This article first appeared in Kyoorius Magazine
When John Sculley quit Apple in 1993, he held on to one share to ensure he would receive the annual report every year. Warren Buffett's letter in the Annual Report of Berkshire Hathaway is a much-awaited phenomenon. A relatively lesser known company Marquard and Bahls AG (my personal favourite), invests significantly in commissioning artists for their annual report illustrations every year.
One could carry on for at least the next financial year to list out some of the best and most well done annual reports across the globe. In essence, however, the attempt is to highlight the large role that the annual report plays as part of any listed entity's communication strategy. In India, however, the annual report has been historically seen as a regulatory menace, done more to remain on the right side of the law and less to impress stakeholders or create an all encompassing corporate credentials document. This philosophy applies not just to the annual report, but also to other interim communication directed at communicating financial performance.
The reason I am writing this here, is that the field of corporate reporting represents a significant design challenge and a potentially gargantuan opportunity. The logic is simply this, all companies are desirous of achieving their optimal valuation on the capital markets, to improve their access to funds and deliver consistently high returns to shareholders. Corporate reporting is, therefore, the most important first party communication that informs shareholders and the market opinion makers of the performance, strategy
So why hasn't it happened yet?
To be honest, there are already almost eight consultants in India who deliver corporate reporting solutions as a dominant service offering. Their coverage, however, doesn't extend beyond 200 companies at best. When you consider that there are more than 8,000 corporates listed, one gets a sense of the magnitude of the gap. The reasons are broadly three.
Firstly, the annual report's brand building potential isn't recognized by companies themselves, though that perception is rapidly changing. Therefore, the report is typically the baby of the secretarial department, or at best, the CFO's office, and not the communications team within the company. As a result, it doesn't get the kind of focus or the attention that it deserves from a design and creativity standpoint.
Secondly, it is an expensive proposition for those with a large shareholder base -say, in excess of 10,000. Because, corporate structures are complex, and a lot of companies have subsidiaries, the number of financial pages tends to be too many. Add to this the other statutory disclosures, and what you get is a bulky document. Companies fear that if more design, creativity and communication are added, then the costs increase on all fronts - design, paper, printing and dispatch. They would rather pay a little extra dividend to ensure a better return to shareholders.
Third, designers themselves haven't pursued the opportunity too seriously. More often than not, in larger companies it is the Agency on Record, invariably an ad agency, which is asked to create a few 'corporate-pages', almost as a necessary chore. In the smaller ones, it's the neighbourhood printer who does the honours, sometimes with the added garnishing of 'free-design'. Then again, designers feel that the volume of information to be handled isn't commensurate with the possible fee, and, therefore, this is a territory best avoided.
In my view, though these arguments have merits, these merits are limited. If the corporate reporting business wasn't so lucrative, there wouldn't be over 200 consultants in the UK (and I can list them all), servicing half the number of companies that we have here. A good annual report doesn't have to be an expensive annual report. Just as the BEST form of advertising is often not the 45-second spot on prime time national TV. There are ways of managing costs, so that the entire annual report project doesn't become unviable. To draw a comparison, the entire incremental cost of a good annual report, wouldn't even be as much as a quarter page advertisement in India's leading financial daily. Third, the sheer volumes and penetration potential that a corporate report has, sometimes undermined by design agencies.
The annual report is a critical weapon in any corporate communications armoury. For one, it is the only document that captures the entire corporate identity at one place. For another, it contains pretty much all the information that a company might want to publish in the public domain in relation to self. And lastly, it is compulsorily updated at the end of each business year. The opportunity of specialised sign consultants helping companies to deliver their message more effectively to all stakeholders is therefore, obvious.
It is important to remember, that corporate reporting is a communication opportunity, as opposed to a pure play design one. Therefore, agencies have to have sufficient bandwidth to ensure editorial intervention, backed by a solid understanding of investor aspirations and industry knowledge. This, when supplemented with design and typography can have an impact that goes a long way in preserving top-of-the-mind shareholder and investor recall. I remember the Chairman of one of our client banks once telling me that a large private equity investor called him up and requested for a meeting, only because he found the annual report fascinating. Therefore, to address this veritable goldmine, agencies must fortify themselves with the requisite skills.
The scope for value addition in an annual report is quite akin to a rebranding assignment – where the entire historical practices can be turned on their head, while retaining the essence of the client's basic corporate ethos and philosophy. Therefore, right from a distinct narrative and photographic language, involvement of the agency might lie in selecting a theme, creating visual differentiation, ensuring a cohesive structure and even supervising the ultimate execution.
The annual report today is a paper tiger. And, quite aptly, an endangered species in the ecosystem of corporate reporting. Globally, it is making the digital transition. Improving broadband speeds, increasing computer literacy and a greater internet penetration will ensure that shareholders in India are comfortable with accessing the report online.
At the same time, the unbridled use of virgin paper is likely to come under the scanner, with some companies having to print reports in excess of a few hundred thousand. Add to that the cost of logistics and dispatch, and what you get is an unavoidable shift of legislation towards not making the posting of an annual report mandatory. Instead, the annual report will be more visible online. My own prediction is that it is five years away, but happen it will. Companies listed on FTSE and NASDAQ already benefit hugely from this option, and it allows greater quality and design focus on the annual report, both in the print and online versions, because of far lower conversion and dissemination costs. Therefore, those with a strong online publishing backbone can look forward to a windfall when this inflexion point arrives.
Like most products and services, design too is at the cusp of a consumption explosion. Nowhere will this be more visible than in the field of corporate self-expression. Corporate reporting will be at the forefront of this revolution, and therefore, design firms in India will do well to adopt this as a possible business avenue.
It is about time that the curriculum in our design schools began focusing on editorial design practices, information graphics, characteristics and requirements of Indian companies and an overall conditioning of the young designer's mind towards text-heavy publications, such as annual reports.
The Indian capital markets are the darling of the global fund managers. Valuations are skyrocketing to unheard of levels. More and more companies are taking the IPO route to capital raising. As a proxy of the growth in size and stature of the Indian economy, our design industry needs to benefit more directly from this phenomenon. And the perfect vehicle to ensure that benefit is, quite frankly, a no-brainer!