Action stations for mail order reseller

ICL veteran David Palk has been brought in to restore confidence in troubled reseller Action Computer.

David Palk has had his feet under the chief executive's desk at Action Computer Supplies for just over a month now. And you get the feeling that he is already having the time of his life.

At first glance, he was not an obvious choice to run the mail-order reseller, having spent 22 years at ICL, but he is matter-of-fact about why he took the new job.

A long-time business colleague of Henry Lewis, chairman of Action, invited Palk to meet Lewis. The two men got on and Palk was attracted by the "state of the business and the opportunity to turn it around". He also liked the idea of being chief executive of a public company.

Palk is also matter-of-fact about his departure from ICL. "It was not a wrench to leave ICL, although I had joined as a temporary clerk 22 years ago," he said. "About the time of the company's proposed float, I concluded that it was time to look outside."

The best of times
There was a time when it seemed as if the management of Action could do no wrong. After it was founded in 1981, the company grew as rapidly as its catalogue, known as The Bible. It floated successfully and was selling on the web from early on.

But the recent past has not been so kind. Action's proposed merger with US firm Insight Enterprises was called off about a year ago with Insight citing a "deterioration in Action's operating results and the difficult near-term trading conditions to which Action is exposed" as the reason for the split.

And Action's recent financial performance has been disappointing. Its year end figures are due to be published imminently, but the company has already warned the City that it expects to turn in a pre-tax loss of £6m.

"Previous management bet heavily on the sale to Insight which fell through," said Palk. "Then there were redundancies after the company remodelled its business around the internet."

"We were also hit by the general industry dip in spending after year 2000. It hit corporate resellers harder than it hit Action, but it's an issue of motivation. It's difficult to get off the floor when things like that happen," he added.

But Palk feels that the answers to the firm's current problems lie within its grasp. "This organisation is desperate for leadership. The quality of the people is outstanding. In this type of company, you cannot afford waste, but they are crying out for leadership and direction," he said.

Cutting costs by reducing staff numbers is not at the front of his mind, however. "There are a number of fundamental assets on which we can build. First, there is a base of 170,000 business customers in the mid-market space, and by mid-market I mean companies which are slightly bigger than SMEs [small to medium-sized enterprises], through to corporates," he said.

"We also have a loyal customer base of companies that buy from us three or more times a year." The trick is to ensure Action's customers have a more positive experience with the organisation than they would with the competition, he added.

Customers are key
Palk believes that improving the Action customer experience is the reseller's highest priority and the one that he hopes will differentiate it from what he calls "low-cost web operators" such as Jungle.com and Dabs Direct.

He also claims that Action's business model could work in the corporate space. "Action will never be a Computacenter, but I would rather have my problems than theirs," he said.

Other building blocks for growth are well established. "Early adoption of the web also stands us in good stead, and 30 per cent of the company's business is from the internet. Then there is the fundamental basic on which the business has been built: the catalogue, which is crucial to the business."

If the basics are in place, then Palk's challenge is to ensure the business is behind him. He said: "Action has struggled in the past 12 months; they [previous management] played any number of get-out-of-jail cards, like introducing affiliation programmes and buy-side procurement, but did not have enough resources behind them."

"Once we have worked out what we do and what we don't, we have to make sure that we are aligned behind them," he added.

The highs
But Palk also listed a few high points in his long career at ICL. By the time he left, he was managing director of ICL's operational services division, responsible for pan-European managed services and outsourcing, and call-centre solutions.

He built the call centre business from nothing to become a pan-European operation, was responsible for the company's defence operations and its business in France, Switzerland, Germany, Austria and Italy.

Palk is also proud of his MBA, which he received in 1990. Although he was not a graduate, he was given what he calls "well-made advice" while on a mentoring programme at ICL. His mentor told him in no uncertain terms that if he wanted to progress within the company, he needed some letters after his name.

After an inauspicious first week, in which he was threatened with being thrown off the course because he was not deemed to be suitable MBA material, he ended up as the university's graduate of the year.

"I recommend it to everyone. The experience has given me the confidence to make decisions. I might not be an expert in all areas of business, but I have enough of a grounding to have the confidence to make decisions," he said.

It sounds as if a spot of confident decision-making could be just what Action needs right now.

Costly Action for the year ahead

• Action's turnover for the year ended August 1999 was £276.6m, of which £263m was generated in the UK and the rest in Spain.
• Online sales for the year ended August 2000 were just over £50m.
• From its call centre in Wembley, the company claims to answer 6000 calls each day.
• Action has predicted pre-tax losses of £6m for the full-year to August 2001.
• The Action catalogue, which is published every 60 days, has more than 10,000 products in its 1200 colour pages.