How can you build a culture of bringing it back to first principles?

How can you build a culture of bringing it back to first principles? 1

“First principle thinking is the idea that everything you do is underpinned by a foundational belief or first principles. Instead of blindly following directions or sticking to a process, a first principle thinker will constantly ask, “What’s best for the company?” and, “Couldn’t we do it this other way instead?” — Reed Hastings (CEO, Netflix)

Following my doom-saying musings about ‘Known Unknowns’ last month, and with Q1 firmly behind us, I wanted to take this opportunity to pause for a moment, to bring it back to ‘first principles’. 

What do we mean by that, I hear you ask?

Bringing it back to first principles means to step back and ask the question ‘why’? It means creating space in the working week to think. It means starting with a blank piece of paper. 

We see a variety of pivotal moments for FMCG brands in the industry and yet, I have an observation. The biggest wow moments with our clients do not come from the combined experience in our team, nor from the insights we have gathered over the years.

The biggest wow moments come from the simplest, most obvious questions being asked by someone independent – the ability to see the wood for the trees in someone else’s business. The things we all know we should be asking ourselves, or doing, but in the madness of inboxes and ‘urgent’ activities, we just forget. Or we remember, but we delay action.

I asked my team to spitball some of the questions they ask our F&B brands that can provoke a gearshift in the advisory conversation.

It may be back to basics (and some a little provocative) but if you answer these genuinely (and properly), I suspect you will dig out some value.

Simple questions that can quickly become uncomfortable

If you do not know or like the answer to any of the below, reach out to the YF Team and we will have someone that can support you. These are not things to sit on, particularly not in the current climate.

Commercial

  • Why are you not listed everywhere on your target list right now? “Insanity is doing the same thing over and over and expecting different results.” Einstein

  • Are you making a contribution from every account of yours? What about when you account for overhead allocation (e.g. team) and cost-to-serve? The same for channels? If not, consider the role it is playing.

  • Can you say with confidence that you are delivering real value in existing accounts? Incremental revenue, continuity of supply and cash profit. If not, you may find growth is an uphill struggle.

  • How much are your promotions doing for you? If not much, consider why you are doing them?

  • Do consumers love your product, really? How are you validating that? Are there enough of them to deliver your promises / ambitions? If not, your CAC to LTV will not add up (whether analog or digital).

  • Are you getting the right management information on your business to make informed decisions effectively?

  • Are you planning on making big strategic changes? Is it sensible to do them right now in the context of all the change we are expecting? Only you can answer.

Product

  • Are your products and propositions optimised for customer types, formats and channels? Where is the opportunity? Remind yourself of Ansoff’s framework for growth.

  • Do you really need all your SKUs? You may love your children equally, but usually other people do not – and children cost money.

  • Do your unit economics add up? If not, you are putting yourself under an incredible pressure.

  • Is every single cost driver in the product a value driver? Keep value drivers, eliminate cost drivers.

  • If you invest more on organic credentials, are you confident it pays back? Do you really need bespoke outer cartons?

    Tip to make it fun: Host an internal debate and argue both for and against the motion for each cost.

People

  • Are you gaining scale economies with people? i.e. the return on both spend and management time stacking up? If not, consider outsourcing it.

  • Are you optimising to Eliminate > Automate > Delegate? If not, your blended HCROI is suppressed.

  • Are you paying your team market salaries and benefits? Define this as the cost of replacing them if they left. If not, expect that they will leave and that you will pay 5x the difference in recruitment fees and slowed growth.

  • Are you consciously investing in the development of your people? Remember this is why they join SMEs and the number one reason for leaving jobs. Here is a great blog on compensation packages

  • What do your employees think of your culture? Unpopular opinion: culture is for the whole team to own, not just leaders.

  • Why would a candidate choose your job over the other 50,000 similar businesses to yours in the UK? Excellent candidates (grads included) are being courted by tens of businesses; often they are interviewing you as much as you are them. We have created a fact sheet on recruiting into your start-up

Supply Chain

  • Do you analyse supply chain in £ as well as units? If not, you may well have a leaky bucket.

  • Have you got all the ways of working written down with third parties? If not, it is plausible they believe something very different to you and you will not find out until that worst case scenario happens.

  • What role does your sales team have in forecasting? If the answer is ‘nothing, it’s the supply chain team’s job’, expect further questions.

  • Are you monitoring your COGS and LOGS as % revenue monthly? If not, you may find your GP is not what you modelled.

  • What would your turnover have been last year if you had achieved OTIF and OSA of 100%? Back to the question on forecasting.

  • Do your supply chain team really understand what good supply chain management looks like? If not, you are possibly overspending on an admin team. Train them to get a better return on investment. You can also read up on our honest comparison between supply chain outsourcing vs in-house

  • What do you need to do with your manufacturer to bring costs down? They are not making 100% margin so think OEE.

  • If you had to cut supply chain costs by 50% in the next 6 months, what would you do right now? It is easy to justify fatty costs but, when push comes to shove, usually you can cut more than you think.

How we can help you

Join the YF Community

Doing everything on your own can slow things down and lead to higher costs. The YF Community allows you to become part of a collective voice and hear the creative approach and direction that other brands are taking to adapt to this year.

This month, on the back of many requests, we have created a new sub-community just for Stage 1 brands (<£250k turnover). If you fall into that bracket, or fit into our higher Growth Stagessign up here to be part of the right conversation.

Outsource your supply chain to us

More and more brands are outsourcing their supply chain management and change projects to our Supply Chain Team. We are expanding our service for existing clients to include customer service, if required, and can take off your supply chain weight in just four weeks.

Parachuting in NAM support

With shortages of NAM staff causing real challenges (not to mention more inflation), Alex from our Trading Team has released some time in his commercial team to help a limited number of brands manage their Waitrose and Sainsbury’s accounts. If you need interim account management support, get in touch with Alex and they can take it off your hands in less than two weeks.

Get recruitment off your plate

Recruitment has proven extremely challenging in the past year and we know that many of you are still struggling to secure new hires. Working with our Recruitment Team removes the time taken to search for the right candidates and ensures they are of the best quality.

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