The essential 70/20/10 rule for business optimisation.

The essential 70/20/10 rule for business optimisation.

Nov 10, 2016 | Governance, Leadership, Management

Most of my time is devoted to improving SME manufacturing businesses. I do it for a living, mine and theirs, and I have an ulterior motive.

I want my grandchildren to have a better life than me, and while I have had a great life, the pace of  improvement has faltered noticeably over the last 25 years as the productivity of our economy has floundered, and the flow through benefit to living standards has reduced to a trickle.

I put it down to the decline of manufacturing.

We have taken the easy way out, as an economy and society, and taken the benefits before they were able to be sustained.

Short term gain, long term pain.

The evidence is everywhere, from the short termism of the stock market to the supposed microscopic attention span of millennials, self indulgence of baby boomers,  and the politics of who gets what of the tax take ripped out by the three levels of government and their acolytes.

I believe that without manufacturing, the process by which we gain leverage, the decline will continue. There are only so many baristas and hairdressers we need, and they offer no leverage, as you can only make one coffee at a time.

To the rule in the header.

Almost all small and medium sized manufacturers I work with, from those resilient few remaining who supply into FMCG markets, to those in engineering and service manufacturing (like printing) the formula for optimisation is reasonably consistent.

70/20/10.

70% of the time, effort and investment needs to be devoted to the foundations of the business. The numbers, financial and otherwise that deliver meaningful measurable and actionable planning and feedback loops on the allocation of their resources to their core business. In effect it is improving on the things that made you successful in the first place, but which have not evolved as quickly as the competitive  environment around them, so they are being squeezed.

20% of the effort and investment into adjacent areas. These are the places that will in all probability spawn the new product category, class of competitor,  demanding but value driven customer, and the emerging niche market that technology has enabled. This adjacency leverages some of the capability developed in your core market in a different way, stimulates capability development, and delivers you asset productivity.

10% of the effort is playtime. This is the messy, risky, scary, and significantly disconnected from your core, innovation and change initiatives. it is from this effort that the product and business model disruption that will change everything can emerge. Way better to be on top of the changes, anticipating and planning for them, rather than being taken by surprise and belted by them.

The numbers vary, and the nature of the resources allocated varies, but in rough form, 70/20/10 seems to hold across business sizes, models and market types.

 

October 5, 2016. Five years on.

October 5, 2016. Five years on.

Oct 8, 2016 | Leadership

Last Wednesday, October 5 was the 5th anniversary of the death of Steve Jobs, on October 5, 2011, aged 59 .

How time flies.

The words of the great Apple ad that started the ball rolling again when he returned from exile in 1997 to the company he created with Steve Wozniak on April fools day 1976 are  reproduced above by Hugh McLeod, the sage of the Gaping Void.

Having read Walter Isaacsons terrific biography of Jobs, I am glad I did not know him, but the world is a different place, and most would contend a better place,  as a result of him being here.

Not many of us can say that.

It is pure fantasy, but I wonder what else would have changed that now remains the same had he lived to the ripe old age of 65, which would only be a couple of more months from now, February 2017.

He has been missed, even by me, and I do not use Apple products at all.

The compelling essence of leadership demonstrated yesterday

The compelling essence of leadership demonstrated yesterday

Oct 2, 2016 | Leadership

Yesterday the Western Bulldogs won the AFL grand final.

I am not an AFL fan, my game is the one they play in heaven, sadly not much down here any more, but that game yesterday stirred emotions in even one who really did not care about the outcome.

For the Dogs to win they overcame the odds in all sorts of directions, too numerous to list. However, in overcoming the odds they clearly demonstrated the truth of the old cliché about the team of champions vs the champion team.

There is one word that describes how that phenomenon is achieved:

Leadership.

The single act of the Dogs coach Luke Beveridge putting his premiership medal around the neck of injured club captain Bob Murphy embodies all it means to be a leader.

The work of Simon Sinek in articulating this stuff is to my mind the benchmark. Do not bother reading the libraries of dusty academic tomes written, just watch the Sinek presentations to hear all you need to know.   The one linked above titled Leaders eat Last is a great story, distilled into one 30  second act by Beveridge yesterday.

If you were an aspiring AFL player, why would you want to play anywhere else?

My apologies to readers outside Australia, you will have no idea what AFL is. Does not matter, just watch Sineks presentation.

How will Australia regulate for ‘Culture’

How will Australia regulate for ‘Culture’

Sep 28, 2016 | Governance, Leadership

As a Fellow of the Australian Institute of Company Directors, I look forward to the events put on by the institute, and attend when I can, when the topic of discussion is of particular interest.

Annually there is a general ‘Director Update’, the 2016 version is currently rolling out, and I attended in Sydney last week.

Amongst the items of interest, one particularly took my attention. The emerging focus on ‘Culture‘, has belatedly come onto the radar because the legislators are beginning to use the word.

This begs the question of how you define ‘Culture’, certainly those in Canberra writing the rules have no idea, despite setting out to legislate for it. It is a bit like legislating for ‘Motherhood’. Everyone agrees it would be great to have it, successful people have benefited from it, but definition is a bit tricky.

“Culture eats strategy for breakfast” is now a commonly used phrase, shortened from the original by Peter Drucker who wrote: ‘Culture eats strategy for breakfast, technology for lunch, and products for dinner, and soon thereafter, everything else too’

Lou Gerstners view expressed in his terrific insiders view of the turnaround of IBM  “I came to see in my time at IBM that culture isn’t just one aspect of the game – it is the game. In the end an organization is nothing more than the collective capacity of its people to create value.”

Building a positive culture depends on leadership, not regulation. Absolutely not regulation.

This remarkable TED talk by Simon Sinek is talking about leadership and the culture good leadership builds. I think anyone in authority should watch it and absorb the message, and set about trying to articulate what it means in their context.

ASIC (Australian Securities & Investments Commission) Chairman Greg Medcraft in his speech opening the 2016 ASIC Annual forum failed to give any hint about the definitional questions around Culture, simply pointing out that it led to good commercial and social outcomes. He did add that “We are incorporating culture into our risk based surveillance reviews’ which is terrific but it would be nice to know how one of the key regulators is going to measure it. Back to the politicians?

On occasion I have been critical of the AICD for its focus on the compliance issues of listed companies and their directors, often seen as the ‘big end’ of town. This focus is not unreasonable given that every organisation has to focus on what is seen as the main game in one way or another. However, it does tend to marginalise the unlisted and family company block which constitutes the vast majority of enterprises, and the overwhelming majority of those in the role of ‘Director’ often without knowing anything about the fiduciary responsibility that goes with it.

However, in this case, starting to talk about Culture, the Institute has kicked over a rock that requires a lot of consideration and debate, so well done.

I look forward  to that conversation.

Credit: Thanks once again to Hugh McLeod for the inspired cartoon.

4 easy questions to help get stuff done

4 easy questions to help get stuff done

Sep 15, 2016 | Governance, Leadership

Taking action is the hard part of getting stuff done, the talk is easy, but when the rubber has to hit the road, then you see who is really adding any value.

The 4 simple questions I ask are:

Who is responsible?

Who is accountable?

Who is to be consulted?

Who is to be informed?

Lack of an answer on any of them is a sure indicator of a hole that will swallow some of your efforts.

Last night I was at a forum hosted by the local council for sporting organisations in the region.

The forum had no real objective beyond some institutional need to ‘consult’ , a useful process, but the organisers seemed to have no idea about the framework on which they were seeking input.

As the answer to each of these 4 questions was “nobody’ or ‘not sure’ I do not expect to smell the rubber any time soon.

Environmental research: A commercial necessity.

Environmental research: A commercial necessity.

Aug 29, 2016 | Change, Leadership, Strategy

Last week I was fortunate enough to be invited to a session that outlined the latest Roy Morgan research focussing on Mortgage stress and superannuation.

The data presented by Morgans CEO Michele Levine  was both informative and disturbing in a number of ways. I recommend you have a look at  the slides, and the report, and give some thought to the problems that will evolve over the next few  years that this country will have to address, somehow.

As I considered the data and the implications, it got me thinking more broadly  about one of my long term hobby horses.

Environmental research.

Not the tree hugging type, although there are significant commercial questions and opportunities there, but the sort of research that informs thinking about the long term trends and behavioural changes that will impact the competitive environment in which we all have to live.  Understanding the direction of change has proved time and again to be more important in successful commercial development than the more common stuff that just tests the reactions to a specific proposition. It provides the context for  the varying value propositions reflected in commercial and social offerings, and creates the framework from which you can learn.

environmental research 1

 

A sensible framework includes an ongoing process to scan the trends, focus on those that will have a long term impact on the community, generate alternative responses, execute responses in a trial format, test , measure and iterate.

 

In the fortunate circumstances that we had a political climate that encouraged and enabled the sort of decision making that a society needs if it is to optimise the mix of economic and social policy outcomes over the long term, this sort of ‘environmental research’ would act as a valuable input to the debate.

Pity we do not have that sort of political environment, our children will pay a high price for our failure in that regard.  The best I think that we can hope for is to rely on the collective common sense of the electorate, but I sense that cynicism and the resulting self interest are dominating.

Not much of long term community value seems to be coming from the current politics, although the participants all claim to represent the mood and values of the community. They should be publicly considering the implications of research such as that done by Morgan, and we would all be better off in the long run for the informed debate founded on facts rather than supposition, suspicion and hyperbole.

There is however considerable meat in the data useful for the development and informing of commercial strategies and priorities. This ‘meat’ should assist you to optimise your returns while our so-called leaders fiddle.