Business as Unusual

At the time of writing, the Victorian Government has decided to defer the easing of Covid-19 restrictions, in the wake of a sudden spike in community transmissions. There was always a risk that opening up too much, too soon, would result in a second wave of coronavirus infections, as people returned to work, as shops, restaurants and bars started to re-open, and as people began socializing on a larger scale. There is even talk of more drastic local restrictions in so-called hot-spot areas.

Meanwhile, the deferment (and the extended State of Emergency) is creating further uncertainty for businesses in an already fragile economy. In recent weeks, I have been attending a number of on-line seminars on the broad theme of business in the post-pandemic era. Variously described as the “new normal”, the “new new normal”, and even the “next normal”, things are unlikely ever to be the same, and not many punters are willing to bet on the resumption of business as usual.

Here are some of the challenges and opportunities that lay ahead:

Future of Work

As employees head back to the workplace, employers will need to balance the need for productivity and business continuity with the obligation to provide a safe working environment. Some staff can’t wait to get back to the office, some will prefer to continue working from home (if they can), while a large number would probably welcome a mix between the two. This has prompted debate on introducing a 4-day working week, the introduction of team rostering (e.g., alternating one week in, one week out), and possibly the end of hot-desking.

Overall, new work practices will necessitate a re-think on office space, workplace location and employee facilities. Some commentators have predicted that companies will need to extend their current premises (to allow for adequate space per employee); while others suggest CBD workplaces may need to decentralize towards more suburban or regional hubs (to reduce commuting times, to relieve congestion on public transport and to allow people to work closer to home). The latter may also stimulate local economies as people reallocate their commuting costs and daily expenses into local shops, cafes and services.

Innovation

Change and uncertainty should drive companies to innovate – in fact, former Prime Minister Malcolm Turnbull recently spoke about innovation in light of the pandemic. His view is that current technological trends will only accelerate, and industries facing disruption will be displaced even faster. So no time for complacency, and no point waiting for normal service to resume.

Necessity has driven many retail and restaurant businesses towards more online engagement with their customers, and those that have been shown to be creative, resilient and agile appear to have found a way through the lock-down. Equally, many businesses used to delivering their services in person have had to find ways to embrace digital solutions – no doubt enhancing their digital transformation in the process.

Self-sufficiency

We’ve heard about the need for food and fuel security – especially when supply chains are disrupted, and when countries pursue “domestic first” policies in relation to essential goods and commodities.

While Australia is a net food exporter, we still have to import many daily staples. Primary producers have come to rely on lucrative export markets, so in the light of trade wars and import bans, local farmers and consumers alike will need to adjust their expectations – on choice, price, seasonal availability and market volumes.

Australia is also in the enviable position of being potentially self-sufficient in energy – but although we are rich in renewables, we are still reliant on fossil fuels, and recent events revealed our vulnerability to volatility in the oil markets. It suggests the current environmental and economic debates around weaning ourselves off coal, oil and gas are only going to become more critical.

There has also been a call for a larger domestic manufacturing base – not only to enhance workforce skills and productivity, but also to ward off supply chain disruption. Some have called for a return to domestic car production. Even if that were desirable, let alone a realistic option, I don’t imagine that anyone would welcome the bad old days of churning out Australian-made gas guzzlers that nobody wants to buy. We would need to advocate for smarter cars, energy efficient and non-fossil fuel vehicles, environmentally sustainable materials and manufacturing process, and possibly different car ownership models (in line with the trend for ride share businesses and smart city solutions) and more creative financial incentives to the industry than wholesale subsidies.

Other manufacturing sectors that are getting attention include medicines and medical supplies (surely there must be a market for domestically-produced PPE made from bio-degradable materials?), clothing (again, an opportunity for environmentally sustainable materials and manufacturing processes), processed goods (after all, we already have much of the raw material), domestic appliances and technology.

One area where Australia has also proven vulnerable is in recycling. China and the Indian Sub-continent are pushing back at taking and processing our exported waste. So we have to get smarter at recycling household waste (paper, plastic, glass and metal) especially if in a post-pandemic world we see a return to single-use items and additional sterile and protective packaging for foodstuffs and personal products. We also need to look at e-waste, and find ways to extract more recycling value from obsolete devices.

The lock-down during the pandemic has also highlighted an opportunity to re-connect with the “make do and mend” mentality of our parents and grandparents. Again, if supply chains are disrupted, buying a replacement item might not be an option. But often, nor is it possible to buy replacement parts – either they rely on the same supply chains, or there are no user-serviceable parts available. What if manufacturers and distributors had more of an obligation to take back and recycle their products, or to include more interchangeable parts in their designs, and enable consumers to become more self-sufficient in repairing and maintaining their electronic and electrical goods?

Federal, state and local governments have a huge role to play here – from mandating the use of more recycled and recyclable materials, to incentivizing recycling schemes, from supporting local repair workshops and “maker” projects, to creating more common and open standards around components and replaceable parts.

Finance and Digital Money

At a time when many people are on reduced income and/or or relying on government welfare, the pandemic has also demonstrated a need to rethink our relationship with money in general, and cash in particular.

The latest round of QE by governments and central banks to offset the financial impact of the pandemic has highlighted once again the fragility of current monetary policies, including fractional reserves and treasury buy-backs. The decision to print money on demand will only increase public appetite for crypto currencies as a legitimate store of value – including stable coins and (ironically) central bank digital currencies – and paradoxically, accelerate the removal of physical cash from the economy.

In times of crisis, digital currencies can also transfer money to remote recipients faster and cheaper than traditional means (i.e., incumbent remittance businesses, bank transfers, payment gateways), and actually increase transparency and traceability.

The lock-down also revealed that many people did not have a sufficient financial buffer to withstand job losses, especially in the casual workforce and the so-called gig economy. This suggests a new approach is required for how people are remunerated for their labour and services, taxed on their income, and incentivized to save for the future. Current systems cannot address these issues because they are over complex, far too rigid, and totally dis-empowering of the people they are designed to serve and support.

Digital currencies (along with the benefits of Blockchain technology, and the new economic models represented by digital assets and tokenization) will enhance trends such as decentralization, peer-to-peer networks, trust-less systems, fractional ownership and more sophisticated barter structures.

Bitcoin was created in response to the GFC, it has now come of age in the post-COVID-19 era.

Next week: Antler Demo Day – Rewired

 

 

 

 

 

“There’s a gap in the market, but is there a market in the gap?”

As a follow up to last week’s post on business strategy, this week’s theme is product development – in particular, the perennial debate over “product-market fit” that start-up businesses and incumbents both struggle with.

Launch it and they will drink it….. (image sourced from Adelaide Remember When via Facebook)

The link between business strategy and product development is two-fold: first, the business strategy defines what markets you are in (industry sectors, customer segments, geographic locations etc.), and therefore what products and services you offer; second, to engage target customers, you need to provide them with the solutions they want and are willing to pay for.

The “product-market fit” is a core challenge that many start-ups struggle to solve or articulate. A great product concept is worth nothing unless there are customers who want it, in the way that you intend to offer it, and which aligns with your go-to-market strategy.

I appreciate that there is an element of chicken and egg involved in product development – unless you can show customers an actual product it can be difficult to engage them; and unless you can engage them, how can they tell you what they want (assuming they already know the answer to that question)? How often do customers really say, “I didn’t know I needed that until I saw it”? (Mind you, a quick scan across various crowd-funding platforms, or TV shopping channels, can reveal thousands of amazing products you didn’t know you couldn’t live without!) Of course, if your product development team can successfully anticipate unmet or unforeseen needs, then they should be on to a winner every time! In fact, being ahead of the curve, and understanding or even predicting the market direction is a key aspect of business strategy and product development for medium and long-term planning and forecasting.

Then there is the “build it and they will come” strategy. A bold move in most cases, as it involves upfront deployment of capital and resources before a single customer walks through the door. The image above is the only visual record I can find of a soft drink marketed in South Australia during the late 1960s and early 1970s. And you read the label correctly – a chocolate flavoured carbonated beverage (not a chocolate milk or soy concoction). It was introduced when the local manufacturer faced strong competition from international soft drink brands. No doubt it was designed to “corner the market” in a hitherto under-served category and to diversify against the competitor strongholds over other product lines. Likewise, is was launched on the assumption that people like fizzy drinks and people like chocolate, so hey presto, we have a winning combination! It was short-lived, of course, but ironically this was also around the time that soft drink company Schweppes merged with confectionery business Cadbury, and commentators joked that they would launch a chocolate soda, or a fizzy bar of chocolate….

With data analysis and market research, it may be possible to predict likely successes, based on past experience (sales history), customer feedback (solicited and unsolicited) and market scans (what are the social, business and technology trends). But obviously, past performance is no guarantee of future returns. In my early days as a product manager in publishing, we had monthly commissioning committees where we each presented our proposals for front list titles. Financial forecasts for the new products were largely based on sales of relevant back catalogue, and customer surveys. As product managers, we got very good at how to “read” the data, and presenting the facts that best suited our proposals. In fact, the Chairman used to say we were almost too convincing, that it became difficult to second guess our predictions. With limited production capacity, it nevertheless became imperative to prioritise resources and even reject some titles, however “convincing” they seemed.

Then there is the need to have a constant pipeline of new products, to refresh the range, retire under-performing products, and to respond to changing market conditions and tastes. In the heyday of the popular music industry from the 1960s to the late 1990s, the major record labels reckoned they needed to release 20 new song titles for every hit recording. And of course, being able to identify those 20 releases in the first place was a work of art in itself. For many software companies, the pipeline is now based on scheduled releases and regular updates to existing products, including additional features and new enhancements (particularly subscription services).

An important role of product managers is knowing when to retire an existing service, especially in the face of declining or flat sales. Usually, this involves migrating existing customers to a new or improved platform, with the expectation of generating new revenue and/or improving margins. But convincing your colleagues to give up an established product (and potentially upset current customers) can sometimes be challenging, leading to reluctance, uncertainty and indecision. In a previous role, I was tasked with retiring a long-established product, and move the existing clients to a better (but more expensive) platform. Despite the naysayers, our team managed to retire the legacy product (resulting in substantial cost savings), and although some clients chose not to migrate, the overall revenue (and margin) increased.

Finally, reduced costs of technology and the abundance of data analytics means it should be easier to market test new prototypes, running proofs-of-concept or A/B testing different business models. But what that can mean for some start-ups is that they end up trying to replicate a winning formula, simply in order to capture market share (and therefore raise capital), and in pursuit of customers, they sacrifice revenue and profit.

Next week: Who fact-checks the fact-checkers?

 

 

 

“How do I become a business strategist?”

I was recently asked for some career advice, specifically on how to move from a technical role to a more business strategy role, within a corporate environment. Like a lot of the questions I receive regarding career development (especially on LinkedIn….), the initial question was quite broad, a little bit vague, so I needed to frame it before responding.

At the outset, I should stress that I am neither a qualified career counselor (although I have done some related coaching work), nor an organisational behaviorist/industrial psychologist (but I have some formal experience of using personality profiling tools, and trained as a counselor very early in my career). Plus I have had a varied career path and some in-depth corporate experience to draw on!

I have never worked in a full-time Business Strategy role – rather, Business Strategy has been integral to the whole of my corporate and consulting career, whether I have been working in product management, market expansion, business development or start-up roles. So while Business Strategy can be defined (and practiced) as a specific discipline, from my experience it’s just another management component or business tool everyone needs to understand and apply, especially on a practical level.

First, my exposure to business strategy really began when I was in a product management role. So I it was part technical (requiring some formal qualification and subject matter expertise), part production (understanding the design and manufacturing processes), part strategic (managing the commercial, financial and market dynamics). That framework continues to inform my approach to business strategy, even in my consulting work – and helps in understanding my clients’ business.

Second, business and management tools come and go; some are mere passing fads, others are the result of changing technology or market conditions – so there is little point in trying to grapple with each and every one, or whatever happens to be in current fashion. Rather, I believe that we should each identify some core models and frameworks that work for us, which can also be adapted to different situations either organically or by analogy. For example, even the over-used Johari window and SWOT analysis can be useful techniques for mapping out markets, customer segments, or growth options. And having some basic accounting, legal and risk management ability is really useful!

Third, a key personal skill is being curious, and remaining open to possibilities. Simply asking the right questions (Q “Why do we do it this way?” A “Because we’ve always done it this way”) can uncover opportunities for improvement or alternative solutions. Without being a perpetual rebel, it is possible to constructively challenge the status quo, to find ways to do things better, more efficiently, more ethically, more environmentally friendly etc.

Fourth, if there was one thing I had understood better before entering the corporate world and management roles, it is the function of teams, the role of team dynamics, and the importance of open communications, pro-active stakeholder engagement, and bringing people on the journey with you. Never underestimate how stubborn, stupid, wilful or malicious some people can be – but often, they are acting out of a position of fear, ignorance or weakness. It’s rarely personal (it’s just business, right?), but it can feel that way. So, whether you are managing up, down or sideways, be prepared to overcome objections, present solutions (not just problems), and get buy-in early on. Making the team collectively and individually responsible for decisions means that they are personally invested in the outcomes. It’s also a way of empowering people.

Fifth, this leads me to the whole issue of decision-making. Companies will always make some poor decisions – but worse is sub-optimal decision-making. Partly this comes from not having appropriate systems and oversight (proper matrix processes, clearly delegated authorities, well-defined mandates, strong governance frameworks, transparent and accessible policies, and documented audit trails, etc). Partly this is a lack of cognitive skills (empathy, self-awareness, communication). And partly it is an absence of informed decision-making (e.g., understanding any inter-dependencies), and the misalignment of goals and incentives.

As a follow-up question, I was asked about some of the tools I have found useful for being successful in my strategy roles. Personally, I think the jury is still out on the value of an MBA vs gaining hands-on experience, or learning as you grow into a role. MBAs have their place, but they are not the Be all and End all of a corporate career.

I’ve also been dipping into a few of the “leading” business text books of their day, that were recommended to me over the past 15-20 years or so (Blue Ocean Strategy, the Long Tail of markets, defining Metanational companies, etc.). While they all provide some insights, and even some practical examples, they feel very dated in terms of current technology, business models, and market environment. Hence my comment above on passing fads…

Even though I worked for major multinationals for over 20 years, I think I’ve learned a lot more from working with and for startups and entrepreneurs over the past 10 years – and to me, that’s where a lot of the more interesting stuff is happening, notwithstanding the challenges of founding a new business. But I realize it’s not for everyone as a career choice.

Finally, no doubt there will be huge lessons for business and corporate strategy as we come out of lock down and it’s how we apply those lessons that will determine the next generation of success stories.

Next week: “There’s a gap in the market, but is there a market in the gap?”

 

The Ongoing Productivity Debate

In my previous blog, I mentioned that productivity in Australia remains sluggish. There are various ideas as to why, and what we could do to improve performance. There are suggestions that traditional productivity analysis may track the wrong thing(s) – for example, output should not simply be measured against input hours, especially in light of technology advances such as cloud computing, AI, machine learning and AR/VR. There are even suggestions that rather than working a 5-day week (or longer), a four-day working week may actually result in better productivity outcomes – a situation we may be forced to embrace with increased automation.

Image Source: Wikimedia Commons

It’s been a number of years since I worked for a large organisation, but I get the sense that employees are still largely monitored by the number of hours they are “present” – i.e., on site, in the office, or logged in to the network. But I think we worked out some time ago that merely “turning up” is not a reliable measure of individual contribution, output or efficiency.

No doubt, the rhythm of the working day has changed – the “clock on/clock off” pattern is not what it was even when I first joined the workforce, where we still had strict core minimum hours (albeit with flexi-time and overtime).  So although many employees may feel like they are working longer hours (especially in the “always on” environment of e-mail, smart phones and remote working), I’m not sure how many of them would say they are working at optimum capacity or maximum efficiency.

For example, the amount of time employees spend on social media (the new smoko?) should not be ignored as a contributory factor in the lack of productivity gains. Yes, I know there are arguments for saying that giving employees access to Facebook et al can be beneficial in terms of research, training and development, networking, connecting with prospective customers and suppliers, and informally advocating for the companies they work for; plus, personal time spent on social media and the internet (e.g., booking a holiday) while at work may mean taking less actual time out of the office.

But let’s try to put this into perspective. With the amount of workplace technology employees have access to (plus the lowering costs of that technology), why are we still not experiencing corresponding productivity gains?

The first problem is poor deployment of that technology. How many times have you spoken to a call centre, only to be told “the system is slow today”, or worse, “the system won’t let me do that”? The second problem is poor training on the technology – if employees don’t have enough of a core understanding of the software and applications they are expected to use (I don’t even mean we all need to be coders or programmers – although they are core skills everyone will need to have in future), how will they be able to make best use of that technology? The third problem is poor alignment of technology – whether caused by legacy systems, so-called tech debt, or simply systems that do not talk to one another. I recently spent over 2 hours at my local bank trying to open a new term deposit – even though I have been a customer of the bank for more than 15 years, and have multiple products and accounts with this bank, I was told this particular product still runs on a standalone DOS platform, and the back-end is not integrated into the other customer information and account management platforms.

Finally, don’t get me started about the NBN, possibly one of the main hurdles to increased productivity for SMEs, freelancers and remote workers. In my inner-city area of Melbourne, I’ve now been told that I won’t be able to access NBN for at least another 15-18 months – much, much, much later than the original announcements. Meanwhile, since NBN launched, my neighbourhood has experienced higher density dwellings, more people working from home, more streaming and on-demand services, and more tech companies moving into the area. So legacy ADSL is being choked, and there is no improvement to existing infrastructure pending the NBN. It feels like I am in a Catch 22, and that the NBN has been over-sold, based on the feedback I read on social media and elsewhere. I’ve just come back from 2 weeks’ holiday in the South Island of New Zealand, and despite staying in some fairly remote areas, I generally enjoyed much faster internet than I get at home in Melbourne.

Next week: Startup Vic’s Impact Pitch Night