Good Times Bad Times: Tough gig

The economy is stagnant, customers are cash-strapped and new business is scarce. No surprise then that, from high street to high tech, from publishing to fashion, many firms are struggling.

by Emma Haslett
Last Updated: 09 Oct 2013

So you might think there is not much fun to be had in business these days. But, from a leadership point of view, tough times present the greatest challenge, and those individuals and organisations that best rise to meet it can achieve the greatest things. To some, the lure of the turnaround is irresistible. Are these individuals the business equivalent of thrillseekers, never content unless they are facing an uphill struggle, regardless of how good a job they might be doing already? Or do they just find themselves on the proverbial burning platform and obliged to get on with it? To test the point, MT sought out three bosses from different walks of life - from the corporate world to the surfing counter-culture - who are facing just such challenges to discover how life wearing a tin helmet suits them.

THE UNDERDOG

IAN GRANT MD, UK

Ian Grant, Encyclopedia BritannicaAt an industry conference in London earlier this year, Wikipedia founder Jimmy Wales pronounced that 'five-year-olds will never know what a Britannica is'. For Encyclopedia Britannica UK managing director  Ian Grant, this was too much. 'He always needs to attempt to diminish us in public,' he says. So Grant stood up: 'The first question of the conference was me saying: we're in the top 30 in the Superbrands survey, sunshine,' he laughs. 'Your brand comes in at a creditable 92.'

And yet, after 244 years of publishing, the Chicago-based company announced in March that this year's 32-volume edition is to be its last. That's understandable: just 15% of the company's earnings come from publishing the books. For Grant, though, that means the final transition from a bookshelf-full of leather-bound volumes to the virtual library of the internet. And although he insists that he's not sad about the books' demise - 'it's responding to the way people want to receive their information' - a company like Britannica may find it hard to compete in the online world, particularly when you consider that an individual subscription costs $70 (£45) a year, compared with Wikipedia's $0 (£0).

Admittedly, Wikipedia is Britannica's strongest critic. In fact, Wales never seems to miss an opportunity to state his view that while his site's content is free and 'democratic', Britannica's financial wall has made knowledge into a commodity that only the elite can afford.

Grant's argument is that the two can co-exist: while Wikipedia meets the needs of casual Googlers, Britannica is aimed at serious researchers who don't want to have to double-check facts. 'We don't sell subscriptions, we supply confidence,' he says. The market for Britannica these days is largely academic - schools and universities - and it is present in 93% of UK libraries, according to Grant.

As a virtual offering, it isn't doing badly. Online subscriptions have grown by 'about 60%' in the five years since Grant joined. And as that Superbrands survey testifies, it's a recognisable, trusted brand. 'You can go up the headwaters of the Limpopo river and somebody will know what Encyclopedia Britannica is.'

So, for its UK MD, the challenge is to shed that image of ancient volumes languishing on shelves and convince users - chiefly students and academics - that it's as comprehensive and easy to access as Wikipedia, but more reliable. That's easier said than done. 'I think over the past five years, all of us globally have found it longer and slower to make that change,' he concedes. 'Overcoming the ancient perception, it's a challenge in hard economic circumstances.'

There's also a sense that the Converse-wearing technophilia of Wikipedia has been slower to manifest in the corridors of Britannica. 'I have an iPad and an iPhone because I publish for those media. But I don't happen to use them for everyday life,' admits Grant. And there are certain aspects of the digital world he holds in contempt. He brings up Wales's recent appointment as adviser to David Cameron on crowdsourcing for policy. 'Would you believe it?' he says. 'Wikipolicy!'

Having worked in publishing since 1971, Grant is of the old guard, but he's enthusiastic about his brand's technological pedigree: Britannica was one of the first publishers to go online, in 1994. And, for its mobile offering, there are opportunities in developing economies, where mobile phone ownership has leapfrogged PCs to become the medium of choice.

So it may be going from the shelves, but Britannica won't be forgotten without a fight. And, as Grant points out, financially speaking, his company is in the lead. 'Wikipedia's business model is to beg for money. Ours is to generate revenue by satisfying our customers.'

THE NEAR-SELLOUT

ERNEST CAPBERT MARKETING DIRECTOR, FINISTERRE 

The Cornish surfer stereotype doesn't usually involve a degree in business, but then Ernest Capbert isn't your average beach bum. He's one of the brains behind cold-water surfwear brand Finisterre, one of St Austell's most exciting exports since tin mining dominated the area.

Born in Washington, DC and having studied marketing in Canada and ocean science at Plymouth University, Capbert is not your average fashionista either. But he is a self-confessed surf nut and left a much better paid job to go to Finisterre after meeting its founder, Tom Kay. He admits there has been a 'shit ton of speedbumps' for the brand over the past year. While it has had the squeeze on consumer spending to cope with, the biggest challenge came when it began searching for investment. 'We knew we needed finance,' he explains. 'We were growing and we needed to get more products in. Economies of scale, margin - it would just make us a more commercial business.'

But Finisterre's brand philosophy made finding an investor - never easy in this climate - even more of a challenge. At its core, says Capbert, are 'product, people, environment'. Not only does it source the highest quality materials, but its supply chain has to be squeaky-clean. Potential investors found this hard to grasp. Having had a stream of would-be shareholders through the door, his team soon learned not to trust them. 'A young guy comes in, promises the world, and it sounds really cool. Then he's got these henchmen: one guy who deals with numbers and another who does the manufacturing.'

In late 2010, the company thought its troubles were over when an investor made an offer it couldn't refuse: £250,000 for a 15% stake. The deal required compromises on Finisterre's part: first, transferring manufacture to India. Capbert says the team had moved to a factory in Europe only recently, but with manufacturing requiring an eight-month lead time, the situation was getting desperate. 'We went to India in February 2011. It wasn't the place we'd hoped for, ethically or in quality,' he says. But to get the ball rolling, it seemed necessary.

The next compromise was on its products. 'They started saying: "You gotta do yoga, running, cycling."' For a brand whose reputation had been built among cold-water surfing's biggest players, that could have been devastating. 'If you're trying to get people to scream about your brand but don't really have the vocabulary for those markets, they begin to smell a rat.'

The deal fell through two days before Christmas, when the investors tried to increase their stake first to 19%, then to 40%. Finisterre politely declined. 'We were like, are you kidding me? It was kind of weird.' But the brand had already shifted its manufacturing to the Indian factory, so damage had already been done.

In hindsight, Capbert says it's easy to see how brands take the wrong route. 'Howie's (sold to Timberland in 2006) is a great example. People use words like sell-out, but your company has got to get that cash injection.' (Though Howie's management bought back the company in January.)

Cleaning up the mess will, he says, be fraught but do-able. Finisterre is still growing at 30% and should break even this year on a turnover of around £950,000. And, having returned production to Europe and shifted the focus back to cold-water surfing, it has had a lucky escape. 'They didn't get that we are a quality brand and that it was a high price point. They didn't get a whole bunch of things. We've spoken to quite a few people and they said, thank God, because that's the kind of stuff that breaks a little brand like ours.'

SMARTPHONE STRAGGLER 

PIERRE PERRON MD, SONY MOBILE, UK AND IRELAND

 

It's safe to say that 2011 was a year Sony would rather forget. Not only did the Japanese tsunami and floods in Thailand wreck factories and supply chains and cause massive production delays, but once products did hit the shelves, not many consumers had the cash to buy them. In October, the Playstation Network, used by gamers to play over the internet, was hacked and millions of passwords were stolen. Then in December, Ericsson, with which Sony had run a mobile phone joint-venture for a decade, decided to bow out.

Add in the strong yen and lacklustre sales of even traditionally strong Sony products like TVs and it's no wonder Sony's new CEO, Kazuo Hirai, who took over from British-born predecessor Sir Howard Stringer in April, has admitted that there is a 'sense of crisis' at the company. Ten thousand jobs are to go worldwide and to top it all Sony has just announced its fourth consecutive and worst-ever annual loss, an eyewatering £4.02bn for the year ending 30 March 2012.

In the midst of all this sits seasoned French exec Pierre Perron, who in September was asked to run Sony's now-standalone mobile operations in the UK. 'It was a kind of annus horribilis,' he admits. Perron's advantage, though, was that having joined Sony in 1989, he knew the company well.

Sony's mobile division has taken a long, hard look at itself, as young upstarts like HTC and the all-conquering Apple have left it for dead in the smartphone wars. It's not alone in this: last year, Nokia CEO Stephen Elop said that his firm was stranded on a 'burning platform'. Hang around or leap into the ocean below? It's an unpleasant choice.

Perron says Sony Mobile is coming from a stronger position than Nokia, for two reasons. First, loyalty: it has been around for 60 years and 'probably in every single British household there is at least one Sony device'. Second, because of the huge range of activities it is involved in: 'The only company that is able to produce a smartphone and win an Oscar,' he reckons. Others might say that this lack of focus is the root cause of its woes.

The big move for Perron's division will be to become 'smartphone-only'. That means shrinking its product range from 40-plus handsets to just three top-end models - the latest of which, the Android-powered Experia S, has just been launched. Perron insists that, far from coming as a blow, Ericsson's departure has given his business agility. 'Our greatest challenge is speed. We need to bring our products faster into the market,' he says.

Will that help it take on its meanest rival, Apple? Perron won't mention the name, referring to it only as 'the competitor'. He is convinced that consumers are so quick to buy the latest shiny offering from the Rival That Shall Not Be Named only because they haven't been offered a decent alternative. 'What we are doing is to provide an alternative solution to those customers who would like to enjoy a more open environment.'

For Perron, the biggest test will be to convince the UK market. We Brits have embraced smartphones with an unrivalled zeal: half the mobile market in the UK is now held by them, which is more than anywhere else - even the US. So if the UK is convinced, the world will follow suit. 'We know if it's happening in the UK, it will be a success.'

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