Keeping to the Straight and Narrow

A week on a narrowboat with the bank pretty much within touching distance – what could possibly go wrong? Well, quite a bit it turns out – the Ross family seem to have developed an unerring ability to turn a rhetorical question into some sort of challenge.

All started well. The grandchildren met us on time. We said hello, goodbye to their parents (who seemed perhaps a little too pleased to see the back of their brood) and piled onto the boat. It wasn’t quite as new as we’d hoped, or the photos had suggested, but, as I increasingly feel a certain nostalgia for the 1950s, the dated décor simply added an air of authenticity and I was sure we’d hardly notice the musty smell after a day or two. A quick lesson in boatmanship and we were off. The map the boatyard had given us suggested there was a riverside pub about 12 miles upstream; it was after three but it seemed a reasonable target. By nine o’clock we were still plodding up river, a long way from the pub and it was getting dark, very dark. Time to admit defeat and find a clearish spot on the riverbank to moor up for the night.

A narrowboat is a long craft. It may or may not be true of all such craft but ours had three mooring ropes, one fore, one aft (note nautical terms) and one in the middle of the roof. I pulled in close to the muddy bank and hopped off with the stern rope in hand. The current was stronger than I’d expected and almost immediately the bow started to drift from the bank. I ran to the front ‘Quick! Quick! Throw me the rope!’ The thing about throwing coiled ropes is that you have to sort of let go of all of it as you launch it otherwise it just lands at your feet. The rope landed at Mrs R’s feet. The bow drifted further out. ‘Quick! Quick! Sam, throw me the middle rope!’ Sam, who is ten, froze, looked simultaneously baffled and horrified before promptly disappearing into the boat. I wouldn’t have minded so much if I hadn’t spent the first hour barking at the grandchildren to stop scurrying along the roof lest they trip on the aforementioned rope and fall in.

The boat was now at the point of no return. No worries, I thought, I’ll hang on to the stern rope and let it pirouette; we’ll be facing the wrong way but otherwise no harm done. Which would have been fine if the boat were not longer than the river was wide. Seconds later, through the darkness, I heard a crunching sound from the bow as it forced its way into the reed bed on the opposite bank. We were wedged firmly across the river. Trying to push the boat with the current simply made the situation worse and pushing against the current was futile. It was dark and we were miles from anywhere.

‘What are you going to do now, Richard?’ Was Mrs R’s not entirely helpful comment.

It’s easy to misjudge our environment, especially if you can’t see too clearly, and from time to time we all get it wrong. As part of our series of Masterclasses on building valuable businesses we’ve been looking at the ways companies innovate out of sticky situations. A good starting point for innovation is to look at what you already have and how this can be used differently. This Resource Based View suggests that if you have ( or can develop or acquire) resources that are both useful and unusual, and you build processes to combine these you will end up with goods or services that are better than the competition – which will give you the holy grail of business, sustainable competitive advantage.

The cases of Eastman Kodak and Fujifilm illustrate this approach in action. At the turn of the millennium they were the number one and two colour film manufacturers; by 2010 they had seen their core market collapse by more than 95%.

Both had seen the approach of digital cameras and had started to change their business models to meet the threat; indeed Fujifilm had built the first digital camera back in 1988.

Kodak responded by using their strong consumer brand to support the launch of a range of low-cost, mass-market digital cameras. They were competing on price and, although they achieved a large market share, were barely profitable. A second wave of innovation (smart phones with integrated high-quality digital cameras) wiped out the market for cheap cameras and Eastman Kodak filed for bankruptcy in 2012. From the perspective of the Resource Based View, Eastman Kodak used one resource, a strong brand, but did not combine it with other resources or use it in a particularly unusual way.

Fujifilm also branched into digital cameras but used their understanding of lenses and managing light to create high quality models aimed at professionals and hobbyists – markets where they could compete on value rather than price and which were broadly unaffected by the rise of the smartphone. Importantly, they also diversified more widely, using their resources in novel ways to create new market opportunities. Their expertise in radiology, initially from developing X-ray films, led them further into healthcare and ultimately, by combining their experience in the manufacture of fine chemicals, into pharmaceuticals. Surprisingly, it was their influenza vaccine that was used in the recent Ebola epidemic, having been found to be effective against that virus too.

Perhaps their most striking use of a resource based view was their foray into cosmetics; the market that was to become one of the fastest growing parts of their business.

Someone at the company had noticed a similarity between the challenges faced by Fujifilm in creating robust photographic film and the cosmetics industry in trying to stop us looking older. Both needed to control the oxidation from ultra-violet rays that leads to colour photographs fading and skin ageing - ultraviolet rays increase melanin in the skin, producing age spots, and break down the fibrous proteins, collagen and elastin, that keep skin taut, resulting in wrinkles and sagging. The company was already using a natural antioxidant in its film, astaxanthin, and it was a small step to extend this to skincare.

The story doesn’t end there. Astaxanthin is fat soluble and does not readily dissolve in water, making stable formulation in cosmetics difficult. Fujifilm already had the key to overcoming this. In manufacturing photographic film, more than 100 types of fine functional particles, such as those that sense light and produce colour, are emulsified and dispersed on ultra thin collagen membranes some 20 micrometers thick. These membranes are then layered 20 or so times. This nano-level emulsification and dispersion technology made it possible to stabilise the astaxanthin in cosmetics products, at the same time making it easier to penetrate the skin. Moreover, collagen, a main component of skin, accounts for about half of the materials in film. Fujifilm was able to use its long experience dealing with collagen to determine the best collagen for skin moisture and tautness.

Fujifilm is an exceptional company and presents, perhaps, an extreme example of the Resource Based View but it also demonstrates well the effectiveness of innovating by first looking properly at what you already have.

Back on the Kennet a plan was coming together. If Mrs R ran the engine full throttle with the tiller pulled right over and I pushed as hard as possible against the current maybe, just maybe, we could get the stern free. The water around the prop became a boiling cauldron, fiercely bubbling and spewing mud over me but the boat seemed to be moving. Just when I felt I could push no more another pair of hands appeared and helped give the final shove to set us free. A couple of minutes toing and froing and the boat was in the middle of river facing the way we’d come. Much grinning and backslapping with the passing cyclist who had helped us in our hour of need before I hopped back aboard.

The next morning, we spun the boat around without any mishaps and headed back up river. As we passed by the point of the previous night’s drama we saw clearly the large sign I’d missed in the gloom:

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