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How Dyson Leaves Its Competition in the Dirty Dust

NEW YORK (TheStreet) -- An estimated one in 10 U.S. households owns a vacuum cleaner from Dyson. The premium-priced vacuums have been sold for years at Walmart (WMT), Target (TGT), Bed Bath & Beyond (BBBY), Best Buy (BBY) and even Amazon (AMZN).

While the company continues to unveil innovations to its upright and cordless vacuum products to compete with the likes of Hoover and iRobot's (IRBT) Roomba, it also has its eyes on one day being a player in the connected home via its investments in robotic technology. Dyson could also one day open flagship stores of its own, according to CEO Max Conze.

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Brian Sozzi: Before we get into the great story of Dyson, you have a great story of being a German army parachute member. Could you share how that experience has shaped your career and time at Dyson? Any advice to the 25-year-old looking to work alongside you and your executive team in, say, 10 years?

Conze: Yes, I spent a bit of time in the army. I wanted to do something exciting so I ended up jumping out of a plane which, when you're a young man, is good fun for a little while. I still thrive on that type of excitement and energy in my job, although the subject matter is a bit different. Never a dull moment when you're surrounded by engineers who are constantly inventing and reinventing.

From my past adventures, I learned that taking a risk and withstanding failure pays off. I was only 21 when I suddenly found myself responsible for 20 people in my days as a paratrooper. It was tough, but steeling.

We're big believers in hiring bright young talent (so send that 25-year-old my way). Inexperience tends to accompany an open mind more prone to taking risks -- and potentially hitting on something good. Mostly they get it wrong the first time. But it's a creative kind of wrong that can be worked with.

Sozzi: From an outsider looking in, a key focus of yours appears to be recruiting fresh, creative talent straight from college. I am curious about what new ideas on product design, or other areas, this new crop of future leaders are bringing to the table?

And of course, if I am a fresh, creative talent currently in college that is reading this, any top tips on how to join the Dyson team?

Conze: Fresh engineering graduates are equally as likely as seasoned scientists to come up with some of the most inventive product ideas. We hire for attitude and aptitude, not experience.

For the same reason, we do the same in our other teams. Of course, there is a balance -- we need veterans as well, but the biggest thing for us is finding people with passion and new ideas.

If you work for Dyson, you have to have fun with vacuum cleaners. Just because you're not an engineer by trade doesn't mean you can't think like one. We're an international company now. But I still want us to have a small business mentality, taking on new industries and taking on copycats. And we're seeing new faces every week. We aren't just growing globally but also in our U.S. headquarters in Chicago. We are hiring across the business from marketing graduates to experienced finance people.

Sozzi: That said, could you take us through how a new product at Dyson is incubated?

Conze: Our engineers always start with a problem. Either it's an everyday frustration, or they might look at a common product -- like the conventional fan -- and ask: Is it made well? Could it be made better? Is it doing its job correctly? When they spot a problem that others have ignored, they get to work. And it's great to see their elation when their 'baby' makes it to the shelf and gets people excited.

Sozzi: Looking at the iconic Dyson standup and cordless models, how do you believe they will evolve over time to meet the new cleaning needs of consumers? Is there some form of 'connected vacuum' in the works?

Conze: Up until now, uprights have been our mainstay. But cordless is the future Our latest -- the DC59 Motorhead -- can go toe to toe with traditional, bulky, corded uprights. It even out-cleans some leading full-size models. And yet it has no cord, weighs less than 5 pounds, and can whipped out and put away with ease. No more weekly haul of the hefty machine, but more 'clean as you go' because our engineers have made it easy and effective. And fun; well, we think so.

Of course, the connected home has not passed us by. The trick is to actually make it work bette, though. Create something that improves home life, rather than complicating it with gizmos. And you can be assured that it's in the mix down in our engineering HQ.

Sozzi: Many tend to think of Dyson as a company that only sells its products inside of large box retail stores in the United States. But Dyson is global. Can you run through some of the marketplace specifics that drive Dyson's business?

Conze: Over 400 brands launch a day in China -- it's not enough to be present, you have to explain who you are and what makes you unique. We know that when people experience our machines they understand why Dyson is different. We launched in China in November 2012 with just a handful of department stores. This allowed us to man each store with our expert demonstrators who could explain the technology and show people how to use it. We've had a great reception; in little over a year, that handful has grown to 200 stores covering almost 46 cities. And in every one, we still focus on giving people the space to get their hands on a Dyson.

James Dyson's cyclone technology was actually first licensed and produced in Japan in 1986 under a different name. Our success there has been down to our technology; the breakthrough being our digital motor, which allowed for machines compact enough to fit in small Japanese homes, but powerful enough to actually do the job. The digital motor is now powering Dyson Airblades in Japanese washrooms. The Airblade Tap will look good alongside Japan's high-tech toilets.

And, our first Latin taste is installing 364 Dyson Airblade V hand dryers at Sao Paulo's new Arena Corinthians stadium, ready to dry the hands of 65,000 World Cup football fans. Drying hands in just 10 seconds, we're leaving more time for fans to watch the game (and to see Germany win the final match!)

Sozzi: Is there trouble keeping companies from patent infringement in China and if so, how does Dyson protect its creativity there?

Conze: The trouble with being an innovative company is that there are plenty of others out there trying to copy our technology to make cheap knock-offs. As a result, we invest a lot of time and energy in enforcing our patents, which unfortunately, often means lawsuits. We have over 650 lawsuits against Chinese companies alone copying the design and infringing patents of our bladeless fans. We like competition, not copying.

Sozzi: Dyson has service centers situated across the country, but is there any thought underway to opening flagship stores in major markets to better control the brand?

Conze: We're investigating some options, and not just in the U.S. The more technology we invent, the more the idea makes sense. For now, we are opening more and more service centers where Dyson experts can demonstrate our technology and help our owners keep their machines in top shape.

Sozzi: What is the science behind the iconic purple color scheme of Dyson product offerings?

Conze: We use color to denote technology; drawing a user's eye to areas we need them to focus on. For example, we highlight most actionable parts (buttons, levers, etc.) in red so consumers understand they'll need to do something with that part. Purple usually means Animal -- machines designed specifically for pet owners.

Sozzi: What are lower-priced competitors positioned next to Dyson offerings at Target not doing correctly? In other words, where are they cutting corners?

Conze: It comes down to investment. Others simply aren't investing the time, people, and resources in developing the best possible technology. They're taking shortcuts. Maybe it gives you short-term gain, but it's not what we do. I think it really requires discipline to stay the course and override short-term commercial interests. And that's the heart of discipline, not taking shortcuts.

Sozzi: How many Dyson upright vacuum units are sold in a given year?

Conze: We sell a machine every five seconds across the world. In the U.S. about one in 10 households owns a Dyson.

Sozzi: Most interesting facts about any of Dyson's products that would wow a person?

Conze: Our product pipeline stretches for 25 years into the future, and some products never actually see the light of day. In 2001, Dyson began work on an augmented reality headset featuring a full-color 3D, heads-up display. It was given the secret project name N066. It was a portable, head-mounted, wearable computer that could be carried in the user's pocket. Everything James does is born out of his huge passion for technology, so it's no surprise to me that he had an idea over 10 years ago that we are seeing commercialized today.

Sozzi: Best piece of business advice offered by Dyson founder Sir James Dyson?

Conze: I don't think James fancies himself a businessman -- he spends every available moment with his engineers. He is more resilient, dogged and stubborn than most people I've met. He spent years in his coach house developing over 5,000 prototypes for the bagless vacuum, and then got laughed off by every name in the vacuum business when he pitched the idea. But he didn't quit because he believed in it, and look where it got us.

-- By Brian Sozzi CEO of Belus Capital Advisors, analyst to TheStreet. This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff. At the time of this publication, Belus Capital Advisors rated Walmart and Target a sell. Brian Sozzi is the CEO and Chief Equities Strategist of Belus Capital Advisors. He is responsible for developing and managing an equities portfolio of mid- and large-cap positions, in addition to leading the firm's digital content initiatives. He is also a personal finance columnist for Men's Health magazine.

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