I n T he Office EXECUTIVE INTERVIEW

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The Danwood Group, led by turnaround CEO Steve Francis, has recovered after a restructuring and rebuilding program to resolve issues of profitability.

Images courtesy of The Danwood Group

T he Danwood Group is a £270-million­turnover business owned principally by private equity, the

founder and management. It employs 1,200 people in the UK. As the UK's only nationwide, independent specialist in selling and servicing print-related office technology, Danwood maintains a leading position in this fast­changing channel to market.

Founded 44 years ago, by 2012 it had grown revenues at over 19 per cent per annum since 2004, largely through a series of acquisitions. As a result of OEM acquisition activity around the globe, Danwood was now the largest independent player in the world with over 12,000 customers. Danwood had developed strong OEM relationships at holdings board levels in Japan (Kyocera, Sharp, Canon, Ricoh), Korea (Samsung), and the USA (Xerox, HP). This

had contributed to driving strong profitability. Unfortunately, by 2012, the business had outgrown its family business origins and founding values. While its customers continued to receive outstanding service, the business had allowed the growth to get out of control. The business had stopped generating cash and its relationships with key suppliers had become strained. Urgent action was needed to stabilise the business and create a platform to return the business to growth.

When Steve Francis was appointed to the role of CEO to steer The Danwood Group hack on a path to success in October 2012, he was faced with a challenging task. The print-technology business turned out to be in urgent need of fundamental change. Alongside chairman Bob Ellis (appointed on the same day), he quickly got to work to take control, change senior management, and initiate a rapid

cost-reduction program. By May 2013, the business was cash generative, and Steve had commenced a top-to-bottom review of customer contracts, service levels and sales processes. Steve and his team began to build and implement a two-year strategic turnaround plan that he hoped would effectively set the organisation up for a long and prosperous future.

Urgent leadership change

Steve recalls, "The company was absorbing cash and there were many structural issues to be addressed. A fresh start was needed. Within a short period, I realised that I needed to rebuild the management team.

"I brought in new managers and promoted internally in the weeks before Christmas. Most of the new team members, including me, came in as interims initially and then >

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over time most decided to stay as permanent employees. This approach allowed us to move quickly with lower risk as everyone we brought in was, if anything, over-qualified for the task. Most of the team I had known in some form prior to that, including COO Wes Mulligan:'

Happy customers despite the company's poor systems and processes

"Fortunately, we retained the loyalty of our customers through those winter months. Our people worked around the clock to keep customers happy." Danwood's business is essentially stable: a service business which sells long-term service contracts supplying a basic business-critical service (keeping photocopiers, printing machines, and scanners working day in, day out) to a large fragmented base of over 12,000 customers of all sizes and in all sectors of the UK economy. "The company had inflicted most

of the problems on itself by being overambitious and growing too quickly. There was no single, recognised Danwood way of doing things. Despite this, Danwood was able to provide a great service. I was amazed how happy our customers seemed to be-our people on the ground pulled out the stops every day for our customers.

"Through the winter of 2012-13, we worked hard to maintain the confidence and trust of our major suppliers, funders, customers, and employees:'

Rapid cost reduction

Early in January 2013, Steve quickly started a cost-reduction program to restore profitability. This was completed over two key stages. Phase one was to cut down the sales force. The initial intention was to reduce the 500-strong team by around 25 per cent but in the end it was deemed necessary to cut the number of staff by half. For

a sales-driven business, that may be viewed as a very risky step, but not to Steve: "I look at it the other way-we had too many people, often not selling with the skills expected of large business. The trick was to execute the plan with speed, care for our people, and professionalism:' To determine who had to go, Steve began a rigorous screening process.

Producing sound 2012 financial accounts

The cost-savings program was completed by May 2013, when the company published its 2012 accounts. This was an important milestone: the 2011 accounts, which had been delayed, did not make good reading and it was important that any concerns were put to rest not just by the numbers but also by the tone of the report. "Fortunately, we were able to achieve that, and in a short period of time. Our bankers were also impressed, not only by the fact that the company had been stabilised,

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but also by the speed at which it was achieved."

Building the foundations for long-term growth

Phase two was to turn the company into a more professional, integrated business enterprise with appropriate processes, disciplines, reporting ystems, and training schemes in

place. Steve notes, 'We wanted to create a 'Danwood way' of doing things''. Steve spent the next two years putting all of that into action, while simultaneously investing in better IT systems, continuing to reduce costs, and bolstering the team. He also introduced new graduate and mentoring programs to attract and retain talent.

~By June 2014, the business was back to sustainable profitability and an £8-million program of investments was rolled out which would un derpin the profitability and provide the basis for longer term growth. In the period from March 2013 until September 2014, we were able to produce a steady and regular improvement in profits according to plan. From a financial performance perspective, we had become 'reassuringly predictable'. This was really important as it gave everyone the confidence to believe we Were now ready to grow again."

Investment in people

·'Really successful businesses, be it private-equity owned or otherwise,

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tend to have happy employees;' Steve says. "They tend to have employees who go to work for something more than a pay cheque because they like being there and the company is nurturing them. Pretty much from day one I emphasised the importance of shared values: 'Why do I work for this company? Why do I work with these people? What draws us together?' With that in mind, one of the key elements was to give people a sense of career; let them know that they are going to be trained, that they are going to be developed, that they are going to be given interesting job opportunities, and that they are going to have the opportunity to do lateral moves across the business:'

To create that environment, which has taken a couple of years and, Steve admits, is probably in some respects still a work in progress, graduate and apprentice schemes were introduced. "I think it's critical because in current economic conditions there are so many outstanding graduates and school leavers yet so few good opportunities for them;' Steve says. "So it was in our self-interest to have an expanded graduate scheme and to start an apprentice scheme. Our geographic home and our geographic local responsibility were two things that drove a lot of our thinking. We are one of the largest employers in the Lincoln area of the UK so it was important

for us to give something back and to be seen to be stable, well managed, and farsighted:'

Strategic partnerships with key OEM suppliers

While focusing on the internal operations of the company, Steve and his team were also working closely with Danwood's supply chain. Steve quickly adopted the view that the best way to bond with suppliers was to operate with full openness and as partners. He made it his mission to take regular overseas trips to visit the chief executives and board members of the likes of Kyocera, Samsung, Xerox, and Hewlett Packard to maintain that element of transparency. >

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UK Ltd

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"These are £10- to 20-billion, or in some cases £400-billion businesses, and they would give us significant time at a board level in forming and building trust, as well as forming joint strategies. To them, a partnership with Danwood is uniquely valuable because they don't have anyone else in the world that can tell them about 12,000 customers in an SME marketplace. We are able to give a very broad picture through our experience.

"It's a two-way street, though. We give them a very detailed picture of the marketplace, what customers' needs are, and that includes giving them advice on what their next product range should and shouldn't have, and in return, we cooperate on dedicated product launches and promotions. Our attitude to our suppliers is that they are actually part of our business. One phrase that I use a lot is 'glass supply chain'. We are totally visible to them and we like them to be totally visible to us so that we operate as one team, rather than at_a_n arm's length. It is absolutely cnucal to us to build and work on those partnerships."

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Consolidating suppliers and products

When Steve inherited the business as CEO, there were about I 00,000 machines being serviced by Danwood across about 26 different brands. He says it was a complete plethora without any real focus or differentiation between partners. "From pretty early on in my tenure, we went through a formal process where we had our executive board and the entire local executive board of each supplier spending half a day talking about their strategies and our strategies, their values and our values. Then we got into the details of the support they could provide to help us achieve our key goals:'

The next part of the process was looking at typical procurement­products and services, competitiveness, pricing, what they were like to work with operationally, and what types of technology they used. "We completed the process again in early 2015 and from that work we were able to confirm our three or four key strategic partners. We were quite open in our detailed and objective feedback to them,

which they found both uncomfortable and valuable! We used the scoring criteria to build joint improvement programs to improve their scores for mutual benefit. These strategic partners tend to have dedicated teams just for us, given our scale:'

Investment in big data

By having strong relationships with key suppliers, Danwood is able to better serve its large customer base. This, combined with its continuing investment in big data technology, means that it can deliver the best possible products and services to the marketplace. "We realised that our biggest asset should be the way we capture, analyse and exploit the huge amounts of daily data we collect about I 00,000 offices throughout the UK economy, a unique opportunity;' Steve observes.

"We get a live feed online from each of our machines, something like 60 per cent of our active machines, which tells us every day how much they have been used, if they are working okay, if they need a top-up of various drums, or if they need new parts. We then give

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-teve expands on that notion with a rypical example. "We track daily page usage across the country and because we are an independent, ,, e do it across all manufacturers and all sectors:' Last Christmas, Danwood noticed that the public ,ecror downed tools on roughly 5 DeceJDber, and the large corporate businesses started slowing down on 15 Decemb er, and the smaller businesses similarly. Then, after ChristJDas, it took the SMEs about a week to be active and the big corporates started to be active only by 19 January. They found that the pu blic sector didn't really get going until towards the end of January in terms of page volumes.

'1'hat sort of data can be used for all sorts of things;' says Steve. "Obviously, to help us help the people manage their paper usage, and also see activity levels, but furthermore, it is an invaluable tool to make our services more efficient because if we see a problem with a machine then we can send out someone immediately or we can do a remote fix. We don't have to wait for a phone call. We also develop new products and services, each tailored to the customer. For example, we are now promoting customer online self-help: they are able to generate, review, and pay invoices as well as conduct system diagnostics. This is a win-win, saving costs and time for both of us. The use of that data and technology is on the back of an £8-million investment program we started just over a year ago. It is a new thing we are doing to add to our service quality for our customers:'

"Companies like ours, service businesses with tens of thousands of customers, only exist because they provide excellent service." - Steve Francis

"Danwood is our largest partner in the UK. We work very closely with them to help customers intelligently rethink their approach to print so they can create a connected workplace, and migrate to digitisation, mobility and cloud within their organisation." - Mark Ash, Head of Print, Samsung

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Despite all of the turmoil when Steve was first appointed as CEO, he acknowledges that the fundamental position of Danwood was, is, and always will be, as a company which provides a high-quality service to its customers. "Throughout everything, our major customers have stuck with us and we have invested a lot of time in keeping them loyal. We have ended up with even more loyal customers than before:'

Excellent customer service

"I think that is probably the most important message: Companies like ours, service businesses with tens of thousands of customers, only exist because they provide excellent service. The thing that has remained constant, and hopefully has improved over the last three years, is that we have provided very strong service to customers and they have stayed loyal to us. Our loyalty levels are higher now than they've ever been as a result:'

Smooth succession

After a dynamic three years, Danwood is back in the black and Steve has chosen this time to step aside to leave the company in the capable hands of right-hand man Wes Mulligan, who will continue to lead it on a positive journey forward.

"A turnaround CEO is different from a CEO in normal circumstances;' Steve concludes. "You have less time to act and to make fundamental decisions. Wes came in as my number two and he has done a fantastic job. I credit him for a large part of our 30-per-cent improvement in core productivity since we arrived. The sign that it was time for me to move on was when in meetings I was less and less required, and if I was to make a big intervention then I would risk squeezing down on Wes' space and not allowing him to develop his career. It has been a natural evolution. I have had a very good dialogue with private-equity

backer Bregal Capital and with the chairman throughout."

On Steve's departure, the chairman stated, "The board would like to record their deep appreciation for Steve's decisive and successful leadership of the company, leaving it in good health for future growth."

Unusually for someone who had to implement a fierce restructuring program, Steve's impact has been widely praised across the industry. A representative from Printing Solutions Business, Samsung, said: "Our relationship with Danwood has improved beyond measure under your leadership and the turnaround of your business has been equally successful. The reputation of Danwood within the UK market has grown substantially and our local team are continually impressed by the improvements you have made'.'

To Steve, the most valuable feedback was a comment by James Dalziel, his Group Sales Director: "You built a team, generated energy, determination, self-belief and enthusiasm, whilst simultaneously leading the complete rebuilding of Danwood. You set examples of decency, honesty and integrity and reminded Danwood's employees, customers and suppliers about doing business properly-how it should earn and deserve loyalty and support. Well done for achieving this transformation in a very short time:' o

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