How toilet paper weirdly tells a story of industrial disruption

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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 global content playbook & how the internet actually works

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I’m a big fan of the John Oliver show Last Week Tonight. Which, in an unconnected web world I wouldn’t even know about as it has never been shown in Australia. But through the wonder of sharing great content online I became a big fan. The show airs in the USA on Sunday nights, and in their wisdom, HBO would publish much of the shows content on Youtube a day later. I’d eagerly await to watch it here on Monday night in Australia through the Last Week Tonight Youtube channel. At last, a media company that gets it. A media company that understands the value of building connection and fan bases globally in real time. They even made it available to non subscribers – wow.

That was until this week. For some reason, most likely the HBO launch in Australia or some other licensing arrangement in Australia with Stan, Presto or Netflix, I now get the classic picture above: Sorry, This content is not available in your region.

Wrong.

This content is available in my region, they simply made a decision to give up their direct relationship with me, and forced me to get it elsewhere. Now they won’t share any of the potential advertising revenue or other prizes which come from direct customer relationships. Weirdly, much of it is ‘still’ available on youtube channels where others have uploaded it. The back door has been opened. And it’s licensing deal structures born of the late 1970’s cable TV era that create this back door leakage.

More than 20 years into this thing, here’s a simple lesson every media company should already know: Once it is released anywhere digitally, it is released everywhere digitally. The desires of the content owners to limit distribution are irrelevant. Given this is the new truth, a better strategy might be to just embrace it.

New Book – The Great Fragmentation – out now. 

The culture of the power flip

upside down house 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!

The strategy day you’ve probably never had

While I’m a firm believer we can achieve more as entrepreneurs than we can as employees, there are some damn good lessons we can learn from corporates. One such thing that large companies tend to do is strategy planning. Annual or quarterly events, where time is taken out to sit down and plan the future. So my question is this:

When is the last time you did this for your most important startup: Your household?

Yes, the startup that is the people who live in your home. It seems ever so weird that we spend an inordinate amount of time doing strategy for the companies we work for, and yet fail to do it for ourselves and our family. My household is a 5 year old startup which is clearly the most important in my portfolio – the capstone of all the matters to me. Within it, we have two other startups, otherwise known as children.  So my wife and I are investing a few days where our entire focus is what we want out of life for our family, and how we might go about achieving it.

So what might we include in such a day? Our approach to health, loving, learning, sharing, housing, career, finance and our community. We’ll ratify our guiding philosophy on how we invest the 24 hours in each day. We’ll decide how we allocate our resources to maximise happiness. We know that the major asset in life is time, and the people we love. The financial part of our strategy day – our plans for income and investing – is last on the agenda. This should serve what we want as people, and so setting numbers before we know what we need, would be back to front. The outcome will be an operations plan for a happy home.

We often go through life thinking that if we earn enough money, and do well in our career, the other life stuff will be ok. Turns out the opposite of this is true.

NEW BOOK – THE GREAT FRAGMENTATION – ORDER HERE!

Wood chips, sugar & hazelnuts

It was recently the 50th birthday of that favourite chocolate spread we sometimes convince ourselves is ok to eat between two piece of bread. Nutella.

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What a lot of people don’t realise is that Nutella is what it is because they couldn’t afford to make it the way they wanted to. Originally Nutella was a pure chocolate spread, but during the post WW2 era, a time of heavy rationing in Italy, they bulked up the ingredients with hazelnuts. They did this because hazelnuts were plentiful in the local area and much cheaper than cocoa per kilogram. The presence of mind to turn to the woodchips, in this case hazelnuts, and remarket the brand was very clever indeed. The branding was adapted to talk up the nut credentials and make people believe it was actually a hazelnut spread.

In fact it only has 13% hazelnuts and a whopping 52% sugar by volume – ironically about the same amount as the white label on the jar. While I’ll leave the moral discussion on the marketing of Nutella for another blog post, the question it poses for all of us is this:

How do we turn necessary cost cuts or lack of availability of inputs into brand advantage?

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The competition is invisible

I recently saw a prototype for the Google self drive car – It’s picture is below and looks kinda cute / cool / weird.

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Anyone who follows the technology world will know that Google have successfully driven their self drive cars without incident for more than million miles. But up until now, the cars have been retro fitted Toyota and Lexus’s – other companies cars they fitted their self drive technology to. This is a bit of a shift in the projects trajectory. The Google car, is quite It’s further proof that information, when distributed freely and easily changes the physical world too. That dramatic changes in information, have dramatic impacts on all things physical. But what it should remind business people is that we simply can’t know who our competitors are any more. In a world where everyone has access to all the major factors of production we end up with a global demarcation dispute. Non linear competition where brands and big businesses get blindsided by category newbies. We’ve already seen it in retail, music and media, and we are about to see it in every form of hardware and manufacturing. The established industries who should, could and would provide the next level of innovation probably wont.

Tesla is already around half the size in market capitalisation of GM and Ford after a few short years in the market. And as we can see by this post the auto industry better get ready for new players from the technology world – Google, and possibly even Apple. The auto industry would do well to remember that cars are about to become mobile lounge rooms, and all the high tech companies are already competing for the ‘lounge room’ in the house. Next they’ll be competing for the lounge room in transit. A preemptive sense of future irony right there. Even small players like Tomcar Australia (which I have an interest in) have proven you don’t need to own a factory to make best in category vehicles and disrupt an established industry base.

I also read yesterday about two absolute powerhouse Australian companies (both in the top 10) Coles and Woolworths better get ready for a new set of competitors. And while they mentioned a siphoning of revenue category by category, I believe they have a much bigger problem coming their way:

What to do with 1000+ stores when no one goes to a grocery store to get their shopping.

And no, this is not like discretionary retail which can be made a social, fun and entertaining experience. Grocery shopping is a chore and technology has a habit of removing chores from the human experience. Not many people run fast or lift heavy things for a living. And mind you, the word computer, was originally a job title, not a machine.

In the food industry there is a term called ‘share of stomach’. What share did the food company get of the stomach. Which is the type of measure which is used to assess the truth about who the competition is, and where the revenue threats lie. I feel as though every industry needs to develop their own ‘Share of Stomach’ metric so they can see the real change in their industry. Maybe all industries related to transport need to measure share of human movement? Self driving cars, aren’t just a competitive play against legacy auto industries, but it’s hard to see city car parks being a valid business when we can ‘send our car home to our driveway’ and get it to pick us up later. It also raises questions about what relatively new businesses like Uber will do when cars don’t need drivers? Chances are they’ll need to become a system which organises and delivers our cars?

Just like life, the real life threatening diseases are from entities our body hasn’t encountered before and built a natural defence against. At times like these, a tectonic shift, business would do well remember lessons from the natural world.

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Evolution & strategy

Evolution itself does not have a strategy. It just lets what wins, win. If anything, it is the accumulation of a lot of in market testing. Traits, (or tactics) are tested for advantage, and those that work, keep on happening through natural selection. Nature tries everything. Nature lets things that don’t work die.

We too can help our business evolve. We just need to do what nature does. That is to not pretend to know what will work. Instead we should try everything and find out what does. The good news of course, is that it’s so cheap to try so much in a low cost technology world.

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