Week ending 29th March 2013

This week’s TWb4TW is more politics than business for a change, though as always there are lessons we can learn. 

Aspiration Nation

This week sees the start of some of the biggest changes in decades for the NHS.  These changes are made even more significant given that the Tories said in their election manifesto that this is one thing they would not do.  We are used to politicians not doing what they promised but this may be a first where they do what they promised not to do.

As a precursor to these changes there has been a rewrite of the NHS “constitution” as the framework for the new look NHS.  Robert Francis in his report on the Mid-Staffs hospitals scandal recommended that patients’ rights be formally enshrined in this new constitution.  He wanted to make it explicit that “patients are put first” and that “everything done by the NHS should be informed by this ethos”.  A good idea would be the response from most of us I suspect.  However all that Jeremy Hunt the Health Secretary has come up with is that the health service will “aspire to put patients first”.

Yes I kid you not, these are the actual words that have been written in to the new NHS constitution and published last week.  Coming hard on the heels of George Osborne’s “aspiration nation” budget speech it seems that “aspire” is the new theme for this government as the alternative to actually delivering a result.  After all it has a loftier almost spiritual feel to it when compared to “doing your best” or “trying hard”.  In fact as long as you are “aspiring” you don’t even have to bother with either of those.

The other thought that occurred to me was if the patient has not been at the core of the NHS constitution previously than what was?  Could it have been?

“The NHS exists to enable doctors’ receptionists to satisfy their need to exercise complete power and control over the rest of the human race”.

Or

“The NHS exists to increase the income and egos of medical consultants in equal proportion for ever and ever”.

Or

“The NHS exists for politicians to mess about with, even when they say they won’t and so they can feel they have done something worthwhile”.

OK I am using 3 stereotypes to make a point (and get a cheap laugh) but to actually put the words “aspire to put patients first” into the NHS constitution is just as big a nonsense.  The question is how could this happen?  I have a horrible feeling it is because:

Clever people do clever things

A lot of clever people would have worked on the new NHS constitution, politicians, lawyers, civil servants, representatives of medical professional organisations and so on.  We know these people are clever because they all have firsts from top universities and say things the rest of us can barely understand.  They will have worked far in to the night to produce a set of words about patients that would ensure that it would be difficult or even impossible to be held to account for anything that actually happens to them.  The person who came up with the word “aspire” may well feature in the next honours list!

However what has got lost amongst all this cleverness is a clear sense of purpose.  Without a clear sense of purpose which everyone involved can understand and relate their own role to then the project is doomed to fail.  This has been proven in research and practice time and time again in both private and public sectors but still clever people almost invariably get this wrong. The problem is that for clever people having a clear sense of purpose is just too simple and keeping it simple is not what clever people do.

 

I don’t like your attitude

The Francis report on the Mid-Staffs scandal is an example.  Whilst the recommendation for patients’ rights to be enshrined in the NHS constitution is spot on, Robert Francis and his inquiry team could not resist going further and coming up with no less than 290 recommendations on how to do this.  Now if you want to make something actually happen 29 would have been too many and 290 introduces such an enormous drag factor on change that any meaningful change is unlikely to be achieved.

The number of recommendations is a product of getting into too much of the detail of what should be done, rather than focusing on what needs to change and then holding people to account for making that change happen.  The Mid-Staffs scandal is being used to demonstrate that the standard of patient care throughout the NHS is sub-standard and that this in turn is down to the “attitude” of nursing staff in particular.  One recommendation for fixing this is that nurses should spend a year on the wards caring for patients including feeding and washing before they qualify.  I suspect like me many people were surprised to find this did not form part of current nursing training.  However the inference here is that this will sort out the “carers” from the rest and fix the “attitude” problem, at least Jeremy Hunt seems to think so.

The very worst place to start trying to change people’s attitude is to tell them it needs to change.  What is more the attitude of rank and file staff in any organisation is a direct result of the attitude of the leadership.  Consequently attempting to change attitudes amongst staff without first changing the thinking and behaviour at the leadership level is bound to fail, as all the research and practice again demonstrates.  For the NHS this leadership “attitude” problem goes right up to the top political level.  Perhaps if any politician “aspiring to reform” the NHS was required first to work for a year on the wards, caring for and washing patients, we might get better outcomes for the NHS and all of us who use it.

Arising from the ashes

Back to business now and one good story last week was the news that Jessops photographic shops will be returning to the high street.  TV dragon Peter Jones acquired the brand, stock and other assets from the administrator in a joint venture with restructuring specialists Hilco.

The return to the high street was a surprise as Jones was expected to relaunch Jessops as an online retailer only.  He is smart enough to know that in spite of the best efforts of previous managements and owners Jessops is still the leading brand in the specialist photographic equipment market.  What’s more because, as Jones himself says Jessops sells a “technical product” the click and collect model that a combined high street and online presence enables is best suited to the core Jessops customer’s needs.  So absolutely the right business model and Jones expects to have around 40 stores open by the end of April enabling him to cover the UK with click and collect and to offer the technical advice that the Jessops customer values.  Half the 500 staff will be previous Jessops employees.

The only slight doubt I have is that Jones is to be both Chairman and Chief Exec.  Given his many commitments it will be a challenge for him to give the attention to detail that will be needed to make this all work.  He will need to find leaders amongst his management and staff to help him with this.

And finally

Congratulations to Nick D’Aloisio the 17 year old who sold his app Summly to Yahoo! for £20m.  Apparently this app detects the key points in news stories and automatically rewrites it to fit on to an Iphone screen.  Even though this is still bigger than the average Sun reader’s attention span Yahoo! is very excited about it and maybe they are right to be.  However as they are also the company who took over the management of the Sky e-mail service last week and promptly emptied over 10,000 old e-mails from my business partner going back years into my two mail boxes, I am not so sure.

So that was some of the week before this week. We hope you found some of the above thought provoking and useful for you and your business. We trust you had a good Easter break and hope you have a great week this week.

That was week ending 11th January 2013

Best wishes for the New Year everyone from me and this first article of 2013.  Usually a first article in a new year starts with predictions for the coming year. I am not going to do that for three reasons. First everyone else has already done this. Second I haven’t a clue (at least not a useful clue) about what is going to happen in 2013. Third TWb4TW is about looking back and drawing lessons from the recent past to use in the future. There were plenty of these from last week’s news and here’s a few that caught my attention.

Super not so super anymore?

Last week the big and not so big retail names reported on Christmas trading. In the supermarket sector winners appeared to be Tesco (+2.5pc), albeit having thrown £1bn at the problem, Waitrose (+4.3pc) and Sainsburys (+0.9pc, so only just). A significant loser appeared to be Morrisons where like for like sales fell 2.5%. Interestingly Booths, a privately owned supermarket group with just 28 stores all in the Northwest managed +3.5%.

Those of us who have thought “do we really need another supermarket” every time we saw yet another planning application for one can begin to feel a little smug as overall in the UK it now appears we don’t. The market is not just “mature” it’s becoming pretty much dormant as far as overall growth prospects are concerned. However much of the financial media and comment from financial analysts is still focused on like for like sales. But is this what is really going to matter?

In an insightful article in the Telegraph on Thursday Damien Reece pointed out that what really matters and always has is return on investment. i.e. profitability. Sales growth can drive profitability but when this is hard to come by then maybe other factors matter more. He contrasts Sainsburys profitability prospects with Morrisons.  On £23bn of sales Sainsburys is expected make around £752m. Whereas Morrisons, the apparent loser over the Christmas period is expected make £888m on around £18bn sales.

Justin King at Sainsburys has done an admirable job in growing market share, including moving into online and convenience stores. However this has been primarily a sales led strategy and is maybe running out of steam. Morrisons CEO Dalton Philips has been criticised for not moving fast enough into online retailing and convenience stores but this does not seem to have done significant damage to profits. He has started the move into convenience with his “M” Stores and is working on the online offer. Coming at these later than his competition may prove to be no bad thing in the long run.

However the lesson from all this is neatly summed up by Damien Reece in his article. “The conclusion is that neither company has got things quite right and both need to change. The reality is that only one of them admits it”. The world has and is changing, are we admitting that we and our businesses need to change as well?

Highs and lows on the high street

Contrasting fortunes on the high street over the Christmas period as well. An example of how you can be both a winner and a loser was Debenhams who reported their highest ever Christmas sales. However this was achieved largely through heavy discounting and a big increase in online sales. The discounting and extra costs incurred combined to produce only a tiny 0.1pc increase in margin. So all Debenhams got for its record sales was a reduction in its share price of 6.5pc.

The real low however was the collapse of Jessops the specialist camera and photography chain.  All its stores will close with the loss of up to 2,000 jobs. I am both frustrated and angry about this because it really did not have to happen.

The demise actually started back in 1996 when Alan Jessop retired and sold the business to a venture capital backed MBO. The business had grown from one shop to become a nationwide chain of over 200 stores and was consistently a “first mover” in its market. The buyers thought all they had to do was to buy the market leader, add more stores and then float the company to make a juicy profit. Unfortunately along with Alan Jessop a number of his senior team also left clutching nice cheques for their shareholdings. What walked out the door with them was the understanding of what it was that had made Jessops so successful.

The MBO did not get it and neither did the venture capital arm of ABN Amro when they bought the business in 2002. The company floated in 2004 with a deeply discounted IPO but the investors did not get it and were wiped out in 2009 when HSBC rescued the business with a debt for equity swap. HSBC didn’t get it either and is likely to lose £30m.

The collapse of Jessops is nothing to do with recession on the high street. It steadily declined even during the retail boom. Nor was it to do with camera phones or any of the other trite conclusions being trotted out. I am in no doubt that if the ethos that had driven the success of the business up to 1996 had been allowed to continue to flourish then the company would have as well. Instead the collapse became inevitable but it did not have to be this way.

Time to pay

One of the key business principles of the Jessops business under Alan Jessop was that suppliers were always paid on time, every time. Suppliers were expected to perform but if they did they knew they would get their money when they expected it. Consequently Jessops got the best prices, the best products and service from their suppliers and were always offered new technology first. This practice faded under succeeding managements. So much so that the reason there was no chance of selling any of the business as a going concern is that the suppliers were not prepared to support the business any longer.

This brings me to something I don’t do often, saying “well done” to a politician. This goes to Michael Fallon, Business and Enterprise Minister who has written to 350 FTSE companies asking them to sign up to the prompt payment code (PPC). What’s more he is threatening to “name and shame” any business that refuses to comply.

This is a good start but he has a big challenge on his hands and just how big is illustrated by the response from some big companies. Sainsburys' response was “We already abide by the spirit of the code and will be responding in the coming weeks”. Morrison’s claimed that it already paid suppliers within a “mutually agreed time frame”. GSK has just changed its payment terms to “within the first five calendar days of the month following the expiry of 60 calendar days from the date of receipt of the relevant invoice”. This is gobbledegook for “we have just pushed our payment terms out to 90 days plus”.

Pushing out payment terms to suppliers is not clever at all and in fact is bad business practice and verging on the dishonest. It pushes up costs as the customer employs people to spend time delaying and disputing payments and the supplier employs people to try to counter this. However the biggest disruption is to the business process down the supply chain as the end customer hoards a pile of cash that should be put to work through the system. In effect this causes blockages and interruptions to the “blood supply” which at the very least weakens the effective operation of the process and sometimes kills it off altogether. If the majority of businesses paid their suppliers within 30 to 45 days maximum this would release a huge lump of working capital into the business sector and is consequently in the national interest to do so. So good luck Mr. Fallon but you will need to be uncompromising and tenacious to push this one home.

So that was some of the week before this week. We hope you found some of the above thought provoking and useful for you and your business. We trust you had a good weekend and hope you have a great week this week.