Aug 20, 2013 | Collaboration, Demand chains, Marketing, retail, Strategy
This is a far longer post than normal, motivated by some very sensible feedback from the previous post. Bear with me.
The “tools” that add value to management of any supply chain, playing a role in the transformation into a demand chain are relatively simple to list, but extremely difficult to implement.
I have seen, and worked with many over the years, largely based in agriculture, but the lessons are widely applicable.
The difficulty of implementation is why there are so few successful agricultural demand chains, but those that are in place, at least the ones I am aware of, deliver enormous long term value.
In addition, the classification of something as a “tool” usually creates debate, as it can also be an “outcome” of a successful initiative.
For example, is the “Shakedowns” brand of baby carrots from Bolthouse Farms in the US a marketing tool, or an outcome of a successful marketing and demand chain initiative? Truth is, that it is both, but the debate can become excited.
Following are what I see as the six key components that are the characteristic foundations of successful initiatives, but having them in place is not a panacea, as like any tool, the use remains in the hands of people of varying skill, motivation, and outlook.
- Appropriate scale, and the supporting processes to manage that scale. The scale and supporting processes needed to be successful in the local growers market are very different to those necessary to be successful in Woolworths, Tesco, or a major food service distributor. It is not just a matter of size, it is largely a matter of alignment. At one extreme we have growers market customers, who value product provenance to the point of wanting to communicate with the grower personally, and to know all about a particular piece of produce, and price is not all that relevant, so long as it delivers value. At the other end by contrast, a supermarket customer is way more focused on price, availability and convenience. To be successful with a supermarket chain, you need:
- Working capital reserves, as the margins are thin and payment terms long.
- Data capability. Supermarkets are run by data, and category management, and not having the capability is as good as going to a shootout with a penknife.
- Low cost. A necessity if you are to survive the pressure on operating margin, and marketing investment necessary to combat increasing penetration of housebranded substitutes.
- Operational scale to be able to service a chain nationally, or at least throughout a state.
None of these factors matter a whit in the local farmers market.
- Chain Transparency. Transparency drives accountability, surfaces market and improvement opportunities to every point in the chain. Of increasing importance, transparency also delivers product provenance. This is critical in a farmers market, and branding initiative, and rapidly becoming a marketing tool in supermarkets, but more importantly, is a critical component of controlling a chain. Without transparency, you cannot have control beyond your immediate domain, and thanks to the net there are now fine tools available to suit every situation, the standard setter being an Australian home grown product offered by GFA .
- Collaborative structures and processes. Arbitrage margins are made possible in a supply chain by a combination of lack of transparency and a culture resulting from the old way of “information is power”. This dying a difficult death, but dying it is as the communication tools now available provide the opportunity to collaborate as never before, and as a result the nature of organizations is evolving rapidly. A great example is the wool supply chain, 2 years from sheeps back to a consumer article, a production process that involves at least 7 product transformations which are typically highly competitive, and involve inventory, risk, and time, all of which add substantial cost. A collaborative structure that creates a forum of all the chain players can cut that time, risk, and cash tied up by a factor of 2/3. The poster boy in Australia is Woolconnect, a collaboration all the way through the chain that delivers product from farm to the consumer in 4 months. This did not come about easily, or quickly, but as a result of the vision and determination of a few people over 15 years.
- Contract capable. Customers need certainty, they need to be able to rely on undertakings given, and part of that is a single contract capable party with whom you do business. In simpler times, a handshake was sufficient, and as relationships evolve, it sometimes evolves back to that level, but for the most part, certainty involves a contract. Weather that is with an individual, Pty Ltd company, a co-operative or public company is not relevant, it is simply an agreement with consequences.
- Business model. Success requires the combination of a sustainable commercial business model with an attractive value proposition to the end user, and all points in the value chain. The “business model” represents the combination of all the points where costs and revenues are generated through the chain, mixed with where and how “value” is created. “Value” is the key component in a business model, often missed with traditional thinking. The business model also incorporates a capability to balance supply and demand transparently through the whole chain, not just at any individual point in the chain. Amazon creates value not only by selling books cheaply, but by having an inventory hundreds of times bigger than any bookstore, and offering a crowd sourced rating system. What they cannot offer is the personal and often emotional experience some have with browsing in a good bookstore. The supply chain models and resulting business models are very different quantitatively, and they create value in a different manner. I suspect there are enough bibliophiles for bookshops to survive and prosper against Amazon, but they will no longer be in every shopping location as we have been used to, and will not be a shop-front for recent releases and best sellers, but will be something entirely different.
- Marketing. There are as many definitions of marketing as there are consultants and academics. Mostly they talk about the “4 P’s” the mediums for communication, the need to focus, but my take is both simpler, and more strategic. To me, marketing is all about the definition, building, leveraging and protection of competitive advantage. The way enterprises go about this task is almost infinitely varied, and over the last few years has become increasingly fragmented and confused. However, really good marketing always has a simple, clear articulation of a value proposition that motivates action.
You got this far, well done.
Perhaps it should be an e-book, as there is plenty more to say.
Jul 16, 2013 | Governance, Leadership, Strategy
For a long time now I have advocated the notion that to get something back, you first need to put something in. Time, effort, knowledge, care, whatever. What you put in is less important that that simple act of being generous, and contributing.
It has always seemed to work for me, although the effort to get momentum going has often led to a few moments when I wonder if there is really a return on the effort.
What I have realised is that the crucial element of success is how, and to whom you make the offer.
Assisting those who want your assistance is not as effective as offering it to those who deserve it.
Wanting has become an expectation that something will just arrive, no cost, no obligation, whereas “deserve” inherently acknowledges a moral debt, and that your generosity will at some point be repaid.
Jul 9, 2013 | Branding, Change, Marketing, Social Media, Strategy
To talk to consumers, you used to stick an ad on TV, in one of the main mags, on maybe a few radio stations, a shotgun effort informed by some pretty rudimentary demographic data.
Then we migrated to the web, in the late 90’s, and advertisers transferred the techniques of mass marketing to this new medium. The cost of banner ads, in the early days calculated on a similar reach basis as mass advertising, has plummeted to perhaps 1% of that cost, and much better targeted, as we realised they simply did not work. Mass media consumption necessitated being interrupted by ads, we expected it as the price to be paid, but the web, we do not need to be interrupted, as we have the option to ignore. Increasingly, advertising became about direct response, as we can now count it.
Now the next shift is on, to mobile, where the “rules of engagement” have dramatically moved again, and we are figuring out how best to leverage the move. Customers need to be wooed, as shouting at them no longer works, you have access to mountains of data (using it is another whole challenge) that enable targeting at behavior rather than simple demographics, and you can count the effectiveness of tactics, one by one, person by person, directly.
Not only is the practice of marketing radically shifted to accommodate these moves by consumers and the tools to hand, but the organisation of the marketing function needs to have changed to reflect the immediacy of direct response, and the disconnect that has existed between the strategy held in the minds of the senior group, and those who by default spend the marketing dollars, often without any real authority beyond budget expenditure with little accountability for the outcomes.
It seems to me as I poke around that organisational inertia that is the greatest impediment to the potential productivity gains from this explosion of accountability of marketing investments that is now possible.
Jun 19, 2013 | Communication, Customers, Marketing, Strategy
Marketers have a whole range of new tools to use to tap the opportunities emerging from the digital age, but most appear to approach the challenge in an ad hoc manner.
It seems to me that there are 4 trends that are driving marketing behavior:
- The shift from offline marketing to digital. Whilst this is generally seems as a “catch all trend” it is really just a part of the marketing strategy mix that needs to be considered on its own merits. In this situation, how should I use TV Vs YouTube or facebook, what is the best mix of media to achieve a outcome?.
- The shift from paid to earned media. This can easily be seen as a subset of the first point, and from a marketing resource perspective it is, but from a consumer perspective, it is entirely different. The sudden availability of a digital version of word of mouth endorsement has changed the dynamics, consumers put far more faith in earned than purchased messages. It is also a bit more complex than that, as consumers no longer consume advertising, in any medium, they watch what interests them. If an ad is interesting, irrespective of the medium, it will get watched, and you have only a moment to gain the interest before you get deleted.
- The increasing importance of data in marketing. In the “old days” the best that you could do was measure theoretical impacts on an audience, about as inexact as throwing a stone at a bird flying past. That has changed, we can now measure with great accuracy a host of data that reveals preferences and behavior that have nothing to do with the generalities of the past.
- Fragmentation of just about everything, and because there is just so much data, it tends to be siloed, or ignored. Therein lies the huge marketing opportunity of the future, those who can cut across the silos, and extract the actionable insights will own the markets. Automation is taking over (perhaps has taken over) with the integration of CRM with social media and automated marketing programming that is occurring online.
It is in the fourth trend that lies the secret sauce. Finding ways to increase the productivity of the marketing investment you make, not just in the expenditure to reach the marketplace, and achieve an outcome, but in the overhead costs of running an effective marketing function.
Jun 13, 2013 | Collaboration, Governance, Innovation, Leadership, Strategy
One of the most famous photos ever taken, above, is of the 29 Participants in the 1927 Solvay Physics conference. The astonishing thing is that of the 29, 17 were Nobel prize winners, lauded busy people, so how did they get them all together at the same time?
Relatively easy, as at the time the photo was taken, only 3 had already won the Nobel prize, the other 14 won in the years after the conference, so were mostly unknown outside their research domain. (One of those who had already won was Marie Curie, who is also the only person in the photo to have won the prize twice, in different disciplines)
The point is that assembling this group, the organisers were not looking backwards, they were looking forward, to those who would make, rather than had already made a huge contribution to the topic.
Next time you are considering the personnel to go onto a project team, seeking to define your role into the future, or just operating a day to day activity, exercise the same forethought, and open the opportunity for great things.
Jun 5, 2013 | Innovation, Leadership, Management, Strategy
I was struck by a line in a terrific blog post by Ian Leslie I read that said ” Google can answer almost anything you ask it, but it cannot tell you what to ask”
It is totally counter-intuitive to consider that the power of the web is now narrowing our horizons, and that by succumbing to the lure of the algorithm, we are dismissing the beauty of serendipity, that unexpected discovery, the thing we would never have seen were it not for “right time, right place”. It does not seem to matter if it is a scientific discovery, Fleming recognising that the growth on his slide was killing all the bacteria around it, or just finding a book in a bookstore that is “right” somehow, these thing s cannot happen on Amazon, or in isolation.
The question then becomes how do you create serendipity?
You need to be messy, cross- functional, collaborative, iterative, and work with an open mind, as well as applying discipline to the scientific method of process improvement, practicing what I call Loose-tight , or ambidextrous management.
This ambidexterity is not easy. It takes leadership, an enabling culture, and a deft hand, but the results speak for themselves. Combining the ability to mine the accumulated knowledge of all of us, with the creativity inherent in human nature when it is open-minded and free to make non linear connections will eventually lead you to ask the right questions, and reveal what you do not know.
Once you see the question, serendipity has a chance.
