the success of James Dyson, a UK based entrepreneur and founder of Dyson Appliances Ltd (DAL)

Evaluation Of An Entrepreneurial Venture: Dyson

Introduction

This report deals with the success of James Dyson, a UK based entrepreneur and founder of Dyson Appliances Ltd (DAL). Dyson is famous for designing the Dual Cyclone bagless vacuum cleaner that functions on a theory of cyclonic separation. With a staggering growth of 300% and a presence in more than 45 countries worldwide, Dyson’s net worth currently is £3 billion (Cozon, 2013). In less than four years, Dyson managed to become a market leader, as regard sales in vacuum cleaners, both in the US and UK markets, which clearly shows its success story. However, the journey that started with launching the Ballbarrow in the 1970s to the production of the extremely successful vacuum cleaner in the 2000s has been a rather difficult one that involved struggles in procuring funds during the initial years to fighting court cases against multinational rivals for patenting rights. Despite these major setbacks, Dyson persevered, and transformed his company into a market leader, amidst stiff competition from large multinational brands. Dyson is considered as a great entrepreneur and his sense of innovation and business acumen is evident in his marketing a product that used a technology rejected by other product manufacturers. The product when launched was priced at double the average market rates for similar products and there were very little advertisements and marketing done to promote it; instead, DAL commissioned retailers through their own efforts, an occasional article that described the product was published in newspapers, and the name was made to spread by a general word of mouth.

Discussion

Delineating the terms ‘entrepreneur’ and ‘entrepreneurship’

In the last two decades, policy-makers have acknowledged that that small business enterprise play a significant important role in promoting industrial growth and increasing job opportunities (Deakins, and Freel, 2009; Burns, 2011). Reviews showed that in the US, small firms with fewer employees (less than 20), created a large scope for new job opportunities (Birch, 1979). These figures later encouraged the UK government (under Thatcher) to establish a form of ‘enterprise culture’ that encouraged innovations in the field of business and management (Bridge, O’Neill, and Cromie, 1998). This interest by the government was reflected in the form of enhanced focus on innovation and entrepreneurship in the last two decades, in the context of promoting small business firms (Chell, Nicolopoulou and Karatas-Ozkan, 2010).

To delineate an entrepreneurial person some specific characteristics, skills and behaviours are generally associated with that person. Characteristics include perseverance, resourcefulness, confidence, goal oriented and adaptability; skills include ability to make decisions, solve problems and negotiate; and behaviours include creativity, opportunity seeking, and dealing uncertainties and setbacks (Gibb, 1999).

Stevenson and Sahlman suggested, “Entrepreneurship is the relentless pursuit of opportunity without regard to resources currently controlled” (1989, 104). In another definition Stevenson and Jarillo stated, “[It] is a process by which individuals – either on their own or inside organisations – pursue opportunities without regard to the resources currently controlled” (1990, 23). Later Chell claimed that the process of entrepreneurship involves “recognising and pursuing opportunities with regard to the alienable and inalienable resources currently controlled with a view to value creation (2007, 18). From the above definitions, it is evident that entrepreneurship is a process where a business venture lacks full control over the available resources. In this context, it must be kept in mind that resources do not merely relate to economic terms, but include social and human capital (Barringer and Ireland, 2012). Additionally, to act as an entrepreneur, one must work in a venture that creates and adds value. Besides these, entrepreneurs generally have a strong network, which they use for procuring social capital and creating a wide scope for turning their objectives into reality (Chell and Baines, 2000). Taking into consideration the definitions of entrepreneur and entrepreneurship, as provided by various experts, this paper will now analyse Dyson’s entrepreneurial venture, the DAL.

The entrepreneurial venture by James Dyson, DAL

Before the innovative designing of the bagless vacuum cleaner, James Dyson had already established himself as an entrepreneurial businessperson and a designer. He had already designed the “ballbarrow,” a wheelbarrow fitted with a ball-shaped wheel that changed the entire market, by simply replacing the wheel with a ball (Roy, 1993). This innovative venture later formed the financial foundation for his venture into bagless vacuum cleaner. The experience he gained while working on this particular venture taught him many lessons, especially in the context of business strategy, managing innovation and protection of intellectual rights (Dyson, 1998). Here one particular experience is worth discussing. Dyson had designed the ballbarrow while working with an engineering firm called Rotork. He moved out of this firm eventually, but in the process lost all patenting rights, which was in the company’s name. This experience taught Dyson how to protect his intellectual and patenting rights, where all future patenting would be in his name and not that of any business firm (Dyson, 1998).

The leading share in the market of vacuum cleaners, prior to Dyson’s invention of the bagless type, was held by Hoover that had designed a vertical cleaner functioning on rotating brushes, and known as Hoover Junior this was the UK’s highest selling brand in vacuum cleaners. Almost all vacuum cleaners until the 1980s were variations of the Junior, with minor changes in design. A revolutionary change appeared in the market during the 1970s and 1980s, when Dyson designed a new vacuum cleaner that functioned on the principle of cyclonic forces, and did not have a bag that were used in all prior models to assemble the gathered dust.

After creating the innovative design, Dyson used his experiences from his previous other products, especially the ballbarrow, to plan a marketing strategy for his product, wherein he first ensured all patenting rights were secured before starting negotiations (Dyson, 1998). This is an important step in strategic innovation and management, where an entrepreneur in order to protect his intellectual rights from powerful multi-national firms, must secure patenting rights to prevent any future sabotage or theft (Hart, Fazzani and Clark, 2009). However, Dyson in his book mentioned that despite all necessary precautions, from his previous experiences he was almost sure that the corporate giants would aim at stealing the design from him, regardless of all protection taken (Dyson, 1998).

While trying to market his innovation, Dyson was willing to accord a licence to production companies with special rights to patenting, and as takings, Dyson asked for a certain percentage from the profits made on product sales. In this instance, Dyson’s strategy aimed at offering a license for five to ten years, along with 5% royalty on overall price and an immediate down payment of £40,000 (Dyson, 1998). Furthermore, Dyson was willing to help creating the product from its original design. However, the leading manufacturers of vacuum cleaner at that time, such as, Electrolux, Hoover, Vax, Black and Decker, amongst many others refused to take his offer, and instead some focussed on finding defects in his design (Dyson, 1998). In some cases, the MNCs expected him to give all patenting rights for a meagre compensation. Sometimes Dyson faced difficulties while agreeing to negotiate, owing to the issues of protection of intellectual rights that would inevitably arise during negotiations with the designing experts of the concerned MNC (Dyson, 1998).

Despite this major setback, which made things difficult in the UK and Europe, Dyson persevered, and he soon found a way to enter the Japanese market. After many weeks of negotiation, Apex Inc. finally agreed to procure a licence to make and sell the product (with the name G-Force) in Japan. The procurement of licensing to his product technology by the Japanese firm coupled with Dyson’s negotiating skills and perseverance, helped him to garner the much needed revenue during late 1980s (Dyson, 1998). This revenue also gave him the self-confidence to initiate strategic planning towards establishing production facilities in his own country.

With the small income coming in from the Japanese market, Dyson decided to target markets within the UK. Since all appliance-producing firms had previously rejected his offer Dyson devised a new marketing plan, wherein he decided to offer his product to the UK contract manufacturers (Dyson, 1998). Next, Dyson opted to offer serial contracts to two separate manufacturing companies, where one firm would only create components and the second one would to do the assembling. However, here Dyson faced another setback, where the two firms chosen by him created certain problems. He did not accept the quality of the product manufactured, and found that the firms were placing his work in-between other old contracts, thus not giving the attention necessary to manufacture good quality products. To deal with this setback, Dyson took a major decision, where he decided to produce and assemble all by himself. He started by buying moulds from moulding firms and tried building his own factory (Dyson, 1998). However, here he faced more difficulties, related to procuring adequate funds. He discovered that getting a financial loan, even with a successful business product was extremely difficult. To overcome this problem, Dyson looked at the setting up his factory in places where governmental grants were possible, but David Hunt, a Welsh Minister, rejected his application (Dyson, 1998). By this time, more than a decade had passed and he had spent nearly £2 million. Finally, after a long negotiation, Dyson managed to convince his local bank into granting him a loan, which allowed him to establish his production unit in Wiltshire, and finally the first bagless vacuum cleaners came into the UK market in 1992 (Dyson, 1998). From the review, it is clear that Dyson exhibited many of the characters, skills and behaviours given in the various definitions of entrepreneurs. He exhibited perseverance and self-confidence even when his plans failed to take-off, he remained goal oriented despite constant failure and stiff opposition; he was able to make strong decisions that involved taking risks to some extent. He was oriented towards problem solving, and was a successful negotiator, which is evident in his dealings with the Japanese firm and later the local bank. Besides these, his designs showed creativity, he made use of all possible opportunities, and was adept at dealing with setbacks and uncertainties.

After the manufacture of first series of the bagless vacuum cleaners (DC01), James Dyson started visiting famous retailers, such as, Comet and Dixons to procure order for sales. Once again, Dyson met with a failure. The retailers failed to understand why consumers would buy a machine that was three times more expensive than any other vacuum cleaner already present in the market. Finally, few home catalogue firms decided to feature the cleaner in their product lists, while a Midlands electric store decided to stock them. The sales picked up very slowly but later showed a constant rise, and finally the John Lewis store decided to stock the innovative cleaners. After this, product sales showed a rapid rise, and the company soon turned into one of the market leaders, in the arena of vacuum cleaners.

James Dyson adopted a new concept in sales and marketing, where no advertisements were made to promote the product, which was another major risk, taking into consideration the hurdles faced previously (Janney and Dess, 2006). In this context, Dyson maintained that being product orientated, he always felt that with good quality products promotional works are not an absolute necessity (Dyson, 1998). Therefore, despite using a completely new technology, he did not spend large amounts on advertisements and relied only on a handful of press releases and print features.

As Dyson sales rocketed, large brands like Hoover, Miele and Electrolux saw a steady fall in their sales. These business giants tried fighting back by designing their own versions of bagless vacuum cleaners, and soon Hoover developed their Triple Vortex vacuum cleaners, which removed the use of filters. Dyson however filed a case, where it was claimed, the technology used by Hoover was an infringement on Dyson’s patenting rights. From a Financial Times report we find that “The company won a 2000 High Court injunction to ban the sale of Hoover’s bagless Triple Vortex vacuum cleaner, and subsequently accepted £4m in damages” (Wembridge, 2013), thus procuring a major win for the company. Dyson later faced many legal fights with large MNCs, over standards in advertisements and infringement of intellectual and patenting rights. In 2000, there was another ruling in favour of Dyson, where the Advertising Standards Association (ASA) awarded a verdict against an advertisement by Electrolux, which showed that the firm had the most powerful vacuum cleaners. The ruling clearly stated that motor power does not reflect better performance of vacuum cleaners (Sunday Times, 2000). According to the Financial Times report “[Dyson has] spent more than £2m in 2012 on filing and securing its IP rights, as well as £3.2m defending the “air multiplier” technology in some of its fans. In its 20-year history, Dyson has dealt with more than 750 legal issues involving alleged breaches of its IP, most of which have been settled out of court. The company is currently involved in 13 legal battles over IP, excluding those in China, where misuse of patents is widespread” (Wembridge, 2013).

When Dyson entered the US markets in 2002, he decided to adopt a new marketing strategy, where he did not apply for any intellectual property protection, and simply relied on the brand name and image. Currently Dyson is “the top selling upright vacuum cleaner brand in the US, with a near 27% market share” (BBC Business News, 2012). Dyson used a marketing strategy in the US that was different from the UK/Europe strategy, wherein a successful advertising campaign worth millions of dollars was used. In Japan, Dyson became the third largest name in vacuum cleaners after overtaking Toshiba, and here Dyson strategically made an innovation in the name of Dyson DC12, specially designed for consumers in Japan. Owing to the huge success in Japan and the US markets, the company “turnover was £1.05bn, up from £887m in 2010 [and] its earnings grew by 30% in 2011 to £306.3m… Dyson has been increasing the amount of products it sells outside the UK. Last year it sold 85% of its machines outside the UK, compared with 30% in 2005…[furthermore] Dyson – which now employs nearly 4,000 people worldwide – also said that it planned to increase its spend on research and development by 20% over the next five years” (BBC Business News, 2012).

From the above review, it can be suggested that besides designing a revolutionary technology, Dyson had used various innovative marketing strategies that varied according to the needs of the targeted market. His perseverance in face of constant failures and setbacks, his self-confidence, his sense of conviction in his own invention, and his ability to make decisions and negotiate, made his entrepreneurial venture a complete success, despite lack of promotional advertisements and a stiff competition from powerful multinational brands. The process of entrepreneurship, as derived from the above case study, appears as a persistent pursuit and seizing of opportunities, regardless of the resources that remain under the entrepreneur’s control, and it is in sync with the definitions provided by the experts.

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