Paul Wallbank – Brilliant Communications

Tag: management

  • David Jones’ wasted decade

    David Jones’ wasted decade

    In 2001 Australian retailer David Jones shut down their website.

    Back then, the future was clear; profits were in financial services and certainly not in online sales or investing in improved stores and service.

    Today the company released their strategic review that looks forward to financial years 2013 and beyond. You can downloaded it from David Jones’ investor website.

    On Page 13, they show just how far David Jones has fallen behind their international competitors. Less that 1% of DJ’s sales are online compared to 4.5% of the UK’s House Of Fraser and 13% of John Lewis.

    Australian executives claim they are in a global market for their talents which is why they deserve world standard remuneration. David Jones’ results show how hollow that mantra is.

    The problems start with the board, five of the eight current David Jones directors were with the company when that decision was made in 2001.

    None of them have been held to account.

    David Jones illustrates the weakness in Australia’s business sector – largely unaccountable boards answering only to institutional investors who themselves have grown fat and lazy on clipping the compulsory superannuation ticket.

    One hopes the some of the competitors who are displacing flaccid incumbents like David Jones are based in Australia or the locals may soon find that many of these sectors, not just in retail, will go offshore to better run companies.

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  • Knowledge and power

    Knowledge and power

    In the 16th Century English courtier Sir Francis Bacon declared “Knowledge is Power”, something certainly true during the conspiracy prone reign of Elizabeth I.

    Today the data available about ourselves and our communities is exploding along with the computer power to process that information to turn it into knowledge.

    We see that knowledge being used in interesting ways – US shopping chain Target recently described how they used data mining to determine, with 87% accuracy, to figure out if a shopper is pregnant.

    That 87% is important, it says the algorithm isn’t perfect and bombarding a false positive with baby wear advertising could prove embarrassing, or in some families and societies even fatal.

    A good example of data misuse are the two unfortunate Brummies (alright, one’s from Coventry) who were deported from the US for tweeting they were “going to destroy America and dig up Marilyn Monroe”

    For the US immigration and homeland security agents, they ready the jokey tweets by the Birmingham bar manager through their own filter and came to the wrong conclusion, although it’s likely their performance indicators rewarded them for doing this.
    This is the Achilles heel in big data – used selectively, information can be used to confirm our own prejudices, ideologies and biases.
    In 2003 we saw this in the run up to the US invasion of Iraq with cherry picking of information used to build the false case that the ruling regime had weapons of mass destruction that could attack Europe in 45 minutes.
    For businesses, we can be sure data showing the CEO is wrong or the big advisory firm has made the wrong recommendations will be overlooked in most cases.

    Despite the Pollyanna view of a world of transparency and openness driven by social media and online publishing tools, the information is asymmetric; governments and big business know more about individuals or those without power than the other way round.

    In a world where politicians, business people and journalists trade on their insider knowledge rather than competing in the open, free market we have to understand that filtering this data is essential to retaining  powers and privileges.

    Usually when the data threatens the existing power structures it is repressed in the same way a dissenting taxpayer, citizen, employee or shareholder is discredited and isolated.

    At present there’s lots of data threatening existing commercial duopolies, political parties and cosy ways of doing business.

    The fact many of those in power don’t want to see what their own systems are telling them is where the real opportunities lie.

    Entrepreneurs, community groups and activists have access to much of this data being ignored by incumbents, it will be interesting to see how it’s used.

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  • Why Dick Smith is wrong about overseas buyers

    Why Dick Smith is wrong about overseas buyers

    Last week’s announcement that Woolworths will sell their Dick Smith chain of electronics stores wasn’t surprising and neither was the reaction of the chain’s founder to the idea of the business being sold to a foreign buyer.

    For all his legitimate concerns about Woolworth’s growth model, Dick Smith is wrong about the sale of the stores. It’s almost essential for Australian consumers and business that the chain is sold to a foreign retailer.

    When Dick sold his business to Woolworths in the early 1980s it was the beginning of a long consolidation process across Australian industry that now sees most business sectors dominated by duopolies or – at best – three or four incumbents.

    In retail, the Coles and Woolworths duopoly dominates groceries, liquor and petrol. The power of these companies was illustrated yesterday with Coles’ announcement of price cuts to various greengrocery lines.

    Having a new player enter the market is always an improvement; in neighbourhoods where foreign retailers like Costco and Aldi operate or where a keen, smaller operator decides to compete with the big boys the response is always better prices and service.

    More importantly bringing in overseas owners will bring in fresh thinking and new ideas. New blood in the retail sector may even stem the brain drain where many young, innovative future business leaders are forced overseas because of the limited opportunities in the incumbent duopolies.

    Where Dick is right is that the electronics retail business is dying as fat profits in the sector are a distant memory in what is now a tight margin, fast moving consumer goods industry. To make things worse, consumer electronics aren’t even fast moving in the post GFC economy.

    Adding to the retailer’s pain the collapse in margins has happened at the same time commercial rents have risen dramatically with Sydney now being cited alongside Hong Kong, London and New York as the world’s costliest shopping strips.

    While suburban shopping centres don’t have the same rents as the Pitt or Bourke Street Malls, they still have risen dramatically in the last decade, catching all retailers in a vice between rising costs and falling margins.

    In order to maintain profits, training and staff development have been slashed. Once up a time, a customer would go to a Dick Smith or Harvey Norman store to get informed advice on the best gadget, those days are also long gone as poorly trained staff fight to sell the products with the best commissions.

    Owners of the stores have made it harder to recruit and train motivated staff when employer consider hospitality and retail jobs to be temporary, low esteem positions with few prospects.

    This deskilling isn’t just an issue for the retail industry – it’s something we’ve seen across the Australian economy in the last thirty years. As training and skills development has been seen as an unnecessary business cost.

    Tourism Australia chairman Geoff Dixon’s recent comments about the Australian tourist industry having to accept being a high cost destination is a symptom of this disconnect. The local tourism industry has no chance of moving up the value chain when there is no service culture among staff and no long term management vision to develop one.

    It would be unfair to just pick on any one individual or business for these problems. We have a structural problem in the Australian economy that’s fuelled by entrenched beliefs and habits of a stagnant senior managerial class.

    We desperately need new people and ideas in Australian management to shake up the staid duopolies and oligopolies we’ve allowed to develop in the last three decades, that’s why Dick Smith is wrong to say a foreign owner for the electronics chain he founded would be bad for the country.

    Image courtesy of Icelandit on SXC.hu

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  • I don’t think I’ll write that

    I don’t think I’ll write that

    A media release popped into my inbox from an old client recently. It was, to put it nicely, a total load of corporate tosh from an organisation that has been captured by its time serving management.

    Having dwelt on this for a while, I went to write something about how this company had blown wonderful opportunities competing against a stodgy incumbent which had been given the opportunity to re-invent itself partly because of a new generation of smart, dynamic managers.

    Then a little voice said “no, they’ll never invite you back; the mark of epically incompetent management is holding permanent grudges for pointing out their failures.”

    So I didn’t write it.

    In one way it doesn’t matter; much of what ails the Western world’s business communities is how a culture of managerial incompetence has been allowed to develop.

    Almost everyone knows individuals who waddle from corporate disaster to debacle yet, despite causing the destruction of great slabs of shareholder value, move onto to higher positions and better paid jobs.

    Some even get invited back to companies they’ve previously trashed.

    We know who those people are; boards and big shareholders know who they are, yet they’ll still get hired.

    Which is why its best not to upset them too much. For the moment, history is on their side.

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  • Are KPI’s a business evil?

    Are KPI’s a business evil?

    One of the cornerstones of 1980s management theories is offering staff incentives for performing to certain benchmarks.

    While the theory is good, it can go badly wrong. I encountered this personally when at PC rescue we started selling computers systems and, to encourage sales, offered our technicians a commission on any they sold.

    Quickly we started getting negative feedback from customers, some didn’t like what they perceived as a hard sell and some believed technicians were more interested in selling a computer rather than fixing the problems.

    In a few cases it turned out the customers’ suspicions were correct; we found some the techs had decided it was quicker and more profitable for them to sell a new system rather than to fix the problem they had been sent out to resolve.

    We had to change our KPIs and it taught me a good lesson about assuming how staff will respond to incentives.

    Courier companies are good example of what happens when incentives and performance indicators go wrong, all of us have had examples of deliveries going wrong because the drivers are under pressure to meet targets. In the worst case, you might get your computer monitor thrown over the front gate.

    The systems that encourage this sort of behaviour can damage entire industries, as we’ve seen with the used car industry. For individual businesses, poorly implemented commission based structures, like ours was, eventually build distrust which is one of the reason why electronic stores like Best Buy are struggling.

    Google’s recent changes to search are another illustration of what can go wrong with poorly thought out incentives with CEO Larry Page reported to have tied staff bonuses to “success” in social. As a consequence Google are prepared to damage their core business as employees scramble to meet their targets.

    The definition of ‘success’ is part of the problem with performance indicators, a government agency I did some work with defines successful worker as having a hundred meetings a year which has some predictable results in how that department operates.

    On the bigger level, badly thought out incentive structures are damaging our economy as senior managers are driven to deliver short term objectives while ignoring the long term growth of their business and sometimes even damaging the wider community in the process.

    Probably the ultimate level of damaged performance reward is the political system those of us in the ‘developed world’ have allowed to develop in the last fifty years; by rewarding politicians on being elected, we have a generation of leaders who are very good at winning elections but not terribly good at running governments.

    While there’s little we can do about governments beyond being careful with our votes, we can watch our businesses closely to see what indicators and rewards work best for us.

    Planned and monitored properly, bonuses and performance indicators can work well for a business blindly using inappropriate ones though often turns out to do more harm than good.

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