03 June, 2015

Exports are not enough!

Here's an article I wrote for the Dominion Post newspaper in August 2001, but I think it's still relevant today.

“Export or die!” We have heard that message so often - and for many companies, it is the right message. Getting the world to buy a New Zealand product or service is an important milestone for a developing business. Lots of successful exporters are needed for a healthy economy - but they are not enough. The world’s most successful companies do not just export globally - they operate globally. That means having sales, service, logistics, production and development operating around the world. Look at the world’s greatest companies. How many do things only at home to ship out to the rest of the world? I can only think of one - Boeing. The others made the leap from exporting to international operations. Our own Dairy Board/GlobalCo [Fonterra] has substantial and growing offshore development, procurement, manufacturing and logistics. More Kiwi companies need to recognise when to make that change.

Why? To minimise the cost of distance - freight, duties, foreign exchange risk and in-transit inventory; to reduce production costs, through greater volumes, lower material costs and lower manufacturing wages (an unpleasant reality); to get closer to customers for more efficient service and faster reaction to changing needs; to build critical mass for future investment; and to build credibility with large global customers.

I speak from personal experience. Deltec developed an advanced antenna technology for mobile phone networks - Teletilt - that enables network operators to adjust their cell coverage remotely and with improved signal quality. We began in New Zealand and Australia, explored SE Asia, and then expanded sales rapidly in China. Our products were key components of large infrastructure projects. We were the world leader in our niche. But as we grew and started to explore Europe and the Americas, our larger customers demanded the cost and service benefits of in-market operations. By mid-2000, we were getting a consistent message from global customers like Motorola and Nokia: “Set up full-scale sales, service, manufacturing and logistics in North America, Europe, China and Brazil. Do it now. Or don’t expect to get our business in future.”

The time had come to switch from a Kiwi exporter to a global business.

The capital requirements and the risks were large. Then the tech sector went into meltdown, and technology investors took fright. So we decided to sell. Andrew Corporation, a global competitor with complementary products and a similar vision for the future, recognised the value of Teletilt and our expertise. Our Wellington development facility will become their worldwide centre for developing advanced antenna systems. New Zealand will continue to play a key role in the technology. It won’t save the mainstream manufacturing, which would have gone to China eventually anyway, but we can reinvest in new opportunities.

My point is that New Zealand should not wistfully expect its companies to export everything from home. Global companies like Nokia, Vodafone, and Nestlé operate in many countries. The interesting thing is that large numbers of their high-value jobs are still at home - in development, marketing, and corporate administration. They are surrounded at home by a plethora of supporting organisations in banking, IT, law, accounting, advertising, travel, short-run early-stage manufacturing, research, education, etc. Together, they bring home huge revenue and profit streams.

If New Zealand wants a high-value economy, it needs more than just exporters. It needs global businesses that operate offshore in all facets of their business. New Zealand should encourage its businesses to invest offshore, not deride them for it. Without global operations, we won’t get a Kiwi Nokia or Vodafone. With global operations, we look like getting a Kiwi NestlĂ©. We could sure do with some more.

PS. At the HiTech2000 Awards, Deltec won the High Growth Company of the Year Award, the Investing in People Award and the Supreme Award. When the tech-wreck got even worse in 2002, Andrew’s NZ R&D centre went too, but that could happen under any owner, and only validates my argument that we need our own global players based here. The home R&D is usually the last to go.

First published 13 August 2001 in the Dominion Post.

19 May, 2015

Dimensions of change

You’re probably familiar with the old Boston Consulting Group 4-quadrant grid of business extension strategies:

Develop new markets
Very difficult
Develop current markets
Invest in current product areas
Invest in new product areas

You can compare any two attributes of your business, e.g. products, technologies, geographies, customer segments, skills, operational processes, channels, etc. The message is usually the same - it’s easiest to deepen your current position, but if you are going to extend your business, the more dimensions you change, the bigger the challenge.

It doesn’t matter whether you’re extending organically (i.e. doing it yourself) or by acquisition. However, if you’ve got a sound reason to grow in one or more dimensions, then acquisition can be a faster and lower risk route than trying to do it all yourself, if you can plan well, buy well, and execute well.

Of course, you could acquire a business you don’t really want, in order to divest it and acquire other businesses that you do, but that’s a whole different game. I still shake my head when I think of how brick and crockery maker Ceramco was acquired and turned into underwear maker Bendon. That changed just about every dimension possible.

First posted March 11, 2008

09 April, 2015

In honour of Isambard Kingdom Brunel

Everyone needs a hero - not because your hero is perfect, but because he or she has some admirable qualities or achievements which can inspire you to greater things. My hero is Isambard Kingdom Brunel.

Born on 9 April 1806, Brunel was a 19th century engineer who built the Great Western Railway, the best railway of the times. He built the Great Western, the Great Britain and the Great Eastern - the largest and most advanced steamships of their time. He built great bridges and tunnels. Overcoming setbacks (and the occasional failure), he made things happen, and his works still stand today as examples of innovation, design, entrepreneurship and execution. In an extensive national poll accompanied by in-depth BBC TV documentaries in 2002, Brunel was voted the second greatest Briton of all time.

Brunel was always around in my early years. My parents’ families lived near the GWR in west London (the local pub was called the Great Western). I studied Computer Science at Brunel University in London. Early in my career, I worked near Paddington, London and Temple Meads, Bristol - the original terminus stations at either end of the GWR. Brunel’s constructions were everywhere.

Brunel’s life story is as fascinating as his work. The more I learnt about the man, the more I identified with his sense of ethics, his egalitarian elitism, his setting of grand goals (not just his works themselves, but why they were built) and his ability to achieve them.

Brunel translated his personal motto ‘En Avant’ as “Get Going’. Anyone who knows my leadership style knows that I want to get things going, get started, start delivering value.  And like Brunel, I have tried to apply a bigger vision.  Designing and operating a great business is akin to a great engineering project:
  • an overarching purpose: what you offer the world, to whom (customers, shareholders, staff, communities, business partners), and why they'd want it;
  • a clear, coherent, consistent and elegant design of how you will make and fulfil that offer - core principles, people, processes, products;
  • doing what should be done to build that business (and not doing what shouldn't);
  • thinking, planning and acting for greatness.

It follows that my private companies (Isambard Ltd and my old venture investment company Isambard Investments Ltd) were named after Isambard Kingdom Brunel. I have a small, but growing, collection of Brunel-related books, pictures, DVDs and souvenirs. My car number plate is ISAMBD (which has most personalised-plate translators completely stumped). And I have a life-size banner image of the great little man hanging on my study wall. Top hat, 3-piece suit, cigar, and muddy boots - what an icon!

First published 9 April 2008 and republished on Brunel's birthday