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Inside stories

Created:

9 December 2009

Written by:

Alistair Blair

Here are three excellent books for your Christmas wish list. They're all inside stories of interesting businesses you will know well. EYEWITNESS by Christopher Davis relates the rise and fall of Dorling Kindersley, which redefined reference books in the 1980s by spending a lot more on its titles than anyone previously thought wise. The seer was Peter Kindersley, a designer with business vision and inspirational leadership qualities. Started in a bedroom in 1974, DK had by 1999 sold 400m books under 2,700 titles of which 80 per cent were still in print - astonishing statistics.

Some readers will recall the flotation of DK in 1992 - a moment of cheer in a bear market. Its sales were £87m. Eight years later, they touched £200m, but the end was nigh. The book describes all aspects of DK's growth convincingly but the golden thread is Peter Kindersley's role as executive chairman. He despatched several senior colleagues over the years, including in late 1999 the book's author, who had been with him from the start and was director of publishing and deputy chairman. This was apparently at the behest of a new chief executive, who was the first person in the company to whom Kindersley deferred. This Svengali character's first decision was to overrule DK's top 20 managers who wanted to print 5m copies of a Star Wars film tie-in series. Instead, 18m were printed. Most of these ended up in landfill and a few months later, Dorling Kindersley collapsed into the hands of Pearson which made half the staff redundant. (Despite the calamity, Pearson paid a full price: £300m).

The book is a gripping read, as you try to spot episodes which foretell the conclusion. Davis thinks he saw this by 1995, when Kindersley acknowledged the cheers of an adulatory sales conference with a "not entirely self-deprecating smile". But for me, in Davis' telling, it was there from the beginning. When genius takes the form of remorselessly pushing the envelope, falling right out of it is always on the cards.

THORNTONS – MY LIFE IN THE FAMILY BUSINESS by Peter Thornton (to which I contributed the introduction) tells a not entirely dissimilar story. Peter Thornton was one of four sons of the founding brothers of the Thorntons chocolate shop chain. For decades, all six of them ran the company, but rarely in harmony except over product quality. In spite of the dysfunctionality, the company achieved a fine growth record until its 1988 flotation (since when it has been in reverse gear). By this time, Peter Thornton's brother had established supremacy and forced the author out of the company.

The book, which reads like a novel, is equally a compelling study in family relationships and a fascinating history of one of the UK's best-known brands, and just as with Eyewitness, gives thoughtful investors much to ponder. Both books throw a lot of light onto the often mysterious ingredients and unpredictable recipes which lie behind businesses that are projected from the stock market stage as attractive investments.  

Peter Hargreaves won't thank me for throwing in his book, IN FOR A PENNY with these two and I emphasise I detect no sign that Hargreaves Lansdown is heading for a comeuppance. This was another business launched in a bedroom, in this case in 1981. Today it's worth £1.3bn and the two founders still own 60 per cent of it and run it.

In the 1980s, the UK was awash with financial advisers. It was a very simple, virtually riskless business, a world away from chocolates and books. Small adverts gathered enquiries which were recommended a shortlist of unit trusts. Surely anyone could have done that? All they added - it would appear - were diligence, efficiency and integrity. It there was a magic ingredient, perhaps it was that Peter Hargreaves, having spent a year working for a computer manufacturer, knew from day one that he needed a word processor to do the job efficiently. Three months later, he spent his first big commission on precisely this tool, and not long after that, the second magic ingredient - the investment newsletter appeared. Still, these seem pretty low-grade levels of magic.

But they were enough, within a few years, to make the Hargreaves Lansdown a force to be reckoned with. Then the business became more complex and competitive and called for more inspired and risky decision-taking. Still, Hargreaves and Lansdown's original extra ingredients seem to have been the key factors in getting this right.

All these books are available at attractive discounts from the IC bookshop on 0800 435060.