Appvertising

I'm hoping to coin a new term: appvertising.

At least, I think it's a new term.   I've certainly never seen or heard it before.

Appvertising is the use of applications or applets for advertising.

The first example of this that I have seen was CompareTheMarket.com's (or is that CompareTheMeerkat.com's) iSimples iPhone app.   If you're a fan of the Meerkat, and you've not yet tried it, you really should.

And I've just read that last.fm and MXP4 have just teamed up to to provide advertisers with the technology to offer listeners an interactive music experience.   That must surely beat passively listening to yet another advertising jingle!

Apple, it seems, are encouraging this trend through the launch of their iAd mobile advertising platform in April of this year.

It's my bet that appvertising is here to stay - and I hope that the word will also.   You could help by sharing and/or linking to this story!

Government's view of the economy

I chanced upon the following quote today, and could not resist the urge to publish it:

"Government's view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidise it."

Ronald Reagan

Longevity in strategic planning

Longevity has been in the news again this week - in contradictory stories.

The BBC reports that the European Commission has warned EU member states to overhaul their pensions systems to adjust for low birth rates and ageing populations as life expectancy increases. They note that there are currently four working people for each person over 65, but warn that this will increase to only two working people for each person over 65 by 2060. The also note that less than 50% of adult Europeans are still in employment by the age of 60%. (They also highlight discriminatory and tax rules and barriers to cross-border activity relating to pensions, but that is another topic altogether.)

On the same day, the FT reported that RMS, a leading risk modeller for the insurance industry, has predicted that the recent rate of increase in life expectancy will not be sustained. As a result of this, they argue that insurers and pension funds may already be overstating the risk of longevity increases on liabilities. RMS base their assertion on the extent to which known causes of death, such as heart disease, have already been controlled (resulting in diminishing marginal returns from further work in those areas) combined with a review of thousands of medical trends and drug trials suggesting what new areas of improvements might or might not be opened up.

It's is the job of actuaries to balance these seemingly contradictory views in assessing future insurance and pension liabilities.

In strategic planning, however, we are able to consider both by constructing different scenarios for different potential outcomes, and then testing strategies against all scenarios. In this way, strategists can conduct rational analyse to formulate strategies which are robust regardless of whether its the European Commission or RMS who turn out to be right.

The declining popularity of business strategy

I did a quick Google Insights check on the word "Strategy" in the "Business" category and noted how its relative popularity as a search term has declined since 2004.   You can see the chart below:



Has business strategy as an pursuit really declined by 40% in the last 6 years?   This seems to be a worrying trend. I'd be interested in hearing your thoughts on what it might mean.

Population ageing - the demographic dilemma

One of the many long-term challenges facing society and business is that of population ageing.  The main forces at play are:

• Declining birth rates associated with economic advancement
• Better health care increasing longevity

The net effect, according to United Nations forecasts, is that the world population will either stabilize or peak around 2050, after growing for centuries at an ever-accelerating rate.  However, that population will be considerably older.

For example, between 1950 and 2000, the percentage of the world population older than 60 rose almost imperceptibly to 10 percent from 8 percent. By 2050, however, that percentage will more than double, to 21 percent. And in many countries — notably Japan, the most rapidly ageing country in the world, and those in western Europe — the share of population age 60-plus will be more than 40 percent by mid-century.

Despite this, in the developing world, the working population is still growing, which will lead to increases in productivity there.   For example, by 2050, it is estimated that roughly 20 percent of the world population is going to be in Africa, up from 9 percent in 1900.

Anomalies in this trend include:

• In the developed word, despite having the same demographic profile as Japan or Europe, high rates of immigration in the US offset the effects of population ageing
• In the developing world, by contrast, past policies to limit population growth in China mean that its population is like to age rapidly. (Today, only 11 percent of the Chinese population is older than 60, but by 2040 the proportion will rise to 28 percent.)

These trends have tremendous implications for business and policy makers which are often overlooked as the trends spans more than one business planning or electioneering cycle.   Some of these implications are:

• The escalating retirement and pensions crisis (especially acute with regard to un- or underfunded DB pensions such as the UK public sector and state pensions, as relatively fewer people of working age bear the burden of supporting a growing number of people in retirement).
• An increase in the need for health car, particularly long-term care.
• Firms may need to shift their focus from products and services aimed at younger consumers to products and services aimed at older consumers.   For example, in Japan, they are already looking at toilets that communicate with elderly patients GPs, cars with larger displays, hand controls for the break and accelerator and the ability to curb dangerous driving habits, graveside web-cams for the partner left behind, easy to swallow food, robot pets, beds that turn into wheelchairs and cybernetic suits that strengthen and protect the frail.  They are also scaling up production of art supplies for post-retirement hobbyists.
• Firms may also need to adapt to include older workers in the workforce, or be forced to shift production from areas with shrinking working age populations, such as Western Europe, to countries with growing working age populations, such as India

Sources:

• Facing up to the demographic dilemma
• Solving Japan's age-old problem

Porter's 5 Forces Analysis

Porter's 5 Forces model provides a strategic analysis tool for analysing the competitive forces in an industry.

Sample issues to consider include:

• Bargaining power of suppliers
• Extracting a higher margin
• Forward integrating
• Firm:supplier concentration ratio
• Employee solidarity
  
• Bargaining power of Buyers / distributors
• Price sensitivity
• Backward integration
• Switching costs
• Buyer:firm concentration ratio
  
• Threat of new entrants
• Industry profitability
• Barriers to entry (scale-based, relationship-based or legal)
  
• Threat of substitutes
• Disruptive change
• Perceived level of differentiation
• Level of price / performance of substitute
• Ease of substitution (fungibility)
  
• Rivalry
• Concentration & stability
• Industry growth rates
• Scarcity of resources

Some references add a 6th force, which may either be complementors, the government, regulators or the public.   In truth, the model could be extended to incorporate any significant stakeholder.

When doing a Porter 5 Forces analysis, one should not ignore that the various players may interact with each other, even collude, and are likely to respond to strategic changes from the firm and from each other.   The competitive forces in the 5 forces analysis, may therefore be constantly shifting.   Game theory may help to uncover the likely patterns in such unstable competitive fields.

Resources:

• 6 Essential Strategic Analysis Tools

6 reasons why strategies fail in implementation

In "The Fractal Organisation", Patrick Hoverstadt claims that between 90% and 98% of strategic plans are never implemented.

I believe that the reasons for this include:

1. Strategies are not differentiated and specific: The first failing of strategy must be vagueness and or blandness.   As Machiavelli has said, "There is nothing more difficult to carry out nor more doubtful of success than to initiate a new order of things".   To have any chance of success, a strategic plan must from the outset be bold and clear.
   
   
2. Strategies are not known and understood: Having articulated a differentiated and specific strategy is, of course, no good if the people who must implement it are not aware of it, or being aware of it, do not understand it.   The strategy must be articulated and communicated in such a manner as to engage with the implementers.   This often requires a style of communication quite different to what is appropriate for the people who formulated it (if they are a different group).   Better still, of course, is if the implementers know and understand the strategy by virtue of having been involved in formulating it.
   
   
3. Strategies are not actionable: Understanding something will not deliver results unless the strategy is actionable.   That is, each person in the organisation must know what it is they will do (start doing, stop doing or do differently) as a result of the strategy.   It is only in the doing that new organisational habits develop and the strategy will become sustainable.   Merely knowing how things should be different and wanting them to be different is insufficient - you must know how to act differently.
   
   
4. Strategies are not linked to departmental, team and individual objectives: Such actions must become embedded in existing departmental, team and individual objectives.   If this is not so, then existing objectives will continue to work against and undermine the delivery of the strategy.   Note that even if existing departmental, team and individual objectives may not be formally written down, they still exist in established norms and behaviours and must be addressed.
   
   
5. Strategies are not linked to structure, resource allocation and reward: The old adage that "Structure follows strategy" is most certainly true - you cannot expect an existing (organisation) system to produce a different result without changing the system.   Not only do such changes enable the delivery of the strategy, but they also send an important signal to the whole organisation that the strategy is a real, tangible and significant change.
   
   
6. Feedback and management reporting is tactical, not strategic: Likewise it is said that "You get what you measure", and measurement systems must also be brought in line with the new strategy. Organisations are frequently tempted to measure that for which the data is readily to hand, or just that which is required of them, by regulation, for example.   A new strategy will require new measurements, and often these will require new measurement processes and systems.   Failure to invest in these will ultimately mean that the organisation will revert to the behaviours encouraged by its existing measures.

At the heart of all of this, is one simple fact: strategies will not be delivered if they are formulated, communicated and implemented in such a way as to allow individuals to continue to act in the way they did before the strategy was formulated; that is, if they are vague enough that different people with different agendas can honestly all find in the strategy sufficient justification for their pre-existing plans.   A successful strategy must engage all implementers in all their activities in different behaviours.

The Strategic Learning Cycle is designed to overcome all of these problems.

Finally, it is worth noting of course, that the successful implementation of a strategy will count for nothing if the strategy itself was not good in the first place!   But that is a subject for another day.