Rather like the EU Referendum, a decision taken in isolation can sometimes triggers an unexpected chain of events. The decision taken in October 2015 to put the SMART Technologies business up for sale, set in motion a sequence of actions that has seen significant changes in the way that interactive touchscreens are designed, manufactured and distributed in the UK marketplace, AV News talked to Avocor MD Nigel Steljes and SMART CEO Neil Gaydon to get to the heart of the matter.
The partnership between SMART Technologies and Steljes Ltd, the manufacturer’s UK distributor, was fundamental to the rapid growth in adoption of the Interactive Whiteboard by the UK education community. Holding, at one time, something like 70% market share, the relationship between the distributor and the original owners of SMART Technologies was an outstanding example of how effective third party distribution could work to the mutual advantage of vendor and distributor.
As the relationship developed, Steljes Ltd assumed greater responsibility for supporting SMART Technologies’ products, obviating the need to refer support calls to head office or technical centres outside the UK. To all intents and purposes, Steljes Ltd was SMART Technologies UK. So what happened to change a relationship that had enjoyed years of success?
Drivers of change
Two factors are key: the first is the technology migration that came with the adoption of IFPDs, and the second is the change of management following SMART’s IPO in 2010. While SMART can justifiably claim to have pursued the development flat panel displays as early as 2008, the reliance on the company’s patented DViT (Digital Vision Touch) technology with plasma displays proved to be something of a dead-end. Rivals alive to the potential of relatively high-volume commercial LCD displays were able to innovate and bring competitive products to market far more quickly.
The IPO in 2010 at price of $17.00 per share valued the company on the basis of its historical performance throughout the IWB era. Initially, the IPO was well received but by the end of the year, problems were emerging, evidenced by the filing of two class actions against the company in Canada by buyers of shares in the company.
In the Spring of 2012, it was announced that Nancy Knowlton, co-founder, president and CEO, and David Martin, co-founder and executive chairman of SMART Technologies were stepping down from their executive management roles. A new management team oversaw developments in partnership with Microsoft and Cisco as it made its initial foray into the embryonic corporate collaboration market.
At the end of 2012, SMART announced “a corporate restructuring that will sharpen focus on each of its target markets in Education and Enterprise while simultaneously streamlining its corporate support functions. The restructuring will realign the organization into two business units as part of a plan that will reshape the Company to improve efficiency, innovation and customer experience.” The restructuring led to approximately 25% of the workforce leaving the company.
Neil Gaydon, CEO of SMART said that the “announcement marks a significant change in SMART’s operating model and has been designed to improve the customer experience and provide a more efficient and robust platform to build upon. The new structure will accelerate innovation and enable a more effective go to market.”
Throughout 2013, it became apparent that SMART was to place far more emphasis on its software business, taking advantage of its huge installed hardware base. The company also announced the kapp line to enhance its corporate and B2B offering. Its education portfolio also got a revamp, with a new range of SMART Board interactive flat panels. The 6065 IFP was said to establish “a new benchmark for interactive displays”, with ultra-HD 4K resolution and a smooth, low-friction surface with support for up to four touches simultaneously.
But, explains Nigel Steljes, the product roadmap didn’t accommodate changes that channel partners believed to be essential for their local markets – even significant territories like the UK. For SMART, the first few months 2016 have brought missed blessings. In January, the company received a notification from Nasdaq that it had “failed to regain compliance with Nasdaq’s minimum bid price requirement of $1.00 per share for continued listing of the Company’s stock on the Nasdaq Capital Market,” (which it appealed).
Ultimately, the situation was resolved, with an agreement with Foxconn Technology Group. The contract manufacturer has entered into an arrangement to acquire all of the outstanding common shares of SMART for a cash payment of US$4.50 per share. SMART CEO Neil Gaydon believes that, when the acquisition closes in autumn of this year, the relationship brings Foxconn a deeply respected brand in worldwide education and to SMART a world class manufacturing capability, with the additional benefits of huge financial and intellectual property resources.
In the meantime, the UK distribution agreement with Steljes Ltd dissolved, with a difference of opinion about the circumstances of the dissolution. Nigel Steljes points to a huge reduction in credit facilities by SMART, and a fundamental disagreement on the way forward. Fundamental to the termination of the arrangement, comments Nigel Steljes, was a lack of appreciation by SMART of the distributor’s commitment to supporting the channel and a growing suspicion that Nigel Steljes’ VividTouch brand represents direct competition to SMART Technologies’ products.
From Neil Gaydon’s perspective, the actions taken by Steljes Ltd itself triggered the collapse of the relationship. He believes that Steljes Ltd wanted to move away from SMART in pursuit of the higher margins available elsewhere. The role of VIVIDtouch was pivotal here, with Gaydon explaining that the new flat panel brand was represented as just another third party distribution deal, rather than a move by Steljes Ltd into manufacturing a competitive product.
Already questioning Steljes Lad’s distribution of rival BenQ panels with SMART software, the introduction of VIVIDtouch at BETT 2016 was the final straw. Nigel Steljes’ comments about credit limit cuts are dismissed by Gaydon, as a recommendation by credit insurers and that there was no plan to disadvantage Steljes Ltd. To do, says Gaydon, would be both unethical and nonsensical given the extent to which SMART depended on Steljes Ltd for its UK business.
Any one of these factors could have killed the relationship between vendor and distributor. Taken together, there was no way forward. SMART found itself with no UK distribution with the key summer installation period looming. Gaydon explains that SMART had a pre-existing relationship with Westcon and entered into an agreement to deal with outstanding business.
A more substantia heal with Midwich has seen signed to support investment by SMART itself in channel support, which has seen 30 new hires by the manufacturer in the territory. The new resources available from SMART and Midwich, Gaydon says will see both channel and end-user customers receiving service as never before. For the future, the successful conclusion of the Foxconn acquisition will see SMART enhancing its product roadmap with technologies from the portfolio of its new parent, while the education will also continue its role as innovator and route to market.
Nigel Steljes, managing director of Avocor – any one of a number of factors could have killed the relationship between vendor and distributor. Taken together, there was no way forward.
Neil Gaydon, CEO of SMART Technologies: The new resources available from SMART and Midwich will ensure that customers receive exemplary service.
And the future?
Nigel Steljes has a gift for spotting the next ‘big thing’ in AV. His new company, Avocor, was set-u and trading in less than a month. Avocor is predominantly a manufacturer, but Steljes has also entered into a distribution agreement with SMART Technologies’’ co-founder Nancy Knowlton. Steljes explains that his first objective is to continue the development of the VividTouch – introduced to soe acclaim at BETT earlier this year.
Steljes explained: “Our new company is a collaboration of industry expertise, with a level of market knowledge that has been built on years of experience working with customers across the education and corporate sectors.” Steljes says there is no plan to build a new largescale distributor on the lines of Steljes Ltd. The agreement with Nureva for its Span classroom collaboration system has been agreed to continue a successful relationship with Knowlton.