Forum - Worst business mistakes

One of the worst – although not one of mine, thankfully – has to be Gerald Ratner’s speech at the Institute of Directors in 1991. The former chief executive of family-owned jewellery emporium Ratners (now the Signet Group) said:

“We also do cut-glass sherry decanters, complete with six glasses on a silver-plated tray that your butler can serve you drinks on – all for £4.95. People ask: ‘How can you sell this for such a low price?’ I say – ‘because it’s total crap’.”

He added that some of the earrings Ratners sold were “Cheaper than an M&S prawn sandwich, but probably wouldn’t last as long”. Shortly after the now infamous speech, the value of the Ratners Group plummeted by some £500m, which nearly proved fatal.

Ratner later defended his gaffe by saying it was a private function and his remarks were not meant to be taken seriously – let alone widely reported.

My worst mistake was to completely misunderstand how the public sector works in the early days of running this specialist publishing company. It took me several years to realise what the "needs" of business support organisations (etc) were and to appreciate how protracted their purchasing processes were.

I was used to the private sector, where life is simple: we have to make a profit or we go out of business, so purchasing decisions are relatively simple and urgent.

My understanding of the public sector was out of date, as it was partly based on the experiences of my father's (happy) working life in the navy and then in academia. Nowadays, civil servants and people working in quangos etc have to justify their existence to journalists and politicians every year and have to guard against any sort of mistake that can make their organisation look bad. So operationally they are cautious, defensive and risk-averse. They also have to fulfill a ridiculously long list of targets and objectives ... a list that keeps changing and being added to. Priorities are very different to the private sector. In business we value cost-effectiveness, stability and things that work in the long term, while the public sector scores points for low cost and for innovation (so change for change's sake is so often the order of the day). If a public sector organisation does not tick all those boxes, they are deemed to have failed by the same newspapers that rail against box-ticking.

When we pitch ideas to clients like HSBC and Google, we have a pretty clear idea about what these organisations are trying to achieve in the small business market (enabling organisations to access the SME market is our company's core expertise).

However, when we pitch ideas to government departments, or Regional Development Agencies, getting an understanding of their goals/targets/budgets/strategy/decision-makers/influencers is an altogether slower and more complex process.

Whereas on day one I found dealing with the public sector immensely frustrating and found it easy to criticise these organisations, over the years I have come to appreciate the skill it requires to run such an organisation successfully. As a supplier, we have patiently built up our skills, contacts and reputation and have done well with our public sector clients as a result.