Coutts Entrepreneurs

Mike Southon: This is Mike Southon for Beermat Radio in association with Coutts and today I have got Sir Keith Mills to talk to.  Good afternoon, how are you?

Sir Keith Mills: I am good thank you very much, very good.

Mike Southon: And I suppose if you were going to pick a theme for this, it would be either loyalty or reward or something like that because you are obviously best known…it was your idea, Air Miles wasn’t it originally?

Sir Keith Mills: Yes I started Air Miles initially and then rolled that out around the world and sold the U.K Air Miles business to British Airways which meant that I couldn’t compete here for a while and then after running around the world for about 10 years setting up similar businesses came back to the U.K to find that a whole bunch of other customer loyalty programs had emerged like Club Card and Boots Advantage and practically everyone had a loyalty program and so I thought it would be a good idea to consolidate the market and launch Nectar program here which has been very successful.

Mike Southon: But going back I mean you started in advertising so this was one of these great creative ideas in an advertising agency that came out of a work group or was it something that occurred to you in the pub one night?

Sir Keith Mills: No, no, no we had a couple of clients, Shell and British Caledonian, if you remember BCal before they were gobbled up by BA, both had briefs out to the agency and a really boring train journey from Liverpool to London late on a Friday afternoon with a Scotch and dry on my hand, and so to think about these two briefs and so British Caledonian had a real problem as did most airlines those days they ran about 65% to 70% full and every time they try to increase the load factor they would lower their prices but actually not take any more money for that flight and as soon as they took the price discounting off surprise, surprise the load factor went down 65%.  So they were trying to find a way in which they could increase the revenues from each flight without affecting the yields and at the same time Shell in a fiercely competitive petrol market where differentiating one gallon of petrol from another is virtually impossible, they were trying to find some way to engender loyalty from their customers and on the back of the proverbial envelope I came up with the Air Miles idea, the Air Miles name as a currency that you collected from Shell petrol stations and redeemed for flights on British Airways, thereby improving the loyalty to Shell customers and generating revenue for the airline.  Of course it didn’t take long to work out that you actually needed to spend £600,000 on Shell petrol to give a free flight to New York and so we expanded the program including lots of other companies and so it was literally a back of the envelope idea.

Mike Southon: And that took you from advertising to loyalty full time I guess?

Sir Keith Mills: Well yeah I had during the 80’s owned a succession of London advertising agencies and bought and sold them and after a year of running Air Miles in the U.K decided that I could sell my ad business and abandon the advertising agency business forever which was a very good decision because it was the top of the market when I sold it and Air Miles took off and not without its problems but it’s been a great business since.

Mike Southon: So what got you in to advertising in the first place, I mean did you go straight from school or did you study marketing at university or what was it about the ad business that attracted you originally?

Sir Keith Mills: I think probably like most entrepreneurs I got thrown out of school so no university, no O-levels, no A-levels.  I think I’ve got a one width swimming certificate, it was my sum total of the bits of paper I’ve got when I left school.  But no I flitted into Fleet Street, started in a newspaper group doing menial production work, ended up actually at the age of 19 at The Economist, did three or four years at The Economist which is really where I learned my marketing skills. And then I had a spell at the ft And then I ended up in an ad agency as an Account Director in the late 70’s

Mike Southon: So you moved to Air Miles because that was obviously the thing to do and how long were you running that, it turned into Loyalty Management Systems.

Sir Keith Mills: I still am, I mean the original Air Miles International Group, BV a Dutch holding company I still own, still the sole shareholder of, that still exists, still holds a bunch of my assets and I’ve probably developed a dozen or 15 businesses under the wing of that businesses but my philosophy was not to bring in outside capital, not to build businesses until they became profitable and then sell them and I did that on a number of occasions with different businesses.  So the first being the Air Miles U.K business which was a 50-50 joint venture between my Dutch parent company Air Miles International and British Airways and when that business became profitable, I sold the 50% that I did own back to British Airways and put the money in the bank and I moved onto North America and then onto Europe and then the Middle East.  And each time a company became mature I would sell the equity in it and I would use the money to finance the next.  So I’d always have basically one company that was ready to be sold, one company that was maturing and one that was being started.

Mike Southon: And presuming not all businesses were a success I mean some presumably failed or but you always had a portfolio of not being successful to fund the ones that didn’t work out for one reason.

Sir Keith Mills: No I mean I came very close on a number of occasions to going belly up like most entrepreneurs do and probably my most stressful period was when my U.S business went bust, I closed it down after a year.  I closed it down because we were losing a huge amount of money and that experience probably cost my group, my business about $70 million so it was a bit of an expensive mistake.  But three years later I sold the Canadian business for $300 million and sort of made up for the losses in the U.S.  And I think that unless as an entrepreneur you accept the swings and roundabouts of business, you know entrepreneurs take risks and they are able to outwit the bigger companies because they are faster and they have a different risk profile and as you get older you tend to take less risks but even so I think it’s in the DNA of entrepreneurs.

Mike Southon: So what are the secrets of success, you’ve obviously had more successful than unsuccessful companies.  So you have an idea is it about getting the team together quickly, prototyping the idea, how do you test whether it’s a good idea or not quickly?

Sir Keith Mills: I think you’ve got to be right, actually I don’t think these days, I mean the markets whatever market you are in, these days is tough and sophisticated and you got to have a great idea.  It’s certainly got to have a USP – Unique Selling Proposition because there are lots of me-too businesses out there.  Fundamentally you’ve got to be well financed, the biggest mistake young businesses and entrepreneurs make is that everything takes twice as long and cost twice as much as you estimate and if I leave, just got to have some really smart people around you to run the business.  And one of the smartest things I did was realize there were many more smarter people than me around.  The first thing I do in any enterprise is build a really smart management team.

Mike Southon: So where do you find these people, is it from your personal network or recommendation or job ads, everything?

Sir Keith Mills: I think if you talk to any business man in any walk of life, anyone running a company, I will tell you the hardest job they have is finding and retaining their best people and yes, I have hired people I know, I have used some of the biggest head hunting agencies in the world and I have even run ads in the newspaper.  There isn’t one foolproof way that I found anyway to ensure success.  The one thing that is important is that when you know you have made a mistake do something about it quickly and don’t wait too long.

Mike Southon: And you obviously have a sort of life cycle for a business in your own mind, different types for different businesses obviously but you sort of grow them, you make them profitable, you make them lean and mean then is there a point when you are thinking I think we can sell this, now is it just the market that drives it or a combination of all of those?

Sir Keith Mills: Well in the businesses that I run four to six years is the period where the business is matured, it’s got a track record, it’s profitable, it still has enough growth in it to be interesting to a potential purchaser. There is really any pressure to sell, it’s sort of when the time is right.

Mike Southon: And also your model which is obviously very common, you just get the best people to run these good ideas makes you relatively unsentimental about the businesses.  You are there to build them and sell them, I mean some entrepreneurs I meet are very heartbroken when they have to sell their company, they’ve built up.  There is none of that with you, it’s purely business and everybody’s going to benefit.

Sir Keith Mills: Its not, actually it’s not purely business, I mean I clearly run my businesses to make money but actually for me what I get out of the businesses are the challenge of starting them and making them successful.  Once they are successful, that sort of challenge for me somewhat goes and so I am looking for the next challenge whether it’s another business or another project and different people are motivated in different ways.  I am actually almost certain that had I kept all my businesses over the years I would be probably be worth a lot of money than I am worth right now.  But I wouldn’t have had quite so much fun in the process and the ability to be able to use the cash from one business to finance a new venture without frankly having to go cap in hand to the bank to all the private equity guys was I thought was quite attractive.

Mike Southon: And essentially you used the word fun there because I get this all the time when I interview people which is the strongest driver for most people to have fun, it is difficult to sometimes explain that in schools when I go in there that all these business people, they are having fun, that’s all they are doing, for them this vision that work is something ghastly that you have to do, it’s all about fun then for you?

Sir Keith Mills: Well I think life’s very short and if working couldn’t be made enjoyable then it would be a bit of a shame.  So I try to be involved in things that I enjoy doing and by and large people are much better at things that they enjoy doing.  But having said that, making money is important because you can’t afford to do things you want to do without making some money in the process.

Mike Southon: Probably there’s a way of keeping the score obviously, so let’s put a quick time run on this, you formed Air Miles in which year?

Sir Keith Mills: 1988.

Mike Southon: 1988 and it has been going ever since in different guises and you spin it around and when was the first time you did something sort of left field as I call it, was it the Olympic bid, was that the first thing that you did that was completely different to loyalty management programs?

Sir Keith Mills: Well, I probably had my midlife crisis in my 40’s when I decided that…I think I’d just sold the Canadian business and there was a reasonable gap in the business career that I go off and raced around the world on a yacht….

Mike Southon: This is 1999 or 1998?

Sir Keith Mills: 1998.

Mike Southon: And what spurred you to do that, always been interested in boats or…?

Sir Keith Mills: Yeah I’ve always been a keen sailor but I didn’t really have a gap year because I didn’t have a gap. So this was a combination of midlife crisis and gap year, you know I thought it was a good time actually to get away and when you are racing a 60 foot yacht in very large seas and big oceans and you are away from land for several weeks, I can tell you it puts everything in perspective.  And it actually was sort of on that trip that I decided that I would want for the second half of my career if you like, to do the things that were not just related to business and in fact on that trip I sort of started to think about the one major sailing trophy that this country has never ever won, which is the America’s Cup, something we started in 1851.  It’s certainly the oldest sporting trophy in history, it’s one that Great Britain has never won.  I thought it would be great whilst I was sailing around the world, I’d see if I couldn’t put a team together to win this trophy.  And two or three years later I started to do that but I was then asked to get involved in Olympics and put that on ice.

Mike Southon: So how did that come about, the invitation to work on the Olympics?

Sir Keith Mills: I was minding my business, in fact I was negotiating with a guy called Peter Harrison who owned the last British America’s Cup team to buy his assets and a friend of mine who had recently been recruited I think they are about four or five of them working for the London 2012 bid, called me and said that an American lady called Barbara Cassani had been asked by the Government to chair this bid and she was pulling her hair out trying to find somebody to run it.  Would I speak to her and give her some ideas which I did in fact on a number of occasions, gave a list of candidates I thought she might want to call and to cut a long story short, she eventually persuaded me that I should do it.  And she is a really fantastic sales lady, she said two things one that it will only take three or four days a week which was a complete lie as it was certainly eight days a week and secondly that if I won the Olympic bid then my chances of winning the America’s Cup will go up exponentially and then I could… I can try the America’s Cup any time but bringing the Olympics to the U.K and it only happens once in life time so I got stuck into the Olympics.

Mike Southon: And that was in 2003 I think?

Sir Keith Mills: Yeah that’s right.

Mike Southon: It was interesting I was…as told you I was chatting with David Magliano and he explained to me some of the things that you just don’t realise about winning a bid.  And the thing which struck me was him explaining that, you do your pitching but mostly it’s for the local community to get the percentages up of people who want the Olympics there.  So you spend a lot of time around the Stratford area persuading that it would be a good idea to build this thing here.

Sir Keith Mills: The people that vote, there are 115 IOC members are spread around 80 countries in the world but the IOC the International Olympic committee run a poll and they test the temperature of a country at the beginning, middle and end of a bid to make sure the country actually wants the games to come to that country and when we started Dave and I were rather despondent that we only had 49% public support for the bid in the U.K.  But when we got to Singapore, we had 80% to 83% so we had different constituencies we had to take along.  Certainly the British public, the British media which were critical but then 26 International Sports Federations, 203 Olympic Committees and a 115 IOC members all  had to be persuaded that London was the right place for the 2012 games.

Mike Southon: So you were calling on all of your expertise in advertising, loyalty…everything - reputation building, reward…everything just to persuade a whole different set of constituencies of people.  So I guess persuading the British public is a different job to persuading the British media…?

Sir Keith Mills: Yes.

Mike Southon: And how did you address those two tasks specifically?

Sir Keith Mills: We have different messages for them and I think by large it fell into two categories.  There was a huge very complex technical aspect of the bid, literally thousands of legal contracts and huge numbers of spreadsheets and financial forecasts and just going around I mean we had to secure contracts for 40,000 hotel rooms, we had to own every single poster site in London, we had to negotiate 85 venue agreements.  It was immensely complex piece of technical work and of the 100 odd people in the Olympic bid probably 80 of them worked on the technical aspects of the bid.  But the technical bid only got you to really the starting point and by the time that was all over, really Paris and London and Madrid were all deemed to be technically proficient.  And then it was all about getting people’s votes and starting with support in the U.K and then support internationally and then at the end of the day in Singapore, getting more than 50 people to press the button at the appropriate time..

Mike Southon: Yes because I really would like to know about that because it’s a wide held belief that these IOC members because of issues in the past are largely immune to any kind of persuasion because they have to be so careful of what they are doing.  I mean how did you divide them up and then manage to persuade them to your point of view?

Sir Keith Mills: Well in the early days we identified those that we thought we could rely on as if you like our supporters of which they were probably 15 or so perhaps 20, those that we thought would be voting for Paris and Paris’ main supporters and we considered everyone in the middle which was the majority to be a potential vote.  So we loved our supporters and actually got them to help us you know friend get friend, we took the group in the middle and tried to understand what their voting patterns might be and you only do that when you get to know them and more than anything else and this is certainly the case of business - people do business with people they like and trust.  And so getting close to these individuals, getting to know them actually I don’t think either Seb or I ever, ever asked for a vote, ever.  We just asked their advice on what they thought London should do to host the best games in history.  We used them as the experts to tell us what we should be doing and by doing so they felt that part of their ideas were incorporated in our bid and so by the time we got to Singapore there were 66 IOC members that we thought at some stage we could get a vote from and we arranged over 48 hours, a meeting with all 66 - a 30 minute meeting with all 66 members with either myself and the Prime Minister or Seb and the Prime Minister, or Ken Livingstone and myself or combinations based on the individuals and because we built up a rapport with these individuals we could talk to them about the things that were important to them, it wasn’t rocket science really.

Mike Southon: Well you’d obviously done everything you could but how confident were you really going into that last vote.  Did you think you were going to win?

Sir Keith Mills: I have to say sitting in the front row with Seb, waiting for the envelope, he said was convinced at the last minute that we had lost although I couldn’t understand it because I was certain we’d won.  And he came to that conclusion because we had only two or three photographers in front of us and there were 40 or 50 in front of the French but they moved quite quickly.

Mike Southon: How fantastic and it’s a great story and all credit to you and the awarded with the knighthood, was it just for that or for other things you have done?

Sir Keith Mills: I think that was pretty much it, I mean I haven’t done anything else in my life so...

Mike Southon: Well you’ve done a few things but not…?

Sir Keith Mills: I think the Olympic bid did it.

Mike Southon: And hair-raising going to Buckingham Palace, I mean the sword thrust at you?

Sir Keith Mills: Ah it was fantastic, it was a wonderful day and something certainly I never expected to have happened, fantastic for your family, you know taking your wife and kids to Buckingham Palace is an extraordinary experience and they were very proud and that was just a wonderful day.  And I’d never understood those, I sort of asked whether they will accept an honour turning one down, so I think it’s just a great thing for your family to experience.

Mike Southon: Absolutely and then after that you are back to your idea of the America’s Cup?

Sir Keith Mills: Still having won the Olympics, absolutely.  I mean when we came back from Singapore we had a lot to do and not least I had no intention of running the Olympic Organising Committee for the next seven years, apart from everything else I was completely knackered.  Running an organisation of 3000 people, 100,000 volunteers isn’t my skill set.  And so Seb and I went up and found a great CEO in Paul Deighton from Goldman Sachs and between us we then built out a fantastic management team at London 2012.  Seb remained as Chairman, I became Deputy Chairman and having got the organisations established which took almost a year, I was then free and clear to sort of think about other things.  And at that stage the 32^nd America’s Cup was reaching its conclusion and I started to pull a team together to do some feasibility on whether it was sensible to really have a go to submitting a British team.

Mike Southon: And so how are you going about that, what are you doing?

Sir Keith Mills: Well in January this year, that’s January ’07 after about six or nine months of research I decided it was a challenge that was winnable and at the end of the day I wasn’t going to spend my money or devote my time to something that was not winnable and I really had to get comfortable that we had the talent, both on the water and off the water and that the competition itself and the competitors that were within the competition were at a stage in its development.  I mean America’s Cups has been around for a long, long time that would enable us to win it and I was pretty convinced by January this year that it was winnable and I announced Team Origin at the London Boat Show, spent January to July which is when the finals of the America’s Cup were taking place, putting the team together.  Whilst all the other teams were busy trying to win races I was busily signing up all their best people for next time and buying the assets.  We bought a boat from the Swiss and we established our base in the U.K and then we finally announced our full team about a month ago really.

Mike Southon: So you bought a boat from Switzerland, a landlocked country, they are good at boats, are they for some reason, how does that work out?

Sir Keith Mills: The Swiss are the current holders of the America’s Cup.

Mike Southon: And they have a coast line?

Sir Keith Mills: They don’t.

Mike Southon: That’s kind of ironic.

Sir Keith Mills: Actually a very good sailor, also happens to be a billionaire called Ernesto Bertarelli decided that he wanted to compete for the America’s Cup and he went to New Zealand and stole the entire New Zealand team and with the New Zealand team went out and won the America’s Cup for Switzerland.

Mike Southon: A bit like the Eurovision Song Contest.

Sir Keith Mills: A little bit.  A little bit but any way the Swiss team had developed the best America’s Cup boats and as you need a boat quickly to start sailing, the best way to do it is to buy one of the best boats which is what we have done.  And so that boat, we unveiled at the Southampton Boat Show about a month ago along with about 60 or 70 members of our team, which includes some of Britain’s best sailors Ben Ainslie, the Olympic gold medallist and Iain Percy also an Olympic medallist and so far the team is looking great.  We have decamped to Valencia, the whole team will be in Valencia from January and we start racing in March.

Mike Southon: Fantastic, so you obviously like a challenge but I am getting the strong message you only take a challenge on if you think you are going to win or succeed at what you set out to do.  So Personal challenges, what was the hardest time or the growth strains that you went through, or the things that were a challenge along the way for you?

Sir Keith Mills: I think whenever you have a big loss, in a business, business goes pear-shaped as they always do every now and then, I think the ability to and that can knock the confidence out of you as a businessman, to be able to pick yourself up and deal with failure, I think is a really, really good attribute for an entrepreneur.  And I sort of had my share of knocks and failures and I think everyone in business should and one of the things I think it is a shame in this country in the U.K is that’s not recognised as an attribute.  In the U.S, frankly you won’t raise any private equity finance unless you’ve had a loss or two because they consider it to be part of the learning process.  In this country if something goes wrong you are tainted and that’s a great shame I think.

Mike Southon: So how do you deal with failure?  Is it something you do internally or you go to your mentors for advice, advisors, what do you do to get through those?

Sir Keith Mills: Well I think having good people around you whether they are partners or advisors I think are crucial and I’ve had some very good advisors and you mentioned Coutts and I have been banking at Coutts, a long time now and I would count them amongst my advisors both personally and from a business perspective.

Mike Southon: What sort of advice do they give you?

Sir Keith Mills: Well it’s just another sensible independent and neutral pair of ears and it’s almost a form of therapy I think sitting down with somebody that understands you and understands your business and can help you talk through some of the issues and the challenges you have got to face.  And a good advisor whether they are a bank or an accountant or a lawyer, if they do the job properly, they do act as that sort of sounding board.  You know it can be very lonely when you run a business.  I think most entrepreneurs will tell you that it is very difficult to have frank discussions with people in the business because some of those discussions revolve around things that you don’t want people in the business to know about.  So it’s good to have a small group of advisors who know you, know your businesses and when every now and then you come to a crossroads you can sit down, have a glass of wine with them and say, look, you know I think I might be wanting to do this that or the other, and they can tell you, you are either crazy or give you support.

Mike Southon: And last question about Coutts, do you come here often for meetings and networking, do you find that Coutts network useful?

Sir Keith Mills: I have come to a few, these days time is at a premium, but whenever I can I try and get into Coutts for either the entrepreneurial forums or some of the events that they have that are of interest to me but time is the biggest problem.

Mike Southon: Excellent, well obviously I wish you earn all your endeavours, especially the America’s Cup and delivering the Olympics which of course is a big task. So it has been Mike Southon for Beermat Radio and Coutts talking to Sir Keith Mills. Thank you very much.

Sir Keith Mills: You’re very welcome.