business – Kevin Low

End of oil

Many years ago when I first thought about the study of Economics, there was the prevailing concern about oil reserves running out and the world running out of fuel. It was 2005 and the economist even had an issue where the cover page was showing the reflective colorful swirls of oil. The economists would argue that the world will never run out of oil because towards the last drop of oil left, the price of oil would be so high no one would want it. And perhaps many other alternative technologies which were not commercially viable would have become so before oil runs out.

Those were days when we technically already know about greenhouse effect and the global warming potential of carbon dioxide. And I was particularly fascinated with the recurring debates between the Malthusians (and neo-Malthusians) and the others weigh on the hope of technology (and possibly economics).

It is funny how more than 17 years later, I’m in a career to try and reduce (and eventually end) the dominance of oil. Not to promote an alternative technology, not to rail against the political power of oil but to create a future that we all want to step into. Because climate change is an existential danger for us all and the planet as we know it. And because I believe our current economic system can be superceded by one that works for the future and not the tradition notions of wealth and fortune.

Da Hong Pao Oolong

Authentic Tea House, a brand under Coca Cola Singapore used to sell these cans of Chinese tea (unsweetened) that uses Da Hong Pao tea leaves from Wuyi mountain or so they claimed. Da Hong Pao is itself a very expensive variety of tea and this canned tea was very popular in Singapore for quite some time. My family and I were fans of it.

Recently they changed the tinge of the color of this product. It went from bright red packaging to a little bit darker red. And instead of saying ‘Da Hong Pao’, it was saying ‘Oolong’ though the subtitle still said it was brewed from Da Hong Pao leaves. The taste is distinctly different and I’m not sure if it was a change in formula that demanded that update in marketing and product design.

Either way, my family didn’t like it. And we wonder if it has to do with the cost or the limited supply of the Da Hong Pao tea leaves. It is sad that Coca Cola Singapore decided to introduce an inferior product to replace one that is so popular and widely consumed. But to a large extent, that is the story of industrialism, and also of the worker who have been doing a good job that was previously appreciated by the employer. Sooner or later there’s always a desire to standardise things, make it good enough but not so great that it becomes irreplaceable. But in the process, we lose something.

Industry chains and value chains

It was interesting to look at the copy and storytelling of this TWS’ piece sponsored by Ministry of Trade & Industry. The main message is around skills and jobs upgrading and the changing economic situation of a country that developed. I appreciated the empathy and recognising that the economic shifts do cause people to be left behind. But the idea of applying a one-size-fits-all solution to the broad economic shift seem simplistic to me.

The fact that the country embark on a kind of industrialism does not require all its people to do the same. When the UK was undergoing the industrial revolution, the French and Italians started forming artisan guilds and creating systems of artistic and craft authenticity verifications to protect and price their products better. When Frito-Lays or other big brands moved their potato chip making operations to developing countries, the developed European farms started making their own chips and marketing them at prices that are 4-5 times.

Sure, there is more technical components involved in the premium versions and probably more work went into the marketing, packaging and consumer experience. But this is precisely the sort of product development and market-growth thinking that Singaporeans need to move into the next stage of our development.

Manufacturing value-add and improvement in Singapore can be achieved by having more economic promotion, tax incentives and being able to gather a bunch of competent people able to participate in the production. That is because we are small and rely on MNCs investing in manufacturing capacity. And that MTI push for people to become cogs of such industrialism is based on this strategy. Yet as an individual, I don’t know how optimal this is. I find it simply makes us even more fragile and at the whims of the industrialism.

I’m not sure how worthwhile it is to develop stronger manufacturing base driven by our homegrown technologies and research. We do have that strategy in place and try to move in that direction as well. But we are stuck as second class folks in the game if we continue to encourage the majority to remain as cogs in that industrialism perpetuated by others.

Who does the market serve?

For a government, it makes sense to periodically step back, figure out who and what the market is not serving that it should really be serving and create interventions to redirect the market.

This is why carbon regulations, carbon pricing and systems of disclosure is so important. And all of these entails the government and the people making a choice to take away that false liberty of choice that the market creates. This decision is driven by seeking to serve the people who otherwise would not be served by the market.

For example, in the case of people who are hard-to-insure. The market-based insurance approach makes things harder and harder for them as the companies are able to discriminate against them and pool only customers with better risk profiles.

The invisible hand is invisible but it is still guiding and directing. Better for us to articulate as a society how we want the market to serve us and get it to do just that.

Slow or fast

We think the world is better off faster mostly when we live in cities. When the train or traffic is slow, when the queue at the checkout counter is long, we have an issue.

Yet that’s actually a narrow perspective on things; it comes from that dominant, productive workforce view. In fact, maybe not even the workers’ view but that of the manager. That things have to move faster and we have to produce more.

Yet as the world progresses and the composition of our workforce and consumer class changes, there will be fundamental shifts in the way we think about speed and productivity. Dutch supermarket chain Jumbo introduced slow checkouts for lonely elderly who would prefer to chat with people probably both in line and with the cashier.

And there will be new business opportunities arising from a world that might be slowing down. For people entering middle age and confronting unhealthy lifestyles, falling sick frequently, they might soon be seeing their western medical doctors requesting they go to traditional chinese medicine (TCM) clinics to “rebalance” their health. TCM is generally seen as slow but that is unique suited to more long term issues and preventative in approach. In that sense, certain ailments lends themselves to this slow way.

Like parental controls and screen time limitations, speed limits on things, having the slow option might actually be an alternative for niche customers. And this pool of customers might be growing.

Competitive analysis II

Having written my previous post, I think it’s important to say that knowing your competitor is still important after knowing yourself. As you understand you resource pool and how you can serve your customer better, you can start appreciating why some strategies work better than others. Your competitors’ actions or execution failures become an excellent resource for you.

So what is a good competitor analysis really about? It is more about firstly defining the market properly and figuring out how much of your competitor’s business really competes with you. Then there’s the historical lessons of that competitor that you can learnt from.

Finally, focus back on the customer and how they perceive and view various substitutes or alternative where your products and services are concerned. That’s the true current status of “competition” then consider how you can develop strategies to get more of the relevant customer groups’ mind and wallet share.

Competitive analysis

I’ve done countless competitor analysis in my career. I think about strategy intently when it comes to business, career, life and that works its way into my coaching and consulting career. Most businesses are obsessed with what their competitors are doing.

If you know the enemy and know yourself, you need not fear the result of a hundred battles.
Sun Tze

The quote is probably well remembered especially by people who have a chinese upbringing. But we often take for granted the part about knowing yourself. In fact, the original chinese saying has it in reverse from the above translation. It starts with “know yourself”. Of course we know ourselves, you’d think.

Yet countless businesses whom I’ve worked with when performing competitor analysis are not thinking about themselves enough. They are just identifying random brands or companies doing the same activities as themselves and considering them as competitors, trying to find out their pricing and what they do. If you know yourself then you know where is your stronghold and which is your true battleground. If you know you’re weak, then focus on where you can garner resources; more often in blue oceans rather than red ones.

When Barnes & Noble started their online bookstore, Jeff Bezos rallied the young Amazon team who was trembling in fear by telling them that there was no point focusing on their competitor since B&N wasn’t going to write them cheques, better to focus on the customers. Jeff Bezos knows Amazon well; there was no way a small upstart can win by mimicking their competitors. They’d run out of breathe before they start if they’re on the same race.

Of course, Amazon was afraid. B&N had lots of resources to try crushing them. But if Amazon was obsessed with this fear they’d be running in circles. The greatest competitor they need to analyse is themselves, their ability to focus on the client base will set them apart from each version of themselves.

Subsidies and fundamentals

Huge amounts of subsidies goes into fuel and energy. The companies are not necessarily being the ones subsidised to produce the fuel but rather, domestic markets of net exporters tend to be protected somewhat from international energy prices through subsidies. The notion is to help maintain internal price stability and hence cope with cost of living.

Australia is one of the few markets who are net exporters of natural gas for example and yet do not really “shield” its domestic market from international price impacts. The result is that the recent price spike in natural gas had Australians screaming in pain and for perhaps the first times in decades, businesses and households are seriously considering disconnecting from the grid and electrifying.

But there can be a middle ground. Subsidies can exist for these energy exporters to protect their domestic users given that these exporters stand to gain when the energy price increase. How can they share these windfall with their own economy and the users in local market? The government can subsidise users but make the subsidy transparent. This way, households are not paying the full prices and they are also given information about how much the government is helping to make them affordable. At the same time, it becomes more politically acceptable to pull back on such subsidies for those heavy users who are higher on income brackets and can afford it.

For far too long, we shield the markets from the proper price signals and artificially create false sense of affordability by subsidies, we reduce the resilience of our economies and contribute further to wastage and carbon emissions. Making subsidies transparent is a great first step, towards removing this political gridlock around domestic energy tariffs.

Who does the work wins

If your boss disagrees with you, he can do the work his way. But would he? He can argue however he wants but if you’re the one who will do the work, you win the argument.

Likewise you can have a friendly discussion with friends about various business ideas and they could have concerns about your ideas that are well-meaning. But eventually you’ll be the one to test out the hypothesis. Of course, if they try to test it for you and confront you with the results, you should be heeding them.

The conclusion is the same, that you win the argument eventually when you do the work; not by being right.

Direction of effort

In which direction should one direct his or her efforts? Would it be in the direction of goals? Or the direction of one’s preference and interests? I’ve come to discover more and more than following one’s interests and one’s goals are different and we can set ourselves and our outcomes on very different paths when we pursue one or the other.

Being aware of what journey we are on becomes important when we look at what we are trying to get from it. Often, when pursuing a journey towards goals like career, money and recognition, we forget that we signed up to something that sacrifices our interest and passion, then we get upset about not getting those. Meanwhile people who might find themselves trying to follow their interest complaining about lack of income or opportunities.

We can’t have the best of both worlds no matter how many examples we find in the world to hold up. And we don’t always fully understand the sacrifices and pains involved until we eventually reach that level. When we direct our efforts we must be reminded which path we’re moving along; that determines what the path yields.