It was a thrilling experience being in the trading room to watch our company's shares trading for the first time on the London Stock Exchange in October 1996. We were floating the company with a market expectation that growth would continue at the same rate that we had achieved over the three years since its formation through a management buy-out.
The stock market expectation is often for a company to grow at a faster rate than the market sector in which it is active. This is certainly true for Ultra Electronics, operating in the aerospace and defence sector. We were making big commitments and the onus was very much on the management team to deliver.
I believe a team must hold one tenet dear if it is to be successful and meet market expectations: never accept mediocrity. Striving constantly for the best is a culture that must be led from the top and must permeate the whole organisation. This is easier said than done. The pressures of business constantly push in the direction of compromise. I believe, however, that compromise in many areas leads to unacceptable performance.
Compromising in recruitment is very damaging. We all know that recruiting and retaining top-class personnel, particularly in the electronics and software sector, is tough. These skills are in huge demand, not just in the UK but worldwide.
The limited availability of these resources will undoubtedly constrain growth. It is better, in my view, to spend longer on the search to find the best resource than to employ people who can make only a limited contribution.
Once the right person is found, the company must do all it can to persuade that individual to join, including allowing an element of flexible working. It is essential that charismatic and well-trained personnel undertake the interviewing of candidates. Competent and well-motivated staff must be given the freedom to achieve their potential, rather than find themselves bound by a bureaucratic organisation.
Compromising on the product is dangerous, too. We sometimes know what the market wants but are tempted to launch a product that falls short of this expectation in some way. Yet we accept mediocrity at our peril.
Being able to deliver a better product ahead of the competition is essential for success. Talking to customers, understanding their problems and suggesting various solutions are vital. Finding the best solution for your customer will help your company succeed.
This means investing not only in market research but in new-product development as well. Unfortunately, UK industry is not renowned for sustaining adequate levels of investment. Ultra Electronics invests significantly in new products. At around 6% of sales, this investment is higher than most UK companies. It is supplemented by further investment funded by customers, taking the total to more than 20% of sales each year since Ultra was formed.
We must have confidence in our products and our organisation to address the right markets. At the time of the Ultra buy-out, one of its core products - and its largest revenue-earner - was focused solely on the UK market. This was despite the fact that the biggest market, by a factor of at least five, was the US. The company was not allowed to compete in the US market, but three North American companies were attempting to move into the UK market. Ultra acquired its smallest North American competitor and, by combining the best people and technology, was able to improve its competitive position by offering the best product at an acceptable price.
This led to a significant growth in market share, meaning Ultra was able to acquire a second competitor to become the worldwide market leader. The removal of significant competitive threats while still differentiating the products for local markets will drive continuing growth.
We did not accept being second or third best in any geographic market. We could not compromise our ambition.
In many sectors, it may not be possible to meet stock market expectations purely through organic growth. Making successful acquisitions is therefore an absolute necessity. Although it's a high-risk strategy, concentrating on market sectors with which you are familiar mitigates risk. Even though it must always be a case of 'buyer beware', do not compromise. Do not pursue targets that may deflect focus from dominating your chosen market niches.
A reputation for excellence and fairness brings a huge marketing advantage. Think of those companies that you associate with high-quality, high-technology products and services. Then think of those companies that you associate with low-quality, low-technology offerings.
Obtaining and retaining a reputation for excellence requires an ethos throughout the organisation that appreciates the customers' point of view, provides only the highest level of service and is willing to foster the long-term relationship even where there is a short-term cost. This culture must always emanate from the highest levels of the organisation.
Many companies fail by accepting mediocrity. I believe that Ultra will continue to meet shareholder aspirations by striving constantly for the no-compromise solution.