The Co-operative Group: A noble business failure?

March 12, 2014

The Co-operative Group has its place in the social and political history of modern Britain. Yet it is in deep crisis as its departing leader Euan Sutherland declares it ‘ungovernable’

On March 11th 2014 the following statement appeared on the website of The Co-operative Group

The Co-operative Group announces that Euan Sutherland has resigned as Group Chief Executive with immediate effect. Richard Pennycook, Chief Financial Officer, has been appointed as Interim Group Chief Executive.

The statement then quoted its former CEO’s damning indictment of its professionalism and governance:

“It is with great sadness that I have resigned as Chief Executive. I have given my all to the business and had hoped to be able to lead its revival. However, I now feel that until the Group adopts professional and commercial governance it will be impossible to implement what my team and I believe are the necessary changes and reforms to renew the Group and give it a relevant and sustainable future.

“Saving The Co-operative Bank and with it The Co-operative Group from administration was a huge task, but the changes required do not stop there, with fundamental modernisation needed to safeguard the future for our 90,000 colleagues and millions of members.

“The Group must reduce its significant debt and drive major efficiencies and growth in all of its businesses, but to do so also urgently needs fundamental governance reform and a revitalised membership.

“I will not accept the retention payments and long term incentive payments previously agreed for the delivery and protection of value in the Group and the Bank, even though this was successfully delivered. “I would like to thank all of the Co-op’s hard working colleagues for the support they have given me during my time. I wish them all well. The Co-operative has some wonderful people who deserve a great future.”

Concealing more than it says

Even without further background knowledge by the reader, the news item is of interest to any student of leadership. [Hint to tutors. Try redacting the name of the company and offer the resignation statement for class discussion.]

The resignation statement may be read as a farewell message, concealing more than it says. Why did the CEO fail to achieve the ‘fundamental modernisation’ he believed necessary? What does a revitalised membership imply? How do we interpret the statement that ‘The Co-operative has some wonderful people who deserve a great future.’

A missing story

As editor of LWD I am disappointed that after 1000 posts I have not reported one that dealt directly with the important history and current financial problems of the Co-operative Society. Even a juicy scandal earlier this year did not warrant a mention, although it led to the departure of Euan Sutherland’s predecessor. The story is one which includes one of the most powerful forces towards an alternative capitalism merging socialist ideals with self-help and corporate effectiveness.

What do you think?

I will offer more of the story as an addition to this post. In the meanwhile, I would be particularly interested in receiving the views of LWD subscribers who are unfamiliar with the history of the group, and their assessment of the situation as indicated in Euan Sutherland’s resignation statement.


Puma Adidas rematch as Bayern beat Dortmund in the Champions Cup

May 27, 2013

Bayern DortmundThrough a series of coincidences, the 2013 European Champions cup final between Bayern Munich and Borussia Dortmund was also a reminder of the historic rivalry between the Puma and Adidas firms

The Champions League football final [May 25th 2013] took place in Wembley stadium before a capacity crowd. The fancied Bayern Munich eventually overcame plucky resistance from opponents who also had chances to win.

Puma Adidas

By coincidence, Bayern was sponsored by Adidas and Dortmund by Puma, two brands which have a remarkable historic rivalry. You can read about it in Leaders We Deserve [2009] in a post which describes another football match which attempted to head a seventy year old rivalry:

The charity Peace One Day plays a part in peace initiatives around the world. On September 21st, among those symbolic actions were those taken by Puma and Adidas, two firms whose existence reflects a long-lasting family feud within a small Bavarian township. They played a football game football together and watched the movie “The Day after Peace” by Jeremy Gilley, director and founder of PEACE ONE DAY.

The Adidas Puma story seems right for a Hollywood movie. In the 1920s, two brothers grew up and worked in the laundry shop owned by their mother in the 1920s. They started in business together with a shared idea which created the marketing of clothing exclusively for sporting activities. In the 1930s they equipped Jesse Owens for the 1936 Olympics in Berlin [a story in itself]. But the brothers rarely agreed over anything, and sibling rivalry must have contributed to the split into two firms, still operating in close proximity in a little township in Bavaria.

Whatever, the story tells of a feud during the 1939-45 war which was to split family and employees in the little village of Herzogenaurach for decades afterwards. Today, the old rivalries are mostly muted and symbolic. The Day of Peace celebrations confirmed existing practical realities of life in the township.

Branding wars

As Reuters reported [May 2013]

Adidas is the long-standing kit supplier to Bayern and owns a stake of around nine per cent in the Bavarian club, while Puma became the sportswear partner of Dortmund a year ago.
However, while Adidas and U.S. rival Nike dominate a football market estimated to be worth up to 4.5 billion euros, Puma is playing catch-up after years of focusing more on fashion than performance sportswear.

Its decision to partner with Dortmund yielded an instant return when the club made it to the Champions League final – the biggest prize in European club football and [attracted] a global television audience of over 150 million …[According to reports in the English media ]Puma are set to agree a deal worth more than 30 million pounds a year to provide the kit for English Premier League club Arsenal, replacing Nike.

Felix Baumgartner gives Red Bull more wings

October 15, 2012

On 14th October 2012 a new global hero was acclaimed, as Austrian Felix Baumgartner stepped from a balloon-borne capsule 128,000-foot above the Earth’s surface

The feat which broke multiple world records was backed by Red Bull as the Red Bull Stratus project

The ultimate extreme sport spectacle

As Teressa Iezzi, editor of Co.Create put it:

“Red Bull’s idea of risk is that one of its sponsored athlete’s bodily fluids will turn into gas as he plummets 24 miles from space at 800+ miles per hour while his parents, girlfriend, and the rest of the world watch, live. With the Red Bull Stratos Project, the energy drink brand-turned-media company brought extreme sports spectacle to new heights and redefined the idea of content marketing, PR stunt, and brand utility”.

A fitting tribute

The story is a fitting tribute to Chaleo Yoovidhya the inventor of the Red Bull energy drink, who died in Bangkok at the age of 89 earlier this year. Nor is it unexpected that the Company which is headquartered in Austria was able to find an Austrian to play the starring role.

Yoovidhya came from poor origins in the northern province of Phichit, moving to Bangkok in search of work. Showing entrepreneurial flair, he was employed as a salesman before starting his own pharmaceuticals company drawning on Eastern and Western medical traditions.

One of his products was a tonic drink aimed at keeping factory workers and truck drivers awake through long shifts. It was called Krating Daeng, Thai for Red Bull and comprised a complex mix of sugars, vitamins, and health supplements.

In 1982, his business took off after an Austrian entrepreneur Dietrich Mateschitz discovered Krating Daeng on a sales trip he was making to Asia.

The Independent outlined the development of the Red Bull product

“According to the company’s website, Mateschitz tracked down Mr Yoovidhya, and the two men became business partners, setting up the Red Bull company to take the Thai drink to an international market. In 1987, Red Bull was launched in Austria. Twenty-five years on, it is sold in more than 79 countries”.

An international entrepreneur sees the potential for a product, and helps form a partnership. In Austria the potential was seen for developing the brand through Formula 1 racing, and now through the most outrageous of creative marketing projects.

Bluebirds become Dragons as Cardiff City accepts Malaysian rebranding: Update

June 8, 2012

Cardiff City, the home of the Welsh National Assembly, has a Football Club with the proud claim of being the only team from outside England to have won the FA cup. Now its fans struggle with the rebranding required by its financial backers


December 20th 2013
A summary of the interim happenings can be found in The Telegraph article which catalogs a series of battles between the Malaysian owners and their executives. CEO Vincent Tan has become a central figure in a battle to oust the much-respected manager Malky Mackay

Original Post:

The story illustrates the issues of football fans whose loyalty is rooted in the historical traditions of their club, facing financial requirements for survival into the future.

The Bluebirds have always played in blue, and have a bluebird symbol on the club crest. Its new owners have stipulated that the team will play in Red, and will be known as The Dragons.

A confusion of symbols

There is some irony in the change. The Welsh rugby team plays in red. One nearby regional rugby team is known as The Scarlets, and another, The Dragons. The national flag sports a red dragon (Y Ddraig Goch).

Perhaps the new owners had a sense that the proposed changes would be recognised for such cultural implications.

Press reports indicated that local sensitivities had been acknowledged:

The club unveiled three new strips – a red home shirt, a blue away strip, and a third kit, which is mainly black. The new kits bear a redesigned badge, incorporating a main image of a dragon, with a small bluebird inserted underneath, and carrying the slogan “Fire and Passion”.

In addition, the club have announced plans to build a new training ground, pay off their debt with the Langston company, provide the manager Malky Mackay with a substantial kitty, and explore the possibility of expanding the Cardiff City Stadium.

The move came less than a month after the club’s chairman Dato Chan Tien Ghee said the proposal to change to red shirts had been dropped due to “vociferous opposition” after the plans were leaked.

In an open letter to fans, the chairman said: “We have no desire to cause offence or for people to think we have no respect for the club or its history as it would appear has been suggested in various quarters including by local assembly members.”

He continued: “In the light of the vociferous opposition by a number of the fans to the proposals being considered … we will not proceed with the proposed change of colour and logo and the team will continue to play in blue at home for the next season with the current badge.”

“You can’t rebrand history”

The change indicates the complex nature of commitment. Some Cardiff City fans have accepted the new strip, and the rebranding of the club. Others disagree. “You can’t rebrand history” one remarked.

The colour of coincidence?

When Malaysian entrepreneur Chan Tien Ghee became chairman in May 2010, his longer-term goal was promotion the Premier League. At the time, he made the almost heretical decision to hire a rugby figure, Gethin Jenkins, from Newport Gwent Dragons, to become Chief Executive of the club. Rugby? Red Dragons?

Maybe Mr Chan’s information did not indicate that Cardiff City supporters tend to loathe the city’s Rugby team (aka The Blues) almost as much as they hate their near neighbours Swansea City (The Seagulls, aka The Whites).

Costa Rebrandia: A study in strategic leadership and governance

February 29, 2012

A luxury cruise liner hits the rocks with 32 fatalities. Within weeks, another ship from the same company suffers another serious incident, and is towed to safety. The company faces serious dilemmas of retaining credibility in the marketplace and of finding a way of dealing with its corporate reputation.

The leadership challenge

What would you do, as a member of the board of this hypothetical company?

Hints for students of leadership

A recent series of events prompted this post. A crisis calls for creative actions, be they to preserve the past, or initiate changes for the future. Study of firms who found ways of dealing with reputational threats might suggest parallels. The Perrier recovery from contamination of its brand has become a business school classic. Disgraced politicians and celebrities find ways back into public acceptance. Even the ostrich strategy (do nothing to attract attention) may have to be considered

Suggestions welcomed

LWD subscribers suggestions welcomed and will be added (after editing) to this post.

How a news story develops

The fatalities in the Costa Concordia accident ensured that attention would be turned to the parent company. Without that impetus, the story of a cruise ship being tuged to harbour would have hardly captured attention. By then jouurnlists have begun searches for other stories to add to the developing narrative. Here’s one claiming evidence of ‘sex and drugs on Concordia cruises’. Maybe that even has some positive rebranding opportunities. Perish the thought.

“I need a new tennis racquet …I’m prepared to pay up to £30 for it”

April 3, 2011

“I need a new tennis racquet” I announced to the proprietor of Jim Halls Sports, Bramhall.

“They’ve changed shape since you bought your last one” Jim said rather unkindly

“Nothing fancy…”

“Nothing fancy. Don’t want to pay money for the branding.” I added.

“You’ll have to. Everything’s branded these days” Jim said “Do you want a Murray-branded one or a Nadal one?”

“Just one I can keep in the back of the car winter and summer. Twice a week, used for social doubles. And with strings that don’t break. I’ve never broken a string with my trusty Dunlop Prince 1975 matchplay.”

Jim started going on again, trying to get me to chose from his assorted collection of 2011 models. “Do you see yourself playing more like Andy Murray or Rafa Nadal?” What kind of question was that? No one plays like Andy Murray or Rafa Nadal. Not even my nephew Connor, who has a Rafa racquet, Rafa headbands, Rafa shirts, Rafa baggy long-shorts, Rafa tennis shoes, and Rafa socks (perhaps I’m not right about the socks).

“Just an ordinary tennis racquet” I pleaded “One to replace my old one. I know there’s been inflation since 1975. I was thinking I could go up to even £30.”

Jim looked downcast. “I think you’d better take a seat for a minute” he said. “I’ve got something to tell you.”

Follow the action

What happened next? Will I abandon my trusty 1975 weapon for some new-fangled over-branded over-priced racquet? Watch this space.

Hawk-Eye gobbled up by Sony. Is this a good strategic match?

March 8, 2011

Hawk-eye, the tiny innovative sports technology firm, has been gobbled up by the global giant Sony. There is considerable appeal for large firms to acquire creative talent. But is this a good strategic match?

At first sight, the takeover of Hawk-Eye by Sony [March 2011] has marketing logic behind it. Sony has successfully diversified through sophisticated technological innovation in the electronic games market. It has recently announced a deal to deliver 3D at the next Wimbledon tennis championships. The move comes at a time when Sony is preparing to announce a major internal restructuring

The tiny firm Hawk-Eye is synonymous with a technological capability in the sports market and has niche market leadership in tracking devices used as decision-support systems. Intuitively, there seems synergy with Sony’s play station technological knowhow in its competition with Nintendo.

The firm is also well-placed to be the official supplier of such a system for Football, although the debate over the use of goal-line technology still rages on.

Paul Hawkins

Dr Paul Hawkins is the entrepreneur behind the Hawk-Eye system. He has been associated with the firm since its inception, and has some backing from the cricketing establishment. Initial reports suggest he will continue to play a part in the development of the technology within the mighty Sony empire.

Sports technology

The Hawk-Eye official website summarises its sports technology focus:

Hawk-Eye is the most sophisticated officiating tool used in any sport. It is accurate, reliable and practical: fans now expect and demand it to be a part of every event. Hawk-Eye first made its name in Cricket broadcasting, yet the brand has diversified into Tennis, Snooker and Coaching. Hawk-Eye is currently developing a system for Football (Soccer).

In Tennis the technology is an integral part of the ATP, WTA and ITF tennis tours, featuring at the Masters Cup in Shanghai, the US Open, the Australian Open, the Wimbledon Championships and all high-profile events. Hawk-Eye is the only ball-tracking device to have passed stringent ITF testing measures.

Hawk-Eye’s Cricket systems were used by host broadcasters at the 2006 ICC Champions Trophy, the 2007 World Cup and have been present at major Test and ODI series around the world since 2001. Hawk-Eye offers a unique blend of innovation, experience and accuracy that has revolutionised the sporting world.

When large firms acquire creative minnows

There is considerable appeal for large firms to acquire creative talent. The business model is to provide resources that are often needed to support creative growth. The small firm escapes the hazards of dealing with venture capitalists and other equally demanding sources of finance. In practice, the process may prove unpalatable for the entrepreneur unaccustomed to large company structures and politics.

Entrepreneurship and retailing: The Grigor McClelland Conference

This post was prepared as part of the celebrations planned for The Grigor McClelland Conference to be held at Manchester Business School, Friday April 8th, 2011.

Paul Walsh defends Diageo’s social responsibility

July 29, 2008

Paul Walsh, chief executive of the world’s biggest drinks company, defends Diageo’s social responsibility policies

In a wide-ranging video interview with BBC’s Robert Peston, [July 28th 2008] Paul Walsh examines the social responsibility policies of Diageo, and provides a glimpse of his leadership style.

The loyalty of a lifer

Mr Walsh is one of a disappearing breed, a corporate lifer in the fashion of Henry (Hank) McKinnell of Pfizer. His tenure as CEO is also substantially beyond that of current norms. In this interview, he did not appear to be under pressure to justify his belief in the social responsibility of his company. The question was framed around public debate in Great Britain on the vexed issues of underage drinking and its social consequences.

Not in the witness box but bearing witness

On this matter, as elsewhere during the interview, Mr Walsh was not so much in the witness box, as someone bearing witness, given an opportunity to share his personal faith in the company and its values. This is a claim that comes more easily to the corporate lifer, whose commitment has been demonstrated by decades of loyalty.

Diageo? Most of us (including many financial commentators) still refer to Diageo by its centuries-old earlier name Guinness. You can see the attraction of moving to a name that avoids preserving an image of a single-product company. The brand shift occurred at a time when creativity in branding seemed to have been at a low ebb, and when rebranding decisions tended to favour the Rorsachean over the impactful and memorable. But that’s another story.

Admitting a mistake

Watch out for how Walsh deals with a recent commercial decision. ‘We got it wrong .. we listened .. we put it right’. Walsh seems quite relaxed and invulnerable to the risks of revealing something about himself or his company.

The boys with the black stuff

Some years ago, when the company was known as Guinness, spent some time working with its marketing and corporate managers in several different countries. In those days, the culture was a remarkably coherent one. In Ireland, the job as ‘Guinness rep’ brought high social status. The parish priest was not unknown to use his pulpit to mention job vacancies in the company. But arguably, the strong and dominant image of Guinness was beginning to restrict strategic transformation.

Success was recognized through hard-won achievements as the ‘boys with the blackstuff’ spread the word and the product as successfully as their Christian brothers around the world.

But transformation to a global force has not been accompanied with the replacement of leaders who put financial ratios above the products which have been the lifeblood of the organization.

Facing the media

Robert Peston has argued that business leaders are too reluctant to put themselves forwards for public scrutiny.

In this interview he demonstrates again his claims that such exposure is desirable and valuable for the corporation.

The Need for Creative Ideas

However strong its leader, Diageo faces problems of social responsibility raised at the interview. The firm will need more than good image management to strengthen its global brand. Creative ideas will be a necessary part of the product mix.