Anittel's Ilkka Tales talks to Leon Gettler

Fast growing ASX-listed IT services provider Anittel has a rigorous policy around research and development.

The company's former chief executive officer Ilkka Tales says the company devotes 1000 hours a month to development of products and services. It means making hard decisions and choices, something that every strategy requires.

“We have more than 160 engineers,’’ Tales says. “The question for us is taking their time off from billable type of work to focus on services and product development. In our segment of the industry, it becomes a challenge because the prioritisation is for revenue generation rather than product development per se.

“The norm within any business is that revenue generation is the number one priority. The development side gets left to second priority. We have changed it slightly within our business.”

One of the most radical measures at Anittel was to appoint someone to work as a champion of research and development within the company. “We have one person responsible for development,’’ Tales says.

“He is responsible to a certain degree of approving development work. He is responsible, along with our CFO, for making a business case for a product offering or a service.

“We do the analysis, prepare the business case and then roll that through as a project in its own right. We then measure the success of the outcomes of that project.

“We get the best and brightest working on it and he approves their time spent on it in the same manner that we do for a particular project. It’s the same process basically. He is an internal client and at the end of the day, he manages product and service development for us.”

Tales says the best research and development ideas come from three sources. “They come from your customers, your staff or your suppliers and parties you do business with. Those are the sources of value creation in time of innovation of ideas. It doesn’t happen in a technical sense.

“If you look at the whole value chain, you have product development, you have channels and you have got technologies as part of that mix,’’ he says. “Most of the value gets created at the financing end. So it’s about being able to package your service very differently, or being at the brand end, being able to market your services or products differently, whether that’s through channels or brand pricing at that end of the mix.

“Our product development guy is responsible for the whole value chain and making sure that we get a good mix of development across the business.”

At this stage most of the ideas seem to be coming from customers. They have particular requirement s needing to be addressed.

“Our customers are generating ideas, maybe because they have particular needs to be solved so we are quite focused on our customers and working through verticals and making sure we try to develop solutions for them,’’ he says. “That generates a fair amount of the ideas from an innovation perspective.”

“It’s market driven in terms of where we see the opportunity. It’s very much business case driven.

“Our challenge is making sure we are focused on the right ideas and services from an innovation perspective. We come up with an idea and do the business case. Then we go and do a test market to see whether it is taken up. The proof is always with the customers so we try to get that cycle of ideas happening as quickly as possible.

“Inevitably, not all ideas are good ideas and the proof always comes out of the customer engagement. And through that process you develop something that starts driving a bigger investment.”

As part of the process, he says, the company has also set up a wiki for its engineers. The wiki is aimed at helping them collaborate and create ideas for research and development.

There is a lot focus among engineers looking for solutions for customers or trying to address problems, he says. “It’s a collaboration site. They can foster ideas and find out who is interested, arriving at a particular solution across the organisation. So what we end up doing is building champions within the organisation.”

At this stage, the site can only be accessed by the engineers. But Tales expects it will eventually be made available for customers, allowing them to come in with their ideas. The investment is paying off. After doing eight acquisitions last year, Anittel took the top spot in the CRN Fast50 last year, making it the fastest growing reseller in the country. Tales says investing in research and development was a strategic decision to give Anittel a competitive advantage in a crowded market space.

“It’s the key for us, otherwise it’s just ‘me too’,’’ Tales says. “The challenge for the whole community of resellers is how to innovate in a market where revenues are high but the margins are low. How can we change the model to help us gain market share and by the same token be very different to what everyone else does?”