Along the same lines as hotel telephones, in a period of four years, we managed two successful mergers & acquisitions. That truly was a good experience professionally and personally. That is not to be confused with no problems and challenges. On the contrary, we had a lot of challenges to overcome and some were really severe. Overall, I found the experience invaluable however and learned a lot about the process and myself.
In our first merger, we had a product nightmare when it came to cordless telephones. Cordless telephones were very popular at one stage within the hotel business and they are still purchased and installed in nicer hotels. Cordless guest room telephones are pricey, take more maintenance, and are more difficult to support. We loved them from a sales perspective because they were triple the price of a deluxe corded set which meant a very healthy bottom line.
Prior to closing the merger, we knew of the backorder situation since we did do our due diligence. The problem was a big multimillion-dollar problem. If memory serves, we had up to $5 million in orders placed that were not being shipped. We could not ship them. For a company that at the time was at most $19-20 million in annual sales, that was a Class 1, migraine-inducing problem. And I had the distinct pleasure of having sole responsibility for dealing with it (yay me). Mind you the customers not receiving products were companies like Marriott, Hilton, IHG, etc. These folks can be loud and obnoxious and in this case, they were 100% right in complaining.
What was the issue? Well, management at the company we bought had checked out. More worried about golfing and drinking during the week, there was no direction. How bad was it really? Well, the product in design was using something called Zigbee for the cordless telephones. Zigbee is meant for very concise data transfers- think of garage door openers, remote wireless thermostats, etc. Even if you are reading this and have no technical background, you can probably surmise that a voice call, one that requires good quality and clarity, would be much more than a Zigbee chip can handle.
So bad technology to start with, but we had another issue. If we killed the Zigbee product there was no design taking place, it would mean starting over from scratch. We had used Spread Spectrum in the past, but that was off the table at this stage. Don’t forget angry customers, almost to the point of pitchforks and they were the large premier clients- our key customers. And that $5 mm price tag.
It was April. I recall the conversation well.
Previous CEO: “What do you want me to tell the factory on the Zigbee development?”
Me: “Kill it please.”
Previous CEO: “Are you sure, we have nothing to replace that with.”
Me: “I know, but there is no way we are going to waste another minute on a technology that will not work. It is an interesting idea, it kind of has potential, but I find it interesting that Zigbee has been out for some time, and we would be the only people trying voice communications on such a limited platform. We must start from scratch, and we will even have to use a different factory.”
Previous CEO: “It’s your call”.
Me: “Wish us luck. We are going to go with DECT.”
So our first suggestion on product, is that you have a very clear understanding of the available technologies, that you select proven technology that is known to work and listen to your engineering team. There really was no harm in looking at Zigbee or alternatives, but having no alternative development or letting that Zigbee development become your primary solution knowing the limitations and risks, and then not having an actual product for a year? Note that the prototypes for Zigbee did not work. This had been going on for some time. That is where we were in this predicament and why this was such an issue.
In June, we have HITEC. HITEC is the biggest hotel technology show in the world. This brings us to our second point about product development- own it. June was about 6-7 weeks after we took over and we went to HITEC as planned. We also rented a private room above the show floor where I sat for about 5-6 hours per day meeting with all the clients that were unhappy. I was booked solid- distributors, hotel brands, and hotels. That was three days of stress. We acknowledged the problem, we owned it, and we explained how we were fixing it.
In the end, the first shipments to clear the backorders began in November of that year (6.5 months later). We designed, tested, got approvals for, and had product shipping in seven months. It was not pretty. Our CEO gave me his full support and our engineering team did a fabulous job in getting the phones ready for market (we did use DECT) and we cleared the backorder before year-end.
This was a problem that could easily have been avoided but they happen. Our sales and customer service teams were stressed due to the lack of product and lack of a plan. Even when we put the plan in place, it took some time for folks to believe we would ship the product. Personally, it was a difficult time, not just customers, but our own teams had to be kept up to date. Getting pressure and complaints on this on a daily basis did not make for an enjoyable six months. Over time this became a company-wide effort and the relief of shipping was also a shared experience.
Clearing the backorder and being able to tell a customer when cordless sets would ship with confidence was priceless.