Darren Richardson was constantly managing through either the
high end of the current business cycle or the low end. No sooner
would Mad Catz Interactive Inc. celebrate a profitable year, then
the five-year peak marketing cycle of the latest Xbox or
PlayStation console would end, dragging the company’s customized product line down with it.
Following the last roller-coaster ride in 2006, Richardson, who
serves as president and CEO of the computer and console gaming accessory manufacturer, decided it was time to reposition the
company away from all the peaks and valleys.
“Everyone in the company had worked very hard, and in 2005,
we had a record good year,” Richardson says. “Then in 2006, we
had a record bad year, and we gave back all the profits we had
made the previous year. It felt like all our efforts had been for
naught. After doing some analysis, I came to the conclusion that
we needed to change our positioning and move away from being
a high-volume, low-priced supplier to a low-volume, high-priced
leader.”
Richardson locked himself in his office for four days after the company reported a loss for fiscal 2006, getting down into the SKU-level
detail for each product at every retail account and creating a mini
profit and loss statement for every placement. The analysis paid off
because it was after that data review that Richardson decided to
change the company’s entire value proposition, a decision that later
benefited the bottom line.
After the close of the company’s 2006 fiscal year, Richardson
and his team set out to reposition Mad Catz during the next 12
months. Despite backing away from some business, the company’s
revenue for fiscal 2007 remained relatively unchanged. Most notable,
however, was the fact that its gross margin percentage nearly doubled
in 2007, generating $25 million in gross margin versus the $12.6 million
in gross margin it earned during the prior year. That gross margin
swing returned the company to profitability and allowed Richardson
to pay down debt. Richardson says his main lesson was that generating unprofitable sales revenue doesn’t always translate to shareholder value.