Pulse Data: The Company Bill Gates Likes

Creating outstanding products isn't always enough to win a place on the world market. Sometimes the management strategy requires a little help from a strategically placed friend. This Christchurch developer of electronic aids for the blind hit the jackpot when Microsoft cast an eye in its direction.

Extracted from the August 2001 edition of New Zealand Management magazine with the permission of Profile Publishing. Article written by Wendy Colville.

Christchurch electronics company, Pulse Data, has captured the attention of the world's richest man, Bill Gates - and with that interest has come the sort of publicity money can't buy.

Pulse Data specialises in a niche market - electronic aids for the blind and visually impaired. The brain behind the innovative business is electrical engineer, Dr Russell Smith. He has headed the business since l988 when it was spun off from its parent company, Wormald International, under a management buy out. In that time its revenue has climbed from almost nothing to $30 million last year.

With an eye for a great idea, Gates has picked up on Pulse Data's newest product, BrailleNote. And now the firm is selling its creation worldwide as fast as it can be manufactured.

BrailleNote is a talking computer for the blind, but with much more than basic computer features. It has a Braille keypad and electronic Braille displays, which allows the operator to write in Braille and read what's been written through her fingertips.

But the "killer application", and no doubt the feature that tickled the fancy of Microsoft boss Gates, is the ability to use Windows and email the document created to another user in standard form. BrailleNote is an outstandingly clever computer application. Last year it won Pulse Data an electronic excellence award in the annual Hi Tech Excellence Awards and the company has collected a string of other awards from Trade NZ.

To Smith's delight, Microsoft was supportive of the development and it did some joint promotional work with Pulse Data. "They got their considerable media machine onto it and that led to a meeting with Bill Gates. Despite our trivial size compared to his company, he was surprisingly interested in what we were doing," he said.

But for Smith, developing a brilliant product is never the whole story. "In terms of business success, I don't believe a good enough product will actually get you there. The cost of developing international markets is horrendous, and can take years."

So how does a small Kiwi company get attention on the world stage?

In Pulse Data's case it was able to capitalise on its commercial beginnings as the offspring of a multinational parent. As a subsidiary of Wormald International, the original company built up networks of distributors around the world, developing and selling for the visually impaired.

When, in 1988 Wormald decided to divest itself of some subsidiaries, Russell Smith and seven partners scraped together the capital for an MBO. It cost them $800,000.

"It seemed like a huge amount then. We all ended up with enormous mortgages. It was very risky because the company had never made money before that, though it had come close. We were still in a development phase, and developing international markets is incredibly expensive," says Smith reflecting on the past.

But like all good entrepreneurs, Smith and his partners believed it was time to back themselves. "We believed we could be profitable, and we had to do that very quickly to stay in business."

One approach was to develop a business importing and exporting medical instruments, both for cash flow and as a hedge against currency fluctuations. The venture gave the company breathing space to develop its own niche products.

The first development was Keynote. Launched in 1984 it was the world's first talking computer, released even before IBM's PC it was well ahead of its time.

Then came View Scan, a portable electronic magnifier. With its own tiny scanning camera the size of a matchbox, View Scan could magnify the page of a library book up to 40 times onto a small screen. BrailleNote is the successor of these and other developments.

A key component of Pulse Data's business strategy is its investment in research and development. "We are viewed as a technology leader," Smith explains. We set out to produce concepts that are different from everyone else's. Very few companies are able to do that in this field. Large companies tend to lack the creativity and small companies don't have the cash, and so we stand out.

The strategy has other spin-offs. Other companies that haven't developed the technology employ Pulse Data to supply technology and componentry. "We don't sell them the whole product, but we might supply, say, a video electronics card to build into their product," Smith explains. This is lucrative business and allows the company to keep control of its market niche with its own products. "It maximises our own earnings from R&D and while we are supplying components it means those companies are not developing their own [competing] technology."

Managing an innovation company presents its challenges but it's a discipline Smith enjoys. There is, he says, a constant tension between trying to harness the creativity of his designers and predicting when the next product will be ready to market. The problem of developing innovative products is that no-one really knows how long the process will take.

"We've created very successful products and that's a consequence of good technical development and good ideas. We're focused on doing things differently and leading the way, so our products command a higher price," he says.

But after development comes the sometimes vexing issues associated with control of distribution. This process is equally critical to the growth strategy. "In a specialty field such as ours it's difficult to sell through independent distributors. There are few of them and they may not be focused on your product," Smith explains.

Pulse Data has recently acquired two companies in North America. As subsidiaries they manage the distribution channels. Ownership of these companies will ensure control over the future development of the market for the company's products. "Once those companies come on stream we will be in a strong growth phase. Next year we're predicting sales of $50 million." The company's workforce has grown from five in 1988 to more than a 170 worldwide.

The partnership with Microsoft is set to continue. Smith says he has recently signed on with the IT giant to develop further software that will allow users of BrailleNote to access the Microsoft electronic book program, a move that dramatically opens up the world of literature to blind people. Hitched to Bill Gates, star performer Dr Russell Smith has good reason to be ebullient about his company's future on the world business stage.

  Management Magazine August 2001