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Interviews with: Bruno Bich " Michael Eskew
ML: You certainly are the quintessential multi-national, multi-lingual executive. Tell us what's going on in the global economy. Is it really as difficult, demanding, and daunting as it appears? BB: We are slightly affected by the downturn in the economy. There are good reasons to be careful right now. We created a bubble and we are paying the price. There was a bubble in Asia, which corrected a couple of years ago, and now is trying to recover. In Europe, there was an Internet bubble, but to a lesser extent than in the U.S. It's just like a pendulum. We went too far one way, we go too far the other way. Short term, I'm concerned. Long term, I'm very optimistic. In three years or so, business will come back to its normal pace. ML: Do any of your major products face specific challenges now? For example, lighters. We see what's happened with cigarette smoking in this country, and notably in this city, and presumably that will spread. Or your White Out business, when more and more people are using computers? BB: Smoking is going down one to two percent per year in the U.S. or world. That's a very small decline. In fact, we have increased our sales of lighters about four percent a year over the last five years. We keep on gaining market share despite the tough market. Computers have not really done much to our White Out business. That market also grows two, three percent a year. Our highlighter business has actually increased quite a bit. People are highlighting a lot of computer reports. ML: Shavers must be a challenging market, especially with a goliath of a competitor like Gillette. How do you make that business grow? BB: Our company was started right after World War II by my father. In the U.S., we went in the shaver business against Gillette. Gillette was strong in what I call the system and replaceable blade. To go through the door and attack that market head on would have been extremely difficult. Instead, we went into the one-piece or disposable razor. We went through the side door. And today, if you look at the western world, 55 to 60 percent of the people shave with a disposable razor. There are more people shaving with the disposable razor than with the system razor. Now, the system is bigger in value. But, in volume, we are about equal with Gillette, in the U.S. and in Europe. ML: What is your strategy for expanding in terms of new and different products? BB: First of all, the consumer goes to the store, and has a choice. Consumers usually spend about 20 seconds deciding which product to buy. The quality of the brand name in the subconscious of the consumer becomes very important, as does his recollection of how well he was served by the product in the past. That is really where we concentrate our strategy. The second thing is, we develop products with new technologies that offer different services to the consumer in relation to their purchasing power. Thirty years ago, you had a ball point pen and you had a mechanical pencil. Then came the first felt products, the first flair pens. Instead of four colors, now there are 12 colors of ink. And the point size, which dictates the width of a line of color on a piece of paper. There used to be only 0.7 millimeter and 1 millimeter. Now we have 1.2, 1.0, 0.7, 0.5, and even 0.3 in Japan. So all those technologies offer choices to consumers, which they like to indulge.
Then there are different types of markets. In both developed markets and emerging markets, but particularly in the developed markets, you have the need market and the pleasure market. People want a basic ball pen that writes well. On the other hand, people--particularly young people--want to find a little bit of pleasure in their everyday life. And that's where they really look at the design of the product, and new technologies with different ink colors. At the same time, we can never forget that in today s world, approximately 20 percent of the people earn less than $2 a day. So our strategy is serve the consumer, never forget the basic product, and work on the quality all the time. If people want to spend a bit more money, and they have the money in certain countries of the world, then we'll present a wider choice, with newer technology. ML: Where are you going to make your major thrust for expansion? BB: My father started the business in France. But France, today, represents only nine percent of our sales. Overall, Europe is about 34 percent, North America about 56 percent, South America eight percent. We have the most opportunity in Asia. We started doing business two years ago in Asia, but building a business there will take 10 or 20 years. I think that in the 1970s, you could not call yourself an international company if you were not strong in the United States. I think in 10 or 20 years you will not call yourself a strong global company if you are not strong in Asia. ML: You have a management team that is stationed all over the world. How do you manage that? BB: Well, I have two offices--one in Paris and one in New York. And I commute. I'm in New York 50 percent of my time, Europe 30 percent of the time, and somewhere else 20 percent of the time. We have put together a group of managers who come from different backgrounds and different civilizations, because there is a lot of value to finding what are the common points between consumers in Europe and the United States, South America and Europe, and even Asia. I think too often, people start to talk about the differences. First, let's talk about the common points. Ethics. Teamwork. Internationalism. When you look at consumers, they write the same way, they shave the same way. We use English as our language of business, which is pretty advanced for a French company. Once a month, we video-conference with top managers around the world. We get together face to face every three months. If there's one weakness in the United States, it is that American companies call themselves international when in fact, there are very few executives at American companies who are multi-lingual and very few people who come from foreign backgrounds. ML: What are some of the differences between American managers and non-American managers? BB: The main difference is that the American managers are very results oriented. And the French, who are more intellectuals, love to discuss and do more research. I think Europeans are extremely inventive in terms of technology. And when you put them together with Americans, who are very good at process, you have stupendous machinery. The idea is to use the strength of each toward the same goal, versus focusing on the differences. That's arduous work. But the payoff is great. ML: You have some of the world's best known brands. How do you develop a brand, and how important is that to you? BB: Our brand name is my family name so I look at it as a signature. I think that a brand stands for an agreement or a contract, your signature to the consumer that what you deliver to him is what he expects. You can build a brand, with advertising, with a very good product, and with consistent quality in your product. But you can lose it very, very quickly. I don't think that any brand in the world can be number one or number two by offering inferior quality. The strength of a brand is in the long-term faith of the consumer around the world. The important ingredients are quality, reliability, and value. After that, you're going to add the pride of having the product. And this is where advertising comes in. For example, we used John McEnroe in our shaver advertising. That campaign showed the consumer that Bic has a simpatico side to it. When it comes to the advertising or the design of the product, I personally spend a lot of time on it, because it affects the long term strength of the company. Our managers know exactly how to manage things like pricing. But they are not responsible for the soul of the company, which is the brand name, or the design of the product. ML: When you seek to hire somebody, what do you look for? BB: Personal values. I don't think leopards change their spots. We want to find people who believe in the same values that we do. Respect for the consumer. Respect for your fellow workers. That leads you to teamwork. Modesty. That leads you to the acceptance that there are good ideas all over the world. Then you move on to professionalism. Internationalism. There was a time when I used to say, attitude is more important than aptitude. I don't say this to the human resources department anymore. I tell them, I want both. There are good people all over the world, people with the right values, and the right brain. I also look for people who are hungry. ML: Yours is a family business. The family owns a little more than a third of the shares and has a little more than 50 percent of the voting power. What are some of the particular advantages and the particular challenges of being in a family business? BB: Over all, being a family business is a big plus. The big plus is that you build the business for the long-term. In Europe, we don't report quarterly earnings. We report semi-annually. Of course, when you are a public company in the U.S., you must report quarterly earnings. That puts pressure on management to do things that are not necessarily good for the long-term. But if you're a family business, you can build for the long-term. And that means, in our view, that you don't have debt in such a way that you are under pressure to make short-term decisions in order to cover your debt. And you don't over promise to Wall Street. I sense that some of the things that have happened recently on Wall Street are the result of pressure to generate earnings, which frankly were not realistic in relation to the growth of the market. Also, the people who work in the company must know that they will be evaluated and fairly promoted, even though they are not in the family. And we in the family must do an excellent job. When I came to the U.S., and when I got more and more responsibility, my father was testing me. If I had not succeeded in the U.S., I would not have the job I have today. I tell my children and nephews and nieces, first you'll have to ask to join the business and then you'll have to prove yourself.
Student questions Q: How do you create synergies between your managers of different nationalities around the world and what kind of different talents do you expect from them? BB: You create synergies by choosing the right people. You've got to have people who deliver on a regular basis. And you have to be very careful about communication. When you have people from different backgrounds who speak different languages, you have to be very, very attentive. One of our philosophies is, "It's not enough to explain. You have to be understood."
Q: Do you sell the same razor at the same price in the U.S. as you do in China, India, or South America? Many retailers have a terrible problem when they price discriminate because their merchandise is smuggled from third world countries into developed markets and sold at below market prices. BB: We do price to market and we do have that issue. If you want to grow in Eastern Europe, you have to offer your product at a price that is lower than in Western Europe because people in Eastern Europe don't have the money. But you need to know your business. You need to know an account well enough to see that if you get an order from a wholesaler four times bigger than any order that you have ever got from that wholesaler before, there is something fishy about it. Q: Failure is part of the growing process to become a good manager. Could you share with us one of the most humbling losses that you had while growing up in your business? BB: My biggest failure was the acquisition of Shaeffer Pen. It hasn't worked out yet. I think one of the reasons is that a lot of the Shaeffer business is in Asia. And shortly after we bought the business, Asia went straight downhill. The second thing is that people today, executives, do not have a sense of pride in having a high-quality, high-end writing instruments. We need to revive that part of the industry. We did not thoroughly analyze the high-end of the business. We did not do enough homework before the acquisition. Q: Would you please tell us about your trajectory to the top of Bic? BB: When I was 16 or 17, instead of going to England to learn English, I came here for the summer. And I loved it. Later, I took a year off and traveled all over the United States driving a car. It was 1964 and we were a very small company. And I would go to retail stores and check on our distribution. I became very interested. After a year, my father asked me what I wanted to do. I said, I want to go to business school in America. In 1964, there was no other place to go to business school. After I graduated from NYU Stern, I went into investment banking. I worked for White Weld in the U.S. and Europe for about four years, and then joined Bic. I became president of the U.S. business in 1983. That's when we started to introduce new products which we didn't have in Europe. And that's how North America became 56 percent of our global business. My father gave me the chance to show what I could do here in the U.S.
ML: What do you think is going on in this economy? What is really wrong, and what's going to pull us out? ME: We released our earnings in July and we concluded that the economy, at that time, was sluggish across all the different sectors that we serve. The only area where we saw anything going on was in mortgage refinancing. An awful lot of letters and documents were going back and forth between banks. We used to think that we were a good leading indicator for Gross Domestic Product (GDP). But as inventory levels over the last few years have come down, we don't think we see changes in GDP until they happen. ML: What do you see as the greatest spurs to innovation? ME: For our business, we think about two dynamics that are in place: globalization and what we call consumer pull - consumers being able to look into the supply chain and pull through what they want, when they want it. As far as globalization goes, our international business is strong. The last quarter our exports from Europe were up 13 percent and our exports from Asia were up 17 percent. China was up nearly 40 percent year on year. We see an awful lot of power in that dynamic. The other dynamic, consumer pull, is powerful as well. I'll give you an example. The first computer I bought was an IBM XT. I went to a retail shop to buy it. All the computers looked alike. They were all configured the same way. And they were delivered by truckloads. Today I can order one computer and I can configure it exactly as I want. I can select the screen size and printer. And today, consumers can pull these custom-made computers through the supply chain one-by-one. They come one-by-one in a package delivered, I hope, by a brown package car. This dynamic is making the supply chain cheaper. ML: Tell me about globalization and its effects upon your company. ME: We have an awful lot of customers who really do want to expand their markets. And it's not just the big companies, it's the smallest companies, companies that started with us when they were in a garage. The nice thing is, we can act like each customer s package is the only package we have. We can tailor solutions on a one-by-one basis. ML: UPS is engaged in what seems to be a pretty basic business. You deliver packages by trucks. It doesn't sound like a very romantic or exciting or challenging business, yet I suspect that it is. ME: UPS has been in business for 95 years. It was founded in 1907 by a teenager in Seattle named Jim Casey. He started out delivering messages in Seattle. In about 1911, a new technology put Jim's company out of business: the telephone. The need to run messages all over Seattle went down dramatically. So he changed his business and started to deliver goods for stores. Jim had to go convince the stores of Seattle that if a customer came downtown on the streetcar and didn't want to carry his goods home, his company could deliver those goods to the customer s home. And he could put all the packages together and create scope and scale and put them all in a clean car with a uniformed driver and do it professionally. That's how the whole thing started. That business went on until after World War II. Then people didn't go downtown to shop anymore. They drove to suburbs and shopping centers, bought things and drove them home. So the business model was again threatened by technology. Jim Casey had to go into the common carriage business and compete directly with the post office. The business spread from there. I joined UPS in 1972. We were in 37 states and had revenues of about a billion dollars. Since then, we've moved into 200 countries and we've moved beyond just ground, to air, to ocean, to international. And we've moved beyond just small packages. We now service the whole supply chain. All commerce is all about three flows. Goods flow, information flows, and funds flow. Our business is the flow of goods. And today, thanks to technology, we facilitate the flow of information and funds. We know exactly when a package was picked up, when it was delivered, and whether it was signed for. Think about a camera or a computer or an elevator or a printer or an aircraft or a medical device, any high tech device. Usually folks that buy those devices need two-to-four-hour part replacement when something breaks. You can't run a McDonald's if the cash register doesn't work. Satisfying the need for two hour part replacement anywhere in the world requires the best transportation company in the world, which we've been building for 95 years. It requires a lot of technology. It requires central stocking, keeping those critical parts in one or two or three locations in the world. It requires forward stocking locations, places where you can keep parts so that they can be where they are needed two hours after that phone call is made. We can put all those services together anywhere in the world. We also have repair locations. We do repairs on those parts also, because it all needs to come together at one time and place. Those companies in the U.S., and in Asia, and in South America, and in Europe want one throat to choke. We are it. They want one entity to manage the supply chain. So we do get excited about this mundane business. It's making customers better. ML: You have a very strong brand. How would you define it? How do you preserve and protect it? ME: Our brand was just evaluated and we determined that we have the second best business brand in the U.S., next to Coke. We've done a lot of work with our brand recently. It used to be that our purpose was to satisfy the small package needs of our customers. Now our purpose is to enable global commerce. We went to brand consultants. They told us that we don't use our colors the way we should use our colors. We need to call attention to brown, the color we own. We also need to think about more than just the package, how to make the brand about enabling global commerce. When the brown campaign came out, we did a lot of surveys and we felt that there were two other colors that companies owned. Blue was one of them, that was IBM. And pink was the other one, and that was Owens-Corning. And so we felt like we really could stake brown.
ML: What is unique and distinctive about the UPS culture? ME: We have two strengths at UPS. One is the way we're organized. We have district organization so we can be close to the customer. The people that run our business day-to-day are in the field. The other strength is our culture. We have 360,000 employees in 200 countries around the world. And there are no superstars. None of us are more important than the other. None of us are sufficient by ourselves. We are a team. There are no private jets. We drive ourselves to the airport. I parked my own car and carried my own bag today. And I answer my own phone. Our culture is that we are one group. We try to treat each other the same. For instance, I eat in the cafeteria every day and I don't bring coffee and drinks to my desk because we ask the drivers not to drink coffee and eat lunch in their cars. That driver is as important as I am. That's part of our culture. ML: Do your executives get out and actually drive the trucks? ME: We all did, every one of us. I started at UPS as an engineer. I did some basic engineering for about the first two months. Then I went on to deliver packages for about two or three months. And you never forget the look in the customer's eye, the things they look for. If a package is late, you'll never, ever forget it. And when you get it there on time and it delights and they needed it, you'll never forget it. When I was a district manager in New Jersey I would ride once a month. I would ask the staff to ride once a month. That s not uncommon. ML: You have a lot of long time, long-term employees. ME: We do. We have about four percent turnover, which means that people last on average 25 years among the full-time ranks. The loyalty that they have is terrific. ML: What kind of characteristics and qualities do you look for when you are hiring someone?
ME: We really think about folks that can work with people. This is a people business. It's not a place for everyone. If you want private cars and private jets and country clubs and you want to see your name up in lights, don't come to UPS. It's not that kind of place. But it is a place that you can work and know that you do something that's honest and noble. Delivering a package is noble. We are enabling commerce, making our customers better, taking them places. It's an honest job and it's a great place to work. And we think we make a difference.
Student questions Q: Can you give us an example of how you create high value, innovative solutions for customers? ME: We think about this in terms of four dynamics. We think about things we do internally and things we do externally, things we do for existing businesses and things we do for new businesses. In terms of things we do internally, we look at the product process with our marketing group. For example, they take next day air and second-day air and make it 8:30 and 10:30, and they replicate that model and integrated delivery network throughout 200 countries. The way we grow existing businesses externally is through mergers, acquisitions, partnerships, and alliances. We've done several acquisitions. We've done hundreds of partnerships and alliances, generally in the high- tech space. We know that we have to go to external sources to be able to grow existing some businesses. With new businesses, we can try new things and we can fail small fast, so we try to innovate down there. For example, we investigated web-based grocery delivery. We tried it and failed fast. But we didn't fail with a lot of money. We use a strategic enterprise fund to examine new business opportunities. We use that to fund pre-IPO companies that do things in spaces that we're interested in. And we support research at universities. One of those companies was a company named Savi, which does radio frequency (RF) transponders. We move 13 million packages across the world every day and we want to know where every one is at every moment. Right now, we do that by scanning every package several times. That's a lot of labor. What we'd like to do is use RF transponders as a way to track packages. Q: What items are on your capital expenditures wish list?
ME: We spend a billion dollars every year on technology, and we have for the last 15 years. We've been described as a technology company with trucks and that's a fair description. We're going to continue to spend money on technology. We just opened our new air sort in Louisville. It's the most phenomenal sort you've ever seen in your life. The packages sort themselves! The packages move 400 feet a minute but if you could make time stand still, you could find that package within 12 inches in a building that is the size of the Pentagon. It's a phenomenal thing. Also, we're going to continue to add to the 300 aircraft we own, to be able to take our customers' packages around the world. Q: In your ongoing effort to globalize your market, how has it been different doing business in other countries? ME: We did our first international expansion in Germany in 1976. We all thought that we could do things there just like we did them in the U.S. For example, we called each other by our first names in the U.S. Well, Germans don't do that because of the formality of the language. We want to be able to build our overall brand so that folks all over the world learn to think of UPS. Our website is available in 19 different languages. It's tailored to 109 different countries. So if you're in a remote part of Nigeria, you can find out how long it takes to get a package to Japan. Q: UPS has invested very heavily in aviation over the past decade. I know that you have experimented with using that aviation equipment in other ways. Can you tell us about that? ME: We do sometimes experiment in that kind of new business. We look at three different dynamics. First, it has to be an attractive market, a growing market. Second, it has to leverage our strengths, our skills, our brand, our customer base, our technology, our people. Third, it has to fit our strategy. Again, that strategy is to enable global commerce. We didn't think flying passengers on the weekends to cruise ships necessarily was an attractive market. It almost distracted us. So we got out. |
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