Ten years ago I was the head of marketing for an internet company that went public. It was called Chinadotcom. It was the first such company to bring a combination of the Mainland and the internet to the Nasdaq bourse. It created a frenzy. China and the internet! It had investment banks, ill-informed retirees in Miami and day-traders looking for the next big thing scrambling for a piece of the action.
As a member of the management team it also had me locked in its seemingly enticing jaws. I had stock options and almost every morning this compelled me to check the share price online before shuffling off for my morning bathroom rituals. And the news for a year was spectacular: the share price catapulted from a list price of around US$19 to $150 in less than 12 months.
Heavens, I was rich! On paper. I even took to watching Squawkbox on CNBC and lived in a sea of EBITDA, quarterly earnings reports and investment banks. Not that I understood much of what was being said or done, but I had become part of the great global investment circus and it was intoxicating.
And then the bottom fell out of the markets and my plans to retire in my early 40s vanished as the share price plummeted to less than a dollar. And that _ apart from the fact I love my job _ is why I'm sitting here in modest office surroundings in Hong Kong still fretting over the exorbitant cost of my children's education and my retirement funds.
But something else happened during those initially heady, but subsequently sobering times that caused me to look at the impact of the financial markets on the company I worked for. Suddenly everything we did was being pored over by the media and by shareholders. No longer could we just continue to be adventurous entrepreneurs: the minutiae of what we did and said was leapt on and made an immediate impact on the all-important share-price. We went from being masters of our own destiny to public slaves.
The obsession with quarterly earnings reports also meant our world shifted to a feverish scramble to provide immediate evidence to the investment community that we were going to live up to all the IPO hype that we had created. This had a profoundly negative impact on the organisation's culture. We transitioned from being imaginative, open-minded and adventurous rebels to a bunch of tetchy, constipated captives of our own desire for financial gain.
At the recent Hicap hospitality conference in Hong Kong David Keen _ a fellow hospitality consultant based in Bangkok _ and I were asked to oppose the motion that the large hospitality groups are the catalysts for innovation that will safeguard the future of the industry. Part of our rejection of the motion was centred on the fact that large organisations lack an innovative culture: that they play safe. Steve Blank and Bob Dorf's insightful work, The Start-up Owner's Manual, provided a rich source of evidence that "Big-co" equals "Conservative-co".
A leaf from their pages refers to the type of people and culture that differentiates the Davids from the Goliaths: "Small companies are driven by and attract entrepreneurs whose make-up is challenging and innovative. Those who join big organisations are more likely to be status-conscious, conservative and risk-averse."
I was also struck by other literature that relates to the stagnation of ideas in public versus private companies. The Stanford Graduate School of Business summed up the sentiment as follows: "The transition to public equity markets leads firms to reposition their R&D investments toward more conventional projects. Going public causes a substantial decline of approximately 40 percent in innovation."
In a 2011 Cornell University study "Cases in Innovative Practices in Hospitality", 53 innovations were outlined for their "breakthrough" quality and benefits to guests. Only one of these was solely developed by a major global hotel group. 98% came from smaller, private companies.
In April of this year Mark Hoplamazian of Hyatt made the following observation about the hospitality industry: "It has not been characterised by any significant change or innovation. People talk of new mattresses or shower heads, which is interesting but that can only improve sleep or a shower experience, it cannot really impact how customers feel emotionally or their experience." While he was not referring specifically to large, listed hospitality groups they do own or manage a sizeable proportion of the world's hotel inventory.
So, what has this to do with "Living Brands"? The answer is that private (often smaller) companies have a greater freedom to innovative, to imagine, to express themselves and, occasionally, to make mistakes. These qualities have a profound effect on relationship-building.
Living without the ever-present scrutiny of investors and the media and without the frantic lurch to the next quarterly earnings call team members can behave like normal human beings: they are able to develop more natural connections with others, in turn cultivating richer and more rewarding relationships between the brand and the guest.
If you like your service delivered consistently, efficiently and effectively you're more likely to find these traits with larger service organisations as they need to be consistent, efficient and effective to make the great machine work effectively and squeeze out more profit before the end of the next financial quarter.
If, on the other hand, you like your service a little more personal, stimulating and occasionally surprising then think "small" because the people in such organisations have no Big Brother looking to wipe out any shoots of creativity at birth. They have the freedom to challenge, innovate and express their own unique characteristics in relationships and that makes life a whole lot more rewarding for all involved.
James Stuart is the managing partner of The Brand Company and can be reached by email at james@thebrandco.com. For more information see: www.thebrandco.com