TOO BIG TO BLAME?

When something goes very wrong the biggest companies seem to hang on, not so much by their fingertips as by one finger whilst cocking a snoot with the other hand. It’s amazing that the Costa cruise brand, VW and Boeing all seem to be in such rude health after their respective calamities.

The Costa Concordia foundered with 32 deaths, the Costa brand being now emblazoned on 17 skyscraper ships. The share price of owner, Carnival, dipped by 20% after the accident but was followed by a swift and sustained recovery. VW under assault following their emissions scandal is being sued in the US together with CEO Martin Winterkorn and four other executives but “shock-horror” has been largely followed by “yawn-so-what”. Their share price down to €132 after the scandal broke is now at €164. Boeing’s calamities, two planes crashing with allegedly similar causes and 347 fatalities is remarkable in a world where, first of all, air disasters are increasingly unusual and, secondly, because no other commercial aircraft has been implicated in so many fatalities in so short a period since 1966. Their share price is only down 15% despite a monthly cost in grounding the 737 MAX of around $1billion. “Could they go bust?” I asked a friend to a derisory snort of “of course not; follow the share price”.

There are too many rich, dispassionate interests in all these companies to be overly fussed by a few deaths. The 72 poor, lost souls in the Grenfell tragedy were faced with more anger, outrage and animation to allocate blame. The same will happen in the death-free Notre Dame fire. Blame is a cheap commodity except when mega companies are involved. Do we really believe Facebook would have survived as unscathed as it is it had been a small company?

Ruth Rochelle, mentor and consultant, said about scale-ups in business that at the moment of raising funds to go to the next stage “idealism takes a kicking.” I think that she’s right and I think it’s a pity. It’s idealism that’s inspiring the Climate Change demonstrations (and about time) but they are spending more time dreaming than making a big difference. When they stuck themselves to Jeremy Corbyn’s fence I wondered if they’d gone mad but when he refused to engage them in conversation I realised he’d completely lost the common touch that got him where he is today. This beautiful summer Bank Holiday – it’s far too good for Spring – has restored our faith in ourselves. We are just not a big company country, we only have 4 in the top 100 global companies and two of those are petroleum companies (one 50% Dutch) one’s a bank and one’s another 50% Dutch business. We simply do small better. We are more like Waitrose than Asda; more like Bill’s than Burger King.

As the sun gives those climate change protesters “this-isn’t right-in-April” suntanned faces, applaud the fact that so many care about something other than money.

WHY SHOWING YOUR STRATEGY ISN'T ALWAYS SMART

There’s this constant tussle between transparency and effective management. We see it daily with the cabinet describing the need to keep their cards close their chest in Brexit negotiations as though they were tremulous poker players. Everything has been reduced to process.

My focus is on three companies this week. They are Pepsico, VW and Royal Bank of Scotland.

Pepsico has a female Chair and CEO, Indra Nooyi, who in a radio interview described a research-finding about their brand Doritos.

She said, in brief, women were put off by the loud crunching sound they made when eaten and that their dusty residue meant fingers had to be licked. Women wanted a cleaner, quieter Dorito and that’s what was going to be given to them. A piece of careful consumer research leading to a targeted segmentation of the brand. Sounds OK; sounds like Pepsico is listening.

But all hell was let loose with women on Twitter frothing with rage – “Doritos for ladies? Ridiculous” …”I will eat my crisps however I damn well please and they will no longer be Doritos”….”How can you gender-type crisps?”

Indro Nooyi is a unusually smart CEO who speaks thoughtfully. She’s a model of restraint. No doubt she was surprised that you have to be so incredibly careful nowadays about whatever you say.
And whatever you do. Step forward VW.

They have admitted to funding a research study to test the effect of diesel emissions on caged monkeys. It didn’t take long for people to describe this as a German company creating gas chambers in which to gas little monkeys. These tests took place 3 years ago and Chief Lobbyist Thomas Steg has since been suspended. You couldn’t make that one up.

Next RBS whose Global Restructuring Group (GRG) had been castigated by the Financial Conduct Authority for mistreating thousands of small and medium-sized companies. The RBS Chairman Sir Howard Davies agreed these were the findings but disputed the conclusions. This one will run and run: “we’re not guilty…not…not!”

And another thing….Andrew Krepinevitch (no me neither). He’s a senior fellow at the Centre for Strategic and Budgetary Assessments and he’s regarded as an expert on strategy.

He identifies the ten biggest strategic blunders. Here are just four of them:-
-  Failure to recognize or take seriously the scarcity of resources.
-  Making false presumptions about one’s own competence.
-  Insufficient focus on strategy by trying to satisfy too many different stakeholders.
-  Failure to understand the adversary.

I was struck by these as being pretty much the current Brexit negotiating team’s issues. They constantly overstate our national and their own importance and intelligence. They try to keep too many people happy – a hopeless quest since many are never going to be happy whatever goodies they get. The last one is obvious.

Strategy is about knowing what to do, what’s possible and how public opinion can disrupt a seemingly  logical move. Easy? No it’s not. So pay attention. Even you the highly esteemed Ms Nooyi.

JUST DO IT?

When I stopped laughing I realised a senior executive at the big global Corporation I was talking to this week had defined what lay at the root of the VW fiasco. We were talking about the sclerosis that was infecting his business.

“We’re great at diagnosing problems but hopeless at fixing the problems.”
“Why?” I asked                                                                                                                                           “Because we have action points like this: Action: Fix the problem.”

I was laughing so much because it simplifies our journey towards a perfect world by issuing such clear instructions.  Action: cure cancer; Action: stop wars; Action: reverse climate change; Action: be happy.
I recalled the quote from Michael Jordan.

“If you're trying to achieve, there will be roadblocks. I've had them; everybody has had them. But obstacles don't have to stop you. If you run into a wall, don't turn around and give up. Figure out how to climb it, go through it, or work around it.”

To which I always wanted to ask

“Does that include cheating as a solution?”

The command and control mentality that pervades so many companies leads to a mind set of “Don’t care how you do it just do it….action: solve the problem - don’t care how.”

Do we suppose that the guys at VW sat there and said what a very effective advertising executive, now sadly dead, once said to his assembled team:

“This is a crisis. We have only one fool-proof strategy at this point. We shall have to lie.”

I suspect a creeping sense of dismay at failing to crack the US market fast enough and realising changing minds about diesel emissions was seen as key to this led to a mission of collective mistranslation and Nike do-it behaviour plus a feeling of everyone-else-does-it/could-do-it/will-do-it so we’ll do it - schoolboy stuff. Having said this is not to excuse what happened nor to excuse what I suspect will be the consequences of what VW contrived to do in working around the problems they saw.

In a world of emotional branding where decades has been invested in clothes of “trust me with your life, your family’s life, your new born baby’s life”; where the brand VW becomes part of the family, betrayal of trust has terrible penalties. VW has been caught having an affair with the Devil - there are scorch marks on its collar.

Two VW executives said telling things:
“We’ve completely screwed up”
“We must win back trust”

No. Both statements are those that a serial adulterer might make not a repentant supplier…you earn trust not win it. This is not ultimately a game.

The lessons from VW, RBS, BP and Enron are always the same although the circumstances each faced and the wickedness is different for each.

If you are determined in a come-what-may sort of way to be the biggest you will always, in the end, cut corners, fall short of being properly diligent and revert to cheating.

Strenuous competition is OK but never forget what you really, really  stand for.