‘My proudest achievements at GI are around people’

By Darryl Danielli, Monday 18 April 2016

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Despite being the lead (well, strictly speaking only) guitarist in indie rock cover band The Hoo Haas, it’s safe to say that Patrick Headley is better known, outside the Midlands music scene at least, as chief executive of GI Solutions.

patrick-headley

Headley: "My real job as CEO is to bring great people into the business"

While music might be his passion, after spending the past 23 years helping turn GI from a one-web wonder into a major player in DM and transactional, driving the evolution of the £32m-turnover business is clearly his true purpose in life, especially after leading an MBO at the marketing services provider last month.

GI was born in October 1992 as Graphic Inline when Ron Welch [father of current GI executive chairman Robin] decided to start again after the collapse of Colorgraphic PLC. The £50m group he founded in 1975 and took public a decade later fell into administration after suffering from an overly ambitious M&A strategy, the recession of the late 80s and the banking sector falling out of love with print PLCs in the early 90s.

His subsequent £1m attempt to buy back the group’s flagship Leicester business failed at the eleventh hour, after being outbid by Mike Hunter, the founder of Hunterprint – the collapse of which was ironically one of the causes for Colorgraphic’s fall from grace – and Chase Web founder Max Harvey.

But far from living in the shadow of Colorgraphic, under the stewardship of the late Welch senior, then Welch junior and now Headley, GI has not only outlived the reborn Colorgraphic after the latter, following another change in ownership, closed its doors a decade ago, its taken on its mantle as one of the UK’s leading direct marketing specialists.

Darryl Danielli What was your first job at GI?

Patrick Headley Sales, but I could have been anything really. It was a very small business and very entrepreneurial. I worked with Ron and Robin at Colorgraphic, but they probably wouldn’t have even known who I was. Ron was chairman and Robin was the chairman’s son and I was a little oik sales rep probably 17 or 18 when I joined in 1987. But when I joined here in 1993, as a mature 24-year-old, fresh from enjoying life at Howitts, I walked into a completely different environment. We had one press and it was a typical start-up: very exciting, very dynamic.

You must have been one of the first employees then?

Technically, the company’s first employee was Ron’s chauffeur, because Ron never drove, he never learned. I joined that February.

Obviously you weren’t qualified for the chauffeur’s job?

[Laughs] Exactly right, so I had to settle for sales. I formed a great partnership with Robin, he was the best inside guy I ever had as account manager. I used to go out and sell it and he used to make it happen. It was great.

So when did you start heading up sales?

I suppose I was head of sales from day one, but only because I was the only salesman here at the time. The first sales guy we took on was Lance Hill, ex-Colorgraphic too, probably in 1994. So perhaps its better to say I headed up sales from 1994. But it was probably around the time of the MBO in 1998 that I started to learn what being a director was really about. It was a tough time, so I did a period back on the road selling again, which was good because it did sharpen me up. And we were very lucky, we won Tesco Clubcard, Sky and British Gas in one year, 2001. Now that was a good year.

That was a lot to take on in one year though?

It was, but the one thing I would always say about GI is that we always deliver. We have a lot of processes in place, lean processes, but the customer is king. For example, when we took on Tesco we halved the time it took to get work out. We partner with Communisis on it now, because strategically Tesco decided it didn’t want it all under one roof. But we have always been good at getting the work out, to the highest standard, quickly.

Were you quite vulnerable though, to take on three massive clients at the same time?

We’ve always had lots of big clients, they were just three new wins that happened to come in the same year, but they certainly changed the business. The beauty is that they’re all still here today as direct clients. British Gas, went through print management for a while, but they came back as a direct client. It’s good to have that depth of relationship with clients.

And I guess now that you’re heavily involved with the data side that must strengthen those relationships?

We do a lot of work on the data side, it’s not just about print though. We do a lot of email work for clients – not all of them, but a lot. The whole idea to restructure the management team earlier this year was around our future; about making our message core: data, create, communicate. We manage data, we can create messages and we’re a communication business and we can communicate via email, print, SMS, HTML web page and archive retrieval. We’re completely agnostic as to how we communicate for clients. As a business, production loading used to be everything: if we weren’t fully loaded we weren’t making money. Now the model is changing because it’s not all about production loading, it’s about data, email, SMS, etc.

And production loading?

Of course that’s still very important, but it’s not the be-all and end-all anymore – we approach communications holistically.

So basically its about content: you are paid to deliver a message, but the delivery vehicle will vary.

Absolutely. One of the things we’re really proud of is that we’ve made a profit every year – even our first year. In the past we’ve always likened ourselves to the shy man in the kitchen at the party, but we get the job done. These days, we’re being recognised for what we do: we have some high-profile clients and a great message, which we need to repackage and get out there more, without getting too far up our own bums, hopefully. A lot of our customers will come to us because they just want us to do a print job for them, for others we will look after their databases, their creative and also their output. There are others that we just do data for, or just creative. GI Red [creative agency] is quite small at the moment, but I would like to go out and buy a creative agency.

Haven’t you already bought one?

We bought Cognesia a while back, but that’s an analytics business. That sits nicely with GI Insight.

Which reminds me: GI Red, was that set up before or after Eclipse Red?

Hands up, Eclipse Red was first, but I had no idea. And aside from nicking our enclosing manager, God bless him, Simon [Moore, Eclipse managing director] has not done anything else to get his revenge.

You mentioned the numbers earlier, one thing I meant to ask: you had a massive jump in sales in 2014/2015, but profits slipped a little - what was that down to?

SynYang [China sourcing operation] basically. In 2006 we set up the business off the back of some clients wanting something that could only really be produced in China by hand. So our then manufacturing director, Paul Thomas, went out there and SynYang was born. But the business grew and grew and our USP was that we made sure everybody we worked with was on the Sedex register, were ethical businesses and had ISO 14001 and all the rest of it. And more and more clients started to use it. The problem with it is is that it’s a buy/sell business.

How do you mean?

I mean that if it has a really good year then you have a huge spike in sales, but the profit margin is relatively low. But with the rest of the business, whether it be print or data, say, you have much more opportunity to add value. It also has a high element of risk in that if you place a big order then you have to pay your Chinese suppliers before it leaves the docks, so if anything goes wrong, then you have a problem. When we looked at the restructure, we realised that while it was a good business, SynYang wasn’t really core, so when we led the MBO here at GI solutions, Paul [Thomas] led a separate MBO at SynYang and everyone is happy.

But that gets us nicely on to the MBO, how did that come about?

Basically, it was planned for some time – we started talking seriously about it last summer. It’s been a very nice – tame, if you like – buyout. Our institution, Grove, has left us as an entity, but three of its directors have invested as individuals – which is really nice. But the structure of the business has fundamentally changed because the control is now with the management.

So who’s in the MBO team?

Me, Darren Crawford [managing director, GI Red], Alistair Ezzy [managing director, GI Solutions], Simon Lisser [finance director, GI Solutions] and Andy Wood [managing director, GI Insight] are all shareholders. And, of course, Robin. 

So how has the ownership structure changed?

Broadly speaking, previously Grove owned 60%, but they now have around 45% as three individual shareholders and the management team has the majority stake. I’ll be the largest single shareholder [in the MBO team] with around 12%.

And the structural management change in January pre-empted the MBO so that everything was in place?

We did it this way because it gets everyone used to the change before it happens. The biggest change will be for Robin; he’s always been massively involved in running this business and has always been over everything, but he’s happy to let the management team come through. He will be going to two days a week. My challenge to him is that I bet he can’t keep it to two days a week, but we’ll see [laughs]. I’m sure he’ll look at taking on non-exec roles in the future too – he’s not a great gardener so he’ll want to do something.

But it’s not like he’s retiring?

Absolutely not, we wouldn’t let him.

So what’s the strategy going forward?

Well, first off we will change from being a £40m business to around £32m now that SynYang is no longer part of the business.

But presumably an easier-to-manage £32m business as you won’t have the big spikes from SynYang?

Exactly right. And over the next five years we want to at least treble the size of our Insight business and grow the rest organically.

So you mean grow Insight through M&A?

Not necessarily. I think we’ve been underselling Insight as we operated it as a silo. Insight has been run as a data consulting business, run really well by Andy [Wood] and we’ve never really thought about how we go out there and grow it. Andy has a reputation for fantastic data segmentation, which has been hugely beneficial for clients. GI is all about generating incremental revenue growth for customers. One great example is a loyalty scheme that added £28m to the customer’s bottom line.

So what’s been the growth challenge then?

One of the problems we all have as printing businesses is that we have been massively marginalised because of our own inadequacies: we’ve really failed to sell the value and ended up with too much capacity; as an industry we’ve been a sitting duck for anyone that wants to stir it up a little bit and wind down the price. I’m not really seeing a massive sign that’s abating frankly. I do think there is more work to go around and fewer companies to do it. But in terms of the value I think we create here, and I’m sure a lot of print companies would say the same, a lot of our existing customers really get that and will always use us because of it. But if I’m talking to someone new and all I’ve got is our printing to sell it’s very hard to say ‘we’re valuable because...’ because the potential client might just say ‘it doesn’t matter how good a print job you might do it’s not going to massively change my results’. But if the conversation starts around the level of data segmentation we can offer and the better outcomes that delivers, and how it can actually drive profitability for customers, then they can see that as a tangible benefit. The people that are interested in that are your marketing directors or managing directors, but as soon as you start talking about printed output they would just point you in the direction of someone else in the organisation and the risk is that the conversation starts to move away from value to simply cost. 

But how do you have those sorts of conversations with clients if they go through print managers?

We [the industry] opened the door to print managers because we were too greedy back in the 80s; the ‘barrow boy’ mentality, the Porsches and Ferraris. We all know that – the industry didn’t focus on its customers’ changing needs and probably got too arrogant. That created an opportunity for print managers to offer the services we had let slip. Things changed, though, and it went too far the other way. There needs to be a balance, there needs to be enough profitability to enable printers and print managers to reinvest – we should all be able to coexist and work together sustainably. 

And do you think that’s possible?

Absolutely. The good print management companies provide a valuable service for clients, but there are still some whose model is about squeezing costs out of the printer, which then restricts their ability to reinvest. We’ve just bought another HP web press, and we’re lucky to be well invested, but not everyone is so fortunate. So there has to be an argument that maybe if the industry as a whole was better invested everyone would benefit, clients, print managers and printers.

That sounds like a print utopia?

It does, doesn’t it, but I know it’s achievable. The great thing about mail at the moment is that it’s a very fertile channel, it grew by 5% last year.

Because it offers the cut-through that email can’t?

Exactly right. Fair play to the Royal Mail, Moya [Greene, Royal Mail chief executive] has got something right as she sees a balanced argument between the operational side and the commercial side, then you have Jonathan Harman’s MarketReach side that just wants to promote the channel, regardless of whether its TNT Mail, UK Mail or Royal Mail. More of the agencies need to put print back into the marketing mix though, because I worry that if the customers aren’t asking then they’re not offering it.

Back to your earlier point though, you work with print managers as well as clients direct don’t you?

We do and don’t get me wrong, we have great relationships with our print managers. Those we work with are very professional and value their suppliers, and it’s not just about price. But I’m talking in general terms and the industry needs to invest and things that block that frustrate me.

I can sense that.

[Laughs] I’ll get off my high horse then. I don’t think anyone in our sector has invested more in kit in the past seven or eight years than us, but we only generated a 3% return on investment and that needs to be higher, it should be at least 5%. We will carry on investing regardless, though, because we need to stay ahead of the curve and continue to change and evolve.

I take your point though, if a print manager’s model is simply to cut costs rather than increase value, then ultimately everyone suffers. Whereas a partnership approach that reduces costs and increases value for everyone by looking at mailing formats, or better data segmentation, for example, makes more sense. Otherwise it’s just a downward price spiral with the only saving grace being that DM and transactional work isn’t really suited to offshoring.

You’re right, and maybe we are getting towards the bottom and the majority are realising that there needs to be a fair day’s pay. I know of one print manager that walked away from a major contract, because they had been delivering costs savings for a number of years and there was just nowhere left to go. Also, you have to ask if rebates really work. If you pitch for a job and you have a 3% margin, but you discover that there’s a 10% print management rebate – you have to add that 10% on your price don’t you? Fact of. You can’t work on a margin of 3% and then give someone 10% can you? I’m quite good at maths and I can’t figure out how you can do that.

But then that gets back to the added-value services, doesn’t it? That’s the client ‘glue’ if you like. To a degree anyone can do the print part as long as they produce to the right specifications and standards, but the data, say… 

…if your printer can change the creative, segment the data and overlay it with the different offers then do the output too, then I think that’s got legs. People start to get that very easily, and that really does show value. Everyone is much leaner at the end of the day, so anything that makes it easier for clients, but doesn’t compromise creativity and enhances deliverability and effectiveness is genuinely attractive.

And that’s got to be a good thing?

I think so. When we started GI Insight in 2000 the biggest issue was ‘printer gets data’ and how credible would that be? Which is why we ran it as silo business and it did really well, but we got it up to around £3m and it’s plateaued and we need to get it up to £10m. But there was no credibility in terms of letting your printer handle your data when we started, but you look at all the accreditations the business has, ISO 27001, 9001, 14001 etc – the level of professionalism in the business and our people is unrivalled. A business needs substance and infrastructure in our sector.

Does that mean the barrier to entry in DM is much higher than it used to be?

Absolutely, it would be very hard to start a business like us nowadays – you would need a lot of money. You can’t do what we did, start with one old mini-web.

So who will be the GIs of tomorrow then?

I don’t think there will be, I just think there will be massive consolidation.

So just old businesses coming together?

I can’t think of a single recent start-up in this sector.

Real Digital?

But that was years ago now. I’ve got a lot of time for them and we’ve worked with them on projects. David [Laybourne, managing director] is a lovely guy. That’s another thing that has changed in the industry, the fact that we do talk to each other and there’s not the nasty competitiveness that there used be in DM. We have a good relationship with a lot of our rivals; we’re still competitors, but everyone’s very grown up about it. And that’s a good thing. There will never be a cartel in print though, its just not possible, the requirements are always so varied.

And the technology – will DM and transactional be all white-paper digital soon?

I think so.

You’ve still got litho though, haven’t you?

We have.

And do you think you’ll ever buy another one?

We’re very lucky, we bought our Zirkon presses probably 25 years ago and at the time they were the new generation, with Siemens electronics, they were completely overhauled a couple of years ago – so they’re still very good machines. It made me laugh though because we had valuers in as part of the MBO process and they queried the plant list as they assumed that the Zirkons were long gone. 

So when it came to the valuation did they just ask how much they weighed so they could work out the scrap value then?

[Laughs] Exactly right, bang on. They’re as good as new though after the overhaul, and no one really makes them anymore so to replace them would be crazy expensive as they would be a bespoke build. The problem is that as marketing changes, and we start talking to people about individuals there are more plate changes required and eventually you’ll need to do it digitally. Digital will definitely be the future here. One of the things we’re checking out are coaters, because it’s about getting the substrate right. Okay, some [digital] manufacturers will say they can print on any substrate – yes, you probably can – but in reality you have to slow the line down to half speed or it can’t print full width – at the moment there’s always a compromise.

Clearly digital is having a big impact on the business, but who have been the big influences on you personally?

I’ve been very lucky to work with some great people. Obviously Robin, you will never meet anyone that works as hard as Robin, but he loves it and he’s very good at it. He constantly challenges himself. His father Ron too, but in a different way. He had a charisma about him he just looked at you and you knew where you stood, he used to talk about having to have an undying belief that something is going to happen and he was massively influential on me. I remember him pulling up to Colorgraphic in his chauffeur driven Daimler and you could almost hear the harps and choir of angels as he walked in the building. It was amazing. Robin had enough of that at GI though, his view was that we were a start-up business and if the chauffeur wasn’t driving he should be sweeping the factory or whatever. So all of a sudden, guess what?

You finally got the chauffeur’s job?

I got it in the end, that’s what I put my longevity here down to [laughs]. So I ended up driving him around Leicester in my little Honda Civic that Ron had to fold himself up to fit in to. But I loved it. I wanted people to see me driving around with Ron Welch in my car. The funniest time was when we took on a job for Artisan, which is sadly no longer; Les Sankey ran the business at the time. Anyway, the one thing Ron would never print was porn, he got his fingers burned on a lingerie catalogue at Colorgraphic years before, so wouldn’t touch it.

So it wasn’t on moral grounds then?

God, no. So we got this job in from Artisan called ‘Slider’, the film came in and the platemaker said “‘kin ‘ell Ron’s not going to like this, it’s porn”. So Ron got into a rage and he got me to take him round to Artisan, we got there and stormed into reception and all I could see was him and Les waving fingers at each other getting redder and redder. The Ron came out and got in the car, I looked at him and said ‘back to the factory?’ and he said ‘no, no Les is coming, we’re going out for lunch’.

And did you print the job?

We did, we just never spoke about it.

Has anyone else had a big impact?

Latterly, Nick Devine [The Print Coach] he’s been very influential on the business in the past year. He’s got a great mind and massive energy. I got involved with Franklin Covey ‘Seven habits’ [business methodology] because I’m a very habitual person and I like a routine. It comes from sales background in reality. But Nick took that to the next level. When I was at Howitts, Patrick Howitt and sales director Paul Dane, pure panache, had a big impact. Gary Evans, who was MD when I was there was really good too.

And Hybrid mail, how’s that going?

Very well. The beauty is that it just keeps growing and growing. The customer’s concern with it is that we have to control the postage, because we bundle things together, but when they start looking at the figures they see the opportunity. It’s great for online retailers too, because it doesn’t matter if you send one letter or thousands, it’s a great deal. So for things like abandoned shopping baskets, we’ve run initiatives with hybrid mail where instead of the retailer just sending an email reminder, which might be ignored or go into junk, we send a letter using the same information. We worked out that for one client we did it for they got 9.5 times better responses than with an email.

Hard to argue with those results.

It is, but one of the things we could do better as an industry is making mailing simpler. Agencies used to take care of it for the clients, but the expertise isn’t there any more so we need to make it simpler for clients and hybrid mail does that when we combine it with paper wrap – it’s the same great price for high volumes or low volumes, it’s simple.

I always ask people what separates a good business from a bad one, what are your thoughts?

My basic principle is surround yourself with great people. The difference between good organisations and average organisations are the people you employ. So keep raising that talent bar. Get great people into your business, then give them the opportunity to evolve and define themselves in their roles by training and engaging with them. The greatest gift you can give any other human being is time. Fact of. You also need to give people a progression path. You need to employ young people, but also treasure those grey hairs – it’s about getting a balance. My proudest achievements in the business are around people. One example is our account director on the Tesco account, Ian Groves, he used to be one of our printers. But he runs that account now, he’s grown that business. Ian’s just one example though, and my pride bursts when I think about so many of our people.

Is that one of the biggest challenges in any business then, talent spotting?

Yes. I’ve been quite lucky in that respect. I suppose in many ways my real job as CEO is to bring great people into the business and look at the future direction.

Final question: what’s your greatest weakness as a leader?

I can be a little bit impatient. I’ve got better as I’ve got older though. Perhaps I wear my heart on my sleeve a little too much, but that’s a strength and a weakness I guess? You should probably talk to the management team though, I’m sure they would happily tell you my weaknesses in every detail [laughs]. 

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