Framery's sales dropped by a third - so product development picked up the pace

On Wednesday afternoon at the end of August 2020, Framery's Board of Directors met at the company's factory in Tampere. It was exceptional because six months earlier, the coronavirus pandemic had reallocated board meetings to Teams.

The agenda included a weighty item, the "continuation of the company's strategic projects". Framery, a manufacturer of soundproofed phonebooths for offices, had started designing the new One product family before the coronavirus period. It would mean a complete reform in production. Having previously made booths like furniture, Framery would start manufacturing them like cars. The benefits in terms of product quality, material use, and functionality would be extensive, but so would the investment. The moulds alone would cost several millions of euros.

During the meeting, the board members had the opportunity to familiarise themselves with Framery One’s first prototype. They could sit down and adjust the temperature and ventilation of the booth by touching a touch screen.

“Forward or EBITDA?” was the question the board asked itself.

The coronavirus pandemic had transformed the market overnight. As employees stayed home and offices emptied, customers were naturally reluctant to invest in premises that no one was using. It soon became clear that the way work was conducted was going to change, but because it was not known in which direction, there was still a reluctance to invest. Customers were acting rationally. Framery’s sales collapsed.

The company's founder and CEO, Samu Hällfors (in the photo), reacted immediately to the change. Purchases were stopped, and production was brought down to minimum. As previously received orders were fulfilled and invoiced, Framery's cash position strengthened during the first months of the pandemic. Hällfors had not compromised on future investments. Framery One had been developed, and the next stage was ahead if the go-ahead was decided on.

When Vaaka became Framery's owner in 2018, the company and the private equity investor had prepared a strategy. At the time, it was thought that a recession would occur during their journey together. That's why the strategy already stated what Framery would do when the economy slowed down.

The recession strategy included: Let's step on the gas!

The market for soundproofed workspaces was still in its early days and the competitive landscape was only just taking shape. A recession would not change the fact that demand for them would continue to grow strongly in the long term. Competitors were in a much weaker financial position than Framery, so hard times would provide an opportunity for Framery to get a head start over its competitors' eyes if it continued its own upward development.

The recession would be followed by a period of rapid growth. Then, the company should be on point, both in terms of products and as an organisation. The plan was clear and it was even prepared in writing. What's more, when the strategy was drawn up, the recession was expected to hit between 2020 and 2021.

But the recession was the wrong kind. The recession strategy was based on the idea that economic growth would turn negative for a quarter or two because that is just part of the economy's cyclical nature. However, the coronavirus pandemic struck directly at the heart of Framery's business and had a dramatic impact on its operating environment.

What would happen when the pandemic was over? Would employees return to their jobs, or would there be a vertical shift to remote or hybrid working? In the worst case, would the whole business be wiped out?

And it was not just a slowdown in growth, as the recession scenario had painted it. The strong order book put the brakes on the free fall in turnover: turnover fell by "only" a third, but there is a considerable difference between "slow growth" and "a third’s fall in turnover". There was only speculation about the duration of the pandemic. In such a situation, would it be safer to play it safe and protect profitability?

In the end, it all came down to whether the pandemic would cause a permanent structural change in Framery's business. The world had begun to suggest that this was the case. But these rumours did not fuel fears. Instead, they gave courage: change would happen, and it would be positive for Framery.

The board of Framery decided at its meeting in late August 2020 that the investment programme would not be stopped. It was also agreed that the situation would be closely monitored. Framery was already well prepared for this, as the company has a dedicated team looking for information on changes in the industry. For example, its members read articles, speak to customers, monitor competitors' activities and talk to distributors.

One of the many pieces of information that Hällfors started to share with the board was the data that Framery received from its Israeli distributor, which represented the Israeli market as a whole. The country was a pioneer in tackling the coronavirus pandemic, so Israel provided a glimpse into the future. The property manager of a major international software company also provided information on the use of the company's premises around the world.

Signs seemed to point in the direction of a post-pandemic world working on a hybrid model, which would increase the demand for booths. The multiplication of video meetings alone requires many more soundproofed workspaces.

"Messages began to come through that thirty staff members were at work—and all the booths were full. When a message like this came up for the tenth time, it seemed clear that there was a trend. We conducted our own survey for property managers, and everyone’s message was the same. Although the offices are getting smaller and there are fewer people than average, the number of booths is increasing," says Samu Hällfors.

"Now it's easy to say that it went well, and we made the right decisions. But it wasn't easy in the autumn of 2020 because the visibility was incredibly low," says Ilkka Pentikäinen, Vaaka’s partner on Framery's board.

"But we were constantly monitoring the situation. If the world had looked different, we would have acted differently," says Samu Hällfors.

"We have strong people with strong opinions," Pentikäinen continues. "The discussion defined the measures and gave us more certainty that we are doing the right things."