Jun 2, 2016 | Change, Leadership, Lean, Marketing
The headline is a big call, competing as it does with some real doozies.
Remember “New Coke” or the Ford ‘Edsel‘ or perhaps Thomas Watsons declaration that there was a world market of no more than 5 for computers?
This one is a general observation on the nature of marketing people generally and their project management skills, at least in my experience.
They tend to spend too little time really defining a problem, but then jump effortlessly to a conclusion, leaving a pile of crap in their wake for others to clean up, and sub optimal outcomes from projects.
The explosion of marketing technology is not just making the shortcomings more obvious, it is delivering the means to measure it.
Holy cow Batman: Accountability!
The smoke and mirrors are being removed, leaving many self declared marketing gurus naked.
Leaving aside the question of individual capability, the root cause of this can usually be pinned down to a failure of project planning.
Specifically the failure to recognise the nature of critical activities that are sequential, building on the one before. For example, only a fool would lock into a creative approach and copy before the persona of the target market was absolutely crystal clear.
This notion is entirely different to the usual ‘critical path’ which can be a moveable feast as timetables move around.
Critical activities are just that, and they do not move around, at all. Project planning should always acknowledge the time necessary to complete each critical activity, and the specific sequence that is necessary.
Marketing project planning is no different to planning any other context, although the questions to be answered are usually less black and white, which simply means that the planning process needs to be rigorous and scientific if it is to be any good.
Marketers have a lot to learn from the manufacturing end of the lean movement.
Mar 23, 2016 | Governance, Leadership, Lean, Marketing
The best marketers I employed in days past as a honcho in a corporate environment were pretty much always from a professional background of some type. Those with engineering, science, architecture training, and with a bit of sales thrown in were almost always better marketers than those with marketing degrees.
Having just a 40 year old (had anybody heard of marketing 40 years ago) marketing degree, this both intrigued and disturbed me, and it took a while to understand “why” it was so. It became clear that those trained in the professions had an instinctive approach to problem solving, commonly called the ‘scientific method’. By contrast, those with just marketing degrees tended to jump from problem definition straight to a final solution, missing all the nuances and understanding to be gained from the interim steps, and often getting it horribly wrong as a result.
“Lean thinking” 35 years ago was just a babe, an approach to operational improvement that has transformed the way manufacturing operations around the world are run, and delivered huge benefits to our way of life. It is absolutely based on the scientific method.
More recently however, it has been realised that lean thinking has applications far wider than just operations, and office work flows are rapidly transforming as a result. The next obvious cab off the rank is marketing, traditionally a qualitative, smoke and mirrors part of a business, and marketers have been their own worst enemy.
It often seems marketers sit around, drink coffee, and go to lunch a lot, and as a result of allowing that perception to survive, (and it has been true in an unfortunate number of cases) , we get what we deserve.
If people do not understand the role of marketing, particularly those who allocate resources and measure performance, no wonder there are problems, but there are some pretty simple solutions taken from lean thinking.
Have an objective
Map the processes
Form hypothesis
Test and measure
Rinse and repeat.
From the perspective of managing this process, it is essential that two criteria be met:
- There is great transparency of the whole process across functions, everyone these days is “in marketing”. Leveraging the resources available by the collaboration enabled by technology will evolve as standard practice, for which transparency is essential.
- It is OK to be wrong, you can learn more for your mistakes than from what works well, but to learn there must be understanding of the flaws in the tested hypothesis coming from the failure. In addition, there needs to be a robust process of due diligence both before and after the experiments are done. Saying it is OK to be wrong is not a license to be sloppy, as I have seen from time to time.
Marketing has been very late to the technology table, and as a result the size of the gap between the ‘leading edge’ and what most small and medium businesses are doing is huge, and getting progressively ‘huger’. There is a real danger of just leaving it in the too hard basket, but that would be a mistake.
Marketing technology offers the opportunity to leverage resources and widen the impact, the core principals of marketing remain unchanged, indeed become more important as we increase the leverage that can be applied. For small and medium businesses these technologies are the competitive tool-box they have been seeking.
It is my prediction that inside a decade technology decisions will be driven by marketing. If you cannot locate, understand, engage, and deliver value to your customers in a digital world, you will not survive. This post from the ‘Martech’ guru Scott Brinker detailing the 2016 marketing technology landscape says it all.
Lets see how that goes as the technology landscape continues to evolve.
Mar 19, 2015 | Customers, Governance, Lean, Management, Small business
Image courtesy of ddpavumba at FreeDigitalPhotos.net
Remove transaction costs. Easy to say, hard to do.
The concept of transactions costs is generally attributed to British Nobel prize winning economist Ronald Coase, and the publication of his 1937 paper “The nature of the firm”
Transaction costs will always be present, they are the enablers of an organisation. The challenge is squeezing the maximum productivity out of the transaction costs you will inevitably incur.
Like all costs, transaction costs fall into three categories:
-
-
- Those that are necessary for the sale, and that add value to the customer, so they would be willing, if you asked them (and this is the big test) to pay for it. Things like delivery of physical products fall here, and we all know there is no such thing as “cost free delivery”. ,
- Those that are necessary, but do not add value to the customer. Costs associated with compliance, your training and innovation programs, taxes and charges all fall here .
- Those costs incurred that do not add value in any way, just consume time and money, such as rework, picking up wrong deliveries, or correcting wrong invoices. You generally do not need an activity costing initiative to know that this third category is usually uncomfortably large, and should be eliminated.
The bloating of transaction costs has three basic causes:
-
-
- Not getting “it right first time” requiring rework to correct the mistake. For small businesses, the costs of mistakes are relatively much harder to absorb than they are for a large enterprise.
- The penalty of small scale, expressed in the variable operational costs incurred, and the productivity per dollar of overhead spent. The flip side is that small operations can be far more agile than large ones, as the distance between a decision being made and actually getting something done, is much shorter.
- Less than optimum processes, or the ways that businesses manage the things that need to be done to support and document a transaction.
If you chose to take a deeper look at these three causes, they are all rooted in the way people go about doing their jobs on a daily basis, and for small businesses, with less people, and far easier personal communication, this is where the leverage can be applied by continuous improvement.
It costs the same to raise and process an invoice of $1,000 as it does for an invoice of $100,000. Therefore the transaction cost % of the invoice value is far greater for the smaller invoice. This relationship is reflected throughout the supply and distribution chain, and even minor improvements can deliver substantial savings. Technology offers the opportunity to reduce the absolute cost of processing to almost nothing, making the transaction cost irrelevant either way, but once people are added to manage the exceptions that cannot be handled automatically, the costs soar.
The source of Woolworths superior performance over the last decade compared to Coles has been the impact of their reductions in transaction costs that have dropped straight to the profit line. Wal-Mart became the biggest retailer in the world by focusing on the reduction of transaction costs of all types, and passing the savings on to consumers as lower prices to attract the volume creating a virtuous circle. Less obviously, they passed many costs back to suppliers, then continued to insist on and successfully extract cost reductions from those same suppliers in spite of increasing their costs, simply because of the scale of their sales potential for suppliers.
It seems to me there are two parameters to transaction costs:
-
-
- The absolute amount of the costs in a whole process
- The productivity of the costs in the process.
Most systems just look at the quantum, and set out to cut corners, work the current system harder, but by looking at the detail of the things that generate the costs, you can eliminate those that do not add value. However, moving a transaction cost on to another link in the supply chain does little to eliminate the cost, it just moves it. Retailers generally have been expert at this moving of transaction costs, while often creating them as a source of revenue. Practices such as making minor claims on a supplier, and holding up payment of a complete invoice until the claim is dealt with, then making the dealing with the claim a minefield for small suppliers abound. A source of the success of Aldi in Australia has been their focus on the reduction of transaction costs, but in return they get their “pounds worth” at the invoiced price point.
In dealing with supermarket retailers over many years, a number of transaction cost types have become evident:
-
-
- Cost of searching, storing, processing & managing information. Category management is a prime suspect here. Suppliers engage in a costly, data intensive exercise in the expectation (hope in most cases) that there will be returns from the collaboration that is hoped to occur, and from the opportunities good category management can unearth. While the costs of the data transactions themselves may have dropped precipitously over the last 20 years, the costs of the overheads to manage them have not.
-
- Cost of negotiation. In almost any negotiation where one party has the power, and is happy to use it, the outcome is virtually pre-ordained, it is just the quantum of the cost that is in question. Knowing, and sticking to your “Walk away” point is an absolute must.
-
- Cost of time. A vastly under measured cost in most businesses. We tend to have people on staff because there is a job to be done, and we pay them competitive rates to ensure we get the best people we can for the job, but we tend not to measure the value delivered by the doing of the job, its cost is just a part of the fixed overhead. Every minute spent costs a business, but apart from VC operators who use “burn rate” as a key measure, we tend to ignore it.
-
- Cost of certification. The range of certifications that are supposedly “needed” from HACCP to OH&S, to quality verification of components in a product to various religious and quality standards are legion. Each costs time, money, effort, and carry heavy opportunity costs. A bit of effort to isolate those that are really needed, and to manage those that are with automated or at least consistent processes can save a significant amount of time and money
-
- Cost of influence. People deal with people, not corporations, no matter how automated and impersonal our communications systems become. Getting to know people , building relationships and trust takes time and effort. It is time and effort well spent, to a point, and finding the point at which the costs outweigh the benefits is a management challenge most fail.
-
- Costs of cock-ups and rework. This is probably the biggest, most pervasive source of transaction costs. From the wrong invoice to a truckload pf product turning up to be rejected, and turned around dumped or put into rework. It is not just the cost of the product, but the added time, lost sales, loss of reputation, and needless consumption of capacity that really hurts. “Lean” processes target waste, and this one is the biggest waste that occurs, and is often made up of a lot of low hanging fruit if you go looking for it, and know where and how to look.
Small businesses are in a great position to reduce their transaction costs, simply by being good at everything they do, and being “close to the action” can make the wrinkles that can be ironed out that more obvious.
The original post that started the series is here, followed by the more detailed posts, 1, 2, 3, 4, 5.
Oct 21, 2013 | Communication, Governance, Lean, Operations
I had a post prepared for this morning, relating to the evolution of “local” agriculture, specifically around Sydney.
However, the events of the weekend, the burning of Sydney’s surrounding bushland, including several of the farms of those I have been talking to, seems to make everything else trivial by comparison. Getting your head around the scale of the fire disaster facing us is difficult, for most of us, most of the time, as it is no-one close to us who is affected, so can be pushed aside as we go about our business.
This morning is different.
Walk outside your comfy suburban home, and look at the sky, smell the smoke, observe the odd orange light, and you just know this is different, it is not just another Sydney summer bushfire. Hurts to wonder what may happen when summer actually gets here.
As we watch and listen to the news reports, there is a huge application of technology and human effort to managing the logistics of the fire-fighting effort, but one shot on a news report caught my attention. Behind all the activity of the control centre, the people on phones and computers, handling reports and updates, stood a big whiteboard, what appeared to be a visual record of the fires, their relative risk, resources deployed, resources expected and in reserve.
It always happens, people relate to visual material, when under pressure, a picture can immediately summarise a situation that words alone cannot, so they tend to gravitate to pictures, or a whiteboard in a large group situation, something that can be kept up to date in real time, that all people who need to see it, can see it as it evolves. The whiteboard is perhaps the best collaboration tool ever invented.
When the fires are out, the cleanup someone elses problem, and the inevitable wrangling with insurance is the news topic of the day, the lessons of visual should remain with all of us as we go about improving the way we go about achieving goals.
Our thoughts go to all those who have been impacted by the fires, ands will be over the next few days as the fires continue to ravage Sydney’s bush outskirts. Our grateful thanks for the courage, and committment of the “fireies”
Sep 23, 2013 | Customers, Lean, Operations, Sales
It is amazing how people adopt to “lean” instinctively, without any planning, or knowledge of the cliches and tools spruiked by consultants (including myself). People are pretty sensible when left to themselves, they do not build waste into a system deliberately. Usually when failure occurs, there is a system in place that fails under pressure, or someones ego is involved.
On Sunday my local tennis club took our turn to have a BBQ at the local chain hardware store (Thanks Bunnings) in an effort to raise the funds to keep our historic grass courts going. Most grass courts have been beaten by the maintanence costs, and have been replaced by various low maintanence surfaces, but there is still nothing like grass, so we hang in there!
It takes about 10 minutes to cook a sausage (cycle time) so when we got going, the cooks organised themselves so that sausages were progressively rolled across the hotplate so that they were cooked by the time they got to the end, at about the time they were stuffed into a bun for a customer. They had a lean JIT process going.
As the morning progressed, and demand increased, the cooks responded by adding a second row to the hotplate, and varying the number of sausages being cooked (WIP)at any time in the second row according to the demand. It still took 10 minutes to cook a sausage, but only a few minutes to adjust the number being cooked as demand changed. This increase in the demand is reflected in what is called, in Lean parlance, Takt time, or the amount of time you have to allocate to a process so that it meets the demand from the market.
Nobody was directing this evolution of this simple BBQ production line, it was just common sense, so sensible people just made it happen. It occurred to me, not for the first time, that the various forms of waste that end up in operational systems are there largely because the demand is not clearly communicated to those running the systems, and so they just cover their arses with inventory, and allow silly practices to evolve and get in the way of demand transparency.
Left on their own, people will instinctively respond to the apparent demand, so why not just give them the information and let them get on with it.
Sep 18, 2013 | Customers, Lean, Marketing, Small business, Social Media
Courtesy Michael Taylor
“5 why’s” is a tool that started life in the Lean Thinking toolbox, but in reality is simply common sense. In effect, make sure you understand the real cause of the problem facing you before you start deploying solutions, otherwise you risk treating the symptoms, not the cause.
It is a tool applicable to any problem or challenge, even the reluctance to engage with social media that I see so often with SME’s.
Following is an edited version of a of a recent conversation I had with a bloke running a successful small business, as he confronted his social media demons.
Bill: I have to get off my arse and start using Social media.
Me: Why?
Bill: Because all my competitors are using it.
Me: Are you losing any business to them, are you generating business you expect, or are you just lonely?
Bill: Don’t know, but I think it is expected
Me: Expected by whom?
Bill: Customers?
Me: Which customers, and what do they expect?
Bill: Not sure?
Me: wouldn’t it be wise to be clear about what you wanted to communicate, and to whom, which might offer some clues about how to best achieve the outcome?
Bill: Probably.
That conversation led into a useful session better defining his value proposition, then considering the tactics to be deployed to reach his best prospects, which included some “toe-tipping” into social media.
Social Media is not a panacea, and it is not a description of one thing any more than a label of “Cars” is a description of all the cars available. You still need to decide what you want to do with it, how much you will spend, and how you will measure satisfaction before you make the shortlist, and eventual choice. It is just pretty clear that in a modern world, just like cars, it is hard to avoid Social Media, it is everywhere.
