BQ live: Investment dilemma

BQ live: Investment dilemma

With funding sources strained, where should investment in the North East be spent?

The issue: Which is the better investment for our region: product innovation or brand development?

BQLiveneoneJarrett Palmer: Piramal makes pharmaceutical drugs and healthcare products for different companies. The site I run, essentially the group’s biggest, has gone through huge change. It was a Pfiizer site originally, part of a big corporation. Now it’s a family-run company essentially, owned by Mr Piramal its chairman, with headquarters in Mumbai. The brand is Piramal.

Nigel McMinn: I’m not one of the family owning Benfield but the first non-family managing director there. We’ve been around about 54 years, started by our current chairman’s father, John Squires Snr. We’ve 31 dealerships, in the North East, West Yorkshire and in the North West. (Benfield has since bought Audi dealer Colebrook & Burgess in the North East, increasing sales potentially by a third to £500m – Editor). We employ about 1,200, have a turnover of about £380m and are regarded as the largest private company in our business in the North East. Large turnover is easy when you’re selling units at £10,000 a pop. My chairman keeps reminding me he’d like to be largest by profit! Brand dynamics in our industry are interesting – we represent 11 global and international brands. So the dealer brand is somewhat subsumed. No matter how well known we are locally, how much our market share – nearly 50% with brands we represent in Newcastle – nobody’s ever really aware or bothered about the dealer brand. We consider ourselves agents of those international brands. We hadn’t until this year tried too hard to work on our own brand. Now we work very hard on the substance of delivering good customer service. If that gains us a reputation, we are happy to live up to it.

Mark Simpson: Nigel Wright Recruitment has been around about 23 years, with its head office in the North East. I’ve been with the organisation 11 years. We’ve transitioned from a regional recruitment to a pan-European business. The recruitment market is huge and fragmented. The UK is probably the second most competitive market in this after the US. We’re probably in the top 5% in the UK by fee income. When Nigel set up he wanted the business to be different and a lot of that difference has come through the people we’ve hired. We’re a relationship-based industry, so the quality of people you have directly affects the quality of those relationships and the service you offer. So I think our brand and service is the direct result of taking a different approach to the market with people we adopt and bring into the business. You have to keep finding good people as you grow, as we’ve had to do across Europe too.

David Grailey: NCFE is an education organisation and a charity. In the UK we’re the fourth largest vocational awarding body. Our market place is very competitive. Number one is BTech, part of Pearson, the largest educational organisation on the planet. We’re not in a heavily branded market. The only other significant brand would be City and Guilds. Our brand lies in having significantly differentiated ourselves against the rest of the pack which is regulated and has a regulated mindset in delivering customer service. We were first to introduce exceptional customer service working on a profit chain model, and over 10 years we’ve had exceptional growth. We’re relatively small; 105 people with turnover of about £11.5m. We net about 20% of that in a marketplace about to suffer 25% reduction. That’s challenging, but our brand is seen as young, dynamic – not old and stuffy. We’ve done a lot of work on that so we’ve more than 80% brand awareness across the main colleges of England that form our customer base. About 80% of our work comes from colleges. We have to innovate. I must differentiate myself. It will become an even greater strategic capability as employers perhaps become less likely to invest in what they perceive as a cost – ie, training. As a charity we don’t receive any benefit. We’ve no large surpluses, but we have a greater commercial imperative to drive growth and success. And we’ve a great ethical and moral position because we are a charity.

Hugh Rhodes: When I joined Science City at Christmas as innovation director I was asked if I could start 10 businesses this year. I found the challenge difficult to resist. I’d earlier run a technological innovation consultancy doing in a smaller way I try to do now. We’re running an incubation programme; I bring in entrepreneurs, sift ideas and talent and start there. So far five people have started nine businesses. I’m interested in driving good business practices to markets with demand. I don’t think innovation is some pearl of wisdom difficult to grasp. It’s what others use too. To me, success in this is the over-riding driver. If we can’t get that, the brand will be hollow anyway.

Geoff Allison: Smith has a chequered career. I was asked to take over in 2009 amid turmoil. It has been interesting. Last January our American subsidiary offered to buy Smith Electric Vehicles from Tanfield Group – an asset and know-how purchase. So I now report to Kansas and have been involved for 18 months in fundraising. We’ve raised about $180m so far to develop the business – a success in that context. We’re into a market where electric vehicles are a hot topic and are being taken to the next level in development. We produce commercial electric vehicles. We identify and target fleets of at least 100 vehicles. There are tremendous opportunities in depot-based vehicles. As the UK market is difficult we’re going to see lots of development and opportunity in exporting. Over 12 months we’ve set up partnerships in Hong Kong, Singapore, Germany, Spain, France, and will probably do similar in Holland and Switzerland. I’m travelling most of the time. There’s such a drive on for funding and innovation in the US; they had the electric car sorted in 1996. But they were petrified to produce in volume because the large oil companies had a lot of influence. So they withdrew all the cars from the roads and crushed them. It cost millions. Now they’re in it for the long haul.

Owen McCabe: My background at Happen is technology based. I’m a scientist by training with a Masters. I spent a couple of years in America as a technology consultant. I worked with Procter & Gamble. I’ve also had a number of roles including marketing director at Nestle Rowntree. I’m well aware of away days where people come back with ideas you can’t make and you can’t sell. You wonder, ‘Did I pay for this?’ But the name Happen should tell you everything about our philosophy – making things happen. Strategy’s easy; implementation tends to be more difficult. However it does happen more often than not. We work with companies big and small. One of my recent projects was rugby league as a brand. Some consultancies work in a way you can’t enumerate what they do. We like to think we’re accountable. Unless a product goes to market and has success, you’ve not really innovated anything. Success is making innovation work profitably.

Ian Scott-Bell: I joined Nigel Wright Recruitment six years ago. Our company then hadn’t decided how best to connect. I galvanise the brand in this region and beyond – in France, Scandinavia and the Benelux countries. My job is to keep the company ‘front of mind’ in these markets. Nigel Wright supports and backs brands and innovation. A number of great brands in the North East have helped Nigel Wright in its progress. There’s also intellectual property around recruitment. We regularly do something different to get a bit of profile. We have different programmes for the different services we provide.

David Heath: Many people think Berghaus has German origins but it’s a North East brand started in 1966 when it was the LD Mountain Centre in Dean Street, Newcastle. In the last five or six years the Berghaus brand has been transformed by refreshing the offer and in making it a recognised global brand. Since 2007 we’ve opened in South Korea – a market in itself. We have 60 standalone stores with the Berghaus name there. We’ve opened recently in Japan, in China and are just opening in Russia. We’re re-opening in Scandinavia. There we’ve had to remodel – so far, successfully.

BQLivenetwoNeil Stephenson: Onyx is sixth-biggest internet provider in the UK, started in 1996 on Teesside. Our annual marketing budget is £2m. We’ve built our service on brand, are developing it and feel we can get the edge over competition by using it. The business has gone from one site on Teesside to nine sites across the UK from scratch. We hadn’t great knowledge of the market but had a gut feeling of how we could make it work for us. Today Onyx enjoys vast organic growth and has also made seven acquisitions in a few years. None has gone wrong. They’ve all rebranded well. Our aim is to be effectively the Marks & Spencer brand for IT services. We may be more expensive but we assure quality. Our biggest customer is Sky TV. Our marketing messages help us to enter long-term relations with our customers. At the height of recession we still grew. This year our revenues are likely to grow by 20%, profits by 80%. We’ll do about £18m this year and will be nicely profitable. We’ll continue to market intensively. Others may spend more on it. But competitors have said to us, ‘Your marketing is better than ours’. In marketing we stress core benefits; we explain exactly what we do. Many firms don’t know their customers, don’t know their staff. That’s madness. I’m incredibly direct with my staff and they can be direct back. We tell our staff exactly what we’re going to do in the next quarter. If we’re making another acquisition the staff know what will happen. They’ll ask questions, which is what I like. Treat customers and staff particularly well and you get your returns. (Since this debate, Onyx has been acquired by Isis Equity Partners in a £42m deal aiming to grow Onyx. Isis paid £27m for the purchase, and has committed £15m more to fund strategic acquisitions. Stephenson has called it a bolstering, milestone deal – Editor.)

Graeme Mason: Last year was Newcastle International Airport’s 75th anniversary. People don’t think of us as just bricks and mortar, just where they fly from. It’s interesting hearing others say they share their customers with their stronger brands. We’ve brands like Emirates, British Airways, easyJet, Ryanair. You might think with their global and European brands helping you to compete there will also be a tug of war as to whose customers are whose. But we take responsibility for their experience in travelling through the airport. And if you add some of the other airlines – Eastern, Flybe and Thomas Cook and Thomson – many customers know which airline they’ve flown with. But plenty don’t. However, they all know where they flew from. So I think we have a brand, the whole region knows our strengths and weaknesses. And we have stakeholders who really care when we’re doing well or badly. All this gives us strong brand identity. We offer customer service, provide connectivity in getting airlines into the region. Our aim is to be your airport. Underpinning that is our goal to be the UK’s most welcoming airport. In the much tougher battle to win customers it’s our way of trying to make Newcastle Airport an airport of choice. We have a shopping area twice the size of those in similarly-sized airports. That’s innovation. We’ve got partnerships, as with Newcastle College, which delivers people for the jobs and gives local communities the chance to share in what the airport’s doing. That’s all part of brand identity. Within a political agenda, we’ve made a marked contribution to consultations over proposals for high speed rail. We saw that as a potential threat, but turned the argument on its head, suggesting such a development should terminate at the airport. We’d then get more passengers coming through. Now it seems none of us is going to get it.

McCabe: A lot of companies I deal with see the first order of business as being product based. What really annoys is when someone senior says it’s time to apply a bit of brand, as if it’s selectivity rather than strategy. In successful businesses brand sensitivity is there from the start. Heath: Innovation should be in a company’s DNA. When you go into new markets everything is about what sets you apart. It can take three days to walk round one international fair we take part in. I’ve never known such competition elsewhere. You have to stand out in all that. You need product and innovation but brand too. I think brand’s everything – in the consumer’s eyes too.

McMinn: It’s easy to make the mistake of separating brand and innovation. Whether you call it your brand, or your purpose, your DNA, the essence is what your whole company is about, what it stands for. You must understand your company stands for something. Whether you choose to market that and call it a brand, or just let the reputation grow organically, it all has to start from a seed that grows into something that you do better than your competitors.

McCabe: The quality of your showrooms, the way your staff are maybe not doing the hard sell – all those things are elements of how customers feel about you. It may influence them to buy one type of car rather than another.

McMinn: Benfield was first in the industry to offer a 12-month guarantee with all used cars. Now it’s commonplace and with all the global brands you get 12 months used-car warranty.

McCabe: People don’t buy a car simply because they like its shade of blue. It’s a much more emotional move than that, isn’t it?

McMinn: Yes. In embarking on our campaign the company we worked with spent a lot of time asking, ‘What do you do differently?’ We realised we had something to market.

McCabe: I’ve come to the conclusion we all love brands. The difference lies in whether you have a passive brand or an active brand. If an organisation has ambition it will have an ‘-est’ in its mission statement. It must have some superlative there, otherwise you lack brand ambition. You’re leaving the brand underpowered. Sadly a lot of marketing has become devalued. Sales and finances as times get hard are seen as being more revenue driven.

Mason: Do you see targets as having to be realistic? We didn’t set out to be ‘the best airport in the world’. McCabe: Brand is the convincer, the product the confirmer. I love Berghaus’s promise that its product will satisfy.

Palmer: In most industries Indian had been seen as low cost, low quality. We battled a long time with that, coming from Pfizer. Everyone knows Pfizer as a brand. How could we get our name known as Piramal? In the end we asked: ‘What differentiates us from everybody else?’ We’re not the cheapest, so we based our strategy on service. People will pay for good service.

Grailey: We take the point about ‘-est’. We score heavily on service. We’ve topped ‘100’ lists twice for service. We do everything we can for people, and when we get good people into our business we do all we can to keep them.

BQLivenethreeAllison: Building on brand for me was difficult at first. I’d been in operations. Only in the last 19 months have I got involved more in sales and marketing. I’d been into innovation needed to get product out the door – now I have to be more involved also in meeting customers, going abroad. Branding and innovation for us run parallel with developing the electric vehicle. We’re already seen as a market leader – from three-and-a-half tons to 12 tons. Economically we can make sense. We also have a reputation for reliability. We’re further developing our name for honesty, integrity, and our ability to do what we say we will. Somebody recently told us they wanted to buy 50 electric vehicles. I told them they don’t need 50. ‘You couldn’t cope,’ I explained. I educated them instead in a process to follow.

Palmer: You may not get it right every time. The important thing is to make clear what you’re doing to put it right. (He was asked if a brand name should be revisited). Initially we placed a lot of importance on brand and name. Our chairman’s name works in India because he’s the fourth richest there. It took us some time to realise the name was not recognised here. Now it is starting to mean something. I think we’ll come back to it.

Stephenson: It’s vital people joining your company adapt to your culture.

Rhodes: We must brand for the region’s future. The essence of backing an entrepreneur is to get the right person. I’ve spent a lot of time going through applications and finally got three who I believe will succeed, not necessarily with this particular business of theirs, though I’m very excited about them. But they’ll be successful individuals in whatever they turn to, ambassadors for our brand also, I hope. Social media has changed everything too. At start-up level doing something through social media is really exciting.

McMinn: We really subscribe to it. It’s the first time marketing has become two-way instead of us just throwing messages at customers. Unless you recognise what used to be word of mouth is now in print digitally, and in the public domain and you need to embrace it, anything else you try instead is a waste of time. Those who fight shy of social media may regret in three or four years’ time.

Mason: We use social media to reflect the personality of the airport, the welcoming approach. There was a fear within our organisation it would release an avalanche of complaints, but it’s been a fantastic experience. We’ve had compliments through thick and thin. Compliments have outnumbered the complaints 19 to one.

Heath: People want to tell of their great experiences. Palmer: The internet opens the market but I don’t think social media would work for us. We’re associating with bigger players actually in the market place.

Allison: We don’t use Twitter and Facebook. Part of our innovation over 18 months has been aimed at bringing down the cost of an electric vehicle. The cost won’t come down unless you’re in charge of your own destiny within a supply chain. We’ve studied standard components we bought and now make them ourselves – that way you control your own destiny. We’ve also used a supply chain from all over the world. We’ve also developed systems whereby we control the intellectual property.

Mason: Part of Newcastle College and part of a university are on our airport site with about 500 students there at any one time. They do aircraft engineering from diploma to degree level, cabin crew training, customer service. Through our partnership, Newcastle College secured a contract to provide all the cabin crew for the UK. They come to Newcastle now. In that sense we’ve become a centre of excellence and the people who come here become our airport ambassadors.

Scott-Bell: Every situation is different. I think a lot of innovation goes on under the name of good business practice.

Grailey: We’ve been looking at ways to be more customer focused. One is in innovation. Second is customer experience. Excellence depends more on satisfying what the customer wants. It’s about getting fans of the brand. Thirdly, core capability.

Caroline Theobald pointed out from the chair: We started with branding and innovation, and from there opened a Pandora’s Box showing that good business is about all sorts of things. But what one thing would you most readily invest in to help your company to continue to grow?

Mason: It’s got to be investment in people and delivery of continuous cultural change to keep up with times and expectations.

Rhodes: A successful future economically will need innovation through entrepreneurial drive and growth.

Stephenson: A money-printing machine – I’d use the end product to invest in sales and marketing! Simpson: Though we’re in recruitment we always need to find good people to help us grow. Recession shows that when you find good people you may need fewer people. It’s not just about getting good people but also about productivity you get from that, making you a less complex organisation as a result because you spend less time managing. Finding all the best people across Europe would be our magic wand. Allison: The training structure. We’re building a brand and developing an infrastructure. Skills are required for situations where, for example, things might threaten to go wrong. The energy youth brings may include a little chaos but that can be managed.

McMinn: Better people, better premises, greater efforts to acquire additional brands, all towards persuading the customer to recommend us to others.

Grailey: Getting the right people for the right time – people who deliver on the brand’s proposition. Heath: Most important to us is to create a stable business model we can take global. We can only do that with the right intellectual property.

Scott-Bell: Investment in brand is me telling others how good our people are, amplifying our qualities – a self-perpetuating cycle, really.

Palmer: Building on the brand of service and taking it to the next level. None of the businesses we have heard from are competing on price. It’s about perceived value for money. And you actually get more money for what you are offering because customers are prepared to pay for it.

McMinn: In our industry all the premium brands that are doing well rather than the volume brands. Those competing on price are struggling.

BQ Live is a series of informative debates designed to further contribute to the success and prosperity of our regional economy through the debate, discussion and feedback of a range of key business topics and issues.