London 2012 & the Tourism Industry - The Horse Has Bolted

It was interesting to hear David Cameron yesterday declaring the Government’s new commitment to tourism, in the light of the opportunities and challenges facing us as we progress towards 2012. Of course this is not surprising to hear as regards London 2012. Tourism South East expects that an additional £1bn or so of tourist money will be spent on the back of the Games.

While political capital will exist in the subject for months and even years to come, the truth is that much of the planning and decision making at a macro level has been completed long ago.  This is just one good example of the kind of effort that is needed years in advance of generating any concrete return from the Olympic and Paralympic Games. At the Beijing Olympics, Tourism South East, SEEDA and other regional partners met with hundreds of tour operators, journalists and representatives from National Olympic Committees to pre-promote the region in advance of London 2012 and secure significant up-front reservations. Those organisations' plans are mostly now set in stone.

All is not completely lost, Mr Cameron. We might well still have the opportunity to change the perceptions of individual tourists as regards attending London, but the ease with which they will find flights, hotels, tickets and so on was decided long ago. Having been to Beijing and talked to many people there, much of this seems to involve persuading those Cameron might think of as floating voters to press 'Purchase' on those flight tickets. 

I was a floating voter myself as Beijing drew near. From my perspective, the important message was 'Yes, there will be legitimate tickets available...and yes, your hotel will be ok for your family.' I didn't want pictures of the Great Wall and smiling Chinese cab drivers, I wanted facts.  

I suspect we will hear an increasing number of big picture announcements made to large fanfares in the next few months - investment in athlete training programme X; commitments to grass roots sport Y; Inner City regeneration programme Z and the like. The truth is that most of these announcements are being made principally for political and corporate marketing ends.

Most of the big Olympic decisions were made years ago, it is just that only now are they becoming of interest. Baton down the hatches, here comes 2 years of media circus!

Sport, Business and Change - Welcome to parkrun!

Regular readers of this blog will know that I particular enjoy writing about sport, business and how change happens. This blog covers all three.
I am spending a lot of time focusing on my running at the moment. One of the newest developments in the UK running world has been a new phenomenon which takes up the challenge of delivering sporting experience for the masses. Don't switch off if you're not a runner, because here is the real interesting bit ...the best and most initially puzzling thing about this new venture is its business model. Competing is totally free. 

This concept is called ‘parkrun’. At its heart, it is very simple. A central website and brand is essentially licensed, and no charge, to local individuals who wish to organise a 5k run in their local park. Costs are funded centrally by core sponsors – including Nike and Lucozade Sport – who are excited by the opportunity to engage with grass roots runners in cost effective and scaleable way.

I heard about parkrun from a friend and decided to enter at the last minute on the Friday afternoon before a Saturday afternoon race. After a 2 minute registration process online, I am now able to simply turn up and run a race any Saturday at one of 30 sporting locations across the UK by simply bringing along a personalised bar code. The event itself was very low key – some 130 attended, from elite club runners to those for whom this was a very first ‘race’. The bar code was read at the end to record a finish time, and I received a personalised e-mail by the end of day on the Saturday registering his finish time, finish position and pointing me back towards the parkrun website for free available photos from the event and a race report provided by the race organiser. Better service than I have had at races I have paid 20 pounds to enter.

The following Thursday a chatty, friendly parkrun newsletter arrived in my inbox – updating on the growth of the phenomenon, promoting some of the newer races, gently emphasising the need for volunteers to make the runs happen and thanking the sponsors whose funding made the events happen.
These two final elements of the jigsaw are critical to the parkrun model. Firstly, volunteers are the lifeblood of the event in order that participation can remain free to charge. An ongoing points competition between athletes rewards volunteering as well as competing. Secondly, sponsorship funds ensure that investment in the technology platform which delivers such a compelling experience can continue.

Keep an eye out for parkrun. Whether you are reading this in the US, Australia or the UK, parkrun will be coming to a green space near you, soon. When you head for a coffee after a first race and are asked how you heard about parkrun, I hope you might say 'I read about it in a semi-regular blog I enjoy reading'. Maybe you might feel able to send the felow runner who asked you the question the url for this blog. Welcome to how change happens in 2010!

http://www.parkrun.com/

Best Companies 2010 - The Results Are In.....

It is Awards ceremony season, and tonight is the real big one – the announcement of the Top 100 in the Sunday Times Best Companies to Work For list. Lane4 is in the 'small and medium size businesses' category. This Sunday the results are announced to the general public as a supplement in the Sunday Times.

Lane4 has been invited along tonight, which means that once again we have made the Top 100. We are delighted. An increasing number of organisations enter each year hoping to make the grade. Of course this year we have the extra spice of having experienced one of the toughest years on record for British industry generally, and certainly the toughest on record for our industry. Best Companies provide a feel for individual organisations’ scores in advance of the evening awards, and it was very gratifying for us to see that (as per our own internal data) our data is as strong as in previous years when we have made the top 10.

The first year we entered Best Companies I remember being surprised by the robustness of the diagnostic which underpins the assessment process. On a professional level I am particularly interested by some of the extra questions which Best Companies have begun to ask participants – in particular around how they feel about their organisation’s brand as well as its values, leadership and culture.
  
I would like to think that this evening in itself is a barometer of some of the things that put Lane4 on the list. Of course we have a table at the Awards Dinner tonight. Places were ‘’won’’ via the Lane4 internal lottery. Many others who did not win the Lottery are going to be gathering just down the road at the ‘’Unofficial Lane4 Awards Ceremony’’. Arguments persist every year over which group had the better evening. A brave few manage to meet up at the end of the evening – although Fatherhood has put paid for that level of stamina for me!

It is interesting to see how many of our clients proudly tell us now that they have made the ‘’Best Companies’’ list. We are increasingly party to many discussions around this at FTSE Board tables. Ten years ago references to the ‘’Best Companies list’’ would have been citing the list of ‘’Top Stock Market Performers’’ in the Financial Times. No longer. In fact bestcompanies themselves (the organisation behind the diagnostic) have data which correlates ‘’Top 100’’ status with sustained outperformance of the Stock Market. 

Tonight I am heading along to the Unofficial Lane4 party. We will be celebrating being together  today, and also reflecting informally on how we aim to evolve over the next few years. More on the latter point in the next few months. 

It's a Dodgy Old Game: Debt versus Equity

I enjoyed the Sunday Times article yesterday on the parlous state of the finances of Premier League football clubs. While the Sunday Times business section can regularly veer into sensationalism, the Premier League continues to reflect a truth that is stranger than any fiction.

http://business.timesonline.co.uk/tol/business/industry_sectors/leisure/article6991053.ece

The article, subtitled ‘How Manchester United became a piggy bank for its American owners’, confronted head on United’s attempts to restructure its financing (total debt of £700m). United are not alone. Liverpool are in a similar boat (net debt of £300m), with Chelsea and Manchester City’s owners having recently swapped their loans for equity stakes to stay on the right side of football’s traditionally impotent rule makers.

There is a certain irony of course that the Sunday Times is a Murdoch business – the same parent company that has funded the Premier League gravy train via Sky and some core international TV rights deals. I recall leading part of a due diligence process for Newcastle United some 12 years ago now. Even then, player salary levels were a significant, limiting concern for future value of cash flows. Now this has become a concern for current profitability.

It is widely expected that one Premier League club will default on its financials obligations this season. Hot favourite is Portsmouth. It is extraordinary to think that the England goalkeeper cannot get any games for his club in a World Cup year because that club is scared of triggering a clause in his contract which will commit them to paying another year of his salary. In particular when you think they are bottom of the Premier League and leaking goals.

The hard reality is the business model for professional football – where salary levels are typically 65% plus of total revenue and net profitability is marginal or non existent – simply cannot sustain that level of debt. It might survive it in the short term, but it cannot sustain it or thrive on it.

This brings an interesting reflection for those of us who work in professional services businesses. There are not many businesses in our sector where costs of our ‘talent’ are less than 65% of our total revenues. It is impossible for the average professional services business to make a debt versus equity swap on a week’s notice should things get a bit sticky. I know many who would envy Chelsea’s agility!

Many in our market continue to struggle. This will continue to be the case as demand remains flat, in particular if interest rates rise. It has been interesting to see the increasing number of clients who request our full company accounts when we are pitching for work – and rightly so. Several suppliers in our market have run the debt gauntlet to capitalise on early to mid noughties growth – developing their own software, buying competitors and so on. Any client would want to be sure their 2010 suppliers can continue to fulfil their obligations without needing to do the equivalent of dropping their England regulars.

2010 (or 'Why Robert Peston Reminds me of the Ribble Valley 10k')

And so to 2010 – Happy New Year!

I started to rev up for the New Year this weekend. The first thing I ended up reading was the blog of BBC Business Editor Robert Peston. The usual under-stated Peston approach : ‘A cheerful first thought for the New Working Year.

Viewed across all economic sectors, the UK and the US are still submerged in debt: the aggregate borrowing of households, companies and government is equivalent to more than three times the value of everything we produce, still greater than at any point in peacetime history.

We have all read and heard several variations of the same story told in the Business Press. In the absence of any real news, time for the media to become crystal ball gazers. Predictions of hung parliaments; loss of AAA ratings; costly government borrowing; resultant cuts in state and household spending..and a second dip to make the first look like a hiccup. All this by the end of Q2. Looks like the business journalists have had a nice break and are all revved up to talk us into more financial difficulty.

As I have said in previous posts, we have focussed Lane4 not just to cope with the challenges of any future dip, but also to capitalise on any steady recovery. I’ll say more about how we are doing this in the next few months.

On the subject of a steady recovery though, as befits the return to work I have included a festive holiday snap (of sorts) below. This picture was taken by my wife Claire during the Ribble Valley 10k on December 27th. It shows some of the 900 hardy souls (me included) making their way across the freezing Ribble on their way out to a snowy adventure in the Lancashire countryside.

 I include the photo because the way I felt when it was taken - 800m into the race - mirrors pretty well how I feel today starting the working year. It was already clear that the conditions were going to be a bit tricky underfoot, and I definitely wasn’t sure how I would fare on a course I had never seen before. But I also knew I had done my preparation and was ready for a tougher workout. At least I thought I was.

As it turned out the race went pretty well in the end, but only after I struggled badly in the first half. It was not until I realised at the 5k mark that I had been going just slightly uphill since we crossed the Ribble that I began to understand why. When we turned for home, things really picked up for me. I actually went quicker in the second half than the first - which is very unusual for me.

So – back to 2010. The training and preparation is done, and the gun has just gone off. The Robert Pestons are talking up the course, and we sense the first few kilometres might well be tough. For all we know, the whole race might well be uphill. But here is hoping that the Q4 2009 hill repetitions will pay dividends!

Neither HR Director, nor Marketing Director, But Disciplined Business Leader!

Last night I attended a HR Magazine Leaders Club event somewhat provocatively titled ‘Is the Marketing Director the new HR Director?’. It was an excellent event.

Those who have visited this blog before will know this is a subject close to my heart. It is also bubbling up as a hot topic. Ironically I was facilitating a session not more than two months ago for the European Sponsorship Association where the discussion turned to whether the ‘HR Director is the new Marketing Director’. There’s clearly a little insecurity both sides of the fence!

Navjot Singh, Global Marketing Manager, Recruitment and Global Communications Manager at Shell talked compellingly about how marketing know-how had been integrated into Shell’s recruitment strategy to take them from also-ran to leader in high potential recruitment among their competitors. He shared how the use of behaviour models (as marketers would use every day to model customer activity) were used at Shell to predict the behaviour of job applicants through the process. Shell can not only predict the potential revenue that any new recruit would bring into the organisation, but also predict each individual’s performance once in the organisation.

On one level, yes, these are tools which are now beloved of the bigger marketing departments. For ‘job applicants’ in HR’s world, read ‘potential customers’ in marketing’s. For ‘performance once in the organisation’ in HR speak, read ‘lifetime customer value’ in marketing. However, on another level none of these skills are purely the preserve of HR, or marketing, or both. They are exactly the same techniques one might use valuing a business for acquisition, or deciding whether to spend money on a new factory or product launch. They are simply good business practice in a lean, less indulgent business environment.

For those of you who were good enough to read my last post, you may feel there is an inherent contradiction in this view given my criticism of the ‘commodity trading’ I witnessed at the CIPD Fair. I do not mean to criticise the process of using data to make decisions (quite the opposite in fact). I mean to criticise the laziness of organisations who use the data as not just as the rationale, but also the principle means of communication. To cite an example given last night, the organisation that recruits online, but never sends a tailored, thought-through rejection letter to the unsuccessful candidate with some insightful feedback. I was party to another conversation last week with a friend, where restructuring decisions had been communicated only within the context of total headcount reduction figures. No rationale for the change, or compelling thoughts about what the future might hold.

In my view, good business management practice is the insightful use of data to reach a conclusion. Good business leadership equates to be able to share the story behind those conclusions in a credible and authentic way with each and every stakeholder group - whether the leadership comes from HR or marketing. 

Navjot painted a picture of a world in the future where companies are applying to prospective high potential employees for their service, rather than the other way around. We are definitely seeing that the HR and Marketing communities need each other like never before. The biggest challenge, however, is that both these groups need access to a third set of skills – that of world class 21st century business management. Neither HR nor marketing will lead until they can manage – otherwise each simply offers a world of empty promises.

2010 Planning - On the B of the Bang.

My good friend Steve Hacking, who writes a cracking blog at http://www.stevehacking.blogspot.com/, has just released a great post on the limitations of SWOT analysis in business planning. Steve rates the SWOT as the basic start, not the ultimate end game, of the strategy process. I completely agree.

I wrote in an earlier post that our mindset as we approached business planning for 2010 here at Lane4 was one of 'opportunity, not threat'. Steve says, ''I'm not saying that SWOT doesn't have its place at the beginning of the strategy development process; it does, especially if you start with the "O". O, for opportunity, forces you to take a moment to look around and speculate where the future pools of profit might be, which is especially useful for bringing out those areas that you're currently not doing anything about.''

We were in the 'O' phase during the Summer. Now we're making decisions. However decisions as Steve recognised should be anything but straight from SWOT to reality. We have been immersed in market insight, gathering customer feedback, financial projections, scenario analysis and like-for-like comparison between our ideas, recognising we can't do everything. Essentially September and October have involved a good dose of marrying our excitement with internal and external reality.

The good thing is that things are coming together. We are aiming to hit 2010 on the 'B of the Bang', as Linford Christie would say.

Here comes 2010

September, as ever, brings the start of the business planning process for the year ahead. Much as I enjoy the continual to-ing and fro-ing of a busy office, sometimes there's nothing better than a long early morning run, a strong coffee, a blocked out diary and a blank excel spreadsheet to work with. In case you're wondering (!), we start with some trend-based forecasting at group level, and then compare this with detail from each of our regions and business strands.
As we grow, our planning has become more rigorous, and planning for 2010 is a good test. The devil is definitely in the detail - exchange rates, property interest rates and so on are increasingly critical parts of our jigsaw, and yet tougher than ever to predict. Even my currency trading friends in the City don't have a clue which way things are moving. Gut feel and instinct have a place in planning even in the FTSE.

Actually this year of all years there is not a single cost line that does not have an interesting question sitting behind it. Take IT. Will it really be 2010 when we'll really be able to halve our IT costs by binning the laptops and phones to move over to one device? When will we need to move to the 'cloud'? Like all businesses our size, we're increasingly aware of the balance sheet as well as the P&L this year. The principle is to remain cautious, while also setting Lane4 up for the next six years. Opportunities, not threats.

Given this, of course the spreadsheets are only part of the planning process. There will be decisions to make in the next few months where gut feel will be worth as much if not more than a theoretical spreadsheet answer. Lane4 is a 'heart' as well as 'head' business - our job is to marry the two.