Dec 18, 2015 | Collaboration, Governance, Leadership, Strategy
Peter Drucker said something like “innovation is the only truly sustainable competitive advantage”.
Having just re-read his 1985 musings on Innovation and Entrepreneurship, after 20 or so years, the degree of his foresight is truly astonishing. It is great to finally have a Prime Minister who actually understands how to make a buck, and the strategic, commercial and competitive challenges of bringing new products to market. He may be one of the few in Canberra who do, but at least it is a fair start.
With much fanfare the Government on December 3 tabled in parliament a Senate report on ‘Australia’s innovation System‘ However, with the exception of Professor Roy Greens valuable contribution as an appendix, I see little of real value in the report beyond a few worthwhile observations and some useful changes to the tax treatment of entrepreneurial endeavours.
Our venerable Senators have had summarized for them documents (I wonder how much consideration these busy important people actually gave to the detail of the submissions) that may have started with some valuable ideas but which have been sanitised into a document long on rhetoric and disturbingly short on anything of value, which can only be delivered when someone asks the question “What now”?
As someone who has run an agency outsourced from the Federal bureaucracy charged with identifying and delivering innovation to a specific sector, I can attest from first hand just how powerful the cultural forces are against anything with even a hint of risk, change, or long term thinking in the now politicised public sector.
Successful innovation takes all three, plus a clear definition of the problems to be addressed.
There is little evidence of anything in the report that encourages me to think that the status quo will be truly challenged.
It is useful to look to successful models, and there are none more successful than the US since the second war. Most will now assume I am jumping to Google, Apple et al, but no. if you look deep enough you will see the hand of government at a deep level making very long term investments in basic science, building knowledge that the private sector then leverages with innovation into commercial products delivering new value.
A scientist named Vannevar Bush (no relation to the Bush pollies) was commissioned by President Roosevelt just before he died to report on what needed to be done to promote research and development and the commercial innovation it drives, just as this senate inquiry has done. Bush reported to president Truman in 1945, delivering his report, “Science, the Endless Frontier” which laid out the proposition:
“Basic research leads to new technology. It provides scientific capital. It creates a fund from which the practical application of knowledge must be drawn”.
Directly resulting from this report was the National Science Foundation. Defence Advanced Research Projects Agency DARPA and several other institutes charged with the charter to do basic science, of discovering new knowledge.
When you look at all the products disrupting industries up to today, and changing our lives, many if not most of them have their roots in the various agencies spawned by Bush’s farsighted ideas, and the ability of the scientific agencies concerned to outlive the political cycle.
Now compare that to Australia’s situation.
CSIRO used to be a great agency, capable of developing technology like the wireless technology in the 90’s now in every mobile phone after years on the shelf until a commercial use with smartphones was found. Scientific Capital at work.
Now CSIRO is a politicised dysfunctional rump of its former self, with a little of the funding ripped out over the last 20 years of hubris restored via this latest in a long line of Innovation “initiatives” to the sounds of grateful clapping. I see few practical remedies for the past 20 years of innovation vandalism being actually addressed, although at least a real start may have been made.
As I always say in workshops, “the best time to start an innovation initiative was 10 years ago, the second best time is now”.
Lets hope it is not too late for Australian manufacturing.
Jul 9, 2015 | Branding, Customers, Demand chains, Marketing, Strategy
All those brand stories: gone.
Every now and again I see something so stupid, so irrational, and so destructive of a valuable brand, that I think that perhaps the loonies really do have the keys to the asylum.
One of them happened yesterday.
There was a radio news report that Akubra would cease to buy any of the raw material required for their hats, rabbit skins, from Australian suppliers.
From here on they would be using 100% imported skins.
One of the honchos from Akubra was interviewed, and he was blathering about looking after all stakeholders, that sacrificing 4-5 jobs in Kempsey where the hats are made was worth it to ensure the business remained viable, and that the 5,000 retailers around Australia needed to be assured of continuous supply, or they would be in trouble.
Blimey, stone the crows, 5,000 retailers rioting because there is uncertainty about the viability of a supplier of .00000001% of their sales.
Then it turned out that just 10% of current skin supplies were local anyway, as the khaleesi virus has cut a swathe through rabbit numbers, for which we are all thankful. Then a supplier was interviewed. He breeds rabbits for the table, the skins to Akubra are a very useful addition to his cash flow, important even, but not make or break, so now the skins will go to landfill.
How much better it would have been to set about supporting the Australian industry, modernising their equipment, working with their suppliers, so that this Australian icon could continue to grow, particularly as wild rabbit numbers seem to be increasing as the virus becomes less effective.
What a positive brand story they could have created and spread, reinforcing the existing position, telling the stories that are the foundation of their brand, but instead they chose to trash their brand, built up over 100 years plus.
Your brand is an amalgam of all the stories told about you, your products, the situations encountered, and the experiences users have with the products. The stories Akubra could tell are legion, but instead they choose to self-destruct their most valuable asset.
Next thing you know, a global brand like Coke will replace itself. Oh, poop, they already did.
Sigh.
Let the loonies go free.
Jul 2, 2015 | Customers, Marketing, Social Media, Strategy
I find myself writing a proposal for the development and implementation of a digital marketing strategy for a bunch who know they need it, because I suspect their kids told them, but have no idea what it is.
Part of the challenge is to figure out how to balance the digital and social media education against the tough realities of marketing which have not changed despite all the new tools. The entrenched view that marketing is about putting out a monthly newsletter full of general bluster and crap and discounting as and when deemed necessary, usually from an inflated starting point pervades the thinking, and has contributed to ensuring the previous efforts in the digital space have failed.
Perhaps I am wasting my time?
Some of the essential early questions are proving to be challenging for them. Questions like:
1. Who is your audience? We need much more than generalised demographics, we need specific behavioural information informed by the demographics to the point of being able to give prospects individual personalities which we can address in communications.
2. Why and where do they spend their time online? The prospective audience all have digital lives, and if we are serious about becoming a part of those lives, we need to be serious about understanding how it works on an individual basis now, or we risk alienation.
3. What do you have to say? Unless what you have to say is of interest to them, sufficient to engage and over time lead them to a transaction, there is no future. Speaking to a prospect in their words, explaining why should they care about what you have to say is now essential.
4. How does what you have to say add value to their lives? It is one thing to be noticed, and hopefully gain some interest, but unless we can tell them specifically how the item being promised will add value to their lives, they will not engage. Long gone are the days of broadcasting generalised features and standing back with an order book. Now we have to specifically target benefits and articulate them unambiguously and with sensitivity to the aspirations, situation and needs of the prospect.
5. Why are you reaching out to them? The initial and quite reasonable and logical reaction to digital communication is that you are just trying to reach them to flog them something, and nobody likes to be a target. Describing the payoff to them in their terms is essential.
6. What results are you expecting? Knowing the end you are seeking is pretty important. This is not just the end point of the whole process, but the end points in all the building blocks in the engagement to transaction process. The practise of marketing has been revolutionised by the ability to collect and analyse data. For the first time we can now identify which half will be wasted and eliminate it.
Todays digital consumers are pretty savvy, cynical and can smell a con a mile away. However, they are also able to see the intention behind the tools and the benefits that can be delivered to them by the tools, and are comfortable with the trade-off if it is of benefit to them.
Jun 12, 2015 | Change, Customers, Marketing, Strategy
apologies to Scott Brinker, www.chiefmartec.com
Faced with so much choice of technology and platform options to reach and engage consumers, many marketers are paralysed. On the other hand, many are tempted to be all things to all people, simply because the tools are there to reach them, and they hope that they strike a hot prospect somewhere.
“It’s a numbers game” dominates many conversations, and it seems limiting your options is silly.
However, the customer has extraordinarily well developed bullshit meters to filter out the digital noise, so unless you are very specific with the offer, it will not pass the filter, it will not be seen.
It seems to me there is way too little being done to consider the people we are trying to reach. It is ironic that the tools have given us access to their lives, but often we choose to ignore the individual and chase the usually poorly defined “triibe”. A great description coined by Seth Godin, now misused by many.
We need to stop obsessing about the tools and ask ourselves three basic questions:
What is it we are trying to do?,
Why should anyone care?
How do we use these tools now available to make a difference?.
It seems to me there are four strategies
- Establish your “Why“. Simon Sinek in his seminal TED talk compellingly makes the argument that this is the core of marketing, to quote, “people do not get what you do, they get why you do it”.
- Build relationships. This sounds a bit yukkie, but when done with a genuine desire to help, and add value to others, it delivers to both parties. The twin brothers of C21 marketing, “Social media marketing” and “content marketing” have between them led us astray. Everyone is working feverishly at the tools trying to be different, the face in the crowd that stands out, but mostly failing, there are just too many faces, and too few asking the follow up question of “what am I going to do with them when I have their attention”. For the faces, they are attracted from time to time and let down somehow, and have become even more reluctant to give anything easily.
- Bridge the gap between what you say, and the customer experience. Too many marketers are there for the money, not for the joy of delivering on the “why”, and do not really care about the challenge of getting their customers to say “that was amazing?” Marketing is emerging as the difference between success and failure in this commoditised and transparent world, so you better get some of the rare good stuff.
- Choose your tools based on the behavior of the individual consumer. There are so many tools, and combinations of tools available, that making the choices becomes a task of considerable proportion. Choosing the right combination can be the difference, so make sure you choose on the basis of the best way to match your messages to the behavior of the consumer, not by what is available. No good having a hammer when you need a screwdriver. When you are building a deck at the back of the house, the choice is obvious, but when building a bridge to the consumer, the discriminating factor is their behavior in any given set of circumstances, and this is really hard to predict, you really need to understand them in great detail. There is too much technology, it has become the end, rather than the means.
When you are stuck, give me a call.
Jun 1, 2015 | Governance, Strategy
image thanks to Hugh McLeod www.gapingvoid.com
Writing about strategy, and practicing its development with clients, there are always a number of things that do not fit comfortably into the various academic boxes.
That is the nature of the beast, uncertain, instinctual, and driven by insights that usually evolve over time.
I have recorded them just so they do not get forgotten in the general “whoopsy” that goes on in a strategy process. The orderly, sequential process so beloved by scholars and PowerPoint designers is a rarity in my experience.
I am sure you have stumbled across others, but following is my list of reminders.
- Almost all strategic outcomes evolve from trends and developments outside your business, things over which you have no direct control. The best you can do is prepare, anticipate and react better and quicker than your competitors.
- Peter Drucker said that “the only truly sustainable competitive advantage is innovation” and he was right. However, innovation for itself is of no value, it only gains value in the hands of a customer. Therefore the earlier you can get an idea, new product, new business model, whatever it is into the hands of your customers the better, then you have real market research to work with. What often passes for “innovation” that is internal is virtually always (I have never seen it otherwise) better called operational improvement.
- Competitive advantage arises not just when your product is a new gizmo, with new packaging, it arises when you beat up on your competition, create new demand, and open new markets. That is why you are doing this stuff, to win, so don’t be seduced by clichés.
- Strategy is as much about, if not more about, what you will not do, rather than just what you will do. At a base level, strategy is about choice, which markets, which customers, which priority resource allocations are made. These choices should, in a fundamental way, drive everything else
- Size usually does matter, but in the case of strategy, it is one of the few exceptions. In fact, it often seems to me that the smaller enterprises benefit more from a good strategy well implemented than a large one. Perhaps this is a measure of greater opportunity due to the lesser existing coverage.
- Speaking of size, growth for the sake of it is stupid. Commercial activity is all about returns on the funds employed, putting your money to work doing “A” instead of ‘B” because the long term returns are better. Size for the sake of itself only plays a role when human ego gets involved.
- Setting out to “delight” all customers is nonsense. Nobody can be all things to all people, and it is probably the case that if you are not annoying some you have backed away from some of the hard strategic choices. Net result of that is your overall strategy is weaker.
- Committing to a well thought out strategy does not require heroic quantitative predictions about the future. Commitment to a strategy requires that the tough choices be made that create a framework for future priority setting, resource allocation and decision making which together anticipate, accommodate and leverage the future as it arrives.
- An understanding of the differences between agility and flexibility is required. Being strategically flexible implies that you change your strategy as events unfold, which is a sure sign that tough up front choices have not been made. Agility by contrast implies that you are able to accommodate events as they unfold in the most appropriate manner without losing sight of the overall objectives. Generals have known through the ages that strategy rarely survives the first contact with the enemy, the same applies to commercial strategy, “lose the battle, win the war”. This truism demonstrates the difference between agility and flexibility.
- Finally, you get 1/10 for talking, the other 9/10 are reserved for doing. Moving ahead with a strategy that may still have some holes, and learning as you go, is far better than waiting until all the i’s are dotted, and t’s crossed, as that involves lots of talking, not enough doing.
What things have you come across that could be added?
May 26, 2015 | Governance, Leadership, Strategy
cartoon courtesy Hugh McLeod www.gapingvoid.com
Part of what I do day to day is made up of business reviews. Whilst every business is different, and the competitive environment is different, there are some common questions to be asked that tend to reveal the effectiveness and impact of strategic and business planning.
Strategic planning has become a cliché, often just meaning the three day off site that stuffs up your week, and takes some preparation in case you are asked some difficult questions, but following is a checklist of things I look for in a plan, which may assist your thinking.
Major trends. What are the external, big picture things that are, or will impact on your business. Trends such as technology, the regulatory environment, trade barriers, et al that have the potential to change the context in which the plan has to live. These are generally much “bigger” than a one year time frame, although the pace of technical change often gives the lie to that generality.
AAR on previous forecasts. “AAR” is an acronym, “After Action Review” which emerged from the US army after the debacle of Vietnam. They sought to quickly, and from a grass roots perspective, understand what went wrong, what worked, and how it could have been improved. In effect is it a continuous improvement cycle. Applying the same thinking to the previous years forecasts and assumptions always reveals opportunities for learning. If it is the first time, do it for the last 2 or three years, and analyse what the businesses did, or should have learnt from these experiences.
How and why the differences. Planning should be a rolling, self improving process, but so often I see planning done in isolation of the opportunities to learn from the past. Understanding the reasons why forecasts are different from one planning period to another requires an explicit understanding of the assumptions made. This step builds on the AAR above.
How would you double the business. Most business planning tends to be incremental, a 3% increase in sales, a 2% decrease in costs, it is all easy to agree to in a planning meeting, after all, who would not agree to increments of improvement? To get away from incrementalism, consider what it would take to double, or triple the business. What would you need to do differently, what new products, markets, customers would you have to acquire. I like to change the perspective to this by adopting a position 3 years down the track, imagining the business has doubled, and imagining what changes had been necessary, and how they had been implemented. With the benefit of imagined hindsight, what did we do right, what mistakes were made, what capabilities and capacities did we have to increase, how did we fund the increase, all sorts of confronting questions that in the answering offer insights to the planning process.
Where is the growth coming from. Everyone predicts growth, it is part of the commercial DNA, but articulating where it is coming from introduces some reality checks. If it is from a competitor, why will they just let the volume go? what will their reactions be, and how will you in turn react to their responses? If it is from new products, why would a customer buy yours instead of the one they had been buying, and if it is a new market you are creating, how is your value proposition sufficiently compelling to get the attention of a potential customer, and how are you going to justify the new expenditure in a market that they are unfamiliar with?
What are your distinctive strengths, and how does the plan leverage them? It is astonishing to me how often when I ask this question that the responses are reflections of the market table stakes the things you have to do well just to survive and be competitive, they are not distinctive. It is like a watchmaker proudly claiming that their watch tells exact time. So what, to be a watch, you have to be able to reliably tell the time, it is not distinctive, it is table stakes. What makes you distinctive, does something really different, passes Seth Godins “purple cow” test. It may be that your watch is waterproof to 200 meters. Not many will take advantage of this strength, but to some, the guarantee of waterproof performance will be distinctive. The problem now becomes how you reach the small number of those who care at the time the are considering a purchase.
What differentiates you from the competition, and importantly, the potential left field competition? This question is often confused with the one above, a strength is not necessarily a distinctive capability that adds value to a customer that would drive them into your arms. To continue the watch analogy, when the Japanese started delivering digital watches, the Swiss that at that time absolutely dominated the watch market failed to recognise the attraction of the differentiation that had just taken place, and were decimated.
What would a private equity owner do with this business?. This can be a confronting question, but a very useful one. If you look at the business from an entirely different perspective, one whose time frame and investment return metrics are both aggressive, and usually entirely different to the prevailing horizons, it can stimulate some thinking that is very useful, and informs the rest of the discussion.
Creating a strategy that has real “grunt” and articulating that plan to all stakeholders that are impacted, and can contribute is a huge challenge, and takes time, commitment and brain power to achieve. Unfortunately, the success rate of strategic planning is very low, testament to the difficulty, and the number of things that can go wrong.
