Sir Philip Green, self-made billionaire and boss of Bhs and Arcadia, talks of advice for nascent wheeler-dealers in an article in yesterday's Independent. He lists eight items of gilt-edged advice:
1. Stick to what you know
2. Plug in
3. Get a feel for trends
4. Take risks
5. Don't think about what you can't do
6. Say: 'Come And See Me'
7. Work hard
8. Even tycoons need R&R
The advice for Take Risks is really fascinating as it shows how the concept of iterative capital can be deployed to mitigate risk whilst not diluting the opportunity. His advice on risk is:
The Kate Moss line has launched successfully in the US. Now Green is planning to take Topshop proper into a market where other British brands have tried and failed to expand. It's different there, isn't it?
"It's got people. With two legs, two arms. Which bit's different?" he retorts.
OK, they're not familiar with the idea of fast fashion in America.
"Well," he says, slowly, for the benefit of this simple-minded business student. "Let's put our entrepreneurial hat back on? Is that a negative or a positive?"
Well, it makes it risky.
"I didn't ask you that. Is it negative or positive?"
OK, let's say it's a negative.
"OK, fine. Let's follow that track. Do you like salmon?" He points at a plate of half-eaten smoked salmon.
I find it a bit oily.
"Have you eaten it, tried it?"
"You've tried it. Didn't die from it? On the basis we've got 2,500 shops, and assuming we're semi-intelligent, we're not going to die if we open a shop in New York. We might die if we open 500 without testing it. I was trying to give you an analogy. I think we're a big enough business that we've got to stretch the boundaries to teach ourselves. Will we make some mistakes? Course we will. Do we need to do it? No we don't. So that's the time to do it. I've worked out how to get in. You write a cheque, right?"
That gets you the property?
"Right. That's easy. You just think: 'I'm gonna do it.' Is it slightly advanced for America? Yes it is. Is it too advanced? We think we'd know how to temper it. To add a bit of... American to it. You probably can't translate a pure European business [there]. But you can translate it by probably adding a couple of young American designers. Like we do here.
"I'm already on the case. Americans jog. They do fitness. You've got to add in a little bit of what works locally into the pot. You can't be arrogant enough to think you can just pick up your shop and just move it. 'Cos it won't work. But that's the learning curve."
The idea of taking Arcadia to the Yanks enthuses him a lot more than taking it carbon neutral. Will it ever happen? "Well. I suppose we've all got to try and do... environmentally friendly things," he says slowly, " Carbon neutral – who knows? It's got to be deliverable. But, yeah, we've got to be part of what's gong on. Can't disengage yourself from the world, can you? But you read that Prince Charles took 64 people to America. I mean, what's he supposed to do, swim there? Laughable. Where's it end? What, so nobody's going to travel, go on holiday? It's bizarre. But no doubt over a period of time, it'll all evolve. This is going to take years, isn't it? It's not an overnight, don't put the lights on after 9pm, is it? Live in the dark? There's a balance isn't there? You've got to be positive about these changes, haven't you?"
In yesterday's Daily Telegraph I read about change and the retail banking sector Under the headline Barclays focus on transparency and value, Philip Aldrick writes:
There is a danger that, as Barclays dreams of transformation with an audacious £41bn bid for Dutch rival ABN Amro, the bank will miss the revolution in its own back yard.
The UK retail banking market is evolving fast. Regulators are investigating everything from penalty fees to payment protection insurance. Current account charges remain firmly on the agenda, and - behind the scenes - banks are preparing a new suite of products that will compete on interest rates and extras, such as travel insurance........
Consumers are at war with the banks. The principal battle is over excess overdraft charges....
Ms Deana Oppenheimer (chief executive of Barclays retail banking) makes no excuses. "It's all about the idea of transparency," she says. Penalty charges underpin the UK's almost unique "free" current account system, which ensures customers in credit pay no fees on transactions, but the loss of clarity has also wrecked the relationship of trust between customers and banks.
She says: "It's about 'What's the real deal here - where's the real value for me?' " The upshot, she believes, will be a revolution - the biggest shake-up in UK banking since Midland introduced the free current account in 1984. "What this will cause is the industry to not do business in the same way it has done in the past," she adds.
The Office of Fair Trading is lurking in the wings with the threat of price regulation as part of its investigation into current account charges. But, if the banks prove they are willing to compete on value and so end customer inertia, it may be persuaded to stay its hand in favour of improved transparency and easier account switching.
Crucially, banking must be made more "simple". Ms Oppenheimer says: "The customer is saying we want transparent, we want understandable, we want responsive, we want value and we will be willing to pay for value in some areas."
She declares the changes "a real opportunity". It's an enthusiasm rivals should not take lightly. As marketing director at Washington Mutual she was not afraid to shake the tree, becoming a pioneer of free current accounts in the US in the early 1990s. "The idea was that if you removed monthly fees, you would have the opportunity to garner more share of wallet and attract record amounts of customers. It worked."
In the meantime, Ms Oppenheimer plans more small but significant changes. She is proud of reducing the 58 steps it took to originate a Barclays mortgage down to seven and cutting to 10 minutes the time it takes to set up a current account.
So both companies are engaged in exploiting opportunities and both executives have a reputation of facing up to the risks. Sir Philip Green talks of how to grasp the opportunity and to mitigate the risks. No doubt Ms. Oppenheimer's track record would reveal a similar attitude to risk. Neither of them regard risk as a barrier
[Picture uploaded on by GypsyRock. Used with thanks under CC.]
but as something to be managed in a way that maximises learning whilst keeping the potential downsides in proportion.. as Sir Philip might say "Open one shop at a time not 500!"... so how does this play out in practice?
A few years ago I looked at the rate of growth of Starbucks coffee bars... their timeline starts with the first test bar in 1984; 17 open by 1987; 33-1988; 55-1989; 84-1990; 116-1991; 1994-425, which is a really healthy growth. Contrast that with a UK experiment with an equivalent concept in the called Cha. As the name implies it was based around tea. A sophisticated Tea making device, to do for tea what the espresso machine did for coffee was developed and put into the first tea house... over the next 2 years 2 more opened so by year 3... and here it stuck. The machine won an award in the ID Magazine 46th Annual Review but as we can see compared to Starbucks the initiative is 14 "shops" behind and there it stuck... for whatever reason. So either the feedback said the concept was not going to take-off, or the backers were risk-averse, or...? But it does show Starbucks and Cha-like experiments can be conducted, concepts tweaked, investments managed and risks mitigated along the journey to success.
P.S. In the UK, apparently around 113 million cups of tea are drunk every day!
T-Bird Tea brewing machine in I.D. Magazine July/August 2000