Global Perspectives Local Opportunities

thoughts

Thoughts

26-50
Redefine normal Empower suppliers Buy competitors Encourage loyalty

RichardTaits $70m cup of coffee

Thinking business
Welcome to the second issue of 100 oughts, our collection of some of the best business thinking weve come across from around the world. e path to recovery always presents many opportunities to businesses that are alive to the possibilities that arise at times like this. HSBC is actively supporting these thinking businesses, providing help with everything from nancial planning to funding for investment, working capital, cashow and more. We are among the worlds best-funded banks and this puts us in an ideal position to help the right businesses, not only with resources, but with global experience and expertise that we can put to work for you, locally. We hope you nd this guide thought provoking and that youll get in touch with us to discuss your own business thinking and perhaps let us help you put it into practice.

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To Herman Chinery-Hesse, the Bill Gates of Ghana, these are merely hurdles to greater opportunities. Chinery-Hesses rst company, SOFTtribe embraced Ghanas challenges in writing payroll software. eir system used DOS, it wrote to disk constantly so there was no loss of information during power blackouts, and it could handle the six zeros that most pay cheques required thanks to hyperination. ey cornered the market. His new company BSL has its eye on a bigger prize. Given that only 10% of Ghanaians have bank accounts, theres a huge market in payment processing. Vodafone has created a system in Kenya that allows customers to exchange money in phone minutes.

Cut your cloth

to suit the market
Think of Africa, and many think of aid.They cant see past the hurdles to see a GDP per person is $200 higher than India and rising fast in many areas.
Chinery-Hesses solution is to use prepaid phone style scratch cards. Each card has a code a customer can text to anyone in Ghana, either direct to their bank account or for them to exchange at a Post Oce branch. To support this, BSL has combed Ghana and signedup hundreds of poor rural African merchants thus bringing them and their wares onto the global market for the rst time through a dedicated webmall, Shopafrica53.com It means a craftswoman in a remote village can export 20 sweaters a week at $10 each, says Chinery-Hesse. ats $200 per week in a country where the average income is $646!
Where next? Are you over-engineering your products? A simpler offering could bring you a bigger market. Should your business be targeting Africas growth markets? Why not call us at HSBC to fund your next steps?

Call us on 0800 783 1164.*

*Lines are open 8am to 8pm Monday to Friday (excluding public holidays). Communications may be monitored for security and service improvement purposes.

eChoupal ploughs back a larger share of consumer price to the farmer

Empower your suppliers

Indias agricultural sector employs 60% of the nations workforce, yet the supply chain is beset by inefficiencies and clogged by middlemen who reduce margins on both sides.
To sell products, farmers can wait up to three days to get into a crowded market. Only at that point does price discovery take place, and they have little alternative but to sell. ITC Ltd, one of the largest buyers of soyabeans, was concerned that not only did they lose control, but farmers were losing up to 60% of the value of their crop. ey invested in an internet kiosk in each village, called an eChoupal. It gives farmers access to information like weather forecasts and advice on farming techniques. It also shows them the price that ITC will pay, giving them the choice to sell direct. As a result farmers prots went up by more than a third, the cultivation of soya beans increased by 19% in areas with kiosks and, by buying some produce direct, ITC reduced its costs, which paid for the kiosks. eChoupal ploughs back a larger share of consumer price to the farmer, says Chairman YC Deveshwar. We have demonstrated that it is possible, nay, most crucial to combine the need for creating shareholder value with the superordinate goal of creating national value.
Where next? Do you source via a middle-man? Could you increase transparency and margin by going direct? The investment costs in technology can be quickly recouped. Why not call us at HSBC to fund your next steps?

28 Team buy
Team-buying (or tuangou in Chinese) is a new social trend coming out of central China.
Consumers interested in a particular item gather together on an internet hub such as www.team buy.com.cn. ey then agree a time, a date and a shop on which they will all simultaneously descend to use their collective bargaining power to secure a discount. It doesnt always work, and lls some stores with dread. However, others are more open, seeing that the extra sales volume will make up for lost margin.Some go as far as closing the store to other customers, and laying on hospitality for the team-buyers. e concept hasnt yet spread much beyond China. However, UK companies could consider grouping together to buy certain products in bulk, getting volume discounts.

Radical rental
The success of DVD rental services such as Netflix or Lovefilm is well known, but around the world there are examples of the rental business model being used to great effect in a wide range of industries.
For example, Ltte-Leihen in Germany oers a rental service for baby clothes. For a xed monthly fee,parents select the size and type of clothes they want, and theyre delivered by post.When their baby begins to grow out of them (which happens all too quickly) they can be exchanged for the next size up. e convenience also makes sense for customers whose time is at a premium.
Where next? Could the rental market work for your business? Can you streamline your offer for busy customers? Why not call us at HSBC to fund your next steps?

Think laterally 31 and change the

RULES
Orville Wright did not have a pilot's licence is RichardTaits mantra in his lifetime of entrepreneurship.
Ever since the age of four, Ive been creating businesses in my head. e greatest gift my parents gave me was the freedom to dream. Richard Tait had left Microsoft in Seattle after launching 13 businesses for them. Along with his partner Whit Alexander, he developed a new board game called Cranium. ey knew they had a winning product, yet despite huge eorts they couldnt get the main toy distributors to take it on. ey had placed an order for 27,000 copies with a manufacturer but we had nowhere to sell it, Richard recalls. Commiserating with Whit in a local Starbucks after failing to get their product into the American International Toy Fair, they looked around at the customers in the store. We thought, lets take our games to where customers are, rather than where games are traditionally sold, says Richard. It was the perfect audience of young, hip professionals. Using his business connections he persuaded Starbucks to stock the game the rst time theyd sold such an item. As it took o, Richards became the rst game sold on Amazon.com, the rst sold in Barnes & Noble and the rst with a host of other retailers. Growth from this point was prodigious before Richard and Whit sold out to Hasbro for $77.5 million. We built the third largest games company in the world because we love to change the rules, concludes Richard.Id urge other entrepreneurs not to be fearful. By challenging rules, you open-up your business to bigger thinking. And besides, its tons of fun!
Where next? Could your business benefit from a dose of fun? Think laterally about your distribution. Change the rules in your industry. Why not call us at HSBC to fund your next steps?

30Test your assumptions

When his son Lars was diagnosed with autism, Thorkil Sonnes life was turned upside down.
Poor social skills and diculty in responding to change mean that people with ASD (Autism Spectrum Disorder) have problems interacting with others and nd it very dicult to hold down jobs. But watching the seven year-old making a copy from memory of a complex diagram, Sonne had a brainwave. From his background in telecoms IT Sonne knew many bugs get missed in software testing as people nd it so boring. Yet people with ASD tend to possess extremely good memories, show great attention to detail and would therefore be brilliant at it. Sonne set-up Specialisterne in Copenhagen six years ago. e company now employs 60 people, of whom 45 have ASD. He refuses to run the company like a charity and so competes head-to-head with others, aiming to make a good prot. I think normality is whatever the majority decides it will be, says Sonne. In our company, people with autism are the norm.

Turn a Twitter profit

Many MDs have become jaded about the hype for social media.They view it as the sole preserve of the digital cognoscenti.
e challenge for major companies is to embed it as a useful tool for their mainstream customer base. German airline Lufthansa is just such an example. eir recently launched MySkyStatus service updates registered users Facebook and Twitter accounts with their live ight position and actual arrival time, even if they are ying on other airlines.
Where next?

It smacks of Big Brother until you consider a ight delay making you late for a meeting, yet you cannot use your phone to alert the other attendees. Or youre wondering whether to brave rush-hour trac to meet someone at the airport. Again, the answer is a click away. For Lufthansa, at heart its an important way to enhance their customer experience. e free social media advertising is simply a spin-o benet.

Could you offer live ordertracking for your customers throughTwitter? How might you capitalise on the wider marketing benefits? Why not call us at HSBC to fund your next steps?

34 Pay customers to take your product

While Bollywood is the worlds largest movie hub, its income is a fraction of its Hollywood cousins.
UFOs answer was to pay for the technology themselves.e owner only pays when they use it.But the real cream, as Satam puts it, comes from advertising. UFO gets a tenminute slot at the start of the lm, in the intermission,and concession space in the foyer. Small cinema owners wouldnt attract national advertisers, and advertisers get accurate statistics. Were not a Bollywood company. Were an infrastructure company, says Satam. Were laying down a digital highway and saying if you want to use it, then pay for it. UFO Moviez now accounts for a quarter of cinema receipts across To ensure that movies reach their cinemas as intended and prevent them being illegally copied, Indian innovator, UFO Moviez, hit upon a technological solution - digitise lms and send them by satellite. But this only brought them to a bigger hurdle. Why should cinema owners invest in the new equipment? As Strategic Advisor Charuhas Satam recounts, e owner would throw us out, saying my grandfather left me this cinema, why do I need to go for high technology? India and is launching across Asia. As Satam observes,Weve proved it in the craziest country like India, so other countries should be a cakewalk.
Where next? If customers are struggling to afford your equipment, can you find an alternative funding model? If you invested in an infrastructure platform for your industry, might others pay to use it? Why not call us at HSBC to fund your next steps?

Think beyond marketing

Japan Post, the Japanese postal service, is a central pillar of Japanese life. So when former PM Junichiro Koizumi announced plans to liberalise it, advertising agency JWT saw the potential of pitching new ideas to a previously traditional organisation.
Tasked with creating a new campaign for Kit Kat in Japan, the agency JWT noticed that students had connected Kit Kat with the Japanese phrase Kitto-Katsu, meaning surely win. It linked with the tradition of sending good-luck wishes to students facing tough exams. In order to amplify this word of mouth, JWT approached Japan Post with something bigger. Together they created the KIT KAT Kit Mail, a chocolate postcard in a cardboard sleeve on which you can write a message and send to someone facing exams. Japan Post loved the opportunity to build closer bonds with customers. Overnight it took Kit Kat into an additional 20,000 locations free of competition. ey sold 250,000 Kit Kat Mails, and it has proved so popular they have made it a permanent feature. It shows the beauty of turning your marketing into a product, and the power of partnering.

Joint adventure

Where next? Could you turn your marketing into a new product? Perhaps a partner could give you access to a wider market. Why not call us at HSBC to fund your next steps?

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Dairy farming is one of those traditional UK industries that has had to diversify to expand and prosper.Theyve faced tightening prices, lower subsidies and major environmental shocks.
ability to compete nationally whilst retaining the ancient method of cave-hanging the essence of the brand. e joint-venture worked, and the condence encouraged them to look at the US where theres a big demand for high-end traditional British products. eir turnover grew from 7m to 18m. e only shame was that their previous bankers were too nervous of the phenomenal export growth to continue supporting them! Michael Papadatos, Regional Commercial Director South West, HSBC

I was really impressed with the approach taken by the sons from two long-established neighbouring dairy farms. One was really strong on marketing, the other on the craft of cheese-making. So they decided to use their complementary skills to set up a joint venture tackling the premium cheese market. It increased capacity, gave the company the

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Where next? You could try them with your next graphic design project? Set-up a crowd network of creatives to address challenges in your industry. Check whether your organisation has a policy of engaging and nurturing smaller suppliers. Why not call us at HSBC to fund your next steps?

Creativity
comes in small packages
Looking at the logo designed for the London 2012 Olympics, the Australian founders of DesignCrowd.com were frustrated. It had been produced by a major agency for a large budget, but they believed they knew dozens of people who could do better, but were never given the opportunity. It was a familiar refrain from the design community.eres a world of creativity out there, and yet large companies restrict themselves to a preferred suppliers list of the largest design agencies. Spurred by this thought, DesignCrowd created a website to enable large companies and small businesses to get ideas and designs from thousands of freelance designers or smaller agencies around the world. e client species their requirements for the design, and the amount they will pay for the winning design. ey then receive dozens or even hundreds of submissions from dierent designers, and can pick their favourite.

38 Ensure loyalty
ForTony Hsieh, Zappos CEO, the loyalty of his staff is critical. So he ensures they are there for the right reasons by paying them if they want to leave.
e online retailer has grown into a billion dollar retailer through its superlative customer service, but this depends on a totally committed workforce. Every new recruit has to go through a training programme regardless of his or her job or title. roughout this they have the option to leave at any time, and if they do, Zappos will pay them $2000 dollars for their time. Its essential to know early on if an employee doesnt buy into our vision and culture. It just makes economic sense, says Hsieh. It must be testament to his judgement that over 97% turn down the oer.

Be transparent
A problem online retailers face, as opposed to their bricks and mortar counterparts, is that customers cant touch and feel exactly what they are buying.
is gap is compounded in industries like oristry where, despite tempting brochure shots, orists often cant guarantee exactly what they are sending because of variations in availability. e resulting transparency gap creates nervousness in customers. is in turn presents opportunity. New Zealand-based orists Roses are Red have addressed this by sending customers a digital photograph of the exact bouquet they have sent. And if customers arent completely happy with it, they can have a full replacement.

Where next? Ask your customers what makes them nervous in the buying process. Is there a lack of transparency at any stage? Can you create opportunity by addressing these worries? Why not call us at HSBC to fund your next steps?

39 Connect the unconnected

Half the worlds population three billion people live in areas not covered by a phone network.
Rajiv Mehrotras mission is to get them connected. His challenge is that mobile-phone masts use a huge amount of electricity and most of these areas are not connected to a power grid. Plus the kind of masts used in the UK are far too expensive for deployment in rural areas where people have about 1 a month to spend on their phone bill. However, Mehrotra recognised that there is one resource in abundance. Sunshine. After six years R&D, Mehrotras company, VNL, launched a base station that uses the same amount of electricity as a light bulb so can be run by solar power. It is also very easy to put up two villagers can assemble it in six hours. It is also cheap, a quarter of the cost of traditional base stations. Weve scaled down the cost, the energy, and the equipment so that almost anybody can deploy it. VNLs base-stations are now being used by 50 villages in rural India, and networks rolled out in Africa, Asia and Latin America.

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Where next? Mehrotras thinking shows you can profitably serve those at the bottom of the pyramid. Is there a potentially larger market for your business if you can overcome technical challenges? Why not call us at HSBC to fund your next steps?

Dont squeeze your suppliers

Conventional wisdom dictates that in a downturn suppliers must be squeezed until the pips squeak. But this short-term fix can do more harm than good in the long run.

Instead, says Darrell Rigby of Bain and Co, smart companies treat their suppliers as fellow combatants trapped in the same foxhole. He cites the example of Chrysler. Its strategy in the teeth of the 1990 recession was brilliant. Rather than forcing pain on their suppliers, they got closer to them. ey outsourced more to them, thereby reducing inventory and improving cycle times. If suppliers came up with a cost saving of more than 10% they would share the savings with them. Chrysler used the cash to invest in new products and as a result, was the only Big ree car maker to turn a prot the following year.
Where next? By rationalising your supply base you could forge closer links with fewer core partners. Do you have a policy of sharing cost savings with suppliers? Have you calculated the possible long-term benefits of outsourcing more to your suppliers? Why not call us at HSBC to fund your next steps?

Set up a date
The dating business model is highly profitable but companies have been slow to spot its potential for other industries.
Spanish company Busuu.com spotted the opportunity and started an online language school with a dierence there are no teachers. Every user is not only a student of a foreign language but also a tutor of his own mother-tongue, says co-founder Bernhard Niesner. Busuu directly connects native speakers in dierent countries who want to learn a language so a Spaniard seeking to learn English can connect with an Englishspeaker wishing to learn Spanish. Lessons take place in online video chats, with guidance notes provided for structure. Users correct each others written work. Its popular, and people stick with it. Bernhard puts this down to the peer-to-peer model, Normally when you start a new language you are quite insecure. But if you see others also making mistakes and you can help them, it motivates you to continue.
Where next? What might your customers have in common, and could you help them to connect? A community like this could be revenue generating, or you could use it to leverage other commercial benefits. Why not call us at HSBC to fund your next steps?

Ambassadors
Where next? What customer communities could the brand ambassador strategy work in for you? What incentives could you offer the ambassadors in return? Why not call us at HSBC to fund your next steps?

Brand
When Austrian energy-drink company Red Bull launched in the UK market, it knew students were a key target audience.The challenge was how to reach them.
e answer? ey created a network of Student Brand Managers outgoing members of the student community who represent the brand and bring to life the entire world of Red Bull on campus. ey get exibility around when they work, ownership of Red Bull projects and events on campus and they gain experience working at Red Bull events around the country, as well as a regular supply of the drink. Red Bull now has 70 SBMs at universities across the UK. It says Our SBMs are very special to us, they arent promotional sta; they are part of the family. ey ensure we have personal one-toone contact with students in a way that is relevant to them, even though we are a global brand. After graduating, around 30% of Red Bull Student Brand Managers go on to join Red Bull full-time, either in the marketing team or in other areas of the business.
Image: Marcelo Maragni/Red Bull Photofiles

Recruit

What are your customers saying behind your back?

It used to be that a good or bad customer experience would be shared between several friends.The internet means it can now influence millions of people.

Dont give to charity

Six million workers experience daily low points in their job, according to research by the Vodafone Foundation.
Taking a career break to pursue a charitable interest would signicantly boost their job satisfaction. But for most,nancial responsibilities mean this just isnt an option. Only, now it is.Vodafones World of Dierence programme gives individuals the chance to be paid to work for their chosen charity for one year. e Vodafone Foundation pays 25,000 towards their salary and 20,000 towards expenses. e scheme started in New Zealand and now operates in 15 countries, with winners working for charities around the world. e UK 2009 programme received over 1000 applications. Eight lucky winners are now being paid to work for charities such as Health Unlimited, where a UK midwife will tutor midwifery skills in Sierra Leone. Andrew Dunnett, Director of e Vodafone Foundation, sums it up: World of Dierence oers an ideal opportunity to help others while gaining valuable life and work experience.
Where next? Would long-serving staff members benefit from a sabbatical? Would you? Do you link your customer base with your giving activities? Why not call us at HSBC to fund your next steps?

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RJ Friedlander is the CEO of ReviewPro, a start-up aiming to help the hotel industry aggregate, analyse, manage and respond to customer feedback on the web. e hotel sector is heavily inuenced by online user reviews, and the impact directly aects the bottom line of hotels. According to various studies, up to 85% of people consult reviews prior to reserving a hotel on the Internet

and 87% are highly inuenced by what they read. e Barcelona-based company nds praise or criticism posted on hundreds of websites worldwide, and displays the data in an easy to use web-based analytical tool.e hotels management can then see the patterns, look at comparisons with competitors, and make decisions about how to improve their service.

Where next? Do you monitor reviews of your companys products or services on the web and social media? Does your company respond to this feedback quickly, to show customers youre listening and that you care? Why not call us at HSBC to fund your next steps?

Buy your competitors

The time to buy is when there is blood on the streets, says Warren Buffett.
Yet a survey by Bain and Co. found that only 20% of executives would consider making an acquisition during a downturn. at 20% clearly includes Arrow Electronicsformer CEO Stephen Kaufman. We made our greatest strategic moves during the period of greatest nancial weakness. In 1985, the electronics component distributor was number two in an industry dominated by a market leader more than double their size. e slump in tech spending had pushed them close to the edge. We had $30million worth of interest due that year and no operating income, said Kaufman. But rather than battening down, Arrow decided to ght their way out. In 1987, they bought the number three player in the market, funding two thirds of the deal against the targets inventory and accounts receivable.It worked,and Arrow turned a net prot in the year after. In the 1991 downturn, they did it again, and through a series of tactical acquisitions became the industry number one, a position they still hold. Kaufmans lesson is simple. We acquired in bad times.

Where next? Are your competitors struggling? Is now the time to make an acquisition? Consider the full range of approaches to funding this. Why not call us at HSBC to fund your next steps?

Sell more
Persuading wine drinkers to be adventurous and try more high-end wines has traditionally been hard. Tentative consumers tend to stick to wines at the 5 mark and only pay more for a limited number of the most famous brands.
A French start-up, WineSide has come up with an alternative.ey oer a variety of 6cl sealed glass tubes sold individually or in boxes through retailers and their website. ese packs encourage novice wine enthusiasts to sample Grand Cru wines and gain condence without breaking the bank. WineSide also markets its tubes to restaurants in 10cl sizes. is allows restaurants to oer highquality wine by the glass without having to open a whole bottle.
Where next? Could you encourage customers to try a wider range of your products by offering sample-sizes? Is there a whole new market you could reach by thinking sample-size? Why not call us at HSBC to fund your next steps?

Think Think small small

Go global for gold

When Goldcorp Inc. acquired a poor-performing gold mine in Ontario it knew it was sitting on high-grade gold, as it was adjacent to highperforming mines. But with 55,000 acres of land to survey, it would take a massive effort to interpret the data.
e CEO at the time, Rob McEwen, took a highly unusual step. Under the Goldcorp Challenge banner, he released all their data to the wider community of geologists, and oered a large cash prize for the best information on where to drill. While open-sourcing is common in high tech, it goes against the conventional thinking of an oldeconomy business like mining.
Where next? Are there any problems too large for your company to analyse? Could any of the information or data within your company be set free to be developed by a wide community under your stewardship? Why not call us at HSBC to fund your next steps?

Mineral discovery is much like technological discovery, gured McEwan. e response was amazing. More than 1400 international geologists downloaded the companys data. And when the results yielded a rich seam of gold, their willingness to open up their business to new thinking has helped turn a $100 million company into a $30 billion success story.

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Image: Carla Gomez Monrey

One for you, one for them

The boundaries between business and charity are becoming increasingly blurred. Companies are keen to be seen as ethical while charities are discovering the power of commercial thinking.The latest combination of the two is the 'Get one, give one' business model.
Nicholas Negroponte, a serial entrepreneur from Massachusetts, set up One Laptop Per Child with the vision of providing computers to children in the third-world to improve their education. His team designed a cheap, rugged laptop that could sell for $199, but thats sometimes still too much for developing countries, making it dicult to persuade governments to purchase in large numbers. In an entrepreneurial twist he put the laptop on sale in the US with a requirement that each customer had to buy two; one for them, and one for a third-world schoolchild. e rst campaign sold 162,000 laptops, raising $35m. It was such a success that they repeated the campaign again recently, becoming the best-selling laptop on Amazon during the campaign. Production capacity currently cant keep up with demand.

50 Step into the gender gap

The feminine character of the bottle is highlighted by the colours and its unusually pleasant satin texture.Weve created Karmi beer thinking about women, says EwaTarnawska, the brand manager of the Polish beer.
Business guru Tom Peters has been (literally) shouting about the opportunity of the female market for the last ten years, and some companies are taking notice. e makers of Karmi wanted to increase their share of the highly competitive beer market. So they took a counterintuitive sidestep and decide to target a new market where beer sales were low women. ey researched the avours women might like (sweeter avours like caramel,raspberry and coee),and also found that women wanted the beer less strong.Its also low calorie, with the same caloriecount as natural yoghurt. e strategy paid o. Women have responded well to the product, sales are good, and they have decided to expand the range.

Where next? Are you customers interested in giving back? Could you mirror your product offer with such a donation? Why not call us at HSBC to fund your next steps?

49 Dig for data

The amount of digital information created globally increases by a factor of 10 every five years.
ere is a quiet revolution by organisations who can capture and use these data. For example, during the swine u outbreak, governments tracked the spread of the disease by looking at the words people search for online. Similarly, where others had spent millions, Google built one of the worlds best spell-checkers simply by gathering and analysing the digital dust of all the wrong words people type and then correct. e sheer abundance of data offers lucrative opportunities for those with the power to put it to protable use.
Where next? What data does your company already have, and what could you gather in the course of your work? Could you sell access to this information to others? Why not call us at HSBC to fund your next steps?

Where next? Could you create a special version of your products for the opposite gender and open up a whole new market? Outside of gender maybe you could adapt the product for different age ranges and social groups. Why not call us at HSBC to fund your next steps?

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Thought No.101
All that remains is for us to thank you for your interest and make a suggestion for Thought No.101 that maybe now is the time to call us. If youre already a customer, it may be valuable for us to share our business thinking. If youre not a customer yet then its probably worth talking to see how we might help you put your thoughts into practice. Either way, we think it would be great if our businesses could help each other.

Call us on 0800 783 1164*

*Lines are open 8am to 8pm Monday to Friday (excluding public holidays). Communications may be monitored for security and service improvement purposes. The views and opinions expressed by contributors are their own and not necessarily those of HSBC Bank plc. Issued by HSBC Bank plc. We are a principal member of the HSBC Group, one of the worlds largest banking and financial services organisations with around 8,500 offices in 86 countries and territories. AC17838.