The founder and chairman of fast-growing electronics firm Psion is known for his sharp intellect, a quick tongue and an inability to accept the status quo. The commercially minded academic tells Andrew Davidson about 'riding the front of the wave'.
There are a number of things to avoid if you are founder and boss of a runaway success plc. One is placing a large number of shares on the market, saying everything is hunky-dory, and then suddenly nipping into hospital for a life-threatening heart bypass operation.
'Ha!' laughs David Potter, chairman of Psion, 'ha!' he laughs again. 'Now, I'm very grateful you are asking me this, I can clear it up. I absolutely did not know, I really didn't.'
Potter, 53, tall and lean, with a face as round and brown as an almond shell, has only been back at work for a month since his December operation but his humour and vigour appear unchecked. As head of one of Britain's fastest growing electronics companies he has earned immense respect over the past 17 years for the way in which he has carved out a market for Psion, first in software, then in palmtop computers and card modems. Last year, though, was just a little bit wobbly, despite yet another set of impressive financial figures. First, a curious attempt to buy out Alan Sugar's Amstrad fell through rather publicly in the summer. Then in the winter, just weeks after the November placing of an extra tranche of much-sought-after Psion shares, came the announcement that Potter had been whisked into hospital with a dangerous heart condition.
'It was the first Sunday of December,' he says, sitting forward on his office sofa. 'I remember just waking up in the middle of the night with a strange feeling. It happened a couple of times and I went to see a physician and that was that. I never thought I would have a heart problem. I've never had angina, I've always played lots of sport.' He shrugs and raises his eyebrows. It was, he acknowledges, the worst possible timing, but there was nothing he could do about it. The company, to its credit, immediately broke the news to the City. 'As one of my colleagues pointed out to me,' he adds drily, 'the share price didn't move a penny, therefore it was clearly demonstrated that I have no value to Psion at all.'
He laughs again, stretching out his long frame, his eyes wrinkling up with pleasure. Potter, South African-born and a former Imperial College academic, is a man who rather enjoys being teased. Despite his reputation as one of the country's most erudite company chiefs, he has a loquacious charm which can make two hours in his company pass rather fast. Some who know him will tell you he is quite the most brilliant and likeable man they have ever met. Others, who have experienced the impatient side of his nature - he can, for instance, be notoriously short with some of Psion's followers in the City - counter that he is a much harder man than any sofa chat will ever let on.
He is certainly a maverick. His head office is down a side-road up the insalubrious end of London's Edgware Road. He has four or five buildings in the area, he says, because he likes it. It was where he started Psion, it's close enough to his house in St John's Wood, and it's cheap. Well, he must be the only multimillionaire boss (the Sunday Times reckons he and his wife are worth £90 million) whose personal office is just a washing-line away from a block of council flats, one of which has such a good view into his personal sanctum that I can only presume its tenant has already sub-let it to a Psion competitor. From there, the rivals could try and work out just what this man has got that has enabled him to triple company turnover in three years, from £41 million in 1993 to £124 million in 1996, and earn Psion pole position in a ranking of the FT-SE 350 based on total shareholder returns, (Management Today, March 1997). They might also get a glimpse of Psion's eagerly-awaited new range of products, the first to incorporate 32-bit technology, which will be launched later this month.
Potter's exuberant passions for innovation, manufacturing and education are well known now. He is particularly scathing about those who want Britain to adapt to a service industry culture and is always tickled when others express surprise at how much Psion manufactures in this country: the company has plants in Middlesex, Buckinghamshire and Oxfordshire. Gradually, more people are listening.
He already sits on the CBI's London council and is a member of the committee of inquiry into higher education set up by the Government and chaired by Sir Ron Dearing. He is also vice-chairman of the London Link initiative, a non-profit-making infotech service for authorities and businesses in the capital. There are so few business leaders whose experience stretches from academia to running a public company, and so few British computer success stories, that it's little wonder that Potter's skills are in demand. Most importantly, say those who have worked with him, he combines a sharp intellect and a quick tongue with an innate reluctance to accept the status quo. Although he says he feels more British than anything else after 30-odd years in this country, he acknowledges that his South African roots - you can still hear faint traces in his accent, when he says 'yah' rather than 'yes' - have given him a useful half-in-half-out perspective on what goes on here. And he has never been afraid of telling anyone what he thinks.
He ascribes his success to chutzpah which, he says, he got from his upbringing.
He was born in East London on the South African coast. His father died of cancer when he was young, and he and his sister were brought up by their mother, who worked as a nurse, and by their grandmother. They instilled into him a generous portion of confidence and self-reliance that has always stood him in good stead. He thinks he got his technical and academic ability from his maternal grandfather, who worked for the London County Council before emigrating to South Africa to set up the engineering department at Cape Town University. The young Potter wanted to be an engineer too.
Had he been born a Victorian, he says, he could think of no happier way to make a living than building bridges.
But he was born in South Africa. 'It was not,' he says, 'a place at the frontier of how world technology was evolving. It was also a bad time because of the whole apartheid thing. A lot of people didn't want to share in that.' So when he won a scholarship to Trinity College, Cambridge to read natural sciences he leapt at the chance. He stayed, married a journalist, got his PhD from Imperial College in London, did a stint on sabbatical at UCLA in California, and returned to a post at Imperial, where he published an important text on computational physics. He says he had always been interested in business but those who studied under him at Imperial say his American experience was formative: in California, the path between academia and Mammon was well-worn. Others suggest the wide circle of friends that he made through his wife, who was one of the Insight team which worked on the thalidomide story at the Sunday Times, was also a factor in his decision to look for other opportunities.
It was while he was in America that he started investing, putting all his savings into British blue-chip companies at the bottom of the 1974 bear market, and then, as the market recovered, shifting his profits into little niche companies he had winkled out. All he was doing, he says, was applying his academic training to the markets, properly researching prospective investment targets. But he had the trademark Potter confidence too. When, for instance, he decided duvets were going to be the next big thing, he tracked down a manufacturer in Lincolnshire and rang the chairman up.
'I said, "My name is David Potter, I am a potential investor and I would like to come and interview you". And he said fine. It was probably the first time any investor or analyst had shown any interest. Actually, I think the chutzpah I had was unbearable.' But people today, he sighs, especially young people, are just so cautious. Of course, in-depth research for relatively small investments hardly sounds reckless, and those who have worked closely with Potter over the years say that in fact he is actually the most financially conservative of anyone at Psion, though that, laughs one of his executives, might have something to do with the large personal stake he still has in the company (the Potter family own nearly 19 million of the 71 million shares in issue).
He started Psion in 1980, using the money he made on the markets. Initially he published software for microcomputers, picking up other people's work, packaging and marketing it. A year later, with the profits from that, he set up his own software development team, luring in Charles Davies, one of his old students from Imperial, to head it up. Davies, who is now group development director at Psion, remembers it as a one-man-and-a-dog operation. 'And I was the dog,' he says. But the software sold and a year later Potter brought in Andy Clegg, an ex-British Aerospace design engineer, and set both of them to work on an idea for a simple, hand-held computer. The rest, as they say, is history.
Psion launched its first Organiser in 1984, and built sales steadily, especially in the corporate market. Key contracts like that with Marks & Spencer, which initially gave the machines to staff to check stock, ensured credibility. The usual problems that hit successful small companies - soaring administration costs, cash-flow hiccups, difficulties in foreign markets, getting the right new investors in - were overcome. In 1986 Psion launched the Organiser II. In 1988 it became a public company. In 1991 it launched its Series 3 range of palmtop computers. By this stage Potter's little machines were combining electronic diary, address book and alarm clock functions with powerful word-processing and spreadsheet capabilities. And they were selling to private consumers as fast as to corporate clients. An up-graded Series 3a and industrial Workabout range followed. And Psion grew and grew. Last year it reorganised into three new product arms: Psion Computers, Psion Industrial and Psion Software, which, added to Psion Dacom, its data communications arm, gives it four clear divisions. A Series 3c and a smaller product, Siena, pushed its total palmtop computer sales to nearly £82 million, up 41% from 1995. Psion now claims to account for a third of world palmtop sales. You have to ask: why have the big boys never muscled Potter out?
The answer is probably because they never thought the niche was there, and by the time they woke up to Psion's success, Potter was too far ahead.
Crucially, he guessed early on that the big companies like Apple and IBM were too set on size and power to pursue the hand-held idea - it just didn't look viable to them. Now success has brought its own problems: competitors are breathing hard down Psion's neck - Sharp and Hewlett-Packard on the hardware side, and on the software side Microsoft, which has just started marketing a purpose-built operating system for palmtops. Last year Potter took the important step of licensing Psion's technology to other players, hoping to expand the market and offset the possibility of being sidelined by Microsoft's marketing muscle. 'Only the paranoid survive,' he declaims. Potter pauses then adds, looking suitably glum, 'I profoundly believe that, and the worst thing about Bill Gates is that he knows it too.'
Why has Psion been so successful? Potter attributes it to 'Riding the Front of the Wave', a phrase he likes so much that he has given it capital letters and put it on the front of his latest annual report. He explains: 'What Psion does is not just make palmtop computers or just be Europe's number one company in portable data communication. What we do is innovation and development. And we are always moving on, that's why we talk about riding the front of the wave. We are always moving on, pursuing high added value with high-margin products and markets. That's why we don't produce low-end calculators, we produce leading-edge palmtop computers. We don't produce low-end fax machines, we produce GSM data cards. It's a business philosophy built around innovation and creating added value which you can exploit in this particular industry.'
Others also point to the way Potter runs Psion. He describes his style of management as 'collegiate'. Many of the team have been with him from the early days, and he is intensely loyal to them. Everyone is drawn into product development, even the non-executive directors, at the earliest stage. Everything is discussed. Danny Fiszman, the diamond dealer and financier who put a large stake into Psion a decade ago and is now a non-executive director, says it is an extraordinarily close-knit team, which hinges around Potter, but it isn't, as many people think, a one-man band.
'It's just that David is good at everything: understanding the market place, running the balance sheet. He's that rare animal, both academic and commercially minded.'
Potter's style has, at times, grated up against the pressure of running a successful plc. Last year he was forced to replace his finance director after pressure from the board, a move he is known to have been very reluctant to push through. And there are those inside Psion who think he should spend more time at the company, not, as he seems to be doing, broadening his interests outside. 'Yes, I want him at the grindstone 24 hours a day,' laughs Fiszman. But while Psion keeps getting its products right, the board cannot complain. The company's knack for pricing, especially, has been impressive. Psion products never look that expensive compared to pcs and laptops.
Most importantly, they are high tech but always easy to use. When we met, in April, he was reluctant to be too specific about this month's new wave of products but confirmed that they would include a range of palmtop computers incorporating mobile phone technology which will enable users to be on-line wherever they are - 'on-line books' as he calls them.
It was the growing convergence of computer and phone technology that tweaked Potter's interest in Amstrad, the electronics company founded by Alan Sugar. Psion's bid to swallow up Amstrad, which valued Sugar's company at £234 million, caught the City completely by surprise last summer, not least because many thought the two companies and their founders were a very unlikely match. The deal was Sugar's idea. He had been looking for a way out of Amstrad so he could concentrate on running Tottenham Hotspur football club. Much of the hard talking was then done by Fiszman, who is also a director of Arsenal. Indeed, as Potter cheerily admits, the deal had as much to do with the 'north London football mafia' as it did with the electronics industry. But it had a certain logic. Psion would get Dancall Telecom, Amstrad's mobile phone subsidiary, and with it a head start in cellular phone technology. It would also get a bit of digital satellite know-how, which had possibilities. The bits Psion didn't want, like the loss-making consumer electronics arm, it could sell off. So why did it fall through?
At this point Potter says frankly that he is not allowed to tell me, as he has signed a non-disclosure agreement about the deal. Pretty extraordinary stuff if you are a shareholder, no doubt, as all the annual report says about it is a one sentence wrap-up: Psion was approached by Amstrad and the deal fell through on price. Oh, and advice on the deal cost a cool £1.5 million. Surely there was more to it than that? The whole episode throws up a lot of questions. Fiszman, for one, says that he was 'seriously disappointed' that the deal didn't happen. 'It would have been an outstanding deal for Psion,' he says firmly. So if everyone was keen, why could an accommodation not be reached? Or was Potter, as some believe, over-ruled by his City advisers, who didn't like dealing with Sugar? And who leaked the deal to the press, a move which clearly discomfited Potter? Was Amstrad trying to flush another buyer out of the woodwork at the last minute or was someone in the City trying to prise Potter away from Sugar?
Clearly Psion's inability to get City support for any kind of deal with Amstrad was a key factor. But others in the company say it was never a 'have-to-have', and anyway, not getting it had at least one huge, unexpected bonus. If the takeover had gone through, Potter would have been pitched into a gruelling period of intense, hands-on management as he tried simultaneously to merge the Amstrad companies into Psion and prepare for the crucial new product launch. With hindsight, says Davies, it could have proved lethal for someone in his condition.
Does he know what brought on his heart condition? Potter leans forward, stirring the tea on the table in front of him, and nods. In 1989, he says, he was struck down by a rare and severe kidney illness, and spent the next 18 months going in and out of hospital for treatment while also running the company. One of the side-effects of that illness was probably to drive up his cholesterol levels. Really? Did he tell anyone about it at the time? No, he says, looking slightly sheepish. 'I should have but I didn't.
I mean, I did after a certain amount of time. I think you should tell ... that's why we made the announcement this time.'
Certainly his friends think he must now start to take life easier, although no one is quite sure how. He has other interests: his flute-playing, his educational bequests - he quietly gives a lot of money away (beneficiaries include the Fort Hare University, Nelson Mandela's alma mater, in South Africa) - and the gardens to tend at his large houses in London and Oxfordshire.
'But I don't think he's quite ready to concentrate on his vines and roses just yet,' laughs Anne Page, chief executive of the London Research Centre, which helped set up London Link, and an old Potter friend. She thinks he is impatient to sort out the world outside Psion. But there will have to be some scaling down. Inside Psion he is expected to hand over some power to a new chief executive, whose appointment will be announced soon.
He has no desire, he says, to keep slots open for his three sons, who are nearly grown up. 'I don't want to have a dynasty here. I am not a Murdoch,' he laughs. Potter defines his role then as to provide 'a little bit' of leadership in Psion, ensure that the right kind of young people are brought into the company and that its future is secure. No doubt, he will keep surprising people as well. 'You know, people keep asking me: when is Psion going to die? They just don't think you can manufacture in this country.' He shakes his head. 'Like Mr Gummer, they want us all to be tourist guides.' And he glares with conviction. Everyone, he concludes, should have the excitement of making things, of being involved in big projects, of participating. As I leave, I wonder whether Psion will ever let him go long enough to take his message to a broader audience.
Born 4 July, East London, South Africa Educated Prince Edward School, Harare, Zimbabwe and Trinity College, Cambridge
Lecturer, Blackett Laboratory, Imperial College, London
Assistant professor, UCLA, California, while on sabbatical from Imperial College
Founder and chairman of Psion
What People Say
'David is very thoughtful and reflective, and actually quite cautious.
Certainly he is financially very conservative. He will always play devil's advocate if you bring him an idea, and try and knock it down.'
Charles Davies, group development director, Psion
'He has a strong commitment to investment, not just in technology, but especially in people.' Jane Calvert-Lee, director of the London region, CBI
'He's definitely a one-off. I don't think I have ever met anyone in business quite like him. It's a style which his intellect and academic ability have created. He is very approachable.'
Brian Pearce, former president of the London Chamber of Commerce
'He may appear cautious to some of his colleagues but that's only because he has seen what has happened to others in his industry.'
Anne Page, chief executive of the London Research Centre and an old friend of Potter
'David is good at everything: understanding the marketplace, running the balance sheet. He's that rare animal, both academic and commercially minded.' Danny Fiszman, non-executive director and second biggest Psion shareholder after the Potter family.