Naked, Majestic, and Angels: a cautionary tale of belonging?

"NO-ooh!" 

A cry from my husband over Saturday morning coffee.

Political comment on the election?
News of the death of a much-loved actor?
Another tech innovation hit the dust?

No. Much more personal…
An email from Naked Wines saying it has been bought by Majestic Wine Warehouse for £70m.

It was a cry of betrayal of belonging.
Naked Wines was the antithesis of wine warehouses.

As part of the deal Naked's founder, Rowan Gormley, is taking over as CEO of the group.
It felt like David had put down his slingshot and gone to man Goliath's big guns.

Belonging is right at the heart of Naked, as an enterprise and as a brand. Customers, growers, and the team behind it, all feel a close sense of belonging.

My husband has been an Angel with Naked Wines since soon after it started eight years ago as a new concept. For a modest investment 'Angels' support independent wine-growers and in return buy interesting decent wines direct from the source at a good price. A small community with individuality, interest and mutual benefit.

It all felt like belonging to a maverick, independent club of like-minded people. Wine-lovers without the pretension. Insiders but outside the establishment.

The note to Angels emphasises that the deal solves Naked's biggest bugbear - distribution. Plenty of reassuring words of ‘exciting news... good for you’ or ‘we’re not selling out’. But could ‘Majestic wine warehouse’ and ‘click and collect’ undermine this?

The personal dismay of one Angel reveals a hidden commercial risk. 
What happens if a deal dislocates the sense of belonging for customers and partners? 

As well as employees, mergers create wide ripples of impact on markets and communities that can quickly destroy belonging - and value.

BBC Business correspondent Linda Yueh has called 2015 the year of the mega deal. This one's a bit modest at mere £70m, compared with last week's £47bn Shell-BG Group acquisition. Still it exposes some of the belonging challenges in these big deals.

All the fine talk of compatible businesses, synergies in strategy, creating more value... can ignore the complexities of culture clash:
 
What if the people whose loyalty has created all that value just don't want to belong any more?

Belonging to Naked was liberating. A bit anarchistic even.
It defines us because of what we don't what to be. 

Naked's style has been joyously informal, sociable and direct. We've enjoyed exploring, discovering new possibilities. At the wine tastings we chat with the growers while sampling - a real sense of intimacy. No spitting-pretence to be proper tasters: just enjoy flavours. Then rollock our way home, slightly squiffy, on the tube.

Naked’s unique relationship with customers is acknowledged by Phil Wrigley, Majestic’s chairman, in the FT's Lex column

 “Our online [business] is only 10 per cent and we are behind in building bridges with our customers online.

“Naked specialise in customer loyalty. We could have built it, but it would have taken time so this deal is an accelerator.”

It’s a virtuoso performance in social enterprise networks, far better than most retailers.

But, though Naked already has 300,000 customers compared with long-established Majestic's 640,000, maybe the commercial reality didn't add-up without bigger backing.

The Telegraph comments:

"Although Naked Wines grew its sales 40pc in 2014 to £74m, it made a loss before interest, tax, depreciation and amortisation of £3.3m.
The City gave the deal a lukewarm response, with shares in Majestic rising ½ to 318¼p”

Will Naked throw the baby out with the bath water (wine?) ?

I can only tell you that there's a slightly glum Angel in North West London, feeling a little less Naked.


At Belonging Space we help organisations create a sense of belonging, keeping ethos at the heart of their business.

isabel@belongingspace.com


www.belongingspace.com

BG-Shell merger: beware the Belonging challenge

A mega merger between Shell and BG Group in the headlines this morning with news that "Royal Dutch Shell says it has agreed to buy oil and gas exploration firm BG Group in a deal that values the business at £47bn."

Mergers and acquisitions pose some of the most complex and costly Belonging challenges for business.

This promises to be one of the biggest mergers so far of 2015 and the first big energy company merger in a decade.

It comes just a couple of months after Helge Lund took up his position as CEO earlier than planned in order to get stuck into the challenges of reviving BG's fortunes.

Interesting times. As the oil and gas market continues to crash, taking economists into a tailspin, what future - in a sector where big is not just best but apparently the only way - other than the gobbling behemoths?

The numbers look impressive. But beware the excitement of 'look at the size of my merger'.

Time and again the early promise of big mergers ends in small value - and, after the swag claims, headlines of disaster.
KPMG, among others, a few years ago found that more than 80% of mergers fail to create value - and over 50% actually destroyed value.

And the biggest cause? Failure to merge cultures.
 
Culture can be the greatest invisible threat to business - or the most powerful intangible asset.

What does it mean to belong to this newly merged company?

What is our ethos, what is 'doing the right thing'?
This is what guides decision-making in daily business, far more than stated strategy or policy.

The question for employees post-merger, once they have some assurance that they still have a job, is
"What do I belong to?"

BG group has done steady work on creating a new brand, though whether for employees this meant a confident sense of belonging is unclear from the outside.
Shell has a deep-rooted sense of belonging in its blood-line. Its mammoth scale with 92,000 employees dwarfs BG Group's 5,200.

Both companies make fine claims about values and principles that, in theory at least, sound compatible. But the reality of integration is all about how those values are put into action.
And how well people with different heritage and specialism can work together - quickly.


Far from being soft, this is hardcore: culture and belonging can make or break the success of a merger. The need for rapid shifts to survive, reconfiguring teams and structures, intuitive collaboration, upholding shared ethics... this takes  deep commitment within - not separate from - daily business activity.

And what of leadership? Does BG still gain the opportunity from Helge Lund's direction? 

While a lot of focus in the British press was on his pay offer, more interesting is his style. 
In over ten years as President of Norway's Statoil Lund gained respect for both shrewd commercial direction and careful stewardship of the wider impact on society. His emphasis was on values, safety and sustainability alongside profit. 

It's an unusual balance that business - especially the oil business - sorely needs. And requires much subtle craft in culture behind the strategy.

So let's watch this merger carefully.

Will cultures merge to support success?
How will the business create a sense of belonging?
And will shared values turn into value?


At Belonging Space we help organisations create a sense of belonging, putting ethos at the heart of their business as the greatest intangible asset.

isabel@belongingspace.com


www.belongingspace.com