Category: hacks

So, naturally, you select the Labrador!

You wait in the lobby, but Mr. Labrador is late. You wait a bit more, but no one comes. You ask the receptionist to remind Mr. Labrador of your presence. Finally, after 40 minutes of waiting, you are moving into the meeting room with a friendly chap.

You present yourself, fresh from the top business school, just being promoted from the category position. Mr. Labrador is at least 20 dog years older than you and completely overwhelms you with anecdotes of the great times he had with your pre-pre-predecessor.

He knows the job, he knows your company, and he knows how to help you influence your superiors in order to get what he wants. You chuckle politely, thinking of the German Shepherd ready to shred you to pieces if you yield.

You come with bad news for Mr. Labrador. You must raise your prices and cut the marketing budget at the same time.

Select your strategy:

Strategy 1: Don’t shoot the messenger.

Mr. Labrador knows Hoof & Bone rather well (in fact, better than you). It makes no sense to hide things from him; let’s be as straight to the point as possible. So, you explain the VUCA, the Red Sea, the viruses, and wars. In fact, you have a slide for each of the four horsedogs of the apocalypse. Finally, you announce that the firm gave you no choice but to protect its very 150 years of existence by simultaneously raising prices and cutting promotions. Take it or leave it; the decision is from the top dog, and even the market-leading retailer Nile.com has already accepted the new tariffs and thus reaps the increased profits.

Strategy 2: Veni, vidi, vici.

Remember, you are a pure-blood descendant from the now-extinct wolves. You have never been tamed. You are wild and ambitious. You want to use the old chap as a trampoline in your career. So, you tone up your presentation: the VUCA, the Red Sea, the plagues, and the wars.

But you show another slide at the end, where the prices must rise even higher and the austerity is almost complete. Surely, the old Labrador will not be able to sniff the foul game and will collaborate fully. But the German Shepherd might shred some other account to pieces and maybe give you a raise and promote you to a better account next year…

What is the best strategy according to you and why?

Imagine a planet where the dominant species are dogs. The world is just as similar to ours, yet instead of humans, there are dogs. Building skyscrapers, driving Maseratis, and negotiating deals, ok?

You are a professional key account manager of Hoof & Bone, a 150-year-old market-leading conglomerate, and you come down to visit an ordinary customer—nothing special, just a “meh,” let’s call them “MeowMart”.

But that’s all you’ve got as a job. Your career depends on this one. You are a straight-to-the-point, no-nonsense Husky. Your boss is a German Shepherd, she demands higher than the market revenue growth, sits tight on your trade marketing spendings and can calculate ROI faster than MS Excel.

Imagine at the MeowMart reception you learn that there are two buyers who negotiate with suppliers in your category of goods, and in fact, you are free to choose any one of them as your key negotiation contact.

Whom would you choose?

Buyer 1: a Labrador – loyal, friendly, and cooperative.
Buyer 2: a Pit Bull – mean, ferocious, and unpredictable.

Write below in the comments who and why would you choose!

While reading “The Art of Strategy” by Professors Dixit and Nalebuff, I’m once again reminded of the Game Theory classes we’ve so much enjoyed during our MBA program at Solvay.

Game Theory has revolutionized understanding of negotiation and decision-making, proving that rational human beings tend to make irrational decisions that lead to suboptimal settlements (Nash equilibria). The most famous and widely publicized example of Game Theory is called the “Prisoner’s Dilemma”. I’m sure that most of you know the story perfectly well. While it is a good and illustrative demonstration of the non-cooperative game, it is oversimplified, inaccurate, and somewhat naive. Reality is non-binary, as we all perfectly know.

Negotiators often inherit the weakness of such a binary approach, while the spectrum of options is virtually unlimited. Just as logs are thrown into the fire, negotiators must throw new perks into their ZOPA (Zone of Possible Agreement).

The classic negotiation theory instructs us to make the smallest concessions for the biggest gains while adding low-valued perks to the high-value deal. Each iteration should never be linear but ever diminishing (1%, 0.9%, 0.895%, 0.8945%, etc.). Thus, the real prisoner could have demanded: all charges to be waived, witness protection for him and his family, lifelong government support, and immunity for all past crimes in exchange for cooperation. Each of these demands could be secured against every diminishing bit of information.

Asymmetry of information: In real life, people’s choices are influenced by a multitude of factors, both rational and irrational. During some very difficult negotiations, I’ve asked my opponent what his BATNA (Best Alternative to a Negotiated Agreement) was, “I will be fired” was the answer. Understanding and respecting the person is the only way. No successful agreements are reached by intimidation, lie or extortion.

Both prisoners could have hired the same lawyer to avoid asymmetry and outplay the police…

Static game: In the Prisoner’s Dilemma, both prisoners are given one single choice (confess or remain silent) and must decide quickly. In real life, negotiations take weeks, months, and even years. The pieces on the chessboard move all the time, and the window of opportunity can open or close at any moment, and not necessarily at the end of negotiations. I witness over and over the same mistake in the negotiations between the supplier and a buyer, where both tend to ignore the law of demand and supply, visualizing the game and its outcome as static. The optimum outcome must include milestones that automatically trigger a revision of the deal during the contracted period, thus protecting both parties and allowing corrections.

While the prisoner’s dilemma provides valuable insights into decision-making and cooperation, it is essential to recognize its simplifications and limitations when applying its lessons to real-world scenarios.

Recently, I have been asked about the most effective leadership style in today’s world and the style I personally practice.

First and foremost, a leader should be someone whom people can trust, someone who actively listens and demonstrates empathy. It is essential for a leader to lead by example, possessing a clear vision and the ability to enable, defend and empower their teams.

The COVID-19 pandemic has changed our work dynamics and our perceptions of life, family, and commitments. It is crucial to adapt the leadership style to this new reality.

Traditional autocratic leadership is no longer effective, whether in military settings or office environments. Disengaged teams are a ticking time bomb for any organization.

On the other hand, I am also skeptical about the efficiency of democratic leadership. When every stakeholder has equal power, reaching a consensus can be challenging, which would result to unsolved issues, loss of productivity and competitiveness. Mistakes must be alowed and tolerated, they contribute to the famous “learning curve”. As Mance Rayder (The-King-Beyond-the-Wall in the “Game of Thrones” TV series) said, “The freedom to make my own mistakes was all I ever wanted.”

There are numerous other leadership styles, each with its own advantages and disadvantages and a great leader is able to use a variety of them in different circumstances. However, in my current context, I would like to emphasize the importance of Transformational leadership.

Considering the tectonic shifts in the retail industry, an exceptional leader is someone who inspires and motivates their teams to surpass expectations and achieve remarkable results through changes and sacrifices for the good of organization. Transformational leaders invest time in the personal growth of their teams, providing support, offering a clear vision and direction, and challenging the status quo.

I would recommend “Transformational Leadership” by Bernard M. Bass and Ronald E. Riggio to those who wish to study this subject further.
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So we are in the second year of an incredible roller coaster, when the bills continue to rise and the economy is staring into the abyss from the top of the ride.

Food retail is one of the industries where inflation is most obvious.

A quick example: an average price of a dozen of grade A large eggs in the US (Source: U.S. Bureau of Labor Statistics) in January 2022 was $1.929 and in January 2023 already $4.823. An increase of 250%!

Yet, as one might intuitively guess, consumption of eggs did not decline. It is stable.

In an imaginary world of economics, this means that an egg’s price is “inelastic”.

In the graph above you can see a very small factor of elasticity of eggs, equal to 0,1 (elasticity index below 1 means that an additional 1% price increase results in a less than 1% quantity decline; elasticity index above 1 means that an additional 1% price increase results in a higher than 1% quantity decline).

So, groceries in general are inelastic, as they represent a commodity that we cannot live without and would need to purchase anyway.

Often times, these products come from local farmers, who rarely can have an upper hand in negotiations with professional buyers. Thus, in most countries, governments grant farmers extra protection. It exists in several forms, from an unconditional price acceptance by retailer, to the strict regulation of both buying and selling prices and in some extreme cases, to establishing caps on the profit margins of the “essentials” food basket.

Last year several EU countries removed Value Added Tax from grocery products to limit the inflation burden on their citizens.

On the other hand, most of FMCG products, like home and personal care are elastic.

Not only HPC producers must avoid inflation if they want to grow their sales, but what is more, they need to constantly sell on promotion (elasticity index >1)!

In some categories, sales with discount represent from 50% to 80% of total sales.

Business models of FMCG suppliers are built on higher than average margins, offset by the volume of discounted products.

Raw materials and energy inflation represent a small increase in the cost of the final product and can be mitigated by

(a) direct and often disproportional price increases;

(b) lowered discounted/promotional activities;

(c) shrinkflation

and notorious and most famous (d) cost cuts.

Needless to say that all top FMCG manufacturers are the experts in this game and have managed to grow both their top and bottom lines last year, declaring record breaking results while paying the biggest ever dividends to their shareholders.

Highly recommend Noam Chomsky’s “Profit Over People” if you want to understand better this broken system.

#inflation#elasticity#fmcg#retail

Fascinated by my new read that I picked up in London recently:

Value(s) by Mark Carney – a former governor of the Bank of England.

According to Mark, the original charter of the Bank of England (established in 1694) was to promote the public good to the benefit of the people.

Most of the original charter is repealed, but here is part of the original text available online (https://lnkd.in/gjr-nihG)

Bank of England Act 1694
1694 CHAPTER 20 5 and 6 Will and Mar

An Act for granting to theire Majesties severall Rates and Duties upon Tunnage of Shipps and Vessells and upon Beere Ale and other Liquors for secureing certaine Recompenses and Advantages in the said Act mentioned to such Persons as shall voluntarily advance the summe of Fifteene hundred thousand pounds towards the carrying on the Warr against France:

X1Wee your Majesties most dutifull and loyall Subjects the Comons assembled in Parliament for the further Supply of your Majesties extraordinary Occasions for and towards the necessary Defence of your Realmes doe humbly present your Majesties with the further Gift of the Impositions Rates and Duties herein after mentioned…

I have been recommended this book and I cannot stop reading it! I haven’t finished it, but already can’t wait to share some of the great thoughts it contains!

The idea that a pure luck is behind almost everything that we encounter was cultivating inside my mind for a while and this book describes best what I tried to figure out.

On top of the odds and volatilities, the book talks about our self-imposed biases, noise that distorts our reality perception and black swan events. Through basic examples and thorough fundamentals discussion (i.e. Shiller redux, Monte Carlo simulation), it creates an important foundation to anyone interested in psychology, negotiations or applied sciences.

Here are some quotes that moved me

“The problem with information is not that it is diverting and generally useless, but that it is toxic.”

“Mild success can be explainable by skills and labor. Wild success is attributable to variance.”

“Probability is not a mere computation of odds on the dice or more complicated variants; it is the acceptance of the lack of certainty in our knowledge and the development of methods for dealing with our ignorance.”

“Those who were unlucky in life in spite of their skills would eventually rise. The lucky fool might have benefited from some luck in life; over the longer run he would slowly converge to the state of a less-lucky idiot. Each one would revert to his long-term properties.”

“No matter how sophisticated our choices, how good we are at dominating the odds, randomness will have the last word.”

Put yourself in the best possible state to perform by creating an attitude of energetic curiosity.

You do this by deliberately thinking, Let’s see how well I can [run/throw/sing/speak..] right now! Instead of being dead serious and thinking, This [race/game/audition/speach..] is super important, so I really have to do well right now or I’m in big trouble!

Dr Nate Zinsser “The Confident Mind”

In the famous scene, Neo tries to comprehend that the rules he follows are the ones his brain imposed on him. There is no spoon, it is a fiction, mutually accepted social construct.

In the daily negotiations, I see over and over again my counterparts bringing their spoons to the table. Anchoring on them, insisting that it is the best alternative to walking away hungry.

True, when you play by socially constructed rules, spoon is a physical object with concrete value attached to it. The more spoons the better.

Yet, my objective is to prove that there is no spoon. There is no cake nor pear to cut. No win-win, nothing of those clichés. Just two individuals trying to understand each other.

Because it is by establishing direct contact with your counterpart, by building trust and credibility that the person will liberate her mind and let go of the spoon.

This act of faith is highly rewarding for both. Once the right messages are sent, the multiplier effect kicks in bringing extraordinary results.

Free your mind!