Marketing – I Must, I Must, I Must

I attended a roundtable discussion yesterday evening organised by the Prague-based International Business Forum (IBF) on the subject of marketing, and especially marketing on a low budget. Low marketing budgets, unfortunately, abound when it comes to the members of the IBF, since most of us are small business owners.

The roundtable was led by the excellent Jo Weaver of JWA. Her theme was that marketing is as essential for most companies as desks, chairs, PCs, and telephones. (Actually, in my view, desks and chairs aren’t essential.)  Marketing can be a website, a business card, a dinner with clients or prospects, a newsletter, a battery of telesales agents, a seminar, an advertisement, a Facebook Page, an article on LinkedIn, a well-crafted press release, a commissioned PR article, or a blog (such as this). She pointed out that the large multinational fast moving consumer goods companies (such as Coca Cola, Procter and Gamble, and Unilever) spend up to 20% of their revenue on marketing. And when times get tough they spend more, not less.

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Most of us in the room, as Jo pointed out, run or own small businesses, and small companies, unless they’re directed from abroad by larger headquarters offices, are reluctant to spend money on marketing. We’re also inclined to think we can do it ourselves without professional help, and we approach the task without forethought, without consistency, and expect immediate results.

All of this is true. Every company must spend time and money on marketing. Not, in most of our cases, since we’re not selling consumer goods, 20% of our revenue, but probably more than we’re in the habit of spending. Many of us trust to ‘word of mouth’, but that is marketing, too, and we should work hard to make sure that the ‘words of mouth’ that get bandied about are the right ones.

Most of us in the room were also at the helm of companies selling to niche markets, and the larger amongst us have tried marketing of many kinds. My company, LLP Group, resells and develops business software, and provides consulting services to international organisations in Europe and North America. How to reach our market? And where? In the countries in which we have our offices, or in the capitals where our potential clients’ headquarters are based?

And how? Website, obviously (we have four, aimed at different segments of the market), Facebook pages, LinkedIn groups, blogs, Google AdWords campaigns occasionally, sometimes telesales, and so on. Even over many months or years, these have achieved marginal results (or, looking at it another way, they have kept us in business). We might spend more money if we knew how or where it would be effective. Or should we realise that our markets are small and that we are reaching them as effectively as we can? One of yesterday’s participants stressed the need for measurement. He made some good points, but how do you measure the effectiveness with which you are reaching potential customers if your market is a niche market? It’s not obvious.

But there are many easy mistakes to make in marketing, and I always find myself telling a story about our early days in Romania, when our amiable but ultimately crazy managing director (so possessive was he of our subsidiary in Bucharest that eventually he stopped doing what he was told and we had to fire him) complained incessantly that we weren’t allowing him to spend enough on marketing SunSystems.

‘Look,’ he said, as we travelled through the city in his vast and vulgar limousine, ‘our competitor, Scala, has advertisements on every lamppost. Every taxi driver knows about Scala.’

‘And how many taxi drivers are looking for international financial software?’ I asked.

It’s easy to spend too little on marketing. We should all spend more, and we must accept that we will never be entirely sure as to how much of our money is wasted and how much is effective.  But one thing is certain – market towards your customers –  and if your customers aren’t taxi drivers, don’t waste money on telling them a single thing about your products.

 

I don’t believe in the Cloud

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There, I’ve said it. I know it’s a heretical view, but I’m no follower of fashion, whether sartorial, gastronomic, linguistic or professional.

the cloud

But it’s not a simple issue, and I will qualify my views very carefully.

I’m talking of course, of the IT Cloud, that somewhere-nowhere place where software and data are held for private or corporate use. I don’t doubt that it’s a safe, secure and cost-effective place, (and if it’s not yet those things, it could be). And I don’t doubt that when it comes to certain kinds of ‘utility’ applications – word processors, spreadsheets, simple databases, and so on – it makes it easier for people to share data and ideas. There are plenty of benefits when it comes to certain, limited, kinds of Cloud. My objections are confined to the Cloud as it’s promoted for business applications, a field I’ve worked in for more than 35 years.

Business applications are at the core of all medium-sized and large organisations all over the world. Without them things don’t get made, sales don’t happen, deliveries fail, customers become unhappy, profits don’t get calculated, and vital things don’t get bought or just don’t arrive in time. I’m not sure if they save on paper, but they save on labour, doing those repetitive, communicative and administrative things more accurately, consistently and rapidly than humans can ever do them. They reach out across the internet to enable us to order pizza from our living rooms, or buy tickets for flights from one continent to another. They touch are lives hundreds of times a day.

They are immensely complex. The largest of them, such as SAP or Oracle, contain millions of lines of computer code, and trillions of possibilities, and they’re developed by thousands of programmers over millions of man-days. The largest (and most expensive) of them also do absolutely everything that a company needs its business systems to do- from procurement and purchasing, engineering simulation, to distribution route-planning, payroll and career-planning.

The best of them are configurable and don’t need source-code modification to make them work well for a particular customer. Take Infor’s SunSystems, for example, a beautifully designed accounting system that is easily adapted for all sorts of purposes, or systems@work’s time@work, a professional services and expense management package that works for a wide variety of professional services organisations, from consulting and engineering, to law or oil and gas exploration. Neither system comes with source code, so ‘one size fits all’ and each organisation’s quirks are managed through configuration of the software’s parameters. My company – LLP Group – has worked enthusiastically with both of these products for more than twenty years. We love them, but except when life is very simple, I don’t seem them perching entirely comfortably on the Cloud.

The reality is that there is no core business system in the world that does all the mission-critical things that a company needs only through configuration (those vital things that enable it to be competitive). And there’s no core business software system in the world that does everything. There’s usually a need for the integration of several business systems –  time@work with SunSystems and Microsoft CRM, for example – to cover 95% of a company’s needs. Some of these systems, particularly those that bring a particular competitive advantage, may even have been written specifically for one company.

Integration is difficult to do in the Cloud. I take the Cloud, in this context, to be a place where a single instance of a business software system is installed and used by multiple organisations of different kinds – one software version, but configured differently for each organisation. That’s ‘cloud cuckoo’ Cloud in my experience, certainly if we’re considering those essential systems at the heart of a competitive business.

The Cloud is best when it offers either a peripheral function that isn’t mission-critical and is more or less standard across a wide variety of sectors (expense management, for example) , or a function that is essential but can be configured sufficiently to suit most organisations (CRM systems such as Salesforce, for example). But it’s no good for those idiosyncratic areas that make one company stand out from another or when an ambitious fashion-following IT or Operations Director says, ‘I want everything in the Cloud.’

I’ve seen Cloud implementations fail at the first hurdle, especially when it comes to the almost always necessary integration of multiple systems. Integration code is rarely usable by more than one organisation, and as soon as you need something special up there in the Cloud alongside the ‘one size fits all’ copies of your core business software, you’ve descended from the purest Cloud to something that’s merely ‘hosting’, because no one else can use the particular combination of software and integration code that’s been installed and developed for you.

And, even if you’re in the purest Cloud, you’re still vulnerable to what can seem like the arbitrary upgrade of the core software, which is entirely out of your control. Sadly, business software contains bugs, and most companies want to test very carefully before accepting a new version. In the purest Cloud you don’t have that option.

So, no, I don’t believe in the  Cloud. I love the idea that you don’t need your own IT department, that to others can be delegated the responsibility of procuring IT infrastructure, and of ensuring safety, security and performance. That’s hosting or the ‘private Cloud’. But when it comes to the mission-critical functions and very specific integrations on which your organisation depends – forget the Cloud in its most idealistic form.

 

SunSystems and Manufacturing – A Transylvanian Tale

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Imagine Transylvania in 1997, a part of Romania still largely populated by vampires and werewolves. It’s a place that’s bitterly cold in winter, scorching hot in summer, and most terrible of all, it was then a dark corner of the world where accounting was done largely on paper by huge armies of accountants, and a place where manufacturing planning systems were entirely unknown.

Welcome to my accounting department….

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Imagine, also, that South African Breweries (SAB), a newly acquisitive international brewer, had acquired Ursus, in Cluj Napoca, one of Romania’s best-known breweries.

ursus

Acquisitions at any time, and in any place, are a cultural nightmare, but international acquisitions are the most difficult, especially in emerging markets. The nominal cost might be attractive, but the challenge can be almost unmanageable.

The first step in any acquisition is to establish reliable financial systems, but the brewery’s army of accountants couldn’t tell SAB what they really wanted to know about Ursus, at least not in a timely, GAAP-compliant way.

What they really needed was a flexible financial system that could meet Romanian statutory requirements and report intelligibly to their South African headquarters. Given that SAB manufactures beer, a large system such as SAP or Oracle might be the obvious choice because they do manufacturing, sales, purchasing and distribution as well as accounting. But there wasn’t a hope in hell, nor in Transylvania, of implementing such complexity. And local financial software systems were fit only for the undead nature of Romanian statutory accounting, not for the sophistications of GAAP reporting.

So we, LLP Group, and our recently formed subsidiary in Bucharest got the job of implementing Infor’s SunSystems and of making it work in a manufacturing environment.

Manufacturing accounting is all about calculating the cost of finished goods. A finished item, such as a labelled bottle of beer, comprises packaging  and content. Content, in turn, comprises this and that – water, sugar, yeast and whatever else goes into a bottle of beer. There’s a bill of materials that describes the component parts of every item, and the cost of labour and machinery involved in producing it. Most companies calculate a ‘standard cost’ for each item and component based on estimated costs of components and labour, and in many countries it’s perfectly permissible to value stock on the basis of standard costs, as long as the actual costs vary within reasonable limits.

But not so in Transylvania. The law demands that ‘actual’ costs be calculated, or the next best thing, a rolling average of actual costs. You can do this in SunSystems, using a T-code for each finished or semi-finished product, crediting a production account with all the products that come out of the production process at standard cost, debiting all the materials and labour consumed at standard costs. Purchase price variances, and manufacturing variances emerge, that must then be allocated against materials consumed at the next higher level in the bill of materials, and materials still unused.  It’s an intricate calculation, and one that even manufacturing systems didn’t do well in the 1990s, but to do it in SunSystems takes more courage that knocking on the door of Dracula’s castle.

It helps, of course, if the number of finished and semi-finished products is few, and in the end the packaging materials were more complicated than the beer itself. It helps, too, if you know manufacturing systems, and we used Fourth Shift, a small but powerful manufacturing system, solely for the definition of bills of materials and the calculation of standard costs. It doesn’t help, though, if inflation is running rampant and you have to recalculate your standard costs several times a year.

But we made it work, or rather my colleague Jiri Stiller, now manager of all of LLP Group’s operations in Central and Eastern Europe, did it, spending a year in Romania, in Cluj Napoca and Bucharest. He wore garlic next to the skin and never went out after dark, but as far as I can tell, his blood is still human and he’s very much alive.

SAB used SunSystems for many years, but eventually moved to their standard software system – SAP. Romania has changed too, and Cluj Napoca is now a pleasant, modern, easy city, where you needn’t fear vampires nor accountants.

SunSystems is a wonderfully well-designed financial system. Its unified ledger and transaction analysis concept makes it one of the most flexible and versatile in the world. It can do almost anything, even in Transylvania.

NOT Jiri Stiller – at least not during the day.

vampire