National Post (National Edition)
Why Dyson is the Apple of appliances
SECRETIVE COMPANY CONSISTENTLY PROFITS FROM CONSUMER GADGETS
When Michael Aldred joined the British home electronics maker Dyson two decades ago, he had a simple goal: to quickly build a robotic vacuum cleaner.
But Aldred and his team kept running into roadblocks.
Their first attempt, unveiled in 2001, was too clunky for James Dyson, the company’s founder. The next prototype involved creating a computer vision system that would allow the machine to skirt independently around furniture; it took more than a decade to perfect.
As smartphones became everyday tools, Dyson’s robotics team again had to rethink the vacuum cleaner, adding Internet connectivity so the machine could send notifications — with a heat map of where it had cleaned — to a mobile device. After a nearly 20-year odyssey, the robot cleaner, priced at an eyewatering US$1,000, finally hit stores worldwide last year.
“At times, I really asked myself what I had signed up for,” Aldred said in an interview at Dyson’s rural headquarters near the border with Wales. “But James Dyson always told us to focus on the product. Everything else would follow.”
Not many consumer electronics brands would spend almost two decades — and tens of millions of dollars — building a vacuum cleaner that retails for more than a mid-range laptop.
But combining an almost obsessive eye for design and engineering, the privately held Dyson has cornered the nonglamorous market of high-end vacuum cleaners, lights and hair dryers — and in the process bucked the technology truism that companies rarely make money in the difficult arena of hardware.
Even as other hardware brands like Samsung, smartwatch maker Fitbit and camera designer GoPro have struggled with physical products because of low-priced copycats and thin profit margins, Dyson has shown an uncanny ability to mint money. Its latest robot cleaner, which is selling briskly, exemplifies that and puts Dyson in rarefied company alongside Apple as one of the few tech companies worldwide to consistently profit from consumer gadgets.
“It is extremely difficult to make money if you’re not in the premium segment of the market,” said Tim Bajarin, president of Creative Strategies, a tech consulting firm. “That’s what Apple and Dyson have done well — being best in breed for technology and industrial design.”
Dyson said its pre-tax profits rose 41 per cent last year to 631 million pounds (US$785 million), while revenue rose 45 per cent to 2.5 billion pounds, partly because of the weakened British pound. Dyson, 69, who founded the company in 1992, is worth about 5 billion pounds.
The company, with 8,500 employees split mostly between Britain and a factory in Malaysia, is growing rapidly in China, where the country’s emerging middle class remains eager to spend on designer goods, including expensive vacuum cleaners.
“Asia is a huge growth area for us,” said Max Conze, Dyson’s chief executive, who joined from Procter & Gamble in 2010. “Five years ago, 85 per cent of what we sold was corded vacuum cleaners. Now, more than 80 per cent comes from new products.”
Dyson is indeed moving beyond vacuum cleaners, hair dryers and air purifiers. The company said it would spend more than US$2 billion on battery technology, machine learning and other high-tech wizardry to create new products, many of which remain under wraps behind tight security at its headquarters.
The developments may include an electric car. Dyson bought a U.S. battery startup in 2015, secured a hefty British government grant last year to develop the vehicle concept and hired executives from Tesla and Aston Martin. Dyson officials deny that they are making an electric car.
“We’re still heading into new areas where companies are well established,” said Jake Dyson, 44, the founder’s elder son, who rejoined the company in 2015 and is the most likely successor to his father. “We’re not afraid to try and beat them.”
As with any company synonymous with James Dyson, it is often hard to separate Dyson the man from Dyson the brand.
Tall, bookish and with a penchant for designer glasses, Dyson trained as an industrial engineer and dabbled in building things like boats and wheelbarrows before settling on vacuum cleaners by the late 1970s.
Frustrated with how his machine worked, Dyson reused technology that mirrored how a cyclone forcefully sucked wind from its surroundings, eventually spending 15 years — and building more than 5,000 prototypes — before releasing his first vacuum cleaner in 1993. He initially licensed the designs to companies in the United States and Japan, but eventually decided to build the machines himself.
“When we launched it, we were slightly terrified,” said Dyson, who had mortgaged his home and used his life savings to fund the project. “I’m not a businessman. I didn’t start a business, I started with an idea.”
His professorial look, complete with cut-glass English accent, belies Dyson’s ruthlessness. When competitors like Hoover and Samsung copied his ideas after his vacuum cleaner hit the market, the entrepreneur fought, and won, costly patent lawsuits, and instilled an “us versus them” attitude that still permeates the company.
At Dyson’s headquarters — chosen for its proximity to Dyson’s original workshop — employees remain tightlipped, even among themselves, about their projects. During a tour of the company’s facilities, prototypes were covered in tarps while large areas of the open-plan offices were off limits. Photographs of engineers’ computer screens were prohibited, and machinery in some of the research labs was obscured with black trash bags.
Not everything Dyson has tried has turned to gold.
In 2000, the company released a washing machine priced at 1,000 pounds, or double the cost of rival products. Despite positive reviews, Dyson pulled the plug five years later after failing to turn the machine into a profitable business. Now, the original washing machine prototype stands unloved in a corridor in one of Dyson’s research buildings.
Dyson’s ambitions have raised some eyebrows, particularly after it bought Sakti3, a Michigan startup specializing in solid state batteries, for US$90 million in 2015. This technology could be more than three times as powerful — and significantly safer — than batteries used now in smartphones and electric cars.
Dyson later claimed his company would invest more than US$1 billion by 2020 to figure out how to massproduce these solid-state batteries, although experts question whether Sakti3’s technology will ever go beyond the lab.
None of this is stopping Dyson’s long-term planning. At the modernist campus of Imperial College London, Andrew Davison, a computer vision expert, has worked with Dyson on a 5 million pound research project aimed at helping robots better interact with the world around them. (Dyson separately sponsors a Design Engineering School at the British college.)
Davison, an Imperial College professor, helped Dyson build the computer vision used in its robotic cleaner. His team is now combining that technology with machine learning and artificial intelligence so that one day, the company’s products may navigate the real world, just as its autonomous vacuum cleaner now scuttles around people’s houses.
“We’re looking really far out,” Davison said. “Most of the work that we do is years away from being in an actual product.”
IT IS EXTREMELY DIFFICULT TO MAKE MONEY IF YOU’RE NOT IN THE PREMIUM SEGMENT OF THE MARKET. THAT’S WHAT APPLE AND DYSON HAVE DONE WELL — BEING BEST IN BREED FOR TECHNOLOGY AND INDUSTRIAL DESIGN. — TIM BAJARIN, PRESIDENT, CREATIVE STRATEGIES