From BAd To Worse

It seems not a day goes by without another tale of woe from BA and I have blogged before about an airline that is dying a death of a thousand cuts.

It turns out I was wrong - it's around 1,700 cuts, of jobs that is plus a pay freeze. Well that's just the latest round. Further, this is just a week after BA launched an ill-fated new Business Class only service to New York from City Airport when two such airlines operating similar models have gone bust inside the last 12 months. Despite CEO Willie Walsh claiming that this service would be profitable in a year, all indications are that it was dead before it took off. In the launch interview he even claimed BA was on the verge of buying another airline that is slowly dying, Iberia. I have said it before but I think Walsh is BA's problem - he just seems to lurch, punch drunk from one bad idea to the next and just does not seem to have in his mind a cogent strategy for survival. And that is the key here - after a £401m loss last year, the biggest since it privatised in 1987, BA will announce another loss this quarter and it is battling for survival. In many respects, an ill-starred takeover of another ailing airline is about the worst way to spend precious cash.

But Walsh soldiers on. Amidst several petty ways to save cash he is now taking on the Unions in promoting the idea that many staff should take early retirement or voluntary redundancy. There is also an issue over the roll of cabin crew for the future where the proposal is to drastically change the current roles, slashing their status and pay and bringing on new recruits at rock bottom prices. The staff are up in arms as, rightly, the former 'World's favourite Airline' had a good reputation on service and that's what kept customers loyal. But it seems that BA is losing itself in a 'Neverland' as it is caught in the vanilla whirlpool of budget airline menu-style services and high quality class service that customers pay a lot of money for. BA is a strategic dead duck and that flows right the way to the top. The final straw could be a strike of any sort - a prolonged one would almost certainly bring a failing airline to its knees.

Central to BA's woes has been the depletion of the higher class cabins as customers book more economy flights in the face of a recession. The passenger figures in that category are 13% down year on year and falling. Despite several silly offers to get people to upgrade by offering a free ticket when buying Club of First Class, or if you buy at economy ticket you are offered to buy an upgrade on one or more legs for idiotic prices considering you have usually just paid over the odds for a higher priced ticket anyway, BA has not stopped the exodus from the higher class seats. This means that these seats at the front of the airline are going empty.

But BA have several other problems, to my mind. The first is a silly rigidity about changing tickets once bought. If you arrive for a flight early and want to see if you can get on an earlier flight, BA, unless you have paid stupid money for a fully flexible ticket, do not allow such a useful thing. It means that seats go empty on the early flight but had they been filled, the later flight would have empty seats which BA would then have time to sell. And at any price, as it would be incremental money. Not so with BA (many airlines suffer from this dumb logic). They actually try to charge more for these newly freed up seats and so they remain empty whereas simple logic would say as long as you are covering the cost of the meal and and the fuel, you are making some money rather than cutting off your nose to spite your face.

Further, it remains to be seen whether Walsh and his management team understand where the future lies for BA. You can cut costs easily in a business like that without thinking hard and the biggest issue will be the Unions. Given that you think that you can handle the Unions, what is it you want to the airline to do after you have cut all the costs and ditched the staff? Do you want to be a flagship, high service carrier or do you want to be a low budget, menu-service airline? If so the latter, you are in the wrong place today as your hubs are the two most expensive of airports and you have a purpose-built terminal to handle customers. Yet that's what seems to be the plan - as BA sequentially withdraw simple things like meals and seat booking to charge for them but they do not lower the prices of the ticket in return.

In the middle of all this remains the staff - loyal and capable people who love the airline and give the service that the company was once famed for and proud to advertise. Effectively, Walsh is trashing their skills and abilities and looking to replace them with 'Easyjet-style' crew. The result could be tragic in terms of service - make no bones about it. The difference in the levels of ability and skill of cabin staff between low budget and BA is enormous and there is an immense confidence factor involved. If an incident occurred in mid air, I know who I would want to be running the plane - I think I best summarise it as that. On the last Easyjet flight I was on, we were served by a young man wearing a stewardess's outfit bought from a joke shop with his boxer shorts sticking out from his mini skirt as the staff laughed at the unwitting groom-to-be and took photos. Good fun but airlines are, in fact, serious business.

I wonder why the investors in BA carry on with the current management. From the Terminal 5 total fiasco to the series of knee-jerk, almost fag-packet attempts to save the business to a total lack of strategy, the airline is slowly dying and Walsh seems powerless and witless to do anything about it. The enduring image I have of him of late is his interview on the converted Airbus 318 taking off from City Airport, refuelling at Shannon and going on to New York running an already dead Club-only service for just 100 passengers talking of his new attempt to take over an equally dying airline, Iberia.

It was all wishful thinking.

This Internet Thing May Catch On

Cuh, who would have thought it, eh? This little wire into your house and down it comes all this fantastic information and now TV and much more.

In fact so popular has this phenomenon known as 'The Internet' become that advertising spend on it has actually overtaken spend on TV advertising. Some years ago, I attended a conference in London on the future of the web and some chap who was part of an investment group justified some of his company's hair-brain investments by saying precisely this would happen. I wonder if he survived his daft investments in web 1.0 but he was right, despite the guffaws and rude questions of the chap sitting next to me who kept whispering in my ear how he thought the speaker was talking rubbish. I noticed from his badge he worked for a TV company.


It is a fact that during this year, advertising spend has decreased, even on the internet. Companies are questioning more than ever the worth of some of this spend. As Aviva showed with their crazy decision to spend £millions on publicising a name change from Norwich Union while making people redundant, you can blow a lot of money very quickly on TV advertising. While glitzy agencies would tell you can measure the success by means other than sales growth, it would be a really tough job to understand what a campaign like that could have done for Aviva. TV advertising, in the main, is incredibly wasteful. For the millions of TVs it gets played on, the net effect is pretty low and you have to spend a lot of money to sustain the message and advert in order to get some tangible effect.


The internet has given advertising a new lease of life. You see, the trouble with the TV is that by by and large it is technically just a broadcast or stream which hits every aerial in the country regardless of if the TV is switched on or what channel they are watching. At any one time, the vast majority of people are actually watching something else while the advert is being broadcast. The other issue is that TV advertising is not very context sensitive in that an advert for a car may play after a scene where people are in a pub - yet would it not be cool if an advert for beer or wine were shown at precisely that point.


This is where online advertising scores as you can be incredibly targeted down to timing, demographics, geography, location and by the very words used to search the web. At the point you enter your search using a keyword, up will pop an advert only on your browser which is directly related to that keyword. If you search for Indian restaurants, up will pop the name of a local one. There is a simple, yet complex way of 'buying' access to a keyword for your specific needs that is governed by an auction in the ether - it's a bit like TV adverts but it is far more targeted. It can be far more powerful than that as a great deal more information about your browsing habits are stored than you may know or want. It means that adverts on places like Facebook in the future could actually be far more tailored. This is why Social Networking is so important to advertisers and why companies like Facebook and Twitter who have no revenues to speak of today are so highly valued - they contain a great deal more information about you and your online habits than many of your friends know about you. This only exaggerates the futility of TV advertising which is 'hit and miss' at best.


Related to all this is measuring results. The online advertising industry talks a great deal about Return on Investment (ROI) and can measure a great many things about your adverts and traffic to your website. The trouble is that there are many companies that can monitor a great deal of the traffic information by many different methods. There are only a few who have mastered the art of correlating data from multiple sources like Webtrends, Omniture and Google and make some sense of what is really going on by displaying the results with clear dashboards and automating reports. One such company I have found is Theorem Inc and their Data Analytics product which does precisely this. It is now available for companies to buy and use on their own premises to keep their data within their corporate firewall whereas most companies offer web-based access only.


The plethora of analytics tools mean that you can accurately measure response rates, numbers of views, where the clicks came from, time spent on your website, which pages were viewed, how often, for how long and then you can adjust and refine your marketing to maximise response and, hopefully, sales as a result. Naturally, I am simplifying what is a complex industry but when you boil it down, the internet means you can have a great deal more power over your advertising spend to get real results from all your marketing and adjust your budgets as you go, daily and by the minute if you wish. For TV, once you have paid for all that design and production work, it is just a matter of affording the right places to put the advert at vaguely the right time and, literally, hope for the best.

The internet has brought advertising into a new age. For those who doubted its viability against the sheer weight of the TV, it has now proved itself beyond all doubt. The spend statistics tell their story.

What is The Point of Airmiles?

I have over the years, off and on, saved airmiles - the BA focused customer loyalty scheme. I have tens of thousands of the things. Yet, it is only when you actually try to do something with them that you realise they really are pretty useless.

This year I have travelled a lot on BA through work, and the odd bit of leisure. For a while I made a conscious effort to stick with them as I thought travel would be a lot easier through Terminal 5 and I would indeed build up airmiles that might get me to a Silver Card or I could use them on a holiday. I have must admit that I have travelled enough this year to become an expert on every terminal except four and most European airports. I can say that Terminal 5 is pretty good - it's very accessible from the M25 if you can avoid the roadworks, there's plenty of room at setdown, a good carpark and there are reasonable bus routes serving it if you don't mind endless stops. Trains are fine if you are coming from London - other than that, then forget it.

Quite big things let it down. Staff shortage is the first. That is at both security check in and passport control. It's like being a local Budgens - they wait until the queues are so long that people are snaking all over the place and back into the terminal before they even consider opening up a second or third machine and there are always ones not being used. Meanwhile at passport control it's just an ugly mess and a big scrum - in fact, at every terminal. It's a real shame after so much money and effort when into it. Going through any airport in Germany you simply do not get those sorts of queues or daft bottlenecks, there are always plenty of machines or stalls open and loads of staff. The throughput is much faster too and that has nothing to do with the severity of checks, it is simply staff more interested in getting the queues down and more of them.

Enough of those gripes - back to blinking airmiles. I read with some eagerness that BA has opened a direct route to Las Vegas and next year for my brother-in-law's 40th birthday we are going there. The big problem I have found with airmiles is that they are not a real 'currency'. For instance, if you want to upgrade to Club Europe, it's the same airmiles for an hour's trip as a long haul upgrade. Dumb. The second thing is, it's actually quite hard to spend them. We are one of those families who have to grab time when we can and even if we could plan a trip, we would usually buy a package holiday of some sort. So airmiles would be handy for grabbing those trips of whim. But there is fat chance of you getting the dates you want.

It is a Ryan Air approach that says that one type of traveller only gets cheap fares, all others pay accordingly and expensively for their needs. BA airmiles are the same - unless you are flexible to an amazing degree, it's highly unlikely you will get a flight to suit. And this is not just on one occasion - my airmiles have not been spent for nearly 3 years and yet I try regularly to get flights with them.

So Vegas next June sounded ideal. I now had dates a year ahead, could be flexible by about 3 days and I needed hotels too. Wallop. I could possibly get a flight 10 days after the dates needed and then coming back would mean nearly a fortnight stay which was not ideal for a planned 4 night trip. I didn't even get to investigating a hotel.

I then made the mistake of phoning the Executive Club to see if there was a mistake. Nope. No airmiles seats were available for that flight any time around the dates. The phoneperson said that it was a very busy route - so busy it has yet to start flying, I mentioned. Ah, there had been high demand. Right, that's why I could buy the tickets by the bucket load from any website including BA's, I suppose. Ah, said the person, there are only a few airmiles seats allocated to each flight and therefore they sell out early. Given the route has yet to launch and was only just featured in HighLife Magazine, that was pretty quick indeed. In answer to my question, why are the airmiles seats limited to so few, the person said that they had to make a profit.

At this point I did not hold my peace. I asserted that the whole point of a customer loyalty scheme is that customers already have paid for tickets upon which BA accrues a certain amount of profit which is set aside to pay for these future flights. I can see the point of trying to limit them but by making the number so low, and therefore the scheme so inflexible, people like me would get exasperated and therefore think the scheme is valueless. Put simply, if you cannot redeem the airmiles, then they are worthless. Just to make matters worse, when I tried to use them for the same dates on non-direct routes and via partner airlines, the same answer came up.

So out of sheer morbid interest, I looked at several websites and airlines, every one of them was cheaper for direct and indirect routes to Las Vegas. In the end, we looked at two great deals via Air France and Virgin that got us 4 nights at the Bellagio Hotel and the whole package was cheaper than an indirect flight with a BA partner, using mostly airmiles to pay for the flights and having to fly over week later. Just to be clear, as Robert Peston would say, it was more expensive using a customer loyalty program and less flexible than the alternatives, one of which was a direct flight.

I could have commented that BA is losing shed loads of money and it is simply driving customers away as, frankly speaking, if I can avoid BA in the future, I will. The rules on accruing Tier Points are stupid and Virgin does not have such a stupid and complex scheme nor do most other airlines. Finally, all the others, in my experience, fall over backwards to help you spend the loyalty points.

After all, that is the entire point of the scheme. Perhaps it may dawn on BA management that if their loyalty scheme is not incentivising loyalty then they are giving away money for no reason to fund it. However, if they give the profit away in the spirit of customer retention, do not make it difficult to redeem the points.

It's pretty simple really. Vegas here we come - and not via BA.

Green Shoots And Leaves?

An article on the web this morning tells us that bank trading volumes are up for the first time in two years, giving some clear signs of a recovery. It does point out that pensions and life insurance products still remain depressed, which I would argue are the better long term indicators, but the point is taken.

However, a cursory glance at the familiar barometer of the employment situation, The Sunday Times Appointments Section, revealed that confidence is still at rock bottom. Firstly, you would be hard pushed to find a single private sector job advertised in there. Secondly, the number of Non-Executive jobs and Public Sector jobs seems to be dominating all aspects of the section. Indeed, I had a good chuckle seeing a nice advert for a well sponsored, 'Non Executive Director of The Year Awards' night which was to celebrate the outstanding achievements of these people who wear similar ties. No doubt Tom McKillip and the army of NXDs who sat on the boards of banks and other financial institutions getting fat and rich while doing nothing, will be right up there in the award ceremonies showing the way.

Getting back to the Appointments Section generally, it is clear that the Public Sector seems to be propping up the high end recruitment sector with companies like Odgers and Tyzack prominently and expensively displaying pretty naff Public Sector jobs. It seems the Private Sector has gone to sleep for a long while as the Section had been like this for around a year. I cannot recall a time in the two or three recessions I have sat through when the Times was so thin on Private Sector jobs. The hunt for good talent has gone underground at minimum, but it more likely reflects business conditions.

Meanwhile, in my layman's observationary mode, my wife and I ventured into London on Saturday and caught the final hour of shops around Oxford Circus. There were no shortage of shoppers - it seemed very busy. But the shop assistant I spoke to at Libertys pointed out that the credit cards were mostly not from the UK but are tourists enjoying the almost perennial sales we seem to have at the moment. We went for the early supper at a really superb restaurant on Poland Street, Vasco's, and had the pre-theatre meal of two courses for £19.50 each. The food was outstanding and the owner, observing that we were the only people in the restaurant, berated the fact that business has been like this for months - no early diners for the theatre anymore, but clogged full from 8 o'clock. He was right, Soho seemed absolutely empty and getting a drink with a group of friends at the Argyll Arms was easy, they even allowed us to fully occupy the upstairs dining area as only one family were in.

Pubs and restaurants are good barometers of the times we are in. On a Saturday night in early Autumn, with pleasant if windy weather, the eating and drinking places were nowhere near full or empty. London is no different from most cities. The green shoots are not so evident.

That said, the number of placards outside houses marked 'For Sale' seems to be on the rise in my area although I know some people who have had their houses on the market for 18 months with not a single viewing. It would be a shame if the biggest feature of a recovery is another housing boom as that would be a sure-fire indicator we put our money in the wrong place as they are precisely the kinds of stupid asset inflations that got us into trouble last time around. But that's another story.

For me, the green shoots are not yet in evidence in the right places.

Disconnected Thinking

For most of us, the issue of things like bank bonuses are complex, and therefore distrusted, mainly as we are so far removed from them. They are of an unreal world that is hard to identify with.

That explanation would suffice in most cases. But what of credit to businesses and how banks are behaving in the current recession? Surely, that is much closer to home? And education, jobs and the mythical ‘Lost Generation’ that I have blogged on before, aren’t these real world issues right at our doorstep? Why is it then that it seems so easy to disconnect these issues from what we observe in life and paint a picture of what we think is right?

Of course, I am prompted in some way by Gordon Brown’s conference speech – so much of what he talked of was as if he had not lived it. The issue of free market corrections and bank bonuses seemed not to have existed in his life and yet they occurred right under his nose, on his watch and were the subject of his very policies. You cannot disconnect them and say they did not exist or because they were there you could not affect them. It is the job of Governments to impose law and policy to make our country sound and safe yet all that seems to happen is that politicians crow about getting their pet policies right while ignoring the real world. The reality was that the whole credit crunch, recession and bank crisis were phenomena which their policies not only contributed to but compounded.

Lack of action or ignorance is not an excuse.

But there is far more of these daft situations. In this month’s Director Magazine, Lord Mandelson contributes and gives some startling statistics on how banks and the Government are helping small businesses. No less than 6,410 businesses have been deemed eligible for the Enterprise Finance Guarantee (EFG) and have the potential to receive loans of £732m. By reducing bank risk on loans, he has obtained commitments from RBS and Lloyds to provide an additional £27bn in loans to SMEs this year. The HMRC have established over 191,000 agreements with businesses to spread more than £3.3bn of tax payments so increasing the amounts available to invest. With such amazing numbers, British businesses must be thriving and Lord Mandelson can rightly sit back and pat himself on the back for a job well done.

But in the very same issue of the magazine we get to know about the reality for businesses. The Bank of England has said that lending to small businesses is down by £14.7bn this year. Insolvencies are up 40% in the same category of business. The average overdraft rate to help businesses is 6.6%, over 13 times the base interest rate – it has never been more expensive in relation to the base interest to get a loan or a mortgage for that matter. The reality is, that the moment a business raises its hand to say it is encountering a problem, banks immediately make life hard, with many businesses getting the exact opposite of help like having loan or overdraft facilities withdrawn as well as interest rates hiked up by as much as twofold. Banks effectively hold guns to businesses’ heads the moment directors approach them, only making matters worse. For many businesses, by the time they have filled in the forms, sought approvals and gotten banks or the Government’s approval to help, it is six months further on and the business landscape has changed even more so the situation becomes even more desperate prompting knee jerk bank reactions.

The reality is that the Government may believe in their figures but the SMEs are suffering so there is a disconnect between the good news received by ministers and the world faced by businesses.

We talk of the Lost Generation or Generation Y as it is labelled. The prospects for those leaving school or university have never been lower and this category has been disproportionately hard hit by this recession in the unemployment figures. Yet, if we believe the Government figures, this generation is more intelligent than ever as they have higher percentage passes compared to my generation, which are improving year on year, and these pass levels are higher with more people getting A grades than ever before. Yet the same generation leave university with major debts and much lower prospects of employment compared to my generation – and I graduated at the time of Miners and Steel strikes, with no debt to talk of. All that money into education and fantastic pass figures mean nothing when the quality is actually poorer. I am no role model, but the average literacy of new graduate entrants into business is pathetic, numeracy skills are poor even with a calculator and basic communication skills are basic at best. Despite all the extra money and the apparent results, Britain is going backwards. The standard of taught French to GCSE level is dreadful and when you compare it to the standards on the Continent of how English is taught, we are far worse than we were 10 or 15 years ago.

Britain is going backwards and there is a disconnect between Government statistics and targets and reality.

Again, in the same issue of Director, Barbara Knight of the British Bankers Association (BBA), a perennial butt of my criticism, argues that we should not cap bankers’ bonuses. The argument against is presented by a Union man and it is wrong as it stems from jealousy. I don’t believe we should cap anybody’s pay if genuine profits are earned. But where Knight falls down in arguing for is that she claims we need to remain at the forefront of the financial world, stop talent from slipping our grasp, and we need to move to where the best deals are found.
That whole argument falls to pieces when we point to the incredible calamity the banking system has not heaped on itself but on us. As we watch the unemployment clock edge toward 2.5m showing no signs of slowing, as we count the £1.5 trillion cost of the bank bailouts, we can easily argue that these so called talented individuals actually earned nothing – they created no profit at all. All profit they actually ‘created’ was clawed back in losses – every penny of it. And more, as the long term cost of this whole mess will go on until 2032 for the mortals of this country who have to pay for it – and the interest alone by 2014 will be £60bn a year, the entire current budget for the NHS.

The disconnect here is that Knight has failed to connect the fact that the same bankers she defends are the ones who have clocked up untold losses. By conveniently disconnecting the two things, she is basically saying that we pay all bankers effectively guaranteed bonuses based on make believe figures forever – no matter what happens. Losses are not what banks should be concerned about, they should be focused solely on the pursuit of fictional profits based around products or instruments that serve no purpose in the real world.

The fundamental issue is that we should take away what these people are trading, focus them on core banking activities and outlaw the complex and unreal forms of investments they create out of basic debt. Only then will we start to curb the whole bonus scene by taking away the game of monopoly they play.

Banking, as Knight defines it, is the art of sweeping dirt under the carpet and getting paid well for it. When the dirt is discovered, we should not blame the cleaner as the house looked clean after all.

And here’s another to ponder. Due to defence budget cutbacks, our territorial reserves will be training without live ammunition. That certainly prepares them well to fight a war in Afghanistan. The major decision on spending by the Government amidst mounting criticism on the mobility of our Forces there as our Generals tell us there is not enough helicopters, is to blow our budget on upgrading existing ones rather than supplying more – so the will be out of commission to be upgraded when we need more of them. And as we send more kids into danger and see them get killed, maimed or injured daily, instead of treating them like heroes and helping them look forward to something for the rest of their lives as a thank you for their sacrifice, we take them to court to claw back compensation payments when we are at fault for not equipping them properly in the first place. Yet if we listen to the Government there is no problem.

The failure to connect what you want you believe with reality is a huge issue today. The gall that has been displayed by the present Government to try and hoodwink us into believing we are in good shape is wholly out of kilter with reality and we should hammer them for suggesting otherwise. Yesterday, we saw a Union Leader tear up a paper because it dared suggest the Labour Party was wrong – for that his 2m members should park their own free will and freedom to have their own opinions and follow his lead in boycotting the paper. I have never thought the Sun as an informative newspaper and they are not well regarded for their informed debate on real matters but they still have the right to express their opinion without being subject to public blackmail. But had they supported Labour, we would have had glowing endorsements.

Disconnecting reality with the virtual world stems from my age old themes – Accountability vs Responsibility and denial. I don’t have to spell it out for you, but if we continue to run our world with our head up our backsides, we are in for a far more serious fall than the one we have just had.

Where Trains Run Properly

I arrived yesterday from Hamburg and had a hire car booked to get to a small town called Soest some 120km east of Dusseldorf Airport. For whatever reason there was mix up on the booking with Hertz and in a huff I stormed off to take my business elsewhere.

Having made my point, I suddenly was struck with the problem of how on earth I get to the place from there. I looked at my map and it was clear that a car would have been the best option but crawling back to Hertz or having them know I was going to have to get a car anyway from anywhere would have been their victory. The signs to the airport Bahnhof or train station were far clearer than the signage for the hire car counters if you take the baggage-only exit and it directed to me to the Skytrain. This is the space-age suspended automatic train linking all the terminals and car parks. It is a feature of travel in Germany that all the airports have brand new terminals which are superbly laid out, plenty of security desks, passport controls near the jetways so that queues for everything are far less than in the UK and the surroundings are far nicer.

Skytrain took just 5 minutes to get to the Bahnhof and there I saw the sign for the Reisezentrum or travel centre. I waited my turn with nervous anticipation as a similar experience in Belgium last week resulted in me taking an expensive taxi as the staff were so rude, uncommunicative (I even used my best French) and gave far too little information. The station signage in Brussels is awful too. Not so in Dusseldorf. The middle aged gentleman smiled and I asked, in my best German which is actually English as I failed the O Level badly - twice - understood every word and replied in perfect English. Consulting his computer screen, he told me that the train, direct to Soest and bound for Paderborn would leave in five minutes from the platform he indicated and he was already in the process of printing me a ticket with an itinerary. He asked when I would return and which class I needed and First Class was €75 only €20 more than Second and I could return any time the next day but when he asked me for my flight time he suggested two alternative routes back with times. He printed the whole lot out and it had taken just a couple of minutes. Try that anywhere in England and then trt again using German.

The train arrived perfectly on time and First Class was Spartan but clean and comfortable. I was concerned about if I had got it all right – it seemed too simple. So I asked a pretty German girl, again in English, if this was the right train. She spoke perfect English in reply, glanced at my itinerary and said don’t rely on announcements, just stand at the electric doors at precisely the time it said on the itinerary and then press the button to exit. She guaranteed me that my foot would fall on the terra firma of Soest railway station and she was exactly right.

Having stayed a night at a pleasant hotel Bad Sassendorf, watching Bayern v Juventus and enjoying Schnitzel and beer, I attended my meeting in Soest and asked for a taxi at 11.15 to take me to the station. The driver was waiting for me and I got to the station quickly. I looked at the timetable as I was early and couldn’t see a direct train for a while. The station was under reconstruction and the travel centre was in a portacabin. I went in again asked in English how to get to Dusseldorf Airport. The lady replied in perfect English again and printed me off a new itinerary saying the exact times I would need to catch the trains, which station to change at and which platforms the trains would arrive and leave on. And she was exactly right.

The First Class carriages on all the trains are well advertised, very clean, have power sockets, nice seats and are quiet. These are not UK Intercity class but are regional fast trains for commuters. They are very reasonably priced for the trips too considering I was not buying special or discounted tickets.

I contrast all this to the miserable train network and stations we have at home, where the emphasis in ticket offices is to fleece you and not be helpful at all – God knows they communicate enough badly in English, heaven knows what they are like when someone speaks to them in anything else. The trains do not run to time, you are never sure of platforms, signage is often a moving target and carriages are filthy, poorly ventilated and invariably overcrowded at peak times and there is an emphasis to give you as little information as possible so that the probability is that you will incur penalty fares at some point. Oh, and there are 26 franchises just to confuse you even more – and it is entirely expected that a foreign visitor would have sat an exam to know them all before arriving in the UK and so understood one ticket does not fit all, or even more than one of them.

Of course, the Government would tell us that this is entirely the fault of the Conservatives for their right wing fundamentalism which has got us into this ludicrous state which, if Labour were in power, they would change to make more efficient, cheaper and integrated. The fact is, it takes 12 years to ease your feet under the desk, spout rubbish, get to know how you can personally make money, line up your knighthoods and peerages and after-Ministerial non-executive director careers. Doing something about it is something you might get around to should you be re-elected after the Conservatives have caused all this mess.

Britain remains a joke when it comes to transport and the railways and associated travel is an absolute mess. It has been for so years but someone has had 12 years to devote some time, and money if need be, to have addressed even the basic issues. But that was far too much like hard work. Prescott was far too busy lining his pocket, shagging his secretary, getting freebies from lottery bidders, playing croquet and punching people. And the rest have been no better.

Integrated transport policy? My buttocks.

Following The Money

In the last year, I have spent a lot of time talking to Distributors in the Hi Tech sector and, with few exceptions, they have had a bad time in this recession and specifically the credit crunch. In a world of double whammys, one company has impressed me in handling the situation and getting growth in a tough market.

I have some ‘form’ here as I am an ex-employee from many years ago – the company is Tech Data. However, I have talked to distributors large and small, broadline and specialist, in every major country and a few smaller ones, and the story seems to be consistent. In a world of general sales and profit contraction, Tech Data have bucked the trend.

As an independent nowadays, there are three or four important things which I believe has helped them grow in these hard times. And remember, this is in my opinion and without any reference to the management at Tech Data – no propaganda here, just a genuine critique of what I have found. The major things I have identified may not be their ‘Secret Sauce’ but they certainly impress me as strong differences in a very large and diverse business.

1) Credit Policy
2) Going Where the Money is
3) Cloning Success in New Territories
4) Adding Strategic Lines

1) Credit Policy

I attended a meeting with Andy Gass, MD of Computer2000 or Tech Data UK. He told me that as the credit crunch bit and the recession kicked in too, he was faced with a double squeeze. First up, resellers would be suffering from the general reining in of IT spend by their end user customers and second, they would be suffering from a constraint on credit. It meant that if resellers were going to identify opportunities or even adopt a more aggressive business stance or even try to find new markets to replace a lack of business, they may find that they could not get the credit to do what they needed to. It was a double whammy. As Vendors looked to try to help with special offers or market initiatives, resellers could only watch and ponder on what might have been. Fundamental to all this would be the attitude of the credit insurance companies that underpinned distributor credit lines and we all know how they viewed the recession and credit crunch. Instead of wallowing in the recession, Andy beat a path to C2000’s credit insurance company, Euler, and had a meeting with the MD. If C2000 could show that their resellers were disciplined in payments, could they a) not decrease current credit levels and radically, b) if they could show that resellers were prepared to pay to terms, then they could INCREASE credit in the channel.

This was a whacky idea. After all, most companies were trying to INCREASE their credit days with suppliers. In the face of it, C2000 agreed contracts with resellers, particularly smaller ones or who had a lower existing credit line with them, to have a payment pact. Against this, Euler actually INCREASED available credit. They even increased it further as each month went by and the resellers paid to the agreed terms. In return for not just agreeing to pay to time but actually doing it, the resellers got greater credit lines. This meant that C2000 actually increased its available credit lines when the market was constricting, attracting more business from companies wanting to grow or who were getting squeezed by other distributors.

It wasn’t just in the UK. In Portugal and Spain, Tech Data, under the MED Region VP Oriol Cornudella, increased available credit to resellers by actually enforcing discipline on a market that traditionally paid badly. Again, by engaging with their credit insurers they agreed a plan. The first step, initiated back on October 2008, was to effectively enforce their standard credit terms on resellers. The next step was once again to reward those resellers who actually paid to terms. In partnership, the credit insurers increased the available credit in response to the discipline. The result was that while other distributors have seen sales shrink in Iberia, Tech Data has seen sales increase as resellers have increased their spend with Tech Data. In Portugal alone, sales have increased 20% this year as a direct result after available credit first dipped and then sharply increased over the last 12 months.

At a time when most companies have seen credit lines decrease, Tech Data has actually increased available credit by working in partnership with their resellers and credit insurers.

2) Go Where The Money Is

While the recession has meant a general doom and gloom, most IT resellers have seen their sales shrink, particularly as corporations and businesses, large and small, have cut back their spend.

However, many Governments, in order to combat the combined severity of the credit crunch and recession, have injected serious amounts of short term money into the economy aimed at specific projects to stimulate it fiscally. While car scrappage schemes and VAT reductions have been aimed as a broad-brush stimulation to consumers, education has been a heavy recipient of money in several countries. In Portugal, 3 phases of technology have been sanctioned, as over €2bn has been pumped into education which is aimed at providing up 60,000 university students and professors with PC and broadband connections, secondary schools will see a ‘Smart Card’ scheme which will cover security and even small cash purchases for students whilst they also receive a voucher for a PC and broadband connection and most innovatively, even primary school children will get a new Netbook under the Intel low cost PC scheme ‘Magalhaes’ that will see kids as young as 6 get a technological headstart in education.

Further, over 10,000 classrooms got interactive whiteboards (IWB) for interactive teaching last year alone, in the next phase 75 secondary schools will have one IWB per 3 classrooms and by 2015 it is estimated all students and classrooms will have PCs and access to IWBs. Not only is the economy being stimulated but kids will have a great new headstart for the future thanks to stimulus money from the Government. It also means that companies like Tech Data can prepare their resellers to take advantage of the opportunity this relatively short term money provides. By acquiring contracts to market leading products like Promethean, companies like Tech Data are providing specific ‘solutions’ positioned by vendors interested in the new opportunities to be pre-packaged as marketing bundles or menus for resellers so that they can participate. Backed by training, demos and events it means resellers can quickly show expertise and participation in Government schemes.

This forward thinking has helped Tech Data take advantage of the opportunities provided. In France, Tech Data’s CEO, Gerard Youna and Commercial Director, Nadine Bloch, put together a short term strategy to provide a menu of market leading products to satisfy the Government’s mandate under the Ecole Numerique Rurale program which would equip 5,000 classrooms with laptops and IWBs. Youna, saw an opportunity to work with Promethean and thanks to the Maverick business in the UK, headed by Jon Sidwick, which specialised in AV and IWB, they were able to quickly onboard the vendor and take advantage of the stimulus money. In less than 3 months, Promethean has seen over €2.5m of new business as a result while Tech Data France has enabled its resellers to fully participate in the ENR program. In Germany, over €500m will be spent of interactive learning technology in the next 18 months and again Tech Data hoping to use the Maverick model to roll out their menu of solutions for the markets – the same is happening in Iberia. By adding IWBs to their portfolio, Tech Data has uniquely positioned itself, and its resellers, in several countries, to rapidly take advantage of educational stimulus money funded programs. No other distributor in the same category has been so forward thinking.

Tech Data goes where the money is.

3) Cloning Success In New Territories

Tech Data has always been the sort of company to adopt ‘Best Practices’ in a harmonious fashion across all its operational territories. But adopting similar business specialisations has long been a black art and not always successful. For instance, cloning a high value added business like Datech across territories depends on a high investment and exclusive contracts with vendors like Autodesk – that is a high price to pay and may not yield results if you cannot get the right people to invest in.

But adopting the Maverick model has been successful and swift. Maverick is a specialised AV business unit which was acquired a few years ago in the UK. Run by Jon Sidwick it is one of the largest specialised AV distributors in the UK. As part of its business it also has a successful projector accessory business called Hotlamps. This is a business that is aimed at a narrow market but requires special branding, some good product knowledge, high stock availability and excellent logistics. The basic fundamental skills are at the heart of the Tech Data credo and with the use of their ubiquitous SAP system, small countries like Portugal can be ‘switched on’ quickly by having direct access to the total stock centrally held in the Czech Republic warehouse which can be sent to anywhere in Europe in 24 hours. It means with some brand marketing, product training and a will to adopt, new territories can participate in the specialised business in just weeks.

Similarly, the Maverick business unit itself is rolling out in several territories under Sidwick’s enthusiastic supervision. Not so simple to deploy as Hotlamps, it takes some specialist sales staff, the product set from key vendors, specialised marketing and purchasing plus logistics. In less than 6 weeks from contract discussion to roll out, France was selling promethean IWBs thanks to this rapid deployment model. Iberia came next and Germany is on the way – spookily exactly where the Fiscal Stimulus money is at its highest. Brightstar, a mobile phone business, is another business on the roll across Europe and Tech Data are getting experts at providing vendors with a template for rapidly expanding into markets with a proven model and brand, enabling comparatively smaller vendors to quickly attack market opportunities without massive investment each time and with a strong, skilled and financially capable strategic partner.

4) Adding Strategic Lines

Often a distributor realises that small, unprofitable lines that take a lot of managing can be real loss makers in recessionary times causing undue attention of management to resolve costly stock mistakes or similar. So distributors tend to shed smaller lines rather than take new ones on in recession. Tech Data has been no different on that front. But it has actively sought out, with a proper strategic plan, sponsored from the highest levels, new lines to aim at specific, sustainable opportunities. Tech Data has identified IWBs as a missing part of the strategy to access Government spend which is good money, even if slowly paid, and will be spent quickly in defined solutions. This makes building the portfolio of target products very important and it’s why a strategic relationship with Promethean was sought to augment these menus for stimulus spending. With their rapid deployment model, it has meant that Tech Data, Promethean and many resellers can access the opportunities presented with a menu of high quality products at aggressive prices for the resellers to sell.

Meanwhile, in Belgium, Marc Moons, General Manager for Tech Data Benelux, has won the exclusive contract to supply a package of products under the Government initiative to have all inhabitants using the web called ‘Start To Surf’ where a package of PC and broadband is subsidised via tax rebate over the next two tax terms. By distributing an anti-virus software disk in the delivered goods, Marc hopes that users will adopt the security package which would mean sales and profit for Tech Data and their resellers – but under the clever scheme of the vendor, it means that they can also get 50% of the annuity revenue every subsequent year too which is collected by the AV vendor at renewal time via the web and distributed as 100% gross margin. It means the users surf with a state of the art full web security package at a subsidised and aggressive price while the reseller and Tech Data share in the annuity revenue in subsequent years with no sales effort. The target AV package is likely to be AVG, as no other vendor offers such an annuity sharing model.

In a shrinking market, Tech Data has tactically taken advantage of opportunities while laying a strategic plan for the long term.

All this has meant that Tech Data has taken a piece of market share from its competitors by making sure the credit in the Channel is at least the same as before if not higher, that new territories can get new businesses rapidly deployed to increase business, to give resellers the chance o take advantage of new Government spend and then to access new strategic lines that open up these market opportunities. It means that resellers can share in the opportunities while enjoying more credit to help grow their business. This means they divert more of their efforts and spend towards Tech Data’s markets.

From my view, this is why Tech Data is bucking the trend and growing in a tough market – it’s the difference between battening down the hatches and surviving the recession or understanding the opportunities and adapting to seize them.