Ben Scott

I started Datum in September of 1993 in the UK.

In 2004 I moved to Singapore to open our Asia operations, and in 2010, I took advantage of the opportunity of the closure of one of my US customers by taking-on their key operations and admin people to open the US facility.

Our business overall has been very good. The US and Europe are both profitable markets and have solid cash flows. They’re the nice ones. The sticky ones.

Our business in Asia was once the most profitable of the group. However, we needed to update our flagship product as our Japanese manufacturer had become unreliable. We thus stopped production and made the decision to develop a new supply line and improve the product. (Don’t ever believe what people say about Japanese companies being honorable and having integrity, those days are long gone. The recent corporate scandals that resulted in near collapses, Fukushima, product recalls, and accounting fraud is all you need to know about Japanese corporate culture. It’s not healthy and there is a reason why Japan has been stagnating for more than 20 years.)

This was rather tough to recover from, but it was the right decision.

Being in Singapore and servicing consumers in China, Korea or Taiwan, is always a challenge due to the combination of higher transaction costs, time, lower service level, and some cultural issues. It was Trump’s trade war with China and Brexit that brought a level of risk to our business, both political and financial, that meant it would be foolish to try to muddle through.

The trade war and resulting tariffs increased all of our costs by 25% almost overnight (for products destined for the US, Canada, and LATAM markets). Our steel from Japan, for example, has qualified for exemptions and these were granted recently, but all the other products we can’t buy from anywhere else, now cost 25% more. That’s rather difficult to manage in a market that does not normally permit sustainable margins.

Brexit has also brought much uncertainty. In order to manage it we opened a temporary facility in Poland (we call it our factory-in-a-box as it fits into a 40 foot container).

We have more than 70% market share in both the US and EU, and our customers were starting to question how we could support them during this time. In the US, we have really sat-on prices as much as possible and bought extra inventory to try to manage the impact (either by ensuring orders arrive prior to the additional import duty, or by securing additional discounts to mitigate the losses). In the EU, we were able to create the factory-in-a-box by closing Singapore and reallocating its assets to Poland. For us, this was a better trade-off and more effective use of resource. However, the sum total of this is a significant increase in stock and a change in our cash cycle, plus some sunk-costs in investments in Poland.

Brexit brings risk to the UK, and it will only get worse if the current mentalities continue.

So we decided to close out the marginal parts of our business, and only focus on the most profitable. We continue to invest, (we will actually invest more), despite what we think will happen. Thanks to the investments we’re making we will be able to make cash during this time.

A critical thing for me, during times of risk or uncertainty, is to solidify and manage risk to ensure that cash generation is still positive and sticks in the bank. This means also trying to grow the business at the same time. This can only be done by knowing what you’re good at, where your strengths are, and sticking to the facts.

(Peter Drucker’s The Five Most Important Questions You Will Ever Ask About Your Organization is a great tool for this)

These difficult periods always end and when they do they bring opportunity. With uncertainty, recession, or stagnation (all the things the world is experiencing now) companies get in to distress and go bankrupt. Thus, when these periods end, those with cash can just do more. You can buy up the distressed businesses, their assets, or just take their customers. We experienced great growth during and after the financial crisis, but did not have adequate cash to make aggressive moves. What we did achieve was significantly lower debt, some new products (we spend between 5% and 10% of sales on R&D every year), a stronger and more skilled team and well over £750,000 on new equipment.

This time, the plan we have committed to is to double the business’s free cash flow and build cash, then find an opportunity that we can smash.

And if neither Brexit or the trade war get resolved, the world economy risks another period of recession (technically Germany and Italy are already in recession and France is in stagnation). It will likely get really messy because of the vast debt overhang that still exists in all major economies. China has significant issues with off-balance-sheet debt, SPVs, and shadow banks and lenders. You can dress it up any way you like, but the world has too much debt and trying to buy your way out of it at best gets you some time and makes the crash all the harder. Always take losses now, as soon as you know about them and move on (avoid the sunk cost fallacy).

At some point debt has to be repaid and this can only be done with cash inflows. With low wage growth and many countries and sectors either in, or looking at, recession, there are some great opportunities on the horizon. Governments and people continue to borrow vast sums of money for frivolous things. All this when there is little inflation to reduce the value of the debt, or growing cash flows to actually repay it.

We have seen in the corporate sector a hoarding of cash as risk aversion sweeps through the world’s boardrooms. Little of this cash put to work or returned to shareholders.

That means, when this is over, (and there will be plenty of companies that will not make it) we will be able to invest in areas where we see growth. That is our answer to the looming hard times in terms of the rational “why.” Although we have a lot invested in each business units, it doesn’t take away from the fact that in order to be successful you have to make difficult decisions. When something is not performing, working out or losing money, it’s easy to make that decision, but making decisions when things are “OK,” or even good, that’s harder for a lot of people. They’ll rationalize their way out of the problem, or hide, which is the “emotional thinking” approach, rather than the disciplined evidence and statistics based decision tree.

My advice: just kill it and walk away. Instead, focus on the stronger side of the business. How you feel about it is not material and your bankers and shareholders wont care either. Peak performance is mind management, knowing that pain is a normal part of life and it is expected. That don’t submit to it, we accept it and use it to add to our energy levels.

My management team and I will have to look back in 2–3 years time to see if we made the right decision, but we expect our group sales will be higher and be more profitable, even after losing 1/3 of the business units.

As you run your business, your own company, division, or whatever, be very clear. Don’t hide, don’t think emotionally. Ask yourself, “what do we need to achieve?” Yes we like the people, but if the business is just “OK” you need to do something about it. FAST. And that means either invest in it, make it great, or sell it or shut it down. As Jack Welsh wisely said: “Be number 1 or number 2, or get out.”

“OK” isn’t somewhere any business should be satisfied to rest, if you’re OK, then get out, do something else, stop wasting your time. There’s only one place to be in this life, and that is excellence, if you’re not you’re just taking up space.

As my 102-year-old grandmother likes to say “it’s better to be a has-been than a never-was-been”

In the end, what are you actually doing? You’re investing your time, spending more time at work than with family, so what do you want to get out of it? Do you just want to make it to the end, and say “phew, we made it” or actually do something of consequence? Be more.

Well, if you want to do something of consequence, you’ll need truth and honesty. Especially with yourself. If it’s “OK” it’s not good, and if it’s “OK” now, it will only get worse if left un-managed. You must analyze your business, what are the strengths and weaknesses? Drive the weaknesses out of the business. This starts with you. If you are not performing, step out — selflessness is a critical success factor and where true leadership begins.

Doing this can mean getting rid of a lot of people, which will mean changing culture: changing your attitude, how you make decisions. Listen to people, what they say, what they’re talking about, are they driven, do they care, are they invested in the process, do they give a toss about the purpose and mission?

Take a look and be honest. Don’t rationalize it, don’t emotionalize it, that’s just a way of justifying failure, a form of confirmation bias. It’s very very dangerous.

So, getting to the truth is essential for making the right decision. Once you’ve made the right decisions, execute, don’t hesitate, don’t withhold. Do it nicely, gently and fairly. You don’t have to be mean or an asshole. Treat everyone with respect, make it as nice as possible. That means paying out more cash than the law says, but its not for people to pay for the failures of management.

For example, give everyone 2 or 3 months bonus for their work, and gently move on saying “thank you very much.” It doesn’t necessarily make it easy, it’s very hard for those who lose their jobs. So respecting what they need and what they have, what they’ve done for you, goes a long way. Not everyone can walk in to a new job in a week or two. We can do a lot of good things as large companies. And by just doing the minimum, we’re never going to be great, don’t be OK even in the execution of great ideas. You only get out what you put in.

Why would you want to get up every day just to be average? It’s not good enough for me, not good enough for my team. We don’t care about that. We’re not interested.

If you’re not happy with what you’ve got, if you’re not satisfied with whatever you’re doing, if you want X, Y, or Z, look at yourself. The only reason you’re not getting that is because of yourself, and it’s never ever anybody else. Please read Peter Senge’s “The Fifth Discipline” and Peter Drucker’s “Managing Oneself” as well as Prof Steven Peters “The Chimp Paradox.”

Whatever we might think, it actually comes down to us. We create situations, we manage ourselves in certain ways, we make choices, it’s always us. If you notice situations, people, or events keep repeating in your life, the common element to recognize in each is yourself.. We choose to make it so. Take responsibility and change.

These moments of truth — understanding who we are what we do the choices we make, how we feel about life, our expectations — we live what we believe. So, challenge your beliefs, on what you think life is about, and what you think you can achieve, and what kind of person you think you are.

It’s all in the head.

You conquer the head, you conquer what you believe, you conquer what you think, and you will excel

What you feel isn’t relevant. Feelings come and go, they distract us. It is not what we need during difficult times.

The one thing to understand is: where do we I to be? What do you want from life, and what is the best course to get there? And if you’re not getting what you want, then you need to challenge how you make decisions. And what you think, because it is only down to us. So, when you look at your business, your team, or your life and you’re not happy with it, look to yourself first. Don’t criticize, or blame. Own your emotions and point that big finger at your own forehead and tap it very sharply and ask “what is it that I’m doing?”

Shape it, make it, move it forward, don’t be satisfied with “OK.”

Whatever else you deal with at work, whether it’s politics or emotions, leave it all behind and deal with truth and fact. Separate yourself from the situation and think.

Life will be much better, more comfortable, and you’ll find you have better relationships with everyone, because you always start with with the question “what am I doing? What are my desired outcomes? What am I doing that I ought not?”

Thus the decision to close the Singapore operations was right, because it enables my team to commit to their and our strengths, avoid being distracted by the runt of the litter and has nothing to do with my personal and emotional investments in the business — it was my idea, it is my money, my daughter is here and I wish to stay living here. These are all emotional and not relevant to the decision of what must be done.