disruption Archives - Page 4 of 6

How toilet paper weirdly tells a story of industrial disruption

Posted on April 12, 2015 by Steve Sammartino

If you’ve been wondering recently why you use so much toilet paper. Why it seems every year you’re buying more rolls than ever before. Wonder no more. As a bonus you’ll also find out with a weird example how so many industrial companies sow the seeds of their own disruption.

The first every job I held with a big company after graduating was with Kimberly Clark. An American multinational paper goods manufacturer. A big brand of theirs is Kleenex. The market leading toilet paper which we now buy giant packs of up to 24 rolls. But it wasn’t always this way. When I started working there more than 20 years ago the best selling package size of toilet paper was a 4 pack. Did we all of a sudden start going to the toilet more frequently to require more toilet paper? If not, then how is it that most families could survive on a 4 or 6 roll pack from the weekly shop and now we need to purchase to a 24 roll pack?

Here’s how:

When I started working at Kimberly Clark most toilet rolls had between 300 and 500 sheets (paper squares) per roll. Some brands had up to 1000 sheets per roll. But what I discovered as a few years went by is that instead of raising the price, the company would simply remove 10 or 20 sheets per year. They did this as they believed that consumers are more sensitive about price than quantity. It’s a popular fast moving consumer goods ‘pricing‘ tactic to maintain profitability without changing the selling price. Kleenex Cottonelle is now down to 180 sheets per roll. In addition to this Kleenex Cottonelle is 1 ply, and the Kleenex brand it replaced was 2 ply. Some toilet papers are down to 100 sheets per roll. They even increase the size of the core of the roll to keep the same perceived roll width. So there is your answer. Each roll we buy these days has far less paper on it. Often by a factors of 4, 6 and even 10. This is why we need to buy packs which are 4x times the size. But the paper companies got what they wanted, they kept their prices per roll roughly the same.

But this goes deeper than a story of bathroom anthropology. It tells the story of how many large legacy companies are coming undone. It’s a story of their industrial mindset. And that mindset is as follows: They’d rather give their customers less for the same price than be transparent. In fact, it’s exactly what industrialists do, they want to get more for less, every single year. But in a strange kind of reversal, they end up costing themselves more and giving themselves less. Their cost per roll in distribution, and packaging goes up. And their cost per tonne of what they sell in retail margins increases. And it is of course a race to the bottom. A brand can only cut product delivery so far until the product is no longer. It also creates a worse product experience for the end consumer. I know I don’t want to carry home toilet paper packs four times the size in my trolly or buy it 4 times as frequently.

Above all of that, it shows where the focus is for these companies: On selling stuff they already sell, as cheaply as possible, using the machines they’ve already got, with a short term focus. At no point is the end user considered, or part of a strategy which doesn’t involve trickery. They have a mindset of scarcity, not abundance. On the flip side we have many startups and technology companies focused on giving more for less, and creating platforms for consumer creation and collaboration. It’s no wonder half of the the Fortune 500 lost their invitations to the party in the past 10 years.

New Book – The Great Fragmentation – out now.

The culture of the power flip

Posted on February 17, 2015 by Steve Sammartino

Many of the economic ideologies we learned in business school are turning upside down. What once worked, now doesn’t. What was expensive, is now cheap. What was impossible, is now humdrum. But unless we stop, consider and look, we just might miss some of these changes in what is true. Capital used to be expensive, and labour used to be cheap. Now it’s moving in the opposite direction. We used to think that the accumulation of capital was the key to success. But we forget it was a substitute to try and uncover intrinsic value. Thankfully we are starting to remember money is a tool, and not an end. Creativity used to be chosen by gatekeepers, now it’s chosen by us through sharing. We got tricked into believing that we should leave creative pursuits to others in the media, in the movies, and to the rock bands with recording contracts. To those who got picked. But now we know that was just because they owned expensive tools and could afford to buy our attention. We’ve now proved there is no monopoly on art, we’re all artists. Technology used to be expensive, and walled behind industrial barriers. We could only experiment with it while ensconced in corporate quarters building things for them as employees. Now we have NASA in our Pocket, maker spaces and collaborative tools to make better tech than those who gave us the tools to do it. The best tech now comes from hacking entrepreneurs because it’s accessible to all now, at disposable price points. The challenge most established businesses face isn’t technology, or ideas but belief systems. They develop a culture that makes them fall in love with what made them successful. It’s why big business is being disrupted after years of relative stability. Sometimes the most important thing ‘Big Co’ can do is forget what they know, and maybe even burn the map that got them to their current destination. New Book – The Great Fragmentation – out now!

You say 'ello', I say goodbye

Posted on September 29, 2014 by Steve Sammartino

While it is around 6 months old now, and still in beta, there has been a lot of noise about Social Networking Startup Ello. And rightly so. A decade or more deep into this social connection thing people are starting to realise, that corporations like Facebook and Twitter, are well, just corporations. They just have incredibly compelling and usable products, from which they’re motivated to deliver what all public corporations aim to do – increase shareholder wealth. Nothing new there. And while some of the founders may have had, and possibly even still have rather altruistic visions…

A more open and connected world

Change the world 140 characters at a time

… once any company becomes public, its DNA changes somewhat, it mutates and we end up with what we’ve always had. Profit centricity. This isn’t necessarily bad, profits are good, and only companies with great (or addictive) products ever turn one. It’s more about understanding things for what they actually are, or in this case, have become.

Ello, on the other hand believes there is a better way. And I agree. You can read their manifesto here. In short they promise never to sell ‘you’. What they don’t mention is that they’ve already accepted venture capital funding as part of their growth plan. Call me a cynic, but in general people who provide funds usually want some kind of monetary return at a later date.

If any social network wants to arrive and actually be, what Ello is positioning itself as, then it can never be a for profit corporation. It also probably should never be controlled by a limited number of people, or even an organisation. It needs instead to be a gift to humanity, a bit like the World Wide Web. It needs to be open source, and uncontrolled. A bit like a language really. One thing is for sure, it can never be about a financial return on investment.

New book – The Great Fragmentation – out now!

recent thoughts

Posted on September 16, 2014 by Steve Sammartino

I’ve been publishing a few thoughts for the good people at Pollenizer – two recent articles are below:

History repeats: The seminal article written in 1960 by Theodore Levitt of the Harvard Business School called the Marketing Myopia is having a sequel. I wrote about it here and why startups are eating the lunch of many fortune 500’s.

Why we don’t have to invent the future: Sometimes it is enough just to participate and facilitate – I wrote about the feeder startup here.

In fact just yesterday I was doing a keynote for the financial services industry and I spoke about the GFD, ‘Great Finance Disruption’, which I believe is on the way given the recent developments in crowd funding, micro payments and crypto currencies. And I got asked a question about it.

And this was the question:

There are many banks in the audience, what advice can you give them to keep an eye on these trends in non traditional banking?

And here is my answer:

It’s not about watching from a distance, it’s about getting involved, even in a small way, maybe set up a skunk works or a division for radical finance for dissident customer groups. Instead of watching it or trying to fight it, get involved and even facilitate it. It’s very difficult indeed to shape or benefit from something when you are not participating in it.

New book – The Great Fragmentation – out now.

Some companies are infallible, or are they?

Posted on May 8, 2014 by Steve Sammartino

In a classic case of economic externalities, privacy has become the hot issue in the Digital Industrial Complex. It’s the industrial pollution equivalent of the digital era. There’s a lot of attention going to startups which circumvent or avoid centralisation of their services, or use what is becoming known as Block Chain technology. In fact famed Venture Capitalist Fred Wilson is calling their 2014 fund the Block Chain cycle. In simple terms, startups in which the information is distributed across the network of users, rather than stored in the companies server farms.

It got me thinking about how what seem like minor road bumps can become the key factors which entirely disrupt companies and industries. Privacy could be the type of road bump which up ends businesses, whose infrastructure is based on an old method. That method being, centralised data aggregation and distribution. I’m talking about brands like Google and Facebook. Companies who at this very moment seem entirely infallible, simply too important, big and powerful to ever lose their position of dominance. Personally, I don’t think it will happen, because unfortunately most people have a level of apathy where they usually don’t care about a potential problem until it really becomes one. And even then they sometimes still don’t care – just look at the climate change issue. Why this is interesting is that the thing which disrupted the recording industry, the retail industry and many others was that the infrastructure they set up became a distinct disadvantage. I’m starting to wonder if internet based companies with centralised data systems are creating an infrastructure which isn’t in line with a shift which technology seems to wants to make happen. The shift to distributed data.

Some recent numbers on a search engine called Duck Duck Go – a privacy based search engine are interesting. It is growing rapidly. Here’s a description of what they do straight from Wikipedia:

DuckDuckGo is an Internet search engine that emphasizes protecting searchers’ privacy and avoiding the filter bubble of personalized search results. DuckDuckGo distinguishes itself from other search engines by not profiling its users and by deliberately showing all users the same search results for a given search term. DuckDuckGo also emphasizes getting information from the best sources rather than the most sources, generating its search results from key crowd sourced sites such as Wikipedia..

Here’s a chart of the recent growth that Duck Duck Go has achieved:

While this search engine doesn’t operate on a distributed system, it is interesting to see how a slightly different proposition to the incumbent can have a lot of meaning to groups of end users. Yes, it’s tiny in the scheme of search, but this is how change begins. Every disruptor was insignificant at some point. And we’ve already seen the disruptors being disrupted. For example streaming music impacting iTunes business in the space of under 10 years. It seems like dominance occurs in shorter life spans now.

The key thing that we shouldn’t forget is that once powerful organisations can fall quickly. They seem infallible, untouchable. But the two things we ought remember are that companies like Ford once had a Google-like air about them and in a digital world the barriers to entry and dissemination of change are lower than ever.

When innovation is not really innovation

Posted on May 6, 2014 by Steve Sammartino

Innovation is an interesting word which gets thrown around lot in organisations. No one seems to disagree that it is the life blood of long term organisational survival, but I think it’s clear that the definition of what it actually is happens to be wrong. The definition tends to be most wrong in large stable industrial companies. I should know, once upon a time I was the ‘head of innovation’ in one such large organisation. I was recently pointed to this article which goes a fair way to demystifying innovation, versus novelty and invention. But for me it doesn’t go far enough. I think the problem with innovation in many large companies is this:

They confuse Asset Utilisation with Innovation.

A colleague of mine works in a large industrial concern heading up the product innovation area. Here’s a bunch of constraints they’ve placed upon him:

– All innovations must be able to manufactured in their existing factory.

– All innovations must use the existing machines in the existing factories.

– All innovations must focus on the existing core users of the brand.

– All innovations need to be able sold in the existing sales channels and retailers.

– All innovations should have a price point in and around the existing price points their range of products are already sold for.

– All innovations have exactly 13 weeks to prove themselves in market, because that’s what the reseller demands.

Clearly constraints like this prove that the core task is not at all about innovation and much more about business management within a set set of structured parameters. In simple terms it’s an asset utilisation program. There’s nothing wrong with asset utilisation. It’s a valid, profit centric, strategic imperative. It’s what companies must and should do to reach their financial potential. What’s foolish though, is confusing it with innovation. Such confusion can only lead to a long term displacement of brand relevance.

Random Soundbites

Posted on March 25, 2014 by Steve Sammartino

In the past few weeks I’ve been in the audience a few times when some smart people have taken to the stage. The presentations were largely retail focused. As usual I took notes and thought I’d share some random soundbites from what they had to share. I haven’t got the sources for each quote, because I couldn’t write those down quick enough without losing the information. But the thing that really matters isn’t the exact figures, but the patterns they are part of:

10 years ago car buyers used to visit the dealership an average of 6 times before buying a new car. Now the average 1.5 times. When surveyed about the cars they bought more than 90% of buyers knew the specs in more detail than the car salesman.
Retail Delivery Gap: Australian retailers believe their customer shopping satisfaction rates are 80%. When surveyed the actual satisfaction rates from shopper was 8%.
There are a significant amount of retailers who are now treating the customers as employees: Airline check in – Supermarket check out. This is all fine so long as it reduces friction and increases joy. It shouldn’t be the default approach, but a considered one.
Retailer measurement used to be all about foot traffic and transactions, now they can measure everything in between, before and after. But smart retailers will need to ensure they have permission and share the prize with those providing the data.
Big data is a bit like teenage sex: “Everyone talks about it. No one knows how to do it, and everyone thinks everyone else is doing it, but not many actually are.” Not my quote – but made me laugh.
Advertisers need to get ready for revised TV. A television that knows who is watching it, what they’ve bought, where they’ve been and what they car about. One that can serve up specific, permission based and relevant content for a single person. 1 to 1 television creative executions – the TV’s can already do it – but it seems no marketers can?
The delineation between physical and digital is over – pointless and and us versus them zero sum game. The intersection is now mandatory, or even tables stages – it’s now phygital.
People like buying stuff, but not so much paying – but the money isn’t the pain point, it is the process and the friction they hate. Sellers need to get out of the way.
Network Survival: A network stays alive so long as it provides trust and reduces friction. What’s interesting is that friction is often reduced by routing the long way round.
The top 12 Australian retailers have $700 billion worth of currency convertible loyalty points on hand – a giant liability, or is it an asset?
The phone is now becoming the personal life controller. It is the new location for commerce – literally where the phone is: simple example is Uber.
We are entering the wallet wars era. The digital wallet as spruced about by Bill Gates way back in 1995 – every tech player, bank, payment system and hardware developer is in the battle.
Mobile payments growing at an astounding rate in e-commerce. In the past 2 years payments via mobile phone grew 57 fold in Australia alone.
Mobile provides a leap frog opportunity. Many players who missed the first web iteration, can now disrupt the disrupters by doing an amazing job on mobile – this game is still open.

What does this tell us. Just that there is so much happening, and no matter what business we think we are in, we are all in the startup business now.