This week I was invited as the guest speaker at the Annual Spring Dinner of the Worshipful Company of Distillers at Saddlers’ Hall in the City of London. The company was founded as a “Body Politique and corporate” by Royal Charter in 1638. 80% of its members today are or have been active in the Spirits trade and so it stands out among Livery companies as an ancient one that is still active in its original craft. I gave the following speech.
Which apple do you think has changed the world the most? Was it the apple from the tree of knowledge with which Eve tempted Adam in the Garden of Eden? Or was it the Apple of Discord that Paris chose to give to Aphrodite in return for the love of Helen? This alienated Hera and Athena and led to the Trojan War. One of the few Trojan survivors, Aeneas, led a small band to Italy where he founded the people that would eventually become the Romans. Or was it the apples of the Hesperides which Hercules was commanded to steal from Hera. This is one of the best stories of the labours of Hercules as it includes the bit where Hercules kills the eagle who eats the liver of Prometheus every day, his punishment for stealing the secret of fire from the gods, and also the bit where he tricks Atlas into taking back the whole weight of the world on his shoulders. The Swiss might say it was the apple that William Tell shot off his son’s head with his crossbow that the Austrian tyrant Gessler had ordered him to do as a cruel punishment. New Yorkers would claim it was the Big Apple, the nickname for their great city. Or was it Newton’s Apple that led him to work through the principles of gravity and thus found modern physics? Perhaps some popular music fans would vote for the Beatles’ Apple label and studios. No doubt there are Distillers in the Hall tonight who would vouch for ‘Rouge Duret’, ‘Rambault’,’ Saint Martin’, ‘Frequin’, ‘Binet Rouge’ just some of the 200 varieties used in Calvados. Or perhaps some would just say it is the apple a day that keeps the doctor away.
Many people think it was the Apple Corporation that Steve Jobs founded. By the time of his death seven years ago it had become the most valuable technology business in the world. It exceeded all the companies he had taken on and beaten: IBM, Microsoft, Sony, Nokia, Samsung and many more. It can be said that he transformed the Personal Computer, Music, Movie and Mobile Telephone businesses. I would not mind betting that if he had lived he would have gone on to transform the Television business as well.
Clearly Steve Jobs was a brilliant innovator and while his successor, Tim Cook, does not have the same charisma the tradition is continuing. Apple has become the most valuable corporation in the world, the first to exceed one trillion dollars in market capitalisation, though Aramco may have something to say about that. We have seen the introduction of number ten in the phenomenally successful iPhone series as well as the launch of another new category, Apple Watch, itself inspired by Jobs. Perhaps of greater significance was the introduction of new payment methods using your iPhone. This might threaten the traditional banking industry. And only last month Apple announced its attack on the TV content business to take on the likes of Netflix.
I used to work for Sony running its UK consumer electronics business for ten years from 1988. When I took over, the company was recovering from the Betamax debacle in which it had lost £30 million in the UK alone. We had lost market share and had to make tough decisions over people and facilities. Over the next ten years we grew our consumer business in the UK from £150 million, losing money, to over £500 million and meeting corporate profit targets. At that time Apple hardly registered as a competitor. We regained our position as the leader in consumer electronics with number one market share positions in TV, Hifi, Personal Audio and Personal Video, i.e. camcorders. Every year I launched around 250 new products, many of which were updates of existing models, but always some of which were brand new ideas. In my time we launched digital cameras and camcorders, digital books, VAIO computers, widescreen TVs, PlayStation and many more. We used to pride ourselves on creating markets.
Sony was founded in 1945 in Tokyo at a time when that city was largely destroyed by allied bombing. I am not asking you to sympathise with the Japanese but to recognise the audacity of two young men Masaru Ibuka and Akio Morita who set out to create a new business based on the fusion of electronics and electro mechanics. Bell Laboratories in the US developed the transistor but saw its potential in industrial use. Sony thought it might have consumer applications. They applied for access to $50,000 of foreign currency but faced great opposition from MITI, the Government department for industry. Sony prevailed and developed the first pocket radio, launched in the mid-1950s. It did not quite fit into pockets so the salesmen had especially large pockets sewn on their shirts to demonstrate this.
A range of audio products flowed from this including tape recorders. Then in the ‘60s they developed a superior system for colour television receivers known as Trinitron, creating a far more accurate system than the American development Shadow Mask. In the ‘70s came the Walkman and then Compact Disc, a joint development with Philips.
Sony was perhaps a more successful company when it was run by engineers with one eye on the technology and the other on the market. For the last 20 years it has been run by marketing people with less understanding of the technology and what it can do, and consequently less vision, and I say that as a marketing man. iPod and flat screen TV should have been Sony territory.
The grandfather of marketing is the great management thinker Peter Drucker who said ‘because the purpose of business is to create a customer, the business enterprise has two –and only two – basic functions: marketing and innovation. Marketing and innovation produce results; all the rest are costs. Marketing is the distinguishing, unique function of the business.’ He also said ‘The aim of marketing is to know and understand the customer so well, the product or service fits him and sells itself.’
According to the brilliant author Jack Trout, ‘Today, when top management is surveyed, their priorities in order are: finance, sales, production, management, legal and people. Missing from the list: marketing and innovation. When one considers the trouble that many of our icons have run into in recent years, it is not hard to surmise that Drucker’s advice would have perhaps helped management to avoid the problems they face today.’ He wrote that in 2006 two years before the Lehman crash.
And what do I think? Marketing can be a confusing term. On the one hand it is identifying the customer need and organising the business to meet this need. In this sense everything the enterprise does is marketing. However, it is also convenient to isolate marketing as a functional activity and to consider it as an activity separate from production and finance. I am firmly in the first camp with Messrs Drucker and Trout. At a very simple level marketing can be defined as ‘winning customer preference.’
But I’m not sure I can teach a group of Distillers much about marketing. Your industry is characterised by strong brands many of which have long heritage and international weight. It might be invidious to single any out, but both whisky and gin are well known for their outstanding brands. But I have also seen, particularly in gin, a new spirit of entrepreneurship with very many new comers with terrific innovation and marvellous marketing. Well done!
Thank you for listening. And now please rise to join me in a toast. And so I give you the health of the Worshipful Company of Distillers, root and branch. May it continue to flourish for ever and good health to the Master.