THE POINT Moving beyond ownership - Where's it from? Proving provenance in a global market - Bridgepoint
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THE POINT Intelligent investing in Europe from Bridgepoint Issue 33 | May 2018 Moving beyond ownership Where’s it from? Digestion deals The new oil Proving provenance Gut health moves Data comes in a global market centre stage of age bridgepoint.eu
Contents
2 INS & OUTS
Bridgepoint investments
and exits across Europe
26 HEALTHCARE
Gut instinct
The adage ‘You are what you eat’ has
never seemed more apt, with experts
4 VIEWPOINT
Where’s it from?
Provenance matters like never before,
increasingly linking gut health to general
wellbeing. And the commercial potential
is substantial
as customers and clients question the
source and integrity of what they are
buying. How can businesses cope? 32 BUSINESS
Data rules
Data has been described as the ‘new oil’
9 MANAGEMENT
Above and beyond
Certain companies become national
with good reason. Used well, it can
deliver material benefits to both
companies and their customers
treasures over time, acquiring a
special status among consumers.
What’s their secret? 36 LAST WORD
Fancy a drink?
Once, it was perfectly normal to have a
14 THE INTERVIEW
Driving ambition
Tim Buchan left school at 16 to
quick snifter after work. But social
drinkers are in danger of becoming
social pariahs. Monocle culture editor
become a car mechanic. Today, he is
Rob Bound elaborates
chief executive of leading UK fleet
business Zenith, with 680 employees
and 120,000 vehicles
20 ANALYSIS
The borrowers
In the digital world, clothes, cars, pets
and penthouses can be rented in
seconds. The trend presents manifold
opportunities to smart-thinking
businesses
FOREWORD
In plain sight
t’s strange how ownership, once considered the highest consumer
I aspiration, has been displaced in the minds of certain groups by its
distant cousin, renting. Today, the rental economy is growing at more
than 30 per cent a year and firms are scrambling to adapt. In ‘The
borrowers’ (page 20), The Point unpicks the myths about this phenomenon
and explains why it is enabling a new generation to have the lifestyle they
want without any of the hassle or commitment associated with ownership.
Who would have thought that supply chain management would be uppermost in the
mind of the consumer? Quality is no longer simply based on whether a product looks
good, tastes good or works well. Now, it must be sourced properly, produced ethically
and safe. In a world where supply chains are longer, more distant and more complex,
this poses problems for all companies. ‘Where’s it from?’ (page 4) examines the
challenge, explaining what smart businesses do to ensure the integrity of what they
source and the measures used to avoid food and product fraud.
Data – and its abuse – have been hitting the headlines for perhaps the wrong
reasons, so why is it being described as the ‘new oil’? In ‘Data rules’ (page 32), The
Point identifies business models that are mining data to greater effect and using it to
stay relevant to the customer.
This edition also highlights the latest investments and realisations in the Bridge-
point portfolio. Since the last edition, Bridgepoint funds have invested in US-based
Safety Technology Holdings, the world’s leading supplier of crash test dummies,
associated simulation models and industrial sensors – a true pioneer in saving lives.
Our small to midcap fund, BDC, acquired a significant stake in FCG Holding, a Nordic
risk and compliance specialist for the financial sector. We also became the master
THE
POINT franchisee of Burger King in the UK and acquired one of the UK’s largest franchisees.
Businesses leaving our portfolio include Trustly, the Nordic online payments
provider. Under our ownership, payment volumes tripled to €6 billion, the company
May 2018
Issue 33 generated 66% compound annual revenue growth and it expanded its footprint across
Published by
Bladonmore (Europe) Ltd Europe. We also exited our investment in Leeds Bradford Airport in the UK. During our
Editor
Joanne Hart
five-year investment period, passenger numbers grew by some 40% and £30 million
Design was invested in the business.
Bagshawe Associates UK LLP
Reproduction, copying or
We welcome feedback, so do get in touch via
extracting by any means
of the whole or part of this
thepoint@bridgepoint.eu.
publication must not be
undertaken without the
We hope you enjoy the read n
written permission of
the publishers.
The views expressed in
The Point are not necessarily
those of Bridgepoint. William Jackson
www.bridgepoint.eu is managing partner of Bridgepoint
1
INS & OUTS
Bridgepoint acquires world-beating
safety and sensor pioneer
employs around 600 skilled point’s international
professionals worldwide footprint.
and its global customer “Bridgepoint have a track
base includes many Fortune record of building and
100 companies, as well as providing long-term support
several government to the businesses with
agencies. whom they work. We are
Bridgepoint partner, already a global business,
Andrew but will
Sweet says: undoubtedly
“STH is a benefit from
pioneer in saving lives. Its the Bridgepoint network,
technology is uniquely especially in Europe and
positioned to address the China, to drive growth and
opportunities presented by continue to deliver world-
disruptive developments, leading safety solutions.”
Bridgepoint has acquired Safety Technology such as driverless cars and The company has five
increased safety regulatory standalone specialist
Holdings, the world’s leading supplier of
requirements. We look divisions – Humanetics,
crash test dummies, test equipment, forward to working with the Fibercore, HITEC, FronTone
simulation models and industrial sensors. company to pursue its many GmbH and DSD. Each highly
Safety Technology Holdings range of end markets, avenues of growth.” regarded, they are
(STH) has been a pioneer in including aerospace, STH president and CEO supported by a central
its field for almost 70 years. agriculture, automotive, Christopher O’Connor is executive team and a
Headquartered in Michigan, energy, industrial and also keen to expand the shared administrative
its products are used in a medical devices. The group business, using Bridge- infrastructure n
A tasty bite for Bridgepoint
Bridgepoint has become the UK entity will be run by a
UK master franchisee of highly experienced manage-
BURGER KINGG, the second- ment buy-in team, led by
largest fast-food hamburger Martin Robinson as
chain in the world. The chairman, with Alasdair
transaction gives Murdoch as chief
Bridgepoint exclusive executive. Robinson
rights to the BURGER also chairs Casual
KINGG brand in the UK and Dining Group, while
the opportunity to roll out Murdoch has worked in the
new stores across the restaurant industry and
country. At the same time, franchise sector for more the much-loved BURGER ahead. We believe that
Bridgepoint has acquired than two decades, most KINGG brand and grow the within the next two years, it
Caspian UK Group, one of recently at the helm of UK business significantly. will have the potential to
the UK’s largest BURGER Gourmet Burger Kitchen. Murdoch says: “The increase the size of its
KINGG franchisees. Bridgepoint believes the BURGER KINGG UK business estate by 10 per cent
The new BURGER KINGG new team can reinvigorate has a huge opportunity per annum.” n
2
Successful exit for
Scandinavian
payments group
Bridgepoint Development account payments.
Capital (BDC) has exited One of the Nordic
Trustly, the fast-growing region’s fastest-growing
online payments provider. technology companies,
BDC invested in the Trustly has built a
Stockholm-based business pan-European network of the Benelux region. BDC partner Johan
three years ago, since when integrated banks, increasing Today, Trustly processes Dahlfors says: “Trustly’s
it has generated 66 per cent geographic coverage to 29 annual payment volumes of progress during our
organic, compound annual countries compared with more than €6 billion, a ownership has been
revenue growth, driven by nine at acquisition. It has threefold increase since outstanding. The business
both geographic and also added a number of BDC bought into the has expanded its footprint
product expansion. The high-profile merchants and business. The workforce across Europe and chief
company has also benefited partner relationships has grown substantially as executive Oscar
from underlying growth in outside the Nordics, which well, and Trustly now Berglund has invested in
mobile and e-commerce has resulted in triple-digit employs 192 people in the team, the infrastructure
usage and a shift towards revenue growth in Germany, Sweden, Malta, Spain, and the proprietary
real-time account-to- the UK, Poland and Germany and the UK. technology.” n
Leeds Bradford Risk and compliance specialist
Airport moves on teams up with BDC
Bridgepoint has exited Leeds FCG Holding, a fast-growing provider
Bradford Airport, an international of specialist risk and compliance
hub in the North of England, services to the financial sector, is
used by more than 4 million entering into partnership with
passengers annually. Bridgepoint Development Capital
Under Bridgepoint’s five-year (BDC). Under the terms of the deal,
ownership, passenger numbers BDC will acquire a significant stake in
grew by almost 40 per cent and FCG and support the business as it
around £30 million was invested in expands and develops. “FCG has built a leading position in
the business. Employee numbers Established in Stockholm in 2008, the Nordic region, based on high-
more than doubled to 460 and FCG is the leading provider of quality services, passionate and
EBITDA increased by more than governance, risk and compliance competent employees, and a broad
25 per cent per year. (GRC) services in Scandinavia, service portfolio. FCG has ambitious
offering consultancy, outsourcing plans and we look forward to
and fund administration. Across partnering with the current owners
Europe, the market for GRC services and the company to develop the
The airport attracts low-cost, has experienced double-digit business further.”
charter and major international growth over recent years and FCG managing partner
airlines, focusing on short-haul this is expected to continue, Kristian Bentzer adds: “BDC
flights and domestic destinations. driven by an increasingly will add additional business
It benefits from a catchment area of complex regulatory competence, experience
5.3 million people, including Leeds landscape. FCG is well positioned to from scaling medium-sized
and Bradford, the third and seventh- capitalise on this trend. companies, a pan-European network
largest cities in the UK respectively n BDC partner Johan Dahlfors says: and financial strength.” n
3
VIEWPOINT 4
Where’s
it from?
For today’s customers, quality is not simply based
on whether a product looks good, tastes good or
works well. They want to know that it has been
properly sourced. This can pose a serious challenge
to companies, especially in a world where supply
chains are longer and more complex than ever.
nce, most people had no Unscrupulous suppliers
O idea where their purchases
came from and even fewer
cared. Today, provenance is a
pervasive concern. Among
By its very nature, the true scale of
product fraud is almost unknow-
able, but experts agree that it runs
into billions of dollars. A study
consumers, manufacturers and carried out by Portsmouth
retailers, the same questions crop University and accountancy firm
up time and again. Are these PKF Littlejohn estimated that food
goods produced sustainably, fraud alone costs the British food
organically, ethically? Are they and drink industry £11 billion a
healthy? Are they safe? year. The global figure is
Companies that fail to address incalculably higher.
these basic enquiries struggle Products such as olive oil and
against rivals. And in the worse Manuka honey have been key
cases – when horsemeat crops targets – goods where unscrupu-
up in lasagne or T-shirts rely on lous suppliers or others along the
child labour – the results can chain can easily dilute them or
be catastrophic. substitute the real thing with a
There are no easy answers, cheaper and inferior alternative.
however, particularly in a
globalised economy, where supply Supply chain integrity
chains can involve many But food and drink are not the only
participants and stretch from one items susceptible to fraud,
side of the world to the other. prompting all sorts of companies
5
to look closely at the security and contrasts today’s global supply beginning to hit some consumer
integrity of their supply chains. chains with his own early career. goods brands,” he suggests.
Geoff Lane, an expert in sustain- “When I started as a buyer at a
able supply chains at professional large engineering group, I could A trend in reverse
services giant PwC, explains. go and visit the factories in the Shortening the distance between
“The whole issue of sustainable West Midlands that were the field or factory and the
sourcing and responsible sourcing supplying me. We have come a consumer is an idea that has
started out with environmental long way since then and gained increasing traction. As
issues, but it is broadening into businesses have got more Thomas Kwasniok, partner at
social issues. Regulation is partly complex. Some companies do not consultancy Bain & Company,
driving it. And we have seen that realise how that matters and it is suggests, the trend for longer
with the Modern Slavery Act, supply chains may already be
which has moved this issue up the going into reverse.
agenda. Even companies who do “Until a year ago, supply chains
not make that part of their were getting longer and the
positioning cannot afford for it to assumption was that this would
go wrong,” he says. lead to ever decreasing costs,
Tom Woodham, an expert in lower customs fees and barriers.
digital supply chains at PwC, Now the pendulum is swinging
back, as consumer interest in
sustainability forces companies to
source more locally. But supply
‘‘
Food fraud
alone costs the
British food and
drink industry
chains are still longer than they
were 20 years ago. That makes it
more complex and more likely that
things will be tampered with.”
Transparency is key
A short supply chain may be easier
£11 billion a to monitor, but it is not an
year. The global automatic solution. “When you
figure is look at a supply chain, it’s the
incalculably transparency that matters, not the
length,” says Eoghan Daly,
higher” forensic and counter-fraud
services expert at accountancy
firm Crowe Clark Whitehill.
Daly cites a case from 2012,
when UK supermarket giant
Sainsbury’s was systematically
overcharged for potatoes, a scam
that culminated in the conviction
of three businessmen, including a
Sainsbury’s buyer. There was just
one link in that supply chain –
but the fraud amounted to nearly
£9 million.
“There was a supply chain that
was really short, but fraud
happened because of the lack of
transparency,” says Daly.
6
Tackling fraud turn allows every packet to be and track it using RFID. This RFID
There are numerous ways to tackle traced down to the last ingredient. logs not just where the component
supply chain fraud and each has “In pharma, if there was a has been, it also measures temper-
its own advocates. But in essence, problem, the company would have ature, humidity, whether it has
there are two principal approaches: to show exactly which factory, been dropped and so on. The
technology and old-fashioned which batch and which batch from factory can then say not only that
due diligence. which supplier was in each box, so this is the part it made, but that it
PwC’s Lane believes smart you would know exactly which has been transported in the right
supply chain analytics can be boxes needed to be taken off the conditions.”
extremely beneficial. “We’ve been market,’ explains Kwasniok. This high-tech solution is
developing a data analytics tool evidently suitable for very high-
for one big retailer that will help it Component tracking end products. But the march of
see where the risks might exist,” In aerospace, the technology of technology means basic forms of
he says. component tracking has gone RFID are increasingly affordable
“We’ve built a tool that distils even further. “Another step is to in other sectors.
all the supply chain information in trace products by attaching Fashion group Burberry has
its factories, looking at where the transponders to them, which can used RFID on products in some
products are made and the supply trace identify the producer of each
of raw materials, using real data
and modelled data where real
data is not available. Then you
start to understand where the risks
might emerge.”
He says spikes in prices can ring
alarm bells. If the price of a certain
commodity or food ingredient
jumps sharply, perhaps because of
a poor harvest, everyone along the
chain has a higher financial
incentive to cheat. It may be time
to apply some extra checks. Black
pepper, for example, is extremely
prone to substitution fraud when individual component,” Kwasniok
‘‘
prices surge. explains. “When you change a
part on an aircraft, you must
High-tech solutions register it and exactly where it Using relatively high-
But the real excitement in supply came from, even if it is a tiny tech seals – for example
chain security is in the application little screw.”
of technology to create a seamless The technology behind such
with holograms or
chain with absolute integrity. Such systems is radio-frequency identi- watermarks – can help
systems, which aim for water-tight fication (RFID). The transponder to ensure that boxes
chains, have long been a feature of reacts to transmitters at every step cannot be opened and
the aerospace and pharmaceutical of its journey, enabling the resealed while in transit.
industries, where adulterated or logistical path of each component
inferior products can have to be traced.
This in turn allows every
disastrous consequences. The technology can also do far packet to be traced
Using relatively high-tech seals more than merely track journeys, down to the last
– for example with holograms or says Woodham. ingredient”
watermarks – can help to ensure “We worked with a big
that boxes cannot be opened and aerospace group and we could
resealed while in transit. This in take each component it produced
7
Checking on individuals
Daly also argues that many
companies could save themselves
a lot of risk and damage by getting
Until a year ago, supply chains were to know their suppliers properly,
‘‘
right down to the individual level.
getting longer and the assumption was He says: “Organisations do the
that this would lead to ever decreasing financial due diligence and the
costs, lower customs fees and barriers. technical due diligence, but they
Now the pendulum is swinging back” do not look at the individuals they
will be dealing with. Do they own
the assets they say they do? What
is their personal record? What do
stores for several years. Daly says: “Anyone who sells people say about them? Are they
Sometimes in the tag label, but software will tell you it’s the linked to organised crime?
also woven into the fabric, the answer, but it’s the quality of “You need someone local to
system allows traceability of information that goes into that check the local office. Are these in
products and provides the ledger that matters.” fact the type of people you would
company with data on sales and That involves feet on the ground prefer not to do business with?
supply chain efficiency. and eyes on the scene. In other And it’s not very expensive.
words, know your supplier. Individual checks on people
The ‘blockchain’ buzz Mitchell Weinberg is founder of range from about £1,000 to £1,500
Today, however, the latest buzz in Inscatech, an investigation per head.”
supply chain integrity is company that specialises in That can still amount to
blockchain – the technology uncovering food fraud. He substantial expenditure for a
behind crypto-currencies such became interested in the subject modest company with dozens of
as Bitcoin. after a bout of food poisoning in suppliers. But the risks of not
Lane says: “Blockchain was set China. He started looking for taking such steps can be immense.
up to act as a ledger for financial technology solutions, but soon “I’ve seen examples of where a
transactions – an unfalsifiable became frustrated. meat trailer has been sent to
ledger. But once you have it for collect the product and it turned
financial transactions, you can use A bottomless pit out the supplier company did not
it for other transactions, including He says: “At first someone talked even exist,” says Daly.
moving products.” me into thinking a piece of The ‘disappearing supplier’ is,
In early March this year, US software could be developed, but I of course, a nasty shock and may
retail giant Walmart applied to realised that this was just a be costly to the bottom line. But,
patent its own system, ‘smart bottomless pit. The whole thing is for most companies, the supplier
package’, to monitor items in just senseless, at least when it that is diluting or adulterating
transit. And in the UK, start-up comes to protecting against fraud. products, paying illegal wages,
company Provenance is working The only way to deal with this is to employing underage workers or
with Unilever, Sainsbury’s and treat it as another type of crime. flouting environmental regulations
others on developing a blockchain “I have a network of investiga- poses a far greater risk.
system for absolute traceability tors in about 190 countries. It may be endangering the health
along supply chains. A typical investigation involves and wellbeing of its own employees
But it is early days. As Kwasniok surveillance, interviews and and community. It may also be
cautions: “Blockchain will placing people inside production endangering your customers’
contribute in the long term, but I factories. We take video, get health and wellbeing. At the very
have not yet seen a real end-to-end photographic evidence and do least, it is a risk to the integrity of
blockchain system for logistics.” online surveillance. We do your brand and company.
And even where it can be everything that a typical investi- And in today’s world, such risks
applied, blockchain has its limits. gator would do.” are not worth taking n
8MANAGEMENT
Above
and
beyond
In a fast-moving world, where
tastes and trends can evolve in
days and fade in moments, it can
be hard for businesses to keep
pace. Yet some companies
manage not just to stay ahead of
the pack, but to retain the
respect, and even love, of their
customers along the way.
How do they do it?
9F
or many companies, became the first British retailer to trust at the heart of the business.
delivering consistent produce a profit of more than “I think trust means three things.
growth in sales and £1 billion. But its decline was First, act in the customer’s
earnings is their vertiginous – by 2001, the shares interests. Second, make sure you
ultimate endgame. had tanked by two-thirds and always do as you say you will. And
Some, however, aim profits had crashed to a mere third, if something goes wrong,
higher. They strive to attain the £145 million. Last year, M&S admit it and then deal with the
status of ‘national treasure’. made a net profit of £117 million problem,” he says.
To achieve this, a brand needs to on a margin of 1.71 per cent. The This combination of honesty,
be so much a part of a shared respect has gone. The love affair integrity and transparency is no
culture that it basks in the rays of a is over. bad yardstick. “You get a ‘trust
collective romantic nationalism. Some might say that M&S is deficit’ when an inherent conflict
Mentioning its name evokes a stuck in the middle market. But arises between the making of profit
fondness among its customers John Lewis covers the same and the interests of the consumer,”
and revenues soar while the going territory and it is in a rather better says Mayfield. “At the extreme,
is good. position. The UK chain store had these two can be in opposition.
“To become a national treasure a rough 2017, but it is widely So maximisation of profit is not
brand requires two things,” says perceived to excel at the ‘trust’ our goal. We aim to make
Rita Clifton, chair of specialist thing, probably the most sufficient profit.”
consultancy BrandCap. “You have vital component of being a Few retailers are willing to state
to be loved and respected. There treasured brand. that maximisation of profit is not
can’t be one without the other.” high among their key performance
Few businesses can expect to Putting trust first indicators. But it seems to help the
reach this hallowed state and it can That is no coincidence, as John Lewis brand. And it may work
be a terrible burden, a veritable chairman Charlie Mayfield puts for others, too, perhaps more so
poisoned chalice. Any stumbles
are hugely visible, as many a
company has found out to its cost.
To become a national treasure
‘‘
Take Marks & Spencer. Once
loved and respected, its products brand requires two things. You have
transcended class and distance for to be loved and respected. There
nearly a century and, in 1998, it can’t be one without the other”
10today than ever.
As PR guru Richard Edelman,
founder of the Edelman Trust Amazon is no one’s national
Barometer, explains: “You need to
take consumers through the door
of reassurance before you can sell
to them.”
The ‘door of reassurance’ is a
complex concept – a blend of
delivering on promises, doing the
‘‘ treasure, but that is part of its
extraordinary success – it
transcends borders”
behaviour – this is no warm, paradigm and is a brand destroyer.
right thing and plain dealing. intimate closeness. Its success People will still pay a premium for
A prerequisite for treasured comes from all-conquering a product if the brand equity is
brands, it assumes impeccable algorithms and vast warehouses, sufficiently high. But Amazon is
governance and a thoroughly sometimes described as the sucking away at brand margins,
virtuous existence. modern equivalent of Victorian making it hard for even treasured
workhouses. Amazon’s profits for companies to charge a premium.
All-conquering algorithms its entire existence are still less Apple is one of the rare
Yet technology has shaken up than ExxonMobil’s takings every examples of a tech company that
many of these maxims. two-and-a-half weeks, so maximi- manages to make serious profits,
Amazon, for instance, is no sation of profit is not an remain at the cutting edge of
one’s national treasure, but that is overarching goal right now. innovation and scale the heights of
part of its extraordinary success – But the company is still a global love and respect among
it transcends borders. Although it phenomenon. consumers. Those who own
is very close to its customers – And here we approach the crux iPhones or iPads would feel at a
frighteningly close when it comes of the problem. Amazon is not just total loss without them. Even the
to intimate knowledge of their another brand. It created a new iWatch outsold the entire Swiss
11people with passion can change is the most valuable piece of real
the world for the better. That’s estate in the world – a corner of
what we believe.” someone’s mind.” National
Apple is more than a national treasures reside in the minds
treasure, it is a global treasure. of multitudes.
And, like many extraordinarily It is perhaps significant, too,
successful businesses, it is backed that Apple makes physical things.
by a comprehensive and strictly Jobs said his products must be so
observed book of rules, a ‘bible’. desirable that you want to lick
Nothing that is offered can be them. That may make them less
inauthentic or sub-par. All subject to the whims, transience
disciples must understand and and ravages of the purely digital
submit to this. world. And the company is
Steve Jobs said
‘‘
To create a true national or vertically integrated, leaving far
his products global treasure, the meaning of the less margin for error. It controls the
must be so word ‘iconic’ must be understood, process of bringing goods to
desirable you too. Not for nothing does the word market from the drawing board to
‘icon’ cross from religion to the legendary Apple stores, which
want to lick them” business to religion and back have become places of 21st
again. That we use it to discuss Century worship.
watch industry – with its centuries everyday goods serves to
of brand equity – in 2017. Apple’s emphasise the ritual element in Saintly Scandinavians
products have become almost consumer behaviour. An ikon is Jobs had almost boundless drive
bodily extensions. But Apple is a the Greek word for a static visual and ambition – and he succeeded.
luxury brand – the world’s most image. But ‘iconic’ has now Lesser mortals, however, may find
successful. It travelled abroad with evolved to mean something that is it a good deal harder to create a
such alacrity because its either well recognised or revered, true national treasure.
customers are frequently wealthy or has some synoptic power to They have had a pretty good
or aspiring to be so. They want the suggest a larger value system. crack at it in Scandinavia, though.
same things, and Apple The British advertising veteran Sir Just think of IKEA and Lego,
understands them. John Hegarty once said: “A brand which, like Apple, have virtually
Apple also understands how to
create, build and nurture its
treasured status. Steve Jobs wrote
the book here – what one might
term ‘The Book of Jobs’ – based
around a fiercely-guarded,
rigorously-controlled brand. It is
no surprise that, at the heart of a
national treasure, you will often
find an obsessive.
Jobs could even be described as
messianic in his zeal, and once
said: “What we’re about isn’t
making boxes for people to get
their jobs done, although we do
that well. We do that better than
almost anybody in some cases.
But Apple’s about something more
than that: Apple, at the core, its
core value, is that we believe that
12A brand is the most valuable piece
‘‘ of real estate in the world – a corner
of someone’s mind”
achieved global treasure status. something goes wrong, admit it 24 million followers: “sooo does
But they can slip up, as Lego found and deal with the issue. And it anyone else not open Snapchat
out when it refused to sell its bricks worked. ‘Doing the right thing’ is anymore? Or is it just me”. Shares
in bulk to Chinese artist and part and parcel of being a of the app’s parent company,
activist Ai Weiwei in 2015. treasured brand. Snap, fell 6 per cent in response –
After Lego’s initial refusal, Ai BrandCap’s Clifton points out a $1.3 billion drop in market value
retaliated by reposting the that brand equity is more that launched a fresh cycle of
company’s letter on social media vulnerable than ever these days. embarrassing headlines. “We’re
with a photo of a toilet bowl “Truth hits you much faster in the watching a company explode to
clogged with the toy bricks. He digital age,” she says. “Within bits,” said one Silicon Valley
described the Danish company’s hours you can be hit by a Twitter observer. “This is far more than a
refusal to sell its product as “an act storm or bad news on Glassdoor one-day PR snafu.”
of censorship and discrimination”. [the website where employees can Marks and Spencer was
What happened next is instructive. anonymously review firms and founded in 1884. Snapchat was
Kjeld Kirk Kristiansen, the their management]. Any brand born in 2011. Retaining treasured
founder’s grandson, quickly frailty is punished mercilessly and status may seem tougher than ever.
described the decision as: “An brutally. There is no place to hide.” But those who succeed still share
internal mistake, made by a very The world of social media can the same key traits: an obsession
low-level employee.” Kristiansen indeed be unforgiving. In with quality, an obsession with
followed the approach advocated February, US reality TV star Kylie service and an obsession with
by Mayfield at John Lewis: if Jenner posted a single tweet to her customer understanding n
13THE INTERVIEW
Tim Buchan left school at 16 to become
an apprentice technician in an Alfa
Romeo garage. Today he is chief
executive of Bridgepoint-backed Zenith,
the UK’s leading independent vehicle
leasing business.
Driving
14ambition
C
ars are in Tim practical focus, so I started out as a Valuable lessons
Buchan’s blood. His motor vehicle technician in an Alfa After a few years with the Italian
father ran automotive Romeo garage,” says Buchan. luxury marque, Buchan moved on
dealerships, so This was in the late 70s and to Avis Assistance, where he
Buchan junior often early 80s, a time when Alfa Romeo worked a night shift, repairing hire
helped out during the was an aspirational brand whose cars and dealing with customers’
summer holidays. Shiny new cars technical ability did not always problems. Now in his early 20s,
with exciting gadgets were a perk live up to owners’ expectations. the job provided him with another
of the trade and they became a “Being an Alfa Romeo appren- opportunity to learn some
regular feature of the Buchan tice gave me a really good valuable lessons.
household. An enduring passion grounding in the automobile “Because it was at night, I was
was born. sector. I learnt about selling cars, often on my own, so I had to think
“There was a family history of maintaining them, providing parts on my feet, be agile and find
being involved in cars, right back and dealing with difficult and solutions to common problems:
as far as I can remember. So that demanding customers, who often people breaking down, losing their
was all I knew when I left school. had lots of money but were keys, leaving the lights on, forget-
Academia was not my strong point disappointed with their vehicles’ ting where they parked, being
back then. I had more of a performance,” he says. towed away. That was 30 years
15ago, but we still face many of the Zenith too. Garages tend to inflate Over time, Buchan became
same issues in our business today, their expenses, but we can use our head of account management and
so it was another really good scale and expertise to drive down new business and, by 2000, he felt
experience,” says Buchan. costs. Even today, then, our it was time to branch out and run
Night work is only palatable for technical controllers save £21 in his own business. With a group of
so long, so he then moved to every £100 of costs requested,” colleagues, he founded a company
car-leasing group LeasePlan UK, he says. offering fleet-style solutions to
where he worked initially as a While at LeasePlan, Buchan individuals.
technical controller, in effect moved into an account manage-
sanctioning garage expenses ment role, working with corporate Dotcom bubble victims
when cars were sent off for mainte- customers in the City. “I was “It operated under a subscription
nance or repair. helping high net worth individuals model, where customers paid a
with their cars – people with monthly sum, in return for which
Driving down costs demanding jobs who expected we would manage their cars for
“LeasePlan is still a competitor of someone to do everything for them – repairs, maintenance,
ours and the job of technical them. It was a great grounding in service and such like. It would
controller is an important one at account management,” he says. have been perfect for now, with the
subscription economy coming
along, but we were probably a bit
early,” he explains.
Within a couple of years, the
business failed. Victims of the
dotcom bubble, Buchan and his
colleagues were unable to
secure sufficient funding. “I
was bitterly disappointed,
ZenAuto is like
‘‘
but it was a real
Spotify for cars, so it learning curve. In
really responds to the particular, I realised
needs of the subscription that you need a
level of financial
economy” backing if you
are going to
build a serious
business,”
Name: Tim Buchan Greatest he says.
Nationality: British achievement:
Turning Zenith into a
Age: 54 company that can Wider
Education: Little serve every aspect of skill set
Heath School the automobile car Out of a job
Family: Wife and one park
in his mid-
daughter Perks of the job: 30s,
Car: A black Range Driving all the latest
products, most Buchan
Rover (mainly) and a
recently the new joined a
Land Rover Defender
(for a bit of fun) Jaguar E-PACE on the small
Jaguar Land Rover consulting
Hobby: Skiing track in Warwickshire
firm, which
specialised in
the automobile
industry. He says:
“I’d never done
16Zenith has come a long way since servers and into the cloud, which
‘‘
gives us much greater security and
Buchan joined the business, moving resilience. And we moved into a
from 12,000 vehicles and 80 new headquarters last year, which
employees to 120,000 vehicles and is much more suitable for an
680 employees” employer of our size, particularly
with a large millennial workforce.
consulting before and I worked on today, from the largest truck to the We really work on employee
all sorts of projects, so it gave me smallest car. We want to be in each engagement, too, and have been a
another skill set, which has proved of those markets.” Times Top 100 employer for four
really beneficial to this day.” To that end, Zenith acquired years in a row.”
It was at this stage in his career truck-leasing specialist CVL Employee engagement,
that he met Andrew Cope, founder shortly after the Bridgepoint according to Buchan, involves
and then CEO of Zenith. Cope transaction. The move gave the listening to staff and
asked Buchan to join Zenith, but company access to a new segment understanding their needs; being
initially the conversation did not of the automotive sector and took flexible and allowing agile
go well. the fleet size up to 120,000 working; and operating a well-
“Being a Yorkshireman, he vehicles. thought-out share scheme, under
negotiated hard and I could not which more than 50 per cent of
really see an opportunity for me. Different dynamic staff own shares in the company.
But a few months later, he came “The CVL deal was really “It really aligns people with the
back, we came to an agreement important for us on several levels,” business and gives them a much
and I started as sales and says Buchan. “The dynamics of greater focus on delivery,” he says.
marketing director,” says Buchan. the truck market are very different
That was in 2005, when Zenith from ordinary cars: the sector is Encouraging communication
operated from a mill building, had highly regulated, trucks are The new headquarters in Leeds
80 employees and a fleet of serviced every six weeks and they helps, too. Strategically located
12,000 vehicles. form a large part of the 38 million next to a train station – providing
Over time, Buchan’s role vehicles on the road today. easy access to several key cities in
expanded, as he took over more “Also, we can now go to large the north of England – the offices
and more functions within the corporates and service all their have been carefully designed in
company. In 2010, he became automobile needs, from heavy line with the latest aesthetic and
CEO and in 2014, Zenith merged goods vehicles to home delivery functional trends. “I wanted our
with Leasedrive, a transaction vans and company cars to short- new HQ to have a really modern
which doubled the size of the term hires and a wide array of look and feel,” says Buchan.
business. special services around personal “Everyone has lockers rather than
leasing to employees. No one else individual desks, people can log in
Transformative takeover in the UK can do that.” anywhere and there’s lots of
“We did our first acquisition in Mindful of his start-up experi- communal space to encourage
2008, but the deal with Leasedrive ence, Buchan also
was really transformative. We devoted considerable time Being an Alfa Romeo
‘‘
integrated it successfully, added and resources to building
new products and services and in up Zenith’s infrastructure
apprentice gave me a
2017, Bridgepoint invested in the so that it was well really good grounding in
business,” he says. positioned for future the automobile sector. I
By this stage, Buchan and his growth and could accommodate learnt about selling cars,
team had a clear mission – to the CVL acquisition.
maintaining them,
ensure that Zenith covered every He says: “We have invested
part of the automobile sector. He heavily in the business over the providing parts and
says: “There are 38 million past four years. We moved all of dealing with difficult and
vehicles on the road in the UK our technology out of physical demanding customers”
17people to move around and thought this was a huge opportu- For the moment, with 38 million
communicate. It’s created a nity for us,” Buchan explains. vehicles on the road in the UK,
completely different way of Personal contract purchase there are plenty of opportunities
working and it should stand the deals, or PCPs, have become here, but the international option is
company in good stead for the next extremely popular in recent years, there,” says Buchan.
10 years.” allowing customers to pay a Zenith has come a long way
There are informal seating monthly rate over a number of since Buchan joined the business,
areas, outdoor terraces and quiet years, at the end of which they moving from 12,000 vehicles and
rooms for people to sit, think and have the option to buy their car 80 employees to 120,000 vehicles
have the odd nap. Meeting rooms outright. ZenAuto operates in the and 680 employees. A consider-
are named after Formula One races personal contract hire space, able achievement, Buchan
and drivers, and the entire space which is simpler, cheaper and suggests that his background in
would not be out of place in more straightforward. the industry has played a critical
Silicon Valley – which suits “It’s like Spotify for cars, so it role: “I started out as an apprentice
Buchan well. “My ambition is to be really responds to the needs of the in a dealership, so I knew how to
the Apple of our industry,” he says. subscription economy. And you repair cars and manage customers
“I want us to sell the best products, can make choices based on cost, at a basic level. I worked in a
be the most innovative and offer colour or special features, as well leasing company, which gave me
the highest service levels – but not as make and model,” says Buchan. another perspective on managing
necessarily the cheapest prices.” There is also the option to lease costs and the supply chain. I
electric and hybrid vehicles, a worked with corporate customers,
Targeting consumers choice that he expects to become so I had a really good knowledge
The company’s latest innovation increasingly popular. He says: “I of the industry and the roles that
was launched at the beginning of think people are going to feel a lot people play. And I was a
this year. ZenAuto is a state-of-the- more comfortable leasing electric consultant, where I learnt about
art online service that allows vehicles instead of buying them. presentation skills and how to put
individual consumers to lease cars There is still a lot of uncertainty forward a business case. Having
flexibly, swiftly and with consum- around battery life, real or covered so many areas has given
mate ease. unfounded, and the technology is me a real understanding of the
“Having focused on the moving so fast that leasing will industry and I think that has
corporate market and built up the allow you to upgrade easily as new contributed to Zenith’s success so
infrastructure, the expertise and features emerge,” he says. far.”
the supply chain around that, we Leaving school at 16 and
asked ourselves a strategic European potential working his way up from the
question: should we be in the The name, ZenAuto has been bottom provides inspiration to
consumer market too? Given the deliberately chosen, too. “Auto is a employees, too. He says: “I hope
size of the addressable market – worldwide name for car so, if we that it shows our staff that anyone
around 800,000 vehicles operate wanted to expand into Europe, the can do anything – with the right
under lease finance today – we brand could easily be exported. attitude and focus.” n
There are 38 million vehicles on the
‘‘
road in the UK today, from the largest
truck to the smallest car. We want to be
in each of those markets”
18My ambition is to
‘‘
be the Apple of our
industry. I want us
to sell the best
products, be the
most innovative
and offer the
highest service
levels – but not
necessarily the
cheapest prices”
19ANALYSIS
The borr
20rrowers
Once, renting was considered a distant second to the kudos of outright
ownership. Today, however, the rental economy is growing at more than 30 per
cent annually and businesses are scrambling to adapt.
L
ast year, nearly 6 million aspire to keep these things forever. term, comprising three main
people in Europe belonged They prefer to be ‘life-lite’ – valuing sectors that are disrupting
to a car-sharing service, access over ownership and traditional ownership models.
music streaming services preferring limited upfront First is the productive service
attracted 68 million investments over expensive, long- systems model, which covers
global subscribers and tens of term commitments. companies whose assets can be
thousands around the world loaned to customers for temporary
opted to rent clothes rather than Umbrella term use. Examples include French
buy them. This generational shift in company Zilok, which started out
Ownership, once considered the consumer attitudes is often renting household items, and
highest consumer aspiration, has referred to as the new ‘rental American company Zipcar,
lost its favoured status. This is economy’, a term sometimes used which offers hourly access to
particularly true for millennials – interchangeably with ‘the sharing company cars.
those born between 1980 and economy’, which includes peer-to- The second sector is focused on
2000. These young adults are peer asset-sharing through tech redistribution – individual
interested in the same consumer companies, such as Airbnb. While consumers are provided with a
goods as previous generations, it is difficult for economists to platform they can use to pass on or
including music, high-end clothes agree on a common definition, trade things they already own. The
and entertainment. Unlike their rental economy is generally website ThredUp, for instance,
parents, however, they do not understood to be an umbrella connects people selling used
21clothing. And today Zilok falls North America has been at the more cautious approach to buying.
under both sectors, as the site forefront of the sharing economy, Frequently at an early stage in
allows for peer-to-peer rentals as but Europe is not far behind. their careers, these consumers
well as rentals from corporations. Rental economy revenues are may already be suffering from
The final piece of the rental projected to grow at roughly 35 per salary setbacks, having started out
economy pie is generally referred cent a year in Europe – at least 10 during a downturn. A considerable
to as the collaborative lifestyle times faster than the economy as a number have never found
sector, where people offer whole. Existing businesses permanent employment and work
temporary usage of their skills, continue to broaden and deepen on a freelance basis. Perhaps not
including tech expertise and what they offer, while new apps surprisingly, therefore, they are
handiwork, usually for hourly rates and websites are launched on an more likely to rent their homes
they set themselves. almost daily basis, testing just how than own them. And with both
far customer enthusiasm for the home and work life based around
Soaring growth rental model can be stretched. uncertain, short-term models, they
Each of these areas is slightly Many consumers, for example, are effectively already rental
different, but they are all experi- would blanch at the thought of economy natives, which might
encing rapid growth. According to renting a wedding dress. But explain why they account for 68
a recent study by PwC, for enough people love the idea that per cent of it.
example, global rental economy multiple companies have cropped
revenues are expected to soar from up just for that purpose, including Digitally primed
$14 billion in 2014 to $335 billion One Night Affair and Borrowing Schor believes that social trends
by 2025. Magnolia. play a key role, too. “Many of these
How about borrowing a pet? It consumers have been ‘digitally
may sound bizarre, but it is primed’ by years of sharing music
perfectly possible to order a dog and other cultural products,” she
for a walk and return it the same says. “Their value system is
day, through BorrowMyDoggy. distinct from that of their parents,
who were raised on the dream of
Cautious approach accumulating assets as the path
According to research by Boston to success.” She describes this
College sociology professor shift as “a real twist on where
Dr Juliet Schor, who is leading a values, sensibilities and culture
six-year study on this new have been”.
phenomenon: “The sharing Even if grim economics pushed
economy emerged from the younger consumers towards the
wreckage of the 2008 financial rental economy, what started as a
collapse,” as young people, hard necessity is now emerging as a
hit by the downturn in global preference. According to a 2016
employment markets, adopted a study from US think tank the Pew
‘‘
Proponents of the sharing economy
say it enables them to have the
lifestyle they want without any of the
pressure or commitment that comes
with ownership”
22Research Center, 72 per cent of tials”. If your car sits empty 95 per
Americans said they expected to cent of the time, for example, an
participate in the sharing economy option such as Turo – where car
over the next two years. And, of owners rent out their vehicles – can
course, there are benefits to being be attractive. Other objects with
a non-owner. Renting avoids the high utilisation differentials
stresses of ownership, such as include jewellery and designer
upkeep, depreciation or, in the clothes. The US service Rent the
case of expensive consumer Runway, for instance, allows
goods, simply growing tired of customers to rent a $700 designer
what once seemed a must-have dress for $100. The dress would
item. Proponents of the sharing probably have been worn just a
economy say it enables them to few times if bought at full price:
‘‘
have the lifestyle they want without now it can be rented for a fraction
any of the pressure or commitment of the cost, enjoyed fully once and
that comes with ownership. returned, with wardrobe space to
spare and the option of trying out
According to a recent
Differentials another dress next time. study, global rental
Dr Kurt Matzler, a professor at Importantly too, the experience economy revenues
Innsbruck University’s department of wearing the dress can be fully are expected to soar
of strategic management, notes documented on social media, from $14 billion in
that the rental model works partic- where followers neither know nor
ularly well for expensive items that care how the wearer came by 2014 to $335 billion
have “high utilisation differen- their outfit. by 2025”
It’s no stroll in the park
Like any nascent model (£44.99 annually matching is not always participation are uneven.
economy, the rental for owners and £12.99 totally smooth. In Bringing in equal
economy is not immune for borrowers) has population-dense numbers of users on
to growing pains. One attracted thousands of markets, borrowers can both sides can be like
common obstacle faced members, but the outnumber owners, marketing two
by peer-to-peer sharing leaving one London businesses at once. To
services is balancing woman who joined in overcome imbalances,
supply with demand, 2016 to give up after Rosenlund created a
particularly when it pursuing several dogs. ‘Kanine Council’, where
comes to assets for “We didn’t receive a reply employees report
which there is no or they had a regular member feedback that
market precedent. borrower already,” she they can react to in real
Take the case of notes, “exactly like a time. Insurance, a
BorrowMyDoggy. dating app.” 24-hour vet hotline and
Founded by Rikke In an interview last online testimonials are
Rosenlund in 2012, the summer, Rosenlund said also provided, all
company aims to that balancing supply designed to reassure
connect pet owners who and demand was one of owners and borrowers
need a break with pet her biggest challenges. equally, even if one side
lovers who cannot The needs of owners and of the equation can
commit long term. The borrowers are different outnumber the other
company’s subscription and the risks of at times.
23Conserving resources ownership world.
Not only does this model make The first suggestion is simple
economic sense, it also appeals to but effective: companies can begin
millennials’ desire to consume in to sell the use of a product as well
line with their values – in this case, as outright ownership. Daimler
resource conservation. “Sharing is successfully did this when it
thought to be eco-friendly because created car2go in 2008. Based
it is assumed to reduce the demand on the success of this rental model,
for new goods or the construction other traditional car companies,
of new facilities,” says Schor. including BMW, have
But the rental model can still be followed suit.
daunting for traditional
businesses, whose revenues are Adapting to change
based on ownership. Matzler set Companies can also adapt to the
out to accommodate any such rental economy by creating a
concerns, with the help of platform to redistribute their
researchers at the Sloan School of products. In 2010, IKEA launched
Management at the Massachusetts a website in Sweden allowing
Institute of Technology. They set customers to resell their used IKEA
out specific steps that any business goods. American outdoor gear
can take to help diversify their company Patagonia created a
offering and prepare for a post- similar offer for customers to resell
equipment and clothing. Some
companies worry that this
approach – and other rental
tactics – may cannibalise
their own sales. In the case
of IKEA and Patagonia,
however, branching out
just increased their
customer base.
Matzler and his
colleagues believe companies
can also benefit from exploring
unused resources and capacities.
In Germany, for example, the
agricultural association Maschi-
nenring identified that the costs of
farming machinery were prohibi-
‘‘
tive for many individual farmers, so
it created a sharing system,
Companies can adapt to the rental allowing farmers to pool their
resources and reduce costs. In
economy by creating a platform to
Switzerland, Kuhleasing was
redistribute their products. In launched when a Swiss farmer –
2010, IKEA launched a website facing rising costs – decided to
allowing customers to resell their lease his cows to customers,
used IKEA goods” promising cut-price cheese to
anyone who rented a cow. Within a
year, he was leasing 150 cows to
customers all around the world.
24Ripple effects not delude ourselves that it’s a
While there are many advantages
to the sharing economy, some
economists and strategists suggest
that ownership should not be
wholly discounted.
A recent report from market
strategists at the Convergex Group
panacea,” says sharing economy
expert April Rinne in a World
Economic Forum opinion piece.
“Historically, many people held
their wealth in what they owned:
their homes and possessions.
These assets also served as
‘‘
A Swiss farmer
decided to lease his
cows to customers,
promising cut-price
warns that if everyone adopted the cushions in time of hardship. As cheese to anyone
rental model, the ripple effects we enter an era of ‘asset lite’ who rented a cow.
could be “catastrophic”. It says: lifestyles and fewer physical Within a year, he was
“Everything interesting in possessions, this doesn’t negate
leasing 150 cows to
economics happens at the margin, the need for other forms of wealth
so if the nth consumer chooses to in times of strife.” customers all around
rent an apartment instead of It is still too early to judge the world”
buying a house or makes do with a whether the rental economy is a
car-share programme instead of temporary phenomenon or a more
purchasing a new vehicle, then permanent shift in consumer
demand for new houses and behaviour.
cars drops.” For now, however, it is
Other analysts have expressed expanding at pace, so companies
concern for a generation that may that are willing or able to adapt to
arrive at mid-life with few assets the ‘life lite’ model may find sales
and regret their life-lite style. “Let’s and profits following suit n
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