:00:04. > :00:07.sometimes organic food? Exactly. I remember lying on my back as a kid
:00:07. > :00:10.and kicking my legs and hands in the air because my mum had booked
:00:10. > :00:13.me into McDonald's for my birthday party so I remember the attraction
:00:13. > :00:19.and excitement and entertainment value of fast food and you grow up
:00:19. > :00:27.and realise it makes you fall asleep and wake-up fat. You try and
:00:27. > :00:29.come up with an alternative. second guest is Peter Jelkeby,
:00:29. > :00:33.senior vice-president of Clas Ohlson, the Swedish chain store.
:00:33. > :00:37.Branches in quite a few countries. In four countries today, three in
:00:37. > :00:44.the Nordics, Finland, Sweden, Norway and the UK. An international
:00:44. > :00:46.store, selling? Everything from homeware to hardware. Homeware
:00:46. > :00:49.which is everything for the kitchen, toasters, coffee makers, utensils
:00:49. > :00:59.and so forth, electricals meaning wiring, lamps, light bulbs, the
:00:59. > :01:03.
:01:03. > :01:07.hardware side, drills and power tools. Multimedia, and also cabling
:01:07. > :01:11.for your stereos. Finally we have leisure. And you haven't been hit
:01:11. > :01:16.by a retail Armageddon yet? We are doing fine. Of course there is
:01:16. > :01:18.uncertainty but generally we are fine. Also joining us is Helena
:01:18. > :01:27.Morrissey, chief executive of the investment management fund, Newton
:01:27. > :01:34.Investment Management. I want to kick-off and get us talking about
:01:34. > :01:37.the eurozone because it is the topic of the week. We have to.
:01:37. > :01:40.Anything we say it may be out of date by the time we finish a
:01:40. > :01:44.sentence. Just looking back at the 10 year, decade long experience of
:01:44. > :01:49.the eurozone from the point of view of the investor, what has gone
:01:49. > :01:52.wrong? How would you characterise the fundamental problems? You have
:01:52. > :02:02.got monetary union without other sorts of union. You haven't got a
:02:02. > :02:09.
:02:09. > :02:12.political union, fiscal union. You have channelled everybody down one
:02:12. > :02:15.path in one area, but it is a freefall in other things so you
:02:15. > :02:19.have ended up with this disparate sense of policies, and it doesn't
:02:19. > :02:22.all hang together. You need to reinstate trust. If you take the
:02:22. > :02:25.consumer side, the consumers need to look forward and confident and
:02:25. > :02:29.that is needed. Sweden is outside the eurozone, still in the European
:02:29. > :02:36.Union, also affected. Is Sweden glad to be out of the
:02:36. > :02:45.euro? Right now, yes. I would say You were certainly pondering on
:02:45. > :02:48.going in, probably more seriously than the UK. What is frustrating is
:02:48. > :02:58.that the move into the euro as Helena was saying, it defied GCSE
:02:58. > :03:03.
:03:03. > :03:06.level thinking. There are 16-year- olds, as we were going into the
:03:06. > :03:10.euro, who were learning that if you have got wages, your exchange rate
:03:10. > :03:13.and interest rate, two of those have to be flexed and this was in
:03:13. > :03:17.GCSE economics. Meanwhile our leaders were taking us into a
:03:17. > :03:20.situation that defied that. That is what we have got to understand. We
:03:20. > :03:28.have got leaders who don't understand economics, and it is the
:03:28. > :03:31.political leaders that created this mess. If you had the discipline of
:03:31. > :03:38.a single currency countries would learn to live with in that
:03:38. > :03:41.discipline. When was the last time anybody sat in front of somebody
:03:41. > :03:45.and said we need to make wages flexible, guess what, you will have
:03:45. > :03:49.a 20 per cent, 30 per cent, 40 per cent pay decrease. Wages are not
:03:49. > :03:52.flexible. When you take Greece, they thought they pretended Greece
:03:52. > :03:57.had met certain criteria which it hadn't, there was a political will
:03:58. > :04:01.to do that. What is frightening now is instead of saying we had a
:04:01. > :04:03.political agenda, that has screwed us, they are saying what is needed
:04:03. > :04:13.is more powers to the politicians so we can harmonise everything
:04:13. > :04:15.
:04:15. > :04:18.within Europe. Forget defence, we can harmonise taxation, everything.
:04:18. > :04:22.Instead of holding their hands up and saying we actually created
:04:22. > :04:25.something that went too far, they are saying it didn't go far enough.
:04:25. > :04:31.We haven't got enough control in Brussels. Let's have more control.
:04:31. > :04:41.That is the debate. That is the irony. The fact is it is hard
:04:41. > :04:46.
:04:46. > :04:48.having built it is to get out of it. Unwinding contracts written in
:04:48. > :04:51.euros, cross-border contracts, banking systems that would have
:04:51. > :04:53.runs on them if you tried to suggest the country was going to
:04:53. > :04:56.exit. It is the sticking-plaster approach, ultimately, and I don't
:04:56. > :05:01.think people have a choice. Businesses and politicians should
:05:01. > :05:04.work together, that is the other thing. I am not sure I agree with
:05:04. > :05:08.John it is all down to politicians. We should show more leadership, be
:05:08. > :05:18.bold and engage business. When was the last time you met a politician
:05:18. > :05:21.who understood economics? The last politician I met was David Cameron
:05:21. > :05:24.so now I am in a bind. I didn't challenge him about economics. We
:05:24. > :05:26.have got to get a solution and saying people did understand is
:05:26. > :05:31.getting us nowhere. Let's not talk about eurozone too
:05:31. > :05:34.much because it is upsetting and fast moving and a developing story.
:05:34. > :05:37.If you think the euro was a product that looked good from the outside,
:05:37. > :05:40.but was hastily constructed by people who failed to read the
:05:40. > :05:49.instructions properly and ended up rather fragile, this is a terrible
:05:49. > :05:56.link into a quick chat about Ikea. The flat-pack furniture giant.
:05:56. > :05:59.Peter, you spend most of your career at Ikea, 25 years. I find it
:05:59. > :06:07.surprising it has maintained its dominance at that value segment of
:06:07. > :06:15.the market for so long. What do you put it down to? A lot of things.
:06:15. > :06:18.This whole chain of how it brings an idea to the market. This
:06:18. > :06:20.integration, it is one thing to design something that looks nice,
:06:20. > :06:30.it is another thing to make it be practical, functional, transported
:06:30. > :06:34.
:06:34. > :06:44.to a store, get it on the shelves, so it fits in the store, etc. It is
:06:44. > :06:47.
:06:47. > :06:50.a very strong pipeline. An ability to motivate and take the core from
:06:50. > :06:53.a product, the product developer to the shop floor. They understand
:06:53. > :06:55.this. The culture seems like it must be very important. It is
:06:55. > :06:58.imposing a sort of design philosophy, this design philosophy,
:06:58. > :07:02.thinking about how it transport, get on the shelf, the functionality.
:07:02. > :07:06.Part of the culture is there to be different, take risks. You are
:07:06. > :07:14.allowed to make mistakes. It is very outspoken we should try
:07:14. > :07:24.different things. Ikea has been trying a lot of different things.
:07:24. > :07:25.
:07:25. > :07:35.Also the way they are sourcing. A very forward-thinking company.
:07:35. > :07:35.
:07:35. > :07:45.you got Billy shelves? They make a Billy shelf every four seconds.
:07:45. > :07:49.
:07:49. > :07:59.there a female version? It strikes me that sometimes Ikea is quite
:07:59. > :08:01.
:08:01. > :08:11.controlling. There are a product designers that can say I have got
:08:11. > :08:12.
:08:12. > :08:15.this vision for this product, but is that driven by focus groups? Or
:08:15. > :08:18.is it driven by a maniacal visionary designer? Ikea invest a
:08:18. > :08:22.lot in lifestyles, how people are living. I am actually out visiting
:08:22. > :08:25.the markets, go to your house, want to see how you live. By doing that
:08:25. > :08:29.I go back and develop something I think fit to a purpose. Do they
:08:29. > :08:37.stand there while you make it? Because that would be useful!
:08:37. > :08:41.course we take feedback. The majority of the products you can
:08:41. > :08:49.assemble. If you have thrown away the instructions you might be in
:08:49. > :08:59.trouble. You do have to read the instructions. You have hit on
:08:59. > :09:01.
:09:01. > :09:10.something. One theory for the success of Ikea which ideas can
:09:10. > :09:12.complete his it lets the primeval hunter-gatherer instinct in men.
:09:12. > :09:16.Gives them the pleasure of manufacturing and craft all there
:09:16. > :09:23.it is already done. There is a cake mix in the supermarket, and it did
:09:23. > :09:26.not sell. And then what they did his they did a cake mix, in America,
:09:26. > :09:30.and said crack an egg in it. Suddenly all of the housewives felt
:09:30. > :09:32.they were making something and the Ikea on the male side, not being
:09:32. > :09:38.sexist, is a similar thing, absolutely. Look what I made for
:09:38. > :09:43.you darling. It is not particularly adapted from country to country. It
:09:43. > :09:45.is this is our vision and we will impose it. It is one of the things
:09:45. > :09:49.I worry about the globalisation trend, stamping out individual
:09:49. > :09:57.individuality. I think difference and challenge is valuable. It is a
:09:57. > :10:07.fair point. But at the end of the day it is a free choice. Yes, there
:10:07. > :10:13.
:10:13. > :10:16.might be a global offer, but you need to be local relevant. I could
:10:16. > :10:20.decide if I go to Germany may be darker furniture is more in fashion,
:10:20. > :10:24.but I can gear up my range in a certain way so I become more local
:10:24. > :10:33.relevant. The strength is there is a strong concept. But at the end of
:10:33. > :10:37.the day there is also a local relevance. Why hasn't it been more
:10:37. > :10:41.challenged? In each local market there are companies that try to
:10:42. > :10:44.sell in that segment but there is no global competitor. I can only
:10:45. > :10:47.guess that there are some scale advantages in Ikea, the fight to
:10:47. > :10:57.control factories, supply chain, advertising, the more stores you
:10:57. > :10:58.
:10:58. > :11:03.have the more you can dominate advertising. I would have thought
:11:03. > :11:06.there is a real state advantage. Let me drop in a question. Let's
:11:06. > :11:08.talk about the Swedish factor. Sweden has produced quite a lot of
:11:08. > :11:15.global companies, Ericsson, Electrolux, H&M, ABB, it is only 10
:11:15. > :11:25.million people, not even that. A phenomenally successful economy. Is
:11:25. > :11:26.
:11:26. > :11:34.there something about the way Sweden does things? It is a
:11:34. > :11:38.pragmatic approach to general things. Swedes are very pragmatic,
:11:38. > :11:44.when it comes to running a business as well be start with a lot of
:11:44. > :11:47.common sense. With us being a small country we need to reach out beyond
:11:48. > :11:50.Sweden to get the volume and the timing was that there has been gaps
:11:51. > :12:00.in the market where the value proposition, if you look into the
:12:00. > :12:08.retailers, we always have a big journey on value propositions.
:12:08. > :12:12.has had its down moments. A terrible financial crisis in the
:12:12. > :12:15.early '90s. My impression is Sweden has a strong culture and that I
:12:15. > :12:19.think strikes me when I look at it and talk to people in the financial
:12:19. > :12:23.services that they have been quite resolute and strong. If you are a
:12:23. > :12:29.Swedish brand it helps to be Swedish. Is the Swedish brand
:12:29. > :12:39.helping? It is. It will not take us all the way but it takes us a
:12:39. > :12:39.
:12:39. > :12:48.little bit of the way. The gate If you want to know more on the
:12:48. > :12:52.topics of this programme, or our part of the Open University, visits
:12:52. > :12:55.the website. We will talk about product proliferation in a moment.
:12:55. > :12:58.But before that, in last week's programme, we had a spirited
:12:58. > :13:02.discussion about the value of financial services. We had three
:13:02. > :13:08.financial players, not bankers. We discussed whether their industry
:13:08. > :13:16.created wealth or not. We had more e-mails and response to that
:13:16. > :13:19.discussion than ever before. Most expressing annoyance at the
:13:19. > :13:26.perceived failure of the guests to understand why the public got so
:13:26. > :13:29.cross with what happened in the financial sector. I won't reprieve
:13:29. > :13:37.the whole thing but, Helena, you would have been a perfect guest
:13:37. > :13:43.last week to contribute. I did think it was a shame the guests did
:13:43. > :13:46.not stand up and be counted for the part we have all played. I am not
:13:46. > :13:49.saying everyone is equally culpable but we are in a mess today because
:13:49. > :13:57.of a series of events and actions by lots of people in different
:13:57. > :14:02.places and financial services... All sorts, fund managers, the
:14:02. > :14:05.benign end of the scale. But we have responsibilities, investing
:14:05. > :14:08.and engaging with companies and to accept we played a part in not
:14:08. > :14:10.challenging the boards, not calling time on profits and saying you need
:14:10. > :14:20.to be more responsible and sustainable about your lending
:14:20. > :14:23.policies. For example. I was a bit depressed by listening to the
:14:23. > :14:28.conversation because I think everyone was blaming each other and
:14:28. > :14:31.we will not solve anything. response should be instead of
:14:31. > :14:37.saying, "what did the other person do wrong?" is, "let me think, what
:14:37. > :14:41.did I do wrong over the last 10 years?". Exactly. Governments,
:14:41. > :14:46.regulators, banks and people who borrowed too much. You asked that
:14:46. > :14:50.question last week. Everybody was culpable to a degree. I do not
:14:50. > :14:52.suppose that is the last word on that topic but now proliferation, a
:14:53. > :15:00.term we might associate with cell biology but I am interested in
:15:00. > :15:10.product proliferation. The range of services that companies put on
:15:10. > :15:14.offer. Sometimes it is genuine choice, sometimes confusing. I want
:15:14. > :15:21.to get at what drives it. Leon is a good example for us start with. I
:15:21. > :15:28.do not know how much... How big a range you have but there's a lot of
:15:28. > :15:32.thought go into the maximum size? I'll my goodness. -- my goodness.
:15:32. > :15:35.It is a constant conversation we have. In a process driven fast food
:15:35. > :15:42.operation, the rule is to make it as simple as possible without
:15:42. > :15:45.turning customers off. Albeit good fast food. To get product out at
:15:45. > :15:51.speed, to store product, to have to negotiate on products, you want it
:15:51. > :15:58.as simple as possible. The starting point is, could I sell one thing?
:15:58. > :16:01.No, I might have to sell another thing. What we also find is,
:16:01. > :16:10.sometimes the less choice you have, the more customers think there is
:16:10. > :16:14.choice. Sometimes I walk into my book shop and all these unread
:16:14. > :16:21.books, where will I start? If I have two books, somehow emotionally
:16:21. > :16:26.the choice becomes more manageable. We did analysis to say it when you
:16:26. > :16:34.shrunk the range, people thought there was more choice. So there is
:16:34. > :16:38.an argument for restricting choice. I agree. In the way we work with a
:16:38. > :16:42.range and it is about good, better and best. Make it simple. I need
:16:42. > :16:47.something basic, I need this type of drilling. Do not make it too
:16:47. > :16:50.complicated. Do not turn up with ten different models. With the same
:16:50. > :16:53.price range or stomp The challenge is to communicate this convincingly
:16:53. > :16:57.in a store environment. You'll need a co-worker reading the labels on
:16:57. > :17:05.the shelf. They all look the same. Suddenly, a five pound difference,
:17:05. > :17:09.what can I do? Then, you have gone too far. It is a balance. To have
:17:09. > :17:13.enough so I am confident as a customer that yes, I want to buy
:17:13. > :17:18.the middle priced one but in order to do that I feel comfortable no
:17:18. > :17:22.win there is a more expensive one that I can pay a little bit more,
:17:22. > :17:25.or be cheaper one, but I end up buying the middle one. I trust them.
:17:25. > :17:31.I ended by the middle one. right number is three. In this
:17:31. > :17:38.simple case, yes. It is expensive to carry, it is fairly basic. The
:17:38. > :17:43.80, 20 wall is fairly basic. 20% of range stands for 80% of your total
:17:44. > :17:51.overall profit. I think that is a very valid raw as a generalisation.
:17:51. > :17:54.But is it cannibalising? Or adding incremental people? If we talk
:17:54. > :17:58.about a vegetarian product, we have noticed that will deliver a hard
:17:58. > :18:03.core of 10% of our customers who would not be substitute it for the
:18:03. > :18:08.chicken. The question is, will this at more people? Financial-services
:18:08. > :18:16.is interesting because there have been a proliferation. If you want a
:18:16. > :18:19.loan or a savings account. Or a mortgage for storm it is
:18:19. > :18:21.overwhelming, yes. It is bewildering. There is too much. The
:18:21. > :18:25.example of 2,500 funds, the difference between how one of UK
:18:25. > :18:34.equity funds is run and another is not evident to any body and it is
:18:34. > :18:38.very off-putting for people. We found that what people want now,
:18:38. > :18:45.particularly that things are so uncertain, is to give over their
:18:45. > :18:53.money to be managed. They only want a couple of choices. An absolute
:18:53. > :18:56.return or a relative return. That is fascinating what you are saying.
:18:56. > :18:59.As consumers, we like you as companies to do some shortlisting
:18:59. > :19:06.for us rather than giving us a long list. The top list is in the
:19:06. > :19:10.bookstores. People love the top 10. How do you shop? The question
:19:10. > :19:18.remains why, when you buy a mobile phone or airline ticket or airline
:19:18. > :19:21.ticket or energy package from an energy company, a range of markets.
:19:21. > :19:27.They should edit them more. When you get in these businesses, there
:19:27. > :19:30.is no gatekeeper. There is no what he says, let me put myself in the
:19:30. > :19:37.shoes of the customer, and let me edit these different tariffs that
:19:37. > :19:41.my different marketing teams want to create. One of the accusations
:19:41. > :19:45.is that one reason why companies may not adopt the philosophy you
:19:45. > :19:49.have all espoused of shortlisting is that you can bewilder and
:19:49. > :19:51.bamboozle people if you offer them a choice. It makes energy prices
:19:51. > :19:58.difficult to compare your different utilities because you have
:19:58. > :20:03.similarly choices. Maybe it paralyses consumers so they think,
:20:03. > :20:07.I would just stick with the one I had got. There is a kind of way of
:20:07. > :20:11.looking at things. A logical way but also illogical. There are
:20:11. > :20:18.emotions involved. We know in some cases, it is not about good, better,
:20:18. > :20:26.best. We need brands as well. It happens to be an emotional part of,
:20:26. > :20:29."why do I choose this?". The blue or the Red? Customers today,
:20:29. > :20:32.especially in this crisis, they are more keen on value, not only value
:20:32. > :20:36.being cheap but value that they will not spend money on excessive
:20:36. > :20:41.stuff. For example. They will be more careful where they spend their
:20:41. > :20:46.money. Hence there will be more challenging if there is a surplus
:20:46. > :20:50.of different models and you need to help them to choose. If you a bed
:20:50. > :20:56.with the internet and social medias... It is much more of a
:20:56. > :21:00.dialogue. We have to become relevant. One of the other products
:21:00. > :21:04.of the current economic woes is we will get a shrinkage of choice
:21:05. > :21:07.because a lot of the weaker players in any field will go bust. You walk
:21:08. > :21:16.down the High Street and there are boarded-up shops and that's partly
:21:16. > :21:19.because people go to the internet but there will be less... A cull.
:21:19. > :21:23.Not a business editing its own range but it will be interesting to
:21:23. > :21:28.see if we have a better choice when we have a smaller choice because
:21:28. > :21:33.there is a myth about it. In some restaurants, not the poshest, they
:21:33. > :21:43.have extraordinary long menus. Page after page. How could you keep all
:21:43. > :21:52.this food? Those restaurants have a big freezer. I like this, someone
:21:52. > :21:56.said to me: Do not go to restaurant who has more menu items than chairs.
:21:56. > :22:06.I know somebody who literally counts them! I am afraid we need to
:22:06. > :22:14.draw a close. Thank you to my I will be back with more guests
:22:14. > :22:24.topics discussed, and about our partner, the Open University, visit
:22:24. > :22:40.