Lies, lotions and potions…

/ Lisa Bondesio / Leave a comment

OK, picture the scene…nubile TV couple engaging in pillow play. Yes readers, I mean pillow play. This is before the 9 pm watershed in the UK! Suddenly, the voice-over says: ’77 per cent of women feel sexier when their underarms look good!’ Cue really loud guffaw from me. Clearly I’m watching an advert for Nivea deodorant in the form of soft-porn science.

In these recessionary times, I’m still amazed at how much guff advertising there is on TV. Misleading pseudo-science masquerading as fact. UK women all know who Nadine Baggot (aka Beauty Editor) is – and now Anna Richardson has jumped on the bandwagon -wearing a white coat to convince us of the veracity of her ‘info-mercial’!  By the way, the sample size of the previous statistic was around 2,000 – less than 0.00064 per cent of the 31 million women in the UK. Not exactly significant from a statistical perspective!  I’ve had a similar allergic reaction to the Avon claim that their night emulsion will make you look ‘up to 5 years younger in just 14 days’ – this highly scientific claim being tested on a group of no less than 30 consumers!

Now don’t get me wrong, I find fashion and beauty fun. Grazia magazine is one of my guilty pleasures along with the Economist and 90% Lindt Dark Chocolate Bars! What offends me, is that the advertising industry, which is still mostly run by middle aged men, think female consumers are gullible twits who will purchase any old crud in a jar, as long as there are ‘statistics’ to back it up. And that we must all be so obsessed with our quest for beauty and youth, we will actually believe the half-truths peddled by cosmetic companies and their ad agencies.

Ogilvy, the advertising genius who quipped – ‘the consumer is not a moron, she is your wife’ is often quoted. But many of today’s admen leave out the rider which is…’You insult her intelligence if you assume that a mere slogan and a few vapid adjectives will persuade her to buy anything’. I wonder what he would make of the 100 per cent of women who find the ad from the agency which bears his name just as insulting.

Are you being served…?

/ Lisa Bondesio / 2 Comments

By now most people have seen the John Lewis advert. Channelling Fyfe Dangerfield’s cover of an old Billy Joel song, and costing £6million, the ad was watched an incredible 100,000 times the first week it was available on YouTube. And for those cynics who think it’s just sentimental snake oil, think again…JohnLewis.com has seen a 39.7% leap in sales in the short time this ad has aired on UK screens.

A catchy tune and evocative story-line had us hooked from the first second, but what distinguishes this piece of creative genius from just another 90 second soap opera in the intermission between Celebrity Come Dine with Me and I ate my Teenage Sweetheart, is that it authentically represents the brand.  On a very deep level, what you see is really what you get.  A lifelong commitment to customer service.  Retail devotion. Walk into any John Lewis store – you might not want to marry the man behind the till, but you will feel the love, I promise you.

In our current climate of austerity, commitment and service matter more than ever. Still you’d be forgiven for thinking that some retailers were still practicing stone age customer techniques, should you be brave enough to shop on the high street. Which is why I am particularly impressed by Boden.  An on-line clothing retailer, their colourful style and irreverent voice has built a loyal fan-base. And for good reason.  They’ve worked hard on delighting their customers in every way. Last week, I ordered a dress for a special occasion.  It didn’t fit so I exchanged it for one that didn’t make it to my new address because of a computer glitch.  I rang Boden, who said they would fix the problem. So far, so good. But no guarantee of a dress.  The special occasion was looming, and the dress wasn’t going to fly itself to the US.  A few hours after the conversation, I was pleasantly surprised to receive a second call from the customer services manager – apologising and personally guaranteeing that my dress would arrive in the post the following day.  It did!  Now that’s retail worth marrying.

Snog, marry, avoid…

/ Lisa Bondesio / Leave a comment

This blog should probably be called ‘Why engagement matters?’  And I don’t mean that in the biblical sense… Actually, it has been prompted by a union of sorts. Have you noticed how rapidly the marriage of Liberal Democrat and Conservative has shifted from ‘hung parliament’ to ‘coalition’?  And this isn’t casual wordplay on the part of the sultans of spin – ‘coalition’ bears positive resonances of collaboration and collegiate enterprise…’hung’ has an altogether different timbre.  The language has been chosen and reinforced quite deliberately. What I find interesting is that we have a coalition goverment that actually seems to be committed to working together. Of course, intent is not the same as action, and only time will reveal whether this was an arranged marriage made in heaven or a shotgun ceremony that will ultimately end in a political decree nisi. 

Nonetheless, serious and careful work has been done behind the scenes to engage a group of stakeholders with almost diametrically opposing agendas.  In politics, so in business.   M&A mavens will be watching the impending deal between Deutsche Bahn and Arriva with interest.  Worth Euro 2.8bn, the deal is largely being funded by cash reserves from the German suitor.  Deutsche Bahn already operates the Chiltern rail franchise in the UK and owns freight train group EWS. A deal would add Arriva’s Wales and CrossCountry rail franchises, plus a clutch of bus services. However, Arriva’s chief attraction is its mainland European businesses spread over a dozen countries – providing footholds in Europe’s liberalising transport market.

This makes for a complex cross cultural mesh of stakeholders – all of whom may need careful handling if the value of the deal is to be realised across the network and ultimately operationalised. Language will matter, as will culture.  But so will engagement – by which I mean actually getting a culturally diverse workforce mobilised to partner effectively with one another. 

In recent years, social scientists have started an ongoing debate about the influence of culture on peoples behaviour.  For instance, if people in different countries follow different norms and therefore display different value orientations, would this lead to different economic outcomes, even if the pecuniary incentive was the same?  Funnily enough, they found that under normal market conditions, culture does not significantly alter the outcome – however, in environments where competitive forces are removed, cultural differences become more pronounced. Thus, while the deal between Arriva and Deutsche Bahn is happening, I’d guarantee scant attention will be given to the way in which the two parties differ.  Like a man who marries well, deal brokers and shareholders are only really interested in the aquisition of corporate dowry…perhaps they should spend more time getting to know their intended, before they discover that the beauty spots are actually warts, and that the in-laws are hostile.

Trust me, I’m a banker…

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Our most recent financial crisis has brought the way in which the banks and financial markets operate into sharp relief.  Perhaps more significant is the amount of money it has cost to bail out the banks, as UK taxpayers underwrite levels of national debt which – depending on the election -could herald a new era of sluggish UK growth & relative decline, and strengthen the case for joining the Euro.

Many commentators have squarely laid blame at the door of financial innovation. But financial disasters are nothing new and they are not caused by a single event. They repeat with astonishing regularity, and often radiate from the center through commodity prices, capital flows, interest rates, and shocks to investor confidence.  This time round, cataclysm was closely linked to a series of economic circumstances – strong growth, low inflation and the increased flow of international trade and finance. And although the global financial crisis was not caused by these factors per se, they highlighted the vulnerabilities in the financial and regulatory systems of the UK and US – fundamental weaknesses that were exposed because they combined with a number of unsustainable trends such as rapidly rising property values, high levels of consumer debt and untrammelled bank leverage.

While financial innovation may have a role to play in fomenting disaster, it is likely to occur in combination with other systemic factors. Bankers are incentivised to penalise risks that can be seen and measured, but this time round they invented new and sophisticated financial products which generated added value and high profit, but which carried risk they did not see – or perhaps chose to ignore.

 In good times, the City attracts wealth, generates economic wellbeing and creates employment. In bad times, it can put our AAA credit rating at risk and prolong recession by limiting the flow of credit in the financial system. Still, financial services are crucial to the allocation of resources in a modern economy. We would be wise to realise it will be impossible to prevent future calamity – that is simply the inherent nature of the capital markets. By implementing a combination of regulatory and systemic changes, the UK may seek to retain its position as a leading global financial market. A successful outcome will depend largely on the appetite of the State to do battle with the bankers, and the motivation of investors to think intelligently about financial innovation.

The Ethical Imperative…

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As four Rio Tinto executives are jailed for bribery, and BAE Systems fined £30 million to settle further investigation by the Serious Fraud Office, it’s easy to be cynical about the ethical intent of large corporations.  Nevertheless, it is rare to find an organisation without a mention of ethical business in their annual report, but is this just ‘greenwash’ or ‘hogwash’?

Corporate Social Responsibility (CSR) is not a new concept. Business philanthropy existed as early as the nineteenth century with the development of model factory villages in the UK such as Cadbury’s Bournville and Lever’s Port Sunlight. What has evolved is how large corporations now respond to the challenges of a shifting and dynamic business environment. The way things were is not the way things are.  Chief Executives and their boards find themselves in a strange new reality – one where good corporate citizenship, stewardship of the environment and responsible business practice are no longer optional extras, they are ethical imperatives.

Today’s CSR landscape is often complex and multi-dimensional, involving diverse groups or individuals who may at times have contradictory or competing agendas which run counter to an organisation’s profit motives. And seismic trends such as globalisation and climate change have radically altered the role that corporations play in society. In counterpoint, the expectations that society has of these organisations has also shifted. We’ve moved on from Milton Friedman’s bold free-market view that ‘the social responsibility of business is to increase its profits’. In practice, the manner in which firms now conduct business cannot be disassociated from the perceptions of stakeholders – who may be impacted by such activities – nor can it exclude the judgement of stockholders – for whom financial performance is a key driver.  To put it another way…whether in Borneo, Beijing or Bradford, it is no longer possible for big business to operate independently of the society in which it finds itself, even if it wants to.

One of the most significant drivers in all of this is the transparency and immediacy of modern media. For the iPod generation, the sins of their corporate fathers can be streamed live via RSS feeds and mobile downloads. The inexorable rise of blogging and ‘tweets’ (via Twitter) means the battle lines for corporate reputation are being drawn virtually. Nowadays there is nowhere to hide CSR indiscretions, but doing nothing isn’t an option either. Errors can be costly in both financial and reputational terms. Corporations are primarily motivated by profit, so risk and opportunity also have a contribution to make in shaping CSR strategy and its eventual implementation. Wise organisations reach a compromise between ethics and economics.

This is an excerpt from a longer paper on CSR. If you’d like to know more about CSR strategy or implementation, please contact Lisa Bondesio via lisa@chiridion.com

Last Post: Will the Royal Mail survive?

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Along with Cockneys and Cabbies, Routemaster Buses and Buckingham Palace, the Royal Mail’s distinctive red pillar-boxes are considered an enduring symbol of all things British. Formally established by Oliver Cromwell as the General Post Office (GPO) in 1567 (The British Postal Museum and Archive, 2008) this is an institution with a long and robust history. However, as the latter day Royal Mail, its future is less certain. Against a backdrop of increased competition resulting from industry de-regulation in 2003 and 2006; a fractious relationship with employee unions that has led to wildcat strikes and severe disruption of business; and public and political censure at plans to close local post offices, Royal Mail faces a stark threat to both its survival as a business and its corporate reputation.

Royal Mail: What are the business issues?
By its own admission, Royal Mail has to contend with significant business challenges. Unlike other former state monopolies such as British Gas and British Telecom, Royal Mail was not privatised in the last decade, but remains a public limited company (plc) wholly owned by the UK government. As such it is fettered by dual obligations which appear to conflict – the requirement to run as a cost-efficient, commercially profitable enterprise since being made a plc in 2001 and a public duty, or ‘universal service’ requirement laid down by The Postal Services Act 2000 (OPSI, 2000).

  • The terms of the licence granted to Royal Mail by the UK regulator Postcomm include obligatory service standards, a cap on prices, and a requirement to provide a universal postal service – a ‘one-price-goes-anywhere’ delivery model.

Clearly, this makes it impossible for Royal Mail to increase profits simply by raising prices, but the terms of their licence also expose them to increased competition from other UK carriers, who operate as private companies and are not hidebound by government. Bulk mail services have been open to competition since 2003 and by 2011 the entire EU market will be fully liberalised. (Postal Services Regulator, 2008) This will make it extremely hard for Royal Mail to compete, let alone prosper unless their business model is radically overhauled.

  • Modernisation of the business model is another thorny obstacle. Despite an already huge transformation since becoming a plc, and turning losses of more than £1 million per day into a £534 million operating profit for the year ending 2004-2005, Royal Mail’s latest annual report indicates that the group is barely profitable, with operating profit down by 30%, and Royal Mail Letters and Post Office Limited recording overall losses of £3 million and £34 million respectively. (Royal Mail Holdings Plc, 2008) Additionally, they are sitting on a Pension Fund deficit of £3.4 billion which, given nose-diving capital markets and increased life-expectancy, could double the liability by the time the scheme is re-valued in 2009. Despite the UK government setting aside £1bn to cover any shortfall, it is incumbent on Royal Mail to make sufficient money to meet their obligations to the members of the scheme.

It is also unlikely that any future UK government will be willing to bail out Royal Mail in the way they have done for the Banking Industry – the perceived burden on taxpayers would cost votes. One option to greater profitability would be to privatise Royal Mail in order to secure an injection of capital – however the political obstacles to this route are considerable. The ruling Labour Government, which is funded by union contributions, is under duress from the Communication Workers Union (CWU) to keep Royal Mail in public hands. Indeed it made this promise in its 2005 election manifesto, and given the proximity of a general election, Labour may be reluctant to risk an internal party revolt as the UK government wrestle with economic downturn and a looming election.