Three lessons on innovation KEYNOTE SPEAKER Terry Plochman

Three lessons on innovation
KEYNOTE SPEAKER
Terry Plochman, Plochman’s Mustard
moderated by
Philippa Taylor, Family Business Australia
sponsored by St George
Terry Plochman
3 Lessons on Innovation
1.
Think up new and better products,
services, processes, and ways of
working together as a family.
2.
Implement the above
3.
Enjoy & Repeat
Thank you very much…
Your Context
Question:
What innovation created your
family business?
Question:
Identify 1-2 critical areas where your
company innovates or needs to
innovate.
Question:
In the struggle between innovation and
the familiar, where would you place the
bet in your company?
Failure?
A Delightful Collision!
Cost
$15.00
$10.00
SMART!!!
$5.00
$100
200
400
800 1600
Sales
$5,000,000
$4,000,000
$3,000,000
$2,000,000
$1,000,000
$1
2
3
4
5
“Well, it was fun while it lasted.”
Hester Prynne
Lesson:
The best time to innovate is when
successful doing what you did before.
Lesson:
But, all measures say “do more” of what
you have done already.
Lesson:
At some level we keep hoping we can
return to a generally less competitive
past without changing significantly.
Do you?
Lesson:
How we interpreted our success drove
what we looked for in the future.
Focus

Having had a product “hit,” we tend to
think our future depends on more “hits.”

Having differentiated with packaging, we
tend to focus on packaging to create the
next “hit.”

FOCUS IS POWERFUL
The Power of FOCUS
Mission Statement
Our people are great
 We have teamwork
 We have a long heritage
 We take pride in what we do
 We honor our stakeholders
 Our products are excellent
 We are a family company

Lesson:
Watch out for differences between what
you value in your company and what
sets you apart in the minds of your
customers.

Exercise:
“What sets our company apart or will set
our company apart for our customers
is…”
UNDERTOW
Mythology – The Stories We Tell
Mythology
Our Mythology
“We invented squeeze
mustard”
Mythology

What does your mythology say about
what “better” means in your company?
The Family Effect
“If somebody else in my
company makes a
mistake, it’s a mistake.
When I make a mistake,
it’s policy.”
Terry Plochman
“We have a nice thing here if we
don’t rock the boat…”
“We have a nice thing here if we
don’t rock the boat…”
Learned Helplessness
What Are We Doing?
Find and celebrate small wins.
 I am trying not to be the gatekeeper and
bottleneck
 Scorecards can help.

 What is your target for innovation 2 years
from now?
 Every month I include a list of our
innovations in my CEO report.

Separate idea generation from idea
evaluation.
What Are We Doing?

A Parable
What Are We Doing?
What Are We Doing?
Problems (examples)
Consumers
Help me make a quick decision
Don’t want to buy something I don’t like
Want to please my family
Etc…..
Retailers
Watching WalMart
Make me look good to management, even if products
fail
Improve my sales & margin
Etc.
Distributors
Tell me why I should pay attention to you
Etc.
What Are We Doing?
Biggest Challenge:
Freeing up time and resources to foster
creativity
What Will You Do?
Complete the following sentence:
“In order for us to be a more innovative
company and family I need to……”
Worth Reading
The Progress Principle
Teresa Amabile & Steven Kramer
“How to Kill Creativity”
Article: Harvard Business Review Sep-Oct 1998
Teresa Amabile
The Happiness Advantage
Shawn Achor
Lesson: The Killer Questions
 Why
haven’t we…?
 Why
didn’t we…?
 Did
we ever try…?
“The best and worst
football teams in the
country use the
same scoreboard”
Follow the conference
conversation at
#fbanc11
Three contrasting succession models
Haydn Chrystal, Caterlink
moderated by
Mark Pollock, BDO
sponsored by Enterprise Connect
Family Business Australia
THREE CONTRASTING
SUCCESSION MODELS
Haydn Chrystal, Caterlink
Family Business Australia
 3 Western Australian Companies
 Successful companies -
 Models for succession ???
Betts Group – Generation 1
 Founded in 1892 as a
 Family : 1st generation
shoe repair shop
 Wife converted the shop
to a Shoe Retailer when
her husband died.
 2nd generation joined
after 30 years
 Shareholding : Founding
owner
 Management : Founding
owner
 Geographical reach :
Fremantle
Betts Group – Generation 2
 1920’s to 1950’s
 Family : 2nd generation
 2 sons , 2 daughters
4 siblings
 Shareholding - split 30%
to the sons, 20% to the
daughters
 Management : 2 sons
joint MD’s
 Geographical reach : 8
stores - Perth, Fremantle
and suburbs
 All family members
worked in the business
 Growth restricted to
retained earnings
Betts Group – Generation 3
 1950’s to 1980
 most family members




worked in the business,
family rewarded by job and
salary
Low dividends
Expanded throughout WA
and into SA
Growth through acquisition
Funded by Retained
Earnings and share issue
 Family : 3rd generation , 7
siblings, 5 active, 2 passive
 Shareholding : Family plus
new members through
share issue
 Management : Family
 Geographical reach : 45
stores – WA, SA
Betts Group – Generation 4
 2 eras - 1980 to 2000
 Employment priority




continued to be given to
family members
Low dividends
Growth organic
Funded by retained
earnings
Period dominated by
family dispute 1993-2000
 Family : 4th generation,
11 active, 19 passive
 Shareholding : 30 family
members, those running
the coy minority share
 Management : Family
 Geographical reach : 90
stores – WA, SA, Vic
Betts Group – Generation 4
 2nd era - 2000 to present
 Major strategic review
 Employment based on




performance
50% NPAT dividend policy
Buy back policy introduced
Share option plan to nonfamily as reward
Significant growth into 4
retail branded shops,
national and international
wholesale, franchise and
vertically integrated
 Family : 4th generation, 6




active , 8 passive
Shareholding : reduced to
14, controlled by 7 , include
non family
Management : Family plus
professional
Board : introduction of
Independent NED
Geographical reach : 195
stores in Australia, global
wholesaling and
franchising
PLANNING ? WHAT PLANNING !
 1st Generation – Early Death
 Husband Dies , Wife carries on the business
 1st to 2nd Generation – 2 Sons ! Joint MD’s
 2nd to 3rd Generation – Oldest Grandson
 3rd to 4th Generation – Early Death
 Oldest Great Grandson at 21 is given the mantle of MD
 4th to 5th Generation
 ??? 2 daughters and son all in the business
PLANNING !
 The business is set up
 Independence on the Board
 Dividend policy in place
 Exit opportunities through buy backs
 Tightly held share register
 Professional management
 Development of potential leaders
Politics and Succession
Snap Printing Group –
Generation 1
 Founded 1913
 Family : 1st generation
 Business : commercial
 Shareholding : Founding
printing
 Growth : one of the
largest commercial
printers in Perth
 2nd generation joined the
business after the war, 32
years later
owner
 Management : Founding
owner
 Geographical reach :
Perth
Snap Printing Group –
Generation 2
 Eldest son started in the




business in 1945
He brought new instant
print technology from USA
to Australia in the 60’s
Started Snap Instant
Printing as a division of the
family company
Original print business
sold
Franchising model started
in the early 80’s
 Family : 2nd generation
3 siblings
 Shareholding : 1 active, 2
passive
 Management : eldest son
 Geographical reach :
Australia
Snap Printing Group –
Generation 2
 Eldest son had no one to
 Family : 2nd generation
hand business to
 He found a buyer for the
business
 Before sale was finalised,
the 2 passive shareholders
decided to buy the eldest
son out
 Used property
accumulated from
Dividends to fund
purchase
Brother and sister
 Shareholders : 2 family
companies
 Management and Board :
professional
 Geographical reach :
Australia , NZ, Ireland
Snap Printing Group –
Generation 3
 Board structure : Indept




Chairman and NED,
IndeptMD, 2 family reps
3rd generation involved as
Franchisees only. No one in
the Franchisor coy
Dividend, Risk and Debt
Policy formulated by
shareholders and Board
High Dividend paying coy
No Exit plan
 Family : 3rd generation 7
Grandchildren. Very
independent of eachother
 Shareholders : 2 family
companies run by 3rd
generation, dividends
passed through
 Management and Board :
professional and
Independent
 SFL seen by 3rd gen as a
high dividend paying
investment
PLANNING ? WHAT PLANNING!
 1st to 2nd Generation – Eldest Son returns from war
 When he was ready to retire , sale is organised
 At the last minute – siblings decide to buy out the
older brother
 2nd to 3rd Generation
 Professional Board , Professional Management
 3rd to 4th Generation ???
 There is no formal Shareholder agreement
 Current plan is - one out all out
Politics and Succession
Chrystal Group –
Generation 1
 Founded 1953
 Family : 1st generation
 Business : Diversified
 Shareholding : Founding
Distribution and agency
 Growth : restricted by
capital
 Invested surplus profits
in Property
owner
 Management : Founding
owner
 Geographical reach :
Perth
Chrystal Group –
Generation 1
 1972 Business sold to
 Family : 1st generation
Hong Kong trading
house
 Other trading business
merged into new entity
 1975 expanded business
bought back by family
 Purchase funded by
Property
 Shareholding : Founders
plus 3 children
 Management : Founding
owner
 Geographical reach :
Western Australia
Chrystal Group –
Generation 2
 1989 son joins business
 Family : 2nd generation
 2 daughters remain
 Shareholding : 5 family
passive shareholders
 Business expands into
manufacturing in
Australian and Indonesia
 Property holdings
further developed
members
 Management : Only son
 Board : Founder, son
plus independents
 Geographical reach :
Australia , Indonesia
Chrystal Group –
Generation 2
 One operating division
 Family : 2nd generation
sold
 Funds used to pay down
debt
 Son buys the operating
companies with cash and
vendor finance from
family company
 Property used to fund
the buy-out
 Shareholding : Son’s
family
 Management :
Professional
 Board : Son, Founder,
independent
 Geographical reach :
Australia , Indonesia,
India manufacturing,
global distribution
PLANNING ? WHAT PLANNING!
 1st Generation Sold the business
 Business bought back using debt secured by property
 1st to 2nd Generation and beyond
 Planning for succession based on a philosophy –
 Owners of operating companies should be those who
work in and have a passion for the business
 Passive assets are used to facilitate ownership of
business assets AND
 To facilitate Exit opportunities
Politics and Succession
LESSONS
 from our political leaders – how NOT to do it
 Some things you can’t plan for –
 WAR
 UNTIMELY DEATH
 FAMILY DISPUTES
LESSONS
 A Plan is better than no Plan
 In business, as with life
 Things change!
 When things change –
 A NEW Plan is better than none
Family Business Australia
NEW MGI LONGEST LUNCH
FREMANTLE MARKET
1.30pm – 3.30pm
EVENT SPONSORED BY
WINE SPONSOR