Longevity - How do they do it?

Franco Manca, South Kensington
20/05/2017 - 08:00
What makes some companies near-indestructible for decade after decade while others disappear before they’ve got 10 units? Andrew Pring talks to retail veterans who’ve been there and done it and have some tales to tell.

When the average lifespan of a listed business is just 15 years these days, the achievement of giants of the hospitality sector such as PizzaExpress (51 years’ old), Pizza Hut (49 years)  Hard Rock Cafe and Starbucks (46 years), and JD Wetherspoon (32 years) is really quite remarkable.

These are companies that have weathered recessions, retail revolutions  and enormous cultural and social changes, remaining relevant, popular and profitable. Just how do they do it?

It’s not an easy question to answer. Prestigious business schools across the world have struggled for years to identify the magic elixir that holds the key to long-term corporate success. Their libraries are stacked to the ceiling with management books that talk about resilience, adaptability, innovation, culture, vision, values, employee loyalty, team collaboration, marketing and branding.

The list of qualities and characteristics required is seemingly endless, and often contradictory. Do you need to reinvent your customer offer regularly, as some say, or do you stick to what your best at, as others suggest?

The classic management textbook of modern times, Built to Last: Successful Habits of Visionary Companies, by James Collins and Jerry Porras identifies seven themes of said companies: 1) they have visions and values that they try to uphold consistently throughout the company and to which they stay true over decades; 2) they set incredibly ambitious (and in retrospect realistic) goals that inspire their employees ("big hairy ambitious goals"); 3) they are cult-like in their beliefs in themselves; 4) they allow for trial and error, which leads to "evolutionary progress"; 5) they hire leadership from within; 6) they cultivate keeping their employees a bit off-balance ("uncomfortable") as a way of getting them to perform at their best; and 7) they make sure that all elements work in concert and are internally consistent and self-reinforcing.

So what works best in this sector, what is the secret of success for our veteran hero companies? Ask David Page, veteran restaurateur who ran PizzaExpress in the 1990s and is now a serial entrepreneur involved with a string of companies including Franco Manca, and he’ll tell you in his usual jocular manner – “Copy Stalin’s ideas, but without his methods”.

By that he means, you need long-term plans. “Stalin had five year plans and so should companies. Then, at the end of every five years, take a look at the competitive landscape and your pricing and make the necessary adjustments. By the third phase, you should be 80% away from where you started.”

Consultant Andrew Marsden, who was the second longest serving FTS100 marketing director during his time at Britvic, calls those adjustments “polishing the diamond” and he believes they are essential. But he’s not one who believes companies should be constantly striving to reinvent themselves.

Now running his own consultancy, Pilgrim Marketing, Marsden says: “Innovation for innovation’s sake is a waste of time. Long-term success is not all about change. And the unforgiving statistic is that most innovation fail.”

He says there’s a big difference in the strategies of start-ups and established companies. “You start off in an experimental stage – then you make sure your idea is polished. But once you’ve got a loyal customer base, they want what they want. That’s what you need to remember, though polishing the diamond further may be necessary.”

Successful brands, he says, consistently deliver on their customer promise. Tamper with that at your peril, is his message.

“The ambience and the atmosphere of a restaurant is as much part of the promise as the food, and creating that is a huge investment. You have to get so many details right – for example, brown leather or blue cord seats? Or with Spanish tapas, what level of authenticity are you aiming for? The truth is, you can change a menu more easily than the décor, and companies do experiment. But the format doesn’t change, only some of the products.

“And you’ve got to remember, the more unique a restaurant is, the harder it is to roll it out. How do you roll out the Savoy Grill? And money is only made in brands that are scalable.”

To Tim Martin, the founder of JD Wetherspoon, corporate longevity is “a balancing act”. He says: “The text books tell you that you have to change – it’s all about change management, and what worked in the past won’t work today. But what happens so often is that in trying to change, managers go too far in a different direction – like a golfer trying to correct their swing, they start with a slice and end up with a pull.

“Or they go chasing what Shakespeare calls the bubble reputation by diversifying overseas and hoping they’ll be the next big cheese in New York

“The key to long-term success is to aim for evolution and seek out small changes every day that will benefit the business. Don’t over-complicate it. If you do enough small improvements, it’ll take care of the business automatically. I try not to leave one of our pubs without giving a nudge here or there.”

Wetherspoon, to most people, is a brand – the strongest by far in the pub world. But intriguingly, Martin himself has never seen it that way. “Pubs are not brands, though a lot of people think that by calling something a brand, you give it resilience. No, that’s not true. Our pubs will fail if they’re run badly.”

Perhaps it’s a matter of semantics. Many marketing experts would say that Wetherspoon, with its 900-plus pubs offering low price and good value, is clearly a brand and that’s what’s helped make it successful for so long. And, indeed, Martin himself acknowledges that people associate his pubs with very competitive pricing. He tells a story of being in hospital once and at the pre-op stage the nurse who was sedating him recognised who he was and told him she and her friends had always gone to Wetherspoon because of the cheap food and drinks. “As I fell unconscious, I remember thinking ‘Price does matter!’.”

Like Wetherpoon, most successful companies have a well-understood customer proposition which never changes. “Look at PizzaExpress,” says David Page. “Right from the start and throughout its 50-plus years, Margerhita has been No. 1 customer choice and American Hot the No. 2. All the changes they’ve made along the way have just been fiddling at the edges.”

Of course, some fiddling is bigger than that – and dramatic changes can happen at established companies. At Wetherspoon, early morning openings to offer breakfast was, according to Martin, the biggest step they ever took. Other changes such as focusing hard on beverages (coffee is now its single highest margin item), television (beyond the pale in the earliest days) and accommodation are all big developments yet none of them in any way represents anything contrary to the basic Wetherspoon ethos.

Similarly, Starbucks’ move to lengthen trading hours with Starbucks Evenings - a concept that offers meals and shareable hot and cold snack, a coffee ‘theatre’ and premium wines and beers – is an extension of its brand, not a reinvention. And the same is true of Pret, offering dinners with wine and jazz or vegetarian-only venues, Burger King selling beer and Costa’s Fresco extended food-range offer. They are all, In Marsden’s phrase again, simply polishing the diamond rather than excavating a new mine in search of the next Koh-I-Nor.

Sticking to your last seems to be a key factor in achieving corporate. Says Alex Reilley, Loungers co-founder: “Our view is that anyone big who tries to change what they’ve been doing for years, well, good luck to them! The only company I know which has added on something very different is JDW with coffee and breakfast. Many others have failed. We’ve always had a breakfast, all-day offer – it was part of our culture from the start, and customers understood that.”

At the end of the day says industry consultant Peter Backman, “Long-term success is down to basic things like having a reasonably good product which is fairly mainstream, not going out on a limb, being true to your roots, a little bit adaptable, though not too floaty by going with every whim, being clear about the fundamentals and looking after the staff. And being lucky too – Pizza Express was lucky that pizza has been so popular.”

To which David Page would add being in the right place. “Location is 75% of your success – however brilliant you think you are.”

For Roger Whiteside, chief executive of Greggs, whose first bakery opened in 1939, long-term success is a mixture of evolution and revolution. Since he arrived in 2013, the company has accelerated its progress away from a traditional bakery business towards a modern food-on-the go retailer.

“The reason Greggs has survived and thrived is because it’s adapted to market change. It was finding it hard to survive in the take-home market so it switched to the food-to-go market – but it’s not a massive change from what we do, it’s not selling dresses!

“Thirty years ago, it saw sandwiches selling well, and said let’s give it a go; the same with sausage rolls, and then coffee, where we’re now No. 4 in the market. Retail is mostly like that. You throw mud against the wall and see what sticks, ie what the customer likes.

“In retail, you often try new formats to see if they’ll work: we looked at motorway service stations, it proved very successful and we now have franchises in over 100 petrol locations. And we experimented with Greggs in a frozen item for Iceland and that’s now going well.”

Naturally, not every experiment will work. “We tried an artisan stand-alone artisan coffee shop, but that was too similar to the main stores and not successful enough to warrant a chain. So I flushed the learnings with seats and wi-fi back into the main stores. You can get a pretty good feel for a new concept from just one or two units, and quickly – that’s the beauty of retail.”

He agrees with Reilly that trying something completely new is very difficult to pull off. “If we were to do something new without the Greggs name attached, it would not have the immediate credibility, so you’d need to allow more time for customers to get used to it and see if they like it.”

But as well as a modern format and relevant offer, Greggs’ success, says Whiteside, has been based on a very strong company culture. “Greggs has a very strong set of values. People are happy to be part of it and work for us for a long time. They like working for a company which is socially responsible. CSR is embedded in the company. For example, we’re the country’s biggest seller of sausage rolls/indulgence food yet we encourage healthier on the go food. That’s now 10% of the business.

“And people like to have a purpose that’s bigger than just making money. Our mission is to make good food accessible to everyone.”

Whiteside says he’s half way through what is no less than a transformation of Greggs over the past near-decade. “We’ve got lots more to do in the next three years - new locations, digital channels, overhauling IT systems and investing £100m in centralizing our structure. These are major changes, and managing these changes is a big part of being a successful company. But once this step change is completed by 2020, it’ll then be more of a question of small little gains and adjustments.

“It’s essential to keep adapting. Unless you’re restlessly dissatisfied, you’ll lose the game."

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