This is the third chapter of the Basket Case story but it is also a tale in its own right.
What to do with a failed tech investment?
You will notice throughout this site I frequently refer to structure, capacity and process and the pillars of enterprise.
These are my constants and I am a strong believer in transparency through direction that everybody understands. Undoubtedly, staff should do as they are told – but they do it better and are more fulfilled by their work when they know not just why they are doing it, but also know the metrics which determine whether or not they have done an outstanding job of the task. The organisation becomes less command-orientated and more collaborative through understanding.
So, taking our perfect little batch manufacturing enterprise as an example, the greatest test of how well these first principles were understood was in deploying the recovery strategy. I would find a company to acquire that fitted the business model irrespective of market sector, and my team would apply their skills to that, as well as keep the primary (soon to be parent) company ticking over. This would be a daunting prospect for many but I am proud of how my team took it in their stride.
The company I found made specialist hardware for the entertainments industry. A stark contrast with the oil industry.
The target company was over 40 years old and the owner wanted to retire. It had been run very conservatively but had amassed a large product range. It had shied away from exports having had its fingers burned 20 years previously, and had not got to grips with the Internet. Going global and igniting eCommerce were huge new opportunities in themselves but its real ace card was the ability to create new products largely comprising components from its extensive back catalogue. Every new component added to the burgeoning inventory held potential for future products – not dissimilar to the expansion of Lego’s range of bricks.
The normal course of acquisitions is that the target company is packaged for sale so that the new owner will be able to run it. There is a period of due diligence to review the package and audit the chattels, records and know-how. The final stage is post-transaction integration with the purchaser’s systems. In this particular instance, all three stages were done simultaneously, on heads of agreement, over a period of months to enable a prompt exit for the vendor and a seamless transfer of trading post-transaction.
This integrated process fully immersed my team in the new company’s affairs – they became familiar with suppliers and customers, and their trading patterns. They soon learned to recognise all the components and products too. When they first met their future colleagues in the target company, the latter were stunned by their knowledge and quickly recognised the powers of the new systems that would soon be at their disposal too.
The systems created for the ill-fated primary business were at the cutting edge in leveraging modern software to manage the business. Every component existed in the CAD system so all products were first ‘built’ in the virtual realm. The product builds include packaging and accessories so the CAD system produced complete bills of materials that passed from the Design Engineer to the Office Manager for import into Sage. The Design Engineer also prepared image assets, including photo-realistic renderings, and passed them to the Business Development Manager who uploaded them to the web site with specification and price data.
From that moment onward, the product was available to the world. To call the online system a web site is to sell it short. It is also the central depository for all product information and generates brochures as PDF files dynamically on demand. It is not only eCommerce for end users but, through login permissions, enables distributors and resellers to place their orders at their negotiated prices. Resellers can draw down PDF brochures that include their contact details; they can also translate the text. The ‘web site’ is a virtual marketing department, as well as an online shop.
The web site had been built for the primary company but its conversion to the subsidiary involved little more than copying the primary site structure, changing its skin (branding) and then populating it with the new product information. Living proof-of-concept that the primary company was built as a template.
On first inspection the subsidiary company had a ‘current range’ of around 150 products but by the time all the permutations were considered this grew five-fold and enquiries from customers would go on to result in new products being continuously added, sometimes several in a day.
Pause for a moment: this company can ‘invent’ a product in the morning and offer it for sale worldwide, with images and brochures, in the afternoon. This is what I meant by ‘ultra-streamlined’ in the Basket Case chapter.
You could forgive customers being wary of a new team but this rapidly dissipated. Consider the impact on customers who were used to the company being able to solve their problems with ‘custom’ products …but now they received, sometimes same day, what appeared to be a photograph of their scribble made real. “How did you do that?”
Within 6 months of the acquisition, sales were already rising 50% year on year, with numerous overseas distribution enquiries.