‘Good ideas can come from anyone’
Monday, November 13, 2017
A little over 12 months after getting back into print, and almost a third of the way into his journey to double sales by 2020, the new chief executive of Hobs Group, James Duckenfield, shares his vision for the business.
And it’s a vision that centres on innovation, consolidation and digitisation – but at the centre of it all, thankfully for the purposes of this interview, is print.
Darryl Danielli We should probably start by talking about the different businesses, as the group is quite an eclectic mix.
James Duckenfield Hobs Group is composed of four businesses. First we have the reprographics business, which is where we started in 1969.
And it all started with one store?
Exactly, it was set up by Kieran O’Brien and Joe Hackett senior – did you ever meet Kieran?
I don’t think so.
He’s quite a character, so you would definitely remember [laughs]. He’s a very charming fellow – anyway, he and Joe came up with a new technology for coating paper for dyeline printing. They had a factory in Ireland and were selling it all over.
Do you not remember that? It was an ammonia-developer-based engineering drawing technology. It was still going when I joined the industry in 1990s, but a lot of people didn’t like it because of the strong smell. But one of the advantages was that users never got colds. But new digital technology came out, from the likes of Océ, in the late 1990s I think, and that completely destroyed the dyeline business. But long before then Kieran had moved on to reprographics. They started in Liverpool and then went on to Manchester and the business grew organically and through acquisition. They actually bought Océ’s reprographic business – which gave them a lot more sites.
Back when the reprographics business started, was that the time of the ‘mini girls’ I read about on your website?
The mini girls were famous, quite inappropriate by today’s standards, but it was the 1960s and it was perfectly sensible.
And what did they do?
The business had teams of very pretty mini-skirted girls driving Minis to construction sites, picking up drawings and returning them – so it’s no surprise the business did very well in the construction industry of the 1960s and 70s.
Probably a bit different from the typical delivery drivers of the time?
Exactly. The business wasn’t just built on product innovation, it was go-to-market innovation as well [laughs]. So, from there some clients asked us to provide printing services onsite, so Hobs On-Site was born.
Still in the same AEC sector (architecture, engineering and construction)?
Back then it was, but now it’s across all sectors, whereas Repro is AEC and professionals-focused, so we do lots of work for law firms, accountants, etc. Onsite also evolved into managing mailrooms, creative services, manning receptions...
So BPO basically?
Exactly. So, now it’s document related BPO and today’s On-Site business is very much focused on digital transformation, so, for example, we offer digital mailrooms where we pick up a client’s post from the mail depot, scan it in and make sure its delivered to recipients’ inboxes by 9.30am every day – so post never hits a company unless it requires a ‘wet’ signature, say contracts. We also offer smart parcel management with smart lockers, records management, where we do lots of scanning for clients in advance of GDPR next year, or just general record keeping management. We’re actually doing that for some, let’s say, big Whitehall customers as well as corporates.
Has GDPR generated significant opportunities for the business?
My personal opinion is that there’s lots of hyperbole around GDPR. It’s a bit like the millennium bug: lots of hype, lots of people making a lot of money out of it, but I don’t know anyone that was adversely affected by the millennium bug – although I appreciate that the IT experts will probably say that was because they did all the work in advance.
Fear can encourage spending though.
True. But the reality is that today we have the Data Protection Act and that can fine you up to £500,000, but the maximum fine that I’ve ever seen was around £400,000. The regulator isn’t in the business of putting people out of business. While the new fines are very scary – up to 4% of global revenue if its cross-border, 2% if it’s contained, and I have no doubt that a big well-known company will fall foul of a whacking big fine to set an example – I think provided you’ve shown an effort to secure your data and comply with the new regulations, then I can’t see the regulator hitting people with bankrupting fines. That’s not what they’re there to do.
And the basic rules haven’t changed that much?
Not really, they’re updated to bring them in line with the modern digital world. There’s a couple ‘getchas’, like the fact there’s no admin fee anymore. At least before there was an admin fee to stop people being mischievous, but now there’s no barrier. I can see some people abusing the subject access request system. There’s also the right of erasure, the right to be forgotten, these are challenging things for people to comply with – particularly if your records aren’t digitised. A company’s disclosure processes might be challenging too, because the last thing you want to do is disclose something and then inadvertently breach someone else’s privacy by not redacting something sufficiently well. Which is a nice segue into our third business, Anexsys, which specialises in legal services such as hard-copy services, scanning and printing and the area that is growing very quickly managed legal systems, such as e-discovery services. Layered on top of that is digital forensics.
So, we have an evidence vault with full chain of custody services which we provide to police forces and clients like the Home Office and we also secure data for public enquiries like that at Grenfell Tower. And we can take hard drives and retrieve deleted data or mobiles and take all the deleted data and work out where you were when you sent a text – it’s amazing what you can do. So, we have this massive evidence fault, but I don’t know what’s in it because I’m not cleared to go in.
Have you only seen it from outside?
Well, I did see it when it was empty, when we first commissioned it, but I’ve not been allowed back since [laughs]. But it’s a very interesting business, we acquired K2, a legal services provider, last year which increased our [legal services] geographic coverage to Leeds, Birmingham and Bristol on top of our London and Manchester operations.
In terms of M&A, there was also Face Creative Services last year and you’ve mentioned you want to close more acquisitions. What do you look for?
Each business – Hobs Repro, Hobs On-Site; Hobs Studio and Anexsys – has its own M&A strategy, so within Repro, for example, we’re looking for new geographic or sector coverage or businesses we can incorporate to increase revenue without increasing our cost base significantly.
You have quite a few city-centre sites; do you own them or lease?
Most are leased.
I only ask because you have a few sites in prime London locations, like this one in Marylebone, and they must be seriously expensive to run?
We have a very understanding landlord here, but at some point, real estate in London will get to an unsustainable level and we’ll have to look at an alternative delivery model. But we’ll stay in London as long as we can, if that’s what our clients want.
I suppose you already have the hub and spoke model to an extent with bigger production facilities supporting smaller branches?
Exactly, but we’re going to specialise the hubs a little more in the future, in Manchester we have Indigos and flatbed digital printing and cutting, and that serves the north west cluster and we have the same in Bristol, Glasgow, Birmingham and London to support their respective satellite branches.
How many sites are there in total?
21 [Repro branches].
And is that about right?
We have geographic holes in Cambridge, Newcastle and Aberdeen. I would like to fill them, but I’m not desperate as we already serve them from other branches. But if we found the right tie-ups that would be good.
Through acquisition rather than organic?
Most of our branches have been acquisitions historically, but then Bristol was organic and it is one of our most successful branches. But acquisition is a good way to kick-start growth rather than a ramp-up time of 12 to 18 months, when you’re probably losing money and seen as the interloper.
How did you get involved with the business, because you only joined a little over a year ago?
I was previously involved with print, but left it altogether some time ago. I’m a research chemist by training. But I decided chemistry wasn’t for me after all, so I joined Kodak as a trainee digital sales executive a very long time ago.
In the glory days of Kodak?
Very much so. They were simple days, when it was really just us Xerox and Océ in the production digital space in reprographics. It was a brilliant company to work for, I have to say. Back then you couldn’t say that Kodak wasn’t a well-run company, it had just in time manufacturing, it was the second-most valuable global brand after Coca-Cola, because anywhere you went in the world there was a kiosk selling Kodak film – everyone knew Kodak.
And what did you learn there?
A very good life lesson, because where Kodak went wrong was that it wasn’t willing to sacrifice the sacred cow – film. If you look at other companies that faced similar disruptive crises, the ones that survived, then that’s exactly what they did.
IBM is the classic example. It reinvented itself several times, from typewriters to punch card computers. When I was growing up, my dad ran shoe shops and in each Clarks shoebox there was a punch card and that card was sent off to Sale every evening and that programmed the mainframe to replenish the stock. And I wanted to see what happened in Sale, so my dad arranged for me to go, and it was inspiring to see the process.
Was this in the 1970s?
Around then, and at that time IBM derived 70% of its revenue from computer punch cards, so this consumable item was its primary income stream. And its CEO at the time said that he was going to develop the System/370 mainframe, which was paperless, and the IBM board said it was madness as it would wipe out the punch cards business. So, he basically bet the company on moving to paperless mainframes. And it was a rip-roaring success and transformed IBM into a technology giant. Then in the 1990s they had another crisis and reinvented again to become a services business. The problem with Kodak was that it wasn’t willing to sacrifice film, despite inventing things like the OLED screen, what is now the next generation of TV screens. How they used it though was to make tiny screens for the back of Advantix cameras that gave people a preview of the photo, so they could decide if they needed to take another photo, and use more film. But the user had no way to get a copy of the digital image. What they said was that if you wanted a digital copy then you could buy a Kodak CD of the images when you got your film developed! So, they invented the digital camera, but did nothing with it so as to protect the film business.
It’s the adage: if you’re not attacking your market then someone else is.
Exactly. But I went from Kodak to run Ricoh’s UK production printing ops.
So, when did you leave Kodak?
In the late 90s. I was there for probably five years.
Were you graduate trainee then?
Well, I was only the second graduate they had taken on [in the UK graphics business]. If anything they were anti graduate, because they were of the opinion that I wouldn’t be able to ‘talk’ to print room managers. So I had to convince them that I could talk to ‘normal’ people . But, I went to Ricoh on the premise that I could see their machine before joining.
Was that just as Ricoh entered the production printing market?
Yes, the machine’s codename was ‘Bellini’ and I went to have a look at the first version. But after seeing it I said I would only run the UK production printing business, if we could fix the product.
What was wrong with it?
The finishing unit just threw the paper out so it was all over the place, so the operator had to straighten it out before finishing it. The toner was uneven, so you had this mottled effect on greys and you couldn’t adjust the LPI. I actually met with some of the engineers to explain and being a scientist I had a microscope at home, so I showed them an example of Kodak and Ricoh toner, where the former was very uniform particles and the Ricoh toner was all over the place in terms of particle size. And these three issues had to be fixed before it could become a credible product. And to be fair to Ricoh, I had a fixed product to sell within eight months of joining the company, which was amazing.
So, you could speak the language of print room managers and engineers?
[Laughs] It also helped that I did a youth exchange in Japan and lived there for two months, so I knew the etiquette and a little bit of the language. So, we went from 7% market share to 47% market share in mono light production when I left three years later.
Well it was a very narrow sector, but we did very well.
And you joined Xerox after that?
Well no, I ended up looking after various UK business units within Ricoh and then I started a new business for them selling document management software in the City. I left to set up my own document management business with a colleague, Robert Newry, Newfield IT back in 2003. We grew that business and created some software that used geospatial databases to analyse client environments very quickly that used the fairly new, at the time, tablet technology. We built in all sorts of verification systems, so that in the end it would enable people to assess a site’s requirements four times faster and gave a more accurate result than the old methods. So we sold that to all the printer manufacturers and it very quickly became the industry standard. And then Xerox decided to roll out our system globally and I think someone said ‘what if they get bought by HP?’, which was our biggest client at the time, so Xerox bought us in 2011. I carried on running Newfield for three years, and then they made me chief innovation officer globally for their consulting and analytics businesses. It was an amazing time, it had a $1.2bn R&D budget and was doing some exciting stuff around robotic process automation, AI, analytics – but I missed operational management. So, I went into their HR services division and was running four businesses in that billion-dollar unit, running a small bank, a start-up pensions and financial wellbeing business, a web portal and analytics business and private healthcare exchange.
How did those businesses fit with your experience though?
Well, they were all parts of the business that I worked with as CIO. So, I had got to know them quite well.
And I suppose they were essentially data-driven like Newfield?
Yes. And in the later years Newfield had moved heavily into analytics and had developed several patented technologies. One of which was using people’s print habits to cast light on the processes in an organisation, which essentially used Galton’s theorem on the wisdom of crowds – it’s a statistical phenomenon. So, we worked out a method of analysing peoples printing habits in offices and then spun that in with questionnaire data to go into enterprises and give them an analytical view of where to start their digital transformation journey and where the benefits might be. That’s now called Xerox Document Analytics.
So, what made you decide to get back into print?
I was commuting to the US every three weeks, which I was quite happy with – but my wife less so. And there’s no glamour in that kind of travel. I was then approached by a recruitment consultant. I was attracted to running a business without lots of red tape above me, having an equity stake and, well, it’s an interesting business. I’ve told you about three of them [Repro, On-Site and Anexys], but what we haven’t talked about is the 3D business, Hobs Studio, which is one of the largest 3D bureaux in the UK. I knew a lot about the print business, because that’s where I came from, I knew a lot about the FM business partly because of Xerox, but also because Newfield IT was the in-house consulting department of Williams Lea for many years, I knew the legal services because legal technology was part of my remit at Xerox and I knew 3D because Xerox had quite a few patents in that area and I had a personal interest because I find it interesting.
I have to say the recruitment consultant did very well, it sounds like your perfect job?
It was a good match. And I still think you can’t beat print in some applications, so while volumes may be declining I truly believe that the values are increasing. So, if you look at Repro we’re seeing solid growth in display graphics and bespoke packaging, we’re doing some really high-end beautiful things. Then there’s bid support services, our partnership with Qvidian [a market-leading RFP and proposal automation software that Hobs can sell as a managed service to clients]. We’re also doing things around augmented reality and AI, and apps. But all of these are around print, putting more value into print. Printers have to work harder now than they used to and we have to make sure we remain relevant, it’s hard work, but there’s still plenty of money to be made in print and plenty of value to give to clients.
It must have been an interesting interview though, because you were being interviewed to be one of the owners, not ‘just’ chief executive?
It was certainly long, there were seven interviews. But I liked the cultural fit and the growth opportunity and the fact that compared with my previous role the structure was very flat and the decision-making process was very, very fast.
Where do you see the biggest growth opportunities across the group?
All of them. Through acquisition and innovation.
You mentioned just after you joined last September that you wanted to double the size of the business to £70m by 2020, is that still on track?
It’s now probably 2020 and a half, because what I hadn’t factored in was Kieran [O’Brien] retiring this September, and he was still a major shareholder, and buying him out took probably six months.
Was that what the latest £4m Business Growth Fund investment was for?
Part of it, but the rest of us [directors] also increased our stakes. But the process inevitably took priority over any M&A activity – but we’re back on the plan now.
So you think next year will be a busy year for your M&A wise?
This year’s not over yet! I would be disappointed if we don’t complete at least one this calendar year.
Any hints on what part of the business the deal will be in?
You’ll be the first to know... Well, not exactly the first [laughs].
Doubling revenue is significant growth though, what’s the strategy?
The reprographics business will be acting as a consolidator in the market. There are lots of businesses that have got founders that are ready to retire or businesses that are struggling and people looking for an exit. Inevitably there are going to be some that are going to be in receivership. But we’re not circling vultures. We simply want to grow the business by taking on existing relationships without doubling up the cost base. The industry as a whole has masses of excess capacity, so the last thing we want to do is grow more capacity in an already saturated market. We’ll also focus on the areas of the print business that have significant growth opportunity. And that could be through acquisition, or innovation, like in the graphics business where we have materials like Noise Sponge for office spaces and then there’s also the printable, flat-pack cardboard ducting [for commercial air-conditioning systems].
And the others?
With On-Site it’s more of a sales job, so, organic. We need to get out there more and get selling. With the 3D business we’re seeing huge amounts of organic growth, but we will also look for acquisitions where possible, which might be technology-driven or similar businesses. In Anexsys, we’ve already made an acquisition and we’re looking at others, but we’re also seeing good organic growth.
The 3D market, despite all the hype, doesn’t seem to have grown as quickly as many people predicted?
It certainly has for us.
Is that because you identified and operate in a niche market?
We’ve certainly leveraged the AEC relationships we had in reprographics. We’re doing master planning models, we’ve done the Barking and Riverside development model, the biggest 3D model ever produced as far as we know. And we’re about to do one slightly bigger, and that will also have virtual reality components weaved into it. So we’re in a market place where we have a rare opportunity; you usually have one of three choices, you can do it quicker, better or cheaper – usually you have to compromise on two of those elements and abandon the third. But in this case, we deliver on all three.
But is the success down to the relationships the business already had?
That and the fact that there’s also a high barrier to entry. We’ve got the biggest SLA [stereolithography] printer in the country, we also do powder printing, and also have the largest one of those in the UK, which is very high quality. We do models for 80 of the UK’s top 100 architects.
I suppose file preparation expertise is probably as key as the technology?
That’s the secret sauce: how to fix the files that come from the architects. They’re not worried how the lines join in the CAD file, but when you come to 3D printing, when they might be a load bearing structure, it’s critical and there’s a lot involved in making sure the files ‘work’.
And I guess there are lots of possible new applications beyond AEC?
We also work with a lot of famous sculptors, where we scan their artworks and make limited-edition 3D ‘prints’ of their sculptures. We also do three-quarter size busts of people – we’ve done some really nice ones for a gallery in Barcelona and the Royal Academy. We’ve even done one of Bez from the Happy Mondays. We also do some medical work, automotive, and fashion. The applications are very broad and we just need to get deeper into these various verticals.
And what’s the revenue split between the various companies?
We’re around £35m and reprographics is still the biggest, second is On-Site and the other two are smaller, but fast growth.
What’s that in pounds?
£19m for Repro, £9m for On-Site and the other two are about the same.
And in terms of profitability, is the split along similar lines?
No, completely different [laughs]. 3D is very capital intensive, we’re building that for the future and it has been in start-up mode, but this year should hit profitability. Legal services is profitable, Repro is probably more profitable than many, On-Site operates on pretty tight margins – but they’re all profitable businesses.
I appreciate that after seven interviews, this might sound like another job interview question, but what do you think you bring to the business?
I guess I’ve brought a much more technology-focused approach. I’m a scientist by trade and I’ve run technology and analytics businesses and I used to sell the printing technology, so I understand things from the finest detail up. We’ve had to do quite a lot of modernisation from a systems perspective, so since I’ve arrived we’ve put in a new ERP system, consolidating 12 systems into one, a new web-to-print system and some other technology-driven modernisation. I think that was needed to create a platform to add more acquisitions easily into the business. We’ve also bought in new digital services, for example Qvidian. To be honest, I’m just continuing what Kieran did, Hobs has always been a very innovative business, he tried lots of new things, diversified from a paper coating business to reprographics business and then to the business it is today. My approach to innovation may be different, but the guiding principles are the same.
And what are your guiding principals, what have been your key business learnings?
The Kodak lesson was very important. I learned a lot with Newfield, starting the business from scratch, and the key lesson there was cashflow – businesses generally don’t go bust because of a bad idea or business model, they go bust because they don’t manage their cash well enough.
Was that a hard lesson?
Absolutely. When you’re running a business for a big corporation, you really don’t have to worry about it, when it’s your own business you becoming acutely aware of it. You do your 13-week cashflow forecast, and it took a long time [at Newfield] for that forecast not to show that we were about to go bust. So cashflow was critical, and also appreciating the value of recurring revenue – I mean contracted revenue, not repeat work. It enables you to plan so much better. And finally the value of intellectual property – most businesses don’t realise they have IP when they actually do, so we’re filing for patents on things right now.
The value of ideas.
And on that front, you have to be aware that good ideas can come from anyone in any part of the business, you just have to listen. I had great insights from one of our couriers on how we should manage logistics in London and arrange territories.
He didn’t suggest miniskirts and Minis by any chance?
Some people have suggested that, but I’ve resisted [laughs]. But you have to be willing to listen to anyone.
And what are the potential obstacles to growth?
The biggest challenge is always people – getting the best people, putting them in the right role and hanging on to them through periods of change. As Richard Branson says, you put people first, not your customers, because if you do that your people look after the customers.
Final question, what’s your biggest frustration?
That some people think we’re just a chain of glorified copy shops. We’re so much more.