Jun 12, 2013 | Change, Customers, Lean, Operations, Sales
The sorts of customers you have play a significant role in defining who you are.
A former client had a customer base that valued the hands on, custom design, and short supply chain they offered on their packaging component items. That group of clients were not buying the high volume, commoditized products, but far smaller volumes for more specialised and bespoke products.
However, promises of large volumes can be seductive, so in the face of squeezed margins and a flat industry, they broadened their product base to include the low margin high volume items required by the large commodity product suppliers.
The equation was changed, no longer did they enjoy an intimate relationship with their largest customers, being engaged in their businesses at a detailed, technical and developmental level, they were just suppliers who could be replaced with product from China or the US.
The result is a flat revenue line over the last 5 years, with fragile margins despite great success in increasing the productivity of their asset base and employees, and a significant lowering of overheads.
It takes guts and vision to turn a customer away, but it often pays.
May 8, 2013 | Change, Management, Strategy
Success is the result of hard work, smarts, good teams, focus, with a hit of “right place, right time” thrown in, etc, etc, right? Right.
At least that is what I always believed, knocked into me by my Dad who believed, and lived by the credo that “the harder I work, the luckier I get”
Increasingly however, I am seeing success being a relative thing, significantly dependent on a whole host of factors outside our control, many that have perhaps only come into play since the net made our world so bloody complicated, immediate and transparent.
Bill Gates did well, right time and place with an idea that was new, but when he pitched it to IBM, the defining moment of his career, he was not to know that internally IBM had reached some strategic conclusions about how they would approach the emerging world of personal computing.
Contingency.
Ron Jones got fired three weeks ago from JC Penny, where he lasted 17 months after being hired to “Appelise” the aging department store retailer. The retail guru who saved Target, created the retail megastar that is Apple stores, failed to do anything but annoy JC Penny’s existing management who rebelled, and customers who went elsewhere.
Wrong strategy perhaps, but it had certainly worked before, demonstrating again the sensitivity of context, and that success is a fragile, elusive thing, dependent on all sorts of contingencies, making continuous experimentation a “must”.
Apr 22, 2013 | Change, Governance, Leadership
It is always intriguing to get into a debate with one of my director peers about the way forward for an enterprise. Opinions vary, and the “chat” can become animated, as one did a few weeks ago. As a result, I jotted down a few points to email as a follow up, just for sport, (perhaps commercial suicide) but on re-reading, they seem to make sense. Following is a language edited version.
Bill, managing and promoting growth has a couple of dimensions:
The first is managing the customers, market dynamics, and value proposition that keeps the bills paid, the second in being able to look around the corner and see what is coming next. Not just in terms of the old “same/similar product/new customer/new market” matrix, but the genuinely new stuff, the revised business models, products that break the consumer usage mould, packaging of technology that genuinely changes the dynamics, i.e., the future.
This second part is really hard, but there are a few things that every success seems to have in common, that we need to consider:
- We need to understand what it is that we deliver, our purpose, why are we here?. Steve jobs did this better than anyone when he defined Apples purpose when he returned in terms of design, not the hardware or software, but the way in which consumers interacted with the product, and the design of the way it worked, and without being too wanky, its soul.
- See better than our competitors what it is we need to know to be successful in the future, indeed, we need to anticipate who may become competitors as the technology underpinning our business evolves. Those who saw the impact of the net first in terms of behaviour and the disruption of markets that occurred did best. Again, Jobs saw the future, and put bits of existing technology together in different ways and came to the market with revolutionary and disruptive products. By contrast, Jeff Bezos saw the future, and built Amazon to leverage that vision. In our business 3-D printing seems to have the potential to be a significant disrupter, it may miss us, but will not go away, so shouldn’t we be learning about the technology?
- Learn to unlearn, as they way we do things today will not be sufficient to survive in the future. This I see as a significant failure of the existing management, and our own demands of them. Rarely, outside the public sector have I seen a management so risk averse, but really, whose fault is that?
- Pilot, experiment, and take a lot of small steps, some of which individually may seem “flakey” but together provide the opportunity to learn. See comment above.
- Reward the behaviour you want, not just with money, as whilst money is important, far more important to our employees is recognition, and further opportunities to stretch their minds and build experience. They may move on with that knowledge and experience, but that is the world we live in, but while they remain, they contribute at a high level, and when they leave, they do so thanking us, not turning to Twitter to dump on us.
- Learn to live with the discomfort of not really knowing what is next, the disruption of the status quo that is fundamental to finding tomorrows successes. The twin notions of managing a project portfolio, and being prepared to pivot any project as circumstances demand rather than being wedded to some artificial business plan and operating budget should be embraced.
Unless we can agree that this list has some relevance to the way we direct the business, one of us has to go, and I would prefer it be me, as I do not want to be branded as one of the directors who failed to see the “crappola” coming, and when it hit, did not have the sense to turn off the fan. Besides, you are the chairman, and my peers like to be told what to do, so my departure can be seen as a “smoothing” of the board debates.
In short, it is my contention that we must manage the present, and invent the future, and to do this we need to develop a far higher degree of management ambidexterity, and sensitivity to our rapidly evolving marketplace.
I look forward to our next conversation.
Apr 10, 2013 | Change, Communication, Social Media
In the economy of C21, we are far less interested in physical stuff that we are in intangibles.
A measure that will emerge both as one of internal corporate performance, and the performance of markets is the velocity of ideas.
How quickly do the ideas being considered in the executive suite filter to the shop floor, and in what form are they perceived?
How quickly is an initiative taken up by others externally upon which depends the success of the initiative?
This morning I was at a meeting of small businesses, 700 of them, gathering to voice our dismay at the total disenfranchising of small businesses in our political process. Together we employ millions of Australians, are the biggest generator of economic activity, and we create, innovate, and drive the health of the economy, but are ignored.
Hopefully no longer.
By the end of the meeting, the “#toobigtoignore” handle on twitter had generated substantial traction, and the hits on the website www.toobigtoignore.org.au were starting. The velocity of the spread of the ideas expressed will be a key measure for the success of the initiative, and by watching the velocity of the ideas, and the depth of engagement of those reached, will be not just measures of success, but leading indicators of that success.
Ignore the notion of idea velocity at your peril.
Mar 20, 2013 | Change, Innovation, Marketing, Small business
Peter Thiel, founder of Paypal, early facebook investor, uses this term to describe the opportunity created by not competing, not being pushed into the competitive funnel of beating the other guy, rather they prosper by looking for ways to be different, to see an opportunity and grab it, rather than just doing incrementally better than the other guy at leveraging an established product category, business model, or process.
As an investor, he looks to invest in businesses where the founder has a clear view of the future, where the crystal ball has been rubbed and delivered a picture that makes sense, and disrupts the status quo, even if it has not been even contemplated before.
This story of Facebook turning down a billion dollars from Yahoo when it was still in Zuckerbergs Harvard dorm is instructive, and is perhaps a pointer to why Thiel has such a stellar track record. However, the simple notion of investing in businesses where there is no competition, where a creative monopoly exists, is compelling, and is one that should have far wider appreciation that in a VC appraisal. The successful business strategy book “Blue Ocean Strategy” is a tome that makes the same point in 300 pages, and has spawned an industry, so something must be working.
How are you developing your own creative monopoly? You do not have to be a multinational. Several local SME’s I have contact with have successfully created their own creative monopoly in their area, carved out a niche where the competition is minimal, and are doing very well.
Mar 13, 2013 | Change, Lean, Management, Small business
Manufacturing SME’s in this country (Australia) are under severe pressure, particularly in heavily trade exposed industries like food manufacturing.
Yesterday, Windsor Farms was put into administration, a month ago, Rosella went the same way and is currently being liquidated in a fire sale, Heinz ceased to manufacture here a year ago, Goodman Fielder is a shadow of its former self, the list goes on.
To some extent, most of the failed, and failing businesses have adopted some of the elements of “Lean” often just seeing it as a way to cut costs, rather than recognising the wider implications for enterprise culture.
However, almost always, the accounting function is the last to make any substantive changes. Partly this is due to the conservative nature of the profession and its training, and partly the fault is accounting convention and regulation.
To survive, SME’s need to remove waste in all its forms. The stuff on the factory floor is easy to see, what is harder to see is the waste in time, effort, and morale that occurs in offices. The core service function in any enterprise is accounting, so change here can have substantial impact elsewhere. It is my view that setting about changing the focus of the accounting function from compliance and the traditional view of the published accounts to one focused on waste in all its forms, can pay huge dividends.
There are some great resources around, even though the thinking is still emerging. The take-up is remarkably slow given the dire circumstances of much of the manufacturing sector, so there is the scent of competitive advantage as well as just survival in the air.
This interview with Lean guru Bill Waddell is a terrific explanation, Brian Maskell has a range of material available free on his great site that offers some real thought starters. A recent blog post by Brian also led to this front page piece in “Strategic Finance” magazine, finally the profession starting to recognise the implications of lean accounting.
PS. March 13, 2013. Another established SME, Spring Gully, a 70year old family company goes to the wall. There is simply nothing left in the fabric of food manufacturing in this country, and in the long run, we will pay a very high price for that generational mismanagement of a pretty fundamental manufacturing sector.
