Business Strategy 2015 by Key Media

SPECIAL REPORT FOURTH EDITION

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BUSINESS STRATEGY YOUR COMPLETE GUIDE TO BUSINESS SUCCESS IN 2015

PLANNING AND STRUCTURING YOUR BUSINESS

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BRANDING AND CHANGING YOUR APPROACH TO CLIENTS

DISRUPTING DIGITAL DISRUPTION THROUGH INNOVATION

LEADING A TEAM WITH CHARISMATIC COMMUNICATION

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EDITOR’S LETTER

Contact the editor: sam.richardson@keymedia.com.au

Working on the business

elcome to the fourth edition of MPA’s Business Strategy special report. This annual supplement might look like your regular MPA, but it’s packed with high-level opinion and analysis from business experts, world-class academics and the leaders of Australia’s mortgage industry. In fact, this supplement is our version of ‘working on the business’. Your regular MPA suggests new revenue streams, interviews the industry’s top brokers and forecasts direct threats and opportunities in the short term: the next 12 months. This supplement, on the other hand, looks to the medium term. The articles you’ll read over the next 64 pages may not even mention broking, and that’s a deliberate move – they’re intended for business leaders. This year we’ve brought together academics from Harvard Business School, Oxford University’s Saïd Business School and Melbourne University, and expertise from Deloitte, brand consultancies, futurists and regular contributors to MPA. I’m particularly grateful to the industry leaders who contributed their thoughts on a range of issues, coming from all the major banks, a non-major, a non-bank, top aggregators, a franchise and a technology provider. We hope the expertise in the supplement helps you run your business well, although that’s not the ultimate objective. We’re looking for innovators, and we hope the cutting-edge research and powerful industry views you’ll read here encourage you to push your business in new and novel directions; it’s time to end business as usual. Sam Richardson, editor, MPA

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BUSINESS STRATEGY 2015

CONNECT WITH US

CONTENTS PART 1

STRATEGY & PLANNING 08 Strategy

Internal and external plans

12 Diversification

Making radical changes to your direction

16 Exit planning

Building the value of your business

Got a story, suggestion, or just want to find out some more information? twitter.com/MPA_Australia www.facebook.com/ MortgageProfessionalAU

ALSO IN THIS SUPPLEMENT 01 Editor’s letter An introduction to the supplement

04 Contributors Our academic and industry experts

64 Helpful Info Further reading and resources

PART 2

SALES & MARKETING 22 Rebranding

Why, how and when to rebrand

26 Marketing

Five essential do’s and don’ts

30 Digital experience

Seamlessly connecting with customers PART 3

PEOPLE & MANAGEMENT 34 Organisation design

Restructuring your business

40 Leadership

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44 Performance management

NOW ONLINE:

Through all your communication channels Focusing on strength not weakness PART 4

SMART BUSINESS 48 Executive education

There’s more out there than the MBA

52 Digital disruption

How to respond to online competitors

56 Career models

Empower junior staff and free-up talent

60 Outsourcing

Managing your outsourcing relationships

Whilst our Business Strategy Report only appears once a year, you can find a large collection of business strategy tips on our website mpamagazine.com.au, many of which don’t appear in the magazine. You can also sign up to our free newsletters for market news, product updates and analysis, including extracts from the magazine. You can also watch our roundtables and other events in MPA TV.

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CONTRIBUTORS

CONTRIBUTORS A rundown of some of the top business and academic minds who added their views and expertise to this year’s Business Strategy supplement

RAJIV LAL Rajiv Lal is Harvard Business School’s Stanley Roth professor of retailing. He has developed and taught parts of the school’s marketing modules, a core part of Harvard Business School’s MBA program. He has previously served as faculty chair for the Global Management Program, and currently co-chairs the program on Building and Leading a Customer Centric Organisation.

MICHAEL SMETS Dr Michael Smets is associate professor of management and organisational studies at Oxford University’s Saïd Business School. His research focuses on management and career models in law and reinsurance, and has been mentioned in the UK’s Financial Times and academic and industry journals. He teaches modules on strategic management, innovation and business development.

OLIVER FISCHER Oliver Fischer is head of the Centre of Expertise for HR at German mass media corporation Bertelsmann. Previously he was a fellow in strategy, leadership and change at Oxford University’s Saïd Business School, and he continues to work with the school as an associate fellow.

ERIK MOOI Erik Mooi is a senior lecturer at the University of Melbourne and works on topics such as outsourcing, inter-firm contracting, technology licensing, and franchising. He has published

his research in the Journal of Marketing, the International Journal of Research in Marketing, the Journal of Business Research, and others. He is also the author of A Concise Guide to Market Research, published by Springer.

PETER GAHAN Peter Gahan is director of the Centre for Workplace Leadership, and professor of management in the Department of Management and Marketing at the University of Melbourne. He has held academic positions at Monash University, Deakin University, the University of New South Wales, the University of Southern California, Los Angeles, and the European University Institute.

ELHAM GHAZIMATIN Elham Ghazimatin is a doctoral researcher at the University of Melbourne. Her research interests include inter-firm contracts, governance mechanisms and opportunistic behaviours, in the area of outsourcing relations in particular.

STEFAN KAZAKIS Stefan Kazakis is a renowned business strategist, sought-after presenter, and founder of the Business Benchmark Group, which helps clients from a variety of industries seize opportunities to achieve ongoing business success and substantial profit growth. Stefan is also the author of From Deadwood to Diamonds (Major Street Publishing, $29.95) and has over

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CONTRIBUTORS

20 years’ experience in running successful small to medium sized businesses, including a family business that he took from near bankruptcy to a multimillion-dollar business. For more information, visit www. businessbenchmarkgroup.com.au or email info@businessbenchmarkgroup.com.au.

information or contact Tim directly at tim@ winnersatwork.com.au.

PAUL NELSON Paul Nelson is the managing director of BrandMatters. Paul is an accomplished international marketer with over 20 years of marketing and brand management experience in a diverse range of industries. Paul established BrandMatters in 2002 in order to satisfy the need in the market for a strategic yet results-focused brand and marketing agency.

DAVID BROWN David Brown is the lead partner for human capital at Deloitte Consulting. He has over 30 years’ experience in the human capital space in both corporate HR and advisory roles. David has spent 20 years in lead HR roles at major multinationals such as Eastman Kodak, SmithKline Beecham, Exxon, Standard Oil and Goodman Fielder. He has worked for the last 13 years in advisory roles, including as managing director of Hewitt Australia’s HC consulting business, with the last four years spent at Deloitte Consulting.

ANDERS SÖRMAN-NILSSON Anders Sörman-Nilsson (LLB MBA) is the founder of Thinque, a strategy think tank that helps executives and leaders convert disruptive questions into proactive future strategies. As an Australian-Swedish futurist and innovation strategist he has helped executives and leaders on four continents to map, prepare for and strategise for foreseeable and unpredictable futures. Visit www.thinquetank.com and www.blog. thinque.com.au.

ROLAND HANEKROOT Roland Hanekroot is a highly experienced business coach and mentor for small business owners, and the author of The Ten Truths Books for Business Owners. Download the latest of Roland’s books, The Ten Truths for Making Business Fun (and building a business that sustains you for years to come), for free from www.funinbusiness.biz, or see www.newperspectives.com.au for more information.

TIM BAKER Dr Tim Baker is an international authority on performance in the workplace and author of six books on the subject. Tim was voted one of the 50 Most Talented Global Training & Development Leaders by the World HRD Congress in 2013. He has conducted over 2,430 seminars, workshops, keynote addresses and coaching programs to more than 45,000 people in 11 countries across 21 industry groups. Go to www.winnersatwork.com.au for more

• • • • • • • • • • •

And a huge ‘thank you’ to the industry leaders who contributed their experience and opinion to the ‘industry view’ sections within the articles: Sam Boer, general manager broker sales, CBA Tim Brown, CEO, Vow Financial Kim Cannon, managing director, Firstmac Mark Haron, director, Connective Tony MacRae, general manager mortgage broker distribution, Westpac Wayne McCartney, general manager, Loanworks Technologies Melissa McCarney, general manager group marketing, Mortgage Choice Stephen Moore, CEO, Choice Aggregation Services Phil Quin-Conroy, CEO, PLAN Australia Brendan Wright, CEO, FAST Keiran Evans, head of third party relationship channels, ANZ

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PART 1 PART

STRATEGY & PLANNING

08 STRATEGY

Internal and external business plans

12 DIVERSIFICATION Making radical changes to your direction

16 EXIT PLANNING Building the value of your business

INDUSTRY VIEWS: Brendan Wright, FAST, and Tim Brown, Vow Financial

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STRATEGY & PLANNING

BUSINESS PLAN

FAILURE TO PLAN MEANS PLANNING TO FAIL You can’t win in war without a battle plan and you can’t win in business without a business plan, according to Roland Hanekroot

PLANNING IS CRUCIAL. No general has ever won a war that didn’t have a plan in place. Yet the famous general Von Clausewitz stated “No battle plan ever survives the first contact with the enemy”. However, if planning is that crucial, why is it that so many business plans, once written, never get looked at again? And why do so many business owners have such strong resistance to business plans (even if they know they ‘ought’ to have one or update the one they wrote a few years ago)? The first thing to understand is that there are two distinctly different reasons to write a business plan, two different functions, if you will: internal and external.

EXTERNAL PLANS In most cases, when we think of a business plan, it is more of an external document which is used to communicate to a third party what the current state of the business is, what the future of the business is expected to be and what the future needs of the business are. This type of plan is usually formulated in order to

get money, whether it is from a bank, an investor or to impress a new business partner. This type of external plan may also include a balance sheet, profit and loss and cash flow, as well as an executive summary, various supporting documents, and addenda by accountants or other advisers.

Useful as they may be in order to gain finance for your business, external business plans have little or no impact on the running and direction of the business on a day to day basis They also tend to be impressive looking documents, presented in nicely bound folders and can cost thousands of dollars to produce. Once the loan application has been made, the chances are they won’t get looked at ever again. Well, until the next time the bank needs to review it and you rush around trying to update the information contained within it.

Templates and sample plans Useful as they may be in order to gain finance for your business, external business plans have little or no impact on the running and direction of the business on a day to day basis. Your accountant, business advisers and your bank will be able to provide you with standard templates and samples of this type of business plan. You can choose to complete this yourself,

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I have seen whiteboards with different coloured sticky notes all over them, mind maps on computer screens and plans that were all expressed in one-word statements. All of them were successful as they were dynamic documents which were being used on a day to day basis. So, how do you go about writing a living and breathing effective internal business plan? The simplest process I know is to get yourself a piece of paper or a bunch of yellow stickies, a white board, turn your phone and email off for half an hour, make yourself a cup of tea and ask yourself the following questions: What is most important to me in my business? Aim to name your top three What gets me most excited in my business? What do you get out of bed for every day? What does my business uniquely exist for and why would anybody else care about that? (Hint: it’s not money and profit) Who are our target customers? What promise do we make those customers? How do we make money, sustainably? What are my big goals, 10-15 years, three years, this year? What are the major things to focus on to achieve my goals, this year?

or if you need to apply for a loan or talk to an investor, I suggest you do get your accountant to help you create one which shows your business in the best light. However, just to make it crystal clear, the external business plan does little to motivate you and drive your business forward.

INTERNAL PLANS Internal plans exist to engage people in the organisation in the operations, strategy and focus of the business on a day to day basis. They are live documents and are placed on business owners’ desks where they can reach them easily. They are being constantly changed and updated and usually have coffee stains all over them. Internal plans are often short, sharp

documents with mostly bullet points or oneword descriptions. Ideally they fit on one page. If you need more than two pages it means you haven’t tried hard enough yet (and don’t cheat by going down to 6pt font with 2mm margins). The truth is that it doesn’t matter what the actual business planning document looks like. Effective business planning isn’t about the document at all. It’s about the process of planning. The word ‘planning’ is a verb, not a noun, and this is why a business plan should live on everyone’s desk and have scribbles in the margin. It should also be constantly updated in monthly meetings and revised and re-written, at least every year (or more often in fast-growth businesses).

The outcome of answering these questions and putting the answers together on a single page or white board or mind map is now the basis of your living Internal Business Plan. Answering those questions for yourself and with your team, succinctly and committing to updating the answers every month, will mean your business and your life will never be the same again… I promise you. The most important take-away If you take nothing else from this article, I hope you’ll remember this: a great plan is one that is started and then is worked upon at least monthly. Roland Hanekroot is a highly experienced business coach and mentor for small business owners and the author of The Ten Truths Books for Business Owners. Download the latest of Roland’s books: “The Ten Truths for Making Business Fun” for free here http://funinbusiness.biz or visit www.newperspectives.com.au/

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STRATEGY & PLANNING

DIVERSIFICATION

THE RISKS AND REWARDS OF DIVERSIFICATION To create different forms of; to vary in order to spread risk; to expand. These are some of the most commonly accepted definitions of risk and for most organisations and business owners, they can inspire both motivation and dread, writes Sarah Megginson

MOTIVATION, BECAUSE to change is to realise new opportunities. When you diversify, you are essentially “adding depth or breadth to your service or product suite”, explains Daniel Garnsey, commercial manager and partner at Amstarsat, a West Australian satellite communications business – and this has the potential to seriously improve your bottom line. “The key is always profit. If something is profitable today or it is going to be in the near future, it should be considered. If you look ahead two years, the market is probably going to be very different,” Garnsey explains. “In our case, we provide internet and phone services to mining camps and mining is not what it was in the last 10 years; it’s in a slump. People are starting to now understand we’re in a bust and we’ll start to see mining companies failing. So my take on that two years ago was to consider diversification strategies then that would prepare us for this market.” In Garnsey’s view, there are three different types of diversification that business leaders should focus on, and all three need to be considered every time a decision is made about your business.

Change a product or service to suit a specific, different target market.

CHANGE TACK

CHANGE DELIVERY

CHANGE PLACE

Evolve the way that you go to market, such as moving from retail to wholesale or bricks and mortar to online.

Pick up the whole business and move it somewhere else, take it online, or move to a new location or expand into new markets.

“Most people don’t think about diversification enough,” Garnsey warns. “They tend to work in the business day-to-day too much, and they don’t look at the macroeconomy and the likelihood of change.”

The many faces of diversification Diversifying can be about the process of evolving in many different areas of business,

whether it’s reviewing your income stream, the people you employ or partner with, the way you do business in terms of policy and procedure, or the markets you operate within. To some business owners, diversification comes naturally. For online entrepreneur Daniel Brady, for instance, the willingness and ability to diversify and change directions is central to his success.

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“You might decide that over the next five years, you will gradually diversify in a series of incremental changes, in a way that your staff and customers will get accustomed to”

3 BIGGEST HURDLES WHEN DIVERSIFYING YOUR BUSINESS Aaron Smith, CEO and founder of KX (www.kx.com.au), diversified into a range of markets, cities and business models – including franchising – when growing his Australian fitness brand. These are some of the biggest challenges he believes businesses face when executing a diversification strategy:

EFFECTIVELY TESTING YOUR CONCEPT “Ambition can be a huge driving force for growth and can get you very excited to diversify, but it can hinder you if you don’t plan and execute properly,” Smith says. “Plan and test, ideally in a small consumer population first, so you can look at each and every scenario and crunch the numbers. Also, get as much feedback from customers or clients in the direction you would like to be heading in. You will thank me in the end!”

HAVING A POWERFUL DRIVE TO PERSIST “Why exactly are you diversifying and what are your driving factors behind it? It always comes back to your ‘why.’ Your ‘why’ will help you get through those dark days and allow you to persist and complete what you set out to start. And diversifying almost always means that more challenges are coming your way; goal setting will aid here, as something that may seem so unachievable can all of a sudden become realistic and ‘in reach’ when broken down into smaller goals,” Smith says.

BEING PREPARED FOR CHANGE “You need to be over-prepared for growth and prepare your staff for change. You may be prepared for change and moving on up, but your staff may not be as excited,” he warns. “Make sure they know where the company is headed so that their expectations and possible role growth is laid out from the start. It comes back to company values and goals; align these with the personal goals of your staff and you won’t go wrong.”

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STRATEGY & PLANNING

DIVERSIFICATION LESSONS FROM A LEADER Australian Capital Territory Minister for Economic Development Andrew Barr knows the value of diversification only too well. Leading his territory through economic change is a challenge unique to other states and territories, as a large proportion of Canberrians are employed in the public sector. This leaves the ACT’s economy open to significant risks, prompting Barr to produce a report, Growth, diversification and jobs: A Business Development Strategy for the ACT, to guide Canberra’s “ongoing journey for economic sustainability”. “Our economy is about our people, our knowledge, our assets and how we grow by enabling innovation. Our economy will grow as we diversify our private sector base and this in turn will create new jobs,” Barr says. With a flood of universities, research organisations and cultural heritage institutions to inspire Canberra’s creativity, discoveries, inventions and ideas, Barr believes that the region is well-prepared to diversify into new businesses, innovative industries and growing enterprises. “We recognise the crucial role of the Commonwealth in our economy,” he adds, “but we equally see the private sector as a key influencer and shaper of a dynamic and robust economy that provides a diversity of job opportunities.”

“I run around 10 websites, which I buy on Flippa.com at cheap valuations. I focus my bidding on sites that don’t rely on Google for income, as I have diversified away from a very Google-focused marketing strategy and even [avoid websites that rely on] revenue through Google Adsense too,” he says. “This helps with both traffic source diversification and revenue source diversification. I also started importing

The challenges of radical change Instead, he advises business owners and managers to adopt a big picture outlook that is deconstructed into phases of incremental change. “You might decide that over the next five years, you will gradually diversify in a series of incremental changes, in a way that your staff and customers will get accustomed to,” he says.

“If a business manager either develops, or is perceived by customers and staff to be engaging in, overly radical change, the customers and staff may try to ‘escape’ to their normal mode of operation” products from China and for my e-commerce business, Heavenly Hammocks Australia, for revenue diversification. With these two strategies in play, I have doubled my previous income and around 20% of the total income is now from new revenue sources.” For other businesses, however, diversifying can represent ‘the great unknown’. This plays into that sense of dread referenced earlier. One of the “truisms of human interaction” is that humans are not very good at coping with change, says Lindsay SpencerMatthews, psychologist and author of Why Clever People Do Dumb Things (www. greatchangemaker.com.au). “If a business manager either develops, or is perceived by customers and staff to be engaging in, overly radical change, the customers and staff may try to ‘escape’ to their normal mode of operation,” SpencerMatthews says. “If your competitor is demonstrating that they’re not engaging in radical change, they might consider that it’s more comfortable to go with them. So as a psychologist, in general I would advocate against radical change.”

Nathan Schokker, director of Talio, a commercial facilities management company that diversified into concierge services, agrees that it’s sometimes the smaller, subtler strategies that generate the best returns. This is particularly important for small businesses and sole operators, who can get stale when using the same systems, processes, business models and thought processes without other partners and stakeholders to generate ideas. “One thing that I’ve done is to really encourage a diversity of thought by leveraging my support network. Most of them are fellow business owners – some have been in business a lot longer, and some less – and we tend to bounce ideas off each,” Schokker says. “I was talking to one just last week who owns a transport and logistics business. She’s trying to set the trend in the industry by being much more tech advanced and ahead of the curve, and she was interested in the fact that from a director’s point of view, I run my entire business from an iPhone and iPad.” Schokker’s colleague wanted advice and insights on overcoming the challenges of not having a desk and operating with mobile resources.

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“I told her my experiences and we shared some stories. I love to bounce ideas off similar people; it’s imperative as a business owner, you’d be surprised how much confidence it gives you,” Schokker says. Encouraging diversity of thought can generate successful outcomes in a range of ways, adds Spencer-Matthews. “When I’ve employed staff, I’ve always encouraged them to think creatively, and instead of me being the one who says ‘yes let’s do it’ or ‘no let’s not’, I let the group decide on the outcome,” he says. “I’ve also always been an advocate of profitshare with staff, by allocating a proportion of net profits to be distributed amongst the staff. Many businesses pay ad-hoc bonuses, but I don’t know many that allocate a portion of profits to staff. That’s diversification of income and it can be very effective.” Ultimately, Spencer-Matthews says, diversity is another word for ‘change’, which when executed well can deliver substantial benefits to your business. “If we engage in this thought process, we start to question our own status quo, allow us to have diverse thinking, manage in diverse ways and have diversity in business cycle,” he says. “I truly believe that if we don’t identify the gap between where we are and where we want to be, we’re just going to stay where we are.”

INDUSTRY VIEW: BRENDAN WRIGHT, CEO, FAST There is a significant opportunity for brokers to broaden their service offering and cater to the growing needs of their clients. More and more business owners are turning to brokers to have their broader business needs met – from business lending and leasing and equipment finance, to financial planning. A more comprehensive service offering not only empowers brokers to meet more of their clients’ needs; it enables them to diversify their income streams – a valuable way of supporting the long-term sustainability of your business. A recent survey of FAST brokers revealed almost 70% of brokers refer their clients to a financial planning referral partner to address their financial planning and insurance needs. Matthew Carr, MC Mortgages, is one such broking business who has established referral partners: “They support us, and we support them so it’s beneficial for both parties”, says Carr. For brokers, it is certainly worth exploring the opportunities that the new terrains of business present. Whether it’s residential, commercial and asset finance or a referral partnership with a financial planner or the incorporation of a specialist business lending division, there are small steps you can take to gradually broaden your service offering, and ensure your business is well placed for future growth and long-term sustainability. As head of aggregator FAST, Brendan Wright is one the industry’s most vocal advocates for diversification of brokers’ businesses

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STRATEGY & PLANNING

EXIT PLANNING

(NOT SO) FAST EXIT Planning an exit strategy for your business is something that will take as long as seven years to carry out, if it is to be done thoroughly – and successfully. Ideally, you will be planning your exit right from the start, as Stefan Kazakis explains

MOST BUSINESS owners at some point will consider the option of selling a business. Some business owners buy an entity with only this thought in mind. So, what factors do you need to consider before embarking on this journey? Proof of concept, establishing a business and preparing it for market can take as a long as seven years from the point when you really get serious. Yes, you need to be prepared to sharpen your pencils, roll up your sleeves and

work hard to make this happen. Most importantly, the business needs to be making a healthy predictable profit – this is nonnegotiable. And it must be easy for a potential buyer to step into your role. If your business operates around you as the one with all the knowledge and skills to run the business, a potential buyer’s fear is that the business will fail without you. So, how do you start to plan your exit strategy?

THE SIX PILLARS TO EXCEPTIONAL GROWTH

TEAM

CUSTOMERS

SALES

MARKETING

FINANCE

OPERATIONS

PROFITS

PREDICTABLE 16

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PLAN AHEAD

The three key scoreboards you need to thoroughly understand – in no particular order – are profit and loss, the balance sheet and the cash flow forecast. If you don’t continuously look at these and understand finance – which is the language of business – you will be in trouble

Every business owner needs to be considering their exit strategy right from the outset. It is more crucial than ever for owners to plan ahead to ensure maximum results for the business they are building and selling. Exit planning is about building your business so that it lasts for the long term. And how do you achieve this? By building a business that will stand the test of time. Not unlike the Acropolis in Greece. It was built on solid foundations for the long term. It has survived wars, erosion, changes in the environment and extremes of weather. It was built for sustainability. Your business must be the same – actually it must be the same regardless of whether you have an exit strategy or not. It’s the six pillars of exceptional growth that are the foundations for the success of any business. So, how do you grow a business with the end goal of selling for a profitable outcome? I refer to this as the Six Pillars to Exceptional Growth. These are the foundations for the success of your business. If you can master these six areas you will have the fundamentals in place for success. Think about that word for a minute: fundamentals. This is not about making your business flashy or building an empire. These are the nuts-and-bolts basics without which no business can succeed over the long term. If your business cannot succeed over the long term it will never become a saleable asset. So, how do you build your business so that it becomes a saleable asset? If you don’t have confidence and clarity around each of these pillars your business will collapse sooner or later – most likely sooner. It’s about predictability for long-term profitability and ultimately sale. This is the foundation premise for your business. Get brilliant at the basics. It’s about mastery. You have to be brutally honest with yourself when you rate yourself in each of these areas: Operations. Your business has a predictable operations procedure with good systems and ‘How to’ manuals for all tasks including the testing and measuring for

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STRATEGY & PLANNING

EXIT PLANNING

INDUSTRY VIEW: TIM BROWN, CEO, VOW FINANCIAL Every broker should have an exit strategy for their business, it does not matter whether it’s a five, 10, 15 or a 20 year strategy, but you need to start with the end in mind. When planning your exit you need to have a vision of what the business will look like when you are ready to sell and what are the metrics that will tell you when you get there. For example, do you want the business to have 300 clients paying you $10k per annum in income, or do you want to be writing $100m per month and 20 staff, selling General Insurance, Wealth and Property? Other things you need to think about include, will you sell outright, bring in a partner or dilute over time? Bring a manager into the business and you move into a chairman’s role. If these are your objectives you need to document them and put time frames around them so you start working towards achieving your goals. Last but not least you need to think about the most cost effective tax structure for your exit. How long do you have to be in business to get small business roll over relief, will your SMSF own the shares, will you set up a discretionary trust so your children can inherit the asset? At Vow we are getting more involved in helping our brokers facilitate the sale of their business. Simply selling the book does not make sense. This gives no recognition to the good will you have built in your business over time. Vow wants to ensure we help our brokers achieve the maximum sale for their business when they choose to exit. As well as heading Vow, Tim Brown is also president of the MFAA, where he encourages brokers to think ahead with exit planning.

Sales is the only activity that actually puts money into your business. Everything else takes it out. It is fundamentally important to grow this, system this and completely understand this part of the business all activities. Exactly what do you do and how have you set it up so it becomes sustainable and systematised? How do you serve your clients? How do they buy from you and how do you deliver? Think about your marketing and your finance, terms of trade, administration and your customer service in general. What about your team development and recruiting? This is where all elements of your business must be predictable and easy to follow. Even businesses that have been operating for many years don’t necessarily have the best operations in place. Every time you grow so do your operations. You must be preparing for future growth and ultimately sale. Operations are ongoing. What are the key things you do in this area?

Finance. Like sport, business has a scoreboard and you must understand it if you are going to win and know when the time is right to sell the business. That scoreboard is finance. You will have taken legal and financial advice. Are your financials up to date and in order? A potential purchaser will be looking for at least three years of financial accounts as part of their purchasing process. Informing your accountant early on that you have an exit strategy will ensure that as you grow your business the structures are put in place to ensure that your accounts are presented in a consistent format. You want brutal honesty about how your business is going? Look at your figures. You

can talk big to your friends and you can tell your clients you’ve made $7m so far this year, but if it cost you $7m and one dollar to get there then your business will never be a viable sales option. Your figures don’t lie. They are the final scoreboard on all the decisions you’ve made in your business. If your figures are strong you’ve made good decisions, if not you haven’t. It’s that simple. Is it making a positive cash flow without the key/critical staff being present? Having the right management structure is also non-negotiable. The three key scoreboards you need to thoroughly understand – in no particular order – are profit and loss, the balance sheet and the cash flow forecast. If you don’t continuously look at these and understand finance – which is the language of business – you will be in trouble. You need to be able to showcase your break even, gross profit, cost centres as a percentage, and the balance sheet – this is the most important scoreboard of all. It tells potential buyers (and you) the truth – the cold hard truth – about every decision you have made in your business to date. From day 1. Not many people understand that. It’s a mirror. Look into it. Because a potential buyer will! Marketing. You have a defined and proven lead generation system delivering leads within a cost per lead budget. Your marketing will be getting results and you will intimately understand three specific areas: your unique selling

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STRATEGY & PLANNING

EXIT PLANNING

Customer loyalty has to be with the brand, the company and your team. No buyer will invest in a business that once the owner has gone, so do all of the customers

proposition (USP), your emotional selling proposition (ESP) (connecting with your current and future clients) and your community selling proposition (CSP), for which you have built a reputation from many of your customers and advocates who are confirming and saying, ‘Yes, you supply the product and service they need’. Sales. A saleable business has a progressed and defined sales system to ensure a 60% conversion on all leads regardless of the sales skills of the person selling. You will have a test and measured sales process which includes a call to action. You will have processes in place to make it easy for people to buy from you with a process of multiple steps. Any potential buyer will know that your competitors are lurking just around the corner waiting to snap up customers if you make things difficult. In fact a potential buyer may well indeed be your biggest competitor! Sales is the only activity that actually puts money into your business. Everything else takes it out. It is fundamentally important to grow this, system this and completely understand this part of the business. You have a welldefined target market with services and products for each and a variety of key customers – building a business based on just one or two clients increases the risk of those clients being lost with the departure of the owner, ensuring that the key customers do not make up the significant portion of the revenue.

Customer loyalty. Having a track record of keeping customers for life, in other words a ‘healthy book’, will boost your business value. Put systems in place to make your customers advocates and raving fans. Creating a customer loyalty program that ensures that people will not leave you just because something is cheaper or fancier or newer elsewhere – they truly belong to you – is invaluable. You need to keep being relevant and valuable. But remember, the loyalty has

to be with the brand, the company and your team. No buyer will invest in a business that once the owner has gone, so do all of the customers. Embracing a philosophy of customer loyalty is of paramount importance – building this because it’s cheaper to keep a customer than it is to find a new one ensures a profitable business but it also ensures that the loyalty is scalable and stays long after you have left the business. Team. Are you building a strategic team who have buy-in to the business and what it stands for? You will be okay to not personally have all the greatest ideas in your business, and more importantly you are okay to encourage this to ensure the growth of a senior management team. Can your business operate without you? It needs to. Every employee should have a documented clearly defined role and a set of tasks and procedures which leads to measureable and desired outcomes.

So in conclusion, once you have agreed the timeframe for an exit strategy you will continue to work harder with even greater laser focus. You need to find a mentor or coach who will keep you accountable to the exit plan. If you do not have a plan to exit at some stage, when the opportunity does arise the plan to exit will end in failure. However, ensuring you have the right foundations in place, selling a well-run business with systems and processes, procedures and rules, will provide benefits and satisfaction for both parties. Ultimately think like a buyer right from day one. Stefan Kazakis is a business strategist, presenter and founder of Business Benchmark Group, which helps clients from a variety of crossroads and industries seize opportunities to achieve ongoing business success and substantial profit growth. For more information please visit www. busienssbenchmarkgroup.com.au

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PART 2 PART

SALES & MARKETING

22 REBRANDING Why, how and when to rebrand

26 MARKETING Five essential do’s and don’ts

30 DIGITAL EXPERIENCE Seamlessly connecting with customers

INDUSTRY VIEWS: Melissa McCarney, Mortgage Choice, Keiran Evans, ANZ, and Mark Haron, Connective

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SALES & MARKETING

REBRANDING

THINKING OF REBRANDING? When and why you should consider it Whether to rebrand or keep your company’s image unchanged is an important – and potentially costly – consideration. Paul Nelson of BrandMatters takes us through when and how to revamp your image

THERE ARE various reasons why an organisation may find itself in a position where it is considering a rebrand. If you are considering rebranding your organisation, start with an understanding of the business need behind the rebrand. Do you need to accelerate growth? Have you been subject to a merger, or made a significant acquisition? Are you hovering between being a mid-sized and large-sized organisation and do you need to position yourself to compete with businesses more sizeable than your current competitive set? Or do you simply need to grow your market awareness or meet your sales budgets? Before launching into a comprehensive rebrand you need to understand the business problem you are trying to solve, and realistically assess if a rebrand can effectively address your challenges. Broadly, the business reasons that may trigger the need to rebrand can be divided into two classifications: proactive and reactive.

PROACTIVE REBRANDING Preparing for growth: If you are a business teetering on the edge of rapid expansion, a rebrand can help position your organisation for growth. It can act as a signal to your customers, competitors and stakeholders that you are here, you are ready and you have the momentum to drive your company forward. New strategic direction: If your organisation is preparing a strategic plan that will change the future direction of your organisation, a rebrand can help communicate this new intent to your market. New product or service offering: If you have added a significant new product or service to your business offer that has changed the focus of your organisation, a rebrand may act as a circuit breaker to signal to your audiences that your offering has changed. For example, if you have traditionally dealt with institutional markets but have just developed

a product targeted at a retail audience, launching your new product offer might also be the opportunity to launch a new brand. New audience: You may find yourself in a situation where you are marketing your products and services to audiences that were not previously relevant to your organisation. A good example of this is superannuation. Before super choice was introduced, superannuation funds primarily marketed

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DOES MY ORGANISATION NEED TO REBRAND? Before committing to a rebrand, check if your business problem appears in the list below. Checking two or more of the boxes is a decisive indicator that it is time for your organisation to rebrand. If your situation doesn’t appear in the list, consider if a rebrand is truly the best solution to take your organisation forward: Are you looking for a way to accelerate growth and lead your organisation forward? Have you merged with another organisation or been acquired by another organisation? Have you acquired a significant new asset? Have you introduced a game-changing new product or service? Are you developing a new strategy that will change the direction of your organisation? Do you need to introduce your services to an important new audience? Have you been involved in a damaging or controversial situation that will impact your brand? Has it been more than five years since you reviewed your brand to check it was still relevant? Has it been more than 10 years since you refreshed your brand or rebranded your organisation? themselves to a B2B audience. The introduction of super choice, and more recent further reforms, has meant that superannuation funds must now market their funds to B2C audiences. This represents a significant strategic shift, and has been a relevant trigger for rebrands. The flurry of superannuation industry funds who rebranded to attract members from competing Industry/Public Sector funds is an obvious example here.

Finding talent: Despite the lingering effects of the GFC, Australia continues to enjoy low unemployment and financial services companies continue to struggle to attract and retain the top talent. Rebranding your organisation can position you to attract candidates who in the past may not have considered your organisation as a prospective employer. Relevance: As your organisation grows, your markets expand and new challengers enter your

Have you been exposed to trademarking or legal issues? Is a new competitor threatening your market position? Does your brand tell the wrong, or an outdated story? Do you struggle to recruit the industry’s top talent?

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SALES & MARKETING

REBRANDING INDUSTRY VIEW: MELISSA MCCARNEY, GENERAL MANAGER SALES AND MARKETING, MORTGAGE CHOICE To create a strong brand, you have to start with the fundamentals. Before you can create a brand that is truly reflective of the company, it is important to clearly articulate what you do, how you do it, and why you do it. The most successful brands have a clearly defined purpose and customer promise which reflect the company’s core values and align with its long-term strategies. Once these fundamentals have been established, you build the brand by reflecting the purpose and customer promise in everything the company does and says. Over the last two years, Mortgage Choice has evolved. The introduction of financial planning helped us to transition from a home loan provider to a fully-fledged financial services provider that is able to cater to the growing financial needs of all Australians. With the company evolving, it was important to evolve the brand, from the inside and out.

On the inside we articulated our purpose, customer promise and a set of service standards to guide the delivery of the Mortgage Choice customer experience. These all stemmed from the core values of the business and our drive to help Australians live a rich and rewarding life by helping them take control of their finances. For the brand on the outside, we launched a new visual identity, starting with our logo. Our logo was 22 years old and it was time to refresh it to reflect our new business whilst holding onto the equity in the name Mortgage Choice. After extensive consumer research, we decided on a new logo that highlighted our purpose, diversification and ongoing growth – a logo that helped to evolve the brand. We also launched a new marketing campaign that would serve to not only enhance Mortgage Choice’s overall branding in the marketplace, but highlight our key differentiators and what we stand for. And so the Happy As campaign was born. At the core

of our Happy As campaign is our desire to help Australians build rich lives because people who have their money under control can relax and enjoy the important things in life. We help our customers achieve happiness by making sure they have the right home loan and financial plan in place. More practically, the campaign highlights that our brokers have the customers’ best interests at heart as it focuses on one of our key differentiators – paid the same. Our brokers are paid the same commission regardless of which loan the customer chooses from our choice of lenders. We believe this campaign was unique to the financial services industry. Generally thought of as quite a ‘dry industry’, the Happy As campaign speaks to all Australians in an entertaining and educational way. Mortgage Choice’s 2014 Happy As campaign looked to change the image of finance through TV commercials, Twitter hashtags and an online curated content hub of ‘happy’ videos

competitive set, you may find your sales are declining or your current brand is looking dated and your brand story lacks relevance to your target audience. A rebrand can be an opportunity to revitalise and modernise your brand positioning and look and feel in line with the expectations of a rapidly evolving market.

channels and against different customers, and their customer segmentation is no longer clear. In situations like this it is often also the case that the internal culture has drifted away from the organisation’s aspiration.

lawyers to ensure that you protect your rights to use your new brand name and logo on an ongoing basis.

REACTIVE REBRANDING Merger or acquisition: If you have recently made a significant acquisition or been part of a merger (that may have also necessitated a name change), and as a result the strategic intent of your business has changed, you will need to rebrand to reflect the different intentions of your newly expanded organisation. In this situation, a rebrand can act as a unifier for your new team, and can launch your new company or new structure to your external audiences. Reaction to recent growth: Sometimes businesses may experience periods of rapid growth and find that over time their business strategy and brand strategy are no longer aligned and, in a sense, the brand has been left behind. Their brands start to collide in different

Negative publicity: A worst-case scenario is when your organisation is embroiled in a controversy so significant that you need to rebrand your organisation to demonstrate to the market that you have moved on from the contentious situation and are ready to begin rebuilding trust from your stakeholders and customers.

Changing business environment: The introduction of new industry regulations or a new competitor in your market can rapidly alter your ability to compete and can very quickly make your brand appear dated and irrelevant. In such a situation an assessment and review of your brand positioning can help reinvigorate your organisation internally, and can inject a new sense of innovation and energy behind your organisation to your customers, allowing you to compete more effectively.

In some situations you may not need to rebrand, you may simply need to refresh, or strengthen your existing brand. Some examples of this include:

Trademarking or legal issues: From time to time trademarking or other legal issues may arise and necessitate a rebrand. An example of this might be an Australian business expanding to the US, where its current name may already be trademarked and unavailable for use. If this should happen, seek the advice of trademarking

Reacting to a sales decrease: Broadly, it is unlikely that a decline in sales can be solely attributed to brand. Similarly, rebranding alone will not necessarily fix a sales challenge. However, declining sales may be in response to recent negative publicity or new challengers in the market, and may signal the need for an organisational strategic shift.

REFRESH, DON’T REBRAND

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Low brand awareness: Low brand awareness alone is not a reason to rebrand. You may simply need to invest in educating your customers and prospects about your brand and the benefits it can offer. On the other hand, low brand awareness may be one symptom of a broader relevancy challenge, and may be a sign that a rebrand is needed.

WHEN NOT TO REBRAND It is generally not advisable to rebrand if you have launched a new brand within the past three years. Building a depth of understanding and trust in a brand takes time, and brands that are continually changing and reinventing themselves can risk being confused and not being taken seriously by their target audiences. Additionally, rebranding can also be a costly process, so a reasonable ROI is difficult to obtain over a shortened period. If your organisation does not genuinely

Building a depth of understanding and trust in a brand takes time, and brands that are continually changing and reinventing themselves can risk not being taken seriously meet one of the criteria for needing a rebrand listed on p23, consider why you are pursuing a rebrand. Minor tweaks to the logo could achieve the revitalised look and feel you are seeking, or an innovative new marketing strategy or brand communication campaign might help you stand out from your competitors without requiring the complexity and cost of a true rebrand. Finally, a rebrand will not help you to grow and prosper if it doesnâ&#x20AC;&#x2122;t reflect a genuine change within your organisation. A rebrand alone cannot turn a poorly performing financial services firm into a

market leader. All a rebrand will do is to create a polished and professional-looking version of a (say) still poorly performing financial services firm, and the market will see through the guise almost instantly. Paul Nelson is managing director of BrandMatters. He is an accomplished international marketer, with over 20 yearsâ&#x20AC;&#x2122; marketing and brand management experience obtained in a diverse range of industries. BrandMatters is a brand strategy, design and marketing consultancy with a deep specialisation in financial services. Visit www.brandmatters.com.au

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SALES & MARKETING

MARKETING

5 MARKETING DO’S FOR 2015 Your old ways of reaching customers may not be working anymore. Kim Goldstone offers five ways to get through to today’s client

WITH A new financial year upon us, it’s not uncommon to focus on doing things better, more efficiently and with more impact than in prior years. This is true for marketing. Whether you are a marketing director, a branch manager or a loan originator, there are things you can do right now to take your marketing to a higher and more meaningful level.

Know your audience

Knowing your audience is rule #1, whether you’re considering a single piece of marketing collateral or an entire campaign. More often than not, marketing dollars are a precious resource that must be spent wisely to maximise impact and get you a solid return on your investment. Consider your audience in a thoughtful way before going into design and copywriting. Are you targeting millennials? Consider fresh colours and design elements that a younger audience will relate to. Research what their concerns are, and address the questions they may have about the product you are selling. Present your message in a way that will eliminate their concerns and address any potential questions or hesitations. Offer an interactive element, such as a URL, to redirect them to a site where they can find additional information or reach you for one-on-one help. Consider eliminating the cold, corporatedesigned pieces of generic handshakes and businessmen sitting around tables, and use

graphics that show a younger, more diversified borrower. Show borrowers in a real-life situation to make your piece stand out and evoke more emotion. You have mere seconds to entice someone with a piece of direct mail before it potentially ends up in the trash. Anything that catches your customer’s attention and makes them pause to read your collateral is a success. If you include that interactive element and they actually take it into the house and save it? You’ve won the battle.

Engage and educate, don’t sell

People are generally tired of being ‘sold’. Today, consumers want to be engaged, educated and empowered. They seek information and relationships with trusted advisors. Give your customers a reason to want to work with you by positioning yourself as an SME (subject-matter expert) in the home lending arena. Avoid old-school flashy call-out banners and statements of desperation or urgency in your direct mail. Instead, dedicate that space to a statement that will engage your customer or educate them. For example, if you are doing a refinance direct mail piece, get rid of the starburst that screams ‘Call Me Today!’ and replace it with a crisp, sleek box that offers a statistic of how many people you refinanced in 2014 and how much money you saved your clients every month last year. Let the consumer generate the idea in

People are generally tired of being sold. Today consumers want to be engaged, educated and empowered

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their mind that you are a person who saves their clients money and not someone who relies on sales gimmicks. If you are a loan originator, elevate your personal brand by being an educator, and empower your customer with information and scenarios to consider whenever possible.

Get automated

Get social

The more customers and prospects in your database, the harder it can be to effectively stay at the top of their lists when it comes time for a refinance or to purchase a new home. Not even the most ambitious loan officer would be able to manage his or her relationships with hand-written notes and cookie-cutter mass marketing. The pros have a secret – and that is to use a CRM that contains fresh, relevant and compliant email and direct mail options for you to send to your clients based on varying factors or triggers. Most CRMs today have dashboards that will tell you which clients you should focus on based on their rate as it compares to today’s rates, clients who you have flagged for follow-up or any other client that you have set up to trigger in certain scenarios. If, for example, there is new interest rate which could benefit certain clients, you can do an advanced search of those customers and send them an automated campaign letting them know about this change and how to contact you. A good CRM and automated marketing partner will monitor what’s going on in the lending world and will most likely have this campaign already developed for you.

You would be hard-pressed to find a loan originator today who is not at least on LinkedIn or Facebook. However, simply setting up a profile or two does not equate to being engaged in social media, nor does it set you apart from the millions of others who have done the same thing. Real engagement involves spending time exploring and understanding how to use social media as a tool for establishing yourself as an SME. While many loan originators have Twitter accounts, the reality is that most people are not looking for tweets on current rates or saving opportunities. Focus on social

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SALES & MARKETING

MARKETING INDUSTRY VIEW: KEIRAN EVANS, HEAD OF THIRD PARTY RELATIONSHIPS, ANZ When developing a customer-centric strategy, Evans suggests it’s important for brokers to consider consistency, certainty and to ensure that they work to ensure that prospective customers ‘fit’ with the financier being recommended. Putting the customer at the centre of every decision, every action and every recommendation will enable brokers to rise above the competition, says Evans. In a customer centric world brokers should consider the customer’s holistic financial needs, what a bank can deliver and ultimately choose the right proposition for the customer. He acknowledges that there are many reasons a broker and a customer choose a financier and it’s important that the needs are considered in conjunction with the bank’s overall service proposition. He said it’s like buying your morning coffee, there are so many options available: which coffee shop to choose, would you like a latte, cappuccino, skinny milk, soy milk, a large, a small; these are based on personal needs and preference. So understanding deeply your customers’ needs and wants will lead to a valuable and long-term relationship. The importance of asking probing questions and listening are paramount skills for exceptional customer centric service. It is our obligation to use our expertise to look ahead at the implications of raising debt. Many customers are unaware and we must provide customers with options, and whether the broker fulfils or refers, the insurance, risk protection and wealth advice need to be covered off. Recently, we continued to demonstrate our commitment to our customer centric focus by expanding our NSW sales force and vastly improving our turnaround times on credit decisions. Evans explains that by doing so, the broker receives even greater certainty from ANZ and support from our BDMs. By improving these areas it allows the home loan experience to be a smooth and easy process, leading to a better customer experience. Finally, he adds that, “to ensure that there is a value driven relationship, your BDM needs to be aware of the challenges and opportunities that influence your customer network, and how we can help. We are listening!” Keiran Evans is a proponent of customer centric strategies and ANZ are also supporters of MPA’s inaugural Consumers on Brokers survey

Diversification of your marketing portfolio is one of the smartest things you can do for yourself, because while you may have one single message, different people react to and engage with various mediums in diffferent ways outlets that are appropriate for the business of lending. For example, if you log into LinkedIn and go to your profile, there is an area just under your photograph and basic information that is called ‘Posts.’ If you have nothing there, then you’re not doing enough to establish yourself in the worldwide web of experts. Take whatever angle of focus you can think of and get your thoughts out there, whether it’s ‘Top 10 Reasons You Should Consider a Refinance’ or your own personal ‘Why Work With Me’ mission statement. Be thoughtful and intentional about what you write, and then publish it. Once it’s published, share it with your connections. Join some groups that are relevant to the lending industry, or even groups that are relevant to your interests outside the office. You can establish yourself as an expert and get a whole new doorway into prospects by sharing your expertise within groups of people that may know you simply for your love of fly fishing.

Diversify your mediums

An investment advisor would tell you not to put all of your investment dollars into a single basket, but instead to reduce your risk and maximise your returns by investing in different areas that will react differently to the same event. This is exactly the case in marketing. Diversification of your marketing portfolio is one of the smartest things you can do for yourself, because while you may have one single message, different people react to and engage with various mediums in different ways. For example, rather than spending $30,000 a month on direct mail only, spend

half that, and spend the other $15,000 on a combination of Facebook advertising (which you can set your price at using cost-per-click), one month of banner advertising on a local news site, sponsor in a local race or community event, and then donate $500 of it to a charity and send out a press release about it. People like people who give back to the communities they live and work in – and to return to the diversification point, this plan reaches people who actually read bulk mail, young parents posting their child’s pictures to Facebook, the group who reads local news online – and you’ve established yourself as someone who cares about the community around you. These five tips are merely things you should consider as you evaluate how you spend your marketing dollars in the upcoming financial year. Each of these topics could be delved into on a much deeper level, but the goal is to get you thinking about what you are putting out there, how it is being perceived, how efficient your marketing is, whether you are truly engaged on social media and what mediums you are using to get your message out to the world. Spending just a little extra time on being thoughtful of your audience, crafting your brand, maximising your reach and diversifying your marketing efforts can go an incredibly long way and yield you much higher results. Be smarter and more intentional this year and every year after, and you should have no issue remaining fresh and relevant – and watching your success grow to whatever level you ultimately want to achieve.

Kim Goldstone is director of marketing for Mortgage Returns.

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SALES & MARKETING

DIGITAL EXPERIENCE

SEAMLESS TRANSITIONS:

Winning the customer’s digital minds and analogue hearts Never before has it been so easy for business to reach customers, thanks to the digital age – but if your message is confusing and comes through too many channels, it can be disjointed and you will fast lose customers purely because of the irritation factor. Futurist Anders Sörman-Nilsson explains

WHEN I was growing up, I used to despise the friction caused by the stitching in the back of my pants, and the labels with ‘Anders SörmanNilsson’ that my mum used to insist on handsewing into every football jumper, piece of underwear and garment I used to leave home with. In fact, this rubbing annoyance could take the pleasure out of otherwise fun outdoor activities, or situations involving wearing these privately labelled threads. The thought behind this branding exercise was good – my items would be differentiated from the other kids’ garments at Kindergarten, and could be returned if I ever lost them. However, the fact that I didn’t have a choice in

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the matter, and that seemingly, my mother superimposed this discomfort on me, didn’t make the situation better. Of course she always pointed out that I should be grateful for the fact that I even had clothes to put on my back. There may be a moral point of truth in her statement, but there is also an element of ‘shut up, be grateful, here’s what you are getting’ to this approach. An approach which we as customers and business people also see in the experiences we have with brands and the way we design our brand touchpoints for our clients.

Customer friction As customers we experience this friction dealing with retail banks and their myriad concoctions of seemingly disconnected communication channels – mobile, desktop, branch, phone, snail mail – none of which seem to integrate with the other. As business people we also tend to design from our own channel convenience, rather than shifting to an empathy with the customer and how they want to experience your brand, your solutions and your products. And for every channel we add because a social media guru told us we should, our approach to marketing becomes more and more channel additive, rather than integrative. And when we don’t think through how these channels should interlink holistically, what we are doing is creating friction for our customers, and making their transitions between their preferred modes of communication seem a hassle. In fact, what we are doing is creating stitching and labels which give our customers an itch. An itch that will cause them to leave, or never do business with us. And what they are reminded of when they feel this annoying itch is your brand. Hardly a situation you want from a branding perspective. And our attitude to this friction is similar to the attitude of the past – when the customer didn’t have a choice – of ‘shut up, be grateful, here’s what you are getting’. The problem is, today and for the foreseeable future, the customer has a choice, information asymmetry has become information symmetry, and we must design seamless transitions between digital and analogue modes of communication to win the hearts and minds of tomorrow’s customers.

Digital disruption In my last book Digilogue: how to win the digital minds and analogue hearts of tomorrow’s customers (Wiley 2013) I described the paradigm shift caused by a phenomenon known as digital disruption. Digital disruption is the revolutionary shift which is impacting all industries (and that includes mortgage brokers!) caused by the digitisation of information. As information moves from physical, analogue formats, to digital formats in the cloud, the old value of the physical information partly evaporates. Think about music, for example. Music used to hold more value in how we perceived a song when it was on a vinyl record or on a tape cassette, but now that music is simply a streamable subscription service, we don’t give it as much value anymore. This is the reason why today only 6% of revenue of US recording artists comes from selling songs. The remainder comes from merchandise, concerts, sponsorship, brand ambassadorship deals etc. The other impact of digitisation is that the customer’s increasingly digitised, rational minds are being spoilt with real-time data – real-time data that they used to rely on you as an intermediator for. Digital disruption also means digital disintermediation, and in the future, potential displacement unless you shift your role in the value chain. When we lived in an age of information asymmetry, your expertise and insight was highly valued. When that insider information sits on aggregation websites, and is available in an instant, what is your value going to be moving forward? The digital world kills those in the value chain who are either average at what they do, or don’t add any value beyond what a digital interface can give you, so you better listen up. Now. But the digital world is also your saviour. Think about it. Never has it been easier to design a website (Wordpress), contract a web designer (99designs), get a team of developers (Freelancer.com), study your digital effectiveness (Google Analytics), start a TV channel (YouTube), build a landing page (Unbounce) or build an engaged tribe for your brand (Mailchimp). Never has the little guy or girl had so much power to amplify their voice. Never before have you had the ability to go from being merely local, to now being also

INDUSTRY VIEW: MARK HARON, DIRECTOR, CONNECTIVE “We’ve recently re-done our own website. It’s a classic example: the website we had before was good as well, but if you don’t refresh and update your look, a lot of the terminology falls behind. It’s not so much the beauty but the functionality that counts; what people want more than ever is the information which is relevant to them, and they want to be able to find it easily, get it quick, and not be searching through pages and pages to get it. If someone’s on your website for more than three pages they’ve either got your business or are so confused they’re not going to buy from you. The first thing that most brokers’ websites do is signify that they exist; for some people nowadays if they can’t find anything about their potential broker on the internet then they don’t exist, or aren’t legitimate enough. It doesn’t have to be as full-on as a website but could be a LinkedIn profile or some other form of social media that the broker might be using. One of the things that we find is on every page you should leave that opportunity for the customer to provide their contact details and submit that. If you’re worried about high-end website design being expensive, then outsource; aggregators, including Connective, can give you that level of website at a very reasonable price. I can’t reiterate enough: how to enhance your digital strategy is to segment your clients, and certainly a big thing we’ve focused on within Mercury’s CRM component is for brokers to be able to put lots of clients into lots of different categories, to make sure they’re communicating the things that those customers are looking for. That’s what digital for us means: managing data, efficiently, online.” Mark Haron is director of aggregator Connective, current holder of the MFAA ‘Aggregator of the Year’ award.

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SALES & MARKETING

DIGITAL EXPERIENCE regional, national or global. All because of the fact that the same tools that are in the hands of your customers and prospects are also in your hands. The question is whether you are ready to use them.

Analogue hearts I mentioned that the customers’ rational, information-seeking minds are increasingly digitised. But we also need to highlight that their hearts are enduringly both emotional and analogue. But they are expecting something different. And as the customer is shifting their customer journeys and where they are accessing information, and how they are connecting to sooth their need for positive experiences, any friction that they can feel in the process of transitioning between digital and analogue channels will annoy them. Your job is to design seamless transitions to ensure that you do not annoy them. The tools to do this are in the palm of your hand. So, how do you do this? One way is to think strategically about your brand touch points according to our strategy consultancy Thinque’s Seamless Strategy Map.

SEAMLESS STRATEGY MAP

This elegantly simple Strategy Map lets you map out the various brand touchpoints you may have with your customers. On the X-axis you have the dimension between on the left hand ‘Analogue’ touchpoints and on the right hand ‘Digital’ touchpoints, and on the Y-axis at the top you have ‘Pre-Sale’ touchpoints, and at the other end of the axis you have ‘Post-Sale’ touchpoints. Your job as a business leader is to map out the current and future brand touchpoints with your customers. This requires you to audit your current brand assets, and assess how consistent these are in terms of visual look, tactile touch, messaging and tone of voice. Then you need to decide whether these brand touch points are more digital or more analogue, and ask yourself the question whether you use them as pre- or post-sale brand touch points. Are there any gaps at the moment? If there are gaps, this needs to be addressed. Gaps hint at overlooked opportunities. For example, have you claimed your Google Local/Business name? Is your blog mobile-optimised? Have you been actively getting involved in sponsoring the local junior football team? When was the last

time you organised an event to give something back to your clients? Once you have audited your current brand assets and touchpoints, it is important to notice whether they are balanced. Are you more digital or more analogue? Do you focus more on pre-sale activities, or are you engaging your clients post-sale as well, for example to answer questions and generate referrals and testimonials? The ideal is to get a holistic balance to ensure that you are compatible with the customer’s increasingly complex and Digilogue customer journeys. But the touchpoints must be integrated. We shouldn’t be additive, until the whole Seamless Strategy Map is integrative. For example, do you integrate your Mailchimp newsletter to automatically send out a mobile optimised newsletter, as soon as you post three new blogs? Does a new blog trigger a Tweet in your hootsuite account? Have you set up a marketing calendar for the year which ensures some analogue touchpoints, and do they direct your customers to a digital Landing Page with a special offer on an Unbounce page? What you are starting to see here is the integration of your brand touchpoints, and seamless transitions between them. This does require some thinking and experimenting, but it is well worth the effort and your customers will thank you for being elegantly simple to find, easy to remember, and for providing engaging, beautifully designed and valuable content that connects both with their increasingly digitised, rational minds, and their enduringly analogue, emotional hearts. The future is where we will spend the rest of our business lives. So, we’d better get prepared for it in a seamless fashion. Otherwise you may just give your customers the itch to leave you.

Anders Sörman-Nilsson (LLB MBA) is the founder of Thinque – a strategy think tank that helps executives and leaders convert these disruptive questions into proactive, future strategies. As an Australian-Swedish futurist and innovation strategist, he has helped executives and leaders on four continents map, prepare for and strategise for foreseeable and unpredictable futures. Visit www.thinquetank.com, http://blog.thinque.com.au/

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PART 3 PART

PEOPLE & MANAGEMENT

34 ORGANISATION DESIGN Restructuring your business

40 LEADERSHIP

Through all your communication channels

44 PERFORMANCE MANAGEMENT

Focusing on strength not weakness

INDUSTRY VIEWS: Stephen Moore, Choice, and Sam Boer, Commonwealth Bank

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PEOPLE & MANAGEMENT

ORGANISATIONAL ARCHITECTURE

REALISING THE IMPACT OF ORGANISATION DESIGN It is vital to be very clear on why you want to undertake an organisational redesign. Can you clearly articulate how each planned change will relate to the way your organisation creates value? This report by David Brown of Deloitte explores the issues inherent in organisational architecture THE MAJORITY of organisation design initiatives start out with the best of intentions, but few live up to expectations. What they do provide is disruption, as people and positions shuffle for very little gain in real value. Restructuring efforts like that can undermine faith in the wisdom of an organisationâ&#x20AC;&#x2122;s leadership, which actually erodes value and team coherence. The following questions are designed to help you ascertain whether a redesign is the right path to follow, and how to go about it. Have you really unpacked the intent behind redesigning your organisation? A variety of internal and external influences can trigger organisation design initiatives. An executive may just have the intuition that something is amiss. Or the market or regulatory environment can deliver an

unmistakable imperative for change. It is essential to identify and express the true purpose and intent of the change in the context of the organisationâ&#x20AC;&#x2122;s wider strategy. Only this perspective can position the design change in a way that supports broader

The majority of organisation design initiatives start out with the best of intentions, but few live up to expectations. What they do provide is disruption, as people and positions shuffle for very little gain in real value business goals. Is organisation design the root cause of the symptoms you wish to address? Or might alternative interventions achieve a similar result with less cost or risk? For

example, if the goal is to reduce cost, other actions such as asset optimisation, a facility relocation, or renegotiation of agreements with third party suppliers might be an easier,

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Qualitative or intuitive justifications for change can feel powerful, but they aren’t enough. A fact-based approach will illustrate any misalignment between the current and desired organisational state and lends substance to the case for change. It’s also vital not to focus so much on long-term strategic ambitions that you risk making near-term implementation more difficult. It is often easier to focus on interim states that are easier to understand and achieve – and, where possible, to build a degree of flexibility that helps the organisation deal with uncertainty. This is particularly important in organisations with a high likelihood of divestment or M&A activity.

faster and less disruptive course. Do you understand where value is created and how to enhance it within your organisation? This question contains many others. Which part of the organisation contributes most to the realisation of our strategy? Which processes are critical? Where are our critical talents? Too often, people see organisation design as the way to fix many business problems. But the complexity of the remedy may be larger than they imagine, and the value it unlocks may be smaller. So be realistic about goals – and unintended consequences.

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For example, cutting costs in back office areas may increase the administrative burden on front office staff and downgrade the customer experience, which ultimately destroys value. Do you have a clearly articulated strategy and business model? Too many strategies try to accommodate everyone. That leads to vague statements and rosy promises. An organisation design that works needs a clear strategy that helps guide specific decisions. Leaders must be clear on the business model they desire, so organisation design can align processes, structures and roles with their strategy.

The right future organisation is not based on structures alone If organisation design is the answer, there is a right and wrong way to approach it. The scope of an intervention should extend to elements beyond the organisational structure itself. Leaders should also reflect on the ways changes in one part of an organisation can affect the overall system. Being clear on how significant the change will be and how decisions will be made can significantly speed up project delivery. Reorganisations are complex undertakings, all the more so because of how rapidly competitive dynamics can change. Supplier, employee and customer webs are becoming more global. Disruptive technologies, multigenerational talent and heightened regulation are introducing new challenges. Social media and the dynamics of multigenerational talent are changing the ways firms communicate, both internally and externally. Amid all this change, executives are finding their own organisations hard to navigate. To deal with these complexities and avoid common pitfalls, executives who plan to undertake organisation redesign should ask themselves the next sequence from our list of 10 questions.

How ambitious do you want to be, and how far are you prepared to go,

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PEOPLE & MANAGEMENT

ORGANISATIONAL ARCHITECTURE

with organisation design? Once an organisation’s leaders define the strategic imperatives that underpin their decision to pursue reorganisation, they should consider the amount of change they are comfortable introducing. That depends in part on the documented core capabilities that support the change strategy. How ambitious can the future vision be? Which areas need immediate intervention, and what changes can be deferred? In the end, design change is about managed disruption – driving for ambitious change in areas that promise disproportional returns, while saving energy in other areas that can benefit from more time and deliberation. Every organisation answers these questions differently. One company might begin with radical shifts to new service delivery models in back-office functions. Another might start at the source with core operational or ‘business’ functions. New organisational forms are being introduced on a regular basis, but that doesn’t mean the newest and shiniest thing is the right one for you. Whether these new organisational models or more traditional frameworks are appropriate for your business boils down to

your strategy and how ambitious you are in your goals. Are you clear on the scope, approach, tools and the pace of the project? Organisational design is about more than structure charts. Getting from the status quo to the desired end state requires a deliberate, carefully sequenced design plan, and that starts with crystal clarity on scope. The senior leadership team should have open discussions about the breadth (some functions or all functions?) and depth (how far down to design?). For example, some organisations prefer analytics, benchmarking and peer practices, while others want an inside-out view that builds from internal consultation and consensus. Similarly some organisations prefer a highly automated design experience with interactive visualisation tools, while others look for simple one-on-one advice. Regardless of the methods and approaches selected, a carefully designed plan that integrates milestones, dependencies and broader transformation objectives is essential. Finally, the speed of the project creates a

CASE STUDY A large public-sector organisation was undergoing a difficult organisation transition as the result of a merger. There was extensive duplication of effort, senior leadership was in conflict, and there was no authoritative vision of the right way forward. The incumbent CEO spent limited time engaging key stakeholders, did not discuss options fully with the board, and did not invest working time with the design team. Support for the design process consequently dropped to dangerous levels. Eventually, the chief executive resigned. The incoming CEO took a contrasting approach. She appointed some of the organisation’s best people to the design team and empowered them to engage across the organisation to fully understand all points of view. The new CEO engaged with the design team herself, and led comprehensive and high-quality discussions at a board level. Her energy and commitment levels led to significant increases in engagement and buy-in, and soon all but a handful of senior stakeholders supported the design. In this environment, implementation was also more effective and robust. The result was improved organisational outcomes for many years after the change initiative ended. trade-off: Going too fast can mean too little engagement and consequent downstream challenges. Going too slow risks too much disruption. How will you know if your design is the right one? Traditional organisation design approaches are heavily process-based with common steps: • Establish design principles • Define future capabilities • Identify gaps between current and future • Explore new structures and reporting line scenarios • Transition workforce But how do you know you have it right? This is where art meets science. Combining analytical methods with visualisation tools can point

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more precisely to the places where change needs to occur – a new role, an enhanced capability, or a revised set of decision rights, for example. Using visualisation tools to represent quantitative data, such as operational, financial, HR or market metrics, can increase the likelihood of making the right structural choices. In the end, a good organisation structure can’t guarantee improved performance. But in the words of Peter Drucker, “The wrong structure is a guarantee of non-performance”. It pays to get it right.

event. It takes deliberate management. Working through the ‘decide’ and ‘design’ stages of an organisation change requires significant effort, but the real heavy lifting comes when it’s time to deliver the promised benefits. Organisations are made of flesh-andblood people who have different ideas, various incentives to align, and varied reserves of the time and attention it takes to engage with a new design and understand what it means. To make the process work as well in practice as it does in theory, start with more of our checklist questions.

Realise the planned benefits and value through thorough implementation Perhaps the most difficult part of an organisation design job is implementation. The steps you carry from paper into real life will affect the ways people work every day. They will realign the personal connections people value. That’s hard enough when everyone is on the same page – but getting people motivated to change, or even just getting their attention, can make it even harder. Implementation is a journey, not an

Is the organisation prepared for potential shifts and disruptions? Changing the organisation can be a significant disruption. Accountabilities change, people move or leave, and new capabilities emerge. The effectiveness of an organisational change can lie in how well you prepare everyone for the transition. Act early to help people understand the impact. If you give people and teams enough time at the beginning to prepare the organisation for change, it can smooth implementation issues later.

INDUSTRY VIEW: STEPHEN MOORE, CEO, CHOICE As a broker, it’s important to step back and look at the bigger picture of your business structure, to ensure you are positioning yourself for growth in the years ahead. When it comes to structuring your business for success, there is no ‘one size fits all’ approach. Importantly, take the time to create a tailored plan that fits your individual goals and needs as a business owner. Set clear goals and then actively manage to a plan – this is a defining trait of most successful brokers. Take the time to plan out where your future clients are coming from and make sure you devote time to seeking out and managing referral partners. Don’t forget your existing clients are the best source of referrals so ensure you are focused on CRM into your business. For those brokers with staff, having clear, documented business processes can be valuable. Streamlined file management with a clear chain of custody between loan writers and admin staff makes it easier to eliminate mistakes, and to train up new staff when they come on board. Whatever way you choose to structure your business, it’s important to get the best advice for your situation. Listen to your staff, your broker peers and consult with your aggregator to help with business planning and process improvements. As head of Choice Home Loans and Choice Aggregation Services, Stephen Moore has helped brokers organise their businesses for a number of years

Have you learned from past attempts to implement organisational change? Companies are better at initiating change than they are at executing it. A common phenomenon is that enthusiasm swells upon the announcement of an organisational restructuring then drops when excitement turns into work. This makes benefits elusive for three reasons. • Good design teams can think creatively and break out of established paradigms, but this skill seldom translates to execution. In other words, great designers are rarely great builders, and vice versa • Competing priorities and all the moving parts that go into daily business simply get in the way of elegant designs and ultimately derail them. Maintaining the integrity of a design through the execution phase requires vigilance: are all those daily, heat-of-the-moment decisions aligned with the master plan? Executives like the designing part, but they often delegate implementation to lower levels, and that makes it harder to preserve a grand vision • Just as design means much more than structure, capability-building means much more than switching employee reporting lines. Designing an organisation with new capabilities is where initiatives like these ultimately create value

How are you going to balance collective accountability, maintain momentum and maintain integrity of the design? Getting to the decision point regarding an organisational change is the last step in the job, but it is a critical juncture. It’s important to keep energy and commitment levels high while approvals are pending, design teams morph into implementation teams, and external advisors disappear. This is another way advanced planning can help organisations

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PEOPLE & MANAGEMENT

ORGANISATIONAL ARCHITECTURE

CASE STUDY A 100-year-old lending institution decided to redesign its business and operating models in an attempt to ward off the threat of bankruptcy. The program involved extensive redesign of the core banking divisions and retail branches. In order to balance accountability, integrity and implement the design, the CEO and the top eight executives led a steering committee that remained active throughout the two-year project. This committee had authority to approve all design decisions and implementation accountabilities. Once the group endorsed each step, it was allocated to an accountable executive and management team for implementation. The result of this approach was full implementation of the board-endorsed design within 12 months. The new, financially sustainable business has shown double-digit growth in both the size of its loan book and overall profitability. avoid common pitfalls and enjoy all the planned benefits of the change. Do you have leaders with the

10 capability, energy and stamina to lead the design and embed results? At the executive level, leaders sponsor and drive organisational change. At the program

“Take the time to plan where your future clients are coming from and devote time to seek out and manage referral partners” level, other leaders facilitate the design and bring it into reality. At both levels, organisation design requires deep commitment and intense participation. This isn’t only because leaders are the ones with authority. They’re also the ones with strategic insight and emotional intelligence. When staff and stakeholders embark on the journey from the old to the new, it’s easier when they feel they have someone to follow. These undertakings can be long and challenging. They demand significant energy from key people. And they can test longstanding relationships. Leading an

organisation through the process of becoming something else takes capability, stamina, and a willingness to stay the course. What we’ve learned is that organisational design really is a company’s conversation with itself. What are you trying to achieve? What stands in the way? How can you get from here to there? People can’t improve without honest self-awareness and a plan. Neither can organisations. Decide based on analytics-based insights. Design organisation solutions with precision. Deliver business value with lasting impact. Creating and implementing a new design can be a significant organisational accelerator in complex business environments. But there are no guarantees in merely committing to change. It takes precision and careful emphasis on all three phases – decide, design and deliver. Asking the right questions at each phase – and acting on the response – can save time and effort. And it’s the only way to link the effort you’re expending with the results you want. David Brown is the Human Capital lead partner at Deloitte Consulting. He has over 30 years’ experience in the Human Capital space in both corporate HR and advisory roles. He has spent 20 years in lead HR roles for major multinationals including Eastman Kodak, GlaxoSmithkline Beecham, Exxon, Standard Oil and Goodman Fielder. The last 13 years have been in advisory roles as managing director for Hewitt Australia’s HC consulting business and for the last four years with Deloitte Consulting. David has a BA (Psychology), a Graduate Diploma in Employee Relations and a Masters in HR & Coaching from Sydney University.

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MPA Br

ON DESKS IN JUNE

2015 MPA Brokers on Banks FPDesign_subbed_v2.indd ad.indd 10 33-39_Part 3 - Organisation 39

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STRATEGY & PLANNING

LEADERSHIP

21 CENTURY LEADERSHIP: WHEN AN EMAIL DOES DO THE TRICK ST

Communicating through new media can be more effective than face-to-face communication, insists leadership expert and academic Oliver Fischer. He tells Sam Richardson why writing a good email is now a core leadership skill

LEADERSHIP IS often assumed to be integral to the digital revolution. Our icons are Apple’s Steve Jobs or Facebook’s Mark Zuckerberg. Leaders now pride themselves on flourishing in an era of ‘digital disruption’, by constantly reimagining their businesses and whole industries. Yet what constitutes good leadership itself is rarely reimagined, particularly when it comes to communicating with followers. We hold traditional leadership values, namely charisma, as the polar opposite to modern and supposedly impersonal communication methods, whether emails, Skype or social networking. Even with the most social-mediasavvy leaders, we assume it’s their strength of character – as demonstrated through face-to-

face encounters – which has got them to the top. That’s where we’re wrong. Oliver Fischer, currently teaching leaders at German media giant Bertelsmann, and previously a fellow at Oxford’s Saïd Business School, believes that our attitude to communication needs to evolve. Fischer has been researching the impact of communication through ‘leaner channels’, by which he means a method of communicating that provides less opportunity for feedback: you can’t see someone’s facial expression when they read your email, for instance. Yet he doesn’t see such channels as a poor substitute for personal interaction; quite the reverse. “We need to understand that using these leaner channels in a skilful way is a

core leadership skill and a core leadership responsibility,” he says. The challenges facing the 21st century leader Fischer’s research is born out of necessity. Our traditional image of the charismatic leader gesturing from the podium, surrounded by cheering employees, is an increasingly unattainable goal. Modern leaders, particularly in Australia, will find themselves dealing with employees in different states, not to mention monitoring operations outsourced to different countries and time zones, even in the case of smaller businesses. Being there in person, for every crisis and pivotal moment, is often physically impossible, and we need to admit so.

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“Sometimes a very lean, quite short message can be much more powerful than a much richer but necessarily more complex face-toface interaction.” “The key link between technology, mediation, and leadership,” Fischer explains, “is that with leadership very often, if you look at the actual behaviours, the majority of communication doesn’t occur face-to-face, which we believe is the natural mode of communication, but through some sort of medium, whether that’s a Skype conversation, or email … the question that I’ve found

particularly interesting is that we tend to assume the effect is usually a negative one; one that affects the impact a leader can have.” Harnessing group identity We’re mistaken in that belief, Fischer argues, and to demonstrate why, it’s necessary to understand what draws people to a leader. “My research particularly looked at an

area called social identity research, within social psychology. And one implication of social identity research is that people want to belong to certain groups; they want to be members of these groups. Being a member of a group is linked to the sort of leadership we want to see; that person personifies the group,” Fischer explains. “Sometimes when we communicate through a lean medium like email, these interactions, because of social psychology on the side of the leader and the follower, can become richer because people compliment what they see.” Essentially, because we want to be part of a group, we construct a persona based on the smallest of details, such as the way someone signs off an email, or the choice of clothing in their Facebook profile picture, for instance. If you’re the one controlling those details, you can lead people relatively easily, Fischer believes. “Sometimes a very lean, quite short message can be much more powerful than a much richer but necessarily more complex face-to-face interaction,” he says. Undoubtedly, the theory appears counterintuitive: how can providing less information make appearing charismatic easier? Well, because we, the followers, are so intent on identifying with a group that we ignore the lack of information at our disposal. Fischer cites social media as a good example of this: “Look at the enormous effects that emerged initially through social networks; that’s a very good example that being part of a group is by no means comprised because communication at least initially takes place predominantly through lean media.” In these groups, leaders emerge and are occasionally nominated by group members who, Fischer presumes, “have no hesitation in saying they know this person, and can describe them and their personality. Whether that’s right or wrong is a different matter”.

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STRATEGY & PLANNING

LEADERSHIP

BUSINESS TOOLS There are a whole host of options now available for teams spread over multiple offices, beyond the humble intranet.

Mainstream social media Facebook, Twitter and LinkedIn can all be used for leader-follower communication. However, it’s vital you consider privacy settings, who owns the hosted content, and where the boundaries of personal/business interaction lie.

Virtual offices Employees collaborate by setting and monitoring goals, chatting, editing documents and more, on a secure web page, in real time. Examples: Asana, Basecamp.

Internal social networks Some companies, including Australian banks, have developed their own social networks to promote group discussion and cooperation without heaps of emails. Example: Yammer. Of course the distinctions between these platforms are rapidly becoming blurred as they expand.

What we’re currently doing wrong Lean media might make it easier to appear charismatic, but it also means that leaders need to think harder about how they communicate, Fischer explains. Firstly, lean media doesn’t remove personal like or dislike from the equation. In fact, Fischer’s field of study emerged in part from research into online bullying. And while you have to be likeable, being able to lead effectively through online

which is often what tends to go through official channels quite easily. Get a sense for what the group that you’re leading really thinks and feels, and if you personify that, if you boil it down to the core message, communicate that through relatively lean media, chances are people will simply perceive you as the appropriate leader at that point in time.” In practical terms, this means getting the right advice from middle managers and

“If you have something really difficult to communicate, for which you require feedback, don’t assume that people have exactly the same understanding as you do and ask for feedback” media doesn’t mean the end to the culture of showing face, Fischer insists. “If you have something really difficult to communicate, for which you require feedback, don’t assume that people have exactly the same understanding as you do and ask for feedback,” he says. Pressurised situations are correspondingly emotional, and many of us still struggle to express and identify emotional cues on platforms like email. “This is where face-to-face interactions can help,” notes Fischer. “[For] highly ambiguous messages, or communicating in a situation where both sides have a completely different starting point, that’s where communicating through email or other types of lean media where you don’t get much feedback gets tricky.” You can communicate complicated concepts on lean media, according to Fischer, providing “you get the message right”. That doesn’t mean going with the safest option, he cautions. “What you don’t want is a piece of generic propaganda,

communications specialists, and avoiding those obsessed with crafting the perfect message. Know the different platforms out there, and pick the right one at the right time – essentially the one your target group is actually using, rather than necessarily going with the fancy new blogging platform your IT division just invested in. It’s no longer acceptable to just leave sole responsibility for these leaner channels to others; even if you don’t actually use the channels, you need to know which will best suit your group and your message. Lean communication and adaptive leadership Previously at the Saïd Business School, and now at Bertelsmann, Fischer has integrated his research findings into his teaching of business leaders. He teaches ‘adaptive leadership’, “the core of which is learning the art of giving work back to the people who can do it; don’t assume that responsibility always rests with you”. It’s an approach that runs counter to the

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traditional emphasis on leaders taking responsibility for what happens in their business. It’s also a style of leadership developed from, and for, the age of digital disruption. Forbes magazine describes adaptive leadership as an extension of those core leadership components of which you’ll already be aware: strategy, action and results. Adaptive leadership adds emotional intelligence, organisational justice, character and development to the mix. Fischer’s emphasis on lean media communication fits into adaptive leadership, because changing an organisation requires excellent communication all round, he explains. “If you want to change behavioural patterns in a sustainable way, that requires learning, and you can only do that through passing a very significant part of the leadership-of-change element on to those you lead,” he says. “Expand your toolkit,” Fischer urges. “Reflect on the unexpected areas of leadership. Leadership is not just about giving a big presentation in a carefully stage-managed context; it’s much more about smaller things that happen on a daily basis.” Changing an organisation requires that you convey your message through all the channels of communication you’re using, including the quick emails and even texts. “Be aware of the context in which this takes

place,” Fischer advises. “Hone your skills or media selection and media use.” A core skill of leadership Leadership is not immune to the digital revolution, as technology is expanding the channels through which leaders need to engage with employees. Fischer’s conclusion, that “lean media can be richer than you think”, is a warning to the leader who says they can’t be bothered to use social media or

LEAN MEDIA

Change a product or service to suit a specific, different target market. Examples: email, social media, Skype, blogging.

A GROUP

For Fischer’s research, he simply defines a group as people sharing common assumptions, such as a common goal, as you expect in a successful business.

to blog, or leaves the writing of emails to their PA. However, lean media also presents an opportunity for different styles of leadership to emerge. Given that followers build personas and even attribute charisma to mere emails, a leader has more opportunity than ever to craft the right message when not able to physically meet employees. Faceto-face presentations are still important, but are now just one tool among many. For Fischer, his research has direct and very practical consequences for leaders out there. “We need to understand that using these leaner channels in a skilful way is a core leadership skill and a core leadership responsibility,” he says.

Oliver Fischer is head of the Centre of Expertise for HR at German mass media corporation Bertelsmann. Previously he was a fellow in strategy, leadership and change at Oxford University’s Saïd Business School, and continues to work with the school as an associate fellow.

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PEOPLE & MANAGEMENT

PERFORMANCE

FOCUS ON STRENGTHS Imagine if you focused energy and resources on nurturing the strengths of your employees rather than pumping money into ‘fixing’ their weaknesses. Dr Tim Baker explains that the focus on overcoming weaknesses is the path of most resistance, and that boosting employees’ innate strengths is more worthwhile – for them and the business

MARY ENTERED Sandra’s office with some trepidation, knowing that she was about to be appraised for her performance on the job after six months. Mary was concerned about Sandra’s appraisal of her work. Sandra is an accountant in a professional services firm. Sandra began with the question, “Now that you’ve been in this job for six months, what are the tasks you enjoy doing the most?” Mary was blindsided; she wasn’t expecting this kind of question first up. She thought carefully for a moment and responded, “I guess most of the time I like dealing with our clients.” “Approximately how much of your day is taken up with clients?” Sandra asked. “Not too much; maybe one in eight hours,” replied Mary. “What is it about the client contact that you enjoy, Mary?” probed Sandra. “I enjoy communicating with them to provide solutions to their problems. I find that it energises me and I feel useful,” Mary replied. “Yes, I agree this is one of your strengths,” Sandra said. “I get great feedback regularly from some of our valued clients. How can we work together to provide you with the opportunity to do more of this? Could I delegate more of the routine accounting work to one of the administrative assistants in the office and move you into a client liaison role? Perhaps we could make you the first

point of contact for client requests, and that may entail you being out on the road more. That won’t happen overnight but we can work towards this.” “That would be great, Sandra,” Mary replied. “I would really appreciate that opportunity!” The world of work, which mirrors society at large, is obsessed with spotting and overcoming employees’ weaknesses. We are socialised at an early age to focus on overcoming our weaknesses rather than building on our strengths. You will always get a better return on investment in time and effort by investing in the development of your strengths than by trying to overcome your weaknesses.

Our obsession with overcoming weaknesses Think about it: all things being equal, spending an hour developing a strength or talent is a far better use of your time than spending an hour trying to correct a deficiency. You will learn faster, gain greater traction, and be more efficient and effective in building on a talent than in trying to overcome a weakness. As the saying goes, what seems common sense is not always common practice. We are told at school to lift our grades in subjects we struggle with and maintain the good grades we get in subjects that come easily. When we enter the workforce, the traditional performance

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appraisal devotes a disproportionate amount of time to our weak areas and very little time to what we do well. So it is little wonder that we are obsessed with our weaknesses and take our talents for granted. In his 2007 book Strengths Finder 2.0, Tom Rath says Gallup has surveyed over 10 million people worldwide since the 1990s on the topic of employee engagement; that is, how positive and productive people are at work. Only a third of those surveyed ‘strongly agreed’ with the statement, “At work, I have the opportunity to do what I do best every day”. Of those who ‘strongly disagreed’ or ‘disagreed’ with this statement – that is, those who felt they did not focus on what they did best – none were emotionally engaged in their jobs. The message is clear: if you want to engage the hearts and minds of people at work, you need to give them the opportunity to exercise their strengths and talents at work. To further illustrate the point, Gallup’s research suggests that employees who are given the opportunity to utilise their strengths are considerably more

about an employee’s strengths. While it is true that a lot of what we do in the workplace is hard work, giving people a chance to exercise their innate talents can be significantly beneficial to employees, the organisation, and society in general. Yet performance appraisals are generally geared towards overcoming employees’ weaknesses. I am not suggesting we do not discuss these weaknesses or opportunities for growth. In fact, the next conversation in my ‘Five Conversations Framework’ does just that. What I am saying is this: we need to redress this imbalance in focusing on weaknesses by discussing strengths and talents. Not only are traditional performance appraisals obsessed with identifying weaknesses, but managers are preoccupied with pouring resources and support into the development of these weaknesses. Most learning and development programs are designed to overcome weaknesses. As Rath puts it, these programs “help us to become who we are not”. For example, if you are poor with numbers you are sent on a course to develop accounting skills.

We are socialised at an early age to focus on overcoming our weaknesses rather than building on our strengths. You will always get a better return on investment in time and effort by investing in the development of your strengths than by trying to overcome your weaknesses committed to their work than those who are not given the same opportunity. These same people who exercise their strengths at work report having a better quality of life than others who do not get the same opportunity at work. It appears that focusing on strengths has considerable benefits for the individual, the organisation where they work, and society. This is the rationale for holding a conversation

Or if you are appraised as being poor at dealing with people, you are sent on courses to enhance your “emotional intelligence”. Our whole life seems to be devoted to overcoming weaknesses, and this is more often than not done at the expense of developing our talents. On top of this, our heroes in society are those who have overcome massive obstacles. People who excel despite a physical

INDUSTRY VIEW: SAM BOER, GENERAL MANAGER BROKER SALES, COMMONWEALTH BANK Our people are the key to our success so we spend a lot of time nurturing and investing in them to make Commonwealth Bank a place where people feel welcome and inspired to be who they are and work at their best. An empowered member of the team will enable us to deliver the best possible customer experience, so it’s critical that we provide the right forums where our people can work together and feel comfortable to share their ideas. As part of our commitment to productivity, all teams across the bank are strongly encouraged to regularly hold ‘huddle’ meetings. Huddles are short 10- to 15- minute stand-up meetings to clearly share results, plan ahead and pass on key information. We’ve found these meetings foster a great environment for teams to embed operational improvements and discuss day-to-day priorities by engaging the teams in regular, focused and data-driven conversations. Some of our broker partners will be familiar with the concept of huddles through our productivity program, Kaizen. Kaizen is a team activity which delivers rapid and dramatic improvements; it focuses on quality, and promotes teamwork and team spirit. We have seen dramatic improvements in the businesses of brokers who implement Kaizen to focus on enhancing the engagement of each staff member, which increases productivity and creates great customer outcomes. We also encourage our teams to participate in our Group Volunteering Program to promote collaboration, teamwork and deepen our relationship with the communities in which we operate. Commonwealth Bank runs a number of business development programs for brokerages, including Kaizen and Lean disability, individuals who triumph over barriers such as age, discrimination, and economic circumstances – our lives are filled with such stories. These stories are undeniably inspirational. But they teach us that overcoming

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PEOPLE & MANAGEMENT

PERFORMANCE

obstacles is more virtuous than capitalising on our strengths and talents. On the other hand, we take for granted those who have natural talent. We do not value the effort they put in to exploit those talents. We do not see – or want to see – the hard work put

AT THE COALFACE In June 1985, two British mountaineers, Joe Simpson and Simon Yates, made the first ever ascent of the West Face of the 21,000-foot, snow-covered Siula Grande mountain in Peru. It was an exceptionally tough assault, but nothing compared with what was to come. Early in the descent, Simpson fell and smashed his right knee. Yates could have abandoned him but managed to find a way of lowering him down the mountain in a series of difficult drops, blinded by snow and cold. Then Simpson fell into a crevasse and Yates eventually had no choice but to cut the rope, convinced that his friend was now dead. In his subsequent book on the climb, entitled Touching The Void, Joe Simpson wrote: “As I gazed at the distant moraines, I knew that I must at least try. I would probably die out there amid those boulders. The thought didn’t alarm me. It seemed reasonable, matter-of-fact. That was how it was. I could aim for something. If I died, well, that wasn’t so surprising, but I wouldn’t have just waited for it to happen. The horror of dying no longer affected me as it had in the crevasse. I now had the chance to confront it and struggle against it. It wasn’t a bleak, dark terror any more, just fact, like my broken leg and frostbitten fingers, and I couldn’t be afraid of things like that. My leg would hurt when I fell and when I couldn’t get up I would die.” The survival of Yates himself was extraordinary. That Simpson somehow found a way of climbing out of the crevasse after 12 hours and then dragged himself six miles back to camp, going three days and nights without food or drink, losing three stone, and contracting ketoacidosis in the process, would be the stuff of heroic fiction if it were not true. Indeed, six operations and two years later, he was even back climbing. All because, against all the odds, he tried…

into activities in which people have a natural advantage. Inspirational stories (see boxout, ‘At the coalface’) create powerful myths in our society. Overcoming shortcomings is romanticised to such an extent that it is considered an essential element of our culture. Movies, books, TV series and the like are filled with the underdog

is more concerned with the first than the second set of questions. I remember as a child devoting hours, days, weeks, months and years to trying to bowl like the great Australian cricket fast bowler Dennis Lillee. I was not alone in that; thousands of others practised with the same dedication. Hours were spent in the cricket nets. Sooner

Not only are traditional performance appraisals obsessed with identifying weaknesses, but managers are preoccupied with pouring resources and support into the development of these weaknesses. Most learning and development programs are designed to overcome weaknesses beating the odds. This leads us to idolise those people who succeed despite their lack of natural ability. There is no room for us to celebrate individuals who use their innate talents for achievement. We therefore emulate the underdog. We believe that the way ahead is to overcome our weaknesses. Capitalising on our strengths is a secondary consideration. (Unfortunately, though, overcoming our weaknesses instead of building on our strengths is the path of most resistance.) So it is little wonder this idea is embraced when it comes to assessment of performance in the workplace. It raises questions such as “What are your weaknesses?”, “How can you overcome these?”, and “What can we as a business do to assist you in this regard?” We do not really consider the alternative questions: “What are your strengths?”, “How can you capitalise on these in your job?”, or “What can we as a business do to help you to exercise your strengths in this organisation?” The traditional performance appraisal system

or later it dawned upon me that no matter how hard I worked at my fast bowling, being a great fast bowler was not on the cards for me. I now think to myself, “Imagine if I had spent that time working as hard on my innate talents. What may have come of that, I wonder?” This is an extract from Tim Baker’s book, “The End of the Performance Review: A New Approach to Appraising Employee Performance” (Palgrave Macmillan). Dr Tim Baker is an international authority on performance in the workplace and author of six books on the subject. Tim was voted one of the 50 Most Talented Global Training & Development Leaders by the World HRD Congress in 2013. In a nutshell, Tim has conducted over 2,430 seminars, workshops, keynote addresses and coaching programs to over 45,000 people in 11 countries across 21 industry groups. You can go to www.winnersatwork. com.au to find more information, or contact Tim directly at tim@winnersatwork.com.au.

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PART 4 PART

SMART BUSINESS

48 EXECUTIVE EDUCATION Thereâ&#x20AC;&#x2122;s more out there than the MBA

52 DIGITAL DISRUPTION

How to respond to online competitors

56 CAREER MODELS Empower junior staff and free up talent

60 OUTSOURCING

Managing your outsourcing relationships INDUSTRY VIEWS: Phil Quin-Conroy, PLAN, Kim Cannon, Firstmac, Tony MacRae, Westpac, and Wayne McCartney, Loanworks Technologies

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SMART BUSINESS

EXECUTIVE EDUCATION

EXECUTIVE EDUCATION: MORE THAN THE MBA The traditional business master class has its place, but small business leaders should consider the many other options business schools now offer

YOU CAN’T deny the allure of the MBA. In the past few decades the Master of Business Administration has attracted an almost sacred status; for big corporations it is often the gateway to senior management; for the leaders of smaller businesses it promises to put you on a road to riches. However, this 1950s-vintage US model for executive education has started to show its age. Leaders of small businesses, nongovernmental organisations and those without a spare $100,000 or so are often badly served by the traditional MBA, and education providers are beginning to respond. In this article, MPA has set out to explore the new generation of executive education offerings which may better suit you. Ironically, our journey to find the new face of executive education begins at a university which is over 800 years old. Oxford University is renowned and disparaged in equal measure for ancient cloisters, dreaming spires and academics high in ivory towers. However, its business school, the Saïd Business School (SBS)is quite different entirely. Established in 1996, it’s very much a forward-looking business school, housed in an ultramodern

building and perched beside the train line to London’s financial district. The SBS’s MBA program is similarly up-todate. Alongside the MBA essentials – modules in accounting, strategy and leadership fundamental – it includes a large number of electives, where students can choose optional modules which are more relevant to their areas of business. There are also innovative ‘cross-cutting’ modules on ‘Entrepreneurship’, ‘Responsible Leadership’ and ‘Global Rules of the Game’. According to Kathy Harvey, director of the Oxford Executive MBA, the pace of change in business is driving that innovation: “We are finding that many of our participants want to understand how they can manage themselves as leaders in uncertainty, and understand more about their role as communicators for their firm. Our leadership programs include executive coaching, and we work with our students and executive participants to explore their leadership style and give them the tools to manage change. This coaching approach is part of a wider trend in business education.” The school’s character is unmistakably global, with only 4% of MBA graduates being

OXFORD FOR SMALL BUSINESS LEADERS “The School has always focused on entrepreneurial thinking and has a strong record of fostering start-ups and nurturing companies to the next level of their expansion plans. All our students have to write business plans and develop ideas for new products and services, and they work with mentors and faculty to make the best of their opportunities. We also have an entrepreneurship centre which runs programs for small and growing firms, so there is a lot going on here. If you run your own business you will feel at home!” Kathy Harvey, director of the Oxford Executive MBA, Saïd Business School

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INDUSTRY VIEW: PHIL QUIN-CONROY, CEO, PLAN AUSTRALIA

based in the UK, compared to 26% in North America and 9% in Australia/NZ. Worldwide connections are something the school leverages heavily within their programs, according to Harvey, with faculty consulting with industry and governments. All students take the ‘Global Opportunities and Threats Oxford’ course, which brings together students, academics and alumni to develop responses to typical global threats, which conveniently also provides an invaluable global networking opportunity.

The Executive MBA While innovative, the Oxford MBA is a considerable financial commitment, currently

costing around $91,000 (at exchange rates at the time of writing). We asked EMBA director Harvey to explain these costs: “These programs are high touch, with senior faculty teaching in an intensive manner over a long period of time. All MBA programs represent a huge investment for the students and we recognise this, but we also realise that to provide the best teaching, to innovate and to offer a truly global business education we have to invest. And of course, like all business schools, we have the usual overheads you would expect of any organisation, but the key is always providing excellence in all aspects of our programs.” Other than cost, perhaps the greatest

At PLAN Australia, we believe that a company can only excel if it manages to assess, adapt and evolve over and over again. The same can be said for people. Continuous learning and professional development is something I’m passionate about and I see a lot of it with my team, brokers and other industry participants. Education has played an important role in my own professional development. In addition to an initial Bachelor of Commerce from Murdoch University, attained in the early 1990s, I’ve since undertaken a course in Strategic Leadership at Oxford University in 2003 as well as completed MBA studies at AGSM. The Oxford University experience was amazing and reminded me that you don’t need to manage people to lead and exposed me to interesting scenarios like conducting a choir to demonstrate the impact leaders can have. I also took away some terrific techniques to develop strategies and then business plans to implement those strategies. It may seem difficult to fit professional development into a busy schedule, but if you’re looking to lead and grow, I’d urge you to make it a priority and take some time to consider how you can free up some time. And it doesn’t have to be an MBA – for our members it can be as simple as taking advantage of the quality training and development focus provided at our PD Days and Conferences. Phil Quin-Conroy attended the Saïd Business School’s Strategic Leadership Program while working in the UK

disincentive for potential MBA participants is the investment in time, as the MBA is a oneyear, full-time course, based in Oxford. If you’re not able to leave your business for that amount of time, a better solution may be the Executive MBA (EMBA): a 21-month course which only requires you to be physically present in Oxford part of the time. The idea of an executive MBA is not new, or unique to Oxford. Moreover, the EMBA shouldn’t be thought of as simply a part-time

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SMART BUSINESS

EXECUTIVE EDUCATION AUSTRALIAN EXECUTIVE EDUCATION: GMAA RATINGS The GMAA is a membership-based organisation of graduates who hold an MBA, DBA or other postgraduate management qualification. The methodology for the Star Rating system is designed to provide a balance between a range of factors from total cost through to content and entry requirements. Schools are ranked from 5 stars down to 1 star. The GMAA 5 Star Assessment is designed as an index of the quality of MBA programs provided in Australia to onshore students. In 2014 data was received from 60 programs offered through 37 institutions, of which 46 programs were ultimately included in the final results. Courses awarded a 5 Star Rating in 2014 were (alphabetically): • Deakin University • La Trobe University • Queensland University of Technology • RMIT University • University of Adelaide • University of Queensland • University of South Australia • University of Western Australia

MBA; it has a very different aim and structure. Students spend a week studying a module, and then go back to their businesses and attempt to apply what they’ve learnt. It’s intended for more experienced and senior professionals and arguably a better fit for those already at the top of their organisations.

might come back to business school to immerse themselves in corporate finance through our Finance for Senior Executives program, which is a one-week intensive experience.” The diploma has many of the same perks as the MBA; membership of an Oxford college (an

“Many senior managers have never studied for an MBA and for them a short intensive program can be very effective” Oxford’s EMBA also takes the emphasis on global business to a whole new level, with modules previously held in India, China and the US. Given most students are businesspeople, networking also takes on additional importance; incidentally, this provides a compelling reason for being physically present at the SBS, rather than studying the entire course online.

Executive education programs The EMBA still doesn’t address the question of cost, and is in fact more expensive than the MBA, at approximately $129,000. There’s also the cost involved in attending 17 week-long modules in Oxford and overseas. There are a number of shorter non-MBA programs which are both cheaper and more practical for business leaders. If the certification aspect of executive education still matters to you (i.e. the letters after your name) then taking a diploma may be a good alternative. Diplomas are considerably cheaper, around $40,000 for the SBS’ ‘Oxford Diploma in Strategy and Innovation’. Many are part-time courses, usually spread over a year, with several four-day courses to attend and they may, Oxford’s Harvey suggests, be a better fit for some senior leaders. “Someone who did their MBA in their late 20s and finds themselves expanding their business globally in their 40s may still benefit from refreshing their skills and knowledge,” she explains. “They may choose to focus on strategy and globalisation, through a program like our Diploma in Global Business, or if they are looking at an acquisition they

excellent base for networking) and access to the Oxford Business Alumni Network. The diploma is linked with the EMBA; upon completion, participants can get a considerable discount on the EMBA and may be exempt from needing to complete certain modules. Outside the formal qualifications, the SBS also runs a number of programs, which are generally 1-2 week events with very specific aims. The ‘Strategic Leadership’ program, which takes six days, involves participants hearing a number of different expert speakers bring very different approaches to leadership: change management, psychological and historical, to name but a few. One past example involved a famous conductor getting students to try conducting a college choir, to demonstrate the importance of clear communication. Harvey claims that Oxford’s programs can offer a gateway to executive education: “We recognise that many senior managers have never studied for an MBA and for them, a short intensive program can be very effective.” What distinguishes a program from an industry conference is the opportunity for dialogue between industry leaders and academics, she adds; “we want to learn from business leaders and executive programs are the bridge between academia and the business community. We have much to offer each other.” The benefit of programs, as opposed to the generalist MBA and diploma options, is that they can be more specialised and customised. The SBS has programs on real estate, impact investing, negotiation, retail and transport, as well as on leadership and strategy. Finally, the school creates customised programs, previously

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THE SAÏD BUSINESS SCHOOL

1996 Established in 1996 23rd MBA ranked 23rd globally by the Financial Times

4th Executive MBA ranked 4th in the world by The Economist magazine

230 230 MBA students / 77 EMBA students working with the UK Government, brewing giant SABMiller and defence firm BAE Systems.

More than three letters It’s increasingly obvious that small business leaders need to move beyond the letters MBA. Certainly having a structured program has a lot to offer, but potential participants should be looking at specific modules, commitment to entrepreneurship and opportunities for global networking, rather than the certification itself. The academic reputation of universities such as Oxford certainly adds prestige, but it’s the work their academics do with real businesses worldwide which keeps executive education at a high level. These academics practise what they peach: many schools – not just Oxford – are moving towards ‘experiential learning’; learning through doing, and executive education participants will find courses are far more hands-on than their longforgotten undergraduate degrees. What potential executive education participants need to do is balance their time and cost constraints with opportunities for collaboration and in-person networking, which are the auxiliary benefits of executive education. With so many intermediary options – the EMBA, the diploma and individual programs – striking that balance is becoming easier than ever.

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SMART BUSINESS

DIGITAL DISRUPTION

THE END IS NOT NIGH: DISRUPTING DIGITAL DISRUPTION Rajiv Lal, Harvard Business School’s Stanley Roth Professor of Marketing, has been studying the seemingly unstoppable spread of online retail. Sam Richardson talks to him about his new book, Retail Revolution, and what you can do to protect your business

RETAIL REVOLUTION: will your brick and mortar store survive? is a rare book; a call to action that applies to almost any service business. Published in December 2014, the book is a combined effort by Harvard University academics Rajiv Lal, José Alvarez and Dan Greenberg, and the subject matter is the threat posed by online retailers. The online retailer in focus is Amazon, and the authors focus on large American bricksand-mortar retailers, demonstrating through several case studies how the stores are being impacted by online retailers. However, this is a book for any retailer, whether of consumer or financial products because the book’s fundamental questions – about distribution, competition, consumer behaviour – are universally applicable. The message of the book is clear: there are concrete strategies that can be put in place to respond to ecommerce, depending on your product. While quality management is important, the authors stress that some products are better distributed online, and business owners need to seriously examine what added value their bricks-and-mortar

“Small businesses can truly ask the question: what is the best way to serve a consumer with the best use of technology and people...starting from a clean sheet of paper” channel provides, and whether it’s worth the expense. Good management will mean having the courage to implement cuts while simultaneously encouraging creative innovation – no small task. Ultimately, Retail Revolution is a book for proactive managers, not armchair observers of the rise of e-commerce. The authors make bold predictions for their case studies, and encourage you to think in the same way about your own business. By providing a simple starting point for innovation, ‘The Online Threat Decision Framework’, the authors bring the e-commerce

discussion beyond the confines of academia and big business, making it accessible to every business leader.

Retail Revolution: will your brick and mortar store survive?, published by Harvard Business School, is available in print and as an e-book

Rajiv Lal is Harvard Business School’s Stanley Roth professor of retailing. He has developed and taught parts of the school’s marketing modules, a core part of Harvard Business School’s MBA program. He has previously served as the Faculty Chair for the Global Management Program, and currently co-chairs the program on Building and Leading a Customer Centric Organization.

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THE ONLINE THREAT DECISION FRAMEWORK At the core of Retail Revolution’s message is the authors’ framework for responding to online threats, requiring an honest look at your own business and current and potential online competitors.

1. Which threat do you face?

Digitisation or disappearance of core product

Online retailers have large cost, inventory, and selection advantages in core categories

2. Do you have a compelling advantage?

Yes

Wind Down

Shrink and Transform the Format

3. Strategic imperative:

Products and/or customer behaviour does not lend itself to online retail

Enhance the Value of the Box

Turn over for more detail on response strategies and an interview with author Rajiv Lal

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SMART BUSINESS

DIVERSIFICATION

INDUSTRY VIEW: KIM CANNON, MANAGING DIRECTOR, FIRSTMAC RIDING THE DIGITAL WAVE: NOT DROWNING, WAVING. Digital technology is to mortgage broking what the telephone was to telegrams. It will revolutionise the channel but it might be a bit painful for some. There will be parts of the industry that recognise the opportunity for what it is and launch forward to make good early gains, and there will be others who make a more gradual transition of parts of their business onto an online format. There will be still more who never get comfortable with the digitisation of mortgage lending and will stick to a conventional bricks and mortar model for their business. None of these outcomes are the wrong answer. Mortgage broking is a knowledge-based, customer-centric field and brokers know how to do what is right by their customers. They will do themselves a great favour, though – if they ride the digital wave rather than let it swamp them. Planning is the key to managing change and the starting point doesn’t have to be momentous. Take advantage of industry resources like the Firstmac Broker+ program as a guide to using digital technology to grow new markets, streamline customer communication, and trim down manual administrative processes.

As managing director of Firstmac, Kim Cannon launched loans.com.au, which pioneered online lending.

THE THREE STRATEGIES EXPLAINED

WIND DOWN

SHRINK AND TRANSFORM THE FORMAT

ENHANCING THE VALUE OF THE BOX

“ ‘Wind Down’ focuses on maximising the cash that can be returned to investors. This is achieved by not betting the farm on trying to drastically reinvent brick-and-mortar stores (unless there is a clear, achievable, near-term payback period), but rather by acknowledging the realities of the situation as online retailers or product shifts replace the need for a store network. While the end result is very likely a closing of the company, this strategy is not a race to bankruptcy but a continuous rationalisation of the organisation and its stores to maximise shareholder value.”

“ ‘Shrink and Transform the Format’ involves transforming brick-and-mortar stores and other elements of retailers’ operations to focus on the most value-creating activities, while simultaneously ensuring that these activities are paid for by those who most benefit from them. Some retailers face the necessity of a wholesale reimagining of their business: from their stores, to the way they interact with customers, to their supply chain in order to remain relevant and competitive. These retailers should, indeed, bet the farm as the shift to online retail could quickly drive their current stores to unprofitability.”

“ ‘Enhancing the Value of the Box’ is for those retailers who, for various reasons, have largely been protected from the vicissitudes of eCommerce. It includes further protections of the brick-and-mortar store through a variety of strategies, as well as shrewd leverage of retailers’ online operations to direct sales to a largely unchanged brick-and-mortar store. For some of these retailers, a blind adoption of online retail should be approached with caution as their core product, for example pet food, is better fulfilled in-store.”

Examples: Staples (Office supplies superstores) Examples: Walmart (Supermarkets), Best Buy (high-end electronics)

Examples: Home Depot (hardware store), PetSmart (pet food and accessories)

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Q&A WITH PROFESSOR RAJIV LAL MPA: What would you say to (for example) mortgage

Prof Rajiv Lal Harvard Business School

salespeople currently operating from an office? How can they respond to online lenders? Rajiv Lal: I think we need to understand that many financial products are digital in nature but require advice and help at some point in the decision making process all in the context of the regulatory environment. We need to first understand how the decision making process for mortgages has changed over the last five years. These days, consumers can almost get pre-approved even before they start searching for a house or enter a retail branch. Even most of the advice for many consumers can be delivered without a face to face meeting and the final documents can be signed off at the home of a customer. In fact, if you consider the digital channel, call centre help through phone and video and the possibility of servicing the client at home, you can easily imagine a scenario where the customer does not set foot in a branch. Over the last three months, I have been involved in two mortgage transactions and have not visited a bank branch.

MPA: What separates retail and financial products in the context of the online threat?

RL: The most salient difference is in terms of the regulatory environment that often requires certain documents and messages to be delivered face to face. Otherwise, for simpler financial products, the digital age is going to transform the financial services industry. If you look at the innovation taking place in many emerging markets, new business models are being developed to deliver credit through technology and third party retail outlets without the help of bank branches. Most branches are now being redesigned for advice and the complex parts of a financial transaction.

MPA: Retail Revolution concentrates on very large organisations, and for some suggests their scale could be a valuable asset. But how will smaller independent operators – both in retail and financial products – respond to the online threat? RL: The smaller independent operators have a huge

advantage because they do not have legacy costs to deal with. They are not encumbered by the existing assets and inertia. They can truly ask the question: What is the best way to serve a consumer with the best use of technology, people, ATMs and call centres, starting from a clean sheet of paper? They can question the fundamental of premise of a branch, that is, branches are essential to gathering deposits that affect the cost of funds for the rest of the business. The argument still rings true but do we need the same density especially to service the retail business.

MPA: How far can providing education and advice go when competing on price is not an option?

RL: The financial services companies will have to reconstruct their business models. Currently, many make money from transactions. This way of making money often conflicts with the interest of the client/customer. Financial services firms should set up their business models so that they make more money for themselves only when their client portfolios do better. On transactional items, they need to be as efficient as possible by deconstructing processes and systems and rearranging them to give the customer the best experience at the lowest cost. This is the true wonder of technology! We used to think that better service can only be delivered at higher cost. Not so today!

MPA: Do you think the financial services sector is further advanced along the ‘shrink and transform’ path than retail? RL: The financial sector is further along the shrink and transform path than retail without taking the regulatory issues into account. I also believe that there is an opportunity to reimagine the business because many banking activities can be reconciled by transforming the process to a digital process and then using the advice proposition in the branch to serve a larger section of the clientele. For example, one can potentially think of providing wealth management services to clients with fewer assets because the cost structure could be very different.

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SMART BUSINESS

CAREER MODELS

TURNING CAREER MODELS INTO STRATEGIC INSTRUMENTS Oxford University associate professor Michael Smets talks to Sam Richardson about changing career models in professional service firms, and how new positions can drive innovation

WE TEND to think of the career path as a natural process of rewarding age and seniority. But in fact, the career path is a tool, which you can and should utilise to develop your business. Whilst traditionally, ‘climbing the greasy pole’ has been a sacrosanct part of professional service firms (PSFs), innovative players are creating new career paths, according to associate professor Michael Smets of Oxford University’s Saïd Business School. Smets is part of the Saïd Business School’s Centre for Professional Service Firms, and as associate professor in management and

organisational studies, has been studying the inner workings of professions for years, in particular law and reinsurance, and has worked directly with industry associations and specific firms including Deloitte and Clifford Chance. He has seen career models in these industries adapt to societal changes, but also be adapted as part of innovationdriven strategies.

Understanding your business Before you can adjust career paths you need to understand them, which is synonymous

DEFINITION: PROFESSIONAL SERVICE FIRM Businesses which are characterised by a high need for knowledge, a professionalised workforce, and low need for capital – it’s about the people, essentially with understanding your business. This begins with the very definition of what a professional service firm is and does, Smets explains. “You can say that all professional

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THREE MODELS OF PSFS – WHICH ARE YOU? BRAINS PROJECTS The business proposition of these firms is about delivering entirely novel solutions to problems. Smets explains “the highly customised, really cutting-edge solutions, things that have never been done before.”

GREY-HAIR PROJECTS These firms work in specialised areas where “experience is at a premium, [you’re] doing things that have been done before but are still very tricky”. Many law firms fall into this category.

PROCEDURAL PROJECTS Delivering standardised solutions to commonplace problems, these firms typically have “very high throughput, very high volume, but low levels of customisation and tailoring of the service”.

Whilst some industries lean towards one type (i.e. IT firms are often procedural), one industry can have different types of firms, depending on whether there is demand for novel solutions.

service firms are knowledge intensive; there is a high level of human capital and a low level of other capital involved, so it’s mostly about the people and their expertise.” Although PSFs trade on their knowledge, it is very difficult to hold onto that knowledge. Smets points out, “a consultant or lawyer gives away their knowledge the minute they hand over the slide deck… knowledge commoditises incredibly quickly in professional services.” Therefore, personal skills and client relationships are important, because the highest-value services are customised for the individual client, and developed in conjunction with that client. PSFs can be further subdivided into three categories: ‘brain projects’, ‘grey-hair projects’ and ‘procedural projects’. The definitions of the categories are explained in the box at the top of this page, and what makes these differences particularly important, according to Smets, is that they determine the structure of your business; the balance of junior to senior staff and who clients expect to deal with. It’s vital you know which category your business falls into before attempting to change career models.

The up-or-out model The most established career path is the ‘up-orout’ model. Typically associated with law firms, staff (often termed associates) compete for promotion, with the end goal being to make partner, a position which typically involves co-ownership of the firm and considerably greater financial rewards. Smets compares the up-or-out model to a ‘knockout competition’, the reason being that failure to earn promotion results in being made to leave the firm, hence the ‘out’ component.

What makes the up-or-out model dominant, Smets explains, is “that it has very strong motivational and reputational impacts. In terms of motivation it is very difficult to monitor the quality of professional work because it goes on within people’s brains… the assumption is, when you dangle that carrot of long-term promotion to partner in front of people’s noses, they will work extra hard and you can save the money required to closely monitor their efforts.” Similarly, the reputational aspect comes from client perceptions; “when you have a very strict up-or-out system, you signal to clients that only the best of the best are retained within the organisation”. There are other advantages, of course; junior staff may be more willing to accept low wages and long hours if the prospects of substantial financial rewards are present. Furthermore, the system also assumes a natural exchange of senior professionals’ knowledge for junior professionals’ manpower; you assign your employees more menial admin work, for example, so you can focus on bringing in more business, which is what you do best. Indeed, the categories above play into this exchange; innovative ‘brain projects’ need a greater number of experienced staff compared to juniors, because there is no set of instructions for junior staff to follow. On the other end of the scale, procedural projects involve juniors following well-trodden paths, requiring minimal oversight from senior professionals, thus fewer of them are required.

Modernising the up-or-out model Traditional models have worked well for years, but their in-built disadvantages are

CHANGING INCENTIVE MODELS Incentive schemes are also changing, and can be part of a strategy. Traditionally, professional service firms followed one of two strategies: ‘EAT WHAT YOU KILL’: individual incentives based on the business you bring in ‘LOCKSTEP’: profits shared amongst partners Rather than making the choice between personal accountability and group collaboration, PSFs are starting to blend the two models together; indeed “neither of the two models exists in their pure form very often”, according to Smets. Whilst profit sharing in the ‘lockstep’ model can drive interdisciplinary and international collaboration, which is crucial for firms expanding abroad, integrating an element of performancebased incentive promotes individual innovation, and less senior employees' exceptional contributions can be recognised. obvious. Whilst ‘up-or-out’ promotes growth – because new partners will need new associates to assist them – this growth becomes ever harder to achieve as the market matures and becomes more competitive. Such a situation can damage the entire motivational aspect of the up-or-out system. Smets explains, “firms can’t grow fast enough to sustain promotions to partnership but they need to keep everyone motivated.” PSFs who are unable to add partners, or simply have no tradition of intergenerational knowledge-manpower exchange to justify the up-or-out, will struggle to attract new talent.

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SMART BUSINESS

CAREER MODELS INDUSTRY VIEW: TONY MACRAE, GENERAL MANAGER, WESTPAC BROKER DISTRIBUTION Westpac’s Best Banker program is the people capability-building component of Westpac’s strategy. It ensures Westpac’s Broker BDMs have the support and tools to be the Best Bankers and the Best Leaders in the market. It is not one single program, but a strategy – and our single-biggest investment in our people – that brings together different initiatives and learning/development opportunities to build our people’s capability, organised by the three ‘pillars’ of Leadership, Professional Qualifications and a High Performance Culture. Our industry is changing and the level of skill and knowledge that is needed continues to step up and expectations are increasing from brokers and customers. Our goals are very simple but effective, as part of our commitment to the industry we want to ensure Westpac’s BDMs and leaders have the expertise to be true consultants and business partners. To this end, Westpac has partnered with a highly notable Australian University to upskill and educate our BDM workforce, which are both classroom plus practical style education. The program has been running these for the last two years; ultimately it will culminate with professional qualifications for all our BDMs by the end of the year. Westpac has provided the skillsets and the ability for BDMs to stand out as real growth consultant experts through education in key business development areas which include; segmentation, portfolio effectiveness, customer profiles, value proposition development and pitching to win. What’s beneficial about the Best Banker program for BDMs is the potential to truly make more confident strong leaders in the mortgage industry, provide further opportunities to study nationally recognised professional qualifications or accreditations which make a difference in their careers, and supporting our people to perform and succeed through providing better service and more innovative solutions to brokers, which have a substantive positive effect on their businesses and their customers. Last year, we increased our BDM network by 33% nationally. This year, the focus is on continued education and increasing our capacity to get out in front of more brokers. Westpac has made developing their BDM network a priority through enhanced training and development .

“It is very problematic for people going into it,” comments Smets, “in the sense that senior people are in position; there is no up, there is no out, so there is a blockage of the career path, which is problematic for those juniors who wish to build their book of business and distinguish themselves.” The obstacles facing up-or-out PSFs has led to the creation of entirely new positions, known in the legal industry as ‘counsels’.

than purely reactive business strategy: “We argue there’s actually a lot of untapped potential in these alternative positions… these positions can also be used as real innovation engines”. For a start, the existence of counsel positions make wannabe-partners think more carefully about how they act; raw performance is no longer enough. According to Smets, junior professionals realise “that they have to start

“We argue there’s actually a lot of untapped potential in these alternative positions… these positions can also be used as real innovation engines” “These are positions where professionals are allowed to stay with the organisation permanently without making partner,” Smets explains. “It flies directly in the face of the up-or-out system… you create something of a logjam for that promotional system.” You might imagine that counsel positions would de-motivate junior professionals, who will see the hopes of making partner diminish, even if they perform well. But Smets cautions that it isn’t so simple, “we see that especially with Generation Y, those work-life preferences are shifting distinctly… that was one reason these alternative positions have been introduced; to create more flexible careers and family-friendly careers.” In some countries, he claims, surveys have shown as little as 30% of junior professionals aim for a partnership. Thus, counsel positions help retain talent in the workforce, who would otherwise have left. It also allows companies to retain senior professionals in niche areas which are important but don’t bring in enough revenue to justify a dedicated partnership. The main risk actually lies with the clients; some may be dissatisfied at dealing with someone who evidently has not made partner, even if they have equivalent experience.

Making your career model drive innovation Furthermore, Smets believes PSFs can go further, new positions and incentive schemes can be part of a proactive rather

innovating earlier, position themselves as thought leaders, and build their personal book of business that will then qualify them for partnership. That means the lower levels of the organisation are much more motivated to become innovators than before.” It works the other way round, too. Counsels have fewer revenue-generating responsibilities than partners, and so may have more time to mentor junior staff and thus “they support the innovative spirit that those junior professionals bring. If you look beyond the work-life impact that these positions hold, and you use them cleverly… you can actually build quite an effective innovation infrastructure through these alternative positions.” Whether you have a partner-based ‘up-orout’ system or not, Smets has a clear message: traditional models can and should be adapted for your particular market. You have the power to free-up senior staff to work on value-add activities, and empower junior staff to innovate by changing job titles, remuneration and the business culture that surrounds them. Dr Michael Smets is associate professor of management and organisational studies at Oxford University’s Saïd Business School. His research focuses on management and career models in law and reinsurance, and has been mentioned in the UK’s Financial Times and academic and industry journals. He teaches modules on strategic management, innovation and business development.

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8/05/2015 1:53:34 9:18:47 PM AM 13/05/2015

SMART BUSINESS

OUTSOURCING

OUTSOURCING THE CUSTOMER INTERFACE? What you are exchanging with the customer is key to deciding how to manage outsourcing relationships, according to University of Melbourne’s Erik Mooi, Peter Gahan and Elham Ghazimatin

MORE THAN ever before, the capacity of a business to generate customer value relies on managing the quality of the customer-firm relationship. Even in those sectors where the production of goods is the core rationale for the business, the ability to service the customer relationship is critical for business to generate value and to compete. This, it has been suggested, reflects a new ‘service dominant logic’ in which relationships, ‘co-creation’ of goods and services, and intangibles lie at the heart of any business model. Somewhat paradoxically, however, this same shift has been associated with a growing tendency to outsource functions that define the interface between a business and its customers. For example, many airlines have outsourced baggage handling to companies such as Swissport or Aviance. This means that the interaction between the airline and its customer, when baggage gets lost, is typically with the baggage handler rather than the airline. Thus if problems occur, the airline might not be aware or is dependent on the ground handling company for information. Yet this is the very moment where customer experiences can enhance the value proposition of flying with any airline, or diminish it.

This same dilemma also occurs in the finance industry, where many retail customers only interact with financial intermediaries or third party providers, such as comparethemarket.com.au, iSelect, or Aussie Home Loans. These organisations are responsible for working directly with customers to select products and often also undertake risk assessment and brokerage. In doing so, these intermediaries ultimately manage customer perceptions of the service environment on behalf of the business for whom they work. The fact that critical aspects of the customer-company

relationship may not be fully in control of a business may, if not well managed, ultimately undermine customer perceptions of the value that a business is able to create. Perhaps surprisingly many businesses are finding that where such arrangements are well designed and executed, the business is able to work together with outsourced providers and customers to co-create a superior customer outcome that both enhances their perceptions of the value provided and the ability of the business to compete in innovative and rapidly evolving markets.

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WHEN SHOULD YOU OUTSOURCE THE CUSTOMER RELATIONSHIP?

The most often cited reasons for outsourcing a business activity relates to the potential cost savings associated with doing so. Outsourcing also allows a business to focus on its core activities that define the business, or critical assets such as a brand name, customer base, or IT capabilities that are otherwise not available. Some firms have developed strategies for working with outsourcing partners to core business relationships with customers. The reasons for doing so are economic. Managing customer relationships can, like many business activities, consume a lot of money, time and resources. However, the potential cost-savings associated with outsourcing these activities need to offset against the potential risks associated with losing direct contact with customers, especially where it can be difficult to capture knowledge about changing customer preferences, or manage customer loyalty.

HOW DO YOU EXCHANGE WITH THE CUSTOMER?

Many businesses never ‘meet’ or see their ultimate customers. Large banks often outsource call centre activities, such as to deal with merchant facilities for their business customers, or for handling complaints and disputed payments for the consumer segment. This means that information on customer interaction cannot be had first-hand. There are various structures in which firms allow outsourcing providers to engage with customers. The fully connected approach. In the 1990s, as many businesses began to depend more extensively on outsourcing, most also retained in-house operations that retained a direct link to customers. In these situations, where the customer may be served by the company or outsourcing provider, customers remain ‘fully connected’ (see ‘Different forms of triads’ box on p. 62). While these in-house operations might seem outdated in today’s business environment, in practice doing so helped businesses understand how well their outsourcing providers operated. This

INDUSTRY VIEW: WAYNE MACARTNEY, GENERAL MANAGER, LOANWORKS TECHNOLOGIES Loanworks Technologies established a presence in Manila in 2008, and our back office is firmly established there. We chose the Philippines as it’s a good cultural fit with Australia, with mature infrastructure, excellent English proficiency and manageable time-zone differences. Under our Outsource Professional Services brand we also provide outsourcing solutions to industry. These include dedicated staff and bureau options for loan processing, commission processing, outbound lead generation, accounts and marketing services. In 2014, we implemented call centre infrastructure and now offer outbound cold lead generation campaigns. These have proven to be extremely effective, for example one client’s campaign resulted in average cost for a set appointment with a fully qualified lead of $25 per appointment. We find that the best approach is to start by offshoring straightforward, routine tasks such as data entry, then build on that, progressively adding increasingly value-added services and processes to the mix. Our experience is that Manila provides a pool of highly qualified, experienced and motivated staff – our clients benefit from significant cost savings without compromising on quality. Industry acceptance has increased dramatically over the past 12–18 months; there are now enough success stories to balance against the experiences of early adopters, and there’s now an established network of Australian companies operating out of the Philippines. Loanworks Technologies helped pioneer outsourcing within the mortgage third party channel

structure has a number of advantages. It reduces what might become an ‘unhealthy’ dependence on the outsourcing provider by ensuring the business can more credibly threaten the outsourcing provider be replaced when performing poorly. It also ensures that the performance of the outsourcing provider can be easily measured by comparing and benchmarking in-house and outsourced activities. Outsourcing the customer interface. Of course, the fully connected approach involves the cost of duplication that can become a problem if the in-house operations lack critical mass. Recognising the potential gains associated with stripping these costs out of their operations, some businesses have looked to fully outsource their activities to a single provider. The cost advantages of scale are greater, and duplication is avoided. What were the benefits of being fully connected now turn to disadvantages as replacing the outsourcing provider becomes more difficult – good luck with any future (price) negotiations – and performance becomes more difficult to measure and understand. In this situation, the critical customer interface remains out of sight and one ‘cannot see the customer’.

The power of competition and comparison. An alternative approach is to outsource one activity to at least two providers. While it still means that the customer is invisible to the business, this approach allows a business to compare performance among providers and, critically, reduce the extent to which they are dependent on a single provider. Of course, this approach will only be cost effective where a business is operating with sufficient scale of operations, and where neither outsourcing provider insists on exclusivity.

WHAT TO DO WHEN YOU CANNOT SEE THE CUSTOMER DIRECTLY The academic research on outsourcing

suggests a few ways of reducing problems of not being able to ‘see the customer’. While there is unlikely to be a ‘cure all’ solution, deploying a combination of these strategies helps avoid the worst. Select the ‘right’ outsourcing provider. Outsourcing providers come in different forms and shapes. Some are highly motivated by the economics of the deal – something academics have termed ‘business people’. Others want long-lasting relationships and

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SMART BUSINESS

OUTSOURCING DIFFERENT FORMS OF TRIADS

“Fully connected” Company

Customer

“Outsourced customer interface” Outsourcing provider

be considered as ‘friends’. Selecting ‘friends’ is not easy. Just about every service provider claims to put weight on building relationships and being your ‘friend’. How can you tell these two different partner types apart? Work by Heide and Wathne (‘Friends, Businesspeople, and Relationship Roles: A Conceptual Framework and a Research Agenda’, Journal of Marketing), suggests such friends can be selected, created through socialisation, or through monitoring. Selection can occur through trial programs and supplier or outsourcing qualification programs. Most large companies have such programs but they are rare for smaller companies. Socialisation can occur through (mandatory) training programs or by getting the outsourcer to invest in the relationship – for example, by investing in technologies that cannot be transferred to other business relationships it may have. If such investments are substantial and cannot be used easily in other outsourcing arrangements, they function as ‘hostages’ that induce the supplier to focus on the long term. Monitoring is a third strategy and relies on the outsource provider being open to inspections, site visits, (financial) audits that allow companies to ‘meter’ activities and outcomes of outsourcing providers. Strategic information sharing. Because outsourcing providers are directly in touch with customers, they know things about

“Competition & compare”

“The fact that critical aspects of the customer-company relationship may not be fully in control of a business may, if not well managed, ultimately undermine customer perceptions of the value that a business is able to create” customers that others don’t. These information ‘blind spots’ may extend beyond knowing whether customers were provided with quality service by the outsourced provider, through to whether the provider is meeting regulatory requirements (for example, relating to product fee or other disclosures). Where these occur, they can be costly to remedy, and difficult to reverse. Such information blind spots require strategic information sharing between the company and outsourcing provider. Sharing

information is often difficult. Outsourcing providers may not want to disclose problem situations that undermine their own undertakings. Meeting information sharing requirements may also require additional information collection and be costly to compile or manage on an ongoing basis. Or the advantages of sharing information may be long term without clear immediate benefits to the outsourcing supplier. Where information is shared, plans between the company and outsourcing provider can be coordinated and these blind spots avoided. Managing the relationship. Building ongoing relationships with customers based on loyalty and value are critical elements in maintaining competitive advantage. The same philosophy has been found to underpin viable and resilient relationships with outsourcing providers. Depending on the value proposition associated with these relationships, investing in and managing the relationship are critical to aligning interests between the business and its outsourcing partners. However, at its core, these relationships need to be built on shared values about how the relationship is to work for both partners – and to the benefits of customers. These values and outcomes also need to be reflected in the ways that the performance of the relationship is measured and incentivised. Perhaps most importantly, where these relationships are expected to operate and evolve over time, a clear understanding of how the parties will make decisions, solve problems, negotiate any conflicts or go about planning and implementing any change to the relationship needs to be clearly articulated at the outset of the relationship. Gain direct access or handle select elements directly. As we have noted, retaining exclusive access to your customers has several benefits and drawbacks. However, it is also possible to retain direct access through insourcing some activities – particularly complaints handling – and handle these directly, leaving service delivery to an outsourcing provider.

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Why is this approach proving successful? Having a direct view on customer complaints allows companies to monitor outsourcing providers in a cost efficient way. As the outsourcing provider cannot rectify problems without such information, problems cannot be easily hidden, thereby giving companies a clearer view of what is going on. This also puts the outsourcing provider in a position of dependence and allows companies to detect issues early on without relying on the honesty of the outsourcing provider. In the long run, this also helps maintain more commitment towards the customer. This last point was emphasised in a Forbes report (‘Outsourcing Customer Service May Be Penny-Wise and PoundFoolish’) which suggested a strategy of complete outsourcing customer service is pennywise and pound foolish; as complaints handling is outsourced, customers face increased scripting, fewer solutions, and company learning is reduced. Overall, then, the experience of many businesses is that outsourcing can be extended to many areas of the business’ operations that traditionally might have been thought to be core business – activities which were viewed as potentially risky to outsource. However, as we have indicated, it

does represent a double-edge sword: it may reduce costs, but this may come at the expense of maintaining control over strategic relationships with customers and outsourced providers. Yet, the evidence shows there are solutions to many of these challenges. With careful management, even these strategic relationships can be maintained throughout outsourcing – to the benefit of the customer and the business. Erik Mooi is a senior lecturer at the University of Melbourne and works on topics such as outsourcing, inter-firm contracting, technology licensing, and franchising. He has published his research in the Journal of Marketing, the International Journal of Research in Marketing, the Journal of Business Research and others. He is also the author of ‘A Concise Guide to Market Research’, published by Springer.

WHAT WILL HAPPEN TO OUTSOURCING PROVIDERS? The globalisation of service outsourcing began to take off in the late 1990s. Finance and accounting (FAO) were one of the first processes to be outsourced. The outsourcing of these services is directed mostly to India, followed by Sri Lanka, China, and the UK. The largest Indian players, mostly based in Mumbai and Delhi, for FAO are Accenture, Capgemini and WNS. Despite enormous growth, Hackett, a Florida-based firm that advises companies on outsourcing, predicts that the migration of services to India and to other offshore locations will slow this year and that further migration will stop entirely by 2022. The reason for this startling prediction is that by 2022 about 80% of the FAO tasks that can be outsourced, will be outsourced by then.

Peter Gahan is director of the Centre for Workplace Leadership and professor of management in the Department of Management and Marketing at the University of Melbourne. He has held academic positions at Monash University, Deakin University, University of New South Wales, University of Southern California, Los Angeles, and The European University Institute. Elham Ghazimatin is a doctoral researcher at the University of Melbourne. Her research interests include inter-firm contracts, governance mechanisms and opportunistic behaviours, in particular in outsourcing relations.

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INFORMATION

ANY MORE QUESTIONS? If you’re interested in reading more about business strategy, or are looking for helpful information resources, we’ve listed a few places to start

GOVERNMENT RESOURCES The government has consolidated a number of old initiatives into the Single Business Service, which you can find on business.gov.au You may want to look at the ‘Grants Finder’ and ‘Adviser Finder’ tools. The website also has a large number of downloadable templates, tools and checklists for: • Starting a business • Creating a marketing plan • Emergency management • Case studies of established businesses • Financial calculators • Succession planning The following websites are also essential reading: ASIC – NCCP guidelines and licence holder registers. At the time of writing, ASIC had promised to introduce a new ‘innovation hub’ to help start-up Fintech businesses navigate regulations. asic.gov.au/ Australian Taxation Office – for latest tax guidelines, ato.gov.au/

BOOKS AND WEBSITES FEATURED IN THIS SUPPLEMENT Retail Revolution: Will Your Brick-andMortar Store Survive?, Rajiv Lal, José Alvarez and Dan Greenberg, 2014 Why Clever People Do Dumb Things, Lindsay Spencer-Matthews, 2015 From Deadwood to Diamonds, Stefan Kazakis, 2014 The End of the Performance Review: A New Approach to Appraising Employee Performance, Tim Baker, 2013

D The Ten Truths e-book series http://www.thetentruths.com.au/ Digilogue: how to win the digital minds and analogue hearts of tomorrow’s customers, Anders Sörman-Nilsson (Wiley 2013)

OTHER RESOURCES MFAA Pathways The MFAA’s learning platform is an essential resource for brokers, allowing access to a number of online and in-person courses, with CPD hours on offer. Better Business Hub Pepper’s online learning platform has a variety of modules on practical topics; relationship management, interviewing clients and business planning. It’s available for free to Pepper-accredited brokers. Kaizen and Lean Workshops Commonwealth Bank’s workshops are intended for experienced brokers looking to improve their processes. The workshops

encourage brokerages to document existing processes and create time and quality metrics, and have been used by several of MPA’s leading Top 100 brokers. BDM and Broker Broadcasts A LinkedIn group where BDMs and brokers can share expertise. The group is open to new members.

PRODUCT AND INDUSTRY NEWS MPA Lender Update Our new afternoon update of all product changes – you can sign-up on mpamagazine. com.au. We also have a morning update, Market Watch, with financial news. Australian Broker Online Industry news, including a morning newsletter and breaking news updates. Your Investment Property Monthly magazine aimed at property investors, which also has a website yourinvestmentpropertymag.com.au/

www.mpamagazine.com.au

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See how CommBankâ&#x20AC;&#x2122;s market-leading broker relationship team can help you. Talk to your Relationship Manager or visit commbroker.com.au

Things to know before you Can: Fast Track eligibility subject to loan type and submission of all mandatory supporting documentation at point of application. Refer to commbroker.com.au/Net/Documentum/processes/new-applications/fast-track.aspx for applicable criteria and document requirements. Availability of flexible features depends on loan type. Applications for finance are subject to credit approval. Fees and charges may apply. Full terms and conditions included in our loan offer. Australian credit licence 234945.

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