Leadership | StrategyAudit

The ‘Change Quadrant’

Jul 27, 2018 | Change, Leadership

‘Death and taxes are the only certainties in life’. Perhaps this used to be true, but no longer, there is now a third certainty:

Change.

Like it or not, it is happening around you right now.

Those charged with the responsibility of running enterprises, managers and Directors, have to be able to lead change, taking all stakeholders with them.

Clearly not all are capable of changing themselves, let alone leading anyone else.

It seems to me that people react to the prospect and fact of change in one of 4 differing ways.

Change avoiders.

There are those who are rooted in the past. Whatever the status quo may be, it is not as good as it has been in the past, so they are positively motivated to ensure that you do not move further away from this past nirvana they see

Only when there is no choice. These people will not welcome change, they want nothing to be different, and will only change at the end of a pointed stick, and often then only when it is too late, the train has left the station, then they complain about missing it.

Change followers.

There are those who want to be led, they are open to change , as long as somebody else does it for them, and ensures their life is easy. Generally they are happy to tag along and take the benefits of change, and make the contributions to the change so long as they are assisted to it.

Change troublemakers.

This is what they are seen as, but these are often the ones who actually make it happen, the ones who treat the risks and challenges of change as a personal opportunity to make a mark.

Change embracers.

This group seeks change all the time as some sort of stimulant, sometimes as an antidote to everything else that is annoying them in their lives. They are often counter productive as they forget that change does need to be allowed to evolve, and bed itself down, or it fails to take hold.

These four groups fall neatly into a quadrant, and you do need elements of all four in a change project, as when well managed, all have something to offer. In assembling a team to develop and implement change, a careful selection of the ‘change profile’ of all potential members should be considered in order to get the blend that best matches the sorts of outcomes you anticipate, and the nature of the task. Knowing yourself, which group you fall into is a pretty important first step.

Cartoon credit: Hugh McLeod at gapingvoid.com

The ethical underpinning of strategy & marketing is being eroded.

Jul 11, 2018 | Change, Governance, Leadership, Marketing

Marketing is about adding value, finding innovative ways to solve problems. Sometimes marketers set out to ‘solve’ problems that around the BBQ would be termed a ‘1st world’ problem.

‘Which dog manicurist’ rates in my mind as such a problem, the subject of a conversation I was unfortunately involved in at a local dog park a few weeks ago.

However, sometimes extremes are pushed.

An extreme example perhaps, but the fiasco surrounding breastfeeding at the recent World Health Organisation meeting in Geneva convened in the belief that there was a consensus informed by science to be ratified, shines a light on the ethical challenges we face.

For some, mostly our wives and mothers, it is a highly emotional question, to breastfeed or not, substituting formula for the real thing. It seems that the 1st world is returning to breastfeeding as the developing world turns to formula, believing it is a sign of maturity, sophistication, something to which they aspire.

To me the answer to breastfeed or not is blindingly obvious.

We evolved as mammals, breastmilk evolved with us, and is therefore uniquely suited to the nurture and development of a baby. The high jacking of breastfeeding by those flogging formula for profit is to my mind an unethical, indeed immoral act of marketing strategy.

Formula is terrific for those who for one reason or another, cannot feed. Back in the day the baby would have either died, or been passed on to someone who could, a ‘wet-nurse’ for nourishment.

The sight of the WHO being managed by those with an agenda favouring formula for profit over the natural product appals me.

Where has our moral compass been hidden?

Locally, the marketing for profit before ethics brigade have taken over in the financial services industry, insurance, urban development, and a host of other sectors, and we are all the poorer for it.

Bit by bit the fabric of our communities is being ripped apart, the evolutionary power of Dunbar’s number thrown against the wall of technology as the power to communicate and collaborate erodes what made us human in the first place.

Somewhere, somehow we have to find the tipping point, and start to recognise that all that is new is not necessarily good.

7 Leadership lessons from my granddaughter.

Jun 12, 2018 | Leadership

Little kids are just amazing to watch, before they have absorbed the rules of thinking and behavior that we adults impose on them.

My granddaughter is just three, and yet she displays many of the leadership characteristics so admired in the libraries written about what it takes to be a great leader. Her only failing against the list is that she is as yet unable to clearly articulate the stuff swirling in her little head, but the palpable excitement at the world around her more than makes up for this minor shortcoming.

Relentless curiosity.

She is never satisfied with the first answer, and rarely the second, ‘Why’ being her favourite question. To an adult this can be annoying, so we set in place rules to avoid having to answer consecutive ‘why’ questions, and kids learn quickly not to. This is a lesson we should ‘unlearn’ for an engaging environment. Last week, at about the 4th ‘why’ to a question about the operation of a set of traffic lights to be seen out of their kitchen window, her mother responded by saying ‘because I said so’, to which my granddaughter responded, ‘Mummy, that is not an answer’.

No boundaries.

Nothing is off limits, her boundless curiosity takes her all sorts of places both in her mind and physically. Last week walking with her in the local park, she took off to what she later told me was her favorite ‘place,’ which was an ants nest in a garden. Down on her haunches for 10 minutes she watched the comings and goings of a colony of ants, all the while asking questions I found I could not properly answer.

Feedback = Learning.

She is a little ‘info-sponge’. Give her an answer to one of her relentless questions she accepts, and you can almost see it get stored away, for use later on. Walking back from the park, two tradies were struggling to get a heavy bit of gear off the back of their ute. Quick as a flash she told them they needed someone else to help, just like the ants. Then volunteered me. Delegated to by a three year old!

No feedback = Rebellion.

Being ignored is a sin to her. When she asks a question, or seeks attention in some way, ignoring her, or dismissing the effort leads to rebellion, displayed in a very diverse set of responses, from noise, to walking away muttering, to going somewhere she is normally not allowed to go. (best spot is under her Dads desk, amongst the rats nest of cables, where all sorts of mischief can be achieved in a very short time. Mums make-up once got a run, but the container was put out of reach, a problem she is no doubt still working on)

Try another way.

She has a box of Duplo bricks that get assembled, scattered around, and reassembled as something different, a legacy from her father at the same age dug out of our roof storage. While the attention span is still a bit short, she sets out to make something, usually from a picture in a book, then gets cranky because it is hard to see the similarity, but that does not stop her pulling bits off and replacing them with different bits in different places in an effort to replicate the picture. Usually they are unrecognisable to anyone but her, but she will tell you which bit of her construction relates to what in the picture.

Inclusion.

While she does love to be the center of attention, and often is, she is generally also happy to be just included in a conversation. She will happily sit beside Mum or Dad when there are several adults around having a chat, observing the conversation, and occasionally making some sort of contribution, usually one we adults fail to properly comprehend, but which is nevertheless valuable to her.

Memory of an elephant.

Even at her tender age, she is able to recognise a different answer to a similar question, and responds poorly to the inconsistency. In the absence of an explanation of why this time it is different, that meets some standard she seems to have evolved, the inconsistency niggles her. It will come back later at a seemingly random time in the form of another question, that seems to activate another series of ‘Whys’.

At three she is a joy, God help her parents when she is 16! However, by then she will probably have been conditioned by school, peers, the boss in her part time job, and even her parents, just to go along with the flow to make life easier.

I hope not, as that would nullify what I call Grandparents revenge, (the opportunity to engage with grandchildren, but then hand them back to their parents when the going gets tough), and diminish her, and the contribution she has the innate capacity to make to those around her.

Is the supermarket business model about to be retired?

May 30, 2018 | Governance, Leadership, Strategy

The face of the supermarket in the 2030’s is emerging, and I suspect it is not a face most of us will warm to immediately. The combination of artificial intelligence and the capacity to automate just about everything will render much of the current supermarket business model obsolete.

The model of Amazon Go and Chinese Hema supermarkets will apply particularly to convenience stores, in high traffic high rent areas, like the inner city and business centres. Our grocery shopping will be done on line by voice, and delivered by some amalgam of autonomous vehicle, Amazon, Ocado, or delivery services like FedEx, Uber and others that will spring up, which will hook up with the owners of the automated Pick ‘n Pack warehouses.

Amazon Alexa and other technology deploying voice ordering ensures a limitation of options, to those that favour the seller. With voice, we get the convenience of ordering from the couch, but in exchange we give up the visual cues of a store where we usually have several options, with differing characteristics and price points, and the resulting capacity of marketers to hang their hats on a point of differentiation to a group of consumers, a niche in the market. Voice removes all that, and will offer you only the one or two that the seller recommends, but their recommendations will be based on their commercial objectives, revenue, margin, and stock rotation, not yours, which are likely to be entirely different.

The recently announced deal between Ocado and Kroger adds a whole new dimension. Ocado is the first entirely e-commerce grocery business that I am aware of, to have leveraged themselves into a controlling position, and it took a while. Like all on line supermarkets, it struggled with fresh produce, and the higher customer acquisition costs that are the result of having no physical shops. Ocado launched in 2000, went public in 2010, but did not turn a profit until 2014, a modest 7 million quid on a turnover of a billion. The logic appears to be developing and licencing their technology, but little happened beyond the deal with the John Lewis owned Waitrose until Amazon bought Whole Foods in August 2017, which jump-started a rush into the technology to automate order receipt, pick, pack, and delivery. Suddenly everyone was chasing them, and in November 2017 a deal was struck with Casino in France, and talks with others advanced quickly, culminating with the Kroger deal.

Kroger is deeply threatened by the Whole foods purchase by Amazon, and while Wal-Mart dominates US grocery, Kroger is a strong second, but has not had a viable on line offering. The potential for Amazon to convert some or all of Whole Foods sites into local delivery warehouses seems pretty real to me, which would give the relatively low on line grocery share in the US (estimated at 1.5% Vs 7.5% in the UK) a real kick along, and potentially add Kroger to the conga line of US retailers heading for the liquidator. From Ocado’s perspective, the deal offers access to the biggest grocery market in the world for their technology, and led to a share price jump that will be making patient investors reach for the bubbly.

If we think that here in Australia we are insulated from all this, we are in la la land. While the distances here add to the complication, it is a predictable number, and therefore manageable by algorithm. I predict that one or both of the gorillas will be on a plane to talk to Ocado very quickly, if they have not already, although Coles might be pre-occupied with moving out of home, and resetting up in their own digs. Wesfarmers have been badly burnt by the Bunnings foray into the UK, brought to an embarrassing end last week by the sale of the former Homebase business for 1 pound, and would I suspect be wary of supporting an investment of this type for a departing problem child. It might just be an ideal time for Woolies to get a jump on them?

Who will pay for tomorrow’s hospitals?

May 23, 2018 | Governance, Leadership, rant

I did not watch the royal wedding. That does not mean I am a republican, or anti-monarchist, it simply means I am not interested.

If they want to get married, let them get on with it, they do not need the approval of the masses. After all, they are both adults, both famous for being famous, and one has already been there and done that!

I am also not interested in going to church. That does not mean I have no moral compass, or personal code that has as a base what could loosely be termed the 10 commandments. They make sense irrespective of your brand of faith.

What I am interested in is the replacement of important questions and issues, such as how we live together, how we treat others, and who pays the piper, by this wild and to my mind absurd, emotional response to two thirty somethings getting married.

It seems to me that the things that got us were we are, no longer hold any sway.

We have a tax system that is broken, at a time when we voters appear to be demanding more and more. Those with the power, which really means those few individuals running multinational corporations, hold the power to, and are personally paid to ensure the institutions they run pay as little tax as possible, and they have the resources to find the cracks in the system through which they can wriggle.

Amazon is a prime example, along with their digital multinational friends. They are disrupting retail, and a host of other domains, while investing heavily in new services in the cloud. Great you say, they deserve to be successful, and they do, but Amazon is doing it by more than just being the smartest in the room, they are being subsidised by their competitors.

Amazon trades at what is effectively break even, yet it will probably become the most valuable company in the world very soon. It has grown by reinvesting their profits into becoming bigger and more powerful across their areas of operation, and as investment is a tax deduction, they pay no tax.

Their competitors do pay tax, they are largely those who were around before Amazon emerged, but will not be around much longer to pay for the schools and hospitals we all want.

Who will pay for them then?

Not Amazon or Apple, or Google, or Netflix, they are reinvesting in growth at the expense of their competitors, and in the process denying our kids a place to go to school.

Amazon has flipped the system.

Listed companies are usually judged by their profitability, usually on an absurdly short term basis. Companies sweat the books and beat up their staff to deliver on optimistic forecasts of quarterly profitability. By contrast, Jeff Bezos makes no or negligible profits and has made vision and the long term the source of share value.

Amazing!

Any business that pays more tax than it is legally required to do is not acting in the best interests of shareholders, or so the mantra goes, as was so dramatically stated by the late Kerry Packer in 1991. Therefore in this day of internationalised supply chains, and low tax regimes in fly blown little islands scattered around the place, they register as businesses, and engage in legal but morally bankrupt practises.

In Australia we have in addition the sight of personal greed, cronyism, and utter lack of personal and corporate integrity being brought into the light by Royal Commissioner Hayne and colleagues. I am sure that this level of malfeasance exists elsewhere, most probably in greater volumes, but that does not make the sight any more palatable. Most probably nobody will go to gaol, a few will be banned from being directors for a while, and there will be mutterings of regret forgotten almost before the words are out. Then we have the competing pollies promising handouts of money we do not have, a bill our kids will have to pay in one way or another.

Who will pick up the real bill for tomorrows hospitals?

How will the banks ever recover our trust?

May 7, 2018 | Customers, Governance, Leadership

Over the last decade, banks, and other financial institutions have spent billions, I have no idea how many, but guess multiples, on telling us they are our friends, there for us, reliable, trustworthy, yada, yada, yada.

That investment has gone.

Poof.

Billions gone in a puff of Royal Commission smoke.

Then the stinky smell of the smoke is intensified by the APRA report into the CBA, released on April 30th, which is critical of the internal management and governance of the CBA. While the CBA has been in APRA’s gun, there is now no reason to believe that the others are not similarly tainted. Just look at that doyen of financial rectitude, AMP for evidence of that.

I am not sure how much we all knew before all this came about, as most of us seemed to know at some level we were being screwed by the financial institutions, but the extent has come as a surprise, even to the most cynical amongst us.

If the boards of all financial institutions are not deeply concerned with these issues, they should be, in fact I would contend they are not doing their job if they are not.

Which opens two key questions:

How they can possibly recover the trust of their customers and the community?
In the absence of that trust, what alternatives do we as customers have?

So what is it that the financial institutions need to do to earn back our trust, and once earned, keep it. Trust has to be earned, it is never just given.

Transparency. Until we are able to see all the squalid details of the financial business model, be able to make informed choices, and have the current bunch of directors acknowledge their individual and collective failures, we will never trust them again. Probably the only way forward is increased regulation, or perhaps a more meaningful application of the existing regulations. A change to mandatory fee for service rather than commissions throughout the industry would remove the cause of much of the dishonesty at an operating level. Trust is impossible without transparency.

Communicate relentlessly. Having something of value to say, and saying it consistently, in many different ways is essential. This does not mean more fluffy advertising, and competitive product pitches attacking us from every angle. It means that we, the customers, have to be able to understand the value that is added by our financial institutions, and the cost of that value.

Measure the right things. Every business has financial objectives to meet, but confusing those financial objectives with the behaviour that delivers them is a bad mistake. In the end, the financial results are the outcome of a whole range of activity and behaviour, which when right will deliver the results. The old adage that you get what you measure almost always applies, and the financial institutions have been measuring the wrong things.

Manage behaviour and build a new culture of service. Ensuring that behaviour is consistent with a revised set of values that will apply is essential. These should evolve from the Royal Commission report and the need for every business to be able to define its purpose. The boards have a big task in front of them to change the cultural norms that drive behaviour.

Be prepared to be wrong. When a mistake is made, and we all make them, admit it openly, while adding what you have learnt from the experience, and what you will do in the future as a result. The sight of various board members setting out to absolve themselves of responsibility is a very bad ‘look’ and should not be tolerated by us as consumers, or the regulators.

Take responsibility. Responsibility and accountability seem to be sadly lacking at present, and this needs to be reversed. Hopefully, it will evolve as part of the cultural renewal I optimistically forecast.

Be human. The pace of change has outrun our collective ability to absorb it. Automation in the name of efficiency is fine, until the automation removes people from the equation. People deal with people they know like and trust, so there is a real challenge for the banks. Be known, liked and trusted again.

One of the structural problems the industry has to face is a very human one. We all want something for nothing, and nothing usually means we would rather pay more, but not see the payment to avoid feeling the pain. The result of this is the generation of hidden commissions, and sliding scale charges, rather than fee for service. Commissions wherever I see them change behaviour, create a short term financial incentive, that is their purpose, and usually become a part of the status quo. In most cases, and certainly in the financial services industry, this practice is not in the best interests of those who ultimately fund the commissions. The whole financial services business model is based on commissions, which is like building a skyscraper on quicksand, bound to unravel at some point.

Oops, I think it is unravelling!!

To the second question, the options we have as consumers: currently none. There are many alternatives, many touted differentiators, but in essence they are pretty much the same, it is just the details of the business models that vary a bit. However, malfeasance such as we are seeing has a way of adding fuel to the innovation fire, and I suspect there will be options opening up very quickly that deliver some if not all of the characteristics that will build trust from outside the traditional financial services industry. This will certainly give the regulators a headache, and boards something beyond their current horizons to think about.

I wonder if many of the legacy businesses will still be around in their current form in a decade? I doubt it very much. However, the point should also be made that it is the people who run and govern these businesses that are to blame, not the institutions themselves. The financial institutions play a vital role in our economic and social lives, and are indispensable, unlike those running them, many of whom should be dispensed with forthwith, without any form of golden handshake. Indeed, many should be thankful they will not be measured for striped suit and a modestly furnished suite at Silverwater.

Cartoon credit once again to the great Hugh McLeod at Gapingvoid.com

The ‘Change Quadrant’

The ethical underpinning of strategy & marketing is being eroded.