Focussing on being the absolute best pays off with fast-growing worldwide sales for headphone technology company

By Andrew Patterson

Headphones these days have become the fashion accessory de rigueur.

If it’s not the ubiquitous white earbuds that every runner, walker or fitness fanatic seems to possess these days, it’s those slightly over the top headphones that always look somewhat out of place on the wearer.

What might surprise you is that an innovative New Zealand company, Phitek Systems, has been at the forefront of developing technology that has made it a leader in a particular type of headphone favoured by international travellers.

Noise cancelling headphones contain a special piece of technology that significantly reduces the noise from the plane’s engines if you happen to be using them in-flight or any environment where noise is a distraction.

By effectively cancelling out the external noise source, the user is transported into a quiet zone of peace and solitude while also being able to access music or other audio delivered in a rich surround sound format that is almost too good to believe.

Ask anyone who travels internationally regularly for their job and they’ll tell you these headphones have become almost as essential as their passport.

The company has also worked closely with several major airlines to build this noise cancelling technology into passenger seats.

Paul van Tol, Phitek’s CEO says it’s a business that is continuing to grow rapidly, despite competing in the crowded consumer electronics space which you would expect to be completely dominated by Asian suppliers.

“We focus deliberately on being the absolute best because many people are no longer interested in just buying a $49.99 pair of headphones. These days they’re often willing to pay to pay up to $US299 for a good set of headphones that, number one, look great and secondly, sound great and Phitek has made that decision to continue to focus on excellence at the upper end of the market."

Competition

Sennheiser and Bose are our two major competitors and they have their own proprietary technologies, but where Phitek is different is that we have a technology we offer to a number of other brands and while [for commercial reasons] I can’t say who those brands are, we’re actually part of some very successful headphone technologies produced by those companies.”

Anyone who has travelled internationally has seen all too frequent occurrences where a passenger forgets they’re wearing headphones and goes to stand up suddenly, which can often lead to the plug being wrenched from the socket causing it to break.

Phitek have developed and patented an innovative solution to fix the problem where the headphone plug is actually magnetized and easily detaches from the socket located in the seat avoiding any damage to the componentry.

For airlines, with fast turnaround schedules, anything that avoids unnecessary repairs being required within the aircraft cabin itself is obviously welcome.

“It sounds so simple in hindsight, but when we presented it to the airlines they were certainly drooling over the concept when we showed it to them.

Right now we’re talking to just about every airline in the world about this technology because they all recognise the immediate benefit of it.

The concept development didn’t actually take that long. However, the airline industry is very strict around regulations pertaining to quality and safety so to get from the initial concept we presented last year through to manufacturing has taken us more than a year.

Innovation

Innovation is obviously vital for any technology company’s future success. Continuing to come up with new ideas is the lifeblood of businesses like Phitek and Paul van Tol says market validation of ideas is the first step.

“We use trade shows to present prototypes and see whether there is any real interest in the idea.

"We don’t go into full blown product development until we’ve tested the market and until we’ve got a first tentative order in place and I think that’s been important for Phitek to realise that you can’t spend all your time and money on a development in the hope that it will take off. You really have to validate the idea first.”

However, not everything works out according to plan.

“Sometimes we have come up with ideas that have just failed and it’s only then that you’re grateful that you didn’t invest all you time and money in it."

Manufacturing

The production side of the business is split between manufacturing operations in both NZ and China.

“The connectors are all made here which makes it easy. In China, where he have a design house, we offer customers the complete range from either just the technology platform through to the design and contract manufacturing."

"I actually made a choice a few years ago that some people might consider quite dangerous where instead of spreading your work around a range of manufacturers to keep them honest, we’ve built a very close relationship with one contract manufacturer, and while we’re always checking prices, we find the arrangement works well for us because quality is absolutely key.”

99% of what Phitek produces is exported with the company’s main markets being Europe and North America.

Future growth

The business has recently been split into two parts in order to streamline its operations with Paul van Tol basing himself increasingly in China.

“Our business in Hong Kong and China is growing very fast in terms of staff. But where you have buyers in Europe and their buying offices in Hong Kong being in NZ has proven not to be very practical and because this is a very technical sales process you can’t really have your sales people in one place and your technical people in another so unfortunately the headphone side of the business is slowly slipping out of NZ.

"However, what’s great about NZ, speaking as a non-kiwi, is that you can pull a team of people together here and it doesn’t matter what job they do, they have a very broad range of skills. What I’m struggling with in Hong Kong and China is that jobs are much more defined and everything is a lot more regimented."

"I really miss that freedom you have here of being able to walk out into the office and say I’ve got a problem, who can help me with it and someone will step up and sort It out."

So that’s one of the great advantages of starting a business here. People have that broad outlook and everyone has that give it a go attitude.”

"Right now there are few signs of the recession at Phitek. The business is growing rapidly and that presents its own set of challenges for management."

“My two biggest issues right now are finding additional qualified staff, particularly mechanical and electronic engineers and more working capital to take advantage of the growth that we’re currently experiencing.

"It’s a great problem to have compared to a couple of years ago when business had become quite flat but luckily, operating at the upper end of the market, we haven’t really seen much of a downturn at all."

"But I’m really excited about the future. This is a great company and the innovation that is starting to emerge from the two parts of the company only makes the next few years all the more exciting for Phitek.”

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