Episode Transcript
Tom: Welcome to the Be Inspired series, where we sit down with CEOs, founders and senior leaders of London's listed and private companies. Please rate us and follow us on Spotify, Apple or wherever you get your podcasts. Today we're thrilled to be joined by the founder and CEO of AO World, John Roberts. John is also a passionate supporter of young people and an investor and former chair of OnSide Youth Zones. John, thank you so much for joining the CEO series this morning. I wanted to start off with just a few words from you about AO and how it's evolved as a business?
John: Yeah, well on the basis that all the best businesses start in pubs, we're right up there. You know we are a classic entrepreneurial story of a £1 bet with a friend of mine that we wouldn't start the business with you know no real dreams and vision. People say, did you ever dream it could be what it is today? No is the simple answer. It's been something that's been built, and we keep resetting our bar and our horizon all the time. And we've been going for 24 years, and we've tried really hard to learn from lots of other businesses. And our goal is very much to create a completely customer centric ecosystem around the topic of selling electrical products. And that's a lot more complex than people imagine. So delivering electricals, particularly big and bulky electricals like washing machines, fridges and freezers is a lot more difficult than people think. You know the context of we have one stockholding in the UK and anyone nationally across the country up till about 9:00pm tonight can order one from Crewe to be delivered to Dorset tomorrow morning in a two-hour time slot, and have it installed, you know it takes a fair old infrastructure behind that. So we believe that no one cares about our customers the way that we do. So we've built all that infrastructure ourselves and we're continuing to build that out. So we own all our own logistics operation, we run about a thousand vehicles. We have over 1,000,000ft² of warehousing, we hold the vast majority of everything that we sell in stock for next day delivery, seven days a week. On the back end of that we offer all the services of things like gas installations, putting TVs on walls, washing machine installations, take your products out. We then have a responsibility to take products away. And so we made the decision many years ago to bring the AO standard and service to recycling. So we have in our group our own recycling. We have the biggest fridge recycling business in the UK, which is about 50% serving our needs and doing lots of things for other people as well. We also in-house have our own AO Care business, which is our own insurance product. So looking after customers for the lifetime of their product. So we have over a million people that take those products out. And then we have our own mobile business within Mobile Phones Direct and Affordable Mobiles and Buymobiles, and so that's now the biggest network connector for new contracts in the UK. And what we're trying to do is create an ecosystem of shared economics in effect for customers. But to do that brilliantly, you need to be in control of all the various parts of that, and all those various parts take a lot of time to build, to do them well and to scale them and to do them across multiple products. And so where we used to sell, so when we IPO'd the business we were just a white goods retailer, we've now expanded out into being a meaningful seller of TVs, vacuum cleaners, laptops, mobile phones and haircare, all sorts of different things. So broadly, if it's got a plug on it, you know, we'll be selling those products and trying to bring the AO level of service, both upfront and customer service in the backend. And we also run in the backend our full in-house customer service metrics as well. So all centred around trying to be sort of simply brilliant for customers. And these things don't happen overnight, they're not a straight road. You know, there's a lot of invents and wonder in that, there's a lot of intuitive just blind faith belief and investment on a field of dreams ‘build it and they will come’ basis. But you know we're really pleased with our progress in what is a relatively short period of time for the scale of the business that we've built. And we're currently at about just over a billion of sales for this year. We employ something like three, three and a half thousand people. And we'll make just over £30 million of PBT. So that's the scale in the context and the operation of the business.
Tom: And the data sort of speaks for itself. I was going onto Trustpilot over the weekend, and you're 4.8 across over half a million reviews I think it is at the moment. And every time I've seen a lot of your speeches and also your colleagues speaking about customer services, and obviously that's ingrained, you know, throughout your business. And I think it starts with the values that you articulate. And those are, I think I'm getting these right; 'treat every customer like your gran’, ‘make decisions that will make your mum proud’, ‘operate at AO speed’ and ‘everyone needs to have a growth mindset'. I mean talk to us about those values, how important they are to you, how do you embed them in your business and how does it impact your decision making process?
John: I mean they're absolutely central to everything that we do. We talk about them all the time. There's barely a day goes by ever that I won't use at least 1 or 2 of them. Clearly we have them on the walls but I'm not actually a fan of putting values on walls, I want them coming out of people's mouths. Because when they're coming out of people's mouths, then they're living them. And so the principles that we set is that everybody needs to understand them. Not everybody needs to learn them, but everybody needs to understand them. And so you’ve got to keep them incredibly simple. And you know the way I think about it is that simplicity is the ultimate sophistication. And perfection is achieved when there's nothing left to take away, rather than when there's nothing left to add. And so that's the way that we think about that. We like to give people lots of autonomy. We, you know two different customer service situations might look the same in a handbook, but those two customers are you know, somebody in a rural area whose daughter suffers from diabetes or whatever and needs insulin, let's say. And their fridge breaks, is a completely different situation to a single guy in London working for Google, and his fridge breaks. They are completely, but on paper, they're exactly the same situation. So we've got to give people in our business the autonomy to make those decisions. And what would my gran want? My gran would want you to, If we've got it wrong, and we get things wrong, everybody gets things wrong. But she'd want you to apologise, emphatically, sincerely and quickly. And then she'd want you to bloody well sort it out. That's about it. Because she would understand that stuff goes wrong. I hate the whole compensation culture of 'I've been inconvenienced' therefore I need paying. Let's just sort the thing out. Let's be sensible and reasonable about that. And so when we talk about customers, you have internal customers as well. So, you know, we talk about the you know, the recycling business has to deal with the logistics business, that has to deal with the retail business. And so all those teams, when we join that business up brilliantly, they're sort of internal customers, so that they should think about each other like that as well. And they should just be nice and kind. I mean who would set out and not be nice and kind to their own gran? And, and so when we give people that autonomy, the one thing that we ask them to do, is imagine that mum was watching. So if your mum's watching, how would you behave? And so if you had to go and explain to your mum over dinner tonight the actions that you took, or the decisions that you made, would she be proud of the decisions and the intent behind those decisions? And if the answer is yes, the cost is just the cost. We'll suck the cost up, don't worry about that. We believe in the long-term of you know, customers are not always right. You know, so you know, let's sort of put that out there. You do get ‘buyers are liars’. It doesn't matter, right? It doesn't, not everything has to be a battle. So are we doing what's right and fair, and is the customer happy? Rather than how much does each situation cost? And when you give people that autonomy to make those decisions, then the business moves a lot faster. And so that's true of an experience with a customer, because we can get you fixed on the first call. But it's the same if you're dealing with buyers who are dealing with one of our manufacturing partners, and they can make a decision. They might get it wrong. But people don't come into work saying; 'do you know what? I'm really going to go to work and cock it up today Tom'. And if they are, we've recruited the wrong people in the first place right? So if we give them the autonomy, we as an organisation can go a lot faster, and that fuels a growth mindset. So it's that simple really. Trust them. If you make gran happy, mum proud, go quickly, always be 70% right and fast, and 95% right than too late. And the business will keep growing.
Tom: And I mean, innovation is like core to what I’ve been reading about AO, is innovation every single year and driving forward, as you say. And you talk about making mistakes, and obviously when you're innovating, those mistakes are going to happen. On an individual basis to use those mistakes as the founder, the entrepreneur, the CEO, as an opportunity to improve, and how do you deal with those mistakes when they are made?
John: So the most important thing is we'll make mistakes every day. And so my single biggest rule on making mistakes is tell someone and tell them fast. Because, you know, by not telling someone what you end up doing is covering it up, and that creates a problem. And so if you just tell someone and tell someone fast, nobody gets shot. Nobody, nobody sets out to make mistakes with intent. But let's learn from it. And I don't believe in celebrating mistakes. I think that's a Yankee stupid statement. Who goes, ‘hey, hey great, we made mistakes’? Look it doesn't matter. What you've got to do is acknowledge it, recognise and move on and learn from it. If you make the same mistake six times, that's a different conversation. But if you've just made a mistake then the most important thing to do is recognise it, and then make decisions. No one, no one in our business will ever catch me on money wasted. I've been at it for longer, and the decisions that I make tend to be big. And so it's really important if you want to have a culture with autonomy and decision making and speed and growth mindset, It's really important that, you know, when somebody thinks they're going to get a kick, they actually get a hug. And that you share some stories with them of other things that we've learnt, and what do we take out of it? The last thing that we want people to do in our organisation is have a fear of decision making. And you know when you're 70%, you know, your intuition is 70% right you want to go fast. By definition, you're going to get 30% of stuff wrong. And for me societally it's one of the problems when you look at the politics in the country, is that, oh so-and-so's done a u-turn. Oh, God. You mean he realised that what he said wasn't right and he's actually been big enough to admit it, correct it, and move forward? That's not a narrative that works in politics. It's a narrative that happens in the best businesses all day long, every single day. And the more you can do it, the better. But that doesn't mean go and make loads of mistakes. It just means have the confidence to make decisions. Decisions are the most important thing.
Tom And you obviously need the right team around you in order to trust them to make those decisions. I was reading about the data driven approach that you take to recruitment, and I think you called it the DNA and a common mindset across the business. Can you talk to us a little bit about how you think about that recruitment process and getting the right team around you?
John [00:13:22] Yeah I mean, recruiting the right people is everything. There's no doubt about that at all. And you know one ten out of ten person is worth ten, six or seven out of ten people. And so that's really important. But it's, and we yes, we do have, you know lots of surveys that we ask people to go through that we've learned over a very long period of time on you know the whole analysis of the key characteristics of those people, and that's an aid to decision making, not a substitute for thinking. And and it's really important that we look people in the eye and we make judgement calls, and we get people that we trust to make judgement calls, because otherwise, if it's just a pure data driven approach, then you'll just end up with clones. And the last thing that we want is an organisation full of AO clones. What we want is, a really, truly diverse organisation in every way that is confident to challenge whatever the topic is. And that diversity comes in all sorts of forms, whether it's introverts, extroverts, colour, religion, background, travel, education. The last thing you want is an organisation full of the brightest people. Interestingly the, we find that people who were what I would call overeducated, they struggle in our organisation, because they've never failed at anything normally. They've always been in the top, you know, ten percentile or whatever, for whatever they've done in whatever university or education course that they've been in. They tend to work at their own pace. And they come in to here and we're, you know, we want you to make decisions, we want you to get on with it. We want you to go at AO speed. Don't worry about that not being perfect. And so we, you know, we have a good number of really successful, highly educated people in the business. But they've got to blend in with people that just move fast, move extremely intuitively on things. So you've got to have a real blend of people. It isn't just about building algorithms and questionnaires, and away you go on some psychometric testing.
Tom That's reassuring. And you talk passionately about making the right decision at a cost. I mean you are obviously a listed company, and when you think about that cost, how do you articulate it to your investor base and say look the cost is worth making the right decision and looking in the long-term?
John [00:16:21] It’s dead simple. You know it's what I said at the beginning on what the organisation is, and we're a long-term investment. And, you know, we always think with, with the long-term in mind and you know, we have a low frequency purchase cycle product. So we're not grocery you know, we can't correct things the week after and re-impress you. We've got to wait. And, you know, you only buy a washing machine once every 6 or 7 years. So you know, we are in this for the long-term. But you know we, our performance of repeat customers. Our cost of acquiring new customers is quite high, so the last thing that we want to do is alienate them, and then the share of wallet and the repeat metrics that we get out of those customers that we’ve then impressed with AO service pays back, but it takes time to pay back. So from an investor point of view, I think what investors want is consistency. They don't want you to be flip flopping around. They want to know what you are doing. And, but we need to be very clear that some of the things that we do are chunky, and very unknown. I remember there was a famous meeting where actually we were spending some time with, on a supplier day yesterday. And I was having this exact conversation with somebody over lunch, that we did our IPO, and one of the use of funds was to expand the business into other the product categories like TVs and so on. And we were a big customer for Samsung in white goods. And I remember going down and having a meeting with them to say right, great news. We got the IPO out the way, we've now got the funds to go into these other product categories, we want to start buying TVs off you. And their answer was, we don't want to sell you TVs. We don't want the disruption that you've brought into the white goods market in the TV market. And you go, I've just told a load of people we're going to start selling TVs. And they're the market leader. And so then we've got to spend time winning hearts and minds of explaining how we're going to do that, why we're going to do that, and why we're going to bring a better proposition and service to their brand for their customers online. And actually that's the direction of travel of how people are going to shop. And winning hearts and minds takes longer. And then when you go and do your next quarterly update, or your next six-monthly update, and they say well where are you up to with TVs? Well that's not actually live yet. Okay. When will it be? I don't know. And and 'I don't know' is a very, very difficult thing for people to say. But I'm always really clear with people here, that if you do not know, that is what you say. There is nothing worse than somebody that just makes something up. And so that uncertainty creates some issues. But other than that, you know, our core investors understand what we're doing. And I think there's a real insightful group of investors that understand founder-led businesses is probably the best way that I would put it. That you know, I'm still a big shareholder in the business. I joke about my ten-year lock in. I haven't sold any shares in the last ten years. All I've done is buy them and give them away. And so I think founders think differently about an organisation. And, you know, when the going gets tough, we dig in. Because it means more normally, not always, but to a founder, it means more. You know, I always talk, we've got five kids. I always talk about the business as my sixth child. And so from an investment community perspective, I think it's just really important to be consistent, to be clear, to focus on the business, not the investors. To tell the story correctly, and you will get the investors you deserve and we're, you know, really happy with the investors that we've got.
Tom: Well you're obviously doing something right. I met one of your investors, the other day who called you an absolute superstar.
John: Very kind...
Tom: And you talk about being a founder, you're I think you, you're reasonably rare in the capital markets and that you are a founder, scaled up, CEO, you know, you've been listed now for ten years. Obviously, there are bumps in that road. But looking at a, you know there are plenty of founder's now building businesses, what advice would you give them going on that journey and going through sort of an IPO process?
John: So similar to the last answer really, which is be very clear and consistent on what you are and who you are and what you stand for and what you're trying to do. And be relaxed about the elements that are unclear and sort of break it down into what you're clear about, what your levels of conviction are into different areas. And you know the capital markets have been great for us. Yes it's been a rocky ride. But, you know, I would suggest the last ten years economically have been a bit of a roller coaster as well. And who knew what was going to happen as we went into Covid? Who knew what was going to happen as we came out of Covid? I think that from our perspective, you know we've been very decisive. We've doubled down on exactly what we are about on the model that we've got and the ecosystem that we have. But the, you know a wonderful example through that is, you know, we made a decision as we did our pivot to profit in 2022, to raise £40 million. That's a lot easier to do in the public market. I'm not saying it's easy to do, but it's a lot easier to do. And, and so I think that, and we've done over the last ten years, we've done two different raises, one to support the investment that we were making in Germany, and one to support the pivot to profit. So you know you're able to have very good, challenging conversations with a diverse group of investors. And I genuinely enjoy that. You know my favourite topic is, you know, if I'm having a beer with my mates, I love talking about work. You know, and some people think that's sad, but I, work is a hobby. Whether it's investing in other businesses or whether it's, running AO. I, you know I genuinely, genuinely enjoy the intellectual stimulation of the challenge that comes with it. And so meeting really smart investors and being challenged by them intellectually I enjoy. And I don't like meeting dumb investors. I find that something of a waste of time. And I don't have a lot of time for that, frankly, because I don't like time being wasted. So there's a lot you can get out as an entrepreneur of, that some of the best investors that have seen it all. If they're just algorithmically investing or you know, they've just picked up a pencil and a pad and they think they're important. You know, don't go and seek them out. But go and seek out really high-quality investors and spend some time with them. They've seen a lot of things before. And it's quite lonely being a founder sometimes, and investors can be really good friends as well. You know, so we've made the effort to spend the time, deepen those relationships. And most of those investors believe in the value of compounding, which normally involves holding a stock that you believe in, which enables you to further deepen those relationships. So you know I think there's a lot of bad press that that comes with being a listed business. And yes you have to go and do results twice a year. Well, I'll tell you what. If you've got big private equity in your organisation, you'll be doing it more than twice a year, I promise you. And so you'll be dancing to their tune. Whereas a listed business on a diverse register. You know, the leadership team very much gets on with running the business with relatively little interference, in my experience.
Tom: I guess the challenge for your business is when you go down to the pub with your mates to talk about it, they've got a genuine opinion about what you should be doing? They're probably harder than your investors a lot of the time.
John: Well you know, it's, that's the joy of having a retail listed business. You know, if you have a chemical engineering, chemical engineering listed business, then everyone in the pub or the cricket club, you know, they don't really have an opinion on it, and most of them have never heard of it. You know but it keeps you honest, right? That's the that is the public that we deal with, and if we've delivered something to someone and we've cocked it up, I promise you, they don't mind that you've got a pint of Guinness in your hand, they'll let you know.
Tom: Obviously AO is only part of your story. For probably longer you've been an advocate and a huge supporter, and investor in youth, and young people from, I think I've got this right, the Bolton Lads and Girls Clubs, over 25 years ago. And then more recently, the OnSide Youth Zones. You're an investor, you speak passionately about it. For those people listening who don't know about it, could you tell us a little bit about the youth zones? And you know why you're so passionate about young people?
John: You know, I again, I come back to some fundamental principles that, you know, we have in everywhere in the world, really but, you know in the UK particularly, we have the postcode lottery of birth. You know, I was really lucky. And frankly I think everybody that works in this business, the vast majority of them were extremely lucky in the postcode lottery of birth. And I believe that talent is evenly distributed and opportunity is not. So it's been a passion to try and level that playing field. Because everything that I've seen, is that when you give opportunity to those people that have been deprived it, they have more grit, spit, determination and entrepreneurial nature than a lot of middle class, privileged kids. And so economically for UK plc I think there is a phenomenal amount of energy that we can unlock there. And I think it's the right thing to do. And I think when you're in a position to be able to help those people, come back to our values you know, decisions that make your mum proud, and look after kids like you would your own gran. I also think that there's a lot of things in society that are broken. And a lot of stories that don't get told. A lot of government spending, or the majority of government spending goes on something like 3% of the population. And it's deployed incredibly badly. And that's very frustrating as a taxpayer. But it's heartbreaking when you look at, when you look at what's possible. And so something like OnSide Youth Zones, but it's not, it's not specific to OnSide Youth Zones you know. You've got, I was down looking at some YMCA facilities in Leicester and Newark a couple of weeks ago. I mean you know mind blowingly good operations. But they're all centred around one thing really, which is helping those kids and helping to educate them and get them active. And so this is about creating opportunities for them to be the best version of themselves. But that might be educating them from a nutritional perspective. So they all have kitchens in them. It might be getting them on a climbing wall because that gives them confidence. I mean, real confidence. It might be educating them from an art perspective, because actually art is one of the things that gets cut from the school curriculums. It might be teaching them music. Their school might not have the range of musical activities. And so this is a different kind of education. And a lot of these kids don't have trusted adults in their lives, and people can't follow in footsteps that they can't see. And so who's going to be those role models and lay those footsteps for those people? And youth workers have at least as an important job in my opinion, in the national infrastructure for kids, as teachers do in the formal environment. Yet we've got rid of 5,000 youth workers. Could you imagine any government getting a mandate in an election if it came to the electorate and said, ‘what we're going to do, is we're going to close 10% of schools, and we're going to get rid of 15% of teachers because we think that's a really good investment. And that's a really good saving for the nation’. It would be madness. But that's what we've done on youth service provision in out of school time. We've closed over a thousand youth clubs and got rid of over 5,000 youth workers.
And successive governments have fiddled around and come up with one branding and one policy after another, and we are in a materially worse situation than we were 25 years ago. And the societal invoice for that in looked after children, in crime, in shoplifting, in drug and alcohol abuse and everything else, is material. And so my big advice to government is the government has to provide some of the capital. But then partner with matched funding on philanthropic organisations, and then get out of the way and allow people who are brilliant operators to operate. Because in this arena, the government is not a great operator.
And so there's a whole wall of philanthropic energy and money that wants to get involved in solving this. But I just can't tell you how difficult it is. And the system is just fundamentally broken. If you look at the outcomes for looked after children, it's something like for round numbers, 30% of them will end up in prison. About 25% of them will end up homeless. And 60% of them will never get a job. It's not an amusing topic, but how the government can brand them 'looked after' children and not get pulled up by the Advertising Standards Agency is beyond me.
Tom: And John, just on that point 'looked after' children, what for those of us who don't know what is, what is that definition?
John: Incorrect. That's what it is. So in old money, it's what you would, when I was growing up, there was a care home down the road from us, that I used to go and knock about with the kids there. And so kids in care. It's kids that will have been removed from their family. And it's a last resort to move them from their family. You know, you look at it, you know the number of looked after children is about double what it was ten years ago and rising. And the cost of providing the provision is more than double what it was. So the compounding nature of those two things means that the council just have to keep paying for it. And the costs, and the costs are going bonkers. And the provision is going south. So, you know, these are things that any politician that cares surely has a responsibility to empower some people who know how to fix these things, to fix them. So you know the, increasingly what I'm trying to do is, is use the platform that we've got to shine a light on that, and to challenge people to say, do you know what? It's wrong. And if I'm in a position to help, and it's mind blowingly frustrating at times, I can't almost can't put it into words. And if I tried, they probably wouldn't be polite. So I'll refrain. But you have to keep going. You have to keep trying because you can, and there's so many people that are in a position of influence, that can bring that influence to bear, whether it's the public at election time, or business leaders to do more and inspire their workforces, to do more in these arenas because somebody's got to speak up for these kids.
Tom: Yeah, I guess I guess we all are in a position to help. And just so people understand this, I was reading that the youth zones are open seven days a week, twenty activities in every single one, state of the art facilities. Entry I think is 50p, meals cost £1. Open to all 8- to 19-year-olds. And obviously the support and community is central.
John: Yeah I mean, that's the that's the OnSide model. As I say there are different models. But, you know, for a lot of those kids that £1 meal will be the only nutritious meal they get. A lot of these kids go to school and can't concentrate at school because they, they're not been fed before they go. We charge them 50p importantly to come in. And 50p gets you anything. So you know, you have a personal training session, it's still only 50p. You know, you can go and operate the radio station in there, and it's still only 50p, because we believe deeply that anything that's freely given is lightly received. And the fact that kids are paying something, 50p is a lot to a lot of those kids. But the fact that they're paying something means they have a right to demand a level of service.
John: The kids know. You know, when you're in a youth zone and you've got the volunteers serving out the meals. There is no cheek. There's no cheek the way you would get in a dinner queue at school. Because they know those people are doing it as volunteers. It's just, it's what I call the world working properly together. And it's interestingly when we do some stuff with Age Concern, and one of the biggest problems with elderly people is isolation. And so getting those people into the youth zones. Look how much experience they've got to share, how many life stories, how many footprints they've got that people can follow in. And so you can connect a kid that needs inspiring and needs a trusted adult, with a pensioner that needs purpose and someone, you know, they're looking for someone to help. And so the clubs just become huge magnets, the kids and everyone else are just the filings if you like that get drawn to that magnet. And it's humbling to watch it in motion. But there's only fourteen of them. Fourteen of them. There's 300 B&Qs. So thinking as a retailer, if a town can support a B&Q, surely it can support a youth club? And so that's the scale of the task, right?
Tom: I know you're pushed for time John, but I just wanted to ask you just one quick question about there are obviously CEOs, there are influential people out there that may listen to this who are you know want to get involved, whether it's in youth zones or whether it's in with young people or other philanthropic areas. As a CEO how would you advise them?
John: Do something. So step one is just make a commitment to do something. And use the influence and the power that you've got. And it doesn't have to be kids in youth zones. You know, go and look at what James Timpson has done with ex-offenders. You know there are there are lots of great examples. But don't do nothing.
Tom: And last question. You've obviously got AO, you've got your philanthropy. How do you think about legacy?
John: The fundamental one would be to leave the world a better place than how you found it. And that can cover a whole multitude of things. From a business point of view, you know build an incredible team of people that can continue doing everything when you're long gone. And that's the kind of from a business point of view, that's the best legacy. And that, that's not a nod to 'I want to leave'. I'd like to be taken out in a box, but one day you'll stop becoming relevant and productive, and then there'll be a time to step aside. And at that point, your true legacy is how well the business thrives and what you've really instilled in all the other things, and the culture of the business and the people.
Tom: John, listen, thank you so much. Thank you for your time. Really appreciate it, it's been a fascinating discussion.
John: Thanks Tom it's been great.
