by Sugar, Alan
To be honest, I wasn’t interested in these things. I always find they turn out to be a bloody bore, with people pestering you and slipping you their cards, trying to do some business one way or another. By this time, I’d already done my fair share of corporate entertaining – wining and dining customers and talking a load of bullshit. For the punters, it was a big night out and the staff saw it as some kind of treat, but as boss of the company, I didn’t see it as anything special – I’d rather have been sitting at home watching TV and relaxing.
So there I was, all dressed up in a dinner jacket and talking to a load of boring people on my table, looking at my watch and wondering when I could get out of this place. The award ceremony started and went on for about half an hour until it got to the final top award of the night. While drifting away with boredom, to my surprise, I heard the Master of Ceremonies declare, ‘The Product of the Year Award goes to Alan Sugar of Amstrad for the CPC464.’ The whole room stood up and applauded, except me. I was stunned. Nick nudged me, as if to say, ‘You’d better get up there and accept the award.’ I guess it was a nice thing to have. I am terrible when you think about it – I made no fuss or showed any sign of elation.
*
There comes a time when a business grows to such spectacular heights that, regrettably, some of the staff initially tasked with jobs such as accounting or sales find themselves out of their depth. This was the case at Amstrad with Jim Rice and Dickie Mould.
Jim had been employed back in the days of Ridley Road, taking over an accounts department that was run by one person. He was perfectly qualified to run the small department and transform it into something larger, but by now we were becoming a giant public company and we needed a heavier hitter. I appointed Ken Ashcroft as our new finance director. Ken, who was quite well known in the City, had held the same position at Comet and was recommended to me by Nick Lightowler. Ken put a lot of systems into place very quickly, including a big IBM mainframe computer to control the whole business.
It’s a tricky subject to bring up with one of your loyal staff members – to tell them it’s time for them to move aside and let someone else step in – but the new job I had in mind for Jim was no small task. Though he was initially upset at the prospect of someone else taking over the accounting reins, he finally accepted that it was the sensible thing to do. Instead, he would move into the newly created position of operations director, controlling our distribution and warehousing logistics for the whole of Europe. He had successfully supervised the building of our facility at Shoeburyness, and his new role was to ensure that our expansion in places like France was dealt with efficiently.
Dickie Mould – Boycie – was good in his day, dealing with the small retailers, but was totally out of his depth handling the Rottweiler-type buyers at companies such as Dixons, Rumbelows, WHSmith, Littlewoods, BMOC and Argos. My philosophy of selling in Britain was to stick to large organisations such as these, who would buy in bulk, and, to be perfectly frank, I largely ignored the individual and smaller dealers, but we had appointed one wholesaler in the Midlands who would supply the smaller retailers on a ones-and-twos basis. The company was run by a pair of old fogeys who wanted to retire and, as far as Ken Ashcroft was concerned, it would be a financial risk to extend them any more credit.
I could never understand where there was any margin for small retailers. Since I wasn’t prepared to sell to the wholesaler at a lower price than I was selling to Dixons, and since the wholesaler would have to make a profit when selling it to the retailer, how could the retailer compete with Dixons’ price?
With this in mind, I never had much enthusiasm for supplying wholesalers. It was like walking into a hornets’ nest because small dealers still felt, quite rightly, that they too needed after-sales service and technical support. Nevertheless, we bought this small wholesale company in Stoke-on-Trent because I saw this as a convenient opportunity to help Dickie Mould save face. There was no job for him at our head office and it would have been unfair to get rid of him through no fault of his own – he was simply a victim of the dynamic growth of the company. Instead, I created a new company, Amstrad Distribution, and appointed him as managing director to run the wholesale side. Effectively, he was trading with the Amstrad head office on an arm’-length basis by buying from us and selling to small retailers.
All of this coincided with a general expansion of our executive staff. We were still very much in the audio business – indeed, Shoeburyness was built so we could produce massive volumes of tower systems as well as provide warehousing for speakers shipped from the Far East. Audio was still important to me – I was not prepared to ignore the business upon which Amstrad was founded, despite the temptation to concentrate solely on computers.
Malcolm and I decided that we’d bring in a new tier of management, known as product managers. On the audio, TV and VCR side of the business, Malcolm took on a young man called Anthony Sethill, who’d previously worked for Hitachi, as our consumer electronics product manager, and on the computer side of the business, we employed David Hennell as our computer product manager, along with Keith Collins as a specialist computer salesman.
In entering the computer business we became more and more entangled in legal documentation, especially with software companies, who were paranoid about being ripped-off. We found that we were using a lot of external legal resources, which were costing an arm and a leg, so we decided to recruit our first corporate lawyer, David Hyams, to deal with the increasing number of licence agreements and contracts.
With new markets opening up in Spain and Germany, we also needed to employ someone who was familiar with the logistics of export – the paperwork, the letters of credit and so on – and who could bring it under control. Waco in Japan was finding business tough, as changes in the nature of trading between manufacturers and customers abroad meant there was less opportunity for agents such as them. The shrinking of their organisation resulted in the departures of Sakai and Joe Oki, so we asked Joe to come to England and be our export sales manager, handling orders to France.
While on the subject of personnel, I had asked Mike Forsey to leave the company a while back, as he just didn’t fit in with the Amstrad culture – he dithered and pontificated and was somewhat awkward in his manner – and I promoted Bob Watkins to technical director.
In discussion with our corporate advisers, I decided to initiate a share option scheme for the staff. In simple terms, it was a way of giving my employees the right to purchase Amstrad shares three years after the options were granted. As an example, if when I granted the options the share price was £1 and three years later the share price had risen to £10, the employees would have the right to pay £1 per share, sell at £10 per share and make £9 per share profit. I am sure some technical guru will disagree with my simple explanation, but trust me, that’s more or less the nuts and bolts of it in simple Hackney terms.
Share options were granted to all my key staff. Naturally, the directors got a lot more than the general staff. Most employees didn’t realise the benefits that were about to be bestowed upon them. They thought it was similar to the various incentives that sometimes crop up in companies – in other words, to be taken with a pinch of salt as some kind of management gimmick to try to make the staff feel wanted. The scheme was put into place at a time when Amstrad’s share price had dropped back a bit, due to what the market perceived as disappointing results at the end of June 1984.
*
Roland, Bill, Bob and I had been talking about the next model of our microcomputer. We decided to get rid of the archaic method of downloading games via cassette and replace it with a floppy disk drive, which was clearly the way forward. This would raise the profile of the computer into a different league and would allow more sophisticated programs, such as spreadsheets or word processors, to be run on it. It would also allow third parties to write software for this new platform and would leave the Sinclairs, Commodores and Ataris standing – as simple games machines. Of course we knew
that even if we did add a floppy disk drive to bring sophistication to the product, its real use would still be for games. Nevertheless, parents would always want to buy the best for their children in the belief that it was an educational tool.
We brought out the CPC6128 in August 1985, a very slick and slim-looking grey computer with a floppy disk drive in place of the old cassette mechanism. We also doubled the amount of memory to 128k. It became a massive seller in all markets due to its perceived higher technology. People considered it a real computer.
The success of our computers was seriously threatened at one time by a lack of components. This was a new phenomenon for me. In the audio, TV and VCR markets, I don’t think there was ever a time when our style was cramped by a lack of materials. In general, suppliers would advise us that they needed sixty or ninety days’ advance notice for their component orders and we would simply work within those guidelines. There was a brief shortage of ferrite for loudspeaker magnets at one point, as most of the raw material came from Africa and I believe that the Africans got fed up being beaten up on price and cut off the supply, but this lasted no more than a month or so.
However, in the computer market, memory chip manufacturers (basically a handful of giant American and Japanese companies) would suddenly decide to give up making certain sizes of memory chip as technology advanced. The CPC464 and CPC6128 used a bunch of 64k D-RAMs – eight pieces were used in the CPC464, sixteen in the CPC6128. Now manufacturers were giving up making 64k chips and moving on to larger sizes such as 256k. No one wanted to supply us with 64k chips any more and there was a severe shortage of memory chips throughout the world. It got to the stage where production was stopping and we couldn’t manufacture computers.
Thankfully, Samsung had just started to enter this market and, like all new boys, they decided to start with the lowest technology, namely 64k chips. We ended up persuading Samsung to continue to run their 64k chip production and we bought millions of chips from them in order to keep the CPC464 and CPC6128 running.
While it would have been possible to redesign the computer to accommodate the new type of chip (as the 256k chip was effectively configured as 4 x 64k), it would have meant a complete re-layout of the PCB and there simply wasn’t time.
It was a worrying period for me as a manufacturer, but it also reminds me of a funny incident at the time. At home one Saturday, I was preparing to play tennis with a friend of mine, Ivor Spiro. We were sitting in the kitchen chatting about things in general when suddenly the doorbell rang.
Standing at the door were two rather smartly dressed gentlemen. They announced that they were sorry to disturb me, but were here on ministerial business. I automatically assumed that these two blokes had come from the council to discuss some planning consent we’d applied for on the field next to the house. Then it dawned on me that it was Saturday, so it’d be highly unlikely that any officials would come round.
It took another couple of minutes of conversation for me to realise that they were Jehovah’s Witnesses, and that the ministering they were doing was on behalf of the Lord. They asked whether there was anything the Lord could do for me. How funny that two Jehovah’s Witnesses had turned up to confront me and Ivor Spiro, two Jewish fellows.
I decided to humour these two chaps. ‘Perhaps there is something you could help me with,’ I said, keeping a straight face.
The more senior of the two gentlemen looked interested and pleased that I was about to call upon their assistance. ‘How may the Lord help you, sir?’
‘Any chance you can get two and a half million 64k D-RAMs?’
He laughed and replied that the Lord has been known to do many things, but that one was rather challenging.
Anyway, these two fellows didn’t want to leave, so I cut them short by telling them that, in actual fact, I had a special consultant there who dealt with these matters and if they wouldn’t mind, I’d call him over and leave them to explain their work to him and then he would report back to me.
They agreed quite readily, at which point I shouted over to Arthur the gardener, who was hovering in the background wondering what was going on.
Arthur! I’d like you to help me out here. I have two gentlemen that need your specialised attention.’
‘Righto, sir. Leave it to me, sir. With respect, sir, you go and play tennis with your friend, sir, and I shall deal with the two gentlemen and report back to you, sir.’
‘Thank you, Arthur. Yes, would you kindly do that. They’re here on important matters. Would you please take them away and deal with them.’
This was the first time I’d ever found a good use for Arthur. He would bore the pants off these two to such an extent that they’d never come back. About ten or fifteen minutes later, when Ivor and I had started our match,
Arthur stormed up the path to the tennis court.
‘Thank you very much, sir, thank you very much. You lumbered me with those two blokes. With respect, sir, I’m a gardener – what do I know about the Lord’s work?’
‘Never mind, Arthur, you’ve done a very good job. Have they gone?’
‘Not half, sir. I told them to clear off and not to bother you again!’
*
I mentioned earlier about protectionism in Spain. In August 1985, I had a panicked telephone call from Dominguez telling me there was a serious problem, that all computers of 64k and below were now banned from importation into Spain. This was because a Spanish manufacturer was producing a 64k computer and had managed to get the Spanish government to impose a rule blocking all others. This was a disaster for Dominguez and Amstrad – by now we were selling thousands of computers in Spain. This new rule would effectively shut us down.
If anyone knows about dealing with Spain, they will be aware that it would be an insurmountable task to try to argue this point legally with the Spanish customs and government – we had to find another way to overcome the problem. The simplest and most obvious solution was to increase the computer’s memory, but that would mean some high-level design changes and re-engineering. Even at the fast pace Amstrad worked, there was no way we could pull it off in time for the forthcoming Christmas market.
The computer boffins out there will cringe when they hear what I did next. I felt the trick I was about to play was morally justified because the Spanish government was trying to impose import regulations simply to protect one of their mates in the local market. I remembered that nearly twenty years earlier there was a fad in the portable transistor radio market, whereby the more transistors in the radio, the better it was claimed to be. The fact was, those radios only needed six transistors to work, but some Hong Kong manufacturers used to stick four extra transistors – which did nothing – on the PCB, simply so they could label their sets ‘ten-transistor’.
We needed to do a similar sort of thing on our computer. Fortunately, the main operating system ROM chip was fitted on the PCB by means of an IC socket; it wasn’t soldered in permanently. I suggested to my people in Brentwood that we design a mini-PCB which would hold the ROM chip as well as an extra single 64k D-RAM chip (and a few peripheral components). I also asked my technical geniuses to come up with some justification as to what this extra chip was doing, rather than be sitting in mid-air going nowhere. They did – but don’t ask me what it was! This mini-PCB, with its additional D-RAM, then plugged into the original IC socket.
Based on this trick, it was true to say that the computer now had 72k of memory. We rushed the design of this mini-PCB to Orion. On top of this, we had to change the faceplate on the front of the computer which was labelled ‘64k, as well as all the packaging and the instruction manual. This was the brilliance of Orion and why it was so worthwhile putting up with Otake’s nonsense. Once he got behind something, he moved at a speed I’ve not experienced in all my manufacturing life, neither before nor since. I don’t know how he motivated his staff to do it, but within two weeks we were producing a special CPC464 for Spain with 72k of memory – all with new faceplates, books and packagi
ng.
We had basically stuck two fingers in the air to the Spanish government, who were trying to screw our business, and there wasn’t much they could do about it because at the cargo’s point of entry into Spain, customs had to allow them through. We never received a technical challenge from anybody in the Spanish market. The bottom line was, we beat their system. Eventually, they scrapped the ruling, at which point we magically changed back to our standard 64k product. As a result of this exercise, we managed to sell at least another 50,000 units in the Spanish market that Christmas season. We’d have been in trouble otherwise, as all the advertising had been booked and the retailers had placed their orders.
*
Marketing was to play a big part in the Amstrad success story. On reflection, I’m a marketing person, effectively an advertising agent in disguise. Maybe that’s why so often I didn’t feel the need to seek the advice of advertising agencies in coming up with killer catchphrases for our adverts. Most of the headlines and punchlines in our adverts came from me. Rightly or wrongly, they seemed to work.
Originally, I thought that advertising agencies had some secret talent. They would come along and pitch their great ideas to me, the client. It transpired that the great idea was limited to the main punchline of the advert and from then on, the only great idea they had was to send you big bills for doing three parts of sod all. There were unbelievable charges for photography – things like setting the lighting scenes and the ambience, with a whole crew out on location in Lake Ullswater in the north of England, waiting for the right moment to see the moon setting on the lake, with the rippling lights on the water and all that bollocks. I put up with one bout of this crap and then kicked their arses out.
Amstrad’s philosophy was simple – pile ’em high, sell ’em cheap. Adverts had to be full-frontal: show the product, show what it does, show the price and tell the punters where they can go and buy it. Simple as that.