Jun 13, 2012 | Change, Customers, Management, Marketing, retail
Data mining as it is evolving in retail is a fascinating exercise in identifying behavior characteristics that apply to very small percentages of the shopper population, and doing something with them. Progressively retailers are getting better at leveraging the data, and as the penetration of cards increases past a critical mass, so will the effectiveness of the marketing and promotional programs. Of course, consumers are well aware of this, and have well developed “relevance meters” built in.
Consider the category management of potatoes. Pretty dull stuff? no, fascinating stuff. I am making these numbers up to illustrate the point, but consider, of 100 customers using their cards at the checkout, perhaps 10% have potatoes in their trolleys, and 10% of that 10% have a particular variety, and of that 10% (now down to 0.1%), they also have sour cream and chives in their trolley. Pretty reasonable guess that the potatoes will be cooked in their jackets, with sour cream and chives garnish, particularly if the shopper is single, no kids, and also buys steak. An opportunity to offer the consumer a deal on a bottle of red wine on her way out of the shop, or in the associated retailer across the way? Multiply that by 5 or 6 million cards, and you have a pile of data to mine.
The gold standard of retailer card data mining is Dunhumby, now owned by UK retailer Tesco. They did such a great job in the development stages of the Tesco loyalty card, that the retailer bought them to keep their competitors away from them. In a move that recognises the future, Dunhumby is now crowdsourcing ideas via Kaggle, a fascinating startup that turns data mining into a competition for data nerds.
This is Category Management on steroids, and represents a monumental change in the skills needed by FMCG suppliers deal with dominant retailers. In the Australian context, very few FMCG suppliers have any idea of the power of the data tsunami coming at them, and how this will impact on their brand marketing strategies. It is also the realisation of the vision of category management the few of us who were playing with this stuff 30 years ago had when the data was warehouse withdrawals, we had a bit of U&A consumer research, and managed it all with calculators.
Jun 11, 2012 | Branding, Change, Communication, Management, Marketing
Today in Sydney has been about as miserable as it gets. Rainy, cold, grey, just plain shitty, and not fair for a public holiday.
What a relief it was to find a distracting way to spend the afternoon.
After watching the replay of the unfinished French Open final, assiduously avoiding any media when I “rose” so I did not know the score, I started to clean up the hard drive of my laptop, removing some of the stuff that had accumulated to clog it up.
Amongst the “random savings”, were quite a number of advertisements I had accumulated from various sites, all of which had the common element of having struck me at some time as being enormously creative, funny, engaging, delivering a serious message, or just sufficiently different to really cut through, when flogging stuff from cars and fashion to condoms and computers. They all, in one way or another, rang my creative bell.
It also struck me that we are in the middle of a huge confluence of two enormously powerful forces, technical development, and creativity, that is changing everything. Hardly an original insight.
The technical advances of the last 15 years have reduced the costs of technology, and the distribution of content to relatively miniscule proportions, which has opened up huge new opportunities for creativity to be seen. However, the digital media has become so clogged with content, from the great to the absolutely inane, that being seen is still the greatest challenge, so creativity remains an essential element of all successful communication. It has also offered up the opportunity to focus laser-like on a very small group of individuals, delivering a compelling message that they would have been unlikely to get in the old mass communication days.
I cannot finish without offering my pick as the best ad of all time, at least the best I have seen. Perhaps surprisingly, it comes from my childhood, so is a very old ad, but is a very simple execution delivering a powerful message in unequivocal terms. Pity the companies management was not up to same standard as their communications people.
Jun 5, 2012 | Change, Lean, Management, OE, Operations
Robust, repeatable, and easily taught processes are the foundation of good outcomes. It therefore makes sense to consider the factors that separate good processes from poor ones, the effective from the ineffective.
The measure of the process has two parameters:
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- Repeatability. The outcome is repeatable, it has become the way things are done, so has an element of “automatic” about it.
- Agility. In apparent contradiction to the above, effective processes must also be sufficiently agile to accommodate the short term stuff that just happens, and flexible so that they can evolve to continue to deliver optimum results in response to the changes in the environment in which they operate.
Over 35 years of participating, observing and analysing processes, there appears to me to be a small number of enablers that drive effective processes. The weighting of these factors is different from situation to situation, but all are evident to some extent in every successful location.
- Deliberate Design. Successful processes are the outcome of a deliberate design. Sometimes the design comes after a process has evolved, and it is modified and optimised post birth, other times, the design is a deliberate response to a situation that requires a process.
- Infrastructure support. Processes do not survive in a vacuum, so the organisational and operational infrastructure, and the culture of the organisation play a significant role in their success. Without any of these three infrastructure foundations, a process will become sub-optimal.
- There is an “owner”. This is just another way of saying that someone in the organization takes specific responsibility for the effective management and support of the process. The more important the process, the more senior the process owner should be. In almost every situation, a process adds to other broader processes, and each component should have its own owner. Eg. An inventory management process has many sub-processes, from the documentation of deliveries to the appropriate allocation of purchase order numbers and general ledger postings. The “Inventory Management” process may be owned by the CFO, but the supporting components will be owned by others at the more operational levels.
- Process metrics are in place. The old saying, “you get what you measure” is accurate, without performance measurement against current criteria, as well as some that may reflect how the organisation expects the process to evolve, it will solidify at sub optimum performance levels.
- Process improvement. Continuous improvement of processes is a feature of successful businesses, the environment in which businesses operate is subject to ongoing change, and therefore the enabling processes need to evolve to best reflect the environment. In an apparent paradox, improvement is really only possible in a situation of stability. To improve a process you need to be able to identify the impact of a change in the process on the outcome, and you can only do that when the impact of all the existing variables are known.
Jun 4, 2012 | Change, Innovation, Management, Marketing
On a flight from a regional town last week, the attendant went through the nonsense of the “safety speech”. Instructions on how to do up the seat belt as if nobody knows is pretty dumb, but of total irrelevance is the instructions on how to use the life-jacket. I remain unconvinced that a little whistle and light will do much good if the engine stops at 20,000 feet, and the only water within 100km is in farmer Browns property dam. What about a parachute?
However, it is all taken so seriously, passenger jokes are not appreciated at all. Surely an example of a mould that needs busting.
Another mould more likely to be busted by the avalanche of mobile and electronic payments innovation is the banks credit card and cheque business model.
I have observed the missed opportunity by banks before, and the pace of change is accelerating rapidly picking up as Apple, Google, Paypal, and a host of startups like “Levelup” “Square” see the opportunity in disruption, and are chasing hard, often using technology that evolved in an ecosystem with nothing to do with banking.
These changes pose a huge problem for banks, one that their legacy structures and business models are apparently having big problems addressing. The role and performance of banks around the world over the last decade, and in the current European mess has removed any residual loyalty consumers may have had, and opened them up to non bank competition that will change the nature of banking in the coming decade. Opportunities abound to bust the current mould.
May 25, 2012 | Change, Management, Marketing, Operations, Personal Rant
Last week speaking to a gathering, I told the group that Australia was now a net importer of food with a $2.7 billion deficit in 2010-2011, according to the AFGC State of the Nation report . Utter disbelief was the primary reaction, “how could that be” being a typical response.
The Australian food industry is dying at a rapid rate, the pressures on local suppliers are heavy, and increasing all through the supply chain. Retail oligopoly, high $A, regulatory impositions that make no sense, costs of supporting local government social initiatives, and all the rest of the stuff that clogs up the wheels of competitiveness and productivity.
Heinz moved to NZ last year, SP exports, Australia’s largest tomato grower in liquidation, a second major grower hitting the wall in April, and this week, fresh tomatoes hit $10/kg in supermarkets. A sign of things to come in many categories.
We are watching the death by a thousand cuts of an industry, small businesses that garner little exposure are hitting the wall all over the place, Golden Circle gone, Goodman Fielder on the skids, growers are going broke across the board, dairy processing almost all owned overseas, about all that is left is meat, because we are amongst the biggest producers, and horticulture, because most fresh produce does not travel well.
Now, if we continue to go the way it seems we are destined to go, housebrand NPD will eventually overtake proprietary NPD as it has now done in the UK, and you need to ask where that NPD will occur. Certainly not here, because not only have we seen off the manufacturing businesses, we have substantially depreciated the technical capabilities necessary for innovation. Even the CSIRO is a shadow of its former self in the food industry, having removed much of the intellectual infrastructure as its masters re-aligned the priorities to other areas, and progressively trimmed the resources.
The recent drop in the $A will help, just a pity there are few businesses left to take up the slack.
May 11, 2012 | Change, Innovation
Creativity at its heart is a process of either something entirely different, or coming at something currently around by an entirely different path.
Weather it be a painting, piece of music, a new bit of electronic wizardry, or just a different way of combining inputs to generate an outcome, it is creative, on the edge, risky.
Risk assessment is by its nature a quantifying process of the past and projecting it forward. The conclusions are usually inhabited by assumptions of little change in the way things work, and come together, the future will be similar to the past, and we all know how well that works.
When we set out to commercialise creativity, we usually try to apply a risk assessment, hoping that oil and water will mix, this time.
Henry Ford, probably the most creative industrialist ever, when asked about the potential acceptance of his new fangled Model T, quipped “If I asked my potential customers what they wanted, they would have told me a faster buggy”. He allowed creativity to have its head. I’m sure he considered risk, but never in the context of projecting the past into the future, he was able to see an entirely different future.
Creativity is by its nature risky, and without risk, we get no progress.
