Tinker your way to scale: James Dyson

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0:41That's why over 3 ,000 firms trust Affinity, the CRM platform purpose-built for private capital. Affinity's relationship intelligence reveals your team's strongest paths to founders, investors, and decision makers using insights It's hidden in emails, calendars, and meetings. With powerful AI tools like Affinity NoteTaker and Deal Assist, you'll spend less time managing data and more time closing the right deals. Learn more at affinity.co slash marketplace. The very first person to stock up vacuum cleaner was a mail order catalog. I was trying to sell to the buyer from this catalog, and I was able to demonstrate it.

1:26we sell a dry powder carpet shampoo that you can use with it as opposed to wet shampooing carpets. He said that won't work. So I went off to the local petrol station, gas filling station, and got some Ribena. Do you have Ribena? There's blackcurrant juice. Concentrated blackcurrant juice drink. I came back and threw it on his carpet and then put the powder down and vacuumed it up and it worked. he said why should I chuck out a well-known brand out of my catalog and put in your thing very expensive nobody understands it and who are you anyway and I said well because your catalog is boring and he sort of looked at me for five minutes and said okay I'll give it a try

2:16that's engineer inventor and entrepreneur James Dyson who founded the Dyson company over 20 years ago. He's probably best known for his breakout product, the Dyson vacuum cleaner. With its bright colors, sleek design, and clear body, it looked like nothing else, and it worked like nothing else. It used patented dual cyclone technology, separating dust from air at a speed of 924 miles per hour. James Dyson's road to his first hit product was long, and it was rough. He turned that success into an invention empire, starting the Dyson company in 1993. Driven by engineering challenges, Dyson has developed a plethora of innovative household items like hair dryers, air purifiers, and fans.

3:00He's also stretched to electric cars, robotics, and now AI. James is driven by exploring what is possible. That mindset is what helped him grow his breakthrough vacuum cleaner into a technology company with thousands of team members worldwide. His scale story is one where innovation leads the way and business decisions follow. I'm Jeff Berman, your host. You've got to have incredible talent at every position. It's like this huge push. There are fires burning when you're going home. Can you believe it? Such an idiot. And then you go back to, this is totally going to be amazing. There are so many easy ways.

3:39I have no idea what to do. Sorry, we made a mistake. But you have to time it right. Oops. working as a three-bedroom apartment. Stuff that just seems absolutely nut balls. Ten years later, we're like, well, that's just how you do it. We haven't made it just how you do it.

3:56This is Masters of Scale.

4:04James Dyson, good morning. You are joining us from the Dyson showroom in New York. Welcome to Masters of Scale. Good morning. Good to see you. I got caught in this torrential rain as I came in. It never rains in England, you know, so I'm completely unused to this. Wouldn't it be wonderful if you had a hairdryer that you could use? Now, funnily you should say that, but actually we put three hairdryers on me as I came into the shop here. Dyson's hairdryers are highly coveted, even at a price point far higher than most of his competitors. It took three of them to dry me, which is not a criticism of the hairdryer, It's just that I was very wet.

4:40Like all of Dyson's products, the supersonic hairdryer uses pioneering technology, like temperature protection for your scalp and remembering your go-to preferences. But James Dyson didn't always dream of creating beloved high-quality household helpers. Growing up, he wanted to be an artist. So let's go back to rural England in the 1960s, when James was an art school student and his path took a turn. The principal of my first art college saw me painting and drawing, And I suspect decided the world didn't need me as a painter. And he suggested design. This is 1965. I'd never heard of the word design.

5:17So I said, what's design? And he said, oh, well, you can design furniture, glass, ceramics. I said, I'll do furniture because I've sat on chairs. So I went to the Royal College of Art and Design to design furniture. And when I was there, I discovered the architecture department, The scale of architecture and the complexity of architecture really interested me. And while I was doing architecture, we had a rather brilliant structural engineer talking about structures. And I suddenly realized that I loved engineering. I'd never been exposed to it. Historically in architecture, architecture had been about concrete and bricks.

5:56But in the 60s, with Fry Otto and Buckminster Fuller, the wonderful American inventor and architect, that now the engineering would be the thing that mattered. Buildings would change because of engineering and the buildings would express the engineering. So that's how I got into engineering. When you made that turn into engineering, you were working on such an incredible range of projects, something called a sea truck, a better wheelbarrow. How is it that you came to decide that you were going to develop a better vacuum cleaner, of all things? Oh, frustration. I had a, I think it was called a Hoover Junior, which was typical of a vacuum cleaner of that era, which had a bag.

6:38And I was vacuuming one day and it wasn't picking up. And I thought, why isn't it picking up? Perhaps it needs a new bag. I went and emptied the old bag out because it was full. I sealed it back up again, put it back in the machine and still no suction. Now that's odd. Why isn't it sucking? And I suddenly tweaked that the bag was empty, but the pores in the bag were clogged. And it's the pores of the bag that result in it being a filter. So I realized how frustrating this was, because the first dust that goes into the bag goes straight to those pores and blocks them. So I looked around for something that would solve this problem.

7:18And like so many inventions, it came from your own need, your own desire for something better. but it took you, as I've read, something like 5 ,000 prototypes in four years to arrive on your final design. Can you help us understand what lessons you learned in that process and why it took so much iteration to get to something that you felt was right? When you develop something, you only make one change at a time. It's not a question of brilliance. Oh, I wonder if this complete thing would work. Because A, it doesn't, and B, you don't know why it doesn't work. So what you do is you start off with your basic idea, in my case, a cyclone, which separates dust by centrifugal force.

8:00You typically see them outside factories and cement works and sawmills as a means of collecting very fine dust. But I was doing it on a miniature scale. I was making one little change at a time, development by iteration. It was before the age of computers. His book, Invention, A Life of Learning Through Failure, describes how he tweaked his vacuum to capture smaller and smaller particles, changing the angles of key parts, the length of the main chamber, and any other detail that might yield a better result. At the time, Dyson was building with the equivalent of caveman tools. It took what felt like forever.

8:38Today, powerful computing speeds up designs like James Dyson's, but the need to iterate remains the same. Making precise, controlled changes to your product can unlock innovations that create a massive impact. I had to do everything empirically, very painstaking. I always like to say I had 5 ,126 failures over a period of four years. And then finally, the 5 ,127th worked. I came in covered with dust and there were highs and the belows. But it was just fascinating discovering what works and what doesn't work. So what did you do when you finally got it right? After those more than 5 ,000 efforts, more than four years, what did you do once you had it?

9:22I went off to try and license it to all sorts of people, including all my competitors. They all had a good look at it, but none were interested in licensing it. Why not? They didn't really want to change. It had become a very boring industry. They're all selling the same thing, same technology, and presumably making money. They don't want to improve. They don't want to make a better product. They don't want to get rid of bags and the problems of bags. They're quite happy as they are. Quite happy not just making the same vacuum cleaners with their dusty bags, but also happy selling those bags as a revenue stream.

9:57And it's in that complacency, the other company's incentive to shoot down his improved technology, that James Dyson understood his business opportunity. I ought to set myself up and compete with them. So I decided to set myself up as a manufacturer from scratch to take on these big multinationals. Did you raise money at that point, or you were just going into debt to do this? Well, I discovered I was hopeless at raising money. I went to venture capitalists and the people I suppose who ought to have lent the money, but they wouldn't because they said we're not lending it to an engineer. Especially an engineer who might have seemed more of an eccentric inventor, perhaps not practical enough to run the financial side.

10:37Eventually, Dyson gave up on investors and took out a loan from a bank. He had to get a friendly manager to appeal on his behalf to get the funds. It was about 600 ,000 British pounds, or$900 ,000, as he recalls. This was 1992. Quite a lot of money, which I take it you took on personally. Yes, exactly. Putting my house up as collateral. Yeah, so you went deeply into debt. Yes. How did you think about functionally where to bring people in and when to bring them in? Because if you're taking on debt, you've got expensive manufacturing, you've got a supply chain, you've got to manage, et cetera, et cetera.

11:15And you must have been very cost conscious, right? If you're dealing literally with borrowed money and you're personally liable for it. So I'm curious just about how you made the decision, okay, I'm going to invest money to hire someone and when you did that. Well, the best thing I'd do was to hire three graduate engineers. The business started with the four of us, doing the drawings for all the components. And then we as engineers went out to the subcontractors, the toolmakers, and to people who might assemble the product for us. As it happens, we couldn't find anyone to assemble it. The people who are doing the moldings for us had a half-empty factory.

11:52So I said, can I rent the other half to do the assembly? So we didn't have to buy a factory. We did have to buy tooling, and that was our biggest investment. It's about six or seven hundred thousand pounds worth of tooling. And the tooling is the means you inject plastic into the molds and the molds are called tooling. We as engineers did that. So we had no production manager, no quality control person. It was just four of us engineers doing that. Then we had to hire someone to run the assembly line and of course people to assemble on the assembly line. James and his team succeeded in solving the assembly line problem.

12:30So it was time to turn their attention to sales. The vacuum market was packed with big, established brands. James could promise his technology was better and more innovative than theirs, but he could not promise store owners that the vacuum would sell. So when I approached the retailers, they weren't interested at all. They said, look, we're selling all the big brands. Why on earth should we sell a Dyson? Looks strange. Why would they buy it? And of course, you can't say why they would buy it. Why would they give over space in their shop to you? The reputation is on the line. I quite understand that.

13:03At the time, in the early 90s, everything was sold on discount and price. And I thought that was wrong. It's boring for a start. It's when you're looking at his price rather than looking at specification and how things perform. And I think performance and durability, enjoyment of use, ease of use, not having to have bags and filters, I thought all that was important. And one of the problems in the early days was getting retailers to allow us to say next to our vacuum cleaner on the stand what the difference was, what the technology was all about. Because in those days, they just wanted people to buy on price.

13:40So that was quite a big breakthrough, getting what we call point-of-sale display material onto the product. That made a huge difference for us. It wasn't just a bet that performance could be a selling point. It was a bet that high-performing vacuum technology could command a big premium. Dyson's Model 1 Dual Cyclone DC01 cost$275. That was more than double the average household vacuum at the time. His bets paid off. Only a year after the Dual Cyclone model hit the UK market, it was the number one selling upright vacuum in the UK. After two years, Dyson was outselling the classic Hoover brand. By 1997, Dyson vacuums were earning about 1.6 billion in sales.

14:23Technology, design, and performance were winning. And as the product started to take off, I have to imagine that half of a manufacturing plant was not sufficient. How did you make the transition from small-scale to large-scale manufacturing? What had to happen for you to get there? It's a painful growing process. You have to employ a lot more people to assemble the product and finding that maybe some people you recruited initially just couldn't cope with the scale. You keep having to move factory. You have to find more suppliers. Some suppliers don't want to make more product. So it's a painful growing process.

15:03It is fascinating. A lot of people think manufacturing is very boring. It's a repetitive process. Actually, everything goes wrong every day. So it's a matter of solving problems all the time. and I was able to recruit good people to help me and ultimately to run all that for me. But, you know, I learned it all on the way up. I mean, it is interesting. We went into Japan very early on for various reasons. And Japan wanted everything to be much smaller. They love miniaturizing things. And we started developing vacuum cleaners just for Japan, small ones. And then we discovered that the rest of the world wanted small things as well.

15:41So it's interesting how designing things for one culture suddenly gives you innovation in another culture. James released several more iterations of the DC01 vacuum, focusing on designs that were more compact or had special features like a power nozzle. But the company was not going to stop at simply sucking up dirt. Coming up after the break, how James Dyson decided where to innovate next.

16:10Real leaders don't back down when the stakes are high. They innovate, they push forward, and then they take the stage at the Masters of Scale Summit. Join us in San Francisco, October 7th to 9th, to hear from the CEO of the New York Times, scientists using cutting-edge technology to find cures, the leader of crypto powerhouse Coinbase, a retired four-star general, and many, many more. Apply now at mastersofscale.com slash apply25. That's mastersofscale.com slash apply25. If you're ready to take your startup from idea to impact, then AWS is your launchpad. From data storage to machine learning to secure app hosting, AWS gives you the tech trusted by the world's fastest scaling startups.

17:00And here's the best part. Join AWS Activate today and you could score up to$100 ,000 in AWS credits tailored to your stage and network. Go to aws.amazon.com slash activate and start building. Expanding your business in the U.S. can feel like a maze. Every state has its own payroll, benefits, and compliance rules, which can pull your focus away from growth. That's why founders use Deal. Deal is the professional employer organization, or PEO, that gives you a dedicated HR expert plus Fortune 500 level benefits for your team. The National Association of PEOs says businesses can grow twice as fast if they use one.

17:43So if you're scaling, make it simple with Deal. Go to deel.com slash MOS and get up to three months free. Welcome back to Masters of Scale. We're exploring the scale story of James Dyson and his life of innovation with the Dyson company. You can find this full interview and more at the Masters of Scale YouTube channel.

18:11It feels like such a shift from artist and engineer inventor to entrepreneur and scaler of a company. Somewhere along the way, you realized and then made the decision that Dyson couldn't just be a vacuum company. that you had to expand into other product lines to scale, to fulfill your potential. Could you share with us how you made that decision and then how you chose what directions to go in in exploring new product lines? Firstly, I wanted to do other things. It wasn't that I felt I had to, because I didn't have to. You can have a very lovely, relatively simple business just making vacuum cleaners, but I wanted to do other things.

18:53And the other things I didn't do as part of a business plan. I did them because I had some technology that could make that product work better. So that's how I approached it, just doing products that we find interesting and fascinating and that solve problems. It wasn't a conscious decision, for example, to go into the beauty business. It's just that we had a particular motor, this tiny little motor, which could replace this huge motor that you see in hair dryers and be quieter and more efficient and dry hair better. With hand dryers, we had no idea of the market size because it's quite a sort of concealed business.

19:33But we felt we had a much better hand dryer that used 700 watts instead of 3000 watts and dried much quicker. So we thought it was a better product. But we didn't research the market to see how big it was. We just wanted to sell it because we thought it was a better hand dryer. So it's always the technology that decides that we should go into a certain product area. It's not a business decision. I mean, you could say that's a stupid thing to do, but it's the way we are. We go where our technology takes us. Going where the technology leads instead of building the business plan first. That's a risky but captivating theory of scale.

20:10And it's worked in Dyson's favor many times. But sometimes it fails. That's what happened when James Dyson went after the electric car market. The industry thought that only 2 % of cars by 2030 would be electric. and we decided that couldn't be right. More than 2 % of people were going to go electric. People would vote with their feet and the industry wasn't taking any notice. We made electric motors, new technology batteries and we know quite a lot about air movement and air treatment and that's pretty much a car. We were quite interested in having one big project and a car certainly answered that question and we developed it with huge enthusiasm.

20:54and we were all very keen on it and were passionate about it. And probably that was a bad business decision. The electric car project hit a snag that James could not have anticipated. In 2015, a major scandal erupted. Dieselgate. Volkswagen, one of the world's biggest carmakers, was cheating on diesel emission tests. This caused public uproar in Europe and the US and resulted in stricter automotive industry regulations. Carmakers had to get in gear to make cleaner cars and fast. You might think this would have benefited Dyson and their plans for an electric car, but suddenly they were not ahead of the curve.

21:30The heavy hitters rushed in, and now Dyson faced heated competition. Just to give one example, if your new manufacturer is starting up small scale, you're paying 30 to 50 percent more for each component than an established manufacturer. And that's because they can buy at much larger scale, so they have pricing power. Exactly. They've been in the market for ages. They know the suppliers. they've got a reasonable price. But we were the new kid on the block, and we were probably being taken advantage of on cost. And to be small scale in the car business is very difficult. I don't have Tesla's type of money.

22:05So we recognized that it would be a really long haul to make it profitable. And very sadly, we had to tell everybody involved in the project that we were stopping it. And we'd spent 500 million pounds,$700 million on it. And it didn't really teach us that much. We didn't really get much from it, except some very talented people who we'd recruited to do the car project who came into the existing business with us. When you make that big of an investment, you put that much time and money into it, and then you pull the plug on it. How do you explain that to your internal stakeholders? What is that process like at Dyson?

22:47Well, I'm the investor, so I'm talking to myself. So I don't have to explain things to investors. I do have to explain things to the workforce. And we had to explain the commercial reality that it would be very unlikely in the short term that we make any money from it. We might in the long term, but to struggle through to the long term making losses is not a good thing to do. And they understood that. And actually, the world was looking for electric car engineers. So those who wanted to go off and continue in cars went off and continued happily in cars. Whereas those who wanted to stay with us stayed with us.

23:24But it's a sad moment. And as you say, it's not just the money. It's the hard work, all the emotion, all the enthusiasm, all the long hours that have gone into developing it. But that's what our life is. Our life's a risky life. We spend a lot of money developing new technology. It can take years and years. We've been developing new battery technology for 10 years, and we're still not on the market with it. These are big, big investments, which are risky investments. And innovation is a risky business. When James looks back on the failed electric car initiative, the biggest takeaway may be to control what you can control, like your own iterative process, and to let go as much as possible of what you can't.

24:06the only thing we did wrong probably was making the decision to go in in the first place when we set out to do it there was wonderful tesla but nobody else we felt the industry was wrong about that but of course circumstances changed and we probably should have stopped the moment diesel gate happened and we saw what the big car manufacturers were doing we probably should have stopped at that point but we carried on for another two years and then realized that our worst fears were being realized and that we should stop it. You can't really learn anything from these experiences because things that happen in the future have different circumstances.

24:45I mean, I've never believed that experience helps anything. I prefer naivety. And it sounds ageous, but I try to employ young people who are unafraid of failure, unafraid of trying something new, and unafraid of pioneering. Experienced people always know why you shouldn't do something. I want people who don't really have that problem, who, in their naivety, question things and want to do things differently and are prepared to ignore the doubting Thomases. There's an inherent tension in this, right? Because it's essential that you have people with the right experience and expertise in understanding how things work, how to build things, and yet you want that naivete.