Can you shrink your way to prosperity?

Can you shrink your way to prosperity?

Apr 21, 2017 | Customers, Strategy

There is the old story of the successful large business becoming an unsuccessful smaller one. Usually it is accompanied by stories of missed opportunities, poor strategies and a focus on cost cutting.

The poster boy for this transformation in my personal experience is Goodman Fielder, for whom I have worked on two occasions. First as a youthful marketing person in the glory days, when Meadow Lea was changing the spreads market by congratulating its consumers for their choice of margarine, and later as a General Management contractor tarting up one of their smaller business units for sale, as it shrunk its way to near oblivion.

To be successful in any commercial arena means that you have created value for someone else. It is a simple truism of business that only be creating value do you attract customers, the support of your value chains, and as a result, revenue.

Businesses do have the tendency to attract overheads, the way a boat attracts barnacles. They attach themselves to the structures and they slow you down, reduce manoeuvrability, and can eventually sink you. You cannot be prosperous while carting around the commercial equivalent of a barnacle covered hull. Cleaning off the commercial barnacles may result in some size reduction initially, but it also increases the potential to add value, agility, and sensitivity to the needs of your markets, so growth is the outcome when the cleaning is done well.

Growth is part of our DNA, it is a mind-set necessary for success.

Who would want to work for, or deal with a company that was overtly focused on squeezing out the maximum dollars from a transaction and relationship? You know the motivation is about their interests, so It would be easy to believe the service, quality, and longevity would be compromised by such a focus.

By contrast, who would not want to engage with a company growing quickly, innovating, and delivering value to customers, and offering opportunity to its employees.

Cost cutting is one thing, using your resources wisely to create value is another, and they are profoundly different.

Photo credit Wes Iverson https://www.flickr.com/photos/62425933@N04/7398646344/

 

The tragedy of ‘doing a Fairfax’

The tragedy of ‘doing a Fairfax’

Apr 7, 2017 | Leadership, rant, Strategy

The once great Fairfax media empire, once a fearless protector of our democracy, on Wednesday announced a further rationalisation in an effort to save $30 million.

This is another in a long list of ‘Adjustments’ and programs which have  become code for making editorial staff redundant.

The Fairfax announcement of 30 million in cost savings, promises to turn the Fairfax publications into  ‘genuine digital businesses with the capabilities and cost base to best operate in the current media environment’.

This is code for no more news that we should be hearing, and more mindless nonsense about footballers hammies, bar brawls, and steamy affairs with soapie stars.

How do such stories give us the intellectual depth and investigative rigour needed to keep the forces of greed, self indulgence, neglect, corruption, and sheer criminality  at bay?

From a commercial perspective, it is reasonable that a private organisation follow the market that it needs to service in order to survive, but that survival, assuming it happens in this case, comes at a long term cost to the community it serves.

Lord Beaverbrook, amongst many colourful quotes is credited with something like ‘my papers give the public what they want, which is not necessarily what they need’.  At this time, never has a truer word been said.

In 2016 Fairfax saved $15 million by cutting 120 editorial jobs, on top of the 1200 saved in 2012, which included the closure of a number of its printing operations. Saving another $30 million will see the cleaner writing the editorials.

If this was just another business going broke, and struggling for its identity and survival in a disrupted industry, it would be one thing, but this is Fairfax, a group that for 180 years has kept those who seek to govern us honest, or as honest as they can be, and has exposed the corrupt and venal amongst us to fearless scrutiny.

It has been clear for decades that people bought newspapers for the classified advertising, the cars, jobs and houses being sold turned into a ‘river of gold’ for the newspaper proprietors, who invested a bit of the river back into the public good.

Now the rivers have dried up, the public good is being left to fend for itself.

Therein lies the tragedy, it can’t without help.

In the absence of an accountable and fearless press, we are all in trouble.

Without Fairfax, and the determination and commitment of Kate McClymont and others like her, we would not have the current  Royal Commission into the Institutional abuse of our kids, and Eddie Obeid and his cronies, like Sir Lunchalot would still be running the state for their personal benefit, to our collective cost.

The lesson for the rest of us is that you ignore the tsunami of change that is coming at you at your peril, and collectively unless we find ways to replace that which is lost in some way, our children will pay a very big price indeed.

 

The 4 levels of a successful business improvement project 

The 4 levels of a successful business improvement project 

Apr 3, 2017 | Governance, Leadership, Management, Strategy

My clients are mostly small and medium sized manufacturing businesses. They usually come to me when they are in a spot of bother, as word does get around.

Over a period of over 20 years of working with these businesses, a process has evolved. It is repeatable scalable, and can be applied to any business of any size. This is not because it is a complex set of algorithms that account for every contingency, just the opposite. It is a simple way of approaching a performance improvement project, that recognises the beauty of Einstein’s quote that “everything should be made as simple as possible, no simpler’

It is not rocket science, it is common sense, first principals.

My entry point is usually strategy, marketing & sales, or as I prefer to call it, ‘Revenue Generation’. The functional distinction these days between marketing and sales is utterly redundant. It never was relevant to customers, it just made the organisation chart easier to understand.

When someone is in trouble, and that is where I usually come in, the standard call is ’get more sales’. However, 9/10 times I see other things that need fixing, so in order to do that, I go back to the foundations, to the first principals of business.

In the end, Business is pretty simple, make and sell something for more than it costs you, and ensure the value to the purchaser is greater to them than the cost, and all will be well.

An improvement project can be treated as being in four parts, or levels, and each will contain numerous sub projects and elements that need to be addressed.

However, they need to be addressed in some sort of logical order, starting with the most urgent, as well as those that will deliver some quick returns. The quick wins are not just for commercial and financial reasons, it is because any change will inevitably be disturbing and potentially disruptive, so having a few quick wins makes the pain of change go away, or at least be more palatable.

Foundation.

These are the things that no matter what else you do, absolutely need to be done.

A lot of it is ‘underground’ as most foundations are, largely unseen, nevertheless, without a solid foundation, whatever else you build will  not last.

It is also true that the foundations wear out, become depreciated, and without renewal, which is a continuous process, you will still fail.

  • Basic financials. Cash management is essential, as cash is the oxygen of business. No business should be without weekly cash flow forecasting. The Profit and Loss statement measures your trading outcomes. It is less immediate than cash management, and gives a better picture of the items that are consuming and generating cash, so they can be managed appropriately. The P&L should be done monthly, along with the relevant performance measures against expectations in whatever form they have been articulated, usually a budget. The balance sheet is a picture at a moment in time of the performance of the business in creating or consuming wealth for its owners. These three basic financial measures are a part of the statutory accounts of any registered business, but a fourth that is not, is a simple measure of the break-even point in a business. At what point in trading do you go from loss in a period to profit. Knowing your break-even point is a bit like knowing when swimming if your nose and mouth are in the water, or out of it.
  • ‘Why’. Being able to articulate the purpose of your business is a huge competitive and cultural benefit that shapes the evolution it will go through. For those who have not stumbled across the various writings of Simon Sinek, it is time to start.
  • Business model. This is the means by which you turn your product into money. The foundations of a wholesaler will be different to those of a retailer, or on line supplier of products. The way you build the foundations will similarly be different. Different business models do not easily mix in the one business. Barnes and Noble should have invented Amazon, not been put out of business by them. Similarly, Blockbuster was in the prime position to invent Netfliks, not become their victim.
  • Regulatory requirements. These are a do it or be prosecuted choice, which for most is no choice at all, but you would be surprised how many businesses I walk into that are (mostly) unknowingly breaking the law. If you are running a child care centre, better get the regulatory stuff sorted!
  • Operational capability. Setting out to run a business, you need to be able to deliver a product of reliable quality, on time, and in budget, that delivers value to the customer. Pretty simple, but I have seen many business plans that seem to think that a product will come about like manna from heaven, just because it is ordered.

The advent of digital has changed forever the manner in which you approach a number of these elements and I would contend, is continuing to change them, almost weekly. I was tempted to put digital capability as one of the Foundation elements, but digital is a bit like breathing, you do it or you are history.

 

Revenue generation.

Commonly called Marketing & Sales, but as noted the distinction is redundant.

No business survives without revenue, and it is my view that all  the processes aimed at generating that revenue, directly or indirectly, should be seen through the one lens.

Marketing is a huge topic, way too much for a single blog post, but there are some basics that should be clear.

What is the profile of your ideal customer, How do you find and engage them?

What is the value proposition, how will the customer make the choice between your product and the alternatives, How will you go about building a brand, what are your best distribution channel options, which communication channels and platforms do you use,  which customer profiling methodology, lead generation and conversion, NPD & C, customer service, Strategic key Account Management, value proposition, advertising, market research,  and so on and on and on.

I ‘bounce’ between revenue generation and the foundation activities. While you have to have the foundations in place, you also have to be generating revenue to pay for the investment, one without the other is still a ‘fail’. Therefore there is a continuous and parallel improvement in both, it is not sequential, it is a parallel journey.

One of the traps of all the digitisation that has taken place in the revenue generation space is the sudden availability of new shiny toys to play with. Each in its own way promises to deliver at least some part of the silver bullet you are seeking. The temptation to chase the newest shiny tool is overwhelming for many, but also equally daunting for many others. The right mix is somewhere in the middle, as usual.

Identify the tools that solve your problems in the manner that best suits your strategic and financial objectives and limitations,  without losing sight of the foundations of your business, and you will be OK. Being seduced by the tools is as bad as ignoring them.

 

Leverage & Scalability

This is where the fun really starts.

We all understand the concept of leverage, of doing more with less. The tools available in the revenue generation space give you leverage in your current markets. They also provide the opportunity to leverage capabilities outside your immediate markets and customers. This sort of leverage can be applied geographically, to adjacent markets and customers, in new value propositions, new technologies, and to gain a decisive advantage over competitors.

Having built a stable and profitable business by solid achievement in the foundations and revenue generation stages, you will free up the time to enable the leveraging and scaling of your processes, assets,  capabilities, collaborative demand chains, and importantly spread your process improvement successes wider.

 

Sustainability.

Commercial sustainability is the rarely stated, but often considered objective of all this commitment. The best metaphor for this stage is nature. As the environment changes, the organism evolves to accommodate and leverage the changes to its benefit, and this happens without added effort. It is commercial evolution at work.

This is the vision painted by so many of those trying to get into your pockets, of the 4 hour work week, taken remotely while on an island paradise collecting magically recurrent income. It never happens, at least I have never seen it. Even those who claim to be making millions via the web selling all sorts of dreams, are doing more than they tell you. It is true that web based products, a new  commercial option still only a decade old have made a huge impact, and there are a few who have made it big, but they are as rare as those who made it big in manufacturing in the last century were. Nevertheless, having a goal of sustainability in your sights, and working towards it will see your business prosper, and you will be able to enjoy the fruits of that prosperity.

So what now?

You can only do a very small number of things at once.

Therefore where I start is with a ‘StrategyAudit’ where I go looking for the holes then prioritise them into an action plan, and gain some sort of agreement  that the plans will be followed. A realistic assessment of the current situation is an absolutely crucial first point of any improvement project that offers the genuine chance of enhanced performance.

 

Decision time for manufacturers of ‘disposable’ items.

Decision time for manufacturers of ‘disposable’ items.

Mar 8, 2017 | Branding, Change, Small business, Strategy

I have used the term ‘disposable’ to mean that the consumers investment is low, so purchase risk is limited. Buy one and find it does not deliver, and little is lost.

Over the weekend I had a casual conversation with an acquaintance who runs a small business selling such a line of disposable consumer products into a niche via specialist chain retailers, many branches being franchised, so are somewhat independent.

His problem is that he is being overrun by the scale of the retailers who take his ideas and have them fabricated in China under another brand at prices he is having increasing trouble matching.  In any event, they also control shelf space, so he is at their mercy.

Not an uncommon problem.

My rather glib response was that he was trying to sell to the wrong people. His current customers, the retailers, were not actually his customers, in fact they were more like adversaries. His real customers were the ones who had a need that his products fulfilled, and the retailers were just a logistical barrier to be managed and overcome.

The retailers see the only value in his products as a range they should carry as an occasional addition to the customer basket  at the cheapest price that meet their margin requirements. For them there is no investment in the success of the product, and little downside.

To the real consumers however,  the question of whether they outlay $8 or $11 for the items is largely irrelevant once the buying decision, often impulse, has been made. There is little brand awareness or preference involved, there has been only modest marketing investments made, the sales come from demonstrating the utility of  the product.

My advice: Set up an online shop, and actively market to the identifiable groups of customers who would benefit from using his products.

As he has a limited budget, and little brand recognition, this is potentially a make or break decision, not to be taken lightly.

Retailers will be even more disinclined to stock his products when they see him actively competing with them on line, but on the other hand, his sales volumes have been dropping steadily for some time, and the costs of doing business are increasing, so the end game is in sight.

The flip side is that the product is ideally suited to selling on line, the value is demonstrable, it is easily sent via the post, and the margin freed up by selling direct would be considerable.

A change of this nature would be uncomfortable, but I suggest the only way the business will continue to prosper, and have any value when the current owner decides it is time to retire.

Does yours fit the consumer definition of ‘Disposable?”

If so, what are you doing about it?

 

What does ‘Priority’ mean to you?

What does ‘Priority’ mean to you?

Feb 20, 2017 | Change, Leadership, Strategy

Most of us would say in answer to that question “the one most important thing”.

The thing that we just have to do first, in preference to all others.

Priority is singular.

However, in most cases I see the word used as a plural, ‘Priorities’. It seems this is a new word, spawned perhaps by our instinct to cover our bets and our management arses.

We all get what ‘Priority’ means, but how do we separate the ‘Priority’ from the ‘Priorities’.

In most management situations, we do not do that separation job adequately. We end up trying to do too much, compromising the outcomes of everything in front of us.

Pick one priority, and when done, move on.

In 1997 when Steve Jobs (don’t you get sick of examples from Apple and Jobs?) returned from involuntary exile back to Apple, the company he started was on the verge of insolvency, having just lost over a billion dollars. A year later, Apple turned a $309 million profit.

How did he do it?

He focused Apple on the priority: selling the core range of two products, the PowerMac 3 and PowerBook 3.

Most of the huge range of products were discontinued, revenue did drop, but overheads dropped even further, so they made money, and were able to reinvest in the follow up innovations that changed the world.

Italian mathematician Vilfredo Pareto coined what has become known as the 80:20 rule by observing a wide range of totally unrelated situations where 80% of something was generated by 20% of the generators. The truth of this principal was observed by pioneer management consultant Joseph Juran who popularised it as the Pareto Principal.

In 22 years of consulting and contracting, mainly to medium sized manufacturing businesses, I have only ever seen evidence that the Pareto principal holds. In some cases, it is more like 90:10, so the challenge is the same one faced by Steve Jobs.

Which 80% of what you are currently doing do you no longer do?

Never an easy question, there are always reasons for everything that is being done, but survival is often about establishing the priority, and doing just that one thing better than anyone else.

 

 

 

Case study: The pros and cons of PR in a B2B market.

Case study: The pros and cons of PR in a B2B market.

Feb 15, 2017 | Branding, Customers, Marketing, Strategy

PR can be a remarkably effective tool in the marketing arsenal, but most of it is just wasted, simply because it is not delivering any message of value to anyone who cares.

What can you expect when you have a combination of PR agencies who get paid by the word, various supposedly credentialed dills with a barrow to push who like to see their names in print, and politicians who will respond to the smallest of pressure groups who make a big noise?

The latest target of the word churners is sugar, specifically sugar in soft drinks,  but more broadly, sugar in everything.

Tax it and the problem will go away.

Nonsense.

While it is true that in economics 101 I learned that when you increase the price of anything, you sell less of it, this is a logical outcome based on an assumption of rational behaviour.

If I have learnt anything about consumer behaviour in the 45 years I have been in the marketing game, it is that it is rarely just rational, and unlikely to be altered by well meaning press releases, full of adjectives and promises of better days, written by those with a dog in the fight.

I was recently asked by a former client who supplies high value but very low usage ingredients that have the  potential to replace some of the functionality of sugar in food products for an opinion on a couple of different PR approaches they were considering in response to the discussion about a sugar tax.

Following is the reasoning I offered on PR as a marketing tool in this situation, sanitised for more general consumption.

  • There is a political problem, we are all too fat, therefore there is pressure on governments to regulate. Some of this regulation is warranted, such as the disclosure of the calorific value of products, in this case soft drinks, some is just nonsense.
  • We all (should by now) know that soft drinks are full of sugar, and drinking them to excess makes you fat, as well as having other health impacts. Therefore ensuring that label regulations are clear and understandable to laymen is a good thing, resisted by the beverage companies, as they do not want to scare the horses.
  • We cannot expect (in my view) governments to regulate for our behaviour, to be the gate keepers on our fridges. However, the tendency seems to be to seek to regulate to protect people from themselves. This is the guts of the move to have a tax on sugar, but underneath, there is a revenue measure for government that they will not talk about, but remains.

For a business to successfully leverage the public discussion for their commercial purposes requires some sort of strategy, and what I often see is a strategic vacuum, into which a PR release is sent. Some thoughts on the value of PR in these circumstances to a business that has some sort of vested interest in product formulation in the beverage market :

  • The target market for information is the marketing and technical people in beverage manufacturers, and they require different messages entirely. If it was me, I would have a plan with a few simple elements, and execute on the plan.
  • Create a list of the beverage manufacturers in each market, along with the relevant information about their ownership, location of factories, brands, strategies, etc, all you can reasonably glean from the combination of public documents and what your sales force knows. This is part of what marketing departments in businesses  with these sorts of interests should be doing.
  • As part of the above, ensure there was a list of the personnel in each business, their role in an organisation chart, and more importantly their role in the marketing, procurement, and product formulation decision making.
  • Develop ‘content’ with credibility to support all sides of the debate, and make all the data available, not just the bits that may support your commercial objectives. Research by the likes of Tate and Lyal, and CSR will be viewed with suspicion, irrespective of the science of it, because they have a vested interest, unless they discuss all the data and both sides of the debate.
  • Use the lists developed above to target selectively the people you need to speak to with the commercially agnostic data (content) you have developed. Do this digitally to create MQL’s (marketing qualified Leads) which are then passed to Sales and Technical services to follow up in person to make your formulation and commercial arguments.
  • Pick a small number of real target companies and devote resources specifically to the task of selling to them.  I would pick the challenger brands in each market, the ones you can sell to without the regional head office being involved, those who do not  have the big marketing budgets and brands, so they have less to risk. Once you convert a small number, and they have success in the market, the rest will follow.

This is pretty basic marketing 101.

Recognise that your target market is specific, and sales intensive, not marketing intensive. You are not selling toothpaste to a consumer with a low transaction value and regular small transactions, where marketing is vital. You are selling high value ingredient to customers where there is a high degree of specification, complication, and a long term relationship at stake. The challenge is different. Wasting time and effort, as well as money on consumer PR is useless in this context except as a strategy for keeping the wallies who do not understand the basics of the sales and marketing of their businesses quiet.