What governments can learn from small business.

What governments can learn from small business.

Jan 29, 2018 | Governance, Leadership, rant

Apart from the obvious, of doing sufficient due diligence on the important detail, such as knowing your nationality, there are many other lessons to be learnt.

Amongst the key ones is the depth of consideration small business owners need to give to the deployment of their very limited financial and operational resources. In most cases, some level of financial and strategic consideration is applied, and trade-offs are always necessary and usually painful. Governments on the other hand are not similarly constrained, spending is welcome, and rewarded, whereas constraint and tough choices are avoided, and there is no bank to refuse an increase in the overdraft.

Those I work with are encouraged to consider their commitments from three buckets:

  • What is required to keep the business going, which includes operational and necessary capital expenditure.
  • What is required to build the resilience and agility of the current business, enabling it to grow and prosper at the rate, and in the manner necessary to be commercially sustainable.
  • What is required to move the business to the ‘next level,’ whatever that may be in the context of their competitive and strategic environment.

Those that give this sort of framework deep consideration generally come out on top.

By contrast, Governments seem to consider their expenditures only in two buckets.

  • Sustain operations and get elected. In other words, never take anything away, but find creative ways to rebadge it so that it seem you are always giving.
  • Who is entitled to what from the bottomless purse of money to be spent. Joe Hockey when delivering the 2014 budget referred to ‘The end of the age of entitlement’ and look where it got him, and the Abbot government. A bad dose of adversarial short term politics by the opposition, and marketing incompetence by the government ensured that the age of entitlement continues, to this day.

 

Let’s hope that in this new year we see some common sense and vision emanating from Canberra. A big ask, but after a year of utter and complete chaos, irresponsibility, and self-congratulatory bullshit in 2017, I think we all deserve more.

 

11 trends that will influence success in 2018

11 trends that will influence success in 2018

Jan 15, 2018 | Governance, Leadership, Strategy

This is not really a set of predictions, those are around at this time of the year aplenty. Rather it is a mix of the things I am thinking about, the trends I see underlaying the performance of both the public and private sectors, and the performance of marketing and strategy in these changing contexts.

It is pretty easy to make predictions, get a few right, and you become seen as a ‘guru’ but few remember the many you got wrong, so I am not going to try this year.

Are monopolies OK?

Facebook and Google between them control 75% of the global digital ad spend, not a monopoly, but certainly a global duopoly.  Currently around 40% of advertising spending is digital,(depending on whose numbers you use)  and the lack of transparency and accountability is huge. The rock was kicked over by Procter & Gambles  Mark Pritchard in a presentation to the IAB in January 2017, and the roaches are still scuttling from the light. There has been movement for the better as Colgate, and several other major advertisers followed the lead of P&G and slashed their digital ad budgets until their suppliers could/would supply data that supported their claims. However, advertising is only a slice of the cake.

Facebook as a ‘community’ holds unprecedented power, with the attendant opportunity for morally challenging situations to arise, something Mark Zuckerberg  acknowledged in his 2018 letter, and  needs to be addressed.

Amazon continues its march to world retail dominance, (so long as you ignore Ali Baba which is more an exchange platform rather than a retailer) and the retailers we are all familiar with are racing to the wall. Amazon bought Whole Foods for $13.7billion, cash, on August 28  and the next day, the Amazon share price jumped $15.6 billion. In other words, Amazon got paid $1.9 billion to buy Whole Foods and got a distribution base into the bargain as well as a whole swag of quality relationships with produce suppliers, and a great brand. At the same time, the share prices of Walmart, Target and other major retailers took a bath in the wake of the purchase.  On top of Amazon as a retailer, we have Amazon providing an unprecedented breadth of services from Amazon Web Services, to a vast array of web tools, to space exploration, to demonstrating newspapers can still work with the turnaround of the Washington Post. 

Google copped a €2.4 Billion fine in June 2017 for anti-competitive behaviour as it used its dominant position in search to give itself the edge in price comparisons, from which it may take a cut when the product has been advertised  using AdWords. While Google is disputing the ruling, the evidence seems pretty clear, and in any event, the fine is only a few weeks profit, so is easily afforded.

As a new year resolution, Mark Zuckerberg has pledged to clean up Facebook. This guy is really smart, he has built the biggest communication platform in history, and in the process made billions for himself and a relatively few others, but I cannot help wondering if the juggernaut can be turned around by anything other than regulatory intervention, without which there is  no incentive to turn the tap off. History would suggest differently, and perhaps the impending IPO of Snapchat will put a dent in the flow of Facebooks  ‘automatic’ ad revenue. By automatic I mean hands off, they give you the tools to micro focus on segments, a great capability easily manipulated as demonstrated by both the Trump campaign and the Russians.

The apparent lack of ‘moral governance’, of the new digital behemoths that are now 5 of the 10 biggest companies in the world, Google, Facebook, Amazon, Tencent (still unknown to many) and Alibaba, all of which were just start-ups in 2000, will encourage regulators to try and throw a rope around their activities. However, if history repeats itself, they will be replaced at the top of the pile by companies we have not yet heard of inside 25 years. The corporate life of a major enterprise seems to be reversing Moore’s law, and increasingly diminishing every couple of years. This reality creates great challenges, as well as opportunities.

 

We will figure out how to use data

We are awash with data, the vast majority of it currently unused. Consider the opportunities to use the data currently around, in all sorts of applications from SME’s collecting and leveraging data on their customers to Governments digitising medical records, activity, and diagnoses to improve the productivity of the investments they are making by reducing waste, and improving the  delivery of health outcomes for patients. On top of that we have the emergence of ‘Blockchain’ technologies, with the attendant hype and bubble. However, it seems to me that the applications of this technology are both wide and deep, but require a wholesale change in the manner in which our private and public institutions work, and that will not happen in a hurry. Or will it?

There are some pretty scary implications in all this, as well as the benefits to be gained.

 

The final frontier: Attention.

The greatest challenge in marketing is the fight for attention, and it is becoming a more challenging, expensive, and bitter fight by the day.

The so called panacea, ‘Inbound marketing’ can and does work, but needs to be built on a solid foundation of marketing strategies directed at specific customers who will value what you have to offer above all else. Otherwise, the leads you to spend money to generate via inbound campaigns are going to be largely useless, as the conversion rate will be low. The name of the game is to get to those whose attention is valuable to you, and generally, these people at the top of the corporate food chain are very selective about to whom and when they give their attention. I think we are almost at a tipping point  where the personal contacts of yesteryear are becoming as important as any inbound activity, with the caveat that the digital stuff out there offers fantastic resources to do research to select out those who may be of value to you and then find them in a highly personalised way, if not in person.

Account based blather.

So called ‘Account Based Marketing’ became a buzzword over the last year or two, with all sorts of automated solutions vendors breathlessly declaring it the saviour. This will become recognised as the bullshit that it is, a tactic to flog software, not a solution to the basic challenge of marketing, to find, engage, service and retain customers.  It is not new, it is as old as selling, but those with a ‘shiny new tool’ to sell act as if they had discovered the holy grail. Define your target customer as closely as possible, ensure the exact alignment with your value proposition, research their company as well as the individuals as much as possible, and turn the on-paper prospect into a warm lead. It has always been so, and slowly marketers will come to realise that software is no substitute for creative and informed thinking and strategy development.

Brand building will again be seen as the key to sustainable success.

In a commoditised and connected world where information is freely available, brands are struggling to maintain their role as an assurance of value, just as consumers need it the most.

Building a brand has always been challenging, time consuming, risky, and expensive, but the return was there when  successful. In a world of sameness, the return is still there when successful, but the task of building a brand has become geometrically harder. This will not go away, but  there is light in the tunnel. The tools available enable very tight marketing, customer and value source definition to be done, enabling brands to be built that are relevant to a very specific group of people, and  therefore able to deliver value to them that is sufficiently unique to act as insulation from the general competitive milieu. Niche brands will become the go. In truth they always were, even the biggest brands occupied some sort of segment rather than the whole breadth of any market.  Even Microsoft, as the US Department of Justice was seeking to break it up to destroy the ‘Monopoly’ position it was seen to hold, was not the only option at the time.

The brand building skills of the ‘old guard’ will come back into fashion, simply because they are more relevant and effective than ever when armed with the digital tools. The generations of so called marketers who can use only the tools without understanding the principals behind their use, will struggle.

Given brands can be targeted, the message must necessarily be unambiguous and specifically relevant to the receiver. It makes it necessary for marketers to make very clear choices about who they will target, and with what, as generic offers have no weight. The greater the degree of personalisation and specification the more likely it will be received favourably, by the few who really want it.

Marketing in the boardroom

Increasingly marketing will be seen as a profession, requiring not just the creative and collaborative skills of the past, but also deep  technical and management skills.

Investment in marketing technology is accelerating at a huge rate, driven by the competitive pressures that come from the increasing productivity coming from marketing automation. Therefore the marketing personnel will increasingly be responsible for huge IT investments that determine the effectiveness of the strategic choices that are made. Marketers need to be qualified to make those choices, and more importantly, need to have the credibility in the boardroom necessary to gain the support for the allocation of the limited resources available, and to prepare the business case underpinning the choices. Those businesses without marketing in the boardroom will fall progressively behind their competitors.

The time for marketers to step into the top jobs has never been better, the ability to focus an enterprise on customer outcomes which are then reflected in the financial results will become the mark of successful leaders who shape enterprises for commercial sustainability.

Time frames will continue to compress.

Time frames for everything from long term R&D as in the pharma industry to the local start-up and political actions are being radically compressed, and this will not change, just get faster. If you are unable to keep up by changing at least as quickly as a those around you, the abyss is just down the road.

20th Century institutions are not able to cope.

Anyone can now start a business with a laptop and a few dollars, and physical location is becoming increasingly irrelevant. This is leading to a whole new structure of internationalised competition and governance,  self and part time employment, multiple jobs and career paths. Our institutions were simply not designed to accommodate the pace and breadth of change, no matter how much we may not like that reality.

The future of creativity in an increasingly automated world

What is the future of creativity, which takes time, energy, imagination, and does cost, in an increasingly automated and short term world?  Does the volume of ordinary ideas required to keep the ‘content machines’  turning outweigh the few big ideas? This is not just marketing, our lives are increasingly programmed, often without us realising, e.g. the Facebook algorithms that deliver to our feeds the ads, and stuff that the algorithms ‘think’ we might respond to, this is just telling us more of what we already think, removing the need and urge to think, to make leaps of logic, and see a different perspective.

It seems to me that we are pretty good at seeing what is coming from within our narrow domain, but very poor at seeing what is coming from outside, which is where most change comes from, and where creativity has the opportunity to deliver real leverage. Most of the great blunders thrown around reflect this reality, while the companies concerned continued to be successful within their own boundaries. Edison’s failure to recognise the benefits of AC over his baby of DC, Thomas Watsons declaration that there is a market for only 5 computers, Bill Gates initially missing the internet (then, remarkably turning Microsoft on a dime) Steve Ballmer dismissing the first iPhone, IBM missing the shift to personal computers, Xerox not commercialising any of the stuff they invented in PARC, (except laser printers which were right in their playground of document reproduction), that now underpin much of the tech we use every day, and many others. These are obvious with hindsight, but when you think about the context of the missed opportunities, each came from outside the essential expertise that had delivered initial success. The lesson is that creativity is more essential than ever, it is the source of innovation and change but usually only obvious with the benefit of hindsight.

The public vs private world

We are demanding more of our public sector, schools, hospitals, teachers, and all the services we take for granted, but we are also demanding we pay less. Partly this is a response to the waste we all see in the public sector, but there is a longer term trend at play that will focus attention on the really challenging problems associated with the revenue side of public budgets, rather than just the expenditure. Large corporations with an international footprint can select their tax domicile to minimise tax, and the releases of the ‘Panama Papers‘ and the more recent Paradise Papers have at least lifted the rock a bit so we can see a few of the roaches running for cover, but it is the tip of the iceberg.  With the US corporate tax rate dropping to 21%, we (in Australia) will have to adjust to changed flows of US capital, one of the underpinnings of the Australian economy, potentially drying up while politicians argue about our corporate tax rates, and how reducing them is giving back to the rich at the expense of the poor. The reality is that the pie is getting smaller. Then we have the movement in the economy from  PAYE employees to contractors and small businesses with the attendant tax benefits. The  impacts of all this will be an increase in the heat of the political debate, with a geometric increase in the bullshit that  gets served up, when what we really need is some genuine leadership that is prepared and able  to articulate the core issues driving these trends, and execute sensible strategies to start the process of addressing them.

Are we at the tipping point?

To end with, this is a question that will continue to bother me, as the implications to the management of both private and public institutions, and the rules to which they are supposedly accountable, are profound:

Are we reaching a tipping point in a range of tech enabled areas? Artificial intelligence, Augmented Reality, Virtual Reality, Autonomous everything,  new generations of quantum and neuromorphic computing, and most particularly renewable energy.  All are being rapidly developed, or already being incorporated into our daily lives without us really seeing it, after 100 years of science fiction. It seems to me that the revolution that took place 100 years ago as electricity revolutionised our lives, is about to be repeated, but from a different direction. we will be confronted by the change from disruption to collaboration,  and I do not think most of us are ready for it.

Ray Kurzweils observation (I think it was Ray) that ‘The future comes very slowly, then all at once‘, seems to be coming true.

What do you think?

 

 

Reflections on my 2017 observations.

Reflections on my 2017 observations.

Jan 7, 2018 | Change, Governance, Leadership

 

Each year for the past few, I have looked at my prognostications for the coming year and given myself a score. It is now 2018, so time to do it all again, before I rub the crystals to see what might be coming down the track this year.

As a lead in, I find it difficult to improve on last years recitation of J. M. Keynes, it still seems absolutely right.

Never have JM Keynes’s words been more relevant: “The difficulty lies not so much in developing new ideas as in escaping from old ones”

He said this in relation to economics, but it seems to me that it is now ubiquitous across everything we do personally and as communities and countries.

Working as I do with medium sized businesses, particularly those who actually manufacture stuff rather than flogging intangibles,  all are hugely challenged to compete in a globalised and commoditised world. Some common themes that underpin,  define, and are redefining the path to commercial sustainability appear to be largely ignored.

What is old is not new again.

It seems to me that this old truism is now redundant, as the pace and scale of change is so vast that the old stuff no longer gets recycled, and while by not understanding history we are doomed to repeat it remains true, the new versions are radically different to the old ones.

The ‘old’ ways of doing things are not  being changed, which implies that there is a progression of some sort, they are being disrupted, by which I mean thrown out the window. Uber and Airbnb are the poster boys, but look at what is happening with artificial intelligence, machine learning, virtual and augmented reality, and it is hard to conclude anything other than the old is dead, and the most relevant question has become ‘how will we cope with the new?

How did I do? 4/5. The year past just seems to confirm the view that the old is just old, and should be ditched. However, the lessons that can be learnt from the old should not be missed. The foundations of success over the last 200 years remain the same. Uber disrupted the taxi industry, not because there was any really new customer  value to be found, but because the taxi industry around the world had dropped the ball entirely, and Uber leveraged some tech to pick it up. People still need transport, so in that sense Uber is not new. We also learnt from them that success has its own dangers

 

The fight for attention.

The tsunami of stuff coming at us in a myriad of ways, increasingly mobile, is overwhelming, and most are seeking ways to aggressively filter out the stuff they do not  want, but there are industries out there finding ways around the filters. The old notions of privacy are out the window, and so the tsunami just grows geometrically. So called digital helpers, might claim to make life easier by anticipating what you might need and want based on previous behaviour, but they are really just ways of gaining and holding attention in order to create a transaction favourable to them. Mobility is an absolute requirement of attention. Not just do we require our data to be immediate on demand and mobile, we do our searching and thinking while mobile.

How did I do? 4/5 again, the fight has just got harder and harder, and that will continue. However, it must happen that quality will win out over quantity at some point, so the notion of an overnight success after 10 years of effort still holds.

 

Immediacy is currency.

The world is immediate, we want it now, on demand, and will not be satisfied with less. However, it is hard to get immediacy from legacy systems. Why should it take Telstra a week to connect a new mobile phone, interspersed with bullshit from an off shore call centre, when obviously it takes a few seconds on a keyboard. Not good  enough anymore. With the immediacy is mobility, a sort of coinage from the currency of immediacy. Everything in life is on demand, from cabs to grocery deliveries, and not meeting the demand has become a harbinger of failure. If you are  not mobile you will be missing out.

How did I do? 4/5 again, doing OK so far, except that if anything, I underestimated the impact of immediacy, and again, expectations are becoming more demanding by the day.

 

Creativity delivers attention.

Amongst the tsunami of stuff, the few that stand out will be different, and in some way strike a chord in an individual. It is ironic that the notion of ‘big data’ is really geared to ‘little data,’ picking through the masses of data-garbage to find the few bits that are focussed on the individual. The customer journey, so easy to map over the past few years, has had its day in the sun. No longer can we rely on the standardised generic journey from which, while we know there will be deviation, remains in general sufficiently true to use as a base for decision-making. No longer. There are simply so many ways to travel the road, that the only way to get them to stop is too be creative, arresting, or as Steve Martin says, ‘so good they cannot ignore you’

How did I do? 3/5. I still think the idea is right, but the creative drivers have become more about immediacy than creativity, so the creativity has suffered. In a contest between the ‘big idea’ and reach/ frequency equations, creativity is losing out due to the demands for immediacy, and creativity takes time. It is just as hard to come up with that great idea as it has ever been, and 10 mediocre ideas do not add up to 1 great one. We have a long way to go.

 

Business is personal.

Peter Drucker is famous for observing amongst other things that the sole purpose of a business was to create customers, and never has that been so right. However, in order to create a customer, being different is essential, which requires continuous innovation and more importantly the ability to deploy innovation almost in real time. Marketing is now all about the personal, therefore the ability to create  automated personalisation, or perhaps personalised automation, will define the parameters of success.

How did I do? 5/5? Never has anything been more true, and if possible it is getting truer every day as we ‘communicate’ via digital platforms, we are inundated with likes and connection requests that are covers for a sales pitch. No end to this in sight.

 

Success is dependent on attention.

This is getting harder and harder as the access to organic social feeds is increasingly limited by those with their feet on the choke point, the digital platforms through which this all flows. In order to be successful the need to own your own digital platform is getting greater by the day, just as it is getting harder to achieve it, simply because the task of gaining attention has become geometrically harder.

How did I do? 3/5. TI think I got this one right, but seriously underestimated the challenge of attracting people to your own digital real estate. The challenge has multiplied as we have gone mobile, up substantially from just a year ago. As the volume of information increases, it is getting progressively harder to attract people to our digital platforms, away from the social ones.  In the long term however, the value of owning your own digital property will not go down, and the value of those you can attract, and keep, will multiply.

 

Trust requires transparency, and transparency requires trust.

The world is a way less trusting place than ever, nobody leaves their front doors open any more, and we are wary of public gatherings. Even in a place like Sydney, where last night’s New Years fireworks on Sydney harbour brought an unprecedented level of security, which really serves mainly to get in the way of most, as the really determined would simply plan their way around the cops on the beat. The most concerning danger is the one we do not see and understand, and by over-reacting we are just making things worse for most while offering solace to those who trade in mistrust.

How did I do? 4/5. Hard to get this one wrong, as it has always been so, even if we did  not recognise the importance. I think the turmoil in US politics over 2017, reflected for different reasons in Australia, has just made us more cynical and less inclined to trust anyone we do not know personally.

 

Are we educating for the future, or reflecting the past?

I am no expert in education, but between my 4 grown kids there is 6 undergraduate degrees and a masters, so I claim to have rubbed up against the system a bit. My education goes back a long time, but  the best teacher I ever had was an old Harvard professor, Jim Hagler who was somewhat ostracised even by that august institution because of his ideas about the value of rote learning Vs creative thinking. That was in the 70’s, and I do not see much progress, he would still be outside the mainstream of bureaucratic education implementation. It seems to me that we are setting about the process of education by reflecting the past, and assuming the future will be pretty much the same,  when even the most blinkered thinker will concede this is not  the case. Our universities need to be funded, but the economic rationalists seem to be in control, and are screwing the pooch. The environment of thought, learning and education in its broadest sense is bastardised by the requirement to flog bits of paper to whomever is willing and able to pay for them. Somehow It seems to be a road to perdition, a place where a degree can be bought, and is therefore worth little as a mark of true education. At the same time we have been telling our kids that they are second rate if they do not have a degree. The trades have become dirty, and the skills that built cathedrals, bridges, machines, and the water systems that enable us to be civilised are rapidly being lost to generations who think that manipulating digital currency is useful work.

How did I do? 5/5, and if anything this has become more important than ever, and it certainly has cemented its place in my corral of hobby-horses.

 

I am 65 in a few days, so perhaps I am just a dinosaur, but from the perch of all those years in and around businesses, education and the public sector, I am becoming seriously concerned with the world my grandchildren will inherit.

Anyway, I hope that 2017 turns out to be a great year, one that marks a turning point in our capacity to see ourselves as others see us, and understand that as communities we simply have to live and work together, as the alternative is pretty ugly.

Happy 2017 to you all.

 

And, now on to 2018, (and my 66th birthday…. do not feel 66) the year in which if we believe the bullshit emanating from Canberra, all will be well. We have made same sex marriage legal, and established that the provisions in the constitution, arcane as they may be in relation to citizenship, need to be followed. Now to get on with the stuff that really matters, like shaping a community for our children and grandchildren. (Always the optimist, I expect to be, again, disappointed)

7 Mental models for business planning

7 Mental models for business planning

Dec 18, 2017 | Governance, Leadership, Management, Strategy

Business planning, when you think about it is a  bit of an oxymoron.

The only thing you know for sure about your plan is that it will be wrong.

George Patton said ‘Without a plan, you are just a tourist’ and even that great social philosopher Mike Tyson weighed in with ‘everybody has a plan until they get hit in the face’.

However we persist in writing what is usually a document full of crap that is not looked at again, until next year.

Here I am going to offer you an alternative to the formatted, templated, disciplined plan, so beloved of accountants, banks, and education institutions. I am going to suggest you use ‘Mental Models’ to ask the right questions, gather information, generate insights, create strategies that are meaningful, implementable and measurable.

Albert Einstein used mental models to develop his theories of relativity and quantum physics.

If employing mental models is good enough for Albert to articulate a picture of uncertainty, ambiguity, and then hypothesise about its hidden drivers, it should  be good enough for us.

Mental Models are frameworks that can be used to simplify problems, to ensure that the right questions have been asked, and the explanations that evolve from those questions hold when subjected to detailed scrutiny and testing.

Mental models frame things.

As a kid I loved cricket. I would walk to school early, and play for a couple of hours before ‘the bell’. As I came up to the oval attached to the school, when someone was batting, I could see the stroke, then a second or two later, hear the bat hit the ball. Clearly there was something at work here I did not understand. Dad explained it by telling me that sound travelled at 740 mph, while light, which enabled me to see the stroke travelled at 186,000 miles per second. This meant the sight was instantaneous, the sound was not.

Hearing the bat hit the ball a second or so after seeing it hit the ball created a mental model that made the understanding of the effect of the differing speeds of light and sound absolutely clear. Had I been a mathematical kid, I could have measured the speed of sound by measuring how far I was from the batting crease, divided by the time it took for the sound to reach me. This is exactly what Albert did to come up with E=MC2, although a little more complicated.

Einstein used simple mental models to come up with his theories of relativity, then worked his way through the maths to test and ultimately validate the theories mathematically. It is only now that some of the stuff he hypothesised about is becoming confirmed, as the measurement of the effects he hypothesised are becoming available.

The origins of the business plan was to attract funds. If someone was going to lend you money it is reasonable that you told them where you would be spending it, what the risks were, and the means by which you were going to repay the debt.

Banks, which are usually the first port of call when seeking funding are not particularly interested in your success, they are interested in the asset backing you have, so that when you go broke, they can sell up and get their money back. They would prefer you did not go broke, just because that complicates their lives, but they ensure they are covered if you do.

Banks are not your friends, they sell a commodity: money, and like any sales organisation, will sell as much of it as they can within their risk parameters and any regulatory restrictions, by solving your cash shortage for you.

Therefore the standard P&L, and balance sheet projections, with a few discounted cash flow scenarios were enough. All accounting and management education was oriented towards this model, so it became widely used and abused, but if you are going into a serious business planning exercise for your business, in this homogenising and increasingly volatile world, it should not be enough for you.

Do  not think about business planning as a linear incremental process, with a known set of tasks to be done, which is what all  the templates assume. Rather, it should be the application of a series of mental models to the circumstances of the business, each looking at the business from a different perspective.

It is like looking at a display in a museum. Looking from the front only, you get one view, but go behind, under, above, and you can get a 3D view of the display. Often very different, and ensures that you capture the whole picture of the business.

To continue the museum exhibit metaphor, is the exhibit in a room of its own, is it in a quiet corner with other pieces of no distinct value, or is it in a room full of similar and complementary exhibits. Each will influence the way in which you see the exhibit.

Out of interest, I googled ‘Business plan template’ and got 9.4  million responses in .45 seconds.

Must be important????

Problem is when you look at  them, they are all pretty much the same. The words change, the graphics change, but they are essentially a fill in the form and bingo, a business plan.

Might be OK for a bank, but as a document that determines the allocation of your scarce resources to achieve an outcome, it is next to useless.

A template is the easy way.

The hard way is really hard, but is worth the effort,

However, you must have the right ingredients, or the cake will not work.

It is all about the questions you ask, and what you do with the resulting information, intelligence, and instinct.

So, take Alberts advice, which is also the advice of Charlie Munger,  Warren Buffets offsider who knows a thing or two about being successful, and who uses Mental Models extensively.

Following are some of the more common ‘Mental Models’ to apply.

Each has its strengths, but none is the silver bullet that those who write books about them claim them to be.

The trick is to be familiar with them so you can run through the models and pick the ones that apply to any given situation.

 

Most are familiar with SWOT.

We spend time dreaming up items, then filling in boxes, rarely with any useful numbers, rarely anything new, and everything is equally weighted.

Most times, there is as much debate about whether something is a strength or an opportunity, a weakness or a threat, as there is about the strategic impact of the item itself. Many do not recognise the distinction of strengths and weaknesses as being internal to the business and opportunities and threats as being external, and that they are all relative. For example, a strength is really only a strength when it has two distinguishing features: It is something that you do that your competitors cannot do, or chooses not to do, and that it is of value to customers.

SWOT has limitations in fast moving and technically evolving industries, and typically, there is insufficient time given to the consideration of the options that may emerge that offer some degree of differentiation.

In its generic form, a SWOT also fails to weight the factors it identifies, so I do that as well in a different table.

Because SWOT is well known, it often gets a run in the projects I do, almost always in parallel with another that better explains the problems, and offers another perspective. It is a good start to the process because it acts as a catalyst for the more difficult questions, and identification of the cause and effect chains, and eventually to the use of other models that drive a deeper analysis.

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Many will be familiar with the 5 forces that shape industry competition first articulated by Michael Porter 30 years ago, and still is a great way to examine the nature of the industry in which you compete.

Bargaining power of suppliers

Bargaining power of buyers

Threat of new entrants

Threat of substitution

The sum of these forces adds up to the state of current competition in any market.

A thorough examination of the forces really surfaces most if not all of  the issues that have to be faced.

When you think hard about it, everything can be broken into one or a mix of the forces.

As with SWOT, it suffers a bit in a fast evolving environment, as the searching questions about the future are often missed, but it is extremely useful.

For example, if you are a supplier to supermarkets, this is a great tool to use, as it captures the drivers of the competitive environment, but if you have an idea for a new piece of software, the outcomes of the analysis will be a little less certain because of the more ambiguous competitive environment.

 

Roger Martin is an academic and widely experienced commercial consultant, who wrote a book a short time ago called ‘Playing to win’ with AG Lafley, who was the CEO of Procter and Gamble.

This sequential process he outlines is a very good framework indeed, forcing difficult choices to be made at each stage before moving on, while encouraging necessary adjustments via the feedback loops.

One of the factors I really like about this model is that it creates a flow, from the macro to the micro, and forces you to make choices all the way. One of the key factors I look for when doing a StrategyAudit for a client is the manner and degree of ‘flow’ that exists in the business.

It is the flow of information, flow of product through a production process, and flow of the planning execution and revision of activities that take place.

 

The Balanced Scorecard goes back to the mid 90’s, and offers an integrated set of ‘perspectives’ through which to observe, measure and plan the business.

You agree the vision and strategy, then determine the measures of that strategy against the 4 perspectives, and map the interrelationships.

Balanced scorecard analysis can become very complex, particularly as you set out to  cascade it through an organisation.

However, It makes absolute sense to look at, and measure the strategies agreed upon from the perspectives of those perspectives impacted by choices made.

The financial performance of the business.

The customers perspective of how the business meets their needs, now and into the future.

The necessary business processes required to deliver value over the long term as well as immediately.

How the business will learn and grow.

It is still widely used, mostly by large organisations with centralised strategic planning functions.

 

A business plan on one page.

Halleluiah.

This methodology evolved quite recently out of the ‘Lean Start-up’ movement, first articulated in a book called, surprisingly, ‘Business Model Canvas’. The thinking underpinning this tool is still evolving, and it is still oriented towards tech start-ups, but I really like it for any business as a way to quickly ensure the right questions are being asked, and is to my mind a must use model.

It is designed to be iterative, and its strength is that it is both iterative, and stackable, in that where there are two major customer groups, or product groups in a business you can do two, or even more canvases, and they will all be stackable.

It forces choices to be made, and is iterative in that as you progress, and learn more, you often need to go back and review and balance the choices made earlier.

Generally I do this in a rough order.

  • Problem to be solved
  • Customer segments
  • Value proposition
  • Revenue streams
  • Key activities
  • Cost structures
  • Channels
  • key resources

 

There are many others:

  • Ansoff matrix,
  • BCG matrix, dogs, stars, that most of us are aware of.
  • Options games
  • Blue ocean strategy
  • Scenario planning
  • Jobs to be done
  • A3

The real point is that there are many ways to plan, but there is no easy way, no silver bullet, and you must get amongst it or fail.

The old cliché: failing to plan is planning to fail is unfortunately correct.

There is no school for fortune telling, unless you join the circus. All these purport to be able to at least remove some of the uncertainty of dealing with the future, but they are all tools, and the value of a tool rests with the skill of whoever is wielding them.

To my mind, using a bunch of them, each with slightly different perspectives offers the best opportunity to remove more of the uncertainty.

However, if I go back to Albert, E=MC2 does predict that time travel is possible.

Much of what he projected is coming true, a bit like Arthur C Clarke, Jules Verne, and others. Perhaps this is Alberts time to become a strategy guru?

 

I think it is only right to finish where I started, with Albert.

His theories of relativity, that famous formula we all know, but have no idea what it means, explains the workings of the universe. Perhaps it can also give us an insight into the value we can add to an enterprise, which is after all, what we are setting out to do by planning.

In my view, the internet has changed everything about the business models that will be successful in the future. Therefore we have to find a way to recognise the power of digital access and the compounding that is possible by leveraging networks in our planning processes and mental models.

I like e=mc2 because it explicitly compounds the value of networks.

E is the enterprise value, not the stock market valuation, which is only a financial calculation, but the value that is created by the enterprise, which has many forms. Value can be time, services, transparency, design, everyone sees value as being different, and is subject to the context in  which it is seen. Apple is the most valuable company on the planet, which has absolutely nothing to do with the fact that they outsource the manufacture and assembly of what has become generic electronic gizmos. The value of Apple is elsewhere than the functionality of the devices.

M is the mass of the enterprise.  This is the sum of the physical assets and processes of the business, the stuff that enables the work to be done.

C is the Capital of the enterprise.  It includes financial capital, but the greater part is in the capital contributed  by  the people who populate the place, and this comes in many forms, Intellectual capital, what is between peoples ears, and the relational capital they bring, and the cultural capital, the way in which there is collaboration and alignment of activity towards the creation of value by the enterprise. This is squared, simply because of the geometric nature of relationships, and the network effect, the more you have, the greater the sum of the value that can be created

 

The strategic wisdom of Donald Rumsfeld

The strategic wisdom of Donald Rumsfeld

Dec 5, 2017 | Leadership, Strategy

Strategy is all about making choices, often difficult ones in situations where you are setting out to assemble the resources and capabilities to deal with the future.

In days past, those who claimed to be able to tell the future were burned at  the stake, so be very careful!.

In order to have any chance of being in the right ballpark, it is essential that you are able to assemble a list of possible outcomes that will impact on your businesses, and then prioritise them by some weighting system that gives relative weights to how likely they are to occur, and how significant might the impact be.

There are also considerations of internal and external forces. Internal you  can control, external, the best you can do is anticipate and respond.

The key to all of this is asking intelligent, informed and searching questions that reveal a picture of the future to which you can respond.

We have all seen what has become a cliché first uttered by US secretary of State for Defence Donald Rumsfeld:

‘There are known knowns. There are things we know that we know. There are known unknowns. That is to say, there are things that we now know we don’t know. But there are also unknown unknowns. There are things we do not know we don’t know.’

While he was widely lampooned, there is a logic to it, when you break it down.

A robust strategy process addresses all of these, and the better the questions, the more likely that you will uncover the things that others miss, which is after all the essence of differentiation.

In assembling the agenda for a strategic session, it  is worth assembling the list of questions that will at least get the conversations going.

There are questions to which you already know  the answers, so are not worth asking, again.

There are questions that have no clear answer, which are well worth debating

There are questions that we do not really want to ask, the potential answers are too confronting in one way or another. Very valuable.

There are also those questions that may reveal themselves in the debate, and general creative conversations that emerge in these situations. With great attention to the detail, and sometimes a modicum of luck, these are recognised for the nuggets they may be, but are always really easy to miss as you proceed through an agenda

There are questions we do not think to ask, and do  not see. The danger here is that your competitors do see them, think to ask them then come up with an answer that creates competitive circumstances outside your control.

None of this happens by chance.

Effective questioning takes a lot of preparation, deep consideration of the circumstances, and generally the application of some ‘mental models‘ to stimulate the process. The most common ones being a SWOT, Porters 5 forces, and more recently variations on the Business Model Canvas, and Clayton Christianson’s ‘Jobs to be done‘. I use all of them, as each approaches the challenges from a different perspective, and often uncover differing ideas from each that stimulates lines of thought and question that would have otherwise been missed, and adds some wisdom to the process.

There is a German word: ‘fingerspitzengefuhl’ which refers to the instinct that comes with domain knowledge, explained in this fascinating Taylor Pearson post. it is this instinct, this curiosity, fed by domain knowledge that enables the exposure of the things we do not know we do not know.

‘Rumsfelian’ would be easier to say.

 

 

 

 

 

How do you make change when nobody really wants it?

How do you make change when nobody really wants it?

Nov 21, 2017 | Change, Leadership

Making change is about the hardest thing any leader has to do. I specify leader, as in my experience, managers cannot effect change, the best they can do is optimise the status quo.

Regularly, I am faced with situations where change simply has to be made, where there is recognition that the status quo is no longer viable, where there is verbal acknowledgement that it is necessary, but insufficient commitment to the hard stuff that needs to be done, so it does not happen, in any meaningful and lasting way. There is no situation I have seen where at least some of those involved would rather not change, and when they are in a ‘blocking’ position, it can get messy very quickly.

There is only two ways:

  1. Fast and bloody, the ‘Chainsaw Al’ approach which can deliver short term results but long term usually destroys value.
  2. Bit by bit, building on what has gone before, adjusting the small things that may not have worked so well.

Behaviour is about the most elastic thing I have seen, you can change it, like stretching an elastic band, but take the pressure off, and the elastic goes back to the original shape. The challenge is to make the adjusted shape the default, so that when the pressure is taken off, the shape does not change.

Mostly that is all about how you design and manage behaviour.

When I have seen change work, behaviour has been overtly managed in a number of ways:

  • Progressive. While people are clear about the need for change, and the end point, the actual changes to behaviour are progressive, in small doses, and the easier ones are done first. This enables you to bed in the foundations of the change, and build the habit that change is actually not as painful as could be expected, and the benefits make the pain worthwhile.

 

  • Track progress. While changes happen progressively, tracking progress overtly builds in the confidence that the next step will not be the end of the world, and look how far we have come! As I watch my kids play video games, I am surprised at the compulsion that emerges from the overt tracking of progress through the stages of a game, how it becomes almost addictive. I speculate that this behavioural characteristic is not isolated to video games.

 

  • Offer rewards. This can be tricky and backfire, as the reward must be associated with the changed behaviour and the human outcomes of that behaviour. Offering rewards, that are not connected do not result in further motivation, and I have seen them counter-productive as they alter behaviour to chase the rewards, rather than the outcome. The best example is the difference between offering public acknowledgement of great work done (almost irrespective of the outcome) Vs offering money for a change. People may chase the money, but it will rarely result in the changed behaviour becoming a part of the status quo.

The take-out is that, as in selling where most people like to buy, but hate to be sold to, most people will resist being controlled, but are happy to be guided, mentored, to be led.

When you need an experienced hand to help, give me a call.

 

Photo credit: Brad Rose.