Dyson: Conventional Wisdom Be Damned

Dec. 22, 2004
James Dyson invented a management style that's unconventional, radically original -- and hugely successful.

In a period of just five years, a small start-up company called Dyson Appliances Ltd. captured more than half of the United Kingdom's vacuum-cleaner market, a sector long dominated by such giants of the industry as Hoover, Electrolux, Miele, and Panasonic. James Dyson, the founder and chairman of the company that bears his name, accomplished this feat by doing everything wrong.

First, Dyson developed a technology whose value no one seemed capable of discerning -- a bagless vacuum cleaner that worked on the principle of centrifugal force within dual "cyclones" of rapidly spinning air. Then, after a 14-year struggle to raise the capital to start a company to produce the vacuum, Dyson located his manufacturing facilities in the bucolic county of Wiltshire, a substantial train or automobile ride southwest of the varied resources of cosmopolitan London. Next, he built a staff not of tested professionals, but of recent university graduates with no experience in the real world of manufacturing.

He priced his product -- the Dyson Dual Cyclone DC01 -- at a level up to 400% higher than that of his competitors' mainstream models. He spent virtually nothing on advertising, relying primarily on his own efforts to enlist retailers, on publicity generated by the occasional newspaper article about the DC01, and on word of mouth. When the company finally began to make money he pumped an unusually large percentage of revenues back into research and development.

And, most radical of all, he held to and acted upon the conviction that "design" was more than just the look of a product. To Dyson, design was a holistic concept that represented the seamless integration of a product's engineering content, its functionality and performance, its look, its feel, and its appeal to the end user.

Conventional wisdom would have had Dyson Appliances failing within months -- an eccentric little company with an eccentric manager at its helm, trying to sell an overpriced product of limited appeal in competition with less expensive, conventional, mass-market products made by respected manufacturers whose names were, quite literally, household words. Yet James Dyson succeeded spectacularly. And he did so on his own terms.

"From the beginning I perceived these vacuum cleaners as mass-market items, never in any sense niche products," he says. "Because when design works, people will buy it. Everybody will buy it."

Today, the DC01 is outselling its nearest competitor in the UK by a ratio of five to one. And that nearest competitor is another Dyson model. Indeed, the three best-selling vacuums in Great Britain are all Dysons, and the company has now entered markets as far-flung as Israel and New Zealand. In addition, virtually all of Dyson's competitors -- in fact, virtually all vacuum-cleaner manufacturers in the world -- now produce their own versions of bagless machines, many of them using technologies that to the layman's eye bear a striking resemblance to Dyson's dual whirling cyclones.

A relatively small company to have made so dramatic an impact on a market, Dyson Appliances sold nearly 1.4 million units worldwide in 1998. Revenues for the year were 190 million (approximately US$310 million), but net income was 29 million (approximately US$47 million), an eye-popping 15% of sales. Dyson's success is all the more remarkable in light of the degree of competition he faced in 1993 when he introduced his first machine. Indeed, his competitors were so entrenched in the UK at that time that the common British slang term for vacuuming a floor was and still is "to hoover." The DC01, an upright model, features the dual-cyclone technology, a silver and yellow color scheme, and a clear plastic removable bin that actually shows the dirt, detritus, debris, and dog hairs the vacuum accumulates -- all revolutionary departures from any machines then on the market.

Not surprisingly, the big names of the industry merely sniffed derisively at Dyson's minuscule company and his bizarre new gizmo. Yet Dyson Appliances quickly became the fastest-growing manufacturing company in Great Britain, and the extent of the company's penetration of the market makes it entirely conceivable that before long parents in England, Scotland, Wales, and Northern Ireland will be telling their children to "go dyson" their rooms.

The key to the company's success to date is its culture of creativity, an appreciation of sheer novelty that springs from Dyson himself and extends through every level of the organization. Nothing is prized more highly within the firm than the willingness and ability to generate and develop new ideas, to take chances, even to fail miserably, if that failure comes in the pursuit of an exciting potential innovation.

"Everyone is empowered to be creative," says Dyson, who points out that the idea of putting the company's customer-assistance phone number on a label on the handle of each vacuum came not from a manager, but from an employee on the service desk. "You are just as likely to solve a problem by being unconventional and determined as by being brilliant," he once wrote. "Be a bit whacko, and you shake people up. . . . And we all need shaking up."

The high value he places on creativity sets Dyson apart from his peers and helps explain his insistence on maintaining what in Britain are considered insanely large annual investments in research and development. Nearly 17% of revenues regularly goes to supporting the company's R&D efforts, a figure some 10 times greater than the average in the UK.

"We're a completely private company and we're very profitable, so we can plow it all back in," Dyson explains. "But we also want to do it. R&D is our lifeblood."

As a result of these ongoing research expenditures, a company that started with just one product now offers more than a dozen -- all either upright or canister vacuum cleaners, each a more refined and technologically advanced model than its predecessors. Some are priced at nearly 300, or approximately US$490. Dyson believes in pricing his products high enough to generate a substantial margin and to reflect their true value -- that is, their performance quality, their durability, their engineering content, and their aesthetic appeal. At about 200 (about US$305), for example, the DC01 was nearly off the chart when it was introduced in September 1993. At the time, the entire UK market for vacuum cleaners costing more than 160 was microscopic -- just 3.6% of the total sold. The bulk of the market was at the bottom end, with machines costing less than 60 commanding 34% of total sales, and those priced from 60 to 80 garnering another 25.3%.

Yet by April 1994, with only minimal advertising, Dyson was moving about 1,000 units a week. Word of mouth -- which continues to be one of the company's most potent marketing tools -- helped boost sales to such a point that little more than a year later he was outselling Miele, Vax, and Hitachi. By October 1996 he passed Hoover and Electrolux, and in January 1998 Dyson was selling nearly 28,000 units a week, more than double the total of his nearest competitor. Sales slowed somewhat as the UK economy dipped, but at the end of 1998 Dyson Appliances was still maintaining its two-to-one total volume lead over its competition and, in terms of revenues, controlled more than half the UK market. By then, vacuums priced above 160 constituted nearly 18% of total UK sales. In effect, Dyson single-handedly had created an entirely new market.

The company currently is working on a batch of top-secret new products that industry watchers believe will extend the Dyson name into other, even more lucrative areas of the home-appliance market. The rumors run the gamut from Dyson washers, dryers, and refrigerators, to Dyson toaster-ovens, hair dryers, and electric can openers. One observer -- who owns a DC01 and swears by it -- speculates that before long there will even be a Dyson automobile.

Now 52 years old, James Dyson is a graduate of London's Royal College of Art. An industrial designer by training and an artist by temperament, he learned the basics of engineering only when he became an employee of his mentor, Jeremy Fry, inventor of the motorized pipeline valve actuator and managing director (the British equivalent of chief executive officer) of a company called Rotork PLC. Dyson's concept of holistic design paired with intensive ongoing research derives from the ideas of Fry and those of his personal heroes: Isambard Kingdom Brunell, designer of revolutionary suspension bridges and railway tunnels throughout Britain during the Industrial Revolution; R. Buckminster Fuller, creator of the geodesic dome; and Thomas A. Edison. Dyson believes that so-called high-design products really are just products that work exceptionally well and look exceptionally good.

This point of view is integral to his approach to business. Indeed, it puts him in a niche of his own, far from the mass of more conventionally minded management. "The attitude toward design has always been that it is something to be added on, rather like advertising," he says. "The perception of a designer is a man with a pink shirt and a ponytail who comes in at the end of the process and makes the product 'look good.' But when a product doesn't work, the consumer kicks it and says, 'Who the hell designed this?'"

When design is applied holistically from the earliest stages of product creation, Dyson believes, it encompasses the technology the product uses, how the product is engineered, what it's like to use, how long it lasts, its quality, how it performs, and finally how it looks. When all of these elements are considered collectively from the moment of conception, the product will be a desirable and long-lasting item that consumers at all income levels will purchase, no matter what the price.

"Design isn't the 'thing' that sells you the product, like advertising," he says. "It is the product, and it becomes real when you start using it."

Dyson Appliances now runs its own sales organizations in France, Spain, Switzerland, the Netherlands, and Australia, controlling 10.5% of the European market by volume. (Dyson's foreign subsidiaries are just two years old; demand grew so rapidly in England in the company's first years that until fairly recently it had no spare production to export and no management in place to oversee foreign operations.) The company utilizes distributors in New Zealand, Israel, and Turkey and has licensed its technology to Fantom Technologies Inc. in Canada, which records some $200 million annually in sales of its own versions of Dyson models designed for the North American market.

Dyson also maintains a wholly owned sales subsidiary in Japan, as well as licensing the dual-cyclone technology to a Japanese firm that produces a pink and lavender machine called the "G-Force." Indeed, in 1986 Japan was the site of Dyson's first cyclonic triumph; the G-Force, which he designed, became a status symbol and remains a steady seller, even at a price of nearly US$2,000.

Dyson's belief in the benefits of holistic design extends to every facet of the company, including areas of the business that other corporate chairmen seldom consider. There are, for example, no "casual Fridays" at Dyson Appliances because Dyson himself eschews suits and ties and encourages all employees to dress comfortably every day. Dyson headquarters in the rural town of Malmesbury, a quaint little village on the edge of the Cotswolds, was nothing more than a vacant manufacturing plant when he bought the building in 1995.Today, after turning loose contemporary architect Chris Wilkinson, it is a modern and stylish interconnected complex of 188,000 sq ft -- an environment that Dyson believes encourages creativity by making all employees "more conscious of design."

There are no reserved parking spots for management at Dyson Appliances, and all employees from the chairman down enter the building through the same door. Everyone eats lunch in the same cafeteria, where healthy meals are available at modest prices. Inside the office portion of the facility, an open-space plan promotes the creative interaction among different disciplines that Dyson encourages. "Designing, engineering, legal, patenting -- they're all right here," he says, gesturing toward a large and airy floor of desks and cubicles. "We found that the lawyers wanted offices, so we gave them some, but there is still good integration and communication."

Dyson himself has an office, but it is small, unpretentious, glass-walled, and, on occasion, something of a mess. His door is always open, and he is addressed by everyone in the company simply as James.

The remainder of the Dyson facility includes assembly lines that run two shifts a day and product-testing labs that are busy around the clock. All line employees change jobs every 45 minutes or so, a schedule that accomplishes three goals: each employee learns to assemble every model; no one grows bored with the same repetitive tasks; and the lines themselves can be extremely flexible, meaning they can be lengthened or shortened to switch from one model to another in a matter of moments. Dyson makes a point of telling employees on the assembly line that speed should not be their primary concern. Rather, they should focus on maintaining attention to detail and vigilance in eliminating errors. And if any of them comes up with an idea that might improve the assembly process, he wants to hear about it.

The company employs 1,390 men and women, of whom 300 are mechanical, electrical, or software engineers. An additional 150 or so hold degrees in other areas, many of them in literature, fine arts, or similar fields of study that are more often considered useless in conventional companies. On their first day of work, all new hires -- no matter what their positions may be -- build a vacuum cleaner on the line. Dyson wants all employees to understand the company's products from the inside out, because then, he believes, they will understand that the company is its products. And once they build their own machines, employees can purchase them for a mere 25.

The experience on the line also helps to fight what Dyson calls "techno-fear," a syndrome whose pervasiveness he decries. "We have a sort of inverted snobbery right now, whereby many people -- especially cerebral people, like bankers or investors -- boast about how they can't put a screw in a wall or mend a car," he says. "They actually boast about it! It's an extraordinary state of affairs."

The fact that the company maintains its own in-house legal and patenting staffs -- as well as product design, engineering, development, graphic design, marketing, advertising, and public relations departments -- speaks volumes about Dyson's managerial priorities. He sees patenting, for example, as "part of the creative team," because it helps the company to build and defend its store of intellectual property, which is the driving force of Dyson Appliances.

"A lot of people would say, 'But you don't get the outside influences you need to spark the business if you don't hire outside consulting organizations,'" he says. "My response is, 'If that's what you need to spark your business, there's something wrong with your business.'"

Even the structure of the company reflects Dyson's views on creativity and the freedom to pursue it. "We appear to be a vacuum-cleaner company, but in fact we have several companies within this building," he explains. "We have a floor-care company, a research-and-development company, an international-sales company, and two companies that will be producing our new products."

Another entity, informally known as Group Services, contains such functions as legal, patenting, human resources, and marketing, which serve all of the operating companies. "They assist crossways, not from above," says Dyson. "That's what I wanted to avoid. Each company maintains its own management, its own board, and its own budget, which is set by themselves in consultation with me and the financial director and the group financial controller. We try to avoid the idea of a formal head office and group directors, so each company feels that it stands on its own and makes its own decisions, independent of the holding company."

If Dyson's unique managerial methods did not brand him as unconventional, his take on the current and future states of the manufacturing sector itself would certainly set him apart from the crowd. In short, he fears for the future of manufacturing, because he sees too many of the world's best young minds pursuing careers in advertising, media, and other so-called creative fields. And the fault, he believes, lies with the manufacturers themselves. "Manufacturing is essentially a creative activity -- probably the ultimate creative activity," he says. "But I don't think it is perceived as that at all. "

The industry, he insists, must learn to present itself in a creative manner. Instead of talking about share prices, company heads should be talking enthusiastically about the products they make. "A filmmaker talking about his most recent film doesn't discuss the gross receipts," he notes. "He says, 'Gee, we have this great crash scene and Sylvester Stallone hanging by his teeth from a helicopter.' Manufacturing is a very exciting, very risky act of creativity, and we have to convey that if we are going to attract bright young people to our companies."

At no time since the earliest days of the Industrial Revolution have technology, intellectual property, and design been so important, Dyson believes. "Everybody can make everything right now, and almost everybody will have the same cost base shortly, because it really is a global marketplace and a global economy," he says. "The difference will lie in having products that people want."

To some he sounds like a visionary, to others a screwball. But James Dyson's message may well be getting through in some surprising quarters. Consider: During the years between his conception of the bagless vacuum cleaner and its initial production, Dyson's efforts to raise capital -- even to license his new technology to other manufacturers -- frequently were rebuffed with the same sentence: "James, if there were a better vacuum cleaner, Hoover would already have it on the market."

A few months ago, just six years after Dyson finally created his company and launched the DC01, Hoover's European Appliance Group announced a new product -- the Triple Vortex vacuum, a bagless upright machine. According to Hoover's own spokespersons, the Triple Vortex was being introduced in the UK market specifically to compete against the products of one particular company -- Dyson Appliances.

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