By mixing business logic with vulgar chutzpah, the new bosses at Tussauds have jolted a moribund business back to life. The old lady must be spinning happily in her grave. Andrew Davidson reports.
Dance with Kylie. You can. Step round the gaggles of Japanese, Germans and Brits clicking away in the garden party set of Madame Tussaud's, the London waxwork show, and one room further on, there you'll find her. She's waiting for you, her elbows on the floor, her bum in the air and, if you bend to listen, a whisper in her mouth. Nearby, a pole on a podium beckons.
Step up, strut your stuff to the music, and with the wonders of modern audiovisual technology, your image conjoins with hers ...
'Go on, try it,' giggles James Bradbury, general manager at Madame Tussaud's, with a grin as wide as a banana. Behind him, one of his floor staff stands fingering a camera - photos are big business now at Tussaud's. Bradbury, 37, crop-haired, slightly manic, a year and a bit in the job, is emblematic of the new breed of manager moving through this firm. Once written off as a 'clapped-out brand' - Bradbury's words - Madame Tussaud's now fights hard for everyone's attention, living on its wits and, it seems, giving customers what they really, really want: pop stars, movie icons, sex, sensation and, most of all, celebrity.
Hence David Beckham's sudden appearance last summer, in full England kit, on Trafalgar Square's spare plinth opposite the National Gallery in London. Bradbury, quite illegally, had craned Beckham's Tussaud effigy up at 6am one sunny June morning in the middle of England's World Cup campaign. By 6.05 the police, amused at the stunt, had ordered him to take Beckham down, but not before press photographers had got their shot. Tussauds duly got front-page coverage in every tabloid newspaper the next day.
Likewise Kylie's knickers which, after much newspaper linage, are now more discreetly covered in the Madame Tussaud's exhibition (Kylie's agent suggested, ahem, that although his client was happy with the publicity, it might be better for the long-term purposes of the waxwork if there was slightly more skirt). Five years ago, such stunts would have been unthinkable at the 200-year-old waxwork show. But the new energy is palpable, and it doesn't stop there. At Tussauds Group, the former Pearson subsidiary that runs not just the waxworks but theme parks Alton Towers, Chessington World of Adventures and Thorpe Park, and attractions such as the London Eye, you could say there is a new mood afoot.
Which is odd, because if there was going to be a shift in gear at Tussauds, you would have expected it to come when the group bought itself out of the clutches of Pearson, the newspaper-to-book-publishing media giant, for pounds 352 million in 1998. The move - effectively a management buyout backed by private equity specialist Charterhouse Development Capital - left Pearson's old team in charge. Two years later, with Tussauds facing stalling growth figures, big borrowings and leisure market uncertainties, Charterhouse changed tack, bringing in its own people.
Out went CEO and chairman Mike Jolly, the affable marketer who had built up the Tussauds Group within Pearson and spent 18 years at the firm. In came new CEO Peter Phillipson, ex-Gillette, Guinness and Diageo brand specialist, and chairman Sir Eric Nicoli, the former United Biscuits boss.
Phillipson and Nicoli demanded a new approach, and the new team obliged, making Tussauds one of the surprise business successes of the new decade.
This year, the Tussauds Group hopes to hit its third 40%-plus profit leap in a row - an astonishing feat, considering the externalities: 11 September, stock market corrections, tourist numbers plummeting. Tussauds is spending confidently, opening a vast new indoor waterpark and hotel at Alton Towers in May, as well as new waxwork sites in cities all over the world. With Charterhouse (as venture capitalists do) wanting their profit out soon, the group is expected to float early next year, conditions and figures permitting. Nicoli describes Tussauds as one of the best-performing and best-positioned leisure companies around. The investors in Charterhouse's buyout fund, no doubt, have very wide smiles to match.
The man responsible for creating those smiles sits in a determinedly unprepossessing head office about 15 miles outside the City of London, in a low-build business park near Chessington, Surrey. Phillipson, 49 this month, Geordie by birth and accent, pretty accurately reflects his choice of corporate HQ: he's chunky, friendly, no frills, sporting a creased, open-necked shirt and a shy grin. He worked his way up through sales and marketing at Gillette and commands respect among colleagues for his 'closeness to the consumer' and his control of costs.
Phillipson's first move as new CEO of Tussauds in 2001 was to move its corporate base from flash digs in London's Tottenham Court Road to this mundane outer suburb. The saving? 'About a million,' he shrugs. The changes he has instigated, however, are about more than just cutting costs and pepping up marketing; they are about 'connecting with the customer at an emotional level', be it with waxworks, theme park rides or even the coffee parents can buy while chasing after their kids on a long day out.
So were the old management team getting something simple wrong? Is that why Charterhouse demanded changes?
Not quite, says Phillipson. 'Charterhouse had bought the business, supporting the management against the management's business plan. After two years it became clear the management were not achieving the plan, and a decision was taken by the board, not Charterhouse, that there had to be changes.'
Malcolm Offard, the 38-year-old Charterhouse director who led the Tussauds deal and who sits on the group's board, says it was simply about getting management to take a more 'entrepreneurial' approach. Tussauds had done well in the 1990s but faced a different market - a downturn in international tourism, shifting consumer expectations - and had to change. 'It's very difficult to ask the same people who have run it well for five years in a certain way to suddenly change it for the next five ...'
Some on the board felt that the Pearson genetic inheritance - being slightly hidebound by tradition, not upsetting the Establishment - was unsuited to new times and proving hard to breed out. One director cites the use of Beckham at Madame Tussaud's in London. 'They didn't even have him in the exhibit; they didn't want tabloid figures, they were more worried about what the royals thought.' It's unthinkable, adds the same source, that a manager under the Pearson regime would even have contemplated the Trafalgar Square stunt, let alone had the confidence to do it without referring it up.
Phillipson, who has only praise for Tussauds' original team, says it was probably easier for an outsider to effect the changes needed. He runs through the organisational factors that had to be sorted out. The theme parks operated independently of each other, as historically they were self-grown 'cottage industries' bought into Tussauds and bolted on, but they'd rarely leveraged the buying and marketing power of the combined group. There was little sharing of information, or a sense of creative urgency. 'It wasn't just about profit,' he says, 'but about the culture within the business, and the need to inject more commercial awareness and dynamism ... My background was very much sales and marketing. I felt there were things I could add that could make a difference.'
He brought experience of brands and service industries, and of yield management - from a stint in the travel business at First Choice - that he felt were pertinent. Charging the right prices at the right times, getting close to what consumers want, and giving them an experience they relished rather than endured, were key.
So what has altered? The most tangible things are centralised buying for the theme parks, an effort to provide a better-quality experience for all - better food, better coffee (provided by Costa), better shops at all the sites - more creativity and a smarter co-ordination of initiatives.
It's not been all-change on the personnel front, however. Although Nicoli, Phillipson, chief financial officer Robert Roger and commercial director Bruce McKendrick are all post-1998, many of the site managers have remained from the old regime. All of them, claim directors, have been enthused and empowered by the new sense of direction. 'It's a clearly focused management team,' says Nicoli, 'with a shared sense of purpose.'
And it's been achieved, too, with little audible rancour. Former CEO Jolly, who retains a stake but now heads Penna, the HR consultancy, left Tussauds quietly and describes the transition as 'commendable'. He says new blood was obviously needed, and there was no point in hanging around as chairman. 'How many times have you observed that the person who doesn't know when it is time to move on is the CEO?' Nicoli adds that he was deeply impressed by Jolly's no-nonsense attitude. 'Mike is a man of great honour,' he says simply.
What is surprising, given that Phillipson has never run this kind of business before, is how the new team has gelled so quickly, with a leap in performance clearly visible: profits up from pounds 30 million in 2000 (on pounds 123 million turnover) to pounds 43 million in 2001 (on pounds 137 million turnover) and pounds 65 million last year (on pounds 178 million turnover). Offard, who initially lined Phillipson up to head an FMCG buyout that fell through, says spotting talent is what good venture capital work is all about. 'Peter has run big businesses - he ran United Distillers for Guinness - and he's squeezed growth out of mature businesses. That's what he is good at. He has also got an uncanny eye for what consumers want.'
Part of that comes from research. Madame Tussaud's, for example, now uses outside agencies to do about 200 visitor interviews a month, covering all aspects of the visitor experience, plus two waves of non-visitor interviews checking that the PR and advertising messages are getting across, and in particular whether people understand that the brand is changing. Phillipson has also tried to spell out clear priorities for employees. 'I want to build a framework in which all of our people are engaged, and give them as much freedom to succeed as I can within a controlled environment, so that all the staff have written, quantifiable objectives set against the priorities we have in the business.'
He has a catchy list of Cs - customer, costs, commercial - that lie at the heart of his message. He wants to increase the wow factor for customers - part of his solution to repositioning Madame Tussaud's so that it is 'relevant to now' is the new, provocative tactility. There is no point, he says, in just trotting out the same portraits 'for hundreds of years', stuck behind museum ropes. The ideas have to be kept fresh, local audiences lured in.
Combined with that, he wants the business to be confident commercially, to know what the customer is prepared to pay, to be able to vary prices with demand (at different times of the day at Madame Tussaud's, for example).
And to resolve cost issues by restructuring the organisation so that negotiating muscle and exchanged knowledge is maximised. And, drawing on his experience of reviving old brands like Guinness, he wants to get the message of change out. Hence the PR stunts.
CFO Roger, who worked with Phillipson at First Choice and joined Tussauds before his boss, describes this shift in style as 'substantial'. Yes, a lot of the initiatives had been started pre-Phillipson - the overseas rollout of Madame Tussaud's, the concept of an Alton Towers water park - but the group was facing big problems. He cites the difficulties it had in positioning Madame Tussaud's in America. Its Las Vegas site, opened in 1999, made little money 'because consumers there didn't really understand what it was - some even thought Madame Tussaud's was a brothel'. There were problems with the pricing policy at its theme parks; heavy discounts were on offer through newspaper promotions.
Now Tussauds sites in Las Vegas and New York are popular and profitable - in New York, where Tussauds was swift to provide a tableau of NYFD Twin Towers firefighters, business has doubled, says Phillipson. Why? 'Clever marketing, great site, relevant attractions, good awareness.'
Tussauds has expanded into theme parks in Europe, buying Germany's Heide Park, and has plans to move successful initiatives round the group. If the water park, complete with new 216- bedroom hotel and 450-delegate conference facilities, is a hit, there is room at Heide to build another.
Tussauds, now the number one theme park player in Britain, is in the market for other European parks too, if they become available. There may even be a role for Madame Tussaud's exhibits in the theme parks, if they can get the proposition right.
Will Tussauds increase its stake in the London Eye? Phillipson shrugs.
Tussauds owns a third, BA another third and the architectural practice that designed it the rest. BA may want out but, says Phillipson, Tussauds will 'just see how it evolves. There are plenty of other fish in the sea, to be honest'. The Eye is, however, another neat concept that could be rolled round other big cities.
But there are so many growth possibilities to invest in, he adds, that they have to be careful. Now they have learnt how to market Madame Tussaud's overseas - they also have sites in Holland and Hong Kong - they are looking for more. Each costs about pounds 20 million to fit out. How many could they open? 'There are a lot of huge cities in the world,' says Phillipson.
There are also a lot of things that could still go wrong - an accident at a theme park, a step over the limits of taste at Madame Tussaud's, an exuberant outflow of cash with not enough return on capital. As Jolly remarks wryly: 'It is always possible to think of ways of pushing the envelope too far.' But the prospects look better for the group than for some years - good news for Charterhouse, which needs to cash in its investment before the 10-year lifespan of its fund runs out. Will it end in a float?
Or a sale to an American theme park rival? Phillipson says he hopes the former. 'The idea of being a European wing of a major multinational is not the most appealing to me. I have spent a lot of time working for big companies - Gillette and Diageo were very good to me - but I've moved on now and I enjoy being CEO of my own company.'
Yet Tussauds needs access to more capital to fund its growth. There is still, say its executive team, far more scale to leverage, more creativity to unleash. Can it keep coming up with the ideas? Can it retain its verve?
In a culture that increasingly reveres celebrity and craves sensation, Tussauds might just be onto something, but it will require quick feet. Dance with Kylie ...
1794: Marie Tussaud inherits Philippe Curtius' famous Parisian waxwork collection. Exhibits include French politicians, guillotined aristocrats - these wax death masks are of Louis XVI and Marie Antoinette - and revolutionary heroes and criminals.
1835: After 33 years of touring the UK, Madame Tussaud sets up a permanent exhibition of topical tableaux, up-to-date models of public figures and a gory 'chamber of horrors' in London. She dies in 1850, leaving Britain's most successful tourist venue to her two sons, Francis and Joseph.
1884: Marie's grandson moves the family business to an pounds 80,000 purpose-designed building on its present site in Marylebone Road. The seven exhibition halls, new chamber of horrors, garden, restaurant and transport links make it a firm fixture on the tourist trail.
1926: The company goes into liquidation following the destruction of the exhibition in a fire the previous year (Bernard, Marie's great-great grandson is pictured among the ashes). A new, limited company is created and the reconstructed exhibition and cinema open in 1928.
1930s: Madame Tussaud's inclusion of Wallis Simpson after the abdication of Edward VIII boosts attendance by 10,000 in a fortnight. The company responds to the public's appetite for sports and film personalities, adding Everton captain Dixie Dean and Greta Garbo. But a model of Hitler, installed in 1933, suffers frequent vandalism.
1958: Madame Tussaud's opens the Commonwealth's first planetarium in London on the site of the former restaurant and cinema, destroyed by a wartime bomb. The new venture reflects the public preoccupation with the cold war space race.
1973: Madame Tussaud's diversifies into family daytime amusements and acquires Wookey Hole Caves and Paper Mill in Somerset. A craft centre opens in the mill and Wookey Hole is transformed into a storeroom for pensioned-off wax heads. The Witch of Wookey features in the publicity material.
1978: Madame Tussaud's is acquired by Pearson, and Chessington Zoo becomes another Tussauds attraction. The Tussauds Group buys Warwick Castle from Lord Brooke for pounds 1.5 million.
1987: Chessington zoo re-opens as Chessington World of Adventures, following an pounds 18 million investment to upgrade the attraction to a North American-style theme park. New rides include Calamity Canyon and the 5th Dimension.
1989: Madame Tussaud's Rock Circus opens in London to capitalise on the high spending power of the young. Attractions include Freddie Mercury, Michael Jackson and Phil Collins. Despite a multi-million pound redesign in 1999, the attraction closes in 2001 due to diminishing profits.
1990: Tussauds acquires Alton Towers for pounds 60 million and transforms it into a theme park. It becomes the second most visited site in the group, drawing 2.5 million customers in 1997. Tussauds opens its first hotel on the site in 1996, at a cost of pounds 12 million.
1998: The Tussauds Group buys Thorpe Park, the theme park in south-east England, for pounds 17 million. Pearson then sells the Tussauds Group for pounds 352 million in a management buyout backed by Charterhouse Development Capital.
2000: February The British Airways London Eye (left), opens at a cost of pounds 35 million. Tussauds manages and operates the venue.
November Madame Tussaud's New York opens in Manhattan. Wax models in the dollars 53 million museum include Woody Allen, Rudolph Giuliani and, after 9/11, a tableau of firefighters.
2001: June Eric Nicoli is made non-exec chairman of the Tussauds Group.
August Peter Phillipson, former boss of pub-owner Eldridge Pope, is made CEO.
December Tussauds acquires Heide Park, a German theme park, for an undisclosed amount. Founder Hans-Jurgen Tiemann takes a significant stake in the group.
2002: March Thorpe Park launches Colossus, the world's first 10-looping rollercoaster, a pounds 10 million investment.
June Madame Tussaud's staff illicitly place their wax model of David Beckham on the empty plinth in Trafalgar Square the day before England's World Cup match against Nigeria. It's a PR coup.
2003: A new conference centre, a second hotel and an undercover water park are scheduled to open at Alton Towers in June at a cost of pounds 40 million.