SLOW Movement

FT: How to avoid choosing the wrong partner

Source: http://www.ft.com/cms/s/0/b867b068-eed2-11e0-959a-00144feab49a.html#ixzz1aGUT7uK4

 

October 4, 2011 11:36 pm

How to avoid choosing the wrong partner

By Luke Johnson

I have read and written about the desirable attributes to look for in a business partner: but I have never seen a list setting out the characteristics to avoid. So I thought I would itemise the most dangerous flaws I have observed among top executives.

● Endless excuses: certain bosses are incapable of admitting any failings – their entire management style is about finding others to blame for setbacks. Since they never own up to guilt, they never improve – and no one wants to work with them. If things go well, they steal the credit.

● Conflict avoiders: running a business is not a relaxing affair. Frequently it involves differences – with suppliers, employees, customers, landlords, regulators and others. Wimps who retreat from any form of disagreement, who are incapable of being assertive, are no use.

● Too many divorces: everyone can make such an error once, but to repeat it several times shows poor judgment and lack of willpower. I know more entrepreneurs brought emotionally and financially low by repeated divorce than through their companies going bust.

● Serial litigants: never work with individuals who sue all the time, be it staff, vendors or partners. You are bound to suffer a legal claim from them sooner or later: better not to start such an arrangement in the first place.

● Chronic overoptimists: quite a few entrepreneurs fall into this category. There is a delicate balance to be struck between positive thinking and overcaution – which can inhibit action. But steer clear of the fantasists whose ambitions wildly exceed their abilities and resources.

● No sense of humour: things go wrong in life and at work. If you cannot laugh at the bungles, the journey is simply too painful.

● Alcoholics and drug addicts: partnering with unreformed substance abusers is a nightmare. They will lie and perhaps steal – their first loyalty will always be to booze and drugs.

● Wrong priorities: you want a financial partner to be highly focused on success. If their hobbies, home, family and friends are overwhelmingly more important to them, walk away. You need someone who will make real sacrifices to achieve your joint commercial goals

● No hinterland: the opposite extreme – workaholic bosses who possess no life whatsoever outside the office. Such monochrome types are dull and lack balance.

● Philanderers: owners who sexually exploit their staff are toxic – and surprisingly common. Their private lives are chaotic, and their extracurricular activities often generate discrimination claims.

● Verbal diarrhoea: great managers should listen and thereby learn, not simply deliver monologues. Communication must be an exchange of information, or it is ineffective.

● Persistent critics: their endless carping demotivates all their subordinates, which means they never build a solid team. Such moaners do not understand that the carrot is a much more effective tool than the stick.

● Non-delegators: detail maniacs who cannot surrender control of anything. As a consequence they are incapable of building a substantial enterprise, because they trust no one and doubt everyone’s competence – save their own, of course.

● Financial illiteracy: do not appoint an innumerate CEO. If they do not understand financial statements, they cannot be in charge of a business. They do not need to be a qualified accountant, but they must be able to interpret the accounts.

● Bullies: most who rise to the top are forceful personalities, but megalomaniac dictators who torment their staff tend to destroy morale and undermine productivity. They are anathema in the modern workplace.

● Neurotic worriers: overanxiety makes people indecisive and erodes confidence. Skilful leaders cannot afford such weaknesses: they are the ones who are meant to know the direction of travel, and who promote the cause.

● Profligacy: extravagance is not an asset in these straitened times. You want a cost-conscious, abstemious colleague who leads by example.

Of course, no one is perfect, and many of us suffer from some of these faults. But big scores on more than a few categories should set alarm bells ringing.

Don’t say you haven’t been warned.

Copyright The Financial Times Limited 2011.

 

Economist: Applying the world's business brains to housing the poor

Schumpeter

A $300 idea that is priceless

Applying the world’s business brains to housing the poor

Apr 28th 2011 | from the print edition

FRIEDRICH ENGELS said in “The Condition of the Working Class in England”, in 1844, that the onward march of Manchester’s slums meant that the city’s Angel Meadow district might better be described as “Hell upon Earth”. Today, similar earthly infernos can be found all over the emerging world: from Brazil’s favelas to Africa’s shanties. In 2010 the United Nations calculated that there were about 827m people living in slums—almost as many people as were living on the planet in Engels’s time—and predicted that the number might double by 2030.

Last year Vijay Govindarajan, of Dartmouth College’s Tuck School of Business, along with Christian Sarkar, a marketing expert, issued a challenge in a Harvard Business Review blog: why not apply the world’s best business thinking to housing the poor? Why not replace the shacks that blight the lives of so many poor people, thrown together out of cardboard and mud, and prone to collapsing or catching fire, with more durable structures? They laid down a few simple guidelines. The houses should be built of mass-produced materials tough enough to protect their inhabitants from a hostile world. They should be equipped with the basics of civilised life, including water filters and solar panels. They should be “improvable”, so that families can adapt them to their needs. And they should cost no more than $300.

Mr Govindarajan admits that the $300 figure was partly an attention-grabbing device. But he also argues that it has a certain logic. Muhammad Yunus, the founder of Grameen Bank, has calculated that the average value of the houses of people who have just escaped from poverty is $370. Tata Motors has also demonstrated the value of having a fixed figure to aim at: the company would have found it more difficult to produce the Tata Nano if it had simply been trying to produce a “cheap” car rather than a “one lakh” car (about $2,200).

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The attention-grabbing certainly worked. The blog was so inundated with positive responses that a dedicated website, 300house.com, was set up, which has attracted more than 900 enthusiasts and advisers from all over the world. On April 20th Mr Govindarajan launched a competition inviting people to submit designs for a prototype of the house.

Why has a simple blog post led to such an explosion of creativity? The obvious reason is that “frugal innovation”—the art of radically reducing the cost of products while also delivering first-class value—is all the rage at the moment. General Electric has reduced the cost of an electrocardiogram machine from $2,000 to $400. Tata Chemicals has produced a $24 purifier that can provide a family with pure water for a year. Girish Bharadwaj, an engineer, has perfected a technique for producing cheap footbridges that are transforming life in rural India.

Another reason is that houses can be such effective anti-poverty tools. Poorly constructed ones contribute to a nexus of problems: the spread of disease (because they have no proper sanitation or ventilation), the perpetuation of poverty (because children have no proper lights to study by) and the general sense of insecurity (because they are so flimsy and flammable). Mr Govindarajan’s idea is so powerful because he treats houses as ecosystems that provide light, ventilation and sanitation.

Numerous innovators are also worrying away at this nexus of problems. Habitat for Humanity, an NGO, is building durable houses of bamboo in Nepal. Idealab, a consultancy, is on the verge of unveiling a $2,500 house that will be mass-produced in factories, sold in kits and feature breakthroughs in ventilation, lighting and sanitation. Philips has produced a cheap cooking stove, the Chulha, that cuts out the soot that kills 1.6m people a year worldwide. The Solar Electric Light Fund is demonstrating that you can provide poor families with solar power for roughly the same cost as old standbys such as kerosene and candles.

Profits and other problems

These thinkers, like the advocates of the $300 house, must solve three huge problems to succeed. They must persuade big companies that they can make money out of cheap homes, because only they can achieve the economies of scale needed to hit the target price. They need to ensure sufficient access to microloans: $300 is a huge investment for a family of squatters living on a couple of dollars a day. And they need to overcome the obstacle that most slum-dwellers have weak or non-existent property rights. There is no point in offering people the chance to buy a cleverly designed house if they have no title to the land they occupy. Solving these problems will in turn demand a high degree of co-operation between people who do not always get on: companies and NGOs, designers and emerging-world governments.

However, the exciting thing about the emerging world at the moment is a prevailing belief that even the toughest problems can be solved. And a similar can-do moment, in the late 1940s, offers a striking historical precedent for the application of mass-production techniques to housing: as American servicemen flooded home after the second world war to start families, Levitt & Sons built Levittowns at the rate of 30 houses a day by mass-producing the components in factories, delivering them on lorries and using teams of specialists to assemble them.

Some emerging-world governments are beginning to realise that providing security of tenure is the only way to deal with the problem of ever-proliferating slums. And big companies that face stagnant markets in the West are increasingly fascinated by the “fortune at the bottom of the pyramid”. Bill Gross of Idealab reckons the market for cheap houses could be worth at least $424 billion. But in reality it is worth far more than that: preventing the Earth from becoming what Mike Davis, a particularly gloomy follower of Marx and Engels, has termed a “planet of slums”.

WSJ: How to Get a Real Education

THE SATURDAY ESSAY
APRIL 9, 2011

How to Get a Real Education

Forget art history and calculus. Most students need to learn how to run a business, says Scott Adams. 

By SCOTT ADAMS

I understand why the top students in America study physics, chemistry, calculus and classic literature. The kids in this brainy group are the future professors, scientists, thinkers and engineers who will propel civilization forward. But why do we make B students sit through these same classes? That's like trying to train your cat to do your taxes—a waste of time and money. Wouldn't it make more sense to teach B students something useful, like entrepreneurship?

Scott Adams

I speak from experience because I majored in entrepreneurship at Hartwick College in Oneonta, N.Y. Technically, my major was economics. But the unsung advantage of attending a small college is that you can mold your experience any way you want.

There was a small business on our campus called The Coffee House. It served beer and snacks, and featured live entertainment. It was managed by students, and it was a money-losing mess, subsidized by the college. I thought I could make a difference, so I applied for an opening as the so-called Minister of Finance. I landed the job, thanks to my impressive interviewing skills, my can-do attitude and the fact that everyone else in the solar system had more interesting plans.

The drinking age in those days was 18, and the entire compensation package for the managers of The Coffee House was free beer. That goes a long way toward explaining why the accounting system consisted of seven students trying to remember where all the money went. I thought we could do better. So I proposed to my accounting professor that for three course credits I would build and operate a proper accounting system for the business. And so I did. It was a great experience. Meanwhile, some of my peers were taking courses in art history so they'd be prepared to remember what art looked like just in case anyone asked.

One day the managers of The Coffee House had a meeting to discuss two topics. First, our Minister of Employment was recommending that we fire a bartender, who happened to be one of my best friends. Second, we needed to choose a leader for our group. On the first question, there was a general consensus that my friend lacked both the will and the potential to master the bartending arts. I reluctantly voted with the majority to fire him.

But when it came to discussing who should be our new leader, I pointed out that my friend—the soon-to-be-fired bartender—was tall, good-looking and so gifted at b.s. that he'd be the perfect leader. By the end of the meeting I had persuaded the group to fire the worst bartender that any of us had ever seen…and ask him if he would consider being our leader. My friend nailed the interview and became our Commissioner. He went on to do a terrific job. That was the year I learned everything I know about management.

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At about the same time, this same friend, along with my roommate and me, hatched a plan to become the student managers of our dormitory and to get paid to do it. The idea involved replacing all of the professional staff, including the resident assistant, security guard and even the cleaning crew, with students who would be paid to do the work. We imagined forming a dorm government to manage elections for various jobs, set out penalties for misbehavior and generally take care of business. And we imagined that the three of us, being the visionaries for this scheme, would run the show.

We pitched our entrepreneurial idea to the dean and his staff. To our surprise, the dean said that if we could get a majority of next year's dorm residents to agree to our scheme, the college would back it.

It was a high hurdle, but a loophole made it easier to clear. We only needed a majority of students who said they planned to live in the dorm next year. And we had plenty of friends who were happy to plan just about anything so long as they could later change their minds. That's the year I learned that if there's a loophole, someone's going to drive a truck through it, and the people in the truck will get paid better than the people under it.

The dean required that our first order of business in the fall would be creating a dorm constitution and getting it ratified. That sounded like a nightmare to organize. To save time, I wrote the constitution over the summer and didn't mention it when classes resumed. We held a constitutional convention to collect everyone's input, and I listened to two hours of diverse opinions. At the end of the meeting I volunteered to take on the daunting task of crafting a document that reflected all of the varied and sometimes conflicting opinions that had been aired. I waited a week, made copies of the document that I had written over the summer, presented it to the dorm as their own ideas and watched it get approved in a landslide vote. That was the year I learned everything I know about getting buy-in.

“Why do we make B students sit through the same classes as their brainy peers? That's like trying to train your cat to do your taxes—a waste of time and money. Wouldn't it make sense to teach them something useful instead?”

For the next two years my friends and I each had a private room at no cost, a base salary and the experience of managing the dorm. On some nights I also got paid to do overnight security, while also getting paid to clean the laundry room. At the end of my security shift I would go to The Coffee House and balance the books.

My college days were full of entrepreneurial stories of this sort. When my friends and I couldn't get the gym to give us space for our informal games of indoor soccer, we considered our options. The gym's rule was that only organized groups could reserve time. A few days later we took another run at it, but this time we were an organized soccer club, and I was the president. My executive duties included filling out a form to register the club and remembering to bring the ball.

By the time I graduated, I had mastered the strange art of transforming nothing into something. Every good thing that has happened to me as an adult can be traced back to that training. Several years later, I finished my MBA at Berkeley's Haas School of Business. That was the fine-tuning I needed to see the world through an entrepreneur's eyes.

If you're having a hard time imagining what an education in entrepreneurship should include, allow me to prime the pump with some lessons I've learned along the way.

Combine Skills. The first thing you should learn in a course on entrepreneurship is how to make yourself valuable. It's unlikely that any average student can develop a world-class skill in one particular area. But it's easy to learn how to do several different things fairly well. I succeeded as a cartoonist with negligible art talent, some basic writing skills, an ordinary sense of humor and a bit of experience in the business world. The "Dilbert" comic is a combination of all four skills. The world has plenty of better artists, smarter writers, funnier humorists and more experienced business people. The rare part is that each of those modest skills is collected in one person. That's how value is created.

Fail Forward. If you're taking risks, and you probably should, you can find yourself failing 90% of the time. The trick is to get paid while you're doing the failing and to use the experience to gain skills that will be useful later. I failed at my first career in banking. I failed at my second career with the phone company. But you'd be surprised at how many of the skills I learned in those careers can be applied to almost any field, including cartooning. Students should be taught that failure is a process, not an obstacle.

Find the Action. In my senior year of college I asked my adviser how I should pursue my goal of being a banker. He told me to figure out where the most innovation in banking was happening and to move there. And so I did. Banking didn't work out for me, but the advice still holds: Move to where the action is. Distance is your enemy.

Scott Adams

Attract Luck. You can't manage luck directly, but you can manage your career in a way that makes it easier for luck to find you. To succeed, first you must do something. And if that doesn't work, which can be 90% of the time, do something else. Luck finds the doers. Readers of the Journal will find this point obvious. It's not obvious to a teenager.

Conquer Fear. I took classes in public speaking in college and a few more during my corporate days. That training was marginally useful for learning how to mask nervousness in public. Then I took the Dale Carnegie course. It was life-changing. The Dale Carnegie method ignores speaking technique entirely and trains you instead to enjoy the experience of speaking to a crowd. Once you become relaxed in front of people, technique comes automatically. Over the years, I've given speeches to hundreds of audiences and enjoyed every minute on stage. But this isn't a plug for Dale Carnegie. The point is that people can be trained to replace fear and shyness with enthusiasm. Every entrepreneur can use that skill.

Write Simply. I took a two-day class in business writing that taught me how to write direct sentences and to avoid extra words. Simplicity makes ideas powerful. Want examples? Read anything by Steve Jobs or Warren Buffett.

Learn Persuasion. Students of entrepreneurship should learn the art of persuasion in all its forms, including psychology, sales, marketing, negotiating, statistics and even design. Usually those skills are sprinkled across several disciplines. For entrepreneurs, it makes sense to teach them as a package.

That's my starter list for the sort of classes that would serve B students well. The list is not meant to be complete. Obviously an entrepreneur would benefit from classes in finance, management and more.

Remember, children are our future, and the majority of them are B students. If that doesn't scare you, it probably should.

—Mr. Adams is the creator of "Dilbert."

Copyright 2011 Dow Jones & Company, Inc. All Rights Reserved

WSJ: The Perfect Stimuls - Bad Management

• SMALL BUSINESS
• NOVEMBER 6, 2010

The Perfect Stimulus: Bad Management

If no one had a hamster-brained sociopath for a boss, who would start new businesses?

By SCOTT ADAMS

One of my earliest childhood jobs involved shoveling manure at my uncle's dairy farm in upstate New York. Things were going well until my uncle explained that no matter how well I performed, I would never be promoted to farmer. Or even cow. I had hit the manure ceiling.

I consider that experience my first economic stimulus package—the unwelcome realization that my current job was a dead end. While my classmates were building snowmen with carrot noses (mostly the girls) and carrot genitalia (mostly the boys), I started to do some serious career planning about how to get out of the fecal relocation profession and into the warm embrace of a loving corporation. I studied hard, and I earned money for college by mowing lawns, shoveling snow, shoveling even more manure, and (my personal favorite) shoveling frozen manure covered with snow. I saved my meager funds, and with the help of my parents, who both took extra jobs, plus a few scholarships, I clawed my way into college.

Years later, my dream came true. I got a job with a large bank, and I never again needed to shovel manure. Corporations use something called PowerPoint instead. Thanks to my farm training, I was so good at designing PowerPoint slides that my coworkers called me "The Natural." Jaws dropped when I introduced my signature move: the frozen PowerPoint slide with snow on top.

In those days, I was a furious bundle of ambition and determination. The old-timers told me I had a "rocket strapped to my ass." All I needed to do was get my "ticket punched." It wasn't long before I was able to enjoy my second economic stimulus package: bad management.

Though most of my immediate bosses were entirely reasonable and competent, the organization at large was riddled with hamster-brained sociopaths in leadership roles. Surely, I thought, this must be a problem that exists no place else on Earth. Otherwise we'd all be living in caves and holding long meetings on the feasibility of using sticks as stabby things.

One day, a position opened above me, and I was the most obvious candidate to fill it. My boss called me into her office and said she had some bad news. She explained that the media was giving our company a lot of heat because almost all of our managers and executives were white males. Promoting me, she explained, would only make things worse. I asked how long I might need to wait for all of this to blow over. My boss was vague, but she said the timeline involved smoothing out the effects of two centuries of corporate discrimination.

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Copyright Scott Adams, Inc.

I decided to jump ship and go where my talent and hard work would be rewarded. I took a job at the local phone company and soon discovered, to my horror, that banking was not the only industry in the world managed by hamster-brained sociopaths. Once again, my immediate bosses were quite capable, but interacting with other departments was like being the last human in Zombieville and trying to buy groceries at dusk. Still, it was marginally better than shoveling manure, so I doubled down. I finished my MBA classes at night and distinguished myself as an up-and-comer.

One day my boss called me into his office and explained that the media was giving the phone company a lot of heat because almost all of the managers and executives were white males. So, he explained, promoting me would only make things worse. You might say that was the day that the "Dilbert" comic strip was born, although I had not yet drawn one. Let's call it a tipping point. From that day on, I considered myself an entrepreneur. All I had to do was figure out what business I was in. The phone company was willing to pay for almost any sort of semi-relevant training or education that I was willing to endure. It was like an accidental school for entrepreneurs. From an economic viewpoint, I was in exactly the right place, with exactly the right amount of career discomfort.

I wasn't suffering alone. Many of my co-workers already had active side businesses and ambitious expansion plans. The guy in the cubicle behind me was running a concert equipment rental business. Across from me was a guy running a computer tech support business. We had Amway dealers, Mary Kay sales people, inventors, authors and just about any other business you can imagine. That's not counting all of the business plans in the incubation phase. I think we all understood that working in a cubicle and being managed by Satan's learning-challenged little brother was not a recipe for happiness.

The way I describe it may sound pessimistic, but consider the alternative. Imagine a parallel universe where employees enjoy going to work. They feel empowered and fulfilled—so much so that they don't care about the size of their paychecks and never want to leave their jobs. That's exactly the sort of nightmare scenario that would destroy the economy. The last thing this world needs is a bunch of dopey-happy workers who can't stop humming and grinning. Our system requires a continuous supply of highly capable people who are so disgruntled with their jobs that they are willing to chew off their own arms to escape their bosses. The economy needs hamster-brained sociopaths in management to drive down the opportunity cost of entrepreneurship. Luckily, we're blessed with an ample supply.

To put it in plainer terms: The primary purpose of management is to kill any hope that staying in your current job will work out for you. That sort of hope is like gravel in the engine of progress. The economy needs workers who are fed up, desperate and willing to quit their jobs for something better. Remember, only quitters can be winners, because you can't do something great until first you quit doing something that isn't.

You see this same dynamic with countries. The United States is a nation founded by people who couldn't stand the leaders of their old homelands. I'm no geneticist, but I suspect that the "screw it, I'm out of here" attitude can get passed on. We're probably the most disgruntled, self-loathing, hard-to-satisfy people on Earth. It's no wonder our GDP is awesome.

Israel is another perfect example. The entire nation is full of people who were displeased with their last situation. And Israel's economy is one of the most vibrant in the world. If every Israeli became satisfied at once, they couldn't keep the lights on for a week.

I have always assumed there's a correlation between imagination and risk-taking. You wouldn't leave an unpleasant but relatively safe situation unless you could imagine a better outcome. So the people who leave a company first tend to be the visionaries who can best imagine entrepreneurial success. The last wave of people who leave are usually excreted just before the door is chained. They didn't imagine it would happen so soon. Bad management is how imagination gets wings.

—Scott Adams is the creator of 'Dilbert.'

Copyright 2010 Dow Jones & Company, Inc. All Rights Reserved

FT: Your kids are your paramount investment

Your kids are your paramount investment

By Luke Johnson

Published: September 28 2010 22:37 | Last updated: September 28 2010 22:37

Are high-flyers any good at the “ultimate start-up” – bringing up children? Or is the conflict between relentless ambition and sound parenting simply too great?

I ask this because, with three children under six years of age and various business involvements, balancing the competing demands on my time is a challenge. I get the priorities wrong sometimes – but suspect I’m not alone. Most entrepreneurs I know work 60- or even 80-hour weeks. When they get home they are often exhausted from the struggle of building a company and trying to fulfil their dreams. Being the perfect mum or dad in such circumstances is not easy.

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Research shows that today’s parents spend far more hours a week with their children than in the past. Fathers in the 1950s and 1960s were not expected to devote most of their leisure time to their offspring – it was assumed they would be playing golf or watching football or down the pub rather than ferrying their children to birthday parties or taking them to swimming lessons.

I once heard an astute PR man observe that the two aspects of life that suffer if you fully embrace the role of modern-day father – assuming you take your career very seriously – are friendships and hobbies. The old generation of bosses played it differently: they would spend their holidays and weekends sailing, shooting, skiing, playing squash and tennis, and at dinner and house parties. No doubt the loss of such non-familial relationships and pursuits makes one a less rounded individual. But it is probably better to endure those sacrifices than act as some sort of Edwardian figure – distant, unemotional and barely aware of the detail of your children’s lives, packing them off to a boarding school, effectively subcontracting their whole upbringing.

Of course, by their nature entrepreneurs are highly competitive, and that urge does not diminish outside the office. So certain dynastic magnates appear to display their prowess by having extra-large families – populating the world with their superior genes and proving they can afford to bring up so many boys and girls. And, inevitably, high achievers want their own little darlings to be top of the class, superb at sports and welcomed into the right universities.

All that takes not just money but personal effort and participation, too. Being head of a family is not like managing a business – you cannot delegate bedtime stories, school parent evenings and all the other small delights of parenthood to staff. And compensating for absence by spoiling children with material possessions is a very poor substitute for actually being there. The most impressive offspring of the high achievers are those who enjoy close bonds with their parents, and understand the importance of self-reliance and the obligations of wealth. As Elizabeth Gaskell said: “A wise parent humours the desire for independent action, so as to become the friend and adviser when his absolute rule shall cease.”

The always-on nature of commerce today does not help the cause. Clients and deals will not wait – if you want to get ahead you are expected to be available to answer e-mails and mobile calls at all hours. I am sure many children of the rich and powerful hate devices such as BlackBerrys, for they have induced a form of attention deficit disorder among many fathers, who are endlessly distracted from the school play or carol concert.

As children mature, so entrepreneurs can relate to them about their work. You can never tell which children will reject their parents’ vocation, and which will embrace a similar career path. Many of the most enterprising individuals I’ve met learnt about business from close relatives as they were growing up – such an education is vastly better than any MBA. But often the burden of inheritance can undermine lives. I think every entrepreneur would agree with William Thackeray when he said: “I would rather make my name than inherit it.”

Being a great parent is harder than building a business. And in truth the result endures far more than any financial construct. Ultimately, companies and money come and go, but children really are the future.

[email protected]

The writer runs Risk Capital Partners, a private equity firm, and is chairman of the Royal Society of Arts

Copyright The Financial Times Limited 2010.

FT: An emperor of Asian aromas

An emperor of Asian aromas

By Jonathan Guthrie

Published: September 21 2010 23:22 | Last updated: September 21 2010 23:22

Food for thought: Tony Wouhra and his brothers restored the family fortunes with East End. But Mr Wouhra is also conscious of broader issues surrounding foodstuffs

Food aromas connect us viscerally with childhood and the comforts of home. It is from the evocative scents of musky cumin, gingery turmeric and herby coriander that Tony Deep Wouhra and his four brothers have built East End Foods, a UK-based Asian food business with sales of more than £100m ($155m) a year.

You get an appetising whack of these fragrances as you enter the huge warehouse and food factory built by the Wouhra clan at West Bromwich in the English Midlands. Mr Wouhra in­vokes aromas himself over lunch at a nearby restaurant, talking of their im­portance in Asian cuisine while inhaling luxuriously over a plate of tandoori fish.

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“Everyone has something to give,” Mr Wouhra says, discussing how family businesses function. But the comment could equally describe the taste of home that East End gave immigrants when it set up in 1972. Many British Asians had only recently left their mother countries. Traditional English grocers sold “exotic” food in tiny amounts, with spiciness calibrated to the coy tastes of the host population. In contrast, East End’s spices, pulses and rice came in big, fat packets, sold through the proliferating Asian-run cornershops.

Nowadays, curry has the status of a British national dish, East End’s big packets are stocked in some supermarkets and Asian cornershops are in decline. Mr Wouhra, who is 69, is thinking about legacy and succession.

“I don’t have so very long left,” he says matter-of-factly as his Bentley limousine swishes over potholed West Midlands streets, Asian pop trickling from the sound system. His personal assistant Lesley Davies drives while Mr Wouhra fields a call about the £24m headquarters he is planning to build next year on the site of an old HP Sauce factory – the Birmingham landmark was left purposeless after HP owner HJ Heinz moved production abroad.

East End’s new base will boast an exhibition and visitor centre to bring food production alive for city kids who have never seen a farm. Mr Wouhra explains: “We want to show that British people have the guts to take their food legacy forward.”

Pressing his mobile to his ear, Mr Wouhra learns that a key contractor has gone bust. He deals with the crisis calmly, telling a colleague how to extricate East End from the mess. Mr Wouhra’s early experiences have given him broad shoulders. His grandfather was killed during the communal violence of Partition in 1947, when the Muslim state of Pakistan was carved out of Hindu-dominated India. The Wouhra family, which is Sikh, lost its home and wealth, and Mr Wouhra came to the UK as an economic migrant in 1961.

Every morning he would queue for work, often fruitlessly, outside factories in Wolverhampton, a gritty Midlands town. In the evenings he at­tended secretarial college. Racism was common; he changed his name from Kuldip Singh Wouhra to Tony Deep and stopped wearing a turban. A girl called Barbara Ann he had met at college, and who became his wife, put him in touch with a poultry farmer. He began selling chickens and eggs door-to-door.

Ingredients of curry clan’s success

Tony Deep Wouhra is co-founder and chairman of East End Foods, a UK-based Asian foods company set up by five brothers. This is his advice on building a family-run business:
●Family involvement strengthens a business. “One person can only do so much on his own, even with systems in place and whatnot.”
●Do not be too secretive. “When you are established, be open about what you are doing and help other like-minded people who are finding their feet in business. It pays dividends.”
●To get a project off
the ground, tell a colleague it was their idea. “They will put their heart and soul into making it successful.”
●Listen. “Family members have different talents that steer the ship in the right direction. You may be in charge, but if people say to you ‘Brother, maybe the course you are pursuing is too risky’, listen to them. Take less risk.”
●Establish a niche. “Once you have made a space for yourself, you will have greater staying power.”

The chicken and egg business had given Mr Wouhra “the germ of an idea”. In 1972 he set up East End with his brothers Trilok, Devender, Gurdarshan and Jasbir Wouhra. “I gave them 20 per cent of the shares each, and they still haven’t paid me,” he jokes. “But this is a family business, and without the family effort, nothing gets done.” The brothers started canning chickpeas and kidney beans to sell through independent grocers under the East End brand they had adopted because Eastern Foods was taken.

While working 14 hours a day at his growing business, Mr Wouhra saw the engineering industry that underpin­ned the Midlands economy begin to crumble. No one seemed to care about quality, he says. If the handle of a British-made car door dropped off in the owner’s hand, too bad.

East End was following a different tack. “Never sell food that you won’t eat yourself,” was the mantra. Mr Wouhra therefore got a nasty shock in 1990 when he visited suppliers in India and found that some were adulterating the products – “grinding in anything, even road sweepings”. East End gradually brought many manufacturing functions – cleaning, milling, grinding and bagging – in­house. The mighty rice mill that towers up to the lofty ceiling at the West Bromwich facility is the biggest in Europe.

East End has grown steadily by financing investment from cashflow and sometimes from personal savings. For example, in the year to April 30 2009, the directors of the business, all male family members, lent £1.6m to East End. It was a tough year. Sales were £4.3m higher at £114.6m, but pre-tax profits were just £390,000, eroded by food price increases that East End could not pass on to customers. Numbers for the year to April 30 2010, which are yet to be published, should be better, with profits at about £5m on sales of £120m, says Mr Wouhra.

The entrepreneur is as worried by the humanitarian impacts of food shortages as by their effect on his business, which employs 300 people. He believes under-used city land must be pressed into production and he has plans for an urb­an farm in Birmingham, a city dotted with derelict industrial sites. He spent much of last year persuading Indian suppliers to farm organically.

Day-to-day running of the business, which Mr Wouhra chairs, now falls to his younger brothers Devender and Jasbir – “two kingpins” as he puts it. Mr Wouhra’s sons Paul and Roger are directors of East End but may not automatically step into their uncles’ roles. Over lunch, Mr Wouhra praises the abilities of Jason Wouhra, his nephew and the company secretary, who is leading a push to promote the brand to non-Asian customers.

Asian-owned cornershops, which gen­erate 80 per cent of East End’s sales, have come under relentless pressure from UK supermarkets as they expand aggressively into convenience shopping. In response, East End has been training mini-market owners to run their businesses better. But that can hardly halt the decline.

Supermarkets meanwhile represent trickier customers for East End, in spite of the economies of scale they represent. Mr Wouhra says: “They try to find out what sells best at your cost, then produce the best sellers under their own brand.” East End refuses to produce white-label food for supermarkets, having witnessed that ending in ferocious margin pressure for other private food companies.

Mr Wouhra has a quality rare among entrepreneurs: serenity. He talks elliptically about the business challenges facing East End, generalising them into broader social and environmental issues.

The sense one has leaving his West Bromwich aroma empire is that he feels he has done his bit to restore the family’s fortunes. So he has. Increasingly, East End is a project for the next generation.

Copyright The Financial Times Limited 2010.

FT: It's the little things that matter

It’s the little things that matter

By Jonathan Moules

Published: September 7 2010 22:47 | Last updated: September 7 2010 22:47

Window of opportunity: Simon Carter is is adapting to changing tastes now that the company has got through the downturn

Simon Carter, founder and namesake of the world’s largest cufflink business, is at a table in his flagship Mayfair shop, ordering in afternoon tea. At least, I think he is.

“Si, could you run out and get us a couple of tarts,” he shouts with a knowing look across the shop floor to his store manager.

EDITOR’S CHOICE

Evangelist in sheep’s clothing - Jun-01

Jack Wills eyes international expansion - Apr-26

Jaeger targets younger shoppers - Apr-15

Hot Tuna in £1.5m placing - Mar-31

Fashion brands refuel F1 sponsorship - Mar-27

Fashion brands are the must-have buy - Mar-26

Mr Carter, who really does want a custard pastry, has built a reputation for double-entendres that has done him no harm at all.

One of his first cufflink design successes famously looks at first sight like two innocent children’s picture book images. However, on closer inspection, you realise that the pairing of a cockerel and a cat actually has a more risqué, adult interpretation. He is also known for creating a pair of cufflinks that not only look like a couple of Aspirin, but can unscrew to keep the headache cures, or any manner of other pills, to hand.

He does not seem entirely happy to be reminded about this last design, although it helped propel his brand on to the world stage. “I shall have a pair of those put on my tombstone,” he grumbles.

The Simon Carter brand is a marriage of cheekiness with quality that has struck a chord with lawyers and bankers in particular. The range varies from cufflinks with Swarovski crystals to others adorned with pin-up girls. The company’s accessories are now stocked in department stores in 40 countries, from Harrods in London to Bloomingdale’s in New York, Seibu in Tokyo and David Jones in Sydney.

Mr Carter got his taste for fashion and entrepreneurship in the early 1980s, while working in a vintage clothing shop on London’s fashionable King’s Road to help pay for his immunology studies at university.

Given a 1930s pewter brooch in lieu of wages, he wore it for a while before deciding to see if he could sell copies to fashion retailers. “This was the early 1980s, and the fashion was New Romantics,” he says. “Blokes wore brooches.”

He had 100 copies of the design made up by a manufacturer he found in Cornwall and went door-to-door through Chelsea trying to sell it. “It was raining and by the time I got to Sloane Square I had sold absolutely nothing,” he says. “I came into the last shop on the King’s Road looking like a drowned rat and they said they would buy 50.”

Off-the-cuff business rules

Simon Carter has 25 years’ experience of building his business into an international fashion retailer. Here are his top tips:
●Recognise the bits of your business that you do well. Then do them better than everybody else.
●Avoid debt and avoid being beholden to the banks. It gives you an edge over your competition: “For the first decade we had a large overdraft, but since then I have never had to draw up a business plan for a bank, which is wonderful.”
● Employ staff who can do the job better than you can do it yourself. Then be grateful they can do it better than you.
●Keep your overheads low. “I don’t need a flash office, although I do need a flash showroom.”
●Packaging is almost as important as the product. It is the first thing that people notice. “At Selfridges, the cufflinks display is a sea of dark blue until you come to what we rather pompously call cinnamon – but everyone else sees as orange.”

After graduation, Mr Carter pursued a career in retail rather than medicine. He took a graduate traineeship in the men’s wear department of Fenwicks in Brent Cross shopping centre, but also started trading on his own during the evenings and weekends under the Simon Carter brand.

He quit the salaried job a couple of years later when he realised he could make a better living selling his own merchandise. Twenty-five years later, the pre-tax profit for the business is expected to be about £1m ($1.5m) on global sales of £10m.

The company is no longer just about accessories. Cufflinks made up 40 per cent of turnover last year, down from 57 per cent 12 months earlier. However, they remain a profitable line and account for 25 per cent of net profit. The company’s ever-expanding range of Simon Carter suits, shirts and luggage is licensed to third party businesses that pay a royalty on each sale. “The licence is great because it goes straight to the bottom line,” Mr Carter says.

Accessories are still designed in-house, by a team of 24 employees. “Design is critical, both in terms of quality and originality,” Mr Carter says. “I employ designers, both in-house and as consultants, who immediately get the Simon Carter philosophy. I then give them a fairly free rein to explore, and only really input at the very end of the process.”

Very little is now manufactured in the UK – which has got Mr Carter into trouble in the past with those who think a British designer should make his products locally. He is unrepentant, insisting that cost is only one reason for going offshore.

“The reason we make this in China is really due to the quality of manufacturers over there,” he says, holding up an onyx cufflink. “We used to make stuff in Birmingham, but eight years ago I moved away, with great reluctance. The guy we used to use would stop for a half-day on Fridays; everything was late and all the bits fell off the back.

“He never came to see us once for all the five or six years that we worked with him – except when I told him we didn’t want to work with him any more.”

Mr Carter makes about 10 overseas trips a year: “Considering I am scared of flying, that’s quite enough.” This month his destination is Toronto, to visit his own store in the city and Tip Top Tailors, the Canadian men’s wear retailer, for whom he has designed a collection.

Other trips are closer to home, such as the Birmingham gift fair. “God knows what I did in a previous life to deserve that,” he says.

The recession hit Simon Carter hard, partly because of its strong reliance on the Japanese market, where sales dropped by 80 per cent. But Mr Carter prefers to put a positive spin on the experience, claiming it en­abled him to regroup his business in Japan to take more control of operations. “The Japanese retail market has gone through this seismic change,” he says. “The department stores were king, and it was more important to have space in them than a standalone store. In the space of six months that was turned on its head.”

The UK was also down last year, but Mr Carter claims the market has now revived. He notes that the company had its best ever showing this year at the Brighton Gift Fair, the key trade show for his segment of the fashion industry.

“Our key clients, like John Lewis, have finished up 40 per cent in the past 12 months. Those are what I call the barometers,” he says.

Now that the company has got through the downturn, the biggest challenge is adapting to changing tastes.

“There is a limit to how many people will buy a cufflink,” Mr Carter says, noting that men under the age of 30 appear to prefer shirts with buttons.

His solution is to try to take the Simon Carter brand more upmarket by using more exclusive materials in his designs and charging a higher price. His most expensive pair of cufflinks is now £75, compared with £49 at the beginning of the year. “We are not pushing up the opening price point, but we are seeing where the brand can go,” Mr Carter says.

Although entrepreneurs must master a range of skills to create a business, most people excel at one. Mr Carter is clearly suited to selling and marketing.

I can tell he has clocked my cufflinks, by a rival British designer, as soon as we meet but Mr Carter waits until our leave-taking before trying to turn this into a sales opportunity.

“I cannot bear the thought of you wearing those other things a minute more,” he says, urging me to take home a Simon Carter design instead.

Do I choose the diamanté skulls or the pair of blonde nudes with strategically placed crystals?

Copyright The Financial Times Limited 2010.

FT: Things my mentor taught me

Things my mentor taught me

By Emma Jacobs

Published: August 10 2010 19:59 | Last updated: August 10 2010 19:59

Starting a business can be lonely and prone to failure – which is why many entrepreneurs take advice from those who have done it before. Five business founders speak about the people whose advice they valued.

Donald Trump, property mogul

My father, Fred C. Trump, was my mentor. When I was young, the arrangement was informal. I would follow him around construction sites and see how he conducted business.

Later on, when I worked with him in his office, it was definitely more formal. He told me to “know everything you can about what you’re doing”. He was extremely knowledgeable and could even help out the carpenters. His four-step formula for success was simple: get in, get it done, get it done right and get out. He worked quickly but thoroughly, creating a brand with his developments. He had great integrity, which he believed was the best way to promote yourself.

I didn’t agree with everything he said. I wanted to develop in Manhattan, which he couldn’t understand. He was satisfied with Brooklyn and Queens. I also wanted to build skyscrapers; in fact, I’d glue my building blocks together as a child in order to build them. When I built Trump Tower, he suggested I use brick instead of glass.

Brick worked for him, but that wasn’t my vision. Nonetheless, being mentored by my father was very important in my working life. I try to set the example for my children as well as employees.

It’s important to have someone you look up to – if they aren’t around in your daily life, it helps to read books about successful people and how they became successful.

Sahar Hashemi, founder of Coffee Republic

Strangely, my mother was my mentor. I say “strangely” because she was a full-time mother and housewife when I was growing up. But she was very creative and talented and spoke a lot of languages. Whereas my dad was very much a corporate man.

It was when my dad died in 1993 when I was 25 that I decided to leave my job as a solicitor and start up Coffee Republic with my brother, then an investment banker. My father’s death made me realise that there was no such thing as a comfort zone any more and that I should really pursue my dreams while I still had time.

It was my mum’s encouragement that sustained us as friends voiced their doubts and banks turned us down. The idea of selling coffee to a tea-drinking nation in the early 1990s was a bit reckless. But when you start a business you have to listen to a lot of doom-mongers, and having someone buy into your dream, like my mother did, was vital. Her belief in me was contagious. She gave me the push that ultimately led me to discover skills and confidence I didn’t realise I had.

In a practical sense she was supportive in that she allowed my brother and me to move in to her home while we were at the start-up phase. But it was a lot more than that. Everyone has the ability to pick up business advice or practical tips but not everyone has someone they can share their insecurities with and get a pep talk when needed. My mum encouraged me to take leaps out of my comfort zone – to basically be true to myself and go for my dreams.

Sahar Hashemi is the author of ‘Switched On’

Biz Stone, Twitter co-founder

I have two mentors. The first is Steve Snider, a guy I worked with a long time ago who got me started. I dropped out of university and got a job at Little, Brown publishers, moving boxes from the ground to the second floor. In between the floors was the art department. I had started out as an artist and was interested in computers. One day when they were out at lunch I snuck on to a computer and designed a book jacket, which I included in their designs. Mr Snider, the art director, found out it was the “box guy” who had done it and hired me to do book jackets; in return I taught him how to use Macs.

He set in motion the chain of jobs and businesses that ultimately led me to start Twitter.

It was an unusual apprenticeship. I took advantage of all his knowledge and asked him everything, even “How did you know when the right time was to propose to your wife?” We worked together for two years. I learnt a lot about graphic design and life from him. It was better than going to university. He’s a great art director and a natural teacher. He taught me how to deal with fragile egos. We’re still friends.

It might sound a bit corny but my other mentor is Evan Williams, my Twitter co-founder. We’re very different. He’s patient and takes a long view. He never shoots down my outlandish statements. He gets to the core of a problem by looking at things from various angles.

I advise some small start-ups and find it fulfilling. When I talk to a start-up, something will pop into my head about Twitter.

Michelle Garnaut, restaurateur

I have had many mentors – both in my homeland Australia and also in Shanghai and Hong Kong, where I opened my restaurants. The people who have had the biggest impact on my career have been those who have been inspiring and creative. The relationships were never formal. When I’ve mentored younger people in a formal way, I find they can be bit demanding and want their hand held.

When I was starting out 25 years ago, I looked up to women. In the restaurant trade, there were only about half a dozen women who had made it. When I met them, I’d think: “They’ve managed it, so can I.”

When I was 23, I met Mietta O’Donnell, who owned a restaurant called Mietta. I went as a customer and watched from a distance. It was probably 10 years later that I met her – then she was also running a salon downstairs.

She was small, softly spoken and beautiful, but she was also formidable. I was terrified. She was an inspiration to me starting out and has been all my life. She told me that a restaurant was not all about the chef. As a trained chef, I thought she was wrong but now I realise she was right.

When I opened a restaurant in Hong Kong, she advised me to start a salon – I thought she was mad but eventually I started a literary festival, which proved a huge success. She planted the seed in my head. Mietta died 10 years ago and I still think about her.

The other person who influenced me was Gay Bilson, who is fantastically ethical about business. Like Mietta, she was formidable. So rather than ask her questions, I found myself thinking: “What would Gay do?”

And then there is my financial mentor, Josephine Price: supremely clear-headed and such a strong influence in my business life that I eventually asked her to join our board, and so that mentorship became formalised. After being in business for so long I’ve got my own moral compass, but the importance of Gay and Mietta has been to plant ideas in my head and I’ve taken them on myself.

John Ayton, founder of Links of London and Annoushka jewellery

I was a lawyer between 1986 and 1992 before going into business. The person who taught me lessons I have used in my working life was David Macfarlane, a senior partner I shared a room with at Ashurst, the City law firm. When you see someone up close for so much time you end up absorbing some of their traits.

He would find it ironic that I see him as a mentor as, after working with him, I quit law. In fact, he was the one who sat me down and told me I had to choose between law and business – I had started a few entrepreneurial projects, including Links, while a solicitor. We had an amicable divorce, and remained in contact. From him, I learnt how to negotiate and how to see the wood for the trees.

After I sold Links in 2006 I set up Walpole Brands of Tomorrow, which matches mentors with young luxury businesses. Being a mentor is not completely altruistic, as working with small start-ups burgeoning with fresh ideas is invigorating. It also puts you in touch with new markets.

Copyright The Financial Times Limited 2010.

FT: BBC does business a dramatic disservice

BBC does business a dramatic disservice

By Luke Johnson

Published: July 27 2010 20:30 | Last updated: July 27 2010 20:30

The BBC has always regarded business with suspicion. As an institution funded by a regressive poll tax, it struggles mightily with the whole concept of the profit motive, or indeed the very concept of organisations having to actually generate revenues to pay the bills – rather than just acting as a spending empire that extorts money from taxpayers. For the BBC, the assumption is that business is ruthless, domineering and egotistical. And so the grotesque programme Dragons’ Den fits their in-house prejudices perfectly.

Dragons’ Den is a cartoon masquerading as factual television. It has more in common with broadcast wrestling than the real world of investing. The very idea that genuine venture capital takes place in such a ludicrous way is a farce. It is obvious that many misguided projects are encouraged to present because they provide a few cheap laughs. Does it serve the cause of enterprise to have multimillionaires humiliate inventors, and cackle like schoolboys while treading on people’s dreams? But the BBC – despite being a public service broadcaster – doesn’t care. It all feeds the ratings monster, even if it does a disservice to innovation and the private sector.

EDITOR’S CHOICE

More columns from Luke Johnson - Jul-06

My tips for saving money in tough times - Jul-20

A job may be the best launch for a start-up - Jul-13

Business books for the holidays - Jul-06

Healthy body, healthy business - Jun-29

Start-ups focus on the true prize - Jun-22

Having chaired a rival broadcaster for six years, I understand well that television is a mass medium that is obliged to use broad brushstrokes. But in the case of Dragons’ Den, entrepreneurship has been dumbed down to the status of staged entertainment. This is a tragedy. Britain needs entrepreneurs who are positive role models, who inspire others, and who help create jobs and accelerate our recovery from the recession. The BBC gives us the bullying of The Apprentice (another idea formatted from elsewhere) and the superficiality of Dragons’ Den.

Perhaps in 2005, when Dragons’ Den was first shown in Britain, there was a degree of novelty and even a modest element of authenticity about it, even if it was a derivative format copied from Japan. But now in its eighth series, the concept has been milked dry and has descended to the level of caricature. The “Dragons” participate for the publicity, the producers want tears and jokes. The amount the investors risk is small change to them, but in return the show buys them plenty of exposure. As Simon Woodroffe, one of the original Dragons, said: “The thing to remember is that when you walk up the stairs [to pitch an idea] it’s not five people thinking ‘How am I going to be able to make an investment here?’ They’re actually thinking ‘Am I going to be the star of this next little piece?’”

Real angel investing is not a game. It is a vital source of funding for early stage companies that may represent the next wave of industry. It succeeds when it involves rigorous due diligence, conscientious research and professionalism. It involves long-term backing and collaboration, not macho bidding contests based on a two-minute pitch. It is a shame such a serious matter is debased by this sort of fake drama, much of it cooked up for the cameras for prime-time consumption.

It takes little imagination to produce shows like The Apprentice and Dragons’ Den, which pander to popular misconceptions about business and entrepreneurs. I suppose the patronising behaviour and casual cruelty are meant to toughen up candidates for the rigours of the market and the workplace. In reality they display a distorted picture closer to slapstick comedy than a genuine 21st century corporation.

As long as the audience and participants realise the programme is an exploitative sham, then I suppose it is merely a missed opportunity. But I do wonder why they bother. The entire purpose of the BBC is to deliver public goods in the form of high quality transmissions that are edifying and uplifting. After all, the BBC does not come cheap. Prosecutions of licence fee evaders undertaken by the British courts on the BBC’s behalf represent at least 10 per cent of all prosecutions of any kind. Meanwhile, law abiding citizens contribute £3.6bn ($5.6bn, €4.3bn) a year – all to deliver misleading confections like Dragons’ Den. When will the BBC adopt a more constructive and grown-up approach to business and free enterprise?

[email protected]
The writer runs Risk Capital Partners, a private equity firm, and is chairman of the Royal Society of Arts

Copyright The Financial Times Limited 2010.

FT: My tips for saving money in tough times

My tips for saving money in tough times

By Luke Johnson

Published: July 20 2010 20:54 | Last updated: July 20 2010 20:54

Every business I know has been through the wringer during the past two years. Sadly the good times aren’t returning any time soon. So I’ve compiled a list of some more creative and worthwhile ways companies can save money to help entrepreneurs keep afloat in spite of the challenges.

● Use open-source software. Free software such as Linux is used by millions, including organisations like Google, Ticketmaster and the Canadian government. They pay no licence fees, and the mainstream systems are constantly supported by armies of volunteers around the globe. Many in the IT industry hate the concept because it undermines much of its business model, but qualified advocates are becoming more and more common.

EDITOR’S CHOICE

More columns from Luke Johnson - Jul-06

A job may be the best launch for a start-up - Jul-13

Business books for the holidays - Jul-06

Healthy body, healthy business - Jun-29

Start-ups focus on the true prize - Jun-22

Do’s and don’ts to get ahead in the game - Jun-15

● Do random expense claim audits. Abuse of expenses is endemic, but if staff know that even their mobile phone bills are checked occasionally, then they are less likely to take advantage. You should have very clear expense policies, so fiddlers are not able to use confusion to get away with cheating.

● Use procurement specialists. For costs like electricity and insurance, it can pay to pool your buying power with others and negotiate bulk discounts, especially if you run a small business. You can organise this on an ad hoc basis with partners or formal consortia that work together to drive efficiencies.

● Barter. For a start-up this can be especially valuable. Whatever service you offer, see if you can trade it with your suppliers in exchange for their services. Far too few entrepreneurs try this, but at the very least you may be able to negotiate discounts in return for goods in kind.

● Buy second-hand. We frequently buy reconditioned kitchen equipment for our restaurants. Do not hesitate to choose used over showroom-new if it makes economic sense.

● Lead from the front about costs. As a boss, you should constantly question costs and try to be seen to be abstemious rather than extravagant – at least with corporate assets. If you are a spendthrift, you set a poor example that others will copy – with the company’s money.

● Sign the cheques. Many of the most successful founders I know still sit down and pay all the bills every week, so they see exactly how the money is spent. They scrutinise unusual items and bring a proprietor’s conscientious attitude to bear.

● Ask for early payment discounts. If you have the cash, it might be a great way to improve your margins. If your suppliers are under financial pressure, they may well agree a 5 per cent discount for swift settlement. It would take almost two years with current low interest rates to earn that much if you kept the money in the bank.

● Monitor absenteeism. Apparently almost two-thirds of employers don’t bother. But on average the cost per staff member of absence in the UK is £692. It damages productivity and puts extra pressure on staff who do show up. You should put absence targets in place and adopt return-to-work interviews where appropriate.

● Use auctions to purchase. Online bidding for supplies is increasingly common, especially in areas such as graphic design and web programming. There are many Ebay-style websites where you can put up your brief for auction. I recently used this system to get a pretty decent website built for less than £2,000.

● Understand what everyone does. At least once a year, undertake a thorough analysis of all staff roles and try to work out their true productivity – and rationalise posts if necessary. Remember: no one ever tells you they are underworked or that their contribution is inessential.

● Question travel. Video and teleconferencing can replace many expensive trips to meetings. A modest investment in the latest technology can save enormous amounts of time and travel expense. Connecting with people face-to-face should only be necessary if the alternatives really don’t deliver. Too often staff go on jaunts just because they like time out of the workplace.

● Just shut the HQ. Admittedly a radical step, but with modern technology, everyone can work remotely and much can be outsourced.

[email protected]
The writer runs Risk Capital Partners, a private equity firm, and is chairman of the Royal Society of Arts

Copyright The Financial Times Limited 2010.

FT: A job may be the best launch for a start-up

A job may be the best launch for a start-up

By Luke Johnson

Published: July 13 2010 22:02 | Last updated: July 13 2010 22:02

Occasionally, putative entrepreneurs ask me whether they should quit their job to start a business or do it part-time while keeping their current job. I usually suggest the latter strategy, because it worked for me. For six years after university, I was employed by other people – all the while moonlighting on my own projects, such as pubs and software companies, in the evenings, during weekends and holidays. I didn’t take many vacations in my 20s, as I was too busy managing various ventures on the side.

The turning point came when a memo was circulated at Kleinwort Benson where I worked, stating that staff were not permitted to hold directorships or shareholdings in external companies. I knew then the time had come to take the plunge and embrace full-blown self-employment, so I jumped ship the following month and became independent. My sense of freedom was palpable, but I didn’t regret the years juggling employment and entrepreneurship. It was part of my apprenticeship.

The advantages of holding down a job while plotting to become an entrepreneur are plain. You learn at someone else’s expense; you receive an income to pay the overheads while your business develops; and you hedge your bets in case your freelance activities fizzle out. The disadvantages are also clear: if you get caught by your boss misusing resources or getting distracted from the day job, there will be trouble; and a business run in your spare time will never receive the focus and devotion it needs to be truly successful. If you are ambitious, the part-time option should only ever be temporary. You should have a “boat-burning” target: the point at which you chuck the job and dive in.

The online revolution has made moonlighting easier than ever. Apparently, 2.5m businesses in Britain are based in their owner’s home – many of them will be spare-time occupations. As long as there is no conflict with your principal job, why shouldn’t such an arrangement be successful? A part-time enterprise like this will have to become your hobby and your holidays – and you must steel yourself for 70- or even 100-hour working weeks. It will test your determination: if you don’t have the energy and commitment to put that effort in, don’t expect the journey to get easier if you go full-time.

Frequently, such part-time enterprises are family affairs: the principal wage-earner remains in the day job, with its health, retirement and fringe benefits, while their partner runs the home business.

Certain ventures suit moonlighting: e-commerce, direct marketing, franchises, property and suchlike. The rise of virtual businesses has made part-time pursuits much easier to grow, thanks to the expansion of outsourcing. Of course, not everyone running a business alongside their main job wants to build an empire – some just enjoy the variety, freedom and extra income. In the west of England, one in 13 police officers in Devon and Cornwall has a second income: some are tattoo artists; one is a horse dentist; and another provides a holistic massage service. The most common sideline involves letting property or running a bed-and-breakfast. All are permitted, as long as they do not interfere with policing. I applaud the authorities for taking such an enlightened view.

The biggest single hurdle for many start-ups is the proprietor’s low or non-existent income in the early years. Is the sacrifice of a safe salary for the uncertainty of self-employment worth it for you? Will your family support you – emotionally, if not financially? What often kills an early-stage business is excessive personal drawing of money by the owner, draining the company of vital working capital. A moonlighter can avoid these traumas, but making a go of it requires industry, rather like studying at night school.

As ever, all these decisions come down to your personal philosophy. As Goethe said: “Most people work the greater part of their time for a mere living.” Do you want that phrase to apply to you, or do you want to break out and at least try to make a difference? If you moonlight, the downsides are reduced. To me, it is the sensible compromise for many would-be entrepreneurs.

[email protected]

The writer runs Risk Capital Partners, a private equity firm, and is chairman of the Royal Society of Arts

Copyright The Financial Times Limited 2010.

FT: Healthy body, healthy business

Healthy body, healthy business

By Luke Johnson

Published: June 29 2010 21:57 | Last updated: June 29 2010 21:57

This year, for the first time in my life, I have started going for an early morning run almost every day. Previously I played various sports, but this regimen is more methodical. It has helped keep me fairly sane amid the challenges of a recession and being the dad of three children under five. We all know that regular exercise is essential for physical well-being. Now I have also become a strong believer in the positive influence it has on one’s mental health.

Many entrepreneurs I’ve worked with have been fitness fanatics. They included cyclists, swimmers, gym and yoga enthusiasts, marathon runners – I would guess that a majority has been keen at training of one sort or another. There are a number of explanations for this – many of them nothing to do with controlling their weight or physique.

Importantly an exercise ritual requires discipline and motivation, and entrepreneurs tend to possess both of these character traits. Someone who builds a business from scratch should undertake physical activity, because they cannot afford to fall ill. Moreover, they need to command respect as a leader – inspiring not just employees but backers, lenders and customers. It is easier to respect someone who respects themselves, and plans for the long term about their career and their health.

Focus is an important ingredient in any successful project – yet many entrepreneurs are restless by nature. Indeed, I suspect that quite a few suffer from attention deficit hyperactive disorder. One way to address this is through a structured programme of workouts. Such conditions trigger a degree of stress, which then sweeps aside fear and procrastination. Complex exercise, such as skiing, rock climbing or competitive sport, is a good cure for indecision. It forces concentration, and unleashes neurotransmitters such as norepinephrine, which arouses attention, and dopamine that sharpens it.

There is also research to suggest that exercise doesn’t just tone the body, but also works wonders on the brain. A 2007 experiment showed that cognitive flexibility improved after just one 35-minute session on a treadmill. There is no doubt that an ability to adapt intellectually is a powerful skill displayed by many entrepreneurs.

In the 21st century the need to evolve business models is greater than ever, thanks to the accelerating pace of technological change. I have met a number of entrepreneurs who remain engaged with their companies well into their 70s, better able to adjust with the times than some of their younger colleagues. If you own a business there is no retirement age – and the best prescription for a long and fulfilling life is to keep mentally and physically active, whatever your age.

Doctors have known for many years that vigorous exercise can lift your mood. And an optimistic frame of mind is almost a prerequisite for anyone looking to do a start-up, so as a tool to boosting one’s confidence, exercise is hard to beat.

Many doctors now prescribe aerobic exertion before even considering anti-depressant drugs. As the title of an American Medical Association pamphlet says, “Exercise Is Medicine”. The point about exercise is that it can be free, instant, and entirely under your control. All it requires is willpower. It doesn’t even demand a lot of time – half an hour a day is sufficient to keep an adult in shape, and provide a mental lift.

The best material I’ve read on this subject is a recent book called Spark!: How Exercise Will Improve the Performance of Your Brain, by a Harvard professor named Dr John Ratey and Eric Hagerman. They offer a series of thoughtful arguments that show how exercise helps learning, cuts anxiety, eliminates distractions and alleviates depression. The book is not an academic text, but a readable account of his findings.

By their nature entrepreneurs don’t do things by halves, and the danger for some who take up a new routine is that they might overdo it in the beginning. Such intensity risks injury or burnout. Experts say it is better to take a balanced approach and build up activity gradually. That way you steadily use more energy, and have time to appreciate the mental improvements as well.

[email protected]
The writer runs Risk Capital Partners, a private equity firm, and is chairman of the Royal Society of Arts

Copyright The Financial Times Limited 2010.

Forbes: Nitori Furnishes Japan

On The Cover/Top Stories
Nitori Furnishes Japan
Alexandra Harney, 06.07.10

One trip to America was all it took to change Akio Nitori's life and the future of furniture retailing in Japan. It was 1972, and Nitori, then 27, was the owner of two furniture stores on the northern Japanese island of Hokkaido. On a study tour organized by an industry association, Nitori spent a week in California, shopping and observing the way Americans lived.

Nitori noticed that unlike Japan's cramped houses, California homes had not one bathroom but two, separate rooms in which to entertain guests and family, and a swimming pool in the back yard. Americans bought color-coordinated linens, while Japanese filled their homes with a mismatched jumble of colors. American furniture was designed to make life easier for consumers, not simply to pad manufacturers' bottom lines, as in Japan. All this, for so little: American furniture prices were a third of Japan's.

"I understood then for the first time how poor Japan really was," Nitori told FORBES ASIA, in his first interview with the foreign press. "I decided I wanted to help Japanese people live as prosperously as Americans."

Today Nitori is Japan's largest furniture and home furnishings chain with sales up 17.3% to $3.2 billion in the year ended in February, but pilgrimages to America still shape its strategy. Every year Nitori flies about 800 employees to the U.S. to visit Wal-Mart, Target and other stores. Traveling on chartered buses, the Japanese staffers scrutinize store layout and sales techniques as well as product design, materials, colors and prices. "America," says Nitori, "will always be our teacher."

Humble tactics like these have helped Nitori flourish in an environment that has devastated many of Japan's traditional retailers. Anxious consumers have driven down Japanese department store and supermarket sales every year for the past 13, according to industry groups. (Some furniture is sold through those channels.) Even convenience stores, which had been faring relatively well, have reported sales declines for the past 11 months, according to the Japan Franchise Association. Furniture and home furnishings sales fell 1.7% last year to $4.8 billion, according to the Japan Chain Stores Association.

But even as traditional retailers suffer, upstart discount chains like Nitori, Shimamura, Fast Retailing (which runs clothing giant Uniqlo) and Yamada Denki are expanding briskly. These retailers offer more than just low prices. They are the new face of Japanese retail--ruthless about cost control, obsessive about profitability and conscious of fashion and design.

Analysts credit President Nitori, who ranks thirtieth on FORBES' list of Japan's 40 richest people this year, with a singleminded focus on keeping prices down for customers without disappointing them on quality--no small achievement in a country of picky shoppers. In 2009 Nitori (best known in Japan for its "price-cut declaration" advertisements) slashed prices four times. Only about 45% of Nitori's sales are of furniture; the rest are home furnishings, including appliances, kitchenware, carpets and linens. A three-piece duvet and pillow set, for instance, sells for $26, and a lacy white curtain for $18. Nitori sells a large kitchen cabinet on wheels for $110.

Like rival Ikea, Nitori expects customers to assemble some products themselves, but the Japanese retailer dispatches staff to deliver and assemble heavier, larger objects for its customers. Some of Nitori's products are 30% cheaper than Ikea's. Deep discounts like these may be commonplace in America and Europe, but in Japan they are almost revolutionary.

As the scandals with made-in-China toys in 2007 showed, cutting prices can cut into quality. Three years ago Nitori made headlines in Japan when it recalled Chinese-made earthenware pots that appeared to leak lead when heated. Nitori turned to Kiyoshi Sugiyama, a veteran Honda executive he'd hired years before, to accelerate improvements in the company's product safety and testing division.

---

Sugiyama asked his former colleagues for help. Today these Honda refugees, most of them in their 60s and with résumés that trace the carmaker's international expansion, occupy a windowless room at Nitori's headquarters in Tokyo. Filled with tools, whiteboards and boxy gray machines, the room is an engineer's paradise. Here chairs are broken to see why they splinter, pillow covers washed with acid to see if their colors bleed, lightbulbs left on for hours to see how hot they get.

On a recent afternoon five engineers in matching blue jumpsuits huddled around as a colleague in a hard hat sat down in a chair balanced on four scales and leaned back, as a customer might. His colleagues noted the distribution of weight on the scales and took two sets of photographs of the experiment. "Nobody else in the industry does the kind of testing we do," says Sugiyama, a marathoner who once headed up a joint venture engine factory in Guangzhou, China. "We're tougher than all of our competitors."

Sugiyama's revolution is unusual in other ways. Late-career hires from other industries are almost unheard of in corporate Japan. Even more unorthodox was Sugiyama's decision to bring mainland Chinese to join the Honda veterans on the product-quality team.

Nitori himself has little patience for convention. Three-quarters of what he sells are private brands. His company has not partnered with a name-brand designer as Target, Wal-Mart and Uniqlo have, though many of its products are designed in Europe. Though most of Nitori's products are made in factories in China and elsewhere in Asia, unusually among global retailers it also owns two plants in Vietnam and Indonesia. There the store makes products that it doesn't trust third-party factories to manufacture to its quality standards--certain cabinets, chests of drawers and beds.

"No other company has pursued the dual manufacturing and retailing business model to the extent that Nitori has," says Nozomi Moriya, who covers the company at investment bank UBS. Owning factories allows Nitori to engage more directly with its third-party suppliers, she says, because they understand their business better. That helps Nitori bypass trading companies to buy direct from factories, allowing the retailer to lower its prices.

Nitori tracks a long list of data: customer traffic; the age of every store and employee; the number of quality complaints; profit and sales area per employee. To each the company assigns a target, most of which Nitori can recite from memory.

Nitori, who is meticulous about both numbers and words, believes there is an ideal age for both stores and employees. He aims to keep the average age of his stores at 24 and closes stores that are too old or that fail to attract adequate foot traffic. He's equally cool-headed about who he hires: Nitori keeps the average age of employees between 30 and 34. "When employees are too young they don't have the knowledge or skills we need, and no matter what we do, we can't reform them," says Nitori. "After 34 employees start getting arteriosclerosis and gaining weight ... they become less nimble." (Later one of his assistants has to look up the president's official definition of "reform," which is to "effect a fundamental change in direction.")

Politically incorrect though they seem, Nitori's formulas are not illegal. Japanese law does allow employers to specify age limits for new hires under certain conditions.

Nitori's data-driven approach is working. The company has increased sales and profits every year for the last 23. Customers line up outside its wide-aisled, brightly lit store in Fuchu, a Tokyo suburb, before it opens, and cars wait to get into the parking lot on the weekends. Keiko Yamanaka, a 33-year-old soon-to-be-married secretary who recently spent $1,100 in an hour there on cupboards, pots and pans and a chest of drawers for a shared home, says the "price-cut declaration" ads got her attention. "Ikea's products are more fashionable, but Nitori is cheaper."

---

Nitori has achieved his goal of making Japanese feel richer at a time when many could use the boost. He has even succeeded in bringing color coordination to Japanese households and even to other parts of Asia: Nitori has five stores in Taiwan. Selling color-coordinated sets offers the added benefit of increasing the average number of products customers buy, which helps offset the disadvantage of being a discount furniture retailer in a country of tiny homes. Like other furniture retailers in Japan, Nitori's products make the most of small spaces: some beds come with drawers for storage, for instance.

But at age 66 Nitori isn't finished yet.

Back in 1972, when Nitori returned from California, he did some quick math. It took America 120 years to develop its retail industry, and he guessed it would take him 60 years to catch up. He began crafting a six-decade plan then that he continues to refine today. Sometime in the next 20 years Nitori intends to open a store in the U.S. "We'd like to return the favor to our teacher," he says.

WSJ: If It's Thursday in Tokyo, It Must Be Creamy Chipotle Chicken

June 7, 2010, 11:31 AM JST

If It’s Thursday in Tokyo, It Must Be Creamy Chipotle Chicken

Mark Robinson, author of “Izakaya: the Japanese Pub Cookbook,” gives a rundown on Tokyo’s take on one of the hottest dining trends: the food truck.

Mark Robinson

Seiko Shimizu, at food van Tipi, sells Tex Mex food in Tokyo parking lots.

Bound to be a hit in Tokyo this summer are the city’s burgeoning ranks of lunchbox minivans, already doing a simmering trade in multi-ethnic meals that cost less than the equivalent of $10.

The “yatai,” or food-stall vehicles, offer a seemingly limitless menu ranging from Thai stir fries to Japanese rice balls to Italian grilled chicken, and have become a social phenomenon. They’re popular with office workers in business areas like Otemachi and fashion centers like Omotesando, and are also extending their charms among young entrepreneurs.

“There are just so many of us now,” says Seiko Shimizu, 31, one of the two partners behind Tipi (slogan: “Have a Rice Day”). Tipi runs two vans and first lifted its tailgates two years ago, serving Tex Mex: taco rice, taco chili rice and creamy chipotle chicken.

Martin Richardson

Mark Robinson

It’s hard to ignore Ms. Shimizu’s van if you happen upon the aroma of her frying eggs, or your attention is caught by the faded Santa Fe woodwork, or the stained-glass picture of a peeling wave that adorns her mobile kitchen.

Ms. Shimizu starts prepping her meals at home from 5 a.m. every weekday, then loads up the van, which is fitted with a gas stove and other equipment. By around 11 a.m., she’s open for business at her parking spot, which for two days of the week is in a part of Tokyo crowded with design offices.

She shares other locations around town with four other vendors; each of them contributes around $100 per month in “rent.” She says she can make a reasonable living — between them the two vans sell around 120 meals per day. Other vendors, she says, have signed on with companies that control parking spots in office-dense areas like Sankei Plaza in Otemachi, although this costs a lot more.

A few blocks away this particular Thursday, the plain white van of Not Bad Plus is anchored outside a design office. In contrast to Tipi, NBP is minimalist with no décor apart from a large banner that says simply “Curry.”

It’s a look that suits the stoic, wiry bearing of proprietor Hiroshi Watanabe, who has plied his curries — keema, chicken or Thai green — for the past five years. A former restaurant cook and fashion model, Mr. Watanabe opened his own eatery three years ago (also called NBP) and publishes a small magazine about his neighborhood of Ikejiri.

He pays nothing for parking, since his friend works in the office building that owns the space, though he gives the staff discounts. Business lately has been slow: He’s selling around 30 curries a day.

“It should be 50,” Mr. Watanabe says. “But curry picks up in summer.”

With their sudden, short-lived appearances and the queues they attract, yatai vans give Tokyo a sense of happening and festivity. They also give their operators a chance at making an independent living. The chefs and entrepreneurs are a class of Japanese you might describe as “creative slackers.” They don’t have strong ambition, yet they don’t fit the corporate mold and are not satisfied being wage slaves.

“Most people who do this want to open their own restaurants,” says Ms. Shimizu. That’s her dream too, along with making a home by the sea.

Copyright 2008 Dow Jones & Company, Inc. All Rights Reserved

FT: How to avoid being a one-hit wonder

Excerpt:

Too often, the problem is that entrepreneurs go into business because they have a great product idea, rather than an idea for a brand, according to Rita Clifton, UK chairman of Interbrand, the branding consultancy.

Not only does this mean they are highly unlikely to create a second great product, they are also open to competitive attack from larger companies operating in the same market, Clifton notes.

“The whole way to create a sustainable business is to have a brand,” she says. “Products tend to be highly replicable, so if a large company sees a start-up come up with a good idea, it will just do something similar, scale it up much more quickly and market the hell out of it.”

===

How to avoid being a one-hit wonder

By Jonathan Moules

Published: June 4 2010 16:58 | Last updated: June 4 2010 16:58

It has been said that entrepreneurship is the new rock and roll. This may not be a perfect analogy, but musicians and business founders are alike in that they have to repeat their initial success multiple times in order to be considered great.

The history of start-ups is littered with fantastic business ideas that faltered because they ended up being a one-hit wonder.

Sometimes, it is a failure on the part of the founder to step back and let others take the business to the next level. In other cases, the owners become so obsessed with perfecting their original product that they fail to see where to take the business next.

Successful businesses are those that can overcome these problems. So what can budding entrepreneurs learn from their stories?

Ash Gaming began life in 2002 delivering specific customised online computer games for bookmakers and online betting sites. It has grown fast by regularly supplying new products: it now has a portfolio of more than 100 games, supplying 30 bookmakers and gambling websites in 32 different languages.

The key, according to founder Chris Ash, is to consistently exceed expectations. However, he admits that this is not easy.

“If people are used to being surprised with what you deliver, it’s hard to maintain the bar,” he says. “Everyone is waiting for the next thing, and if it does not live up to the usual highs, even a good product can seem unexciting.”

Too often, the problem is that entrepreneurs go into business because they have a great product idea, rather than an idea for a brand, according to Rita Clifton, UK chairman of Interbrand, the branding consultancy.

Not only does this mean they are highly unlikely to create a second great product, they are also open to competitive attack from larger companies operating in the same market, Clifton notes.

“The whole way to create a sustainable business is to have a brand,” she says. “Products tend to be highly replicable, so if a large company sees a start-up come up with a good idea, it will just do something similar, scale it up much more quickly and market the hell out of it.”

Those that have overcome this kind of competition – such as online grocery delivery business Ocado and ethical drinks and snacks group Innocent – have done so by sticking to a bigger brand strategy, according to Clifton.

“When Ocado started, it was not just that they wanted to do an online grocery service, it was that they had a new way to do online grocery delivery,” she says.

“All of their innovations, such as the massive bags, the text messages before your order is delivered and the iPhone app, have all come from an understanding of the brand.”

One entrepreneur who has followed the brand first, product second principle is Paul Lindley, founder of healthy children’s meal maker Ella’s Kitchen.

Lindley – whose daughter Ella’s reluctance to eat fresh fruit inspired him to set up his company in 2005 – had the advantage that he understood branding, having spent 10 years at Nickelodeon, the children’s television channel.

“I knew we had a problem with kids’ food and with my experience I knew I could create a brand of food that was just for kids and meant something different for them,” he says. “We try to be very uncorporate on our packs and in our language to make us very different to Heinz and Hipp [the market leaders in child and baby food].”

Innovations, such as the soft packaging used in the Ella’s Kitchen baby food ranges, were the result of thinking about how to satisfy the core brand values, Lindley claims.

“I went for the packaging originally because it was so tactile,” he says. “Once we started developing the stuff, I very quickly realised that there is another function of packaging: convenience.”

Ella’s Kitchen started with two lunch box products and now has a range of 46 items, earning the Henley-based company a revenue of £30m this year and putting it among the fastest growing businesses in the country.

New products are developed with the help of what Lindley calls “unscientific groups” made up of his daughter’s and his wife’s friends – many of whom would not normally consider ready meals. This has not only helped the company come up with ideas but has helped to get supermarket buyers to agree to stock new ranges.

“What the supermarkets love is that we managed to persuade a group of mums who would normally cook their own stuff to use our stuff once or twice a week,” Lindley says. “They also love the fact that this has led to a ‘premiumisation’ of baby foods because there wasn’t a category like that before.”

Another business to crack the problem of recreating the buzz of an original good idea is Vitabiotics. The London-based company was started in 1971 by pharmacologist Kartar Lalvani with a concept for multivitamins.

Vitabiotics now sells a range of products across 15 brands, covering different areas of health – such as pregnancy, skin, hair and nails. Last year, this generated sales of $430m in 108 countries, although the UK remains the biggest market.

Tej Lalvani, the founder’s son, who is now chief operating officer, puts the company’s success in generating new products down to owning the research and marketing expertise. The company has also avoided buying other businesses to add to its range of products.

“More care goes into elements like the packaging if we own the process ourselves,” he says.

Perhaps most of all, Vitabiotics has maintained its focus. Even with so many different products under its brand, Lalvani claims that the business is a success because what it does is clear and simple.

Copyright The Financial Times Limited 2010.

NY Times: Their Future, Made by Hand

June 1, 2010

Their Future, Made by Hand

By JULIA MOSKIN

Fabiana Lee’s spicy beef empanadas are traditional Argentine style. Of Korean heritage, she grew up in Buenos Aires.

THEY carry home-grown radishes and red-cooked pork. They transport dozens of empanadas, juggling sheet pans on the G train. They pack boxes of butterscotch cupcakes, Sichuan-spiced beef jerky and grapefruit marmalade. They haul boiled peanuts, ice-grinding machines, sandwich presses and at least one toaster oven painted hot pink.

One Saturday morning each month, the vendors of the Greenpoint Food Market converge on the Church of the Messiah in Brooklyn.

“This is my investment in the future right now,” said Fabiana Lee, 26, an interior designer who lost her job in 2009. She has been selling at the Greenpoint market since its inception in October. After experimenting with cookies (too much competition), she has pared her offerings down to two: gorgeously browned empanadas and irresistibly twee “cake pops,” golf-ball-size rounds of cake perched on lollipop sticks. At the moment, they are her main source of income.

Young, college-educated, Internet-savvy, unemployed and hoping to find a place in the food world outside the traditional route, she is typical of the city’s dozens of new food entrepreneurs. As the next generation of cooks comes of age, it seems that many might bypass restaurant kitchens altogether. Instead, they see themselves driving trucks full of artisanal cheese around the country, founding organic breweries, bartering vegan pâtés for grass-fed local beef, or (most often) making it big in baking as the next Magnolia Bakery.

Joann Kim, 26, who organizes the market, cited the intersection of the economic downturn and the rise of the local artisanal food movement as reasons for the recent flowering of small culinary start-ups.

Aspiring cooks (and the adventurous eaters who love them) come face to face at markets like this one, which are opening and expanding at a brisk pace. The Brooklyn Flea, the Hester Street Fair and the soon-to-reopen New Amsterdam Market have become tasting destinations, where handmade food is as much of a fetish as vintage Ray-Bans or bargello pillowcases. The all-food Greenpoint market, which is open to home cooks of all stripes, is one-stop shopping: Mexican-Indian tacos, artisanal soda pop, roof-grown produce, exotic chili peppers, long-brined pickles, Taiwanese street food and retro-Southern snacks under one roof.

“I feel like I’m at a science fair and I get to eat all the experiments,” said Erin Massey, a Chicago native who lives in Brooklyn, looking around the crowded church basement. “It’s like going to a music festival with all the different bands, only here it’s different kinds of kombucha.”

There were almost 50 vendors. Many had been up since dawn, rolling rice balls, filling containers with waffle batter, crimping pie crusts. In headscarves, retro-chic aprons and all manner of eyewear, they skidded around the crowded basement, jockeying for electrical outlets and space.

“We do whatever it takes,” said Nicole Asselin, who brought tiny pies filled with organic rhubarb, chocolate chip cookies (to be warmed in the hot-pink oven) and logs of butter mashed with wild ramps that she had gathered in Vermont.

Each vendor had paid $25 to $50 for a table, with half the money going to the church and half to Ms. Kim. The cash they earned was theirs to keep. At $4 an ice pop or $3 an empanada, the margins on many products seemed high, but some of the vendors who have been operating without official certification may soon see their profits shrink.

On May 28, the New York Department of Health confirmed that all food vendors in the city must have a food handling permit, and may use only approved commercial kitchens. Renting space in a commercial kitchen costs about $200 for eight hours. For some vendors like Ms. Lee, who is in the process of getting her permit, that would mean the difference between making a small profit and just breaking even on a day at the market.

Ms. Kim said that she believed that the fact that the money benefited the church meant that unlicensed vendors were allowed to participate. “I guess we’ve been trying to fly below the radar a little bit,” she said, acknowledging that the bustle of the church basement might disappear under official scrutiny. “It’s been a wild ride.”

Some of the vendors were amateurs there on a lark, to earn brownie bragging rights and a little spending money.

But for many, the stakes were much higher. In these markets, cooks like Laena McCarthy of Anarchy in a Jar, who makes extraordinary preserves from local fruit, have a shot at developing a viable food business without working with a commercial processor, such as the large food companies that she deems “evil agribusiness warlords.” (Her company’s motto is “The Revolution Starts in Your Mouth.”) Ms. McCarthy’s jams have recently been picked up for sale by a Whole Foods store in Manhattan; for her, and others, a national distribution deal is the dream.

But for now, most of the vendors have a “day job” of some kind. Ms. McCarthy works as a librarian and teaches library science. Ms. Asselin is a pastry chef at Marlow & Sons in Williamsburg. Jun Aizaki, who makes Japanese rice balls called onigiri, wrapped in and scented with banana leaves, has designed the interiors of New York restaurants such as Rayuela and Macondo.

Two eminent but unemployed pastry chefs — Fany Gerson and Hannah Goldberg — banded together to start La Newyorkina, making delicious Mexican-style paletas, or ice pops, in flavors like mango, guava and horchata (cinnamon-rice). They have been selling outdoors at the new Hester Street Fair, and handed out mini-paletas to children to draw their parents in.

“If we first build a following at the markets and online,” Ms. Goldberg said, “then we can get the money to open a storefront that much more easily.” Professionals like Ms. Goldberg say that a commitment to marketing, packaging and general hustling are as important — or more so — as kitchen skills. Twitter, Facebook, Etsy, Tumblr and Blogspot are important for spreading the word; so are the city’s many new amateur cooking contests, like the Brooklyn Pie Bake-Off; so are food shops with a commitment to local artisans, like Blue Apron Foods in Park Slope and the Northern Spy Food Company in the East Village.

So is paring down your line.

“I’ve already seen that you do much better if you’re ‘that girl’ who sells ‘that thing,’ ” said Ms. Asselin, who has yet to commit.

Ms. Lee is still deciding whether her business, La Tía Faby, will focus on empanadas or cake pops. Growing up in Buenos Aires, she said, she set her sights early on a life in New York City.

“I was used to being the only Asian girl at school,” said Ms. Lee, whose parents were born in South Korea and now own a knitwear company in Argentina; she is fluent in English, Spanish and Korean. “But I loved the mix of people and food in New York.” Ms. Lee said that her mother, who served steak with kimchi on many nights, taught her the basics of cooking, both Argentine and Asian. Ms. Lee’s chorizo and kimchi empanadas with Korean glass noodles are pleated down the edge, like huge Chinese dumplings; the spinach and mushroom version is folded like a fortune cookie.

Ms. Lee moved to New York to study interior design at Pratt Institute in Brooklyn; when she graduated in 2006, she quickly found a job at a downtown firm. But in early 2009, she said, the effects of the stock market downturn began to hit. “It was almost a relief when I got laid off like everyone else,” she said. “Better than sitting at my desk waiting for it to happen.” Then she spotted an online open call for vendors at the Greenpoint market.

The recession weaves through the back stories of many of the itinerant vendors, even those who are not new to selling food. Matt and Alison Robicelli had both a fledgling cupcake operation and a specialty foods shop in Bay Ridge until last October, when they decided that brick-and-mortar was a losing proposition. “We sat down with an adviser who looked at our crazy life and said, ‘You have three things to take care of: your shop, your cupcake business and your kids,’ ” she said. “He told us we had to pick two.” Now they sell cupcakes — including a dark, bittersweet “Bea Arthur” number that combines chocolate, coffee and cheesecake flavors — through various cafes, at the Greenpoint market, and at another newly opened Brooklyn venue, the outdoor Red Hook Mercado.

Ms. Lee is still unemployed, but she has never worked harder, she said, trying to build a viable business one bite at a time. The day before the Greenpoint market, in her sixth-floor walkup in Chelsea, Ms. Lee folded hundreds of empanadas and painstakingly decorated dozens of cake pops to look like pale yellow chicks, using sprinkles and edible inks she orders from online candy suppliers. (Cake pops and cake balls, made by mixing fresh cake crumbs with frosting, then dipping balls of the mixture into “candy melt” for a smooth, Ring-Ding-like coating, are up-to-the-minute successors to the no longer trendy cupcake.)

“Transportation is by far the biggest stress,” said Ms. Lee, who must travel by subway or taxi to Greenpoint; there are many casualties among the empanadas. But her wares have always sold out, so far. All day at the market, women exclaimed over the cake pops and asked about custom orders for baby showers and birthday parties; only a few of these inquiries have ever panned out. She took home about $500 in cash, having sold out by 3 p.m.

One of the charms of the food-market scene is an Old World sense of cozy community: everyone seems to know one another. But this also means a race to capture shoppers before somebody else does. At Greenpoint, two vendors of kombucha were stationed right across from each other, and there was more than one seller of pickles, fizzy drinks and gluten-free muffins.

“I didn’t know there would be another granola,” said Alex Crosier of Granola Lab, eyeballing the competition for her ginger-molasses and cranberry-cashew mixtures.

At the end of the day, said Ms. Asselin, the vendors are very tired, very thirsty (much of the food is very sweet, very salty or both) and not much richer.

“It’s hard work,” said Hannah Goldberg, speaking about her time at the Hester Street Fair. “Our ancestors came through the Lower East Side to find a better life, and our parents think it’s crazy that we’re back here selling from a pushcart.

NY Times: Web Start-Ups Offer Bargains for Users' Data

May 30, 2010

Web Start-Ups Offer Bargains for Users’ Data

By STEPHANIE CLIFFORD

As concern increases in Washington about the amount of private data online, and as big sites like Facebook draw criticism that they collect consumers’ information in a stealthy manner, many Web start-ups are pursuing a more reciprocal approach — saying, in essence: give us your data and get something in return.

The budgeting Web site Mint.com, for example, displays discount offers from cable companies or banks to users who reveal their personal financial data, including bank and credit card information. The clothing retailer Bluefly could send offers for sunglasses to consumers who disclose that they just bought a swimsuit. And location-based services like Foursquare and Gowalla ask users to volunteer their location in return for rewards like discounts on Pepsi drinks or Starbucks coffee.

These early efforts are predicated on a shift in the relationship between consumer and company. Influenced by consumers’ willingness to trade data online, the sites are pushing to see how much information people will turn over.

“People are a lot more willing to give away a lot of stuff as long as it results in some benefits that they value,” said Stephen J. Hoch, a marketing professor and director of the Jay H. Baker Retailing Initiative at the University of Pennsylvania’s Wharton School.

WeShop.com, still in development, has built a system that allows people to spread information about their shopping habits.

New companies including WeShop, Aprizi, Blippy and Dopplr are trying to exploit the data that people seem so willing to give up. Some are even allowing shoppers to set what terms they want — free shipping, half-price discounts, only fair-trade products. They can also list what they are shopping for, like a gray cashmere sweater under $100, for instance, and let the retailers fight it out for the right to make a sale.

“The whole privacy debate has grown up around people using your data without your permission,” said Antony Lee, chief executive of WeShop. “If you want to use your data to your benefit, that’s for you to do,” Mr. Lee said.

Daniel Sjoberg, a 26-year-old in Manhattan, signed up for Mint as he was completing graduate school in biostatistics last summer. He allowed the site to pull information from his checking account, his credit card and his student loan account.

He meant to use Mint as a budgeting tool, but soon began browsing through offers Mint listed under “ways to save.” He signed up for a Charles Schwab checking account when he learned it would refund his A.T.M. fees, and an Ally savings account based on the interest rate.

Sponsors are allowed to include their logo and a link to their site, and they pay a referral fee if a consumer signs up, but offers from nonsponsors are listed, too. Mr. Sjoberg said he particularly liked how transparent Mint seemed to be.

“They put that very clearly for you to see — ‘We think Ally is good for you, and by the way, they’re endorsing us,’ ” Mr. Sjoberg said. “It’s refreshing to have it out in the open who’s giving them money and who’s not giving them money.”

Aaron Patzer, who founded Mint in 2007 (the company was acquired by Intuit in 2009 for $170 million), believed that users would give the site private information in return for allowing Mint to analyze their finances to alert them when they had exceeded their budget, or to send them offers from cable companies or banks.

“Most venture capitalists, when I was starting this company, said that no one would trust a start-up with their financial information,” said Mr. Patzer, now vice president and general manager of Intuit’s personal finance group. “In essence, we would data-mine your own data in order to help you.”

While data on Mint is kept private — there is no way to share financial details with other users — WeShop has built a system that allows people to spread information about their shopping habits. After a consumer gives WeShop access to an e-mail account, the system scans e-mail headers to find electronic receipts, then extracts what someone bought and what price they paid.

All that information is posted to the WeShop site as a kind of in-depth shopping history. A consumer can keep it private, or share some or all purchase data with other people in WeShop networks (using a nickname). That lets users compare prices and post messages about what Lego sets or prom dresses they are considering.

WeShop will soon give retailers access to the data and allow them to send specific offers. A retailer like Bluefly, which says it plans to test WeShop, could search for people who have bought something prom-related, and send those users e-mail messages with special offers on formal dresses. Retailers pay WeShop a percentage of the sale price when a consumer buys a product.

“Everyone’s kind of working on different angles of how we give the consumer more ways to target what they want, to ask for what they want, and get it,” said Bradford Matson, chief marketing officer of Bluefly.com. “This notion of how people shop is changing very quickly.”

Bun Lai, a chef at Miya’s Sushi in New Haven, said he liked the way WeShop put him in charge. “I wasn’t completely comfortable right from the start — it’s after I understood that you actually have control of the information that you’re going to allow the network to have, then I realized it was actually something more empowering,” he said.

But the upfront dealmaking does not quiet all the privacy concerns.

“The big problem is that these business models are not very stable. Companies set out privacy policies, consumers disclose data, and then the action begins,” Marc Rotenberg, executive director of the advocacy group Electronic Privacy Information Center, said in an e-mail message. “The business model changes. The companies simply want the data, and the consumer benefit disappears.”

But Giff Constable, co-founder of Aprizi, a shopping start-up that asks users to enter information about preferences, then selects products for them from throughout the Web, said a changing business model was unlikely, and even if it happened, the consumer could easily disengage.

“It’s opt-in, and it’s understood from the beginning what’s going on here,” Mr. Constable said. “That level of control is explicit: you can plug in and you can remove the information that’s there.

“It’s a very simple bargain — it’s, ‘You share with me, and I am going to make your life better.’ It’s not about privacy versus lack of privacy — it really does come down to control and giving people choice.”

That, and a perceived benefit. “I wasn’t really concerned about giving them information,” said Mr. Sjoberg, the Mint user. “I was only considering the things I was getting out of it.”

NY Times: On the Go and Hungry? Dinner Is an App Away

May 30, 2010

On the Go and Hungry? Dinner Is an App Away

By CLAIRE CAIN MILLER

In today’s mobile, real-time world, fast food is not fast enough.

That is the idea behind Snapfinger, a Web and mobile app for ordering takeout from chain restaurants like California Pizza Kitchen, Outback Steakhouse and Subway. Diners craving a pizza or burger can pull out their phones on their way home from work and arrive at the restaurant to find their meal waiting for them.

Kudzu Interactive, which owns Snapfinger, will announce Monday that it raised $7 million from Norwest Venture Partners and early investors, money it will use in part to expand its service beyond chain restaurants, known in the industry as casual dining, to independent ones.

“What they’ve done at Kudzu is combine three of the hottest areas right now for venture capital investing — e-commerce, mobile and local,” said Joshua Goldman, a Norwest general partner who will join Kudzu’s board.

The next phase of popular — and profitable — cellphone apps will move beyond novelty, like turning a phone into a piano or an imitation lighter, toward mobile commerce and transactions, Mr. Goldman and other analysts say.

Unlike most app makers, Kudzu Interactive, which is based in Atlanta, is profitable, and its revenue grew fivefold last year, said Jim Garrett, its founder and chief executive. The Snapfinger app is free for diners, and Kudzu Interactive charges restaurants 3 percent to 10 percent of each bill. It makes money every time someone uses the app, not when it is first downloaded.

“A lot of people think of mobile companies as iPhone app developers who make a product and sell it for 99 cents,” Mr. Goldman said. “This is much more than that. It’s a new way to conduct a transaction that everyone does multiple times per week.”

Many mobile apps, like Yelp and Foursquare, offer information about restaurants, but “we don’t see much of a barrier to entry to doing reviews or social stuff related to restaurants,” Mr. Garrett said. “The real trick is being able to place an accurate order and picking it up, and it being ready and prepared on time.”

Snapfinger presents menus from 28,000 restaurants in 1,600 cities nationwide and in Canada. The service is most popular, the company says, in Orlando, Fla.; Chicago; San Francisco; Portland, Ore.; Houston; and Winnipeg, Manitoba. People can search for restaurants nearby, order and pay from their phones. There are tools for group ordering for an office lunch, ordering favorite items with one click and getting location-based, limited-time coupons.

Snapfinger is linked to each restaurant’s computerized cash register, and it reflects what is available at what price that day. This real-time information is helpful because each of the hundreds of restaurants in a chain has different prices, daily specials and store hours, and if one runs out of an item, Snapfinger knows it.

Mr. Garrett’s “whole vision is about modernizing the quick-service restaurant industry, much more than it is about an app,” said Noah Kravitz, editor in chief of PhoneDog.com, a Web site about the mobile phone industry.

People who order takeout using Snapfinger spend about 25 percent more than when they order from a traditional menu, Mr. Garrett said. That is because Snapfinger prompts people to add items, like grilled onions on a hamburger — the kind of upselling previously done by servers.

On Snapfinger, Boston Market offers a third side dish, like creamed spinach or macaroni and cheese, for 99 cents, and suggests desserts and drinks, which takeout customers often overlook. The amount people spend using Snapfinger is 25 percent more than other takeout customers spend, said F. Lane Cardwell Jr., Boston Market’s chief executive, which is significant because 60 percent of the chain’s business is takeout.

One chain plans to replace the menus in its restaurants with iPads running Snapfinger’s app this summer, Mr. Garrett said, eliminating the need for some servers.

There are 400,000 restaurants in the United States that are part of chains, and their takeout business is $50 billion a year, Mr. Garrett said. Snapfinger is also adding independent restaurants, first in California and then elsewhere.

Kudzu Interactive was founded in 2004 as a service for restaurants to build their own takeout Web sites and, later, mobile apps. Snapfinger, its consumer app, was introduced last year. The mobile version is available for iPhone, Android and Palm phones; a BlackBerry app is coming in June.

Kudzu Interactive will use its new capital to increase sales to independent restaurants in addition to chains. It is also working on the iPad app to replace menus at tables, and a new app for fast-food restaurants whereby people order at the counter, to bypass the line.

“Speaking to a person at a restaurant to order over the phone is going to be like calling directory assistance these days,” Mr. Goldman said. “Why would you do that?”

NY Times: Putting Customers in Charge of Design

May 14, 2010

Putting Customers in Charge of Design

By AMY WALLACE

THE idea was never to try to supplant retail, says Fan Bi, the 22-year-old chief executive of Blank Label. Sometimes you need a dress shirt right now, and at those times, Mr. Bi says approvingly, “you can get it right now at Nordstrom.”

But what about those times when you get a hankering not to wear the same thing that 10,000 other men are wearing? Or when you wish you could have the fabric, collar, pockets and lining you’ve always wanted — not what some fashion buyer has chosen for this season? What if you could design that shirt yourself and hang it in your closet for about the same price as a mass-produced button-down?

“The value proposition of customization at retail prices was a cornerstone of our company from the very start,” Mr. Bi tells me by phone from Shanghai, where Blank Label shirts are sewn to customers’ specifications and delivered anywhere in the world in about four weeks. But Blank Label, his Web start-up based in Boston, offers something else that off-the-rack doesn’t: “the emotional value proposition: how expressive something is.”

“People really like a Blank Label shirt because they can say, ‘I had a part in creating this.’ ”

Since last Halloween, when the company’s dress shirt design application made its debut at www.blank-label.com, Mr. Bi and his three partners — ages 19, 22 and 30 — have joined a small but growing co-creation movement that uses the Internet to let consumers have a hand in making the products they buy. Web ventures have already popped up that allow shoppers to customize granola (MeAndGoji.com), jewelry (gemvara.com), chocolate (CreateMyChocolate.com), handbags (LaudiVidni.com) and clothing for girls ages 6 to 12 (FashionPlaytes.com). There are also online competitors selling design-your-own shirts, while Brooks Brothers is one major retailer that offers the service on its Web site.

The upside for business owners is obvious: low overhead. At Blank Label, for example, the sew-as-you-go business model eliminates the need to produce shirts of every size and style. There’s no need to rent space to store inventory. There’s no storefront, no office other than a borrowed space at Babson College in Boston, where until recently Mr. Bi was an exchange student from the University of New South Wales — he grew up in Australia.

“We’ve focused on being very bootstrap, very lean,” says Mr. Bi, who says the business has sold about 450 shirts. Recently, it has seen a big bump in traffic, with orders of about 10 shirts a day. He says the company makes money on every shirt.

Once, Mr. Bi wanted to be an investment banker. In the summer of 2008, while pursuing his finance degree, he worked as a junior analyst at a Sydney bank. But the experience left him disenchanted. “Probably a product of my generation — I was too entitled,” he acknowledges. “I felt I’m just one very, very small ant in this massive firm. I’m not feeling very engaged. And entrepreneurships and start-ups became interesting.”

On a trip to Shanghai, where his parents grew up, he got an idea: a service offering custom-tailored suits to college students at a bargain price. He wasn’t thinking about an online business. He thought he’d hire a rep at every college in the Boston area and sell suits one at a time.

Then he met Danny Wong, now a 19-year-old communications major at Bentley University. Mr. Wong had applied to be a rep. Excited about “bridging the gap between consumer and manufacturer,” Mr. Wong remembers quizzing Mr. Bi about his marketing strategies, particularly on the Web. They teamed up and, several months later, Blank Label was born.

At first, Mr. Bi and Mr. Wong tried to raise venture capital.

“To be honest, we couldn’t,” Mr. Bi says. “We were two very young guys who had no track record.” So Mr. Bi financed the site with about $10,000 in savings, he says, recruiting a programmer and a Web designer and vowing to make leanness a strength, not a weakness.

One goal was to communicate directly with customers. The Web site commands: “Call us. We like to talk.” Depending on the time of day, Mr. Bi answers the calls himself. When he is awake, he also activates a feature that sends instant messages to customers who have been on the site for more than 90 seconds.

Need help? he asks. For several hours a day, he and his partners chat with customers about what they like and don’t like on the site.

The feedback has led to several site revamps and — I can’t resist — alterations. The company is on its third home page in six months, and the partners say they tweak the site every day.

A FEW weeks ago, before I had decided to write about Blank Label, I sat down and designed a shirt for my 13-year-old son. It was a striped button-down made of “Green With Excitement” — all Blank Label’s fabrics have hyperdescriptive names. I chose the cut, the size, the placket and the collar; I opted for single-button cuffs, no pockets and no epaulets.

For fun, and to test the ordering interface, I added a contrasting inner collar and cuff in a solid fabric called “Masculine Poplin Grey,” and added a monogram of my son’s initials on the cuff. For the inside of the collar, I made up a custom label, “Live Free or Die” — I was reading “Game Change” and had New Hampshire on the brain.

The whole process took 10 minutes. With all the bells and whistles, the shirt cost $72, compared with $45 for Blank Label’s most basic, no-frills model.

The site showed me a mock-up, which looked great. But when I went to check out, the order summary did not list the contrasting inner collar. No matter what I did, the inner collar was green and excited instead of masculine and grey. So I clicked on “Help” and sent a message. Soon, I heard back — from Mr. Bi himself. Notably, this was before he knew he would be in my next column.

On Friday, the shirt arrived. It was just as I’d designed it, just as Mr. Bi assured me it would be. If my son doesn’t like it, Blank Label policy is that I can return it, no questions asked. And here’s the best part: I sort of made it myself.

E-mail: [email protected].

FT: Why focus groups tell you the obvious

Why focus groups tell you the obvious

By Luke Johnson

Published: March 23 2010 22:44 | Last updated: March 23 2010 22:44

I recently commissioned some market research and, as is too often the case, it told me what I already knew or was obvious. I paid the bill of several tens of thousands of pounds, consoling myself with the fact that the work at least confirmed my prejudices – always a satisfying sensation. But I also sensed I had received very poor value; and in talking to other clients of research companies, I realise quite a few feel the same way.

As Michael Skapinker wrote on Tuesday, the idea that the customer is always right has become an accepted truth in business. Unfortunately, customer desires are often wholly unrealistic – because of cost, technology or legislation. As Henry Ford said at the launch of the Model T: “If I’d asked the customer, he’d have asked for a faster horse.”

EDITOR’S CHOICE

More columns from Luke Johnson - Mar-08

Behind all successes are a series of failures - Mar-30

A good gut feeling is a secret weapon - Mar-02

Business Life: Exploding the myths of private equity - Mar-09

Recovery demands a clear-out of the old guard - Mar-16

Celebrate the boon of business diversity - Feb-23

I remember Peter Boizot, founder of PizzaExpress and my predecessor as chairman, telling me how, in 1965, customers in his Soho pizzeria felt uncomfortable with authentic Italian pizza – and demanded chips. But he stuck to his vision and guided their tastes to the genuine product.

I have also experienced data blindness over research studies. Consultancies supply blizzards of material – far more than could ever be useful. Wordy, sprawling PowerPoint presentations compensate for a lack of incisive thinking. One can end up paralysed with indecision, buried in e-mails too large even to download.

Great breakthroughs in fields such as new product development are frequently achieved by avoiding surveys and committees altogether. Constant testing can lead to blandness and safety-first choices. In creative affairs, corporate brainstorming sessions usually end up with groupthink dullness, all originality squeezed out because of the fear of failure or through the influence of office politics. As Steve Jobs said: “It’s really hard to design products by focus groups. A lot of times, people don’t know what they want until you show it to them.”

At Channel 4, many of the most brilliant and distinctive programme ideas during my time as chairman were pioneered by eccentric independent producers who were championed by renegade commissioners. Meanwhile expensive, mainstream concepts often flopped.

Over the decades since I worked in advertising, I have sat in many focus groups and wondered about the quality and effectiveness of such qualitative research. After all, who submits to a two-hour discussion about brands of washing-up liquid? All too often, the answer is the lonely, the old, the unemployed, students and, most worrying of all, serial participants in search of the small stipend and free tea and biscuits. It is very hard to persuade a normal working person to attend such panels, but they are usually the target subjects.

I worry that researchers who appear to succeed are too often the snazzy firms who trade in sexy stereotyping. They use phrases like “Inner City Adversity” and “Twilight Subsistence” to categorise and supposedly understand various imagined socioeconomic and demographic groups. I am unconvinced that this terminology and philosophy are especially practical and relevant for many companies. In my restaurants, the people who know our customers are not researchers but branch managers, who serve the public all day, every week. Our staff may not have the slick patter, but they have the frontline, first-hand knowledge.

Another unfortunate byproduct of the growth of research has been the increasing use of surveys by political and charitable organisations in their campaigns. Almost every day a pressure group gets publicity by publishing selective and scary conclusions about poverty, health, discrimination or other controversial issues. Journalists rarely question the study methods or validity of the results. Even if there were no errors in the sampling techniques, questionnaires or systems used, the media often over-simplify and exaggerate outcomes.

Over-reliance on researchers means owners and managers are separated from the consumer. Successful entrepreneurs I know put more effort in talking to customers themselves, than they do working with costly experts who tell them what they should have learned long before.

[email protected]

The writer runs Risk Capital Partners, a private equity firm, and is chairman of the Royal Society of Arts

Copyright The Financial Times Limited 2010.