How do you reconcile conflicting statements by geniuses?

Feb 10, 2020 | Governance, Strategy

 

‘If you cannot measure it, you cannot manage it.’ Peter Drucker.

‘Not everything that can be counted counts, and not everything that counts can be counted.’  Albert Einstein.

How can both be true?

The first is half true, the second is absolutely true, which leaves us with a problem, if it is not measured, how can we manage it?

A lot of things cannot be measured, good parenting, the enjoyment you get from watching a great game of football, business culture, the likelihood of a new product succeeding in a non-existent market.

Take that game of football, the statistics tell one story, the game as watched may tell another entirely. The stats do not reflect the quality of the game.

What about the future, how do you measure that?

Tough call.

You cannot measure what has not happened, but you can draw inferences from all sorts of variables, quantitative and qualitative.

Digital has driven a bias towards quantitative, all we hear about is A/B testing to the point where we feel diminished if we do not do it. However, this mad reliance on the quantitative is a nasty illusion,  a mirage, leading many astray. Qualitative has a huge place in telling the future,  it is a way to fill in the behavioural blanks, to imagine what may happen  in a given situation.

Qualitative research can be an aid to the intuition born of experience, and domain knowledge, factors not able to be quantified. It is also a great way to surface the questions that need to be asked in a following quantitative process, which is useless without the questions that go to the heart of the drivers of the behaviours being quantified.

Qualitative research when done well, and unfortunately I have seen it done poorly more often than well, digs into  the psychological and motivational aspects of behaviour. Not just what we do, but why we do it, and what might we do in the future.

The missing ingredient in most ‘future-telling’ exercises, usually called ‘forecasting,’ is the wisdom born of experience. Frederico Fellini once quipped that ‘experience is what you get while looking for  something else’.

It seems to me that wisdom, and the insights that emerge from that wisdom, come from a lot of experience.

 

What are the ‘tells’ of a failing culture?

Jan 30, 2020 | Leadership, Management

 

A ‘Tell’ is an unconscious, usually inconspicuous, sign that something is happening. It is a term commonly used in card games, someone scratches their nose when they pull an ace, or looks over at their drink when a potential flush, is well, flushed.

Cultural failure is all around us, in our workplaces, communities, and institutions. The news bulletins are full of it, so full we seem to becoming immune, no longer enraged, just sad and drained at the seeming inevitability.

However, when you see a problem early enough, you pick the ‘tells’, you can often address them as molehills before they emerge as mountains.

So what are the tells of a failing culture?

In my experience there are a number of very common ones, the presence of any is a sign of disturbance to be addressed, more than one is a problem.

Lack of accountability.

When accountability is clear, individuals tend to act in more predictable and generous ways. When that accountability is to a peer group, rather than just ‘a boss’, that tendency is amplified, as we are social animals, and our welfare is tied to the welfare of the group. Behaviour that leads to the erosion of the welfare of a peer group leads to expulsion, and that is a huge penalty, greater than any that can be imposed by a ‘manager’

Shortage of diversity.

This has little to do with gender, ethnicity, sexuality, or any other label that can be applied by pressure groups. It is all about the diversity of thinking, background, and understanding. That diversity of thinking does  flow from the diversity of the people, but it is not a direct correlation. Actively seeking those who are willing and able to shed a different light on issues and challenges, hearing those often challenging views and taking account of  them in decision making, is a sign of a healthy culture

Absence of investment in people.

The greatest asset of most businesses walks out the door at 5.00 every day. Without them, a business is just a shell, a building, unable to get anything done. Investing in people is an essential ingredient of not just success, but remaining in business. There is piles of evidence that an investment in people is a great investment, generating a very fat return, but it is long term, hard to measure, easy to cut when times get a bit tough. The best enterprises double down on their people, particularly over the last 25 years as we have moved towards business models that value intangibles over tangibles.

Relentless imposed pressure.

High pressure environments wear people out, generate mistakes, short cuts, and poor behaviour. Every enterprise has times when things are really busy, the pressure is really on for some reason, but when it is relentless, and unchanging, particularly when imposed by a management that is using its power to impose the pressure rather than the individuals taking it on willingly, it is corrosive.

Walk the talk.

Talking about the desired culture and the behaviours, standards and ethics that underpin it is one thing, easy for most, the hard bit is to walk the talk, every day. This applies most specifically to the leadership of the enterprise. The behaviours that support a great culture are embedded and reflected at all levels.  However, they have no chance at all if the person at the top is not diligent about their behaviour, every day, in even seemingly small and supposedly unseen ways. People listen to what their leadership says, and if it is not exactly as they behave, they ignore what is said, and mirror and multiply the behaviour.

If you have ever seen a slick, egotistical CEO deliver a persuasive narrative about the importance of people, and a month later oversee a ‘re-engineering’ because the quarterly numbers are down, you know what I mean.

As you think about the culture in your business at the beginning of the new decade, you need to look at yourself and your behaviour early on in the process.

 

My thanks to Scott Adams for the portion of a Dilbert cartoon acting as the header, that reflects the last sentence.

 

 

 

 

How do retailers create irresistible ‘customer flypaper’?

Jan 28, 2020 | Customers, Marketing, Small business

 

As a very young kid, I remember my grandmother having flypaper stuck around her kitchen. From time to time she would smear something smelly on it, which doomed any flies in the neighbourhood.

Wouldn’t it be nice to have ‘Customer flypaper’ for your business?

Once attracted,  they will never leave, simply because they never want to.

A secondary but ideal characteristic of that customer flypaper would be that those customers who were just there tyre-kicking, shopping for the cheapest price, or were inclined to just waste the time of you and your staff, would be repelled.

Nice. I have seen such a metaphorical commercial flypaper at work.

My aging mother lives in a major regional centre, and has a range of pharmaceutical and ancillary needs. A local pharmacy has created a veritable moat of flypaper around his ever increasing customer base, my mother amongst them.

How has he done this?

  • Focus. He focusses his attention on his current customers, personalising their experiences and interactions with the pharmacy and its staff. This is done by a combination of digital record keeping software, and old fashioned humanity. If you want loyalty from your customers, you have to earn it, as it is rarely just given, and then never lightly.
  • Differentiation. Finding something that is challenging to replicate, and adds value to a cohort of customers creates a powerful attraction. In this case, the pharmacist is a compounding chemist, so is able to combine and mix the medications in such a manner, that instead of taking a pile of pills twice a day, my mother is able to take just one or two.
  • Rewards. Current customers are rewarded, not by money, discounts, or any of the other easy to replicate offers, he recognises and rewards their psychology, their instinctive need to be a part of some sort of community. In the early 50’s, psychologist F. Skinner did a series of experiments, using rats and pigeons as subjects, since validated widely in labs, and obvious any time you walk into a location with poker machines. The psychological power of an intermittent reward can be compelling, for some, irresistible. This pharmacist uses intermittent rewards that confirm he cares about his customers. A vase of flowers sent when one is in hospital, a handwritten birthday card, remembering a grandchild’s success at school, all sorts of things that just demonstrate he, and his staff, care.
  • Service. Older people sometimes find it hard to get out and go to the pharmacy. So, there is a free delivery service, for your compounded few pills, all sorted into the times you must take them, packed in a daily and, morning/afternoon blister pack that even someone with advanced arthritis can open. This is all run on an account, so not only can you get the pills delivered, you can also ring up and get other items stocked delivered at the same time, paid for in one simple monthly transaction. Being cynical, I compared the prices of a number of the ‘grocery’  items my mother had bought in this manner to other retailers. While it was not the discount promotional price sometimes available in woolies, they were by no means capitalising on an opportunity to gouge.
  • Overheads. This pharmacy is located in a suburban shop, next door to a butcher, baker, and physiotherapist, with generous and easy parking outside the door. Not only is this convenient, it would be a cheaper place to have a store than in a location with heavy passing foot traffic, and leaves a bit more in the kitty for doing the things that really matter to customers.
  • Collaboration. There is considerable collaboration between the co-located shops. The pharmacist also collaborates closely with a number of the local GP’s and specialists to ensure that their patients receive the best possible care, and medications. Mums GP from time to time, varies the dosage of some of the things she takes, and communicates that change directly to the pharmacist. This ensures that the information is clearly communicated and understood, and adding a layer of added professional scrutiny to the mix of medications she takes.
  • The ‘original’ social media. Word of mouth is the original social media, and still by a country mile, the best. My sister who lives in the town, and helps Mum, often picks up bits and pieces in the pharmacy for herself, as well as Mum. The level of service and care evident, and the simple fact that the staff also know her, and her family, means not only would she not go anywhere else, but she will not allow any of her friends or acquaintances to go anywhere else.

All this adds up to very powerful ‘commercial flypaper’.

It is not easy to build, takes time, effort, and investment ,as well as a very clear strategy within which to build the tactics that act as the flypaper.

 

 

 

Australia Day, January 26, 2020.

Jan 24, 2020 | Governance, Leadership

 

Sunday is Australia Day, and the bushfires consequences, and the possibility of more in the next short period, is at the forefront of peoples minds.

In recent days however, we have had dust-storms that have been truly frightening, and intensive storms, including damaging hail, some in areas still smouldering. Now we have the farce of the Libs buying votes with grants to sports clubs prior to the last election. (In the interests of full disclosure, I chair a sporting body that had an application in to replace some critical infrastructure that was, now still is, on its very last legs.  We were pretty confident of being successful, as it fitted the guidelines like a glove, but we failed to account for the fact that the club concerned is in a safe Labor seat)

There will be substantial political and commercial fallout from all this.

From the various climate induced calamities, insurance rates will go up, politicians will be held accountable. Those with capital to be invested  will demand that action be taken, and they will vote with their money by not investing in areas they see as subject to the uncertainty of climate change. Larry Fink, chairman of Blackrock, the largest money manager in the world ,has written an open letter to CEO’s informing them of Blackrock’s revised assessment of the risk profile of investments it makes based on climate change risk. His is a voice that carries huge weight, and Blackrock putting their trillions where Larry’s mouth is, will have a significant impact. If the commercial funding of the revised Adani project needed another nail in the coffin, I suspect Mr Fink just supplied it.

Mr. Morrison will be haunted by photos of his stunt bringing a lump of coal into parliament. It has become a parody of the inability of this government, and to be fair, those that preceded it, to develop a framework to manage the impacts of climate change. I wonder if the Greens in their quiet moments now look back on their decision to scuttle the Rudd governments carbon pricing scheme as the greatest blunder they have ever made? I did hear Richard Di Natale defending the decision on radio a couple of weeks ago, and he sounded like a kid caught stealing money from the church fete. 

Rudd’s comment that ‘climate change   is the great moral challenge of our generation‘ is proving  right, unlike much of the other stuff he said. He was right and every government, including his, has failed to step up to that challenge.

I wonder if the fires might start a serious consideration of  the manner in which we replace the infrastructure destroyed? We have the opportunity to experiment with technology, capital equipment, and organisational processes, rather than just running out and replacing the destroyed infrastructure with more of the same. Perhaps not: that tactic may reduce the headlines and openings to use as photo ops, as well as risking partisan criticism in the inevitable event an experiment does not work as ‘advertised’.

The economy is in the shitter. The GDP figures for the April quarter when released in about September, will show increases in activity and our gormless Treasurer will mount his soapbox blathering about the plan, when the increased activity is just about replacing assets lost in the fires. Nothing will be done about our manufacturing productivity, which long term is the core of the economic growth we would like to see. Supporting that are basic items  like the technical education and  apprenticeships, the hard, on the ground skills needed to keep up in a digitising world.

I suspect tourism, one of our biggest industries and employers will be hit hard, not just by the impact of the fires,  but by the uncertainty that prevails. It will put off many travellers, and spending a few million on reactive advertising is about as useful as pissing on a bushfire. Better than nothing I guess, but about as useful.

The impact of the financial services royal commission are yet to be worked through the system, but to me it seems like not a lot will change. There have been a few heads chopped, a few of the protagonists in the debacle promoted, and a few new regulations proclaimed, intended to fill the obvious holes,  which will more than likely just require more administration, and inevitably costs will increase. Just in the past week, we have had AMP caught, again, with its hand in customers cookie jars. Will these amoral pricks ever learn?

The current Royal Commission into the treatment of the aged, will I suspect, throw some more explosive material into the public forum, and we will be demanding quick and effective action, neither of which the government will be likely to deliver. If the fires, storms, and sporting grants rorts do not destroy the prospects of another term for this lot, the anger from the baby boomers whose parents it is that are suffering should be enough to tip them into oblivion. This is assuming of course there is a credible alternative. If not, hopefully Morrisons invisible friend who has been notably absent these last 4  months will turn up to assist.

Exactly a year ago today, I expressed concern that we would be ‘molested’ by politicians seeking election. Well, that happened, but then as we got closer to the day, the polls clearly showed a win for Labor, which failed to eventuate. Nobody was as surprised as our then, and now current Prime Minister who said in his acceptance speech: ‘I have always believed in miracles.’ As a result he floated along doing nothing beyond making ‘how good was that’ speeches and having a restive, and in some cases stupid back bench, sitting on a one seat majority, but grasping the trappings of power. I suspect the year coming will be entirely different, as the mood of the electorate seems to me to be pretty ugly. The question is have Labor recovered sufficiently from losing the election they thought was in the bag to be an effective and contributing opposition, or will they remain hiding under the table. A good start may be to propose a unity ticket to develop a  long term policy response to the climate and energy challenges we face.

Whoops, there goes another heavily made up pink pig flying past.

Have a good Australia Day, hug your family, friends and neighbours, and batten down the hatches.

 

What is the core KPI of Marketing?

Jan 13, 2020 | Branding, Marketing

 

The answer just has to be ‘Sustainable Margin’.

An enterprise can only do three things to increase margin, however you choose to define that term.

  1. Lift prices.
  2. Expand sales.
  3. Decrease production and operating costs.

Options 1 and 2 are often seen as mutually exclusive, but truly successful marketers prove the opposite. The gold standard here is the Apple iPhone, 15% market share of volume, 85% market share of industry profitability.

Marketing has at least some control over the prices and sales efforts, but usually little over the operating costs.

None of these strategies are easy, neither are they short term.

It would seem that a focus on the drivers of margin will pay big dividends

What is the biggest driver of margin?

Brands.

The greatest store of economic value we have ever seen.

Would Apple have  been the first trillion dollar business without the premium held by the Apple brand?

No. It would be in the gutters scrapping with Samsung, that also happens to be one of its key suppliers from whom they buy screens. I bet that Apple headquarters is looking for an alternative supplier for some price competition, and that Samsung is investing in the tech in order to hold and enhance the margins they would be making from their wealthiest customer.

In a homogenising world where it is getting harder and harder to build a brand, a long term intangible asset it is becoming ever more crucial that you do so in order to protect margins and remain competitive.

Like Rome, brands are not built in a day, and you need experts doing the building.

 

Header photo courtesy Tom Shockey via Flikr.