English - Perspectives Pictet

Transcription

issue ten | spring 2012
next generation
Philip Anderson
There has never been a better time to start a business p4
Markus Boesch
The boat entrepreneur p9
Dr Daniel Nyfeler
Unravelling the mystery of gemstones p13
Anne-Katrin and Julia Hummel
The footwear entrepreneurs p21
Morten Bennedsen
Transition is a crucial step in the life of a family business p25
Neil Rimer
The venture capital entrepreneur p28
Simon Jablon and Tracy Sedino
The eyewear entrepreneurs p35
Jacques de Saussure
A unique succession model p38
Foreword
It has never been easier to become an entrepreneur, and young people
today are in many ways ideally qualified to start and run businesses.
Yet the retirement of the baby-boomer generation is raising troubling
questions for many established owner-managed companies and older
family businesses. They are finding that the next generation often
remains to be convinced that succeeding their parents is the most
attractive option in life.
In this issue of Pictet Report, we look at the next generation
of entrepreneurs and at how owner-managed and family businesses
are resolving their succession issues. We interviewed members of the
next generation taking the helm at three successful family businesses.
And we met the entrepreneur who struck out by creating one of the
world’s leading venture capital firms in partnership with his father
and brothers.
To find out how best to prepare the next generation to take over
a business, we turned to the expert in family succession at INSEAD,
the leading international business school. We also asked INSEAD’s
Professor of Entrepreneurship about the qualities the next generation
of entrepreneurs needs to be successful in business.
We then visited one of the world’s leading gemmological
laboratories—itself family-owned—in Lucerne where the most
advanced scientific techniques are used to analyse diamonds,
coloured gemstones and pearls, and to detect fakes and synthetics.
Its managing director draws on his extensive experience to advise on
how to select stones for investment.
Finally, we interviewed Pictet’s senior partner about his decision
to join the bank at a time when his father headed the firm. His advice
on how to approach a family succession reflects the experience that
has helped Pictet prosper as a family-run bank for more than 200
years. We hope you will find this report stimulating and valuable in
thinking about the succession issues in your family—whether you are
a member of the older or the younger generation.
Philippe Bertherat
Partner, Pictet & Cie
April 2012
Cover image–Sunglasses, collaboration Jeremy Scott and Linda Farrow for collections 2010–2012
Pictet & Cie editorial team–Ninja Struye de Swielande and Olivier Capt
Design & editorial consultancy–Winkreative | Rapporteur–John Willman
Photography–Yang Tan, Beat Schweizer, Meinrad Schade, Ralf Barthelmes, Jacob Langvad Nilsson, Andrew Hobbs and Loan Nguyen
Spring 2012 ISSN 1664-008X
For subscription information please contact: privatbanking@pictet.com
insead on family succession
contents
Morten Bennedsen Transition is a crucial step
in the life of a family business
p25
Philip Anderson There has never been a better
time to start a business
p4
Insight on gemmology
Afterword
Jacques de Saussure A unique succession model
insead on entrepreneurship
p38
Dr Daniel Nyfeler p13
Unravelling the mystery of gemstones
Inspiring entrepreneurs
Neil Rimer The venture capital entrepreneur
p28
Markus Boesch The boat entrepreneur
Simon Jablon and Tracy Sedino The eyewear entrepreneurs
p35
Anne-Katrin and Julia Hummel The footwear entrepreneurs
pictet report | spring 2012
next generation
p9
p21
3
INSEAD on entrepreneurship
There has never been a better
time to start a business
Economic, technological and cultural changes have opened up
exciting opportunities for the next generation of entrepreneurs,
but the ability to build a business remains the key to success
PHILIP ANDERSON
PROFESSOR OF ENTREPRENEURSHIP
insead
The nature of entrepreneurship has changed radically over recent
years. Developments in the global economy and the increasing adoption of digital technologies have made it easier to start businesses—even
in traditional industries. Meanwhile, the next generation of entrepreneurs is better equipped to deal with the inevitable challenges.
would start a company, grow it to become number one, two
or three in the home market before starting to look overseas. The creation of the European Union, the rise of Asia (a
source of both supply and demand) and the invention of the
internet mean that entrepreneurs can go cross-border much
earlier in the game.
In addition, globalisation means that it has never been
The single most important change is a consequence of
globalisation. It used to be the case that an entrepreneur easier to assemble a really efficient world-class supply
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chain. Even a struggling entrepreneur
can find a supplier in Shenzhen in
southern China which will make the
business cost-competitive from the
start. That is remarkable: a brand new
company can have the same supply
costs as an established business such as
Ericsson or Microsoft.
there is now more capital available to
entrepreneurs with the right relationships. It is easier to network your way
to people looking to deploy their capital than it was a generation ago. And
when a business plateaus, as they often
do with growth companies at around
$15 million of annual sales, there
are now plenty of private equity and
large corporations prepared to acquire
Corporate restructuring them. Being acquired is part of the life
cycle of a growth company, and can
give it access to new distribution chanA second significant change is the way nels and complementary assets.
that the typical modern corporation
Finally, we have known for more
organises itself around a core, with a than 30 years that the single biggest
great deal of outsourcing around it— predictor of success in entrepreneurvery different to the vertically inte- ship is having an entrepreneur in
grated companies of the 1970s and your close circle—whether it is a family
1980s. This has created an order of member, a classmate or a friend in the
magnitude increase in opportunities to neighbourhood. People learn about
build business-to-business companies entrepreneurship by talking to somesupplying larger enterprises with goods one who has experience of it, and a far
and services which in the past they higher proportion of people now have
would have provided for themselves.
an entrepreneur in their network.
Something similar is also happening in government, where fiscal pressures are leading to the contracting
out of public services. It can be difficult
for entrepreneurs to deal with public
bodies which can take a very long
time to make decisions. However, the
contractor who wins such contracts will
often look for sub-contractors—creating
opportunities for entrepreneurs.
The internet has helped foster
networks—budding entrepreneurs can
now get to know more people around
the world. It also gives them much
greater access to information online,
making it easier to identify gaps in the
market that can sustain an entrepreneurial business.
A brand-new company
can today have the
same supply costs as an
established business
At the same time, there has been a
change of attitudes among young
people that encourages them to create
their own businesses. This is the generation that does not believe in lifetime
employment any more: even if you
go and work for a large bank, it may
not turn out to be the organisation
Capital-raising
The third big change is that it is possible to start a business with considerably less capital than before. That
is not true in all industries—heavy
manufacturing, chemicals and pharmaceuticals still require a large capital
outlay. But people who would not have
become entrepreneurs a generation
ago because they could not have raised
the capital can now start businesses
in many industries, especially those
which are wholly or partly online such
as social media, portals, web games
and personal services.
For businesses that do need funds,
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that you joined. Working in a smaller
growth enterprise is attractive because
it gives you a feeling of influence and
the ability to make yourself irreplaceable. And the younger generation has
a competitive advantage in the digital sphere where many of the growth
opportunities lie—even people in their
thirties defer to those in their teens
and early twenties when it comes to
social media.
There is also a greater understanding today that success does not rely
solely on hero entrepreneurs—individuals such as Bill Gates and Steve Jobs.
We now know that businesses are built
by teams working together collaboratively. The younger generation are by
nature more inclined to cultivate those
relationships, recognising the interdependence of team members.
A surge in start-ups
Today, we see more and more people in
their twenties leaving relatively prestigious companies to start a business. They
have identified a good idea in the course
of their work which for some reason the
company does not want to pursue. So
they quit and build their own company.
That people see entrepreneurship as
a viable alternative to perfectly good
jobs in substantial companies is one of
the biggest changes I have seen in my
professional lifetime.
The younger generation
has a competitive advantage
in the digital sphere
Another change is the growth in the
number of women starting businesses—there is much less prejudice
against female entrepreneurs. As in all
walks of life, there are still issues to
overcome and it can be hard to break
into the ‘old boy’ networks that dominate many sectors. And of course,
there are differences between national
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cultures: it is much harder for a
woman to succeed in many parts of the
Middle East for example.
Preparing for
entrepreneurship
Business schools have developed
modules that can help budding entrepreneurs hit the ground running,
especially when they move from a large
corporation into a growth venture.
At INSEAD, we tell them that if they
want to start their own business, they
should work at the right hand of an
entrepreneur first—and we provide
them with opportunities to do that.
Then when they become entrepreneurs, they can apply their knowledge
from day one rather than spending
six months finding out how a growth
company works.
The entrepreneur is not
a person who invents a
big idea, but one who
can build a business
The most important thing to learn is
the importance of flexibility and versatility. In entrepreneurial businesses,
everyone has to wear a lot of hats and
learn not to take their job description
too seriously. The ability to learn very
quickly really matters—and someone
who has learned to think critically will
perform better than someone who has
merely memorised the theory. The best
business education is about meeting a
diverse group of people and learning
to speak a common language.
These lessons are valuable even to
young people planning to return to
roles in family businesses. A noticeable
trend is that families are more likely
to manage their succession issues—
selecting the right member of the next
generation to take over, rather than the
eldest son or daughter. Taking talent
management seriously in a family
business means matching roles to
the strengths of individuals and even
shaping the business around the next
generation rather than forcing them
into the positions that are the least bad
fit. Family businesses are much more
robust when they look to the future,
seeing where family members could
fit in and identifying holes that can be
filled by professional managers.
No big ideas?
I still meet many people who say they
want to be an entrepreneur but lack a
big idea. But this is a misconception:
the entrepreneur is not a person who
invents a big idea, but one who can
build a business. Whether he or she has
the big idea is secondary. And whatever the idea, entrepreneurial teams in
most cases end up building businesses
that are quite different from the original plan. The idea sets the trajectory,
but it does not define the business—it
is much more important for the team
to adapt to what the market tells them.
Again, relationships can be critical
in finding the right idea. Many entrepreneurs are successful because they
have connected with people who have
really interesting ideas but lack the
capability to build them into a business.
To be a successful entrepreneur, you do
not have to be a Leonardo da Vinci who
is able to fill all the roles in a business.
But you do have to spot the good idea
and then build the business.
Philip Anderson is The INSEAD Alumni Fund
Chaired Professor of Entrepreneurship and Professor of Entrepreneurship at INSEAD. His teaching
and research focus on entrepreneurship, venture
capital and private equity, managing technological change, organisational growth and strategic
management. He co-authored a collection of readings on Managing Strategic Innovation and Change
(with Michael Tushman) and also the award-winning Inside the Kaisha: Demystifying Japanese Business Behavior (with Noboru Yoshimura).
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8
the boat entrepreneur
next generation
The boat entrepreneur
Markus Boesch
A fourth-generation member of the family which owns
a Swiss boat-builder famous for its high-tech mahogany
speedboats returned to the company after leaving it to pursue
other interests—and is soon to become its chief executive
When Markus Boesch was growing up, he always assumed that he
would join the speedboat business founded 91 years ago by his greatgrandfather Jakob. As a young boy, he had played in its boatyard on
the shores of Lake Zurich, and later worked there during his summer
holidays. But after failing to complete a degree in mechanical engineering, he decided on a change of career and left the family business—forever, he thought. Ten years ago, however, he returned to
Boesch Motorboats and is soon to take the helm as chief executive.
sent them to Germany for their technical education so they
could join the business.’
There has been a boatyard on the site of the Boesch
headquarters in Kilchberg, a lakeside village which is now
effectively a suburb of Zurich, for more than 140 years.
Jakob Boesch, a carpenter who retrained as a boat-builder
after realising that he had no head for heights, came to
work at it around 1900. When it went bankrupt after the
First World War, he bought it in 1920 with financial back‘My first reaction to the disappointment in my studies was ing from some directors from Lindt & Sprüngli, the famous
to decide to do something totally different—which is typi- chocolate-maker whose headquarters is across the road.
cal of people in their mid-20s who see things in black and
white! So I went to business school and also trained as a
swimming coach at Switzerland’s sports university. At high
‘I am the first generation
school I had been a keen swimmer and I became coach of
where not all family members
the junior national team. And when I had completed my
are working in the company’
business degree, I went into IT, working for a small chain of
shops that specialised in mobile computing.
‘I found the IT industry fascinating, but it was moving
so fast that the company’s strategy and career plans changed The business then was building, servicing and repairing
every few months. I realised I’d be happier in a smaller, sailing boats, motorboats and rowing boats. But Jakob’s son
more familiar environment where I could be involved in Walter, who started his apprenticeship with the company
building a business over the longer term. So I talked to my in 1925, was fascinated by the first half-glider speedboats
father and my uncle about returning to the company and whose design allowed them to achieve faster speeds more
how I might move up to an executive role over the medium efficiently. Under his leadership from 1938, the company
term. And in 2000, I joined Boesch, with my first role being developed the ‘horizon gliding’ designs which mean that
Boesch boats climb up on their bow waves and overtake
to modernise the company’s IT system.’
He is the first generation where not all the family them nearly horizontally. The resulting stable stern waves,
members are working for the company, Markus adds. speed and agility quickly made them a favourite for waterHis younger brother is pursuing a career in psychology in skiers, used in European Championships between 1960 and
which he has a doctorate, while his cousin moved on after 1976, and in World Championships from 1960 to 1991.
When petrol rationing halted motorboat production
working for Boesch for a time. ‘In previous generations,
the children were expected to follow their parents. My during the Second World War, Walter switched to making
father and uncle had no choice, because my grandparents sailing boats. But once the war was over, the demand for
next generation
9
motorboats soared—and with it sales of Boesch boats which
were relatively cheap because of the low exchange rate of
the Swiss franc against the dollar. Walter visited the US
to study mass production of boats in Detroit, and in 1953
Boesch was the first company to apply such techniques to
boat-building.
resin and varnished with further layers of polyurethane
which cumulatively bring out the natural beauty of the
wood. The result is a skin that is solid, rigid and stronger
than the fibre-glass which is now the commonest material for speedboats. A larger production plant capable of
making up to 150 boats a year was opened at Sihlbrugg in
the neighbouring canton of Zug.
In the 1970s, the family’s third generation came on
board,
when Marcus’s father Klaus, a newly graduated naval
The boating industry has changed a lot in
architect, and his uncle Urs, a mechanical engineer, joined
the last 15 years, with small manufacturers
the company. But the business quickly faced tough new
facing increasing competition from large, challenges with the oil shock and the devaluation of the
vertically integrated companies
dollar against the franc. Boesch moved from mass production to a niche business model, designing bigger boats with
more features to order and using new products and techThe company continued to be innovative, switching from nologies. Today, they make 25-30 motorboats a year, which
plank construction to the use of laminates after yet another take around six months to complete and sell for between
trip by Walter to the US in 1964. Today, the boats are built SFr150,000 and SFr750,000.
with up to eleven layers of mahogany from West Africa,
The latest innovation is the introduction of elecwhich is stained and coated with several layers of epoxy tric motors for boats on lakes such as those in southern
10
next generation
Germany and Austria where the number of petrol-driven
motorboats is capped or their use is restricted in summer.
Up to a third of Boesch sales are now of electrically powered
boats, using the latest types of batteries that are no heavier
than a standard V8 internal combustion engine.
‘If you compare today’s boats with those of the 1970s,
they look the same, but a lot has changed,’ says Markus. ‘Just
like a Porsche 911, you’ll always recognise a Boesch boat—even
though they are constantly developing technically.’
Being successful as a niche producer raises a lot of challenges, he adds. The boating industry has changed a lot in
the last 15 years, with small manufacturers facing increasing competition from large, vertically integrated companies using mass production methods.
‘We have a very good reputation and a strong brand,
because we still make our boats out of mahogany. But we
need to find new markets for our products—most of our
boats are sold to customers in central Europe where the
markets are flat or even shrinking. And we have only the
marketing resources of a small business.
‘We tried selling more in the US during the 1990s, but
American dealers want to have dozens of boats in stock
because buyers like to choose a boat and take it home immediately. With our output, we just can’t maintain such stocks.
Russia and Dubai also offer possibilities, but the former
has high import taxes and there is no money in the latter
right now.’
The company has been thinking about selling in Asian
markets, but there is a lack of infrastructure in many of the
larger countries. And Markus believes it is important not
to just go after quick short-term sales: a long-term relationship with customers is part of the brand. Indeed, the
boatyard is even now working on restoring a boat sold in
the 1960s to its original condition. ‘We know most of the
families that own a Boesch boat,’ he says. ‘They remain in
contact and we care for their boats over the generations.’
Markus Boesch’s tips for entrepreneurs
•Find a way of developing a dialogue between the generations.
There are lots of issues in family businesses, and it is vital to talk
about them openly.
•Experience outside of family business and/or branch
is very important.
•Try to set up a network of connections locally, in your country
and on your continent or further abroad.
‘You’ll always recognise a Boesch
boat—even though they are constantly
developing technically’
Markus is now the commercial director of the company,
and the business is effectively run by him, his father and
his uncle. The plan is for him to become chief executive in
the next few years, but he recognises that he cannot carry
out all the functions that the two third-generation family
members handled. So the business has been split in two:
a boat-building operation and an after-sales arm which
services and restores Boesch boats and supplies spare
parts. Outsiders have been appointed to run production at
Sihlbrugg and the servicing subsidiary, and the company is
searching for a technical director.
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11
As a member of a new generation, Markus wants to do some
things differently. One priority is to maintain a proper
work-life balance: ‘I don’t want to “live on the yard”,’ he
says. ‘When my grandparents came to dinner in the 1970s
and 1980s, the subject was always business—they had no life
outside the company. And my father worked seven days a
week for most of the year. I have had the big advantage of
working in a different environment before coming here.
When I’m in the yard, it’s business and when I’m home, it’s
home and family.’
A long-term relationship with
customers is part of the brand
In addition, he has introduced more formal arrangements
for managing the company with regular meetings to discuss
set issues. ‘My father and uncle got on very well together
and had a method and rhythm of working together. But
moving from two to three people meant we had to formalise our discussions and not just talk about them at the
coffee machine. This was important to me, because it’s business and it’s family, and there are emotional issues.
12
‘Also, people of my generation like to share their thoughts
with friends and discuss business issues that my parents
would never have discussed outside the family. I like to get
interesting people together to share opinions and pursue
business opportunities.’
Although Boesch remains family-owned and
controlled, executives from outside the family are offered
minority shareholdings in the subsidiary companies. And
the family has no interest in selling up, despite some very
attractive approaches. Markus cites the fate of Riva, the Italian company which was Boesch’s biggest competitor in the
1960s and 1970s. The family owners sold the boat-building
operation at the end of the 1970s, since when it has passed
through a variety of hands—private equity, trade buyers, a
public listing and hedge funds.
‘If we sold the company, we could cash in heavily,’ he
says. ‘But what will I do for the rest of my life?’
Would he like one or more of his four daughters—
all under 10—to be the fifth generation to run the family
company? ‘I would love it if they started to take an interest. They certainly like it when we go out boating on the
lake at the weekend! And as they get older, they might want
to come with me to boat shows and get to know the business. But I won’t push them to get involved. It’s for them
to decide.’
next generation
Insight on gemmology
Unravelling the mystery of gemstones
A family-owned Swiss company has created one the world’s foremost
gem laboratories, devoted to protecting its clients by analysing and interpreting
the scientific characteristics of precious stones and pearls
DR DANIEL NYFELER
MANAGING DIRECTOR OF GÜBELIN GEM LAB
In an era of increasing volatility in financial markets, many
investors are including gemstones in their investment portfolios.
Their durability and rarity mean that they are a compact way of
preserving capital—one that has proved to be a relatively safe haven
over the very long term. They are also attractive assets whose beauty
has made them highly desirable throughout human history.
next generation
Yet as with other asset classes, the selection of investments
is critical. Gübelin Gem Lab uses the latest scientific techniques to offer clients the expert advice which is essential
in distinguishing the true rarity from more ordinary gems
and fakes. For as Dr Daniel Nyfeler, the company’s managing director, points out, the appearance of a gem is only one
factor in its valuation.
insight on gemmology
13
molecular structure of a gemstone,
and also whether it has been treated to
change the colour.
‘With this technique, we can
answer even the most challenging
questions. For example, we can see
whether a green diamond is natural because its atomic structure was
changed through contact with radioactive materials deep below the earth’s
surface, or a normal stone which has
been treated by bombarding it with
radiation. The price for the highly
prized natural green colour can be up
to half a million US dollars per carat,
while a treated diamond is worth
much less.’
‘The most beautiful sapphire from
Madagascar will often be much less
valuable than a less attractive stone
from Kashmir, because it does not have
the cachet. The soft velvety blue colour
of Kashmiri sapphires remains the
most highly regarded by connoisseurs
and collectors alike. Investors must
always go for the highest quality.’
The difference lies in the authenticity of the material, the absence of
treatment, the country of origin, and
above all in the beauty of the stone.
Global leadership
Gübelin Gem Lab was created in 1923
by Dr Eduard Gübelin, a jeweller and
watchmaker based in the picturesque
Swiss city of Lucerne. It was originally
set up to provide consumers with confidence in the jewellery purchased from
the family stores, at a time when the
sale of synthetic gems and cultured
pearls was threatening the industry’s
reputation. Under the leadership of the
founder’s son, Dr Eduard J. Gübelin, the
company began investing in new gemtesting instruments and became known
as the best-equipped gemmological
laboratory in the world.
The business expanded to offer its
services to gem dealers, and in the 1960s
14
The difference in value
auction houses such as Christie’s and
is about authenticity,
Sotheby’s began to ask for its reports.
the absence of treatment,
Thirty years ago, it was separated from
the other Gübelin businesses to give it
the country of origin and
legal, operational and financial indethe beauty of stone
pendence. Today, famous jewellery
stores, insurance companies, museums, royalty and private collectors have
joined the client list, and Gübelin Gem The third group of analytical techLab remains one of the most-highly niques analyses the chemical composition of gemstones which in most cases
respected laboratories worldwide.
can help in determining their origin.
In some cases this can be done by nondestructive methods, but in others a
Analytical techniques
laser is used to remove a tiny sample for
analysis, leaving a pit which is less than
The many analytical methods can be half the diameter of a human hair.
‘There is no impact on the beauty
grouped in three categories: microscopy,
spectroscopy and chemistry. Micro- or value of the stone—we might take
scopic analysis is always the first stage, the sample where the stone will be
carried out just as when the laboratory mounted, for example. This gives us
was set up 80 years ago. ‘The human eye the chemical fingerprint of the mine
looks at the stone with some magnifi- for most coloured stones, though not
cation,’ says Dr Nyfeler. ‘It is still a very in every case: sometimes it is not easy
versatile and comprehensive technique to distinguish between Kashmiri blue
which did the job for decades, but there sapphires and those from Madagascar
have been enormous advances in quan- because their properties overlap. But it
titative techniques over the last 20-30 has been used to demonstrate that “old
years that have added to our under- mine” emeralds said to be from India
were in fact from Colombia.’
standing of gemstones.’
There is, however, no consistSpectroscopy uses different parts
of the electromagnetic spectrum, such ent way of identifying the origin of
as infra-red and ultra-violet light. The diamonds, which are almost pure
equipment allows the analyst to gather carbon created at great depth more
information about the chemical and than a billion years ago with little by
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Daniel Nyfeler’s advice to gemstone investors
• Treat investing in gemstones as a diversification only—one that preserves value,
rather than offering a secured return
• Buy only from established, reputable sources such as. traditional jewellery
and auction houses
• Always ask the seller for a report from the gem lab of your choice
• Seek professional advice and do not rush to buy
• Go for high quality stones only and for size rather than quantity
• Beginners should start with white diamonds–coloured stones are for
more experienced buyers
• Buy what you like—gemstones have an intrinsic, emotional value
way of trace elements. This is why the
Kimberley Process was devised to deal
with the problem of ‘blood diamonds’
from conflict zones, by using government-validated certificates to make up
for the lack of traceability.
It is also impossible to analyse the
origin of pearls, since their composition is determined by the nutritional
elements in the water where the shellfish live, which can vary enormously
even within a small area. However, X-ray
scanning in tomography equipment
can distinguish natural pearls from the
cultured ones which make up 98 per
cent of those brought to the market.
Enormous advances in
quantitatives techniques
over the last decades
help understanding
the gemstones
While some of the equipment used
is very bulky, Gübelin sets up mobile
laboratories several times a year in
New York and Bangkok where clients
can bring their stones for analysis.
It has also opened an office in Hong
Kong with similar capabilities.
Fakes, synthetics
and treatments
One common way of enhancing the
beauty (or appearance) of gemstones
is heat treatment, used for more than
90 per cent of rubies and sapphires,
according to Dr Nyfeler. ‘The mines
will find a big, attractive stone only
once every so often, so to survive they
must improve the average quality of
their stones There is nothing wrong
with this—so long as it is disclosed.’
For emeralds, many are treated
with oil or wax to improve their
appearance. Although there is a good
supply from Colombia and Zambia,
their geological history leaves them
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15
with fissures and fractures that can be
hidden with oil or wax to make them
look nice. ‘That’s also fine so long as it
is properly disclosed.’
Despite all expensive
equipment and hightech
analysis, there is a
subjective element in the
valuation of gems
As for synthetic stones, some are easy
to spot, says Dr Nyfeler, while others
are very tricky—and some are slipped
into the supply chain for natural
stones which makes them even harder
to detect. This often happens with
new mines, where controls may be
weak and stones from known mines
or synthetic stones are mixed with the
new ones.
‘Three years ago, big rubies with
lovely colour said to be from a new mine
in Tanzania began appearing in Hong
Kong. Such stones are rarer than top
quality diamonds and the buyer wanted
to close deals on stones for several
million dollars. But the material was
not like any natural or synthetic stones
we knew. So we sent a staff member to
Tanzania to collect material from the
mine, and were then able to certify that
the new stones were natural.’
go for diamonds where the quality
rating system is well-established. With
coloured stones, there are national
and regional differences in taste—so
Asian buyers prefer darker, inky blue
sapphires, while Americans prefer
bright colours.
‘And even with diamonds where
people talk about the four Cs of Colour,
Cut, Clarity and Carat weight, there
can be more Cs that affect value, among
them Context. So diamonds worn by
Elizabeth Taylor or an Indian maharajah can be more valuable than similar
stones without these associations.’
Still private
Strength through
experience
Gübelin Gem Lab has two further
assets. One is its extensive collection
of more than 25,000 reference stones,
which is constantly growing as new
mines open. Their spectroscopic and
chemical fingerprints can be compared
with those of clients’ stones to determine their provenance. The laboratory
sends its own staff out on field trips
several times a year to collect specimens from the mines—in some cases in
quite difficult parts of the world.
‘Each sample is graded for its credibility on a scale from one to five,’ says
Dr Nyfeler, ‘Grade one is where our staff
member took it from the rock, while
grade five is where we are not confident
about the sourcing. We have been doing
Subjective factors
this since the 1920s, so we have stones
from almost every commercial mine in
One thing that Gübelin Gem Lab does the world, including some that are no
not offer is a valuation service. The role longer producing.’
The other asset is the staff, who all
of a laboratory is to establish the facts
about a gem, which can then be used have degrees—and in many cases doctorby others to determine its worth. And ates—in earth sciences such as geology,
despite all the expensive equipment mineralogy, crystallography and geogand high-tech analysis, Dr Nyfeler raphy. After two to three years’ trainacknowledges that there is a subjective ing, they reach the expertise to sign off
on Gübelin reports, which are always
element in the valuation of gems.
‘There is no universally accepted prepared by two staff members workgrading
system
for
coloured ing independently. Some have experigemstones, for example. That’s why ence in post-doctoral research and the
we tell people thinking of invest- laboratory carries out relevant applied
ing in gemstones for the first time to research to expand its capabilities.
16
Dr Nyfeler says they even require
biological knowledge to keep abreast
with crossbreeding in pearls which has
been making analysis harder. And one
of their specialists in pearls is Susy
Gübelin, a family member who has
tested a double-digit number of topquality diamonds above 100 carats.
‘Aside from all the sophisticated equipment, she has seen many developments in pearls during her career and
having someone with her experience
is invaluable.’
The laboratory remains a private
company. Like the other Gübelin businesses, it is still owned and controlled
by the founding family which is now
in its fifth generation. Dr Nyfeler
regards its private status as essential to
its reputation because it eases commercial pressures that might otherwise
lead it to pull punches in its reports.
‘The family expects it to be selffinancing, but a gemstone laboratory is
not a money-making machine. In some
cases, clients are very angry about our
findings on their stones and we have
to be prepared to lose their business
in the future in order to demonstrate
our integrity. If we were a listed public
company, we would be under pressure
to increase revenues and profits and
come up with news stories. I am very
happy not to have that pressure.’
Swiss-born Daniel Nyfeler, managing director of
Gübelin Gem Lab, has a doctorate in mineralogical
crystallography from the University of Berne. The
fieldwork for his Master’s thesis was an investigation of the geology of granulites in the Limpopo
belt in Southern Africa. He joined Gübelin in the
summer of 2003 after several years with an international management consultancy.
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17
18
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Sunglasses, collaboration Boris Bidjan Saberi and Linda Farrow for Autumn/Winter Collection 2012
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19
20
the footwear entrepreneurs
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The footwear entrepreneurs
Anne-Katrin and
Julia Hummel
The two sisters left the provincial German town that
was home to their father’s shoe business to pursue their
chosen careers in Berlin and Amsterdam. Yet both gradually
became more involved in the company and to their surprise,
have ended up in senior roles back in their home town in
charge of the KangaROOS and flip*flop brands
It is often an unspoken assumption in family-owned companies
that the next generation will join the business. But today, that is not
always the case: the younger members of the family are often given
the freedom to decide what they want to do with their lives. Many
decide to pursue interests that take them into other walks of life, yet
some still find their way back into the family business—as the vivacious Hummel sisters found.
Anne-Katrin and Julia Hummel grew up in Pirmasens,
Germany’s ‘shoe city’ which is famous throughout the country for its boots and shoes. Neither wanted to join the footwear business their father Bernd founded more than 40 years
ago, so they both moved away to follow other interests. Yet
they have now returned from the bright lights of Berlin and
Amsterdam to live in the town of just 40,000 people close to
the French border to help their father run the company.
‘I did an internship to meet my father’s
suppliers in Asia—though with no thought
of joining the family business’
Anne-Katrin, the older of the two, certainly did not plan
to join the family business—or live in Pirmasens. ‘For me,
it was a clear “No”—it never crossed my mind. I knew early
on that I wanted to be an architect, so I studied in Frankfurt
and began practising there. Later, I spent a year in Australia
working for an architectural practice in Melbourne. Finding myself marooned in Pirmasens on my return, I moved
to Berlin to set up as a freelance architect, working on lots
of little projects.’
Julia had always felt she wanted to end up working for
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a fashion business, and her studies in business administration took her to Hamburg, where a placement with the
mail-order group Otto International gave her experience in
all aspects of the industry. ‘I wanted to develop my career
further, and did an internship to meet my father’s suppliers
in Asia—though with no thought of joining the family business. Then I moved to Amsterdam to work for two clothing
companies: Mexx, where I was in the e-commerce department; and O’Neill, where I was a buyer.’
It was their father’s expansion ambitions that drew
both sisters back to the family business. Bernd Hummel
wanted to open a store in Berlin to sell the company’s
flip*flop brand, which has expanded from sandals into
other types of footwear, clothing and accessories. He asked
Anne-Katrin to find a suitable shop and to design what
would be the business’s first retail outlet.
‘That was a great project and of course I wanted to do
it,’ she says. ‘I found a shop near where I was living in Berlin
Mitte and designed it around the flip*flop brand. But when
I walked by it every day, I saw that it hadn’t been laid out
as I had planned. When I kept complaining to my father, he
asked me to take charge of it. As I became more involved,
we built up a flip*flop design and production team in
Berlin, and for three years I commuted between Berlin
and Pirmasens. At the start of this year, however, I decided
it would be easier to live in Pirmasens—so we brought the
Berlin team back with me, leaving only a showroom for
promotion and design.’
Julia was also drawn into the business after she
consulted her father about how to develop her career, feeling frustrated with the hierarchies and slow progress
of working for big companies. ‘My father said I could
always join the business, but I was not yet ready to return
to Pirmasens—it was so much not on my agenda. Instead
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I suggested working with my sister to open a flip*flop store
in Amsterdam which we did at the end of 2008.’
Her father then asked her if she would use her expertise to help build up the company’s e-commerce business.
At first she commuted between Amsterdam and Pirmasens,
but just as Anne-Katrin had become involved in more than
the store, Julia found herself dealing with presentation and
branding issues for the website. As she took over responsibility for all aspects of the company’s other main brand—
KangaROOS street shoes—she, too, recently decided to move
back to Pirmasens.
‘I love working with my father, because
I learn such a lot from him when we talk
through important decisions’
The Hummel family has been in the shoe trade in the
town for at least three generations, and Bernd started
running the shoe factory owned by his ex-wife’s parents
when he was 21. He began sourcing footwear from Italy
and Hungary, and on a trip to the USA, secured the rights
to sell KangaROOS in Europe. But although he has travelled
frequently to Asia where most of the shoes are now made,
he has always lived in Pirmasens. And his love for the town
has led him to start restoring historic buildings connected
with the footwear trade.
22
One of these is Neuffer am Park, a former shoe factory
converted into elegant office accommodation which is
now used by doctors, dentists and other professionals as
well as the family business. Winner of the German Design
Award in 2008, the high ceilings and tall windows have
been preserved, creating bright and airy spaces, with unrestored waxed floors that still show the scars of their industrial past. The Hummel offices include an art gallery that
provides a showcase for local artists, as well as regular exhibitions celebrating famous painters such as Picasso.
‘My father loves the old buildings in Pirmasens, and
some of the factories are great buildings,’ says Anne-Katrin.
‘He grew up when all the factories were making shoes here,
and he wants to give something back by making the town a
nicer place to live.’
Bernd is still fully involved in the shoe business, and
his continuing role was one attraction in returning to
Pirmasens, the sisters say. ‘I love working with my father,
because I learn such a lot from him when we talk through
important decisions,’ says Anne-Katrin. ‘He knows so much
about shoes, and he’s full of passion and ideas and sometimes younger in mind than ourselves.’
‘When we were growing up, we picked up his enthusiasm for the business, meeting his business partners from
all over the world and travelling with him to the fashion
shows,’ says Julia. ‘And he has had no difficulty in handing
over responsibility to us from day one.’
Making the transition to executive roles is not always
easy, of course. Anne-Katrin says she had to learn that
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although she was the same age as the employees she started
working with in Berlin, she had more responsibilities.
‘When you realise that people talk differently when you’re
there, that brings it home. I now know that is how it is, but
it was frustrating at first to find some distance opening up.’
‘When we were growing up,
we picked up our father’s
enthusiasm for the business’
‘When speaking to friends, I realise they do not always
share my outlook on things like taking a day off work for
no good reason,’ adds Julia. ‘Anne-Katrin and I found it
helpful to attend seminars for those in similar positions in
other family businesses, where we could meet like-minded
people. And a welcome consequence is that it has brought
us closer to each other and to our father.’
In the longer term, the sisters are happy for the
company to remain a niche producer, but they would like
to expand flip*flop internationally. With three stores open
in Germany and one in the Netherlands, they would like to
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expand into other European countries such as Scandinavia, Switzerland and Austria—and perhaps later to the US
and Asia. ‘But there is no grand plan,’ says Anne-Katrin. ‘It
will be in small steps, through friends or contacts in those
markets. And we will want to control as much as possible
from here. We build our brands, rather than focusing just
on selling shoes.’
E-commerce will also have an important part in generating sustainable growth, says Julia—as a shop window
for their products. ‘It will be particularly important for
flip*flop, which is a smaller brand. We have brought our call
centre back in-house because it is such a vital connection
to our customers and we take great care to give them great
service. Our dispatchers wrap the shoes beautifully, with a
little gift and a personal message from the packer. Clients
are very touched by this special attention which differentiates us from big retailers.’
They have also tried to bring in a younger team,
including people from outside the area. And they have
introduced a different meetings structure, with regular
scheduled meetings bringing together teams working on
brands and projects.
In addition, they plan to reopen a shoe factory in
Pirmasens, bringing back production from other European
23
countries and Asia, initially on a small scale. This project
is close to the hearts of all three family members, who see it
as a positive step in reviving the skills that are still available
locally. But it will also give the business more control over the
products and shorten the time needed to introduce new lines.
One thing the family does not expect to happen is for
the business to be sold—neither sister can imagine someone else running the business. ‘We like being a private
company,’ says Julia. ‘It gives us flexibility and control. It
also forces us to think long-term and avoid risk: we build
up reserves in good years that help us through tough times
such as the last few years.’
‘Clients are very touched by the
special attention which differentiates
us from big retailers’
Anne-Katrin and Julia Hummel’s tips for entrepreneurs
thinking about joining the family business
•You need to have 100 per cent passion for the business—money
is not enough.
•When faced with big problems, think small. As a next
generation entrepreneur, keep cool, approach decisions step
by step and don’t be bullied into precipitate action.
•Don’t be over-impressed by people with something to sell.
‘They also cook with water,’ as a German saying goes.
•Be ready to exercise responsibility—to be the person who takes
the final decisions. And make sure you are happy about people
management issues which are a large part of day-to-day business.
•Take advantage of the freedom of working in a family business
—and change everything if you are not happy with it.
The question of succession is not one they have given
thought to. For now, their immediate aim is to put roots
back down in Pirmasens which they thought they had left
when they began their careers.
‘Travelling back and forth between Pirmasens and
Berlin or Amsterdam was too stressful,’ says Anne-Katrin.
‘It doesn’t feel like home here yet, so I will stay here for a
year and get the new factory going before deciding where to
live in the longer term.’
24
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INSEAD on family succession
Transition is a crucial step in
the life of a family business
It is no longer axiomatic that the next generation will take over the
running of a family company—many younger people choose to pursue
other careers and lifestyles. But this change in assumptions offers
opportunities to ensure the continuing success of the business
MORTEN BENNEDSEN
PROFESSOR OF ECONOMICS AND POLITICAL SCIENCE
INSEAD
The nature of the succession process in family businesses varies enormously between different firms and families—and there is no single
correct model applicable to every case. But my research into some
10,000 successions in Europe, mainly in small and medium-sized
enterprises, has thrown up evidence of fundamental changes in family
succession over the last 30 years or so. To summarise, the succession of
the family’s next generation can no longer be taken for granted.
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The traditional approach in family businesses was very
patriarchal: the dominant entrepreneurial father had a
strong desire for the next generation to succeed him. When
I talk to older owners of family businesses, they often say
that they were not given a lot of choice, and there was no
discussion of whether joining the family business was what
they wanted or were qualified to do. The aim was simply to
ensure the continuation of the family firm.
25
Preparation in these circumstances
was by what we call the apprenticeship
model: you would work in the firm
and follow the previous generation
around to learn the business. There
was not much emphasis on learning
from other businesses or from relevant
education. After all, entrepreneurs
thinking about succession are part of
the tiny minority who have succeeded
in business and they see passing on
their knowledge and experience as the
best form of training.
The problem of labelling
Today, it is very different in western family businesses, where there
is a greater separation between the
family and the business—with spillovers from one to the other. Family
conflicts, deaths, divorces and changing values now affect what goes on in
the business. One reason why things
are changing in successions is that
society is changing around families:
culture and values are changing, families are having fewer children on average, rising divorce rates are dissolving
families. When there are fewer kids
and they are becoming more independent of their parents, those kids
can exercise choices and the patriarchal model is no longer enough.
ating huge wealth. There are many
attractive alternatives such as going
to business school, working for large
companies and living in exciting cities—
and children today think about what
sort of life they want to lead.
children to be happy, and in some cases
they regret that in their own generation they were not able to follow their
dreams. They recognise the desire for
a better work/life balance in the next
generation and they understand that
it is not always easy to live where the
family business is located—especially
for the spouses of their children.
One strength usually
They are also prepared to think
derives from the
about alternatives, such as putting the
apprenticeship model
family business into a foundation and
bringing in outside managers, selling
it to their employees or being bought
So the older generation have to make out by larger companies when indussuccession attractive to their heirs tries are consolidating.
and not rely on pressure or guilt. As a
result, there are fewer family successions in European firms, which is in
Preparing the
‘Things are changing
many ways good: when the younger
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in successions because
generation takes over the family business, they have done so by choice,
society is changing
having decided that it is the life they Even when the next generation is
around families’
want to lead. As volunteers, they will motivated to take over, succession is a
probably be better at running the very challenging process. Many studies
family business because they are better have shown that with family succesInstead of having to decide between motivated, and they are following sions, the firm tends to suffer for some
children competing for the succession, their dreams.
years in comparison with those that
When I talk to the older genera- are sold or professionally managed.
the owners of many small and mediumsized businesses are now struggling to tion of entrepreneurs, I find them This is despite the best efforts of the
persuade at least one of their children well aware of these changing circum- parents to hand over a financially
to join the family firm. Those children stances. They have acknowledged that sound business to the next generation.
may have seen their parents work- they have to sell succession to their
So we have investigated the qualiing 60-70 hours a week, often living in kids, but also that it may not be the ties of family heirs to see what makes
small towns or villages and not gener- best option for them. They want their them successful. One strength usually
26
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derives from the apprenticeship
model: they have learnt a lot about
the business before taking it over—the
traditional advantage of the family
business. But they have less by way of
measureable qualities: on average they
will have less education than managers in general, they are less likely to
have completed a business course at
a top business school, they have less
experience in running companies and
even less in sitting on boards. In other
words, while they know more about
the business, their CVs are not as good
as those of outside managers.
We have also compared the qualities of the chief executives of poorly
performing family firms with those of
top performers, and a significant factor
is the quality of their CVs. The best
performers had worked outside their
family businesses, often in the same
industry or in other countries. They
were also more likely to have MBAs
from good business schools and to
have sat on boards.
The combination of
formal preparations and
growing up in a family
business can be ideal
is more likely to bring the passion to
the business that isneeded for success.
When advising families on succession issues, I always urge parents not
to put too much pressure on their children. Tell the kids that if they are in
doubt about joining the family firm,
they should stay away, complete their
– Networks—knowing the right people education and get relevant work expein business, politics or regulation. It rience. Any business experience can be
is easier to build up these networks useful—working for consultancies, for
as children, and the family name is a example, helps develop project management skills, and a career in banking
calling card.
strengthens financial knowhow. It is
– The continuing association with
important to recognise that while it is
the founding family and its descenhard to leave the family firm, it is always
dants—even in big global companies
possible to join it at a later stage.
such as Siemens, Toyota and Pictet—is
often seen by investors, suppliers and Morten Bennedsen is INSEAD’s Professor of Ecocustomers as a symbol of the continu- nomics and Political Science, the André and Rosalie Hoffmann Chaired Professor of Family
ity of their values.
– Family values which reinforce business success—including personal
values, the cultural values that drive
many Chinese businesses and the religious values that led to the success of
many Quaker families in chocolate
firms. These are hard to buy in from
the managerial market.
A successful family succession transfers these assets, which cannot be
learnt at business school, from one
generation to the next. The next generation will then be better prepared to
formulate business strategies if it can
draw on these assets and complement
them with leadership development
training and work experience. And if it
is result of choice, the family transition
Enterprise, Academic Director of the Wendel International Centre for Family Enterprise and Co-Director of the Hoffmann Research Fund. His main
research area is the governance of family firms and
other closely held corporations, and he frequently gives talks to family firms, corporate finance institutions, investment banks and private equity
funds on the governance of family firms and the
economic consequences of succession.
The apprenticeship model is still
useful, but it is no longer enough. That
is why some families place their children in jobs with their biggest competitors or send them to work in the US
or China—to prepare them for the next
30 years. The heirs leave home, build
careers and gain qualifications, and if
they then return to the family business,
they are more likely to be successful.
Family assets
In fact, the combination of formal
preparations and growing up in a
family business can be ideal. There
are family assets that can make a vital
contribution to business success:
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27
The venture capital entrepreneur
Neil Rimer
The co-founder of a leading venture capital firm based
in Geneva, Jersey, London and San Francisco focuses on
investments in start-up technology companies. Currently
a member of twelve boards, he partners with other
entrepreneurs to expand their businesses, taking them
through to sale or a stock-market debut
When Neil Rimer co-founded Index Ventures in 1996, his ambition
was to create one of the best venture capital firms in the world. Sixteen
years on, it has a portfolio of more than 100 companies—many with
well-known names. They include Skype, now part of Microsoft, Lovefilm, bought by Amazon in 2011, Net-a-Porter, the luxury fashion
website now owned by Richemont, and MySQL, the world’s most
popular open source database which was sold to Sun Microsystems in
2008. Many others are quoted on stock markets around the world, with
the online gambling group Betfair and the internet clothing retailer
ASOS listed in London and several companies on the US Nasdaq.
Today, Index Ventures manages more than €2 billion of
funds and is ranked first decile in its category. With around
50 staff, it is just raising its sixth venture fund and last year
raised a €500 million growth fund to finance later-stage
activity which often requires larger sums of expansion capital to reach the next stage of growth. IndexVenture just
announced a EUR 150 million life science fund in partnership with Glaxo Smithkline and Johnson & Johnson.
‘We’ve had successes like Skype and
MySQL and hopefully over time
we’ll become associated with more
and more companies like them’
‘Doom for a business like ours would be to believe that we
have arrived—we’ll never arrive,’ says Neil Rimer. ‘But we’re
making progress on a path towards a distant objective.
We’ve had successes like Skype and MySQL and are associated with companies such as Dropbox, Etsy and Criteo.
Hopefully over time we’ll become associated with more
28
the venture capital entrepreneur
and more companies like them, so that entrepreneurs will
recognise a pattern and come to us with their businesses.’
Born in Montreal, Neil was educated in Switzerland when his father moved his bond-trading business
to Geneva. After school, he went to Stanford University in
California, at first studying biology and physics in preparation to be a doctor. But with the technology boom just
beginning on Stanford’s doorstep in Silicon Valley, he
decided he was more interested in technology and its use to
solve problems. He switched to history and economics, and
on graduation spent four years with Montgomery Securities in San Francisco, one of the ‘four horsemen’ in technology investment banking.
After a year obtaining an MBA from Harvard Business
School, he decided to move back to Geneva with the intention
of raising venture capital finance in Europe, a nascent market
for the sector. He joined his father’s bond-trading business—
called Index Securities—but after two years his father sold it
and the two of them started Index Ventures in its wake.
‘At the beginning, we had no fund, so we raised money
for each investment from institutional investors. We made
two crucial decisions: that we would always rely on funding
from institutional investors; and that we would specialise
in technology and the life sciences.
‘For the first four years, we would identify an opportunity, structure the investment, raise the finance for it and
then help build the company—either by sitting on the board
or as an observer. We were and still are minority investors:
our aim is to help entrepreneurs build their businesses.’
His younger brother David joined after a year, with the
role of helping the firm to raise funds. David still manages all
non-investment aspects of the firm. He had worked at Capital International, a big money management firm where he
had been through the management training programme.
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In 1996, the first non-family partner joined: Giuseppe
Zocco, also a Stanford graduate who had worked for McKinsey with another of the Rimer brothers. ‘Very early on, we
decided we didn’t want to be a family firm. We wanted to
be the best venture capital firm in the world and the way to
achieve that was to recruit the best people—and they wouldn’t
all be Rimers. So we made Giuseppe an equal partner with a
right of veto so that the family couldn’t gang up on him.’
In the same year, Index Ventures raised its first fund from
a group of investors, including a Dutch pension fund. ‘We
had $17 million to invest which we could deploy using our
judgment without having to raise finance for each project.
‘Our first big success was Virata, a Cambridge University spin-off which made the chips needed for ADSL
modems. These had yet to become the standard for internet
connections, but Virata bet the company on the adoption
of ADSL—which was exactly what happened. The company
went public and was then acquired, making it a very
successful investment for us.’
Two other outsiders joined the firm in 1997, becoming
partners soon after: Bernard Dallé, also ex-McKinsey and a
friend for many years, and Francesco De Rubertis whom he
had met through a friend of Bernard. Francesco had done
a PhD in molecular biology in Geneva and post-doctoral
work at the Massachusetts Institute of Technology, and
he set up a life sciences practice for the firm. A year later,
the firm raised a second fund of $180 million, and in 2002
brother Danny joined to open a London office with a young
associate, Ben Holmes, who is now a general partner.
because they’re doing revolutionary things and creating a
ton of value.’
Neil Rimer sits on the boards of 12 companies at the
moment, but the commitment to each depends on where it is
in the development process. Early-stage companies can take
a lot of his time, as they formulate their value proposition,
recruit the management team and refine the product. More
mature companies that have gone public or are close to it
will have their management teams in place. ‘I speak to all the
chief executives very regularly, but with the early-stage ones
it could be daily—sometimes several times a day.’
The key factor in any venture capital investment, he says,
We’re looking for opportunities where
is the quality of the entrepreneur. ‘A lot of entrepreneurs
the next momentum wave will gather,
think the idea is the hard part, but ideas are cheap. We look
becoming mainstream 12–18 months away for someone with a passion for solving a big problem with
a solution that lots of people will be prepared to pay for. We
don’t want someone who is doing it for a job, or to make
The timing of its expansion might appear difficult—the money, or because their father wants them to. The best entredotcom bubble was about to burst in 2001. But Neil Rimer preneurs simply can’t imagine doing anything else. They
says that the firm is not a momentum investor, taking a rela- need to be driven, but they also need to be humble because
tively long-term view of its investments. ‘We’re looking for entrepreneurs must learn a lot of lessons quickly and know
opportunities where the next momentum wave will gather, when they need someone else to fill a role.
becoming mainstream 12-18 months away. The people who
got whacked in the dotcom bust were the people betting on
high valuations—investing in late-stage financing, pre-IPO
‘We look for someone with a
rounds or inflated IPOs. If we think things are getting out of
passion for solving a big problem
hand, we don’t invest.
with a solution that lots of people
‘We took advantage of the money pouring into technolwill be prepared to pay for’
ogy companies at the end of the 1990s to fully finance all our
companies. Admittedly, their growth prospects were affected
by the sagging market, and exits became harder as companies stopped buying. But the cycles we’re looking at are ‘We want people who have missionary zeal, who want to
three, five or seven years—not three, five or seven months. An change the world. They will get very rich in the process, but
exit could be delayed, but only by a year or 18 months. And they mustn’t be doing it just to make money. Facebook’s
we hope our companies can go public in any environment Mark Zuckerberg is a good example—he really wants to
30
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change the world, and could have sold out long ago if all he
wanted was a lot of money.’
One exciting trend in venture capital is the growth of
entrepreneurship among the younger generation, he adds.
‘The generation growing up today definitely understands
networks and the extent to which impact can be multiplied by leveraging networks such as Facebook, Twitter and
Tumblr. These allow them very quickly to spread information, collect feedback, answer questions and raise money—
it’s second nature.’
Despite its spectacular success, Index Ventures continues to have a family feel: three of the ten partners today are
Rimers—Neil and brothers David and Danny. The company
has a collegial management style, and there is a unique
partnership dynamic, says Neil. ‘The relationship between
me and my brothers spreads to the other partners—I can’t
be closer to or more direct with them than with any other
partner. It’s one of our great advantages, and it’s something
that entrepreneurs like. They see the rapport, the immediate communication and the lack of politics.
‘They want that for their own businesses and for their relationship with us. We’re not a family firm, but we have a lot of
the best aspects of family communications in our business.’
next generation
Neil Rimer’s tips for entrepreneurs seeking venture capital
•Are you passionate about your business? Without passion,
it will be harder to succeed.
•Does your business solve a big problem? The success of
your product will depend on enough people buying it to create
a profitable and scalable business.
•Are you adaptable? Your business will evolve fast as you
develop it, and you must be ready to learn the lessons.
•Can you recognise your strengths and weaknesses? |
You must be willing and able to hire people who are better than you.
31
32
next generation
Boesch boat construction in mahogany wood, Sihlbrugg, Switzerland
next generation
33
34
the eyewear entrepreneurs
next generation
The eyewear entrepreneurs
Simon Jablon and
Tracy Sedino
The son of legendary eyewear designer Linda Farrow
relaunched her iconic brand with his wife almost two
decades after it was put into storage. Nine years later, it is
again making waves in the fashion world, its designs worn
by global stars such as Lady Gaga and Madonna
When Simon Jablon went to clear out a North London warehouse
owned by his father in 2003, he discovered a treasure trove of the
vintage eyewear designed by his mother Linda Farrow. Her iconic
designs had helped shape the fashion world of the 1960s and 1970s, but
in the mid-1980s, she had put the company into storage to focus on her
family. With retro styles back in demand, Simon and his then girlfriend
Tracy Sedino decided to revive the brand and build a global eyewear
business in partnership with many of the world’s leading designers.
‘I was 24 and Tracy was 22 and we were opening up box
after box of amazing creations,’ says Simon. ‘I always knew
the vintage archive existed, but I hadn’t grasped the level
of creativity and the value of my mother’s work—it was just
mum’s stuff. But we were able to start our company simply
on the back of what we had.’
His mother had designed innovative eyewear in the
swinging sixties for fashion houses such as Balenciaga,
Emilio Pucci and Yves St Laurent. She launched the Linda
Farrow brand in 1970, pioneering designs still popular
today such as the avant-garde wraparounds that were Yoko
Ono’s signature 1970s look. Meanwhile, his father had his
own business which distributed eyewear for many of the
major brands and manufactured own-label products for UK
high street retailers.
‘Linda Farrow revolutionised eyewear design which
had previously been very functional—dictated by men
and doctors. She was the first designer to bring a feminine approach to eyewear that was influenced by fashion.
Bigger brands then worked with her on their designs, and
the company was very successful. She put it into storage in
the 1980s, when my father’s company was doing sufficiently
well to allow her to focus on the family.’
When he made his exciting discovery nine years
ago, Simon was working for his father, whose business
next generation
included a small property portfolio. The warehouse which
housed the stock was about to be redeveloped for residential purposes, but turned out to contain more than
2,000 eyewear styles, with up to 10 or 20 pairs of each—and
hundreds of pairs of some. With seven months to go before
London Fashion Week, the two entrepreneurs worked up to
18-20 hours a day to catalogue and document the stock for
their first show.
‘There was an amazing response when we launched
Linda Farrow Vintage. We took some 50 orders in four days,
with a value of around £200,000—which was effectively
profit, because we hadn’t had to produce anything. We
could have made a pretty penny by just selling off the stock
year after year, but every year we invested in the new Linda
Farrow Luxe brand as we learnt more about the industry.’
‘I hadn’t grasped the level of
creativity and the value of my mother’s
work—it was just mum’s stuff’
The two entrepreneurs soon realised that exclusivity deals
restricted their sales growth. When Simon went to Hong
Kong where they were selling through Joyce, he realised
there were many more great stores that could be outlets
for them. So they decided to work with other designers to
create more eyewear brands, starting with Eley Kishimoto,
the London design house whose work was displayed on
the catwalks of Louis Vuitton, Marc Jacobs and Alexander McQueen. Today, Linda Farrow partners the likes of
Alexander Wang, Dries Van Noten and Agent Provocateur,
developing concepts and helping them to realise their
35
designs. The company also cultivates new talent by working
with emerging designers such as Jeremy Scott, Peter Pilotto
and House of Holland.
The strategy has been highly successful. ‘We’ve been
profitable from the start and this year have grown by more
than 100 per cent—not bad in a depression! Our product is
a high-end one: we’re selling sunglasses for up to £1,000
apiece to the pockets of wealth that exist all over the world—
in Eastern Europe, the Middle East and Asia, as well as
Western Europe, the UK and America. We even managed
to increase sales 30 per cent in 2008, in the depths of the
recession. People stopped travelling, but many spent their
money in a more discerning way—on “outer skin” accessories such as eyewear, watches, handbags and shoes.’
Linda Farrow designs have become very popular with
celebrities, including Lady Gaga, Madonna and Lenny
Kravitz from the music world and film stars such as Sienna
Miller and Maggie Gyllenhaal. ‘It’s not forced,’ says Simon
Jablon, ‘we don’t pay for coverage. If you create it, they will
come. We work on the pull mentality: if we make a beautiful product that’s different, people will desire our brands.’
Neither of the two entrepreneurs was conventionally
prepared to run such a fast-growing, cutting-edge business. Simon had dropped out a business studies course at
University College London, partly because he felt he was
36
being groomed to work for a big company. He had wanted
to be an entrepreneur or a sportsman from the age of nine,
a combination that led him to start his first company at 14.
‘I played table tennis at a very high level and having
been national Under-10 Champion, played for England until
I was 17. One year I trained in China where the head coach
of the national team had his own brand of rubber for table
tennis bats—at the top level you change them quite quickly.
I became his European exclusive distributor, advertising in
national table tennis magazines with a small loan of £500
from my father which I turned into an income of £10,000 a
year. After five years, I opened a shop with three staff, only
winding the business up when I went to university.’
‘We’ve been profitable from the start
and this year have grown by more than
100 per cent—not bad in a depression!’
Tracy—who became his wife last year—had a background
in fashion and public relations, helping organise events
such as opening parties for fashion houses. She had been
accepted by London’s prestigious Central Saint Martins
next generation
College of Art and Designfor a fashion degree. ‘She started
young like me, and we’ve always worked for ourselves. We
started from the bottom up and with just the two of us, we
had to do everything and learn by trial and error.’
But as the company grew, they had to take on staff, and
now employ around 35 people (production is outsourced,
largely to Japan, and sales representatives are freelance).
They also found they had to employ people to do all sorts
of things they had never anticipated. ‘We needed someone
just to take care of our samples, for example—to move them
around and keep them clean. With 200 designs in perhaps
five colours each, that could be 1,000 pairs and if we have
five to ten sets of samples, that is up to 10,000 pairs to look
after. And dealing with returns is nearly a full-time job:
when you’re selling 100,000 units a year, if only 1 per cent
are returned, that’s three pairs a day to process.’
Simon Jablon’s tips for entrepreneurs
•Margin, margin, margin! Don’t overspend and make sure you
make a profit on everything you sell. Margin is your room for
error—without it, you can go under.
•Always employ people to do what they really want to do.
Don’t take them on just to fill a gap—very few people are versatile
and flexible enough to perform well outside their comfort zone.
•Make sure your accounts are straight from day one.
•Diversify your customer base. Try not to be dependent on any
one customer, market or territory—that’s a scary place to be.
We started from the bottom up and with
just the two of us, we had to do everything
and learn by trial and error
The company still has the feel of a family business, with the
two entrepreneurs owning 100 per cent of the shares. Simon
occasionally leans on his father for business advice, and
his older brother manages sales—his ability to keep a grasp
of the details complements the skills of the two founders,
Simon says. As for his mother, she stays away from it, recognising that the world has moved on and the fashion scene
has changed completely since her day.
One of those changes is the growth of online sales, which
Simon sees as a useful way to give the company more control
over the retail market. ‘Retailers with exclusivity in a city
can mark up the price, which reduces sales but maintains
their profit. If they charged the right price, we could double
our business. Online creates a worldwide high street where
consumers can see the price that the company has set. And
we can see the results of marketing initiatives in online sales.’
And the company, which operates boutiques in leading
luxury stores, is now opening its first dedicated shop in Hong
Kong. ‘It’s a way of driving the business. But it’s also a way of
controlling the presentation of Linda Farrow eyewear to the
consumer—wholesale clients may just put it in a display cabinet. And it’s a marketing tool which takes us to a new type of
wealthy customer who shops in exclusive outlets.’
The two entrepreneurs are hungry for growth, and
have ambitious plans for Linda Farrow. ‘We’re in an industry where our competitors have sales worth hundreds of
millions of pounds a year, and we’re nowhere near that,’
says Simon. ‘Our room for growth is enormous, with
Luxottica’s net sales over €6 billion last year and Safilo
and Marchon doing over €1 billion. I believe that we can
compete with them eventually.’
next generation
37
Afterword
A unique
succession
model
An interview with Jacques
de Saussure, Senior Partner
of Pictet & Cie, on how he
joined the bank and how it
appoints the next generation
of partners
jacques de saussure
senior partner
pictet & Cie
Q. When you joined Pictet in 1980, your father
Claude de Saussure was Senior Partner. Did he
expect you to follow him in the business?
My father had this aspiration, but the
principle at Pictet is that there is no
right for family members to join the
bank. He had no power to bring me in:
only the group of active partners can
decide to invite a family member to
join—or to become a partner.
Q. What did you do before joining the bank?
I had taken a masters in applied mathematics and computer science at the
Swiss Federal Institute of Technology in Zurich and the Sloan School
of Management at the Massachusetts
Institute of Technology. Then I worked
at Intersec Research, a New Yorkbased pension and asset management
consultancy firm.
Q. How did you decide to return to Geneva
and work in a private bank?
I was almost 29 and had been headhunted with an offer to join Goldman Sachs. Before accepting the offer,
I called my father and asked his advice.
He suggested that I should join Pictet
instead. Apart from an internship with
Pictet in 1975, this was the first time
I had considered working for the bank.
‘Only the group of
active partners can
decide to invite a family
member to join—or to
become a partner’
Q. Was your outside experience helpful in
taking up your responsibilities with Pictet?
Yes, it was very useful, because it had
introduced me to the US institutional
asset management market. Pictet’s
institutional activities were still in
their infancy, and my experience was
very valuable in helping to develop
the business. It helped me anticipate
the type of issues that we would face
as the institutional market matured
in Switzerland and in Europe. When
38
afterword
next generation
next generation
afterword
39
I started at the bank, I was expected to major factor in the bank’s growth over
reach a target of CHF1 billion under the last 30 years.
management, but today the business
is worth more than CHF100 billion in
gross terms.
‘You should not envisage
Q. How did the other partners see your
activities in setting up this new business line?
Several feared it would be a loss-making
venture for Pictet. But the Pictet partners are very open to new ideas—ready
to give them a try and not simply to
take the path of least resistance. The
growth of the institutional asset and
investment funds business has been a
40
afterword
joining the family
business unless you have
a passion for it’
Q. When your father retired in 1986, you
became a partner shortly after. Did you find
it difficult to follow your father into the
partnership—to step into his shoes?
It is, of course, always a challenge to
come after a very successful father. But
I was not stepping into his shoes—I was
already playing a very different role
in the bank before I was elected. Only
when I became Senior Partner in 2010
did I literally follow him in my career.
But, even then, our firm had become
very different from the one he had led
25 years earlier.
Q. Why are successions so difficult for many
family businesses?
The main reason for difficulties in
family successions is the age differ-
next generation
ence between the parent and the child
which is usually too great for a smooth
transition. When parents want to
retire, the children are normally still
too young and inexperienced to take
over their responsibilities.
Q. How does Pictet’s succession model avoid
such generational problems?
One of the beauties of Pictet’s model is
that the partnership is renewed with
at least one new succession every five
years or so. The aim is to have three
generations represented in the partnership, so that there are partners
already around the table closer to the
age of the retiring partner than the
new appointments.
‘The main reason for
difficulties in family
successions is the age
difference between the
parent and the child which
is usually too great for a
smooth transition’
Q. Was there any training or coaching when
you became a partner? How could you benefit
from the experience of the older partners?
The best transfer of knowledge and
experience comes from the participation of young partners in the decisions,
from day to day, through close co-operation with more senior partners. But
there was no formal coaching: older
partners played that role, and I learned
enormously from them. However, we
could formalise this process, and could certainly too short to feel obliged to adopt
make it more effective.
a career that you will not be happy in.
Second, they should learn early
Q. You meet a lot of families and family on what the business is all about. And
businesses with all sorts of succession early exposure will help them develop
models. What advice would you give to a an interest in the business.
member of the younger generation who may
Finally, they should develop their
be thinking about whether or not to join the skills as if there was no question of
family business?
joining the family business. If they
First, I would recommend that they can become successful outside the
should not envisage joining the family family business, it can only increase
business unless they have a passion for it— their chances of success if they do join
passion is an engine of success. And life is it. Developing their own expertise
next generation
through experience acquired outside
the business will also earn them
respect from the staff.
Q. Do you have any thoughts about what
you would like your own children to do when
they are thinking about their careers?
I would expect them to be passionate
in whatever they do, to and to strive to
excel in one skill. And whatever their
choice, I hope they would be ambitious
to succeed in their chosen career.
afterword
41
acknowledgements
We should like to thank the entrepreneurs who generously shared
their experiences with us: Julia and Anne-Katrin Hummel, Markus
Boesch, Neil Rimer, Simon Jablon and Tracy Sedino. We are grateful
to Morten Bennedsen and Phil Anderson for their different views on
entrepreneurship and family business succession, and last but not
least to Daniel Nyfeler for his insight into the world of gemstones.
Pictet & Cie
42
acknowledgements
next generation
the Pictet report
Pictet & Cie
The Pictet Report is published by Pictet
& Cie between three and five times a
year. Its contents are based either on the
proceedings of a Pictet conference, or
on a series of specially commissioned
interviews and discussions on particular investment and business themes of
topical interests.
Founded in 1805 in Geneva, Pictet & Cie is
today one of Switzerland’s largest private
banks, and the leading independent
asset management specialist in Europe,
with CHF 366 billion (EUR 277 billion) in
assets under management and custody at
December 2011.
Pictet & Cie is a partnership owned
and managed by eight general partners
with unlimited liability for the bank’s
commitments.
The Pictet Group, based in Geneva,
employs more than 3,100 staff. The group
has offices in the following financial centres: Barcelona, Basel, Dubai, Florence,
Frankfurt, Hong Kong, Lausanne, London, Luxembourg, Madrid, Milan, Montreal, Nassau, Osaka, Paris, Rome, Singapore, Taipei, Turin, Tokyo and Zurich.
Disclaimer
This publication is issued and distributed by Pictet &
Cie based in Geneva, Switzerland. It is not aimed at or
intended for distribution to or use by retail clients, or
any person or entity who is a citizen or resident of, or
located in, any locality, state, country or other jurisdiction
where such distribution, publication, availability or use
would be contrary to law or regulation. The information
and material presented in this publication are provided
for information purposes only and are not to be used
or considered as an offer or invitation to buy, sell or
subscribe to any securities or other financial instruments.
Furthermore, the information expressed herein reflects
a judgement as at the original date of publication and is
subject to change without notice.
This publication and its contents may be quoted provided
that the source is indicated, but it may not be reproduced
or distributed, either in part or in full, without prior
authorisation from Pictet & Cie.
For subscription information please contact: privatbanking@pictet.com
All rights reserved. Copyright © 2012 Pictet & Cie.
www.pictet.com
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