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FT: Showrooms on show

Showrooms on show

By John Reed

Published: November 28 2007 19:32 | Last updated: November 28 2007 19:32

Newport Lexus, located in upscale Newport Beach in Orange County, California, looks and feels more like a luxury hotel than a car dealership. Its reception, reached via a walkway lined with palm trees, features a water wall, a concierge-style desk with two attendants and a glassed-in fireplace that crackles with flames on cool days.

The keys of a grand piano tinkle through the premises, which includes a reading room, a putting green, a café, and a menswear boutique. Customers buying new cars are greeted in a separate delivery room, their names emblazoned in lights on a marquee above the vehicle, as in: “Congratulations Ed and Judy! Enjoy your new Lexus GS 350.”

The dealership, owned by Lexus franchisees David Wilson and A.J. D’Amato, opened last year and cost $75m (€51m, £36m) to build. Its landscaping includes a $75,000 Senegal date palm, visible from Newport Beach’s busiest intersection. “We didn’t buy it because it was expensive – we bought it because it was an eye-catcher,” says Alan Moznett, the dealership’s general manager. When people see it, he says, it “brings their eye up” to the showroom’s turret and Lexus logo.

Toyota, Lexus’s owner and the world’s most profitable big carmaker, is better known for value than for lavish spending. But the opulence on display at Newport Lexus points to something bigger at work.

Lexus is the top-selling luxury brand in America, the world’s largest car market, and its dealerships are among the industry’s most profitable. Lexus dealers are investing heavily to defend their position in a briskly competitive premium-car segment that is forcing all brands to offer customers more service and perks than ever.

The raising of stakes in the luxury car business is visible right across the street from Newport Lexus at Fletcher Jones Motorcars, America’s largest Mercedes-Benz dealership. The facility, which sells 600 to 1,000 vehicles a month, also has a putting green as well as a shoeshine attendant, nail salon, and customer shuttle service to nearby John Wayne Airport.

When setting up Newport Lexus, the dealership’s owners studied Mercedes’ offering, as well as methods applied at Four Seasons, the hotel chain, and Disneyland, a short drive down the road in Anaheim. As at Disney’s theme parks, technicians are cordoned off in a separate area of the dealership, invisible to clients.

“We took the Disneyland approach of keeping the work we do ‘off stage’ and the customers ‘on stage’,” says Mr Moznett.

When Toyota launched Lexus in the US 18 years ago, it had to battle with Americans’ scepticism that an Asian manufacturer could make high-quality luxury cars. High standards on service was part of the brand’s ethos from its early days. In 1987 its managers adopted “The Lexus Covenant,” a pledge to “treat each customer as we would a guest in our home”. Lexus dealerships were among the first to feature a free car wash and a cappuccino machine, things now commonplace at other luxury showrooms, and even some volume brands.

“We have to consistently set the bar higher,” says Nancy Fein, the vice-president for customer services at Lexus. “Our competitors are doing better and our customers are expecting more.”

Lexus also needs to keep its eye on the ball as it deals with an expanding, and ageing, customer base. While baby boomers are its core clientele, the brand is targeting younger buyers with models like the IS sedan and IS-F, a high-performance car akin to the BMW 3-Series due to launch next March. In all, Lexus will this year sell more than 300,000 vehicles in the US for its third year running, and has more than 2m vehicles on the road. The wider Toyota group is grappling with the growth-related challenges of its rise to the top of the industry, including high recall numbers and the recent downgrading of Consumer Reports ratings for some of its cars.

“We want to customise the experience for every customer, and that is difficult to do,” says Ms Fein.

At Newport Lexus, putting car buyers’ names in lights appears to be one of the solutions. Customers are also invited to relax at the dealership’s plush café, which on a recent afternoon was filled with people watching plasma TV screens, eating sandwiches or tapping on laptop computers. One of the showroom’s customers comes in three or four times a week and treats the dealership as his “satellite office”, claims Mr Moznett. Some non-Lexus owners come to the dealership just to visit the clothing boutique.

Forging strong bonds with customers – and keeping them parked in dealerships for longer periods – is about more than brand image. Most vehicles can be serviced in 90 minutes or less, so if dealers can persuade customers to wait in the showroom they can cut down on the cost of replacement cars, which for some dealers exceeds their rent.

Lexus claims the highest loyalty rates in the industry, with 59 per cent of its customers who repurchased buying another of its vehicles. The brand also has high retention rates for service, with customers returning to its dealerships for maintenance even after their warranties expire.

Other Lexus dealers have come up with alternative ideas: one in Omaha, for example, is experimenting with embedding chips containing customer information in vehicles’ dashboards, so that they are greeted by name on an LED display when they pull up. The chip also downloads information about the customer’s history, preferences and family.

In New York City, where dealership space is at a premium, another Lexus franchisee has cars delivered directly to customers and tutors them on how to use the vehicle’s navigation, Bluetooth wireless, mobile-phone and other high-tech functions.

“It’s no longer about satisfying customers,” says Jim Lentz, who heads Toyota’s sales operation. “If you’re only satisfying customers you’re going backwards.”

How meticulous attention to detail can help drive a brand image

Lexus’s attention to detail in retail is not unique in the premium car market. Infiniti, Nissan’s luxury brand, in 2005 launched new designs for its dealerships globally. Its showrooms now have dramatic glass walls leading into airy spaces adorned with natural materials such as marble, stone and slate.

Like Lexus, the brand aimsfor the feel of a “luxury boutique hotel” in its showrooms, says European brand spokesman Wayne Bruce.

The brand, however, goes further than Lexus in making the look of its showrooms explicitly echo that of its vehicles. Some feature the same wood used in Infiniti cars, and the brand’s head of vehicle design is also responsible for the cars’ “retail environment”.

Attention to detail is important as the brand prepares to launch across Europe, home to some of the world’s most demanding luxury car buyers, next year.

Eye-catching showrooms appear to be part of Infiniti’s battle plan. One of its new-look showrooms opened in February in St Petersburg, Russia, the only European country where the brand operates. Infiniti says customers are spending longer in that showroom than usual. The point, says Mr Bruce, is to “engage the customer and make the whole process of shopping for a car more pleasurable”.

Copyright The Financial Times Limited 2007

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FT: America should be thankful for canny Arab wealth

America should be thankful for canny Arab wealth

By John Gapper

Published: November 28 2007 19:00 | Last updated: November 29 2007 07:08

If you find yourself in Abu Dhabi, as I did the other day, it is worth driving westwards along the Corniche road to the Emirates Palace hotel, a $3bn edifice of marble and gold leaf, where a musician plays teatime tunes on a Steinway baby grand.

Abu Dhabi’s government could buy Steinway & Sons without a blink if it were interested in New York trophy assets, as Japanese investors were in the bubble years and Middle East sheikhs were in the 1970s. But one piano is enough – it has set its sights on altogether bigger things.

Here, on the Gulf coast, is the spot where the world’s wealth is most concentrated. Abu Dhabi, the biggest of the United Arab Emirates, has nine per cent of the world’s oil reserves and four per cent of its natural gas. The Abu Dhabi Investment Authority (ADIA) is thought to have $1,000bn (€677bn) in funds thanks to $90 oil, with billions more pouring in every month. Perhaps the peace and quiet and the distance from New York – a 14-hour flight away – accounts for the sanguine attitude of the ADIA, the world’s biggest sovereign wealth fund (SWF), to the US housing slump and credit crisis. As other investors lost their nerve this week, Abu Dhabi injected $7.5bn into Citigroup in return for bonds convertible into a 4.9 per cent equity stake.

It helps to be separated from Wall Street just at the moment. We have reached the point in the cycle where fear has definitively taken over from greed. Bad news about the US consumer or the housing market, which increases the risk of a recession, is seized on anxiously. Good news, such as last week’s buoyant Black Friday sales figures, is explained away gloomily.

In Abu Dhabi, that noise is less intrusive. The ADIA took the view that a bank with an unmatched global franchise, trading at 1.4 times book value, with a dividend yield of about 7 per cent, was either on the point of cutting its dividend and breaking apart, or was a bargain.

Perhaps it is that Abu Dhabi has a lot of cash, which it has to invest somewhere. The SWFs are taking over from private equity and mutual funds as the place for companies to go when they seek large slugs of risk capital. Investors in the Gulf states hold between $1,600bn and $2,000bn of foreign financial assets, according to a McKinsey study, and are no longer content docilely to buy bonds.

Given this, it makes sense to buy stakes in western banks such as Citigroup and in private equity and hedge funds. Abu Dhabi has acquired stakes in Leon Black’s Apollo Management and the Carlyle Group this year and Dubai International Capital has taken a 9.9 per cent stake in the hedge fund Och-Ziff.

These institutions are conduits through which SWF can make other investments. They get first look at deals in emerging markets in which SWFs can invest, either through or alongside them. McKinsey estimates that the ADIA allocates 50 to 60 per cent of its fund to equities and a further 20 per cent to private equity and other alternative assets, so it is hungry for opportunities.

One thing it is not is stupidity, which was the parochial explanation bandied about in New York this week for the willingness of Gulf investors to expose themselves to dollar weakness and US subprime mortgages. Those who want to believe that expertise is confined to the west whisper that “the Arabs” have more money than sense.

There is little evidence of that. Domestically, it makes sense for the Gulf governments to invest their financial holdings into a variety of assets and to take risk. Many oil-rich states suffer the “resource curse” – the tendency for oil wealth to lead to corruption and lassitude. Gulf states such as the UAE and Qatar are trying to escape the curse by diversifying their economies and assets.

They are doing so in a professional manner. As I wrote last week about Dubai, the Gulf states are buying in expertise in the form of expatriate professionals from consulting and financial firms. According to one banker who has worked with the ADIA, it has hired 1,300 professionals from Wall Street and City firms in the past five years. It does not simply take the word of companies and banks that roll up asking for cash.

They are also getting better at navigating the sensitivities raised by Arab governments investing in western companies, after the fiasco of DP World having to shed its management of US ports when it acquired P&O last year. The recent Gulf investments in financial institutions, and in AMD, the US chip company, and Sony of Japan have not raised too many hackles.

There is no reason why they should – quite the opposite, in fact. Funds such as the ADIA have a clear rationale for taking stakes in US companies and are content not to insist on board representation or strategic control. If these investments work, it will help them to broaden their economies and to avoid the social instability common in oil-dependent countries.

Meanwhile, the money spent on energy by US consumers and businesses is flowing back into the country in the form of capital at a time when it is urgently required. Financial crises call for deep-pocketed investors willing to support institutions in return for the chance of outsize returns and the Gulf states have arrived on cue.

If all of this capital were locked up in Swiss bank accounts and houses in Hampstead, or deposited solely in Treasury bonds and driving down yields while US financial institutions were starved of support, that would be a reason for Americans truly to worry. As it is, they have the luxury of working out what to think about an influx of Arab equity. Mainly, they ought to be thankful.

john.gapper@ft.com

Copyright The Financial Times Limited 2007

FT: Leaders with the gift of starting a march

Leaders with the gift of starting a march

By Stefan Stern

Published: November 29 2007 02:00 | Last updated: November 29 2007 02:00

Why have more business books not been written on the subject of decision-making? That moment of truth when an organisation commits to a course of action would seem to be pretty important. And yet, while there is no shortage of wise-after-the-event studies of why great businesses appear to have succeeded, and why lousy businesses have failed, few books have grappled head-on with the subject of judgment itself.

One reason, given by Noel Tichy and Warren Bennis in their weighty new book, is that it is simply very hard to define all the elements that lie behind big judgment calls. What we crudely label "gut feel" in fact usually emerges from years of experience, reflection and planning.

The authors, both distinguished professors - Tichy is based at the Ross School of Business at the University of Michigan, while Bennis's academic home is the University of Southern California - are well placed to offer a view. Between them they have several decades of experience, having consulted and observed top teams in a range of big corporations.

Rightly, they begin by asserting the centrality of judgment. "The single most important thing that leaders do is make good judgment calls," they write. "In the face of ambiguity, uncertainty, and conflicting demands, often under great time pressure, leaders must make decisions and take effective actions to assure the survival and success of their organisations."

An introductory chapter that wears its learning rather heavily makes all manner of literary and historical references. But citing a comment by the Roman politician Cato the younger does seem pertinent: "'When Cicero spoke, people marvelled. When Caesar spoke, people marched.' Leadership is not simply speech," the authors state. "It is speech that makes people march. Good judgment without action is worthless."

Tichy and Bennis have devised a useful analytical framework to describe how judgments come to be made. One important insight is that judgment is a process, not a single event. Effective leaders prepare the ground for decisions by understanding their situation, getting to know who will be affected by their decision, and allowing time to finesse that decision as events unfold. These "redo loops" are a vital part of successful judgment calls.

For the authors, there are three areas where judgment must be exercised: selection of people, choice of strategy and handling crises. And these judgments come in three parts: preparation, call and execution. Of course, some judgments matter more than others. "Good leaders not only make better calls, but they are able to discern the really important ones and get a higher percentage of them right," the authors say. "They are better at a whole process that runs from seeing the need for a call, to framing issues, to figuring out what is critical, to mobilising and energising the troops."

People decisions are the most important of all, the authors say, more important even than strategic choices. It is so easy for leaders to fall down on this point, getting dazzled by an exciting strategy without thinking hard enough about how achievable it is, given the resources available. As Jim McNerney, chief executive of Boeing, tells them: "If an organisation's standing in front of you with this great strategy, and says that to implement it we're going to do this using skills we've never managed before, selling to customers we've never seen before, yet it fits the strategy beautifully, that's when judgment has to be applied . . . I have a very different view of that than I did 25 years ago when I was a McKinsey consultant."

Making successful judgments is hard. It takes character and ability, the authors argue, as well as courage and decisiveness. Leaders need "domain knowledge" but also self-knowledge. They must have a "teachable point of view", which will allow others in the organisation to understand what has been decided and why.

Many of the usual role models get a name-check here: Procter & Gamble's A.G. Lafley, General Electric's Jack Welch and Hewlett-Packard's Mark Hurd. But the last word should go to Mr Welch's successor, Jeff Immelt, who describes how he forms his judgments in characteristic style: "I make every decision, but get lots of advice. I don't delegate. It's 'What do you think? What do you think? What do you think?' Then boom. I decide."

Boom. Not to be followed, we must hope, by Bust.

Copyright The Financial Times Limited 2007

FT: Why banking is an accident waiting to happen

Why banking is an accident waiting to happen

By Martin Wolf

Published: November 27 2007 18:51 | Last updated: November 27 2007 18:51

Why does banking generate such turmoil, with the crisis over securitised lending the latest example? Why is the industry so profitable? Why are the people it employs so well paid? The answer to these three questions is the same: banking takes high risks. But the public sector subsidises this risk-taking. It does so because banks provide a utility. What the banks give in return, however, is gung-ho speculation.

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Perhaps the most striking characteristic of the banking sector is its profitability. Between 1997 and 2006, for example, the median nominal return on equity of UK banks was 20 per cent. While high by international standards, this seems not to be exceptional. In 2006, returns on equity were about 20 per cent in Ireland, Spain and the Nordic countries. In the US they were a little over 12 per cent. Returns in Germany, France and Italy seem to have been close to US levels.

As Andrew Smithers of London-based Smithers & Co and Geoffrey Wood of the Cass Business School at the City University London note in a splendid report, from which I have taken these data, long-run real returns on equity in the US have been a little below 7 per cent.* Another study estimated the global real return on equity in the 20th century at close to 6 per cent.**

A starting assumption for a competitive economy is that returns on equity should be much the same across industries. If a particular industry earns two or three times long-run average returns for a while, one should expect an offsetting period when returns will be below that average. If the high returns are very high, as they are, the low returns are likely to be negative.

Yet banks are also thinly capitalised: the core “tier 1” capital of big UK banks is a mere 4 per cent of liabilities. If returns on equity become negative in a thinly capitalised business, many banks will become insolvent. The point can be put more tellingly: these high returns on equity suggest that banks are taking substantial risks on a slender equity base. But the slenderness of that base also means that insolvency threatens when bad times arrive.

How do banks get away with holding so little capital that they make the most debt-laden of private equity deals in other industries look well-capitalised? It can hardly be because they are intrinsically safe. The volatility of earnings, the history of failure and the strong government regulation all suggest that this is not the case. The chief answer to the question is that banks benefit from sundry explicit and implicit guarantees: lender-of-last-resort facilities from central banks; formal deposit insurance; informal deposit insurance (of the kind just extracted from the UK Treasury by the crisis at Northern Rock); and, frequently, informal insurance of all debt liabilities and even of shareholders’ funds in institutions deemed too big or too politically sensitive to fail.

Such assistance reduces the cost of the debt associated with any level of equity, since lenders know they are protected by claims on the state, as well as by the equity cushion. This, then, allows banks to take more risk. If things go well, shareholders earn exceptional returns. If they go badly, the downside cannot exceed their equity. Beyond that point, creditors and government share the losses.

Governments are not totally stupid. They guarantee banks because the latter provide a social utility: a safe haven for money, and a payment system. But governments also realise that they are providing incentives for banks to economise on capital and take on risk. So governments impose capital-adequacy ratios, rules on risk management and (if they are sensible) liquidity requirements, as well. Unfortunately, these institutions are not only complex, but are staffed by single-minded and talented people. They go round regulations, just as water flows round an obstruction.

The result of this ingenuity includes “special purpose vehicles”, hedge funds and even, in some respects, private equity funds. These are all, in varying ways, off-balance-sheet banks: ways to exploit the exceptionally profitable opportunities (and corresponding risks) created by high leverage and maturity transformation. Securitisation, to take a salient example, is a clever way to shift what would once have been bank loans on to the books of these quasi-banks, with the consequences we all now see.

Quite as important as the tussle between regulators and shareholders is that between shareholders and their employees. In an industry with long periods of high profitability, followed by massive write-offs, the ideal employment contract for the employee has high bonuses for short-term performance.

Assume, then, a run of profitable years in which shareholders receive high returns and employees are handsomely rewarded. Then comes the year of the locusts. Many employees may then lose their jobs. But since they do not receive negative pay, they are able to keep their earlier gains.

So what we have is a risk-loving industry guaranteed as a public utility. One result has been insufficient capital. That permits splendid returns in good times. But the capital may well prove inadequate in bad ones. The loss of capital could well lead to a tightening of credit in the years ahead.

If so, the structure and regulation of banking might have to be reconsidered, again. One possibility would be higher capital requirements. This would lower peak returns and so reduce the chances of subsequent negative returns. Mr Smithers and Prof Wood suggest a 40 per cent increase in capital for the UK. Other possibilities are measures to make regulation easier: narrow banking is an old favourite, although hard to make work. Henry Kaufman, a highly experienced observer of credit markets, suggests intense scrutiny of banks deemed “too big to fail”.

What seems increasingly clear is that the combination of generous government guarantees with rampant profit-making in inadequately capitalised institutions is an accident waiting to happen – again and again and again. Either the banking industry should be treated as a utility, with regulated returns, or it should be viewed as a profit-seeking industry that operates in accordance with the laws of the market, including, if necessary, mass bankruptcies. Since we cannot accept the latter, I suspect we will be forced to move towards the former. Little can be done now. But when the recovery begins, we must impose higher capital requirements.

* ‘Do Banks Have Adequate Capital?’, Report 298, November 7 2007, www.smithers.co.uk (subscribers only);
** Elroy Dimson and others, ‘Triumph of the Optimists’, Princeton University Press, 2002

martin.wolf@ft.com

Copyright The Financial Times Limited 2007

FT: Climate change: the (Groucho) Marxist approach

Climate change: the (Groucho) Marxist approach

By John Kay

Published: November 28 2007 02:00 | Last updated: November 28 2007 02:00

Why should I do anything for posterity? What has posterity ever done for me?

Groucho Marx describes one end of a spectrum of opinion. The only obligation we owe to future generations is to sell them assets to pay our pensions. Sir Nicholas Stern's climate change report takes an opposite view. Governments must value the welfare of all present and future citizens equally and give no special preference to current voters. The issue at the climate change summit in Bali, of how governments should balance the claims of present and future generations, is fundamental to all discussion.

Economists frame the question in terms of the social time preference rate: what number should policymakers use to discount future costs and benefits? The power of compound interest is such that the answer makes a large difference. At a rate of 5 per cent, which most investors would think disappointing, a cent today would be worth more than a dollar a century from now. The choice of a social time preference rate is relevant not just to environmental choices, but to the design of fiscal policy, the shape of pension provision and the appropriate level of public and private investment.

If Groucho's position is morally indefensible, Sir Nicholas's is operationally impossible. The problem of weighting the present and the future equally is that there is a lot of future. The number of future generations is potentially so large that small but permanent benefit to them would justify great sacrifice now. If we were to use this criterion to appraise all long-term investment, the volume of such investment would impoverish the current population. No government advocating it would ever be elected. The burden of caring for all humanity, present and future, is greater than even the best-intentioned of us can bear.

Most normal people feel sympathy and solidarity. But the intensity varies with the closeness of the relationship. Closeness may be familial, linguistic and cultural, or the product of shared attitudes or physical proximity. We care about the suffering of others, but less about the suffering of those in far continents, are ready to make sacrifices for our grandchildren, but less for their descendants. We care more about dogs and cats than about newts or flies. We care about the environment, but more about the buildings we have seen and the mountains we might hope to see than about states of nature in remote locations we will never visit.

The modern culture of rights, and the value system that proclaims discrimination the greatest of public policy evils, finds it difficult to cope with this plain reality. It leads to an intellectual blindness that empathises with humankind in general but not in particular. He loves mankind, Voltaire wrote, therefore he does not need to love his neighbour. Many religious leaders and moral philosophers seek to extend our natural, but not unlimited, capacity for solidarity with others by calling on sacred texts and abstract principles. They are rarely very successful in this endeavour, and their efforts are usually most effective when they provide validation of their followers' instincts.

Governments cannot be expected to do more, and should not be permitted to do less, than express the concerns their citizens really feel. History illustrates the harm done when the fundamentalism of faith or abstract reasoning overtakes pragmatism as political principle.

George W. Bush sends troops to Iraq to promote democracy; thousands fly across the world to draw attention to climate change. The European Union promotes the windy rhetoric of its Charter of Fundamental Rights but fails to frame a statement of European solidarity or an assertion of distinctive European values.

But it is a particular merit of democracy that its leaders are - not always quickly enough - forced to confront the world as it is rather than as they would imagine it. The balance between present and future will be determined not by moral philosophy or economic models but by the decisions of ordinary savers, investors and voters. Economic and political marketplaces ultimately rule policy, as Groucho's realism recognised.

www.johnkay.com

Copyright The Financial Times Limited 2007

FT: The thirst to build a strong brand

The thirst to build a strong brand

By Jonathan Birchal in New York

Published: November 27 2007 19:17 | Last updated: November 27 2007 19:17

In his native Iceland, Jon Olafsson is a controversial figure. Born into poverty, he left school at 16 and went into the music business before shaking up the island’s sleepy broadcasting world with the launch of its first commercial television channel, gaining the reputation of a maverick outsider.

But in 2003 he sold his business, Northern Lights Communications, and moved to the UK, complaining that he had become the target of a politically inspired vendetta in his home country.

                                 Mr Olafsson, 53, is now back in business in Iceland. In 2004, he worked with his son Kristjan Olafsson to set up Icelandic Water Holdings after buying up a bankrupt Icelandic mineral water producer, and launched Icelandic Glacial, a premium mineral water.

This summer, less than three years later, the company signed a US distribution deal for Icelandic Glacial with Anheuser-Busch, the largest US brewer. The deal marks an almost unparalleled achievement for such a fledgling brand and shows how carefully targeted marketing can be as powerful for entrepreneurs as for big business.

Mr Olafsson says he knows of at least 10 doomed efforts to make profits out of Iceland’s water. But the most successful, produced by the island’s main brewer, Egils, has only managed limited sales in the US, trading under the Icelandic Spring name.

“Numerous companies in Iceland have tried this. But they all went to the mass market, seeking cheap profit, and I think that was the reason for their failure,” he says. “We realised we had one of the best quality waters in the world, and we should go for the quality market.”

In the US, the premium mineral water market is dominated by Evian, produced by Group Danone and distributed by Coca-Cola, and by Fiji, established in 1996 by a Canadian entrepreneur, and now owned by Roll International, a privately owned drinks and citrus company based in California.

Icelandic Glacial’s early moves reflected some of Fiji’s initial strategies, including a focus on packaging and an effort to build the brand through careful product placement with key opinion-formers.

After deciding on the name, chosen because it drew on Iceland’s unspoiled and wild image, Mr Olafsson and his son opted for a square bottle – like Fiji – but with innovative artwork. Design Bridge, a London-based brand design company, set out to create a bottle “to resemble an ice formation with each face unique to represent the ever-changing nature of a glacier”. Slightly convex sides on the bottles carry four different photographs of glaciers in the artwork, so that on the shelf they combine to create a constantly varied image.

Mr Olafsson believes the design has helped him win what Procter & Gamble likes to call “the first moment of truth” when consumers survey a shelf of products in a store. “When you put them together you create a kind of a landscape. With the other labels everything is the same.”

He also drew heavily on his previous experience, using his contacts in the media and film business to launch the water at the 2005 Cannes Film Festival. Bottles appeared at all the parties and were placed in the limousines ferrying actors and directors from Nice Airport. He also sponsored bicycle rickshaws on the car-free zone of the Boulevard de la Croisette at Cannes. “We were the only brand going up and down the street for those 10 days,” he says.

In the same month, the water was placed at the high-profile launch of the Microsoft X Box 360 in Los Angeles. But while Mr Olafsson was confident about marketing his product in the US, the logistics of selling it there turned out to be harder than he’d imagined.

“It was a really tough game, much tougher than I thought it would be,” he says. The challenges included discovering that not all US retailers had adopted a bar coding system that is supposed to have been standardised with the European Union – leading to at least one major retailer cancelling orders when the bar codes could not be read by check-out machines. “That cost us a lot,” says Mr Olafsson.

Realising the need for distribution, the company looked at the largest beverage distributors and saw that Anheuser-Busch had the biggest coverage nationally.

“There was Pepsi, and Coca-Cola, but number one was Anheuser-Busch. And we realised they didn’t have any water. So we found a way to get to them ... and almost immediately they said we’ll do some tests and see if your water has some legs.”

Mr Olafsson also happened upon Anheuser-Busch at a time when the brewer was increasingly interested in expanding beyond alcohol and beer. It launched its first energy drink in 2000, and last year started distributing Hansen Natural’s Monster energy drinks.

The American company has now taken a 20 per cent stake in Icelandic Glacial, and its funding is providing the financing for a new water bottling plant in Olfus, Iceland, capable of producing 30,000 bottles an hour. Separate distribution deals now cover Canada and the Netherlands, with a UK deal imminent. Mr Olafsson declines to give revenue projections.

Meanwhile, Fiji has shown signs of responding to the new challenge. The Olafssons have made their company’s environmental claims a central part of their marketing effort, with Icelandic Glacial winning certification as “carbon neutral” by offsetting carbon dioxide generated by its production and transportation from Iceland to international markets.

While most mainstream environmentalist groups argue that all bottled mineral waters are unsustainable, Fiji has responded by announcing a plan this month to make its water “carbon negative”, through a mix of energy reducing initiatives and carbon credits.

In the looming battle of the island waters, Mr Olafsson places his faith in Iceland. “I don’t like to criticise the competition, but when I think of Fiji, I think of heat and palm trees. But Iceland is cool and refreshing.”

Natural imagery or Nordic sexiness? The right way to sell Iceland

“We’re selling Iceland,” says Jon Olafsson of the branding of Icelandic Glacial, the designer water brand (pictured right). “The purity and coolness of the island – because Iceland is very cool and hip these days.”

But focus on natural imagery, reinforced by its carbon neutral certification, contrasts with previous efforts to market Iceland. In 2001, Icelandic Spring – produced by the Egils brewery – launched an advertising campaign in the US that tried to play up Nordic sexiness, including a bare-chested male model in a dog collar and a partially naked female with pointed ears.

“There is nothing sexy about water. It is all about health,” says Mr Olafsson, who recalls earlier campaigns by Icelandic travel companies featuring three attractive young women in a single sweater. “Iceland has been sold on sex appeal, with the image of a kind of Bangkok of the north. That was completely the wrong approach.”

Aside from Bjork, the Iceland-born singer, the country’s best-known international brand remains Icelandair. “We want to be bigger than Icelandair,” says Mr Olafsson.

Copyright The Financial Times Limited 2007

http://www.britishdesign.co.uk/index.php?page=newsservice/view&news_id=4356

Packaging                                   Back to Current News                                                                                   Email this news item. You may use this facility to email this news item to up to 5 colleagues.                                 Print this article                                                                                                                              As cool as ice…                                                                                                                                                                                                Click on images to enlarge:                    Icelandic Glacial                                            Design Bridge creates a unique bottle for Icelandic Glacial, a new glacial mineral water from Iceland [London, 19th July, 2005] International brand design consultancy, Design Bridge, has created the branding and packaging for one of the purest mineral waters in the world, Icelandic Glacial. Bottled in Iceland by Icelandic Water Holdings, Icelandic Glacial is sourced from the legendary Ölfus spring – formed during a massive volcanic eruption over 4500 years ago and shielded from the elements by an impenetrable barrier of lava rock. The exceptional purity and source of Icelandic Glacial water is reflected in a uniquely designed bottle that sets new standards in packaging design and product appeal. The bottle has been created to resemble an ice formation with each face unique to represent the ever-changing nature of a glacier. The transparent sides have been given slightly convex surface which magnifies on-pack graphics and give the illusion of 3D. The brand marque combines the chemical symbol for water, H2O, with the name of Icelandic Glacial to form a strong, ownable identity. The logotype has been given a sharp edge inspired by the crisp, sharp edges of ice and uses silver to convey purity and refreshment. Photographic images of a glacial landscape have been used on the back and sides of the pack to visually describe the origins of the water. Four different bottle artworks have been created using different landscapes so that bottles standing next to each other on shelf are unlikely to depict the same ice formation. The bottle has been produced initially in four sizes, 500ml, 750ml, 1litre and 1.5 litres.    Icelandic Glacial will be launching in the UK in August 2005 and will be distributed through premium retail outlets, hotels and restaurants. For further information please contact David King at Design Bridge on Tel: 020 7418 1125 Fax: 020 7814 9024 email: david.king@designbridge.com Editor’s note: More information regarding Icelandic Glacial can be obtained at www.icelandicglacial.com                                                                             Submitted: 20 Jul 2005

FT: Take the law into your own hands

Take the law into your own hands

By Alison Maitland

Published: November 27 2007 02:00 | Last updated: November 27 2007 02:00

Mark Rotenstreich has an unusual working life for a high-flying Manhattan lawyer. Not only does he choose which clients to work for, he also typically puts in a 40-hour week, has free weekends and takes vacations when he wants without fear of interruption.

"I work very hard but have much more control over my life than I would at a law firm," he says. He works in an office in his apartment building or at the offices of his clients, which include The Economist Group, Virgin Mobile and A Small World, a social networking site.

"I truly enjoy what I do every day, which is something that most law firm lawyers and many in-house lawyers would never say. Plus, I feel appreciated by clients in a way that I never felt when I was at a firm or in-house."

Mr Rotenstreich, 45, is employed by Axiom Legal, one of an emerging group of alternative professional services firms filling gaps in the market for bespoke support for corporate clients while offering job flexibility that most lawyers, accountants and management consultants in traditional firms can only dream of.

Technology is helping to drive this trend. On the one hand, it enables communities of associated professionals to operate virtually, each working from home or a client's office with just a networked laptop. On the other, by blurring the boundaries of home and work and making it harder for people to switch off, it is feeding a desire for greater flexibility and choice.

Axiom launched in New York in 2000, and has seen rapid growth, opening in San Francisco last year and London this year. It operates with minimal office space and no costly partnership pyramid. This enables it to hire out experienced lawyers to corporate clients at a third to half the rate of the so-called "Magic Circle" of big City of London law firms, says Alec Guettel, co-founder.

"We cover the entire spectrum of what our clients do with one key exception - we don't compete for the multi-billion dollar M&A deals and the biggest litigation," he says.

Axiom, whose clients include Goldman Sachs, Morgan Stanley, Cisco and Yahoo, had revenues of $31m last year. It employs nearly 200 lawyers, most of them with experience of big law firms and corporate legal departments. The gender split is 50/50. "We compensate competitively with Magic Circle firms," says Mr Guettel.

One of its new UK recruits is Penny Froggatt, 42, a former Lovells lawyer and ex-head of legal at Legal & General. She joined Axiom after working as an independent lawyer for several years to gain the flexibility she needed with two children.

"The market is pretty ready for this," says Ms Froggatt. "It's nice to be involved with a new, young dynamic company [like Axiom] that's trying to be something different in an area that's been so traditional and stuck in its ways."

Reuters was Axiom's first blue-chip client in the US, using it for things like customer and supplier contracts, M&A deals and maternity leave cover, says Rosemary Martin, general counsel of the business information and media group.

Axiom's lawyers cost less than law firm secondments and know the business better than someone provided by a temporary staffing agency, she says. "They are generally very experienced yet available at short notice."

Ms Martin thinks Axiom is at the beginning of what may be a wave of change. "It's very interesting that they appear to have very little trouble recruiting the quality of qualified lawyers they want. Partners in law firms are saying the 'Generation Y' lawyers don't seem to be quite as willing to sell their souls to the devil for very high remuneration. They do seem to want quality of life, which might be slightly alarming for the private practice law firm modus operandi."

How do Magic Circle firms respond to the emergence of this new model? "In a dynamic legal market, firms will respond differently," says Stuart Popham, senior partner, Clifford Chance. "Clifford Chance has always been at the forefront of developments in the legal world and welcomes innovation, but does not see it as a threat, nor as a challenge."

Axiom says a few others are now operating similar models, though on a smaller scale.

"We think it's a great sign," says Al Giles, a former Linklaters lawyer now running Axiom in the UK with Mr Guettel. "In the cases where our lawyers work in more flexible arrangements, we're helping our clients experiment a bit. There's a natural trepidation about flexibility - we give them a low-risk way to see it in action."

Eden McCallum operates a similar business model in strategic management consulting. Established by two ex-McKinsey consultants in London, the firm does not directly employ its professionals, however.

Instead, it draws on a pool of about 150 freelance consultants to work on projects for its corporate clients, with 350 others to call on if necessary. These consultants, more than 60 per cent of them men, value the fact that flexibility comes without having to sacrifice earning power. Launched in 2000, the firm has grown fast, with turnover expected to reach £16m ($33m) this year, says Liann Eden, co-founder. It will open its first international office in Amsterdam next year.

On a much larger scale, Resources Global Professionals is an alternative firm providing accountants, IT, human resources and other specialists to assist companies on projects. Originally part of Deloitte & Touche, it has more than 3,200 people on assignment internationally and revenues of $736m.

Its business model allows it to charge much less than big accountancy or consulting firms, says Karen Ferguson, president for North America.

"We do a lot of high-level interim management work and we go into consulting projects, but we don't own the work. The resource is owned and managed by the client."

Unlike Axiom or Eden McCallum, Resources sends large teams into companies for projects such as Sarbanes-Oxley changes or integrating acquisitions. It also has a big infrastructure of offices to manage client relationships, recruitment and administration.

Like the other models, however, it offers job flexibility. Associates, who typically have 16 to 20 years' experience, are paid by the hour rather than earning a salary, so they can choose their projects, take long periods of time off, or work fewer days a week.

One of the attractions is being able to focus on work without being distracted by politics, says Ms Ferguson. "Corporate politics is something lots of people are very tired of after 20 years of it."

Mr Rotenstreich at Axiom would agree with that. "I earn less than I would as a partner in a law firm. It's a trade-off that I'm happy to make because I have a life and I'm happy with what I'm doing."

Copyright The Financial Times Limited 2007

Calvin and Hobbes

 

Bizweek: HP

Inside Innovation November 15, 2007, 5:42PM EST

HP's Cultural Revolution

To pick up the pace of innovation, the tech giant is betting on startups and injecting their DNA into its operations

by Reena Jana

At Hewlett-Packard's (HPQ) Page Mill Road complex in Palo Alto, Calif., in the basement beneath the meticulously preserved offices of founders William Hewlett and David Packard, is a cavernous room that has the feel of a chaotic startup. Tables and chairs are strewn about and a giant, makeshift screen takes up an entire wall, even wrapping around a corner. HP projectors made for corporate presentations are clustered together to cast huge video-game images on the wall. The life-size scenes are so crisp and detailed that you almost feel as if you could walk onto a Madden NFL game or Halo 3 battle.

This game room is the kind of place where you would expect to find young programmers hanging out, jazzed on Mountain Dew and revving up ideas for a new 3-D Web or the next generation of social media. It's a different business culture from the one you'll find in the gray cubicles, where most engineers work, in the rest of the building. The area's playful environment is critical to HP's future. The space—and its projection system, itself a prototype—is one result of the Innovation Program Office, launched in 2006 to help the info tech giant buy hip, nimble startups for its huge Personal Systems Group, which makes PCs, mobile devices, and workstations. The hope is to inject big doses of the small companies' creative juices directly into the HP culture. (See also a playbook on learning from startup cultures.)

HP has learned some key lessons on the acquisition trail over the past two years: how to develop cool, high-margin products that appeal to new consumer groups such as video-game fanatics; how to use social media to conduct Web-based consumer research; and, perhaps most important, how to inspire engineers in HP Laboratories to turn concepts into products faster.

HP's culture has been in turmoil in recent years. The HP Way, the company's management code, was once Silicon Valley's innovation model. Top executives mingled with lower-level employees to discover fresh ideas. For decades the company's engineer-led approach generated a flow of popular, affordable, and utilitarian products until it became synonymous with complacency and high costs. Carleton S. "Carly" Fiorina came in as chief executive in 1999 and tried to blow apart that culture. Her marketing-focused strategy generated strong sales but demoralized employees. Mark V. Hurd, who succeeded her in 2005, has been working to restore tradition and reinvigorate the company's 30,000 engineers.

Trouble is, restoring the HP Way may no longer be enough. The old strategy was for engineers to create technologies and products and then expect customers to buy them. Yet over the past five years the company's businesses—computers, printers and imaging machines, storage devices and servers, and info tech service—as well as those of Dell (DELL), Cisco (CSCO), and Yahoo! (YHOO)—have shifted their focus from developing cool technologies to making products customers want. "We were missing the DNA of an organization that had its finger on customer desires," says Phil McKinney, a chief technology officer of the Personal Systems Group and head of the innovation office.

HP is trying to market personal computers today as being friendly, not just fast and powerful. Its slogan: "The computer is personal again." It's not just selling fast printers, but pitching terrific printing experiences. But shifting away from a tech focus to a consumer orientation is proving hard for a 156,000-person company that includes a small army of engineers convinced they are right.

Enter Voodoo PC. The gaming room at HP was the brainchild of Voodoo's Rahul Sood, co-founder of the 30-person startup based in Calgary, Canada, a cult brand among gamers. Now 35, Sood is chief technology officer of HP's new global gaming business unit.

The tech giant snapped up Voodoo because it's a fan-based, gamer-driven company with a devoted following for its luxe offerings, from lipstick-red PCs to customized $50,000 PCs tricked out with jewels and leather. The machines have cut-out panels that reveal their complex innards—the typical Voodoo units are about as far as possible from the commoditized, no- nonsense gray boxes that HP sells. Sood himself is a fierce gamer, and he began the outfit with his brother to make better machines for himself and his friends. Gamers, not techies, run the business. At Voodoo, "we took the ultimate wish list from customers and rolled it into the product line," says Sood, who has gelled, spiky hair and rectangular hipster glasses. He's now helping to bring that customer-centric DNA to the 600 engineers and researchers who inhabit the huge company's research labs.

"When I first walked into HP Labs, I thought, 'Everyone is smarter than me. They know more about the tech and fundamentals of research.' But I brought a completely different perspective. They don't know what gamers want or need.…No one [at HP] had ever figured this out."

So how is Voodoo, the innovation unit's initial project, changing its new parent? The first fruit of the acquisition, the HP Blackbird 002 personal computer, was available for preorders online in September and hit stores this month. The PC was originally designed by an outside shop, but HP scrapped that plan and redesigned the machine with Voodoo after the deal. It has distinctively Voodoo—and un-HP—touches such as a customizable black metal panel with elegant geometric designs and a liquid cooling system that replaces the distracting hum of fans. It's so user-friendly that consumers who want to customize it themselves can do so without using tools. It takes 10 seconds to replace or upgrade a hard drive on Blackbird—a job that typically requires 30 minutes. Although it's a premium PC (priced at $2,500 to $5,000) aimed primarily at hard-core gamers, the high-margin machine was purchased by film editors, animators, medical imaging specialists, an energy trader, a plastic surgeon, and even Navy SEALs, according to the company. It's a powerful, fast computer with room for five hard drives to accommodate rich graphics.

Curious HP engineers, frustrated at not being able to translate their ideas into products quickly, have been making pilgrimages to the gaming room. Chat up researchers at HP Labs, and the tension between engineers and the suits is clear. "There's an overabundance of ideas in our labs, but there's a gap between labs and product development," says Patrick Goddi, a senior researcher. Before the innovation office was created, he says, "It was hard to get a sense of oomph."

Goddi and various other researchers who are avid gamers visit the room in their spare time. After hearing about the speed (just three months) in which Sood pushed the projector system from a mere idea toward a prototype shown at trade shows, Goddi says he felt a rush of energy. With new confidence, he pursued a potential product aimed at gamers based on his current project, a video-messaging service called Conversa, a cross between YouTube (GOOG) and e-mail. "Rahul fired us up to build something, and to bring fun to work," he says. Goddi was inspired, he says, to develop Conversa as a social-networking tool for online games.

Startups are even providing HP with a new customer-based system that accelerates product development in other divisions. Snapfish (HPQ), an online photo-sharing service acquired by HP in 2005 with more than 42 million members now, inspired an experiment called Snapfish Labs that begins this month. Targeted members of Snapfish vote on proposals coming out of HP Labs and provide instant feedback. One upcoming idea: a service that allows people at conferences to upload, manipulate, and archive photos of meeting materials, including the writing on whiteboards, and share it with people not attending. (The jury is still out—the votes haven't been tallied yet.) Snapfish Labs has boosted the rate of customer-focused innovation because consumers can weigh in early on potential HP products. "We're bringing raw projects to the market more quickly," says Patrick Scaglia, who oversees the strategy of the corporation's Imaging & Printing Group. "Before, this was a challenge," he says. "We had a long investment cycle. We'd go with one idea a year. Sometimes it would take 10 years to get a good idea [to market]."

The process itself of buying startups is teaching HP some hard lessons. Take Tabblo, acquired in 2007. It's an online printing service that allows members of social media sites to format content such as pictures so they look better when printed. Users can, for example, create their own slick postcards. In October, Tabblo and HP announced a partnership with Flickr, the popular photo-sharing and social-networking site acquired by Yahoo. But in putting the deal together, cultures clashed. The HP suits "expected that everything we were going to do was going to be defined by business development, legal, and finance executives. They'd expected to talk about the [partnership] contract for a few months," says Tabblo founder Antonio Rodriguez. "But we were used to time scales of days, not weeks or months." Tabblo surprised the suits by signing the contract and releasing the Flickr service in only six weeks—vs. an expected three to four months—thanks to a casual relationship between Flickr and Tabblo execs that didn't involve lengthy bureaucratic talks. It was a wake-up call for HP. "What has been dramatic in the last year since we acquired Tabblo is that we suddenly have injected inside HP a Web culture we never had before," says Scaglia.

OLD SCHOOL RESISTANCE?

 

Throughout Silicon Valley, acquisitions-as-usual are changing, too. In the past, big established companies usually bought agile startups mostly for new technologies and products. One popular model has been to buy companies and keep them independent to maintain their creativity much like Google (GOOG) and YouTube or News Corp. (NWS) and MySpace (NWS). Or Dell and Alienware, Voodoo's rival in the hard-core gamer PC market.

When large corporations do try to change the ways they encourage creativity, they don't typically go out and buy new companies. Sure, Xerox (XRX), Boeing (BA), and IBM (IBM) sometimes create "skunkworks" teams to help speed cutting-edge technologies. But these groups usually work on projects independent of corporate reporting policies and structures. Other companies build venture-capital units, like Intel Capital (INTC), which vet and fund the development of internal as well as external projects. But these incubated businesses remain isolated from the larger corporation.

What HP, Yahoo, Cisco, (CSCO) and others are doing now is different. Their new strategy is innovation via absorption—and that's very hard to do. "It's difficult to infuse the acquirer's culture with the target's culture," says Saikat Chaudhuri, a Wharton School assistant professor of management who's followed the tactic for a decade. Even HP's McKinney admits: "Companies have to realize this isn't a quick fix. It isn't business process re-engineering. This is a fundamental shift in the culture of an organization."

HP has embraced many kinds of innovation in recent years. The acquisition of Compaq, for example, changed the nature of its business. Hurd's move to raise efficiency and cut costs changed its many processes. Now, it's inciting a cultural change. And the company that began as the prototypical story of two guys experimenting in a garage is trying to see the world through the fresh eyes of a startup. Again.

Jana is the Innovation Dept. editor for BusinessWeek.

 

INNOVATION

Acquirers
Keep target team intact to maintain existing projects and relationships
Keep target team intact to maintain existing projects and relationships
Offer senior positions to startup's top performers to retain talent
Encourage new staff to mix with employees across all areas of company
Startups
Negotiate the use of specific resources
Find a "champion" within the acquiring company
Share processes, don't simply adapt to the parent company's procedures

 

Learning from Startup Cultures

New blood has helped reinvigorate the tech giant

By Reena Jana

 

Read the Story

movies

In The Mood For Love 

 

BY ROGER EBERT / February 16, 2001  

Cast & Credits Chow Mo-Wan: Tony Leung Chiu-Wai Su Li-Zhen: Maggie Cheung Man-Yuk Mrs. Suen: Rebecca Pan Mr. Ho: Lai Chin Ah Ping: Siu Ping-Lam The Amah: Chin Tsi-Ang Usa Films Presents A Film Written And Directed By Wong Kar-Wai Running Time: 97 Minutes. No MPAA Rating (Content Is Mature But Mild). In Chinese With English Subtitles.     Printer-friendly »  E-mail this to a friend »

 

They are in the mood for love, but not in the time and place for it. They look at each other with big damp eyes of yearning and sweetness, and go home to sleep by themselves. Adultery has sullied their lives: his wife and her husband are having an affair. "For us to do the same thing," they agree, "would mean we are no better than they are." The key word there is "agree." The fact is, they do not agree. It is simply that neither one has the courage to disagree, and time is passing. He wants to sleep with her and she wants to sleep with him, but they are both bound by the moral stand that each believes the other has taken.

You may disagree with my analysis. You may think one is more reluctant than the other. There is room for speculation, because whole continents of emotions go unexplored in Wong Kar-wai's "In the Mood for Love," a lush story of unrequited love that looks the way its songs sound. Many of them are by Nat King Cole, but the instrumental "Green Eyes," suggesting jealousy, is playing when they figure out why her husband and his wife always seem to be away at the same times.

His name is Mr. Chow (Tony Leung Chiu-wai). Hers is Su Li-zhen (Maggie Cheung Man-yuk). In the crowded Hong Kong of 1962, they have rented rooms in apartments next to each other. They are not poor; he's a newspaper reporter, she's an executive assistant, but there is no space in the crowded city and little room for secrets.

Cheung and Leung are two of the biggest stars in Asia. Their pairing here as unrequited lovers is ironic because of their images as the usual winners in such affairs. This is the kind of story that could be remade by Tom Hanks and Meg Ryan, although in the Hollywood version, there'd be a happy ending. That would kind of miss the point and release the tension, I think; the thrust of Wong's film is that paths cross but intentions rarely do. In his other films, like "Chungking Express," his characters sometimes just barely miss connecting, and here again key things are said in the wrong way at the wrong time. Instead of asking us to identify with this couple, as an American film would, Wong asks us to empathize with them; that is a higher and more complex assignment, with greater rewards.

The movie is physically lush. The deep colors of film noir saturate the scenes: Reds, yellows, browns, deep shadows. One scene opens with only a coil of cigarette smoke, and then reveals its characters. In the hallway outside the two apartments, the camera slides back and forth, emphasizing not their nearness but that there are two apartments, not one.

The most ingenious device in the story is the way Chow and Su play-act imaginary scenes between their cheating spouses. "Do you have a mistress?" she asks, and we think she is asking Chow, but actually she is asking her husband, as played by Chow. There is a slap, not as hard as it would be with a real spouse. They wound themselves with imaginary dialogue in which their cheating partners laugh about them. "I didn't expect it to hurt so much," Su says, after one of their imaginary scenarios.

Wong Kar-wai leaves the cheating couple offscreen. Movies about adultery are almost always about the adulterers, but the critic Elvis Mitchell observes that the heroes here are "the characters who are usually the victims in a James M. Cain story." Their spouses may sin in Singapore, Tokyo or a downtown love hotel, but they will never sin on the screen of this movie, because their adultery is boring and commonplace, while the reticence of Chow and Su elevates their love to a kind of noble perfection.

Their lives are as walled in as their cramped living quarters. They have more money than places to spend it. Still dressed for the office, she dashes out to a crowded alley to buy noodles. Sometimes they meet on the grotty staircase. Often it is raining. Sometimes they simply talk on the sidewalk. Lovers do not notice where they are, do not notice that they repeat themselves. It isn't repetition, anyway--it's reassurance. And when you're holding back and speaking in code, no conversation is boring, because the empty spaces are filled by your desires.

Cable TV's the Sundance Channel will play Wong Kar-  wai's "Chungking Express" on Feb. 22 and 27, and "Fallen Angels" on Feb. 22 and 26.

Chungking Express 

 

BY ROGER EBERT / March 15, 1996  

Cast & Credits First Cop: Takeshi Kaneshiro Woman In Wig: Brigitte Lin Second Cop: Tony Leung Faye: Faye Wang Flight Attendant: Valerie Chow Written And Directed By Wong Kar-Wai . Running Time: 104 Minutes. Rated PG-13 (For Some Violence, Sexuality And Drug Content).     Printer-friendly »  E-mail this to a friend »

 

At UCLA last summer, Quentin Tarantino introduced a screening of "ChungkingExpress'' and confessed that while watching it on video, "I just startedcrying.'' He cried not because the movie was sad, he said, but because "I'mjust so happy to love a movie this much.'' I didn't have to take out my handkerchief a single time during the film, and I didn't love it nearly as much as he did, but I know what he meant: This is the kind of movie you'll relate to if you love film itself, rather than its surface aspects such as story and stars. It's not a movie for casual audiences, and it may not reveal all its secrets the first time through, but it announces Wong Kar-Wai, its Hong Kong-based director, as a filmmaker in the tradition of Jean-Luc Godard.

He is concerned more with the materials of a story than with the story itself, and he demonstrates that by telling two stories, somewhat similar, that have no obvious connection. He sets the stories in the Hong Kong world off ast-food restaurants, shopping malls, nightclubs, concrete plazas and pop culture (one of his heroines wears a blond wig and dark glasses, and the other seems addicted to "California Dream?in''' by the Mamas and the Papas). His visuals rhythmically switch between ordinary film, video and pixilated images,often in slow motion, as if the very lives of his characters threaten to disintegrate into the raw materials of media.

If you are attentive to the style, if you think about what Wong is doing,"Chungking Express'' works. If you're trying to follow the plot, you may feel frustrated. As the film opens, we meet a policeman named He Qiwu (Takeshi Kaneshiro), who wanders the nighttime city, lonely and depressed, pining after a girl who has left him. He gives himself 30 days to find another girl, and uses the expiration dates on cans of pineapple as a way of doing a countdown. A new woman walks into his life: the woman in the wig (Brigitte Chin-Hsia Lin), who is involved in drug deals.

We expect their relationship to develop in conventional crime movie ways, but instead, the film switches stories, introducing a new couple. The first cop hangs out at a fast-food bar, where he notices an attractive waitress (FayeWang), but she has eyes only for another cop who frequents the same restaurant (Tony Chiu-Wai Leung). He scarcely notices her, but she gets the keys to his apartment, and moves in when he isn't there -- cleaning, redecorating, even changing the labels on his canned food.

Both of these stories, about disconnections, loneliness and being alone in the vast city, are photographed in the style of a music video, crossed with a little Godard (signs, slogans, pop music) and some Cassavetes (improvised dialogue and situations). What happens to the character is not really the point; the movie is about their journeys, not their destinations. There is the possibility that they have all been driven to desperation, if not the edge of madness, by the artificial lives they lead, in which all authentic experience seems at one remove.

Tarantino loved this movie so much, indeed, that he signed a deal with Miramax to start his own releasing company, and his first two pick-up deals are "Chungking Express'' and another Wong Kar-Wai film. There's a lot of interesting Hong Kong films right now, but it centers more on commercially oriented figures like John Woo and Jackie Chan. Wong is more of an art director, playing with the medium itself, taking fractured elements of criss-crossing stories and running them through the blender of pop culture.

When Godard was hot, in the 1960s and early 1970s, there was an audience for this style, but in those days, there were still film societies and repertory theaters to build and nourish such audiences. Many of today's younger filmgoers, fed only by the narrow selections at video stores, are not as curious or knowledgeable and may simply be puzzled by "Chungking Express'' instead of challenged. It needs to be said, in any event, that a film like this is largely a cerebral experience: You enjoy it because of what you know about film, not because of what it knows about life.

In any case, Tarantino may weep again when he sees the box-office figures