Naiming the Future
Chris Thomas talks with Paul Stephenson of Naim Audio.
by Chris Thomas | September 1, 2011
aul Stephenson, the managing director of Naim Audio, and I had been talking about doing this interview for several months. Originally it was going to be about the direction in which Naim, with their commitment to streaming technology and audio in general, were heading, with perhaps a bit of history thrown in. But then the huge news of the Focal deal gave our plans an agenda and momentum of their own. So I traveled from London to Salisbury to conduct the first interview with Paul since the news broke. Over lunch we realized that a bit of context was called for, so he suggested that, to understand where Naim are now and where they are heading, it would be helpful to know something of their history. Paul wasn’t at Naim at the very beginning, but soon after his arrival he gave the company a focus and direction that has only intensified as the years have passed and events have unfolded.
Chris Thomas: Take me back to those heady days of 1981.
Paul Stephenson: It’s quite pertinent that we are sitting here today, where Naim is in a different place from when you and I started talking about doing this interview months ago. In fact, apart from joining Naim in 1981, Julian Vereker’s death and now the merger, collaboration or sale with Focal, these are probably the three biggest events in my history with Naim, and two out of those three I had no chance to think about or plan for. Julian and I had spoken many times about my taking over Naim at some point, and he’d go on his boats and to do his thing. Would he ever really relinquish true control? I don’t know. There was certainly a point in Julian’s life where he was getting very dissatisfied with the way the industry was going, with overregulation and the like. He had a growing passion for space and time and boats and those sorts of things. So we talked often about my taking over because he didn’t like to deal with the crap. He wanted the fun. And he had someone like me who was going to be a bit bullish and take on CE, regulation and the distribution channels, things like that plus the general worries of a growing business. Well, he was quite happy to dump that on me [laughs]. He went to New York, came back and said he didn’t feel very well, and six months later he died.
CT: When was that?
PS: That was 1999-2000. The beginning of the millennium. And what was really strange was that there was no time for me to plan. It was very fashionable in the '80s, the Thatcher era, to big-up the guru side, the head of the company. Like Ivor [Tiefenbrun] would have been for Linn, Julian was for Naim. I was the sales and marketing director, so I filled my boots with all of that. Then, all of a sudden, he wasn’t there, and I thought, Shit! You remember how the forums and the industry were full of "This is the end of Naim" or the end of the world and all that stuff? I had no plan for that event because it took us by surprise. Julian was the owner and my friend, and here he was dying and the business seemed secondary to someone’s death. But, once I woke up and shook myself, I understood that the business before was all about the lifestyle, plus Julian made decisions based on if it seemed something was a good idea, then that was good enough for us to have a go. It didn’t matter if it made money or lost money. But as soon as he died, I was faced with what would happen next. The bank had an interest in where we were going and the other shareholders obviously wanted to know what was going on. It wasn’t exactly panic, but I realized that things had to change.
CT: When Julian died was there a plan in place?
PS: There was no plan. And in fact, when Julian was dying he told me that I would take over the company, but he said nothing would really be revealed until he died. So I went though this period of not knowing if the company was going to be sold or his family would take over. It was very weird. So suddenly he dies and I had the funeral to arrange and all that kind of stuff. I just sat there and thought, What’s going to happen now? And the lawyers gathered and looked at me and said, "Well, what are you going to do, Paul?" So I had to look at the business and realized that there was no plan, and I started to think about going forward, although I was initially very uneasy about it. So I looked at who was in the business and how I could develop things. I made Roy George technical director because he wasn’t a director at that time and I told him he had a clean sheet of paper to create whatever he wanted and I needed to decide what Naim would look like in the next ten years. I said to him and R&D, "Come back when you’ve got a plan." There were probably six people in R&D then. Julian didn’t really allow our R&D team to go very wide creatively.
So they were now set free and it was a very big moment because Roy George and his team had been designing 90% of all the products. Julian didn’t like taking on some of the new challenges and that meant that, in some ways, he slowed the process of change down, but who could blame him? Take the communications in the factory. We were on CompuServe for comms because Julian hated Microsoft and Apple. Our processes were antiquated. There was just so much to do, so I recruited new people and empowered the management team. We created a new five-year plan. I thought it was all so bureaucratic, but I decided to go with it. I put a business plan together where I said I would double the business in five years, and after two years in I realized it was such a mess. The R&D team didn’t have the right tools, and in fact we didn’t have enough people. We had to completely throw away the computing system and all the communications. The manufacturing process was in chaos. There had been no investment in the business. The whole thing was creaking. They hadn’t used the moment of profitability during those times to reinvest in the business. It needed massive reinvestment. At the same time, if we look back into the '70s and '80s when we started to make it big, why didn’t we become the size of B&O? Why didn’t we and others become huge companies? They had the possibility. There were wonderful products. There was more competition, true, but we were just having lots of fun. There was no business process, no power management thinking going into organizational growth. So, when I took over, I was made a trustee of the Julian Vereker Trust.
CT: What is that?
PS: There is something called the JV Trust which held the assets of Julian, which were predominantly the Naim shares. Julian made me a trustee of this and the other member was a lawyer.
CT: When did Julian set this up?
PS: He set this up just before he died. JV’s view was that I would take over the company and build it up, but, on the other hand, if the lawyer didn’t think I had a good plan, he could sell Naim. So I was under quite a lot of pressure to come up with a plan that would grow the business. Well, we didn’t grow anything like I wanted to in two years. So in the second or third year I made the decision to discontinue every product in the range and we came out with the new Reference series. Looking back on that now, I think that, with the infrastructure we had, it could have been suicidal. I remember one night lying in bed and thinking, What if they don’t like it, or if the dealers won’t buy it?
CT: But you didn’t discontinue the 250?
PS: No, not the name, but we did. It was in the olive shape before I put it into the new range with a new design.
CT: It was a new amp.
PS: It was a new amp. The 282 came out and the 252. Everything got replaced, not only that but there was the commercial aspect where we launched 24 new models into a market where a dealer would have to invest in demo stock worldwide. It’s a big risk. Well, it was amazing, and everybody went for it. The dealers and the press liked it and we started to grow really quickly. It helped a lot. And the whole cosmetic thing, whether some liked it and some didn’t, had moved up a lot from a quality point of view. So we started to recruit more and more people in R&D and invest much more money. I had regular reviews with the Trust, who understood what I was trying to do and backed it. I had a really good working relationship with them. I was managing director, a shareholder and trustee, so I had to be very careful with compromising any of these positions by doing things properly.
CT: So, let me get the Trust straight. It’s you, a lawyer and who else?
PS: Yes, the two of us and there was also an external financial guy, watching that all was street legal and a sound investment to continue with.
