ELI OÜ is one of the oldest Estonian enterprises, which, despite starting in the sound system business back in 1987, has grown into a considerable development and production company operating in the modern defence industry. Head of the enterprise Tõnu Vaher explains what prompted the experienced enterprise to join the Enterprise Estonia development programme last year and what rewards have they reaped as a result.
What exactly compelled an enterprise that has been active in its market segment for such a long time to think of its future development?
We are more “old-school” as they say (when it comes to our age that is, not so much in how we feel or think) and had been doing our own thing for decades. But then we had an idea and took the bull by the horns. I can’t really say it was in any way systemic. We never used to set specific dates or use time tables in our product development process; we would rather match the launch of our new products with upcoming exhibitions and fairs. However, this proved to be quite time and cost consuming starting from development all the way to testing.
A while back we participated in Enterprise Estonia’s practicum of business models where we attempted to achieve a more complex approach to our product development. The sessions were fascinating as we had wanted to see how modern business development works, in particular, see it from another angle. Even though what we learnt wasn’t rocket science, it helped us in seeing our own processes in a different light – how to make decisions, how to develop products, etc.
For us, it was about finding other aspects that could aid us in making decisions in our own product development process. We’ve had good business instincts in the defence industry and we know our market. So the main result for us was getting the confirmation that we were doing the right things. And learning quite a few new tricks as well. This led us to the Enterprise Estonia development programme.
Which stages of the Enterprise Estonia development programme have you undergone so far?
We started by mapping our current situation, which resulted in a large Excel table with all our activities and numeric measures listed. In the past six months, we have further supplemented and specified this, and as a result, have a significantly better understanding of our graphs and activities. This has allowed us to take a much more systemic approach to the whole process, saving resources and improving cost-effectiveness along the way.
In the second stage we cooperated with two mentors, which gave us the opportunity to compare them. However, the different stages were of different levels. The main advantage of including mentors is that they can give you an outsider’s perspective. The possibilities of our market are rather limited and the defence industry is fundamentally different from any conventional business aimed at final consumers. As a result, we also had to “educate” our mentors so they could provide us with more appropriate advice. In defence industry product development, feedback can sometimes take 5 to 10 years; one of our products developed in 1996 is still on our sales list and recently received a large export order. We are also dependant on the defence procurements of various states that are planned with a 10 to 25-year perspective. The number of contacts is also quite limited and we don’t have that many events. However, we have participated in industry exhibitions from 2000 and, in cooperation with Enterprise Estonia, have recently taken part of the joint Estonian stand in the main defence industry exhibitions such as Eurosatory 2018, UMEX 2018, DSEI 2017 and will also participate in IDEX 2019 held next year.
So you are now at the brink of the third stage of carrying out your planned activities?
Officially we are still waiting for Enterprise Estonia’s final confirmation on our development plan, however, in reality, we have already started to implement the planned activities. Soon the activities supported by Enterprise Estonia should also take off, although we have also already started these. Many start-up companies often think that once you have completed a beautiful and useful product and offer it for a good price, customers will just line up. The reality is that no-one expects a new manufacturer to enter the market and investing in marketing is one of the key aspects of growing your business. We have increased the number of our employees, in particular those involved in sales and marketing and taken a more systematic approach to these activities. The need for such an approach was one of the outcomes of the diagnostics conducted in the second stage.
Will ELI be developing new exciting products as a result of participating in the development programme?
Actually, our aim is to decrease the number of products and focus on smaller product groups, while further improving their quality. This shift in our business philosophy has already led to great results. We want to do less, but at a better quality!
A few years back we were manufacturing unmanned aerial vehicles (UAVs). Although we have now ended their production due to the costly development process, we still offer support to our former customers. The reason is simple – the manufacturer of aerial vehicles is responsible for absolutely everything that may go wrong or break. A component manufacturer, on the other hand, is only responsible for its respective parts. Large systems are also quite difficult to export as they need to include at least a 10-year local support service. This, in turn, presumes larger export volumes on specific target markets.
It’s also becoming increasingly difficult to come up with something new as most things have already been invented, leaving us with the pleasure of improving them. In their structure and essence, guns have largely remained the same for 200 years – you put gunpowder in and a bullet comes out. Everything else is just improvement.
We do, however, carry an innovative product in the form of drone nests – resembling a hot tub in its shape, the nest can be closed with a lid and enables the charging and changing of batteries, allowing the drone to stay in the air for practically the whole time. To this end, we had to include precision landing and positioning equipment as the precision of landing has to be measured in millimetres. We have successfully tested the product for 1.5 years and are certain that it has potential. We have also continued manufacturing mortar firing range simulators, gun recoil and various training equipment, etc. Patenting new products and protecting their intellectual rights brings about significant expenses for smaller enterprises as you will inevitably face situations where an identical copy is launched. It’s difficult for small enterprises to protect their patents, however, it provides the opportunity of selling licences for their use. Patent activity is supported by Enterprise Estonia through innovation vouchers. This is a service we also use.
Why should other enterprises consider joining the development programme?
Sometimes enterprises need to engage in introspection to realise whether what they really want is to gain more fame or earn more money. We wanted both – drones and robotics come with fame and attention. At the same time, we make the most profit from products people know nothing about, such as aircraft mechanisms for releasing parachutes and gun recoil equipment. As developing any new product requires a lot of time and resources, it makes sense to conduct a thorough analysis with the help of external experts. All sorts of start-ups are great as they have the time and energy. More mature enterprises, however, tend to weigh the pros and cons instead of jumping head first into various projects. This is where the large Excel tables and specific development plans come into play. The development programme helps you better navigate your enterprise’s current situation and set more specific goals that can then be reached through thought-out activities.
“Actually, our aim is to decrease the number of products and focus on smaller product groups, while further improving their quality. This shift in our business philosophy has already led to great results. We want to do less, but at a better quality!”
Tõnu Vaher, Head of ELI OÜ