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    The Dumb Report 2007

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    The Dumb Report 2007

    Making mistakes is all part of growing a business. It’s just a pity that not all mistakes are created equal. As 2007 draws to a close, it’s time to look back on some of the goofs, gaffs and groaners that caught our attention, arched our eyebrows, evoked involuntary forehead-slapping, before splitting our collective sides. Bring on the dumbness!
    1. PRATT FIXED UP BY ACCC

    There’s nothing dumber than thinking you are smarter than everyone else… and getting caught out. On 10 October, 2007, after years of denials, paper-magnate, Richard Pratt finally admitted he was guilty of price fixing and cheating his customers out of approximately $700 million dollars in the nation’s biggest ever cartel case. Rather than apologising, Pratt appeared more aggrieved over the effect the criminal prosecution would have on his reputation than the harm done, stating: “I feel very angry – Visy is seen as Richard Pratt’s company – there is a certain amount of character assassination for me personally because I am a tall poppy in the community; it’s a big scalp (for the ACCC). My reputation is something I have been building for 50 years and so I am worried that the general public will now see me as a rich person who has made his money doing something that is wrong in the eyes of the law.” We love tall-poppies at Anthill, but the ACCC did allege “very serious contraventions” of the law and claimed that these had been “carefully and deliberately concealed” by Pratt. The ACCC counsel further stated: “There can be no suggestion that Visy acted in ignorance of its obligations under the act,” and that the use of pre-paid mobile phones that could not be traced and the holding of meetings in private homes, motel rooms and suburban parks “provides a strong indication that Visy was fully aware that the conduct was illegal. Pratt faces a fine of up to $40 million, which represents the largest fine in Australian history, but only 0.75 percent of the Pratt fortune. Hats are off to Mr. Pratt for thinking too far outside the box and delivering an apology that was paper thin. For that he scores our top gong!

    2. THE FLYING KANGAROO GOES ‘MENTAL’

    The failure of Airline Partners Australia’s private equity bid for Qantas is perhaps too complicated to be regarded as ‘dumb’, although it did have moments of sublime ‘stoopidity’. According to journalist Leon Gettler, it highlighted the greed of hedge funds. In a blog posting on management and compliance site Sox First, Gettler describes the circumstances that knocked over the deal: “APA had to secure 50 percent of Qantas shares by Friday 4 May 2007. Under Australia’s takeover rules, getting 50 percent would give APA another two weeks to secure the 70 percent it needed for the bid to succeed. Enter the hedge funds. Hoping to make extra millions of dollars with their arbitrage games, they were looking to orchestrate a result where the bidders would get just over 50 percent, giving them another two weeks of uncertainty and opportunity to buy stock below the offer price. But they miscalculated and the 50 percent level was never reached…. The moral of the story: never stand between a hedge fund and a bag of money.” Of course, that’s not what the punters will remember. In May, former Qantas Chairman Margaret Jackson, when asked about the ramifications of the bid failing, famously said, “If anyone thinks this will happen without affecting the (share) price then they have a mental problem with how the market works.” This was interpreted by some observers as an insult to shareholders and evidence that Jackson was actively lobbying for the takeover consortium. According to most accounts, Jackson is smart. And hedge fund managers are supposed to be pretty clever too. But then, it’s worth remembering… even Paul McCartney had his Wings period.

    3. SPIN KING’S DUMB THUMB

    Former Australian spinner Shane Warne bowled a wobbler when he allegedly sent an SMS meant for his lover Jemima Khan, to his wife. The alleged stray SMS apparently spelt doom for his efforts to woo back estranged wife Simone Callahan (and certainly made him no friend of Imran Khan). Warney hit out at the accusations, stating, “There’s absolutely no truth in that one whatsoever,” during his visit to the MCG for a beer promotion. “I am not going to start a tennis match with Simone, backwards and forwards. My statement that I released is 100 percent truthful and accurate and I stand by that.” While we recognise that ‘Warney’ is a colourful sportsman rather than a businessperson (He’s a lover, not a fighter), Shane Warne is also one of Australia’s most attractive sponsorship ‘properties’. He lost his $200,000 sponsorship with Nicorette after slipping up with a sneaky cigarette in 1999. And in 2005, Australia’s Nine Network announced it would not renew Warne’s commentating contract, worth around $300,000 annually (Warne had previously been seen as a future member of the Nine cricket commentary team). Three-and-a-half months later, however, Shane Warne went on to sign a lucrative multi-year sponsorship deal with Asia-Pacific’s largest telephone audio production company, Messages On Hold (a brand name that should have doubled for advice). Warne’s errant (and alleged) SMS was obviously dumb. Will it have an impact on his commercial dealings? Messages On Hold’s own promotional materials quote him as saying, “Trust me with this recommendation – I know a thing or two about spin.” We suspect that Warney was referring to one of his wrong’uns.

    4. THE EVER-SHRINKING CHANNEL NINE

    In Early 2007, acclaimed journalist Gerald Stone published “Who killed Channel 9?” (see Novel Ideas), a warts-and-all account of the various woes that have befallen the once mighty television station since its charismatic patriarch, Kerry Packer, passed away in late December 2005. Then, in May, after a tumultuous 15-month reign, the irrepressibly buoyant personality-turned-Nine-CEO, Eddie McGuire, resigned as top-dog after a shellacking in the media (namely in response to the now infamous court transcripts describing Maguire’s intentions to ‘bone’ current affairs presenter Jessica Rowe) and a period of ratings freefall. According to Stone, many of Nine’s best and brightest had already departed for Seven or greener pastures offshore. So, where’s the ‘dumbness’? If you believe Gerald Stone, most of Nine’s less successful decisions can be attributed to the cost-cutting influence of private equity company CVC, which is now Nine’s controlling shareholder. When Kerry was King, so were ratings. To get viewers and, therefore, advertising dollars, creative people need the freedom to be creative. When cost-cutting becomes the over-arching priority of all decisions, there is only one way to go. Straight into our Dumb Report.

    5. CAUGHT PURPLE HANDED

    OK, so this is not exclusively Australian, but it was too good to ignore. One would think the collective scientific nous of global pharmaceutical giant GlaxoSmithKline would outweigh that of two 14-year-old New Zealand schoolgirls – but apparently not. The company was forced to apologise for falsely claiming in its packaging and advertising that Ribena contained four times the vitamin C of orange juice. In March, the New Zealand Commerce Commission brought 15 charges in the Auckland District Court against GlaxoSmithKline under the Fair Trading Act, after the real story was brought to light by a high school science experiment. GSK admitted the testing methods used to assess the vitamin C content in the product were “unreliable” but claimed it was not aware of this at the time. GSK was forced to eat humble blackcurrant pie as sales reportedly took a southward turn. Thanks to Tami Dower, Editor, Marketing Magazine, for having the currents to bring this to our attention.

    6. LIKE A RED FLAG TO A… TEENAGER

    Controversy at the nationwide youth rock music festival ‘The Big Day Out’ seems as much a part of the scenery as multiple-piercings and mind-altering substances. This year’s event caused controversy in a way that would have been funny if it wasn’t so stupid, with organisers attempting to quell ethno-religious tension in Sydney by banning the Australian flag at the event, less than a week before Australia Day. The move was condemned by everyone from the PM down, with main stage act Jet expressing their patriotism by performing in front of a large backdrop of a black-and-white Australian flag cut-out of their name. Lead vocalist Nic Cester added fuel to the flag-fiasco by proclaiming, “I can’t tell anyone else what to do, but we as a band are very proud to be Australian and we don’t want to feel we are not allowed to feel proud.” Of course, rebellious teens being what they are, the result of the ban was an abundance of aggressive flag-draped youths, and a tidy profit for opportunistic flag salesmen. Perhaps there’s a tactic here that could be adopted by politicians chasing the youth vote? Just picture the slogan? “Don’t vote for me. You’re NOT allowed.”

    7. IR CAMPAIGN CONTRACTS SERIAL HICCUPS

    In what was a federal election year, the Howard Government earned a touch from the dumb rod for failing to background check one of the actors in a government-funded workplace advertisement. The Workplace Ombudsman in August announced it would prosecute Damien Richardson, who featured in the Federal Government’s Know Where You Stand Work Choices advertisements. The actor appears in the $37 million taxpayer-funded IR ads as a ‘concerned father’ making the remark: “I’m being told employers can rip off young kids.” Ombudsman Nicholas Wilson alleged Richardson had underpaid junior workers thousands of dollars. In September, the Federal Government was once again required to pull a pro-Work Choices ad off air after it was revealed that two of three men featured as “union thugs” had been convicted of serious drug and dishonesty charges. We go to print not knowing the election result. But it’s fair to say that it was a tough year for the Coalition.

    8. THE SHREK PROMOTION

    A decision by some of the biggest junk foodmarketers in the country to undertake a massive joint promotion targeted squarely at kids could cost them more than they bargained for. A recent promotion run by McDonald’s, Kellogg cereals, Ferrero Nutella and Coles Supermarkets featuring the friendly cartoon ogre Shrek attracted a landslide of abuse from health groups, who argued the mass-market saturation had children gagging for their products. But despite all the upset, the Advertising Standards Board (ASB) dismissed the complaints, ruling that the widespread use of Shrek did not in fact breach the Food and Beverages Code or the Advertising to Children Code. Once upon a time, this sort of mass marketing by FMCG groups would have been considered a clever marketing ploy. But given the obesity epidemic, it is leaving a bad taste in the mouths of many, highlighting the inadequacies of the rather convenient self-regulation system, while giving Australia’s growing list of child health groups powerful ammunition in an election year.
    Thanks to Nina Lees, journalist, AdNews Magazine, for spotting this McNugget of dumbness.

    9. COUSINS PUTS ‘EAGLES’ HOT ERA ON ICE
    In an age where sporting teams are multi-million dollar commercial concerns, the management (and mismanagement) of players, both on and off the field, has much bearing on the success and financial viability of a club. The Ben Cousins drug saga is more tragic than dumb, and by the time you read this it is likely to have taken another torrid twist or two. However, let’s break the stupidity down here. The Australian Football League is the most commercially successful competition in the country. And in recent years, Cousins’ team, the West Coast Eagles, built perhaps the most talented list of footballers ever assembled at one club. In 2007, a year that followed two grand final appearances (including a premiership), the hubris of misbehaving stars and complacency of team management brought the team to its knees. Cousins took a forced sabbatical due to drug addiction. Daniel Kerr couldn’t stop brawling in pubs. Chris Mainwaring, a retired club champion and close friend of Cousins, died in a drug cloud. And the team’s most talented player, Chris Judd, departed for Carlton at the end of the season. Can you blame Judd for jumping ship? What should have been a profitable and prestigious era for the Eagles now lies in a thousand shards at the feet of the club’s management. It was they who didn’t do enough to foster a clean, industrious culture among their playing group. It is they who now have a tough road ahead of them. And it is they who have thoroughly earned this dumb gong.

    10. LOSING ON BOOZE

    Last year we mentioned the rumour that one of the big four banks thought it had been cyber-hacked when its entire website network went down, only to discover that someone hadn’t renewed the domain. Well, in another cautionary tale to dot your ‘I’s and cross your ‘T’s, in September 2007, Jim Beam and Coca-Cola Amatil were forced to change the brand name of their Jim Beam Zero (Jim Beam Bourbon and Zero-Sugar Cola) ready-to-drink mix because Foster’s, which launched Cougar Zero in 2006, owns the exclusive rights to the Zero trademark in Australia for alcoholic beverages. Jim Beam and Coca-Cola had already produced 100,000 cases of Jim Beam Zero cans and a further 40,000 cases of bottles featuring the disputed design. Following a court finding in its favour, Foster’s gave its rivals less than a month to move the offending stockpile of 1.68 million Jim Beam Zero cans and stubbies. A new alcohol launch hasn’t been plagued by such dopiness since the aborted and now infamous Champagne brand René Pogel (spell it backwards and you’ll understand why). Thanks to Tami Dower, Editor, Marketing Magazine, for this sample of sublime stupidity.

    Thanks to our special guests!

    Tami Dower is the Editor of Marketing Magazine. A reformed lawyer, Tami found her passion for marketing in the halls of a top-tier Melbourne law firm, combining legal practice with marketing, communications and event co-ordination. www.marketingmag.com.au.
    Robert Gerrish is the founder of Flying Solo, Australia’s online community for solo business owners, and is co-author of the business bestseller, Flying Solo: How to go it alone in business.
    Nina Lees writes about the good, bad and ugly side of the advertising, marketing and media world for AdNews Magazine. Nina also writes freelance stories for a number of magazines in her spare time on topics far removed from advertising. www.adnews.com.au.

    The last word…

    THE WORLD IS MAKING US DUMBER
    According to Robert Gerrish, Founder of FlyingSolo.com.au and author of Flying Solo: How to go it alone in business, we should be wary of technology.
    “A couple of years ago, a psychiatrist at Kings College, London did a study in which a group undertook an IQ test while being interrupted occasionally by emails, SMS messages and phone calls. Not only did they perform significantly worse than a group who were not distracted, they were trounced by a third bunch who were totally stoned. Completely out of their brains. Zonked. In other words that little gadget in your pocket… the one that you take with you everywhere… is making you dumber. Do yourself a favour for 2008, leave it on your desk when you go home.
    Robert Gerrish is the founder of Flying Solo, Australia’s online community for solo business owners.