Archive for February, 2011

when cost cutting doesn't pay

when cost cutting doesn’t pay

February 25, 2011  |  knowledge, leadership, main blog, management  |  5 Comments

We’re finding it harder to compete in Australia! Higher costs (particularly for labour) and a strong currency are providing serious challenges in manufacturing, primary industries, tourism, and retail. A typical response to the problem is to start cost cutting, rather than seeking higher prices – because a strong and well marketed value proposition with a point of difference generally takes longer, and is harder, to achieve.

The entry of James Hardie into the US market is a great example where cost reduction made the difference between market skimming and market penetration. Working with Australian researchers, the US operators and engineers halved the cost of production of “Hardiplank” (fibre cement siding that looks like wood) to levels that had previously been seen to be impossible. Not only did they achieve a penetration strategy, but they “saw off” four new entrants – all with deep pockets who lusted after the market that had been created.

The pursuit of lean manufacturing and smarter ways of doing things in business, like the Hardie example, is widely accepted. However, cost cutting across the board can be a problem. Some CEO’s (often with accounting backgrounds), adopt unfocussed slashing across the board. Handled inappropriately and insensitively, cost cutting can trash morale and stifle creativity, as well as negate the strategies that drive top line revenue. The key to sensible cost cutting is to make decisions based on contributions to profitability, rather than total cost as such. It’s a bit like sorting out the good cholesterol and the bad cholesterol.

Under short term pressure, I’ve seen how some managers and owners have shot themselves in the foot with ill-advised cost cutting:

  • A tourism business where cost cutting in food and beverage diminished the overall customer value proposition. Total savings were relatively small in the context of the resulting loss of word of mouth and customer satisfaction – both critical mid to long term business drivers.
  • A public sector organisation where all the perceived “nice to haves” were cut – things like green plants, art work, fruit and Christmas parties. Losses in productivity from low morale outweighed any cost savings. I also found out the other day that studies have shown a 17% productivity improvement from greening an office!
  • A manufacturing business which had reduced operating costs as well as sales and marketing capacity. While the new business model was sustainable operationally, the sales pipeline dried up due to insufficient customer interface and new business development.

Some of these comments may appear obvious, particularly with the benefit of hindsight. However, too often, management teams and boards get so caught up in the short term pressures for outcomes and quick fixes, that they take actions like the three examples above. It happens!

It’s not too long ago that the four big Australian banks, in a cost cutting frenzy, lost touch with the human element, closing branches and increasing call centres. These same banks are now falling over each other to restore relationships with customers.

My advice then is to chase lower operating costs, but not at the expense of our most valuable asset – people (actually good cost reduction programs make positive motivation an integral part of the process). Nurture, develop and reward talent, and if there are pay cuts, make sure the executives take the medicine as well. Ensure that the drivers of profit and revenue (like relevant R&D and marketing) are not impacted to the extent that they will damage sustainability.

 The objective should to achieve what Catherine de Vrye advocates in her excellent book “Paperclips don’t grow on trees” and add value, not cost, to the bottom line. In tandem with this, ensure that you read how the customer is reacting at every point along the journey.

choosing and sustaining a life partner

choosing and sustaining a life partner

February 18, 2011  |  knowledge, life, main blog, motivation, philosophy  |  2 Comments

A reporter asked a man who had been married for 70 years what the secret to his long marriage was. He replied, “Two words….Yes Dear!” 

We celebrated my parent’s 60th wedding anniversary last year and while my dad does offer plenty of “yes dears”, the two of them are also sustained by a mature, devoted, lasting love that is almost beyond analysis. Yet we all find it hard not to go there – analysing what makes successful and unsuccessful relationships – looking for the recipe, if one exists.

Maybe it starts with us as individuals. In the same way that the flight attendant tells us to “put our own oxygen mask on before helping others”, the ability to care for, and share with, a life partner depends a lot on how well equipped we are for the journey ourselves.

Relationship counsellors often talk about the ability of a couple to live in all four rooms in their relationship – the physical, mental, emotional and spiritual rooms. Their proposition goes further to define the qualities which enable “mastery” of each room – discipline in the physical, wisdom in the mental or intellectual room, compassion in the emotional and integrity in the spiritual. Why I am therefore not surprised that my parents are one of those rare couples who exist comfortably in all four rooms?

So, even if we have come reasonably well equipped, having even modest doses of discipline, wisdom, compassion and integrity, how do we find a like-minded soul?

The world is awash with books, tools and advisers making a living from solving this question. The internet has certainly made it easier to meet more people, and of course, lady luck still plays a big role in bringing people together.

At the risk of trying to simplify very complex issues, I have a couple of thoughts to share about partner selection, borrowed from others, which may be worth reflecting on:

  1. A friend of mine, who has relationships at top of her mind right now, says that she asks just two questions about a potential partner. They are – “Would I want to have a child just like him?” …and, “Would I trust him with my life?” Two positive answers are needed to take the next step.
  2. Others have suggested that for successful partnerships, three prequisites must exist in combination – Chemistry, Communication and Commitment. Sounds pretty good…..but what if one is missing?

On relationship maintenance and nurturing, Kirsten Cronlund, founder of Lemonade from Lemons, adds another dimension in understanding heterosexual relationships. She suggests that the two secrets that are important for men to transform (or achieve successful) relationships are – # Secret 1. Women feel nurtured when men assist with tasks. # Secret 2. Women long for men to welcome their influence. She also has two secrets for women. # Secret 1. The goal of men is to reduce complexity in their lives. # Secret 2. What men want most from women is to feel appreciated. Does that resonate?

Then there is the much discussed difference between romantic love and mature love. When the sparks stop flying and the course of ordinary life weakens the intensity, relationships can be challenged. Individual needs and differences conflict and lead to frustration. Flaws become pronounced, criticism increases and sexual excitement abates. (Remember that joke about the marbles in the jar!)

Lucky couples who get through this phase and reach mature, sustaining, love find that understanding is augmented by acceptance. Tolerance is reinforced by patience and respect for differences. Commitment is redefined by a determination to communicate and compromise, rather than to leave. Couples in mature love embrace openness, accepting that they are “delightfully flawed” and feel safe and satisfied within the space they’ve created. There can also be the X factor – devotion, where bottomless joy comes from giving to another, the peace surrounding that giving and the deep understanding of connection. This is lasting love.

fulfilment from creativity

fulfilment from creativity

February 11, 2011  |  knowledge, life, main blog, motivation, philosophy  |  1 Comment

A friend asked me recently to nominate the things that had given me most fulfilment in life. I asked him for some time to reflect on the question and reverted the next day.

My list went something like this, “Creating a family with my wife; building a house together;   establishing lupins as a new crop with a team at Rutherglen; being part of a team that transformed Corinna from a ghost town into an eco-tourism destination; and the pleasure derived from photography over many years.”

 It wasn’t until I had articulated these experiences that I realised the glue, the common theme, running though each of them. They aren’t about achievements at work or winning competitions. They all involve creativity, and each of them about creating something that has personal interest and meaning.

Greg Barber’s interesting blog suggests that creativity can be related to the newer western principle of making products, building things for a purpose, or the expression of scientific or technological innovation.  Whereas in older cultures, there’s always been an undertone of creativity playing a role in personal fulfilment, private goal setting, and taking an inner journey. My own list involves both aspects.

Creativity in either context often involves a heightened state of consciousness. Things appear to be more vibrant, more alive; colours are vivid, sounds more pure. I love Alan Alda’s quote, “The creative is the place where no one else has ever been. You have to leave the city of your comfort and go into the wilderness of your intuition. What you’ll discover will be wonderful. What you’ll discover is yourself.”

Add meaning and understanding to creativity – in your own eyes and through those of others – and it is possible to achieve deep fulfilment. In my own case, the meaning in the five nominated experiences is, in part, related to the fact that people, products and experiences have been created that are likely to outlast my short time on this planet. They were also achieved through co-operation with other people. What has fulfilled you most in your life?

Featured image is one of the refurbished original miner’s cottages at Corinna Wilderness Experience in Tasmania

off the beaten track in perugia

off the beaten track in perugia

February 7, 2011  |  travel tips and tales  |  2 Comments

The Rock of Ages and I floated through eight warm days in Perugia in September after the hordes of visitors had returned to work. We lived and breathed local culture, practising our Italian and soaking up the ambience and spirituality of a grand place. Perugia is a fairly large Umbrian city of 150,000 permanent residents and 30,000 itinerant students. We stayed in the heart of Centro Historica, which seamlessly and sublimely integrates hundreds of years of history with modern Italian commerce.

 From our base, we spent five days experiencing Perugia’s historic buildings, enotechas, pizzerias, boutiques and theatres, and day trips by train to Assisi, Foligno, Arezzo and Spello. The trip to Arezzo passed Lake Trasimeno, with some delightful views of rural life in northern Umbria and southern Tuscany. Lingering themes of Perugia include:

 • Brilliant food, often of the slow, or peasant type that is authentic to the area. Following the Italian bible on slow food, Osteria d’Italia, we discovered dishes like bean soup and pork in wild fennel. Good quality red is abundant and good value.

 • Classy, well dressed people….women talk of “Italian stallions”, but the women are at least as classy – well dressed with fine features.

 • The strength of religion and Catholicism in a town connected to the modern world. We took a mass (as imposters) at the famous Catedral – celebrated in Italian – and with a feeling hard to convey in words. The organ music and singing was moving and made me weep, it was so special.

 • The appreciation of music running richly through the veins of all Perugians – from school band concerts in the main piazza, to the free jazz and classical concert series, to the Italian folk bands having fun at the farmers markets. The city lives and breathes music and most kids carry instruments to school.

 • Heritage manifested in buildings; the demeanour of well-informed townsfolk, and the stories that people continue to tell.

 • An optimistic and calm spirit that is subtle yet pervasive. The locals may have trouble articulating this. It may result from a combination of religious faith, family values, enjoyment of simple pleasures and supportive communities.

 • Unabashed animation and debate among friends, family and colleagues. Hand waving and aggression soon give way to hugs and kisses – which is no different in Perugia to other parts of Italy. Perhaps it’s more about the process than the content.

• A well organized and generous tourism information facility with capable English speakers supported by a wide range of collateral material. For example we were provided with a detailed map of Umbria produced by the Touring Club of Italy – probably the best free map I’ve ever seen.

 • An emerging clash between the time honoured appreciation of subtlety, class and heritage, and the new commercialism fuelled from the west that is threatening to make this another version of any global town. Starbucks in Italy? Sadly, it’s a reality!

 • Despite a generous approach to refugees and a humanitarian tolerance of homelessness, there is a severe threat to the status quo with under privileged, beggars, drug addicts, gypsies and refugees making their mark on the city, often clashing with the romantic expectations of many visitors.

Treat yourself to a few days in and around Perugia…off the beaten track, when the numbers subside and when the weather is still warm. Truly memorable!

reality of climate change - the trees don't lie

reality of climate change – the trees don’t lie

A few weeks ago, I was standing in awe of the forest giants in the world’s second largest temperate rainforest, the Tarkine, in Tasmania’s north-west. Little did I know that these trees are silent recorders of the environment. Not until Mike Peterson, an experienced forester, unlocked the secrets of dendrochronology – or tree ring analysis.

Many trees produce a single ring of growth in a year. Because climate and environment affect the way trees grow, the size of the annual rings varies from year to year. Dendrochronology requires knowledge of the exact years during which individual rings grew, which is achieved by carbon dating technology. In Tasmania, 1500 year old Huon pines from Mount Read have been cored with a small 5mm increment borer, and with other samples from dead tress and partially buried logs in the stand, it has been possible for tree ring scientists to develop a chronolgy of more than 4000 years.

Climatologists use the statistical association between ring width and weather data to estimate climate variation in the past. Mike sidled up to the back of his ute and pulled out some cores from old Huon Pine specimens that dated back more than 1000 years. He then showed me his published work, in conjunction with the University of Tasmania, on temperature variation over this period. Guess what? There was about 0.5 degrees Celsius of average variation for the entire 1000 year period until we get to the 1960′s. From that time on, the tree rings suggest that temperatures have climbed an incredible 1.0 to 1.5 degrees Celsius in an unbroken upward trend line. The trees don’t lie. They are detecting and recording global warming, deep in the Tasmanian rainforest.

I was amazed at what I’d been shown, not that I need any convincing about global warming, and the contribution of man to it – and yet the sceptics continue to give our decision makers licence to stall action. John Quiggin (AFR Feb 3, 2011 – no hyperlink because of Fairfax content charging policy!) captures my perspective when he argues that “the spoilers generally lack the understanding of basic statistical analysis of trends in time series, or the fundamentals of the greenhouse effect. Worse, they haven’t bothered to learn”. Regardless of their scepticism in the light of overwhelming scientific evidence, it would be pretty hard for these people to mount effective arguments against the evidence that I saw – presented first hand by the mighty Huon Pines of  Tasmania.

If you’re really interested in the subject, then you might even be interested in attending the second Asian Dendrochronology Conference in Xian, China in August 2011! And I’ve just heard that the next major international conference “World Dendro 2014″, will be held in Melbourne, with several excursions and field studies planned for Tasmania.