Dr Udo Zucker of Tag Mclaren Audio

Doctor Udo Zucker is a man with an ambitious plan – to take a £5m hi-fi company and transform it into a world-leader in the quality home entertainment market. Malcolm Steward visited him to discover just how he intends to perform this colossal task.

 This article appeared in The BAJ in 1998

Dr_Udo_Zucker_at_TMA

Dr Udo Zucker at TMA HQ in Huntingdon, UK

In November 1997, TAG McLaren Audio came into being when the electronics division of Technologies d’Avant Garde, best known through its involvement with Formula 1 racing and desirable timepieces, acquired Cambridge Systems Technology, manufacturers of the Audiolab range of hi-fi separates. There has subsequently been considerable speculation, rumour and conjecture about what the future holds for this outwardly unusual coalition. At a press day held to preview the first range of products to appear under the TAG McLaren Audio banner – the Audiolab name having been dropped – I had my first meeting with the Chief Executive Officer of the new company, Dr. Udo Zucker. He struck me as one of the most committed, energetic, highly motivated people I have encountered in the hi-fi industry, so I arranged to talk to him at greater length hoping to discover what drives him and what plans he has for the new company.

Udo Zucker was born in 1952 in Germany. At university he studied physics, concentrating on modern technologies. He gained his PhD at the Max Planck Institute for Solid State Physics, along with two prestigious scientific awards.

His professional career began at Bosch. Although the company had no regular openings – Germany was in the midst of a severe economic depression – he was fortunate that Bosch maintained a fund to employ particularly gifted graduates. He started working with the team that was developing the first electronic automotive control systems, and argues that “since the early 1980’s the use of modern, fast, micro-controller-based electronics has been pushed by the auto industry.”

He quickly found himself heading projects including the development of the first single-processor, Motronic engine-control system. That led to companies such as Audi, Ford and Porsche coming to Bosch for high-performance systems for the homologation versions of their racing machinery or sports cars. That then led to him also leading the company’s Formula 1 program, which was where he made his first contact with TAG through developing electronics for a Porsche-designed engine they were financing – the famous TAG turbo, which won 25 races and many world championships with McLaren. In 1985 Dr. Zucker was made responsible for the world-wide high-performance and motor sport activities of Bosch, an enterprise he built into a successful, independent profit centre. This experience, he says, enabled him to learn much about how a healthy business operates.

By this time, his enthusiasm for what was to Bosch a low-volume business – hundreds and thousands of units rather than millions – reached the point where he felt that the only way forward was to establish a specialised company dedicated to providing the best automotive control systems for high performance cars.

He took this proposal to Ron Dennis and Mansour Ojjeh, the owners of TAG McLaren. (He had, with characteristic efficiency, organised a fall-back option, which involved setting up an in-house electronics facility for another very successful, major motor racing organisation.) Dr. Zucker admits now that he had no idea of the magnitude of the proposed venture. He suspects that neither did TAG. “Today I know that I was a fool to think of doing it: it was too complex; it was too much. Okay, I did it successfully, but I was naïve. With the knowledge I have today, I wouldn’t even think about doing it.”

Nonetheless, he did and, now settled in England, he signed a contract with a small sports car manufacturer and a five-year contract with Mercedes. However, when, in 1989, eight former colleagues from the high performance department at Bosch decided (without enticement) to come and work with him, rumour has it that word circulated the car industry ‘Don’t work with Zucker!’ The sports car company, as a relatively small firm, yielded but Mercedes Benz said ‘We do as we please.” So, starting on the first day of 1989, without so much as a building or any tools, Dr. Zucker established the company that developed the sensors, actuators, electronics and the telemetry for the Mercedes Group C car, a system he claims was the most advanced of its day. Today, TAG Electronic Systems has close to 90 customers, including the small but famous sports car manufacturer who returned to the fold.

Malcolm Steward: Was it your experiences establishing TAG Electronics that made you acquire Audiolab rather than simply head-hunting the people you needed to set up a new company from scratch?

Udo Zucker: I learned when setting up TAG Electronics that it takes a long time to develop your engineers. I had to train all the people and I didn’t want to do that again. I wanted to cut time out of the development and the only way to do that was to find a suitable established company and buy into it. That company had to fulfil several requirements: it could not be too large because the investment – and the stakes – would be too high; it had to be a company with a history of success and consistency and nothing in that history that I would subsequently have to disguise or hide. In addition, it had to be close enough for me to control it easily. Obviously, Ron [Dennis] was concerned that I could continue handling the automotive business, which led me to the Cambridge area. What’s more, I had owned an Audiolab system so I already had a kind of connection with the company. Finally, Audiolab had the expertise I required.

In setting up TAG Electronic Systems, I used engineering skills to build up the company, and over the past ten years I have learned how to run a company. I know this because the turnover per employee has tripled over the years through running the company in a different style to most others. With the audio business, my involvement with the engineering will be minimal apart from with the aesthetics of the products where I will be heavily involved: I concentrate on minor details that escape the notice of engineers whose attention is primarily focused inside the product.

MS: I find it unusual that someone who is obviously a talented engineer can turn himself into an astute businessman.

UZ: I have always taken a global interest in things but when you move away from engineering you have to tell yourself that you are no longer allowed to do the things you enjoy. Management is not about doing things you like. When someone says that I must love my job I tell them that I hate it. That is honest: I hate it. Ninety-seven per cent of the day I do things I don’t like purely because all the problems land on my desk. My only satisfaction comes from doing a little programming. Management is a hard job and often engineers find it difficult to make the move into management. Engineers naturally tend to think that engineering is the most important element. My way round this is to find good engineers, put the required systems into place, and rely upon them to do their job.

However, you can’t be a good manager in a business like this unless you have a technical background. If you look at the automotive industry in Germany you will find that many of the best managers are also engineers.

MS: You also seem to be driving the marketing for TAG McLaren Audio . . .

UZ: That is because Audiolab had never built up its marketing division.

MS: Your marketing approach seems to be inverted. Rather than introduce your expensive models and sell down from those, you are introducing the entry-level models first. Marketing experts assure me that it is much harder to sell people up.

UZ: My approach considers that on one side we have 100,000 people who have bought Audiolab products over the last fourteen years and they have a right to be treated as valuable customers because they sustained the company’s growth. Then, as TAG McLaren, people expect us to build highly expensive products. What they must understand is that we want to make TAG McLaren products that are affordable by the majority of people. They are still expensive but they are in a market where they can compete with interests such as video recorders, camcorders and so on.

One of the things you see often when a high-end company goes down to the mass-market, particularly in audio, is that their mass-market products are not the best solution for those buyers. Rather than saying, ‘this is how much money we can spend on the product so how can we make the best use of it?’ they simply cut costs on their more expensive products, which is not the optimum way to do things.

Fundamentally, though, I want to keep those 100,000 Audiolab buyers: after all, I was one of them.

MS: Some marketing people would have done that by retaining the Audiolab name but improving the products and calling them the TAG McLaren Editions.

UZ: TAG McLaren cannot do that. It has never been nor will it ever be in the re-badging business.

MS: I asked merely because six months ago you were using the Audiolab name then, almost overnight, it disappeared. Do you not think that some customers and, indeed, dealers, will feel vulnerable and exposed because the company in which they’ve invested has gone?

UZ: Please let me explain what happened there. We started a program that assumed we could put the F2 Series [the company’s middle range between the F3 “Audiolab 8000 replacements” and the F1 “flagship” models] into the market first because Audiolab’s management explained that they had a development under way that would upgrade the existing [8000] range. We looked at those products and felt that severe mistakes had been made – not in the circuitry but in the execution of the concept. It basically abandoned all the values Audiolab had developed, it was easy to make but boring, and I honestly believed they never could have sold it. So we decided to do it properly, improving the appearance of the Audiolab products so that it made a better statement, one that ‘said’ TAG McLaren. Peter Stevens [TAG McLaren industrial designer] used the Audiolab series as a foundation so that it would not hit Audiolab buyers in the face – in the way that the Audiolab design for the new product would have done. It looked much better with a new colour scheme and improved screen-printing, so we thought we would leave Audiolab out there until the F2 range was introduced. Then we reconsidered and realised that this was really an unsatisfactory, half-hearted solution. So, we developed stunning new prototypes and when we saw them, we decided that they deserved improved circuit design. Accordingly, we took what we had learned working on the F2 and incorporated those improvements into the F3. Then we halted the F2 program and told the engineers to concentrate on the F3 range, improving the products with almost no cost limitations.

When we finished, even Derek Scotland [Technical Director and co-founder of Audiolab] asked ‘Why does it still have the Audiolab name on it? Why are we risking making consumers confused – is it Audiolab or is it TAG McLaren?’ So, we decided to abandon the Audiolab name then. In addition, you can only use a name if you can protect it, and I had found that the Audiolab name could not be protected under European law anymore but that it was already protected in certain countries using national law. Some of the owners of the name – assuming that TAG McLaren would pay whatever was asked – wanted ridiculous money for a name in which I did not have a real interest.

In our literature and marketing we will refer to Audiolab but, at the end of the day, Audiolab and TAG McLaren are now the same. Audiolab will continue to exist in some markets until we find a distributor who is suitable to distribute F3. That will be a slow process because our expectations are significantly higher than those of the former Audiolab company and probably the traditional industry in general.

MS: I would like to digress because you have just mentioned the traditional industry: what was your reaction coming from the high tech, high volume, big budget automotive world to the very different, much smaller British hi-fi industry? Was it a serious culture shock?

UZ: What I wanted from Audiolab was its engineering skills. Clearly, having visited the factory many times I was familiar with its facilities. I have to say that I have never seen during my life in the automotive business a manufacturing plant that was so outdated as what greeted me when I walked into Audiolab. It was not a problem because I knew that investment could put it right. What really surprised me was seeing other companies. That was what shocked me. I understood then what Philip Swift {co-founder and Managing Director] meant when he said that Audiolab was one of the best.

Let me make this clear. I want to make TAG McLaren Audio a company that can compete with the best companies in the world. To do that I need to have the required resources. I believe strongly that the engineering requirements we face with everything becoming digital will put a lot of people out of business if they do not have access to them. As our industry develops it will not be sufficient, say, simply to have an idea of how to tweak an amplifier: there will be much more high technology involved.

Only with the appropriate resources will companies be able to produce a product that the customer can be happy with. I’ll give you an example: I have a very expensive AV processor at home and I have had to change it four times because of all sorts of bugs and problems with it. It is a good product when it works but it’s also a high tech product and as such it has many complex requirements, which need to be looked at. That is why companies need the resources. Even we are slightly limited in this respect, at least until next year when our new factory opens.

MS: While we have been talking you have not once referred to yourself as a hi-fi company . . .

UZ: That is because we want to be a systems company. The complexity of systems is becoming a nightmare for customers and installers so we want to be able to provide a complete home entertainment solution.

MS: Does that extend to, say, video projection systems?

UZ: Yes. And screens. And furniture. Everything.

MS: It looks as though you are setting yourself a colossal task.

UZ: (laughing) I seem to be making the same mistake now as the last time I set out to make a system. But this time I’m in a better situation. When I started before it was just me; now I have 250 people. And technology is changing to our advantage in certain areas – in video projection, for example – which means that the aim is more realistic and achievable now than it would have been five years ago.

MS: Surely one company cannot embrace all the skills and resources necessary for such a venture.

UZ: I learned from the automotive industry that one of the biggest secrets of success is co-operation. Automotive companies co-operate in ways that you probably do not realise: for instance, in a BMW you have valves partially manufactured by Mercedes. You also see cross-utilisation of plants and it doesn’t make any difference to the end-user. My idea is to try to find this type of synergy.

Having said that, I have failed so far. I went to a turntable manufacturer and said that I wanted to make a turntable with him. I did not ask him for money. I did not even ask him to pay anything. He wasn’t interested, saying we would be in competition. I said that we would not: he sells almost nothing now but afterwards we would be selling together. I also spoke to a speaker manufacturer and that didn’t work out. Then I went to a large electronics company and they seemed to be blinkered – narrow-minded to an extent that I just couldn’t believe.

MS: That is ridiculous. It’s not as though you’re establishing precedent – Japanese companies regularly co-operate on development and then compete with the products that work produces.

UZ: They are mass-market people. They know how to run a business. They don’t have egos like some of the hi-fi companies I approached. Regardless, I’m still working on developing these relationships.

MS: If you succeed in forming these strategic alliances, will you be secretive about who is involved?

UZ: I will be absolutely open. There is no reason not to be. At the end of the day, TAG McLaren buyers will not be bothered if we are associated with successful people. The arrangement gives something worthwhile to both manufacturers but it has only worked so far with our partner in cables.

MS: Now that we’re talking about customers, you have said that you want to introduce new buyers. Several companies have tried to do that and failed. What makes you think that you can succeed.

UZ: First I’d like to know who these people are who have tried it. You can’t come from the audiophile camp and say ‘I am an audiophile and now I will make something that appeals to non-audiophiles’. You have to come from the outside, like us, and to our advantage we have the TAG Heuer products, which are known by people for their styling. They have no other unique function – a far less expensive watch can still tell you the correct time – but they make people feel good. And we have the McLaren F1 team, which is a great marketing tool for demonstrating ‘look out, we are here’.

You might ask why do we want to appeal to audiophiles in sound quality terms while we don’t want to appeal to them in terms of how our systems look. You then might say ‘look at the F3’ but the F3 is the exception: it is our way of buying time and making a present to the Audiolab buyers of the past, saying ‘Look, we haven’t forgotten you. We are not the arrogant TAG McLaren you think we might be, putting out a £100,000 amplifier only for extremely rich people.’ F3 is for discerning lovers of quality, and that encompasses a wide range of people, not only those who are ultra rich. It has to be affordable.

There are certainly manufacturers supplying attractive ‘lifestyle’ products but I don’t believe they are interested in supplying a total quality product. The emphasis in some of these products is too much on style and not the internal quality. That is not our way of doing things. We want to build something we can happily put in our own homes. We want to encourage people who would not buy traditional hi-fi equipment nor, say, Bang & Olufsen, to buy TAG McLaren. There is nothing on the market for these people.

MS: How about your target customers for the F2 and F1 products? I imagine some of them will be affluent people used to shopping in Harrods, Liberty and South Molton Street. Now, while I applaud those hi-fi dealers who make their stores appealing to sophisticated shoppers, many stores aren’t aesthetically pleasing or welcoming. Will that pose problems for you?

UZ: We think that we might encounter some problems with the distribution but it’s not a primary concern at the moment. With F3 we want the audiophiles on our side: otherwise we will not achieve our prime aim, which is to appeal to the audiophile and non-audiophile markets. So we have a little time before we have address that particular problem. We have carefully begun to choose distributors. Audiolab had 23 distributors: so far we have only signed five of them for TAG McLaren Audio. The rest we have discontinued, or are still in discussion with about the future, because they don’t provide us with the base we need in those countries – an understanding that we have to do things differently. In terms of the United Kingdom and retailers, the F3 range fits nicely into existing shops. F2 and F1 will be more expensive and therefore can naturally also go in other shops. We have some unusual ideas where we want to provide them but it’s important that it’s a system by then. A shop will not be able to just sell a few components from the range: if they don’t have the whole system, they can’t sell it to the customer who wants to buy it. What does a customer do if he wants the complete system and the store doesn’t have all the components? Does he buy whatever they have and then go somewhere else to buy whatever’s required to complete the system?

However, to sell a system you have to sort out every element, right down to the connections. Then you can sell a system even in, let’s say, Sainsburys, provided anybody can operate it. I mean, what is home entertainment? It’s a system that anybody in the home can use. That is not the case with most systems today.

MS: Maybe that will change with the more advanced, all-encompassing control systems that are now emerging?

UZ: If you have one of them that works then give it to me. At home I have maybe thirty different remote controls from all sorts of manufacturers, and whenever I buy one of these super, super, super types, I sit there for days trying to program it. Ultimately I end up thinking it would be easier to use a PC. But that’s the engineer in me talking. My wife would certainly be very happy if she could press one button, without needing to know where to point the controller, and have seven different things happen simultaneously. That’s not going to be possible if you are using products from different manufacturers. It will never work properly. Only if you engineer a complete system can you make a remote control that works naturally because all the units communicate with each other.

That’s why I believe you need to make a system: and that’s why we need to work on speakers and so on. My idea was always to get a system together quickly, and that’s why I wanted to form these associations with people who are experts in their field. If everything ends up as it has done right now – with us doing the speaker ourselves because we couldn’t find somebody who had the ability to make a fast decision or appreciate that this had value for everybody – then we will need more time.

MS: You said that while you have a seven-year plan and initial funding from TAG, you would have to become self-sufficient reasonably quickly. Surely that means you will have to generate a great deal of profit from F3 to finance this aim?

UZ: My revenue comes from the electronics business, not purely from the audio business. And we have other advantages, such as the way we are going about acquiring our new building. I did not intend to build a building: I was thinking naively, because when I was in London I saw how things worked there: if you need a building you just go around and see what is available because buildings in London are built on speculation and then rented. Here, in the Cambridge area, everybody said ‘We can finance building you a factory provided you sign a tenancy agreement for 25 years.’ That didn’t sound like a good deal so I went to Ron [Dennis] and asked him to build it and allow me to rent it. That way the building costs don’t come out of my budget and it’s a good investment because we end up owning the place within 15 years or less. At the end of a 25-year agreement with any external financier, we would own nothing.

Sometimes you have to open other funding and I have an agreement with Ron that I get additional funding beyond what I have already – and that’s funding that has not been exhausted simply by making F3. If the growth of the company is faster than I predicted then additional funding will be required because you cannot live from cash-flow. But it’s my pride, more than anything else, which means we will try to handle it from inside – but inside means the electronics business not purely the audio business. This year that arrangement has worked well because Audiolab – TAG McLaren Audio – has naturally made a big loss while the automotive business has made profits, as it does every year, so that compensates nicely.

MS: What about that seven-year plan?

UZ: I had built up the electronics systems operation in ten years, and recognised the phases you go through, so I decided to lop off three years because I already had Audiolab. I don’t really know if it will take seven years: it may move faster if I can put the associations in place.

MS: This doesn’t bode well for your plan to retire at 50. I reckon you only have three years and ten months to accomplish everything.

UZ: If it takes seven years, it takes seven years.

MS: So you will build up the company and then walk way?

UZ: No, retirement doesn’t mean I stop working. What it means is that I won’t work at weekends; that I will take holidays. It means that every problem won’t land on my desk – someone else will deal with it first. I’ll work three days a week and go on holiday properly – no mail, no computers. Holidays now are a nightmare, especially for my wife, because I’m running the business remotely while I’m trying to relax. I get up early and work until midday. Then we spend time enjoying ourselves before coming back to the hotel in the evening so that I can deal with the faxes and email that have arrived during the afternoon. Then we have dinner, I excuse myself and jump back on the computer and the phone. But it’s the only way of handling things at the moment.

I am a workaholic. I accept that and I don’t feel bad about it. People say it makes you ill: I’m not ill. They say it makes you old: I’m not old. What it basically means is, if you’re prepared to give 110 per cent seven days a week, and work long days, you can do more than someone who only works five days a week. You can overtake everybody. That’s the way I work and I accept the sacrifices. But 50 is the limit.

MS: On a personal level, have you met any resistance or hostility from the trade or customers? I ask because Phil Swift and Derek Scotland are well known and have been in the business a long time, and then you arrive from nowhere and, in some people’s eyes, kill or usurp the Audiolab brand.

UZ: The fact is that when we discussed whether the Audiolab name should disappear, we had complete agreement from Philip and Derek. It’s easy for anyone to understand that TAG McLaren is a much stronger brand than Audiolab. Audiolab is a UK brand while we are an international player. It wouldn’t be sensible to be Audiolab in Britain and TAG McLaren throughout the rest of the world.

Initially I think we felt what happened was that some people saw us as another Canon: that we’d soon see how difficult this business is and get out of it. I think that has now passed and people recognise that we are very serious about what we are doing. I also hope people realise that this is not about a corporation doing something: it’s about me doing something on behalf of a corporation. TAG McLaren would not be involved in audio had I not suggested the program. Ron and Mansour know that I will do everything possible to make it a success. And as I’ve said on other occasions, I only accept two reasons for the failure of a project: number one is that it’s impossible; number two is that we’re incompetent. I do not think that we are incompetent. Until such time as somebody proves me wrong, I will go for it.

It would be foolhardy to predict what will happen over the next six or seven years. All manner of circumstances could influence how TAG McLaren Audio develops. I am, however, certain of one thing: if Udo Zucker repeats his success with TAG Electronic Systems, and if his reading of home entertainment trends is accurate, everyone else in the race ought to start flooring the gas pedal now.

 

Ultimately, Tag McLaren Audio failed to succeed in its aims and the company went out of business. The Audiolab brand was purchased by a Chinese concern (IAG)  and is still trading successfully today.


Back to Top ↑