:00:03. > :00:13.BBC News it's time for our inside look at the business world in - the
:00:13. > :00:14.
:00:14. > :00:20.Bottom Line. When things go wrong in companies,
:00:20. > :00:27.or what are the details - market has all conspiracies? Will delve
:00:27. > :00:37.into those those files. Why do they occur and hound you avoid them. --
:00:37. > :00:50.
:00:50. > :00:56.We start by spending a few minutes meeting of the guests. Andy Green
:00:56. > :01:02.is chief executive of Logica - a business and technology service
:01:02. > :01:08.provider. It is a big company, a well-known name, I am not entirely
:01:08. > :01:15.show I know what you do. We operate mainly across Europe. Lead design
:01:15. > :01:19.systems for people. Having done a lot of people, we explain how those
:01:19. > :01:26.businesses can - those systems can improve the businesses. Give us an
:01:26. > :01:30.example. All the courts system in the UK, the Ministry of Justice, we
:01:30. > :01:38.run their system for them. We have designed and implemented at the
:01:38. > :01:44.police and data bases for, the first time there we collected all
:01:44. > :01:50.the information. Very technically difficult. Your staff, they're
:01:50. > :01:54.software writers? They are mainly business people who support clients,
:01:54. > :01:58.thinking about business but they are also capable of integrating the
:01:58. > :02:03.software and hardware. We often use other people's software and
:02:03. > :02:08.hardware - people from Oracle or Cisco, IBM. He anybody to make sure
:02:08. > :02:15.we deliver the right system to the client. Phil Smith is chief
:02:15. > :02:22.executive for the UK and Ireland of the US multinational Cisco. I think
:02:22. > :02:26.of Cisco has making servers but I am sure it is more than that?
:02:27. > :02:32.was only recently its services but it is the coming of the internet
:02:32. > :02:36.which has been Cisco's business for the last years. Building the things
:02:36. > :02:40.they are connected together and making it accessible - everything
:02:40. > :02:46.from a wireless to video to telephone to all the things that
:02:46. > :02:51.sit in your house - BT's. Data centres. You have a service
:02:52. > :02:57.element? But you also have manufacturing? How much would you
:02:57. > :03:03.say is manufacturing? We are much more a significant manufacturing
:03:03. > :03:08.company. 16-70% service. All the rest is predominantly manufacturing
:03:08. > :03:18.and distribution. What is your relationship to the people like
:03:18. > :03:20.
:03:20. > :03:29.Logica, sitting next to you? assume it is good. We do not and
:03:29. > :03:37.generally do not sell directly. With typically would not sell or
:03:37. > :03:42.transact with them directly. We would be... Finally, returning to
:03:43. > :03:46.the programme, Luke Johnson who runs the private equity form of
:03:46. > :03:51.Risk Capital Partners. He is also an investor in many businesses,
:03:51. > :04:00.especially restaurant chains. UB is at the moment is patisserie
:04:00. > :04:04.Valerie? As of last week, we have 85 across the country. I remember
:04:04. > :04:10.there being one, I think, he spotted a formula that worked?
:04:10. > :04:14.is not far off. We took control six years ago and it had six branches.
:04:14. > :04:20.We have grown up organically it ever since then. We hope to open
:04:20. > :04:27.the best part of 20 this year. There's been an explosion of a
:04:27. > :04:33.bakery type products out there - chains like Paul, the coffee chains,
:04:33. > :04:40.the sandwich makers, the grapes - patisserie Valerie is positioned
:04:40. > :04:50.differently? We offer table servers. What we represent is affordable
:04:50. > :04:53.luxury for those who want something slyly classy. We emphasise cakes, a
:04:53. > :05:00.few minutes' respite from the stresses and strains of everyday
:05:00. > :05:05.life. Cakes more than bread? Is it working? It is doing very well. We
:05:05. > :05:10.have a great management team. We are very ambitious crowd. The theme
:05:10. > :05:15.of the day - corporate nightmares of one kind or another. I that
:05:15. > :05:21.cock-up or conspiracy. Let's start with mistakes. The new IT
:05:21. > :05:25.businesses, they are probably more than their fair share,? I think it
:05:25. > :05:32.is fascinating to see. A lot of cock-up is happening every day,
:05:32. > :05:38.people are making mistakes. It is worth thinking about your history.
:05:38. > :05:42.I remember shipping some catalysts to Saudi Arabia in my mid-20s, and
:05:42. > :05:47.then having to hire a jumbo Jets to get it back because it was the
:05:47. > :05:55.right -- the wrong ones. This is happening to people all the time.
:05:55. > :05:59.It can be very simple, somebody can leave the laptop on... We have a
:05:59. > :06:07.very careful process. If anything happens I personally get notified.
:06:07. > :06:12.There is a risk. It is encrypted, there are things to protect. There
:06:12. > :06:18.is the it issue that risk is a good thing. You are going to be pushing
:06:19. > :06:26.the edges. In this industry we're watching the hedges all the time.
:06:26. > :06:35.As a result, scale can catch you out. Many, many years ago, I have
:06:35. > :06:39.been involved in the internet before Cisco, I was at IBM, the
:06:39. > :06:48.Womma you got charged a couple of pence if you got an e-mail. Someone
:06:48. > :06:57.in one of the centres sent an e- mail to everybody and everybody got
:06:57. > :07:00.charge. And we all said, stopped spanning me. That is often the
:07:00. > :07:05.issue around big projects. You are going from something that is easy
:07:05. > :07:12.to manage to something many the enormous and scary. It is hard to
:07:12. > :07:16.deal with. It is big projects, it is a fair sum you have ever done it,
:07:16. > :07:20.it would be surprising if you do not make mistakes. The IT systems
:07:20. > :07:25.for the UK National Health Service - it has caused billions and
:07:25. > :07:29.billions of pounds. It has achieved nothing at all. It has been running
:07:29. > :07:34.for years and years. What is the story there? There are good
:07:34. > :07:41.mistakes but there are also bad mistakes? Lots of things went from
:07:41. > :07:51.there. Some things went well. There is a patient record. I was one of
:07:51. > :07:51.
:07:51. > :07:58.the bidders when I was at BT. I was involved in that. For example, this
:07:58. > :08:02.has report the same system in every possible, half through a Aviv
:08:02. > :08:06.Foundation Hospital was invented and it did not have to go with the
:08:06. > :08:11.same process. There were fundamental errors. Real difficulty
:08:11. > :08:17.in delivering what had been promised. What had been promised a
:08:17. > :08:21.supply chain was fantastic software that had not been signed yet and
:08:21. > :08:24.was going to completely revolutionise hospitals and in
:08:24. > :08:30.delivering that proved to be horrendous. There were significant
:08:30. > :08:35.errors in every phase. Is it not part of the nature of IT supply, I
:08:35. > :08:39.am not an expert but I thought quite a lot of projects have been
:08:39. > :08:47.involved in as a customer, rather like the building trade, that it
:08:48. > :08:57.goes wrong and that it is in the nature of the economic model, there
:08:57. > :09:06.was a recent study that on average out of the 1,500 IT projects worth
:09:06. > :09:13.over $170 million, one in six went 200 % over Budget. As a customer,
:09:13. > :09:17.it is a very scary thing because clearly you are not an expert, your
:09:17. > :09:23.providers are experts and yet they do not seem to be able to get it
:09:23. > :09:29.right often enough, it seems to me, given how much they charge. My view
:09:29. > :09:34.about this is that there is definitely at a higher figure.
:09:34. > :09:39.Failures occur for lots of reasons. Some are common. The kind centre
:09:39. > :09:46.with one view at the beginning and then they have to change it. What
:09:46. > :09:52.builders call variation. Exactly. Be sensible defence is partitioning
:09:52. > :09:57.into small items and relationship. We blindly always think of our
:09:57. > :10:00.clients over the long run. We have to think about. You need to know
:10:00. > :10:04.people so they can actually sit down and have a decent conversation.
:10:04. > :10:13.Too often, when these things go really wrong, they start to go
:10:13. > :10:19.wrong and everybody runs. Inexperience -- experienced buyers
:10:19. > :10:23.and sellers put it back on track. Too few people understand that. It
:10:23. > :10:29.is because, one thing that is happening is technology is catching
:10:29. > :10:33.on so much in our personal lives, buyers, business buyers, a getting
:10:33. > :10:42.much more savvy. That is great. It is great for the provider as well
:10:42. > :10:46.as for the climb. Ayrton it is that you that matters. What can you do
:10:46. > :10:50.that would transform a business. If you can get that done, then if you
:10:50. > :11:00.overrun up by 20% it probably does not matter. It depends how much
:11:00. > :11:04.money you've got. That is true. is about feeling your way? And the
:11:04. > :11:08.comparison to the building trade is per annum. What you're doing the
:11:08. > :11:12.thing for the first time, not very often, you are not terribly
:11:12. > :11:17.experience as a customer and all the advice is that if you change
:11:18. > :11:21.your mind halfway through, that is when the bills begin to rocket.
:11:21. > :11:26.the whole issue of specification and getting it done is part of the
:11:26. > :11:30.issue. When you see government programmes having the biggest
:11:30. > :11:37.problems because they squeeze so much in procurement that there is
:11:37. > :11:40.little good value left. As Andy said, the good project is when
:11:40. > :11:45.people get together and try to solve things. Every piece of know
:11:45. > :11:50.you has been squeezed out, the truth is, your only option is try
:11:50. > :11:56.to get some back from it. Across virtually every area of business
:11:56. > :12:01.purchasing, if the procurement expert takes control, whose
:12:01. > :12:07.ultimate mantra is all about price, it can very often lead to trouble.
:12:07. > :12:12.I fear that in many aspects of this business, it gets down exclusively
:12:12. > :12:17.to prize rather than value. Quality is out the window. They can show a
:12:17. > :12:21.saving so they justified their bonus. Unfortunately, the supplier
:12:21. > :12:27.may be rubbish and the cost will increase down the road. Everybody
:12:27. > :12:32.is BT says that. The cause is going for the cheaper speak every time.
:12:32. > :12:36.In government, they are in a difficult position. Let's be honest,
:12:36. > :12:41.I am on a lot of balls, if you sit on a boardroom and the acting
:12:41. > :12:49.director comes in until you is going to cost you 20 million and it
:12:49. > :12:55.is going to be done in a year - you think maybe 1418 months. If you are
:12:55. > :13:02.in government, you are in a situation where that is impossible
:13:02. > :13:05.to have a conversation about we need to put this thing back on
:13:05. > :13:12.track because you are stuck it into a procurement and what is more, the
:13:12. > :13:15.individual responsible is almost certain will is facing a union
:13:15. > :13:19.could has not won the thing to happen anyway. It is more systemic
:13:20. > :13:27.than that. The person who is individually change in this project
:13:27. > :13:33.has to demonstrate to the superiors that it is not too expensive. It is
:13:33. > :13:38.only by taking the cheapest but you can sell the produce. Down the line
:13:38. > :13:42.it will cost more. In many sectors there are providers will take
:13:42. > :13:46.things across the river less. With the view that they will somehow or
:13:46. > :13:56.kit out and make a margin on the way. They know the client will need
:13:56. > :14:01.
:14:01. > :14:11.variation. We have been working with some people for 25 years.
:14:11. > :14:17.
:14:17. > :14:20.It is lower? I think manufacturing is one of these things, it
:14:20. > :14:24.superevolved. It has got pretty good at picking up things. There is
:14:24. > :14:28.a challenge. I remember years ago going to IBM manufacturing and
:14:28. > :14:35.watching the robots woshing. Of course what happened was, --
:14:35. > :14:39.working, if one gets out of sync, you catch it later. We were there
:14:39. > :14:46.when Margaret Thatcher visited is factory at the time. One of the
:14:46. > :14:50.robots went slightly awry, and one of the guys walking down the
:14:50. > :14:56.supersophisticated factory and he took a hammer out and smacked it on
:14:56. > :14:59.the side. Well that's the hi-tech world. It was very interesting. She
:14:59. > :15:08.had her appropriate comments about what was that about. And
:15:08. > :15:12.manufacturing has got sophisticated. It's become multicompany now, so
:15:12. > :15:17.although we are in manufacturing, the bulk we don't do ourselves,
:15:17. > :15:21.it's done by subcontractors. So there's a complex supply chain
:15:21. > :15:31.connected together, which in itself bring opportunities, and challenges
:15:31. > :15:41.of making sure the quality is good. You remain quite shyly come tem
:15:41. > :15:41.
:15:41. > :15:47.play tiff. A non-IT one. contemplative. A non-IT one. I thu
:15:47. > :15:53.you made mistakes in terms of judging. Some partners and I
:15:53. > :15:56.decided New York needed a huge new Belgian Mussels and Chips
:15:56. > :16:01.restaurant. I think we probably made every
:16:01. > :16:07.mistake many the book. We recruited as a joint venture partner a big US
:16:07. > :16:11.group that went into chapter 11 halfway through the project. We
:16:11. > :16:16.used non-union labour to build the restaurant, and failed to realise
:16:16. > :16:20.in New York you tended to need to use union labour, so the unions
:16:20. > :16:28.stuck a giant 25-foot inflatable rat outside our restaurant. We
:16:28. > :16:33.built it in the wrong part of New York. We didn't budget that the
:16:33. > :16:38.Belgian gear would cost a fortune. We blew I think $5 million on that.
:16:38. > :16:43.If you want an innovative society f you want a society that's willing
:16:43. > :16:48.to take risks to generate new technologies, new jobs, new
:16:48. > :16:52.businesses, then it involves failures and cock-ups. I think the
:16:52. > :16:58.British have got vastly better in recent years at accepting that as
:16:58. > :17:04.part of the journey. I find that if I meet entrepreneurs or journalists
:17:04. > :17:08.or politics -- politicians or any group really they saw see now that
:17:08. > :17:12.is a necessary part of business, that mistakes happen t world is not
:17:12. > :17:21.perfect. We learn from the mistakes and we move on. I think that's
:17:21. > :17:25.incredibly healthy. We've dealt with mistakes, cock-ups,
:17:25. > :17:30.now tiek to -- time to turn to malpractice and conspiracies.
:17:30. > :17:33.There's been a lot in the hair, the scandal around News International,
:17:33. > :17:39.alleged payments to public officials, phone hacking and all of
:17:39. > :17:45.that. Let's talk a bit about when things go wrong because of some
:17:45. > :17:49.maligned practice. Firstly, do any of you think this is a rather
:17:49. > :17:54.overrated problem? Do you think this is not something that happens
:17:54. > :17:58.very often, that business do do stuff like collude illegally,
:17:58. > :18:02.engage in corruption, bribe, evade taxes. Is this something that
:18:02. > :18:05.happens? It clearly does happen, because you know, it's been
:18:05. > :18:09.publicised successfully. I would say in general, and this is my
:18:09. > :18:15.perspective, when I'm in business, most people are not colluding,
:18:15. > :18:20.being con spir tear yoral. They're try -- conspirtorial or whatever.
:18:20. > :18:24.They're trying to do their job. In general people are trying to do a
:18:24. > :18:29.job that's successful and there are examples where people are attracted
:18:29. > :18:35.by the rewards or somehow get involved in something they're not
:18:35. > :18:39.particularly aware of. I think in the UK we're reasonably transparent
:18:39. > :18:45.but it is clearly a danger. I think in general people have good intent.
:18:45. > :18:51.I think what is more of a problem and that is often pictured as a
:18:51. > :18:55.conspiracy is office politics generally. I think actually that
:18:55. > :19:01.this idea amongst observers that there is a property afoot, but in
:19:01. > :19:07.fact it's just the chaos of rivalry and power struggles and things like
:19:07. > :19:14.that, it sometimes gives the impression that there's goings on
:19:14. > :19:17.when it's not that. Internal politics. Yes. I think
:19:17. > :19:23.we're facing a different phenomena. The first thing is newspaper man
:19:23. > :19:27.giving a platform a few quid. How surprising? That's been going on
:19:27. > :19:31.forever. So two things are happening. We're in a world where
:19:31. > :19:35.you can't hide anything. Because of what's happened with social met
:19:36. > :19:39.working, nothing is hidden. People talk about transparency, you can go
:19:39. > :19:47.and read about me on Glass Door. My employee also post things every
:19:47. > :19:50.time I do anything they don't like. I think it is exceedingly difficult
:19:50. > :19:54.if you are involved with running a very large organisation with
:19:54. > :19:58.perhaps tens of thousands of staff for argue's sake, how can you
:19:58. > :20:02.possibly know what is going on everywhere? The idea of perfect
:20:02. > :20:10.corporate governance and complete controls and total knowledge, I
:20:10. > :20:13.think is a fallacy. Just as mistakes will happen, there will be
:20:13. > :20:20.flaws. Throughout my career in business every so often you come
:20:20. > :20:25.across a fraud, from a major rip- off that you're a victim of to
:20:25. > :20:29.petty stealing in a shop. This is a fact of life. There will be
:20:29. > :20:33.negligence as well as dishonesty. To pretend it doesn't exist and
:20:33. > :20:37.won't continue, no matter what checks and balances you install, I
:20:37. > :20:42.think it is an illusion. One has to ultimately not necessarily forgive
:20:42. > :20:48.it but allow for it because it is inevitable in my opinion. I saw
:20:48. > :20:55.this quote from the Chief Executive of Wall Mart. He has 1.9 million
:20:55. > :21:01.employees. Apparently someone in the boardroom walked out and said:
:21:01. > :21:05."If you were a town you'd have a jail".
:21:05. > :21:09.It's true, you will have all sorts of people doing all sorts of things.
:21:09. > :21:13.You have to install a culture and a set of policies and communications
:21:13. > :21:17.that allow you to do with it. can blame the top management for
:21:17. > :21:21.1.9 million people, but it's not sesable, you won't get many people
:21:21. > :21:25.doing the job if they have to be personally responsible for the
:21:25. > :21:31.behaviour of 1.9 million people. It's tough out there now because
:21:31. > :21:35.you have for example legal ramifications as directors, where
:21:35. > :21:39.you can be criminally prosecuted under for example, health and
:21:39. > :21:46.safety legislation. Someone I know well, director of a private
:21:46. > :21:50.business, retailer, there was an accident in the store which he'd
:21:50. > :21:57.never even visited which any reasonable man would have said was
:21:57. > :22:02.the employee's fault, but there was one tiny error that the superviseer
:22:02. > :22:07.had not committed. A criminal prosecution was brought, which
:22:07. > :22:15.thank God was dropped halfway through. But the consequences now
:22:15. > :22:19.for mistakes like that can be very severe. So you know, not only
:22:19. > :22:23.directors -- insurance is more important than ever, but systems if
:22:24. > :22:31.best, if humanly possible, to ensure that major disasters like
:22:31. > :22:34.deaths, don't occur. There are criminal sanctions.
:22:34. > :22:40.You have the act in the United States where the companies are
:22:40. > :22:43.responsible. The sense in all of those is you have systems that are
:22:43. > :22:47.sensible, reasonable and will probably do the job. If you have
:22:47. > :22:51.those systems in place, usually you're not going to get prosecuted
:22:51. > :22:56.etch if something does go wrong. think that's right. Thank God,
:22:56. > :23:01.other wise the system would break down. So it's all about proportion
:23:01. > :23:04.and balance. We need to remember business creates a lot of jobs,
:23:04. > :23:10.people are taking risks, people are deciding to drive the world forward,
:23:10. > :23:14.to do ifrpbt things for consumers, that you know, drives wealth,
:23:14. > :23:19.drives growth, which we desperately need here in the UK. If we end up
:23:19. > :23:23.con straining everyone too far, we'll stop all that. I think you
:23:23. > :23:27.know, at the top of an organisation you have to say, we're going to do
:23:27. > :23:32.everything we can to control things, but we don't live in a zero risk
:23:32. > :23:35.world. What we've got to do is be proud of what we do and feel
:23:35. > :23:39.comfortable that we'll be prepared to defend ourselves legally and
:23:39. > :23:49.with consumers. On that note, let's draw this to a
:23:49. > :23:50.