21 Lessons from a manufacturing turnaround

21 Lessons from a manufacturing turnaround

Aug 28, 2018 | Branding, Change, Leadership, Marketing, Strategy

 

I was asked the question ‘what did you learn from the turnaround of the GPD‘ a while ago, and was persuaded to present on it.

The GPD was the ‘General Products Division’ of the Dairy Farmers Co-Operative Ltd. It produced all the dairy products you manufacture with milk, which were at the time (mid 80’s) unregulated, while the stuff you put on your cereal in the mornings was regulated to the wahzoo. The GPD  was spun out of the much larger milk business so it could be run as a business, and not an outpost to absorb the milk not required in the regulated market.

Various aspects of that journey have been in these pages before, but I had never contemplated the question in depth and from a height, at the same time.

I started with the business just after it had been set up, then called the ‘By-Products Division’ and in the early stages of building a new ‘state of the art’ factory in Western Sydney.

The division was commercial road kill.  I know that as I did the first P&L by hand, (calculator, 18 column ledger sheets, pencil and rubber)  from scraps of information gathered and constructed from a variety of sources, and a lot of observation.

From that position, turning over $32 million, losing somewhere between $6 & $8 million, with the heavy commitment of the half finished high tech plant nobody knew how to run, 8 years later it was turning $162 million and making good money, with much improvement still to be done. It was a very substantial turnaround, not without its share of drama and missteps,  moments of joy and ‘what the hell just happened’. It was a journey that involved everybody in the business, at first reluctantly, then enthusiastically, had built astonishing momentum that was really only obvious to those on the inside.

Then it was stuffed up by a stupid decision to re-incorporate the business back into the milk business in order to ‘spread the successful commercial DNA‘  in preparation for the inevitable deregulation of white milk.

Over the first 6 years I carried responsibility for the Logistics, and part of  the sales, in addition to the marketing role I was hired for, and for  the last 2 years that the GPD was a separate entity, I was the GM. My ideal job at that time in my life.

Over the eight years, the business and its processes was totally reorganised, the  culture completely turned around, and we launched a string of successful market leading products, all of which contributed to the success.

So what did I learn, in no particular order?

  • You have to engage all employees, at all levels in the journey. They must understand their role and importance in that journey and to each other.
  • When you make a blue, recognise it early, correct and move on. Chasing a sunk investment that is not working is a terrible mistake to make.
  • Never look back with nostalgia, just for the lessons as input for what is next.
  • Price is not a measure of customer value, it is simply a means to express it that is understood, and unfortunately, usually misunderstood. Price only really matters when all other things are equal.
  • No business can be all things to all people.
  • Look after your small customers, one day they might be your big ones.
  • Standards of performance and behaviour have to be both present, well understood, transparent, and meticulously followed by those who set the tone.
  • The greater the general level of transparency the better. Hiding bad news never works, and brushing over problems just lets them fester and get worse. ‘Nip it in the bud’ is always a good piece of advice.
  • A managers job is to support the efforts of their staff, not the other way around. Successful companies extend trust to all employees at all levels, and deals with those who breach that trust openly, and absolutely consistently.
  • Breaching trust is very different to making a mistake. ‘Good’ mistakes are the result of initiative, trial and error implemented with due diligence, and are essential for learning.
  • Continuous investment in product and brand development is necessary, and even more important when times are tough. A great mistake is to see this investment as an expense item in the P&L, available to be managed to deliver a short term result. A powerful brand does not happen overnight, is the outcome of many thousands of small actions and improvements, as well as the obvious external marketing activity,  and it is the greatest asset any business can have.
  • The culture of the place is very hard to describe to an outsider, but clear to an insider. It is a mix of rules, experiences, stories, relationships, habits, and is more complex than any family.
  • Have in place a robust and well understood strategic process which serves as a framework for all decision making at all levels. When an opportunity presents itself, no matter how attractive it may seem, if it is outside the framework, leave it alone.
  • Have in place a robust but simple set of KPI’s intimately connected to the strategy, cascaded through every level, and proactively managed.
  • Never compete with a stronger competitor on their ground.
  • As far as possible, fund growth from cash flow. Long term debt is sometimes necessary, but can turn toxic when the best interests of the lender and the business diverge.
  • Be prepared to kill your favourite children and sacred cows, just be careful to ensure they are not golden geese in disguise.
  • Look for diversity in the thinking styles of people, and encourage that diversity of thought to bubble through and influence the whole business.
  • Treat employees as you would a trusted associate, not a piece on a chess board to be moved around at will. That trust will pay huge dividends in morale, productivity and loyalty
  • Institutionalise regular interaction and conversations across functions and up and down the company, without the impediment of formal roles.
  • Continuous improvement in everything should be so ingrained that people feel its absence keenly.

My final two years in Dairy Farmers were as GM Marketing of the much larger entity that now included the former GPD. While the business continued to be successful, the pace of change and improvement stalled under the dead weight of the still regulated milk business. After  two years, the MD of the business reached the end of his tether with me, constantly being a thorn in his side demanding change, and I with him, so one morning we parted company. The irony is that during this time, I (and the marketing team) launched the single most successful product I ever launched, the last in a long list of successful product launches as an employee. However, the means by which I had to subvert the ‘rules’ to do so were the nail in my corporate coffin.

Another two years on after my exit, the business was flogged off, ultimately to a Japanese brewer, at what I regarded as a fraction of its long term value. A sad end indeed to an iconic Australian food manufacturing business, and perhaps a metaphor for the whole food industry.

 

 

How to develop some of that vital  ‘fingerspitzengefuhl’

How to develop some of that vital  ‘fingerspitzengefuhl’

Aug 20, 2018 | Change, Leadership

 

Fingerspitzengefuhl is a German word that translates poorly (I am told, my German is marginal at best) meaning literally ‘finger tip feel’. The real meaning is the intuitive sense that develops in some people with deep domain knowledge, experience and expertise. Somehow, they just know when something ‘feels right’.

In this day of the metrics tsunami, this sense of deep understanding should be easy to find, or at least much easier than it was, but I find in my travels that it actually seems harder to find. Very few seem to have developed it, and those that have seem to effortlessly outplay their competition.

It occurred to  me that this is because the metrics we are trying to untangle only give us half the information.

Why, not what.

They all tell us what happened, that is what algorithms do, they record the events. Very rarely do I see people digging around to find out why they happened. In the ‘old days’ pre-digital, there were few metrics that were easy to come by, so we spent much more time understanding the why something had happened.

Outcomes, not Activities

Our metrics report on all sorts of activities, but do a less effective job of telling us the outcomes of a specific activity, in identifying the real cause and effect chains in place. There are now simply so many options that the causal chains are more obscured than they ever were. However, digging them out is gold, as it enables huge productivity gains in your marketing investments.

Yours and theirs.

Most metrics concentrate on measuring the success, or otherwise, of your own investments, with scant regard paid to understanding the returns your competition is generating from theirs. Commerce is a competitive sometimes Darwinian game, and knowing your opposition better than  they know themselves offers huge competitive rewards. Understanding how they will react to something you do enables you to wrong foot them, catch them off guard, sneak in their back door, and generally knock them around.

None of this comes without effort, it requires deep commitment to understanding, and often breaking with the status quo, but  the rewards are there for the bold. You will develop ‘fiingerspitzengefuhl’ and everyone else will marvel at your insight, and ability to out think and out manoeuvre  your competitors.

For SME’s, ‘fingerspitengefuhl’ is both the source of their competitive advantage and competitive disadvantage. On one hand, they are by their nature much closer to the customers than a larger business, unencumbered by the friction of a bureaucracy, and  therefore have the potential to be more agile and responsive. On the other, they are so busy working to keep the bills paid, without the support mechanisms of a larger business, that they never lift their heads to see what is going on around them.

Need some help? Give me a call.

Header credit: Michelangelo on the ceiling of the Sistine Chapel.

 

11 parameters to choose those who will be tomorrows leaders

11 parameters to choose those who will be tomorrows leaders

Aug 17, 2018 | Governance, Leadership

 

The rate of change is accelerating at a massive rate. A common challenge for all enterprises irrespective of size that have professional management, is how to pick those who will be able to deliver commercial longevity to the shareholders, whether they be spread across the globe, or members of a family.

The gap between those who have been successful, and those who will be successful is widening.

From time to time, I work with clients to plug capability and leadership gaps in their management ranks, and seek future leaders. I am certainly not a recruiter, my objective is not to fill a hole in order to gain a commission, it is to ensure that my clients can optimise their commercial and strategic outcomes.

The first step is to build a profile of the role, how it will contribute to the outcomes being sought. This requires a solid strategy that acknowledges the geometric rates of change happening around us. Without that strategic framework, the task of picking the right leader could just as well be done with a pin down the pub.

When we are all clear, we build a profile of the ideal candidate.

However, the order is clear. The organisation is first, we have to be certain about who will be doing what, how the objectives being sought will be achieved within the context of  the strategy, and finally, why we are doing what we are setting out to achieve, what value will it bring, and to who.

Having that work done, and it should be done as a matter of course, not just because there is a gap in capabilities, we consider the perfect candidate profile.

I have a template that has been used for 25 years with considerable success, consisting of 11 characteristics. Each position and situation is different, and there will never be a an absolutely perfect candidate, so compromises will inevitably be made, the trick is to make them in non- critical areas. Therefore considering the priorities of the requirements, and their relative weight gives a tool against which to measure the merits of candidates, and ensure some level of consistency as you progressively interview.

Competence.

There will always be things that are an absolute requirement of the job, deal breakers no matter how well all the other factors fit.

Trustworthiness.

Leading is tough, and increasingly trust is hard to win and easy to compromise. The candidates need to be the type who will be  absolutely straight, transparent, and follow through on commitments. In a senior management role, it always comes from doing what you say you will do, but also taking in potentially divergent and contrary views in the decision-making process, and  allowing due process, so everyone has a stake in the outcome.

Focus.

Leading even a modest sized business is full of distractions and red herrings. A leader needs to be able to focus on the few things that are really important that will deliver the outcomes, and not  be distracted by the urgent but not necessarily important items that always come up.

Curiosity.

I have  written before that I think curiosity is a defining feature of successful leaders into the future, and nothing  I have seen changes that view. A curious person, prepared to nurture and  enable their own curiosity, and inspire it in others,  will infect an organisation in a positive manner. Curious people are less likely to accept a status quo, believe what others believe simply because of the weight of numbers, they are inherently seekers of the facts, and uncomfortable with inconsistency and hearsay.

People skills.

This is a pretty generic description, but people skills are what makes the leader, as others are prepared to follow them irrespective of the trappings of power and position. Increasingly people make the difference, so having the right people in the right places in the organisation is crucial.

Passion.

Passion is the original communicable ‘disease’. While ‘Passion’  has become a cliché of recruiters ads, that does not diminish the power of passion to inspire, motivate, and engage.

Agility.

Being agile demands that you are able to change position quickly and efficiently in the face of new information, an emerging situation, competitive pressure, whatever it is that demands a response different to the last one. Agility is very different from inconsistency, it is also different from flexibility, which sees you bend in the face of change, but then move back to the former positon when the pressure eases off.

Self awareness

The ability to see yourself as others see you is crucial to effective leadership. Self awareness enables empathy, without which the best you can be is a good manager, not a leader.

Judgement.

You want someone who demonstrates good judgment in  stressful situations, does not let the emotion or heat of the moment overcome rational analysis. This is a really difficult one to measure, or even get a good handle on, as our unconscious reaction to   those we agree with is to warm to them, and vice versa.  The best way is to examine in some detail the performance and behavior of individuals when stress has been imposed in the past.

Fit.

The only person who can really change the culture is the person at the top. If the recruit is other than the top dog, to some degree they will have to be able to fit into a culture that exists with little power to make significant alterations beyond their own span of control. While it is good to have people who question the status quo, and offer alternatives, you also need a balance that ensures that any disruption leads to a positive outcome.

A bias to action.

Even when all the above is present, it does little good by osmosis, there has to be action. As the world gets faster and more complicated, those who take action will win, despite the setbacks that will occur. We all acknowledge that we learn from our mistakes, which presupposes we take action often enough to make some.

A key job of every leader is to replace themselves, and to develop a ‘bench’ that can fill capability gaps as they emerge. The really good leaders I have seen in large enterprises spend more time on this single task than any other, apart from developing and managing the culture, which is inextricably tied up with the personnel choices. It is also the responsibility of a governing board to ensure that emerging leadership is encouraged and nourished, as their primary responsibility is the long term commercial and social viability of  the enterprise.

 

Header credit: Hugh McLod at Gapingvoid.com

That essential second value proposition

That essential second value proposition

Aug 13, 2018 | Customers, Leadership

At the heart of every successful business is a promise made by a business to its customers and potential customers:  Value  can be created for them by commercial engagement.

I have never done any sort of strategic or marketing program where the definition of the Customer Value Proposition is not front and centre.

Often this is expressed as an ‘Elevator Pitch’, a summarised articulation of how that value can be created, usually by highlighting a problem or circumstance that will be addressed by using the products being offered. The logic is that you have 30 seconds, no more,  to make an impression, and given that people are more interested in themselves that you, the way to get their attention is to direct that 30 seconds to telling them how you will make their lives better.

It is a really effective strategy, road tested and tuned over many years.

Why is it then  that we so often fail to do the same thing for our stakeholders, particularly our employees?

Logically, if we can articulate why we make their lives better by working there, beyond the need to put food on their table,  and a roof over the kids heads, the result will be a more motivated and engaged workforce.

The second value proposition therefore is the one we make to our employees.

In most foyers these days there is some sort of mission statement, or statement of ‘business purpose,’ values, or some such fluffy words that could apply to just about every business around.

Who does not want to work for a business that respects customers, shows integrity, and transparency in the way it deals with employees?

Would it not be better to craft a genuine second value proposition aimed at stakeholders? In most cases, it will be very similar to those used on prospective customers, the desired outcome is the same: engagement and motivation.

Therefore the best way to create an engaged employee group is to repeat your customer value proposition to them, over and over, so it is clearly understood. Then you ensure that the tools are in place to enable every employee to contribute to the propositions delivery, and most importantly, live it every day, in every decision made, and every action taken.

Cartoon credit: Hugh Mcleod at Gapingvoid.com

E.&O.E. Very thoughtful reader Craig Armour http://www.kcarmour.com.au/ pointed out the error in the last paragraph. How much better it would be to have the employees sufficiently engaged that they could repeat the CVP back to you. Absolutely right.

 

The substantial value of ignorance

The substantial value of ignorance

Aug 9, 2018 | Governance, Leadership

Being seen as an expert is sometimes a problem, as everyone expects you to have all the answers.

Nobody has all the answers, and they are usually uncovered only by the judicious  use of questions.

As an outsider to businesses I work with, I come in with some level of anticipated expertise, otherwise why would I have been  hired? It is sometimes initially a bit disconcerting for employees and other stakeholders to be quizzed by a so called expert, called in to do a commercial diagnosis. However, the analogy to a doctor doing a diagnosis usually works to turn that around.

Asking questions does two things:

  • It leads to answers that will be essential to the diagnosis, and always leads to other questions you may not have considered that uncover the deeper realities rather than the superficial perception.
  • It acknowledges the value of the specific expertise of those being questioned. Everyone likes to be seen as an expert, or at least having some specialised knowledge valuable to someone else.

Many years ago I came across what Guru Peter Drucker called his ‘5 questions’ critical to diagnosing performance.

  1. What is your mission?
  2. Who is your customer?
  3. What does your customer value?
  4. What are your results?
  5. What are your plans?

I use these 5 questions all the time as a foundation of any diagnosis I do. Not always in order,  rarely asked the same way twice, but getting at the answers is the core task of the commercial diagnostician.

It goes to another of Drucker’s pithy statements , ‘The key value of a consultant was not to have the  right answers, but to ask the right questions’

Most of those I work with are smart enough to recognise when you are on to something, and then help you figure out the right solution for them, in their circumstances.

No consultant will ever know as much about the detail of a business as those who work inside it every day. It therefore makes little sense to assume as an outsider that you do. However, what an outsider does have is a wider view of the context of the business, an unencumbered sense of what is important and what is not, the location and nature of sacred cows, unstated behaviour drivers, and the informal networks at play among every group of humans.

Being an outsider allows you to ask seemingly innocent questions that challenge the status quo, and the conventional wisdoms that exist.

These are the ones that lead to the breakthrough thinking that enables change.

 

 

 

Culture: ‘People like us do things like this’

Culture: ‘People like us do things like this’

Aug 1, 2018 | Governance, Leadership

 

So said Seth Godin in a segment of a Q&A session.

Articulating culture is really hard, my go-to definition to date has always been ‘The way we do it around here‘ from Michael Porter.

This articulation ‘People like us do things like this‘ adds to it, by widening the circle to which it applies.

If there is  not a shared set of beliefs and behavioral norms that describe how and why you do the things you do, in any organisation or institution, chances are the outcomes will be suboptimal.

I recommend you watch this, (it is only 7 minutes) and while the answer is to a question from a politician on how to win, it has far wider implications for us all.

Then think about the behaviour you want, and the means by which you can measure progress towards it to build a sustaining culture.