From a little IT big things grow SME Profile

Arriving as a schoolboy in uniform, Bruce Sullivan was regarded with wry amusement when he descended upon New Zealand customs offices in the 1970s to pick up his latest consignment of digital watch parts from Taiwan. Back at school, the youngster was treated with some forbearance by teachers...

From a little IT big things grow

Arriving as a schoolboy in uniform, Bruce Sullivan was regarded with wry amusement when he descended upon New Zealand customs offices in the 1970s to pick up his latest consignment of digital watch parts from Taiwan. Back at school, the youngster was treated with some forbearance by teachers when sometimes he arrived late for classes after his extra-curricular activity---"Digital watches were the big rage then, and even some teachers were keen to get their hands on the ones I was putting together," he says now.

"I found out, however, that if you imported the components of the watches and assembled them in New Zealand, they were counted as a product manufactured in New Zealand.

"That suited me. Not only did I get a price advantage by assembling them in my shed, but also I was selling the product into a market that was beginning to boom. The combination of the right product and good timing--- and timing is so important--- meant that I was getting great demand and great margins when the market was on the rise.

" I didn't know the words for it then, but I had discovered a classical marketing formula of a product with twin USPs (unique selling proposition- scarcity and price) early in that product' s market cycle when margins are good and competition is scarce."

Nowadays Bruce Sullivan is managing director of the trans-Tasman Mantrack business, which provides on-line and outsourced payroll services to more than 300 companies throughout Australia and New Zealand including major hospitality, health and retail organisations, and larger corporate groups typically employing from several hundred to several thousand employees. Before discovering the importance of building teams, educating, motivating and trusting people as he made the classical transition from hands-on small business to being an Australasian leader in his market, the young Sullivan's next foray was into the video library business in the early 1980s.

"I was studying electronics and working freelance when someone asked me if I could fix a video,"he says.

" I hadn't even played a video, let alone looked inside, but, what the heck, it's just electronics.

"It worked out OK so I developed an interest in the video market just at the time it was starting to boom, and just when speculative investors were looking to invest in likely projects.

"Starting with just $6000, we built up a business that we sold for $4 million just four years later. But then we sold out because we feared that the video bubble was going to burst soon. That was a mistake, because the bus iness went on growing for years while I laboured mightily over payroll programs and computer software. The lesson was that you can't be right all the time with timing.

"What we did do right with the new payroll business was to find another niche that was under-developed (PC-based payroll systems). This suited my ongoing aim to create businesses in niches where we didn' t have to take on the big guys dominant in that field, who could crush us. We went where the prospects of success were brighter for an innovator.

"We were hell-bent on producing the best software, written in languages that business people could understand and use. Usability was a key---sometimes I wonder if some programming people shroud their technology in a language all of its own, so they don't have to explain it all to the market.

"A hazard of bad technology is that customers don't even realise a lot of this stuff is not doing its job until years after t he investment, which is what happened in the technology meltdown in Australia and New Zealand a couple of years ago and is still happening now.

"So we set out from the earliest years to speak the language of our market and to adapt our product to them, not vice-versa. This was an object lesson in how to build a successful company---but also an approach with its own problems.

"One of the biggest problems in retrospect was that we probably spent more than enough time and money on perfecting and advancing the

product and less than enough on marketing it. While this was exactly the right thing to do at the outset it became something of a business burden later. We remained obsessed with the technology, the intellectual property and the service--- but with relatively insufficient resources for marketing.

"We re-invented the product three times in new languages---in 1985, 1992 and 1998---as we sought to position ourselves at the forefront of a fast-moving technology. Every time we led by taking maximum advantage of advances such as internet and features such as Windows format.

"It was good in that we would turn the development process on its head by writing the ideal user manual first, then developing the technology to suit the user, rather than developing a technology concept then writing the manual to suit that technology.

"But while we ended up with what we believe is a great product, what's the use of a great product if no-one knows about it? We had to move quickly to bring our marketing up to speed with our technology.

"It was a classical small business mistake of the founder continuing to do all the things that satisfy him most while paying insufficient attention and resources to the strategic things that will grow the business.

"In retrospect, we didn't focus enough on our people resources---- to make the jump from being a small successful innovator with nine or ten staff, to being a fully-fledged business with sixty people in two countries."

Despite successfully differentiating his company's product from run-of-the-mill technology, however, Sullivan says Mantrack also fell down in an important respect: branding.

"We had all these good products with great client-oriented functionality, but our identit y (outside of our client base) was too diffused. Our problem was that we had put money behind developing the products, but not in developing the brand. One of the biggest things we are approaching now is how to successfully brand the product so that when our people walk into a client's office, they walk in with the strength of a known brand.

"That way our people don't have to re-sell our credibility before they even start to talk about the needs of the particular client. The importance of a strong brand- of a unique differentiating factor--- is particularly important in the current market, which is apprehensive about technologies based on computers and the internet."

The final major mistake Sullivan sees in the process of forging his successful business is that of not seeking appropriate outside guidance---in the form of consultants or directors--- as it grew from being a small business to a substantial business.

"We drew on the advice of some excellent people over the years, but sometimes people who were either too much like ourselves or too different,"he says.

"We found good small-business people who liked to get down on the workplace floor with us. They were brilliant at what we already did exceptionally well. Then we would go to the other extreme and get excellent people in from big business, who naturally were accustomed to all the paraphernalia of big business---the support staff, the business studies, the computer modeling and so on.

"This was all good stuff for big business, but it wasn't what we needed . We needed some outside consultants or directors who had been what we had been and who had gone through the process of becoming what we wanted to be. We needed someone who could guide us through the transition with his or her experience.

"One of the things we learnt in transition from small to larger business was the importance of measurement--- if you can't measure something, your can't manage it.

" We needed to make use of tools useful in the transition, such as key performance indicators. As we moved from flying by the seat of our pants we needed advice on practical things, such as when is the time to let go of doing the things you most like to do, and how to build and motivate teams to do the things that you cannot do alone any more.

"We needed to focus more on customer perception--- we were too much focussed on substance, if that is possible, and not enough focussed on building relationships. Yet relationships are as important as substance.

"A authoritative voice in the background, motivating people, managing people, directing people and getting the best out of them would have moved us further ahead more quickly."

Starting with $3 million venture capital, Mantrack's PayOffice system today is the highly evolved result of pioneering work in payroll outsourcing that began 17 years ago, when Bruce Sullivan's business was the first company Down Under to develop a PC-based payroll package with automated time and attendance. PC-based payroll was a very advanced concept at the time, because Ceridian in the US had only recently developed the world's first PC-based payroll product. Sullivan says: "Most of the local business community was still in the typewriter age---and most payroll companies were just key punchers, whereas we linked the payroll information directly into the business systems, so it was available immediately to see and use as trends and opportunities emerged.

"The outsourced system we have now will certainly blow away the cobwebs of outdated payroll practices that exist in otherwise sophisticated companies--- not to mention eliminating the potential problem of having all payroll knowledge concentrated in the heads of just one or two individuals, which is a risk that companies today take without even thinking about it.

Disclaimer

The purpose of this database is to provide a full-text record of all articles that have appeared in the CDJ since February 1997. It is aimed to assist in the research and reference process. The database has a full-text index and will enable articles to be easily retrieved.It should be noted that information contained in this database is in pre-publication format only - IT IS NOT THE FINAL PRINTED VERSION OF THE CDJ - therefore there might be slight discrepancies between the contents of this database and the printed CDJ.