I’ve just finished reading Michael Hill’s recently released book ‘Toughen Up’, which I really enjoyed. Michael Hill is the founder of the Michael Hill Jewellery chain which is a publically listed company on the NZSX. I had two motivations in reading his auto-biography. First, I have a share-holding in Michael Hill International (MHI), so I took a lot of interest in Michael Hill’s business philosophy. Second, having grown up in the Far North in New Zealand, it is nice to read a biography of a local entrepreneur; most business books and biographies that I read are of US based entrepreneurs and firms. As I read the book, I remembered the memorable Michael Hill TV ads, the original Michael Hill stores, and could relate to his description of small towns in New Zealand in the 80s.
The Michael Hill Jewellery chain has been very successful. It started as a single store in Whangarei, New Zealand, and now has over 234 stores across New Zealand, Australia, Canada, and now also the US. Michael Hill’s success can be attributed to his innovation as he shook up the jewellery business in New Zealand. There were two elements to this innovation. The first was his unusual marketing and advertising ideas. The second was the idea of a jewellery store that focused exclusively on diamonds and jewellery; they didn’t have any sports trophys, cuckoo clocks, silverware, etc…
I really like his business philosophy – there are elements that would please Warren Buffett. One thing that really stuck out was the importance of ensuring that everyone, including the CEO and all the senior management, understand the fundamentals of the business. To quote the book: “My firm belief is that nobody can succeed in any business without understanding it – at a real and practical level – the very fundamentals of it. That means the factory floor, the farm gate, the shop floor, and it means getting one’s hands decidedly dirty.” So all the Michael Hill managers start on the shop floor selling jewellery, and they have to keep going back so they don’t lose touch with the core business. The CEO, Mike Parsell, is a qualified watchmaker who started work at a Michael Hill store at the age of 20. Now, decades later, he is still with the firm and is the International CEO. I find that very reassuring as a shareholder. I personally feel wary of ‘celebrity CEOs’ who I often suspect have a short-term focus and maybe a lack of understanding of the core business.
One thing that wasn’t discussed directly and which I would have liked to have seen, was a discussion about their sustainable competitive advantage. They have a long consistent history of profitability, so I assume their sustainable competitive advantage is attributed to their people and their strength in sales. To quote Michael Hill: “Sales is an art form, and I believe it’s one that is seriously overlooked by many retailers. It is dangerous to underestimate the amount of time and practice it takes to really understand sales.” Therefore I assume that it is their people, the way that they train them in their sales-system, and their ability to continually monitor their performance that is their competitive advantage.
As a bit of an aside, there was one quote that I really liked and highlighted in the book. It was when he was talking about creativity and was talking about himself and his wife Christine: “We get more of a kick out of coming up with ideas – like designing a boat, drawing plans, and thinking about furnishings and decks and cabins and portholes – than we do from actually sitting on the deck of our finished boat holding a cocktail.” That really resonated with me. It captures the enjoyment of building and creating something new and original.
In summary, an enjoyable read, especially for New Zealanders as it is a local success story with a local context. I like his business philosophy and continue to hold my shares with confidence.