Is Dick Smith turning around?

Back in June I thought Dick Smith was a Dead Brand Walking, given the cruel suffering and ineptitude that is a visit to one of their stores, but since then I’ve had a number of opportunities to eat my words. The Business press is crammed with Hero worship for the genius of Anchorage Capital, the Private Equity firm and majority owner of the once iconic retail brand, also for Nick Abboud, the no-doubt brilliant retail CEO.

But I’m not convinced that the PE miracle is anything more than a slick PR mirage engineered to rake in a massive return for Anchorage Capital on the back of their very own ABM (this Alan Bond Moment came at the expense of Woolworths’ Shareholders).

Cut through the awesome David Jones deal, and the fashion tech store concept Move, and you’re left with the same old same old at the vast majority of Dick Smith stores, maligned staff all too few in number servicing a similarly slight customer base. Even if Dick Smith managed to look just like JB HiFi, which it won’t, it still won’t BE JB HiFi and it will lose all the same.

It’s said that growing a business means doing what you do so well that the Market DEMANDS that you get bigger, you get bigger only by being better. Doing deals and launching concept stores helps to create a perception of doing better, but the P&L is geared around the 300+ unprofitable stores that look just like they did when Woollies owned them, setting out a blueprint for a rocky ride on the ASX if they can get it there.

No, I suspect the miracle turnaround begins and ends when Anchorage offloads its investment in Dick Smith in record time to Retail Investors through a listing, or to the management team beforehand, and for as much as 20x the $20m they paid Woollies!

Maybe Anchorage’s ABM is more of a GGM for the Dick Smith team?

Every business needs a Flywheel

From tractors to Ferrari’s and everything in between, engines of all sorts are incapable of functioning without a heavy disc of spinning metal known as a Flywheel. The more you know about the role of and characteristics of the Flywheel, the more you may see parallels with your own organisation.

First, some basics about the operation of an engine when used to generate enough energy to move things.

Strip out all the fancy from an engine, and you are left with a few basic principles;

  1. Fuel is injected into a chamber along with some air, the chamber or Cylinder has a rod or piston at one end.
  2. The fuel mixture is ignited by an electric spark causing the expanding gasses from the explosion to push the piston outward.
  3. The other end of the piston is attached to a shaft, which turns as the piston moves, converting the piston’s outward movement into rotation
  4. A number of ignitions are timed in a number of chambers creating a continuous rotation of the shaft
  5. The end of the shaft is attached to a Flywheel which is hard to turn at first due to its weight (hence why engines have electric starter motors to get the flywheel turning)
  6. Now that the Flywheel is moving, and it has momentum, it has much more energy than any individual ignition could produce, meaning that the Flywheel is storing up the energy from hundreds of individual sparks, ready to move the wheels
  7. When you want to move, the clutch plate is allowed rub against the Flywheel transferring the Flywheel’s energy out to move the wheels and overcoming the vehicle’s inertia.

Like an organisation, the engine needs to be in balance to perform as a whole, and it also needs to be optimised for the function it is intended to perform.

The amount of fuel and the size of the spark, the timing of ignition and in which order. And finally, the size of the flywheel are critical in order to get the balance right between the need for agility (lighter is better) versus the need for power (heavier is better).

I love the concept of a Flywheel because it is so critical yet so often ignored, and so much of the of an engine’s power comes for the energy stored in the Flywheel. Kids debate number of cylinders, capacity, etc, but never the size of the Flywheel!

Organisations of all sizes need to have a Flywheel function too, a place to store the sparks of innovation ready to release them at the optimal moment. Sure, a powerful Flywheel can be the enemy of Agility, but that’s about right-sizing the Flywheel to make sure an appropriate trade-off is made between power and control. But like engines, if the Flywheel is too small the whole thing will grind to a halt when things get tough, too big and it will be hard to alter the speed of the engine easily.

Crankshaft (red), pistons (gray) in their cyli...
Crankshaft (red), pistons (gray) in their cylinders (blue), and flywheel (black) (Photo credit: Wikipedia)

When I think about a Flywheel Function, I think about Finance, IT, Project Management Office, HR and other corporate services. The rightsizing of those functions is essential if the business is to perform, both to ensure that momentum is maintained when new ideas are scarce, but able to respond quickly when innovation emerges.

It isn’t all about surprise and delight, keeping customers is about getting the basics right

Today’s customers are more sophisticated than ever, sampling the wares of more brands in more locations than ever before, happy to journey to a café in the suburb next to the next suburb for a cold drip, encouraged to buy from overseas by far flung Friends’ waxings on Facebook and keenly eyeing the swings in their local currency for macroeconomic bargains. This Neo Consumer is older and richer than before too, more thoughtful, more discerning and always ready to Switch.

The Neo Consumer is empowered, in control and they know it.

Informed and empowered Neo Consumers are hard to impress too. Battling for their business is harder than ever, and the dangling of ever-oranger carrots has become an increasingly important part of the game. 3 Hour delivery, 100 day free returns, free international shipping, and super slick omnichannel blah blah have apparently become the battleground. But too much emphasis is lumped on the need to differentiate from the competition with whistles and bells at the expense of profit, and worse still, at the expense of consistent, good service that’s required to keep the hard-to-win Neo Consumer coming back.

With that empowerment also comes a willingness to walk away at the slightest hint their expectation won’t be met. And for the Neo Consumer, switching to a new provedore is easy come easy go. No warnings and no second chances, one slip, and they’re gone.

Why Dick Smith Electronics is a dead brand walking

Dead Brand Walking

Less than a year after Woolworths (WOW) sold DSE to Anchorage Capital (after 20 years of ownership), and the basics of retailing seem to be all but gone at the struggling Electronics retailer.

It was always hard to imagine that the specialist Private Equity firm could do a better job than WOW at shaking up DSE’s retailing fortunes, suggesting that their focus may be on the DSE Website. But try as they might, they will not build an online profit pot big enough to counter the millstone effect of a failing retail chain.

Get face to face with one of the DSE crew in any of the 325 stores (that’s Harvey Norman and JB Hi-Fi put together) and you will more than likely abandon any idea you once had of purchasing some battery powered thingamy.

My third trip to DSE George Street Sydney in so many weeks has left me agape at the ineptitude of the floor walkers, scarce as they may be.

Here’s an example. “hey” I said, “can you tell me about this Kensington GPRS device”, “no”, he said, “I don’t know anything about it”. “ok, well, what about this Jawbone UP?”, “no, sorry”.

Where is “Let me find someone who does”, or, “let’s look it up on one of the 200 effing PC’s we have in the store”, or “give me your email and I’ll send you something”, or ANYTHING FOR THAT MATTER – SHOW ME YOU CARE, SHOW ME YOU GIVE A SHIT! This is about care for your customer, which is an attitude. JB Hi-Fi seem to solve it with hiring and incentives, but failing that getting the culture right is a good place to start.

I may have been unlucky. Three visits and three checked-out check-out workers. But that’s all it takes to kill your brand once and for all – and after 45 years on the high street, that would be a tragedy.

Starting a business is True Grit, not The X Factor!

Successful businesses evolve from the same place as unsuccessful businesses, but something happens along the way that makes them pop. On rare occasions, a phenomenal idea will emerge that’s backed by a suitably phenomenal management team then the magic happens, but that’s the stuff of legend. For the rest of us, separating wheat from chaff is a grind.

But the grind is the last thing on the mind of many an entrepreneur. Overnight success stories litter our TV screens, conditioning those who know no better to think that being discovered is more important than working hard. And like pitchy hopefuls on unreality TV, many entrepreneurs mistakenly assume the slippery slope to success is greased by exposure alone. It isn’t. Time spent looking for limelight could be better spent knocking on the doors of potential customers, hunting for feedback and trying to secure distribution for their shiny idea.

Walking the streets and talking to potential customers is busking for entrepreneurs, it probably won’t lead to overnight success, but you get to perfect your pitch and make some money along the way, increasing staying power and the likelihood you will nail an audition if the time is right. Better still, generate enough income to avoid external funding and you negate the allure of instant fame altogether.

A high price to pay…

After following a link suggested by a LinkedIn contact I visited Open Forum hoping to read about a recent interview with Sir Richard Branson.

When I got there I was given the option to sign in with LinkedIn, easy I thought…Open Forum

Luckily, I paused at the sign in page long enough to read the terms and realised that signing in with LinkedIn meant I would have to pimp out my beloved LinkedIn contacts… WHAT?

In exchange for access to this interview I have to provide Open Forum access to my LinkedIn contacts, worse still, let Open Forum communicate with my contacts as me! AS ME!(Just like my contact obviously had!)

This doesn’t seem like a fair exchange to me, not by any stretch. Unbridled access to over 1,600 contacts that I know personally and getting to masquerade to those contacts as me to spruik your company message, that would surely be worth many thousands of dollars, way more than the value of the content I suspect.

Time to look for another source of inspiration!

The bigger they are…

Apple has a long way to fall

The mocking began almost three years ago today. Apple Fan boys & girls chorused in smug, urbane disdain of my Apple hate. How I dared question the gospel according to Jobs.

Well, I did.

In March 2010 I wrote, “Increasingly, fashion’s undesirables are adopting the iPhone as their key to cool, just as the true cool are heard to say “it’s just a phone, I’ll change it soon”. iPhone has some runway yet, there are a few hundred million people still to buy one meaning Apple have at least a couple of years of stellar revenues to look forward to from their phone division; but when the fickle face of fashion is looking the other way, what damage will have been done to the broader Apple brand?”

Right now, the Kids are buying Samsung’s range of Android powered devices, they are unmistakably cool. Parents of those same Kids are “doing Facebook” on iPhones, and there’s nothing cool about that!

The challenge for Cupertino is in the awesome strength of the Apple eco-system, the all of nothing iTunes lock-in they so clearly hoped would bind Appleites to polished metal and white doesn’t work when they have found religion elsewhere.

Losing Mobile Phone share and therefore command of the users’ Media collection undermines the entire Apple product range as well as the economic model – meaning the whole business is on very shaky ground if can’t reverse its fortunes, and fast.

I foresee a very rapid demise ahead for the once mighty Apple, truly a victim of their own incredible success.