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.au

In our article on symptoms of a business in crisis, we discussed using crisis diagnosis as an opportunity to review the business holistically. Strategic (Enterprise) Risk Management carries a similar theme.

Rather than turning an organisation’s risk management efforts into a low value compliance task, the Leadership Team should reframe their risk discussions on the basis that superior performance comes from focussing the organisations finite resources on what must go right, rather than concentrating on what can go wrong.  Taking this strategic approach will align the organisational resources on the key levers and maximise the organisation’s potential for success.

Common Failings of ERM Programs

In “The Seven Deadly Sins of Enterprise Risk Management and how to avoid them”1, author Frank Edelblut identifies the main areas that organisations have incorrectly applied Enterprise Risk Management (ERM):
1. Lack of a clear vision for ERM.  Installation of ERM systems to respond to external pressures (eg shareholder expectations) rather than designing the ERM system and process to deliver long term value creation
2. Building unnecessary organisation, function and process.  Establishment of incremental activities and costs rather than utilising risk management activities and capabilities embedded in the organisation
3. Lack of support from leaders. Absence of strong leadership that aligns the organisation around common Risk philosophy and Risk appetite definitions, which leads to an inconsistent perspective and response to risk
4. Bottom-up approach. Identification, assessment and observation of all the things that could go wrong, resulting in consumption of unnecessary resources on risks that are unlikely to occur or cannot be mitigated
5. Risk Confusion. Plethora of terms (eg risk philosophy, risk appetite, risk tolerance, risk assessment, risk response) are not clearly defined and understood by the organisation, leading to miscommunication and wasted time, effort and resources
6. Overly Complex Risk Assessment. Replacement of management judgement with complex quantitative models (which are ultimately skewed to match management judgement), and too much focus on Risk Assessment (likelihood and impact) rather than on how to respond to the Assessment (given success profile of responding to previous concerns and available resources)
7. Making ERM the Endgame.  Allowing ERM to become an objective unto itself, with too much time spent on compliance and risk rather than strategy and objective setting

The Strategic Risk Management Trinity

Whilst The Seven Deadly Sins identify a range of traps that organisations tend to fall into, I can offer you the Strategic ERM Trinity:
1. Focus first on what must go right, not on what can go wrong
2. Harness the Leadership Team
3. Embed Risk Management into your ways of working

1. Focus on What Must Go Right
The fundamental difference between the proposed approach, and that adopted in many organisations, is the change in mindset away from the identification, quantification and elimination of all the things that can go wrong, to a strategic mindset that accepts that many things will not go according to plan, and that the organisation must be ready and able to respond to the best of its ability.  Whilst the approach of concentrating the Strategic ERM efforts on only a portion of the business will result in less attention on some areas, the investment of time on the high impact areas will pay much larger dividends for the organisation.

“What Must Go Right” will vary according to the context of each business, and can only be determined through an understanding of the business strategy. A good business strategy will have an understanding of four key elements:
* What Ambition (Vision, objectives and goals)
* Where To Play (Profit Pools where the business will focus)
* How To Win (Strategies and initiatives to achieve the objectives)
* How to Mobilise (organisation and resources to support strategies)

Any dialogue around strategic risk will be ineffective unless the organisation has a relatively strong grasp over the first three elements.  Whilst embedding a Strategic ERM process will be instrumental in developing the fourth element (How To Mobilise).

2. Harness the Leadership Team
The business strategy must be delivered through the concerted efforts of the Leadership Team.  The best chance of achieving this result is by harnessing the best the team has to offer, and by building an aligned and engaged team.

The team guiding the delivery of the strategic plan are by definition, a set of individuals that have successfully negotiated the trials and tribulations of their experiences to become a member of the current Leadership team.  These valuable experiences need to be recognised and incorporated into the ERM process.  This is achieved by using the team’s collective judgement when identifying and assessing risks, and also when determining how best to respond to these perceived risks Maximising team diversity will help to reduce the risk of group-think and ensure that a broad perspective is available.

Even if the organisation has developed a strong strategy, when participants of a strategic planning process walk out of the room without testing their alignment on the key deployment activities, the program execution could well be compromised.  The ERM process gives a legitimate space to the team to encourage a robust discussion of contrary points of view.  This full and frank discussion helps to clarify exactly where the team is aligned, where there are still underlying areas of misalignment on priorities and activities.

The opportunity for team members to have their experiences valued and their perspectives legitimised not only helps to improve deployment, but also helps to build an engaged team, who are committed to the program that they helped co-create.

3. Embed Risk Management into your Ways of Working
Risk Management is a fluid process.  What is considered a major risk today, may become irrelevant tomorrow, and conversely what is insignificant today may become a major obstacle to success tomorrow, in four weeks or next quarter.  That is why part of the ERM process needs to include a facility to check back with the Leadership Team to see if the team view has changed.

After conducting an initial ERM workshop to align the team, it is recommended that the ERM dashboard is reviewed monthly.  This thirty minute session once a month results in greater understanding, team and individual ownership, and a sense of purpose as actions are completed and risks are mitigated.

To assist in this process the ERM workbook is treated as a dynamic document where risk ratings, risks and actions are rigorously reviewed and updated.  This activity is used to focus the actions of the team throughout the year as additional pressures and actions surface.  Team members critically review the risks and alter the level of resources or actions to suit the current needs.  Additionally, the belief that “if we can crack these issues, we will deliver the Plan” creates a shared commitment and reduces “silo” mentality. This belief leads to a willing re-allocation of resources as required for the best interests of the organisation.

Being mindful of the second of the Seven Deadly Sins, this process needs to avoid the requirement for any additional resources where possible.  This can be achieved by incorporating the ERM dashboard into existing business scorecards. (We will be discussing scorecards in more detail in our next article.)

Additionally, the Leadership Team meeting schedule needs to be reviewed to determine how best to incorporate this discussion into their agenda.

Starting the ERM journey in your organisation
Prior to the commencement of the ERM journey, it is critical have the necessary support structures in place.  In particular ERM requires a passionate sponsor and caretaker of the process willing to invest the time necessary (typically Finance), plus a leader (Chair, CEO, GM) who believes in the value of ERM and provides strong and visible support.

The best time to start the ERM journey is just before the end of an organisational planning process.  This could either be a Strategic Planning process (three plus years) or the Operating Plan process (next years activities and budget).

Starting before the completion of the planning process allows the team to come to the discussions with a strong awareness of the underlying issues and rationale for proposed actions and strategies, whilst still leaving some room for movement if the team recognise the requirement for a fundamental change in plans during the ERM discussions.  Apart from providing the valuable understanding of “How To Win”, the planning process enables the team to gain clarity on the SMART outcomes that constitute success for the business (these should be Specific Measurable Achievable Realistic Time bound objectives).

To kick-off the process, a one day workshop with the Leadership Team is necessary to build a shared view of the strategic priorities, the risks facing the business and the actions required to mitigate these risks.  With the removal of all those distracting PowerPoint slides, and the focus on the strategic few levers of the business, these discussions allow for a more in-depth conversation than is typically possible during standard Leadership Team meetings and generates new insights for all team members involved.

Consistent feedback from over forty workshops has identified a handful of factors that improve the outcomes for all participants and the organisation.
* Preparation.  In particular giving team members time to reflect on the issues, and gathering input from a large and diverse team prior to the workshop are instrumental to gaining buy-in, avoiding group-think, and ensuring time in the workshop is focused on actions due to the higher level of understanding of the initiatives and risks
* Facilitation. Strong external facilitation allows the Leadership Team to concentrate on the content rather than the process.  Additionally, the “Open Floor” and use of anonymous voting in the Workshop allow team members to air views traditionally seen as too negative
* High Performing Team behaviours, such as openness to own vulnerabilities, commitment to the team winning, comfort dealing with conflict, and asking for help play a role is promoting the right discussions
* Full attendance of the Leadership Team is critical to obtain the diversity of opinion, drive strong alignment of the team to a common goal, and where necessary enable the re-deployment of resources.

Once the kick-off ERM workshop has been completed, the outcomes need to be rigorously followed up to ensure this is not just another fad or Planning compliance task.

Summary – Benefits of Strategic ERM
Businesses undertaking this process have substantially improved delivery of their strategic objectives via improved Leadership Team alignment, acceleration of the “critical few” projects, clarification of performance requirements (KPI’s), unlocking cross-functional support for the key levers and improved agility in the face of crises as they emerge.

Next time (final article in the series): Developing your business scorecards.

In the meantime, we welcome feedback from you.
Email us at enquiries@shop-ability.com.au

The FMCG Sustainability Institute (FSI) is pleased to be able to offer accredited Green Skills Training to businesses who seek to increase the sustainability knowledge and skills of their people. Courses are heavily subsided by State and Federal funding – depending on circumstances by up to 90% -  and certificate of attainment is issued on satisfactory completion of the courses.  Currently FSI offer a 1 day Introduction to Sustainability in the Workplace and a 4 day Green Skills for Business Sustainability program (This course provides the knowledge and skills to develop workplace policy and procedures for sustainability and is part of the Business Sustainability- Diploma Unit).

More information on the FSI website HERE

-  By ShopAbility for Retail World Magazine

Last time, Alex discussed measuring your business performance as part of a crisis assessment. This assumes that you’re in the right business in the first place. Ie, that the things being measured are the right things.

In the first article, Margie alluded to determining your core business proposition as a core part of determining your diagnosis and what needs curing. We’re going to explore this further here.

Why is your business here?

What business are you in? Yes, the old clichéd management questions that are currently being jokily used in a banking ad on television are the ones we’re going to dig into here.  This is the first one.

Defining your core business proposition sounds straightforward on paper but is more difficult to define simply. Define your business too narrowly and you miss opportunities and the market might move on without you, like the American railroad company in the late 1800s who defined themselves as being in the railroad business rather than the transport business. In Australia Cobb & Co did the same thing, they thought they were in the stagecoach business not the courier or mail delivery business. Defining the medium can narrow your options.

On the other hand if you’re too broad in your definition you lose vision and flounder in a morass of indirect competitors. An example of this might be if you’re a confectionery manufacturer, and you define yourself as being in the ‘happiness’ business. This puts you in competition with a whole lot of leisure categories such as toys, games, entertainment, and escape/indulgence services like day spas. Useful to look for distribution opportunities and links perhaps, but not a clear proposition for consumers and difficult to do meaningful competitive analysis.

Your business definition needs to be easily understood by your staff, your retail customers and your end shoppers and consumers. It needs to consider the history of the sectors you’ve traditionally played in and the likely future of these and allied sectors.

Keep it straightforward and free of fluffy marketing waffle. Answer the question ‘why are we here?’ by answering ‘what do we do?’ and ‘what need does it satisfy?’

Using confectionery as an example, Figure 1 below provides some levels from a category and consumer perspective to help you pinpoint how wide or narrow you want to go.

Defining your business based on needs and capabilities may uncover sector or channel opportunities. Using the chocolate example above, if a chocolate manufacturer defined themselves as being in the desserts (occasion) business as well as treats business that opens up a whole lot of foodservice applications and opportunities. Or if defined as the ‘ingredient component’ business then the chocolate can be applied to ice cream, biscuits etc.

Making the right stuff

So now you’ve defined the business you’re in, are you making the right stuff to fit that definition? What new opportunities exist?

How is the market performing? Are the categories you are in – or now want to be in as a result of your new business definition – up, down, or static?  Static or even growing share of a declining category spells death in the long term, cash cows die eventually. If you’re in this situation – can the category be turned around? What would that take?

For the categories you are or want to be in, will you drive change or follow it?

What will it take to be truly innovative, vs merely renovating what you already do with line extensions and brand extensions?

To be clear here, the majority of ‘new products’ in the FMCG sector are flavour or pack size variants of existing brands and lines, and therefore have a reasonably high degree of cannibalisation and substitutability. Trying to turn your company around by doing line extensions is like trying to save yourself rich. It’s incrementalism, and perhaps playing the existing game a bit better, but it’s not changing the game.

What is the role of brand to you? Do you need more brands or new brands? Should you be a company playing in brands or in private label, or both?

How extensible are your brands? Traditionally FMCG uses umbrella and sub brands (Arnott’s Tim Tam for instance) where companies like Virgin use the same brand across diverse categories (airlines, credit cards, mobile phones).

If you’ve identified new category or sector opportunities as a result of your business definition you need to determine whether your existing brands can play there or whether you need new ones, or at least new sub-brands.

How full is your innovation (not renovation) pipeline?

Doing the right stuff, for the right people

Once you’ve defined your business and therefore product and brand opportunities, it’s time to review who your customers and consumers should be, and the best options for servicing them.

Who are your target consumers, based on the occasions and categories you’ve identified? Where are they? Where will they buy and consume your product? What are the implications of this for who your retail customers should be?

By reviewing your consumer and shopper targets there will be both channel strategy and  route to market implications. This may throw out opportunities to amend your supply chain, eg to backward or vertically integrate. Or alternatively, to divest or outsource elements of your supply chain so you can be more focussed on manufacture.

This is also an opportunity to identify all potential channels you could be in and to size/prioritise them based on what the product/brand offer in each would be and what the degree of difficulty is in servicing them – barriers to retail entry, competitors etc.

This requires a review of the parts of the route to market you operate in – manufacturer, wholesaler, distributor, reseller, retailer.

In Summary

The above is a set of thought starters to get you thinking about your business at a broader level and get you out of the day-to-day. This type of review should be done every few years, not just waiting until the market has changed and the train has left the station.

Looking at your business purpose, your product offer and your customers (both consumer and retailer) is core in determining whether you’ve still got the ladder against the right wall, or even in the right room.

Next time: Risk Management. In the meantime, we welcome feedback from you. Email us at enquiries@shop-ability.com.au

By ShopAbility for Retail World Magazine

In the first article, Margie discussed how Business Regeneration differs from improving your everyday operations, the types of areas Business Regeneration considers, and the need for diagnosis and a regular ‘health checkup’.

Here we’re going to further this theme with an outline of the symptoms of a business in or approaching crisis, to help you diagnose where your business is, and which areas might need ‘curing’.

Divining signals using all six senses, not just financials

In interpreting signals that the business model has failed or is under intense pressure to survive, the obvious place to start is with financial statements, or amongst the market data you collect.

However, a true investigation requires the use of your six senses to spot the symptoms, so we’re going to outline analysis from a number of angles.

That said, we’re going to start with financials anyway.

Financial Lens

1. Start with the macro view
Review current performance against the competitive set.  This can quickly indicate areas where the business model may be working well or highlight area of risk of failure. Key indicators include:
* Total Sales $ (scale advantage)
* Organic Growth % (wining with the consumer)
* Total Growth % (tapping the sources of growth effectively)
* Gross margin % (effective buying and efficient operations)
* Earnings % (sustainable overheads and marketing investments)
* Cash $ (funds for the future)
* Sales : Total Assets (asset utilisation)
* Sales : Employee (workforce productivity)
* Sales : Equity (financial leverage)

Sources of industry comparisons include web searches (eg www.ibisworld.com.au,  http://biz.yahoo.com/ic, ), Brokers Reports, Industry Groups.

2. What’s the trend, and is it your friend?
It is critical to look beyond a one year view and understand the business trajectory over a multi-year timeframe (say 4-6 years):
* Does Sales Growth oscillate between strong growth and stagnation (perhaps the impact of trade loading?)
* Are Margins on a steady decline or is recent performance an outlier?
* Is the sudden improvement in cash delivery sustainable or has the business turned off the tap on business regeneration activities?

People now understand the power of compounding interest on their superannuation (or at least that was the theory prior to the GFC!).  This same logic applies to businesses.  Over a five year period, a business’ performance can increase many-fold simply by delivering something as small as a 1% annual improvement in each of growth, cost reduction and asset utilisation.

3. The  Cash Crunch
The proximate cause of business failure is running out of cash.  But the signs should appear in the financial reports in the lead-up to this event:
* Declining cash flows (absolute $ or as a % of sales)
* Increase in accounts receivables – income recognised but cash not recouped. This may indicate the business taking on customers with increasing risk in order to stay afloat in the hope they don’t go bust. If this strategy is unsuccessful it will lead to higher risk of delinquency
* Decline in the ability to quickly service short term liabilities.  A useful measure is the Quick Ratio which is calculated as (Cash + Marketable Securities + Accounts Receivable)/Current Liabilities. The relationship with the bank is important here and sometimes businesses have not invested in those relationships whilst times were good. The bank can be your best friend and very valuable in times of need, as long as they truly understand you have a good strategy and business model
* Increase in Current Liabilities due to lengthening payment of suppliers. Whilst you want to increase you current liabilities and hold on to your cash, you need to ensure that the business does so without damaging relationships or the viability of suppliers
* A poor or worsening debt rating. Check reference agency watchlists for this.

4. Adverse Selection, aka Doing the Wrong Stuff
A common trap that can befall a business is the attraction of the wrong customers or delivery of the wrong products or services.  A common cause of this phenomenon is the conscious sacrificing of margin in the hope that the business can make it up on increased volume or by up-trading over the long run.  Sometimes the introduction of a product or service leads to the business incurring costs to service customers that were not envisaged.

Reviewing sub-segment margins can identify this business model failure.  Are there particular geographies, customers, or products that are experiencing a performance decline? Or is sub-segment performance constant, with business mix the cause of the decline?

5. The Egg Cup Game
Contrary to the popular belief that accountants are boring and lack any creativity, the Financial Statements provide many opportunities to show discretion.  Application of this discretion can be difficult to identify even with very detailed accounting standards and guidelines that have evolved over many years, but taking a multi-year view makes the task a little easier.

Take the example of accruals and provisions on the profit and loss.  Businesses use accruals and provisions to recognise estimated expenses or future liabilities they know have been, or expect with some certainty to be, incurred in relation to the operations of the business but for which they have not yet been invoiced or there is not a clear final calculation of the cost. A significant change in the way these items are reflected in the profit and loss or balance sheet could indicate a business scrambling to avoid delivering bad news or hiding the true performance of the business.

A review of the financial statement notes should identify if there are any changes in accounting policies such as revenue recognition, depreciation rates and off-balance sheet debt.

6. Sabotaging the Future
As a business starts to feel the impact of a failing model, it pulls the easiest levers it can first.  Typically these levers relate to areas where the pay-offs are more ambiguous and longer term.  Whilst this is appropriate to meet various short-term goals, the failure to invest in these longer term areas will compromise the organisation’s capabilities:
* You slash Marketing and advertising budgets on a continuous basis
* Sustained investment in fixed assets lower than depreciation (follow up with visual inspections of the assets … are they run-down/tired?) Ian McLeod, the Coles chief, recognised this recently in an article in BRW (May 14) and Coles have now made significant investment in their checkouts and scanning technology
* Your innovation pipeline is empty, and you’re not sure where your future growth will come from
* You pull money out of staff development and training to shore up the immediate term, leading to higher staff turnover in the medium term.

Market Lens

Look at your business vs similar businesses in the sector. Have similar businesses in your industry fallen over recently? What happened to them – what can you avoid? Is the industry highly sensitive to economic cycles – do businesses fall over at regular and repeated intervals?
7. Customer Failure
One of the key indications of a failed business model, is the failure to convert or retain customers.  Depending on the category and your access to data, there are a range of metrics that could indicate a failure with your customer base:
* decreasing share of shelf
* increasing trade spend % of sales
* falling market share
* customer repurchase rate declines
* declining customer satisfaction
* falling size of sales ($/order, $/unit, $/kg)
* increasing finished goods inventories
* increasing returns/write-offs.

Look, Listen, Touch, Taste and Smell
In conjunction with a review of financial or market data, you should use all your experience and judgement to help you spot those lurking inconsistencies or issues.

Whilst there is a lot to find in the data that you can look at sitting at your desk, there are a lot of other inputs you can only get from getting out and talking to people within the business (sales, customer service, non manager level) and working closely with customers and suppliers.

8. “People are your most important asset”
A business cannot operate without people, and a motivated workforce has been shown to be an enabler to superior business performance.  Whilst a review of staff turnover levels or conducting employee “engagement” or satisfaction surveys can provide a measure of science, there is no substitute to looking and listening to the staff in their work environment.  Do they appear happy and involved in their tasks? Do they take pride in their work? Are customer facing staff providing the appropriate level of service?

9. Compromising Safety
Far from being a cost impost, an uncompromising stance on quality and safety will ensure that the company is there for the long haul.  Walk around the office, the warehouse, the factory, and the store with a critical perspective:
* Are there clearly visible signs of procedures and processes in place
* Is the equipment protected to eliminate serious injuries
* Are there shortcomings in the design of the area / equipment
* Is hygiene an issue (particularly in Food / Chemical businesses)
* Are there any intriguing odours
* Is there a safety and Quality Assurance officer?

10. “No Bad News” Culture
Perhaps the hardest obstacle to overcome is an organisational culture that is unwilling to recognise its shortcomings and deal with the situation that presents itself.  Some of the tell-tale signs of this culture could include:
* Unanticipated results (management unwilling to communicate until it is too late)
* Managers fired for poor business results (the messenger gets shot – who wants to be the bearer of bad news?)
* Change in accounting policy.

In Summary

The above questions will help you determine where your business sits in the STARS model Margie discussed:  are you in Start-Up, Turnaround, Realignment or Sustaining Success?

Now you’ve done your diagnosis, what needs curing?

Next time: Putting your ladder against the right wall – Getting your core proposition right. In the meantime, we welcome feedback from you. Email us at enquiries@sh-opportunity.com.au

The Retail World FMCG Sustainability Barometer Survey results are now set for release on 16 March in Retail World Magazine. The report is a comprehensive study on industry sustainability progress, conducted by the FMCG Sustainability Institute through the support of our sponsors Retail World Magazine, Jigsaw Strategic Research and i-Link Research Solutions.

A total of 271 respondents completed the 10 minute online, self-completion questionnaire conducted 11 September – 1 October, 2008, representing a robust sample for the industry as a whole.

There was:

• a good mix of business sizes (over half have less than 100 people, 14% have over 1000 people) & industries with an ANZ focus
• an even spread of turnover  – approx one third were $100m+, while one third were less than $10m
• a breadth of respondent positions  – approx one fifth were CEO/President/managing director and another fifth were General manager/manager

Results will be published via Retail World Magazine on 16 March, followed by the full report being available for free download from the FSI website and the websites of our sponsors and partners.

The FMCG Sustainability Institute (FSI) is a joint initiative of ShopAbility and EcoSTEPS. The charter of the institute is to provide thought leadership, research, education and advice on Sustainability to the Australian FMCG and Retail sector.

To find out more about our services, visit our website

The FMCG Sustainability Institute will be involving conference delegates in the Retail World FMCG Sustainability Barometer Survey, and providing an update on the study at the conference.

More details on the conference:

13 Great ‘Sustainability’ Topics
13 Great Speakers Dedicated to Sustainability

• Sustainability initiatives that have been successfully deployed in Coles and what to expect in the future for environmental concept stores
• Guidelines and things you need to be aware of when tackling the issue of sustainability – Deloitte Corporate Responsibility Practice
• Using telecommunications solutions to reduce energy intensity and emission footprints while enhancing shareholder value – Telstra
• Sustainability initiatives employed by a leading beverage and food company – Coca Cola Amatil
• Research; International and local case studies
• Tools for designers to integrate environmental considerations into their merchandising displays using eco design strategies and life cycle assessment data – RMIT

Date: October 22, 2008
Time: 7.30am till 12.30pm
Venue: Pavilion (AJC Convention Centre) at Randwick Race Course, Sydney

Tickets available online – Early bird price $95.00 + gst
(Standard pricing from 12 September 2008 $125.00 + gst)
BOOK NOW

View the Program Outline here

The conference is an initiative of the POPAI Sustainability Committee, with which the FMCG Sustainability Institute is pleased to be affiliated.

First cab off the rank is the Retail World FMCG Sustainability Barometer Survey; the most comprehensive study yet on industry progress, conducted by the FSI through the support of our sponsors Retail World Magazine, Jigsaw Strategic Research and i-Link Research Solutions.

It aims to determine where the collective Australian FMCG and Retail industry is at in relation to environmental, social and economic sustainability.

Companies will be invited to participate in the online survey in the coming weeks. The FMCG Sustainability Institute will also personally contact a number of companies for in-depth interviews.

Outputs of the research will be used to:

1. Identify what the burning issues are;
2. Determine what companies need to focus on (implications);
3. Provide a form of benchmark for suppliers and retailers; and
4. Identify gaps in current thinking.

Results of the survey will be published exclusively in Retail World Magazine in late 2008. The full research report will subsequently be available via the websites of Retail World Magazine, Jigsaw Strategic Research, i-Link Research Solutions and the FMCG Sustainability Institute.

For more information about the survey, visit
http://www.fmcg-sustain.com.au/help/research/sustainability-barometer/

For further information about the FMCG Sustainability Institute and its services please visit:
www.fmcg-sustain.com.au or contact Lee McAllistair direct on 0414 941 585 enquiries@fmcg-sustain.com.au