Looking after the twenty percent
There's no doubt about it, corporate entertainment is big business. In Japan, for example, where relationship-building is a fundamental part of business life, a staggering £40 billion of marketing expenditure goes on corporate entertainment annually. That's roughly equivalent to Romania's GDP or Venezuela's total foreign debt. The infamous Recruit Group, which has been the subject of repeated scandals in Japan, once paid $15,500 for a single meal for a dozen executives at a favourite restaurant. So it's easy to see how the money the Japanese spend in a year on wining and dining important clients could add up to the cost of 365 brand-new jumbo jets!
Tо some, corporate entertainment is merely an expensive and perhaps unnecessary luxury. To those who take a dimmer view, it's nothing short of bribery. But the truly corrupt corporate entertainer is relatively rare. Famous fraudsters, the Bank of Credit and Commerce International, did indeed specialise in “sweetening” their most valued clients - frequently international terrorists, drug barons and Third World dictators -with shopping sprees in London and endless lines of credit at Las Vegas casinos. But this is a million miles away from an everyday business breakfast at the Hilton or a power lunch at the Savoy. For most successful business people would agree that goodwill is a crucial part of clinching lucrative deals and these days goodwill costs more than a smile.
A few years ago, the Ritz Hotel, recognising the major contribution made by executive diners to its restaurant turnover, invented the award of Business Luncher of the Year to honour, in their words, "the executive who does most to help the recovery of the economy by lunching out". Only those who spent in excess of £5,000 a year stood a chance of winning, but there was no shortage of candidates willing to compete.
What the Ritz was acknowledging is that business lunches are an important part of corporate culture, whether to consolidate professional relationships between colleagues and charge it to expenses or to manipulate over-cautious clients into an immediate agreement. After all, it's rather difficult to reject your host's proposal (however unspeakable) when you have just eaten a hundred dollars' worth of their entertainment budget!
How cost-effective it really is for Fiat to own an art gallery so it can take customers on special conducted tours or for the German Neckermann company to have a whole department organising weekends in the Mediterranean for important clients is, of course, open to question. Certainly in Austria, where corporate entertaining is tax-free, offering Mozart festivals to music-lovers and Klosters to corporate skiers seems to promise a good return on an initial investment. But can it legitimately be considered part of a company's overall marketing effort?
It can. What more and more companies are realising is that across-the-board marketing doesn't work. Marketing in the future will have to be more clearly focused. And it may turn out that big above-the-line marketing campaigns prove less effective in moving goods than simpler strategies for getting the client on your side. Of course, in times of recession, corporate hospitality looks extravagant and doesn't make for good public relations. But it still makes sense to target your best clients. For if the so-called Pareto Principle is true and eighty per cent of your business really does come from twenty per cent of your customers, then shouldn't you be looking after the twenty per cent?
Bright Ideas
The scene is the boardroom of a multinational cosmetics company at the end of an exhausting all-day meeting. The conference table is littered with screwed up papers and empty Perrier bottles. The financial controller is tearing his hair out and the director of R&D is no longer on speaking terms with the head of marketing. The launch of a new shampoo has backfired badly. All decisions have had to be deferred until the next meeting. Nobody even wants to think about the next meeting.
At this point a young marketing consultant cuts in. “Ladies and gentlemen, I have an idea which is guaranteed to double sales of your new shampoo. Now, believe it or not, my idea can be summed up in just one word and for $30,000 I'll tell you what it is.” Naturally, objections are raised, but the chairman finally agrees to the deal. “Here is my idea. You know the instructions you put on the back of the shampoo bottle? I suggest you add one word to the end. And the word is: “repeat”.”
Not all good ideas are this simple, but in business a surprising number of them are. At least, they seem simple after they've been thought of - the secret is to think of them in the first place. As someone once remarked, “If you can't write your idea on the back of your business card, you don't have an idea.”
So what are the conditions for creativity in business? And is there a blueprint for having bright ideas? Here's what the psychologists think:
1. Be a risk-taker. Those who are reluctant to take risks don't innovate.
2. Be illogical. An over-reliance on logic kills off ideas before they have a chance to develop.
3. Let yourself be stupid from time to time. Great ideas often start out as stupid ideas.
4. Regularly re-think things. Problem-solving frequently involves breaking up problems into parts and putting them back together again in a different way.
5. Take advantage of lucky breaks. The most creative people never ignore an opportunity.
They say the West creates and the East innovates, and there may be some truth in this. Take British entrepreneur. Sir Clive Sinclair, the great electronics inventor of the 70s, whose C5 electric car flopped when people found it quicker to get out and walk. Then take Akio Morita, the chairman of Sony, who has seen his company claim eighty-five per cent of the world personal stereo market with the much imitated Sony Walkman - a masterly innovation which merely took advantage of existing technology. The comparison speaks for itself.
And maybe one reason high-technology companies seek to merge multinationally is so that they can combine both creative and innovative strength. For anything that won't sell isn't worth inventing and it's an expensive waste of time coming up with ideas you can't exploit. But it's even more expensive if your competitors can exploit them. And there's not much point doing the research if another company is going to end up doing the development, and making the profit.
The lateral thinker
In his book on creative problem-solving, 'Breaking Through', Tom Logsdon tells the story of a bright young executive hired to manage a San Francisco hotel. One of the first problems the young executive has to face is a flood of complaints about the hotel lifts, which are infuriatingly slow. Guests are actually starting to demand rooms on lower floors. But an upgrade of the lift system is ruled out when the lowest estimate for reconstruction comes to $200,000. Clearly something else has to be done, and pretty quickly, before people start checking out.
Finally, a creative solution occurs to the young executive. The key to the problem, he decides, is boredom. With only the lift doors and a blank wall to stare at, guests are understandably getting bored, and when people are bored they tend to complain. So instead of speeding up the lifts, full-length mirrors are installed both inside and directly outside the lifts on each floor - at a cost of just $4,000. Now, with their reflections to look at when they use the lift, people stop complaining, thereby saving the hotel $196,000.
This is what Edward De Bono called lateral thinking, and it's the result of looking at the problem in a different and unusual way. Indeed, reformulating and redefining a problem is just one of the ways in which you can create a climate for creativity in business. And an increasing number of companies now see such creative strategies as vital to their survival.
At 3M, for example, employees spend as much as fifteen per cent of their time on new ideas and twenty-five per cent of every manager's product portfolio consists of products that are less than five years old. At Hewlett-Packard more than half their orders in 1992 are for products introduced in the previous two years. It's a similar story at Glaxo, ICL and SmithKline Beecham. For it's no coincidence that in research-driven industries, like computers and Pharmaceuticals, an innovative lead creates the market leaders. Management guru, Tom Peters, talks nowadays of a company's whole culture being creative. But creativity would be useless without innovation, and the two terms should not be confused.
According to the team running creativity courses at the Cranfield School of Management, creativity is essentially about generating, not judging, ideas. Innovation, on the other hand, is the successful implementation of those ideas on a commercial basis. In a brainstorming session, you don't criticise ideas before they're fully formed. That would be counter-productive. Evaluation comes in at the innovation stage, where you're turning good ideas into a commercial proposition. It follows that you cannot be both creative and innovative at the same time.
For making a discovery is one thing; exploiting it quite another, as the Xerox Research Centre found out to its cost when its system for making personal computers easier to use was copied by Apple Macintosh. Apple led the market for almost ten years with the enormously successful desktop system it 'borrowed' from Xerox. But Apple had the foresight to copyright the system. Xerox didn't. Originality, it seems, is the art of concealing your source, and too many companies fail to see an opportunity until it ceases to be one.
She's the Boss
Business has traditionally been and to a certain extent still is “a boy's game”. Less than six per cent of executive management positions in American and European companies are held by women, and of the Fortune 500 only four have a female CEO! Yet in Britain one in three new businesses are started up by women, and according to John Naisbitt and Patricia Auburdene, authors of “Megatrends”, since 1980 the number of self-employed women has increased twice as fast as the number of self-employed men.