Oct 30, 2013 | Change, Innovation, Marketing, Strategy
Engaged in an innovation portfolio management assignment a while ago, we struggled to define why one project should continue to suck up resources in preference to many other seemingly worthy opportunities.
We tried all sorts of models, financial and strategic, and really faced the dilemma that all were driven by assumptions, the accuracy of which was only clear with hindsight.
Not much help there.
We set about distilling all the data, assumptions, models, and diagrams we had collected into something simple, something that reflected more than the assumed commercial and strategic value of the initiatives, something we could engage with. We came up with one word, and three questions.
Value.
Who would benefit from this initiative?
Why was it better than anything else?
Why should anyone care?
Suddenly the task became clearer.
The discounted cash flows, competitive positioning, portfolio diagrams, and potential for stock exchange announcements became less important, and what become far more important was the simple notion, which of the projects we were considering was doing something important, solving a problem, adding value to someone unavailable elsewhere.
We developed a set of metrics covering these three questions we called the “Value Gap”
The value gap analysis between options to invest in new stuff became the benchmark for prioritizing projects, and we found there were only a very few from what had previously been a significant portfolio that were worth our effort.
Oct 23, 2013 | Innovation, Marketing, Strategy
Innovation takes up a lot of my time, and whilst successfully bring a new product to market is a huge task, challenging as it does all sorts of personal, organisational and financial barriers, it can nevertheless be broken down into a few, simple two dimensional components.
- Needs that are unmet, Vs needs that are unrealised. Around us, there are unmet needs everywhere, and a better mousetrap can be successful. Unrealised needs are a different beast, as users do not know what they do not know, and it is only after they have seen a solution that they realise there is a need. Again, there are examples all around us products that were launched not as a competitor to an existing product, but to a need we had not articulated. Traditional market research works well identifying unmet needs, but is ineffective at identifying unrealised needs. In that case you need a tonally different set of skills, all too rare.
- Technology driven Vs Customer driven. Customers are constantly looking for ways to solve their problems more effectively, cheaply, and quickly, seeking as they do competitive advantage through the deployment of their limited resources. Getting close to customers in this endeavour is a core part of my marketing philosophy. Technology driven innovation by contrast is almost a solution seeking a problem, to unrealised need. Digital technology over the last 15 years has unleashed a huge wave of technology driven innovation, all seeking a place to be leveraged. The classic here, in view, is Jeff Han’s amazing 2006 TED talk, where he demonstrated what we would now call a touch screen, before anyone had thought of the numerous applications now so commonplace, we do not notice them.
In my view, the key organisational challenge is to have all the components of these two simple axes in the room at the same time. Customers articulating problems, technologists articulating the developments relevant to the conversation, from whichever domain they arise, intelligent, curious marketers, and a failure tolerant, ambiguity accepting, long term thinking management culture.
Oct 22, 2013 | Change, Demand chains, Marketing, Strategy
The success of the last 250 years in western economies is based on the economies of scale. Harnessing technology to deliver greater productivity per unit of input, capital, labour, and raw material.
All industries have been disrupted from the cottage stage to industrial, and the change has spawned industries unimaginable even to our fathers.
Agriculture has been no different, “factory farming” is the standard, even it is it still outside in a paddock.
It now would appear to me that there are the beginnings of a reverse disruption, accompanied and enabled by the removal of organisational and arbitrage barriers enabled by the web. Words and phrases like “Local” “sustainability ” fresh” “product provenance” and “demand driven” keep on coming through. A small but increasing number of consumers are seeking out products that deliver these promises, and a few specialist retailers are suddenly seeing the emergence of a consumer group who will not be seduced by the giant retail chains.
A semantic disruption?
Agriculture in the Sydney basin has been under pressure from development for the last 50 years, and with some exceptions concentrated in intensive industries, has become increasingly marginal. There is not much left to meet the demands of this consumer driven semantic disruption as it evolves. However, those who are left, both producers and specialist retailers, have an opportunity to alter their business to leverage the emerging disruption.
Oct 10, 2013 | Change, Governance, Leadership, Marketing, Strategy
Canadian dairy processor Saputo looks set to take control of Warrnambool Cheese and Butter (WCB) with a $7 a share offer valuing the company at $370 million, which trumps an existing cash and shares offer from Bega Cheese which values WCB at 320 million.
$7 a share is a substantial premium over the Bega offer price for WCB, and appears to be a very full price on any conventional analysis. Trouble is however, that conventional analysis has some difficulty factoring in the strategic value of the business, one of only three substantial dairy businesses left in Australian hands.
WCB’s performance was woeful a few years ago, being on its knees in 2009 after a trading loss of $20 million on $441 million turnover, and having unsustainable gearing. Since then there has been improved but patchy performance, $8.8 million profit in 2010, peaking at $18.5 in 2011, down to $15.2 in 2012, and down again in 2013 to $7.5 million.
WCB has flown a bit under the radar as the dairy industry has been convulsed by take-overs and mergers in the last 25 years, and is now one of just three locally owned dairy businesses with any scale. The other two, Bega and Murray Goulburn have both tried to find a way to consolidate with WCB, and the Bega Chairman has been on the WCB board for several years, so should know the business inside out.
With 2 billion rapidly emerging middle class consumers on our doorstep in Asia, whose consumption of dairy products is rapidly increasing, the strategic value of WCB to the Australian economy is significant. However, the reality is that without a better offer, and subject to FIRB approval, (should not be a problem) WCB will be sold to Saputo.
Part of the challenge is the disconnect between the domestic market where the retail oligopoly is the price setter, and export markets where Australian dairy produce is a price taker. Inability to generate anything more than the cost of capital, at best, domestically, and subject to big fluctuations in international commodity prices and exchange rates, and not being a low cost producer, Australian returns in the industry have been very inconsistent. Now however, with the emergence of the Asian consumer, there is long term potential for value added margins. What is needed is patience, operational and business model innovation, and some really good leadership.
Pity we are no good at that
Also sitting on the desk of the new treasurer is the proposed takeover of Graincorp, by US company Archer Daniels Midland. Graincorp handles 90% of Eastern Australia’s grain exports, and roughly 75% of the crop, so is pretty central to the success of the Australian grains industry. A similarly strategic Australian asset that seems destined to be run for the benefit of others.
What do these North Americans see that we cannot?
Vale the Australian owned food processing industry.
Oct 7, 2013 | Marketing, Small business, Strategy
Some years ago my Dad had a stroke, a nasty one that had a profound impact on his physical capability. We were assured by physicians that with intensive therapy and rehabilitation, he would regain a “quality of life.”
Compared to the prognosis without the therapy, this was certainly accurate, but compared to his life prior, is clearly nonsense. Never again would he walk a golf course, drive a car, take his grandsons fishing on the rocks, or just appear in public without being an object of curiosity.
Not a pleasant thought.
So, what brought this introspection on?
Recently I did a presentation at UWS that examined the 6 trends impacting on the balance between urban living, and the agricultural activity necessary to feed that urbanisation. Regularly over the past few years I have seen advertising for various developments that take farmland and turn it into massive housing estates, and the line used inevitably seems to be something along the lines of the “quality of life” they deliver. I saw another one last night, and gagged. it resembled an ad for a soap powder, or some other consumer product, full of hyperbole, “cutsey” pictures, and whimsical claims of the domestic bliss coming from buying an overpriced box on a tiny patch of dirt.
A short time ago this dirt was highly productive land that had fed Sydney for the last 150 years, and now it is an expanse of macadam, concrete, flimsy project homes, with a bit of green left for “family picnics” and a pond for any ducks that turn up to be fed.
At some point we need to define in what context we talk about “quality of life”, and how we will get on with that life without easy access to agricultural commodities, and the value added products they produce.
Sep 27, 2013 | Customers, Innovation, Marketing, Strategy
People instinctively like consistency and predictability, it allows them to be comfortable, and make judgments without too much risk of being wrong because the status quo has been maintained.
Helping out with a competitive pitch recently I was shown a list of the things that had to be covered, a checklist for the expected content of the presentations, a list of largely irrelevant , administrative crap, and we had only 45 minutes.
With some trepidation, we threw out the list, and built a presentation that demonstrated that the agency I was working with had the experience, and capabilities to break the challenges faced by the “pitchee” down into manageable chunks that could be addressed creatively, responsibly, and with a budget that was less than the one nominated, (which we knew was not gong to be forthcoming in any event)
We knew during the conversation that followed that the business had been won, despite the ignoring of the stated ground-rules. The sorts of comments that were made were that our approach had been “fresh” and “creative” and that we had “thought outside the box” all cliché’s, but nice nevertheless. However, what it really demonstrates is the we won because we were different.
Our competitors had followed the rules, and been boring as a result, we were not boring, had taken a risk that with hindsight was not a risk at all, so we won.
So, any time you hear something that sounds like “the client made me do it” translate it as “I did not have the balls or imagination to be original, different, and interesting”.
