Although the publicity materials clearly show that diamonds actually existed forever ("before dinosaurs walked around the earth"), De Beers did not. When Penny reviewed the history of the world's largest diamond mining and marketing company-which was founded in South Africa in 1888-he also discussed the radical changes that De Beers had made to its business model in the past eight years.
On the road to becoming the world's largest diamond company, De Beers has established a strategy in the past few decades: not only to control large diamond mines, but also to control the main supply of diamonds. De Beers' single-channel market transaction is usually called cartel or cooperative organization, which buys out all rough diamonds in the open market to adjust demand and set prices.
As time went on, De Beers' efforts to control the supply of diamonds eventually realized a reserve worth as much as $5 billion-which ultimately had a negative impact on the company. According to Penny, during the period from 1989 to 1999, De Beers Company-now a "famous case about monopoly"-failed to make a profit. At the same time, the company was also hit by the anti-monopoly lawsuit filed by the US Department of Justice and was banned from doing business in the United States. An article in The New York Times in 2000 said, "The company reserves a large number of rough diamonds to control the supply of diamonds and maintain the high price of diamonds in the world. This reserve has become an expensive burden. The shrinking market share of De Beers also makes it more difficult for the company to support the price by absorbing raw diamonds by itself. "
After strategic review, De Beers decided to give up supplier management and monopoly with a history of more than 65,438+000 years to stimulate the global demand for diamonds. According to Penny, the company abolished the tripartite contract, closed 65,438+04 sales offices, and "intentionally changed from a central supply-driven system to a demand-driven system."
Starting Over
Penny is regarded as the designer of De Beers' new business model. The new business model "reshaped not only the largest diamond company in the world, but also the whole industry." After implementing these changes, De Beers' net income and profit began to increase gradually, and it is said that its net income in 2006 has reached 730 million US dollars. De Beers is free to operate retail stores in new york, Los Angeles, Las Vegas and other parts of the world after reaching a settlement on pending antitrust and civil lawsuits in the United States.
"We are now operating like other enterprises," said Penny. After being completely away from the period of having billions of dollars in diamond reserves, "we now have only two months of total reserves. Therefore, it takes only a few months from underground mining of raw materials to selling products to customers, which makes us proud. "
In 20001year, the shareholders of De Beers privatized the company, and its transaction amount reached $65,438+0.92 billion. At present, De Beers Group is completely privately owned, and * * * has three shareholders. The company operates in 25 countries and has about 22,000 employees, of whom 65,438+07,000 are located in southern Africa. De Beers' 65,438+05 diamond mines in Botswana, Namibia, South Africa and Tanzania account for 40% of the global supply of rough diamonds.
According to Penny, De Beers' value system of "meeting diamond quality standards" ensures that the company gives back to the society where diamonds are mined, helping them build schools and infrastructure, providing medical care and fighting diseases such as AIDS. Penny mentioned www.diamondfacts.org's website in her speech. According to the website, it is estimated that 5 million people in the world get proper medical care through diamond income. "Diamond income enables every child in Botswana to receive free education until 13 years old". In addition, the industry website said that "about100000 people in the world directly or indirectly benefit from the diamond industry".
Gareth Penny is one of the most famous figures in the diamond industry. He was educated in Cape Town and Eton College. Before 1988 joined Anglo-American Company to start his career, he won the Rhodes Scholarship of Oxford University. He used to run British American Tobacco Company. De Beers), a small business project in South Africa, once set up a diamond cutting factory in Botswana and worked as a personal assistant for the then presidents of Anglo-American and De Beers for two years. 200 1 was appointed as the sales and marketing director of the diamond trading company, and joined the board of directors of De Beers in 2003. In March 2006, he became the general manager and chairman of the executive Committee of De Beers Group. He told Wharton students that his main role models were South African civil rights leader nelson mandela and former General Electric CEO Jack Welch.
Conflict diamond
In Penny's speech on leadership, the issue of "conflict diamonds" was never mentioned-conflict diamonds refer to diamonds mined in African war zones and sold by resistance activists to finance armed conflicts-until a listener mentioned this issue in a question. The problem of conflict diamonds has aroused widespread public concern in the past year, mainly due to an Oscar-nominated film called Blood Diamond. The rapper Kane West sang a song called Diamonds from Sierra Leone. And a controversial documentary about the current situation of the diamond industry, called Bling. The question asked by the audience to Penny is: How does De Beers ensure that his behavior does not directly participate in or support the trade of conflict diamonds?
Penny replied, "This goes back to the essence of our business structure." In 2000, when De Beers rebuilt its supply chain business, an alliance composed of government, non-governmental organizations and diamond industry worked together to solve the problem of conflict diamonds, and finally established the Kimberley Process certification system. According to the diamond industry, with the support of the United Nations, this process has effectively eliminated the trade in conflict diamonds. Now, "more than 99% of the global diamond supply comes from conflict-free areas". De Beers claims that "all diamonds produced by De Beers do not use conflict diamonds or child labor".
"We only sell our own diamonds," said Penny. "We are very confident in the products we sell. The Kimberley Process tracks the flow of diamonds around the world and requires (a lot of) supervision. We are trying to find the last diamond that has not gone through this process. The answer to conflict diamonds is not that conflict diamonds do not exist. We are proud that the diamond industry is one of the most regulated industries in the world. "
For years, business critics said that the dispute over conflict diamonds eventually turned in favor of De Beers. In August 2000, The New York Times reported that "human rights organizations condemned [De Beers] for buying illegal diamonds from African rebels and rulers, who used the proceeds from diamond sales to pay for the war. Through decades of clever image building and powerful cartel management, De Beers has established the core of its products, but it is threatened by the association with those so-called blood diamonds. " At that time, faced with the shrinking share of the world diamond market, De Beers decided to become what Time called a "noble crusader" to ensure that there were no "conflict diamonds" in the luxury goods market of the whole industry.
In fact, the debate on blood diamonds in the 1990s was obviously in De Beers' favor, which forced people to distinguish between legal transactions led by De Beers and illegal transactions of immoral diamonds conducted by rebels, which were fully supported by diamond companies. Before the dispute over conflict diamonds, the writer Edward Jay Postan wrote many articles about De Beers. He believes that De Beers' strategy has created "another excellent blow", which is quoted by many publications.
According to Penny, diamond jewelry now accounts for nearly half of the total sales in the luxury market. Although the diamond consumption market in the world is very divided, "the biggest consumption market is in the United States," Penny said. The annual sales volume of diamond jewelry is 84 million pieces, of which, "a very large part, 40 million pieces, are sold (in the United States), and the average price is about 750 dollars. Diamonds are really popular. "
De Beers spends about $6,543.8 billion a year searching for new diamond mines, and is currently developing four diamond mines-two in Canada and two in South Africa. "We are looking for high value-added opportunities," Penny said.
DNA and WPA
When talking about leadership, Penny stressed that there is no substitute, that is, "go to the boring aspects of business and go to the place where business really happens." Don't be afraid to run a factory, and don't be afraid to learn how to manage employees every day. In your development, you need this kind of experience ... I find that what I do every day now is to spend one day with the crew on board or one night with the geologist on site. One day, you will participate in managing and motivating employees, which will be the most important thing you can do. "
When talking about the topic of success, Penny listed four important factors needed for the success of each industry: 1, the ability to pay attention to and understand the company's "DNA", and Penny's explanation of DNA is the company's definition of "purpose, vision and values"; 2. Be able to understand the relationship between company strategy, organization and employees; 3. The importance of getting and training the right people to work in the organization; 4. The ability to successfully delegate and perform duties is what De Beers management calls Workplace Accountability (WPA).
Recently, Penny was invited to participate in a panel discussion on the characteristics of leadership. "Everyone wants to know what great leaders like Bill Gates and Jack Welch have in common. What did they do to succeed? "
Penny said, the answer is "nothing ... but if there is no * * * connection point, this answer is too impossible." Research shows that all great leaders have one characteristic: each of them is themselves. Each of them made their own efforts and did a good job. So be yourself. Where is your competitive advantage? What makes each of you different from the person sitting next to you? What can make you successful in your DNA? Be yourself-adopt a more positive attitude and master certain skills. This is what all great business leaders have in common. "
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