Tapping into a problem – 25 years of Fundamentals
On the wall of Fundamentals’ Bladon Meeting Room – named after the home village of Co-Founder Nick Hiscock – hangs a picture frame. Displayed are two sheets of paper. Creased and coffee-stained, two electrical diagrams hand-drawn in ballpoint pen are still legible. Below, in a small red-lined text box, are the words: “Does this work – of course it does!”
More than thirty years after these two scraps of history were created, Nick’s son Jon (now MD of Fundamentals Group) proudly explains how they changed not only the lives of his Father and his work partner Chris Goodfellow, but also transformed voltage control for distribution networks.
The challenge was originally set by Southern Electricity, Nick and Chris’s employer. As Jon explains: “My father is the definition of an engineer! His entire life has been spent solving problems. Although he’s no longer in the business, he still can’t help solving problems and it’s a great thing.”
The particular problem for Southern Electricity was the ability to operate and balance, in parallel, the two power transformers installed as standard in every HV substation.
Nick sat down in his garage with workmate Chris and developed an electrical control circuit they subsequently named the Transformer Automatic Paralleling Package; TAPP was born.
Pleased with their solution, and after having proved that it worked by installing it in a couple of local substations, they presented the prototype to their bosses at Southern Electricity. Jon takes up the story: “They both expected to be asked to implement the solution in a few regional substations and then get on with their day jobs. Instead, Southern Electricity handed them a large order to build and deploy the TAPP solution across the network.
In 1985, the two colleagues formalised a partnership and Fundamentals was started. According to Jon: “To solve a problem, you have to break it down to the fundamentals, hence the company name. That still holds true today. Just recently we’ve attempted to ‘bottle our clarity’ and ask “why do we exist”? The answer is “to solve problems.” It’s the essence of what we do.”
From garage to greatness
Fundamentals’ first task was to fulfil the Southern Electricity order. Nick and Chris set up a production line at the home of TAPP’s invention – Nick’s garage. Jon was drafted in: “I remember it really well. I was at school but helped as much as I could, including the soldering – although I don’t think I was really up to standard.”
While Jon headed off in 1991 to complete a four-year degree in Physics and French, followed by a PhD in Solid State Physics, his father and Chris Goodfellow were building the business. An industry publication had described the TAPP invention and the publicity helped put it in the industry spotlight. As a result, Fundamentals commenced discussions with Reyrolle Protection – a large industry player at the time which ultimately became part of Siemens in the mid-2000s. Reyrolle had a gap in its product portfolio which Fundamentals was able to fill.
The initial TAPP product grew in scale and sophistication, patents were applied for and subsequently granted. Following further development, the more comprehensive SuperTAPP (a tapchanger control device) product was launched. With Reyrolle fronting sales and marketing efforts, Fundamentals quickly became the market leader in the UK and started exporting into Commonwealth regions.
The company was incorporated as Fundamentals Ltd in 1994 and the growth journey had started. Business turnover had grown to £1M in a few years, but the organisation remained lean with Reyrolle looking after the marketing and a family contact handling the manufacturing.
The timing and omens were good for the business according to Jon: “The Industry was privatised in the very early 90s, just when things were starting to happen for Fundamentals. It was a very people-heavy sector. Older engineers on pension plans were retired and the experienced workforce was reduced almost instantly at the Regional Electricity Companies [now called Distribution Network Operators or DNOs]. Skills disappeared along with R&D. This put Fundamentals in a good position to step in and offer skills and solutions; not just the technology, but also implementation, service, and so on.”
A family affair
2004 turned out to be a momentous year for both Jon and Fundamentals. At the turn of the Millennium, having completed his PhD, Hiscock Jnr joined Lehman Brothers as a systems coder. He also got married in 2002 and, while on honeymoon, “I had a blinding realisation that I wanted to be in the family business. A potential role for me had never been discussed. In fact, I have two sisters and a brother and we were always encouraged to pursue our own careers. I put the suggestion to my Father that it would be a good idea for me to join the company. He initially suggested otherwise!”
Despite Nick’s reservations, Jon persevered and throughout 2003, while still working for Lehmans, he completed a distance-learning MSc in electrical power systems “to reassure my Father, and myself, that I had some understanding of power engineering”. Confident in his academic and business skills, Jon persuaded Nick that with a good team around them, they could grow the business to fulfil its potential.
In 2004, along with the birth of his first son, Henry, Jon became employee number four at Fundamentals. “My wife and I took a substantial collective salary cut, as she left her job after falling pregnant and I changed career. We also moved out of London. It was an enormous risk, looking back, but sometimes ignorance is bliss.”
Jon also took a further risk in persuading his Father to agree a buy-out of the Goodfellow’s 50% share in the business. “I had no real idea where it would take the business, but I was excited about the prospects and potential”, Jon confesses. “It was at the time when the low-carbon economy was just a twinkle in the industry’s eye, so to be in a very niche part of the industry was very exciting and if felt good to be getting back into science and technical. Once the buy-out was agreed, I was glad to have made the decision. We did this without borrowing – in fact the company has only ever borrowed once so far in its history – so it took us five years to complete it.”
From tapchange to step-change
Within a year, Fundamentals had taken-on more technical staff including an ex-Reyrolle employee. However, the business step-change came with Fundamentals’ first acquisition. “My uncle owned an electrical contracting business. We trained-up their team to install Fundamentals technology and after subcontracting to them for a while, acquired the company” Jon recalls. They also started to develop apprenticeships and build a strong core team. “They were real tradesmen in the traditional sense and we realised they were simply unable to do a bad job!”
By 2008, Fundamentals’ payroll had grown to 13 and the company was becoming more involved in tapchanger-related work by virtue of SuperTAPP installation work. The same year, Jon began attending industry and networking events, where he met MR - Maschinenfabrik Reinhausen - the world leader in tapchanger technology. “They needed a new agent with site capability, technical ability and understanding”, Jon explains. “It was right in our sweet spot. Sales, marketing and maintenance of their equipment.” Fundamentals won the contract and the team headed for specialist training at MR’s factory in Bavaria.
“It was all fantastically exciting for Fundamentals and good to extend our offering in a very niche area. We quickly learned about tapchangers and realised that there was a big opportunity, especially relating to legacy equipment. The company took full advantage to fuel expansion.
Over the subsequent 11 years, Jon has witnessed significant change both within the business itself and the power distribution industry generally. Not least, the retirement of his Father in 2010 and his own appointment as MD.
The 45-year-old admits: “For us, aggressive growth has brought a lot of challenges. It’s meant growing up: formalising systems, processes, training management and working with client procurement departments and their regulations. We’re now under greater scrutiny and having to justify our existence.”
It also required a more commercial mindset, including appointing a Financial Controller (now FD) and focusing on Health and Safety. “We cannot get complacent about these things”, Jon states categorically. “That’s meant introducing sustainable policies around health and safety, quality and environmental, and not just as a tick-box exercise to protect us. There also remains a huge skills gap in engineering, that hasn't gone away. There are still too few apprentices. While the Government has made enormous strides, there are massive opportunities for people working with schools”.
As for the industry, Fundamentals is having to adapt to rapid evolution, particularly in the requirements of tapchanger control devices as the smart grid develops. “The energy sector is now very much part of the Internet-of-Things”, Jon notes. “Our core expertise has changed from network understanding and voltage control, to having to include communications capability and data comms. We have little understanding of this and it’s a big learning curve – we’re basically moving from hardware to software.
He continues: “We always have to move forward and be thinking about what's next. We see the voltage control side of things moving down a level and now it’s all about how we can get involved in managing the low-voltage network. Bi-directional power flow is one of the main challenges for the power grid which was built as a uni-directional system.”.
“In an ideal world you would build a whole new grid, but that's never going to happen due to costs. The tension between regulation, profit and development is quite a conundrum. The key principles of reliability, affordability and sustainability is a real challenge for the DNOs to cope with. On balance RIIO is working well, as the DNOs are still making good money. But, the short-termism of governments makes it hard to ensure a long-term view.”
Risks, rewards and next steps
For Fundamentals, being an SME in a niche area of the industry has its benefits. “We’re in a part of the industry that even the industry doesn't know a great deal about! That’s worked well for us because our expertise is important and the challenges exist worldwide.” However, he also recognises the risks, particularly when it comes to securing framework contracts to become an alliance partner. “DNOs seem to have tried hard to rationalise their supplier lists and although we succeed by being a specialist rather than a generalist, it often means competing with larger, more generalist players. From a risk perspective I can understand why DNOs want to work with the larger players and we need to be open to working with them as they front the big contracts.”
Jon and his team are not averse to risk. In 2016, they were approached by a large international industry player who ultimately wanted to acquire Fundamentals. It was a move that Jon had predicted. “We were already working closely with them and could see how becoming part of their organisation to run UK operations would make sense. But I felt we could grow the business to a larger scale independently and look at a global picture. I didn't want to look back in another 25 years’ time and regret decisions.” Fundamentals politely turned the offer down and instead pursued its own acquisitions.
The 80/20 rule
Fundamentals Group now has 80 employees including subsidiaries - Ferranti Tapchangers Ltd, Powerline Technologies (51% owned) and, most recently, Fundamentals Pty Ltd in Australia, incorporated in 2018. “Listen to me? We’re called a Group now”, laughs Jon. “But seriously, the growth chart has been pretty serious over the past 10 years – turnover has grown eight-fold which equates to more than 20% year on year and has been even higher.”
Jon Hiscock’s aspirations for the business are very clear and, being something of a mathematician, come down to the number 20. By the end of 2020 he wants Fundamentals to:
- Reach £20m turnover
- Be ranked in the Top 20 of the Sunday Times’ Best SMEs to work for
- Ensure 20% equity ownership by Fundamentals’ employees
The company is on-track to deliver all of these and, when talking about the last aspiration, Jon’s passion shows: “Giving away 20% of the business after what our family has been through is a very big deal for me. But I want all employees to be on the journey with me and I want people to want to live our values and keep going. Chris Goodfellow once said to me: "That's all lovely, but do not underestimate how challenging it will be from managing an employee perspective." Well, here we are, celebrating the 25th anniversary of Fundamentals Ltd, with an amazing team of people and a thriving business. I want to promote the stars in the organisation who are the future leaders; I want to make their dreams come true. I love that someone can come to me and say: ‘I want to do this’ and we can make it happen for them.”
The Fundamentals Board has a busy time ahead, with a commitment to find four international partners in 2019 alone and a target of operating in 20 countries by 2028. Jon adds: “There are certain products around machine learning that we are developing that are set to become a big fixture for one of our subsidiary companies. How that develops we will have to see. Software-as-a-Service has also got to be part of our makeup. Web services are part of our plan and we have to invest in skills associated with that.”
All about solutions
When it comes to the industry as a whole, the focus on CO2 targets is top of Jon’s agenda: “There have been tremendous achievements in respect of CO2 targets and how quickly the industry has managed to move towards the required level of penetration of renewable generation. Let's keep it going - it needs to transfer to heat and transport. I think GB is doing pretty well in leading the cause and I'd love to see us continue to do so. It would also be great to see people educated on energy and the realities of affordability.”
As far as Fundamentals is concerned: “The sky’s the limit. Let’s take the lid off and see where it goes,” says Jon. But his values remain firmly rooted in the company’s humble beginnings. “I think we’re already involved in helping to find solutions to the largest global problem, CO2, but I want us to do more. It’s what we do: solve big problems.”
It’s clearly in the genes.