Hard choices do pay off. James Harris speaks to CEOs who have revived the fortunes of their respective companies.

Hard choices do pay off. James Harris speaks to CEOs who have revived the fortunes of their respective companies

“We lost credibility with shareholders who had invested in us on the back of the dot-com story. We had to reinvent our business.”

So says Nik Philpot, CEO of Eckoh, which floated in 1999 as a dot-com business providing sports content on the web. “We operated on a conventional advertising sponsorship model, which simply didn’t work. Like many dot-coms, we were burning cash at a frightening rate.”

Philpot adds, “One of the strands of our business involved providing interactive phone services to broadcasters for phone-in competitions. For a long time, the speech business was loss-making. This was offset by selling non-core businesses until the speech business realised its promise.”

Philpot’s judgement has paid off in the end. “Four or five years ago, we were a £100 million turnover business. Now we generate £20 million, but we’re in a much stronger position,” he says.

Quite apart from testing market conditions, there are other reasons why companies take evasive action. Plastics company Symphony Environmental was given a rude shock in 2002 when it found itself embroiled in an ugly court case.

Court battles

Michael Laurier, CEO of Symphony Environmental, explains: “We entered into a technology licence agreement with a US company which came to an end in 2002, after which we used a technology that we had developed. The independence of this technology was hotly contested by our former licensor; and it took action against us on the grounds that we were infringing its intellectual property rights.”

Although Symphony won the case, the dispute proved costly. “The case lasted three years and it was a major distraction,” says Laurier. The experience led the company to make some dramatic changes in order to “avoid another dogfight”.

Scaling back

Before the trauma of the court battle, Symphony manufactured degradable plastic products. “The emphasis was on getting finished products to market and dislodging competitors as suppliers,” explains Laurier. In such a competitive environment, “it’s all about price, and that can put a strain on cash flow, especially for a small company”.

Symphony considered alternative applications for the technology, but decided instead to supply the crucial part of the technology, a chemical additive, directly to manufacturers. “Instead of trying to dislodge competing manufacturers, we started working on enhancing other companies’ production lines.”

This enabled Symphony to reduce operations. “Our turnover went from
£9 million in 2005 to £3.1 million in 2007, but with no manufacturing process to manage, our overheads shrank and our gross profits soared.”
 
Management shuffle

Despite the pain and strife of redundancies, changing personnel can provide a crucial push in a turnaround. Information and communications technology company Scisys Plc demerged from Coda in 2006, following project overruns and losses.

Dr Mike Love, chairman of Scisys, explains, “Following the demerger, the old management team went to Coda and we were left with an inexperienced team.

“In our business, the devil is in the detail. Managers need to be engaged in the detailed specifications of the business, and we lost that focus.”

A hands-on approach was taken to solving the managerial malaise. “I stepped in as executive chairman and brought in a new management team. In no uncertain terms, the changes provided the framework for the turnaround.”

After biting the bullet and making the necessary changes, Love is bullish about the company’s prospects: “We work in niche markets, we have a business that is resilient to the current turbulence and there are good opportunities for growth.”