Today, I experienced a first.
On checking out of a hotel, a surcharge of £3.00 was added to the bill for paying by credit card. As a frequent user of hotels all over Europe, I was puzzled why this charge had occurred and the answer was due to the group wanting go give more ‘transparency’ to their customers – fair enough (Macdonald hotels).
As my hotel was booked through an agent, I don’t recall seeing the condition of this charge in advance, nor was it raised at check-in. No signage was in the reception area, detailing the charge or rationale, leaving quite an awkward conversation with the receptionist who – give her the due – was on message but shared the immense customer disattisfaction she was experiencing on the front line.
This is about trust and left my sponsoring thought about the hotel group as one of disappointment, despite a lovely stay, nice dinner and good staff. Customers remember small things and particularly if it’s the very last thing they do at the end of their stay! That should be the moment of installing the positive attributes of the stay, to ‘bake in’ in the experience.
In today’s expectation and sharing economy, this is a total own goal for me and it reminded me of an innovation process called “do the opposite” – which is when you come at the problem from the other way. Clearly, the group want to recover to make the cost of credit card transactions visible by making a token fixed standard charge. Here’s the example above using ’do the opposite’ which turns the charge into a credit: -
Doing the opposite
Instead of adding a surcharge, include it upfront in the cost of the room like everyone else does, rationale being:-
- Customer isn’t surprised.
- Customer establishes trust.
- Receptionists aren’t left feeling trepidation about every ‘check out’ interaction.
Instead, when it’s time to check-out, the conversation goes something like: -
“Here’s your bill Mr. Jones, would you like to take advantage of a further £3.00 discount by paying with a debit card?”
By doing this, you empower the customer to take the choice. Those that want it, will take it having a little moment of customer delight as they reduce their bill by three pounds, receptionists turn this into a positive and leave the lasting impression as good as the first impression. People who use company expenses don’t then have to process an additional line on their claim, assuming they can claim service charges back.
Decisions like the one above (let’s charge a £3 surcharge) are often quickly implemented without thinking of the longer term impacts. I was a high yield customer, taking one room but also paying for a dinner for x4 people plus drinks, tripling the size of my bill on its own. £3 is not an issue, it’s a principle and in a social world, word quickly spreads when a customer feels their trust has been breached.
In a service business, with plenty of choice, in my experience consumers want the cost to be clear avoiding the ‘Ryanair’ moment with a brand. Small moments like the one above leave a lasting footprint with a customer and what do they do? They either abandon or avoid future use, unless convenience in some other form over rides the moment.
“Fear is a liar.” Entrepreneur Oliver Cookson shared this great one-liner with a room full with like-minded people at Insider Magazines annual 42 under 42 dinner, held earlier this month (14/10).
Telling a wonderful story, which started with a single bag of Whey purchased from a farmer who took a gamble on him, Cookson simply took the concept of Protein supplements, evaluated the supply chain and margin capability, then disrupted the sector by selling it direct through his own website. It worked. The business – My Protein – went on to sell for around £60M to The Hut Group. I’m always hugely interested to listen to stories from Entrepreneurs, there are always so many valuable takeaways which you can use for inspiration in life or business. Let me share a few things that resonated with me from the talk that Oliver gave….
- He came from a single parent family and left school with a single GCSE in Science, he left college after two weeks. So much emphasis is put on further education in life, however do not let it be an inhibitor to your ambition or determination to change your dynamic or outcomes if you weren’t successful at school. Time and time again, in successful people, is a back story of early adversity. No silver spoons, but a taste of life that they later choose to de-couple from and start anew. Look to all the big entrepreneurs, you’ll find a story.
- Gaining an apprenticeship kick-started his career. With so much focus on apprenticeships right now, you can see how valuable they are in providing structure to a young person, an opportunity to be coached, mentored, educated, moulded and injected with confidence. If you don’t provide apprenticeships in your business, why not consider it? One apprenticeship could change the life direction of a young person.
- He had an idea and actioned it. The major difference between those that seek success and those that dream about it. Those that seek it, take action. Oliver took his action by understanding the market, defining his own product, then pursuing it with a drive and passion. It all started with a single bag of Whey, purchased from a farmer who agreed to sell it to him to stop Oliver from calling him so often! That farmer later enjoyed a huge business with Oliver as he rewarded him with business to the tune of 50 tonnes of whey a month. There are so many lessons in this paragraph alone, take action, don’t give up and give someone a break! He commented during the talk – “the hardest thing was starting.” I’ve spoken before about fear and “fear of failure” is a big distortion which stops people doing things in life. The bottom line is fear is a manifest of our imagination, hence the brilliant but true line “fear is a liar”.
- Cookson went social, before the world went social. Back in 2004/5, web 2.0 was just starting. With little marketing budget or resources, Cookson set to convince the world of his product by spending time in forums and also introducing a referral scheme in his customer base. World of mouth soon spread and it went viral. This ultimately meant the business didn’t have enormous marketing costs and Cookson had no debt from the day he started until the day he sold it, retaining 100% of the equity. That is a considerable achievement and just shows the power of communities.
- Get the baby ready! An interesting part of the evenings talk was when asked about the sale of the business. Cookson had a beauty parade of top hitting investors keen to take the business off his hands including Nestle and Pepsi. Building a business from scratch, moulding it to be your own and then preparing it for sale is a tough job, particularly the last bit. Investors want to see robust processes, professional management, long term strategies and particularly that the business will survive independent of its original founder. That can be tough for a founder as they hand over control to others by bringing people in, having to give up the reins and see others take it in potentially different directions.
- What shall I do now? Sitting in a serviced office, a multi-millionaire, yet with a huge void in his life through the sale of his business he stared at a whiteboard with a pen and asked himself the question. What should I do next? And thus the next phase began, albeit with a shedload of money behind his next venture – Saints and Slimmers. The big lesson here is about purpose. Despite being incredibly wealthy, Cookson retains the desire to create, which is what I really admire. Money doesn’t buy purpose, purpose is a natural driver that every human being needs, money or no money. Define yours.
More scandal this week as it has been established that Findus Lasagne has been discovered containing 100% horse meat, not beef as advertised. It’s the latest in the on-going headlines about horse meat being discovered in processed food products, sold by supermarkets and brands. I’m sure we haven’t heard the last of this issue, as no doubt all parties in the supply chain are now busily drilling down to the root cause.
Whilst out riding my bike this weekend, I got to thinking about this issue and what thoughts it triggers within consumers when scandal hits. Believe it or not, the words that came up happened to make an acronym called MEAT! Scandals tend to boil down to four major things, whether you are Lance Armstrong, a merchant banker, an MP or Findus. Generally speaking they tend to fall into one of the categories below. I’ve made some comment against each of them relative to the horsemeat scandal.
M = Morality. In the UK, we have an issue with eating horses. To us, they are primarily pets, not a food source unlike other cultures across the world. It’s funny how no-one has picked up the taste difference, when smothered in sauces, sugar and colouring! So, it’s not about the taste, it’s about the ingredients.
E = Ethics. No household name brand on earth would risk their reputation by substituting constituent ingredients in their products. The risks are simply too large, starting at shareholder value. Nestle previously owned the brand up to 2000, but sold rights to Findus Group. Ethically, major issues like this can set a brand back years and many other food processing businesses will be working overtime to see if they too are affected. Major brands spend significant sums of money protecting their Corporate reputation and suppliers will have been audited, so there is likely to be foul play.
A = Accountability. Consumers will want the root cause to be quickly established. The brand involved – Findus – has already launched its own investigation which points the finger at a Romanian supplier. They’ve been quick, as with all PR crisis management, to get a statement up on their website. The major supermarkets will be applying the pressure big time, exerting their full weight on the supplier to come up with some answers. No doubt they are all busy checking their own brand and private label products, likely sourced from the same suppliers. Consumers expect you to stand up, man up, and be honest if you are in the frame.
T = Trust. Consumers put huge trust in big brands, supermarkets particularly. They take the position that if a supermarket is selling something, then it must be OK. I bet your bottom dollar that the category manager in charge of the ready-meal/frozen foods category is looking at a chart that shows negative sales for value products in their range. We (consumers) can be a funny bunch when it comes to establishing who we want to take the hit. Is it the supermarkets or the supplier who will feel the pain of our brand switch? Worst thing possible for a consumer to lose trust in your brand.
The acronym works for leaders of businesses too. Stakeholders expect morality, ethics, accountability and trust as characteristics of the people charged to lead them. It’s critical that you have these things in order, for example: -
Morality. Doing the right thing, having a strong organisational and moral compass.
Ethics. Never compromising your personal or organisational credibility for a quick short term financial win, always play the long game.
Accountability. Being the buck stops here person. Calling the big shots and standing behind them. Saying sorry when you get it wrong.
Trust. Keeping confidences, doing the things you say, being honest even when the news is difficult, having personal integrity.
In a social media driven world, leaders and brands are instantly accountable for their actions. News spreads like wildfire, opinion spreads, blame spreads and your reputation can be gone in an instant. Take the lessons from Findus and apply them to your own business in terms of your business and personal reputations.
Today we learned that video chain – Blockbuster – has called in the administrators, in the same week that music retailer – HMV – did the same.
For many observers, it’s no big surprise. You only need to look at the prolific rise of initially DVD mail services like Lovefilm, who have quickly migrated their business model over to a film on demand model or the launch of new services like Netflix or Blinkbox to know that the writing was on the wall for “nightly hire” DVD’s. Also on the threat matrix are the thousands of DVD’s to be impulse purchased in supermarkets for the price of a nightly rental.
I’ve spoken time and time again in this blog of the necessity to always understand what disruptive technologies are launching, who your indirect competitors might be and what changes are being wtitnessed in consumer behaviour, in order that you can make sound choices about future pathways. Without these, you are not keeping pace with the world. Add to that the totally transparent levels of pricing of just about anything and you have a perfect hurricane (not storm) ready to rip through your business model.
It’s hard to believe that the strategic plan of Blockbuster did not consider these things, if they didn’t, then the blame lays firmly and squarely with the senior team. Maybe it was speed, they knew what needed to be done, but didn’t possess the talent or technology to move quickly. Perhaps it was the business model, over 500 locations with eager landlords tied into long leases which couldn’t be unwound. Or the cost of downsizing the whole thing simply couldn’t be borne from reserves. The administrators will quickly figure things out and see what value remains. Whether anyone feels there is anything sustainable to buy, I think unlikely.
Hungry consumers will be ready to pick over the bones, to give the shops a temporary buzz as they sense a bargain and a kill. It’s estimated that the closure of Blockbuster, along with HMV and Comet will increase the empty retail outlet numbers by 5%, so cue more charity shops to a town near you soon.
Retail needs to be multi-channel and highly distinctive. Creating store experiences that blend the on and off-line world, giving people a real reason to visit a store. I categorise today’s buyers into three types: -
- I-WIN = I Want It Now. The tribe that leaves things too late to internet shop or hunting down something due to a breakage or fault.
- I-WAIT = I know what I want but I will happily on-line shop for it. Likely to go to a store to see something or try it on, but happy to wait and order it on-line for a better deal.
- I-BROWSE = In a state of active purchase. Happy to browse a shop and make an impulse purchase or browse an internet site.
Many of the big retailers have already recognised this and have created “destination” stores and integrated multi-channel experiences giving someone a real reason to visit using theatre or over and above benefits to shopping on-line, I call these “perkonomics”. Hi-Fi retailer Richer Sounds are great at this, driving foot traffic to stores promising “better than the web deals” with real personal service.
Blockbuster won’t be the last. Other retail chains may fall in 2013, January is normally the time when chains go, with Christmas sales dictating whether they can pay the next quarters rent. What’s for certain is the landscape has permanently changed and the internet has truly challenged the high overhead cost of chains running stores. Things will be fine for the big retailers that own their own brands and margins, life will remain pressurised for those that don’t.
The UK MD of Starbucks – Kris Engskov – did an embarassing climb down today, in response to consumer and government pressure about their UK tax position. Offering to pay £20M over the next two years to the UK tax authorities, regardless if Starbucks make a profit or not, they’ve opened themselves up for further fire. UK authorities have taken the gesture badly, tax isn’t negotiable.
Starbucks are one of the three American ‘GAS’ companies (Google, Amazon, Starbucks) who have adoped similar tax positions which sees them use loopholes in tax law to minimise their corporate taxation position. There is nothing illegal in what they are doing, they are simply optimising their global tax position, through professional advice. Maybe their mistake is that this did not exist on a risk register somewhere – What if we got found out and opinion turned against us?
The consumer backlash has been vociferous, with customers boycotting the stores and Starbucks being the lead story in the national media, fuelling sentiment even further. Clearly Starbucks has taken a battering and they are trying to go on the offensive, perhaps with a slightly ill-advised recovery strategy. The horse has bolted.
A business is entitled to minimise its Corporate taxation position under the rules, morality aside. They are not the first, nor will they be the last. I’m sure the media are undertaking an audit of other USA businesses to keep the story going and there will be further outings in weeks to come, like the MP’s expenses.
Will Amazon and Google suffer at the hands of consumers too?
It’s easy to walk into another coffee shop – maybe Costa – as you’re “voting with your wallet to show displeasure moment” to crowd-force Starbucks into doing something in the short term - and its easily argued that this has worked, we’ve seen action. However, a long term boycott means staff may suffer as takings decline and stores get closed or consolidated. It’s not the fault of the front-line people, it’s a strategic decision for the management to take the flack for, that’s why I’m still ordering my coffee from my usual shop, from the usual barista’s, in the usual way. The people at the top have taken notice and long term changes will come as a result, they are on the radar of the politicians, not a good place to be.
Google and Amazon have stayed very quite on the issue, happy to see Starbucks take the bullets. They were the easy target, on the high st., a discretionary purchase and easy to blame. I haven’t seen a boycott of Google or Amazon in the same way. Google and Amazon feed a need for instantaneousness and convenience in peoples lives in such a way that they are simply embedded in the way people transact their daily business and the back-up options are few and far between.
They will no doubt be reviewing their position and have media statements ready, however I don’t think they will see the bottom line impact of a consumer mob in the same way that Starbucks has seen.
Fundamentally, if blame were to go anywhere, it should go towards the system. If a system exists which allows GAS - as companies – to move profits around the EU legally using all of these royalty payments and licence agreements, then that is what needs to be reviewed. We may not like that these businesses take full advantage of it, but equally if they choose to, then they should not complain if they suffer a consumer backlash as a result. That is simply part of the decision making process and management of risk. Tax authorities allow for such things in complex international organisations under transfer pricing agreements and the like, the question is for any business is how far do you want to take it?
They realise this, you only need to read the open letters on their website from their CEO, CFO and UK MD to see that the situation is complex. However, like anything, headlines say one thing, details say another. De-fragging a complex global tax structure is never going to be easy, particularly for the average person in the street. The bottom line is that the issue it out. To protect their UK employed partners, their brand reputation and their long term investments in apprentices, they need to tackle this quickly and make it yesterday’s fish and chip paper, or low-fat blueberry muffin packaging in their case.
Yesterday I spoke at the Cheshire Business Expo (organised by Profile Communications) on what small businesses can learn from big businesses and leaders of big businesses. I covered quite a lot of content but wanted to summarise some of the key points here for the people that attended as a reminder of the key takeaways. Bullet form for easy digestion: -
- Have a clear vision.
- Have the right people, in the right seat.
- Understand their economic engine.
- Are disciplined in Thoughts, Words and Actions.
- Don’t just have a plan A, but also a B) Big and C) Contingency.
- Know what their main effort should be to deliver the vision.
- Have a stop doing list.
- Confront the brutal facts.
- Act quickly on poor performance at all levels.
- Spend more time thinking about the future.
Successful Leaders of Big Companies
- Manage their emotional state.
- Make evidence led decisons.
- Look to data and facts.
- Check assumptions.
- Spend more time creating than reacting to things.
- Are focused on “being their best” not comparing to others.
- Are open to everyone and everything.
- Have their mind, body and soul aligned.
- Effectively delegate and spend their time coaching/aligning others.
- Know their Ding!
I spoke quite a bit about emotional intelligence, here are a few additional articles for you to read: -
- The Ocean of Opportunity (all about the future and not looking back).
- Fly TWA (why you should put thoughts and words into action).
- AFD-MO (why you should just forgive everything and everybody as the only moment is now).
When your business starts to grow, it may need investment from a third party. Wherever you look, whether it be government backed initiative, private equity or an angel investor, there are some things you should box off to give yourself the best possible opportunity of succeeding.
Here’s 10 tips to help get you on track. It’s not exhaustive as there are other things, but you should be able to demonstrate that all these areas are covered before attempting to engage or you could waste a lot of time and credibility (if anyone would like to add anything, readers I’m sure would really appreciate any further comments): -
- Properly define how much you need and when. (Put together an integrated financial forecast combining cashflow, P+L and balance sheet).
- Define what the investment is to be used for. (cashflow, capital investment, stock, sales and marketing?).
- Outline with intellectual property you have and how you have protected it. (this is absolutely key if you are developing your own products.
- Be open with everything your information (under non-disclosure). (due diligence processes will wring out all the detail, so don’t hide anything upfront it just wastes time).
- Define your market, your customers, the opportunity and your assumptions (People get this wrong all the time by not being clear about their strategy or size of potential market).
- Tell your story as to why you are the person that can make this happen. (A lot of investments are made by backing quality people, what experience do you have that will make an investor feel you are credible? Chemistry is important for new investors).
- Have three plans. A) Achievable B) Big with more investment C) Contingency if A doesn’t work. Investors see a lot of dreamers who have concocted a flight of fantasy sales plan. Give comfort by thinking through the options to drive credibility and clearly show countermeasures in advance.
- Define the exit period, to whom and how for the investment. You invest this, you get this back by this date. If the business is to be sold to who? What sort of multiples have been used in that sector thus far?
- Keep communications regular, consistent and honest with your potential investment partner. Deals invariably go through lots of highs/low, stops/starts and tension. Work through every bump, problem by problem and keep communicating honestly and openly.
- Choose the right partner. There is money out there in various channels, including angels. If someone offers you money, it’s likely you have a good plan. Take time to ensure the investor fit is right, adding value to your business rather than just being a funding source focused on the exit. Most importantly, always take legal advice!
And here’s a bonus one – Keep your emotions in check. If it’s your business and you’ve grown it from an idea to a trading business, it’s very easy to become emotionally involved in negotiations or the due diligence process. Investors have specific tools/techniques to value things, critique things and test your assumptions. Don’t take it personally, step back, detach and keep your eye on the end result.
Remember TWA? If you do, you’ll be thinking of an American airline that existed until 2001 when it was acquired and merged into American Airlines. It was one of the big two at the time, competing with Pan-Am for control of the skies. I use the acronym of TWA when talking about success.
A distinguishing characteristic of successful people is that they take action. How many people do you know that do a lot of dreaming and talking, but not a lot of doing? When it comes to putting the rubber on the road, they are to be found lacking.
Action is the most important component of creativity and innovation. Implementing ideas is where it’s at. It’s no mistake when you get a super successful entrepreneur on a stage at a conference that their journey always started with a single step, that step being they did something about their idea. Nowadays with so many social platforms available, you can get going in a really agile way, developing and refining your concept as you go, there’s fewer barriers than ever.
But still some people choose to talk, procrastinate and put off the vital component in creating success = ACTION. If you want to fly in life, you need to put your Thoughts and Words into Action (hence the acronym). What you’ll quickly establish is whether your ideas will make it or whether you are the next Richard Branson. Without action, you risk falling into that marvellous category of talkers, not implementers. You’ll never find that success unless you take steps to action your ideas.
For many, it’s the fear of failure, fear of exposure, fear of what might happen. Successful entrepreneurs don’t look on it as fear, they look on it as risk management. Many hugely successful people see failure as simply the process of finding success, they start multiple businesses expecting some to fail, in order that the stronger ones survive and prosper. They consistently seek out opportunity and quickly get on with it, when that opportunity looks realisable and able to be monetised. So if you want to fly, buy a ticket to destination Action and see what happens.
Arriving at our local Costa coffee on Sunday afternoon, you couldn’t help but notice that it had been updated and refurbished. Out with the deep red colour, in with a funky new colour scheme – very nice for the customer.
Over the time we’ve been visiting this particular store you always end up talking to the baristas as you’re waiting for your drink to be prepared. Observing the new working area for the baristas which seemed to be more cramped, I asked whether they had been consulted about the re-fit. The answer was no.
Worse was to come, the re-fit had made their job harder. The bins were smaller meaning that they now had to be emptied every half an hour, rather than every morning or afternoon. The serving areas had been reduced meaning they could not benefit from the improved cycle time of an additional coffee machine and the additional coffee machine had been located at the opposite end of the servery, meaning they had to constantly weave through each other with hot drinks. In sum, the new design made the work more difficult for the baristas.
It was a classic scenario of someone thinking about the brand look and feel for the customer – big tick, but not thinking about how the work works – no tick. Bottom line is that customers will still be kept waiting in a queue as something as simple as a serving area was not considered sufficiently enough in the new “grand design”.
In a world where people don’t want to wait, my primary effort would have been to review cycle time to reduce queues and minimise wait times, then designed the coffee drinking experience around that. The only way to achieve that aim is to go to see how the work works, consult, listen and then test, learn and refine.
There’s a huge lesson here in that you should never make big decisions unless you understand how the work works by talking to people who do the work. First question, “If you were me, what would you change?” Invariably, they know more about the processes than anyone, so listen up and listen carefully and you’ll get better results in the long term.
According to some research we’ve just conducted, 22% of new start businesses base themselves in a coffee shop and are driving a new trend we describe as “cappuccino commerce.”
Speaking on Radio 5 live this morning, I cited some of the drivers behind this trend, as always airtime is very limited, so I’m expanding some of the notes I’d prepared here for quick and easy comsumption.
- The new postcode of SME’s is “no fixed abode.”
- Technology is the key driver of this change, in particular the availability of free wi-fi and cloud computing. 71% of respondents cited smartphones, mobile printing devices and tablet computers as the key things that felt enabled them to work in this way.
- 67% of these businesses intend to stay “office free.”
- AAA* is the new standard for business success “Anytime, Anyplace, Anywhere.”
- It took Apple 24 years to sell 67M i-macs, it took them 3 years to sell as many i-phones and only 2 years to sell as many i-pads.
- Apple derives 60% of it’s revenues now from products that didn’t exist 3 years ago.
- Access is the oxygen to mobile businesses (access to wi-fi or a high speed mobile network).
- New start businesses have high agility, this ability to work anywhere gives them competitive advantage, not disadvantage.
- SoLoMo – Social, Local and Mobile businesses are the key trends fuelling further new starts and customer buying behaviour.
- Fi-Wi is the new Wi-Fi. Users are demanding higher speed on the move.
- Generation X, Y + Z are all participating in the shift.
- Businesses like Brother are adapting their product offers to this new breed of “roam-workers” by introducing new products like mobile printers, mobile scanners, i-pad print and scan applications plus cloud printing applications.
- Globalisation of business means people need to be on the move.
- Access to power is also one of the key considerations as to where people work. No power = juice jitters and technology meltdown. Coffee shops, listen up!
- Digital Ubiquity is the new watchword – you heard it here first.