Sep 21, 2011 | Communication, Management, Social Media
What a great term, coined by Euan Semple, to describe the phenomenon of older (largely) male senior executives pretending they have “got” social media.
Like many others, I spend a lot of time trying to persuade people of the value that can be generated by intelligent use of social media, most of those people run enterprises, and usually reluctantly can be persuaded to put a modest amount of resources into SM, often I think because their golf partner was telling them on the 19th last week that he has been able to cut the advertising budget by 50% by using SM.
Anyway, they become superficially engaged, in their hearts thinking this social media stuff is just their almost adult children behaving badly and then for some inexplicable reason, posting the footage on face book.
The term “Dad Dancing,” perfectly invokes a picture of the gyrations and uncoordinated usually frenetic and short term activity that emerges from such a conversion.
Sep 16, 2011 | Customers, Management, Sales, Small business
SME’s in the Australian food industry are up against it if they see their futures as suppliers to the major chains, who require a combination of utter commitment, globally competitive costs, and supply certainty requiring substantial scale and the attendant capital base.
Added to all that, small business has it all in front of them in any stoush with a large corporation. Metcash, the nations largest wholesaler, and effectively the third force in Australian FMCG via its supply arrangements with independent retailers seems to relish a fight.
They chose to fight Andrew Bunn, a small retailer in Canberra who went to the wall, and then accused Metcash of breaking their supply contract. The blue Metcash then picked with the ACCC over their proposed purchase of Franklins has been entertaining. Metcash informed the ACCC they would go ahead with their purchase of the Franklins chain from Pick n Pay before the ACCC delivered its decision, ballsy call, justified as the Federal Court gave them the go-ahead, but the ACCC is now appealing the decision. Who knows what will happen next, but the ACCC must assert its power in the marketplace or become irrelevant, but whilst the legal stuff drags on Franklins is bleeding cash, virtually removing them from the scene as an ongoing concern, whoever owns them.
I’m sure there is more to come, but none of it matters much to the SME manufacturer facing a small number of retail gorillas who exercise their power ruthlessly, and without any empathy with their suppliers. The ghost of Eric Bender who inhabits the memory of the few of us still around who dealt with him, would shake his head in dismay, and take another drag.
Sep 8, 2011 | Customers, Management, Marketing, Operations, Small business
The mulitnational Heinz has been in the news a bit recently.
First, they announce a restructure, which means closing plants, and consolidating production, in this case to NZ, and to a remaining Australian plant that will get a bit of a kick-along. Wonder how long that will last?
Then the worldwide CFO Art Winkleblack took aim at the retail duopoly in Australia, citing it as a reason for the difficulties Heinz has had, and as a basis of the restructuring decisions. I bet the local sales management loved him for it, the next time they had to front Coles and Woolies!
In a short period, the challenges of the industry are laid bare, the $A making imports cheaper, the power exercised by the retail duopoly, and the necessity of manufacturing and marketing scale to counter it.
If Heinz, a global business turning over close to a billion dollars in Australia, and many more globally has these problems, put yourself in the position of the SME, with little marketing leverage, a plant that needs capital, banks that are so risk averse, and so stripped of people who understand small business they simply choose not to engage, how can the little guy hope to sustain his business?. Pure bloody mindedness and determination is about the only answer you will come up with, mixed in with a spirit of being prepared to really have a go, and screw the buggars!.
We wonder why we have more imports of packaged food products into this country than we produce, the position Heinz finds itself in demonstrates why.
Sep 5, 2011 | Innovation, Management, Operations, Strategy
Googles purchase of Motorola poses an interesting management challenge.
To date, Google has been a producer of software, an intellectually intensive activity that can be accomplished anywhere the brain is located.
Manufacturing is a different beast.
Suddenly you have factories, supply chains, unions, fragmented regulatory regimes covering OH&S, environment, waste, and a myriad of other stuff that sometimes seems designed to ensure you drown in red tape. What a difference!
This will stretch Google’s leadership and culture, as any manufacturing executive will tell you, it is not as easy as it looks.
Aug 30, 2011 | Alliance management, Collaboration, Innovation, Strategy
I was amazed to realise that the recent dog fight to buy Nortel, was really driven by the patents they had, rather than the value of the operational parts of the business.
After an opener bid by Google of $900mill, Nortel eventually was sold to a consortium that included Apple, Microsoft, (ironic partnership that) Ericcson and Sony for $4.5 billion, outbidding Google and Intel who had teamed up. The winners will share the patent bank of Nortel, some 30,000 of them covering all sorts of electronic ideas and gizmos. The Nortel sale then prompted the sale of Motorola to Google for 12.5 billion, as it put a value on their patent bank.
A new business has emerged from the development of the last 20 years, “patent troll” someone who buys up patents, and then launches litigation to extract royalties. Given the hazy boundaries of patents in the digital space, the ideas that patent applications address in the first instance often have potential applications in applications never dreamed of in the original form. Enter the patent troll, who chases the royalities, potentially ensuring innovation driven startups may make never get off the ground, as the threat of litigation is enough to smother the commercialisation process.
The giant of Patent Trolls appears to be Intellectual Ventures, started by Nathan Myhrvold, a brilliant bloke whose contribution to Microsoft was a key to their success, and who since has made heaps by effectively greenmailing tech companies with lawsuits and threats suits for patent infringement.
Long intro. This cost of insuring against greenmailing ends up in the cost of the stuff we buy, and virtually all of it is just risk management, avoiding the risk of litigation that adds no value to the innovation process at all. The patent process was developed to protect ideas in a simpler time, and seems to me to have lived beyond its useful life, at least in the digital arena. Ideas scale, they get better with use, and the evolution of patent trolling acts as a disincentive to use, a tax.
Aug 26, 2011 | Change, Management, Marketing, Small business, Strategy
The decision yesterday by the federal Court to allow Metcash to purchase Franklins from Pick n Pay, then onsell, presumably with tied supply agreements is another nail in the coffin of competition in the retail trade, despite the interpretation of the law by the courts.
Now you have Coles, Woolworths and Metcash with a share above 90% of the supermarket trade, limited choice for consumers, a nightmare for suppliers, particularly the decimated local suppliers who have struggled against the increasing power of the retailers for 30 years, and have largely failed.
Several things will emerge that will accelerate change in the supply landscape.
- Scale should dominate the strategic thinking of suppliers. You need to be a gorilla to play with gorillas, so get big or get out. The only alternative is to back off and be a small specialty producer, concentrating on the small share of retail trade not controlled by the 3 gorillas.
- It will be increasingly difficult at the smaller end of the size scale. The businesses left that turn over between a couple of million, and 50 million, many of them regional, with extreme pressure on their finances at a time when banks are not being helpful despite their advertising, will struggle. There are only a few left, and many of those will go to the wall.
- Competition between supply chains, from growers through to retailers will increase. Soon, if you supply Coles, you will not be able to supply Woolies, without risking your position with Coles. Suppliers will need to make choices, and gear up to integrate themselves into a supply chain system, losing their independence, and closing off options. This may not be a bad thing, but it is a substantial change from the current practice and way of thinking, and it limits the scope of customer base available through which to reach consumers with your product.
- The move to housebrands will accelerate, further enabling global sourcing by retailers, squeezing local suppliers. The $A has punched this process along over the last couple of years, adding more pressure to local suppliers who, having lost shelf space for their brands, were relying on contract packing to stay afloat
- Retailers are lousy marketers, good at sales, but lousy marketers. With housebrands coming to dominate categories on price, attractive to consumers in tough times, where will the innovation come from? Where is the incentive for local suppliers to risk their limited capital in doing something different?.
The ACCC, governments at all levels and the courts implicitly decided years ago that the SME end of the food industry was fair game, the survival of the fittest, and all that, and from an economic perspective, it may be the right thing to have done, but at what cost in human terms. The old question I have used in many seminars to make the point about retailer power:
Question. “Where does the 400kg gorilla sleep?”
Answer. “Anywhere he bloody likes”
