The company
Yellowfin was formed in December 1999 to develop and bring to market a new revolutionary type of marine drive. With a staff of 23, Yellowfin is geared up to be a world leader in innovative propulsion systems. The company has a very high growth pattern with projected sales of £212m in 2009 and £464m in 2010.
Its products, variable surface drive (VSD) systems, respond to changes within the marine and boating industry and are aimed at bringing enormous fuel and energy savings. It has joined up with a distributor and major engine manufacturers to distribute its drives as a package selling into a global market of which the addressable market is $6bn. The company is currently valued at around £40m, but will float at a substantially higher valuation.
The aim of the company is to increase the leisure appeal of boating and bring it to a wider public, improving the quality of life, as well as creating a cleaner environment for both sea transport and leisure craft and making products safer and easier to use.
The company has vision statements enforcing this aim. One is “To strive through innovation and excellence to eliminate inefficiencies, to provide solutions for a ‘cleaner’ world and better quality of life and to build a reputation of excellence, integrity, honesty and reliability with customers, suppliers and staff”.
The company’s approach to corporate social responsibility (CSR) is reflected in this vision statement, as by bringing its products to market it will be reducing the environmental impacts of the marine industry. For example, motor boats (of which there were more than 20 million in 2004) have been cited as major causes of pollution.
Yellowfin is also very active in supporting and promoting science, engineering, innovation and the role of women in business through talks to schools and various organisations.
This case study focuses on the entrepreneurial approach and innovation in the marine leisure sector that aim to deliver environmental benefits.
The drivers
The technology of marine propulsion, and in particular stern drives, has developed little in the last 60+ years. As a result, engine design is very inefficient and misses the opportunity to reduce the impact on the environment in terms of fuel emissions and energy use. In 2002, marine service and shipping consumed 3,676 million tons of oil equivalents (MOTE) energy, which cost £1.14 trillion pounds. Improving efficiency is recognised as key to environmental sustainability in shipping and makes economic sense, with volatile oil prices and concern about the impact of using fossil fuels (like oil) on climate change.
Anne Duncan, a founding director and CEO of Yellowfin, wanted to change the situation. She had previously helped to revolutionise city street cleaning machines. Their design had suffered from poor reliability and led to re-distributing dust rather than cleaning it up. A patented water re-circulation system was developed so that far less dust was created. This innovation is now in use throughout the industry.
In addition to the founding director’s drive to create, innovate and build things to function more efficiently, the economic argument for a new technology that did not pollute as much, that was more efficient and saved money was compelling. This, coupled with a market opportunity (nothing was either on the market or planned for release), was an important factor.
Taking action
Before the Yellowfin VSD concept was formalised, the founding directors had tried to develop innovations in wind harnessing for electric power generation. However, the concept was before its time as the market for wind power was very immature in 1996. CSR did not exist as a business strategy, making new product development aimed at meeting social and environmental expectations an alien concept. Fast forward to 2006 and now there is a growing market for these types of products.
Undeterred by the failure to bring wind-power technology to market, Yellowfin’s founders recognised a new opportunity when managing a boat company in France. Here they saw at first hand how difficult traditional engines were to use and dock and how inefficient they were.
One of the challenges in getting a drive system to market is to convince the industry and investors that it has a market place. To do this Yellowfin had to build a working model and get independent assessment from a University to validate the claims.
Finding funding was a huge challenge. The company went to private equity groups and business angels, who reviewed the results from the verifiers. Funds were raised and used to develop the product in the water (the company is based in the port of Southampton).
The high overheads of prototype production (because of the need for highly experienced and qualified engineers) meant that there was no income for four years. What made it worse was that everyone committed to the project knew that there would be four years of no earnings.
Throughout the development stage Yellowfin was keen to use local suppliers, supporting local and regional companies.
Once the company had convinced the market of its product’s feasibility, it needed extra investment to get to market. To do this, it sought the help of engine companies. Four drives from 45 to 3,000 horse power are currently being tested for different boats in the leisure market.
To get this far in the development of the drive technology – a new product that has the potential to revolutionise its industry – the culture of the organisation has been important. “We have a very open culture. It’s a no blame culture that encourages innovative ideas,” said Anne Duncan. “We also believe we can help promote innovation in British industry. That’s why I chair Innovation and Enterprise groups and why we promote science and engineering in schools”.
The business benefits
The technology produces 100% more effective power from the same size engine as conventional inboards, so giving enhanced speed, acceleration and desirability. The drive system reduces fuel consumption by 50%, lowering operating costs and increasing range.
It also reduces emissions by 50%, materially improving environmental impact and ‘sociability’. These features are a benefit as they make the product highly marketable.
By providing direct braking and dramatically improved manoeuvrability and control the technology helps improve safety another feature of real business benefit, again for marketing.
Why is it CSR?
The idea behind Yellowfin is to bring to market a commercially viable new product which will reduce the environmental impacts of the marine industry. Managing a company’s impact on the environment, for example by lowering energy use, fuel emissions and pollution levels is a key component of CSR. Yellowfin’s VSD technology will mean that, when operational, the company will go beyond the required legal requirements for current stern drives.
What next?
When the drive technology is used at a certain speed, the hull design starts to negate some of the engine efficiencies. So one of the directors is researching hull design technologies to complement the use of the drives. A new company will be formed to explore the possibility of using VSD in shipping vessels and to explore the application of the drive technology in other sectors, for example in aviation.
For more information on Yellowfin, please contact Anne Duncan by email Anne@yellowfin.com.
© Article 13 and CBI – CSR Case Study Series, September 2006
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