When James Wickes, Simon Barker and Kevin Harper started Ideal co-founder of Ideal Hardware, we ask what makes his company one of the UK's biggest and most successful distributors. Hardware in 1986 with the backing of an Austrian industrialist, they had no idea what sort of organisation they wanted to create.
'We knew we wanted to start a distribution business, but not one focused entirely on storage. We had to get out of the scrape we were in and fast,' Wickes says. 'My ambition was to dig myself out of the hole I was in and that was as far as I could see at that time.'
Wickes had been involved with PC Upgrade, which went out of business in inauspicious circumstances late in 1986. The upgrade concept had taken off quickly, but Wickes had little experience in business at the time and admits he made fundamental mistakes.
'I had experience, but only in sales and marketing. What I hadn't taken into consideration was business administration and accounting. My knowledge of business started at generating an opportunity and following through the sale. I wasn't interested beyond that. My capabilities were limited by my experience because, to me, that was what business was all about - which resulted in PC Upgrade not being a viable business.'
He left PC Upgrade before it closed, a move badly interpreted by the market. Wickes was then fortunate enough to meet a venture capitalist - Konrad Goess - who believed there was potential in Ideal, saw the basic idea of what he wanted to do, and appreciated Wickes' weaknesses.
'Konrad insisted that all financial controls and business processes were in place before orders were placed on the company,' says Wickes. Ideal was a rehash of the PC Upgrade idea, but the added professional attitude and discipline was the key.
'From the beginning we were reporting to an interested party that had money invested in the business, so we had to develop discipline - financial and otherwise - which would fit in with that. From day one we were reporting on all aspects of the business. Risk assessment was always, and still is, a very important part of the business as opposed to just looking at an opportunity.'
Assessing risk has remained an important part of the business culture at Ideal, and the PC Upgrade experience was an important lesson for everyone at Ideal, says Wickes. 'What happened to me personally as a result of PC Upgrade - losing money and face - was a lesson.
It taught me that everyone has weaknesses, and so to compensate, I had to get involved with people who were good at things I wasn't. Ideal has extremely capable people covering a wide range of activities.'
Do you consider Ideal a typical distributor?
We look at things differently. For example, risk assessment has always been very important. Everyone in the company is motivated and can make decisions and take action.
If a customer has a problem, it is generally within the control of the person answering the telephone to solve that problem. Therefore, we try to empower everyone in the company to do what needs to be done for the customer, and I think that's important.
We pay a lot of attention to detail. The whole company is focused on making sure that happens efficiently. I know that is what people think a distributor should do, but I think we are different in that we do perform efficiently 99.9 per cent of the time.
Do you think most distributors don't?
I wouldn't say they don't, I just get the impression that there isn't the same commitment in people outside Ideal. I might be wrong, but my feeling is that Ideal employees want the company to be the best.
When you talk about empowerment, are you saying that staff can pick the phone up and make an on-the-spot business decision on Ideal's behalf?
Yes, largely speaking that is the case. Many organisations are still quite hierarchical. One of the things we've been able to do is keep a relatively flat structure - people who perform well and are successful continue to be empowered.
Do you look for any particular individual qualities in Ideal employees?
There is no particular profile for people joining the company because we have been unable to decide on the psychological make up of the people we want.
Have you tried things like psychometric testing?
Yes we have. The key area is sales, that's where it is toughest to find good people because sales staff are unusual creatures; a combination of personality, self-enhancement and entrepreneurialism. They are difficult to pin down.
There has always been a lot of curiosity about how your sales staff are motivated with the commission only structure? How does it work? What are the pros and cons?
I only see pros. But because of the reputation of commission-only selling in financial markets, it can initially put people off, both in terms of employing new sales staff and also making customers reluctant to deal with us.
Because we sell to the same customer set as other distributors, we had to be able to provide something different for leverage. That was how Ideal's customer service ethos was built. In order to compete with the broadline distributors, we had to offer something different.
The services and marketing and the other things we do as part of our drive for excellence came out of the fact that the sales staff were on commission only, because they were driving it.
I'm not sure I follow.
There has always someone in the distribution business who is prepared to quote a price below the one you are offering. Therefore, if Ideal is offering something for a pound more than its competition, it has to be able to justify that extra pound on a value-added basis.
So I'm a salesman, selling disk drives on a commission-only basis, and I'm telling the customer I have to make that sale to make any money. So I have to offer something beyond price.
Absolutely, and beyond the price is reliability - to specify the right product, deliver the right product, and if the product is broken, replace it with a new product immediately. The fact that we would provide the online technical support services is part of the sale.
Why does it work better with a commission-only approach rather than a base salary?
Because when you start the month with nothing in your bin and know that you have to create your own business, you need to have the tools to do it.
That's what we're really asking our salesmen to do - step beyond being salesmen and be businessmen - to actually offer a proposition to the customer.
Everything in business is either a commodity or it isn't, and it's up to a salesman at our and the reseller level to turn that commodity into a business proposition. That's what Ideal is all about.
We're also trying to help our customers make business propositions out of things we sell because that's the kind of thing that is missing in the channel.
I don't know how many companies out there actually run anything like a commission-only structure, I don't know if your information is different to mine, but there aren't many.
There aren't any.
Yet you say it works and has worked for the best part of 10 years. With your structure, surely what they're interested in is selling units, and not services that go behind the box.
How do you get people to develop new markets when they are busy tele-selling and they know who is going to buy disk drives or Digital PCs or whatever, but don't know who is going to buy network cards or any other type of product? How can you develop that market beyond the one you've got already?
Look at it this way, I'm a new Ideal salesman and I've got 30 accounts which I've developed, and they're all small. If you're a small reseller that has just started doing business with me, you will have a #5,000 credit limit. Now what is the point in me force feeding you commodity products neither of us make money on? There's no point.
As a salesman, I want to sell you an opportunity to make a profit. If I do that successfully, then I can also make a profit. I can't do it simply by selling you as many boxes as I can at any price.
There's a point in selling a product if I'm getting paid on commission, isn't there?
Yes, but if I mess you around at all in that process, and it happens occasionally, you will get upset, send the product back and the account will be closed. It's a double-edged sword.
Ideal is not the kind of company that says it's yours, you've bought it, that's it. We take things back if we need to, we listen to the customer and have a Customer Care Team for that purpose.
It's up to the salesman to maximise the opportunity with the customer, which means maximising the customer's opportunity to a greater or lesser extent.
In terms of new customers, there are two ways to expand business - to increase the customer's business by helping to find it new opportunities, and by selling things that you weren't previously. It always staggers me to see the opportunities missed.
So, as a commission-only sales person, you come in at 8am, do your admin and are on the phone by 9am talking to your customers. At 5pm you're doing your admin and making sure that you are customer-facing all day.
Do some people have to learn the hard way when they come face to face with the Ideal sales methodology?
I don't think it's a question of learning the hard way, more a question of communicating what we are trying to achieve by making them successful.
We don't ask people to do such things as be in the office before 8am because we want to impose some sort of discipline on them - we are doing it to make them more money and to make the pie bigger for everyone.
Is there a disciplined environment at Ideal?
The one thing that we do insist on is good time keeping, because there are only a certain amount of hours in the business day, and every day we have training sessions to teach and show the sales people new products and explain how to communicate with customers.
From 9am until 6pm we need those people on the telephone. We can't ask any more than that, but to improve business we have to make sure people are trained to face the opportunities that new products are constantly offering them. That's part of the value add.
Next week, James Wickes gives his views on staff loyalty and achievement and looks to future opportunities
GETTING THE MESSAGE ACROSS
Ideal's three founding directors remain close friends today, but are now less of a close-knit team, says Wickes. 'We are now a bigger team because there are other people who have come on board since. The team has grown with the company.'
Because of Ideal's early discipline, it didn't find it difficult to cope with the distributor's growth or with the flotation of the company. Wickes states: 'The City side hasn't been so difficult because we had a City-type relationship with Konrad (former chairman Konrad Goess Saurau). From the beginning, we had a culture of timely, comprehensive and accurate reporting.
'It has never been a company run on personalities, although there are some strong ones,' he says. 'It has never been a one-man band. I get my head in the press more because it was decided that was what I would do.
In terms of the company and the way it is run, it's accepted within Ideal that it is a team that's running things and the team is widening as the company gets bigger. You have to have other skills to make it run, and over the next 12 months or so, that team will get bigger still.'
Wickes does appear in the press a lot and this was deliberate. 'My father's background is in PR and from a young age I have been exposed to PR and made to believe in the importance of it. That's always been key to me.' Good publicity has played its part in Ideal's success. 'The press has been a key part of helping us talk to the market. It's much easier for us to say we're not a cowboy company anymore, we are a company focused on a specific market - storage - with an expert sales team. The press has been very useful in helping us put across those ideas.'
Ideal is marketing focused, something which is important to its success, says Wickes. 'We think we add a lot of value in terms of service and expertise.
You have to use every way you can to get that message across, and that is wrapped up in the company's identity.' Wickes has always felt that Ideal needed to do more than other distributors to get noticed. 'We recognised when we started that we were just a minor irritation to the established distribution community and that we had to do things differently to get noticed. We had different messages to communicate.
The market then, as it is now, was into stripping out cost as much as possible, while saying it was adding value. What we've been trying to do is communicate the value that we add. People need to notice and think, yes that's different, I'll give it a try.'
Commitment, he adds, is key to making the company different from its rivals. 'It's a leap of faith. You have to make a big commitment to doing it (distribution) properly in terms of resources and you have to believe that any investment will result in an improved business. It's like providing a higher service level and investing in any resource for customers. You have to believe it's going to work and see it through. It's like the investment that Ideal is making in e-commerce, you have to give it total commitment, otherwise it won't work.'
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