James Dyson: Dyson
The vacuum cleaner boss proves creative types can make tough calls and run businesses
There's a view that commercial ruthlessness and innovation are mutually exclusive concepts. Inventors and creative types are meant to be airyfairy, liberals, too wrapped up in doing something different to notice the bottom line.
James Dyson, however, proved the two can co-exist when he controversially sanctioned the decision to cut more than 600 jobs from his Malmesbury production line and shift the making of both his vacuum cleaners and washing machines to Malaysia.
Far from a popular decision, Dyson took flak from the national press as well as Wiltshire's locals. But the move was vindicated when, in November, the company announced it was expecting pre-tax profits of £46.3m for 2003, up from £20.4m the previous year. After all, you don't build a business with a £277m turnover in 10 years, without making some tough calls and possessing a healthy dose of common sense.
The escalating cost of manufacturing in Britain was blamed for the lower than expected pre-tax profits in both 2001 and 2002, having made £35m in 2000, and extreme action was viewed necessary to maintain the company's margins.
The positive result is that it has freed up more money to invest in research and development, which Dyson claims is his true passion, and 100 new jobs were created there. Having gradually stepped away from the day-to-day running of the business, he now employs Martin McCourt as CEO and was decidedly sour about the reaction he got to the Malaysia move. His argument is he's never received a penny of government grants and has created 1,300 jobs, paying more than £160m in tax since setting up. And you can see his point.
He's convinced you can bring production line efficiency to the act of creating and modifying too. But while the pressures are different, do Dyson employees have the same desire and motivation of the sole inventor who knows their livelihood depends on doing something that's new and commercially viable?
Dyson clearly thinks so. He's spent the past decade trying to create the perfect environment for innovation. He strives for the slightly ‘studenty' feel the company had when it started out with him and six fellow Royal College of Art engineering graduates. This is highlighted by the firm's average age of 26 and its predilection for eager graduates.
“We were hell-bent on doing something different, creating better technology, and designing and engineering a radically better product. It was absolutely in our blood,” he asserts. “I feel I can give the responsibility that was bestowed upon me early on to others. It also means they're not tainted with other people's ways of doing things.”
He's determined not to be an owner marooned from the workforce. “One of the most important things is I spend time, not in my glass office here, but going among creative people, not just the engineers, making sure they're doing creative things,” he says. “I don't mean I go around like a policeman, more just encouraging creativity.”
Offering praise, encouraging workers to take the difficult route rather than the obvious, and taking an active role himself are pillars Dyson has built the company on. As well as the environment, his teams also need the necessary structure and equipment to innovate. “Timelines, milestones, charts showing where they've got to are all good management systems. So staff are reviewed in the normal way. But that doesn't really help what I'm talking about, which is people having the courage to take risks, make a mistake and be ridiculed. They should have no fear of doing something that's not ‘normal' or ‘sensible' and worry I'll clip them round the ear and say ‘don't be so bloody stupid',” he says.
It's an attitude business in general resists, but illustrates why risk-embracing entrepreneurs often run the most innovative companies. “I guess it helps that the company is run by a designer and engineer who is here not to be a boss and isn't driven by running a big company. Strange as it sounds I'm not desperately keen on making huge sums of money.” Wealth has instead come to him from his creations and he's now estimated to be worth around £350m, owning, as he does, the business in its entirety.
Downstairs, in the heart of the business, Dyson still gets grubby-handed, but not as much as he'd like. Every three days he and his team make their way round, for what he describes as feedback sessions, identifying where problems are and thinking up solutions. “I just go around and fiddle and cut things off,” he says.
As the man who made 5,127 prototypes of his first vacuum cleaner, he strives to replicate aspects of his Blue Peter-style approach as faithfully as possible. He's convinced engineers produce better results this way, as opposed to being cosseted with mod-cons.
“Computer aided design (CAD) is absolutely brilliant, but really good engineers always draw by hand first. We sketch and our team always make rough and ready crude prototypes at the beginning, with cardboard, gaffer tape, MDF, Plasticine and PVC tape,” he explains.
When Dyson appeared on Newsnight he says he was “attacked” by presenter Jeremy Vine for proclaiming he'd like to cut the number of computers in his business in half.
“Sometimes, it's better to act out of naivety and be prepared to make a mistake rather than having access to information you don't need. If you went down to engineering, which you're not allowed to, you'd see people around huge round purple tables working collectively, and sometimes individually. About a third would be drawing on computers, which are situated around the edge, with the rest discussing and interacting, arguing and doing all the right things.”
CAD also only enables you to see part of the drawing. “You used to be able to walk around drawing offices looking at everybody's sketches. With CAD you have no idea what others are doing – you never get full-size, scale drawings. But on the other hand toolmakers can come up with something that's virtually what you've drawn.”
This mix of the old with the new extends to Dyson's more traditional belief that everyone in his engineering department should be able to build their designs too, rather than having specialisms. “Everybody is a development engineer, quasiscientist, design engineer and designer. There's no demarcation.”
He's also an advocate of playing musical chairs and frequently moves staff from one team to another. “One of the things I was amazed at when this first happened was somebody could literally slot in and take someone else's place and often add a new perspective. People aren't always fond of doing it because they want to hang on and own it, but actually, while the next day they might look glum, two or three days later they have grins all over their faces and are enjoying the new thing they're doing. It's not something that comes naturally, but if you do it everybody benefits.” Team sizes are also flexible with groupings ranging from three to 40 people on single projects keeping a non-uniformity in the company.
But how does he instill the necessary desire and neardesperation to create? After all, his staff work in a contemporary comfort zone, surrounded by like-minded people. Dyson, on the other hand, sold his shares in his Ballbarrow invention for £10,000 to support his first year before spending five whole years developing his first cleaner and says: “People tend to be at their most creative when their hands are filthy from scratching around in the thick of it on the workshop floor and the pressure is on because they've had a number of failures. That's when they invent things.”
There's also the small matter of ownership. Whatever ideas his workers come up with belong to the company. They receive no royalties, but are named on the patent and these documents confirm their role as inventor. He also incentivises them with a bonus scheme based on profit. So is his research and development as far removed from the cotton wool treatment as he'd like? “Yes, what we're doing is producing radically new products, which are a huge risk. Everyone in the organisation knows that and the engineers more than anyone else. I think if you asked them they wouldn't say they felt like that. I don't think they're wrapped in cotton wool and safe here.”
Promoting new ideas
Dyson feels the knowledge that a good idea will be supported also motivates. “If someone has a good idea, which happens a lot, we take it up, use it and do it as fast as possible. We have recruited young professors from universities because we've gone into producing technology for electric motors and robotics. Suddenly, here they've got timetables stating when something's got to work. Structure can be very stimulating.”
When an idea reaches some level of maturity Dyson tends to review it himself to help decide whether it's patentable. “Because I have more experience of patents I can more easily say what is and isn't patentable,” he says. Dyson Ltd has around 1,200 patents registered, so there's a fair bit of intellectual property to protect.
Having previously lost control of some of his patents, including one for the extendable hose in his vacuum cleaner, and also fought a drawn-out legal battle against Hoover over an infringement, for which Hoover eventually paid £4m damages, he's determined not to get caught again. From the outset the company has had an in-house patent lawyer, which Dyson acknowledges is unusual for a small business. “It's very important to have the right patents,” he says, “although the patents we fought our case with Hoover on were actually filed before I formed the company.”
The cost of patents often rises quickly to £10,000 through legal and renewal fees, which is prohibitive for most small businesses and individuals. Unsurprisingly, given his background, it's one of Dyson's bugbears. “Patents are very expensive to file – even with an in-house lawyer. The filing fees per country and annual renewal fee per patent per country quickly add up. In any other form of creativity if you've created something you own it,” he says, incredulously.
He argues this is a fundamental infringement of human rights, and his two visits to the European Court of Human Rights to fight this cause show his passion for innovation and the good of the inventor remains undimmed. And with that presence wandering around the Malmesbury HQ it's obvious its inhabitants will never be allowed to settle for anything less than the extraordinary.
Inventions Dyson wishes were his:
?Goodyear stumbled across the vulcanisation of rubber allegedly, although I?m sure it wasn?t accidental. The reason I like it is that he tried for ages to make it work and once he did it was the most staggering invention. He turned a rather stupid natural material into an amazing one. It?s the only material that has a memory ? going back to the shape you moulded it to. Tennis balls, car tyres, rubber gloves all work because rubber has a memory. He died in 1846 with debts of ?4m. The other interesting thing is no foreign government would have allowed its patent because it was so significant.?
THE WRIGHT BROTHERS? PLANE
?Not because they invented the aeroplane ? they didn?t and they weren?t the first to make one fly. But they deserved the patent for being the first to make an aeroplane that was controllable, steerable, and could go up and stay up.?
?A more obscure one is reinforced concrete. It was actually invented in 1867 by Joseph Monier who lived in Provence, France. He was having a problem with flower pots that kept cracking. Although cement has been around since time immemorial, he made a mould and put chicken wire in the cement, and in doing so invented reinforced concrete. When you consider that virtually every new building is now made with reinforced concrete, and the principles have been applied to other industries, that?s some achievement. And it?s a charming story as well.?
1966-1970 Attends Royal College of Art, studying furniture and then interior design
1970 Joins Rotork in Bath to manage its Marine Division, invents the Sea Truck and develops product sales to 40 different countries
1974 Invents the Ballbarrow
1979 Sells shares in Ballbarrow for ?10,000 to support development of his bagless vacuum cleaner
1979-1984 Builds 5,127 prototypes of the Dual Cyclone vacuum cleaner
1985-1986 Launches the G-Force machine through a Japanese company 1993 Sets up Dyson Ltd in the UK with Japanese, American and Canadian royalties, and opens R&D centre and factory in Chippenham, Wiltshire
1995 The Dyson Dual Cyclone becomes the bestselling vacuum cleaner in the UK. Buys a larger factory in Malmesbury
2000 Launches the Contrarotator washing machine
2002 Transfers vacuum cleaner manufacturing to Malaysia
2003 Transfers washing machine manufacturing to Malaysia
2003 Enters the US market and exceeds targets by 180%. By 2006 the US will account for a third of Dyson?s business
Innovation and the government ? Dyson?s view:
When DTI minister Patricia Hewitt called an ?Innovation Summit?, you can be sure James Dyson was one of the first names down.
As far as he?s concerned, successive British governments have not done enough to back R&D and have created a climate where manufacturers, and particularly small businesses, have been unable to compete internationally.
He argues that no other country has used high interest rates to control inflation over the past 35 years and the effect has been to cripple industry. ?High interest rates have held back innovation. Companies that borrow money have to get a return on it fast and R&D is not a quick process. It can take six or seven years in some cases. We put ?50m into the development of our washing machine, and with high rates of interest it ended up costing us double what we originally thought it would. High interest rates probably mean a high pound, which means you can?t export your products. They?ve been the death knell for British industry.?
He is quick to applaud initiatives like the SMART awards and government grants given to companies and individuals responsible for innovations. However, he thinks the schemes should be bigger and better still, with the built-in acceptance that some ideas will fail.
On the subject of universities, Dyson would prefer it if some of the money allocated to higher education was re-directed to small companies. ?If you give companies money to do research it?s much more likely to turn into a product than if you give it to a university,? he says. ?Universities can do a lot more with less money and should concentrate on blue-sky research. They?re unaccountable and funded by you and I, so I?d rather they did that, than the kind of stuff we do here.?
There also needs to be something of a mindshift to encourage future generations into professions where they get their hands dirty. ?Working in a factory is viewed as bleak, not exciting and not something people want their children to go into. The media glamourises itself along with certain other professions. Past governments have never really considered the need for innovation and creativity in industry.?
The best thing the government has done, he says, is to give R&D tax relief, whereby companies can get 120% tax relief on investment. ?It was slow in coming, but is a great move. Every single speech I?ve made or article I?ve written, I?ve mentioned it as the single most important thing to do because it turns the heads of accountants. For FDs and the people running businesses, R&D is a huge risk, but if it?s a total failure you can set off quite a bit of it against tax.?
He does, however, think 125% is still not enough and argues that by making it more like 140% to 150% the UK can surpass other countries. In the US, companies get 140% tax relief on extra investment over the previous year and for every dollar they put into R&D they get $4 back. The UK?s 125% includes any investment in R&D, not just additional investment. ?I rather like the broader definition of the US where anything that includes the product qualifies for relief. It?s probably a better way to improve the product and a superior way to encourage it.?
The benefits for the government are also worthwhile and Dyson struggles to see why that?s not been recognised in the past. ?You only have to look at how our profits have climbed because of our heavy investment in R&D to see they?d quickly get it back in terms of the tax we pay to government. Bankers and investors should take the long-term view, but the government can?t ask bankers to take a long-term view while they take a short-term view. They?ve got to put their money where their mouth is and the rest will follow.?