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?

Saturday, June 15, 2013

Listen To The Real Experts

CEO bunch of 5's
I recently ran a workshop for a small business. The owner of the business asked for my help to improve the business performance and as part of the initiative I suggested, like all good consultants to “borrow the watch, tell the time and then charge for the privilege”. In other words I was going to ask the business what was wrong, and then tell the owner what was wrong based on what the business had told me was wrong! OK, slightly facetious but you will get the idea.

There were 10 managers who joined us for an exercise I call “The CEO’s bunch of 5’s”. It is a simple process of:

  1. Asking each individuals for the 5 things they would do to achieve the desired outcome. In this case the desired outcome was to “grow profitable sales”. At this stage each person writes their 5 actions without discussing their action list with any of the other participants
  2. I then created groups of two. It depends on how large the total group is i.e. you may choose to have groups of 3 or 4 etc. The groups were to discuss each of their 5 actions (10 in total assuming no crossover) and then come back to the main group with only 5 from the list. The purpose of this is to force the participants into prioritising what is important for the business.
  3. Each group then presents their 5 actions
  4. As the moderator for the activity it is important to listen to the key themes. In every session I do this the outcome is always the same
    1. There are a number of common themes
    2. The answers are general and lack detail
  5. Congratulate everyone for their work but then I say something to the effect “it is not good enough. As a CEO you can’t make general recommendations. We want to hear the detail behind your recommendation.
  6. The groups go back to their 5 key action list and re-write the list with specific detail
  7. Moderator summarises the action list and charges the client for the privilege.

This specific exercise is something I came up with myself (I am sure there are similar ones out there) but the technique was learnt by watching all the big consulting firms come in, interview the staff, slice the numbers and charge a fortune for the recommendations. I always found it unbelievable how many times I saw, verbatim, the recommendations from my colleagues make their way on to the smart guy paper.

However, there is significant merit in the consultants methodology. The fact remains that most good employees can see the issues in a company and have probably thought about potential solutions to the issues. The consultants are smart enough to know that listening to these employees will inevitably lead to a probable outcome that is palatable to management.

As managers, business owners or CEOs, you are faced with challenges every day. Whether you chose to outsource the solution finder or look internally is entirely up to you. However before you decide, phrase your two options as such:
a) Employee, we value your opinion and will listen to what you have to say
b) Consultants, we value your opinion and will listen to what our employees have told you

You may have just saved yourself a lot of money, potentially made even more and all by listening to the real experts ... in your business!

Tuesday, March 12, 2013

Strategy, Execution and the role of Leadership

If you don't yet subscribe to strategy+business by global management consulting firm Booz & Company, you are missing out on some impressive management and thought leadership pieces.

Two articles that recently caught my attention are:
  1. The Thought Leader Interview: Cynthia Montgomery by Ken Favaro and Art Kleiner
  2. How Leaders Mistake Execution for Strategy (and Why That Damages Both) by Ken Favaro
I am in complete agreement with Ken Favaro when he says that, "If the corporate five are the cart and strategy is the horse, leaders who put the cart first often end up with no horse at all.

Before they get to the corporate five, companies need to address five much more fundamental, and difficult, questions. Let's call them the “the strategic five”:

1. What business or businesses should you be in?
2. How do you add value to your businesses? (in the comments section of the article, Ken elaborates stating "how a company contributes to the performance of its businesses relative to their respective markets")
3. Who are the target customers for your businesses?
4. What are your value propositions to those target customers?
5. What capabilities are essential to adding value to your businesses and differentiating their value propositions?"


I recall being involved in a big strategy presentation to around 100 execs of $Billion (revenue) sized company. The CEO was presenting and the slides appeared to have been put together by a major consulting firm. A number of slides talked about vision and provided data of where the company was versus where it needed to be. Unbelievably the majority of the examples used in the session were large retail company turnarounds. Why was this unbelievable? Because this company in question was a wholesaler. In a nutshell they nailed The Corporate Five but ignored The Strategic Five. Many of the executives left the session utterly perplexed with a very senior exec commenting to me "Do they even know what business we are in?". Long story short, what followed was years of loses including major market share erosion.

Cynthia Montgomery, the Timken Professor of Business Administration and former chair of the strategy unit at Harvard Business School has a resume many could only dream of, whether it be in the world of academia co-editoring with Michael Porter of the influential anthology Strategy: Seeking and Securing Competitive Advantage (Harvard Business School Press, 1991) or in the corporate world as Director at companies such as Newell Rubbermaid. Her insights into strategy are outstanding but it is how she defines the role of leadership in terms of the Chief Strategist that resonated so much with me when I thought of Ken Favaro's "The Strategic Five". Cynthia states, "When I think about a leader being the chief strategist what I mean is ultimately bearing responsibility for the choices that fundamentally determine what a business is and why it will matter.....Having a compelling answer to "Who are we and why do we matter?", that's where leadership starts. And for me that is what strategy is all about..."

As I have written before, building a solid fact base is critical in helping to devise a substantive strategy but as Cynthia points out "A leader builds a strategy through in-depth conversations with a group of his or her peers, testing the ideas against a variety of situations. Knowing how to do that well will serve the graduates better as leaders than any particular plan they develop at Harvard Business School.

When someone next starts talking to you about the strategic direction of the company you work for, at, in or own, ask yourself whether the conversation is centred on The Corporate Five or The Strategic Five. If the conversation is focused more on The Corporate Five then remember Cynthia's words, "Having a compelling answer to "Who are we and why do we matter?", that's where leadership starts."

If you are in a leadership role, or aspire to be in one, the last thing you want is executives leaving your meetings asking "Do they even know what business we are in?" 

Sunday, February 24, 2013

If- by Rudyard Kipling

Rudyard Kipling (source: Wikipedia)
Last month (18th Jan) was the anniversary of Rudyard Kipling's death. Who has not read or seen the Jungle Book?

I was reading Kipling's poem "If-" again, as it is an amazing piece of literature, and I thought I would share here in case you have not read it.



If you can keep your head when all about you
Are losing theirs and blaming it on you;
If you can trust yourself when all men doubt you,
But make allowance for their doubting too:
If you can wait and not be tired by waiting,
Or being lied about, don’t deal in lies,
Or being hated don’t give way to hating,
And yet don’t look too good, nor talk too wise;

If you can dream—and not make dreams your master;
If you can think—and not make thoughts your aim,
If you can meet with Triumph and Disaster
And treat those two impostors just the same:
If you can bear to hear the truth you’ve spoken
Twisted by knaves to make a trap for fools,
Or watch the things you gave your life to, broken,
And stoop and build ’em up with worn-out tools;

If you can make one heap of all your winnings
And risk it on one turn of pitch-and-toss,
And lose, and start again at your beginnings
And never breathe a word about your loss:
If you can force your heart and nerve and sinew
To serve your turn long after they are gone,
And so hold on when there is nothing in you
Except the Will which says to them: ‘Hold on!’

If you can talk with crowds and keep your virtue,
Or walk with Kings—nor lose the common touch,
If neither foes nor loving friends can hurt you,
If all men count with you, but none too much:
If you can fill the unforgiving minute
With sixty seconds’ worth of distance run,
Yours is the Earth and everything that’s in it,
And—which is more—you’ll be a man, my son!

Rudyard Kipling written 1895

Wednesday, January 30, 2013

Catching The Right Wave

A very (very very) long time ago I tried to learn to surf. The reality was I did not excel at it but I did learn that if you chose the wrong wave you could end up being ‘dumped’ in a painful way.  On the other hand a decent wave could make for a highly pleasurable experience.

Recently two new CEO’s joined different surfwear companies and clearly chose different waves.

On the 9th May 2012, Billabong appointed Launa Inman as the new company CEO. Launa was previously the CEO of Target Australia where she did an impressive job delivering solid growth in a very competitive environment.  However the market was not happy with the appointment. Shares fell on the announcement of Launa’s appointment with the market questioning the related skill set to the surfwear industry. Since the announcement Launa has had to deal with a difficult capital raising, massive write down and had no less than six takeover proposals from four different companies.

A quick paddle onto another wave, on the other side of the Atlantic, Quiksilver recently announced the appointment of Andy Mooney as the new CEO. WOW – the market loves Andy. Andy was formerly with Disney and Nike, which just like Launa, has a strong surf pedigree. O wait ….. according to the market that actually does not matter. In Andy’s first 4 weeks as CEO the company’s stock has risen almost 50%. However Andy had already picked the right wave as the market was pricing considerable growth for Quiksilver prior to Andy’s appointment.

Nice wave Andy!

So why is it that two people with non-surf industry backgrounds can join similar companies and yet see dramatically different results? The reality is the companies themselves have been riding different waves.

The following is a very good summary of what went wrong at Billabong from the website SmartCompany:

Inman says Billabong did not make a mistake going into retail; but it did make mistakes in the way it did so. The result? The company has already closed 58 stores, reducing store numbers to 634, and intends to close another 82 in the current financial year. Paying out leases on closed stores, selling off the inventory at reduced prices, then the reduction in sales from fewer outlets and the partial sale of Nixon all contributed to the significant and exceptional items. Then a big American customer, PacSun dropped Billabong and started making its own house brand.When sales fell, the company slashed its marketing budget. “In our quest to save profit, we cut our marketing budget, but that reduced our sales,” Inman told analysts and investors today, shouldering responsibility for a decision taken before her time. “Then, because of poor sales, we ended up with excess stock and had to mark it down.

Quiksilver, on the other hand, stuck to its core and the investment in World Champion Kelly Slater as the brand ambassador, helped drive the brand. Additionally the success of the DC Shoes brand as well as the recovery, albeit slow, of Roxy have all aided in the success of the overall Quiksilver company.

A quick view of some numbers shows the impact of the differences of the strategies. At the macro level, life for the two companies appears fairly similar.

However a little further down the P&L the sea becomes very rough for Billabong.

And finally a couple of stand-out lines in the Cash Flow statement

Put simply, Billabong is broken and Quiksilver is not. Launa paddled into the wrong wave and Andy the right one.  Launa is going to have to paddle 10X harder than Andy. Sure Andy will have his pressure to improve Quiksilvers’s performance but he has caught a much MUCH better wave.

At some stage in our career we will all face a similar choice. It may not be to run a surfwear company but it will be about choosing the right role. The saying, “you have to be in the right place at the right time” is never truer than when making a decision regarding your next role appointment. Choose the right wave and the sky’s the limit. Choose the wrong wave and you can get dumped. Painfully.