I spent two days of my summer holiday this year at Disneyland. Later in the trip we drove through Hollywood then past Google and Apple’s global headquarters. It struck me that each of these mega industries was founded with fun in mind. And perhaps there’s more value to this distinctive founding feature than many CFOs have grasped.
When Walt built Disneyland he said “Disneyland is a work of love. We didn’t go into Disneyland just with the idea of making money.” As one of the 16 million visitors parting with an average of $100 per head for entry, refreshments and souvenirs, there’s little doubt that the 85 acre former orange grove is now one of the most high-yielding sites in the world.
Other theme parks do well but few come close to the ‘magic’ of the original Disneyland. Interestingly the investment in new rides at Disneyland is less than other theme parks. Where many feel pressure to introduce something new each year, Disneyland still trades on old favourites like Space Mountain (1977) and It’s a Small World (1965). What it saves in new attractions it spends in day to day operations. Cast members are a cut above the disenchanted staff loading rides at some of the other parks. They seem to approach their roles with the “Disneyland is a work of love” attitude espoused by the founder, all wearing costumes aligned not just to the park but to the ride they are working on; the staff-to-visitor ratio is also noticeably higher. The Disney bean counters seem to take the long term view – exceed expectations, value the magic and use this to build a truly sustainable brand.
While I was enjoying the ‘magic’ across the pond, the UKs once most admired company Tesco was desperately looking for new tricks. Ruthless efficiency and an unrivalled ability to understand the customer hasn’t been enough and in this case the bean counters may well have got it wrong (see FT article below*).
Back in sunny California, Apple continues to generate an outstanding net profit per employee of $573,000. They are keeping their accountants and shareholders happy, yet staying true to Steve Jobs’ view – “I think we’re having fun. I think our customers really like our products. And we’re always trying to do better.” It’s hard to imagine an edict to source cheaper materials, spend less on innovation or cut back on marketing at Apple.
So if fun, or at least passion, isn’t at the centre of your organisation what will keep you strong in the years to come? Efficiency alone ain’t enough.
*Tesco has made sweeping changes among its senior and middle managers with 50 being made redundant, as chief executive Philip Clarke strives to turn round Tesco’s UK business.
Roger Fogg, chief executive of Tesco Mobile, and Ian Crook, marketing director for Tesco’s Clubcard loyalty scheme, who were both among the top 150 executives at the company, are being made redundant, according to people familiar with the situation.
The cuts, which will fall at Tesco’s head office at Cheshunt or its office at Welwyn Garden City, come as Mr Clarke is pressing ahead with his £1bn UK turnaround plan.
He told trade magazine Retail Week recently that revitalising Tesco’s domestic business would take an injection of new skills into the retailer.
“A lot of retailers claim it, but creating individually perfect shopping experiences, however a customer shops, is difficult to achieve. Becoming a multi-channel leader is about more than just putting iPads in stores,” said Mr Clarke. “It needs investment in new types of skills and not just in the information technology department.
“From marketing, finance and operations through to commercial and corporate affairs, the skill sets required by retail leaders are changing. That means bringing in outstanding talent with these new skills to work alongside the best of Tesco.”
Among those being hired are Paul Solly, recruited from Marks and Spencer into Tesco’s home business, and Nick Coulter, the retail analyst, who will join Tesco’s investor relations department.
The latest cuts follow changes at Dobbies, the Tesco-owned garden centre business, which Mr Clarke is reinvigorating. Long-term chief executive James Barnes left the business earlier this month, along with finance director Sharon Brown. Tesco has recruited the head of rival Notcutts, Andy King, to be the chief executive of Dobbies.
Mr Clarke’s plans for turning round Tesco’s UK business had appeared to be paying off, but UK like-for-like sales in the last quarter to be reported fell 1 per cent year on year, compared with a 0.5 per cent increase in the preceding three months.
Tesco is continuing to try to sell its US Fresh & Easy business, with several people familiar with the situation suggesting that talks with Yucaipa, the investment vehicle of billionaire Ron Burkle, have cooled. It had been seen as the frontrunner to acquire the US business.
Tesco’s ongoing exposure to Fresh & Easy is among the issues that needs to be resolved. Among the options are a sale or a break-up of Fresh & Easy.
Source: Andrea Felsted, Senior Retail Correspondent, Financial Times, 31 July 2013