Lyreco has long been synonymous with consistency, so it must have been something of a shock to the system to see a new CEO come and go in the space of a mere eight months last year. The reaction to turn to Steve Law, the Europe and Canada Managing Director and 20-year Lyreco ‘veteran’, initially on an interim basis, was therefore perhaps not a surprising one.
Law certainly had his hands full from day one, overseeing the integrations of acquisitions in Iberia, Switzerland and Finland and dealing with declining sales in a couple of key markets while looking to refocus and map a go-forward strategy in the face of continued economic uncertainty.
OPI spoke to the Englishman just a few weeks after he was named permanent CEO at Europe’s number one contract stationer.
OPI: You’re just a few weeks into the job on a permanent basis. Have things felt different to the previous six months?
Steve Law: I can’t say that they have, to be honest. Quite a few people have asked me how I feel and I think the big change in my life actually happened last August when I was asked to step in on an interim basis. My feeling now is I’m just doing the job that I was asked to do back then. I had a nice glass of champagne to celebrate but, you know, ten minutes later I can’t say that my life felt any different to the way it had felt in the previous days, weeks and months.
OPI: Do you feel you have more freedom to make any major decisions that perhaps you hadn’t been able to make when you were interim CEO?
SL: Not at all. When I sat down with Eric [Bigeard] and Georges [Gaspard – Lyreco’s main shareholder] last August I said to them: “You know I’ve never been any good at babysitting; the only way I know is to run a company and I will look to run the company.”
The first thing I did was to sit down with the senior managers here and brainstorm a list of the top ten things to focus on. We prioritised those and then got on with it from day one.
OPI: Going back to last August, were you surprised to be asked to take on the role?
SL: Put it this way, I could see it was not working out with Philippe Martinez and I could see we were heading towards a degree of confusion and instability in the company unless something was done. It was still very flattering that they asked me to do it but, you know, I do have an awful lot of experience in the company. I’ve done so many things in the business and I’ve got a strong working relationship with Eric. So, I think if you go down the logic route, it was getting difficult and I was a logical person to ask to step in.
OPI: When Philippe was appointed, Eric talked about having a “fresh pair of eyes” on the company. Do you think – with the benefit of hindsight – that making an external appointment was not the correct decision?
SL: We do have a very strong culture, there’s no doubt about it, and when you’ve had one CEO for over 20 years the company has got a very clearly defined way of doing things. That said, I would still go back to what Philippe Martinez did in the company and draw many positives from him. Many of his ideas and observations really made us think, and certainly a number of them have been carried forward into our future statements.
And I still think that recruiting externally at a senior level will be of benefit to the company. If there was possibly an error or a misunderstanding, it was to bring somebody in right at the top without a deep understanding of how we do business.
OPI: OK, you mentioned these priorities that you’re focusing on. Can you provide some more details?
SL: Sure, I’m happy to talk about a few at this moment in time. It’s got an overall badge called ‘Future now’ and, as you can imagine, the clue is in the title; let’s stop talking about all of these ideas and initiatives, and let’s start delivering and getting them out into the marketplace.
In terms of products, we all know about the impact of the digital age, so we’ve changed the brief of the company; instead of having the reference of office supply solutions, we’ve changed the brief to workplace supply solutions and that one word obviously gives us a much bigger remit in terms of product areas to look at.
Traditionally, we’ve had 15 product families in our portfolio and we’re now looking at sections 16 and 17. This takes us into a whole range of different areas such as extending catering and hygiene and going into personal protection equipment, industrial packaging and other product segments. That’s certainly something we are looking at in a lot of detail and when we had our group supplier day recently that was one of the key messages we gave to them.
The second key message is a significant redevelopment of our online ordering system. Our current online ordering system is basically just that; it was originally devised as a method to replace the fax and it is a very strong, but simple, ordering tool. But if you go online these days, web shops are a lot more than that: they’re a shopping experience. We’re actually in the start of the rollout now, and will launch to all subsidiaries later this year. We are getting our suppliers more geared up for product placement and product promotional opportunities, and we see a lot of benefit in that area going forward.
OPI: Other major resellers have been expanding product categories and developing e-commerce sites for some time now. Would you agree that Lyreco has been a bit behind in this respect?
SL: I’m not sure about that. It was surprising talking to our suppliers when we were looking at these areas because I didn’t necessarily detect that they’re totally ready for this change either. So to me there’s a lot of talk and there’s a lot of commentary but I don’t see – and I might be misreading this situation – a lot of dramatic action.
OPI: Will the online ordering system just be available for Lyreco account holders?
SL: Yes it will. We’ll keep it to customers and to prospects at this stage. Whether we totally open it up sometime in the future, I’ll leave that open because you never know in life. But at the moment we see a tremendous amount of additional revenue by opening it up to our customer file. And with our business model based on salespeople aligned by sales territories, I’m not sure that we understand yet all the implications of offering an open e-commerce site.
OPI: What about other components of your ‘Future now’ programme?
SL: Another key area we’re working on is the tools for our people. We’ve had mobility software for some time now for field and corporate, but it basically needed a lot more investment; ensuring that our tools work both off- and online and across multiple devices – laptops, tablets and smartphones – and we’re on a big rollout programme throughout the year.
OPI: It sounds like capital expenditure might be fairly high this year.
SL: I’ve seen more zeros in the last six months than I’ve seen in my career to date! It’s a lot of investment now and the plan is it pays dividends in the latter part of 2012 and in 2013.
OPI: Was this investment already planned?
SL: It was talked about. The advantage I have is my shareholders are very close and if I sit down and talk to them – because they understand the business in detail – it’s not a difficult sell to explain that we need to be improving areas such as the web shop and salesforce tools even though there are some big numbers behind them. The shareholders know from past experience that if they continue to invest in this business it will continue to grow and perform. And this is nothing new; it goes back to when the growth started in the early 1990s. So the investment has always been there.
OPI: Anything you can say about the commitment of the Gaspard family to Lyreco and any possible succession plans?
SL: As far as I can see, Georges is very happy to continue for a long time yet. I don’t get any view or any vision of him looking to step down in the near future. He’s in the business on a regular basis, he’s passionate, hungry and wants the business to continue to do well. The message I’ve had from Georges in the last six to nine months is: “Let’s keep pushing on, let’s keep investing and let’s keep looking to grow the business.” And I don’t see any change in that at all.
OPI: Turning to Eric, someone else with a long relationship with Lyreco, I know he took on the co-Chairman’s role in August; has that changed since you’ve taken on the CEO role on a permanent basis?
SL: Yes, it has. My reporting line during the interim period was to Eric; my reporting line now is to Georges Gaspard. Eric has resumed his duties on the supervisory board and will focus on the specific area of strategic development – and for that read acquisitions and partnerships. He has such an incredible network and with him performing that role it will allow me to drive out the operational strategy of the company.
OPI: You’ve recently announced partnerships in South America. Any other markets you’re looking at? The other BRIC countries for example?
SL: Obviously I can’t go into too much detail on that, but if you’re asking me for a level of preference, I would say China is last on the list; it looks to be an incredibly difficult market to make money in and we’re not seeing anything from any of our major competitors that leads us to believe otherwise. So we see other opportunities before there.
OPI: You’ve recently renewed your international agreement with OfficeMax for another three years.
SL: Yes, it was renewed at the end of last year. Our international contracts proposition is very important to us and represents a significant part of our turnover. It’s a very simple process: we take the customers in our part of the geography and our partners take the customers in their part. It’s a win-win; the art is in constant, effective communication and we work very hard at doing that.
OPI: Obviously, you have crossover with ‘Max in Canada and Australasia. Are there any possible developments in those markets?
SL: They’re a very important part of our business. We know there is overlap and we have to deal with it in a very sensitive way.
OPI: Are you satisfied with the scale of your own operations in those markets, especially when you look at the size of Staples after the Corporate Express acquisition?
SL: Certainly we’re far more comfortable when we’re in a much stronger market position. I think everybody is and that’s the way we have typically built our business in Europe. But again, we have to understand that this has not always been the case for us even in Europe and we’ve still got many start-ups going where we are not the number one. Our goal is to have a substantial level of market share; we’re a very determined company and we don’t hop in or hop out at all. We aim to stay the course, but equally there are times – such as with Japan – when we realise that it’s not going to work for us in the long term.
OPI: Looking back at Lyreco’s 2011 performance. How did you do?
SL: We grew the top line by 5% to just over j2.1 billion ($2.76 billion). That growth was aided by the acquisitions in Finland, Switzerland and Iberia that came on board late 2010-early 2011. If you then go into our existing businesses there were a whole range of performances. Broadly speaking, we were very happy with the organic growth in countries such as France, Italy, Germany, Benelux, Finland and Switzerland. Australia grew too, which was nice to see, and our CASH business – which is Czech Republic, Austria, Slovakia and Hungary – was also up and is now trading at around h20 million. In Asia, we were particularly happy with Thailand, which was our rising subsidiary of the year.
OPI: And the disappointments?
SL: I’ll share some of those with you. We are not happy with Iberia from a business performance point of view. Yes, you can always blame the economy and it is a difficult economy there, but equally I think we should have performed better and we’ve just had a leadership change with Marc Schoettel joining us.
We had sales regression in WISE [UK and Ireland], but strategically that was when some major public sector contracts came up for renewal, which for us were either marginally profitable or unprofitable. We rebid on a profitable basis and did not retain. The impact for 2012 is that we’ll have a lower turnover but make more bottom-line profit. These large public sector deals look very attractive from a revenue point of view, but when you get really down to it with the cost to serve and the gross margins that these things get bid down to, there’s actually very little contribution to the EBIT.
OPI: I think office2office said something similar when you won the Ministry of Defence contract from them.
SL: Yes, and they had a point! These things are incredibly complicated to bid on and the reality is the only company that knows the margin is the incumbent. When they passed it to us they said “good luck” and I think, to a large extent, they had a very good message to pass on. I smile as I pass it back.
OPI: Do you think there’s a tendency in our industry to look too much at the top line and not enough at the bottom line?
SL: Yes and yes. The danger is that when companies are under pressure it looks incredibly attractive on the top line, but I don’t know any business book that tells you to lose money on a customer. And, to me, the problem is not with the customers; they’re entitled to do whatever they want to do in order to get the most attractive price for their company. The problem is with us, as an industry, bidding too low and not having the confidence to add sufficient value for our services.
At Gillette – my first company – we had a wonderful phrase for this type of thing which was to call ourselves “busy fools”. There’s no point being a busy fool, because you’re just churning out parcels and putting all this activity through and it’s delivering nothing apart from activity; it’s not giving anything to the bottom line.
OPI: Do you think there’s an industry-wide problem with profitability right now?
SL: Well, if you look at our major competitors it’s publicly stated they have issues in their international divisions. I think the problem when you have to report regularly to the stock market is that you’re under intense amounts of pressure to show something positive on the top line.
That’s a different kind of pressure to what we’re exposed to at Lyreco because, whilst we want to grow the business, I can talk to my shareholders as often as I like; and because they know the business and they know about the business model, they know what is good business to bid for and what isn’t. And I think with some of the recent major contracts that have been awarded across Europe, there has been a degree of just going for the volume and I do not believe – unless my competitors have got different buttons on their calculators to those I’ve got on mine – that these new contracts will deliver bottom-line improvements.
OPI: You obviously know Rob Vale [President, Staples Europe] very well. Is that a weird situation for you?
SL: No, not really. Rob left Lyreco over ten years ago now and we worked together for ten years before that. In many ways I would say it helps me because I know he’s a smart businessman and my view is he’s not going to do anything stupid. The ones I worry about more are the ones under pressure who I don’t think are making the correct decisions for the long-term benefit of their organisations. My view on Staples is that they’re a professional company; we were partnered with them for a long time, so you’re not going to hear me say too many negative things about them. I think they’ve got problems trying to resolve retail, but many companies have problems trying to resolve retail; they’re not alone in that. With other competitors, my opinions may be not quite so high.
OPI: You wouldn’t care to elaborate?
SL: You only have to look at the fact that Office Depot has removed its head of Europe. How can I say this without being too controversial? I’m not sure I can so I guess I’ve got to be: I can understand why.
As far as I can see, whenever we come up against Depot, especially when dealing with the big, high-profile bids which is where you benchmark fairly closely, I’d suggest they’ve been doing some things that go back to a comment I made earlier: unless they’ve got different digits on their calculator, they don’t make too much sense to me.
OPI: Final question. How would you define your leadership style?
SL: Pretty hands-on, pretty straightforward. I’ve grown up in this industry, I’ve been a sales rep, a product manager, a marketing manager; I know how to do pricing, know how to do merchandising, and I’ve been a manager of people for a long time. I’m happy with the detail, I’m happy with the hands-on, and equally quite happy to lead.
I’m not necessarily one of those people out to create a high profile because – and it may sound strange – I don’t need to; I don’t need to impress the stock market because my investors are next door. They’re the people that I’ve got to give a very clear understanding of what we’re trying to do to. Then my family hopefully keeps me fairly grounded. As I always say when I shop at Carrefour on Saturday, standing in a grocery queue nobody knows who I am, so I like to keep things simple.