The Third Dog

The retail supply chain is broken and I am sadly observing systemic failure in the retail supply chain,. The symptoms are as follows:

1. Landlords may tell retailers that their stock is not what the market wants and the customers are simply responding to the fact that they can get what they really want somewhere else. They argue that the customer service levels are not good enough and that the presentation is not up to standard.
2. Franchisors will berate Franchisees for not adhering to the Operations Manual and for failure to engage the customer in the right way; not serve the hot dog the way it was meant be served or that the form wasn’t completed on time. It’s a constant challenge to get people to buy into the ‘system’.
3. Retailers (in shopping centres) on the other hand always blame centre management for lack of traffic and too much competition in their category.
4. Franchisees always think their franchise is a little bit different and deserves to be the exception in a dozen little ways.

Who is right and who is wrong? The short answer is they are all wrong – about each other – and this is the cause of the systemic failures in the supply chain.

We often have to spend a great deal of time on facilitating discussions to help each party understand the other’s point of view.

1. We have to help the landlord understand that the reason why the retailer is not engaging with centre management is that they rightfully don’t have respect for centre management. Just like customers punish the retailer with non-attendance when the retailer does not have what they want, similarly if centre management is not adding value to the retailers’ lives, they cannot expect any engagement from the retailer.
2. We have to make sure the retailer understands the landlord is not a financial institution and that they cannot use them subsidise cashflow shortfalls. They must understand that the centre teams can drag customers to the centre but not into their store.
3. We have to make sure the franchisee understands the Franchisor cannot guarantee success and that the ‘system’ is missing one important ingredient and that is the franchisees commitment and hard work. And of course that territories are not as different as they’d like to believe.
4. We have to make sure the franchisor understands the franchisee will not buy into the consistency message if the Franchisor treats different franchisees differently because that undermines their own demand for consistency. (If you demand consistency, you have to live it yourself.)

‘While two dogs are fighting for a bone, a third runs away with it’; so the old saying goes. And it is true here too.

Whilst there is a tussle for power and control between landlord and retailer, between franchisor and franchisee, the customer (the third dog) runs away with it.

None of the business entities in the retail supply chain have much power anymore. And whatever power you exert over another party is tenuous and will fade anyway. The consumer is empowered. They have a little device in their pocket called a Smartphone, and that means they can any information and increasingly any product from anywhere in the world at any time they please.

A collaborative supply chain is a strong supply chain.

But, I am not optimistic:

• How many Shopping Centre Landlords have an actual, active and successful Retailer Engagement Strategy?
• How many Manufacturers have collaborative, transparent Trade Marketing Strategy that goes beyond mere promotion and equips and empowers their retail network?
• How many Franchisors invest in the development of their network beyond the minimum compliance at the ‘system’ level?

Have fun.

Dennis Price

ganador.com.au: architects of high-performance retail environments.

On the Ganador business model

I am (obviously) fascinated by business models. That is how you design your business to respond to the opportunity in the market.

In my mind your strategic success is determined by your business model and thinking and tinkering on your business model is more important than strategic planning - which usually perpetuates the status quo.

When we started out, we replicated the business model that worked for us running our own business in South Africa. (Consulting, Training, Mystery Shopping.)

Those three elements work well together:

• Mystery Shopping finds the problems
• Consulting identifies the solutions
• Training Implements the solutions

Over time we also added:

• A Publishing division (we have so many training resources it makes sense to sell it to other companies)
• A Technology division (we use two amazing technology platforms for eLearning and for Knowledge Management and we are registered resellers of those platforms.

But putting all of the above into an ‘elevator pitch’ becomes hard. Explaining to a CEO of a potential client what we do is not easy. In fact, whilst it may be true, it is not credible to for a small organisation like ours to be a ‘one-stop shop’.

On a more personal note; we now simply say we are business architects: if you are business with a retail presence (brand or retailer) we will design and deliver solutions to make that happen. It may or may not include training and it may or may not include technology - and so forth.

I hope our message is clearer. I hope by stripping back everything that we do to only the essentials (building businesses in a retail environment) is a better way of communicating – because it is more relevant to the needs of the intended receiver.

Emails, comments and even phone calls are welcome.

Dennis Price

What business can learn from Adam Scott at Augusta is legendary

All of Australia admired the putt on the 10th (the second replay hole) that won Adam Scott the Masters at Augusta.

Much has been said about Adam Scott’s win – none better than Peter Fitzsimons.

But the win wasn’t set up at the last hole with the last putt. There are several key moments that to preceded that moment in order for him to eventually capitalise on the opportunity.

There are a few obvious milestones along the way:

• It took years of training to get there.
• It took years of performing at the highest levels to be invited to that specific tournament.
• He had to play consistently well (under pressure) for four days before that moment.
• He had to keep the faith even though he wasn’t in the lead.

But this is where it gets interesting. There are many players – arguably even most of the field – that did all of the above.

On the last hole of the last day Scott sunk an excellent putt to take the lead. His opponent had to approach the green and sink the putt (make a birdie) just to draw level. Adam celebrated and pumped his fist when he did it. The emotional high was obvious and it was intense.

He trudged off to complete his scorecard.

His opponent (what a revelation Angel Cabrera was!) played the perfect approach shot and left himself with only a short putt to draw level. Which he duly did. 

What happened next is what distinguished champions from the mere mortals.

Adam had to regather himself and return to the first play-off hole. Like a champion he played every shot well, but his opponent matched him shot for shot. Both had to putt again; on the same hole where Scott thought he might have had it won a few minutes earlier.

Scott was closest to the pin, which meant his opponent had to putt first. Cabrera sank a longish putt which demanded Scott had to sink his stay in the game. It was a relatively simple putt of about three feet (a metre or so). He would expect to sink it 999 time out of a thousand.

But if you know anything about golf you will also know that these putts that you are expected to sink. Just the previous year at the British Open he let a 3-shot lead slip over the last three holes. Those thoughts must have been swirling in his head. 

He rolled the three-footer in confidently.

They then played the second play off hole and we all know what happened. He had to sink a fairly long putt – one that no one would have strange if he had missed it. And he made it.

But I firmly believe that the previous putt on the first play-off hole was the one where the pressure was most. And that is where his champion credentials shone the brightest. And that shot was the difference between a champion and a great champion.

But most importantly: He celebrated his victory with humility.

And that my friend, is the difference between a great champion and a legend.

How does Nike succeed to always jump the curve? Semiotics and Culture.

It is always dangerous to write about companies when you have no special access, but I thought it was worth doing some homework on one of the brands to seem to have a track record of success in curve jumping. And maybe there is something we can learn from it.

Stage 1:

Nike, originally known as Blue Ribbon Sports (BRS), was founded by  Philip Knight and Bill Bowerman in January 1964. The company initially operated as a distributor for Japanese shoe maker Onitsuka Tiger (now ASICS), making most sales at track meets out of Knight's automobile

Stage 2:

Went in-house and started manufacturing shoes. Allegedly the first pair was manufactured using a waffle iron. Of course since then they have built up a world-renowned supply chain that has survived all the sweetshop scandals and continues to deliver.

Stage 3:

Consciously and overtly focused on creating the brand – rather than merely advertising their products. Their first efforts in 1976 were successful, but it was in 1988 that the Just Do It campaign idea and brand creative was conceived. Interestingly, the ‘swoosh’ was created by Caroline Davidson (an advertising student at Portland State University) in 1971 for only $35.

Stage 4:
Retail & Distribution was resolved and they opened their own stores – not so much as retail spaces but as brand experience domains. Eventually the stores became somewhat more traditional as the company rolled out in non-flagship locations.

Stage 5:

Nike has recently launched Fuelband – which seems to point to their strategic thinking. Jeremiah Owyang points out, named this as an emerging disruptive technology, and is termed Quantified Self. (Also called wearable computing, these body reading sensors harvest, analyse, and provide insight to how our bodies are working.)

How does NIKE do this?

Their history suggests that they have a track record of making good, successive strategic decisions. Every organisation eventually gets it wrong, but they have shown remarkable perspicacity in a fickle and extremely competitive industry.

I think the partial answer to their continued success lies in their tagline, which is a piece of copywriting & creative genius from When Dan Wieden of Wieden+Kennedy.

As an external observer, it appears as if the brand has become synonymous with the culture of the organisation. And if I am right, then the semiotics of the design is revealing.

The swoosh:

Originally it was conceived to represent the wing of the Greek Goddess (of Victory) NIKE.

Additionally, it also very fluid and dynamic shape – that suggests flexibility and non-conformity.

(Interestingly, they have underplayed ‘victory’ as a brand element and managed to define victory as something that is personal to the buyer/ brand user. This is fortuitous as we are entering the ‘WE’ era… and mainstream brands that are positioned as ‘ME’ brands are in for a torrid time.)

Paradoxically, the brand still manages to convey that it is a ‘tick’ which conveys multiple meanings:

• a tick of approval (positive)
• authorised by (which lends authority to the brand as an arbiter of right and wrong)
• the right thing (as in not wrong)

The ‘swoosh’ is also a progressive shape that points to the future in an upward motion – and conveys the idea of action.

The tagline

It has an interesting history:

The unlikely inspiration was the story of a killer Gary Gilmore, who had received the death penalty for murdering two people in Utah in 1976. Just before a firing squad did their duty, Gilmore was asked if he had any last words. “Let’s do it,” he simply said. When Dan Wieden wanted to create a tagline for Nike a decade later, Gilmore’s words came to mind. “Let’s” was changed to “Just” to add a dash of emphasis.

But, in my humble opinion, the final stroke of genius was adding the full stop to the tagline. Punctuation marks are actually quite rare brand creative because it generally distracts. In their case they actually included the full stop.

This suggests that it is the final word. Nothing to follow: no arguments, no excuses. JUST DO IT.

And that is exactly what Nike has been doing for many decades, and it has allowed them to jump the curve at every inflection point.

And that is the secret of jumping the curve: it requires you to actually jump – not just think about it.

Internet-ready Buildings - in 1997

Now I am digging back a long way - to 1997.

At the time I proposed that the commercial property industry create 'Internet Ready Buildings. I canvassed a few like-minded souls in the property association and we pulled together a whitepaper on the topic.. I wrote the introduction.

Bear in mind this was 16 years ago!

Chapter 1

Introduction and orientation

The new digital era knows no limits, no boundaries and does not discriminate.

The old paradigm of business was atomic and the new paradigm is digital.  Old business problems were about getting products and services to physically, now it is about getting it to them digitally.  Take the fax for example.  The old way required getting a physical piece of paper to another destination. Now your letter never leaves the office but the content magically appears at the other end!  The physical dimension (paper) is now not important, and neither is the physical distribution channel.  Now it is a matter of content.  There is that old yuppie slogan “He who dies with the most toys wins”.  Well in business it is “He who has the best content wins”.

The digital age means that everybody has access to information and there is an enormous amount of it. This has an important implication for every type of business:

There is no competitive advantage in having access to information – it is what you do with that information, the type and quality of information that is important.

This is a new truth that a number of businesses have difficulty in understanding and coming to terms with. It manifests itself in property owners sometimes being secretive when it serves no purpose and brokers still thinking that knowing about stock is their advantage when it’s what they know that should be important.

The value of a computer is not R5000 – that is the cost of the hardware.  The information contained therein, the ability to disseminate and manipulate that information is its real value – and I reckon my PC (personal computer) must be worth at least R300 000.  This makes investment in technology quite phenomenal.  Unlike plant and equipment, motorcars or TV’s a PC is upgradeable – it’s scalable. An old TV gets thrown out – but a computer can just grow and grow as your needs evolve. 

An often-quoted management principle is that a company’s success is determined as follows:

• • 20% because of your industry know-how 
• • 40% because of how you treat your customers
• • 40% because of your technology.

Do you spend your business time in those same ratios?

WHAT IS THE INTERNET?

The Internet is a network of computers. These computers are not directly linked to each other but mostly uses the normal telephone infrastructure to ‘talk’ to each other. In order for computers to talk to each other using the analogue telephone infrastructure they each need a modem. This technology has existed for decades, but has only recently become popular with the public.  The reasons are twofold:

Firstly, Internet Service Providers(ISP’s) positioned themselves as routers of information which is effectively the same function that a server plays in an office computer network.  Your computer is not directly linked to another, but rather to your service provider.  Service providers are linked to each other, and every computer that is linked to a service provider is then effectively linked to every other computer.

The second reason is that special software called browsers has been developed that makes it easy for ordinary people to navigate on the information highway. Some years ago this was only possible if you were real computer boffin; and now it is easier than working a word processor. The average lesson to get started is 5 minutes.

HOW DOES THE INTERNET WORK?

The Internet is a fairly new and very dynamic distribution channel for information/ data. Whether it is pictures, sound or words, a computer can turn any data into bits and bytes (binary code); transmit it over the telephone line to any other computer that is connected to the net - anywhere in the world - in an instant!

If you pause to think about that for a minute, you will suddenly realise that the applications are endless - and that is not just a buzzword. It is a TV, VCR, a Hi-Fi, a fax, a typewriter all in one.

It is a network of phenomenal proportions, fast approaching a hundred million computers - and nobody owns it. People join and leave as they please. They can add any content to their computer and post it on their website.  There are no limits.

A sign of a well designed Internet website is one that keeps that visitor (or ‘surfer’) in that site for a long time, and makes them come back for more. The vast majority of the websites are the equivalent of old, bullet-riddled billboards on a dusty platteland road.  Unless you are planning to make your website work for you, you will do more damage than good by having a poor presence on a medium where the users are by definition opinion leaders, innovators and changemasters. 

Many businesses mistake a site with lots of fancy graphics (the so-called bells and whistles) for an effective site. A visitor (and every visitor is a potential customer) will only wait once to see the pictures, but it won’t make them come back.

BUSINESS ON THE NET

From the property perspective, the potential of the Internet is limitless as well. Without leaving your desk, you can:

• • Design a building
• • Raise finance
• • Contact partners/ contractors
• • List the property with brokers
• • Find tenants
• • Sign lease agreements
• • Do appropriate credit checks
• • Show the prospective tenant a finished unit - before construction has even started
• • Keep in contact with every role player
• • Keep an eye on the building work
• • Have site meetings with all concerned
• • Approve the final work

You only have to take occupation of the building physically, and everything else happens in cyberspace. This is not exaggeration, and each one of these activities are taking place now.

The question is: How do I go about doing business on the Net? The answer is, very soon but in an integrated manner:

The window of opportunity is quite small. With the Internet, it does not matter where in the world you are - you are on an equal footing with everyone else. For example, there is one book retailer on the Net (Amazon.com) that has quickly established itself and now there is no need for another. I have no idea where this retailer is physically located in the world; and neither do I need to know.  Every other book retailer will battle to establish a presence. 

As physical property is a somewhat different commodity, the need is somewhat different. The Internet is a potential productivity gain, if you can capitalise on the opportunities that are inherent in the property management and development process. For instance, a specialist architectural practice in Kuala Lumpur or India or wherever  may be contracted to do design work - without incurring travel expenses whatsoever, and have the work paid for at a favourable exchange rate.

To get maximum benefit from an Internet presence, the work-flow in your organisation must be designed to capitalise on the potential productivity gains offered by the Internet. You should not just duplicate existing services in an electronic format. After all do you back up a fax with a telex - just in case? It is a new business paradigm, and the workplace must be re-engineered to take advantage of that. For instance, a tenant may ‘sign’ a lease on the Internet and submit it to you.  The lease can be verified by a credit bureau, approved by a regional manager, posted to the accounts department for notice, deposits made and the Vacancy Schedule updated - without any human interference.

INTERNET WEBSITES

The dominant part of the Internet is the World Wide Web (WWW)- which is just a collection of websites. The website is just a page (or many pages) full of information that you allow access to from the outside. The first page or front page of this electronic publication is the so-called homepage. The homepage usually functions as some kind of a central link or ‘menu’ to the rest of the site. 

The name and address of a website is referred to as an URL. For example, SAPOA’s website address is:

http://www.sapoa.org.za

The address is written entirely in lower case, without any spaces and exactly with the punctuation marks as indicated. One missing full stop or dash or letter will result in your not being able to find the address on the Net.

The components of the address are:

http:// This merely tells your computer that you are using a specific computer language or protocol (hyper text transfer protocol).

www.  This states that your website is hosted on the World Wide Web part of the Internet. There are other aspects to the Net, but you can let the computer boffins worry about that.

sapoa. That is our domain name that has been uniquely registered.

org. This states that it is an Organisation (non-profit). Other alternatives are: co (non-US company), ac and edu (academic and educational institutions), gov (government), and so forth. Most SA companies will have the descriptors .co.za in their URL.

za. This is the country code for South Africa. Other self-explanatory one’s are nz, au, uk and so forth.

The above is your website address. E-mail is usually integrated into the ‘Internet package’, and every domain is entitled to at least one e-mail box. My e-mail address is similar to the website, but not quite the same: stratserv@sapoa.org.za.

You can clearly see the relation between the two addresses, but they are not the same. The difference is like knowing a company’s physical and postal addresses. Both are useful, but for different purposes. The one is for mail, and the other one is to visit!

IMPLICATIONS FOR THE PROPERTY INDUSTRY

The VMS and other search engines

**Note in 1997 I createda JV with a service provider to create the 'Vacancy Management System' - an early precursor to realestate.com.au

Disintermediation of the broking fraternity is a well-publicised issue. Whereas brokers could previously trade successfully merely based on the fact that they had access to information that nobody else had, those days are now rapidly coming to an end.  The playing field has been levelled and big and small now have access to the same information.  This has lowered the barriers to entry for this industry even further.

At the moment the VMS denies access to the casual surfer and only authorised access by certain members is allowed. This protects the broker from prospective tenants doing deals directly with the owner.  This should not lull brokers into a false sense of security, because it is now the time to seek new service opportunities based on different paradigms. 

PROPERTY DEVELOPMENT

Tenants will soon be asking about Internet-ready buildings- just as they ask about air-conditioners. New developments and refurbishments will have to consider the new technologies. Is it wireless bridges and routers or is it fibre optics? Is it diginet or leased lines? Must the expense be capitalised or is it part of operating costs? Who is responsible for maintenance?  There are a whole host of technical issues that are addressed by this publication.

PROPERTY MANAGEMENT

Much more can now be done from a remote site than was previously possible. Tenants, contractors and professionals can be sourced on the Net. Strategically installed video cameras can be accessed from a distant site and the building observed. Building records can be archived intelligently and very cheaply on the net. Payment for services and rent collection can be done automatically through electronic funds transfer – reducing bad debt risks and arrears.

TRENDS, PROBLEMS AND OPPORTUNITIES

E-mail is becoming pervasive, and is an exceptionally viable alternative to snailmail and fax. Before printing new stationery with your new addresses, investigate whether registering your own domain is not more advisable.

Be careful to register your company’s domain name before somebody else reserves it.  All website addresses are registered at a central database for a once-off fee of approximately R250.00.  A domain name serves the purposes of identifying the addressee.  If your company is the sole tenant of an office block, you want naming rights.

Assuming that your service provider is called Newbuzz, and you are trading as ABC Properties. Your registered e-mail address can be abcprop@newbuzz.co.za; and similarly, your website can be www.newbuzz.co.za/~abcprop.  But you don’t want any reference to your ISP in your address, because if you want to change to a better service provider, you have to redo all your stationery. If you register abcprop as your own domain name, your e-mail address will be (for example) john@abcprop.co.za., and your website address (URL) will be www.abcprop.co.za. This is irrespective of the fact that you are using Newbuzz or any other service provider. (If you want to know what your computer guys have done in this regard, check your business card!)

General practice is that companies have their own domain names, whereas individuals will have their e-mail account addressed to their ISP’s domain.

Choose your service provider with care, and even then don’t sign long term contracts because it is a rapidly changing industry, and not all companies live long.

Be careful of being over-charged for services. Some charge out of ignorance and other out of avarice. Companies without substantial IT/ Computer departments are welcome to contact the author at SAPOA for an opinion on quotations/ costs if they appear substantial.

In companies with office networks, there is a security risk that people from the outside can access your network. Not all hackers are malicious, but if there is a path out (onto the Net) then there is a path in. Firewalls are computers and/or programs that are designed to keep hackers out, but although security is improving - there is no foolproof system. As an interim measure, just connect one free-standing PC to the Internet. The pages that you want on the Internet are hosted at your service provider.  Of course you can act as your own service provider (ISP), but this is advisable really only in very large conglomerates where there are massive economies of scale and hundreds of users.

The Internet-ready building concept

A building can be an office park, a home a shopping centre or an industrial building. A building is internet-ready when it is designed, managed and marketed as space that has been configured and wired for Internet use. The concept of Intelligent buildings is a wider concept that includes for instance highly computerised lifts, air-conditioning etc. which 'intelligently' adapts to its environment.

My contention is, however, that the Internet infrastructure will become the network of choice to create intelligent buildings, and as such will precede the decision to create intelligent buildings in the future.

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Why Marissa Mayer agrees with me and predictions about privacy

I continue my smartarse theme this week.

I wrote this in early 2001 and touched on the idea that people don't care too much about the information they share (privacy). If you consider what people put online via social media you will have to say that even people will say they value their privacy, they don't really act that way.

I also spoke about why tele-commuting is not going to take off in a big way any time soon,.

As I said, it is smart-arse week.

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The new world of work

A lot has been written and said about the new world of work where we will all tele-commute, work via the Web and where robots take over all manufacturing. Without exception, the main proponents of the new way have at the very least got their timing very wrong.

Predicting the future is a dangerous business made doubly so when you are trying to predict human behaviour and slap a deadline on it. However, there are some fundamental values and characteristics of human nature that you can pretty much bank on as being timeless. Man is a social animal. The people who predicted that the VCR would spell the death of the cinematic experience did not consider this simple fact. The consulting landscape is littered with corpses who staked their reputation on the extrapolation of a trend or the discovery of a new technology without due consideration of the essence of human nature. It is time to dispel a few myths about the new world of work.

Privacy.

Man likes to talk about himself and herself. All those who bemoan the demise of privacy on the Net should think again. Barring some really confidential information like a criminal record or serious lack of funds, people generally don’t mind talking about themselves. There are thousands of market research firms in the world who can attest to the fact that the vast majority of people who do not want to participate in a survey do so purely because of the perceived lack of time. They just could not be bothered at that particular point in time. It is very rarely a matter of principle.

Once aggregators of data such as marketers of consumer products and services have all the info they need, the real question will be what to do with it. People are a peculiar mass of contradictions and inconsistencies. Traditional market research has long perpetuated the notion that people can be grouped together as markets based on a slicing and dicing of their attitudes, behaviours or lifestyles. This has given the managers and accountants the false sense of security that marketing is an exact science. The real truth is that people are as unique as their fingerprints signify. In the past the (subtle) differences between people have been disguised by the limitations of research methodologies and the lack of data. If you ask people a few questions, chances are that their answers will be able to be grouped in a meaningful way. With access to perfect information and limitless data, the differences become more pronounced.

And even if marketers figure how to use data in some meaningful way, the targets of their advertising or sales techniques will have found a way to block them. The key in the privacy debate is not whether researchers/marketers will gain access to personal data. I think it was Scott McNealy [CEO- Sun Microsystems] who said famously that ‘privacy is dead – get over it’. He is right of course; but the funny thing is that, by and large, people don’t mind. The reason is that they fully expect to be able to somehow filter the appeals of the marketers – probably through the use of technology. Only messages from trusted sources will get through to them. It is the modern, adult version of “talk to the hand because the ears aren’t listening”. Somehow the Internet will have its own version of the TV remote that allows users to zap between channels and skip commercials at will. It might be as simple as filtering applications as they exist today or something more fanciful. The important point is that consumers/users don’t mind the loss of privacy (outward-bound data flow), but mind the intrusion (inward-bound data flow) of messages coming in. The overload of information has long been identified as an issue that has been made more ubiquitous with the advent of the Internet. But people will find a way to cope, they always do.

Like most people with Internet access, I have done the Amazon.com thing and I certainly do a lot of banking on the Net. There is a bit of concern when I pay by credit card, but I keep a low limit on the card anyway, so my exposure is limited. I tend not to divulge my e-mail address to all and sundry websites, and when I do, it is the freemail one. There I would monitor the spam vs. quality and if necessary, transfer it tio the regular address or attempt to cancel. I have never had difficulty in getting unsubscribed from a website.

Work from home

As stated earlier, man is fundamentally a social animal. Work from home and telecommuting is bound to increase – up to a point. It is a work style that will suit certain jobs more than others, and more importantly the ability to work from home will be important at certain stages of ones life. A career woman who wants to raise a family, a son who needs to look after frail parents or someone who needs to live in one city but work in another are examples of the people who might seek out telecommuting opportunities.

But most people seem to like the idea of leaving the drudgery and dirty dishes behind, dress up a bit and get out. It probably provides people with some meaning in their lives and also gives the man opportunity to play different roles, which are so necessary for their psychological balance. And employers will realise sooner or later that a lot of progress and problem solving comes from the creative tension fostered by direct interaction with peers, customers and competitors.

This means of course that if you had hoped traffic jams would become a thing of the past any time soon, you are wrong. I am rather more fortunate of course, as I drive for an hour every morning and an hour every evening down one of the most beautiful stretches of road in the world. The south coast of New South Wales, Australia is a beautiful part of the world. Particularly as the highway crests Mt. Ousley and follows a sweeping curve downwards it delivers a stunning view of Wollongong. The early morning sun paints the shimmering expanse of sea and harbour and this picture is framed by lush vegetation.

Source: www.mademan.com

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Standing on the shoulders of giants to see retail's future

To continue this weeks theme on the FUTURE and PREDICTIONS, I want to take you back to the 1980s when Alvin Toffler wrote Future Shock (1980) and The Third Wave.

Remember that when he wrote this, we had not yet seen the wide-scale adoption of the PC or the Internet.

This is what Toffler predicted:

"For Third Wave civilization, the most basic raw material of all--and on that can never be exhausted--is information... With information becoming more important than ever before, the new civilization will restructure education, redefine scientific research and, above all, reorganize the media of communication... Instead of being culturally dominated by a few mass media, Third Wave civilization will rest on inter- active, de-massified media, feeding extremely diverse and often highly personalized imagery into and out of the mind- stream of the society.

"The giant centralized computer with its whirring tapes and complex cooling systems--where it still exists--will be supplemented by myriad chips of intelligence, embedded in one form or another in every home, hospital, and hotel, every vehicle, and appliance, virtually every building-brick. The electronic environment will literally converse with us" (352).

"To operate these factories and offices of the future, Third Wave companies will need workers capable of discretion and resourcefulness rather than rote responses. To prepare such employees, schools will increasingly shift away from present methods still largely geared to producing Second Wave workers for highly repetitive work" (353).

Today we are living these predictions.

Toffler got it right because he did not simply look at basic statistical trends, he looked at the fundamentals and did a meta-analysis on the context. He understood human nature and based his thinking on those timeless principles.

I am sure there are a few companies out there who wished they had paid a bit more attention back then.

Dennis

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We have created a market for IDEAS and you are welcome to swing by and get yourself some.

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I was smarter than JB Were about Internet Retailing, and Lend Lease did not listen

This week I am focusing on the future. I am talking about the future of Marketing at a Perth Conference in a few months, so I am updating my prognostications and thinking about the future.

Then I came across this beauty:

This is an exact and complete copy of something that I wrote in 2000 - some 13 years ago...

I can't remember who I wrote it for - or indeed why - but I commented on commentary made by JB Were on the (then) JHD Internet retailing study.

Not only did I disagree with their assessment, I also told Lend Lease what they should have done.

NOBODY likes a smartarse - especially after the fact - but I wonder if Lend Lease wished they had listened to me? 'I told you so' is small consolation though...

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The future ain’t what it used to be

by D Price

The JB Were commentary on the JHD/ Marketshare Internet retailing study makes interesting reading, but also many arguable points. A study that understates the impact of the Internet shows a distinct lack of understanding of what the Internet is and more importantly what it can be, and apparently also the craft of Retailing. Research is too often a summary of all the answers they get, but did they ask the right questions? Not having had oversight of the original study and its methodology, the questions raised below are inferred from the commentary by JB Were.

One. The first major oversight in stating the impact will be relatively minimal is of course that it ignores the impact of the volatility caused by the many attempts at market entry by hopeful entrepreneurs. Even though many may not last long (the burn rate of their venture capital is too high) they still cause competitive pressure and this is applied serially. This means traditional retailers will face continued and long-term margin squeeze. Like space invaders they just keep coming at you – principally because the barriers to entry are so low. [They are of course their own worst enemy because they are eroding consumer confidence over time.]

Two. Retailing is not only reliant on price to move merchandise. Fundamentally the commentary is correct and that the total cost of merchandise may be made up of different elements (distribution costs v rent). But what the analysis overlooks is that there is also a distribution cost in traditional retail channel which is borne by the customer. If the consumer perceives the + 15% charge for delivery to be less than his or her cost (i.e less than the consumer’s opportunity cost), then a niche opens up for online sales. Convenience is a big factor in retailing and its cost can not be underestimated.

Three. There is a high degree of risk in basically asking consumers to predict their future behaviour. I am willing to bet my entire net worth (don’t get excited, there isn’t much…) that cellular phone sales exceeded all the expectations of manufacturers, service providers, retailers and shopping centre owners. Thomas Watson famously predicted that the worldwide demand for the first IBM mainframes were to be the grand total of 5. The US Telegraph Company saw no future in Alexander Bell’s invention, and the typewriter was rejected initially as fad that could not replace a good stenographer. There are many examples like that including the photocopier and the fax. The Internet gives the consumer freedom, choice and convenience. These are powerful values that drive fundamental consumer behaviour patterns.

Four. The respondents in the survey – in all likelihood- could only assume that web shopping in 5 years time would be the same as it is today. That is, sitting behind the computer, browsing and searching and ordering and waiting and waiting. The technology is in its infancy, and it will evolve to increasingly suit the requirements of consumers. Internet shopping will in future probably not even involve the computer but rather the fridge or the mobile phone. Along the same vein, the study assumes that the 20-yr old of today and the 20-yr old of 2010 will shop the same way and for the same things. The 10-yr old of today is growing up with a different market view and technology expectation.

Five. The effect on the retail mix of centre should not be underestimated. As book stores, music stores, florists, financial services computer & software shops slowly disappear or get relegated to strip shops, it will reduce leasing options, which in turn, because space remains fixed, will be leased (at a lower rate?) to an existing category which diminishes the viability of that category which further pushes rentals down. There is a ripple effect that could be dangerously insidious. The product categories that are most amenable to Internet shopping are:

• those that can easily be turned from atoms to digits (music, software)
• those that can be automated because it is either a very routine activity (paying bills) or a highly complicated transaction (buying insurance)
• the conditional purchases (gifts, impulse items) especially where the recipient is geographically separated from the giver.

Six. As retailers jostle with the dot coms for Internet space & marketshare, the traditional retailer (a) diverts its attention from the existing business and (b) dilutes their financial investment in the existing businesses. This inevitably means less capital expenditure and all the corresponding consequences.

Seven. The commentary does not define ‘shopping’. The role of the Internet in making comparisons, sourcing merchants and/or products may well extend way beyond the actual transfer of cash. These activities are an integral part of the shopping experience and the concomitant loss of impulse buying opportunities that are lost in a shopping centre is enormous. In some categories, impulse buying amounts to 85% of sales.

Eight. The effect of a real decline of 5% in sales obviously also means a decline in volume. Most of the retailer’s distribution costs are relatively fixed, and any savings made by selling less, will certainly be offset by loss of channel power (e.g fewer quantity discounts). This means expenses remain relatively fixed, whilst sales are declining – through to 2005 and beyond. A 5% decline in sales volume that continues to decline must be of concern to any long-term retail property owner. Continued negative prospects will depress share prices, lower the ability of the retailer to raise capital which in turn impacts on its ability to finance itself for new concepts or through sales troughs. ‘Market sentiment’ – as any investor knows – is a difficult thing to change

Nine. The famous saying of ‘Lies, lies and damn statistics’ certainly applies. The graph predicting % online sales (JHD/Marketshare) is very misleading. Internet sales have doubled every year for the last 3 years (at least). The authors are of the opinion that the rate of increase will flatten out dramatically. The graph still shows exponential growth, but the X-axis (time scale) jumps from 1-year intervals to 5-yr intervals on the same axis. Effectively they are saying that the exponential growth will not continue to happen, but the graph still shows the exponential growth curve, which is what we intuitively believe.

This  graph is really what they are predicting – a gradual and steady growth rate and not an exponential growth rate.

The basis of this assumption is the 1700 consumers who were (in some form or another) asked whether they (thought) they were going to shop more often on the Internet in the future. Asking consumers to extrapolate behaviour from the present into new paradigm is very risky to say the least.

Ten. The results are ‘surprising’ because the impact is ‘less significant than the market expectation’. I would be very worried if my research differed from the ‘market’. There is always a first time, but the market never gets it wrong. Basic human greed may make investors overpay for shares in the future and correct it, but there are literally thousands and thousands of investors and analysts who have looked at the Internet, and they have seen the future. I think this may be a case of getting the right answer to the wrong question.

Finally. It is often said that a company’s supreme goal is to ‘satisfy the customer’s needs’. Paradoxically, this is also fraught with the danger that the customer’s future needs (which are presently unprofitable) are ignored. Focus on present customer satisfaction stifles innovation. I don’t believe LLR is the kind of company that will risk that.

My view is that the Internet, as we know it, is going to change the shopping landscape radically and forever. The process will take time and there is sufficient space and time to enter the market better than most of the hype would seem to suggest. Most importantly, I believe Lend Lease should focus on the Infrastructure side of the business where

• there is higher barriers to entry
• the existing skills set of project management can be best leveraged
• Lend Lease has traditionally made its money (property infrastructure & financial infrastructure)
• the scope is global & compatible with existing businesses and not competing with customers and suppliers.

The Internet (shopping) phenomenon reminds me of the situation where a movie becomes hugely popular despite the fact that all critics hate it. But then, it is just another opinion…

Regards

Dennis Price

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We have created a market for IDEAS and you are welcome to swing by and get yourself some.

Franchisors: Convert your OPS MANUAL into a custom-branded, interactive web-based application for $5k only

If your only tool is a hammer every problem looks like a nail

In a previous post I revealed that I have a weakness to explore multiple topics and interests – always seeking the latest and best.

I also have a pet hate, which may or may not be a weakness too. It may be the flipside of my yen for the epistemic; so let me explain:

I am reading a book at the moment This Explains Everything edited by John Brockman. Find it in my Library here.)

Basically it is a hundred plus thinkers/intelligentsia who are all trying to answer the same question: What is your favourite deep, elegant or beautiful explanation. The responses range from theories on consciousness to particle physics to natural selection. (Incidentally, it may the most referenced idea in the book.)

However, one thing struck me immediately:

• Physicists expounded a Physics theory
• Neurobiologists and neuro-scientific idea
• Linguists offered a linguistic idea.

And so on.

The bogan version of that phenomenon would be:

If the only tool you have is a hammer then every problem looks like a nail.

And THAT is one of my pet hates.

The book offers over a hundred ideas that are meant to be THE idea, which ironically proves the point that there is no ONE IDEA that ever will.

One of the flaws in our everyday thinking patterns is that we think exclusively more often than inclusively:

We normally think the answer is A or B. We rarely think the answer can be A and B.

Example 1: A company may feel compelled to choose between launching Product A or Product B, or feel compelled to choose a market penetration strategy over a diversification strategy.

Example 2: Australians are encouraged (by politicians and media alike) to be either for or against boat people. (The local illegal immigrant narrative in Australia.) But there is an inclusive solution.

Example 3: If you want to persuade a child to brush their teeth before they go to bed, you offer them two options: Do you want to brush your teeth now after the meal or do you want to brush it before you go to bed?

Example 3: In retail sales, we train assistants to use this general thinking style in their favour. When you ask a customer whether they prefer the red dress more or the blue one more, they say neither.

Practical resource constraints aside, there is no logical reason why only one answer will be the right answer.

I am not advocating indecisiveness – that would simply be lazy.

I am not advocating lack of focus – that would simply be stupid.

What I am saying that there isn’t always just one correct answer. There isn’t always just one tool for the job. By recognising this, we may actually save time and money by cutting short the search for perfection.

Dennis Price

• GANADOR: Architects of high-performance retail environments.
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Future of retail is not about learning new rules, but this...

I constantly contemplate the future of commerce.

Many futurists are charlatans and frauds, but strategy requires forward thinking, so we dabble in the future by necessity.

I have made some bold predictions in the past:

1. Six years ago I published this list of 8 items – picking winners in the very long term. So far, I am happy to stick by 8 from 8 on that list.
2. Five years ago (Mar 2007) I published this list of 18 items from a presentation that I gave. Upon review I give myself 18 out 18.
3. Almost 3 years ago I predicted the failure of Apple. Whilst the jury is still out – I did say 5 years – the share price graph favours me.

What follows is not so much bold predictions, but stating the bleeding obvious – but please read on:

1. Pending Doom: I have been predicting since 2007 the inevitability of a major internet. It is only a matter of time. Governments are not talking about it much and few people who are in the know talk about. This is not conspiracy theory stuff, but simple logic: as societies become increasingly reliant on the internet backbone, it will be become an increasingly attractive target for disruption – for whatever cause.
2. Middlemen go poof! Just like there is computerised share trading (based on algorithms that will scare the pants off you) there will eventually be eCommerce sites that are created and optimised by algorithms – and fully maintained – including social media profiles and ‘authentic’ interactions with the community. This will become an easy option for any/all suppliers or manufacturers to bypass the entire retail network (including traditional and 3rd party online retailers) and to reach out to the consumer directly – at a lower cost than ever before. (Why would you accept drop ship orders if you can create hundreds of sites in different languages for your own products by buying a piece of software?)
3. On a short chain: The suppliers/manufacturers might not enjoy their newfound powers for long because it seems that a new force will disintermediate the only remaining member of the retail supply chain. The development of 3D printing is something I had never foreseen – but it is happening and it may be possible that the entire supply chain will exist only in buying the raw materials to ‘print’ – since presumably the 3D printer itself will eventually be printed?
4. Zeros and ones everywhere: Just as physical goods become entirely disintermediated, services will increasingly also be offered via the internet. Holograms, VR and such technologies only point to the beginning of what is possible in that space. I can imagine a future where a digital hairdresser virtualises in your bedroom and based on a 3D view of your head executes the perfect haircut. She might even chat to you – who knows? When you press ‘enter’ she disappears again. (Or is Ctrl F9 shuts her up.)

A few tangential points in summary:

• The economic system is unstable, in transition and vulnerable.
• The supply and purchase of goods and services is influenced by the balance of power in the retail supply chain.
• Technology is empowering the consumer, and this means no organisation will have the power (for long) to dictate an outcome. As powerful as Amazon is right now, it only takes a small tweak in technology to connect the writer directly with the reader and Amazon is history…
• Social media is teaching brands that they have diminishing power and that they in fact don’t really own the brand. (They never did, it was always what the customer thought the brand was anyway – but it is now becoming evident.)
• Winners won’t be easy to pick and their success may be fleeting as it depends on the fickle goodwill of the consumer. (It always has, but consumers now have direct, swift and powerful recourse because they can activate the Social Mob.)

The key point I want to make is this:

Everything is changing – but few are designing their business for success.

Everyone already knows the points I have made above, but seem to prefer not to think about it and certainly seem to be hoping the status quo lasts long enough to sell the business or build up a large enough super before the s&*t hits the fan, right?

Right now, in almost every business I come across (and I know this is a biased sample) I observe:

• Systems are redundant
• Technologies are obsolete
• Training is ineffective and old-school
• Strategies are superseded by reality
• Pursuing market knowledge via traditional research, which is redundant
• The traditional channels of communication are fracturing

So, how do you design your business for success?

Most executives think (and advisors will tell you) the rules are changing which makes it a different game. You simply have to re-learn the new rules. (I use that metaphor myself because people are familiar with it, but it is not really helpful.)

The new game is an ever-changing game. It’s not as if it used be Aussie Rules that evolved into Rugby League. It is more like while you are playing cricket it becomes croquet and you are competing against a pole vaulter and it is all happening in a pool.

It is not about learning new rules; it is about learning how to relearn constantly and responding to it.

Quick example:

Even though Facebook is an inappropriate marketing tactic for many businesses, I have helped some clients go down that path. NOT because Facebook is important – on the contrary – but the process of learning about the new platform and developing a strategy around it is important.

Quick action:

Establish a project team to write/re-write your job descriptions. The process of doing so will force you to rethink who is doing what and why. For larger organisations this is actually imperative, not because job descriptions are important, but because the process of designing the jobs forces you to consider and evaluate the roles and requirements in the context of the changing landscape. If you are too busy dealing with the present, ask someone to help.

The key to success is to build a business that is capable of systematically responding to changes.

Have fun

Dennis

GANADOR: Architects of high-performance retail environments.

You can now buy ideas – GET IT HERE.

PS: This started out as a blog post and over the Easter weekend it became a 38pp treatise. And I am not done yet. It will probably become an eBook at some stage. Subscribe to get fair notice if you are interested in this sort of thing and I will let you know when I am done with the pretty version with links and videos and images and loads of practical examples.

Sneak Peek: Want some?

It has never been done in Australia (or anywhere we know of)  - so CHECK IT OUT: 

DENNIS

Retail story telling (video)

A great example e of telling stories in retail.

I can hear the objections:

• I can't do that.
• Only in New York - it won't work here
• There is only room for one.

That would kinda be missing the point. This is not the only way to tell a story and this particular business model is not the only one that will work.