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”
Aug 15, 2011 | Alliance management, Collaboration, Marketing
An ongoing frustration of innovation projects is the apparently always moving goalposts. How often have you heard “wish marketing would make up their minds what they want”
This desire to have the end point articulated at the commencement is natural, it enables good milestone and resource management, feedback and accountability systems, all beloved of the bean counters. However, if the requirements of a marketplace are evolving quicker than the projects can be brought to the market, leaving the goalposts untouched is the same as ensuring you bring a redundant project to completion, not much value there.
The challenge is to know if marketing is just a bunch of seat shiners who cannot make up their minds, or a group so intimately connected to the market that they see the evolution as it happens. Sometimes it is pretty hard to tell the difference. Therefore, the only way to ensure the development groups are connected to the market, via marketing or otherwise, is to and hold them to a level of personal and development group responsibility for the outcomes.
Aug 9, 2011 | Collaboration, Communication, Management
Negotiation is usually difficult, that is the nature of things when two parties are setting out to maximise their outcome. Whilst it may not be a win/lose situation, where the parties set out to make the pie bigger, or different before cutting it up, it nevertheless is a confronting process for most.
Considering the negotiation therefore as just another difficult conversation has great merit. Do the background work, see it from the other parties perspective, and be prepared to work through the negotiation toolbox, but do not lose sight of the personal dynamics of a difficult conversation, and set out to manage them as a part of the process.
The nine mistakes articulated in the link above can form a framework for planning a difficult conversation, forewarned is forearmed.
