Online Extra: Q&A with easyGroup's Stelios Haji-Iaonnou
Stelios Haji-Iaonnou is a one-man innovation machine. Known to everybody simply as Stelios, the 33-year-old Greek entrepreneur has launched a half-dozen companies that use the Internet to challenge the structure of existing industries such as travel, Net access, and now, personal finance.
Such iconoclasm might well not have been his most obvious destiny. The second son of shipping magnate Loucas Haji-Ioannou, Stelios grew up in wealth and attended university in England. But he walked away from the chance to be his father's successor in favor of making his own mark in business. Now, his easyGroup has holdings in a growing collection of startups that share the "easy" name, and his interests stretch from Europe to the U.S. Haji-Ioannou recently spoke to BusinessWeek's Paris Internet Correspondent Andy Reinhardt. Here are edited excerpts of their conversation:
Q: How's easyGroup doing? A:
Q: How's easyGroup doing?
A:You shouldn't think of it as a holding company. That's not how I look at it. I don't intend ever to report consolidated profits and losses because that's not how I make money. EasyGroup is more like a venture capitalist. I make money through capital gains. I have some mature businesses that are doing fantastically well. I have businesses that are up and running and still losing money, but I can see them turning the corner in the next couple of years. And I have a couple of crazy ideas that may never work. The jury is still out.
Q: Is there a unifying theme to all the companies? A:
Q: Is there a unifying theme to all the companies?
A:They share a common brand, the "easy" brand, which means they're focused on offering consumers great value for money. You'll never see us engaged in an activity that is high-cost or luxury. Before I invest in a particular sector or idea, I look for sustainable competitive advantages, for ways of doing things significantly differently.
Q: Such as? A:
Q: Such as?
A:Look at Internet cafés: There have always been Internet cafés, but nobody else has the large scale [of easyEverything, his chain of 21 supermarket-sized cybercafés]. There have always been car-rental companies, but nobody else has just one type of car and does it all on the Net [like easyRentacar]. There have been a few price-comparison services on the Net, but nobody has been totally impartial [like easyValue].
And we're about to launch a credit-card and personal-loan business [called easyMoney]. Hopefully, it'll be up and running by the summer, and again, it'll have unique characteristics. It'll offer personal loans and a credit card where you can choose whether you want more cash back, a lower rate, or an annual fee. We've allowed a customer to choose between those factors. It'll be 100% Web-based -- we won't accept applications any other way.
Q: Heavy use of the Net seems to be another common theme. A:
Q: Heavy use of the Net seems to be another common theme.
A:I have to admit I was a relatively late adopter [of] the Net. Back in 1995, when I started EasyJet, I said that the Net was for nerds. I said you couldn't fill an aircraft using the Net. But obviously, I'm adaptable. In 1998, we took our first online booking, and in May, we announced that we hit almost 90% [in online bookings]. Encouraged by that ongoing success, I designed the other businesses.
Q: Has the dot-com crash made you doubt the viability of e-business? A:
Q: Has the dot-com crash made you doubt the viability of e-business?
A:No. I'm still a firm believer. Despite the fact that the bubble has burst, the Internet is such a powerful tool that as a company, you have to use it to beat your competitors. One of the mistakes was that a lot of people thought it was an industry. It's a tool, but you still need a business.
If your business is not worth buying from, then nobody will buy from you, with or without the Net. That's a given. But if you have a business worth buying from, then the Net will make it that much more efficient.
Q: How does that apply to easyJet [Europe's No. 2 discount carrier]? A:
Q: How does that apply to easyJet [Europe's No. 2 discount carrier]?
A:With the typical travel-agency booking, by the time you include the cost of issuing a ticket, the cost of paying [for] the huge mainframe-based global-distribution systems, it comes out to about 25% of the price. A quarter of what you pay to fly goes to middlemen, travel agents, stuff like that! The Net is frictionless. We spend a bit of money on advertising -- and that's coming down -- and that's it. The rest is free.
Q: How is easyEverything doing? A:
Q: How is easyEverything doing?
A:We have to admit that this concept works very well in big cities like London, Paris, New York, Rome, and places like that. The Paris shop [which was the most recent to open, in February of this year] has done fantastically well. It has outperformed our expectations and is one of our top stores. But we're reviewing how small a city we can put how big a store in. We're learning as retailers that [the] right-sizing is important in order to make money. So we're making some changes at the bottom end of the scale.
Q: Will your rate of expansion be as fast this year as it was in 2000, when you opened 15 stores? A:
Q: Will your rate of expansion be as fast this year as it was in 2000, when you opened 15 stores?
A:We're now shifting our emphasis to franchising, because we've covered Europe quite well. We have a plan for the U.S., but we want to keep it to ourselves for now. The emphasis this year is to sign up as many franchisees as possible. We've done it already with a Greek mobile-phone retailer, a company called Germanos, to develop the chain in Greece and the Balkans.
We'll see quite a few openings, but not all of them will be corporate stores -- many will be franchise stores. The idea is to make it as ubiquitous as possible.
Q: Has the Net slowdown affected your business at easyEverything? A:
Q: Has the Net slowdown affected your business at easyEverything?
A:EasyEverything is not just an Internet café: It also has its own media business selling advertising in the stores. I have to admit that dot-com advertising at easyEverything hasn't grown as fast as we thought it would because there are fewer dot-coms around to spend money. But otherwise, we haven't seen a backlash. That's because we have real businesses. People will continue to use the Net because they want that car or that flight, not because it was fashionable.
Q: How did you get into business? A:
Q: How did you get into business?
A:My father was self-made. He started a shipping company in 1959 and ended up with one of the biggest fleets in the world, so he was quite successful. Now he's retired. My first rebellion was that I wanted to work for myself, do something different from my father. So I started my own shipping company. It's what I knew.
Q: That doesn't sound very rebellious. A:
Q: That doesn't sound very rebellious.
A:It doesn't today, but if you're 25 years old, and you're following in your father's footsteps, and you're the heir apparent, why the hell do you resign and go into an empty office and start again? It was quite a strange move, actually.
Q: So why did you do it? A:
Q: So why did you do it?
A:Without meaning to offend the business that has produced so much wealth over four decades, my father's shipping company was a company for the '70s and '80s. It was very old-fashioned, had people with very old ideas, no computers, old ships. Happily, my brother is still around running the business. But I wanted to apply some of the management principles I believed in: openness, flat management structures, even things like computers.
I already knew what I liked doing, which is creating things, not turning things around. I'm not a company doctor. I'm a founder of companies. I start with a clean sheet of paper and design something I like. My father did provide me with capital to start easyJet, and I'm eternally grateful to him for it. I wouldn't be what I am today without his financial help.
Q: How did you get from tankers into running an airline? A:
Q: How did you get from tankers into running an airline?
A:In a word, [Richard] Branson. I met somebody on a flight who wanted to know if I was interested in investing in Virgin Atlantic. Part of the due diligence was meeting Richard. I suppose I caught the virus. Thank God I didn't start an airline like that. My initial idea was business class and luxury and expensive fares. But I went to the States and looked at Southwest. I flew it and got to speak to some people.
Q: Do you mind how often you're compared to Branson? A:
Q: Do you mind how often you're compared to Branson?
A:I don't mind the analogies because there are quite a few. But I also insist on noting the differences. He's self-made, I'm not. He's British, and I'm Greek. Although we both do brand extension -- and I have to admit that's where I got the idea -- I've invented a way of doing brand extension with an investor-friendly theme. In other words, creating a group of companies that are not all owned by the same person or group of people and that operates using a jointly owned brand, without siphoning off royalties and profits off the top.
I'm in it for the capital gain. Branson has never worked very well with the capital markets. He took his company public, and then he took it private again. I'm quite happy to have my bigger, older, more mature companies run as [public companies] because I think that's the best way to do it. And then I can exhaust my entrepreneurial drive with my personal money.
Q: What's it like to do business all across Europe vs. in the U.S.? A:
Q: What's it like to do business all across Europe vs. in the U.S.?
A:It's very different and very difficult. As far as I'm concerned, those who can actually master it have a competitive advantage, in the sense that so many American companies have failed to understand Europe, which is why they've failed to expand in Europe. But if you can really put together a European team and find the right mix of management and staff to operate a truly pan-European operation, you have something that's difficult to replicate. Once you get there, you've created a barrier to entry.
Q: Will that get easier in the future with European political and monetary union? A:
Q: Will that get easier in the future with European political and monetary union?
A:Politically, in general, the trend is in that direction. But there's a skill here that some people possess and others don't, and will never develop. It will get easier -- but some people have a head start.
Q: All of the "easy" companies share a common orange color -- on the signs, the uniforms, the jet engines, and so on. What color is it? A:
Q: All of the "easy" companies share a common orange color -- on the signs, the uniforms, the jet engines, and so on. What color is it?
A:To be precise, it's Pantone Orange 021C. It's not called Stelios orange yet, but maybe someday it will be.