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?
Encouraging innovation
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.