Overview
DiagnoSYS was formed in 1991. The company grew organically for a number of years before its expansion caused it to seek further capital from a UK venture capital fund focused on the SME sector. The company had great technology. An early investment in research and development enabled the company to develop an innovative approach towards testing and diagnosing Printed Circuit Boards. Combined with an acquisition of a related line of testing equipment business from Schlumberger provided the company with an excellent offering of electronic testing equipment and a global foot print for reaching and servicing clients. However, growth was sporadic, not value generating and the technology in and of itself was not the end all.
Challenge
After hearing the DiagnoSYS story, the response was predictable: “great technology, clear advantage, why isn’t the world beating a path to its door?” Ceres Ventures was engaged to work directly on this issue, to help the company create a more focused strategy, insure that this was value generating and open up opportunities for its technology. In summary, to accelerate the company’s growth.
Approach
First, a more comprehensive understanding of the market was required – a reoccurring theme in the work of Ceres. Although incumbent management had a view, outsiders had another and the competition its own, a deep understanding of the forces affecting DiagnoSYS’ customers was not well understood. Through its own research, Ceres was able to assemble a more comprehensive understanding of the key market segments for DiagnoSYS products, their current dynamics and the future trends. Combined with a deeper knowledge of DiagnoSYS products and management team, Ceres was able to put structure around the company’s issues and outline several alternative paths towards growth. This involved not only key discussions with clients/user, inside management but also fundamental understanding of technology lifecycles, cash generation cycles and return measurements for customers and lines of business.
Strategy
The approach, though obvious now, was to move away from selling “boxes” to providing a solution. Changes in the market were creating more demand for a solution. A faster evolution of PCBs created a potentially huge investment in programming to bring testing equipment up to speed. DiagnoSYS held a clear advantage in this area with programming times one fifth of other offerings. Consolidation and cost pressures in the Maintenance and Repair sector for civil aviation was creating demand for a cost effective solution. Long-lived assets in military applications were being put under more stress requiring a solution to provide greater in use availability. Combined, company’s wanted solutions – not more equipment. The strategy was than to reposition the company as a solution provided, build the senior team, through extensive coaching and strategy imprinting, to buy into the vision and the operational team to deliver the solution and retarget marketing efforts on key segments and towards selling solutions measured in key customer decision making metrics. In addition, a blue print towards growth is now completing development with clear internal and external steps required to achieve the vision.
Results
The company has starting gaining traction. Sales in the key North American markets have grown by over by over 300% over the past three years. After the decision was made to exit a non-core business that was consuming the company’s working capital and not generating a sufficient return on capital, the company moved back to a positive cash flow position and profitability. The company recently scored major wins with key reference customers, the US and UK defence, delivering a solution to the US Navy’s AWACS program that is estimated to generate a USD 22MN savings. The company is geared up and evaluating, with Ceres Ventures help, the best way to fund its growth as well as complete and execute an acquisition strategy. You can keep an eye on the company at its web site and see how it continues to “Excel in Electronic Testing Solutions.”