SME chats with Lucas (2021 #GetChatty Series)

Lucas Merlo is the Founder and Principal Mentor at NewLedge. Lucas invented the NewLedge-Framework and CDI methodology (Capability-driven Innovation) during his PhD at RMIT and the CSIRO, to fill the transformation gap between ideas, innovations and new measurable values.

This episode was inspired by Lucas’s recent article What is knowledge? we went deeper into the concept of Creative Destruction, caused by clever industry reporting methods and gaps between data and knowledge.

In this conversation, Lucas and I discussed:

  • Customers and clients have more ways to find solutions to satisfy their needs, so SMEs’ value propositions will need to be a lot more flexible
  • Quick points to consider in order to enhance or transform how to apply one’s business to the customers or clients
  • The pitfalls of looking at things too closely

Transcript (01:15):
In the early 2000s, apart from the pants and frosted highlights, there’s the mentality of “cutting out the middleman” among small businesses. It’s very interesting looking back at it now, because with the online space and digital transformation – even customers are looking for ways to get things done, and they can compare a lot easier.
There are some middlemen that I completely disagree with, and let’s keep it on the digital transformation. Digital marketing companies out there, what they want you to do is to come to them when you’ve found product-market fit, all of your communications are ready, you’ve identified the job to be done, you know your segmentation – and you basically hand them your content and a blueprint. What they will then do is go and organize pay-per-clicks, SEO, and they might create a landing page … they go and outsource it straight away. That I’m very critical of because you could do it yourself and you’re just paying a premium, what they’re really doing is putting another layer on top of freelancer, that sucks.
Where the value is, is in what you and I do – Let’s talk about the market, let’s identify the job to be done, let’s see if we can communicate your value proposition… That’s where the value is getting them to the stage where they become ready
That makes me feel a little bit upset actually because it happens a lot.
Digital marketing speciality of marketing is that they focus on the operational side of how to get the ads done. I had a really interesting conversation with someone in digital marketing before, he regarded things are “working” because it’s operational, it’s up and running, people can see it
I don’t see it as “working” necessary because it’s not targeting the right people. No shades to digital marketers, they are important, they deal with this complication of changing environment and I respect that, but what a customer is looking for? And things different businesses are looking for is different.
Most of them will work on a commission where they’ll take 20 of the increase in revenue that they create for you – so it’s in their interest to pick off the low hanging fruit and get quick sales. What that does to your brand and your product is another story long term right
It’d be about the customer’s perception and what you’re doing to perform and how you look at what the customers need…

Transcript (06:30):
I would imagine most of our (small business) clients don’t have that luxury to be spending too many resources to congratulate ourselves, isn’t it?
Now this is the interesting one, customer application, what’re your thoughts about that
So, in episode one we looked at the customer base and we looked at enhancing and transforming in our customer base; then we went across to product design remember we connect your marketing and technological functions, now we’re back to customer applications.
Customer applications build on both customer base and product design. We’re talking about – where does your product apply in markets other than your core markets – and it’s interesting that we look at firstly how does your product help the customers overcome their struggles? and again get the job done faster more accurately. Because it’s the struggle that causes the customer to look for and purchase a solution. so we know that outside of the industries is a terrible way to analyze thinking outside of your industry there are customers struggling with problems where our products might apply.
Firstly, the enhancing side is to look within our current customer applications or market applications and check back with the unmet needs and see where we can improve; but the enhancing innovation is the great one that’s where we’re creating a new set of applications or finding applications for our technologies outside of our core business.
And there’s a lot of opportunities that we can talk about um transforming customer or market applications. One of the big questions is “do you understand the entire process of uh like you know the purchase and the consumption?” like the process of why and what
There’s the core functional job that the customer is trying to get done and one of the famous examples, is we’re tr we’re driving we’ve got an import appointment it might be a date it might be a job interview and we want to know how to find the fastest route or route available to get to our appointment on time. so that’s a good way to define a job because it’s independent of any technology or solution it doesn’t say we’re looking for a better map to get here on time, if we were talking about the market by maps we know that nobody uses the Melways anymore right, but 20 years ago um i think it was 20 years ago we would use the mailways in our car to find out how to get from a to b on time so that’s an example

Transcript (10:45):
Remember in the earlier episode, we talked about all the numbers of toothpaste or razors, people just change the flavor a little bit or change the charging port a little bit, and sell it as a new product? It’s actually warrants a new question that we should ask our client “have you reassessed what the needs are?” After you have a product out there, there are things that are more than (what) you know; after a little while things do go obsolete – have you seen toys r us? We all grow out of phrases and sometimes we (SMEs) do need to transform.
That’s exactly right so if we look back at customer applications, so companies whether they’re talking let’s talk about a manufacturer. A manufacturer’s got a physical tangible product, so firstly you’re thinking well i might be selling this into medical device, manufacturing. I’m competing in that industry an industry is a group of sellers a market’s a group of buyers then you’re thinking, well what about defense? what about space? so what we advise companies to do is to not look at the product, is to look at the bundle of capabilities that makes up this product. So within this you’ve got capital equipment that you use to produce the product, you’ve got your technical skill sets, you’ve got your supplier relations so any of these capabilities you can leverage into new markets. and a good example again is is dyson’s vacuum cleaner dyson’s vacuum cleaners never competed in the medical device manufacturing industry, as soon as COVID hit, dyson’s was very quick to do this they were saying well we’ve got a vacuum cleaner: this is comprised of this this and this how does this part apply into ventilators because COVID in big native ventilators they did that. Applied their engine vacuum clean engine into ventilators in medical device pharmaceutical industry in about six weeks it was incredible
they just vacuum up the market
Think about how many untapped opportunities we have in Australia?
in the past year on the news, there’s things about solar energy solar panel and the micro grid. How the energy being resold back to the market. There’s a big story about, people thought that when they installed (their solar panels), it would save money but they actually cost them more – An interesting part hardly covered by the news was that, there isn’t a useful energy/electricity storage device that people can keep the energy in their home, so they can have a choice of use it or sell it to the market to the microgrid should they want to. That’s actually the thing that would barely cover on the news because they usually just say that electricity company have that power to control that but then that’s i that is a part of the transformation of like you know using what you got but then use it differently.
So you’ve identified one of the growth priority areas so it’s interesting and it’s another topic. Federal government won’t pick winners as in when you’re when you go for a grant or anything they’re not going to choose or evaluate you to see how strong your offering is they don’t care what they do pick is winners in sectors or industries. Recycling and clean energy is one of the six that have been identified, first they are identified in 2014 and it was late october last year this is where the government puts all of their money because we think that our future will be secured in our competitiveness with these industries; and you and i have touched on food and beverage; then you just introduce recycling and clean energy of course medical products medical devices and pharmaceutical that’s expedited now, defense believe it or not we’re putting a lot in space.

Transcript (16:45):
I saw a funny meme, somebody said “i’m dissatisfied with my job here in Australia and Elon Musk says, “come to Mars” and then you see that they’re in Mars doing the same job….
If SMEs or SMBs are out there listening now – it can be problematic looking at the competitor too closely, and it can be problematic listening to the customer too closely, and that’s a strange thing to say but that’s true. What they need to think is well maybe “i’ll do a patent search”, maybe “i’ll look at trade shows”… Let’s go and see what other technologies are doing or what other technologies exist in other industries and whether my products can be adjusted to substitute and do that job better – That should be something that that gets attention
If we’re looking at enhancing we’ll look very closely but then when it comes to transforming let’s not get too close. I have that problem i’m a content marketer, when i write something i do actually put it aside go to bed come back next morning, because if i look too close at things and i’m sure at least 90% of the population do, we don’t notice bits and bobs that we don’t know and then there’d be gaps out there. For example a product or service development that we can actually step a little bit away from being too close to it and just looking at “ah maybe this component of what i do can become something else”
It’s really interesting maintaining that balance of keeping your current prospective customer base happy, usually that’s with incremental improvements (you know the extra razor on the blade); but then on the other hand keeping that open mind to transform and going “well what else is out there?” Because we don’t want to be restricted by just focusing on our industry. The old ways of analyzing industries – i’ve done it in the past as a strategy consultant and it’s where you you basically look at all your features and functionalities and then, you look at the competitors, you see where you have features and functionalities they don’t and then you call that your point of differentiation and you market that that’s that’s not an effective way to compete.
It used to be a good idea but i think right now people have way more choices available, we have to be much more flexible now.
insurers are interesting though they actually they actually look at they can actually calculate the probability of you living to a certain age that’s how much they’re algorithm they’d use what’s called actuarial modeling which means they go back in past history with a pile of key factors and then they use those weighted key factors to determine your life expectancy and they’re actually pretty bloody good at it so we probably hope that we fall out we might be anonymous i hope that this is a great story that for people to just filtering out when they reconsider that okay i’m going to develop something new with my customers which angle we’re going for maybe enhancing maybe transforming but it’s always good to just uh talk to someone professional about that.