Oct 30, 2013 | Change, Innovation, Marketing, Strategy
Engaged in an innovation portfolio management assignment a while ago, we struggled to define why one project should continue to suck up resources in preference to many other seemingly worthy opportunities.
We tried all sorts of models, financial and strategic, and really faced the dilemma that all were driven by assumptions, the accuracy of which was only clear with hindsight.
Not much help there.
We set about distilling all the data, assumptions, models, and diagrams we had collected into something simple, something that reflected more than the assumed commercial and strategic value of the initiatives, something we could engage with. We came up with one word, and three questions.
Value.
Who would benefit from this initiative?
Why was it better than anything else?
Why should anyone care?
Suddenly the task became clearer.
The discounted cash flows, competitive positioning, portfolio diagrams, and potential for stock exchange announcements became less important, and what become far more important was the simple notion, which of the projects we were considering was doing something important, solving a problem, adding value to someone unavailable elsewhere.
We developed a set of metrics covering these three questions we called the “Value Gap”
The value gap analysis between options to invest in new stuff became the benchmark for prioritizing projects, and we found there were only a very few from what had previously been a significant portfolio that were worth our effort.
Oct 29, 2013 | Change, Management, Social Media
There have always been gatekeepers, those people who make the decisions about what you see, what you have the opportunity to buy, and weather or not you can participate.
The supermarket buyer determines what goes on the shelves, a faceless committee determines what constitutes the levels of “obscene” and therefore what is able to be published, and the bloke running the big dipper determines that no-one under 5 feet can take the ride. The examples go on.
The web is usually cited as the medium that has democratised information, made it available to all with a computer, and that is true, but it has also introduced a new form of gatekeeper: the algorithm.
Algorithms are simply instructions that determine what computers do with a piece of information, or set of instructions, they are the guts of everything we now do with computers.
Facebooks “Edgerank” determines what you see on your newsfeed based on an algorithm, Google uses algorithms to determine the order of responses to a search, sign up to a blog site, and an algorithm sends you a “thanks for joining” note of some sort, and it is the application of algorithms to the mass of so called Big Data that is enabling the extraction of individual behavioral information.
Don’t kid yourself, the gatekeepers are still there, and probably more influential than ever, just better hidden, so you better understand how they work.
Oct 22, 2013 | Change, Demand chains, Marketing, Strategy
The success of the last 250 years in western economies is based on the economies of scale. Harnessing technology to deliver greater productivity per unit of input, capital, labour, and raw material.
All industries have been disrupted from the cottage stage to industrial, and the change has spawned industries unimaginable even to our fathers.
Agriculture has been no different, “factory farming” is the standard, even it is it still outside in a paddock.
It now would appear to me that there are the beginnings of a reverse disruption, accompanied and enabled by the removal of organisational and arbitrage barriers enabled by the web. Words and phrases like “Local” “sustainability ” fresh” “product provenance” and “demand driven” keep on coming through. A small but increasing number of consumers are seeking out products that deliver these promises, and a few specialist retailers are suddenly seeing the emergence of a consumer group who will not be seduced by the giant retail chains.
A semantic disruption?
Agriculture in the Sydney basin has been under pressure from development for the last 50 years, and with some exceptions concentrated in intensive industries, has become increasingly marginal. There is not much left to meet the demands of this consumer driven semantic disruption as it evolves. However, those who are left, both producers and specialist retailers, have an opportunity to alter their business to leverage the emerging disruption.
Oct 16, 2013 | Change, Collaboration, Marketing
Intelligent design is a huge discredited furphy perpetrated by Christian fundamentalists in the US on sections of the school system.
But, taking the notion of viewing something through an entirely different lens a bit further, intelligent re-design becomes a notion that offers the thought that business models can sometimes be, and often should be, turned on their heads as a way of evolving.
Often I find myself between things, having time to kill before the next commitment, and I sometimes spend that time in a café having a coffee, and reading, thinking, and generally just contemplating.
It occurred to me the other day whilst indulging in such a contemplation, that I was not buying a coffee, I was buying a pleasant location to spend time, the coffee was just the excuse.
In effect, I was paying for time, not buying a coffee.
In most cases, there is the apparent reason stuff happens, then when you scrape away, the real reason sometimes becomes apparent. People who buy expensive cars are not buying transport, they are buying an object that says something about them to others, just as my coffee is an excuse to sit quietly in a cafe.
It is the articulation of this “real reason”, difficult as it usually is to articulate, where great value can be created. The breakthrough over the last few years that is enabling much of the development is the two sided market capability enabled by the web. Participants in the so called “collaborative economy” a term popularised by Jerry Owyang are all busily re-designing business models all over the place.
Oct 10, 2013 | Change, Governance, Leadership, Marketing, Strategy
Canadian dairy processor Saputo looks set to take control of Warrnambool Cheese and Butter (WCB) with a $7 a share offer valuing the company at $370 million, which trumps an existing cash and shares offer from Bega Cheese which values WCB at 320 million.
$7 a share is a substantial premium over the Bega offer price for WCB, and appears to be a very full price on any conventional analysis. Trouble is however, that conventional analysis has some difficulty factoring in the strategic value of the business, one of only three substantial dairy businesses left in Australian hands.
WCB’s performance was woeful a few years ago, being on its knees in 2009 after a trading loss of $20 million on $441 million turnover, and having unsustainable gearing. Since then there has been improved but patchy performance, $8.8 million profit in 2010, peaking at $18.5 in 2011, down to $15.2 in 2012, and down again in 2013 to $7.5 million.
WCB has flown a bit under the radar as the dairy industry has been convulsed by take-overs and mergers in the last 25 years, and is now one of just three locally owned dairy businesses with any scale. The other two, Bega and Murray Goulburn have both tried to find a way to consolidate with WCB, and the Bega Chairman has been on the WCB board for several years, so should know the business inside out.
With 2 billion rapidly emerging middle class consumers on our doorstep in Asia, whose consumption of dairy products is rapidly increasing, the strategic value of WCB to the Australian economy is significant. However, the reality is that without a better offer, and subject to FIRB approval, (should not be a problem) WCB will be sold to Saputo.
Part of the challenge is the disconnect between the domestic market where the retail oligopoly is the price setter, and export markets where Australian dairy produce is a price taker. Inability to generate anything more than the cost of capital, at best, domestically, and subject to big fluctuations in international commodity prices and exchange rates, and not being a low cost producer, Australian returns in the industry have been very inconsistent. Now however, with the emergence of the Asian consumer, there is long term potential for value added margins. What is needed is patience, operational and business model innovation, and some really good leadership.
Pity we are no good at that
Also sitting on the desk of the new treasurer is the proposed takeover of Graincorp, by US company Archer Daniels Midland. Graincorp handles 90% of Eastern Australia’s grain exports, and roughly 75% of the crop, so is pretty central to the success of the Australian grains industry. A similarly strategic Australian asset that seems destined to be run for the benefit of others.
What do these North Americans see that we cannot?
Vale the Australian owned food processing industry.
Sep 16, 2013 | Change, Collaboration, Demand chains, Operations, Strategy
Most of the really great innovation that happens has as a core component, a re-definition of what the future should look like.
From Orville and Wilbur Wright, to Henry Ford, Martin Luther King and Steve Jobs, the words they used explained why they were doing something, and how they believed it would change the future.
They defined what the future would should look like, and the similarity to the present was only by exception. Then they got on with delivering.
On a more mundane level, lets consider the future of agriculture as a component of our modern lives. We have cities now that were unthinkable a generation ago, Tokyo’s urban area contains 37 million people, Jakarta 27 million, Seoul 23 million, and so on down the list.
Mans evolution seems to be grounded at the points where he first domesticated some animals to serve as hunters, food, and companions, then domesticated wild grains, and settled down to grow them rather than moving and harvesting as they went. A similarly monumental change is happening around us now, as we leave the land and cram into cities. Initially we fed ourselves with factory farming monocultures replacing natural environments, and we are only just starting to realise the ecological impact of this social change as a few experiments in “rewilding” progress.
This increasing disconnection from our roots I believe is being felt at a subconscious level, and we are reacting, demonstrated by the sudden popularity of cooking and gardening shows in the media, the growth of farmers markets, “pick your own” trails run by local farmers, the resurgence of specialist retailers who provide product provenance, and the nascent groundswell of interest in urban agriculture.
Degraded urban areas are being re-greened, and the thinkers amongst us are slowly recognising the extent and power of the changes, and reporting the changes, as with the” Urban food security, urban resilience and climate change” report.
So what next?
Technology will play a huge role in enabling “vertical” agriculture, a capital and technology intensive idea, but the bridging stage is to retain agriculture as an integral part of our urban landscape rather than removing it under the short term pressure for housing and industrial development.
The exciting part of all this is not just the revolutionary agricultural practices that will emerge, but the opportunities for the ancillary industries and services to evolve, providing jobs, education, and some reconnection with our evolutionary ancestors, whose DNA is hard-wired in us, but recently ignored to our social cost.
