Archive for June, 2015

Willis Towers Watson Uncovered

Tuesday, June 30th, 2015

A few weeks after my recent blog post low and behold Willis and Towers Watson surprise the market this morning. Occasionally you see a deal announced and your first reaction is to re-read the headline making sure what you think you have read is in fact true. Uhm, a “merger of equals”, really?

On the surface the logic would be obvious, Willis’s immediate competitors, AON and Marsh both own substantial professional services firms, Hewitt and Oliver Wyman. The future is largely being shaped by high-value advisory services and low-cost transactional broking and administrative services. That is where the easy comparisons stop.

Oliver Wyman largely operates as a separate “silo” with its’ own brand focus, leadership, culture and resources inside MMC. Collaboration is limited to a small number of “joint” client assignments.

Hewitt has been absorbed more comprehensively into AON’s brand offering, leadership and culture. The healthcare consulting has largely been transferred to AON’s transactional healthcare broking business. The Hewitt outsourcing business has undergone extensive changes. What exists of “Old Hewitt” today is largely a talent, rewards, retirement and investment consulting business.

Twinkle Eyes

Willis and Towers Watson had the advantage of getting know each other last year in the due diligence phase of the sale of Towers Watson’s reinsurance broking business (ultimately sold to JLT). At the time, JLT trumpeted a future collaboration with Towers Watson. Are we to presume that the JLT/TW collaboration has really proved underwhelming or were there hidden attractions for a Willis/TW merger that few in the public domain spotted? While surely welcome, the mention that ValueCapital, Willis’s activist shareholder, is supportive of the transaction, could be interpreted to mean that Willis was under pressure to consummate a deal with organic growth prospects hardly setting the pulse racing?

The Challenges Ahead

A “merger of equals” is the hardest type of deal to pull off. The first requirement to a successful merger is everybody is open to change. Yet both firms would be characterised by conservative leadership teams and cultures that more often than not have rejected change or accepted it with some reluctance, particularly in the era of Joe Plumeri.

Here are some fundamental questions that investors and analysts need to ask:

  1. Would Willis Towers Watson be willing to abandon, for example, default labels such as investment consultant, treaty broker and political risk broker? The world is looking for expertise, it is not looking for a client issue to be wrapped in a broking, consulting or investment solution with the inevitable internal competition that does nothing to help the client. Would they be willing to rip up widely held beliefs about fee-setting (scrapping unethical hourly billed fees, a relic of audit firms) or contingent commissions?
  2. What do the people within the new firm need to thrive? (very light on detail)
  3. What are the benefits of this union to the customer? (very light in today’s announcement)
  4. Do the leaders and people within each of the businesses truly believe in those benefits? (Fostering compliance or commitment to the “cause”)
  5. Do they have people with the skills and volition in the real world to leverage Willis’s global distribution platform or articulate TW’s consulting proposition in the cherished mid-market? Are we going to see a TW expert called in by a Willis broker and vice-versa? (The unwelcome legacy of Willis’s foray into the US – HRH acquisition – has been a high dependency on the local broker’s trusting relationship and very rich producer incentive plans that do little for margin improvement)
  6. To what extent is each firm’s current structure fundamental to the new firm’s profitable growth and success? (Abandon existing structure or selective tinkering. For example, TW’s prized asset Liazon is dependent on 640 indepdendent brokers who cannot reasonably expect to standby and hand opportunities to a competitor)

My experience and observation is that the combined firm will have some of the brightest and best people working in their respective fields (reinsurance, political/credit risk, capital markets, insurance consulting). They have thrived because they have had strong leaders willing to cut through the institutional bureaucracy and it has been in their self-interest to do so. On top of the Miller-Willis liaison, this is a high-risk foray and investors would be wise to ask the right questions of senior management.

As a footnote, the departure of Steve Hearn, Willis Deputy CEO, yesterday is incidental to the firm’s announcement today. It almost certainly has more to do with Hearn returning to his passion (wholesale broking) in a business where he can have a greater impact on its’ future.

© James Berkeley 2015. All Rights Reserved.



3 Reasons Business Leaders Should Trek To Glastonbury

Friday, June 26th, 2015

Over 250,000 people will descend on a sleepy corner of Somerset, England for the Glastonbury Festival today. For some an annual rite of passage and others an introduction to an experience their Parents still rave about some 30 years after first making the trek.  There are acts of their Parents generation (The Who and Paul Weller) and their grandparents generation (Burt Bacharach) joining today’s megastars (Pharrell Williams and Kanye West). The event is a classic example of the three “R’s”: relevance, recognition and reinvention as its’ market’s needs and ideal buyers have changed. “Relevance” in the form of is the experience what our ideal buyers need (introduce hospitality chalets alongside the pitched tents). “Recognition” that the time is now for bold changes and adaption of our beliefs (infuse rappers and uptown funk with a rock heritage). Finally a constant commitment to “reinvention” (introducing new acts to regular attendees and old acts to new attendees).  It sounds simple and when you look at market-leading businesses it is universally a trait that keeps them at the forefront of their competitor set. Yet for a great many firms and indeed sectors (private banking, insurance, legal, accounting and audit firms) it is something that they struggle with hugely. It is first and foremost a leadership issue. Great leaders are willing to champion change. They lead from the front with their eyes focused on the stage, not the disheveled hipster swaying in front of them. They listen intently and consistently ask the right questions at the right time. They apply that knowledge rapidly to the critical organisational issues impacting their firm’s future and make wise decisions consistent with the strategic direction of the business. Are those the very same traits your leadership regularly exhibits and you hire for? If not, why as a client, employee or shareholder should I return each year to listen to your tired line up of fading musicians playing music that is boring and increasingly irrelevant to my future?

© James  Berkeley 2015. All Rights Reserved.

Healthy or Unhealthy Growth

Tuesday, June 23rd, 2015

Most of us when we get larger after a certain age, do so at our own peril (increasing obesity, great risk of heart and other serious illness). When CEO’s pronounce “scale” as an imperative for an acquisition strategy, why do I think it says more about their own fears and their inability to innovate successfully? Sure stronger balance sheets are desirable from a client’s perspective and it is easier to take risks when the pockets are deeper. Most obviously in sectors such as pharma, biotech and defence where the R&D lead times are many years and the risks with a new product exponentially higher. When I hear US health insurers (Anthem, CIGNA, Human and Aetna) pushing the same message, I draw breathe and ask:

If you are a visionary CEO,

  1. Why has your business reached a growth plateau (or sub-scale)? (what are the “causes”: incorrect market assumptions, poor strategic implementation, reduced productivity, insufficient innovation and so on)
  2. Are the causes of your growth plateauing (or size) predominantly external or internal? (there is always a bias towards external when more often than not the reasons are internal)
  3. What is the minimum level of growth in future without which your business would be in danger of becoming a marginal player? (It is relatively easy to be explicit about costs, it is much harder to articulate profitable growth. Why? Personal accountability.)
  4. Why is “scale” the answer? (what unique resources, expertise, products and so on are available that only when combined successfully with the driving force in the new business would create a more impressive future for your firms’ key constituents – customers, shareholders, employees, healthcare facilities and physicians, regulators etc)
  5. Why now? (limited window of opportunity)
  6. Why in the manner proposed? (Tried and failed alternative organic growth or strategic alliance options)

If you are not a visionary CEO, I suggest you quit now.

Investors are wise to not take the bait. There is a litany of businesses where “scale” is a soft excuse for simply stripping out cost and the acquiring CEO boosting their ego and pay packet. No business can dominate it is market alone without dramatic top line revenue growth. The fastest way to do that is to sell new products to existing customers and existing products to new customers. Let’s see the case in full technicolour before rushing to judgement.

© James Berkeley 2015. All Rights Reserved.


Complexifying Uncovered

Thursday, June 18th, 2015

Hard on the heels of yesterday’s blog post, I run into another client taking a simple idea and voluntarily promoting a more complex alternative without regard to the client’s benefit.

Our capacity to take complex ideas and turn them into simple, pragmatic ideas that are easy to grasp, implement and provide a tangible benefit for our clients is essential to all organisation’s success. Whether it is front or back of house processes, new ways to compete, new ways to distribute products or services, new ways to integrate technology and so on. Yet many organisations and intelligent people are so in love with their new methodologies or technologies that they promote greater complexity without regard to the client’s benefit (results and value). Indeed, adding complexity is often used as a defensive measure to protect historical practices, existing business or market share in the belief that the client or individual isn’t smart enough to decipher the smokescreen. It is called “complexifying” and manifests itself in bureaucratic behaviour. Governments are masters of this dark art.

I developed this process visual while working with several clients in the past few months on new approaches in their sector where converging forces are causing significant disruption. Someone says I have a great new idea and I often ask the other parties to write down and agree on the process visual where are they today “T” and where the new idea or process would position them in future “F”. Grasping the movement from “T” to “F”, provides a highly insightful understanding of the idea’s worth and more importantly, the priority that should be given to it.

Prioritising Improvements pv jpg-page-001











© James Berkeley 2015. All Rights Reserved.



Simplicity In A Complex World

Wednesday, June 17th, 2015

I walked out of a capital markets presentation in London today about the convergence of the insurance and capital markets sector. The speakers spoke passionately about the quality of “new” alternatives (capital efficiency) and the speed of accomplishing a potential client’s desired business outcomes.

Yet, I couldn’t help thinking that there is a more powerful converging force happening today that most ignored, making the complex simple. This force is not unique to finance or insurance, it is happening in all aspects of our lives. Technology and human behaviour are the great “enablers” if used intelligently.

Three of the four speakers used detailed PowerPoint presentations to deliver their thoughts and provide hard evidence for their views. One speaker used no slides, he chose to escape the lectern and share informally his opinions, occasionally reverting to handwritten notes when he lost his train of thought or needed a prompt. All of them used wireless microphones, carefully placed television screens and discreet lighting to enhance the audience experience.

One speaker, you have guessed it, was exponentially more effective at conveying his wisdom and interacting with the audience. He was able to distill complex ideas and insights into simple, digestible soundbites and mental pictures. I doubt he was any more expert or knowledgeable about the subject but he was much smarter with the delivery.

This is an important lesson not just for speakers.

Ask yourself,

  1. “Where can I/we make the complex simple?” (Marketing, sales, delivery, business management, personal productivity and so on).
  2. “How do I/we best achieve that?” (adjusting human behaviour and leveraging technology).
  3. “What is the risk and reward attached to each alternative?”

You might just surprise yourself at how much complexity and time loss has inadvertently crept into your business and life while the bouncers weren’t looking. You need to challenge it immediately and eject the transgressors. You also need to proactively put in place processes to protect yourself. If you are unsure what or how to do that, get expert help.

© James Berkeley 2015. All Rights Reserved.





Let’s Spend The Night Together

Wednesday, June 17th, 2015

The classic Rolling Stones refrain ends with “Now I need you more than ever”. Many experienced professionals in advisory businesses often have a very similar mindset when it comes to entering into collaborative discussions with other firms in order to profit from a client opportunity. Here is why they are more often wrong than right.  Trust trumps money. No amount of riches will arise if promises and expectations are not openly shared or honoured to the satisfaction of both parties.

In the opening conversation, my best clients at a minimum, ask five powerful questions:

1. “I am curious, what motivated you to contact us about this opportunity?” Find out the business and personal reasons.

2. “Do you a short term opportunity in mind?” You want to hear a buyer’s name, organisation and need. If the other party cannot provide that level of clarity, your retort is “I will happily tell you briefly about my firm’s expertise and an ideal client. However experience tells me it is a poor use of our valuable time to have a detailed conversation about a conceptual collaboration that may very well not happen.” Stop there, don’t go into the following questions.

3. “What stops you doing this yourself?” Identify the perceived or actual gaps in the potential partner’s competency and passion to address the client’s need.

4. “What has been the secret of past collaborations with people like me?” You want to find both the substance (expertise, knowledge, contacts) and the style (personal chemistry, appearance, image) that best suits the other party.

5. “What are your expectations about the investment each of us would ideally make in the relationship (communication, priority, accountability marketing, sales, revenue sharing, resources, branding and so on)?” You want to lay the cards on the table. Note, not all the cards are of equal value or importance in meeting or exceeding your client’s expectations so devote time accordingly.

In my experience, on average most service businesses will have between 10 to 40 such exploratory conversations in any given year. Typically, there is 1-10 hours spent on due diligence. 80% result in “it was great to meet you” and no business. Only 5% result in a long-term relationship. In other words this can be a huge “time dump” if you don’t apply the rigour I am suggesting. Equally, no advisory business can ignore alliances as a growth alternative.

Know where you are headed, ask the right questions and use your time wisely.

© James Berkeley 2015. All Rights Reserved.

Maintaining High Growth Mindset

Monday, June 15th, 2015

When a trusted colleague refers a talented individual to you, is your default position to offer them a warm welcome or to immediately state copious reasons why you don’t have the need or money without listening to them? The former is a classic example of a high growth vs. a low growth mindset.

In industry sectors where convergent forces (new sources of capital, technology and distribution etc) are increasing the amount of uncertainty and competitive threats, Boards and executives would be wise to look out for these behavioural dispositions in their key people, understand the cause, take appropriate action and reinforce the desired behaviour.

If left unchecked, this low growth behaviour permeates throughout the business, future clients and employees are turned off and top line revenue growth stalls even faster.

Copyright James Berkeley 2015. All Rights Reserved.

Asian Markets Surprise (In Ways Most Overlook)

Friday, June 12th, 2015

When investors and corporate executives talk about profitable growth in Asia, the first word most audiences expect to hear is “China”. Yet the risk and return dynamics in Vietnam, Indonesia, Philippines and Korea are just as compelling right now.

The question the smart money is asking “Is Vietnam the new Guangdong?”

With labour costs 50% of those in Southern China, a fast rising and young workforce, high levels of mobile adoption and wide use of the Internet, the dynamics after a 5 year slump are fast moving  into favourable territory.

Global brands such as Nike, Samsung and others have jumped on the opportunity.

Vietnam, as a growth market for many firms may still be seen through sceptical eyes. For Americans, a dark historical perspective needs to be overcome. Yet who knew Vietnam is the world’s largest producer of coffee? Think about that when you sip your next Nescafé coffee.

In short-term challenges lie long-term opportunities. In 1947 Myanmar (Burma) was the richest country in Asia. While economic prospects are most positive there today, no serious investor or corporate executive would put that country in the Top 5 Asian growth markets.

For those willing to take a long-term view and with a stomach for high levels of volatility, go and take a look in person at what is happening on the ground in Ho Chi Minh and Saigon.

© James Berkeley 2015. All Rights Reserved.

Social Confusion

Monday, June 8th, 2015

We are all in the communication business today whether we like it or not. If that is the case shouldn’t we place a greater emphasis on great communicators when we decide who to hire in or promote to senior or executive levels?

In certain sectors insurance, banking, asset management and private equity a belief has existed in many quarters that there is little or no need to communicate beyond a bare minimum outside of their key constituents – shareholders, investors, clients, employees, business partners and regulators.

Indeed, many market leaders have such strong and powerful brands that business “walks in the door” with minimal marketing investment (Munich Re, Goldman Sachs, MAN or Blackstone). These firms are the exception but the need to be outstanding communicators is no less.

What communication skills and volition should you be looking for, nurturing or developing in a market-leading business:

1. Superb language skills – it is not sufficient to simply be able to talk impressively about the “content” of your firm, market or industry (“what you do”). You must be able to explain in simple practical steps the “how”, the process of improving your clients, shareholders and the wider public’s well-being. You must provide relevant and interesting examples, use metaphors intelligently and share impressive insights that are highly relevant to the listener.

2. Ability to Control the Discussion  – you must have superb communication skills to move the conversation naturally towards your intended goal. Knowing at all times where you are in the conversation and what you must say or do next.

3. The Discussion Must Move the Relationship Forward – in most case it is insufficient to simply make demands, you must create an empathy with the listener in your social interaction and intellectual agreement such that they realise that THEIR best interests are served by following your advice. You don’t have to be liked but you most definitely have to be respected.

4. The Relationship Must Discernibly Be Generating Results – those results don’t have to be tangible, indeed the intangible (greater peace of mind or personal security) or peripheral results (promotion, new opportunity or referral) that arise from following your advice might be even more valuable. However there must be a discernible benefit for both parties otherwise why invest time talking in the first place? I observe that this realisation comes as a shock to many seasoned managers and client facing people when they are challenged about the return on their time invested in daily activities.

Many businesses are in what I term a state of “social confusion”. A great many people confusing a desire for greater levels of affiliation with their key constituents and meaningful conversations. The result is excessive internal meetings, email threads and daily interruption. There is a fear amongst many people about addressing the issue (a fear of being unfriendly, dictatorial, disrespectful and so on). That is why this is a leadership issue.

Leaders set the expectations and hold others to account. Only leaders can rapidly resolve the confusion so long as their own behaviour is consistent with the behaviour they are demanding from their subordinates.

People talk about great orators being born, in business, superb language and communication skills can be readily honed. That pre-supposes you agree it is your priority.

Copyright James Berkeley 2015. All Rights Reserved.








20th or 21st Century Business

Thursday, June 4th, 2015

Many executives and managers in financial services, insurance, professional services, private equity and so forth presume that they have to go to great lengths to stand out from the crowd with their clients. I am telling you that isn’t true. Look around at your colleagues, peers, business partners, advisers, competitors and clients behaviour. How many of them regularly exhibit attitudes and behaviour that are informed by 20th Century operating beliefs some fifteen years into the new millennium?

In another breathe they quite casually pull out the latest iPhone, Blackberry or tablet device. By any rational count they are hyper-connected. They simply don’t choose to make their clients or customers THEIR priority. They hide behind the “shared” belief that their lack of responsiveness is reasonable and appropriate.

Pick your favourite:

“Sorry I am travelling I will need to call you when I get back from my trip” (are you telling me you have no access by phone, voicemail or email? Are you really in Mongolia?)

“Can you speak to my Assistant she manages my calendar/diary” (is your Assistant in charge of your life?)

“I am in meetings today, I’ll get back to you” (do you really not have 15 minutes to respond via phone or email?)

“He/She is in a meeting, can you send them details via email” (are you seriously suggesting an alternative that demands both of you accept a significant delay and greater labour intensity to decipher an issue that could be solved in one three minute call today?)

There is a perception in many business advisory sectors that a powerful brand = greater responsiveness. I have recently conducted a straw pole of senior executives in Top 5 global businesses in insurance, private banking, executive search and advertising amongst other sectors suggesting a genuine potential client opportunity.

The least responsive sector quite humorously is the executive search business. The average response is 7.5 working days! Well done Odgers, Korn Ferry, Heidrich and Russell Reynolds, you are joint winners of the “Global Customer Disservice Award” (GCDA). There are a great many other global brands who would be appalled at the behaviour of their senior and key executives.

Next time your colleagues tell you “it is tough to compete with XXX, they have such a powerful brand”, caution them that clients buy from individuals who are highly responsive to their needs.

There is a high probability that you can establish a competitive advantage if you focus on customising your people and systems tightly to your customers’ self-interest. You don’t need to be selling some predictive analytic tool, overly complex technology or big data process. You need common sense and enthusiasm.

Copyright James Berkeley 2015. All Rights Reserved.