Aug 17, 2009 | Governance, Management, OE, Strategy
Return on Asset calculations as a realistic basis of performance measurement for many firms is rapidly going out the window.
On one hand we do the financial calculations, based on the accounting notion of tangible assets in the business, whilst on the other, saying that the primary assets of the business walk out the gate every night and go home.
This paradox should radically change the ways we measure the return on assets, it creates the need to find ways to consistently measure Intellectual Capital, not an easy challenge, but one that Directors and management need to start grappling with.
Consider, physical assets depreciate with use, but intellectual assets appreciate with use, so perhaps there is a measurement matrix in there somewhere, but probably fashioned by psychologists and anthropologists, rather than accountants.
Aug 16, 2009 | Innovation, Management, Operations
Over the last 10 years in the farming operations that make up a substantial portion of my client base, the foundations of the decisions being made have been radically altered by the rapidly increasing cost of water.
Water productivity is a now common term, coined to describe the relativity of the return per unit of water used to grow differing crops.
Water is now a capital item, traded independently of the farming operations to which it was originally attached.
Is it too long a stretch to consider other productive inputs in a similar light?.
Electricity is produced by coal burning power stations, and is used in a variety of ways from domestic lighting to powering industrial manufacturing. What would happen if we started to make decisions about the power usage in the same manner we make decisions about weather we grow rice or stone fruit, by the value of the output for a unit of productivity of the base input, power, or water.
Decisions would then be made about the relative value of lighting an office block at night, and making another container load of widgets. Simplistic, but you get the point.
It may be a dumb notion, to be considering the relative value of the output per unit of electrical power used, but 25 years ago, so was considering which crop to plant based on the relative value of the output per unit of water.
The current debate about the fmanagement of greenhouse gas production, the balance between its total environmental and economic costs of production and the value of its use, and how that is to be integrated into a sensible economic framework has a long way to go despite politically motivated noises of certainty emerging from Canberra. As with most unknowns, it should evolve with experiment, and we should be hoping that the rules put in place now to satisfy expediency do not have an adverse impact on that evolution.
However, water is still a political and economic mess, so expecting the carbon debate to be any better will be a very big ask indeed.
Aug 13, 2009 | Demand chains, Management
The following list was imbedded in an article “putting the I back in Alliances” by Rosabeth Moss Canter, one of the better management thinkers around. It creates a simple list of things any successful alliance requires.
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Individual excellence: Both sides bring strengths and neither can be expected to prop up the other.
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Importance: The relationship must matter strategically to both sides.
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Interdependence: You need to need each other.
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Investment: Have a stake in the partner’s success.
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Information: Transparency strengthens the partnership; hiding information impedes trust.
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Integration: Create several points of contact across the organizations.
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Institutionalization: A formal structure can aid in objectivity and ensure the partnership works for both sides.
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Integrity: Trust is critical and ethics are a must.
In all the work I have done in alliance formation and management, there is no time when this list would not have been of value.
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Aug 11, 2009 | Demand chains, Management, Strategy
Technology has multiplied the potential for information flows through a value chain, but often human behavior hampers it as individuals use the available information to enhance their own position. This happens internally, but is even more prevalent in the interactions between firms, as individuals seek to enhance not only their own position, but the perceived negotiating position of their firm.
A key metric to look at when assessing the health of a value chain is the exchange of information between firms. The actual measurement will usually be a combination of hard & soft data such as joint strategic planning, shared KPI’s, availability of data when needed and in a useable form. A technique I have sometimes found useful is an adaptation of an HR practice, do a “360 degree” performance assessment on the available information amongst those who come into contact with it, and have a use for it.
Another of those paradoxes that exist in human relations, elicited by the information exchange in supply value chains:
Why is it that the passionate exchange of information that occurs on social networking sites is rarely replicated in a value chain?
It seems odd to me that people who are willing to share sometimes pretty personal stuff on a networking site are unwilling to share information of a non- personal nature in a commercial situation, even where the commercial case for the exchange is clearly made.
Such information exchange is a pre-requisite of creating a demand chain from a bog standard supply chain.
Aug 10, 2009 | Management, Marketing, Sales
As a senior marketing executive in a previous life, in a business with a highly seasonal FMCG product range, I used to force the marketing department to spend substantial amounts of time in the field with our field sales force in the critical pre Christmas period.
The November and December period was critical to the achievement of the years budget, a miss by more than a couple of percentage points would never be made up before the June 30 year end.
This provided a great excuse to get desk bound marketing staff into stores, interacting with the consumers, products and brands in the categories where they had responsability. “All hands on deck” speeches were common, to overcome the reluctance, after all, they consistently told me, they looked after the brands, and the long term interests of the business, and stacking shelves in Woolworths was a waste of their time.
The underlying motivation, much more important than a few extra relatively unskilled (in that environment) people in the field, was the opportunity to gain the first hand views of the “coal face” which were much more directly connected to our consumers in a competitive market than a research report ever will be, albeit at a qualitative level. It also offered the front line personnel a chance to get stuff off their chest, very useful feedback for office bound marketers.
Interestingly, the marketing staff who enjoyed the experience were also generally good at the marketing job, and those who resisted, only went out reluctantly (usually with my boot up their clacker) were also not the best marketers, and so the process offered me another measure of the potential of an employee to make a worthwhile contribution to the marketing and brand building challenges we faced.
Aug 8, 2009 | Management, Marketing, Strategy
That ability to make quick decisions that more often than not, turn out to the right choice is an envied and rare talent. How much is just pure talent, and how much is training, instinct, and experience?
After 35 years of engagement with management, it appears to me that the talent, without the training and experience is as good as a great cricketer with his favorite bat in hand, approaching the first tee in a golf tournament.
