Harjeev Kandhari, CEO
People always confuse disruption with innovation. Innovation is evolution, whereas disruption is revolution. Innovation makes the old ways better, whereas disruption makes the old ways obsolete! But most importantly in business, innovation allows you a 10% growth while disruption allows you a 10X growth.
We’ve already seen two technological revolutions in our lifetime that have caused major disruption – the internet and the smartphone. And thanks to the digital revolution, disruption is now happening more frequently and at a faster pace than ever before. So we’re going to experience more disruption than previous generations ever did – disruption that will revolutionise business models and industries in ways that we can’t yet imagine. So who will disrupt the automotive/tyre industry?
In our industry, the last major disruption was the introduction of the motor car in the early 1900s. How many horse and carts do we see on the streets today? Clearly, the car disrupted the horse and cart out of commercial existence. So now our old school, white, male-dominated industry is ripe for disruption and trust me (from the startups that I see as a venture capitalist), it is coming sooner than we think! And moreover, I can tell you that it will not happen as a result of the legacy manufacturers making better tyres, improving distribution systems or selling tyres on the internet. Like in every other industry, disruption in our industry will come from the outside.
Look at the mobile phone industry – Nokia were undoubtedly one of the most innovative companies and arguably the industry leaders in this technology, yet in the space of just a few years, Nokia’s reign was well and truly ended. And this happened because of one reason – disruption, which Nokia just didn’t see coming. Because while Nokia had their eyes on their competitors, Apple came and ate their lunch! Let’s look at the medical industry for another example – CRISPR/CAS9 – (the genome editing tool that will enable scientists to weaponise human cells against cancer) could potentially be a cure for cancer and would ultimately disrupt the medical field. Where did this come from? You guessed it – from outside the medical field. Every industry has such examples!
So who will disrupt our industry? Some industry observers say that Zenises (along with Alzura) is well on its way to disrupting the industry, being the first company in the world to offer tyres as a service across the internet. To those people I argue that what Zenises has done is definitely innovative but not disruptive. To understand disruption in our industry, we really need to understand not just what we do but why we do it. What we do is sell tyres and if we see our industry from that narrow perspective then Zenises is disrupting it. But if we understand the reason why we do what we do, which is to provide mobility, then we can see that we are merely a small fragment of a much larger industry. From this position, we can see that there are many more companies and individuals that have the potential to disrupt our industry. So disruption in the industry could come from the company making flying cars – if that ‘takes off’ and we end up living in a world like ‘The Jetsons’, tyres would become obsolete. Or disruption could happen as a result of tech companies taking virtual reality technology to a level that it negates the need for travel. Perhaps the companies creating personalised drone transport could disrupt the industry, or maybe it will be a company that works with a combination of these technologies or different technologies altogether. Such companies may sound futuristic but they already exist, and two of them have even received investments from our venture capital fund.
My idea here is simply to get my colleagues to start ‘thinking outside the box’ and seeing beyond our industry, as this would perhaps enable them to come up with their own ideas for disrupting it. So what will the Apple or CRISPR for the tyre industry be and how will it work? I don’t know, but you can count on it that there’s a 14 year old kid somewhere outside the industry figuring it out (hopefully one whose company I have already invested in)!
The digital revolution has affected the auto industry in many ways, but perhaps one of the most exciting and potentially cataclysmic changes currently taking place is the development of automated vehicle technology. Up until the late 1970s, automated cars, or ‘robo-cars’ as they are otherwise known, only existed within the realms of science fiction. Fast forward to today and some serious advances have been made in perfecting the technology. In fact, during a recent visit to Silicon Valley I was lucky enough to see a Google autonomous car driving right beside me, so it won’t be long before they become a familiar sight on the roads of the world’s major cities.
Volvo for example, have stated that they aim to have 100 automated cars on the roads of Gothenburg by as early as next year, while Tesla have already released their auto-pilot software and plan to offer their customers the full self-driving experience by 2018. And let’s not forget Ford, who have recently tripled their investment in semi-automated systems in order to compete with technology behemoths such as Google ( who just spun out its self driving unit into a separate company called Waymo ) and Apple (who recently confirmed that they are working on an electric iCar to rival Tesla). However, there’s a good argument to suggest that the current leaders in the car industry are Daimler, who have been implementing a similar autopilot technology to that of Tesla in high traffic situations for quite some time. But fundamentally the issue boils down to are the car companies going to build a better car or are the computer companies going to build a better computer and put it on wheels. From what I have seen in the Valley my view is that that the computer companies will win this battle!
Companies such as Uber are also getting involved, having recently completed their first successful 120-mile delivery using a self-driving truck – it was 50,000 cans of Beer just in case you are wondering what they delivered! Industry experts such as Brad Templeton argue that as automated vehicles become more common, car sharing will increasingly start to become the norm. So although Uber may be behind in terms of the technology when you compare them to companies such as Google, they are undoubtedly the innovators when it comes to capitalising on the concept of car sharing. They have already started picking up passengers in Pittsburgh with their self-driving cars – although there is a driver sitting in the car so that the customers feel more comfortable!
So it’s clear that robo-cars are no longer confined to the realms of science fiction, they are very much a tangible reality. Astro Teller, director of ‘X’ (formally ‘Google X’) recently posed the following question “Is there a scenario in the future that doesn’t involve self-driving cars? No. So let’s just do it”, and I’m inclined to agree with him. So, if car/tyre companies wish to survive in an increasingly competitive marketplace, then such technology needs to be embraced and utilised because progression in this area isn’t going to stop to allow those who aren’t already doing so to ‘catch up’.
There are also many benefits to using automated vehicles. Firstly, energy consumption and CO2 emissions will be reduced dramatically, which would have a significant impact on the environment and would perhaps even contribute towards slowing down climate change. Robo-cars would also provide a safer and more efficient driving experience because unlike human drivers, self-driving systems aren’t affected by distractions or ill health, and most significantly of all, robots don’t drink alcohol, which is one of the leading causes of road traffic accidents. In fact, statistics suggest that on average around 3,000 people are killed or seriously injured each year in drink drive collisions in the UK alone, and such accidents could be all but eradicated when robo-cars start to outnumber human drivers.
This technology is equally positive for the tyre industry because put simply, automated cars will increase mobility. Whilst there will be less cars in parking lots there will be more cars around as demand for mobility will increase. As such demand for tyres will increase but it does beg the question who will be the new customer for the tyres? Just imagine a world where driving on demand was accessible to everyone, where you could use your phone to order any car of your choice that perfectly suited your needs in that moment, all in a matter of mere seconds. This is a concept that appeals directly to the younger generations whose attitude towards ownership is completely different to that of their parents’. They don’t think about what car might suit their needs tomorrow, they only think what car will suit their needs today.
Of course, there are some drawbacks; In 2015, hackers worked out how to cut the transmission of a Jeep being driven at speed miles away — sparking a recall of 1.4 million cars. Autonomous vehicles will need a high level of connectivity in order to detect each other: vehicle-to-vehicle communication which — if hacked by terrorists — could cause carnage. Cyber experts routinely talk of “ransomware” attacks in which driverless cars will be hijacked, with a ransom demanded to avert disaster. But I for one think that the pros far outweigh the cons, and what’s truly exciting is that we aren’t even close to unlocking this technology’s full potential.
Social media is a medium that is used by a vast number of people each and every day. Not only does it provide a global platform from which we can highlight important political issues and social concerns, but it also allows us to work and connect with people on the other side of the world in a matter of moments. However, whilst the considerable technological advancements that have been made over recent years have undoubtedly brought many benefits, there are those who think that it has also had other less desirable effects. Some argue that rather than bringing people together, it is actually driving communities and families further apart, as the younger generation especially appear to become increasingly consumed in their digital lives.
Although such concerns are understandable, I think that they are also somewhat short-sighted. Because social media, if embraced and used responsibly, is one of the most powerful tools that we have at our disposal for connecting with our children, uniting the communities in which we live and most importantly increasing our level of social impact.
Social media sites like Facebook and Twitter and messenger apps such as WhatsApp have allowed us to considerably increase our social impact. They enable my wife and I to connect with the children that we ‘adopt and educate’ through the Zenises Foundation in ways that wouldn’t have been possible even a decade ago. Through social media, we are able to communicate directly with these children at any time and from any place in the world. It gives us an invaluable insight into how they think, feel and relate to the world around them. And it is this insight that enables us to support and guide them more effectively on a real time basis.
This increased level of global connectivity enables them to develop their skills and confidence because they know that they can reach out to us at any time and that we will respond. Through the simple act of following my wife and I on social media, these children now feel as much a part of our lives as we do theirs. These are children who could not even speak English a few years ago, and yet through the power of social media, they are now able to ‘friend’ us and ‘poke’ us on Facebook! So it’s clear that this innate desire to connect has only served to fuel their education further.
More importantly, it also allows these children to communicate amongst themselves and build their own communities and support networks. Recently when we were in India meeting with the children, we found that the older children had taken the initiative to set up a Facebook group to interact and keep each other abreast of developments in their schools and personal lives. Even more pertinently, they also used this network to inform each other of the various job opportunities and training available. We couldn’t help but feel overwhelmingly proud to see this network effect of social media that the children themselves had come up with in order to provide support to one other.
Another way in which social media benefits communities is that it enables businesses to spread the message about the philanthropic work that they’re doing. In doing this, companies can inspire others to increase their own efforts, and thus the actions of one business creates a stronger incentive for all businesses to adopt more socially responsible business practices. And just as importantly, businesses can harness the power of social networking to unite with other like-minded companies and organisations, which allows them to increase their social impact even further.
I recently had some first-hand experience of this when I happened to see a post on Facebook and discovered that an acquaintance of mine was working in India helping to provide education to disadvantaged children, in an initiative that seemed to share similar objectives to the Zenises Foundation. What I saw was that they were using innovative applications of technology to further reduce the cost of education in rural India. Upon learning of this fact, I decided to use this as an opportunity to connect with them through social media, and together, we helped to implement some of their educational programmes and introduce new and innovative technology into the existing curriculum. So, if a small company like Zenises can utilise social media to inspire others and affect positive societal change through initiatives such as Z Aspire and T OutReach, then why aren’t more companies doing the same?
A recent article in the New York Times described social media as being a “public space of seemingly limitless potential in which we can find common ground with total strangers and our closest friends, making progress towards solutions to our world’s crises”, and I am inclined to agree. I see the prevalence of social media as being representative of the absolute hunger that people have to connect with each other. Therefore, by choosing to embrace this most revolutionary of technologies, we are choosing to connect with other businesses, our children, our communities and the world at large on a purposeful and meaningful level. And in becoming more connected with those around us, we can achieve greater social impact on an individual, local and global scale.
Digital technology has revolutionised almost every aspect of modern life, and the world of the motor business is no exception. The internet has led to the rise of an online ‘sharing economy’ that allows people to rent and share physical and intellectual resources. This cataclysmic change in consumer buying habits has implications for us all, but the effect is particularly significant for the automobile industry.
Some industry experts and social commentators argue that the biggest threat currently facing the European motor industry is a phenomenon known as ‘peak car’, which suggests that the number of cars (and tyres) in circulation will hardly rise any further. There is now a tendency among the younger generations to focus on gadgets and technology rather than being seduced by their first car as a teenager. And as the sharing culture of Airbnb and Uber lead inextricably towards carpooling and ‘on demand’ driving, what does this mean for the future of tyre companies? One thing is for certain – it’s no longer going to be ‘business as usual’. In fact, according to Automotive News, in June 2016 the growth of European car sales had slowed to just 6.5 percent.
The Practicalities of Car Ownership
One of the main issues appears to be that a significant number of Millennials, particularly graduates, currently live in urban areas so car ownership isn’t a priority for many, and for a great many more, owning a car simply isn’t financially viable. Like owning your own home, for the younger generation, car ownership seems very much out of reach. It’s clear therefore, that the auto-industry needs to adapt. But what changes need to be made, and how exactly are brands to appeal to a generation whose interest in car ownership is seemingly at an all-time low?
What we need to remember is that although Millennials aren’t necessarily investing in cars now, they will in the future as their lifestyles inevitably change. When they have swapped urban life for the suburbs and have children that need to be driven to and from school, sports practice and music lessons etc., renting/sharing a car will no longer be practical. Having a family means that your priorities change – this is no less true for Millennials than it was for previous generations. The struggle of trying to balance family life with work and other commitments is a difficult enough task in itself, but as Millennials are now starting to realise, it’s even more difficult when you don’t own your own car.
It is then perhaps of little surprise that recent statistics suggest that Millennial demand for cars is actually rising much faster than anyone anticipated. According to global market researchers, J.D. Power, Generation Y are in fact, buying more cars than the previous generation, with sales rocketing to 27 percent in 2014, from 18 percent in 2010. While it’s worth noting that Millennials do significantly outnumber Generation X by 15 to 20 million people, these statistics demonstrate that the need and desire for car ownership still very much exists, and that it’s a consumer-market that’s just waiting to be tapped into.
Further proof of this is the fact that the growth of car sales isn’t just rising in the European market, growth has also risen exponentially in China and shows no sign of slowing anytime soon. In fact, the growth of car sales in China is still growing so considerably that in Beijing it is difficult to get new number plates allocated to you, even for those who can afford to buy a car. In Qingdao, which is a second tier city in China, they are now considering implementing the odd/even number plate system, which prohibits motorists from using specific thoroughfares on certain days of the week, due to there being such a large number of cars on the roads. So there can be little doubt that car ownership is still clearly growing and forecast to continue doing so – and statistically speaking it’s the Millennial generation who are driving this growth.
Adapting to Meet Changing Consumer Needs
Therefore, it’s more imperative than ever that automobile and tyre businesses focus on building a strong consumer-brand relationship with Millennials to establish themselves as Generation Y’s brand of choice, so that when they are ready to buy, they’ve already decided exactly which brand they’re going to buy from. Generation Y won’t make any purchase unless they can see an immediate and tangible benefit – and more importantly than that, they want to invest in a company with whom they can create a purposeful connection. Therefore, brands need to show that they share the same social concerns as Millennials by focusing on purpose as well as profit, to ensure that they appeal to a generation whose purchase power is still yet to reach its peak.
Indeed, The Deloitte Millennial Survey 2016 found that “Most young professionals choose organizations that share their personal values”. Therefore, brands need to be aspirational by ensuring that their products are at the forefront of technological innovation, but they also need to show that their working practices are economically and environmentally sustainable. They need to show that cars are as necessary, desirable and more importantly, as attainable for Millennials as they were for the generations that preceded them.
Forward-thinking companies such as Zenises in partnership with Alzura have already responded to this change in consumer needs by introducing the Flat Rate Tyre Subscription via the internet. Both innovative and unique to the industry, from just 2.99 euros a month, it is designed to cover all new tyre-related costs, and allows the customer to fit or upgrade tyres without having to worry about expensive on-the-spot payments. It is in essence offering a style of contract that has been popularised by companies such as ‘Netflix’. This concept is of huge appeal to the younger generations because it provides a short-term, cost-based solution to the issues that new motorists encounter, such as the high cost of making initial distress purchases.
Another fast-emerging trend that we are seeing within the auto-industry is that an increasing number of companies are now focusing on developing more environmentally friendly or ‘green’ tyres. Of course, this trend can largely be attributed to brands trying to appeal to the socially conscious value system of Generation Y. However, the introduction of EU labelling legislation in 2012 has also meant that tyre brands have had to focus on developing better quality tyres in a more efficient way, hence the rise of industry 4.0 tyre manufacturing factories. Otherwise known as ‘smart factories’, they are designed to utilise cyber-physical systems and technologies to make the manufacturing process more efficient and environmentally sustainable.
This ‘green’ trend can only be a good thing for the industry and consumers alike, as it means that brands are now creating tyres that have higher fuel efficiency and lower rolling resistance grades than ever before. This not only helps to reduce fuel consumption and CO2 emissions, but also helps to improve the motorist’s entire driving experience due to increased energy performance, which is exactly what Millennials are looking for from the brands that they buy from.
Generation Y will arguably be the most influential consumers in the market. In building this connection with Generation Y through changing business models and appealing to Generation Y values, a company can maximise its chances of longevity and give themselves a huge advantage in an increasingly competitive market.
In a recent interview with Larry King, world-renowned theoretical physicist Stephen Hawking, argued that the biggest threat to humanity isn’t nuclear war or the rise of artificial intelligence, it’s human greed and stupidity:
“Humanity needs to collaborate and change our assumptions of wealth and possessions if it is to tackle challenges like climate change, disease, food production and overpopulation.”
These words are disconcerting to say the least and serve as a rather shocking and worrying indictment of the direction in which humanity may be currently headed. However, thankfully there is one generation who appear to not only share his concerns, but are actively trying to find a solution to a problem that, if ignored, could have catastrophic implications for us all.
Millennials & The Culture of Sharing
Success used to be defined by the house that you lived in, the car that you had on your driveway and the money that you had in your pocket. However, Millennials, having seen the financial achievements of the Baby Boomer generation, have realised that monetary success alone isn’t the answer. As this quote from Forbes demonstrates, “Money is important and they [Millennials] do enjoy making it, however, they long to be part of something bigger than themselves”, Generation Y recognise that there must be a more meaningful and purposeful motivator for success than wealth and possessions alone.
Indeed, the concept of ownership has changed dramatically over the last decade, with an increasing number of young people now choosing to take advantage of the internet’s ‘sharing economy’. This digital economy allows them to rent or borrow physical resources such as cars, electrical appliances and/or recreational goods, and frees them from the ‘burdens’ of ownership. Daniel Arthurson, founder and CEO of Xercion observes that, “Gone are the days of self-serving ownership — community sharing and mass enjoyment are the “now” trends.”
It is perhaps unsurprising then that Hawking, one of the world’s leading thinkers, should also choose to comment on people’s changing attitudes towards ownership in his recent interview:
“People are starting to question the value of pure wealth … is knowledge or experience more important than money? Can possessions stand in the way of fulfilment? Can we truly own anything, or are we just transient custodians?”
In longing to be part of something bigger than themselves, Generation Y are daring to ask the same questions – if money and possessions aren’t the key to happiness and fulfilment then what exactly is? It appears that by being more socially conscious and responsible than any generation that has gone before, Millennials may be one step closer to finding an answer to this question. They understand that if they wish to be the instigators of positive change, then this can only be achieved by holding themselves and others accountable. Ghandi once said that we ‘should be the change that we wish to see in the world’ – Generation Y are embracing this philosophy, and they are inspiring the innovators, leading thinkers and entrepreneurs of our time, as well as the next generation, to do the same.
Focusing on People as well as Profit
Perhaps it could be attributed to the wisdom of youth, but Millennials recognise that money is and can be used as a powerful force for good, and that it can be utilised to create real positive change in society. However, when businesses work with the singular objective of maximising their profit margins and fail to consider their social impact, the pursuit of money becomes blind and the highest of ideals can all-too-quickly descend into greed and avarice.
As the gap between rich and poor only seems to grow wider, the need to find an ‘antidote’ to the insidious nature of greed has never been greater. Generation Y understand that we must start taking a top-down approach to business, in order to create a world where the monetary success of a company will no longer be of benefit to the few rather than the many. Of course those at the top should be able to enjoy the fruits of their hard work and effort, but so too should the employees working within the company, the community in which it was founded and society as a whole.
In other words, big business should be expected to reinvest in the social infrastructure of the communities that made them, and to set up charitable initiatives that benefit the most vulnerable and disadvantaged in our societies. Over time, this will create a ‘drip-down’ or ‘domino’ effect that will ultimately enable individuals and communities to thrive. Millennials don’t only expect, but they demand that this Utopian vision, which many dismiss as being the folly of youth and naivety, become a tangible reality.
Because while those belonging to the older generation may have little belief that our society can ever change, Generation Y refuse to compromise their ideals. They know that if we change our attitudes towards wealth, hold each other accountable and resolve to conduct business in an ethical and socially responsible way, then we can, and more importantly must, create a better and fairer world for everyone.
I’ve been thinking about how the world of tyres might change in the coming ten years or so. That’s not to think about which brands or sizes might be doing better or worse than they are today – except that Zenises and our Z-Tyre will of course be in the ascendant.
It’s more about changes in the way we do business. Tyres made in China are getting better. Today there is still a large gap in price but a much smaller gap in technology performance compared with ‘legacy’ brands (those tyre brands which first established themselves in the Western tyre markets decades ago). That big price gap is no longer justified by the small differences in technology. And the technology gap is shrinking fast. Even today many of our tyre brands can compete on equal performance terms with legacy brands. In a year or two, I expect the difference between ours and legacy brands to be indistinguishable.
On pure performance abilities, we should be charging the same price. The market is probably not ready for that yet, but we can bring that day closer by helping people understand what they could be paying for when they buy a legacy tyre. Just the name – nothing more.
It’s not just happening in car tyres. It is the same story around the world in truck tyres and also in the tyres used on bikes, agricultural vehicles; mining trucks and every other type of vehicle.
Where does that leave the legacy brands?
We’ll be offering great tyres that are largely indistinguishable from legacy brands, except for the name on the side of the tyre. Our prices will be better and our dealer margins will be better. So legacy brands are going to have to find a different way to do business if they want to compete with us.
New business models
There are some recent innovations. In the commercial tyre sector we have seen the move to price per kilometre (ppk) contracts where the fleet manager pays a fixed monthly fee depending on the type of vehicles, distances travelled and so on. Already tyre makers are talking to the suppliers of the telematics boxes. Those are the instruments that measure speed, location distance and can help a fleet manager to minimise costs while maximising up-time for the trucks and drivers. Michelin recently purchased the biggest such company in Brazil.
Here there’s a strategy emerging: Michelin has the Michelin Solutions business; Goodyear has the FleetOnlineSolutions. Bridgestone has its Total Tyre Care programme. Each of these is designed to meet the need for fleets to outsource various services.
In business, we focus more and more on the customer and try to out-source the tasks where we cannot add value through our customer-facing activities.
These fleet management solutions aim to meet that need by providing services to the fleets. Truck tyres are only a small part of the total service package.
If the low-cost, high-performance tyres coming out of China are eroding the legacy brands’ margins, then those legacy brands have to find a way to extract more money from their customers. In the business-to-business world, that means selling more services to help make the customer’s business more efficient.
New strategies in car tyres
In the car tyre business, it’s a bit different. In Germany, in conjunction with our partner Alzura, we have already announced our Z Tyre Flat Rate program whereby customers can pay EUR4.99 per month and we’ll provide them with brand new tyres as a service and even replace them if the tyre gets a puncture. It’s a great service and meets a need and we’re currently the only tyre company in the world to offer a flat rate for tyres.
It might take a while to convert the whole market to this model, but it’s a start. In car tyres, however, I see the legacy tyre makers adopting two key defensive strategies. The first is freezing out the importers by gaining control of the wholesale and distribution and retail system. They originally tried to disrupt new quality brands from China by lobbying for new regulations such as tyre labelling but this backfired. So now they’re now trying to block market access to new entrants by using their considerable financial muscle to buy the market away. The second is controlling the marketing message and using new technology to by-pass the distributors and eventually the retailers that aren’t part of their platform.
The legacy tyre makers know that dealers in many cases receive more profit by selling one of our tyres. They know that most people who walk into a tyre store will buy the tyre recommended by the dealer. They know that long term, this is bad for their business.
Their short- to mid-term strategy is to buy up the distribution and retail companies: Bandvulc and BlackCircles have already been swallowed in the UK; Allopneus in France; Ihle, Meyer- Lissendorf and others in Germany. Following Bridgestone’s acquisition of Speedy there is barely a single independent retail chain left in France. It’s not just Europe – we saw Bridgestone bidding hard to win the Pep Boys chain in the US.
Longer-term, they want to try to change the basis of the consumer’s purchasing decision. Today the purchasing decision is often based on a combination of dealer recommendation; magazine test results as well as availability and the overall price-performance package. That works in favour of a competitive multi-brand environment and against a legacy brand monopoly.
Exploiting social media
A mid- to long-term response is an increasing online participation with social media, webstores, competitions, games, surveys and other infotainment designed to trigger mass sharing and forwarding. Legacy brands are setting up portals to inform consumers about tyres; about what to look for; magazine test results; their ‘green’ credentials and the rest. They are using games and Tweets and infotainment to build a relationship with the customer. They are watching which parts of the site are visited most and which pages contribute to the buying decision.
And then they place a big, bright ‘BUY NOW’ button that encourages the customer to hand over credit card details with no need to visit a dealer.
They believe this approach will make it more difficult for consumers to learn about the alternatives to their brands.
They want to gain control of the communication channels and the message and then to understand the fine-grained needs of the consumer and meet those needs with an outstanding service offer.
That offer includes a mobile fitment van that will visit your place of work, or a street address; it includes a time-slot booking option and it includes feedback like you get on Amazon or TripAdvisor, so that consumers are given confidence that they will get great service as well as great tyres.
If we are to respond, then we need to offer not only great products at great prices, but improve service as well.
Over the shorter term, the battleground is moving to the distribution and retail chains. I think that it will be difficult for importers to compete on that front as they are effectively removed from the distribution channels. But I am convinced that in the longer term as the battleground moves to dominate the social media and internet channels we will be able to compete more effectively and the legacy brands know this.
Making a business succeed is hard enough on its own. So now you want entrepreneurs to also add in aspirations of social impact and other niceties that are ancillary and not directly tied to Profit? Nobel laureate Milton Friedman argued that “there is one and only one social responsibility of business – to use its resources and engage in activities designed to increase its profits.” Maximizing profits and shareholder value has become conventional wisdom ever since.
But with the global economy brought to its knees by short-term profit maximization Millennials, who are our future, are getting more and more turned off by companies who focus only on profit. Saddled with student debt, they are unable to find work at twice the rate of those over 30 years old; twice as many live in poverty as in the 70s. The unstable nature of the world they are inheriting – and the knowledge that many of them will not share the opportunities their parents had – has led them towards an existential crisis. In the UK, millennials’ average disposable income is just a third of that of pensioners, with home ownership a distant dream.
As a result, millennials are making explicit their universal hunger and innate desire to contribute to something bigger than themselves. The most socially and environmentally conscious generation ever, they have become humanity’s conscience and self-correcting mechanism. They insist on a purposeful connection with companies they buy from, work for and invest in. They want to know why a business exists, what it does, how it treats people and the planet.
Nine out of ten believe that success should be measured by more than financial performance. For them, the idea of going to work with the singular goal of maximizing profits and shareholder value is pointless and abhorrent. They’re willing to put their money where their mouth is: more than half of millennials have ruled out working for an organization because of its values or standard of conduct. More than half have “chosen not to undertake a task at work because it went against their personal values or ethics”, according to a 2016 Deloitte survey. This is something to sit and take notice of as they’ve surpassed the baby boomer generation in size and are expected to own $41 trillion in transferred wealth.
It would be easy to dismiss this as the naivety of youth, were it not for the fact that many of the world’s most successful, admired and enduring companies are purpose-driven. Contrary to conventional wisdom that purpose is a tax on the bottom line, companies such as Patagonia, Virgin, Zenises, Starbucks and Southwest Airlines are demonstrating that purpose-driven enterprises have an inherent market and profit advantage giving them staying power.
The best entrepreneurs I know are the world’s greatest change agents precisely because they share a belief that the fundamental purpose of business is purpose. They view profit as essential oxygen to a company’s ability to survive and thrive, and the fuel that maximizes their impact. As Kickstarter co-founder and CEO Yancey Strickler puts it, “That’s so obvious, it’s not even a thought. It’s how you find long-term success.”
I also want to have considerable social impact and make money. These two goals are clearly complimentary. Social Impact and Purpose lead to greater value creation and that leads to more profit than trying to maximize profit as an endgame. Profit and purpose are force multipliers that reinforce each other. It’s strange that people see them as a dichotomy. I say, It’s best if you have both. It would never be satisfying to me to build something that was successful in either of those dimensions, but not both. Profit allows you to reinvest in purpose.
Great companies aren’t great just because they make lots of money. They make lots of money precisely because they’re great. Imagine a world that understands that purpose and profit are complementary. Imagine a world that unlocks our creativity because we are working toward a higher purpose that is worthy of our life effort. Imagine a world where businesses compete on being best for the world, and where that is precisely what makes them the best in the world.
With news on anti-dumping investigations making industry headlines, we have subsequently seen more countries considering anti-dumping duties (ADD) against China. The US has had tariffs in place on some types of Chinese tyres since 2008, while even more duties have been legislated over the past year. Recently, the Indian government has announced that it is also looking at putting similar legislation in place. Investigating a demand from the rubber industry body, India are currently looking at creating similar ADDs and increasing the cost of many imported Chinese tyres.
The ultimate reason for these tariffs is that China has been very successful at reducing production costs and manufacturing large numbers of quality tyres. As someone familiar with the tyre industry, I have to say that low-cost, high-quality products are only going to benefit the world market. The demand for tyres is increasing and will continue to do so. With emerging markets like India and Africa just coming into the picture, there’s a real need for these Chinese-manufactured products.
Of course, this is a complex situation that can be examined from many different angles, but here at Zenises, our customers’ point of view always comes first. We distribute tyres at a global level, with a presence in close to thirty countries. Zenises is dedicated to offering premium tyres at the best possible value and we will work with manufacturers that produce this type of product, regardless of where they happen to be located.
There are a number of misconceptions regarding these duties, so let’s take a closer look at the specifics of the case. The anti-dumping duty (ADD) in question is the method the World Trade Organisation (WTO) has chosen to regulate sale and production costs in different countries. The intended goal of the policy is to ensure that exporting countries don’t have an unfair advantage over internal manufacturers when it comes to product pricing. A country that suspects dumping, in this case India, can launch an investigation into production in another country, such as China, to ascertain if there is indeed a valid case for the accusation. Independent researchers need to find data showing that the cost of tyre production in China does actually exceed the price at which these tyres are being sold in India. In other words, the country must prove that the low cost is due to government subsidies rather than fair market factors.
When China entered the WTO in 2001, it exhibited a sincere commitment to reforming the economy and creating an open market that was favourable to foreign investment. Nevertheless, some suspicions, from the US especially, led China to accept considerably harsher conditions than most developing countries do upon entry. China has yet to be granted full Market Economy Status (MES) within the WTO, in spite of internal reforms that reduce government subsidy and support foreign investors. China’s lack of MES means that countries interested in adding an ADD to Chinese exports can use statistics provided by a third party rather than China’s own internal manufacturing statistics.
Government support may have helped to initiate tyre development in China, but currently the industry is thriving on product advancement and state of the art facilities. At Zenises, we are happy to count a number of excellent Chinese brands among our products, including the world famous Westlake tyres, and Z Tyre (famous for selling the most expensive tyres in the world as certified by the Guinness Book of World Records). I obviously can’t speak for every Chinese tyre; examples of poor quality manufacturing can be found in every country around the world, but this shouldn’t make us deny the merits of factories like Zhongce Rubber, one of the top ten tyre manufacturers in the world, which has been producing quality rubber products for years.
If the Indian government chooses to add a new tariff, this will punish both Chinese manufacturers and Indian consumers. The rubber industry in China will see a production decline; at the same time, Indian drivers will be forced to purchase tyres at a higher price. India’s government will be ignoring the immense advantages a competitive neighbour like China can bring.
We have to ask ourselves why the trade deficit between India and China is currently around 50 billion. Why have Indian exports to China increased by only 22 per cent over the past ten years, while Chinese exports to India have grown by 500 per cent? The middle class in China is expanding almost exponentially, so the market for imported consumer products inside the country should more than offset Chinese exports. Perhaps a campaign aimed at reducing this trade deficit with China would do more to support Indian rubber manufacturers than a tariff on imported tyres.
The bigger picture here, I believe, is how governments are approaching trade with China. At present, many countries seem to see the Chinese manufacturing capacity as a threat, yet at the same time these countries have not found a way to satisfy their own internal consumer demand or adequately support their own manufacturers.
When we advocate a free global market, we should support manufacturers around the world who work hard to offer quality products at low prices. This is what the Chinese have accomplished in the tyre industry, leading to an increase in jobs and affluence in China. By adding unfair ADD’s, we are limiting the scope of China’s success, and in the process we are also curbing worldwide progress and job growth. It seems countries would do better to follow China’s lead and increase manufacturing efficiency so that all these new emerging markets can be an opportunity for growth.
Through the Zenises Group’s work as a global tyre distributor, we have helped to turn the slogan “made in China” from an outdated slur, to an assurance of quality. With a number of large, internationally recognised brands under our care, the company has grown exponentially since its launch in 2014 and now has a presence in 20 countries. However, Zenises is fundamentally different to other multinationals. With a deeply ingrained ethos of ‘doing what is right’, at Zenises we have become well-known for our successful philanthropic enterprises.
Over the years, witnessing numerous countries achieve industry transformations, I have become more determined that this economic growth should not bypass the local people. Africa and the Indian subcontinent are just two examples of continents which have experienced tremendous recent growth but where great financial disparity remains. In expanding The Zenises Foundation, we sought to create educational opportunities and improve the quality of life for the multiple impoverished communities that are in urgent need of investment.
The Zenises Foundation charitable organisation was created before the Zenises Group manufacturing company even came into existence; it is the core philosophy and fundamental axis of the business. Zenises emphasises the importance of sustainable long term relationships rather than concentrating solely on profits. Money should really be treated as a vehicle; the true value of a company is in the benefit that it brings to those who really need it. Many businesses need to re-prioritise and recognise the difference between “need” and “want”, ensuring their ambitions and goals for the business are beneficial to the wider community.
The Zenises Foundation’s primary focus is to work with the local communities where Zenises Group operations are based, and potentially plant the seeds for community development across these countries as a whole. The Zenises Foundation aims to ensure children have a better future by providing access to a solid education to support their aspirations. Z Aspire, a branch of the Zenises Foundation based in the Indian sub-continent, works with underprivileged children of all ages – from primary school to university – ensuring that they receive not only an education but mentors to help them make the most of their opportunities. These mentors help students to realise their true potential and develop their skills, thus boosting their confidence in the process. The Zenises Foundation runs programmes through India and Europe supporting children and young adults to help them reach their maximum potential.
While many businesses are investing heavily in charitable causes, I would urge them to re-examine the effectiveness of their activities and to avoid taking a simplistic approach to their work with impoverished communities and developing nations; a starving man’s needs are not met by one meal and writing a cheque does not always guarantee an impact. Our counterparts must instead offer support to help individuals escape from the poverty trap by providing tailored and circumstantially tailored opportunities.
All too often, the specific situations of individuals are not considered. While paying tuition fees, for example, is a generous gesture, it is one which will have a limited impact if further support is not forthcoming. Circumstances often occur which prevent recipients from taking full advantage of any schemes which are put in place for them. A key example of this can be seen in the work we have been doing within Z Aspire. Meeting with a number of our mentees to catch up on the progress they were making, in conversation it emerged that one student was struggling due to a lack of light at home whilst others were having difficulties with entrance exams. By having this one-to-one conversation we could better understand the real issues that our mentees faced and also take immediate action to provide these students with the resources they needed. I have also arranged to receive regular WhatsApp messages regarding the progress of Z Aspire students; monitoring their marks and academic development enables me to spot changes and flag up any problems which our students may be having. Providing extra tuition, installing working lights and keeping an eye on marks are small gestures, but are integral to the success of our mentees.
By adapting our approach to the needs of the individuals and communities with whom we are working, the Zenises Foundation are able to deal with issues hands on, immediately making improvements and ultimately maximising the project’s impact.
Seen by many companies as nothing more than a marketing strategy, corporate social responsibility runs the risk of simply becoming another business buzzword. Corporate responsibility is the ethos of leading by example. The responsible CEO aims to expand business not by seeing corporate social responsibility simply as an obligations or another box to tick, but by embracing a sustainable approach to business; by taking into account not only the environmental impact of their activities, but the true societal impact upon local communities.
The work of the Zenises foundation is fundamentally about helping improve lives. By taking a proactive interest in all of our projects across the Z Aspire, T OutReach and Westlake Wishes initiatives, we are able to avoid a “one-size fits all” approach. I would call upon other companies to do likewise by looking beyond the obvious and try to truly understand the communities they seek to help.
As a founder and lead sponsor of the Careers Society at St Peter’s College, University of Oxford I wrote this article for the budding entrepreneurs, and emerging superstars that always ask me what they should do to manage their path.
GO TO THE GYM!
In business it’s not enough to be great at what you do, you have to get lucky! – but the harder you work the luckier you get! When people are right out of school, they tend to prioritize the company first, then the job, and then the industry. In fact I think this is the other way around. The right industry is paramount because while you will likely switch companies several times in your career, it is much harder to switch industries. Think of the industry as the gym and the companies as the equipment you use. To get fit you can change the equipment you use but you still need the gym – and you always want to be in the gym with the latest and best equipment.
If you choose the wrong company or you have bad luck with an aggressive boss who drops in on your first treadmill run, you’ll still have a great experience if you’re in a gym with the latest cross trainers. Conversely, if you choose the wrong industry early in your career, then growth opportunities within your company will be limited. Your boss won’t move, and you’ll be stuck without much leverage as there just will not be that many cross-trainers for you to use.
Fortunately, the forces driving the Tech era mean that a lot of industries are great places to ‘get fit’. It’s not just the Tech companies that have a huge upside, but also energy, pharmaceuticals, high-tech manufacturing, media, and entertainment. The most interesting industries are those where product cycle times are fast, because this creates more chances for disruption and so more opportunities for fresh talent. But even businesses like energy and pharmaceuticals, where product cycle times are long, are ripe for massive transformation and opportunity.
From a compensation standpoint, stock options and other forms of equity are quite limited early in your career, so it’s more lucrative to develop expertise in the right industry than to bet on a particular company. As you get industry experience more companies want you and will be willing to compensate you with more equity.
PICK THE COMPANY THAT “GETS TECH”!
After you pick the industry, then it’s time to pick the company. All companies in the future will have to be technology driven at most levels. So you need to look at companies where the people really have an understanding of how technology will drive their company and their industry. These people will ensure that when their companies are disrupted by technology they will be ahead of the curve. These are the genius-level creatives who see, before the rest of us, where technology is going and how it will transform industries. Bill Gates and Paul Allen saw that chips and computers were getting cheap and that software would be the key to the future of computing, so they started Microsoft. Chad Hurley saw that cheap video cameras, bandwidth, and storage would transform how video entertainment is created and consumed, so he cofounded YouTube. Steve Jobs foresaw computers as consumer accessories and it took over two decades for the technology and market to catch up to him.
PLAN TO DEVELOP!
Career development takes effort and forethought-you need to plan it. This is such an obvious point, yet it’s astonishing how many people who I have helped over time have failed to do it. Here are some simple steps to creating a plan:
Think about your ideal job, not today but five years from now. It may not be a job but your own business. But the questions are the same. Where do you want to be? What do you want to do? How much do you want to make? Write down the job description or a business plan. Now fast forward four or five years and assume you are in that job or business. What is the path you took from now to then to get to your position?
Keep thinking about that ideal job or business, and assess your strengths and weaknesses in light of it. What do you need to improve to get there? This step requires external input, so talk to your manager or peers and get their view on it. Finally, how will you get there? What training do you need? What work experience?
By the way, if your conclusion is that you are ready for your ideal job today, then you aren’t thinking big enough. Start over and make that ideal job a stretch.
DATA IS SEXY!
Data is Sexy! Numbers are Sexy! We are in the era of Big Data, and big data needs statisticians to make sense of it. The democratization of data means that those who can analyze it well will win. Data is the Future!
For those who don’t consider themselves well versed with numbers there is still some hope. Asking the question and interpreting the answers is as important a skill as coming up with the answers themselves. No matter your business, learn how the right data, delivered the right way, will help you make better decisions. Learn which questions to ask the people who are good with numbers and how to make the best use of their replies. Even if you aren’t a numbers person, you can learn how to use the numbers to get smarter.
As you get along the organizational path you will need to start hiring and managing teams. Most people hire those that they let them stay in their comfort zone or don’t challenge their authority. But the only way to move up the career ladder is to ensure that you hire people who are smarter and more knowledgeable than you are. They will challenge you to be a better you. Hire people who will get things done. Don’t hire people who just think about problems as they bring a negative energy to the workplace. Hire people who are well rounded, with unique interests and talents. Don’t hire people who live only to work – frankly they are just dull and also bring a negative energy to the workplace. Finally and most importantly though hire only when you’ve found a great candidate. Don’t settle for anything less!
Businesses are only getting more Global – So GET GLOBAL! Business, regardless of size of scope, is forever, permanently global, while humans are naturally provincial. It may have been said many times but travel really does broaden one’s horizons. And today doing business in many cultures is a necessity not a luxury. Go live and work somewhere else. If you’re at a big company, seek the international assignments. You will be a much more valuable employee as a result and frankly a more interesting person!
If working overseas isn’t an option, then travel for business whenever you can. If that is not possible then take as much of your vacation time to travel. When you are out and about don’t forget to see the world as your customers do. If you’re in retail, walk through a store or two and observe, if you’re in media, pick up a paper or turn on the local TV. It’s amazing how often people come back from business trips to foreign lands with insights gleaned solely from their conversation with the taxi driver who took them from the airport to the hotel. If those drivers only knew how much power they have in shaping global business strategy!
FIND YOUR PASSION!
Finding your passion is a luxury: not that it’s expensive, but just rare. It’s something that many people either can’t work out – how many people truly know their passion at the outset of their careers? That’s why this is my last career point and not my first. Finding your passion isn’t always simple. Perhaps when you were starting out you were just happy to find a job, regardless of your passion. Then as your career progresses you find that it’s not what you expected it to be. You could drop everything and start over – buy that small bed and breakfast in Paris! Or you could take a more deliberate approach. Find Passion in the things that you do. I am in the tyre industry but have a passion for luxury travel and marketing. So as part of my job I decided to focus on building a brand. This was a successful brand because I lived and breathed it. I didn’t leave my industry but found my passion within it. When it came to luxury travel I decided as part of my brand building strategy to be the brand in the industry that provides luxury travel to its customers as part of our B2B Marketing. Even as CEO I personally planned every detail of these trips and my passion for this was enthused in every trip. These trips allowed us to cement our relationships beyond the norm which eventually flowed through to the business. It is this simple act of enthusing passion in what you do that has helped people turn around their careers instead of leaving to start a small bed and breakfast in Paris!