Nov 22, 2023 | Change, Communication
Last week I was copied on an email one of my clients sent to a now former supplier.
It was polite, respectful, thanking them for their service, and wishing them well. What struck me immediately was that it was not in the ‘voice’ of my client. A moment later, I realised it had been generated by AI. There is nothing wrong with that, AI is a tool, like any tool, that enables leverage to be applied to your time and effort. There are many situations where that leverage is enormously valuable. Not using it to free up cognitive capacity to do something more valuable with your time would be dumb, even irresponsible.
However, writing has a crucial and increasingly unacknowledged role. The generation of wisdom and understanding.
I write a lot. There are almost 2,500 published blog posts on StrategyAudit, a bank of thoughts, ideas, opinions, responses, and a few rants about things I believe in. It is the product of 14 years of reflection, thinking, and understanding.
Writing for me is way more than just putting words on paper, or out into the ether. It is the way I explore, clarify, focus, and reason. It is an essential tool in my thought processes that build understanding. It is also the way those ideas are shared, inviting response, in whatever form it comes, building greater understanding in the process.
Over a commercial life of almost 50 years, I have accumulated a wealth of knowledge and experience, the latter often gained at the expense of some pain. Writing about all this has made it much more real, visceral, and readily available to those few I work with.
The machinations at OpenAI, the sudden firing of CEO Sam Altman, and conflagration that is still unfolding will be a tiny ripple in the exponential process of AI development. It will do little more than create some headlines, and the opportunity for commentators who have no inside knowledge at all to express an unfounded opinion. It seems the fight is, as usual, about money. OpenAI was founded as a nonprofit with a mission to ensure responsible deployment of the emerging AI technology. Potentially a fragile mission in todays world.
I worry that the world we are leaving our grandchildren (my kids are all making their own way now) is one where superficially attractive output camouflages a lack of real understanding of the drivers of those outcomes. To overcome this, we should encourage them to read, and write, a lot. Put down the devices and read books, real ones, with highlighter and pen in hand to emphasise the points of new understanding, and those that need further thought and investigation.
You cannot achieve that by skating over the surface, outsourcing your thinking. Using tools that cannot think is no substitute to doing the work yourself.
Nov 7, 2023 | Change, Innovation
November 30, 2022, will be remembered as the day AI was unleashed upon a largely unsuspecting world. Dall-E had been around for some months, but it was OpenAI’s launch of ChatGPT that opened the floodgates.
Yesterday, November 6, 2023, OpenAI announced they are launching custom versions of ChatGPT that users will be able to customise for specific purposes.
No coding required, the code-monkeys in the background will be doing that for you.
As is now a common strategy, there will be a ‘GPT Store’ where community developed bots will be made available for sale.
This press release from OpenAI gives the story and provides food for thought.
For those few in businesses who have not spent any time figuring out how to use at least a few of the deluge of AI applications and platforms that have sprung out at us in the last 12 months, better get on with it. Your time will be limited.
Header: was created by Dall-E in about 30 seconds, including writing the instruction.
Oct 31, 2023 | Change, Marketing, Strategy
When I was a boy in this business, back in the seventies, having a brand was table stakes to be in the game. At that time, there were a number of supermarket chains, and every one was stocked with a suppliers proprietary branded product.
There were many types and scale of brands. From the small producers hoping for a modest segment in the market that would provide a living and employment in their modest factories, to the multi-national, mass market giants. There were no ‘House brands’, until Franklins as an experiment ranged ‘No Frills’ margarine, packed by my then employer Vegetable Oils Ltd, which later became Meadow Lea foods.
Over time, the number of supermarkets reduced to the two gorillas and Aldi that we have today, and the number of brands reduced from the many hundreds down to the few MNC brands, with a very few exceptions, which are slowly being squeezed of life today.
If the trends of those 40 years continue, a brand extinction event is getting closer every day.
The latest victim is Sara Lee.
Originally the brand came from the US, and at its height had diversified into a wide range of products from the initial frozen cakes to clothing, and real estate. The Australian business has been through several owners, the most recent being a Dutch company nobody outside the industry would have heard of.
Manufacturers have been their own worst enemies.
They have failed to recognise the long-term impact on their profitability of the increasing power of Woolies and Coles, with the recent addition of Aldi. Retailers do not care about proprietary brands; their goal is their own profitability. If they cannot have your product on shelf, they are just as happy to have an alternative.
Increasingly over the past 30 years that alternative has been a house brand.
When retailers own the shelf space from which consumers pick products, and also ‘own’ the sales margins from half the products for sale, guess who wins. Retailers have used their muscle to squeeze out proprietary brands, taking the proprietary margin for themselves. The stupidity is that manufacturers have aided and abetted this quest to destroy them, by supplying the products and stopping the long-term brand building that made them successful. The funds have been redirected by manufacturers from advertising and brand building back into price promotion. Selling with price being the only differentiator is a sure way to destroy a brand.
To explain the resilience of a few brands, and some that resisted the retailer pressure for years before succumbing, you need look no further than effective, long term brand building advertising. The Vegemite jingle is in the brains of most Australians over 40, and Vegemite persists. Aeroplane jelly is also there, and I would guess the brand could be rejuvenated by a return. Similarly, Meadow Lea is a shadow of its former self, but 30 years after the great ‘you ought to be congratulated’ advertising finished, the positioning of Meadow Lea remains viable, and could be revived with investment.
To explain the failure of FMCG management to continue to invest in their proprietary brands over the years, allowing house brands to take over, you need look no further than the lack of understanding of the contrary dynamics at work.
Advertising is a long term investment, over numbers of years. Advertising is treated as an expense, one that is accounted for on an annual basis in the accounts of businesses. These two contrary forces, when allied to executive KPI’s dominated by accounting thinking, and the increasing power of the retailers to demand discounts as a necessity for distribution has drained the capital necessary for brand investment. The retailers are happy, they have the margin. The short term executive profitability goals of a few executives may be reached, so they are happy individuals. However, the brands have been destroyed, and the long term viability of their manufacturing operations been compromised, in most cases, terminally.
That in a nutshell, leaving aside questions of the operational efficiency of the Sara Lee business, is why it is now on the discount block itself.
Oct 16, 2023 | Change, Leadership
There is a notable omission amongst all the verbiage, finger-pointing, hollow triumphalism, and handwringing emerging after the predicted result of the referendum became a reality.
That omission is the failure of marketing, at least by the ‘Yes’ supporters.
The ‘No’ campaigners did get something right, in the ‘If you don’t know, vote No’ slogan. It was very effective, but was never truly tested in the public arena. It was just left to gather momentum.
Any student of marketing knows that facts and data by themselves struggle to gain and keep the attention of most. If you have ever sat in a presentation where the presenter was reading densely packed PowerPoint slides, you know what I mean, no matter how relevant, intriguing, or important the information being imparted, it fails to be engaging. Telling a story gains the initial attention of an audience, but that attention will be lost in the absence of a connection created by a few facts relevant to that audience. That connection is most powerful when it is both emotional, and quantitative.
Such a combination of the quantitative and personalised qualitative creates empathy that changes minds and generates action.
The ‘No’ campaign had a very good headline, gaining attention, and for many, was enough in the absence of any contrary facts or emotional magnet from the yes campaigners.
The ‘Yes’ campaign failed on both accounts. It did not have a headline, so failed to gain attention, and it did not use any facts to back up the weak and non-personalised emotional connection it set out to make.
At the disposal of the Yes campaign were plenty of facts. They needed to go no further than the statistics articulating the size of ‘the gap’ between education, health, and incarceration rates of first nations people and the general Australian population. What stopped them asking the question if these differences were acceptable to Australians? how would they feel if their child was statistically 14 times more likely to end up in gaol than a white kid, and would die 8 years before the average Australian? They failed to use these emotional doorways at all, at least in my line of sight.
It is easy in hindsight, but the foregoing has been obvious to any serious marketer for a considerable time. The politicians on both sides, and not only the elected ones, allowed the whole ‘debate’ and I use that word cautiously, to become a binary choice. Yes or No, argued in the absence of any basic marketing discipline or strategic thinking.
As an aside, it is my view that the referendum had reasonable odds of being the first in our history to pass despite the lack of bi-partisan political agreement. Australians are in general tolerant of difference. We could not be otherwise, and still be a reasonably successful multicultural and multi-religious nation. Those odds crashed to zero at the recognition that among the Aboriginal leaders, there was not only disagreement, but quite emotional and deeply held disagreement. Those in the electorate who had no strong pre-existing view, or base from which to create one, simply felt that if those who the referendum was about could not agree, who am I to vote for change?
Header photo courtesy SMH
Sep 11, 2023 | Change, Leadership, Lean
If there is a magic ingredient to success, it is captured in two words: ‘Leverage’ and ‘Compounding’.
We all understand the concept of leverage, using a small amount of force to generate a larger outcome.
Compounding is a little more difficult to understand, although if you currently have a mortgage, you are suffering the compounding results of higher interest rates eating away at your growth in equity as you pay the monthly piper.
Question is, how do you find and build on them to generate a sustainable level of profitability?
Our commercial entities are built on the correct assumption that you need leverage to scale. As you build scale, it becomes necessary to add management layers to leverage the capabilities of those the next level down. That is why our organisation structures are always pictured as pyramids, because they are, for the leverage they generate.
Leverage leads to compounding, and compounding leads to greater leverage: a self-sustaining cycle, until the system becomes gummed up with friction.
Friction in management terms ends up being hidden in the layers of authority necessary to act. The transaction costs, which are almost always hidden from easy view, can be commercially fatal.
Leverage also delivers power to those in a position to exercise it, and as we know, power is a drug with many side effects, some of them not so good.
Technology has changed the ratios between leverage and compounding, but not the basic arithmetic. They remain mutually reinforcing, but their management has become significantly more complex.
Sep 4, 2023 | Change, Innovation, Strategy
If strategy is all about choice, and I strongly contend that is so, the challenge for responsible management is to imagine first what those choices may be.
This ambiguous mindset requiring choices to be made with less than full information never happens by itself, as it makes people uncomfortable. It must be pushed, being uncomfortable must be made a significant part of the status quo, making change along with its risks and downsides a normal part of the culture.
Ask yourself what could be true in five years?
Chances are you will not get much right, but the process of thinking about and resetting the status quo to a state ready and able to welcome change will be immensely valuable.
In 1985, few predicted that microprocessors would be everywhere, from rockets to fridges, from phones to toys.
In 1995 few predicted the Internet would become ubiquitous, and in 2005 few predicted their kids would get all the news they could consume, and wanted to consume, from social platforms.
Ask yourself what could be true that would alter the shape and dynamics of your industry.
Step forward and embrace the possibility of those changes occurring in the way you manage your business. By so doing irrespective of how accurate you have been, the business will be much better able to respond to and leverage the change.
