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Fathom’s Gareth Dunlop writes about what people designing tech can learn from Gerald Ratner – the man who made one of the biggest business gaffes in recent decades.
I recently watched a webinar by the quite remarkable Gerald Ratner. Now in his 70s, he was able to reflect humorously on the turbulent time in the early 1990s when his throwaway remarks at a private Institute of Directors dinner cost him his jewellery retail business.
During his now infamous speech, he said:
“We also do cut-glass sherry decanters complete with six glasses on a silver-plated tray that your butler can serve you drinks on, all for £4.95. People say, ‘How can you sell this for such a low price?’, I say, because it’s total crap.”
He was finished off by his comment about his store’s earrings being “cheaper than a Marks & Spencer prawn sandwich but probably wouldn’t last as long” as it gave the press the sound bite they needed to run their stories.
He clearly shouldn’t have made those remarks, which crossed the boundary from self-deprecation to sneering at his customers – something he now readily accepts. The mistake cost him £500m and his business.
It is a real shame that he will be remembered for those comments, because he was a quite brilliant businessman, with a real nose for the market and an appetite for risk. His early career boasts the numbers to prove it.
In the early 1980s, Ratner took over 120 jewellery stores in the UK that cumulatively registered annual losses of hundreds of thousands of pounds. By the early 1990s, he had 2,500 stores in the UK and the US and annual profits in the hundreds of millions.
Through the lens of design thinking, what is fascinating about Ratner’s success is that it is founded upon him identifying and acting on an incorrect assumption which everyone else in his industry believed.
‘He disrupted an industry decades before the term was popular’
The jewellery industry in the early 1980s was established in such a way that manufacturers set a minimum price at which their goods could be sold by retailers, and market forces meant that most high-street jewellers eventually ended up selling those products at the minimum permissible price. In a desire to differentiate, the industry’s attentions focused on shop layout, decor and display, alongside the in-store customer experience. In the absence of being able to compete on price, the market focused on giving the customer a perception of quality, luxury and opulence.
But around the time he took over his family’s business, Ratner noticed a queue forming outside another jeweller where the message wasn’t around opulence – but rather the opposite. The window was full of price promotions, with signs using words like bargain and with promises of wholesale prices.
Could the assumed wisdom that quality, luxury and opulence was the only way to sell jewellery be incorrect? Ratner decided to find out.
He immediately went about reorienting his business around the promises of a low-cost, bargain-based, value-focused proposition. His customers responded enthusiastically almost immediately. He started selling products like watches, rings and necklaces below the minimum price set by manufacturers. He was selling so much that his suppliers turned a blind eye to it.
He disrupted an industry decades before the term was popular. He executed on a piece of incorrect perceived wisdom, and the rest is history.
Design thinking invests time exploring assumptions and biases. User experience, or UX, is focused around identifying and testing opinions and notions, which may or may not be true. Innovation design explores theories and hypotheses that can be tested as a means of identifying opportunity.
Ratner’s story reminds us why we do this.
Each of these techniques is founded on the rationale that the absorption of accepted wisdom hampers and limits opportunity, whereas the identification of previously undiscovered truth offers openings for competitive advantage.
Stelios Haji-Ioannou and Michael O’Leary challenged the assumption that airline travel needed to be focused on luxury, and so launched EasyJet and revolutionised Ryanair. Marc Benioff and his co-founders challenged the assumption that software needed to be bought, and so allowed their customers to rent Salesforce in the early days of software as a service.
In the words often (perhaps incorrectly) attributed to Mark Twain, “It ain’t what you don’t know that gets you into trouble, it’s what you know for sure that just ain’t so.”
