Sunday, February 19, 2017

Not All Questions Have An Answer

Have you noticed how many articles now have a number as the starting point of the article i.e.
  • 3 ways to improve your sales
  • 5 tactics to improve profits
  • 2 exercises to get a flat stomach etc etc
It seems almost that us humans want any issue boiled down into a few succinct bullet points and "hey presto" you have a solution to an issue.

However, I am coming to the uncomfortable realization that the rate of change in industry and the effects on the planet and its inhabitants are happening so fast that not only may we not be prepared for the changes but we do not know how to prepare.

Questions that are clearly being discussed but where the ability to forecast is simply guesswork at best, include:
  1. What will be the global impact of 1 Billion people moving out of poverty (source) be on the worlds resources i.e. food requirements, disposable goods consumed, pollution etc

  2. What will the impact of Artificial Intelligence and its role in Automation on societies. In a widely noted study published in 2013, Carl Benedikt Frey and Michael Osborne examined the probability of computerisation for 702 occupations and found that 47% of workers in America had jobs at high risk of potential automation (source) i,e.
    • Imagine a world where there are no taxi drivers, bus drivers, truck drivers, train drivers, pilots.
    • Image a world where surgery in hospitals were conducted by flawless robots whose combine knowledge of 1000's of similar surgeries have made their decision making more accurate than any human
    • Imagine a world where the ability to computer code is no longer a skill but a commodity and technological advancements are underpinned by low income / paid coders from any 3rd world country.
  3. What is the real economic impact of people living longer i.e. what will retirement look like in 20 to 30 years? Will you retire at 75 to enjoy your twilight years to 90?
The reality is that there has always been change. The Industrial Revolution and the Digital Revolution for example have had everlasting impacts on the world in which we live and as optimists point out we live longer than ever before,due to (but certainly not limited to) improvements in health care and jobs simply shifting i.e.remember how ATMs were supposed to cause huge job loses in banking but actually ended up creating jobs in technology.  So therefore change must be good! Right?

I'm not putting on my pessimists hat. I'm just putting on my "I am not sure" hat. The introduction of ATMs did indeed help create new jobs in technology but those ATMs never, to my knowledge, were considered artificial intelligence with the ability to learn and improve their function. What if they did? Would they be "intelligent" enough to self improve, self service and therefore reduce the reliance on human interaction for maintenance?

Perhaps now is not the time to look for the "3 steps to secure the future of mankind" or "5 ways to ensure global security" but actually a time for leaders to listen. Listening may not provide a short term solution that so many seem to demand but it may help to articulate the real issues. Once we understand the real issues we may begin to look at the real solutions. I can honestly say I am neither the optimist nor the pessimist but that I am in the "I am uncertain" group so if now is the time to listen, tell me, given the rate of change in industry and the effects on the planet and its inhabitants how do you suggest we prepare?

I look forward to hearing from you.

Sunday, May 22, 2016

The Funny Side Of Conference Calls

I haven't written (obviously) in sometime however this video gave me genuine giggle followed by the thought "I really need to post this".

 I am sure everyone who has dialed in to a conference call will enjoy this :)

Wednesday, December 31, 2014

What Will Impact Your Profit In 2015?

Profit is vanity 
Assets are Sanity 
but Cash is king! 

I am not too sure who came up with that phrase but whoever did is spot on. I have previously written about the problem of profit and have seen first hand how a profitable business almost went under due to a cash flow issue.

Understanding the issues related to managing 'by profit' is important as are understanding the benefits.

One of the key benefits of Profit and Loss statements are understanding the business expenses. As we head in to 2015 my question to you is:

"If you have more than 1 customer, do you know which customer (or customer channel) incurs more of your costs, and if so, are you adjusting your pricing or cost allocation method to account for the differences?"

Put another way, do you know your Cost To Serve?

In the retail / wholesale sector you will often find department stores with a very high cost to serve. In other words, wholesalers who distribute through the retailers will need to provide the retailer with a high first margin, rebates, marketing funds and potential markdown contribution. These costs potentially erode the wholesalers ability to fund future growth. Passing these costs on to the consumer is difficult as the retailer will want to manage their price points and in a competitive market may not want to pass on wholesaler costs to the consumer. Hence the wholesaler is in the difficult position of managing its ability to generate profit through careful expense management.

However these wholesalers typically distribute through a number of retailers. A cost allocation P&L will allow the business to see which retailer has a higher cost to serve. By understanding the cost to serve the business is able to allocate resources in a manner that generate the most profitable outcome.

Imagine the following scenario:

Customer A generates -2% profit / $10 mil revenue
Customer B generates 4% profit / $3 mil revenue
Customer C generates 15% profit / $1 mil revenue

or alternatively

Product A generates -2% profit / $10 mil revenue
Product B generates 4% profit / $3 mil revenue
Product C generates 15% profit / $1 mil revenue

Knowing this would force you to ask questions such as:

a) How do we make the the $10 mil revenue profitable? i.e. Is it possible to increase the gross margin, what costs can be reduced etc?
b) How do we grow the $1 mil opportunity? etc etc

Obviously this is much easier said (or written) than done but ultimately this is what good businesses do everyday. So back to my question. I'll put it another way. Even if your biggest customer will be expensive to manage in 2015 (the customer has a high cost to serve) will they be more or less profitable for you?

Sunday, August 10, 2014

HR - Change is coming

"It’s time to say good-bye to the Department of Human Resources. Well, not the useful tasks it performs. But the department per se must go."  Ram Charan, HBR July 2014

Every now and then you might read an article that gives you genuine food for thought. This happened to me last month when I read the one page HBR article, titled 'It's Time to Split HR' by Ram Charan. To be honest though I think I may be in the minority when I viewed the various defensive and HR apologists comments on the online article.

With the apologists in mind, I am most likely being optimistic in suggesting that my proposal, that I will call 'Building On Charan's Idea 2.0', is also given due consideration.

Charan's proposal is to eliminate the Chief Human Resources Officers and split the HR function into two, namely:
  1. HR-A (for Administration): "would primary manage compensation and benefit. It would report to the CFO"
  2. HR-LO (for leadership and Organisation): "would focus on improving  the people capability of the business and would report to the CEO"
The driver behind Charan's proposal is that CEO's disappointment in the HR function are borne out of the fact that the department it is staffed by employees who have not worked on the front line and do not understand the operational complexities of managing a business unit, division, business or company.

I agree with this!

And because I agree with this I am proposing a potentially more radical solution - merge the HR-LO into the line management and not have it as a separate reporting line. The Chief Marketing Officer should take the responsibilities of the HR-LO for Marketing. Likewise the National Sales Manager should take the responsibilities of the HR-LO. Don't pull line managers out of their operational role, bring the HR Leadership and Organisation into their role. The role of the HR-A will be an administrative support function. It does not get a seat at the table. However the capability is critical in making sure those line managers with the HR-LO responsibilities have the available tools to execute the role efficiently. This proposal is a high level outline and no doubt the naysayers will be vocal.

A number of organisations have tried this in parts however I have yet to see it successfully implemented. Issues I see around the reason for failure are that CEO's are often reluctant to let go of their CHRO due to the fact that:
  1. The CHRO is often seen as a "trusted adviser".
  2. The thought of making line managers responsible for the LO function is politically unsavory due to the backlash many may see as a burden on their already strained workload.
My view is simple. You either accept the status quo as positive for your business or you make fundamental change. It is simply not acceptable to keep lamenting on the inadequacy of an entire organisational function yet at the same time not adopt a model for change. CEO's, Managers and Bloggers alike need to stop bashing HR. The department is an easy target. It's time those that do bash HR stand up and take on the HR-LO responsibilities and bring the front line operational thinking and capability to the most important part of any organisation, people.

Sunday, June 15, 2014

Dr Jekyll and Mr Hyde: Struggling To Land That Job

First Impressions
I was talking to a HR contact recently about first perceptions when hiring and she relayed the following story to me. My contact was recruiting for a customer service based role. She put the ad up on a job board and clearly stated that one of the key requirements for the role was "To provide outstanding level of customer service." The following day the first resumes started to arrive. As she read each resume there was a standout applicant whose resume matched exactly what she was looking for. So she called the person and the call went through to voice mail where she was greeted with a very gruff "You know what to do". That's it. No "Hi you have called..." No pleasantries. Nothing but a gruff "You know what to do". Yep this person would be great at customer service!

I had a similar experience. I was receiving a number of resumes and one arrived in my inbox from big....@ (I'm not going to go in to details needless to say the applicant thought he was an adult film star). The tragedy was that is resume was actually quite good. However I could not get over the email address and kept thinking if this person was going to send me something like this what might they send to our customers.

It may sound harsh and I am sure many of you will read this and say it is just a voice mail or an email address but take a step back and think about it from the person doing the hiring. When one writes the job description an image of the ideal candidate is created. Sure we are not all perfect, but if you are someone who is going to be replying to a job ad it pays to think simply beyond the resume.

The reality, we as humans, make snap decisions based on first impressions. In fact some decisions can be made so fast that the reasoning mind has not even had a chance to react. Princeton Professor, Alex Todorov found in a study that "when we see a new face, our brains decide whether a person is attractive and trustworthy within a tenth of a second....people respond intuitively to faces so rapidly that our reasoning minds may not have time to influence the reaction". (Source).

Additionally the first impression can truly be the last impression.  In a 1992 study in the Journal of Personality and Social Psychology (Vol. 64, No. 3), Nalini Ambady, PhD, of Tufts University, and Robert Rosenthal, PhD, of the University of California, Riverside, found that after the first 30 seconds of the first class, students' evaluations of a teacher were similar to students who rated the teacher after the entire semester. (Source)

Landing that next great job is not easy. There are sure to be a multitude of candidates and competition will be tough. The question you have to ask yourself is will you be seen as Dr Jekyll or Mr Hyde? If decisions that will effect your career can be made so quickly, you need to ensure that you are one step ahead of the decision maker. There is no use having the resume of Dr Jekyll but answering the phone as Mr Hyde. Return to paragraph one if you remain uncertain.

Sunday, March 16, 2014

Selling On The Web: What I've Learnt About Websites, Social Media......

I was first involved in e-commerce over 14 years ago. At the time I was working for a Venture Capitalist / Accelerator who had invested in an online advertising aggregation site. I am sure you can imagine the pitch, "There are millions of small businesses out there and it is impossible to reach all of them but if we created a portal .....". Anyway it was hugely enjoyable, a massive learning experience and I got to be a part of the whole boom and bust. As an FYI to those who are interested in the true nature of the bust, when we were raising our second round of finance our revenue model predicated a US$400 million annual gross revenue when the site did not even have the ability to take a credit card. Good times :)

Fast forward 14 years and I thought I would summarise a couple of recurring points I see time and time again.

1 - It is not easy.

Forget the hype about how you can get an e-commerce website for $1 per day. That is the easy part. However scaling up to a serious business model takes hard work. Anyone can get a website but can you get anyone to come and buy your product.

I have lost count of the times that people say to me that they built a website but are disappointed with the income generated.

2 - Not all traffic is created equally.

Anyone can get traffic. With focus, SEO effort, new content etc your traffic will grow. So what! Do you want a million visitors with 10 buyers or 50 visitors with 15 buyers. If your target market is not coming to the site then who is?

It is critical you focus on building you traffic based on you genuine target audience and not simply the desire to increase your Google rankings.

3 - Google is GOD!

Here is some sobering data:

Search Market Share


That’s right, 2 out of every 3 of your customers, who use search, are coming through one company.

Which brings me to the next piece of data from said company:


So basically even when you spend money advertising with Google, almost half (2*.72=1.44 of the original 3) of your customers are being driven by a search algorithm rather than the advertising.

In summary, it pays to go to the church of Google as almost half your customers who use search as part of their purchasing decision, are coming through this all powerful single entity.

4 – Conversion vs Traffic (Content)

One of the best internal web teams I saw set up was a very large retailer that had separate teams as part of their web strategy.

At this organisation the Traffic Team is responsible for bringing customers to the site.  The Conversion Team is responsible for converting the visitors to sales. The beauty of this model is it means that the teams were highly specialised in their fields and not distracted by metrics outside of their control. For example the Conversion team does not every worry about the number of visits as this was outside their control however the conversion rate of those that visited is a measure that is always top of mind.

I am sure there are countless methods of team set-up’s that exist however I found the simplicity and rifle shot focus of this model particularly interesting.

5 - Cowboys

Every industry has its fair share of cowboys but without any data and only my gut instinct I am certain that the e-commerce industry is home to more cowboys per capita of "specialists" than any other industry. How many companies (I use the term companies loosely here as who knows if the websites purporting to be companies truly are) promise:

  • we promise to get you on page 1 of Google
  • double your income
  • 100% ROI GAURANTEED !!!!!
I am not an expert at sifting out the pros versus the cowboys. I am the first to admit that a number of cowboys have made off with more of my money than the ROI that was promised. Do your best to do reference checks etc. Make sure you read the contract thoroughly. Beware of the cancellation periods of the contract. Make sure you can walk away on your terms.

6 - Experts

Having just written that the industry if full of cowboys, I have had the pleasure of working with genuine experts who do add value to the given e-commerce strategy. If you find a good expert listen, learn and pay....

7 - It's Expensive

That's right pay. Yes you can get a website for free. Yes you can buy a domain name for next nothing but the reality is that if you want to scale up to a million dollar e-commerce offering then you will end up spend a considerable amount of money.

The following articles are worth reading for the reality of e-commerce spending

'How Much Does An E-commerce Website Cost?'' - - provides a great insight into e-commerce website costs and includes the opening statement,"We cut our teeth on e-commerce design back in 1996 while working on an online store for Footlocker. The project budget was approximately $500,000 and although I’m not involved anymore, the site continues to require upwards of $1,000,000 a year in maintenance and enhancements."

'E-commerce: I’ve never heard so much bullshit talked about a business model,' says Razorfish boss"-

"spin and bullshit" - - note this is a guy who has built a $5 Billion business.

8 - Investing in social media

Is social media important? Yes. Is it the answer to all your prays to grow revenue? No. A little while ago a wrote an article titled "The Fundamental Problem With Social Media". As I have written previously on this area I am not going to say much more except reiterate my firm belief that Social Media is a marketing medium like TV, radio, direct mail, pr etc. You would not believe it with all the hype surrounding social  media but it is a medium and as such like all marketing expenses requires an investment to generate revenue.

So those are some very high level findings along my e-commerce learning voyage. Remember you always hear / read about the minority i.e. those few who built Amazon, Facebook, etc etc but you never read about hundreds of thousands (as at August 2013 there were over 700 million websites world wide - source  who have also tried but not been as lucky and or successful. Why? See point 1.

Thursday, November 28, 2013

The Fundamental Business Problem With Social Media

Social Media Icons
The fundamental problem of social media within the context of traditional business metrics and reporting is that no matter how much of a media darling it is, Social Media is merely another medium in the total marketing pool and hence falls within the expense category.

Think about the last time you looked at a P&L, did you see the following financial metrics?
- Number of Likes
- Number of Followers
- Number of Friends
- Number of Re-tweets
- Number of +1's?

Obviously not. That's because none of these "metrics" are directly related to the financial reporting of any business.

How about Marketing, Advertising, IT and Payroll? Of course because these are standard expense lines in the P&L.

As a fan of Social Media, I am a true believer in the power of the medium. A recent article on Huffington Post rightly points out that, "Social media is powerful at two points during the sales process: the beginning (lead generation) and the end (customer retention)." Another major attraction of social media is that it is cheap. Small businesses have access to Instagram, Facebook, Twitter etc just as large corporate's do. Sure, there are snake oil salesmen out there who will tell you have to spend a fortune to "design and implement an integrated holistic social media strategy", but I have come to the realisation that there is a direct correlation between the crap talk and the amount billed.

Another major benefit of Social Media is that so much of it is trackable. That is, you can see what revenue your expenses are generating. Tools such as Google Analytics are excellent at providing tracking of the financial impacts of social media activities. With a little coding on a website, one can track the Facebook link through to check out. However, for any non-accountants out there, from a financial reporting mechanism, the Facebook link is not recognised as revenue but as an expense.

Tragically, as some articles point out, one of the key reasons for generating a Social Media ROI is to "justify the expense". In my view this comes down to the fact that Social Media seems to have been discussed as a New World revenue model, rather than accepting its' true fate as an expense.

Having read countless articles about the ROI of Social Media (here are a couple of thousand, if you are keen to completely waste your time -, I have often thought I was a laggard of the social media medium. However, I was delighted to read a report from Business Intelligence with the none too subtle page header, "The Death Of Social ROI -- Companies Are Starting To Drop The Idea That They Can Track Social Media's Dollar Value". It seems the corporate world is catching up to the fact that measuring the benefit of social media is more than "Likes + Shares = $$$"

For businesses looking to invest in social media as part of the their marketing effort, the benefit can generate fantastic results. However these results are an outcome of an expense because, as I just mentioned, social media is an investment. Is social media the best marketing medium available? I don't have any facts to suggest it is better than a major TV campaign, although pretending that this is a medium that sits outside a traditional P&L because it is new and special, is absolute nonsense. Social media is an expense. Spend well and the financial gain will hopefully exceed your costs. Spend poorly, then close your eyes and pretend that "Likes + Shares = $$$" (and polish your resume).

Sunday, October 13, 2013

Are You Being Served?

Customer Service
I was recently talking to a colleague, who was excitedly opening her package from asos, about shopping online. One of her primary reasons for shopping online was she preferred the customer service. I pointed out that when she made the purchases she did not deal with anyone face to face and the whole process was simply click a mouse. "Exactly" was her response.

How many times have you purchased something online and where genuinely happy when the product arrived at your specified destination. Why were you happy? My guess is that your expectations were fulfilled. Now think about visiting a bricks-and-mortar store and purchasing a similar product. Did you you leave the store with the same level of satisfaction?

One of the challenges I see taking place in the retail sector is how the definition of customer service is changing. Take, for example, returning product. Most traditional retailers will happily exchange a product if the size etc is wrong however many will not refund the purchase and merely provide a credit. On the other end of the spectrum internet retailers of significant scale appear happy to provide a full refund if you are not happy with the purchase. Check out the returns policy from asos -

Whilst some retailers are struggling to come to terms with the change in customer expectations others are doing a better job at creating a seamless experience across the various shopping channels. This approach, often referred to as Omni retailing, was articulated by Macy's CEO Terry Lundgren almost three years ago when he said:

"We talk a lot at Macy’s about “omnichannel” retailing. Our customer is multi-dimensional. She is busy at work and out with friends. She always has her mobile device in her hand. She’s active on Facebook and Twitter and YouTube and a dozen other social media sites. She is smart and demanding. We want that customer to be able to interact with Macy’s no matter where she is or how she shops. It makes no difference to us whether she buys something in our store or online … or whether she is shopping from her desktop computer or her Droid or her iPad. Macy’s best customers are those who shop us in-stores and online. We have a whole series of strategies in place to drive our store customers to the Web, and our online customer to the stores. We strive to have a 360-degree view of the customer. Today’s customer is not monolithic. And that’s the way we are approaching our customer."

When reviewing Macy's instore refund policy vs their internet refund policy one can see the 'omni' approach:
1 - Store policy -
2 - Internet policy -

This 'Omni' approach is absolutely the right approach but the issue I see is that it is all well and good to suggest a level playing field in customer service, where a business adopts the 'Omni' approach, however the reality is not so. A classic example is the 'up-sell' or 'cross-sell'. All of us will have made a purchase on an online site and been shown "similar items others have purchased" or "you may also be interested in". This is a very simple tool to drive an increase in sales. The online e-commerce provide Shopify's second most popular add-on is the app Product Upsell. The ability to see similar or better products is often taken as a given for the online shopper. But what about the bricks and mortar retailer? How often are you offered an add-on or shown a more expensive item only to think negative thoughts about the sales process? Same process, different method, different outcome!

The true challenge for traditional retailers is not simply improving customer service but adapting to 'Omni' view of the customer without overburdening the business in increased expenses. Customers expect to deal with experts in the store who can provide knowledgeable solutions, just as big data helps tailor options to the shopper based on their specific purchasing habits online. This provides a challenge for the traditional retailer in that retail floor staff are an expense not borne by online retailers. Even more so if retailers are to provide experts where such expert knowledge may come at a cost over and above the standard floor staff rate. One solution may be as simple as providing all floor staff with a tablet. Imagine approaching a Customer Service Representative who knows the floor product well but also refers to the website for product information. At the same time the service rep could point to the tablet showing similar items others have purchased.

There is no doubt that the advent of online retailing has been disruptive for traditional retailers. Considering the Netscape Navigator (early browser for those not familiar with the name) launched nearly 20 years ago we can all marvel at the impressively slow response of so many retailers to the world of shopping. However, as I always tell clients, it is a hell of a lot easier to criticize a decision than it is to fix a business. Solutions to the challenge appear available however the challenge to run an Omni approach will lie in the ability to manage the cost base whilst providing the desired level of customer service. This may sound logical but according to my colleague, great customer service meant not dealing with customer service. Go figure?