The Digital Steamroller

Isn’t it amazing that in a world in which so many things are so obvious, so many people keep on ignoring the signs.

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When there is so much momentum for change so many people keep thinking “same”.

Steve Jobs had a great instinct for the signals of change and the way that one mans infrastructure in a digital age could become everyone’s…. and that uncanny ability to understand what the customer would want and to deliver it was what made Apple so valuable as a company.

We have all witnessed the changes in the distribution of music and movies. When digital technology was launched thirty years or so ago, it delivered huge benefits to the music industry. It enabled improved recordings to be made. It delivered new effects in the studio. It meant that the discs that could be created using scalable manufacturing would be less expensive per unit in raw manufacturing terms; they would be lighter in weight taking up less space which meant cheaper shipping costs; and as a windfall surprise, it led to consumers totally replacing their music collections. So the whole catalogue got sold twice! But music companies thought that it was their smarts that brought them the fabulous hockey stick growth that they suddenly experienced, not consumer choice.

As the digital wheel turned it and tools became easier to build along came the mp3 and then Napster and digital disruption broke loose. The consumers took charge….

The music companies resisted change – and quite aggressively as we all know. They still do. The new reality is that the music companies are almost totally beholden to Apple for their revenues. They don’t like it, but they have had to adapt. But Apple and perhaps Steve Jobs in particular, knew how to both anticipate and to manage consumer expectations from technology.

In retail there are a few emergent people globally who have Jobs-like vision for retail. Steve Bezos has to be one of them. What he and others like him will do next will be interesting to see. What is clear though is that retail in Australia is starting to go through the same evolution as music. Big retailers have been enjoying the margins from selling big box, big ticket items, but China’s manufacturing output means that supply is constantly looking for demand and the player that delivers big consumer price benefit while not reducing quality has to become the winner. As a result companies like Harvey Norman are experiencing the same sort of pain that the big music labels went through…  And while they haven’t died yet, the game is far from being over.

Now it may be useful to consider this: In the UK a year ago research was undertaken at one of the leading universities into crime statistics. It seemed to the researcher interesting that the ‘breaking and entering’ statistics kept going down, while at the same time there was continuing speculation in the media about the need for more police. The research established that indeed breaking and entering had almost disappeared, and the conclusions that were established after interviews with traditional criminals associated with this kind of crime were quite revealing. They said that because of the advent of cheap Chinese white goods in the high street stores the price differential for selling “hot” stolen items was too small to make the risk of being caught worth while!

Thievery was stopped by Chinese manufacturing. (Reported street crime went up with the main things being stolen being iPhones and other portable technology).

Retail is going through a similar wrench as the music industry and it seems to be difficult for the people in charge to come to terms with the concept that they are going to have to utterly throw away their pre-conceptions of their business structure in order to survive. They are now past the peak of the profit curve. You can read  data that has recently been published that suggests that Australian online retail still only accounts for around 1o% or less of total retail sales and think that this is not a big deal. But the macro numbers are not the issue, just as with the music business. Its the micro numbers and how they add up. Online sales are being seriously disruptive.

Bricks and mortar retailers have a totally different cost structure to the online sellers. We all know that. What is not generally understood is they also have legacy systems that they have spent fortunes on that are just not efficient enough to meet the dynamic requirements of markets now. Now retailers have to have real time knowledge of inventory, not daily reports that require batch processing of data. Ironically, the bigger the retailer, the less in touch they are with the true numbers. And the accountants don’t want to have to invest in new systems. And the systems integrators don’t want their big clients to switch. So the charade continues just as it did in the music business. Those who are in the legacy supply chain try to maintain it… because they are fearful that the alternative may be digital anarchy with the customer knowing too much and systems being able to be hacked by the crims. Its a unenviable position.

And we are about to head into an even braver new world with the advent of Additive Manufacturing. (By the way I am putting on a conference on additive fabrication on April 23rd. You can find out about it here.)

With additive manufacturing you can print three dimensional things. Its pretty amazing and is in the process of going mainstream, and it too will over the next few years utterly alter the landscape for product manufacture, for retail, and for the consumer.

What it will do first though is to provide inventors and product developers with the ability to manufacture prototypes quickly and inexpensively and then manufacture those products in the least expensive manufacturing geography. Disruption traveling up the supply chain as well as down!

There is only one place to be in this digitally disrupted world, and that is on the side of the customer. And those who understand how to apply their knowledge of how infrastructure functions and who can think laterally about the applications are going to be very seriously in demand.


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Privacy and Trust. Do You Care?

Your privacy. Is it worth anything?

Chapman as Brian Cohen in Life of Brian

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Actually its worth quite a lot. But ironically it is only when it can be aggregated with the information about others that it starts to build real value. Its highly valued by those people who want to sell you things. Because nowadays a tremendous amount of the messaging that you unwittingly receive is shaped by the analysis of information that is gathered online.

Even the advice that you may receive from your doctor is shaped. Pharmaceutical companies are among the most expert in capturing and analyzing information about the end-users of their products. They in turn survey doctors to determine how patients have responded to certain key words in the dialogue between doctor and patient – all quite legitimately so as to maintain privacy. They then parse this information using tools that are also used for intelligence analysis in order to determine what key words trigger what responses so that their sales people can communicate more effectively with the doctors. That means of course – so that they can more convincingly motivate doctors to prescribe their products.

Data capture about you may already be the biggest business on the planet.  You and I benefit from this in one respect in that better products can be developed to suit our needs more usefully. However very few of us truly understand how much of our whole belief systems is constructed for us by the media channels that we unconsciously consume.

The Facebook feed that we get is personally shaped and filtered based on what we have clicked on rather than who our friends are, and the google searches that we get are all personalized based on the things that we have clicked on in the past. As Brian said in the Python movie, “We are all individuals”. The only thing is that we are like the crowd in that famous scene in “Life of Brian” – all repeating the phrase and all walking in lock step behind our own personal messiah.

Jen R sent me the following infographic that illustrates her view of the world of privacy:

You Are Not Safe Online
Created by: Online Marketing Degree


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Additive Fabrication Conference

I am organizing a conference on Additive Manufacturing at the Innovation Campus of UOW in April.

It should be a really good event, so if you have an interest in the next generation of manufacturing technologies, I urge you to check out the web site and to register.

Here is a video that describes the event.


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Conferences And Scientists

I am in Geelong today. I had to give a brief talk at a breakfast forum of scientists and business people yesterday morning which was a follow on from a previous event in Melbourne. It was hosted by Deakin University and

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built on feedback from the last business forum breakfast event that the Centre of Excellence for Electromaterials Science held late last year.

The reason that it was successful was that unlike most meetings of this kind presented by scientists, instead of the scientists presenting their stump speeches about the work that they were doing and the big vision stuff – which came later in the day in a formal conference/seminar setting – business people were invited to get up in front of the gathered group comprising of some of the leading researchers in the field of energy conservation and talk about what they needed.

It was therefore an opportunity for the scientists to hear what was important and immediate. There were some really interesting problems posed – one of them being about how to inexpensively store the power generated by renewable energy sources until it is needed. Clearly one of the big problems associated with power generation via solar, wind, tidal, resources is that the generation event is not in sync with the need. So you have to find somewhere in the grid to store the energy until the demand is there. This has to be economical.

The outcome from this event was that I was able to get a commitment from several of the industrial representatives present to sit down at a near future time and start to drill down into the problems and create the beginnings of a specifications document. After all its good to share the information, but the key to success is to start working through the execution requirements. Armed with this kind of knowledge and insight one can start to understand the scope of resources that are going to be necessary and equally importantly how to structure the undertaking so as to meet the state and federal goals for providing funding.

All the great ideas ultimately get down to one key thing: Who is going to pay. The answer to that, of course, is the public. The public pays either through the continuing funding of research that those who understand how to write grant applications effectively are able to secure. Or the public pays because industry and research get together and develop solutions that are able to secure funding through the schemes that government provides via industry. Or the public pays because the solutions are not invested in and therefore energy costs too much in the first place.

One of the greatest problems for modern society is how to actually create benefit for the public from the money invested into academic research. Meetings of the kind that was help yesterday in Geelong are the first step toward building a very real process of making economic sense of research by giving its use immediacy and relevance.

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Toyota: How Negative Customer Experience Can Destroy A Great Brand

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In 2005 I bought a Prius. Its been a tremendous car. Fuel efficient, quiet, inexpensive to run. In fact it was so good I decided that when it hit 100,000 k’s instead of trading it I would keep driving it. At 140,000 k’s I thought I would find out how much it would be worth as a trade in on a new Prius. I was offered $10,000 and thought, “Why bother when it is cheap to service, cheap to run and is paid for. Might as well keep driving it”.

Just before it hit 200,000k’s a warning light started coming up on the dashboard. It was due for a service, so I took it in to the dealer who serviced it and asked them to check what the problem was. They serviced the car but said that there was no record of any problem recorded in the memory of the car’s on-board computer and that therefore it could not be a problem that required any service response. It was general warning light.

After the service the light didn’t come on again until just before the next scheduled service at 210,000 k’s. I took it in for its service. Asked again for the dealership to look into it. Same response: “There can’t be a problem because, (a) we can’t replicate it (I had given the dealership very specific instructions as to how to get the light to turn on – and I am convinced that they just ignored this), and (b) if it doesn’t show up on the car’s onboard computer we have no way of responding to it.

Once again after the service the light went off. Just before 220,000k’s surprise, surprise – the light came on again. This time I called Toyota’s Customer Care line to tell them that I was very concerned that I had a warning light coming on regularly and that the local dealer didn’t seem to be able to identify it.

By this time I had concluded that the real reason that the dealership couldn’t fix the problem is very simple: Their mechanics are trained to put the car onto the diagnostic equipment, which downloads all the internal system data from the car and then instructs the technician as to what to do. Its designed, I believe, to ensure the maximum efficiency and to reduce the level of human error on machines that have a fairly narrow set of operating specifications – unlike the cars of Henry Ford’s day. As a result, anything that the end-user reports on to the service manager is lost when communicating with the technician. This is important.

During the morning of the service I received a call from the service manager at Toyota in Nowra, Dave, who had very kindly picked up the car from my house that morning. He called to tell me that he had seen the warning light coming on during the time that he had driven the car, and consequently had stood by the mechanic at the time that the oil change was taking place. Apparently there wasn’t much oil in the crank case according to Dave. The verdict was that the engine was burning oil.

Now this is not really surprising in a car that has done 220,000 k’s with normal wear and tear. But what was really unsatisfactory from my point of view was that it took the dealer three services to actually pay attention to what I was saying, and it still wouldn’t have been diagnosed unless Dave had stood and watched as the mechanic worked on the car. My take on things was this: If there is a problem I want it fixed before it gets worse. If the “experts” don’t actually respond to me as the user of the car when I say there is a problem and the vehicle gets worse as a result, of if there was an accident as a result, then who is at fault?

  • Is it me as the user of the equipment who has diligently reported the fact that a warning light shows on the dash?
  • Is it the dealer who services the car?
  • Is it the mechanic who slavishly follows the instructions from the car’s onboard computer?
  • Is it the manufacturer who puts warning systems in the vehicle but doesn’t provide for the warnings to show up on the service computer?

I thought I would take it up with Toyota’s customer care people. I called them a number of times during this period and reported on the whole experience. I told them that I was rather unhappy and that I felt that there was an internal management system failure that needed to be addresses, and that I thought that Toyota should contribute to helping fix the problem – by helping contribute financially to identifying and fixing whatever mechanical problem was now present.

The phone staff at Toyota were quite terse. Not rude, and not at all disrespectful, but definitely put out that they had a customer on the phone who actually wanted them to do something.

In the meantime I had decided that I had several options available to me:

  • Get the engine stripped and fixed (total cost unknown but with a quote from Nowra Toyota just to take out and strip the engine of $1300)
  • Take out and replace the engine with a reconditioned engine (cost approximately $2,300 quoted by Nowra Toyota)
  • Keep on driving the car (I spoke to a friend who runs a Toyota dealership and who I have bought 5 new Toyotas from over the years. He told me that it was probably a pretty low intensity problem and I could deal with it by just putting the vehicle in for an oil change every 7,500 k’s instead of every 10,000k’s)
  • Sell/Trade the car and buy another.

I started looking at my options for a replacement vehicle, and last Friday came very close to buying a Rav4. However, on my way to the dealership in Sutherland where the target vehicle was located, I decided to call Toyota one more time to find out whether they were going to come to the party. The customer care person I spoke to was so useless and stroppy that I got off the phone resolving that if Toyota didn’t change its tune I would totally disengage from the brand. So I sent a text message to the dealer saying the deal was off and turned the car around and headed home.

On my way back I got a call from the Toyota customer care manger, Dennis Smith. He was pleasant but was clearly not going to bend on anything. I explained to him that unless Toyota was prepared to acknowledge that there may be either a computer system problem or a management system problem they would lose me as a long term customer after a total of 8, count ’em,  vehicles (1 new Prius, 1 new Echo, 1 new Corolla, 3 new Landcruisers, 1 new Landcruiser truck, 1 second hand Corolla). He offered me a $100 service voucher as a token of good will, with the rider that he hesitated to even offer it to me because he thought that I might be insulted by it.

I wasn’t insulted by the offer, but it fell a long way short of what I would have expected at a time when I was seriously in the market to buy yet another new vehicle.

I told him that as a result of Toyota’s actions, or non-actions, they were about to shift a customer who had been a strong brand advocate for a long time into an extremely highly motivated brand critic.

I then went on line and did some really serious comparative research into price, performance, customer reviews etc for a number of AWD vehicles in the price range that I was looking at. That led to me going out and test driving 2 – the SsangYong Korando and the Kia Sportage (I had discounted the Hyundai ix35 from a drive because it is essentially the same vehicle as the Kia and the diesel engine for the Hyundai is build by Kia).

I ended up paying a little bit more that I had originally intended and purchased a Kia Sportage.

What is amazing about this story is that it just goes to show how a brand that can overtake the powerhouse global brands (in this case Ford and GM) based on a vastly superior manufacturing quality assurance model, can also fall foul of an inability to maintain an equivalent customer care model.

It almost seems like Toyota built up so much self-confidence as a brand that it couldn’t even consider its vehicles getting recalled. I think that they must still be in denial about the series of disastrous and very expensive recalls of the last couple of years. Its like the case of the banks in the US that didn’t factor into their risk modelling the possibility of real estate prices going down. When one hedge fund found this out they saw that there was a potential to take a bet against the house and win. Toyota is in the same spot.

When a company is prepared to sacrifice a long standing customer’s loyalty to a brand, and turn him (or her) against them for heaven knows what internal reason, you have to wonder why anyone should support that brand at all. They are no different to the giants that have been before them, who have failed: EMI Records who had the Beatles and the Beach Boys and who knows how many great acts, and failed. General Motors: (remember when they used to say in America, “What’s good for General Motors is good for the country”. GM had to be bailed out by the government. RCA who used to virtually own the whole ecosystem of transmitting and receiving equipment. Who hears of them now?

Companies reach a certain size and then feel that they don’t have to be in touch with their customers any more. When they do they fail. In Australia people who work for Toyota’s manufacturing operations wonder whether the federal government will keep writing checques so that they get to keep their jobs. That money comes from you and me as taxpayers. I don’t want to see anyone lose their jobs. But you can’t expect for companies that don’t understand that the corporate pyramid can only survive when it is upside down. At the top is the vast number of consumers who engage with the brand. At the bottom is management.

Toyota’s management and its policies are out of touch for it to remain in balance. Therefore it has only one way to go, to topple and fall.

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The Trick To Getting Great Customer Service

English: TICSS Customer Service Measurement Model

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You would think that it might be reasonable to assume that good companies aspire to provide great customer service, wouldn’t you. Some companies establish customer service as their primary goal.

The bigger the company, the more the focus on the customer, in my view. But how much do we, as customers, help them to achieve that goal?

All too often customers get on the phone to a company, already in bitching mode, and it goes down hill from there. When the service that you would have liked to have received doesn’t eventuate you start to magnify the problem in your own head and allow your anger to be taken out on the poor guy at the other end of the phone. If the operator happens to speak with a foreign accent and is at a call centre in India or the Philippines the problem can escalate further and faster.

It’s hard to imagine that things can improve when you start with this scenario.

The problem, that I believe happens all too often, is that the customer sets totally the wrong modality to get positive results. Problems with products or services are quite real, but may actually be a manifestation of a deep seated, poor or failed internal process within the supplier’s organization that is hidden from view to the management. And customer service normally doesn’t have sufficient clout to motivate that kind of organizational change except under extraordinary circumstances.

I have been reflecting on this because of a personal experience over the last four years that eight weeks ago I decided to stop being angry about and instead to fix. I decided that I had to use all the things that I know about companies and about people and teach to students get results. It was also an experiment since I had no idea whether the theory would work, and it needed for me to understand what was happening and adapt my strategy as new information became available and was processed.

One thing that I believe now is that any successful big brand has as a core philosophy a commitment to provide great customer service. Big companies with such a commitment spend a lot of money on training their staff and I find now that big company customer service employees are all tremendously polite, helpful and dedicated to delivering the optimum result for me as a customer. That is a great start and is the gateway to getting what you want.

Here is the strategy that I used and which you can too if you want to get results:

Log each call, for time, content and quality, just as they do. Keep notes. As a result, every time you speak to a new operator you can refer them back to a particular conversation and the date that you had it. If you want good customer service, there is a responsibility on the part of you as a customer to identify the processes that the company uses and then to mirror them as closely as possible. This is rule #1 of getting great customer service. Use their methodologies, because they work.

Rule #2 is as extension of this: Be as friendly as possible with the customer service representative, the operator, in fact every one that you deal with. It’s a kind of variation on Stockholm Syndrome. The quicker you can establish that you are in this together the more you will get empathy from the other party. In any case there is absolutely nothing to be gained and a lot to be lost from being uptight or rude, regardless of how you may feel. And remember, most of the people that deal with your customer service rep are going to have been rude and uptight. Give your customer service rep a good and memorable experience. They will work that much harder on your behalf. They may even drop a few interesting pieces of information about the company here and there that may be helpful in your quest.

Understand that the problems associated with technology – often the reason for the problem – are often as the result of complex management policies in entirely separate parts of an organization. Problems of this kind are difficult to fix and are going to become more and more familiar as technology intersects with business models and finance and businesses are not sufficiently adaptive for the speed of change.

The solution is all about establishing a common ground for solving the problem. That translates into getting both parties to understand that there is only one language that you will ultimately be able to use – economics.

Regardless of what the problem is, there is going to be a cost for the supplier. Obviously there is cost to the customer, you, in not having the problem fixed. When both parties start understanding that their common ground is economic you can get things done.

This will mean that you have to find a way to get moved up the customer service food chain to the point at which someone has authority. This will probably take time. It is not going to come from saying to someone, “I want to talk to someone more senior”. It comes from being super-nice to the person you deal with to the point that they really want to help, and realize that they are not equipped to do that.

You have to have patience. Patience is what enables you to get real results. Companies rely on the customers wanting instant gratification. They too want to get a problem solved quickly and move on, because all that customer service time costs money. What you need to do is to use that insight against them. When you phone a help line for a company and you hear that recorded message that says words to the effect of “We record your call to measure quality”, that is when you know that you need to reduce the speed of your heartbeat, lower the tone of your voice from angst to calm-and-measured, and get prepared to stay on the line for as long as is possible. But it needs to be with a human being and not a computer – ideally a human who is not in a low priced labour market, but instead is in your home country.

Whatever the problem is, fixing it has a cost. Some things cost more than others to fix. Some things require entirely different departments with different discretionary expenditure budgets to be properly fixed. Most of the time this kind of problem is out of the control of the customer service department at any level whatsoever. This is important. Because it means that you have to find another pathway to resolution, and offer it to your new best friend – the customer service guy.

The other important thing to remember is that everyone that you deal with has a list of known problems and a set of verbal responses to the problems in a well rehearsed, and probably written script that pops up on the service rep’s screen as soon as your problem is entered into a text box on their computer screen. Once you realize that the company you are dealing with already knows virtually every problem that can arise and has a planned – and costed – response to it, you are on your way to understanding how to deal with it.

The primary tactic by companies is to put you on shaky ground by positioning you in unfamiliar territory. That is most easily achieved by making the customer believe that there is a technical problem that is in a separate part of the system and therefore not able to be resolved. They will give you a technical reason that is constructed to put you off balance, and hopefully to get rid of you. Remember that from an economic point of view, they want to get rid of you as quickly as possible without actually doing anything. That keeps the costs down. Once you understand their script you can start using it against them. You may have to figure out how to do that.

Your ultimate goal is to keep their costs up. You achieve this by keeping them on the line.

Next, you have to escalate your problem to the point that someone higher up the food chain is paying attention. They will try to buy you off. You will be offered something that appears to help you and is designed to appease you. Whatever they offer will have material value. Your inclination at this point in time is likely to be relieved that you got somewhere and to just roll over and accept the proposal as a reasonable solution, even though it doesn’t go anywhere near what you want. You need to “qualify” your acceptance of whatever is offered. This is a key point in the service paradigm carefully scripted by the company’s lawyers. This is the part of the process where the company will have made a record of the customer – that is you – having accepted a “consideration” as an agreed “resolution”. All businesses have some kind of statutory authority they need to answer to in the event of complaint. If they are able to show in the records of dealing with you that you were provided with a consideration that you accepted, that was the agreed method for conflict resolution, you don’t have a leg to stand on if you want to take it further.

If, however, you respond to the offer by politely saying that you appreciate the kind offer, and are happy to accept it provided that it is not considered as acceptance of full resolution, then the record will reflect that. The probability is that at this point the offer will be withdrawn but you will move up the food chain one more notch, and hopefully get to a more concrete, economically better outcome.

Remember, once again, that this is not about solving your problem, it is about you helping them solve their problem. Their problem is to make you satisfied. Instead of saying to their customer service people in an irate voice, “Do you realize that this is costing me money?”, say to them, “Do you realize that I have plenty of time and patience, an unlimited supply in fact. And for every hour that I am able to spend with you or one of your colleagues there is a cost. By my calculations the continuing cost associated with solving my problem represents a negative margin contribution of $x”. This is how you get things done.

Send me your customer service experiences. I would like to hear how you have successfully negotiated good results – or where you have failed.

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The Year Ahead

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It looks like it is going to be a big year.

This year I will be back at University Of Wollongong teaching in the Arts Faculty – the same subject as last semester, ARTS301. I had tremendous feedback last semester from students. The subject is really about helping those about to graduate to understand how to create the optimum onramp into business.

I am also going to teach a strategic management course at the AIIM in Sydney, which should be interesting. And, while on the academic side of things, I also have some funding approved to undertake a research project  that will examine the value that businesses place on Science and Engineering PhD students and which will enable direct engagements to take place between students and high tech businesses. I will be writing about this over the coming weeks. I hope that some of the material gleaned will become part of a forthcoming book. The goal of the research is multi-functional. Hopefully it will enable PhD students to build a greater appreciation of the need to build an understanding of what industry wants, it should also grow the network of end-users for UOW, and it will hopefully also yield some useful insights into the vision of industry in this country…. (and much, much more!)

I also have several corporate advisory opportunities lined up in conjunction with a firm in Sydney. These are focused in the online retail sector, and life sciences at this point in time. I am also hopeful that the hydrogen production technology business that is being spun out at UOW and which I wrote the business plan for, will provide some further interesting opportunities.

Whenever I look at a sector of industry these days I find that there is a lot of legacy thinking present that doesn’t fully appreciate the way that either the digital economy or globalization are impacting them. This, in spite of the fact that some very bright people have been hired to work for some of the major corporates that are affected.

I see certain parts of retail as the sector that is changing rapidly and moving toward tipping points in a number of places. The Australian retail sector is already in stress as it is impacted by online sales.The entry of Oliver Samwer and Rocket into online retail in Australia toward the end of 2011 with a focus on disrupting some of the existing online retail operators shows just how vigorous the competition is going to get. By their own admission he is a take no prisoners kind of guy. (See this story on him for an insight)

The irony is that the retailers who whinge the loudest about online think that they are having the lunch eaten by importers. The fact of the matter is that there are some products that are being shipped into the county at low prices, but the competition between local online retailers is equally fierce. What happens is the creation of a very well defined, but not overtly visible, two tier retail economy. The tiers of activity are ironically substantially defined by the discretionary income of the consumers. Those who have the least available cash purchase goods at retailers where credit is easiest and consequently pay the highest prices. Those who have the greatest discretionary income purchase at the cheapest price. This bifurcation of the  market is going to influence advertising on mainstream media, which in turn is going to influence content purchase.

The value shoppers have the greatest capacity to continue to spend, while the high margin shoppers, are actually customers for high risk lenders with retailers acting fundamentally as re-sellers of credit. As a result we can expect the standard of content to become even more of a race to the bottom, to provide entertainment that can be built around ads for Harvey Norman and businesses that cater to the demographic that accepts paying high prices for goods! Ironically this should result in higher A+ viewers for SBS and the ABC, since the Foxtel franchise tends to recycle the same programming again and again, and notwithstanding its purchase of Austar is going to find that it is caught between the cleft stick of subscriber churn and increased costs of purchase of programming from the major studios.

At the physical end of retail this leads us to a point where the high priced shopping complexes which are reliant on foot traffic from high value customers will have decreasing foot traffic since their demographic will shop more from home to find competitive prices, not have to deal with traffic, and is not interested in the homogenized offerings of the major chains.

What that means is that the major shopping centres and their investors are going to start to feel the pinch. They will find that some of their smaller retailers just can’t compete. These are the retailers that don’t have the depth of financial resilience, nor the motivation to compete aggressively online. If these retailers don’t move online they will go under. When these businesses find that the foot traffic at the big mall is not converting into sales, they will quit. When that happens the rot will set in. The big retailers can find a solution, but the probability is that they will only look at the disruption from technology, and not look at a host of other things that are all part of what is very clearly a “wicked problem”.

Solving wicked problems is going to be part of the goal for this year.

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Don’t Eat The Marshmallows Until Later…

English: Marshmallows

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This year has been incredibly busy. Next year looks set to be even busier – in my life certainly.

As we all seemingly accelerate toward the adoption of more toys, more technology, with more speed and more connectivity, I find myself seeing more clearly what is happening on another plane, and find that many of the people I meet and talk to are being blindsided by the enormous focus required from them to execute on the tasks that they have in front of them.

I believe that we all are unconsciously moving to a place where instant gratification is expected, required, and if not delivered, is a primary cause of our frustration and sense of personal failure.

It is one of the primary causes for the failure of some start up businesses, where the planning process is less important than the get to market. While I believe that getting to market is imperative and needs to take place in order to better understand market forces, I also believe that the information gleaned on the way needs to be incorporated into the plan with the plan morphing all the while in order to build a better engagement. Businesses who don’t plan for change from the outset are doomed to failure.  And societies that are obsessed with instant gratification are bound to become frustrated by the inability to be satisfied and will ultimately fail too! (One of the people whose academic work in this field is really fascinating is Walter Mischel, who did the famous Marshmallow Test on children. If you haven’t read about it, I urge you to. It is actually much more important now for society, I believe, than the work that Stanley Milgram did).

I now believe that by developing a personal discipline of deferment of gratification I am able to take much more control of my life. By changing gear from need to desire, kind of like putting an item into the Amazon shopping basket for later on, the whole dynamic of financial and personal control is shifted. People who are driven by needs are frankly no different to junkies looking for their next hit. And most consumers who have Pavlovian responses to the calls for action that they are exposed to are no different.

Your new year’s resolution: Take control of the purchase decision by deferring it by a week or a  month. See how much your life can change.


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Musings On A Sunday Afternoon.

Last weekend my wife and were guests with a friend who is a barrister, and on the way to becoming a judge, all

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being well. We were talking about the mobile devices that we each had. He does not have one. No iPhone, no iPad, no Blackberry – not even a good old fashioned mobile phone. His wife gives him one of hers when he goes travels so that she can get hold of him, but he doesn’t know the number of it and doesn’t know how to place a call on it.

He doesn’t want to. He doesn’t want there to be any digital footprint of any activity that may in any way complicate his life. Pretty smart, actually.

I remember hearing some years ago that the head of a major media company in the US had never ever had a credit card. He paid for things that he purchased with that there could be no forensic record of where he had been and what he had bought.

When you think about the globalization of trade and and the national limitation of legal systems it does seem to lead to an inevitable nexus that is going to create all  kinds of problems for society as the legal system tries to deal with something that it has had to avoid having any experience of. Even more baffling than expecting a Catholic priest to provide advice on sex (I’m sure that many of them actually are celibate in spite of their bad press recently!).

We tend to forget that we are all in motion heading down vectors of varying speed and direction governed partly by our personal experience, partly by the geography that we live in and the bandwidth that we have access to, partly by our language and our culture – an incredible host of modifying factors. We observe what is happening around us with the belief that we have a similar vantage point to everyone else. The facts, however, are quite different and when we start looking at the heart of national governance we are starting to see some cracks appearing in the system.

We are now still only at the beginning of experiencing life in the digital economy – a totally globalized environment where a company like FaceBook is more valuable than most of the companies in this country and it hasn’t even gone public yet: where the recommendations to view content are growing exponentially.

On the other hand we have the political system in this country which celebrates the rise of the Arab Spring and the birth of democracy in countries like Libya. And then we see the rise of the movement to occupy Wall St. All this happening while our law makers, those politicians elected to power by the people, are really beholden to the lobbyists working for the major corporations.

And then on another hand again we have the judiciary, who are utterly out of touch with the whole digital economy, because they don’t need to make their lives even more complicated nor to create any possible vulnerability….

And I haven’t even got to the banks…

I can’t see this story having an orderly and happy ending. But I can see a lot more opportunities in developing more digital widgets that recognize that the system has no hope of righting itself until it has suffered a much bigger failure than anything we have experienced so far.

How far away might that be? Not sure, but my bet would be that there is no point in complaining about what any of us think might be wrong. There is no way back. We need to develop ever better technologies that apply the principles of productivity improvements in ways that have not yet been considered.

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Why Retailing Has Changed Forever


Last Thursday I went our for my morning walk with my wife, Robyn. She told me that we had a problem with our washing machine. She thought that the motor had given up the ghost. We have had it for some time so we decided not to bother with calling a repair man and to bite the bullet and purchase a new one.

We had a lot of laundry and a long weekend coming up, but as it was Thursday neither she nor I had an expectation of getting one. She made a couple of calls and told me that she had found the model she wanted – a Bosch. It was available from a nearby Harvey Norman store for just under $1,200, but the same model was also available from Joyce Mayne for under $800. I suggested that we should also check online with Appliances Online because we had bought a dishwasher through them which had worked out well on both price and delivery – because they don’t charge for the delivery costs.

I found exactly the same Bosch device at Appliance Online for $10 less than the quoted price from Joyce Mayne. The price included delivery, installation and disposal of the old machine at no extra cost.

At that point I got a phone call from a sales person at Joyce Mayne, who Robyn had called to check on availability. The sales lady said that the machine was in stock at the warehouse in Sydney, but that it would not be able to be delivered until next Thursday; there would be a $15 charge for disposal of the old  machine, a $40 charge for delivery – and that she had dropped this price from the normal $45, but that this did not include installation.

I told her that I was looking at the same product online…. cheaper.

So she asked me what would happen if I needed a warranty call…. clearly trying to get me to feel uncertain about after sales support. I responded, because I have been through this with a number of devices, “Service calls are handled by the manufacturer not by the retailer”.

So on line I clicked on the “Preferred Delivery Date” button, requesting Friday, the following day expecting to get a call to say that we would have to wait until the following Thursday.

The website accepted the date, accepted my credit card and an automated email response came back, as they do.

The next day by 10.30am the new machine was delivered, installed and the old machine out of the house. Done. A less than 24 hour turn around from order to installation from a remote, pure play web business when a local, bricks and mortar business couldn’t match the value proposition on price, on delivery, on timing of delivery, in fact on any of the key purchase criteria that you would expect.

Is it any wonder that retail will never be the same.

Clearly the Appliance Online business must be built on having a direct ability to automatically access and indent inventory, access and book trucking, in a seamless way where there is only light touch human intervention. They presumably have no warehousing costs, no retail location costs, and so can set their prices at precisely the level that will capture the business.

On the other hand Joyce Mayne, as a discount business, has to deal with the cost of their retail space and employees, with the employees watch potential sales disappear before their very eyes.

Harvey Norman, one assumes, has an entirely different business model. Since they offer ultra long no-repayment hire purchase terms, I would believe that their model is to sell to people who can’t afford to pay cash, and therefore they take as much of the available margin as they can in return for having the relationship with GE Capital who provide the finance.

So in the future I can see companies like Harvey Norman surviving, but I can’t see how the big box discounters can compete with online.

Its not about imports that avoid the GST. Its about service and time of delivery and price. These three things mean that a company like Appliances Online will continue to build brand momentum and win, win, win.

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