Sunday, November 13, 2011
Sunday, November 6, 2011
Small Business Lessons from the Eurozone Crisis
Our venerated Prime Minister, Dr. Manmohan Singh, delivered weighty comment, when asked for a prescription as a 'Global Guru', for the Eurozone Crisis, on the side-lines of the G20 Summit 2011 in the luxurious environs of Cannes.
Sunday, October 30, 2011
My Customer Management Amalgan-classic, new, and no longer relevant
The farmer in the picture above is from the Krishna District of Andhra Pradesh. I met his friends and him in June 2011, as part of a new farm input launch that I essayed for a major corporation.
I demonstrated my product to the farmers, recorded the proceedings on video and by way of still images, published a PDF, and asked my corporate client to publish and to use the communication throughout their distribution network, using the Internet.
I was first trained to do this kind of work in 1972. I must depend on my feeble memory for records of what happened and of what we did. Training was a massive exercise in logistics. It was hard to visit more than 2 villages a day on a sustained basis. Getting farmers together required entertainment and hospitality, much of which was consumed by volatile village children! Surface post took about as long as it does now; urgent long-distance calls had to be booked at least an hour in advance. Juniors such as I had inflated roles in bridging multiple steps in organizational ladders.
What has changed, and what endures? Here is my list:
1. Customers have more choices now. They are more demanding as well.
2. Marketing has become cheaper and quicker.
3. Not everyone adopts new technology at the same pace. You can take advantage of this, or become its victim!
4. You cannot smell or touch on the Internet-as yet. These two senses can be leveraged by 'brick-and-mortar' types.
5. Supervisors are nearly out. This applies to many staff functions and positions as well.
Marketing tends to be a controversial function because many professionals without formal and updated knowledge of the matter (such as I!) claim to be authorities. Most owners undervalue branding as it is so intangible. However, we can all agree that the Internet has changed Marketing substantially. There are new avenues for small and medium enterprises to build sustainable competitive advantage.
I would like to know your experiences and views on the matter.
I demonstrated my product to the farmers, recorded the proceedings on video and by way of still images, published a PDF, and asked my corporate client to publish and to use the communication throughout their distribution network, using the Internet.
I was first trained to do this kind of work in 1972. I must depend on my feeble memory for records of what happened and of what we did. Training was a massive exercise in logistics. It was hard to visit more than 2 villages a day on a sustained basis. Getting farmers together required entertainment and hospitality, much of which was consumed by volatile village children! Surface post took about as long as it does now; urgent long-distance calls had to be booked at least an hour in advance. Juniors such as I had inflated roles in bridging multiple steps in organizational ladders.
What has changed, and what endures? Here is my list:
1. Customers have more choices now. They are more demanding as well.
2. Marketing has become cheaper and quicker.
3. Not everyone adopts new technology at the same pace. You can take advantage of this, or become its victim!
4. You cannot smell or touch on the Internet-as yet. These two senses can be leveraged by 'brick-and-mortar' types.
5. Supervisors are nearly out. This applies to many staff functions and positions as well.
Marketing tends to be a controversial function because many professionals without formal and updated knowledge of the matter (such as I!) claim to be authorities. Most owners undervalue branding as it is so intangible. However, we can all agree that the Internet has changed Marketing substantially. There are new avenues for small and medium enterprises to build sustainable competitive advantage.
I would like to know your experiences and views on the matter.
Sunday, October 23, 2011
Names
It is nearly impossible to sustain and grow a business without names. We tend to focus on branding physical products. There is a relatively new and welcome trend to name services as well. Large corporations use umbrella branding. Entrepreneurs shy away from investments in such intangible assets. The value of a name is sometimes realized only when a business merges with another.
Formal management learning does not have adequate content related to the process of naming. This is an indication of the neglect of psychology by management teachers. My own exposure to the subject has been in the course of employment and my own business practice. I would like to share my recollections with you in this post.
1. Segmentation and targeting. I recall the case of a new systemic fungicide with which I was associated. France was seen as the prime market, so a sample of French farmers were surveyed for their choices of names. They settled on the French word for 'blood'. The latter reminded them of the new brand's ability to enter the sap systems of crops. This name made no sense in Brazil, so the brand had another name in South America. Large corporations can invest adequately to gain recall in global customer minds of novel names. Small and medium enterprises have to respond to the challenge differently. There is a risk of owners foisting personal choices on markets. It is important to allow typical customers to select names that suit branding best.
2. Values and passing fancies. My Mother bound copies of magazines in the 1930s in order to preserve knitting and crochet patterns. My generation has preserved these vignettes of a past age. Top cosmetics of this Millennium continue with names from nearly a century ago! The models change periodically, as do some physical features of the brands as well, but the name remains steadfast amidst such turmoil. It is tempting to pick fashionable names but classic ones will yield greater returns in the long run.
3. Life cycle management. This aspect is contradictory to the immediately preceding one. Brands for young people, and ones related to personal preferences, will become irrelevant in rather short periods of time. A business should develop and maintain a pipeline of brands that yield strategic flexibility. Perhaps this dimension favors large corporations over their much smaller competitors. However, a creative small-business owner can innovate streams of brands that appeal to changing customer tastes. There is a strong case for a range of brands covering as many possible future segments as possible. We can garner clues by careful observation of what customers do, especially with regard to emerging gaps in their baskets of needs.
4. Registration. I do not know about other countries but name registration in India is nearly impossible! The full process takes at least a decade, and unscrupulous elements are able to file prior applications for nearly every word under the Sun! Lawyer bills and threatening claims never end. The best compromise I know is to surreptitiously prefix all names with the founding one of a company or even a family. I think it also helps to establish widespread usage as soon as possible after the first name search and application.
5. Plagiarism, scope, and growth. This dimension is related to life-cycle management (outlined above). The best names are bound to be imitated. This can be an advantage when a proprietary name becomes a kind of generic for an entire product or service category. However, it is best to try and register a name with a statement and a graphic. Another tactic is to use goodwill for extensions, or better still, use just one name as an umbrella for numerous extensions. However, such an approach can become self-defeating over time if an enterprise begins to serve discrete market or customer segments. Clustering is more of an art than a management process, but it is invaluable in creating a fortress around a brand name.
I have avoided specific examples in this post since name owners might object, but can illustrate the concepts in my mind, in bilateral and private communication. Do write to me with your email address in the space below this post, if you would like my counsel and help in naming your brands.
Now for a practice case: the mango tree in the picture below is from Behat in the Saharanpur District of Northern India.
Formal management learning does not have adequate content related to the process of naming. This is an indication of the neglect of psychology by management teachers. My own exposure to the subject has been in the course of employment and my own business practice. I would like to share my recollections with you in this post.
1. Segmentation and targeting. I recall the case of a new systemic fungicide with which I was associated. France was seen as the prime market, so a sample of French farmers were surveyed for their choices of names. They settled on the French word for 'blood'. The latter reminded them of the new brand's ability to enter the sap systems of crops. This name made no sense in Brazil, so the brand had another name in South America. Large corporations can invest adequately to gain recall in global customer minds of novel names. Small and medium enterprises have to respond to the challenge differently. There is a risk of owners foisting personal choices on markets. It is important to allow typical customers to select names that suit branding best.
2. Values and passing fancies. My Mother bound copies of magazines in the 1930s in order to preserve knitting and crochet patterns. My generation has preserved these vignettes of a past age. Top cosmetics of this Millennium continue with names from nearly a century ago! The models change periodically, as do some physical features of the brands as well, but the name remains steadfast amidst such turmoil. It is tempting to pick fashionable names but classic ones will yield greater returns in the long run.
3. Life cycle management. This aspect is contradictory to the immediately preceding one. Brands for young people, and ones related to personal preferences, will become irrelevant in rather short periods of time. A business should develop and maintain a pipeline of brands that yield strategic flexibility. Perhaps this dimension favors large corporations over their much smaller competitors. However, a creative small-business owner can innovate streams of brands that appeal to changing customer tastes. There is a strong case for a range of brands covering as many possible future segments as possible. We can garner clues by careful observation of what customers do, especially with regard to emerging gaps in their baskets of needs.
4. Registration. I do not know about other countries but name registration in India is nearly impossible! The full process takes at least a decade, and unscrupulous elements are able to file prior applications for nearly every word under the Sun! Lawyer bills and threatening claims never end. The best compromise I know is to surreptitiously prefix all names with the founding one of a company or even a family. I think it also helps to establish widespread usage as soon as possible after the first name search and application.
5. Plagiarism, scope, and growth. This dimension is related to life-cycle management (outlined above). The best names are bound to be imitated. This can be an advantage when a proprietary name becomes a kind of generic for an entire product or service category. However, it is best to try and register a name with a statement and a graphic. Another tactic is to use goodwill for extensions, or better still, use just one name as an umbrella for numerous extensions. However, such an approach can become self-defeating over time if an enterprise begins to serve discrete market or customer segments. Clustering is more of an art than a management process, but it is invaluable in creating a fortress around a brand name.
I have avoided specific examples in this post since name owners might object, but can illustrate the concepts in my mind, in bilateral and private communication. Do write to me with your email address in the space below this post, if you would like my counsel and help in naming your brands.
Now for a practice case: the mango tree in the picture below is from Behat in the Saharanpur District of Northern India.
The orchard belongs to a friend. It is replete with the most amazing varieties of fruit trees. The produce is sold locally and the orchard is run nearly on a hobby basis. What if the owner wishes to expand? A name will become important as the fruit will have to compete with market arrivals from other areas.
How would you address such a challenge?
Sunday, October 16, 2011
A True Story on a Test for Business Viability
I believe that Revered Shri Shri Kantisen is an Avatar of Leonardo da Vinci. Kaka (uncle) to the world, I have abrogated additional kinship to his lustrous dynasty. This is not entirely inappropriate as Kaka has indeed been a father to me in my professional life.
Today, I would like to write about a true story he told me directly about the establishment of an industrial empire of vast social significance with his late father.
The founding family was an apparently average member of the employee community around the time of India's independence. Kaka's father (Papa) took a loan from his wife, permission from his employers, and began to recycle photographic chemical waste in to a useful product, the nature of which I forget.
Kaka says that he knew they had a viable business when a customer returned to make a repeat purchase.
Kaka is not a garrulous person. Hence, I have always strained to register every one of his gems of words in the permanent recesses of my mind. The term 'returning customer' is my memory hook for an acid test to know whether a business is viable.
Reticence in speech is no indication of paucity of thought. Kaki (Mother Chanda) has best demonstrated the values of intricate logistics that her immortal husband has consistently displayed, by emancipating vast swathes of rural women in her homeland of Kutch.
The most befitting tribute of which I am capable for the heavenly couple of Kaka and Kaki is to focus on the goal of returning customers, communicating minimally but acting for it without variation.
You can use this secret to establish and to grow an ethical and socially relevant enterprise.
Sunday, October 9, 2011
Management Principles and Practices for Sustainable Business
Vijay Mallya has set a scorching pace for his business peers since he inherited the mantle of leadership for the business group founded by his late father. His announcement that Kingfisher Red would wind down (http://www.moneycontrol.com/news/business/will-exit-low-cost-kingfisher-red-business-vijay-mallya_591574.html) has therefore been a deflation for many of his admirers.
Business closure is not necessarily bad. It is better than bankruptcy, loss of relevance, and to an extent, stagnation as well. Suppliers, distributors, financiers, and those who have shares, are vital considerations, apart from employees, when it comes to closing a business (this may not be an issue with the UB Group as a whole, but all enterprises that close down do not have branches to absorb people from a failed business).
It is popular to think of conservation in terms of the environment, but the long-term viability of a business is also important from society's perspective. What can a management team do to ensure that a business for which they are collectively responsible, thrives in to the foreseeable future?
1. Profits and reserves: it is tempting, even justified in some circumstances, to incur losses in order to enter a market. However, it is not a viable approach for any significant length of time. Profitability comes from high unit margins, volumes, and cost effectiveness. All legal approaches to protect and grow are worthy of consideration. Profit appropriation should also be conservative, building reserves in preference to the short-term gains of dividends.
2. Environment scanning and potential problem analysis: these processes are best left to independent domain experts. Environmental scanning and reviews of preventive and contingent actions against serious business disruptions should be annual if not ongoing. Environment scanning should be as broad-based as possible, searching for trends in politics, society, education, and international relations, to mention a few areas.
3. Regulatory relationships and compliance: cronyism and corruption cannot sustain business advantage. Politicians tend to fall from grace over time, and their eclipses can be unexpectedly rapid. There is a general impression that capitalist systems based on free enterprise are free from the influences of caucuses and other subtle forms of liaison, but the reality is that cunning people in power may wield their discretionary powers without obvious exposure. Politicians with legal acumen are especially adept in such matters.
4. Fixed commitments: permanent employees tend to become sinking stones around the necks of their organizations. This is glaring in the case of bureaucracies of poorly administered countries, but large and aging corporations can be just as negligent in keeping their fixed costs under control. Establishment and hospitality costs are other insidious areas that leak cash disproportionate to the net and combined values for all stakeholders. Anytime is right for a cost-effectiveness exercise: a management team should not overlook this aspect of long-term business viability during the 'good times'.
5. Life-cycle management: people, products, and services have phases of initiation, rapid growth, stagnation, and decline. Organizations revolve around people, whether they are in sales, research, manufacturing or general management. Customers also change over time, and are notorious for fickleness in their choices. Corporations have to juggle positions to keep streams of new people, products, and customers flowing. This does not mean that older cogs of an enterprise should be abandoned. The case of older aircraft cabin crew is typical of the conundrums management teams must confront.
Business viability is not limited to large corporations. Here is a picture from an evening in Saharanpur, a small but bustling town in Northern India:
You cannot miss this shop if you take a train in or out of Saharanpur. However, the area is choc-a-bloc with competition to assuage hungry and thirsty travelers. Here is an outlet selling hot milk. The service is most popular. The shelves of bottled drinks are no match for the man who dances as he stirs the cauldron and drops exotic spices in to the sea of milk.
Is this business viable in the long term? What if neighboring shops copy? The picture is from a chilly winter's evening: what can the establishment do to retain custom during the hot summer nights that Saharanpur experiences? There are droves of questions and ideas that come to mind as one contemplates the pleasures, profits, and future of retailing fresh milk.
As always, I would love to hear from you!
Business closure is not necessarily bad. It is better than bankruptcy, loss of relevance, and to an extent, stagnation as well. Suppliers, distributors, financiers, and those who have shares, are vital considerations, apart from employees, when it comes to closing a business (this may not be an issue with the UB Group as a whole, but all enterprises that close down do not have branches to absorb people from a failed business).
It is popular to think of conservation in terms of the environment, but the long-term viability of a business is also important from society's perspective. What can a management team do to ensure that a business for which they are collectively responsible, thrives in to the foreseeable future?
1. Profits and reserves: it is tempting, even justified in some circumstances, to incur losses in order to enter a market. However, it is not a viable approach for any significant length of time. Profitability comes from high unit margins, volumes, and cost effectiveness. All legal approaches to protect and grow are worthy of consideration. Profit appropriation should also be conservative, building reserves in preference to the short-term gains of dividends.
2. Environment scanning and potential problem analysis: these processes are best left to independent domain experts. Environmental scanning and reviews of preventive and contingent actions against serious business disruptions should be annual if not ongoing. Environment scanning should be as broad-based as possible, searching for trends in politics, society, education, and international relations, to mention a few areas.
3. Regulatory relationships and compliance: cronyism and corruption cannot sustain business advantage. Politicians tend to fall from grace over time, and their eclipses can be unexpectedly rapid. There is a general impression that capitalist systems based on free enterprise are free from the influences of caucuses and other subtle forms of liaison, but the reality is that cunning people in power may wield their discretionary powers without obvious exposure. Politicians with legal acumen are especially adept in such matters.
4. Fixed commitments: permanent employees tend to become sinking stones around the necks of their organizations. This is glaring in the case of bureaucracies of poorly administered countries, but large and aging corporations can be just as negligent in keeping their fixed costs under control. Establishment and hospitality costs are other insidious areas that leak cash disproportionate to the net and combined values for all stakeholders. Anytime is right for a cost-effectiveness exercise: a management team should not overlook this aspect of long-term business viability during the 'good times'.
5. Life-cycle management: people, products, and services have phases of initiation, rapid growth, stagnation, and decline. Organizations revolve around people, whether they are in sales, research, manufacturing or general management. Customers also change over time, and are notorious for fickleness in their choices. Corporations have to juggle positions to keep streams of new people, products, and customers flowing. This does not mean that older cogs of an enterprise should be abandoned. The case of older aircraft cabin crew is typical of the conundrums management teams must confront.
Business viability is not limited to large corporations. Here is a picture from an evening in Saharanpur, a small but bustling town in Northern India:
Is this business viable in the long term? What if neighboring shops copy? The picture is from a chilly winter's evening: what can the establishment do to retain custom during the hot summer nights that Saharanpur experiences? There are droves of questions and ideas that come to mind as one contemplates the pleasures, profits, and future of retailing fresh milk.
As always, I would love to hear from you!
Sunday, October 2, 2011
Pricing and Margins Along the Supply Chain
Demands to improve margins of all stakeholders never cease. Who does not want to make more money? It may be a cultural trait that Asians use the 'poor and small' vantage point with such persistence against business associates with connotations of wealth and privilege. The latter are often assumed to be natural and inevitable corollaries of better education, western mannerisms, and English fluency. Reverses are mostly true. Conservative Marwaris for example hide oceans of riches under simple garb, servile gestures, and loud displays of the vernacular.
A major obstacle in negotiating fair spreads of profits along the value chain is that everyone wishes to determine how much ultimate consumers should pay. The sticker price, like rack rates of hotels is rarely if ever realized. Much humor surrounds the price first quoted by a friendly seller from the unorganized sector of a market! Deep discounts have become 'force rigueur'. Links in the distribution chain downstream of a manufacturer ask for discounts primarily to manipulate the final consumer price. Organizations with bludgeoning inventories, fixed costs that are threatening proportions of projected cash inflows, crippling debts and top-line focus are easy prey for margin vultures.
Price is an integral link in the Marketing Mix. Consumers who gladly avail of deep discounts are also trenchant critics of brand owners who appear devious in their declared brand prices. A discount that is seasonal may be genuinely appreciated as a mark of goodwill, but expect no respect if you are not serious about your Maximum Retail Price. Discounts along the supply chain should also be linked with specific tasks and responsibilities rather than dictated by convention. The association of medicine sellers in India achieved much notoriety towards the end of the 20th century for blackmailing indulgent industry executives in to incentives entirely removed from the life-saving nature of the goods involved.
One should never negotiate under pressure. Hence, pricing and margin should be determined by consensus before a brand launch. This requires that all stakeholders take part in the planning process. Secrecy is an issue when members of a supply chain are not exclusively wedded to any one manufacturer. This is an issue for brand owners to optimize within the framework of national laws to foster competition.
Do write and let me know what you think about pricing, margins, and discounts. I would love to participate in your processes for these vital cogs of profitable and sustainable enterprise.
The picture below if of a meeting between an executive of a reputed farm input corporation and mango orchard owners. The person with the microphone is from the agro-input corporation. The host is on his right. The expansive cottage is his and he served a sumptuous feast as part of the event in the true tradition of Indian hospitality. The two people on the right are mango orchard owners. They want deep discounts and credit to buy farm inputs.
A major obstacle in negotiating fair spreads of profits along the value chain is that everyone wishes to determine how much ultimate consumers should pay. The sticker price, like rack rates of hotels is rarely if ever realized. Much humor surrounds the price first quoted by a friendly seller from the unorganized sector of a market! Deep discounts have become 'force rigueur'. Links in the distribution chain downstream of a manufacturer ask for discounts primarily to manipulate the final consumer price. Organizations with bludgeoning inventories, fixed costs that are threatening proportions of projected cash inflows, crippling debts and top-line focus are easy prey for margin vultures.
Price is an integral link in the Marketing Mix. Consumers who gladly avail of deep discounts are also trenchant critics of brand owners who appear devious in their declared brand prices. A discount that is seasonal may be genuinely appreciated as a mark of goodwill, but expect no respect if you are not serious about your Maximum Retail Price. Discounts along the supply chain should also be linked with specific tasks and responsibilities rather than dictated by convention. The association of medicine sellers in India achieved much notoriety towards the end of the 20th century for blackmailing indulgent industry executives in to incentives entirely removed from the life-saving nature of the goods involved.
One should never negotiate under pressure. Hence, pricing and margin should be determined by consensus before a brand launch. This requires that all stakeholders take part in the planning process. Secrecy is an issue when members of a supply chain are not exclusively wedded to any one manufacturer. This is an issue for brand owners to optimize within the framework of national laws to foster competition.
Do write and let me know what you think about pricing, margins, and discounts. I would love to participate in your processes for these vital cogs of profitable and sustainable enterprise.
The picture below if of a meeting between an executive of a reputed farm input corporation and mango orchard owners. The person with the microphone is from the agro-input corporation. The host is on his right. The expansive cottage is his and he served a sumptuous feast as part of the event in the true tradition of Indian hospitality. The two people on the right are mango orchard owners. They want deep discounts and credit to buy farm inputs.
It takes a decade for a mango sapling to become a productive tree. Intense annual agronomy starts a good 6 months before each year's harvest. Farm inputs have imported ingredients and scarce indigenous ones as well. Working capital is a major constraint for all stakeholders in agriculture and farming. This is heightened in horticulture from a farmer's perspective.
How would you spread costs and margins along the value chain in such a situation?
 | ||||||||||||||||||||||||||||||||||
| From SunoSuno Stock |
Subscribe to:
Posts (Atom)