Russell sharpens Arrow and aims at new targets

Mega-reseller Arrow Business Communications can chart its long history back to the launch of a small mobile service provider in 1995 and one man has been at the sharp end of its many twists and turns from day one - CEO Chris Russell.

It all started when Russell qualified as a management accountant at Sony. "The Finance Director there asked me to join a team of three people tasked with launching a mobile service provider business," recalled Russell. "I was responsible for the Finance and Operations function, but that quickly morphed into a sales and marketing role. We grew that business to 120 people and £40 million turnover in four years before we sold the consumer customer base to Vodafone in 2000.

"From there I was lucky enough to be sent to Los Angeles to take part in Sony's MBA programme at UCLA before returning to Europe to work in its new business division. By chance, I was asked to look after the remnants of the business that we had sold a few years earlier which we then bought via a management buyout in 2003. That business became Intelicoms, our second venture in this market."

Within four years Russell and his management colleagues had turned the loss making business into a vibrant reseller which was making £1.5 million per year and, as they were all about to start families, they decided to sell the business to Arrow. "I honestly thought that would be the conclusion of my time in this industry, but Arrow asked me to stay on as a Non-Executive Director and, after it ran into some cash flow problems, I led the injection of new equity funding into the Arrow Group which resulted in me becoming the majority shareholder once again," explained Russell.

"This became our third venture in this market and we followed a more acquisitive strategy to complement our organic growth. Between 2010 and 2016 we completed seven acquisitions which broadened Arrow's expertise to include traditional telephone systems, unified communications, data services and IT while augmenting our national footprint."

After trebling the size of the company, Russell and his team faced the same crossroads once again and decided to search for private equity funding to accelerate growth. "Just over a year ago we completed this strategic investment process and started on our fourth venture selecting Growth Capital Partners (GCP) as our partner for an ambitious growth strategy," he said. "This is a true partnership deal with both parties holding a 50 per cent shareholding. All of the management team stayed with the business and remain committed to deliver this stage of our evolution."

Today, Arrow remains a value added reseller of business services to the UK SME and corporate markets, with seven offices and 160 staff supporting over 4,000 customers ranging from entrepreneurs and SMEs to multi-national organisations. The company has a buy-and-build strategy supplemented by organic growth, and to make this work it has developed an operational platform and an effective cross sales strategy. "We will focus on our acquisitions first and more on the value plan once these foundation acquisitions have been completed," said Russell.

"Meanwhile, we aim to nurture close customer relationships through personal contact while offering dynamic solutions that suit all types of customer. We've added gas, electricity and water services to the business portfolio this year so we are now one of very few companies in the UK able to provide a full energy, telecoms and IT consultancy proposition."

The company has trebled in size since 2010 hitting £30 million in revenues and EBIDTA of £5 million, but aims to double profits between 2016 and 2019, adopting what Russell calls a ‘hub and spoke' approach to integration and a ‘Kaizen' culture (constant improvement) which was a watchword at Sony in his early days.

"We like to keep the local offices to preserve the customer relationships that have forged in those businesses over many years," he added. "We have particular expertise in the education, hospitality and legal sectors and many of our customers buy multiple services from us and have been clients for many years.

"Our one word for the business has always been ‘relationship', we want a relationship that we can be proud of with all our stakeholders - be that the local community, our suppliers, shareholders, employees or customers. We are a direct business that provides a solution sale and we are looking to work with like-minded partners.

"The biggest change has been the culture in Arrow. Two to three years ago we realised that we had outgrown our skin and needed to change before we could grow again. That started ‘Arrow Vision' and has led us to a new structure, culture and employee engagement programme that has helped to prepare us for the growth phase that we are now in.

"Our culture is all about three words: Empowerment, Collaboration and Ownership. I don't believe that silo based organisations will work in today's world and I'm amazed by the collective power of 160 brains to solve problems. That is what I want to harness each day. The final piece of that jigsaw is ownership. I want everyone to act as the owner and that is why everyone is a shareholder at Arrow after one years' service.

"The best endorsement of this was our first employee engagement survey which we completed in November last year. We achieved an engagement score of 90 per cent, 13 per cent above the benchmark and in the top 10 per cent of all participating companies. For our first attempt this was an amazing result and a testament to the team spirit at Arrow."

Arrow has four main areas of business - telephony, data, IT and energy - and each breaks down into subsections. IT, connectivity and hosted telephony are growing massively and the company continues to invest heavily in these areas. For example, in energy supply Arrow has purchased its own energy management platform which has won top industry awards.

Latterly, the company has reduced its dependence on some of its more traditional areas such as mobile which now only accounts for 40 per cent of its revenues, down from 85 per cent. However, as one of only six dual licensed network service providers the company has created its own range of tariffs. "These have proved to be successful and are now taken by over 50 per cent of our mobile subscribers," said Russell.

"The mobile market is tough but it's part of our DNA. I wish that we didn't have to directly compete with the mobile networks. When we started, the mobile market was 80 per cent indirect and now it's 80 per cent direct, and it's the only market where we compete directly with our suppliers virtually all of the time.

"Moving forward, it is really important to stay flexible in our approach. We will continue to develop the services that our UK business customers want and I am sure that this will include full fixed and mobile converged products including full employee collaboration and video communication. There are always gaps to fill, some of which we haven't even realised yet. It is fascinating that we are selling products now that I wouldn't have predicted three years ago, such as water, IoT and energy.

"We are also taking our customers on a journey into hosted telephony and beyond. The range of products that we must understand, market and sell does increase the complexity of our business. And we must achieve all of this alongside our acquisition strategy that will see us add and integrate two companies into the group each year in a competitive market while achieving our targets and building and keeping our team. I would say that's enough to keep us busy!"

Looking back on his career, Russell is eternally grateful that his team has been loyal to him for 20 years and has worked so hard to get Arrow where it is today, and he has only one regret. "I just wish I had learned that culture beats strategy much earlier!" he said.