One of Hawke’s Bay’s most successful businesses sells furniture solutions to schools. Including faraway locations like Kazan International School, Tatarstan. With occasional design improvements suggested by 8 year olds (ie, its customers). At prices higher than its competitors.
Its furniture is 100% recyclable, but for the powder on the steel. And 99% materials used are sourced in New Zealand.
It’s unaffected by drought, hail, or threats like fruit flies and PSA.
The company’s revenue has grown 60% over the last four years. In two years, 70% of its sales will come from overseas.
14 staff were added in 2014; as many will be added in 2015. Each full-time person generates $220,000 in revenue.
This company, Furnware, started the same year as Watties, has evolved in style and focus over 80 years, but in its current incarnation reflects the vision of its present owner and managing director, Hamish Whyte.
How did this success story come about? And what lessons does it hold for other aspiring businesses in Hawke’s Bay?
Going to school
“I’m a social guy,” says Hamish Whyte when asked what prepared him to take on and grow a company that in its history had built everything from state house kitchens to rifle butts to caravans… and then school chairs.
“I was the kid in school who looked out the window … I couldn’t wait to get out,” he says. And when he did, he wound up working at Woolworths, where by age 21 he was managing the Hamilton store with 100 employees. Something worked. He would say people skills: “I knew I was good around working with people.”
A few years passed, delivering sailboats in the Caribbean (“I knew the happy hours in every bar.”) and selling copying machines, until Hamish at age 31 and wife Sarah returned to her home turf, Hawke’s Bay, in 1990.
With the family’s backing, in 1993 Hamish took an ownership stake in Furnware and became managing director. That move might have turned out disastrously, because a government initiative had gotten underway in 1990, called Tomorrow’s Schools.
By this time, Furnware was already principally in the business of manufacturing and selling school furniture. Sales were made to the Education Department as the purchasing agent for all secondary schools and a small group of regional Education Boards purchasing bulk for primary and intermediate schools. It was a wholesale business.
Furnware had mastered this tightly centralized system well, but under Tomorrow’s Schools that system was up-ended. Within a few years, individual schools were charged with making their own purchases … Furnware now had 2,500 customers to woo throughout New Zealand. And at the time had one sales representative amongst a staff of 21. The demands of servicing the school business soon drove out other markets Furnware had traditionally served, such as architects, designers and hospitals.
So by the time Hamish took over, the customer landscape was totally changed, and an entirely different marketing and sales strategy was required that focused on servicing and building relationships with many end customers … fortunately the strong suit of the new managing director.
Furnware’s DNA
Hamish Whyte likes to talk about the ‘DNA’ of his company. He doesn’t speak more than three or four sentences without using the word ‘customer’. The DNA of Furnware translates into listening and responding to customers.
And in the case of Furnware, the ultimate customer is the kid … the student. Back to that in a moment.
In the open market Tomorrow’s Schools environment of the early 90s, Furnware found itself facing increasing competition. Some companies blitzed school principals with direct mail offers, cutting costs by not having sales reps. Chinese manufacturers were the rage in the late 90s and sold purely on the basis of cheapest product, delivered quickly.
“All our competitors were focused on being cheapest.” Faced with becoming a ‘me too’ manufacturer, up against ‘cheaper, quicker’ competitors, Hamish chose to bet the company on design and quality. Not just making a school chair, but making a school chair that made his customer – the student – more comfortable, thus happier and less distracted, and, to the immense gratitude of his or her teachers, more productive.
Chair manufacturer becomes teacher’s aide. An entirely new, market/customer-driven value proposition for a sector whose other players focused on how compactly their steel chairs stacked together for shipping.
So in the early 90s Furnware turned to designing the highest quality school furniture. Industrial designer Murray Pilcher was put to the task. His first insight: kids are different sizes; we need to fit the chairs to them. You need to go into the schools, measure the kids, observe them in the classroom. Furnware did just that, measuring over 20,000 students throughout New Zealand and videotaping classrooms – the largest study of this type undertaken. Prior to that, “We had zero relationship with the kids.”
Now Furnware was really meeting, and growing to understand, its customers. “We went back to school to learn,” says Hamish.
The result was a new line of school furniture, called Bodyfurn. “We gave them comfort.”
Students were videotaped using the new furniture and compared to those using traditional school furniture. The Bodyfurn students were less distracted by the discomfort of their chairs and desks. And less distraction from physical discomfort translated into less time off-task (up to 83% less in higher grades) and more engagement with schoolwork.
Hamish tells the story of a Burnside High student so pleased with his Furnware chair that he carried it from class to class because not all classrooms had the Furnware furniture. A highly satisfied customer.
However, quality comes with a price. In this case, Furnware was then selling a $100 chair against a $40 competitor chair. “Everyone thought I was nuts … Probably the biggest risk I’ve taken in my life,” says Hamish.
A disaster? To the contrary, Furnware has grown strongly and steadily ever since.
Making the sale
So how does one sell a chair that’s twice or more the price of its competitor?
Hamish describes a number of factors, beyond the ergonomic superiority of the product.
Quality of manufacture – durability, backed by a ten-year warranty. “We repair or replace heaps of our competitors’ products,” says Hamish. And recyclable – “Almost every component of our furniture can be recycled … and the students like that.”
Getting the trial – often what Furnware needs is simply the foothold provided by a school willing to trial just a single classroom. From there, the student improvement is picked up by the teacher. The teacher becomes an advocate. The school catches the virus. Other schools get infected.
Customer service – in Furnware’s DNA, the customer is never wrong. Anything that does go wrong is righted at Furnware’s expense. “Our philosophy here is ‘customers for life’.”
In today’s marketing parlance, to students and teachers alike, Furnware is offering an experience, not a product, and certainly not just another chair or desk. In school classroom studies conducted by Waikato University, after using Furnware chairs, 88% of primary students said they would not like to sit in their previous chair. And 69% of primary and 54% of intermediate students said that they would not like to use the desk or table that they had before.
But still, it requires an inspired sales force. Not just anyone can upgrade a school principal from a $40 chair to a (now) $130 experience. The benefits of the Furnware line are grounded in solid research that must be effectively presented – the rep is as much an educational consultant as a salesperson. Furnware’s sales people often have so much more knowledge than the schools (why do the colours of the furniture matter?) that they look to the rep for advice.
Hamish described the tortuous interviewing process involved in hiring a new member of the sales team for Brisbane (Furnware has 11 staff offshore) – six interviews, including flying the candidate to Hastings for the final three, plus dinner with the managing director! And once hired, the new person will go through a three-month induction process to make sure the Furnware DNA is well-infused.
Where to?
When Bodyfurn first came along, sales were 100% domestic. Domestic market share is still growing, but as mentioned earlier, Furnware’s future is in exports – today about 45% of sales, projected to reach 70% in two years. How?
Hamish explains that the first call in any country is to the International Schools – the schools used by foreign and local elites. A nice launching pad. They are watched in a ‘best practice’ sense by the other schools. And their parents are both able to appreciate and be prepared to fund innovation and the best for their children, and they are influencers.
In addition, Furnware uses every Kiwi connection it can, including expats and their international organization, KEA.
And finally, strategic partnerships don’t hurt. Furnware is partnering with Fielding Nair International, a Florida-based education consultancy and designer of schools worldwide, to assist in outfitting their International schools in the coming year. Fielding Nair has done over $10 billion of school work in 43 countries over the last 15 years.
What could limit Furnware’s growth, which has been 60% (turnover) over the last four years? What could go wrong? For the first time, Hamish struggles with a question.
Capital isn’t an issue. The product line has enormous credibility with teachers and principals. Markets are available, though he does note that the AUD exchange rate is certainly impacting on the aggressiveness of their strategy into Australia, where Furnware has nine reps.
Finally he mentions finding the right staff. At heart Hamish believes in company as family. He’s fond of the early days when the entire staff (then 17) had morning tea together: “By the end of tea I knew if someone was sick, if a machine was broken … everything I needed to know.” He’s proud of the fact that “five guys have been here over 40 years”, and adds, “they will always have a place here.” And he’s thrilled that children of employees are joining Furnware.
Growth is great, but it requires the right people with the right attitude … and avoiding becoming too corporate. “The culture is more important than the machines.”
As for risk, he’s confident. “I, and I’m speaking for Furnware, know my customers far better than any of my competitors … I like to know what they’re thinking about and what is important to them.” He continues:
“We have many competitors in all the markets we are in; the biggest difference is we look at learning spaces as best we can through the students’ and teachers’ eyes.”
Hamish mentions that he will typically visit 100 classrooms in the course of a year, watching and listening to students and teachers. Teachers will say, ‘I need a cabinet I can pull along with me as I move around the classroom’ … and we’ll develop it – a teacher’s pod. He delights in a story of how an eight-year old student suggested a detachable compartment for his desk that solved a problem Furnware designers had been struggling with.
In today’s business environment, being ‘customer-centric’ is the prevailing corporate mantra, but honoured more in the breach. In Furnware’s case, it’s the real deal. And that’s because it’s in Hamish Whyte’s DNA.
Lessons for HB businesses
Perhaps the best measure of business success is the metric proposed by New Zealand’s Sir Paul Callaghan. He argued that NZ’s economic priority should be nurturing businesses that generated the most revenue per employee. High revenue per employee would translate into higher incomes and financial wellbeing.
Our region typifies what Callaghan viewed as the wrong path – stubborn and exclusive emphasis on primary production and tourism. Tourism, for example, generates (nationally) around $80,000 per job. When he did his calculations, Callaghan figured Fisher and Paykel Healthcare (with $500 million in exports) generated $232,000 per job.
Furnware generates $220,000 revenue per full-time employee. How many Hawke’s Bay companies can make that claim? Maybe that, and not its 80 years longevity, is why Furnware holds PO Box 1 as its Hastings address!
Hamish Whyte believes there are other enterprises in Hawke’s Bay that are rough diamonds (“There are some seriously clever businesses here.”) – small operations that could easily double and triple in size with the right doses of capital and entrepreneurial up-skilling. He sees Icehouse (the business incubator) and Business Hawke’s Bay as providing the needed mentoring and networking opportunities.
But is there any uniquely “Hawke’s Bay” factor critical to Furnware’s success? Or that of other businesses? Furnware has no dealings with local councils. Its export strategy is its own. Furnware could be anywhere that provided easy access to shipping its exports (about half of Furnware’s exports go through Napier Port).
“We don’t need to be in Hawke’s Bay; we want to be in Hawke’s Bay.” Hamish emphasizes. What Hawke’s Bay does offer, importantly to him, is an appealing, less stressful place to live and for family values to thrive. For a business, that translates into a stable and loyal workforce, and is an important factor in attracting job recruits and immigrants with the talent and wealth the region needs.
Part of the Furnware DNA is corporate citizenship. The best businesses invest back into the community for the common good. In Hamish’s experience, it means a lot to employees when their companies give back, and it strengthens the company culture.
And the stronger the business, the stronger the region.