Fresh thinking: Graeme Dignan

Five years ago, creative guru Graeme Dignan set out to change the way he did business. Now, through a joint venture with Coca-Cola, he's establishing a business model all of his own.

For Graeme Dignan, 2001 was a pivotal year. His mother died, and he became a parent for the first time. In addition, he and his business partners sold interactive-only agency Black ID for £3.5 million – mere ‘buttons’ considering the heady valuations the company had attracted during the dotcom bubble.

‘Everyone had money and everyone wanted a slice of us,’ recalls Dignan of the period before the bust. ‘We held out – ignoring the 15 and 20 times multiples we were offered because we thought “we can get more out of this, of course we can”. And like so many others, we were wrong.’

Personal and business crises created a perfect storm, forcing Dignan to refocus on his core values. ‘They say you don’t become an adult until you’ve lost a parent. My mother was young… it was like “bang” – you’re here one moment and gone the next. I decided I was going to clear all the rubbish out of my life.’

Dignan could have retreated to doing what he knew best – well-paid consultancy work for established clients like MTV, Royal Bank of Scotland and British Telecom. Instead, he and partner Ross Cairns set up Erasmus, a company Dignan describes as an ‘incubator’ of brands and ideas that is now engaged in a joint venture with Coca-Cola and in talks with other blue-chips about similar partnerships.

Going online

Though he has focused his attentions on fewer, larger goals in recent years, Dignan has always had a pioneering spirit. In 1995 he decided to turn the design business he’d set up with some fellow creatives into an interactive-only agency: the company that became Black ID.

‘People wrote about us at the time, saying, “Wow! What an amazingly stupid-stroke-courageous thing to do!” Everyone thought this new media stuff was a bit flakey and would be gone tomorrow,’ he recalls.

As a new century dawned, Dignan witnessed attitudes switch from reluctance to invest in the internet to desperation to jump on the dotcom bandwagon. ‘In those early days, it was all about talking it up,’ he says. ‘No-one really understood the power of the internet. We found ourselves in small rooms with people who wanted to capitalise massively on this movement – didn’t know how – but were prepared to spend ridiculous amounts of money trying to shape the unknown.’

Salad days

While such attitudes persisted, Black ID flourished, with a star-studded client list from Deutsche Bank to Channel 4. All that changed with the dotcom bust, forcing the company into a ‘fire sale’ to AIM-listed digital animations specialist DA Group. Tied into an earn-out, Dignan did not see eye-to-eye with his new masters.

‘They thought that technology could save the world, but they couldn’t find ways of connecting it to people,’ Dignan says of his erstwhile acquirer, which recently went into administration after years of mounting losses. ‘They were sitting on a cash pile of £20 million and they burnt the cash until one day there was nothing left.’

The earn-out was not a happy time, and Dignan resigned at the first opportunity, taking the requisite six months’ gardening leave before launching his new company in the summer of 2003. Erasmus started out as a ‘disruptive brand consultancy’ (‘we had to call ourselves something,’ says Dignan). It aimed to transcend the usual client-agency model, which Dignan describes as ‘a revolving door – ideas in, ideas out’.

‘We wanted to get away from the constant spinning of stories, the polishing of turds, which by and large is what the creative industries do,’ says Dignan. ‘They have had 30 or 40 years of having it pretty damn good, but it’s all been born out of trying to persuade us that we need something when the only difference is “we’ve added one more strawberry to our yoghurt”.’

To get big organisations to buy into a different approach, Dignan knew he had to engage with them at board level, retaining greater control over the brands he worked on. But as with many start-ups, he didn’t quite anticipate how he was going to get there.

Original spirit

On the company’s first day of incorporation, Dignan and Cairns, both Scots, won a pitch to launch a new vodka brand for Scottish whiskey producer Glenmorangie.

‘We were hungry,’ recalls Dignan. ‘In Ross’s words, we were in the kind of debt that would give God a sweaty top lip.’

Everything was going to plan until Glenmorangie was acquired by luxury brand group Louis Vuitton Moët Hennessy, which had no interest in continuing with the vodka launch. Luckily, Tara McDonald, a member of the Scottish family selling their generations-old interests in Glenmorangie, saved the day by backing Erasmus to buy the IP for Fallen Vodka, and joined Dignan and Cairns in the business.

The next coup came in 2005, when Dignan secured an introduction to Coca-Cola’s European head of innovation. The beverages giant was considering launching an energy drink in the UK, following the US model of “double energy” – or in layman’s speak, using a larger can.

‘When they asked if we’d like to be involved, it was a complete no-brainer,’ says Dignan. ‘We said of course we would.’

A joint venture was agreed, with both sides investing financially. Erasmus is responsible for the brand, Relentless Energy, while Coke provides the backing of its awesome distribution machine. The business already adds millions to Coke’s bottom line, with sales of four million cases expected this year. For Dignan, it’s a classic example of how creatives and corporates can share both the risks and the rewards of innovation.

‘In large corporates you meet people all the time who are smarter than you, and yet they’re handcuffed to “the process”, the prevailing lack of ambition,’ he states.

Fruitful developments

Erasmus’s third property is Suso, a fruit-based carbonated drink it has built up from nothing to anticipated sales of £8 million this year. Although Suso is backed by London VC firm Smedvig Capital, it has no corporate partner.

‘Carbonated soft drinks is a juggernaut. It’s not going anywhere fast but still delivers massive revenues,’ Dignan explains. ‘Our ambition is to put a bump in the road and divert that juggernaut on to a slightly different course – giving people a better awareness of what they are pouring down their throats.’

Suso is simply fruit syrup added to water, carbonated. There are no additives and ‘100 per cent of the fruit’ is used in making the drink. It even counts as one of your five-a-day, claims Dignan.

How does this message about transparency and health sit with Erasmus’s partnership with Coke? ‘It’s tolerated,’ he concedes. ‘I think Coke’s attitude – though they would never put it like this – is that if you want to be good in bed, you have to sleep around a bit.’

Though the scale of Dignan’s ambition is impressive – he describes himself at one point as a ‘modern Medici of commerce’ – he remains a warm, approachable figure with a line in self-deprecating humour. More than anything else, he’s come to a firm realisation of what he is and what he wants, in both business and personal terms.

‘Someone asked me the other day what I was worth on paper,’ he relates. ‘I told them I didn’t know, and it’s a meaningless calculation anyway. It’s not about that; it’s about leaving stuff behind, building stuff that has meaning, that can change things. Even a tiny bit.’

Marc Barber

Marc Barber

Marc was editor of GrowthBusiness from 2006 to 2010. He specialised in writing about entrepreneurs, private equity and venture capital, mid-market M&A, small caps and high-growth businesses.

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