Dec 24, 2021 | Change, Governance, Leadership
The PM has made an absolute mess of it, bouncing from one headline to another like a clown on speed. You must give credit for the energy, pity it is expended on trivialities rather than tackling the big questions.
The government has changed tack in the face of the coming election, they cannot any longer claim to be the better fiscal managers of the economy, better husbanding our tax money in the face of the huge deficit, largess to corporations under job keeper who did not need or qualify for it, and the massive pork barrels rolled out over the past few years. $1.9 billion to government seats, while labour held seats received $530 million. The most recent report being a review of 19,000 grants in a ratio grossly favouring government seats published by the SMH. The one I live in, the marginal seat of Reid in Sydney, has received $14.8 million, so the member will be crowing about how effective she has been. To be fair, she does seem to have been a smart and engaged local member with an impressive academic and community engagement resume, as well as a solid foundation of common sense. The neighbouring seat of Grayndler, held by the opposition leader, in at least as needy a place as Reid, received $718,000. Will it be enough to save Reid for the Liberal party? Who knows, but amongst my peers it is the solid view that a vote for an effective and moderate local member is also a vote for an ineffective, narrow minded, spin driven and vindictive Prime Minister. If this is the state of governance in an area with publicly available information, heaven knows the mess that those areas, increasingly protected from public view, is in.
In March the Royal Commission into Aged care dropped onto the table, detailing a chronically under-governed industry making the privatised providers a fortune at the expense of the most vulnerable amongst us. It is a wrangle between the feds who regulate aged care, and the States who fund it, nobody carries responsibility. On top of the deaths that occurred in Victoria from Covid mismanagement, it is surprising that this has been wiped off public awareness. It is an ongoing disgrace. Perhaps it is the result of the monumental cock-up the feds made of the vaccine rollout in the early part of the year, and the wrangling the went on amongst the states that has wiped the Commission’s findings from public condemnation.
There was a gabfest in Glasgow, which seemed to be useful, apart from the lack of contribution made by Australia. Sadly, the PM made his ground-breaking presentation outlining ‘The Australian way’ to a packed house of a cleaner, sound recordist and journalist who copped the ‘dog watch’ and was probably asleep. Even the hecklers were too disinterested to show. I continue to find the contrast between the reliance on the science in relation to Corona, and the total dismissal of the science in relation to the reality of climate change, a complete mystery.
Then, just as we thought the worst was over, along comes Omicron, and once again, we are caught with our heads up our arses. My old dad used to say everyone made mistakes, but only a retard made the same one twice. The federal leadership must all be retards by that measure.
At the state level, there has been wholesale leadership change in NSW, and it has become very clear that premiers vowing to keep their states sovereign is a winning strategy. I conclude that the winning is only because of the total leadership vacuum coming from Canberra.
The Covid battle, seemingly being won towards the end of the year, has suddenly in December been put back on the agenda, this week blowing up with record cases being identified. The emergence of this new, hyper-spreadable omicron version may yet force punitive action to again stamp on human beings doing what they need to do for their own psychological well-being, congregate and communicate in person. As I write this on Christmas Eve, new Covid cases are comfortably over 5,000 a day, a level that a month ago would have induced panic amongst NSW politicians, but now seems rather ho-hum.
Rorts have become so common, they are almost ignored by the media and voters, apart probably from that modest percentage of voters who are deeply engaged and angered in the process. There have been plenty to pick from. Almost $300 million given to Australia’s largest companies who actually increased earnings during the lockdown seems just so wrong. Another 6.2 billion was forked out to businesses with more than 10 million in turnover that did not meet the 30% fall in turnover threshold in the first 6 months of the scheme. Meanwhile, small businesses are closing, and those in the arts, a foundation of our cultural life are left to their own devices. Despite the faults and rorts, the money pumped into the economy has been essential, and cushioned the Covid induced fall in activity that happened.
The ‘Merde massive’ perpetrated by the government unilaterally tearing up the submarine contract then lying about the circumstances leading up to, it leaves Australia looking like an unreliable partner. Not much antidote to our trade problems there, coming as they do on top of the idiotic rattling of our tiny sabre towards our biggest trading partner China. Let’s hope they are sufficiently gentlemanly to hold off until we have our new subs, about the time my granddaughter will be retiring.
What about the leadership wrangling in the junior government partner, the National party, giving us Barnaby back as deputy PM. Clearly, Barnaby and the usual PM can barely stand to be in the same room, not a recipe for good governance. Nobody seems to like the Nats, outside of the few seats they manage to hold, which I suspect will be subject to aggressive independent focus in the lead up to the next election. Speaking of which, many of the sensible moderates in the liberal party will be up against it, as they struggle to publicly support climate policies they must privately consider no better than wishful thinking by a few recalcitrant nig-nogs.
Amongst all this, the Liberal Government discovered belatedly that the culture in and around parliament house stank. In fact, it stinks so much that in any other workplace, executives would be fitted for striped suits and shipped off for an extended holiday at public expense. This has been very inconvenient in the early stages of an election runway for some time early in 2022. However, the PM is making the supreme effort to put it all behind him as he massages messages, and the truth. I wonder if the report, promised to be public, commissioned by the PM from his departmental secretary investigating the accusation of rape in the defence ministers office will ever see the light of day? I guess not.
More broadly, despite the covid induced trading environment, property prices in Sydney and Melbourne have gone mad. Lots of people taking advantage of the historically low interest rates, ignoring the consideration of what happens when interest rates go up. The reserve bank governor after reassuring us they will stay low for several more years has recently softened his language. This leads to a conclusion that we will see them creep upby the middle of next year, which could lead to a middle-class bloodbath. Please note, I am absolutely unqualified to make this prediction, but common sense does dictate an increase soon.
Meanwhile, Small Business struggles to generate revenue, pay wages, and keep the place going. A quick look around most shopping areas at the closed retail outlets, and industrial parks at the locked factory units will tell you how well that is going.
The war (or was it another ‘police action’?) in Afghanistan is over. Pity about those Afghans left there, particularly the reviled Hazaras who are paying a high price for our so called ‘principles’. Australia played its part in the deception of those in the region, and ourselves, right from the beginning of the mess when President Bush decided to punish Al Qaeda after 9/11 2001, and invaded Iraq. The excuse was the non-existent WMD, which had nothing to do with 9/11. We ended up 20 years later with an ignominious withdrawal from Afghanistan after massive expenditure of gold and more importantly, lives.
The Americans managed to get rid of their President in the November 2020 elections, with Biden taking over in January, but not before the US Capitol was subjected to scenes reminiscent of a coup in some South American backwater. The dangerous sniping from the sidelines by Trump continues unabated, but it appears to me that fewer beyond the rotten heart of the republican party are taking notice every day.
Division throughout the developed world has seen the rich get richer and the gap widening to all the rest over the last 12 months. Social media has played a role in this, and the backlash will lead to regulation of some type. In the US, Congress is starting to consider how they go about this. Problem is, very few of them have the foggiest idea, so the potential for stupidity is substantial. Europe has had a try, but the GDPR (General Data protection Regulation) regulations have not slowed down the rates of ‘anti-social’ material by much, largely because the main platforms are US owned. Australia’s pathetic attempt to fund journalism becoming law in February by forcing social platforms to pay for news content, has just helped News Corp to fatten its bottom line. Facebook demonstrated its contemptuous corporate power by shutting down in Australia for a day, reminding everyone that they were the biggest bully in the playground. This dog is best repealed, quickly, and replaced by some sensible measures drawn up with the public interest in mind.
Supply chains around the world have been ripped apart. If you can get a container delivered to Sydney or Melbourne it will cost you 4 to 5 times what it cost a year ago. Imported finished products and raw materials are in short supply, and prices have skyrocketed. There is a real possibility our trucks will stop progressively in the absence of AdBlue, an additive made from urea, an ingredient in fertiliser. Australia’s only producer Incitec Pivot is closing its Brisbane factory because they cannot get a reliable gas supply, ironic given Australia is the biggest supplier of LNG into the world market. China makes 83% of the world’s supply of urea, and needs it in the domestic industry, so no more exports, and the rest of us can get stuffed. This is an example of economic power being wielded by what is on some measures already the biggest in the world, and on target to be the biggest on all measures within a year or two. This assumes that the fragile Chinese financial system does not crash, that an economy controlled by a central power can defy the laws of economics as we currently understand them. Russia failed 40 years ago in a similar experiment, but I suspect the Chinese are smarter, and have learnt the lessons of history.
I have missed a lot; it has been a busy and eventful year despite the successive lockdowns. Let me know what the two or three things you felt were most important to you.
I have tried to think of good things that happened, thought I would leave them to the end. Well, here I am, at the end, and I cannot think of any. Must be some, help me here.
In any event, have a safe and merry Christmas, and come back in 2022 looking for some improvement personally, professionally, and in our communities.
Thanks for reading, commenting, and sharing this year, or even if this is the first dose, make it the first of many.
Merry Christmas, and have a great 2022, a low bar to be better than 2021
Allen.
Oct 11, 2021 | Analytics, Change, Governance
The starting point of any review process is to define the current situation.
In every case, the trends are as important, and often more important than the immediate position, as they are often leading indicators of what might happen into the future that will impact your planning.
The trends give a picture over time of the success or otherwise of the organisation, which leads us to examine some areas in more detail than others, asking ourselves the ever-harder questions.
The four parameters are also cumulative and absolutely interdependent.
Under the ‘Strategic’ heading there is a wide range of areas for examination. The most obvious are:
Regulation.
No enterprise can survive, legally, if it is outside the regulations that control it.
Looking not only at the regulations that are in place now, but what might come down the pipe at you is important, in some cases critical.
For example: if you are exporting manufactured products into the E.U. it is likely that in the near future, there will be a tariff added to any that already exist to accommodate the imbalance between there being no carbon tax in this country, while there is one in the EU. In addition, the recent submarines decision will likely disrupt any movement towards increased access to the EU.
Competitive environment and your relative place.
What is the reality of your competitive position?
Being tough on yourself, ensuring conformation bias plays no role is important.
Strengths and Weaknesses are internal to the enterprise, while opportunities and threats are external.
Strengths and Weaknesses are always relative to those of your opposition, and/or what customers are demanding.
Just because you think you do a great job, and you may, it is not a strength unless it is a better job, in customers eyes than the opposition can deliver.
Similarly with weaknesses, if customers do not care, then why does it matter? Only consider weaknesses that impact on your competitive performance relative to the opposition, and to what the market is looking for.
Customers.
As Peter Drucker noted, ‘The purpose of a business is to create and keep a customer’
Your business relies on them, they should be the centre of everything you do, think and say.
Understanding the nature, shape, and trends in your customer base, what needs you are meeting, what needs may be there that you are not meeting, why they are customers of yours, and not someone else’s, what they think about the service you deliver.
Customers must see the value you deliver, or they will walk.
Similarly, it is reasonable to ask yourself ’are they the customers we want?
Measuring customer ‘stickiness’ is the key to a successful business, so much so that if you did nothing else, it would serve you well.
Three measures I use:
Share of wallet. (SOW)
How much of the money a customer spends on products you could provide, do they spend with you? What is your share of their ‘wallet’?
This always opens very interesting thinking and discussions about the scope of the wallet. E.g., Imagine you are an insurance company with a big share of the car insurance market.
Should your wallet also include home, life, professional indemnity? Or do you niche even further to vintage and collectable cars?
These are the strategic decisions that need to be made before a marketing plan can evolve.
This analysis does not have to be confined to individual customers, it may be applicable to a cohort of very similar customers, to give you a SOW of a market segment.
There are some tough choices here, you have limited resources, and need to apply them where you will generate the greatest leverage.
Leverage is a word I use a lot. We all know what it means: doing more with less.
Customer retention, churn, and lifetime value.
How long do customers stay with you, how much do they spend?
Both measures are useful when applied to differing groups of customers, geographic, demographic, or any other parameter that defines the behaviour of a group.
You cannot do enough work in this space, the better you know your customers, the better able you will be to serve them, increase your share of their wallets, keep them as custumers, and have them refer you to their friends and networks, still the most powerful form of marketing there is.
Lifetime Value is a good measure, simply the sales to a customer X the average life of a customer.
Customer Pareto.
The 80/20 rule is immensely valuable. Measuring the profitability, revenue, or margin, perhaps the three of them, offers insights to performance and highlights areas for improvement.
A catch with this approach: it will tend to focus attention on the currently most valuable customers. However, most of your best customers started out as small first timers. Some will be more strategically valuable for one reason or another, so do not let the Pareto discard them prematurely.
Market competitiveness.
Michael Porters competitive analysis tool has passed the test of time.
It is a little outdated now as the complication of all the new digital channels adds complexity, but the tool remains extremely useful.
There is no business where there is not some value in thinking through the competitive forces driving your industry.
Product & market lifecycle.
All products go through a lifecycle, of some sort.
Launch, growth, maturity, decline.
Even a failed product has a life, albeit a short one.
Businesses go through a similar lifecycle, it always holds, in one way or another.
It is a useful tool to consider at which point individual products, product groups, markets, and businesses are situated, and the pattern of their growth and decline.
Where would you put EV cars on this graph? Mobile phones? Cigarettes?
Occasionally a product, or business bucks the trend, and comes back, the product changes in some way, and finds a new lease of life.
The BCG tool is well known. It is a tool through which to consider your product portfolio.
A dog, to be euthanised. A cow, to be milked, A star, to be nurtured and protected
Who knows, it will become a dog, or a superstar, you must decide what to do with it in terms of marketing investment.
Business model.
Your business model, is the means by which you turn your value proposition into revenue.
Clarity about your business model, and how to optimise the mechanics is a key component of considering your current situation, and how best to leverage it.
The strategies that will work for one model may not work for another.
E.g., The wholesale model is becoming redundant, as the net has opened the communication channels and opportunities for buyers and sellers to collaborate, and manage ordering and logistics, a role wholesalers used to fill.
Two sided and subscription models are the ones that have flourished with the net. eBay, Airbnb, Netflix, Amazon prime, all the SaaS software you use.
You must be clear about your business model, as experience suggests that two different Business models sitting under the one roof is very uncomfortable and creates friction.
Every business requires money to operate, the ‘Working capital’ of the business.
Every business also has some fixed costs, even home businesses. Insurance, power, communications, and so on.
Every business that has any sort of manufacturing, from a simple transformation to complex manufacturing has the cost of goods sold, plus the equipment and labour necessary to do the transformation, as well as the fixed costs of factories. The processes to forecast and manage your money need to be robust and subject to continuous improvement.
Budgets.
Given we are talking about the future, we know it will not be as we expect, so the budgets flowing from your forecasts will be wrong, question is by how much, how well do we adjust, and how much did we learn on the way through.
I strongly favour rolling budgets, usually 3 months, which parallel rolling marketing review, and forward planning.
You have in effect two reporting dimensions.
Financial accounts.
The financial accounts are the ones we see in every annual report. There are statutory formats, lists of required information, and the definition of how varying situations will be treated. They are for public consumption, analysis and comparison, and come in three standard sections: Cash flow, Profit and Loss from trading, and the Balance sheet.
Management accounts
These are the reports used internally to manage the business.
They use the same raw data, and the same 3 core reports as the financial accounts, but go much deeper, and have an entirely different purpose.
The management reports are what you use to allocate resources, track their application, monitor the financial outcomes of the decisions you take, and manage the assets, tangible, and intangible, of the business.
For SME’s, the most important measure is your cash flow. Without cash, you are dead, so a detailed understanding of your cash position is essential.
Hidden within the management accounts are the seven financial levers that should be measured and managed. Price, Volume, COGS, Overheads, A/c Receivable, A/c payable, and inventory.
Businesses are usually structured vertically. However, customers interact with businesses horizontally.
A customer has no interest in how you are organised, and how you work, their only interest is in having the product they paid for perform up to or beyond expectations, in relieving the itch they feel, solving the problem they have.
Putting the customer at the centre of your efforts, which is where they need to be in order to be successful, means that you focus on the horizontal, external customer experience, not the internal, vertical organisational experience.
Forget this basic fact at your peril.
Businesses are made up of a series of processes. Order to delivery, Cash to cash, Raw material to finished product, Acquisition of and retention of customers, and others.
Every one of these processes is critical.
Culture is most often defined by repeating Michael Porters assertion that: “culture is the way we do things round here.” However, this leaves the question of what drives the way things are done.
Performance management.
The manner in which KPI’s are allocated, and usually they are financial KPI’s that dominate, is a critical consideration, as they are often in conflict, driven by functional considerations of no interest to customers.
For example. If your factory manager’s KPI’s are all about the efficient running of the factory, with no allowances for the downtime, experimentation, and pilot runs, that are necessary during the product development stage, you will have trouble getting a new product that is OK on the development bench validated through the factory.
This always leads to problems in the market.
A similar scenario comes from many salespeople, they often do not report to marketing, but are crucial in the marketing plan implementation.
Overlooking ‘Culture’ in the preparation and execution of a plan often sounds the death nell at execution time.
Flow.
Imagine a river, running unimpeded by rapids, narrow bits, waterfalls, and varying depth along its path.
It looks leisurely, smooth, but more water passes through than a similar river with all the impediments.
The latter just looks busier, more activity, turbulence, conflicting paths around the impediments.
Processes in a business are similar.
Smooth processes that hand a task over, one person to the next, one part of the process to the next at the critical time, with the minimum of disruption, the better.
More gets done.
Flow is a state that comes from a place of communication, collaboration, and continuous improvement.
All are enhanced by tools, but in the end, you need people to work together, communicate and continually improve to achieve that state.
Flow is an outcome of a positive egalitarian culture.
One of the most common problems I see in businesses as I wander around is constant never-ending firefighting.
That happens because adequate, repeatable processes are not in place,
Next time you walk into a new office, or factory, look for Flow.
You will know it when you see it and know further that this is a place with whom you want to do business.
Flow can be seen and felt, and it can also be measured by cycle time and throughput.
Culture is an outcome of all the interactions, big and small people have with each other.
‘The way we do things around here’
It is therefore critical that you hire the right people.
You can measure engagement, and how happy and fulfilled people are. A useful rule is to
Hire slowly, fire fast, and with great care. When you must terminate someone, it will have a profound impact on them. It is vital that you do it with empathy and make the landing for them as soft as possible. This will aid them immensely, but as important, is the impact on those who are left.
If they see the departed as a valuable member, they will be wondering if they are next. ’Why not me’ survivor syndrome, is a powerful psychological force. If they see the departed as a good riddance, the fact that you did it with empathy will also be noted and bind the remainers closer to the business.
Besides, when you feel you have to fire someone, it is usually your mistake in hiring them in the first place.
A further good measure is how time is spent. Keeping timesheets is not what this is about, it is a cultural behaviour that you leave time, block it out in your diaries if that works for you, to give your self-time to see what is around you. Most in modern businesses are so busy they do not allow the time to look up, observe, and see the opportunities that may pop up. We are so busy we miss them, confirmation bias dictates what we do see, so act deliberately to remove that inherent bias from time to time and look up.
For many SME’s, the opportunity to go to industry trade shows, forums, and formal networks of peers is a great way of doing this. Chance then can catch up with you.
Keep the bias to action without which you will get nothing done, but make the time to look around with clear eyes, meet new people, as opportunities are always attached to people, they do not float around looking for a place to land.
Bias for action, must be part of the culture.
Ask yourself the question ‘Do I really need more information, or do I need to simply act on what I have’
Most decisions are reversable so long as you have good feedback loops and are prepared to recognise early that a course of action is not going to deliver expected results.
Marketing is always about making choices with incomplete information, do not allow yourself to be paralysed by the missing pieces, act and be prepared to back away, having learnt something new. Bias for action is a cultural thing, demonstrated by the leadership.
The secret sauce of a successful business is to have a successful culture, one that ensures that everyone knows that what they are doing today is correlated and contributing to the long-term achievement of the mission, strategic objectives, whatever you choose to call it. Every person understands the contribution they are making today, for that long term achievement of the goals.
Defining your current situation is like having a detailed map of the block of land you intent to build on before you start designing the house. The better the map, the more functional and useful the house design will be.
Take the time, and make the effort to do it well. An independent set of eyes always helps.
