In my last article I discussed the importance of thinking about the design of a business. I encouraged you not just to rely on fast cost cutting, but to think about what the real drivers of low value activity are. I encouraged you to think about whether there were better ways to design your business.

In this article I will go much further in discussing the conscious design of a business. First of all I will define what I mean by a Business Operating Model: this is important as there are several conflicting definitions. Then I will describe some examples of business model principles, and their consequences on the model. Finally, I will describe how organisations go about rapidly, but thoughtfully, considering the design of their organisation. Business Operating Model design can be a complex business, so unfortunately I will not be able to achieve more than an introduction to the concepts.

A Business Operating Model is the combination of roles, skills, structures, processes, assets and technologies that allow any organisation to deliver on its service or product promises. It is in effect the way the business is set up to deliver. For example, it can refer to the way the organisation is vertically or horizontally integrated. It can refer to the way the organisation thinks about its staff (e.g. contract or permanent). It can refer to the way personnel work together. It can refer to the way responsibilities are divided up within the enterprise.

Let’s imagine an extreme example which might help make this clear. Imagine a retailer with the following characteristics.

1. It is a retailer of fashion clothing and footwear
2. It has a catalogue and web based model
3. Management, IT, product development and buying operate out of the Middle East where it has been granted favourable tax status and has access to both Middle Eastern and European talent pools
4. Procurement operates out of Asia
5. All manufacturing is outsourced to Asian enterprises
6. The target markets are Australia and NZ (first), followed by Canada and UK
7. The business is a low cost in comparison to its physical shop front competitors

There are a number of factors which can be considered in this operating model and we will step through some of them.

Firstly we have to understand that the company is very clear about what it is trying to be. It is a catalogue and e-channel company of fashion which offers reasonably priced, good quality, and conveniently available goods. It is very clear about its target demographic (which will not go into here).

This enterprise has thought about the following dimensions of its Business Operating Model

1. Capabilities. The capabilities are actually essential elements of core competence e.g. product development, buying, procurement, pricing and web retailing: but not manufacturing, not physical retailing
2. Functions. The functions that need to be together and those which can be separated in order to deliver on the essential capabilities e.g. web skills and manufacturing do not need to be co-located.
3. Geographies. Which geographies are best placed to accommodate different functions e.g. Asia for procurement because it is intended to source most manufacturing from Asia.
4. Role and Process Design. It is important to think of these together and separating them is a fundamental design error which many companies make. It is essential to understand who is accountable for what, how big the roles are, and how the processes will work to string together a truly multi-national operation.
5. Structure. How are the roles and processes integrated? For example is the organisation structured along process lines such as Design to Order process, or Order to Cash Process (each of which can have a separate GM), or is it along functional lines (e.g. GM of web development) or is it along geographic lines (e.g. country head of Australia) or is it some combination of these (or other alternative e.g. Product Category).
6. Technology. What technologies are required? It is not just the obvious tools like web retailing and catalogue development technology, but also the enabling technologies such as those that support effective communication and knowledge management in this very fast paced fashion business.

The dimensions above to NOT even begin to fully describe the operating model options available to this imaginary enterprise. However, they suffice to give us an example. As you can see, if you break up the design of your organisation into dimensions, it is possible to make rational decisions based first on your strategy (including target markets) and secondly on available data. Some of the dimensions need you to have more professional support to make your decision. For example, role and process design is a real skill that (if done poorly) will cost you a small fortune. It is helpful to ensure you have professional design in detail. The same is true of technology choices.

So, hopefully this provides you with some insight into just what a Business Operating Model is. Now in the above example the enterprise is relatively new, and in our imagination had the advantage of some early advice. However, most of you will already be in the midst of a Business Operating Model which has evolved rather than been designed from a clean sheet of paper. This design might never have been optimal, and it may (at this point in time) be largely out of alignment with today’s realities. In such a circumstance just what do you do?

Fortunately there are structured approaches to dealing with this situation. What I am about to describe is an outlines. Please be careful with this. I did once have a call from a client who said “I read your one page article, and tried to design my business around it.” Naturally it did not work as I cannot possibly mention all you need in a short article. Nonetheless, the following will give you a flavour of the approach.

Firstly, it is important to be able to integrate a number of factors into your design:

• A clear understand of what you want to be as an organisation, and, at least at a high level how you intend to get there (for the sake of simplicity let’s call this the “strategy”)
• A set of principles which will inform your design (more on this below)
• A willingness to look outside of the organisation and even outside of the industry for different ways of doing things
• A willingness to challenge the organisation’s assumptions and sacred cows
• An ability to capture role and process information in detail quickly (so you can plan how to get from where you are to where you want to be)
• A willingness to involve a broad representation of personnel and management to an intensive organisational design workshop (so the design is not just done at the desk of the CEO – but is done in a way that will actually maximise buy-in).

We do not have time to consider all of the above factors so we will look at two of them.

1. Principles to inform your organisational design.
2. The personnel and management workshop to define your organisational design options.

By organisational design principles we mean a short list of bullet points that guides the way you design your organisation. Let’s consider the example above and think about what its design principles might have been.

• Functions will be placed where there is access to appropriate high quality skills and resources at a globally competitive price
• Processes will have clear ownership at an executive level, and clear accountabilities (leaving no staff member in doubt) will be designed into the roles, processes and structures
• The organisation will be structured first of all along process lines (e.g. Design to Procure), then along functional lines (e.g. Buying), then lastly along geographic lines (meaning that leadership is genuinely global)
• The business processes will be designed for speed (as we are in the fast fashion business) and Ease of Use for our customers (as convenience is a key customer value propositions)
• We will not endeavour to deliver on all our capabilities in-house. We will outsource to the most appropriate provider where the function is not core to our competitive success
• Functional co-location will be considered based on the level of intense interaction required between functions: if it is not necessary to co-locate then we will place the function where it is most advantaged
• There will be a full investment in the required technologies to ensure a ready interaction between all functional units in a value stream

I have just made up the principles above. However, hopefully, you get the idea. There is no doubt that this organisation will go where it needs to go to geographically, will source externally as required, will design processes which ensure clear accountabilities (because without clear processes and accountabilities you cannot have speed), and will invest to make this technically possible in a globally dispersed enterprise).

Such principles are essential because they limit the possible design options. Without a clear set of design principles then you will end up either with too many options to consider, or you will apply a subconscious set of principles (which is probably worse because you should rationally test these principles).

Naturally, having a set of principles is not enough. How do you go about developing the organisational design? Well you could just get the top three executives together and nut it out, or hire a globally recognised consultancy to give you a report. However, both of these options are probably a poor way to proceed. You really need a design that can be implemented, not one that just sits on a bookshelf as a report. What this means is that you need to engage the people who know about the realities at the front line, and who are influential enough to help you get buy-in to the changes you need. If you are going to get resistance every step of the way then you may not ever finish implementation.

In practice the way forward is a design workshop with the following characteristics.

• It brings together personnel who know the problems of the business today, are influential on the ground (they can be change champions), and are hungry for change
• It integrates the deliberations of the above people with sessions with executive management to agree the problems to be resolved, the design principles, and the design options
• It must produce a series of design options, with executive management making the final decisions
• It must be carefully organised and facilitated (preferably by experts who have done this before and have seen this through to implementation)
• It must incorporate different thinking and practices which are likely to be sourced from other markets and possibly from other industries.

Typically these design forums last from three to five days. They are a major commitment so they do require a great deal of preparation. You need to have thought about the dimensions of your design and also thought about external options. Some of the workshop will involve education on different possible models, and you need to think about the best way to get this through.

These workshops work so well because they force timely decision making. At pre-set stages in the workshop’s progress, executive management need to enter and approve (or otherwise) of the progress to date. This can save many months of deliberations, condensing it to just a few days. At the end of such a Design event the executive leadership should have no more than three options from which to choose, with a description of the options along each dimension.

These workshops are also powerful because they consciously engage the potential influencers. These influencers may not simply be the managers, but personnel generally who are willing to change and who have earned broad respect. These people will have felt part of the decision making process and will therefore be more willing to back the solutions. This leads to a more readily implementable program.

OK. So you have a high level design. What next? This will be the subject of my next article, but to give you an early indication of the next steps, we can safely say that they must encompass the following.

• A clear understanding of the current state of affairs so you can develop a pathway from the As-Is state to the To-Be state. In our case we use a methodology known as XeP3.
• A way to split up the implementation into phases. In our case we call this Wave Based Implementation Design.
• A way to manage the change with agility so that solutions can be tested monitored and promptly responded to. In our case we use a method call Momentum Management.

In conclusion, the Business Operating Model which you are currently living with may have been consciously designed in a different era for a different set of conditions, or it may have evolved over time. Fortunately you are not stuck with this model, and it is eminently possible to design your way out of trouble, as long as you can also robustly implement. Such design must consider a broad range of dimensions such as functions, processes, geographies, roles, processes, technologies etc. A conscious and informed decision will produce a better result; one that engages critical change champions will produce an even better result. This sort of redesign activity will unquestionably become more common as the pace of global change accelerates.

© Bevington Group, all rights reserved.

ShopAbility has partnered with the Bevington Group, Australia’s most experienced process and productivity improvement specialists.

Coupling the experience of ShopAbility’s senior strategy team, all of whom have decades of CEO and Board level experience in Retail and FMCG companies, with the Bevington Group’s experience in improving business operational processes, we can deliver a unique suite of services that centre on real Organisational Insight using XeP3.

The Organisational Insight Approach using XeP3 consolidates lessons from over 400 assignments in some of Australia’s largest and best recognized companies and ShopAbility is exclusively licensing Bevington Group patented technology and expertise for use in the Retail & FMCG sector.

Here, Roger Perry the CEO of the Bevington Group discusses the fundamental principles behind restructuring your business in a changing and improving trading environment.

Back to Thinking About Unit Costs

Most of us will be now be convinced that the Australian consumer is a much more conservative spender than in the hay days of retail. To add to that, the nature of retail business models seem to be changing at a rate that continues to accelerate: the rise of internet shopping, and supply change transformations, are examples of this phenomenon. For some organisations margins are under pressure, for some volumes, for many both margins and volumes are under increasing strain.

So many of you will have already been thinking about costs, and many will have been doing something about it. However, there are different ways to conceptualise the cost challenge: some of which can get you over a short term challenge, some of which can lead to a downward spiral, and some of which can lead to genuine innovation and creativity. In this article I will endeavour to provide you with some brief insights into all three scenarios. In this review there is both good and bad news for the executive team considering costs. Starting with the bad news, I will describe how even apparently simple changes can have materially negative consequences. However, the good news is that, done properly, a real review of costs can lead to lasting benefits whereby costs are truly aligned to value creation and the nature of enterprise you wish to be.

For convenience we shall start with cost cutting to deal with a short term challenge. In this case executive decision makers are looking for costs that can be dialled up or down for short term benefit. For many this is the classic review of discretionary expenditure, literally by looking at cost categories within the profit and loss statement. This cost category focused analysis can address the small changes such as cutting the biscuits in the coffee room or terminating newspaper or article submissions; but it can also cut more deeply, for example, by reviewing buyer expenses or addressing sales force expenses such as mobile phone costs. Short term action might include the reduction of entertainment or catering budgets. In many senses this is the simplest of the cost cutting scenarios. Unfortunately, even this apparently easy approach to cutting costs carries inherent dangers. Firstly, some of the changes may in fact reduce morale without having much impact on costs. One needs to be very careful in deciding whether the action being taken is a signal to staff, or a real cost cutting activity (i.e. it delivers a real financial return). For example, if done clumsily the cutting of sales force expense budgets can punish both those who behave appropriately and those who are more profligate in their spending relative to the market they are serving. The end result might be a sales force which feels that they are not trusted, and that they are shackled from doing the job that they are supposed to do. Cutting the staff’s biscuit allowance or reducing meeting catering seem like the most inconsequential of changes, however, one must question whether it is worth while raising the hackles of staff without a significant financial return. In some of these cases you will need to assess the costs of productivity losses, against the savings of the actions you undertake.

For example, I was invited to a client conference last week where the catering was not available. This is fine in a low cost culture, however, such a culture had not been imbedded. As the cost reduction was implemented overnight, with poor messaging, much of the time taken in the day was a debate about the merits of a “no catering” policy. This was not a discussion which had high strategic value. Indeed we lost the cost of a cut lunch many times over in missed opportunity to cover the big issues.

However, it is not all bad news. Much of the success you can achieve at the smaller item end of cost reduction comes down to the strategy you are pursuing. For example, if you wish to build a sustainable cost conscious structure in a low margin industry then you can use the current downturn to create a rationale to bring staff with on a journey to cost consciousness. If done with plenty of explanation and communication, if done intelligently (by assessing the value of the costs not just their absolutes), then cost cutting activity can help you create much greater commercial awareness in the workforce. For many this is the real game, it is about creating a sustainable cultural and capability change. Now to do this means you need to go at cost reduction more carefully, with more analysis and a lot more communication. This can be a great opportunity.

There are genuine examples of using hardship for real and positive change. One supply chain client:

• has spent time travelling the country explaining the financial challenge
• has talked to personnel about the need for a different way of thinking
• has stressed that leadership are determined that the organisation will once again thrive BUT that they need the help from staff.

On the back of this communication a range of cost cutting measures were taken, however, they led to no noticeable reduction in productivity, and no noticeable decrease in staff goodwill (indeed shrinkage reduced).

This starts to take us to the second cost cutting scenario whereby the executive lead the team into a downward spiral. This is the challenge of the old adage “it is hard to shrink to prosperity”. Note it is not impossible to shrink to prosperity – just very hard. Vicious cycles can emerge, many of which are difficult to foresee, simply because the world is so complex. For example, we might look at training expenditure. This is an absolute classic for short term spending reductions. You will have all have seen situations when the training budget is seen as one of the real discretionary spends, which can be dialled down to help meet the budget gap. Now in situations where training is ill conceived and not fit for purpose, then cutting the training budget might be valid (I will come to this point later, because often role design, not training is the problem). However, in many cases cutting the training is just a downward spiral. For example, one organisation had reduced its sales force training consistently for three years. The consequences were far from happy because the sales forced ended up with:

• insufficient product knowledge
• insufficient understanding of the processes for ensuring timely and accurate product delivery
• and little understanding of the way in which the brand was to be represented.

As you can imagine, this led to declining sales, poor information capture at the sales front end (leading to delivery delays and errors), and even to problems in brand perception. In this case, the training really was worth the money, and the first round of cuts only led to a vicious cycle of later cuts as the organisation tried to shrink in order to make profit objectives.

However, it is not all doom and gloom for unit cost reduction. It is possible to reduce your costs in ways that are strategically sustainable, and that provide you with a real advantage. Firstly, note that I have just switched from talking about costs, to talking about unit costs. This is an important switch, because it is critical to understand costs in relation to what you sell. This starts you (but only starts you) on a journey to think about the value of expenditure in an appropriate way. To help elucidate this point I will take the example of training budget, and from there I will take you on a journey to a smarter way to think about “value for expenditure” and fundamentals of your operation.

In one example where I saw a sales force training budget cut it was done for a very good reason, and was only the first stage in an overall transformation to the way the organisation did business. In this particular case the turnover of sales personnel was especially high. There was insufficient return on investment for the training being delivered. The difference here was that the customer service enterprise we were dealing with started to ask the next level of question: why was staff turnover so high? In this case the answer lay partly in the clumsy processes of the organisation, and partly in the real design of the job. It transpired that the sales staff were spending much more time correcting delivery errors than they were planning for and executing sales activity. This was happening for two reasons:

1. the organisations processes just did not work well
2. and many members of the sales team had become more comfortable with customer service than with sales.

Under these circumstances this enterprise had the opportunity to make a real breakthrough by concentrating on the value of its costs. Actually the sales force cost a great deal more than the training, and most of the sales force time was not spent on selling. So taking the whole story into account the costs needed to be restructured not just reduced.

So what did they do? Well the logical steps were taken:

1. A customer service team was built in order to take on those “service recovery” tasks which had been previously conducted by the sales force;
2. Process improvement was deployed to dramatically reduce the incidence of customer service failures (because the costs of many customer service failures are hidden – but they get you in the end);
3. Training was redesigned and initiated for the sales force;
4. Sales activity and closure targets were reset to take the sales team to real sales growth.

The end result of this story was increased sales. Actually, some of the sales team left (because they did not want to do the new job) and some of the sales team really found their wings. Customer service problems reduced over time, but in the meantime a customer service team dealt with more of the issues at a lower real cost than using the sales force.

Overall, costs reduced significantly as a percentage of sales.

This is an example of digging deeper into the cost problem by seeing it for what it often is – a business design problem. In this case, if your business has designed the wrong role for the sales team it is going to consistently underachieve.

Another example may help to further illustrate the point. Offshoring of administrative and customer service activity is common (indeed increasingly so). It can deliver significant benefits but often the control costs are very high. What I mean by this is that the process of handing off to the offshore partner, and of controlling the quality of the deliverables, becomes much higher than anticipated in the business case. In one example we saw up to 30% of the activity that was sent offshore was returned to personnel in Australia with a query. This is just a complete waste of money and, of course time. In this case the enterprise was paying for offshore time and for the time of onshore personnel. This is a classic business design problem that must be solved by looking at the root cause of the problem (which may be in process, in form design, in training, in behaviours etc). Once resolved, this can liberate costs, free up time, and improve customer service. It is not an examination of the P&L by itself that has driven this opportunity, but an examination of the way the business works. It is a design issue. It means asking more questions to dig deeper.

The Bevington Group has conducted hundreds of studies with many of Australia’s largest and most respected organisations. All have had opportunities to save costs, all have had opportunities to lift service, and many have had opportunities to lift revenue. The message that we would send today is that these are intimately connected factors, so much so that it is possible to reduce unit costs and raise revenue through the right business design. However, the only way to get to the opportunity is to consider the underlying causes of some of your costs and to ask more questions. This provides the opportunity to understand the value of your spend and design a more effective business solution. Of course this questioning should not constitute an excuse for analysis paralysis. This journey must be pursued with sense of urgency, so the quick changes can still be done. However, even with the low hanging fruit would advise that a little time is taken to design the right communications and to target the culture you really want.

Opportunity abounds in most businesses, the right mindset (one of business design) and the right questions (to dig deeper) using the right people (experienced and knowledgeable) will maximise the returns for any business no matter how well they are currently performing – even yours!

ShopAbility has partnered with the Bevington Group, Australia’s most experienced process and productivity improvement specialists.

Coupling the experience of ShopAbility’s senior strategy team, all of whom have decades of CEO and Board level experience in Retail and FMCG companies, with the Bevington Group’s experience in improving business operational processes, we can deliver a unique suite of services that centre on real Organisational  Insight using XeP3.

The Organisational Insight Approach using XeP3 consolidates lessons from over 400 assignments in some of Australia’s largest and best recognized companies and ShopAbility is exclusively licensing Bevington Group patented technology and expertise for use in the Retail & FMCG sector.

Here in our second of a series of six insightful and interesting articles, Roger Perry the CEO of the Bevington Group discusses the fundamental principles behind restructuring your business in a changing and improving trading environment.

The 7 Principles of a successful restructure

Even as the economic outlook appears to brighten, the fact remains that many organisations can no longer operate as they had been.  A key feature of this changing landscape is the need for organisations to restructure. As process and structure specialists, Bevington Group has observed the good, the bad, and the ugly of restructures. Based on our experiences, we have devised seven broad restructuring principles to help make any restructure a successful one. These principles are:

1. Align structure to strategy

All restructures must align to strategy.  This may seem self-evident, yet a significant number of organisations fail to do so. For example, if local conditions are a predominant factor then stress local sales and marketing functions rather than a centralised behemoth which then tries to matrix with local elements.

2. Reduce complexity

Simply put, complexity costs. Whether it is a complex organisational structure, a complex product offering, or complex transactional processes, the added cost of complexity can be a drag on performance.

To mitigate complexity, there are three considerations which help with organisational design:

1. Design structure for strategy before you design for specific personnel.  Organisational redesigns which are a compromise between strategic intent and line management preferences inevitably add complexity. So, whilst politics are unavoidable, at least start with a clean and clear design that matches to strategy.

2. Avoid making leadership roles too complex (see principle #5);

3. Minimise the use of matrices. They introduce measurement overhead and a lack of clear direction to the staff;

3. Focus on core activity

Remove noise (inefficiency in processes), and enhance core, before restructuring roles. This means that you will need to know what people are doing today by obtaining a detailed understanding of tasks by role.  This ensures that no value added activities are thrown out when removing a role.  Similarly, duplication and redundant activity can be removed at the time of the restructure.

4. Create feasible roles

Don’t overload roles – restructures generally leave an organisation with fewer people to do the same amount of work.  When restructuring to reduce headcount, make sure you understand the current workload of employees. This will help to ensure you design roles that are neither too heavily laden nor indeed too light.  Furthermore, role design must take into account realistic groupings of skills.  Packing a role with too many distinct skillsets reduces the pool of durable candidates.

5. Balance Own-Work and Supervisory load of managers

The case of leadership or “management loading” can be particularly troublesome in restructures.  Often, the inability of managers to focus on leadership tasks due to increased output requirements can create significant problems for an organisation   For example, time spent mentoring and coaching staff drops off; staff become disengaged, more issues arise due to staff errors, and managers end up spending more time resolving them.  To ensure management are appropriately loaded, it’s critical to balance three elements: 1) the number of staff directly managed or supervised; 2) staff ability to perform work without supervision; and 3) the amount of “own work” managers have to do on top of their leadership activity.

6. Implement with clarity

Often there is confusion in the first weeks and months after an initial restructure. After all, who is supposed to be responsible for what? The answer is to clarify roles and responsibilities from the beginning, identify all functions (activities, tasks, and decisions) that have to be accomplished for effective operation, clarify who should be involved, and be specific about accountability.

7. Maintain flexibility

Finally, it is important not to cut your resources too fine. If the organisational change is material you will need resource flexibility in the first few months, so even as you strive to operate more efficiently, be sure to give yourself some wriggle room in your staffing.  Flexibility applies not only to staff members, but to staff capability.  Leave yourself and your leadership team some room to respond to capability gaps in the new structure.

Common ways to do this include: a staged transition so there are fewer capability gaps to manage at a point in time, and a temporary use of contract resources until in-house staff become familiar with their roles.

ShopAbility has partnered with the Bevington Group, Australia’s most experienced process and productivity improvement specialists.

Coupling the experience of ShopAbility’s senior strategy team, all of whom have decades of CEO and Board level experience in Retail and FMCG companies, with the Bevington Group’s experience in improving business operational processes, we can deliver a unique suite of services that centre on real Organisational  Insight using XeP3.

The Organisational Insight Approach using XeP3 consolidates lessons from over 400 assignments in some of Australia’s largest and best recognized companies and ShopAbility is exclusively licensing Bevington Group patented technology and expertise for use in the Retail & FMCG sector.

Here in our first article of a series, Roger Perry the CEO of the Bevington Group discusses opportunities make your Marketing department run leaner….and smoother.

Tips for running a Lean, Mean Marketing Machine

A key feature of the changing economic landscape has been the push to operate in the most efficient manner possible.  As revenue has dried up, organisations have been realigning teams, trimming staff, cutting spending, all in the interest of finding the most cost-effective way to operate.

As productivity and restructuring specialists, we have observed the good, the bad, and the ugly of organisations’ attempts to increase effeciencies, including within marketing teams in various organisations.  From these experiences, we have distilled some critical pieces of advice for any marketer that wants to run their team, department or business as efficiently as possible.

Align the thinkers and doers

In most marketing teams we have encountered, there is a split between strategy execution (often called Comms / Marketing Managers, ie. The Doers) and strategy creation (Customer Intelligence, Marketing strategy, ie. The Thinkers).

While important, we have seen this split become problematic in structures that have divided these functions into two separate teams, with separate reporting lines.  This can lead to a disconnect between the actual intention of the strategy, and its execution, meaning that strategists’ advise on campaign execution may be ignored, customer insights disregarded, and at worst, an us vs. them mentality can arise between the teams.

Break down this disconnect by creating marketing teams that combine the thinkers and doers.  By putting the thinkers and doers into the same team, the barrier caused by the above structure will be eliminated.

Control the ad hoc work

Often, the lack of a clear process for channeling requests into a marketing team can lead to a high volume of ‘backdoor’ activity.  Because many people find it difficult to say ‘no’ (especially to a senior stakeholder), ad hoc requests of marketing teams – for data, for new initiatives, for a small (yet inevitably time-consuming) change to a piece of collateral -  can become a significant distraction to actually completing the prioritised tasks.

To combat this, it is helpful to have all ad hoc requests go through one person (a ‘front door’), who can clarify the specific needs of the stakeholders, ensure the necessity of the request, and then help prioritise the work.  There should also be clear escalation points to resolve any disagreements.

Streamline the briefing process

The campaign briefing process is the most critical process in an marketing team, yet is often inefficient and inconsistently conducted by staff in the same team.  This leads to unnecessary use of time for multiple stakeholders – an agency’s account managers, the creatives, marketing managers, and even product and legal teams.

…It is critical that all people managing the briefing process understand and follow a consistent briefing process.  This will reduce confusion internally and teach the agency how to deal with your organisation.

Furthermore, make sure that all relevant parties understand exactly what their role is in the briefing process, and exactly at what point they will be engaged.  Each role should know where they fit in the process, and whether they are responsible for an action, accountable for the overall piece of work, are being consulted for advise, or are being informed as a courtesy.

Beware the retainer

When agencies are on a retainer, client staff have a tendency to use the agency as if it were ‘free.’  This has two negative consequences: 1) the agency is called for any problem, no matter how appropriate, leading to inefficient use of agency’s time; 2) The marketing team will send campaign work to the retained agency, even when the campaign would have been better executed by another non-retained agency, because the retained agency is ‘free’.

It is important that marketing teams understand the appropriate way to engage a retained agency: agency time isn’t ‘free’ – it just comes at the expense of another, de-prioritised piece of work; secondly, work that can be done internally should be done internally; finally, prioritise campaign spend to ensure that the most appropriate agency does the job.

Marketing teams that are able to not abuse retainers are able to reduce costs associated with the retainer, and use their and the agencies’ time more effectively.

Don’t create roles just to fit technology

The technology available to marketers is changing rapidly.  Google, Facebook, Twitter and their ilk are expanding the ways that organisations communicate to the market.  This means more opportunities – and more work.

As these technologies proliferate, it is tempting to create new roles – and hire new staff – to fully harness them.  Yet because these roles often have little time to mature, some of their output can be of questionable value.  In good times, marketing teams can afford the luxury of the learning curve.  In tight times, however, this is not the case.

Rather than creating new roles to harness these technologies at the outset, start off by upskilling existing staff in these technologies, or even outsource the work.  Overtime, as your organisation comes to understand its needs in relation to these technologies, the number of staff dedicated to this area can be scaled up.

Review your reporting

Marketers, particularly in large organisations, produce lots of reports.  These are an integral part of a high performance organisation, and their quality and timeliness are key to good decision-making.

However, we have witnessed many companies – and marketing teams – that spend far more time reporting than is required.   This can be due to a number of factors: inefficient reporting processes, poor data quality, or the production of unnecessary reports.

If the issue is data quality or reporting processes, the solutions can often be complex and costly.  For these, it is often helpful to enlist the support of outside experts.

However, a simple reporting audit can provide important insights into the value of reports produced by the marketing team.  Start by compiling a list of all reports produced – even seeing them all on one page can expose the sheer volume of reporting done.  Follow this by asking the end users about what value they derive from the report and what data they can do without.

Based on this information, it will be much easier to determine which reports should continue, which should stop, and which can be altered to better suit the end-users’ needs.

Maintain flexibility

Finally, it is critical not to cut your resources too fine. As organizational imperatives change and the economy picks up, marketing teams will need resource flexibility to ensure they remain agile enough to carry out new initiatives.

Flexibility applies not only to staff members, but to staff capability.  Leave yourself and your leadership team some room to respond to capability gaps in the new structure.  This can involve a staged transition to reduce capability gaps, and a temporary use of contract resources until in-house staff become familiar with their roles.

POPAI’s Shopper Marketing Industry Council (SMIC), of which ShopAbility’s Norrelle Goldring is Chair, have developed a number of best practice tools and templates, including a handy ‘shopper marketing wheel’, case studies and roadmaps that are free to all delegates visiting the POPAI stand.

Delegates at the stand can also voice their opinions in the 2011 Shopper Marketing & Industry Survey. The study, a joint initiative of POPAI in partnership with  ShopAbility, will track advances in shopper marketing and category management, including case studies, since the first Australian industry benchmarking survey in 2010.

Survey participants are rewarded with a free copy of the resulting research report, valued at $495, and are invited to attend key industry leadership workshops where the research findings are discussed amongst retailers, suppliers / brands and POP agencies.

A link to the online version of the survey will also be announced in mid-May for those unable to attend Shopper Marketing Live!, according to POPAI’s General Manager, Karen Spear.

“The inaugural industry survey in 2010 led to a raft of measures for industry improvement, and the best practice tools and templates developed by POPAI’s Shopper Marketing Industry Council over the past months since the study’s completion are evidence of this,” Karen said.

“This year the online survey will be shorter, and we’ve taken our focus areas directly from industry feedback provided last year.”

Broad focus areas for the 2011 Shopper Marketing & Industry Survey include:

• Definitions
• Capability & Resources
• Insights
• Activities & Case Studies
• Digital / Online / Social
• Measurement & Effectiveness
• Impacts, Challenges & the Future

In addition to the online survey, POPAI and ShopAbility are conducting face to face interviews with interested participants willing to share case studies of shopper marketing in action (optional anonymity).

What you can do:

o   Visit the POPAI & ShopAbility stands at Shopper Marketing Live! To pick up your free tools http://www.shoppermarketinglive.com/

o   Want to know more? Download the survey FAQs at www.popai.com.au

o   Register to participate in the online or face to face or both: Email your name, company and ‘register for Shopper Marketing Survey’ to popai@popai.com.au

THE SHOPPER JOURNEY TO THE SHOPPING CENTRE

Whilst the number of Shoppers visiting a Shopping Centre in small groups as a pure leisure outing is increasing, the majority of Shopper trips to the Shopping Centre are still destination based.  That is, the Shopper is going for a specific purpose or item, or set of purposes and items.

However, they’re also open to influence – nearly 90% of Shoppers deviate (add to) their shopping list, regardless of whether the list is on paper on in their heads.  So as a Centre based retailer you have a good opportunity to ‘interrupt’ them once they arrive at the centre, with ‘while I’m here’ type reminders. More about how to attract that impulse sale a little later.

First and foremost however, you need to ensure that you get on their destination shopping list – to be the reason they’re going to the Shopping Centre in the first place.

Below is a starter list of ‘habits’ of effective Shopping Centre retailers in making themselves retail destinations vs their competitors.

HABIT #1: LOCATION! LOCATION! LOCATION!

Be in the right place to optimise walk past traffic. What we are talking about is the real estate game, and having your store in the right (read logical) location for your categories as well as the best location for Shopper traffic.

It’s all about footfall. You need to be in the main traffic flow areas. These include areas near carparks, entrances and exits as well as main traffic flow paths to public transport. For example changing the location of the bus terminal due to centre refurbishments or extensions can cause major declines in what was once a thriving business as people just don’t walk past anymore, certainly not the sheer volume there once was.

The rule of proximity applies. Stores located near a major or mini major (department stores, supermarkets, major chains with large store footprints) get more traffic, period. The average supermarket would have around 35-40,000 customers each week and almost every household shops there….think about it.

Be in a precinct.  For example, if you’re a fashion store you need to be in a fashion precinct or fashion store cluster.  Competition actually DRAWS traffic.  You’re better off being right next door to immediate competitors than away from them, as a clutch of stores all with a similar offer – eg shoes – become a shopping destination for that type of item.  It’s no good being a shoe store and being located near all the services like banks and road traffic authorities.

You might not be able to influence your existing store position, but if your lease is about to expire or the centre is about to undergo renovations you should use this as an opportunity to review your store location in the centre. Get a hold of their new centre floorplans and identify your ideal location based on main traffic flows, proximity, and precincts.

HABIT #2: MAKE YOUR STORE A DESTINATION

Reduce reliance on impulse and browsing foot traffic.  Ensure your store is a destination for the Shopper for their shopping occasion – that they have already decided to visit your store for a specific purpose BEFORE they even set foot in the Shopping Centre.

The rest of this article is devoted to ways to do this.

HABIT #3 (and 4, 5, 6, and 7…): CREATE A GOOD RELATIONSHIP WITH SHOPPING CENTRE MANAGEMENT

Your absolute first port of call should be meet and get to know the Shopping Centre’s Retail and Marketing teams, and make sure THEY know YOU. Get involved in any offer and voucher runs they may be doing. Support events they might run such as  fashion parades.  Get involved in campaigns they are planning.  The more you proactively offer, the more preferential and supportive treatment you will receive and the more you will be their first port of call when they are planning an activity.  It might sound obvious, but it’s amazing how many retailers don’t make the effort. And it doesn’t cost much. (And might even get you a better deal on your Shopping Centre media and advertising).

Little things mean a lot. Giveaways work wonders. If your centre has hubs – eg fashion hubs, kids hub, food hub – make sure you’re there with a goodie bag of offers and small trinkets.

Don’t look a gift horse in the mouth. Get involved with the Shopping Centre’s giftcard program.  Shopping Centre management LOVE retailers who help with their centre giftcard programs and it’s cost effective to be involved.  Come up with a prize, gift with purchase, coupon or other offer – it doesn’t have to be big or expensive.

HABIT #4: INVOLVEMENT IN CENTRE MANAGEMENT MARKETING CAMPAIGNS

Ensure you have a presence and better yet, an offer, in major gift guides the centre puts out.  You may need to provide a couple of hundred dollars’ worth of stock for photo shoots, or it might cost you a few hundred bucks in redemptions of promo offers, but the traffic it drives to your store and the incremental sales resulting pay for it ten times over. This is increasingly important with new season fashion (clothing AND housewares) launches for example, most Centres publish glossy colour magazines as free Shopper give aways, find out the publishing dates and get involved.

Become a consistent presence in any ongoing or long-running campaigns the centre may have, both with Shopping Centre media and online (see below).

HABIT #5: SHOPPING CENTRE MERCHANDISING AND ADVERTISING

Options may include one or more of billboards and posters, banners, kiosks, toilet media, floor media, car park media, Shopping Centre entrance media. These options can be expensive, but is worth doing when launching your store or when your store has a major seasonal promotional theme running. You can amortize the cost by offering the centre a bundled deal to take up more than one media type for the duration of the promotion.

Shopping Centre media and advertising for retailers is best approached on a centre by centre basis – doing a total media package per centre – rather than on a most-centres-for-least-cost reach and frequency type basis. But understanding how this option could fit as part of your total promotional/ marketing spend is critical.

HABIT #6: ONLINE SHOPPING CENTRE PRESENCE

Most Shopping Centres have a loyal Shopper on line data base that can be accessed by their retail tenants with special offers or seasonal promotions. This will give you and your business, via your Shopping Centre data base, the all important 1:1 contact with potential customers. These can be Brand driven, category driven or even Service driven – how about promoting that new staff member with extensive experience in kids clothing or shoe fitting?

Get involved in online campaigns offered by your centre or centre group. Because Shopping Centre trips are fairly frequent, Shoppers use centre websites to check out what’s coming up at their ‘local’. By having a presence on your Shopping Centre’s website you are more likely to turn your store into a destination – rather than relying on walk past traffic – next time Shoppers who have browsed the centre’s website visit the centre. Take out banner and click-through ads. Ensure you have online specific offers running that they can redeem when next in the centre (this will also help give you – and Shopping Centre management – an idea of how effective their website is).

HABIT #7: EXTEND YOUR RETAIL SPACE

An additional store space – kiosk style – within eyeline of your current store can double your sales, particularly in key retail periods like Christmas where your core store may be too crowded to fit all potential Shoppers.

Yes you’ll need to pay additional rent, but you can mitigate this cost by offering the centre’s management a package deal on the combined rent.

Pop up stores have been wildly successful overseas and some Centres offer these temporary options to tenants for short periods of time (– these are not the sock retailers that seem to appear in major traffic flow pathways!). Usually implemented as a ‘stunt’ that fits with an overall marketing program, these can sometimes be attractive to your supplier base to launch a new range of products or a new service. Banks are using this as a way of extending their reach.

HABIT #8: EVOLVE YOUR OFFER

Oddly enough, the major retailers that created the furor late last year around the growth of internet sales effecting their business, have now “opened” their own on-line retail offer, one from a virtual shop front in Asia. Surely all of that fuss last year wasn’t to cover up the fact that they had strategically and financially underinvested in the growth options available for their business. No way!

So what is the salutary lesson to us all with this example? Understand that your Shopper’s wants and needs for products and services evolve as much as the options that are available to communicate with them – iphone apps, social media options and direct marketing to name a few.And you need to understand which applications are best to attract and stick Shoppers to your business.

HABIT #9: VISUAL MERCHANDISING

The front of your store is what potential Shoppers see first so why not treat it as the critically important element that it is? Initial impressions count, either good or bad – windows, the entrance path and internal visibility construct that all important initial impression of the front of your store.

Regular Shoppers visit Shopping Centres every 2-3 days and if your front of store treatment does not get a positive response, why leave it unchanged? Two week turnarounds are common for front of store window treatment, but theming the content is also important. Planning your front of store treatment to align with the key events on your promotional calendar is fundamental for any retailer. If you need help to understand or implement, ask an expert to advise you on your best options. Most Centres have experts available who can provide advice free of charge.

Basic housekeeping underpins great Visual Merchandising. If your store looks messy and disorganized why would a Shopper even be attracted to enter and look at what you are offering?

Look at Osh Kosh or Country Road for lessons in managing your VM messages from the front window right through to the fixture, especially with new seasons merchandise all combined to create a fantastic story.

And they illustrate great solutions to their Shoppers which is the intention.

HABIT#10: IN STORE MARKETING

How is your business ‘categorized’ in store? Does it align to a logical sequence and flow? Then, do the key messages and call to action prompts subtly sell your offer?

What ticket types do you use? Tickets for ‘New Line’, “Sale or “Special” and “clearance” should be in every retailer’s toolkit, and probably not many more. Be disciplined about their use. For example ‘Sale’ should be exactly for that and used strategically 2-3 times per year. Shoppers see through permanent Sale events and it amazes me to see how many retailers cycle the same ‘Sale’ offer each week and wonder why there is little Shopper interest.

‘Clearance’ should be used to clear old stock with depth of mark down that ensures quick movement.

The old adage “the first mark down is the best mark down” still rings true. If a line is a dog and has not sold at the regular price, cut it hard and sell it out. Small 10-20% off will not clear a dud buy.

‘New Line’ or just ‘New’ on a product is a powerful message for fashionistas and can create a sale, and not just to introduce new seasons clothing but can be extended to any product in any category.

And now for HABIT #11……DO SOMETHING….ANYTHING!

It amazes me to see Centre based Retailers wondering where their business went. If your business is not growing, or declining, you have a responsibility to do something – anything is better than nothing (which has got you to where you are in the first place)

• Who have you talked to you about your business? Your accountant reports on numbers and is not a retailer by trade. Talk to your Centre Retail management, see what they can offer by way of supporting activity or providing an experienced retail expert to advise you on a few options to consider.
• Have you asked your Shoppers? Ask them, you may be surprised.
• How are the other tenants around you performing?
• Is your decline in customer numbers or in spend, or both?
• Has the competitive set changed in the Centre?
• Have you changed or not changed your range or offer?
• How old is your fit out?
• How shop blind have you actually become as the landscape slowly and subtly changes…..but you haven’t??

Most Shopping Centres have independent retail expert consultants who can provide independent advice on alternatives to grow your business. Ultimately the decision is yours, but talking to and getting advice for someone who has been there/ done that may help you either save your business or get you back on the path to growth.

To sum up, your approach needs to be both internal and external – to cover the bases with both traditional retail media, new media options, your overall initial Shopper front of Store impression and with the Shopping Centre management for incremental opportunities to increase your destination Shopper footfall and thus your sales.

]]> http://shop-ability.com.au/2011/the-10-1-habits-of-highly-effective-shopping-centre-retailers/feed/ 0 http://shop-ability.com.au/2011/shoppers-catastrophes-and-forced-behaviour-change/ http://shop-ability.com.au/2011/shoppers-catastrophes-and-forced-behaviour-change/#comments Mon, 04 Apr 2011 01:44:41 +0000 lee /?p=2227 Read More >]]> In the wake of Queenslad and Victoria natural disasters (echoed in catastrophes of an even larger scale further from our shores), ShopAbility’s Peter Huskins examines the likely impacts on shopping behaviour. For Retail World Magazine.

Imagine you are sitting on the veranda of your beach front home of 20 years in a quiet neighbourhood in a small coastal Queensland town. Your family are with you, at least the youngest of your kids, the eldest have left home and are living at other small coastal towns, going about their daily lives.

You are waiting, waiting for the arrival of the worst cyclone in years, worse than Tracy in the Northern Territory so many years ago. You have done all you can, battened down windows and secured doors and personal effects, the best you can anyway. You are waiting for the unknown. You are waiting for what the weather forecasters are saying is gale force winds, lashing  rain, high tides, flooded rivers and roads.

Fast forward 3 weeks.

No house, no furniture, no car, no personal effects. The insurance is coming. Your family are around you.

But you have to live, eat and drink. Australia gave generously to help our northern neighbours, and so we should have. What happens as you slowly rebuild your lives, and your house, and your life style?

How do shopping patterns change when we are faced with this type of crisis – not just for food, but for clothing and the other necessities of life? Food is one of the basic requirements of life, and a routine that generally supports a strong family unit. Three meals a day plus snacks, bring it on so we can at least get back to a routine.

I am not a philosopher or an expert in human behaviour, however when you look at  Maslow’s Hierarchy of Needs (see diagram) that we all learnt about at school or uni, certain things start to fall into perspective. At least the bottom three ‘rungs’ are thrown into complete disarray, without any structure or time frames for remediation. These then rattle into the top two Needs. Looking through this lens allows us to understand how standard or regular behaviours, including shopping behaviour, will do a complete somersault after a catastrophe such as those we have experienced in Queensland and Victoria.

We are not trying to commercialise a drastic situation, far from it, what we are trying to frame is how we can best help support the changes in shopping behaviour brought on by these events, and start to understand any short or long term changes that require our assistance or support.

The damage caused by catastrophes such as those we have experienced in Qld and Victoria in recent months have highlighted the fact that consumption (as well as production) of food will be destabilised for some time to come. Consumption and shopping behaviour are inextricably linked as one precedes the other.

So how do these events affect shopper behaviour? How do people now change the way they shop for food, or do they? If they do, is it reversible?

Retail stores generally bounce back pretty quickly after major calamity, make no mistake there is a lot of hard work to do to restore the normal shop footprint, but they generally have access to the width and depth of resources needed to restore order. Simply a matter of scale as well as purpose.

From a Shopper perspective there are most likely two scenarios that cause change in purchase behaviour:

1.    Pre Event

Assuming enough advance warning is given of the arrival and nature of the incident, how will Shoppers prepare for any impact? What will they buy to either stock up or use during the incident?

2.    Post Event

Like #1, the majority of Shopper behaviour will be triggered by the degree of trauma and the overall effect on their individual situation, what does disaster recovery look like for me?

“During Event” is surely a “non-event” as people grapple with the circumstances that prevail at that particular moment. It’s a personal thing requiring situational management. It is also not channel specific, so if I cannot get my (Pauls) milk in a northern Queensland Woolies I’ll go to the nearest P&C or route store to but it, getting milk is the key, I don’t care where from or which brand.

So what type of products would most people look to purchase during a Pre-Event store visit to prepare for an oncoming incident? Some are more obvious than others, and to a large degree this is pantry stocking in its purest form without the price incentive, but here we go…

• Water – plain fresh water, as large a container as possible or multi packs
• Drinks – soft drinks etc but also juice and functional products
• Snack foods such as muesli bars but also chips etc (experience from Katrina in the US shows that this category exploded both before and after)
• Confectionery
• Quick centre store ‘easy’ meals – pasta, rice, cereals, biscuits, soups, tinned food, sauces etc
• Fruit and vegies
• Frozen meals but think of the power outages
• Dairy especially milk
• Ice – often underestimated (for filling eskies and bathtubs)
• Disposable party ware – plates, knives and forks, napkins etc
• Paper – towels and toilet paper
• Hygiene products – fem hygiene, medicinals and wound care
• Emergency kit items – torches, batteries.

The slant is recognisably towards convenience, life and durability of products,  ease of preparation as well as nutrition but I think ‘fast gut fillers’ would also rate highly. It is more about survival than elegance and table manners.

Most of the categories listed above would also feature heavily in the Post Event shopping list, and clarity of the situation after the individual circumstances are clear would affect what is bought, how much etc. So a few extra Post Event categories may also be:

• Meat
• Fruit and Vegies
• Baked foods, bread
• Household cleaning
• Laundry
• Pet
• H&B
• GM – really dependent on the effect on individual household. Hardware would be a key thought but you’d probably go to a specialist rather than a top up grocery range.

So as people move out of survival mode, the Shopping behaviour starts to return to normal, the caveats being the degree of devastation and the effect on each household. For a time frequency of shop would likely increase as shoppers find and increasing number of items that have been disaster affected, resulting in a number of small top up shops.

The categories may be obvious but there is another level of behaviour that also needs to be included in the frame – that of price. To a large degree, there is no price elasticity during Pre or Post Event periods as people will pay what they need to survive, a basic assumption.  But where the effect is far reaching and people do not have access to either a normal household routine or the ready cash to restore their life balance, what happens to purchase behaviour?

Purchase more specials but only of those things they NEED

• Housebrands
• Smaller packs
• Substitutes such as quick service restaurants (Maccas) if they are trading
• Do without or survive with what I have left.

If you have a look at the latest offering from the Nielsen Global Consumer Confidence Index for the December 2010 quarter, on a global basis most people have chosen to downgrade their spending and buy cheaper grocery brands.

This covers all of the major global economies, most of which suffered a worse fate than Australia did at the hands of the Global  Financial Crisis. So GFC, flood, fire, cyclone, earthquake -  don’t worry about what it’s called – it is easy to see how these life changing events quickly turn into purchase changing events .

That is the sad and unfortunate thing, many of these events are out of our hands but have far reaching effects, way past the individual and the community. We have all contributed personally to Relief Funds as have our employers, the question is what can we do from a business and commercial perspective to better assist shoppers and their changing behaviours during these awkward times?

Comments that we frequently hear when talking to industry contacts:

‘The Marketing team is a roadblock. They don’t get in store. They don’t understand what the Retailer wants, trading terms and the implications or how a store operates”

‘we have developed the product now it’s over to you guys to sell it!’

‘The Sales team only care about achieving short-term sales targets. They don’t get the bigger brand and product positioning story, or the personality of our brand.’

And Category and Field teams don’t feel like they are understood by either.

And the bigger issue: who is looking after the Shopper?

The Shopper is the person who actually makes the BUYING decision at shelf and is the last person we have an opportunity to “talk to” before an item is put into a basket – hopefully our item!

The Shopper may not necessarily be the Consumer – think pet food, kids cereal, fem hygiene, men’s deodorant, hot and cold beverages, vitamins and supplements….and the list goes on.

So how is this really important person usually recognized in our internal structures, processes, procedures and most importantly accountabilities?

Marketing is usually focused on Consumer, Sales on the Customer/ Retailer. The traditional Trade Marketing role is intended to own the Shopper, but is usually the buck-stops-here point of contact for all sorts of other loosely aligned reporting and tactical initiatives that leaves little time to think strategically about our Shopper response

There might be an embryonic ‘Shopper Insights’ department (headed up by a person who has had to shift from Consumer insights or sales to Shopper insights with no additional training by the company). But nobody to actually direct Shopper strategy or implement Shopper-focused initiatives.

What to do?

1. Consider Structure Optimisation 

It could be that your traditional teams and their reporting structures are no longer effective for your changing needs.

For example, some leading FMCGs have created a department that is ‘Shopper’. It is on the same level as Marketing and Sales, reporting in to the GM or MD.

Another example is to implement Category teams populated by the relevant Marketing, Shopper and Sales team members.

These examples achieve three things:

a) Ensure that Shoppers as well as Consumers are considered in the strategic decision-making process

b) Create a bridge between Marketing and Sales, improving alignment

c) Ensures a clear focus on the in-store element of the path to purchase.

These are a couple of examples of how to restructure to refocus – not for the sake of it but to change your business approach to include the Shopper in all strategic decisions.

The most important factor is the true function each team is currently performing, whether it is the optimum function for the business, and what, at a higher level, actually needs to be achieved and therefore how the business should be structured to support that objective.

Things to consider when looking at your Structure Optimisation:

1. How/ where is your current business structured to include the Shopper?
2. Assess the overall internal alignment of the different silos
3. Compare Roles across the business to identify insight gaps.

2. Skills Assessment

Have you changed people’s roles, titles and expectations without giving full consideration to their skill sets?

This can become a major source of stress to both company and team members.

For example, the bevy of new ‘Shopper Insights’ roles that have miraculously appeared without adequate training provided to support the new roles. And the growth of Trade Marketing into increasingly complex analysis and forecasting, again without adequate upskilling.

And one of the biggest issues: Marketing people are expected to know all about Shopper when it currently is not even on the radar of most traditional marketing schools and training grounds, leaving a big knowledge gap that can be behind the ‘roadblocks’ the Sales department complain about.

When reviewing internal alignment, it helps to conduct a thorough, supportive (non- threatening) skills assessment of the relevant staff.

Things to consider when undertaking skills assessments:

1. What are the current outputs and deliverables by silo?
2. What are the duplications and unnecessary outputs?
3. Where to reallocate responsibilities if necessary?
4. How do I identify best practice for my business? This will depend also on how ‘best practice’ I want to be.

3. Training

Roadblocks to internal alignment and getting things done amongst multiple silo functions are often about people feeling threatened. Because they’re supposed to know something they don’t (because nobody has told them or trained them in it!), so they stick to what they know in order to feel comfortable and appear competent.

This ultimately holds the company back.

Tailored approaches are needed for each team, and the personalities within the team, to harness the potential for alignment.

Things to consider when conducting team training:

1. Clearly assess current Company and individual skill capabilities and competencies – where are my gaps?
2. Use a template or roadmap for training that ensures a consistent flow and sequence of subject matter
3. Match the required skills to the Role, Job Description and review process.

4. Culture

Culture, for the purpose of this article, can be defined as ‘how the members of a company experience it’.

Often, in FMCGs with alignment issues, that experience can be fraught with turf wars, impenetrable alliances and the careful navigation of internal politics before any single initiative gets off the ground.

That, in turn, results in all those good ideas and strategies sitting on a shelf or being dumped in the ‘too hard’ basket.

Some things to consider to improve your alignment through culture:

1. Co-locate functions that need to work better together.

The classic example is Sales and Marketing. As exampled above, some of the better integrated companies have put Sales, Marketing and Category all on the one floor in an open space. They have to talk and understand the issues other roles must contend with!

2. Musical chairs

It’s an oldie but a goodie: ask people to step into others’ roles for a day (‘walk a mile in the other man’s shoes’) to gain better understanding. A really important one is to get the Marketing people out in field. Get them to see how their brands are brought to life (or not) in the instore environment, and how their brands are being sold by the sales team to retail customers. If Marketing staff aren’t out in field at least once a month, they risk being ivory tower theorists.

Ensure that Marketing co-present that all-important new line to the Retail Customer, not just to get feedback on their creation, but also to start to understand what, when and if their earth-shattering new line will actually get the acceptance and subsequent shelf space that was expected.

If not, what went wrong?

If accepted, how can I use those learnings to make sure the next new line I submit is just as successful?

3. Similarly, ask Sales people to deliver their thoughts on the long term brand building strategy (3–5 years). And so on. The point here is that the company has to invest in enough ‘downtime’ to allow staff to do this i.e. it needs to be seen as valuable time spent.

4. Assign an Account sales problem to another area of the business for a ‘blue sky’ solution. This forces research and understanding of the other functions’ issues and solution frameworks, and the only place to get the answers is from the people who currently do the role. Again they have to talk and understand the issues other roles must contend with.

You may well be surprised with the result!

5. Category Vision

An interesting question to ask a round table of 10 of your senior executives drawn from across your business:

“What is our Category Vision and what are the key elements I would expect to see in store?”

Most companies would generate certainly over 6, and up to 10 different answers to that simple question.

Why? In most instances there is not a single aligned Company approach that has been developed across the different silos, so that each is subtly and without intent, working against the other.

It is critical that your Company speaks with the one voice with your approach to in store marketing – the impacts are clearly evident to your Retail Customer and may just be the reason why your competitor is considered the thought leader and overall category driver – regardless of market share, promotional spend or rolled up margin.

The fact is that better internal alignment enables a more strategic approach to developing your categories and therefore your business, less time navigating politics, better skilled staff with higher morale, all leading to increased sales due to a stronger end-to-end offer.

Most important is the single business focus that is initiated – one Company one voice.

So, time to empty the silos and critically review your structure!

ShopAbility’s Peter Huskins has a wealth of experience with structure optimisation and internal alignment. Call him to discuss your needs on 0412 574 793.

Geoff Frost

As former CEO of Bartter / Steggles, Geoff headed up the company’s transition from a $35 million company in 1987 to more than $900 million in 2008, implementing business improvement programs to reduce debt by $20 million per annum and restructuring the Sales function to better meet customer needs.

Since 2008, Geoff has been involved in various due diligence roles and has assisted with the evaluation of potential business acquisitions by individuals and equity investors.

John Day

With a reputation for strategic thinking and a realistic approach John has had more than 25 years of General Management and Senior Management experience in blue chip companies such as National Foods, Simplot, Mars Confectionery, Masterfoods, Uncle Bens and Bowater Scott. He has held General Manager roles across a number of functional streams including Sales (all Channels), Marketing, Distribution and International and Domestic Business Development. In addition he was General Manager of National Foods Milk Operation (Victoria) and on the Board of Management with Simplot, heading up the Shelf Stable Division with brands including Leggos, Edgell, and Plumrose.

John’s expertise covers all channels including Grocery, Convenience, General Route, Catering, Institutional, Distributor, Delicatessen and other Foodservice Channels. Whilst he has had many successes and achievements in this time, from a Grocery perspective he led the team which achieved the biggest Housebrand Tender in FMCG, that being the Woolworths National Milk Contract in 2002 for National Foods.

Geoff and John join our core members Peter Huskins (ex Senior Exec & Board levels with Franklins, Millers & Grace Bros) and Margaret Haseltine (ex CEO Mars / Masterfoods) to provide a comprehensive and results-focussed business strategy service for our clients.

Click on the links to find out more about our Business Regeneration & Strategy services.

You can also download our handy Business Success Scorecard.

WHY SCORECARD YOUR BUSINESS?

Rather than point out the icebergs, or where your company Titanic may or may not have holes, scorecards are designed to help you rank where you’re good and not so good across the business and then improve them incrementally. Evolution rather than revolution.

Once you’ve ranked each area you can then prioritise where you need to get from bad to OK, or from good to great. Scorecards help you identify the broken bits that need fixing vs the bits to leave alone, and then to determine the relative importance of the bits that need improving.

Do you want to fix what’s broken, or if what’s broken isn’t that important in the scheme of things will you get a better result from shifting some areas from good to great?

Done correctly, scorecards act as a form of progress barometer for your business and often spark a series of important initiatives.

GETTING STARTED  – HOW LONG IS A PIECE OF STRING?

Who to Measure?
Ideally each function of the company should be scorecarded. This includes externally facing disciplines (external being consumers, shoppers, customers/retailers) including:

• Marketing
• Sales (account and field)
• Category/trade/customer/shopper marketing
• Insights
• Supply & Operations

… and also internal functions such as

• Human Resources
• IT
• Finance.

The examples we’ll discuss focus on the externally facing functions.

Within each function, you’re effectively scorecarding a rolled up or average ‘take’ on the entire department based on a number of individuals’ opinions within it. You’re not measuring individuals, you’re measuring departmental outputs and approaches.

The responsibility of building and completing a scorecard for each department or business function lies with, and needs to be driven by, the head of that department/function with the support and encouragement of top management in the business.

How to Measure

You can really only measure where you sit by knowing what the market is doing.
A good scorecard takes into account where you are, where you’ve come from and how you compare against the market.

Note however that the market – ie the average of your competitors’ activities – might not be at the level you determine aspirational or ideal either. Ie current ‘best practice’ may still be only at Average, particularly for disciplines and in areas that are new and emerging such as sustainability.

So to build the scorecard you need to start with an intelligence gathering review of competitor activity in each business function.

This activity should be amalgamated into a series of competence headings (see below) with each area of competence summarised and ranked eg Below Average, Average, Above Average and Ideal/Best Practice.

Measurement Scope – Areas of Competence

The lenses you use and some measures will be common across business functions, and other measures/competencies will be function specific.

Overall lenses to use might include macro areas such as Industry, Company, Operational, and Cultural.

Areas of common competence across all business functions and generally relate to industry, market and company knowledge are include aspects such as:

• Industry makeup – key competitors and customers/retailers
• Company product and category knowledge
• Company structure, culture and processes.

There will then be lenses that are specific to certain functions. For example, Customer Engagement is important for Sales, Category/Trade Marketing and to a lesser extent Brand Marketing and Insights.

Planning and Operational (in various function specific forms) applies to Sales, Marketing and Category/Trade Marketing.

Something like Brand Performance is largely specific to Marketing (although bits will also apply to Sales).

Building the Scorecard

Once you’ve identified the common and function specific areas of competence (‘lens’), next you flesh out the aspects of each area as they apply to that function.

So for Operational for instance, aspects that might apply to Sales are Presentations, Territory Management, Reporting and Retail Maths.  For Category/Trade Marketing, Operational aspects might include Trials Management and Category Reports Distribution.

For a lens like Planning,  for Marketing the aspects might include Strategic Planning and Brand Planning, where for Sales the Planning aspects could be things like Account & Customer Plans, Promotional Planning, Territory Mapping.

So now have a scorecard containing a number of levels that looks a bit like this:

GETTING ENGAGEMENT

The easiest way to get engagement within your department is to involve a number of individuals across various levels and job types in the ranking and prioritising part of building the scorecard.

Using the scorecard you’ve developed, for each aspect of each Competence area you’re after a group consensus on:

• Current score (where we are now)
• Aspirational score (where we want to be in 12-18 months, based on what’s realistic ie if you’re currently a 2 on something, getting to a 5 over 12-18 months is more realistic than trying to achieve a 9)
• Where the biggest gaps are (current vs aspirational scores)
• For where the biggest gaps are, closing which of them will make the biggest difference (ie, ranking the gaps in importance).

Once the departmental scorecard is completed the department heads should get together to share, challenge and agree results as a cross functional team. This is because departments will have different views of each others’ competencies, and what you’re after here is a 360 degree company view that minimises departmental turf protection.

The last step is then to determine what actions will be taken to close the gaps.

MAKING IT STICK – APPLYING IT

So now you’ve developed, completed and scored yourselves, what are you going to do with it? This is the most crucial part of scorecarding. Unless you’ve turned your scorecards into actions, you’ve really only conducted an extensive naval gazing exercise.

Scorecard uses include (but are not limited to):

• Departmental capability and training needs identification (eg training courses)
• Build into new processes eg changing the promotional planning process
• Build into strategic plans as enablers eg category knowledge required to build customer plans
• Identify knowledge gaps that will help inform innovation into new products, services and markets/channels
• Initiatives and trials for the department or business to undertake to close the gap
• Determining inter- and intra-departmental organisation structure changes required.

Progress against the initiatives outlined should be monitored by department heads and senior management monthly as part of ongoing business review.

So that’s it for the Business Regeneration series. Comments welcome.

For 2010 we’ll be talking about Customer Relationship Management, Shopper Marketing Evolution, and best practice Shopper Research from a number of angles.  In the meantime, we welcome feedback about what you’d like to see discussed. Email us at enquiries@shop-ability.com