Reinventing the Business
It’s generally accepted that the only way forward for UK manufacturing is competing through higher added-value.  Two participants on BGP 2001 came on the programme to examine whether their manufacturing businesses had a future – and both have radically re-invented their companies as a result. 2005 is the year in which the transformations are bearing fruit.
Transforming the Transformers
Ian Turner came on BGP as Managing Director of a business founded by his father, Tunewell Transformers.  Based in north London, the company had for many years produced specialist electrical gear for applications such as neon lighting.  By the late 1990s its best days were behind it and the business was struggling.  Italian competitors with lower labour costs had taken the bottom end of the market.  It was unclear to Ian what competitive advantage, if any, Tunewell still had.
By the end of BGP Ian had decided that drastic measures were needed.  Within a short space of time he sold the factory, reduced the volume of business and made 50 people redundant.  It was not a pleasant experience, but there was no option if the business was to stop haemorrhaging cash.
With the old business off the critical list, the future lay in exploiting the company’s intellectual property.  Ian created a new, associated business, Juice Technology.  In the past Tunewell had tried to sell new approaches to distributing high-frequency power to the automotive industry, but the market proved too difficult.  Ian turned his attention to the electrical lighting sector and over the next eighteen months Juice focused on cracking the problem of distributing high-frequency power over long distances.  Through a network of friends and business acquaintances Ian raised over £500,000 in two financing rounds.
By mid 2002 the R and D team had a technical solution that they were confident could be commercialised.  In a nutshell, the Juice approach enables luminaries – office overhead lighting – to be installed with a single, centralised power box.  It makes installation faster and cheaper, and, by extension, allows lighter and more attractive equipment to be used.  The killer feature, however, is that the technology complies with strict US building regulations.
The original intention was to create a new manufacturing opportunity for Tunewell.  That all changed shortly after Juice went public with its innovation.  The PR announcements were picked up by Juno Lighting of the US, a $250mn Nasdaq-listed corporation, and a visit to London rapidly ensued.  Juno could see huge potential in the Juice innovation.  Fully commercialised, it could produce a 30% saving on the standard approach to installing lighting systems, which on a typical big construction project could equate to a saving of 1% on total costs.  In a business with tight margins, that’s a very attractive proposition – and the installation market in the US is worth $2 bn a year.
Juno was keen to collaborate with Juice on the commercialisation.  The US partner would invest significant cash in application work and joint patenting, if Juice focused on R & D.  And so the business model changed.  Now Juice makes its living from licenses and royalty fees on every manufactured part which Juno sells in the US.  Outside North America Juice retains worldwide rights to its technology, and Ian is looking for another two or three deals with similar big partners to cover the rest of the world.
Making a living out of IP
From his own experience, Ian Turner has some clear guidance to offer on the subject of intellectual property assets.  As a rule of thumb, he says, patents are of only limited use to small companies.  They are expensive to generate and maintain, and they are costly and difficult to defend, especially against large organisations.  However there is a way of using them strategically that can be highly successful, and create significant value.  The principle is to build partnerships with large companies where the technology is strategically useful to them, but the partners do not have the capability of development in-house.
The deal with Juno has enabled both parties to win.  Juno gains a unique position in the market, with attendant high barriers to entry from competitors, while Juice receive a royalty revenue stream with a reduced risk of having their IPR infringed or stolen.
The icing on the cake is that the original Tunewell business will finally show a profit this year, and is once again a viable concern in its new Hertfordshire premises shared with Juice!  Ian’s reinvention of the business has also allowed him to return to his first love, product design and innovation.  He’s well on the way to achieving his lifestyle goal of spending several months a year tinkering in a design studio in the Pyrenean foothills….
Intelligent Clothing or Riches from Rags
George Costa has spent his working life in the textiles industry.  When he came on BGP in 2001, he was wrestling with the problem of how to move forward with a business that was under competitive attack from all sides.  Cheap imports and over-supply were squeezing UK manufacturers like George in the traditional clothing hub of the east Midlands.  “The moment it became clear to me that the party was well and truly over”, says George, “was when I found myself arguing with Adidas about which of us should bear the cost of using DHL.  I thought that if this was the position of a world leader, there was no future for us!”
In the last four years he too has reinvented his business.  The sports clothing and the old integrated textiles group has vanished, to be replaced by a lean structure with a very clear technology focus.  Pro-Activ Textiles still has manufacturing capacity in the UK, but it exists to create the core fabric product on which the future hopes of the business rest.  Full-scale fabric production is outsourced completely to low-cost suppliers overseas.  The real value of the business is in its intellectual property.
In 2002, while the restructuring of the old business was still in progress, George began investigating technical textiles, a term covering any kind of fabric with specifically-engineered properties.  His attention was drawn to an innovation in the Far East.  The Taiwanese army were being kitted out with uniforms impregnated with a natural mosquito repellent.  Intrigued, George investigated.  In the coming months his research and development team looked at how they could isolate the chemical element that keeps mosquitoes at bay, and then engineer that into the fabric.  The trick was to develop a process that would allow the chemical to vaporise when rubbed, since that is when it is most effective, and to retain its insect-repelling properties when washed.
An additional spur was provided by an event in George’s personal life.  On holiday with his family in Cyprus, George applied traditional mosquito repellent to protect his children.  The youngest developed an allergic rash, so he and his wife ceased the application – only for her to be bitten by a mosquito and rushed off to hospital.  Sitting anxiously in the waiting room, George decided the business should redouble its efforts to find an alternative approach to chemicals on the skin.
By last year the team had arrived at a solution which provides continual protection comparable to – if not better than – existing sprays and ointments.  Close collaboration with the London School of Hygiene and Tropical Medicine confirmed its efficacy.  iFabric, as the new material is trademarked, contains a constant level of a natural active ingredient, which can be scented or left odourless.  The fabric releases this active in vapour form when worn – and keeps the evil insects at a distance even after repeated washing.  The agent causes no allergies and is environmentally-friendly, as it is synthesised from natural and renewable resources and has no impact on the atmosphere.
The business has protected its investment in R and D through patents and trademarking.  It has even created a cuddly toy, Arny, who is the company mascot and leads the initial range of accessories.  In addition to Arny, George has opted for sarongs, bandanas and wrist and ankle bands as his entry suite of products.  “These are versatile accessories which will work for anyone,” he says.  They’ve certainly impressed Boots.  From the start of 2006 the iFabric range will be available in Boots stores up and down the country, under a three-months exclusivity deal.
You can contact Ian Turner at firstname.lastname@example.org and George Costa at email@example.com.  To view the Juice and  iFabric range of products, visit www.juicetechnology.co.uk, and  www.ifabric.info/