures of leadership that went largely unnoticed. Those in senior positions do not have all the answers, often they have very few of them. Unfortunately, those in leadership positions are often there partly as a result of being able to convince others they are right more than anyone else, and they play ‘the game’ more effectively. The reality is that they are usually as confused and uncertain as the rest of us, they just hide it better, and sometimes ask better questions. The tide has gone out, so the rocks are exposed, the failures of leadership are more obvious. Humility is the common characteristic of every really good leader I have seen.
Deliver Psychological Safety. Everything I see and read about the psychology of human beings is that we seek ‘psychological safety’. This is the place where we feel safe to do and say things that really reflect what we think, without fear of any sort of retribution. Achieving this in any workplace is really hard, and is the result only of truly great leadership. Achieving it when many of us are working remotely, away for the ‘safety’ of those few we know well and truly trust, will be a monumental task.
When you strip it all away, the reason workers are congregated in offices is to achieve the objective of making money for their employers. It is however an artifice forced on us by the industrial revolution, and is somewhat inconsistent with the way we humans evolved. The recent past has demonstrated that this congregation may not be necessary to achieve that commercial objective. Almost certainly it is not necessary in the form that it evolved, as a means to find a way to manage operational scale. Therefore, a rational management will set about reducing costs, and expensive CBD office space has suddenly become a soft target.
Cartoon header courtesy Scott Adams and Dilbert.
May 27, 2020 | Change, Leadership
Social capital
Like all new things, remote work was a small outlier in the world of corporations. It was something that a few dabbled with, mostly with specialist consultants and those for whom they had statutory responsibility, such as maternity leave.
That has now all changed, as the experiment at the edges has been forced to become mainstream in the face of the Corona crisis, and the world will not return to the previous status quo as the crisis dissolves.
Not only do many workers like remote work, as a relief from the daily commute, it has put a focus on the potential of substantial savings in expensive office space, and the opportunity to extend employment to areas where there exists a pool of available labour.
The change is a radical one, not one that would have happened inside a decade without the impetus of the Corona bug, but how do we make it work?
The critical ingredient will be Social Capital.
Are Social Capital and Trust synonyms?
Perhaps. However, to my mind, Trust is something that you give to individuals, and to the extent that those individuals are representatives of an institution, there is ‘rub-off’. Social Capital to me is an idea that encompasses the resilience of the culture in an organisation as well as personal trust given to individuals, and so is a much broader definition.
Pre-Corona, social capital was a function of the daily contact with co-workers of all levels in the corridor, around the water cooler, in meetings, all face to face. It was the glue that held everything together. It is the product of ‘culture’ forged by a combination of genuine leadership, and the instinctive behaviour of individuals, and groups of individuals.
Social capital is like any other form of capital. It needs to be built, strengthened, and renewed, or it dissipates as it is used. Face to face contact is the primary mechanism for this process, and in its absence, any store of social capital will be quickly used up unless alternatives are developed and leveraged.
Those who just manage by exerting the institutional power vested in their position in the pecking order will be emasculated. They never built any social capital, often did not see the need or have the ability. Others, the real leaders amongst a group, and they are not necessarily those with the slot in the pecking order, built social capital by their behaviour and attitude towards others.
The former group will hate this remote working thing, as their ability to direct is significantly diminished. They will fight the implementation. Meanwhile, the leaders amongst us will be less impacted, and will welcome the change as it makes the life of their co-workers, to differing degrees easier, while making theirs very different, and probably harder.
You will see the leaders amongst us very quickly, they will be the ones figuring out how best to replace the drivers of social capital pre-corona with new drivers in a post-corona world, and they will be shouting from the rooftops. The others will be in the long line of those swept aside by this tsunami of change.
