by Sugar, Alan
I explained that our computers were assembled in Korea at a very low cost and they soon got the message that Seikosha assembling computers for us was not going to happen. However, we struck a deal on the mechanism and I managed to get them to supply the technical details for the print-head driving codes. I wrote them an order there and then for 100,000 pieces – it was the only way to convince them to co-operate with me. What a lunatic I was in those days! A hundred thousand pieces, all from the seed of an idea that started with me catching something out of the corner of my eye in a shop in Akihabara. I was now taking a massive gamble before even showing the idea to the market. Was this computer business going to my head? My thinking was that we’d already sold hundreds of thousands of CPC464s and CPC6128s and I just had this gut feeling that an all-in-one word processor – targeted at £399 – would change the face of office work.
The word processor’s code-name during development was ‘Joyce’. Bill Poel, with his usual sense of humour, decided to name it after my longstanding secretary at the time – she had been there since the Ridley Road days and still typed the occasional letter for me.
Now the challenge was to come up with a product that could sell for £399 yet offer the dealer a margin of at least 25 per cent. It would need a PCB which had more computing power than the CPC464 and CPC6128 and, what’s more, a completely new gate array. Once again, we commissioned Mark Jones to develop it and this time we chose the giant Japanese company NEC as our partner to produce the superchip, which they did very diligently.
We tasked Locomotive Software with developing the word-processing program and they beavered away to try to meet the very aggressive launch date I’d planned. In conjunction with Roland and Bill, they designed the soft-ware with new features such as drop-down menus, a really flash way of displaying things on the screen. It was something which hadn’t been seen before, but had been trialled in the USA on some sophisticated word processors used by the company Wang, which was a major supplier of word processors.
Nick Hewer had arranged the launch of the PCW8256 in the centre of London in September 1985. Nobody had any idea of what we were about to unveil – they thought it was just another computer, possibly the next step up from the CPC6128. Perhaps that’s why attendance at the launch was quite modest, but the usual suspects turned up from the press. They were amazed when we pulled back the curtains and ran the video for the new Amstrad PCW8256 and they were further shocked when I announced the price.
Let me take you back to Chelmsford market and the man on the stall selling a pair of pillowcases, a couple of sheets, two blankets, five towels and six handtowels. ‘Hold your money, ladies! Hold your money, ladies! The whole lot for five quid.’ Picture that. Then picture the promotional video. ‘Here’s the new Amstrad word processor, complete with floppy disk drive, 256k of memory, dot matrix printer, large twelve-inch green display, full QWERTY keyboard, plus the new LocoScript word-processing software.’ Imagine seeing the drop-down menus in the video; imagine seeing someone typing on the machine, then pressing a button and seeing the letter come out of the printer. And then – bearing in mind that IBM and Wang were selling word processors for around £5,000 at the time – imagine the reaction when the final shot came up on the video: And all this, gentlemen, for £399.’
You can understand why, with our price, the market was about to explode.
The press were totally, utterly gobsmacked. In the Q&A session that followed, they were asking me, ‘Why sell it for £399? Why not £3,999? Why so cheap?’
I explained that Wang and IBM were supplying a very niche market of lawyers, accountants, etc. Our product was for the mass market. I continued, ‘Many of you gentlemen here in the audience are journalists. No longer will you have to hack out your stories on your typewriters; no more will you have to use Tipp-Ex to correct your mistakes. You can copy and paste paragraphs, delete and insert text, search for words, do bold and italic formatting and, finally, save your masterpiece onto a floppy disk. I am changing your lives, gentlemen.’
This statement proved true and there are some journalists out there, like Hunter Davies, who still sing the praises of the PCW8256. What’s more, I told the audience, ‘It won’t just change journalists’ lives. Think about every person in every office up and down the country who uses a traditional typewriter – just imagine how the whole face of office automation will change.’ We had announced an amazing breakthrough in technology.
After the Q&A, we led everyone into another room where twenty of the machines were lined up. The journalists clambered over them. Some of them had already called their offices and loads more people started to turn up, particularly photographers. We’d done it again – we’d created excitement for a product. But now we had to start delivering.
By September of that year, with only weeks to go before they were meant to be on sale, there were still technical issues. The software wasn’t ready yet and we were having problems interfacing the printer to the main unit. Without getting too technical, the main processor chip inside the monitor was crashing.
We made twenty or thirty of them work, but when we started to run the production line in Korea, we found the processor chip was crashing again. Harold Livesey, our factory manager, had employed John Beattie as a right-hand man specialising in production engineering and he was seconded to Brentwood to look into why this product was causing trouble. Urgent work had to be done in the laboratory to solve the problem.
I dived in myself, not knowing what I was talking about, but listening to all the engineers’ theories as to what was going on. At eleven o’clock at night we still had our heads in our hands, wondering how to solve the problem. I’ve spent many hours like that, scratching my head over seemingly insoluble technical problems. Eventually you do solve them, but at the time it looks like you are stuffed – up a gum tree with nowhere to go, a terrible feeling.
Everyone had been working on the thing since nine in the morning, so I told them to go home and go to bed, then, in the morning, jump in the shower and think about it from another angle. One thing I’ve learned is that when you get into these burning-the-midnight-oil sessions, you get tired and lose focus and end up chasing your tail.
The problem was that we didn’t know how to replicate the crash – and I’m ashamed to tell you how we finally managed to do it. One of our engineers, young Ivor Spital, who had started in the service department at Ridley Road and been promoted throughout the company’s growth, had deduced that the problem was linked to radiation caused by what’s known as spikes on the mains supply. It’s difficult not to get technical here, but the mains supply to our houses and offices is not always ‘clean’ – sometimes it contains spikes, which can cause equipment like computers to crash. Typically, these spikes are caused by things like refrigerator compressors (we’ve all heard our fridge compressor kick in). So, with this in mind, we tried to replicate the factory problem by getting hold of an old fridge compressor and plugging it in next to the computer. By switching the compressor on and off we could prove that this crashed the processor every time.
The reason I’m embarrassed to tell this story is because there are pieces of test equipment that replicate mains spikes, whereas our Heath Robinson method of using a fridge compressor to do it was, in technical terms, a total joke. Obviously, in years to come, we had the full monty of test equipment to simulate these things, but in those days we didn’t. So thanks to an old fridge compressor, we replicated the problem and fixed it by adding a few components. Together, John Beattie and Ivor Spital had solved the issue.
The announcement of the PCW8256 had created a lot of demand and the senior buyer from Dixons, Brent Wilkinson, asked me to come in and demonstrate the product to his boss, Mark Souhami.
It’s hard to explain, but when you think you’ve got a hot item on your hands which hasn’t yet proved itself in terms of physical sales, you still feel nervous about whether it’s going to be a hit or not. Would it capture the imagination of the public? Would it sell? Sometime
s you can panic and do silly things. In this case, I nearly did something silly in giving Dixons exclusivity in exchange for a big first order.
I duly arrived at Dixons’ headquarters in Edgware and met Mark Souhami and the buyers. When I showed them the product and demonstrated it, their eyes were popping out of their heads. Pathetically, they tried to play it down and act cool, but they knew that, at £399, they had a killer product on their hands. So much so, I was told that Stanley Kalms, the chairman, would be joining the meeting. In walked Stanley, who was about the same height as me, though I’d have to say much heavier (to put it nicely). He took one look at the product and got it straightaway.
Stanley, a man of few words, acknowledged me by looking up and simply grunting, ‘Hello.’ We had never met before, but obviously he knew of me, as he’d screwed me on VCRs and had been selling my tower systems, albeit reluctantly.
Stanley asked, ‘How many of these have you got coming?’ I explained that this was not a job-lot – he wasn’t buying a load of Canon cameras that were being discontinued – this was a regular product. What was ‘coming’ was simply what was on the high seas. We had started to produce at the rate of 5,000 per month, ramping up to 40,000 per month.
He asked, ‘How many will be arriving in the next three months or so?’ I estimated, ‘About twenty thousand between now and Christmas.’
‘Right,’ he said, ‘we’ll take the lot, but we want them exclusively.’
I didn’t answer. I knew I would be alienating my other customers if I agreed to this. However, in Stanley’s mind I had agreed and he walked out of the room thinking he’d struck an exclusive deal. I had mixed feelings. On the one hand, I was delighted – my product was going to be a hit; I’d got the top boss of Dixons to endorse it with a big order. On the other, I was feeling nervous – I could not give away the shop to Dixons. In fact, I’d deliberately under-committed on quantities earlier in the meeting, so I’d have some left for my other customers.
The advertising campaign for this product was another challenge. How do we transmit to the public the death of the typewriter? We came up with two concepts. One was a large lorry filled with old typewriters being taken to a dump. The lorry turns up, tips all the typewriters off and they fall into a big pile, then we cut to someone using the PCW8256, showing how it works.
The other advert, which I favoured (and was also a favourite of Margaret Thatcher), was the one where a secretary picks up a typewriter, opens the office window and throws it out, so that it lands in a rubbish skip in the street. The secretary then replaces her typewriter with the Amstrad word processor. This was one of the most successful adverts we ever ran, as it told the whole story. It was dreamt up by Malcolm Miller and myself and the advertising agency worked to our rules. They were given a budget of no more than £25,000 for filming the advert (as opposed to the usual £150,000 one would expect to pay one of the leading agencies). We also dealt with the media ourselves by negotiating with them directly or by using a media-buying organisation that took a small commission.
We were a big advertiser in those days, but we certainly weren’t going to waste money on advertising agency fees. My philosophy was: if we’re going to piss £1m up the wall on a campaign, I want it all spent on the actual advertising; I don’t want a large chunk of the budget wasted on production and creative fees. You can see why I’m not on the Christmas card lists of most of the advertising fraternity.
One of the ways we convinced an agency to work with us this way was to tell them that when the ad was aired and people asked who the agency was we’d keep schtum and let them take the credit (and go on to rip-off other clients who think they are geniuses). We’d also let them go on their jollies to Cannes and accept any awards going. Trust me, this worked!
It seemed our advertising was spot on. Even John Major, the then Chancellor of the Exchequer, bought one of our word processors. He sent me a picture of himself with the PCW8256 in the background.
In Spain, José Dominguez bought some television time and copied our advert. The product was fantastically successful there, as well as in Britain and France. In Germany, interestingly enough, Schneider decided to call the product by its old code-name, Joyce, and they wanted the name printed on the front. When I told him about the advertising campaign we had in Britain and suggested he follow it, I was told that in Germany there were laws whereby you could not slag off market sectors. An advert with typewriters being thrown out of the window into a skip was effectively illegal as it would imply that typewriters are rubbish and be disparaging to German typewriter manufacturers. Because of this restriction, the PCW8256 wasn’t such a great success in Germany, though they still must have sold over 100,000 there.
When the product launched in Britain, there was a queue outside Dixons at Brent Cross on the Saturday. This was not some pre-planned PR stunt – people were genuinely falling over themselves to get these word processors as soon as they came into the shop.
Stanley Kalms must have been plutzing. Never mind that he was making 25 per cent on every unit sold, he hated the fact that he was buying from me, knowing he couldn’t get them from anyone else. He also hated the fact that there was no negotiation on price, no negotiation on quantities and no real negotiation on exclusivity. Then he got the raving hump when he saw the product on sale in Comet. One of his underlings, Eddie, the acting MD, called me to complain. I told him that no official agreement had been made as far as exclusivity was concerned – it was all in Mr Kalms’ mind. It certainly wasn’t in my mind.
Eddie threatened that they would no longer stock Amstrad products. The conversation ended with this fellow saying something like, ‘Well, that’s it. We’re closing our account with Amstrad.’
I said, ‘Fine. That’s a decision which you’ll have to live with.’
I have to admit that at the time I was worried. I wasn’t really so arrogant as to believe that one could exist without Dixons – they were growing in the marketplace. They had acquired Currys in a hostile takeover bid in December 1984 and they had a tremendous distribution network throughout the country. However, it was just one of those stand-off situations. Should I get on the phone and start kissing the arses of Stanley Kalms and Mark Souhami? Or should I just sit back and be quiet? More by luck than good judgement, having been distracted during the next day or so by other problems, I didn’t do anything about it.
Then I received a phone call from Souhami, who was a bit of a smoothie. He was a short, well-groomed gentleman with a very posh, City-type accent. ‘Now, young Alan,’ he said, ‘you’ve upset Stanley. And when you’ve upset Stanley, you have to understand that people like me have to sort it out. Now, what can we do about this?’ I told myself to keep my mouth shut and not fan the flames by arguing over whether I’d offered exclusivity or not. Just be quiet.
After a moment I spoke. ‘Well, I don’t know what to say, Mark. According to your managing director, Eddie What’s-his-face [I never could remember his name], we haven’t got an account with you any more, so . . . there you are, that’s it. What do you want me to say?’
‘Well, this can’t go on, obviously. We need your products, you need us . . .’
Best to shut your mouth, Alan. Keep quiet. ‘Yeah, you’re right, Mark, you’re quite right.’
‘Now, we’re right out of these word processors – what are you going to do about it?’
‘Er, sorry, Mark, I was told by Eddie that our account is closed – what do you want me to do about it?’
‘No, no, take no notice of Eddie! We need some units – how many have you got?’
Alan, keep your mouth shut, don’t be spiteful, don’t rub it in. Don’t start bullshitting that you’ve allocated all the stock to someone else and make it even worse. Just shut up.
‘Let me call you back, Mark, and I’ll see if I can get some stuff to you quickly.’
I had been a good boy and restrained myself from my mischievous ways. We were obviously back on track with Dixons without the need for further confront
ation. But the episode did endorse something that was to become part of my philosophy: never rely on the retailers to help you. Don’t listen to any bullshit that they love you and they’ll always support you. No, you have to generate a demand for a product which drives consumers to the retailers. You must create a situation where the retailers need you and you don’t need them because, as I was to find out through painful experience, the minute you’re no longer the darling of the market, they’ll drop you like a hot potato and forget about all the help and support you’ve given them in the past. And with the exception of my relationship with Nick Lightowler in the early days, they all fall into that category.
We were extremely successful with the PCW8256, selling 350,000 in the first eight months after the launch, and we went on to make a big brother version, the PCW8512, with two floppy disk drives and 256k more memory to justify sticking the price up by another £100. The same old trick worked every time – £399 for the lead-in model, £499 for the twin-drive/larger-memory version. As ever, the margin on the additional £100 per unit was exceptional.
In June 1986 we announced a turnover of £301m and profits of £75m – almost four times the profits of the previous year.
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In America, as I’d predicted, the CPC6128 was not selling. But despite this, Pero was now driving me crazy about the PCW8256. I said, ‘It’s bad enough you can’t sell the CPC6128s which are arriving in volume – now you’re talking about buying something else that isn’t suited for the American market! Haven’t you learned your lesson yet?’ He explained that it was the people at Sears World Trade who’d picked up on the publicity for the PCW8256 – it was they who were showing enthusiasm for the product.
These Americans, bless ’em, they’re ever the optimists and you have to take them with a pinch of salt. I certainly wouldn’t take any notice of their enthusiasm for their so-called ability to sell my products in the US market. I was very sceptical, but Pero insisted on coming to London with a representative of Sears World Trade, Karl Flummerfelt.