In November, Steelcase UK launched a new integrated office interiors business named Steelcase Solutions. OPI Executive Briefing spoke to managing director of Steelcase UK Mark Spragg and sales director David Hay to find out why Steelcase chose to set up the subsidiary now and what it hopes Steelcase Solutions will achieve
OPI Executive Briefing: What is driving office product companies to diversify?
Mark Spragg: It’s not necessarily an issue of questioning diversification. Every commercial organisation in this day and age really does have to look at how it’s doing, how it’s addressing its market and how it’s addressing its customers while looking for the new angles and opportunities.
I think that if you look at what Steelcase is doing and what others in our sector and in other sectors are doing, everybody is looking for new ways of creating customer value. We’re no different to that. I’d like to think that we’re at the forefront of it in terms of how we’re looking at it both in terms of product definition and in terms of the products we offer.
It’s the way of the world now, it’s diversify and figure out new ways forward or stand still and standing still in any market these days — especially with the rapid changes in technology — is the death of a business. We’re trying to take advantage of as many opportunities within our core competencies as we can.
OPI: So why diversify now?
MS: Well, Steelcase UK has been looking at the way we should be distributing our products and taking things into market for at least three or four years now. We started off with a programme, back in 2003, really looking at how we were addressing the market in the South East.
One of the things that was very interesting for the business at that time was that our large corporate sector really required a great deal of a high service offering from our client base. We found that our independent dealerships were struggling to deliver and finance that.
OPI: And how did you find that out?
MS: It was the result of a study of the businesses back in 2003. We had a couple of dealers collapse on us. And at the time, there was a small team, including myself, put together to look at why. I wasn’t working for Steelcase, I was an external consultant. We spent four or five months meeting with the dealer principals and meeting with clients to find out where we needed to be. We’ve been on a road map since then to create a different model for the South East. The original thought was to put that into the core Steelcase business, which meant that we would have really been narrowing down our service offering.
We then followed that work up early this year with another review of what our clients were saying, to find out, now that we’ve gotten ourselves in a better model, exactly what they were requiring. And out of that we tweaked the model a little bit to create Steelcase Solutions, which was more of a solutions driven vehicle. Part of that was that Steelcase is not just about the product but about the application and the knowledge that goes with the product. We felt it very important to find a vehicle through which we could take that into the market without really cutting across the product side. That was really where the whole concept for Steelcase Solutions came from. So it’s not so much a diversification but a continuity or natural progression.
OPI: So what is it exactly that you’re hoping to achieve?
MS: We’re hoping to achieve a really consistent, high quality set of services for the office environment that is capable of doing a lot more than just office furniture. Furniture is important but our clients are increasingly asking for much more than that. They’re looking for assistance in how they use their buildings, how they bring in modern technology to flexible working through to the very basics of how you re-upholster a chair. So it was really about creating a holistic approach, and single point that our client can contact to get clear advice. It’s so difficult to buy furniture because you go to the showroom and they only tell you what they’ve got and what their price is and they won’t tell you why you should buy their product over somebody else’s in case they give a competitive advantage away. And we wanted to try and break the mould on that.
OPI: So are you saying that you would tell customers about products that you don’t make when they’re buying furniture?
MS: If we come across a situation on the Steelcase Solutions side where our standard Steelcase product is not fit for purpose, we will be honest and say it’s not fit for purpose and help them find an alternative.
OPI: That really is quite unique. It seems like a brave move.
David Hay: I think it is but a lot of our clients want one point of contact. So what they want us to do is complement and supplement what we already do. They want one purchase order, one contact point, one set of deliveries, one set of project managers. And I think what we’ve really been encouraged by is that since we’ve made the move, we’ve had a lot of suppliers that have been complimentary about what we do and who have become very good partners. We’ve been very selective about who we work with because we want to complement the Steelcase brand and our reputation for quality. So we’ve got a select number of partners that we use recurrently. And to have Steelcase linked to a select brand of very good products is very unique.
OPI: So how did you go about selecting those partners?
MS: Some have come to us and some we sought out. There is a mixture of different approaches that we have taken. There were some companies that we thought should be in the mix and we went about speaking to them. We tried to find the best that fitted in with our corporate structure, that have the right quality, skills and sustainability story and this keeps developing. This isn’t going to be something that is static. We will keep learning and working with our supplier base, whether in terms of products or services.
OPI: How important do you think the subsidiary will become in the long-term for Steelcase itself?
MS: Well we wouldn’t have invested so much time and money if we didn’t think it was going to be very important. We do see this as intrinsic to the UK market, particularly in the South East. The structure of the market in the South East is very different to the market across the rest of the country and the rest of the world in many respects. For our business in the UK, we see this as a very important division of the business.
OPI: Despite the differences in the South East, do you think Steelcase Solutions is a concept that could be implemented by Steelcase as an international company?
MS: I think it’s probably too early to say. But knowing the market structures in other parts of the world, I don’t see this as being an international model. If I look at my colleagues on the rest of the international board, there aren’t any markets that are quite the same as London.
OPI: So what is it about the South East market that is driving demand for such a holistic approach?
MS: I think it’s the sheer complexity. We put it down to the puzzle of office environments. If you look at the other markets, they tend to be a lot more consolidated. Most European markets have a much smaller number of suppliers. There is a much lesser number of external third party referrals and furniture procurement specialists. London is so fragmented compared to anywhere else in the world. It’s hard enough for people in the industry to know what’s going on in the market. So being the customer, only buying once a year or once every five year on a major project, it’s difficult trying to deal with all those specialists.
OPI: What have been your most significant challenges so far?
MS: I think it’s been building the team. We wanted a diverse team and a team with real depth and experience. And that takes time. We couldn’t really go forward with the launch until we were ready for that. We’ve been in recruitment mode for the best part of nine months. Everybody came from different cultures. Some people had worked for the manufacturer Steelcase, some for Steelcase dealers and we’ve got some new people. The problem with any growing company is that after you’ve approached people, you’ve got to make them feel that they belong. That takes a little bit of time. We’ve got a team of 82 now.
DH: The other problem, we’ve had, and it’s a very nice problem to have, is that we’ve been incredibly busy. We’ve had loads of enquiries, we’ve won a lot of business and so we’re victims of our own success. We’ve had to work hard because of all the extra business.
OPI: And are you looking at any government contracts?
DH: We’re OTC credited, so we are one of the companies under that framework. We’ve always done a reasonable amount of public sector business but over the last twelve months we’ve set up a public sector team within the Solutions business and we’ve won on occasion, contracts from government agencies. We’ve won contracts for the Department of Culture and Media, the Parliamentary Ombudsman, Lambeth Council — some quite significant projects.
OPI: What do you think the learnings from Steelcase Solutions that you will be able to take back into the main business will be?
DH: The steepest learning curve has been dealing with the speed of information coming back. You have a direct dialogue with the clients through the Solutions business. You have really fast feedback from your clients about what they think of your products and services that, as a manufacturer, you very rarely get. The downside of that of course is that if you allow that Solutions side to get too strong, you could find that you’re pulling your manufacturing side around too much, based on the whims of a certain market driver. But the Solutions side really does give us the feedback to target how we do things. And that really does give us some assistance when dealing with our independent dealers. It brings huge value in the way we then talk to them and the way we help them position their sales out in their regions based on the whims of the business that we’ve gotten from the south east. From both sides of the business, it’s really more beneficial than not.
OPI: Are you happy with how the business is currently performing? Has it met your expectations?
MS: If you ask a managing director if he’s happy with how well his business has performed he will always say yes and always mean no. We are meeting our expectations. We’re moving at a good pace. You’d always like to go faster and like to be doing more and there are places you’d like to be able to get to. On balance, we’re pretty happy with how it’s bedding down.
OPI: Do you think there are any recent developments in the general OP industry that will have major ramifications on Steelcase and Steelcase Solutions?
DH: On the product side, there is definitely a trend toward the simplification of furniture products. Things like desks and workspaces are becoming simpler. They are being made to a simpler specification. Technology is freeing up people to work in a more mobile way. So I think the challenge for us is to put together solutions that meet requirements for every single part of the building. And we need to have services in place that can make that happen. I think clients increasingly want that. Clients want you to come with a complete answer. We need to keep up with that. If we don’t, other companies will.