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Thursday 1st November 2001 |
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Michael Whittaker comes bounding down a rather elegant stairway to the foyer of his Auckland office, full of energy for yet another media interview, despite sporting a heavy cold. Since winning Entrepreneur of the Year in September, the 31-year-old head of database management company The Atlantis Group is getting used to the media spotlight.
Frankly, the guy deserves it. For the first couple of years Atlantis - then run by people all under 30 - shunned publicity because it just wasn't sure it would still be around in a couple of years. With little capital, it aggressively went up against the better-resourced multinationals that dominated the database management scene. At times, the fight has turned ugly, with Whittaker laying a complaint with the police about bugging of the company's telephone lines in Auckland.
Five years on, Atlantis has gone from just a handful of people to a staff of 200. Now it's a global, multi-million dollar company run from Auckland, creating world-beating technology such as the Mobil Max loyalty card. So smart is this smart card it is winning customers, really big customers, the world over (see Atlantis Group's profile). Oh, and did we mention that the company is also profitable? Yeah, it's time to start telling the story.
Ranking second in the Fast 50, with 414.6% revenue growth over three years, Atlantis typifies the clique of small, fast-growing companies playing a critical role in the New Zealand economy. They generate competition, pay tax on their profits, and act as role models to up-and-comers. What's more, think brain gain. Employment created by Fast 50 companies accounted for 3889 new jobs in the past three years.
Without hesitation, a confident Whittaker forecasts strong international uptake of his company's retail loyalty card technology will see revenues increase tenfold in the next two years.
That might put Atlantis close to first place-getter, the Australian-owned telco TelstraSaturn. Yes, the reason for all that CBD street-digging in the last three years is growth - a whopping 4200% growth - which puts it up there with the winners of other Deloitte Fast indices (Deloitte runs numerous Fast surveys around the world).
Chief executive Jack Matthews attributes this stellar result to offering consumers something different. TelstraSaturn has achieved 35% penetration of Wellington household lines (on the telephony side) by bundling the phone lines with internet and pay-TV access. "We've done a good job of building the right brand values in the market. It is very much a case of showing we're putting our money where our mouths are."
Which is not to say TelstraSaturn is profitable. In spite of fantastic growth, the company reports an operating loss of $83.8 million for the six months to June. Matthews remains unfazed, saying operating losses are expected for some years. After spending $1.2 billion on a new state-of-the-art cable network, profit is not forecast until 2006. Indeed, the Fast 50 companies were specifically not asked to disclose their profitability. Deloitte says profit is influenced by many factors and easily manipulated, so the Fast 50's focus is sustainable growth to the top line.
Who are they?
So what kind of companies are growing this fast? Take a quick squiz at the table and you'll see the top 50 fall into two groups. One is the mature companies on the acquisition trail, looking to carve out market dominance. They have a clear strategy. And market conditions, including the exchange rate, are working in their favour.
The other group is composed of companies established in the last three to five years. As you might expect their growth was, shall we say, haphazard, in response to huge demand for their products or services. They grew as much by accident as by good planning, says Deloitte partner and Fast 50 champion Brett Chambers. "As a company grows, it is easy to be driven by opportunities that emerge rather than defining the opportunities you want to create. I think this is true of a number of the companies in this year's index."
Planned or not, at least they have capitalised on the opportunities as they arose. There are other features common to this list of fast-growers.
They ain't shy
Or at least they've overcome their shyness. A number of private companies did not take part in the Fast 50, despite achieving growth rates that would have probably seen them on the index. There is a general reluctance for New Zealand companies to let their competitors or customers know that they are successful. Fast 50 indices in other countries indicate that this attribute is unique to New Zealand. Is cultural cringe at work here? "In sporting success as well as in the business world we don't trumpet our success as well as we could," says Deloitte's Chambers.
Trouble recruiting
Fast-growing companies around the world have trouble finding good people. And New Zealand's fast-growing companies find it hardest, Chambers says. In answer to the "difficulties faced" question, our fast 50 picked "recruiting talented staff" as tops.
Take state-owned enterprise Solid Energy (48). It needs to recruit over 300 highly educated and highly skilled people in the next five years as it expands its existing coalmines and opens new ones to cope with increased world demand for its product. While the perception of coal miners may be filthy men toiling down pit, these days a high skill level is required below and above ground, as leading-edge technology is used to extract the best value from what's brought out of the ground. To overcome the recruitment problem, Solid Energy is partnering with local polytechnics and other training organisations to finance training people with the skills the SOE will need over the next few years.
Globally bound
In the UK survey, the top high-growth companies were mainly established in the 1990s, are in business services and are non-exporters. Back here, a significant number of companies on the index export their products overseas, seeing New Zealand as too small a market.
Swing Thru New Zealand (6), a Dunedin-based company selling a patented container handling system, has no choice. Owner Ross Simpson dreamt up the technology one night five years ago. When he woke up the next morning he put the idea on paper and took it to an engineer. The result is an innovative lifting unit that can operate on either side of a truck. It was described by the New Zealand Army as its most valuable piece of equipment for the peacekeeping forces in East Timor. Some 80% of Swing Thru's revenue is based offshore. Simpson says he couldn't survive in the domestic market, where a Christchurch competitor is already a world leader in this niche and vigorously defends its home patch.
"In order for us to make any inroads into the commercial sector we had to find markets offshore in places where we are not in direct competition to this organisation, which has sizeable resources and reserves." Simpson even left his hometown and based himself and his family in St Louis for five months, trying to conquer the lucrative US market.
Not techie
Chambers expects more high-tech companies to make the grade in future, but this year many high-tech companies nominated could point to high annual growth rates in one year, but not to sustained growth. What's more, the "tech wreck" has dampened the chances of many high fliers in recent months.
Growing pains
All Fast 50 companies show pain in growth. The story of Kevin Eder is instructive. He's the founder of Tradestaff (8), a recruitment agency for temporary staff specialising in industrial labour - "all the blokesy stuff", as he calls it. The small Christchurch-based company got the speed wobbles in its second and third years, suffering a serious cash flow problem as it rapidly expanded. "The busier we got, the worse it got, to the extent that if we got any more business from new clients I was starting to groan 'Oh no'," Eder says.
Cashflow, cashflow, cashflow
One of the difficulties with getting more credit from the bank was Tradestaff's lack of assets. Although turnover is heading for $16 million this year, if you piled all the assets together and auctioned them you might get $20,000, Eder says. Since its latest financial results, the bank now "loves us and are falling over themselves to give us money," he says. However, retained profits from the five-year-old company are now adequate to fund its New Zealand expansion.
The frustrating part for the owners of these promising companies is having so little cash, despite high revenue levels.
Access to capital
Indeed, respondents to the Fast 50 survey gave a clear message that the second biggest barrier they face is difficulty in accessing capital. New Zealand has few high-wealth investors willing to fund start-ups, and the stock market is too small to get much capital that way.
Dunedin-based commercial cleaning franchiser Crest (25) wants to see investment opportunities in small companies promoted to retail investors. Crest, set up five years ago, now has 35 franchises nationwide but its expansion has been hampered by lack of capital. It still has big plans though. Managing director Rene Mangnus says the company is about to start franchising ultrasonic cleaning - of venetian blinds, industrial parts and the like - with equipment imported from the US. And he has a host of other ideas, including exporting Crest's franchise system overseas.
One of the biggest causes of business failure is a lack of capitalisation from the outset. "There is a bit of the number 8 fencing wire approach to developing a business, such as using what you've currently got even if it is not the right tool," Chambers says.
What works in a small company often doesn't in a company rapidly becoming bigger. Rather than incrementally growing the infrastructure and administrative support in response to growth in the business, several of the Fast 50 companies took a longer-term view of where they wanted to be. They invested in infrastructure three to four times their current requirements. As the business grew they were free to focus on sales growth, knowing the back office systems could handle it easily. But even one of these forward-thinking companies got caught out - it grew faster than its long-term vision planned for. What a problem!
Smart succession
And there comes a time when entrepreneurs can no longer manage all aspects of the business themselves. The trouble is, many dislike letting go.
Wellington-based retailer The Sunglass Store (27) started five years ago with one store and now has 16 shops, with the 17th on the drawing board. Managing director Regan Wood says he and fellow owner Angus Donald have been forced to allow key staff to do more of the day-to-day retail operations, enabling them to focus on the company's expansion.
"It allows us to lift to that next level, but we've had to have faith in our staff to allow it to happen," Wood says. "We do still spend a lot of time in our stores, rolling up our shirt sleeves and sweating with the staff." It must be working for them - The Sunglass Store averaged a 93.7% growth rate over the past three years.
Passion
Employing key people that share vision and enthusiasm is the most important aspect to getting it right, says Neil de Wit, managing director of telco service provider CityLink (22). It has enjoyed a growth rate averaging 121.2%, despite increased competition in its market niche.
"You can teach people skills but you can't teach them attitudes," de Wit says. They need to share the passion.
How we chose 'em
To qualify for the list, companies had to meet the following criteria:
| Rank | Company | Growth % |
| 1 | TelstraSaturn | 4200 |
| 2 | The Atlantis Group | 414.6 |
| 3 | Alchemy Group | 376.9 |
| 4 | nzjobs.co.nz | 349.5 |
| 5 | Icebreaker New Zealand | 345.7 |
| 6 | Swing Thru New Zealand | 312.1 |
| 7 | Absolute Communications | 307.9 |
| 8 | Tradestaff | 307.2 |
| 9 | Cochrane Ag Helicopters | 252 |
| 10 | Plato CIS | 241.5 |
| 11 | Glass Tower Public Relations | 237 |
| 12 | MSC Solutions | 233.8 |
| 13 | EMS Global | 210.1 |
| 14 | Computer Concepts | 198.5 |
| 15 | Cellular Cellnet (NZ) | 197.8 |
| 16 | Er-Co | 170.3 |
| 17 | Gallager Bros Steel Fabricators | 165.4 |
| 18 | Kathmandu Group | 143.4 |
| 19 | Metal Skills | 140 |
| 20 | Birchleigh Rest Home | 135 |
| 21 | E B McDonald | 130 |
| 22 | CityLink | 121.2 |
| 23 | Synergy International | 119.4 |
| 24 | Incite | 113.5 |
| 25 | Crest Commercial Cleaning | 112.1 |
| 26 | Genesis Research & Development | 107 |
| 27 | The Sunglass Store | 93.7 |
| 28 | Ryman Healthcare | 92 |
| 29 | AgVax Developments | 82.7 |
| 30 | KiwiCar Car Rentals | 81.5 |
| 31 | Prime Finance | 78.7 |
| 32 | PayGlobal | 75.3 |
| 33 | Waste Management | 73.9 |
| 34 | Carlson | 67.9 |
| 35 | Amos Aked Swift | 63.8 |
| 36 | Tristram Marine | 61.2 |
| 37 | Rock and Ice New Zealand | 61.2 |
| 38 | The Bridge | 53.6 |
| 39 | Port of Tauranga | 51.2 |
| 40 | Kilwell Fibretube | 50.7 |
| 41 | Hayes International | 47.5 |
| 42 | The Warehouse Group | 43.3 |
| 43 | Pulse Data International | 42.6 |
| 44 | Greenslades | 40.9 |
| 45 | Fishers meats | 40.4 |
| 46 | Freightways Express | 39.8 |
| 47 | House of Travel Group | 38.4 |
| 48 | RD1.com | 37.6 |
| 49 | Solid Energy New Zealand | 36.9 |
| 50 | Baycorp Holdings | 35.5 |
Recruiting skilled staff: Responses indicate there is a real shortage of skilled staff, although it seems to be more of a problem with the start-ups than established companies with a track record. There is also demand for people with entrepreneurial spirit, risk-takers who can take the pressure off the company's founder. Fast-growing companies (19% of them) are also concerned about retaining their management team because of the relatively low levels of executive remuneration in New Zealand.
Infrastructure support: There is a recognition that as sales grow, so too does the demand for timely and accurate information and the physical infrastructure (office space, storage space) must also increase. Finding the money to keep pace with this is hard.
Managing cash flow: Smaller companies in particular tended to be poor cash collectors and struggled to find the time to dedicate to managing cash. Many underestimate the capital required to start up a new company and the time lag between when the investment is made and when the revenue starts rolling in.
Size of market: Companies reliant on the local economy for growth are constrained. Establishing overseas markets requires significant investment, but it is difficult to establish the right distribution channels into overseas markets from New Zealand, especially for technology-related stocks. Many also felt vulnerable to the overall strength of the New Zealand economy - dragged up when it went well, dragged down when it performed poorly.
| Recruiting skilled staff | 34% | |
| Having the infrastructure to support growth | 26% | |
| Managing cash flow | 25% | |
| Size of the New Zealand market economy | 16% |
New markets: The biggest determinants of future success for fast-growing companies are developing new markets and forming strategic alliances with both customers and suppliers. This may be a more cost-effective approach than making the investment by oneself. The secret is for both partners to have a clear exit strategy (like a pre-nuptial agreement) in case the alliance doesn't work well.
Skilled workforce: Recruiting and retaining top talent is a critical factor. Fast-growth companies say key objectives are: know what you want, develop your workforce, evaluate your people systematically, choose innovative channels to attract people, keep strong networks of past and potential employees, and spread the word - make it known that your company is a great place to work.
R&D: Significant investment in research and development and new technology is required to stay ahead. The window for capitalising on a technology edge is short as competitors catch up quickly. The goal should not be tomorrow's technology, but technology for next year and five years from now.
Management: Having good management that can deal with the challenges of fast growth and stay focused on the vision is important. Stick to your objectives, but be prepared to be flexible and look at new opportunities. Many respondents say "passion" is required by everyone.
| Developing new markets and alliances | 23% | |
| Attracting and retaining good staff | 19% | |
| R&D/use of technology | 18% | |
| Good management | 18% |
Innovation: Innovation in products, services, technology and thinking is a characteristic of all fast-growing companies. Inspiring a creative culture encouraging all people to proactively contribute is seen as risky, but also the only way to keep pace with today's increasingly fast-paced business environment.
Marketing: Many respondents are researching market needs and trying to identify new markets to mitigate reliance on one or two key customers.
Customer focus: Fast-growing companies had a clear service ethic and focus on their customers to drive long-term revenue growth.
Niche marketing: The most successful organisations know what they are good at and put all their energy into doing it well. They use strategic partnerships and alliances to complement their capabilities.
Internal culture: Growth organisations foster a working environment that is challenging yet rewarding, where people are empowered to work towards a collective vision. Open communication, where people share their views, creates a culture to support growth.
Developing overseas markets: Of those who specifically identified they were actively developing overseas markets, most named the US and Europe rather than Australia. South America also featured.
| Innovation | 23% | |
| Marketing | 21% | |
| Customer focus | 19% | |
| Niche marketing | 16% | |
| Developing overseas markets | 16% | |
| Internal culture | 14% |
Location: Wellington (head office)
Started: In April 2000 TelstraSaturn was formed by the merger of Telstra New Zealand, Wellington's pay TV outfit Saturn and internet service providers Netlink and ParadiseNet. Web design company Zivo was added earlier this year. Australian telco Telstra owns 50% and the other half is held by Australian cable company, Austar United Communications.
Concept: To marry the five companies into one convergent company that crosses a number of different product and market segments compared to traditional telecommunication companies. It offers voice, data, mobile, internet and cable television services to both business and residential customers.
Strategy: The core plan focuses on three things: spending $1.2 billion on a state-of-the-art network (partly financed with a $900 million bank facility); becoming a content aggregator; and marketing that network and content to other providers and the public. It has an agreement with mobile phone company Vodafone to provide wireless services. What TelstraSaturn has gambled on is replicating the 35% market share of household lines (on the telephony side, at least) it has in Wellington throughout the country. It is already ahead of plan in Christchurch, it says. Of late, staff have been told the more lucrative business market is crucial to its success and its high-speed business service will be introduced in Auckland, Wellington and Christchurch by year's end.
Growth drivers: Being different and putting its money where its mouth is, says TelstraSaturn's American-born chief executive Jack Matthews. He reckons the company's rapid growth came from stepping up competition in the residential phone market and bundling things together for customers - "one bill, one network, all your services".
Growth barriers: TelstraSaturn has been outspoken at what it calls New Zealand's lack of regulatory protections in the competitive telecommunications market compared to other countries. In August it pulled out of a national digital satellite television joint venture with Television New Zealand, saying it wanted to stick to its core business instead. Telecommunications analyst Paul Budde said this is a warning the company is facing difficulties, and forecasts TelstraSaturn doesn't have a long-term future because the market can only support one national infrastructure operator (presumably Telecom). Matthews agrees a market this size can't support too many players. "Our view is, if it's big enough for two, we intend being one of the two."
Problems gaining resource consents to build its cable network in Auckland have delayed the company's national rollout by a year.
Edge: The breadth of market coverage it will have once the network is completed.
Results: TelstraSaturn's rapid growth is not yet profitable growth. It reported an operating loss of $83.8 million for the six months to June. "When you're spending a billion-plus dollars starting from scratch any company, no matter how successful they are, is going to incur operating losses for a number of years before they turn the corner," says Matthews. He expects the company to begin to be cash flow positive by the end of 2002 and making money by 2006.
Smartest move: Melding a consortium of companies that required everyone to "bury their own egos a little bit". The sum is greater than the parts, Matthews says.
Future: The goal is to become New Zealand's leading convergent company.
Matthews thinks the future is about integration - a seamless market between New Zealand and Australia on the business side, integrating wire line and wireless and business and consumer. TelstraSaturn has high growth requirements to pay for its huge investment. But it is a big ask in a market this size. Matthews expects the revenue ramp to continue over the next 18 months, although that is dependent on how fast the network grows. "We'd better," he jokes. "Or next year's interview will be with my successor."
Location: Auckland
Started: 1996. Then 26, entrepreneur Michael Whittaker and his friends Sarah Morley and Hamish Franklin used their own money to found database management company Atlantis Marketing. Within six months it had 20 staff. The group now includes retail loyalty-card company, Visible Results. The original founders and a small number of Kiwi friends own the group, and a 5% stake is held by Japanese venture capital fund Windmark. Debt company RMG has a 25% stake in Atlantis Marketing.
Concept: The founders claimed the local direct marketing industry was poorly serviced by big corporates with no passion for what they were doing, so they set out to do better. They went out aggressively selling databases to direct marketers. To differentiate themselves, they offered a 500% guarantee that what they gave their customers was 100% correct - if they got it wrong, customers got five times their money back. Whittaker says he can count on one hand the number of times they have had to pay out.
Strategy: Atlantis set out to be a global company because of the size of the New Zealand market. It now has seven offices overseas and partnerships in other countries. This financial year just under 50% of its business is New Zealand-based. Whittaker says the company's success stems from always saying "yes". Sometimes that meant being up for 24 hours, five days in a row, putting together a call centre because they said "yes" to a job and didn't have a call centre at the time, or roping in half a secondary school to lick envelopes because they said "yes" to sending out 100,000 mailers in three days.
Growth drivers: For the first three years the entire management team was aged under 30. That youth culture and energy has been a growth driver, Whittaker says. Early on, Atlantis spent a lot of resources on good financial systems and back-end infrastructure - an area many small companies fall down on - and hired a human resources manager because management were spending up to 60% of their time recruiting.
Adding the retail loyalty-card technology in 1997 speeded up growth. It originally held the New Zealand rights to "smart" cards, which use thermo-chromic printing to deliver instant messages to customers and record their purchases. The Mobil Max card was its first Kiwi customer; Visible Results went on to gain the rights for Australia and Southeast Asia. Atlantis knew building a business without the intellectual property was a risky strategy, but it believed in the technology and it wanted it - badly. It made four offers over two years before Kansas-based GraphiCard agreed earlier this year to sell the company and its IP for $14 million.
Growth barriers: Having enough time to do it all. Whittaker spends 20 days a month visiting each overseas office and clients. But unlike most entrepreneurs, he has the other founding shareholders to keep the Auckland-based business running while he is away. Capital restraints have until now kept the company out of the huge US market but now it is profitable it is expanding there too.
Edge: Delivering on what you promise.
Results: Turnover is kept confidential. Revenue has hit the tens of millions of dollars mark and Whittaker expects it to grow ten-fold in the next two years.
Smartest move: Deciding to centralise operations in Auckland from the beginning. The founders decided if they wanted to be a global company they would remain based in New Zealand, centralising the brains trust here rather than letting it dissipate around the globe. Whittaker says it is far more cost effective for back-end infrastructure, such as call centres, to be based in New Zealand.
Future: Already the world's largest provider of read/write loyalty card programmes, Atlantis has "a lot of unfinished business", Whittaker says. The company is currently signing up a new client every two weeks (Miller Oil is the latest) after only "dipping its toe in the water" in the US market. It has also signed up its first Chinese customer and sees Europe as a big opportunity because of loyalty card uptake there.
Location: Christchurch
Started: 1995. Former DSIR scientist Steve Smith and Dean Ashby (as soon as he graduated from Canterbury University) set up the software engineering company to develop business solutions, delivered via the internet or intranet. Ashby had built New Zealand's second website in 1992. Phillip Sunderland is the third company shareholder. They started with just $25,000 in capital and $25,000 borrowed from the bank.
Concept: Although scientists are not always entrepreneurs, Smith could see early commercial potential in the emerging technologies, once they moved out of the science environment and became more widely available. By 1998 Alchemy was setting up sophisticated database-driven websites for corporate customers.
Strategy: The dictionary defines alchemy as a process by which incompatible elements are combined. New components such as marketing, advertising and graphic design were added to Alchemy during the 1990s, to give clients a one-stop shop. Smith says a number of their early clients - NZ Immigration Service and Harcourts, for example - were attracted to that mix.
Growth drivers: Alchemy says it has had to be innovative and service-oriented to compete against the hundreds of other companies, many of them bigger and offering similar solutions.
Growth barriers: Access to capital is a major problem. Three options are being considered to fund its offshore expansion: borrow money from the bank, if it can get it; sell equity; or partner with other organisations. Its current preference is alliances - the ink has just dried on a deal with UK-based Jay Dee Technologies, another Java specialist development house, to help expansion into that market. It is also looking to set up a Brisbane office on its own. Despite complaints of an IT skills shortage, Alchemy has had no problems recruiting or retaining developers.
Edge: The fact it is a one-stop shop. "There is a lot of cross-fertilisation, where people may come in with a strategic brand management or marketing issue, which ends up being solved by a small technology solution," Smith says.
Results: Alchemy would not reveal turnover figures. Its average growth rate in the past three years is a whopping 377%, though the company expects that to slow down. Smith says it's easy to achieve phenomenal growth rates while still small, but that gets harder as you get bigger and need capital to expand into new markets and grow the business further.
Smartest move: Recognising at an early stage the internet was going to be "huge".
Future: Alchemy is diversifying into product development and expanding offshore, with Australia and the UK the immediate targets, and the US earmarked after that. It's also launching an advertising campaign to lift its profile in New Zealand so its no longer what Smith calls a "well-kept secret".
Location: Auckland, Wellington, Christchurch
Started: 1998. On Christmas Eve 1997 managing director David Wilson and Vaughan Bradley, Jonny Wyles and Alastair Lawrence completed a management buyout of Haines, New Zealand's largest recruitment advertising agency. Their first strategic move was to set up an online recruitment business just six weeks later: nzjobs.co.nz.
Concept: In early 1998 there was a huge amount of hype about the impact the internet would have on traditional newspaper advertising. It was a scary story for the four Haines managers who had just mortgaged themselves to the eyeballs. They set up an online recruitment company as a defensive measure - the country's first generalist online job board.
Strategy: To keep it simple. The focus is on being the market leader in size and service. This year nzjobs.co.nz began a talent supply strategy, holding details on candidates who have not applied for a specific job, whose names can be forwarded to companies advertising a job on their own websites, if they fit the bill.
Growth drivers: The online company has leveraged off Haines' leading position. As a percentage of Haines' total revenue, the online business has gone from 2% to more than 25%. Director Jonny Wyles expects it to reach 50% in two years. Growth in the overall market has seen nzjobs.co.nz mushroom from two staff and 200 job listings a month to 20 employees and over 3500 job postings today. More people entering the workforce are internet-savvy, while changing demographics mean fewer people in the labour market, a global talent shortage and more mobility among workers.
Growth barriers: The dot-com trend was to give away your service, build a critical mass faster than your competitors and make money later. From the start, nzjobs.co.nz has charged "a fair price" for its service, despite being undercut by competitors. Wyles warns that price undercutting could undermine the market if competitors, who may be subsidising prices with shareholder funds, go down in a blaze of glory. Another constraint has been having to train staff because of the lack of experience in online recruitment here.
Edge: It was the first mover and is the biggest in its market.
Results: Turnover is headed to between $2.75 million and $3 million this financial year. The dot-com is aiming to push that above $4 million and into profit next year. "It is fair to say when we set out we thought we'd need to go through a couple of years of investment to turn a profit in year three. Four years on, that view has changed. It is taking a bit longer than we first thought," Wyles says.
Smartest move: Getting in early.
Future: To get the same revenue growth, nzjobs.co.nz will be boosting the depth of information and service on its website. The plan is to increase the number of HR tools available and to help smaller businesses select staff.
Location: Wellington
Started: 1995. Marketer Jeremy Moon asked eight founding investors (including company chairman Noel Todd of the Todd Corporation) to put in a total of $200,000 to set up the pure merino sportswear marketing company. Another 11 investors have since been invited in, based on what value they bring to the brand. Renowned outdoor sportsmen, Sir Peter Blake and Graeme Dingle, number among the shareholders.
Concept: Remember the heaviness and underarm itch of your old woollen singlets? Using new technology, Moon turned the long-ignored fine merino clip into a skin-friendly, lightweight, natural fabric, creating a new category to compete with synthetic clothing in the outdoor market.
Strategy: From the outset Moon developed a marketing company rather than a production company, and a global brand rather than New Zealand product. Moon says New Zealand is a tolerant market that allowed them to make early mistakes. "It was critical to have a safe market like New Zealand to develop in, but the company couldn't reach its potential if it limited its market to New Zealand. Right from the beginning we defined our market as international."
Growth drivers: The business is brand-led, so it stays focused on being a global marketing company. Innovation is a key driver for both the product and the brand. People in the company are passionate about what they do, about the vision of creating a new product category. Moon says it has been important having a board of mentors who bring financial disciplines to the whole framework.
Growth barriers: The biggest challenge for the 31-year-old Moon, as an entrepreneur with a marketing background, has been on the people side. Staff numbers have grown from three to 20. Bringing in someone new every six months to cope with rapid growth has meant constant rearrangement. In hindsight, Moon says he should have hired someone experienced in human resources at an earlier stage.
Edge: Icebreaker is in the classic value-added situation - taking a bale of wool and turning it into something 10 times its value. But first it has to create its market. In its favour there is huge international potential, and a product that performs at the top end of the market. Icebreaker has contracts with 30 New Zealand high-country stations to buy 1000 tonnes of wool over the next three years. All will grow the wool according to Icebreaker's "recipe", maximising fibre length.
Results: Turnover figures are kept confidential. Moon says revenue is now multi-million dollar and over half of the product is exported to 10 markets offshore. He says that, on average, turnover has doubled every year since the company started.
Smartest move: Being single-minded.
Future: Icebreaker aims to continue doubling sales each year until it becomes the leading outdoor clothing brand internationally.
With winning the eye of the world's richest man last year - that's right, Microsoft's Bill Gates - has come the sort of publicity small companies dream of. The company's latest product, BrailleNote, is a talking computer for the blind with a killer application that can use Microsoft's Windows and email Braille documents to other users in standard form. "We got a photo of BrailleNote in the New York Times when Microsoft put out a press release mentioning it, and coverage from all major newspapers and magazines around the world that we couldn't hope to tap into on our own," says managing director Dr Russell Smith. The Kiwi company signed a deal with Microsoft late last year to develop further software to allow BrailleNote users to access the Microsoft electronic book programme. The book reader, due for release in the first quarter of 2002, will allow blind people to download books the day they are published and read them instantly in Braille.
It's all heady stuff for the company that evolved from a 1988 management buyout (MBO) from parent, Wormald International. Smith and seven partners struggled to raise the $700,000 or so capital needed for the MBO, when the company was still not making any money. But they saw the international sales network, built up at great cost, was gathering momentum. Early cash flow hassles were resolved by setting up two divisions (since on-sold) importing medical instruments and hearing aids.
Smith says the company could never have come into existence in the current environment without the export incentives that helped it survive as a start-up. From the outset the company invested heavily in research and development - currently 8% of turnover. Being the technology leader in its field has paid off. All of the major companies in the industry have at some stage bought Pulse Data's technology and componentry to put in their products.
"Some people think it's a crazy idea because you're helping the opposition, but it is very lucrative. It also stops the opposition developing the expertise themselves so they're always a cycle behind you." As an R&D company there is a competitive advantage to being head-quartered in Christchurch - Smith reckons the company gets around three times the output per dollar it would if it were based in the US or Europe. Most of the savings comes from the lower wages paid here.
The biggest challenge in recent times has been strengthening its marketing network worldwide. Pulse Data recently acquired two North American marketing companies to gain greater security of supply into its biggest market.
Staff numbers have gone from five in 1988, to 130 worldwide. Revenue has gone from nothing to $30 million last year. Sales are forecast to be $50 million in the next financial year. If achieved, that growth will lift the company's size to among the top in the industry and give it access to customers who previously wouldn't deal with it because it was judged too small.
Smith reckons the company can continue its rapid growth because the low-vision end of the market is so under-penetrated. "Even if we take never take any business off our competitors there is huge growth potential over the next 10 years because so many more people are living longer and outliving their eyeballs. And more and more are using computers."
That same year, 1992, AgResearch was set up as the largest of the new Crown Research Institutes. It was the combined success of those two vaccines that convinced it to establish its specialist technology development and commercialist vehicle, AgVax Developments, one year later. As new boss Andrew MacPherson tells it, AgVax provides the link between the research lab and the market place - farmers and veterinarians.
Since its inception, AgVax has had rapid growth in sales and profitability (33% per year). Last year's alliance with animal health company CSL, Australia's largest investor in biopharmaceutical research and development, is expected to boost that further. AgVax has the sole New Zealand distribution rights for CSL's veterinary products. O'Connell and Wilkins also plan to collaborate on further research and development projects. Any profit AgVax makes is channelled back to fund more R&D.
The hard part is knowing when to exit losers and how to pick winners - technologies that are going to be relevant to the market anywhere between five and 15 years down the track. One way of minimising the high risk is to be hands-on. The researchers at AgResearch, who boast around 360 PhDs between them, can deal directly with a sheep farmer or a vet on a problem-by-problem basis.
"It gives the scientists a commercial focus for what they are doing," says MacPherson, a former vet. It has certainly changed from the research-driven approach of the past. AgVax also has an exclusive distribution and information feedback system, allowing products already launched to be refined and improved from the experiences of early users.
AgVax is pretty hard-nosed about focusing on technologies with market promise and the criteria applied to selecting projects to invest in. One growth barrier, MacPherson says, is recruiting the right people with entrepreneurial spirit that are not afraid to take risks. Another is finding enough new products. "We want to be in the upper end of the market, with a degree of sophistication to our products."
There's nothing stopping AgVax, despite its AgResearch links, selling products researched by other CRIs or universities, either in New Zealand or offshore. So far, it has sold only two products this way, one developed through collaborative research between Otago University and AgResearch and the other with another CRI. It is also pursuing a deal with a university.
The focus to date has been on animal health but who knows what it may look at in the future? Technologies currently under investigation by AgVax may ultimately have spin-off benefits, if the biology underlying the new animal products is leveraged into human medical applications.
Fiona Rotherham
fiona@unlimited.net.nz
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