THE POINT Issue 21 | May 2012
THE
POINT
bridgepoint.eu
Intelligent investing in Europe
from Bridgepoint
Issue 21 | May 2012
Retro-active
Commercialising the
allure of the past
Young and dispossessed
Harnessing the talents of
today’s youth
Finding your niche
In a global world, specialism
brings real benefits
www.bridgepoint.eu
Crafting the future
Catriona Marshall on crossstitch, decopatching and
efficient supply chains
FOREWORD
Revisiting yesterday
It is perhaps ironic in the 21st issue of The Point that our cover story is
looking back rather than forward. But such is the yearning for
products from the past that many quick-thinking businesses are
seeing commercial possibilities open up that were unthinkable 10
years ago.
In ‘Bring back yesterday’ (page 5) we examine the fascination with days gone by and
show how even nostalgia comes with a price tag, creating many profitable
opportunities along the way.
Striking a similarly contrarian tone, we explore the concept of the niche (‘Small is
beautiful’, page 18). It’s now clear that many companies in Europe are defying the
economic gloom to exploit profitable segments in nearly every market, underlining
the fact that ‘niche’ can mean anything but small or marginal.
It should come as no surprise that Bridgepoint is especially interested in businesses
that have carved out their own niche in sectors where perhaps Europe has a genuine
competitive advantage or where a business has a particular global appeal.
One of the worrying aspects of any economy is its inability to provide employment,
especially for the young. We analyse the long-term costs of youth unemployment
(‘A lost generation’, page 11) and question whether today’s youth can become
tomorrow’s high earners or if their prospects have been permanently blighted.
As we get older, we take for granted that healthcare provision will be both available
and effective. But, as governments and the electorate know, there are no quick costeffective fixes. One favourable innovation is ‘telehealth’, the remote monitoring of
people’s conditions from their home. This, and other exciting advances, are examined
in ‘In sickness or in health’ (page 22).
THE
POINT
May 2012
Issue 21
Published by
Bladonmore (Europe) Ltd
Editor
Joanne Hart
Design
Bagshawe Associates UK LLP
Reproduction, copying or
extracting by any means of
the whole or part of this
publication must not be
undertaken without the
written permission of the
publishers.
The views expressed in
The Point are not necessarily
those of Bridgepoint.
www.bridgepoint.eu
Ironically, as we adopt new technologies to improve healthcare delivery, many
businesses remain firmly in the pre-internet age. As a result they are overtaken by
more agile competitors using technology to grow well beyond their local markets. In
‘New era: old ways’ (page 32) we show how businesses can succeed by embracing the
digital world. Not unconnected but on a more lighthearted note, in Last Word (page
36) we see how technology can go a step too far.
Finally, in our regular Ins & Outs section (page 2) we provide news on two new UK
investments: Wiggle, the online cycling and tri-sports equipment retailer, and Quilter,
the client wealth management group. As always, I hope that you
enjoy reading The Point and that it still stimulates interest in
topics that we believe remain very relevant to the performance
of corporate Europe n
William Jackson
is managing partner of Bridgepoint
1
INS &OUTS
BRIDGEPOINT
news across Europe
UK sports leader acquired
One of the best-known names in sport retail, Wiggle, has been
acquired by Bridgepoint for £180 million.
Specialising in cycling and trisports equipment, Wiggle has a
worldwide customer network and
is the UK’s leading online retailer
for cycling, running and swimming
enthusiasts. The company has
seen exceptionally
strong growth over the
past three years, with
sales and EBITDA
increasing by 50 per
cent, despite the economic
downturn.
During 2011, robust growth
persisted as Wiggle expanded its
customer offering and reach. More
than a million shoppers visit the
online stores every week and more
than 600,000 consumers bought
goods from the company last year.
The website is available in nine
languages, accepts sales in 15
different currencies, and is
accessible to 88 countries across
the globe.
Wiggle has also established a
highly regarded ‘social commerce’
store on Facebook, making it one of
the most advanced and accessible
online retail businesses in the
world. The UK cycling market was
worth £1.4 billion in 2010 while
international markets were
estimated to be worth more than
£25 billion that year. Running and
swimming products were valued at
more than £10 billion.
Bridgepoint partner Vince
Gwilliam explains:
“Wiggle is benefiting
from strong structural
market drivers such as
the shift to online
retailing combined with the trend
towards fitness and health living
and the increasing popularity
of cycling as a pastime. In
addition, it has had a
strong track record of
profitable organic growth.”
Wiggle is chaired by
former Asda chief executive Andy
Bond, while Humphrey Cobbold
is chief executive. “We are
delighted to have a new
partner and owner in
Bridgepoint,” says
Cobbold. “The firm is
highly experienced
and successful in
investing in
growing retail
and consumer
businesses, and
has an extensive international
network which matches Wiggle’s
international strategy and growth
aspirations, and will be a significant benefit to continuing the
strong growth.” n
New hire boosts Asian ambition for portfolio companies
Bridgepoint has
appointed Henry WK
Chow to its European
Advisory Board in a
move that is set to
strengthen its ties with the Asia
Pacific region.
The former chairman and chief
executive of IBM’s Greater China
Group has more than 40 years’
2
experience in the Asia Pacific region.
During his time at IBM, he oversaw
operations in China, Hong Kong and
Taiwan. Mr Chow was recently
named by Fortune magazine as one
of the top15 people who have had
the greatest impact on the Chinese
economy in the past 15 years.
William Jackson, managing
partner at Bridgepoint, says
Mr Chow’s knowledge and experience “will be invaluable in assisting
portfolio companies with their
sourcing, production and business
development activities” and will
significantly help Bridgepoint’s
exploration of growth opportunities
for its investee companies in China
and the rest of the Asia Pacific
region n
Wealth of opportunity
Bridgepoint has gained a foothold in
the UK’s under-penetrated private
client wealth management market
with the acquisition of Quilter from
Morgan Stanley Smith Barney.
Quilter, which can trace its
ancestry back to 1777, manages
approximately £7.6 billion of funds
for a range of private clients
including high-net-worth individuals,
charities and trusts, pension funds,
corporate bodies and friendly
societies. The company currently
employs approximately 350 staff
across 13 offices throughout the UK,
Ireland and Jersey.
The UK’s discretionary wealth
management market has about
£400 billion worth of investable
assets and is forecast to grow due
to several factors including the shift
from defined benefit to defined
contribution pension schemes,
increasing personal savings and
investments and a shift in the
independent financial adviser
market towards outsourced investment management.
“Quilter is a long-established and
highly regarded business operating
in a large but fragmented market
favoured by underlying structural
growth drivers,” says Michael Black,
a partner at Bridgepoint. “As such,
we believe that there is every
opportunity for Quilter to accelerate
its growth organically as well as
make complementary acquisitions
for the business.”
Martin Baines, Quilter’s CEO, has
described the Bridgepoint-backed
management buyout as an “extremely
exciting move” for the company.
“As an independent entity, we will
have more flexibility in how we
operate,” Baines says. “This is a vital
attribute in a fast-changing market,
when the opportunities to meet the
evolving needs of our clients and
intermediaries call for greater agility
and entrepreneurial thinking.”
Quilter has started work on
improving efficiency, innovation and
effectiveness and plans to make
announcements on these developments in the coming months n
IT investments
relaunched as
Pulsant
Bridgepoint Development Capital
(BDC) has integrated its three IT
services companies, Lumison, Blue
Square Data and DediPower, under
a new name, Pulsant.
The acquisition of Lumison, an IT
managed services provider, in
January 2011 provided BDC with a
platform to build a group focused on
the high-growth SME market.
Subsequently, Lumison acquired
Blue Square Data, which provides
data centres for customers in south-east England. To strengthen its
cloud and managed services,
Lumison then acquired DediPower.
Pulsant CEO Mark Howling says:
“We have brought together three
successful IT service companies
under an effective management
team, backed by experienced
solutions architects and support
staff.” The newly formed Pulsant
has a turnover of £30 million and its
growth plan involves an investment
of £6 million in 2012 n
Continued growth ahead
Bridgepoint committed €1.4
billion to 11 new investments
last year and returned €573
million to investors.
The figures emerge in
Bridgepoint’s 2011 Annual
Review, which reveals that
more than 72,000 people
work in Bridgepoint portfolio
companies. During the past
10 years, more than 55
transactions have been
completed with a combined
value of almost €18 billion.
And more than €12 billion
has been committed to the
firm from investors around
the world.
“Market headwinds are
likely, we believe, to create
opportunities for Bridgepoint to continue the
construction of its investment portfolios at attractive
prices,” says Bridgepoint
managing partner William
Jackson.
“We remain confident that
our portfolio companies are
well placed to deliver
continued good earnings
growth and cash generation,” he adds n
3
Market
insight
Bring back
yesterday
The past has often seemed more
beguiling than the present day.
Now, more than ever, consumers
feel a yearning for the good old days
and quick-thinking businesses are
reaping the benefits.
5
n an era when we can watch
films on our laptops, iPads and
even our phones, who could
have predicted that Hollywood’s
biggest prize this year would go
to a silent movie shot in black
and white?
The Artist – the first silent film
to win the coveted Oscar for Best
Picture since the inaugural
Academy Awards ceremony in
1929 – was not alone in drawing
its inspiration from the past.
Martin Scorsese’s Hugo, which
uses 21st-century movie-making
techniques to recreate the Paris of
the 1930s – in 3D – also collected
a clutch of golden statuettes.
The wave of nostalgia
sweeping Hollywood doesn’t end
there: Silent Life, a film based on
the life of the pre-talkies
heartthrob Rudolph Valentino, is
due to be released soon, and later
this year a musical celebrating
the life of Charlie Chaplin will
open on Broadway.
It’s not just the entertainment
industry that seems fixated on
the past these days: echoes of
bygone eras are all around, from
the revival of the 1970s Sunday
teatime favourite the Arctic Roll,
to a surge in sales of vinyl records
and the return of goodies from
former East Germany.
I
6
Past perfect
The yearning for products from
our past seems to be a response
to the confusion of the age in
which we now live, an attempt to
recapture a time when life
seemed so much simpler. As
consumers struggle with postcredit crunch austerity, the
days of old have never looked
more comforting.
A diverse range of manufacturers are now employing
nostalgia as a marketing tool,
from kettle manufacturer Russell
Hobbs, which celebrated its 50th
anniversary by relaunching its K2
kettle, to carmaker Fiat, which
launched the new-look Fiat 500,
also on the 50th anniversary of
the original model. Old-style
Dutch bicycles can be seen in city
centres around Europe. Even in
the cutting-edge technology
sector, nostalgia is widespread:
retro-style radios have become
increasingly popular, while for
the iPhone a retro camera app
gives photos a vintage sepia
tint. There’s also a roaring trade
in vintage Nokia handsets
and ringtones.
In Germany, for example, a
specific brand of nostalgia
dubbed “Ostalgie” – a love for all
things from the former East
Germany – has boosted old-style
brands such as Rotkäppchen
sparkling wine and the Zaha
trainers once favoured by East
German and Soviet athletes.
Vinyl albums have taken off
too in recent years, with sales
surging 39 per cent to 3.9 million
albums last year, accounting for
1.2 per cent of all album sales,
according to figures from Nielsen
SoundScan. The revival of vinyl is
all the more remarkable given
that digital music sales
outstripped physical sales last
year, for the first time ever.
Return of the staycation
Some British seaside resorts are
also championing the growth in
‘staycations’ as evidence of a
nostalgia for past holiday habits.
Growth in domestic tourism is
forecast at 1.3 per cent in 2012,
according to the World Travel &
Tourism Council (WTTC), more
than double the rate expected for
the wider economy. But WTTC
communications director Toby
Nicol suggests austerity rather
than nostalgia is driving the
trend back towards the British
seaside.
“The euro is still very strong
against the pound, which makes
it expensive to go abroad. People
‘‘
are effectively going back to what
they did 20 years ago. But if
they’re eating rock and riding
donkeys in Skegness, I don’t
think it’s because of nostalgia; it’s
just that they’ve got less money to
spend,” he says.
So perhaps any misty-eyed talk
of a resurgence of the great
British seaside resort is more a
case of hard-up holidaymakers
putting a gloss on their enforced
staycations rather than any real
desire to swap Tuscany for the
delights of Torquay.
One of the hottest
homemaking trends right now
is baking, reflected in the
surprise UK television hit last
year, The Great British Bake
Off. More than five million
viewers watched the finale of
the competition”
Homemaking and baking
One sector that has boomed in
the UK recently is the £2 billion a
year arts and crafts market, as
cash-strapped families rediscover old-fashioned pursuits
such as knitting, baking and
papier-mâché.
But the growing popularity of
arts and crafts is not fuelled
purely by hard times. Catriona
Marshall, chief executive of
Hobbycraft, the largest retail
operator in the sector,
explains: “It’s not all about
make do and mend. It’s about
homemaking and a reaction
against materialism and the
disposable society.”
Hobbycraft’s core customer is
aged 45-plus, and a keen sewer
and knitter. These skills tended to
skip the younger generation, as it
became cheaper and more
fashionable to buy goods rather
than make them yourself. “There
was simply no need to darn
socks, so they never learnt how,”
says Marshall.
But the current generation of
mums is keen to see the creative
skills they missed out on acquired
by their children. “It’s a great
way for parents to interact with
their kids and a much more
sociable pursuit than hours spent
alone in front of a computer,”
says Marshall.
One of the hottest
homemaking trends right now is
baking, reflected in the surprise
UK television hit last year, The
Great British Bake Off, which
became BBC2’s most-watched
programme. The finale of the
competition, where the three
contenders baked Victoria
sponges, strawberry and cream
meringue nests and cheesecakes
for a street party, had all the
excitement of The X Factor final,
with more than five million
viewers tuning in.
The nostalgia-fest is a Europewide phenomenon, however.
According to research group
Euromonitor, the more
consumers’ lives become defined
by technology, the stronger their
desire to refer back to slower,
cosier times. In its 2011 report
Nostalgia Marketing and
European Consumers: Does
Yesterday Sell? Euromonitor also
makes the point that nostalgia
and retro styles are not confined
to older consumers, but appeal
across all age groups. This is
backed by a survey from
insurance group Standard Life,
which found that the age group
most eager to go back in time is
7
‘‘
A diverse range of manufacturers are now employing
nostalgia as a marketing
tool, from kettle manufacturer Russell Hobbs, which
celebrated its 50th anniversary by relaunching its K2
kettle, to carmaker Fiat,
which launched the newlook Fiat 500, also on the
50th anniversary of the
original model”
Sweet life
28- to 40-year-olds – ie, the
The food and confectionery
generation burdened by the
market was among the first to tap
biggest mortgages and childinto the trend for nostalgic
rearing responsibilities.
“comfort foods”, such as the UK’s
Kitchens have become
Arctic Roll dessert, first created in
“notorious hotspots for nostalgia”
the 1950s and brought back by
in these days of food blogging,
Birds Eye during the 2008
say Euromonitor researchers.
recession. Cadbury successfully
“Home-makers everywhere have
brought back the Wispa
made UK brand Cath Kidston,
chocolate bar after a campaign
Danish GreenGate kitchenware
on social networks and it is still
and German purveyors of quality
selling well. And
tools and
when Nestlé brought
furniture
In Germany, there’s a
based on old
specific brand of nostalgia back the Texan bar in
models,
dubbed ‘Ostalgie’ – a love 2005, it offered
customers a free
Manufactum,
for all things from the
retro ringtone too.
the success
former East Germany”
Ten years ago,
stories they
Michael Parker founded A
are,” they suggest.
Quarter Of, an online sweets
Furthermore, it would be
retailer that stocks just about
misleading to see this simply as a
every old-fashioned sweet you
result of the recession: “Quite the
have ever heard of, from sherbert
contrary – consumers often
flying saucers to parma violets,
spend above the odds to
space dust and sugar mice.
purchase something that reminds
Business is booming, as older
them of former, happier days,”
consumers satisfy their cravings
says the research group.
for sweets they used to spend
their pocket money on. “It’s an
inexpensive treat,” says Parker.
“For just a few pounds you can be
whisked back to your childhood.”
While some sweets from the
past still sell well today –
pineapple chunks and sweet
‘‘
8
tobacco are among the most
popular treats – others remain
unwanted. “There is a good
reason some brands disappeared
– they just weren’t selling enough
because people didn’t like them.
That’s not going to change now,”
says Parker.
But older customers are not
the only section of society to
indulge their sweet cravings at A
Quarter Of. “We keep finding
younger and younger customers,
who are nostalgic about the
newer sweets that were around
when they were kids. The sweets
might change, but the nostalgia
doesn’t,” says Parker.
Nostalgia also plays strange
tricks on consumers. Cybercandy
imports sweets from around the
world and founder Margaret
Morrison explains: “Customers
sometimes say: ‘It’s not as big as I
remember it.’
“Perhaps it’s just that your
hands and mouth were smaller
then, I tell them.”
Longing to belong
Their experiments found that
There is some academic research
the key to preferring nostalgic
to support the commercial case
products is the human need to
for marketeers’ dash down
belong: “Whenever a situation
Memory Lane. In a study
arises in which people feel a
published in the Journal of
heightened need to belong to a
Consumer Research in 2010,
group, or generally need to feel
researchers from Arizona State
socially connected, they will
University in the United States
show a corresponding higher
and Erasmus University in the
preference for nostalgic
Netherlands conducted a series
products,” the report says, and
of
those players
experiments to
The age group most eager to excluded from
discover why
the ball game
go back in time is 28- to 40people turn to
year-olds – ie, the generation were “cured” of
nostalgic
their need to
burdened by the biggest
products.
belong by eating
mortgages and child-rearing
In one experia biscuit brand
responsibilities”
ment, a group
from the past.
of people were asked to play a
“Next time you know you are
computer ball game, from which
feeling left out, try watching a
some members of the group
movie that you loved watching in
were excluded within the first
college, or eating a food that
few minutes.
reminds you of when you were a
“Those people who were
kid,” the academics advise. “It
excluded after just a couple of
really will make you feel better.”
ball tosses not only said that
There is nothing new about
feeling like they belong is more
nostalgia, nor about companies
important to them than people
tapping into the power of the
who were not excluded did, but
past to sell their products. When
they also chose more nostalgic
the Yorkshire-based confecthan contemporary products in a
tionery group Mackintosh
variety of categories, including
launched its Quality Street
movies, TV shows, food brands,
chocolates during the Depression
cars and even shower gel,” the
of the 1930s, it invoked the spirit
researchers say.
of a bygone era by dressing the
‘‘
characters illustrated on the tin –
Major Quality and Miss Sweetly –
in Napoleonic garb.
With the Queen’s Diamond
Jubilee in the UK this year, there
will be no shortage of opportunities to take a trip down Memory
Lane. However, simply invoking
the past is no guarantee of
commercial success.
Past Times, the retro-retailer,
collapsed into administration at
the start of the year, as customers
found they could do without its
mix of art deco jewellery and
Victorian kitsch.
In 1995, Mars revived
Spangles, the square, dimpled,
fruit-flavoured boiled sweets that
were first sold in the 1950s, when
confectionery was still rationed.
But sales failed to take off and the
Spangles brand was soon
abandoned again, even though it
still regularly tops polls for the
sweet most people say they
would like to see reintroduced.
However, relaunching an old
brand is no substitute for product
innovation, nor can a nostalgialaden advertising campaign sell
products for a company that has
run out of ideas n
9
Talking
point
A lost
generation?
Millions of young people across Europe are
looking for work. The problem is acute and
there are few signs of imminent improvement.
But what are the long-term effects of
this problem? Will today’s youth be
tomorrow’s happy high-earners or
are their prospects for health, wealth
and happiness permanently blighted,
asks Professor David Blanchflower.
11
he past four years have seen
minimise actual redundancies,
dramatic changes in the
the public sector has seen
workplace. Firms across
widespread job culls, hiring
Europe have hoarded labour.
freezes and an effective
They have not fired as many
reduction in pay. All of this has
workers or closed as many plants
been hard enough for those in
as in previous recessions but they
work but it has had a major
have radically cut the cost of
effect on the young, dramatically
human capital – reducing hours
reducing demand for their
and keeping wages low. Fear of
services. Employment of 16- to
unemployment
17-year-olds fell
has risen,
by 209,000
Long spells of unemployworkers have
between March
ment when young can have 2008 and
had little
genuinely harmful
bargaining
November 2011,
consequences, leaving
power and
while that of 18permanent scars rather
companies
to 24-year-olds
than temporary blemishes” fell by 384,000.
have done
what was
The pattern is
necessary to survive.
repeated across Europe. The
While the private
number of unemployed young
sector has tried to
people has risen sharply in many
countries, not least because
youth unemployment tends to be
cyclically volatile. Unemployment rates of more than 20 per
cent have become the norm in
parts of Europe, and in Spain
and Greece about half of the
youth labour force is
unemployed. Countries
such as Austria, Germany,
the Netherlands and
Norway have been more
benign, with youth
unemployment in single
digits. In every country
though, youth rates are
higher than overall
rates and in many
cases, the ratio is
two or even
three to one.
T
‘‘
12
Young, keen
and willing to learn
Even when young people do
manage to find jobs, they are
more likely to be temporary staff
than permanent; they are far
more likely to have a part-time
job than a full-time one, and
even when they are full-time,
they say they would like more
hours. So prospects are not
great: it is hard to procure a
job and those that are available
are unsatisfactory.
The problem is intensified
because there are lots of young
people about, offspring of the
prolific baby boomer generation.
So in 2008 the number of 22year-olds in the UK was the
highest it had been for more than
a decade or will be for at least
another two decades. The
situation is similar in most other
European countries. But it will
not persist. In fact, the size of the
youth cohort is expected to
decline sharply over the next few
years, especially in East
European countries. In Latvia,
Lithuania and Russia, for
example, there were half as
many five-year-olds as 20-yearolds in 2008. Fast forward 10 or
20 years and a clear pattern
emerges. Good news for
toddlers: little comfort for
today’s hard-pressed school and
college leavers, however.
Permanent damage
It is too early in the current cycle
to determine what long-term
impact the Great Recession will
have on these youngsters’
working lives but, as so many
struggle to make a successful
transition from school to work,
there are growing fears that they
Harnessing the talents of the young may seem a tall order in today’s
world – but youth can bring long-term benefits to business
Irish playwright and co-founder of the London School of Economics
George Bernard Shaw famously opined in his dotage: “Youth is wasted
on the young.” But as they face one of the worst job markets in living
memory, there’s a cohort of graduates and school leavers who are
starting to think that youth is wasted on business, too.
It’s true that businesses are hiring far fewer eager young newbies
than they were a few years ago. “Kids are struggling to get on the career
ladder, yes. The situation’s been getting worse for the past five years
and it seems to be harder than ever this year,” says Dan Wagner, CEO of
incubator group Bright Station Ventures. But it’s not because firms don’t
recognise the advantages of hiring youth. “They simply don’t have the
jobs. The gravy train has stopped, businesses and consumers are
squeezed and banks aren’t lending,” he says.
Whatever the causes, a lack of new blood can have dangerous
consequences. Indeed, the business benefits of having a decent number
of youngsters in the workplace are arguably stronger than ever. The
pace of technological development means the latest generation of
twenty-somethings has an unprecedented ability to reshape the world in
its own image, with all the opportunities for growth that presents.
Take the Arab Spring: a graphic demonstration of the younger generation of ‘digital natives’ blindsiding established power structures thanks to
their superior understanding of technologies such as social networking.
Or the advance of online shopping relative to the traditional high street.
“Youngsters are very plugged in from a tech point of view; they live social
networking in a way that older people just don’t,” says Wagner.
It’s not just their engagement with the Next Big Thing that makes
younger people good for business either. “Youngsters are enthusiastic;
they bring fresh eyes to the challenges facing any organisation and a
brain that is not preformed to accept the limitations of the status quo,”
says executive coach Miranda Kennett. Who can afford to ignore such
valuable attributes?
Properly managed and engaged, businesses can reap rich rewards
from the virtues of youth but, like so many things in life, the output
depends on the input. “A proper induction which makes your expectations clear is essential if you are to get the best out of new young
employees,” says Kennett. However enthusiastic and energetic they
are, graduates lack experience of the workplace and need to be shown
the ropes.
Wagner agrees. “They are optimistic, they want to make things happen
and they will work all hours to do so. But you have to mentor them and
give them mindshare and resources to really galvanise results.”
A serial entrepreneur from his early 20s, he has one other piece of
advice for employers – give them credit and as much responsibility as
you possibly can. “In my early 20s, I worked for an ad agency. I got a
client nobody wanted to commit to a million-pound campaign, and the
agency took it away from me. That’s why I left to start my own business –
I felt like I had been robbed.”
13
Table 1: Unemployment rates
Euro area
Austria
Belgium
Denmark
France
Germany
Greece
Ireland
Italy
The Netherlands
Norway
Portugal
Spain
Sweden
United Kingdom
US
Overall
Ratio of under 25/overall
Under 25
21.6%
10.7%
2.0
4.0% 8.9%
2.2
21.2%
7.4%
7.9%
2.9
14.6%
1.8
23.3%
10.0%
2.3
5.8%7.8%
1.3
19.9%
48.1%
14.8%
2.4
29.6%
2.0
31.1%
9.2%
3.4
5.0% 9.0%
1.8
3.4% 8.4%
2.5
14.8%
35.1%
2.4
23.3%
49.9%
2.1
7.6%
22.4%
2.9
8.4%
22.2%
2.6
8.3%
16.0%
1.9
Source: Eurostat, January 2012
Under 25
Over 25
Financial
Life
Financial
Life
expectations expectations expectations expectations
Table 2: Expectations
Columns 1 and 2 report financial and life
expectations for those under 25.
Austria
40
39
21
18
Belgium
38
49
21
29
Columns 3 and 4 report financial and life
expectations for those aged 25 and above.
Denmark
48
54
23
28
France
47
63
22
27
The questions asked were:
“What are your expectations for the next 12
months: will the next 12 months be better,
worse, or the same when it comes to
(a) the financial situation of your household
(b) your life in general?”
Germany
27
44
13
17
Greece
9
18
6
8
Ireland
14
29
13
18
Italy
22
39
22
24
Netherlands
39
53
19
27
Portugal
7
22
8
10
Spain
30
43
22
28
Sweden
52
82
24
36
United Kingdom
41
58
20
27
The table reports the proportion of
respondents that answered “better”.
Source: Eurobarometer Survey #75.3, conducted in May 2011
Table 3: How do you feel?
NEET
In education,
employment or training
The table opposite reports responses to
the question:
“How often do you feel stressed,
anxious, etc?”
Stressed
55
50
Anxious
51
39
Loved
52
70
Down or depressed
52
28
The table presents the proportion saying
“always” or “often” for NEETs and for
anyone in employment, education or
training.
Sad (like crying)
38
22
Secure
38
65
Rejected
38
20
Hopeful
35
65
14
Source: YouGov
‘‘
Youngsters growing up during
recessions tend to believe success in
life depends more on luck than effort”
will be permanently damaged.
Research suggests that long
spells of unemployment when
young can have genuinely
harmful consequences, leaving
permanent scars rather than
temporary blemishes. In other
words, there is a serious
danger that we are creating ‘a
lost generation’.
For a start, the effects of a
period without work when
young can impede further
employment. A teenager who
spends time out of work in one
year is highly likely to spend less
time working the following year.
Lost work experience also
seems to have a persistent effect
on wages. The National Child
Development Study (NCDS)
follows the lives of 17,000 people
born in the UK during a single
week in 1958. Its data indicates
that those who were
unemployed when young still
‘‘
There are large,
had lower wages at
negative and persistent
the age of 50 than
effects on wages for
those who worked
those who graduate
during their teens
from college during an
and 20s.
economic downturn”
Even youngsters
who go to college or
A poor start
university appear to be adversely
affected if they enter the labour
Not only are people poorer if
market during a recession,
their working lives get off to a
whether or not they experience
bad start: they are often more
a spell of unemployment. In fact,
miserable throughout their lives.
research suggests there are
The link between material
large, negative and persistent
wellbeing and contentedness is
effects on wages for those who
widely debated but evidence
graduate from college during an
from the NCDS suggests that
economic downturn. Simply put,
children who were unemployed
lifetime earnings are substanafter school or college are less
tially lower than they would
happy than their more gainfully
have been if the graduate had
employed peers, even 40 years
entered the labour market in
on. There is even a school of
good times.
thought that youngsters growing
Furthermore, those who
up during recessions tend to
graduate in worse national
believe success in life depends
economies tend to end up in
more on luck than effort. They
lower-level occupations.
support more government
15
‘‘
redistribution, but have less
confidence in public institutions.
In other words, recessions
make youngsters both fatalistic
and cynical.
Northern lights
Under normal circumstances,
happiness tends to be U-shaped.
Especially high when young, it
hits a low point in the mid-40s
and rises again in later life,
without ever hitting the highs of
youth. Unemployment seems to
wreak havoc with this trend
however, lowering the happiness
of both young and old.
A look across Europe
highlights this pattern. In
virtually every country, the
under 25s have a far sunnier
outlook than the over 25s. But in
countries experiencing the
greatest austerity measures, the
young are considerably less
optimistic. In Greece, for
example, only 18 per cent of
under 25s expect life to be better
in the coming year. In Sweden,
82 per cent do.
The gap in expectations is also
narrower between young and old
16
In Greece, only 18 per cent of under 25s
expect life to be better in the coming
year. In Sweden, 82 per cent do”
in poorer countries, particularly
when it comes to financial
expectations. In Portugal, 7 per
cent of under 25s expect their
financial situation to improve
this year, compared with 8 per
cent of older folk. In the Netherlands, the figures are 39 per cent
and 19 per cent, respectively.
Of particular concern is the
group of young people who are
not in education, employment or
training, known as NEETs. In a
recent survey conducted by UK
pollsters YouGov, more than
2,000 16- to 25-year-olds were
asked about their attitudes to
various aspects of their lives.
The survey, the fourth in a series,
shows that happiness levels
have remained pretty constant
over the past three years for
those in work, education or
training but the happiness levels
of NEETs, which was always
lower than everyone else, has
fallen further. The gap has
widened considerably.
More than half of NEETs say
they always or often feel down or
depressed, compared with 28 per
cent in work, education or
training (WETs). And just 38 per
cent of them say they often or
always feel secure, compared
with 65 per cent of WETs.
Conversely, only 35 per cent of
NEETs claim they often or
always feel hopeful, against
65 per cent of WETs. The
concern is that this group of
NEETs, along with their counterparts in austerity-stricken parts
of Europe, may never catch up.
This is a difficult situation.
Youth unemployment is rising
across Europe and its long-term
impact could be serious. Longterm unemployment hurts young
people even more than older
adults and is particularly hard to
overcome, having an adverse
impact on optimism, disposition
and general levels of contentment.
In normal economic
conditions, the vast majority of
youngsters successfully make the
transition from school to work
and feel happy and upbeat as a
result. In these tough times many
will not. It isn’t their fault; they
were just dealt a bad hand. How
this will affect their thinking in
later life is anyone’s guess n
Business
trends
Small is
beautiful
cross Europe, mainstream companies are
struggling against austerity and economic
stagnation. But niche companies are
bucking the low-growth trend, defying the
economic gloom to exploit profitable segments of
nearly every market. Businesses in this category are
incredibly wide-ranging: from online retailers to
specialist pharmaceuticals firms to IT services
providers. Nimble and highly specialised, many are
enjoying genuine success.
So what is giving them the financial edge? Jim
Murphy, editorial director at The Future
Foundation, a think tank that identifies social and
consumer trends for businesses, says that for a start
it is a mistake to presume niche simply means small.
“Niche can mean small and marginal, but it can
also be a synonym for game-changing – something
A
18
Niche used to be a byword for small and
underdeveloped in business. Now, niche
is becoming a byword for success.
that completely redefines the market in which it is
operating and then everyone has to follow suit,”
he suggests.
The common driving force behind many niche
businesses is the internet, which has completely
reconfigured the landscape for retailers and other
consumer-facing companies. But business-tobusiness service providers have also reinvented
their models recently in response to the
development of an online marketplace.
Pulsant is a mid-market IT services consolidator,
backed by Bridgepoint Development Capital. The
business, originally called Lumison, has made three
acquisitions in the past 18 months, which have been
integrated and rebranded as Pulsant.
“Our strategy was to create a company that
provides hosted IT services to medium-sized
‘‘
The common driving force
behind many niche
businesses is the internet,
which has completely
reconfigured the landscape
for legions of consumerfacing companies and
business-to-business
service providers”
companies. The market was
poorly served and there was an
opportunity to create a company
that could grow quickly,” says
chief executive Mark Howling.
“The name stands for being
alive with activity. It is supposed to demonstrate we
are at the heart of any company.”
Not only is the service provided by Pulsant linked
to the internet – the company hosts data centres
that companies use to store their information in the
cloud rather than relying on servers on their own
premises – but many of its clients, such as graphic
design agencies, are themselves internet-based.
“We only focus on the mid-market, so companies
a product which is hard to
replicate and has access to a global
customer base, although we do
have a few UK companies in our
portfolio,” says Chris Hutchinson,
investment manager at specialised
asset manager Unicorn.
“Companies also have to have a proven track
record, be cash generative and we have to
understand what they do – so someone who digs
holes in the ground in Kazakhstan wouldn’t work,”
he adds.
Hutchinson says the most obvious niche area for
investments is currently pharmaceuticals, life
sciences and healthcare.
with between 10 and 1,000 staff. And what we
predominantly do is provide their IT infrastructure.
Those customers tend to have a high dependency
on IT and their supplier base is very fragmented,”
explains Howling.
Pulsant’s main competitors are major global
corporations such as IBM, which Howling believes
are not really interested in mid-market UK
customers. Alternatively, big global players such as
Amazon, which currently offers smaller businesses
off-the-peg cloud computing solutions, might be
able to tailor their services to compete.
This could threaten Howling’s continued
expansion but with a £10 billion SME IT market to
play for in the UK – of which Pulsant currently has
just 1 to 2 per cent – there is ample room to expand.
Pulsant focuses on UK-headquartered companies
but in today’s globalised world this is the exception
rather than the rule, both for management teams
and for investors searching out promising niche
companies.
“We specifically look for businesses that are able
to sell into a global marketplace. They need to have
“One example is Advanced Medical Solutions. It’s
a £160 million company, which is in the business of
advanced wound care. They produce what is
effectively an advanced sticking plaster made from
silver alginate and seaweed, which both have great
healing properties. They sell it into the NHS
extremely successfully,” he explains.
London-listed Advanced Medical Solutions has
ploughed its profits back into research and
development and is now ready to launch
LiquiBand, a sort of medical glue. Global
conglomerate Johnson & Johnson is the only
competitor for this product and its offer is more
expensive and more limited; for instance,
emergency medics cannot use it on patients’ faces.
“This is an example of a business where there is
only one global competitor and they can expand
into a huge niche global market,” says Hutchinson.
An early example of Unicorn’s niche investment
strategy is Abcam, a manufacturer and distributor
of therapeutic solutions linked to the human
genome project, which listed in London in 2005.
After failing to secure early-stage venture capital
19
funding in the 1990s, its founders cobbled together
some cash themselves. Their persistence paid off:
when Abcam listed, it was worth £50 million; today
it has a market cap of £630 million.
The Future Foundation believes pharmaceutical
and health will continue to be a huge growth area
for niche businesses, with one twist – that Europe
will be borrowing ideas from the developing world.
“One highly visible trend in Western Europe,
where you have hard-pressed health services across
the continent, is that they are adopting
technologies in Africa and Asia,” says Murphy.
“In poorer countries, people are finding cheap
solutions, like machines that allow patients to take
their blood pressure at home then phone in results
completely changed the dynamics of the
retail sector.”
While there are successful niche retailers who do
not rely primarily on internet sales – for example,
99p Stores, a rapidly expanding UK retail chain that
offers more than 3,000 products at less than a
pound each – online is key for many of the most
dynamic operators in the sector.
And because the internet spans the globe, so does
Wiggle’s marketplace.
“There are a couple of things that make Wiggle
global. First of all, we have customers around the
world – cyclists and triathletes – who have their
own, shared vocabulary. Second, the brands we
deal with are small but global. These common
because they won’t see a doctor for months. There
factors allow us to both exploit and expand a global
are examples of sophisticated wealthy buyers in
niche,” says Cobbold.
Western Europe taking the same ideas.”
But despite the centrality of the internet to his
But it is not just life sciences that provide
business model, Cobbold makes a distinction
entrepreneurs with the opportunity to exploit a
between the original online businesses that folded
global niche. Humphrey
in the wake of the 2001
Cobbold, co-founder and chief
dotcom crash and his own.
executive of cycle and cycle
“There were a lot of bad
We have customers around
accessories retailer Wiggle, says
businesses founded in the
the world – cyclists and triaththe internet made his
dotcom years. Our business
letes – who have their own
proposition possible. Cobbold
had few pretensions so by
shared vocabulary. And the
started the business, as he puts
necessity it was profitbrands we deal with are small
it, “by accident” in the UK in
making from the start. We’ve
but global. These common
1998, with just a “bit” of
hardly even scratched the UK
factors allow us to both exploit
experience with bikes. Today,
market. It’s a £1.5 billion
and expand a global niche”
after two rounds of private
market and we have a 2.3 per
equity backing from Isis and
cent share in total, maybe 20
Bridgepoint, Wiggle delivers to customers in 70
per cent of the online market. Globally our share
countries worldwide.
is infinitesimal.”
“There are a number of things the internet
Bridgepoint acquired Wiggle just a few months
channel helps us to do,” says Cobbold.
ago and Cobbold is confident there is plenty of
“Most importantly, it creates a market globally
growth left in the tank.
where there wasn’t one before. The internet has
“I want to drive and develop this business and
‘‘
20
make it a highly successful retailer,”
was originally driven by safety, but it’s now
he says.
developing rapidly.”
Looking ahead, smart entrepreneurs are
Murphy points to the new electric Ford Focus,
analysing a number of influential trends that could
which comes with what it terms a “Driver
define the niche success
Assistance Pack” as an optional
stories of the future.
extra. The system includes a
One growth area is functional
“One growth area is
front-mounted camera that
foodstuffs, food that either
functional foodstuffs, food
scans the road for the driver,
makes your hair and skin shine
that either makes your hair
looking for traffic signs such as
or makes your healthier. Another speed limits. The car will also
and skin shine or makes you
is smart cars – that do
healthier,” says Murphy.
automatically break for the
everything except make the
“Another is smart cars – you
driver in high-density urban
driver a cup of coffee”
see cars that do everything
environments where it senses an
except make the driver a cup
obstacle, avoiding collisions with
of coffee. The trend
stationary objects.
Luxury customer service is another area of
growth, such as the concierge service offered by
private members’ club Quintessentially. Vertu,
the designer mobile phone created by
Nokia, has a luxe service of its own.
Users can access a global concierge
service that will book dinner in
London or a hotel in Asia at any
time of day or night – a taste of
things to come for the cashrich, time-poor traveller.
But in a globalised
corporate world, which is
rapidly polarising into huge
conglomerates and niche
specialists, differentiation
remains the key to success.
“The world in the 21st
century is about finding out
what the customer wants,
adding that extra level and
delivering it. Niche operators
can often do that faster and more
effectively than their larger peers,”
says Murphy n
‘‘
21
In the
spotlight
In sickness or
in health
Europe’s ageing population imposes considerable challenges on national health
services. But recent advances in the way healthcare is delivered can save costs
and improve lives, as the BBC’s medical correspondent, Fergus Walsh, explains.
ere are two healthcare
visions of the future…
In the first scenario, a
75-year-old man checks into
hospital for organ regeneration
therapy. His failing heart is
injected with stem cells that will
revitalise and repair years of
accumulated damage. For good
measure, his diseased liver is
replaced with an organ grown in
the laboratory. After a spell in
hospital he returns home, but his
vital functions are being
constantly monitored and
relayed back to the medical
team. Any sign of trouble and
he’ll get an alert on his
smartphone and may be called in
to see his specialist. After a few
weeks, he’s back on his bike and
cycling 20 miles a day. The few
medicines he receives are
personalised to his genetic
profile to ensure that they not
only work but also cause
minimum side effects.
H
22
In the second scenario, the
same man is living as a virtual
prisoner in his home due to
chronic cardiovascular disease.
Just walking upstairs leaves him
gasping for breath. He is
morbidly obese and his complex
health needs mean he is a
frequent hospital inpatient. He
would prefer to have some home
monitoring of his diabetes but his
local health provider says it
cannot afford it. Side effects from
his various medications are
worsening his mood and he faces
another slew of appointments to
evaluate and treat his depression.
Clearly we would all prefer to
see the first future rather than
the second, but which is the most
likely? What are the prospects
for health in the 21st century?
Any focus on the future of
health must concentrate on
diseases and ailments of the
ageing body. Elderly people
account for a bigger proportion
of European healthcare every
year and that trend is likely to
continue. Half the population
over 60 already has a long-term
health condition. Yet in most
Western European countries,
one in three girls born this year is
expected to live to 100 and one in
four boys. By 2050, there will be
about half a million people aged
over 100 in the UK alone. So old
age will be the norm. The issue is
whether these extra years of life
will be spent in sickness or in
health – and what technology
and health innovation can do
about it.
Remote delivery
In the corner of his kitchen, 60year-old Joe Barr has a small
black box he calls the “nurse on
my shoulder”. He has heart
disease, Type 2 diabetes and
chronic obstructive pulmonary
disease, a lung condition known
as COPD. When he checks his
‘‘
weight, the machine reads it out
loud. He pricks his finger and
does a blood glucose reading. He
slips his finger into an oximeter,
which monitors the oxygen
saturation levels in his blood. All
the results are relayed wirelessly
to nurses at a health clinic many
miles away. Barr explains: “It
gives me great peace of mind and
it tells you about your body.
When my blood pressure has
been really low, I have just taken
it easy that day.”
Telehealth – the remote
monitoring of people’s vital signs
and conditions from their home –
has been embraced by health
services as an area with huge
potential. The world’s biggest
randomised controlled trial of
telehealth was conducted
recently, involving more than
3,000 patients with diabetes,
The world’s biggest trial of telehealth
suggests it can cut emergency
hospital visits by 15 per cent and
emergency admissions by 20 per
cent. Most strikingly, it seemed to
show a 45 per cent reduction in
mortality rates”
heart failure or COPD.
Preliminary findings suggest
telehealth can cut emergency
hospital visits by 15 per cent and
emergency admissions by 20 per
cent if used correctly. Most
strikingly, it seemed to show a 45
per cent reduction in mortality
rates. Hospitals in Cornwall,
south-west England, had 1,000
patients on the telehealth trial
and were so impressed, they
want to increase that number to
30,000 within five years.
UK-based company Tunstall is
the biggest global provider of
telehealth, with about 2.5 million
patients on its books. Managing
director Simon Arnold says
Germany and the US have been
at the forefront of telehealth and
both countries have trialled a
range of different schemes in
recent years.
In autumn 2011, for example, a
telemedicine network was
launched in Cottbus,
Brandenburg, south-east of
Berlin. Jointly developed by a
telecoms company, a medical
and IT supplier and a hospital,
the system is designed to allow
the remote monitoring of up to
500 high-risk patients with
advanced heart failure. Doctors
will have access to patients’
electro-cardiograms, blood
pressure and oxygen saturation
levels. The aim is to reduce
emergency hospital admissions
and cut death rates.
Getting personal
If patients are to be kept out
of hospital and living
independently, then effective
treatments are clearly vital.
Anders Sandberg, research fellow
23
at the Future of Humanity
Institute at the University of
Oxford, says there will be an
increasing need for medicines to
help those who are living longer
than previous generations but
suffering from chronic disease.
“We are seeing a serious
stagnation in the number of new
medicines coming to market,
which is surprising given the huge
advances in the understanding of
the body. The problem is that in
order to make a new drug you
have to spend a fortune in trials to
check it is safe. This is particularly
problematic because there will be
an increasing need for drugs to
help our growing elderly population,” he explains.
Sandberg believes personalised
medicines may help refocus the
approach of the industry and of
doctors. A simple genetic test can
already check whether many
treatments will work for some
patients and not others. This
‘‘
targeted use of drugs is now a
significant growth area in treating
cancer and other conditions.
Almost every day, researchers
find new genetic markers for
disease, encouraging the creation
of medicines specific to some
patients and not others, so that
side effects can be minimised.
One key driver of personalised
medicine is the dramatic advance
in gene sequencing, arguably one
of the greatest leaps forward in
our understanding of the human
body. In the year 2000, it took
more than a decade and cost
billions of dollars to sequence one
genome. Now it can be done in
hours for a few thousand dollars.
The cost is falling so fast and the
speed of sequencing increasing so
rapidly that within the next few
years it is conceivable that every
newborn could have their
genome sequenced at birth. One
genome on its own is of limited
value, but comparing hundreds or
thousands will allow far
deeper understanding of
Pointing to a bio-engineered
human health and why
synthetic artery, he says:
our bodies malfunction.
‘This material pulses like an
A research project at
artery. We are also making
London’s Royal
heart valves, replacement
Brompton Hospital, for
ears, nose and skin’”
24
example, is investigating
individual gene sequencing as
part of a research project into the
inherited factors that help trigger
heart disease.
Professor Dudley Pennell
explains: “Ultimately, our aim is
to offer same-day analysis –
involving patients having a scan
and genetic profile of their heart
problem, leading to a personalised therapy which will treat
their particular disease.”
Artificial technologies
We cannot change our genetic
profile but we already know how
to boost our chances of a healthy
future, through a balanced diet,
regular exercise and so on. Men
in Glasgow, Scotland, live on
average 14 years less than those
in the smarter parts of London.
The reasons are not to be found
in their genes, but in social
factors, lifestyles and especially
smoking rates. But if damaged
organs could be replaced or
repaired, it might mean
decades more of good health
even for those who most abuse
their bodies.
Synthetic body parts may
sound like something out of a
from the patient’s bone marrow.
rather outlandish sci-fi movie but
major issue – many people die
The operation was carried out
– according to Alex Seifalian,
while on the waiting list for an
in Barcelona by the same
professor of nanotechnology
organ. Removing the need for
Italian surgeon who did the
and regenerative medicine at
immunosuppressant drugs
Swedish surgery.
University College London – they
would release patients from
Regenerative medicine is still
have a great future. Pointing to a
dependence on powerful
in its early stages, and scientists
bio-engineered synthetic artery,
medication, which itself can
are particularly keen to learn
he says: “This material pulses
shorten life expectancy.
how to repair disorders of the
like an artery. We are also
The material used in the
ageing brain, such as
making heart valves,
Alzheimer’s disease.
replacement ears,
Dementia costs the UK
nose and skin.”
A simple genetic test can already check
£17 billion a year, and it’s
Professor Seifalian
whether many treatments will work for
estimated this could rise
and his team are
some patients and not others. This
to £50 billion by 2050 as
already putting their
targeted use of drugs is now a
the population ages.
artificial body parts
significant growth area in treating
Clearly, drugs or
to work and last year
cancer and other conditions”
implants that enhance
orchestrated the
cognition in elderly
world’s first entirely
people would be hugely benefiwindpipe operation does have
synthetic organ transplant. The
cial. “People understandably
limits. While it is suitable for
recipient was a 36-year-old man
want a cure for neurodegenerahollow structures such as a
in Sweden whose windpipe had
tive diseases and there is a huge
windpipe or an artery, it can’t be
been ravaged by cancer. Without
amount of research going on. We
used to create complex organs
surgery he would have died. The
are still far away from it but
such as a heart, liver or kidney.
tailor-made synthetic organ was
treatments which enhance
Instead of trying to replace these
created in London using 3D scans
memory are already in developorgans, many trials are under
of his windpipe. It was flown to
ment,” says Sandberg.
way to see if an injection of stem
Stockholm where it was bathed
Back in 1971, President Nixon
cells can help halt disease or
in a solution of stem cells taken
set doctors and scientists a
repair damaged tissue.
from the patient’s bone marrow.
challenge: to cure cancer. Four
After just two days, the millions
Regenerative research
decades on, there has been
of tiny holes in its surface were
Stem cell research in the field of
immense progress but the battle
seeded and coated with the
transplantation has led to several
has still not been won.
patient’s own tissue.
partnerships between European
The long war against cancer
During a 12-hour operation,
teams. In 2008, surgeons in Spain
should tell us not to expect quick
the diseased windpipe was
carried out a partially synthetic
removed and the patient given
fixes or outright victory in the
windpipe transplant, which can
his bespoke replica. Synthetic
quest to heal the ageing body
now been seen as a precursor to
tissue has two enormous
and tackle dementia. But given
the Swedish operation last year.
advantages over conventional
what is at stake, few would
The difference was that this
organ transplantation: it does
argue the battle is not
earlier transplant involved a
not rely on a human donor, and
worth fighting n
donor organ. A team in Padua,
it will not be rejected by the
Italy, decellularised the donor
body. These benefits cannot be
organ, while another in Bristol,
overestimated. The shortage of
UK, grew stem cells taken
donors for transplant surgery is a
‘‘
25
Face
to face
Craft work
26
Catriona Marshall is chief executive of Hobbycraft,
the UK’s leading chain of arts and crafts stores. An award-winning
retailer, Marshall is ruthlessly efficient, utterly charming and totally
dedicated to her job. So much so, that she has created a list of
characters to bring to life the range of Hobbycraft customers.
J
there from Monday to Friday. It’s no bother at all
ean is an old-fashioned mend-and-maker.
because it means I can completely immerse myself
Brought up in the post-war years, she knits,
in the job – I can live and breathe the business 24/7
darns socks and bakes all her own cakes. Jean loves
during the week and at this stage, that’s really
nothing more than rummaging for patterns, new
important,” she says.
wool and bargains. Her husband will sometimes
Marshall joined Hobbycraft in February 2011,
accompany her on these shopping trips. He is not
having spent eight years as trading and marketing
averse to the odd Airfix plane and would probably
director at Pets at Home, another Bridgepointmake more models if he came across kit that
backed retail group, sold to KKR in 2010 for £955
inspired him. Their daughter, Emma, is quite
million. “I was planning to take six months off
different. She never learnt to knit, sew or do
when I left Pets at Home. But the opportunity to
anything very creative but now she wishes she had.
run Hobbycraft came up, we were under time
Her children are at school, craft is on the
pressure to get going, so in the end I took six
curriculum and she does not have a clue.
weeks,” she says.
The children are taught by Miss Thompson, a real
Before the Bridgepoint acquisition, Hobbycraft
fan of creative learning. She will often buy what she
was a family-run business, developed in a
needs for lessons out of her own pocket because it is
somewhat homely fashion over
easier than waiting for money
Whenever we talk about our
15 years by the Haskins family.
from the increasingly stretched
strategy, we always say we
school budget.
Marshall comes from different
are looking for Emma, while
Sam the artist and Kate, the
stock. Originally at Mars, she
not alienating Jean”
craft enthusiast, may have been
worked with Archie Norman,
inspired in early life by a similar
Allan Leighton and Richard
teacher. Now Sam is dedicated to
Baker at Asda, transforming
his art and Kate is a semi-professional crafter,
the supermarket chain during the 1990s before it
making jewellery and gifts to sell at markets or give
was sold to Wal-Mart for £6.7 billion in 1999.
to friends.
Moving to Pets at Home from Asda, Marshall
This motley crew is Catriona Marshall’s virtual
worked closely with chief executive, Matt Davies,
family. Born and brought up in Glasgow, Marshall
again helping to transform the business. After more
has lived south of the border for most of her adult
than a decade and a half in turnaround retail
life. Managing to combine exceptional energy,
situations, Marshall is something of an expert.
unashamed ambition and genuine charisma,
“The first thing that struck me when I walked into
Marshall is resolute in her determination to make
Hobbycraft stores a year ago is that, as a retailer,
Hobbycraft a true retail success.
you would see lots of things that go against the grain
“I live in Cheshire at the weekends but the
of retail principles. There was no signage, no
Hobbycraft head office is in Bournemouth so I am
obvious customer layout and far too much stock. So
27
The first thing that struck me
when I walked into Hobbycraft
stores a year ago is that, as a
retailer, you would see lots of
things that go against the grain
of retail principles. There was
no signage, no obvious
customer layout and far too
much stock. However, the core
Hobbycraft customer loved it”
it was hard to find your way
around, you had to do lots of
rummaging and if you didn’t know
what you were looking for, you
had to ask lots of questions. So to
me, it was not a retail-friendly
environment,” she explains.
“However,” she adds, “the core Hobbycraft
customer loved it. She knows what she’s looking
for; she’s more than happy to spend time browsing;
she loves to rummage and she loves to find a
bargain so she was very happy in that environment.”
Marshall calls this customer “Jean”. She has been
coming to Hobbycraft for years and Marshall does
not want to alienate her. But Hobbycraft cannot
survive on Jeans alone.
“The direction we’re moving in now is to have a
much wider, younger customer base. And the
customers we’re targeting now are far more
discerning. They want brighter, fresher stores that
are well organised and well laid out so they can find
what they’re looking for without spending hours
searching for it,” says Marshall.
This customer is “Emma”, who’s never had any
interest in crafting but finds herself in Hobbycraft
because her children need paper, glue and various
bits and pieces for their school projects. She is also
drawn to the stores because she is looking for
different pastimes for her children.
“Emma wants to encourage her kids to do
creative play – clay-modelling, painting, cardmaking and other alternatives to television, X-box
and computer games,” says Marshall.
In Marshall’s virtual family of customers, Emma’s
mother knows about papercraft, jewellery, crossstitch and similar painstaking crafts. She is happy to
spend hours on intricate work and is looking for the
products to help her. Emma, however, wants more
immediate results.
Marshall explains: “Emma is looking for
easy-to-do crafts. She is focused on the end result
whereas her mother is as interested in the process
as the outcome.”
Even as Marshall tries to lure more Emmas into
28
Hobbycraft, she knows she
cannot lose her core shoppers,
her Jeans. “Whenever we talk
about our strategy, we always
say we are looking for Emma,
while not alienating Jean.
Fortunately, Jean doesn’t
think of herself as Jean. She thinks of herself as
younger and trendier than a typical ‘Jean’ so she
likes the bright new stores and the more contemporary feel,” says Marshall.
Hobbycraft has 61 stores and 1,700 employees.
Since Marshall joined, she has been steadily
renovating old stores and expanding into new ones.
Over the next three years, the group is expected to
move to 100 stores and change its image – from
homely and old-fashioned to modern, bright
and exciting.
“At Pets at Home, we had about 5,000 different
product lines. When I joined Hobbycraft, there
were 50,000. Some stock had literally been sitting
in stores for years. Now we are down to 35,000,”
says Marshall.
“In retail, you can’t do everything you want to do
unless you have an effective supply chain, so a great
deal of our energy is going into managing that
process. If we have the right systems and processes
in place, then we can put all our energy into
developing fantastic products and offering great
customer service. But you have to do the hard-core
plumbing first, so we are in the middle of a huge
business transformation phase at the moment on
both systems and supply chain,” she adds.
Marshall and her team are working day and night
to complete this process as quickly as possible
before moving on to the “customer plan” – making
sure stores are constantly filled with “new and
exciting products”.
As Marshall explains: “We want to become
famous for seasonal products and occasions. So
every time customers come in, there will be a whole
new seasonal display at the front of the store. We
also need to be really on-trend in terms of fashion,
whether it’s the latest colours in wool or the latest
fad in cupcake making. But we can only do that if
Name: Catriona Marshall
Age: 45
Born: Glasgow, Scotland
Education
Dundee University, reading Scottish and
European law
First job
Midland Bank (now part of HSBC)
Car
Red Audi TT
Hobbies
Running and crafting, when possible
Long-term ambition
To have a successful specialist running
business that funds teaching
disadvantaged youngsters life-skills
through running
Biggest professional achievement
Being part of the Pets at Home team and
transforming and ultimately selling that
business
Biggest regret
My life moves at such a pace, and
always has, that I don’t really have time
to dwell on the past. I just think – good,
bad or ugly, it happens for a reason so
you just make the best of it and move on
we can stock in and out of the stores quickly.”
Reducing the overall number of lines and having
a nimbler supply chain means Hobbycraft stores
can be slightly more compact than they have been
historically so they can be located in better retail
parks, where Emma likes to shop. Fortunately, Jean
does too. Just to make sure the core customers
would not find Marshall’s vision off-putting, she
took a coach-load of doughty knitting enthusiasts
on a trip to one of Hobbycraft’s new-look stores.
“They loved it. They loved the new concept and
the freshness and brightness of it. So we know that,
as long as we continue to stock a good range at
good prices, they will keep coming. But we are
constantly checking ourselves to make sure that
Jean will not be alienated and we will continue to
do so,” says Marshall.
Even as she and her team work on the supply
chain, efforts are in place to improve customer
service. “One of the big similarities between Pets
and Hobbycraft is that your colleagues are also your
customers – pet lovers at Pets, crafters or creative
types at
Hobbycraft.
We stop work at about 5.30
Either way,
in the evening and go for a
they have a
lovely cycle ride through the
passion for the
forest. Then we come back,
subject, which
shower, have some food and
is a fantastic
carry on working”
foundation for
customer service,”
Marshall suggests.
Marshall also benefits from strong support from
Bridgepoint, who recruited her for the Hobbycraft
position after seeing her performance at Pets
at Home.
29
“Bridgepoint truly understand management
kids are at the forefront of Marshall’s mind but Miss
teams and how to get the best out of them. They
Thompson, Sam the artist and Kate the canny
have extremely high values and honour them. They
crafter cannot be forgotten either.
are very commercially aware but they want to build
“It is quite a challenge because you need to have
quality businesses for the long term. They are
a wide enough range to satisfy all of them and they
interested in long-term quality and long-term
all have different needs. Sam is an artist and quite
reputation so they take decisions based on longdistinct from the traditional crafter. Kate is
term value,” she says.
probably the most demanding
Marshall fitted in beautifully
of them all because she is semiIf we have the right systems
at Pets at Home. With two
professional and very
and processes in place, then
Boxer dogs, two cats and a
accomplished,” says Marshall.
we can put all our energy
parrot, she is a real animal lover
Progress is under way and
into developing fantastic
and actually left two bearded
Marshall is full of plans, not just
products and offering great
dragons and some fish behind
for the physical stores but also
customer service. But you
for her successor when she left
for Hobbycraft’s online
have to do the hard-core
the company. Fortunately, she
presence. The task is not for the
plumbing first”
is rather keen on craft as well
faint-hearted but Marshall is
and comes from a family of
undaunted, helped on the way
“crafters”, though she never thought about it until
by another passion – running. A member of a
arriving at Hobbycraft.
running club, Marshall does fell-running and
“My family was always making things and I grew
marathons and tries to run or cycle at least three
up in that environment. I never thought of myself
times a week.
as a crafter but I do a lot of it now, as you’d expect. I
“I started about 10 years ago because I realised I
really love knitting. It’s just so satisfying to be
could no longer eat and drink in copious quantities
watching TV and at the end of the evening, you’ve
without putting on weight. So I used to run to eat
produced something – though I don’t have much
but then I became completely hooked. I’m very
spare time for TV at the moment,” she says.
average but I love the challenge and I find it really
In recent months, there have been some genuine
clears the head. I have also started a weekly cycle
crafting moments, including a weekend where
with my team. We stop work at about 5.30 in the
three teenage girls came to stay with Marshall and
evening and go for a lovely cycle ride through the
her husband. Unsure of how to occupy them, she
forest. Then we come back, shower, have some
ordered a life-size model elephant to be delivered
food and carry on working,” she says.
to her home and invited the girls to have a go at
Marshall admits she works long hours and the
‘decopatching’ – a craft that is growing rapidly in
timetable is demanding but she clearly benefits
popularity, which involves covering models, in this
from the zeitgeist – a nationwide hankering for oldcase an elephant, with colourful paper and fabrics.
fashioned pursuits, from card-making to
“We were doing it until 11 o’clock on Saturday
scrapbooking to cross-stitching to home-baking,
night and when we came down on Sunday
Hobbycraft’s strongest growth area.
morning, they were all there in their pyjamas back
“On the one hand, I want to make Hobbycraft a
at it again. Now I have a decopatched elephant in
really successful commercial retailer and that is all
my guest room,” says Marshall.
about having the right team and the right
This probably speaks volumes not just for
infrastructure. But there is also the opportunity to
Marshall’s creative energy but also for the breadth
create something unique and special so I am really
of Hobbycraft’s appeal. Jean, Emma and Emma’s
lucky to have that chance,” says Marshall n
30
31
Management focus
New era: old ways
The digital world offers huge commercial
opportunities – but many companies have
yet to grasp its potential.
W
hen historians look
back to the beginning
of the 21st century,
they may well conclude that
information technology
brought about changes in
business conduct that were just
as dramatic as those wrought by
the Industrial Revolution 200
years earlier.
From the growth of web-based
ecommerce and cloud computing
services, to the mass adoption of
social networking sites, such as
Facebook and Twitter, and the
unprecedented success of
smartphones and tablets, the
internet and IT are fundamentally changing our personal and
business lives.
32
But, just as with the Industrial
Revolution, these changes are
unevenly distributed and some
companies and individuals risk
being left behind. Many
businesses are still trapped in the
pre-internet age – relying on
paper-based systems to manage
their supply chains, processes
and relationships with
customers. Constrained by these
physical ties, they focus on local
markets at a time when the
internet and ecommerce have
made distance of little
consequence for more agile
competitors.
Such backward-looking
businesses are under threat of
extinction, just like the
handweavers, blacksmiths and
bookbinders who thrived before
the Industrial Revolution. But it
does not have to be that way.
Companies can jump-start their
digital futures if they adopt the
right mindset and take the
right steps.
The rise of BYOD
A key development in this regard
is the so-called ‘consumerisation
of IT’. Historically, commercial IT
and consumer electronics have
been considered entirely separate
and, for the most part, serious
companies have shunned
consumer devices as trivial and
time-wasting. But attitudes are
shifting. Many senior business
managers and corporate
executives have taken to
bringing personal mobile devices
to work and asking if they can be
hooked up to corporate IT
systems and applications, such
as consumer relationship
management, business intelligence and enterprise resource
planning systems.
While some IT departments
have been reluctant to accede to
such requests, others including
many in the financial services,
technology and healthcare
industries have embraced the
idea and encouraged employees
to bring or buy their own devices,
a trend known as BYOD.
The advantage of this
approach is not just financial –
although studies show that
employees using their own
devices at work make far fewer
support calls to IT departments.
Rather, employers such as SAP,
the German enterprise software
company that has embraced
BYOD, say it improves productivity, flexibility, recruitment and
employee loyalty, particularly
among younger employees who
have grown up in a digital world.
As a recent survey and report
from PwC, the management
consultancy, noted: “Everyone is
now a mobile consumer.
Executives must recognise that
the expectations of employees
and customers are largely
affected by consumer-driven
technologies. Employees want
the tools they use for work to be
as good as those they use in their
personal lives, and customers
expect to interact with firms on
the platform and device of
their choice.”
The mobile user
The consumerisation of IT
feeds into another significant trend and opportunity
for businesses – mobility.
PwC’s survey indicates that
while many firms are
focused on developing
better mobile tools for their
workers, they are underinvesting
in solutions for their customers:
only 45 per cent of respondents
said they interact with customers
significantly using mobile
channels, and fewer than onethird are investing in mobile
technologies for customers.
This offers a genuine competitive opportunity for companies
that do recognise the potential of
mobile applications and devices
to reach their customers.
One of the big surprises of the
past 18 months is the speed with
which companies have embraced
tablets, particularly the iPad. By
some estimates, about a third of
all the iPads purchased last year
are being used in business.
Some companies use them to
provide senior executives with
access to a ‘digital dashboard’
showing key financial data.
Others, such as Edmunds.com, a
US-based online vehicle shopping
service, have gone further and
built applications designed to
improve the performance of their
sales teams when they visit
customers.
State Street, a Boston-based
investment services firm, has
built applications for clients,
providing them with comprehensive information about their
portfolios. And in the UK,
Unilever’s investor services
department turned to an external
‘‘
Backward-looking
businesses are under
threat of extinction, just
like the handweavers,
blacksmiths and
bookbinders who
thrived before the
Industrial Revolution”
consultancy to build an app for
investors that allows them to
monitor remote video presentations and access corporate data.
Certain forward-looking
companies have replaced
traditional ‘board books’ sent out
to directors before board
meetings with a secure iPad app
that is always up to date.
Embracing social media
Others are trying to engage
clients and build customer loyalty
through social media channels.
PwC suggests the real value of
these channels lies in their
“ability to add a new dimension
to the entire product life cycle
and create more regular interaction across the lifespan of a
product or service. This information can be instrumental in
wringing greater value out of
existing products while providing
invaluable insights as new
products are developed”.
But again, most companies
have yet to embrace the benefits
these tools can provide: among
the total pool of PwC survey
respondents, only 37 per cent
have invested in social media
tools to reach customers.
Industries that have invested
more significantly in this area
include the retail and consumer
sector (51 per cent) and the
industrial product sector
(50 per cent).
33
Dell, the PC maker, has gone
tion (HD) video, play HD video
one stage further, monitoring
games and conduct face-to-face
social media to detect consumer
HD videoconferencing from
sentiment and encouraging its
smartphones and other portable
customers to ‘help themselves’ in
devices. The move to higheruser forums rather than calling
speed mobile networks also frees
the company support centre.
up capacity for other services
Such services would be
such as machine-to-machine
impossible without the fast wired
(M2M) services.
and wireless broadband services
By embedding a small $10
that consumers have come to
radio module in a device, M2M
expect. While fibre-optic based
services offered by network
wired networks in Asia, Europe
operators enable transport
and the US provide the fastest
companies to monitor trucks or
fixed-line internet access,
containers, utility companies to
the next generation of
read meters remotely and
mobile networks using a
manufacturers to track the
technology called
LTE (Long Term
By embedding a small $10 radio
Evolution) will
module in a device, transport
deliver download
companies can monitor trucks or
speeds of up to about
containers, utility companies can
50 megabits per
read meters remotely and manufacsecond, enabling a raft
turers can track the progress of a
of new software
component shipment”
applications including
data-hungry video
services.
progress of a component
These mobile networks
shipment. Since most telecoms
will enable users to
operators now offer a complete
watch streaming
M2M managed service to
high definicorporate customers, this
technology is within reach of
almost any company, big
or small.
‘‘
34
In the cloud
Other wireless technologies are
enabling smartphones and other
devices to function as ‘mobile
wallets’, while companies such as
Google and Groupon see the
opportunity to deliver instant
coupons and offers to
smartphone owners when they
walk into a store. Smart
companies can also use the data
collected at store checkouts and
ATMs and via digital devices
such as smartphones to detect
consumer trends early, and tailor
services and special offers to
individual consumers.
The huge volume of data
collected this way, coupled with
other information such as
weather forecasts and
demographic data, is one of the
hottest subjects in enterprise IT
today. Dubbed Big Data, it can be
used to assess trends in near realtime and quickly adjust forecasts
and production to meet
customer demand. Indeed, some
companies, particularly in the
financial services and consumer
goods sectors, are already
starting to use it.
The ability to process vast
‘‘
Smart companies can use
the data collected at store
checkouts, ATMs and via
digital devices like
smartphones to detect
consumer trends early,
and tailor special offers to
individual consumers”
amounts of data quickly was
once confined to the biggest
companies operating their own
data centres. But cloud
computing – perhaps the biggest
trend in corporate IT over the
past few years – has put these
resources within reach of almost
all companies.
Cloud computing and highspeed data networks enable
companies to access computing
resources from highly efficient
remote data centres as and when
they need them, and pay for
these resources on a usage basis.
According to research firm
Forrester Research, the global
cloud computing market could
be worth more than $241 billion
by 2020, up from just $40.7
billion in 2010. It is already
having a profound impact on the
way companies operate their
businesses, particularly smaller
companies and startups, which
cannot afford to invest in IT
servers that may be obsolete
within a few years.
“Cloud computing means
someone else runs the computers
and software while you use what
they deliver and focus on its
value,” says Daryl Plummer,
managing vice president of IT
consultancy Gartner.
“You can access solutions that
are ‘in the cloud’, like community
resources that everyone can use
without owning any of them,
and everyone pays part of the
price, which lowers total outlay
for all.”
He adds: “Cloud solutions are
delivered to you ‘as a service’,
like a cup of coffee from
Starbucks down the street. You
go in, order, pay and gulp down
a cup before 6.30am. Did you
stop to think about how much of
the coffee maker you used? Or
what type of machine it was? Of
course not. You don’t have to.
What you came in for was a cup
of coffee. The timeliness, taste
and price dictate whether you
will come back, not the
equipment used to make the
coffee. That’s a service.
Everybody uses the same
equipment and gets their coffee
in the same way.”
This makes it much easier to
launch an online business. But it
can also help bricks and mortar
firms to focus on their core
business instead of worrying
about expensive in-house IT
departments. Computing power
‘on tap’ like water or electricity
enables companies of any size to
test out a new service too, or deal
with sudden changes in demand.
In 2009, for example, when the
number of gamers playing
Zynga’s FarmVille jumped from
zero to 10 million within six
weeks, the online games
company turned to Amazon’s
Web Services to meet demand.
Despite its potential, analysts
caution that cloud computing is
not a panacea. To succeed in
business in the second decade of
this century, companies will
need to embrace a complete
arsenal of digital tools and
rethink business processes
starting with their supply chains
and extending all the way
through to sales, marketing and
customer support. Yesterday was
a good time to start n
35
Last
word
The spy who loves you
A location app revealing the whereabouts of family and colleagues may
be the answer to a parent or boss’s prayers but it could have unintended
consequences, as columnist Sali Hughes explains.
So technology now
exists in the form of
mobile phone apps
that let parents track their children as they go about
their day. I get it, albeit reluctantly. There’s something
comforting about seeing a little moving dot on a map
demonstrating that all is well with your precious baby.
Fair enough, but at which point do children have the
right to their privacy? Are teenagers not entitled to
experience the same sense of adolescent abandon that
we did?
Besides, let’s get real here. These apps will be used
primarily by adults to keep an eye on other adults. And
serious moral implications aside, this is a deeply flawed
way to gather information. If we’re relying on GPS to
give us conclusive information on our spouse’s
whereabouts, we’re barking up the wrong tree – one
that’s probably three streets away. Navigation
software, particularly on mobile phones, is not yet an
exact or infallible science. An app that suggests your
wife is spending too long at the neighbour’s could mean
she’s getting her tyres changed at the nearby Kwik-Fit.
Frankly, an unfounded accusation is likely to cause
more marital disharmony than blissful ignorance.
That is, of course, if you own up at all. In my
experience, looking for information on a loved one only
leads to increased suspicion because what you uncover
is never enough to gain a full picture. An unrecognised or
ominous location is inconclusive and so requires yet
more snooping to give it weight. Either that or, fatally, a
confrontation and an admission that you’ve been spying.
Should anybody really be going down that route? It’s a
depressing end game and one from which it’s near
impossible to turn back. And even if there is no mistrust,
only genuine care, these apps may rob us of our small,
everyday liberties. Who hasn’t dropped a loved one a
well-meaning text saying: ‘I’m just finishing my drink,
then leaving’, when in fact, they’re eyeing up the cocktail
36
menu and contemplating a Margarita fishbowl? Or:
“Traffic is terrible! I’ll be 15 minutes late!” when they’ve
just come out the shower? These tiny lies are largely
harmless and part of life for most of us. It seems
inevitable that a counter app will be out sooner or later,
deliberately telling your partner you’re hard at work
when you’ve actually nipped out for a swift half.
Work is a whole other minefield. Calling in sick by
hanging upside down off the foot of the bed and
adopting a croaky voice (oh. Just me?) will no longer cut
it. Now you (or at least, your phone) will have to stay
under your own roof throughout your absence, however
much you fancy a day trip to the beach. And even when
you’re no slacker, Big Brother could still be tracking
your every move. Who cares if you do your job brilliantly
and deliver your results on time? That two-hour lunch,
extended conference day and quick run to the dry
cleaners will all count against you. And you’d better
forget that drink after a tough meeting – your phone is
stamping your timecard as soon as you leave your
authorised location.
Even if one is untroubled by the morality of this
technology, there are major issues with its workability. If
my children were given an iPhone so I could keep
abreast of their whereabouts, I’d give it no more than
one hour before they’d either removed the app or eaten
all the battery by playing Angry Birds.
With the best will – and the most stringent controls –
in the world, it’s time we accepted that advancements in
technology cannot control everything that happens to
us. We’re obsessed that something terrible will happen
to our children but disasters are no more likely now than
when we were children unable even to imagine what a
mobile phone was, let alone the incredible and fantastical
uses we’d have for it in the future. Tragedy is extremely
rare, yet our extreme neurosis increases by the month –
hampering our children’s self-confidence and need for
some autonomy. I’ll stick with texts for now n
CONTENTS
2
INS & OUTS
Investments and exits
across Europe
5
MARKET INSIGHT
Bring back yesterday
Manufacturers are cashing in as people hanker
after products and memories from the past
11
TALKING POINT
A lost generation?
What does the future hold in store for millions of
youngsters across Europe currently searching for work?
18
22
BUSINESS TRENDS
IN THE SPOTLIGHT
Small is beautiful
In sickness or in health
Why do niche businesses often have
competitive advantages over big
companies?
Advances in the way healthcare is delivered can save
costs and improve the lives of an ageing population
26
FACE TO FACE
Craft work
Hobbycraft’s Catriona Marshall creates a virtual family of
characters to bring its range of customers to life
32
MANAGEMENT FOCUS
New era: old ways
Backward-looking companies risk extinction if they
fail to adapt to the digital future
36
LAST WORD
The spy who loves you
Big Brother’s watching you with mobile apps that
chart your every movement