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July 1, 2004

7 Min Read
OEM vantage point: Expanding the customer's value proposition

"If you’re going to take a stand, then you have to fight the battle based on advanced process capabilities and technology," says Harold J. Faig, president and CEO of The Tech Group.

It’s not just large firms like The Tech Group that will survive into the coming years. Small companies can succeed by determining what their customers value, forming global alliances, and developing capabilities beyond shoot-and-ship.

When Harold J. Faig retired after a 36-year career with plastics technology company Milacron Inc., there wasn’t much doubt in his mind that he would continue that path in some new capacity.

"Florida is nice," he says, referring to a retirement home on the Gulf Coast, "but after you’ve had a couple of cups of coffee and stared at the ocean for an hour, then what do you do?"

Sitting on the Board of Directors for The Tech Group since 1991 gave Faig a unique vantage point from which to view the custom injection molding industry. It seemed a natural move then for this plastics industry professional to continue his career as president and CEO of the global custom injection molding company with about $150 million in annual sales. On Oct. 1, 2003, Faig took the helm of The Tech Group, and it seems to be agreeing with him so far.

The past two years have been extremely challenging for the custom injection molding business, but Faig believes there are also tremendous opportunities. He just returned from a two-month junket touring all the Tech facilities around the world, talking with employees and getting to know the company in a more up-close and personal way. He has also visited with all the primary customers to better understand their requirements and what the future might hold in the way of new business opportunities.

IMM: How do you feel about your career change?

HF: I’ve had a wonderful career with a great company [Milacron], with terrific opportunities to do all I’ve done there. Now, to be able to do what I want to do with a group of people I really like—who have the same philosophy, the same values—is another great opportunity. Maybe it’s been a bit of luck, but I’ve always capitalized on things as they come along and it’s paid off in the long run.

IMM: We’re coming off a tough couple of years, which presents some unique challenges and opportunities for a company the size of The Tech Group. How are things looking now?

HF: I think things are looking better—"optimistic" is a good term. I believe things have finally bottomed out and we’re seeing an upswing. The plastics industry was hit much harder than other industries for two reasons: China offered an alternative to companies to reduce their costs to manufacture in an environment where price increases weren’t possible; and lots of commodity products were ideally suited for that.

After nine consecutive years of growth in the plastics industry, the recession hit and the rate at which China accelerated over the past two years is phenomenal. But, it hit all of us in the plastics industry quite hard—from machinery makers to resin producers to molders and moldmakers.

Things are better. Economic conditions indicate it’s improving. The exchange rate against the euro will be favorable. Companies that manufacture in Europe will look at North America again for opportunities.

IMM: And what about The Tech Group, now that you’ve had a few months to travel and get to know the company more intimately?

HF: It’s what I’ve expected here, after almost three months spent visiting operations, employees, and customers, and understanding firsthand the strategies the company has in place. My job here isn’t to bring radical change—radical change isn’t the point. My job is to keep it focused. The management team in place here is a great team, and the organization is already focused on its strategies. My responsibility is to help them grow the company, streamline the business, improve profits, provide clarity of direction, and maintain the customer focus that has made The Tech Group successful in the past.

We have excellent opportunities to expand into markets we know but haven’t focused on, such as consumer packaging. We see ourselves as more of a health care and pharmaceutical manufacturer, when in fact our capabilities allow us to be much more.

IMM: What will capturing those opportunities involve?

HF: We have to keep our focus on technology. As we continue down this path, we’re seeing the China lesson: Mature products have gone or are going offshore. If you’re going to take a stand, then you have to fight the battle based on advanced process capabilities and technology. Technology is in our name—The Tech Group. We need to keep that clear and in front of everyone, understand it, and implement it.

IMM: If mature products are leaving North America, what opportunities remain?

HF: I see tremendous opportunities in North America. More now than ever the business model will be different from that of the past for this industry. We have to participate and play in those markets [China, India, Southeast Asia]. They are just too large to ignore. They need the same things we need in terms of products and services, so we need to be globally positioned to support these new markets. This will give greater balance to the company, which is critical to survival in today’s world.

IMM: But what about the smaller molders that still make up the majority of the custom injection molding community in the United States, who can’t become a Tech Group and be global? Are there any opportunities for their future?

HF: I have a lot of friends in the molding industry, and many of them operate smaller molding companies. They must find some way to be competitive. I offer them three pieces of advice: Find out where the value stream is with the customer. Is it technology? Low cost? Whatever that is, find what your customers value, then provide it. Secondly, somehow develop alliances or affiliations on a global basis so that you’re not left completely out of the picture if you need alternatives in your business development. Third, you’ve got to be more than a shoot-and-ship molder. You must have applications-driven competency behind your business.

Some small companies are doing well on the basis of those three things. You know, during the 1990s, everyone was growing so fast and new products were coming along so rapidly that even very small molding companies were caught up in it and swept along with that tremendous flow. Today, you can no longer look for industry growth to sweep you along with it. There is no more rising tide that promises to lift all boats. It’s every boat for itself, so you must find what value you provide and grow on that.

IMM: How do you find out what customers value?

HF: I’ve been spending time visiting customers just for that reason. We must understand clearly what motivates our customers. There are lots of opportunities because there are lots of drivers, but we need to understand the important drivers to be an effective supplier. There are really two approaches: One is improving costs; that will get you so far. What you really need to do—and this is the second approach—is improve value in the customer’s product chain. Expanding the customer’s value proposition is worth more than simple cost reductions.

IMM: That sounds like a lot of work. Molders often complain that they long for the good old days when work came in the door almost without any effort. Will those days ever return?

HF: People become complacent when times are good. They get carried along with the flow and get used to business coming in the door with little effort. But the [growth] slope of the 1990s was not sustainable. The slope of the ‘60s, ‘70s, and ‘80s was sustainable.

Computers pushed plastics in the ‘70s and ‘80s, and then the telecom industry pushed plastics in the ‘80s and ‘90s. Currently, there’s nothing commercially viable that promises to push plastics at the growth rates we experienced in the ‘80s and ‘90s. What will come along next will be evolutionary rather than revolutionary. That’s not exciting—it’s like watching paint dry, but that’s the new reality. It forces us to be creative in our business strategies, creative in operations and how we run our plants, and creative in managing employees and suppliers.

IMM: How do you feel about the injection molding business today?

HF: I’m as enthusiastic today as ever before. The environment has changed for everyone in this industry and with that change comes opportunity. I see the unique opportunities that exist for a company of The Tech Group’s caliber, and our challenge will be to make the changing dynamics in the marketplace work for us. I’m confident that we have the talent and the horsepower to be successful.

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