Whatever the Whether!

It’s not a spelling mistake, just a handy play on words.  Talking about the weather is a national past time in the UK, we could compete in the Olympics for how poor weather makes us feel.  When we talk about the weather, it’s generally in a context of downtroddenness.

That same downtroddenness can be observed around individuals suffering from inaction and inertia.  How many people do you meet who dither, delay and put off major decisions, wanting to weigh up every minor detail or excusing themselves through fear?  Taking so long, that by the time they’ve decided the moment or opportunity is lost, becoming a dragging anchor on those around them whilst they talk about the one that got away.

Devoting your life to action is a key decision you can take now to improve your outcomes.  Innovation is when creativity gets implemented and it’s no surprise that successful people simply action more frequently than most.  They manage their fear, work through the possibilities, get it prioritised and just do it.  Now what’s stopping you?

Business Agility @tieuknorth #FoundersDock Launch Speech

Founders Dock Omnijoin

Last night saw the opening of an exciting intitiative from Tie UK North, a brand new incubator for start-up businesses in Spinningfields, Manchester, more about it here

Asked to do a talk around ‘Business Agility’ for the audience, I had a number of people come to me afterwards to ask me if I had a copy of the speech, which thankfully I do.  I’m re-publishing it here for those that asked: -

Phil Jones – Founders Dock  Launch 20/01/2014 – ‘Business Agility’

“Last week we had some great news.  Brother had been named in the list of the Sunday Times Top 100 places to work.  Let me place that in some context for you, our parent is 105 years old and our Manchester business is 46 years old.  In a world where most of the household giants are now less than 10 years old, we’re a wise elder on the topic of staying relevant to your audience, a key attribute defining an agile organisation.

The last seven years have been the most dynamic I’ve ever experienced in business.  At times we’ve ridden waves, other times battled heavy headwinds.  It’s the ability to quickly react which differentiates whether you are a puma or a dinosaur in the new new we all now live in.

So many disruptive technologies entered our realm post 2007 that our landscapes began to shift.  The iPhone, iTunes, Cloud Computing, APPS, Twitter, Dropbox, iPads, Android, Google earth – the list goes on and on. 

And then someone pressed self-destruct on the economy in 2008, creating a perfect storm of technological, organisational and economic turmoil.  I’m sure every business leader in the room has their share of success and horror stories of how this new world order has impacted them, perhaps forcing an unplanned change.

But what is business agility?

It depends who you ask and there are numerous interpretations of the word and what it stands for.  Maybe in the last few years it’s all been about reducing organisational trauma as your business adapts to new markets, for others about finding the quick wins to take on a new-entrant disrupting previous holy ground.

The bottom line is having a workforce, organisational structure, business model and capability to deal with anything that gets thrown at you!  I believe AGILITY is the ATTITUDE of your people, more than your processes.

In the heart of all of this lies the creative leader, the light burst of energy who can inspire, direct and encourage people to turn up with the right attitude towards change.  Recessions bring fear or flight thinking, buttoning down the hatches, sticking with the knitting, risk aversion and controlling behaviour.  It’s about the worst possible environment for large, established businesses battling to keep their oil tanker afloat, whilst observing bootstrapped new entrants kicking the living daylights out of their business model.

Energised and connected leaders who can see this, roll their sleeves in readiness, obsessing about customers in order to stay relevant and intimate.  They are rarely caught asleep at the wheel, a la HMV, Woolworths, Blockbuster, as they are connected to the pulse of the customer, bringing back insights and always ensuring the direction of travel is correct, although the final destination may well still be undetermined.

Words that we normally associate at Brother with agility are: – flexibility, balance, adaptability, co-ordination, autonomy, fluidity, de-centralisation and dexterity, difficult to do all at once unless you are the guy from the TV show ‘don’t look down’ on Channel 4 last night!

We wrapped this all up in an acronym called ‘PRIDE’ – Personal Responsibility In Delivering Excellence.  Driving down responsibility to human beings in a work community to be their best, to adapt and to work through whatever might come through the door.

But why agility has become a theme?

 

With all this technology, we are now entering the age of ‘isation’ – Democratisation, Virtualisation, Consumerisation, Commodisation, Cannibalisation and Globalisation.  A trickle down effect which has put power right in the hands of people to work anywhere, to amplify their voice and demand the lowest cost for anything, from anyone.  The customer is no longer king, they are king kong with corporate reputations under risk from the crowd as they gather across social computing networks to force change from slow responders or head in the sanders.

But big are speeding up as changes in working practice, culture and organisational structure work through.  We call this ‘Kinetic’ working at Brother, creating a workplace which is not pyramid shaped, but molecular in structure.  Providing a workplace which is ‘community’ driven, with the emphasis being on outcomes not hierarchical status.  Using advancements in technology and the revolution in mobile technology to drive location independent working and increasing our reach into the talent pool. 
 
The next five years we will continue to see a period of collaboration, sharing, openness, transparency, disruption, creativity and innovation.  It won’t be about the survival of the fittest, but the thinnest.  
Those benefiting from low cost, PAYG infrastructure and workforces will surely succeed over the fixed cost burdens of many larger businesses as they grapple to de-layer, de-construct and determine the middle ground between centralised and de-centralised working.
 
2020 – 2040 is a tipping point for agility as baby boomers and Generation X retire giving way to the high alacrity Gen Y + Z so used to everything being an application away from anything they need to do. They will demand new democratised work environments with an emphasis on how work fits around their life, rather than the other way round.  Businesses must de-learn their methods of working and adopt new flexible structures, revving up and down, in line with market demand and plus workforce availability.
 
For Manchester and business to succeed, it must be fleet of foot, in a state of readiness with capable people, skill enabled and backed by the right business environment – networks (physical and data) will be key.  The speed at which business can be transacted will be key to capitalise on the opportunities that present themselves nationally and internationally, business without borders.
 
The region needs to think bigger than a region, it needs to thing global, grabbing temporary competitive advantage to be more fleet of foot for business and its residents.  Perhaps the internet of things is the big opportunity to make this one of the smartest cities on the planet?
 
But none of this matters without action.  A region wont grow unless businesses start.  Businesses won’t succeed without the resources to nuture them from incubation to fly.  Large established businesses won’t change unless they adopt a mindset of agility, it all starts with the leadership.  Now it’s about communities, collaboration and connectivity!  Embrace new methods of working, speed up, assist, collaborate or kick the living daylights out of your competition with a pre-emptive strike – but do something!
 
Speaking to an audience of industry executives in London last week I gave two pieces of advice for the future and both pieces were one word: -
  
  1. Change will be constant.
  2. Change!
The objective of this incubator is to provide the platform for ideas to turn into actions and businesses.  To keep talent here, to nurture it, to build a future for this great City.  This incubator will be well resourced, with full web video conferencing, opening the capability of the businesses within it to collaborate with anyone in the world, without a mile of HS2 train track needing to be laid!!
 
I like to think that the moment of serendipity described earlier sums us up (refers to how Brother came involved with this project after a chance meeting on Embankment tube station).  Seeing an opportunity, evaluating it quickly, taking first mover advantage of the opportunity, working it through and creating this space in rapid time working with TiE, sums up that even big business, can be small.
 
We like to think that we not only talk the talk, but walk the walk, demonstrated by our recent award.  It’s not easy, it takes guts, determination and a lot of change, a committed workforce, the right structures, difficult conversations, tense meeting rooms and a passion for the possible.  
 
You don’t have to have it all figured out to move forward but do move forward and always good to remember that you can’t do today’s job with yesterdays methods and be in business tomorrow.”
 
 Ends.
 
 
 
 
 
 

 

 

 

 

 

 

 

 

State of the Nation

Osbourne

Today I appeared on BBC Radio 5 live giving some commentary around the Chancellors speech around the economy and the need to save a further £60bn in spending over the next four years.

Reading through his speech, some key words initially jumped out at me which were things like “Confronting truths”, “dangerous new complacency”,  ”hard truths,” and “brink of collapse.”  These words were being used to position the further difficult decisions that would have to be made and implemented to balance the public finances.

My job within the short time was to give some response from a business perspective, as usual there is never enough time for everything, so here’s my thoughts in random order: -

  • Business has already been doing much of the above since the crash in 2008 in terms of confronting truths, eliminating complacency and adjusting to the new new. 
  • Business has adapted and healthchecks itself regularly with brutal honesty .  High performing businesses have this as part of their regular dialogue.  The ones that do fall asleep at the wheel fail – Blockbuster, Woolworths, HMV etc.
  • Small business access to finance is still an issue for many, many banks would argue that money is available for financially sound businesses.  Key is the approach and appetite by the banks to risk hence why more businesses being crowd funded or funded via EIS.
  • Britain must compete on a global stage.  Costs must be right sized, skills must be developed, new industries developed. opprtunities for young peope created.  Agree with the Chancellor on that one.
  • Business confidence is positive, but realistic.  At the Telegraph Festival of Business a straw poll of 300 business leaders and entrepreneurs showed a positive outlook for the future.
  • The debt size is still £10 trillion, so relatively speaking £60bn is still not tackling the scale of the issue.  We don’t really know what austerity looks and feels like in the same way as a resident of Portual, Greece or Spain might.  Consumer consumption continues here in the UK.
  • Any economy is a bell curve of success and failure at the extremes.  Businesses in specific sectors are having a harder time than others, equally other businesses continue to grow like crazy.  The businesses in the middle of the bell curve are figuring out ways to ensure they stay where they are or move right of the curve.
  • Any business leader would look at their balance sheet or cashflow and look to repair it if it were in a terrible state, the question is just how long will the stakeholders give them?  A failed CEO would be fired, a failed politician invariably gets to fight another day.
  • A small government has to be one of inevitable outcomes of the need to reduce costs.  More productivity, efficiency, automation, /Information Technology, Smart services and Smart Cities will mean fewer people.  A brave move for a politician.

The bottom line is that business is just getting on with it.  Business has little need for politics, other than to create the best possible landscape for business to thrive within.  Businesspeople see that the balance sheet is in dire need of repair and just want more honesty and transparency, so that they aren’t blindsided.

Out-On-In

hbrI saw this article on Harvard Business Review earlier today, which argues that a CEO should step out of the saddle before losing relevancy.  There are some really well made points about tenure length, growing ‘stale’ and it  leading to a cessation in ‘adaptive changes,’ much of which I agree with. The balancing piece that the article didn’t address was - How do you continue to stay relevant if a leader in a large business?

Out/On/In

Speaking at the Telegraph Festival of Business in November, I outlined a philosophy I simply call Out/On/In (OOI) for how I broadly manage my diary.  I use this to dictate how I invest (not spend) my time as head of a large organisation.  It’s pretty simple and looks something like: -

OUT – 1/3 rd of time.  Experiencing, seeing customers, visiting conferences, establishing new relationships, media relations activity, networking, connecting and creating.  What’s changing in the external environment?

ON – 1/3rd of time.  Processing what I’ve seen and the impact it has on our strategy, direction, course, decisions, organsisation.  Reviewing the high level impacts of the things that I’ve seen and experienced for the longer term 3-10 years, so you can always keep  rolling perspective of the future.  What should we change about our direction now from what we’ve seen and heard?

IN – 1/3rd of time.  Being in the business, reviewing process, people, performance and culture.  Dealing with the practical implications of it all aswell as the other things that you need to service a large business as a leader.  What should we change about our practice, process or culture to deal with the changes we need to make?

Staying Relevant

It’s a very simple system and it serves me really well, I don’t run it strictly to 1/3rd all the time, it’s a broad brush.  Some months I’m more in that out.  ‘ON can mean being in the office or thinking ‘OUT’ of the office depending on what’s going on and where I am relating to optimising my travel and diary optimisation.  The key point is this, unless you spend time ‘Out’ you can quickly become one of those CEO’s who do become stale, losing perspective, relying on past data for decisions not the current day climate.  You become the person in the HBR article.

Unless you are feeling, experiencing and seeing what is going on at a ‘meta’ level with the world, it’s so easy to fall asleep at the wheel oblivous to the landscape whizzing by at 125mph like landscape from a train window.  By investing time ‘OUT’ in this way, you can make highly relevant decisions relating to your ‘ON’ and your ‘IN’ that are meaningful for the climate of today. 

As a leader it energises you, pushes you to constantly ask yourself – “What does this mean for us?”   Meeting lots of people, studying organisations, people, cultures and management styles gives you a shot in the arm to ensure you are always keeping up, learning, absorbing and keeping your skin in the game for mood music of today and tomorrow.  If you do that, in my view, you won’t hit a sell by date because you are always remaining relevant my drawing on the now.

Boosted by reading books, being open to everything, staying approachable and always seeking feedback is a framework for staying in the saddle and galloping towards the future – saddle up!

Opposite Attracts!

credit cardToday, 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” – Featuring @olivercookson

“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….42 Under 42 - 4759
  • 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.

The M.E.A.T. of the Matter

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.

Leadership M.E.A.T.

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.

Another Blockbusting Week for Retail Closures

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: -

  1. 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.
  2. 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.
  3. 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.

Why I’ll still be drinking at Starbucks….

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.

Learning from BIG businesses….

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: -

Big Companies

  1. Have a clear vision.
  2. Have the right people, in the right seat.
  3. Understand their economic engine.
  4. Are disciplined in Thoughts, Words and Actions.
  5. Don’t just have a plan A, but also a B) Big and C) Contingency.
  6. Know what their main effort should be to deliver the vision.
  7. Have a stop doing list.
  8. Confront the brutal facts.
  9. Act quickly on poor performance at all levels.
  10. Spend more time thinking about the future.

Successful Leaders of Big Companies

  1. Manage their emotional state.
  2. Make evidence led decisons.
  3. Look to data  and facts.
  4. Check assumptions.
  5. Spend more time creating than reacting to things.
  6. Are focused on “being their best” not comparing to others.
  7. Are open to everyone and everything.
  8. Have their mind, body and soul aligned.
  9. Effectively delegate and spend their time coaching/aligning others.
  10. Know their Ding!

I spoke quite a bit about emotional intelligence, here are a few additional articles for you to read: -

  1. The Ocean of Opportunity (all about the future and not looking back).
  2. Fly TWA (why you should put thoughts and words into action).
  3. AFD-MO (why you should just forgive everything and everybody as the only moment is now).