Kevin Luscombe is a partner in the strategy consultancy Growth Solutions Group. He was formerly chairman of the advertising agency Luscombe & Partners and continued on the board of the company for three years when it was sold to the Clemengers agency in 1986. He is a director of APN News Media, and Shopfast, an online retailer. He has been a senior marketer for Heinz US and Procter & Gamble. He is a fellow of AIM.
AIM: When did your career in management start?
Luscombe: I began my corporate career in 1966-67 with Heinz in Australia and in the United States with Heinz and Procter & Gamble. Marketing was just coming into the language in those days. In my later years I worked with Tony O’Reilly at Heinz. He was one of the best marketers I have seen.
AIM: What did you learn from this experience?
Luscombe: I learnt that marketing is a lot more about the rigorous analysis of facts before you let your intuition take over. Marketing is not a sterile, facts-driven game, nor is it just an imaginative game concerned with intuition about customers. It is about both things.
AIM: There has been a heavy emphasis on marketing in the e-commerce environment. What is your view of it?
Luscombe: I see a dilution of the first part: the strategic rigor that is needed. The e-commerce companies have turned speed of market into a frenzy. Too often in the e-market people are saying: “We have an answer, now where is the market?” I’m no Luddite: many of the technological developments are fantastic. But if it does not have the rigor of identifying what customers are looking for, then it will fail. A lot of e-companies have hit the wall because of that.
AIM: What do you think will be the financial consequences?
Luscombe: We will see merger after merger after merger between e-companies and traditional companies. It is well established in retail companies that customers get what they want, when they want it and in the way they want it. When you get a retailer tacked on to a well-honed internet offer, you are going to have a happy customer.
AIM: One of the common mistakes in the e-commerce world is failing to realise that equity capital is more expensive than debt capital, is it not?
Luscombe: Exactly. It has exacerbated the bad decisions that many people [in e-companies] make. They are doing things for the wrong reasons; looking at the “burn rate” [squandering of capital] on the calendar. The mere fact that you now have an expression “the burn rate” is revealing. A lot of the spending is not related to the tasks, it is related to the amount of funds available.
AIM: What is your view of brand management in Australia?
Luscombe: The role of marketing, and the understanding of what brand management is, has been pushed down the management line. If you took 20 annual reports you would see that the brand name is given great prominence. But if you attend board meetings in those same companies, the brand name is unlikely to be discussed even once a year. The reason companies like Nestle, Mars, Heinz and Procter & Gamble continue to be successful without being heroic is that they not only know about branding, they regularly discuss it. But in Australia a person who is two years out of business school is left to play with a so-called critical asset. The understanding of what is a brand asset in Australia is scarce.
AIM: What is your view of the general state of Australian management?
Luscombe: A lot of Australian companies are owned offshore, and a lot of managers see life in terms of getting the next set of papers to world headquarters. It is hard to get them to think long term and strategically. They become internal managers; they seldom have an expansive approach. They are just branch managers. And when you do have locally owned companies, they have boards that are not excited about long periods. We are still coming out of the mental recession after the late 1980s recession.
AIM: So in spite of strong growth there is still a defensive orientation?
Luscombe: A lot of senior and middle managers only know how to get costs down if sales are falling or there is a squeeze on margins. They know how to get rid of people, as opposed to expanding into new markets. It is a shame, because individual Australian managers are capable of a wide view. We are generalists. A lot of Australian managers are frustrated because they are capable of doing more, but they are channelled into a rote-style, quarter-by-quarter, numbers-driven management.