Growing in leaps and bounds
Small Kiwi company Aranz Geo is ramping up revenue globally under a fast-growth business plan. Fiona Rotherham reports.
Shaun Maloney was relaxing on a beach on Australia's Gold Coast when his wife told him it might be a good idea to get a job.
The couple and their family had just finished living for several years in the UK where Maloney had helped Hamilton-based interactive messaging company Talkingtech spread its wings globally.
Having worked in corporate banking roles prior to that, Maloney knew he didn't want to have to "wear a suit and tie and talk bollocks again".
Like many expatriates used to dealing with customers with multi-million-dollar budgets, Maloney was worried New Zealand would be a great place to live while a sleepy part of the world to work in.
"If we want to tap into the skillsets of these expats we need big business opportunities out of New Zealand. There's just not enough of them," he says.
The 53-year-old spotted his own opportunity when Aranz Geo, a small Christchurch company with some exciting geological 3D modelling technology, wanted someone to help sell the product globally.
Now running the company, Maloney has helped deliver on an aggressive three-year strategic plan which has seen revenues double year-on-year, rising from $2 million in 2010 to more than $12m today. And he's just put the finishing touches on the next three-year plan which is equally as bullish.
Its global expansion included opening its second sales and support office in March - in Belo Horizonte in Brazil where the company's had a 50 per cent increase in licence take-up in the past year.
It now has its own offices in Christchurch, Australia and Brazil and distributor offices in South Africa, Denmark, Canada, Chile and Peru. Along the way it's grabbed a Research and Development grant this year from the government-funded Callaghan Innovation, won a special commendation at last year's New Zealand International Business Awards, and was named top of the 10 hot emerging companies on the annual TIN100+ list of fast-growth hi-tech companies.
Aranz was founded in 1995 by Rick Fright and Bruce McCallum, initially focused on 3D medical imaging.
The company's history even includes a close encounter with an asteroid. Maloney says it was before his time but office lore is that Nasa heard about Aranz's pioneering 3D modelling technology more than a decade ago. This was after a US spacecraft entered orbit around a passing asteroid, Eros, and collected a full year of data on its surface composition, topography, and other properties. Nasa wanted to turn this raw data it had collected into a 3D model. Aranz duly did the work and the model and a $1200 or so bill was sent to the US space agency. It became an office joke though because the bill remained unpaid for several months. When the late payment was finally queried, Nasa said it hadn't paid because it thought there had been a billing error with the decimal point in the wrong place.
The technology's scanning component was also used in the Lord of the Rings movies and TV series such as CSI.
In 2004 the geological modelling software was spun off into its own company, which is still majority-owned by the two co-founders who sit on the board, and other private investors.
The pioneering Leapfrog technology has created a major shift in the mining, hydrogeology and geothermal industries because it allows them to generate a highly sophisticated 3D model in hours or days that would traditionally have taken months to produce. This saves the users big bucks in time and decision-making so they don't start digging in the wrong places and the models can be quickly updated as new information comes to hand. Aranz Geo has signed global corporate supply agreements with the world's top 10 largest mining and exploration companies, including Rio Tinto, BHP and AngloGold Ashanti.
But gaining a global footprint quickly and from New Zealand doesn't come easy.
The initial plan was threatened - like those of many other Canterbury companies - in the 2010 earthquake when it got shaken out of its central city building. Among the things destroyed was the handmade model of the Eros asteroid.
Maloney had joined just three weeks before the September quake struck. Aranz Geo then moved six times in two years before signing an eight-year lease for its current offices.
The first thing Maloney did was a market research project on past and present users of the software and those not yet using it to find out what people liked and didn't like about it and the overall market it was competing in.
"It cost over $100,000 which is a lot of money for a wee company and others may have considered it folly, but it was the most valuable thing we have done."
That analysis found that worldwide the Leapfrog brand was well-regarded - it was seen as fun, cool, and different. The decision was then made to step on the gas for growth.
Under the three-year strategy the world's top 10 mining and exploration companies were targeted with Rio Tinto the first to sign up. The rest landed in the next 18 months and Aranz Geo then started work on the next tier. It's opted for a distribution model to sell user licences that deliver less profit because of the high cost of sale but allow the company to grow a lot faster.
"We're essentially giving away 100 per cent of the first year's revenue but it is all about recurring revenue and that 100 per cent cost of sale is down to 15 per cent by year two," Maloney says.
With nearly 100 per cent of sales offshore, Maloney and his 60-strong team spend a lot of time on planes. They also de-risk the global expansion by spending a lot of time doing their homework before entering a new market.
Maloney says that includes networking with other export-focused Kiwi companies who have operated in that market. For the move into Brazil NZ Trade & Enterprise's help was sought along with that of expats living in Brazil that the company connected with via LinkedIn. It also hires a professional agency to investigate what's happening in each country which could potentially impact on sales and engages external social experts for advice on local practices.
It's all about reducing mistakes, he says.
Cultural differences are carefully considered, with language being the most obvious barrier.
"However religious, legal and business practice and process have far more influence of our successful establishment into a new market," Maloney says. "Additionally it can be the small things such as getting word choice and terminology right or wrong and not understanding the ‘people' idiosyncrasies such as temperament and social hierarchy that will destroy your brand before you get off the ground."
So far the company remains committed to being based in this part of the world, supporting its global thrust from Christchurch.
"It's a good place to operate from and there's a pool of talent from an IT point of view," Maloney says. The downsides though include distance from market and the impact of the foreign exchange rate on profits.
Although business plans generally look out of date the minute they're printed, Maloney says they're as much about what you're not going to do as what you are going to do.
"Without that you're an aimless ship in the ocean."
All the milestones set out in the first three-year plan were achieved, something Maloney feels "chuffed about".
The current three-year plan is as aggressive as the last but has a different focus - moving from selling as many software licences in key markets as it can to approaching early adopters further up the food chain who can make purchasing decisions in each company and creating more value for the end users through software as a service.
Maloney cites the example of one company he offered the software free for the next nine months. Aranz then worked closely with the company to fully utilise the technology. At the end of the nine months he sat down with the company CEO who was more than willing to sign up to pay for it.
‘That company has now spent more than half a million dollars with us and has 100 users and growing."
The new model requires both a shift in business process and the mindset of staff who will need to front up to customers more often.
"Our growth will be built up around customer engagement. Under that model people buy from people they like and it's not just about having the leading software, they're buying into the company. The only way to do that is to get in front of them."
Funding is always a challenge for high growth companies and Maloney admits Aranz Geo is no different. It has managed so far to self-fund growth out of revenue and remains profitable.
When asked whether a public listing of the company was likely, Maloney passed the buck. "It will be up to the board if they are happy to continue to pursue our growth strategy on the same self-funding strategy or consider new equity through external investment including a potential IPO."
Maloney, as you can probably gather from the name of the pub he built in his backyard, has a serious sense of humour.
The company played an April Fool's joke on its customers, sending out a release update on a new product called Froggie. Customers were told that the animated frog would look much like the paper clip in Microsoft Word, and appear and abuse customers in geologically-sound terms when their work was rubbish. Some customers replied that they thought it sounded like a good idea and congratulated the Kiwi company on its innovation.
Some jokes transcend the language barrier.
YE OLDE ENGLISH PUB
Most people have a vege patch or a tree hut or even a swimming pool in their back garden. But on his 10-acre lifestyle block in North Canterbury, Aranz Geo chief executive Shaun Maloney has built a replica old English pub named the Bike & Bovine.
He hand-picked and shipped over the recycled interior fittings from the United Kingdom and even the coasters and the magazines are what you'd find in a real Cotswold pub.
Why did he do it?
"Things got a bit out of control," he admits with a grin. As an expatriate returning to his home town of Christchurch after several years working overseas, Maloney found he missed the UK lifestyle where people tended to meet at the pub and socialise. In his new neighbourhood of Ohoka there's less going on and most socialising is done in people's homes.
So he built his own pub, working late at night and at weekends, much to his wife's chagrin.
The finishing touches were made in the early hours of the morning in late November just hours before around 120 people turned up for work's Christmas do. "The whole day was a blur, because I was so tired," he says. Three of the Aranz Geo staff are "dab hands" at brewing and have their own label, Hopper Frog, which was on tap at the Bike & Bovine for the day.
So what did the pub cost? "My wife asked me that," he says non-committedly. And what did you say? "The most expensive thing was the flooring because I couldn't do that myself. It probably cost around $50,000."
Sunday Star Times