More Change, Fewer Bells Print E-mail
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Written by Mike Buetow   
Wednesday, 30 April 2008 19:00
Talking Heads ImageDover Electronic Technologies is today what some other conglomerates aspire to be. The business unit took in nearly $1.4 billion in revenues last year, and its success has boosted the fates of its top management, in particular John Hartner. DEK’s president since 2001, Hartner last fall was put in charge of DET’s broad holdings, which besides DEK include Everett-Charles Technologies, OK International and a host of other businesses. He spoke with Circuits Assembly’s Mike Buetow in April.

CA: DET’s revenues slipped 2% and operating margin was down 2.2 points in 2007 – mostly on an 11% drop in testing sales. What are your plans for returning DET to growth? And how do you stay focused on driving growth at DEK while getting up to speed on these other, somewhat diverse companies?

JH: Most people in our industry are aware of the slower 2007 compared to a strong 2006, particularly in semiconductors. Naturally, the market has an impact on our growth, but there are many factors we can influence, too. DEK managed to grow through the cycles by focusing on customers and developing technologies. I expect to grow our other businesses in the same way. Along with the leadership teams within our business, I have taken a broad look at the market and our capabilities, and identified a number of growth opportunities. As for DEK, the other thing that made us so successful was the inherent strength of the team we have in place. That same team is introducing many new products, entering new markets and serving customers in ways that drive growth.

CA: DEK has managed to avoid the problems experienced by many OEMs when moving production to China. How do you account for this?

JH: DEK’s efforts in China manufacturing have indeed been a great success – both for our customers and our own team. First, DEK succeeded because there is a strong commitment to quality and people. Our product quality standards, systems and training mirror our UK operation. Second, we have invested a lot of resources on hiring, training and retaining the best people. Walk the floor and talk to them and you’ll hear the same themes as in the UK: quality, customer satisfaction, lean, continuous improvement…

CA: How do you manage the concerns manufacturing in Asia can have on workers in the West?

JH: To be successful, you must have a significant presence. I love the idea of a “home country,” and of Asia being a home country. We are well positioned since we already build some products and subassemblies there. We were able to prove this at DEK, where we still manufacture at Weymouth in the UK without our staff being reticent or fearful of the parallel manufacturing that takes place in Asia.

CA: You are taking over ECT and yet you report to the person [Dave van Loan] who built it. What do you see as ECT’s pressing needs, and what happens the first time you want to change something he put into place?

JH: ECT today needs a more hands-on approach, and for me to paint a picture of the future. Dave van Loan brought tremendous energy to ECT. In the past three to four years, his broader responsibilities required that he step away from the market and day-to-day developments. We need to insert the same level of energy at ECT, and I believe we can. I also believe that Dave’s faith in me is based on my past success.

Test is a $2.5 billion market. When supply chains are stretched so thin and you open that package and find it doesn’t work, it sends a strong message about the need for good test tools. As I see it, there are three challenges: First, although a global company, ECT is not as Asian-focused as it needs to be. We have a great sales presence there, but DEK benefits greatly from its manufacturing presence in Asia and ECT needs to do so as well.

Second, we need to grow recurring revenue. There’s a tremendous number of opportunities. If you look at the last five years, we’ve focused on multi-test, big units. We need to focus on the other side as well. And third, we need to grow the talent base. This is something I did at DEK. At our first management meeting, we put up a map and said, Who are our successors? At the end of the day, that focus was drastically different. ECT just got that same template.

CA: ECT has several brands underneath it. Will you maintain the brands, or roll them up?

JH: Look at OK International. They went full circle. They tried to wrap up Metcal and OK, and then unbundled them. I think the individual product brands have too much equity to consider a broad consolidation. However, you can consolidate brands more internally in the back office, and we’ll certainly do some of that. We want to maintain the autonomy but get synergy where it makes sense.

CA: How do you overcome past missteps ECT has encountered in board assembly test?

JH: I think the spirit of innovation is always to keep trying something new. It’s important, even if it doesn’t always succeed. That said, sometimes it is easy to put too much emphasis on bells and whistles. Customers are comfortable with change at a controlled pace, and we need to stay in line with that. We need to change more quickly, but perhaps with fewer bells and whistles.

CA: A year ago, the next hot spot was India. Is that still the case, or has Vietnam or elsewhere overtaken it? What do the Dover units look for when assessing a country’s prospects?

JH: I was in India a few weeks ago and was happy to see that market continuing to grow. India will be a major intellectual center for Dover. I started Dover Software, and we now have 150 software engineers there. We see the indigenous market being served by outside OEMs. It will be a successful, growing market, but not a China-like export market. Chennai will be where the manufacturing is. That region will thrive for electronics manufacturing, and it’s pretty close to the rest of Southeast Asia. I think it will be one of the key manufacturing centers, but not a hub like China.

Vietnam is also growing, particularly with investments from our Taiwanese customers in the near term and our global customers in the mid-term. We have already started to serve that market. We see a number of established growing and new markets emerging. Insofar as judging investments in new countries, we talk to key customers, meet with local industry professionals and try to determine when a critical mass of factors will permit the supply chain to start operating locally.

CA: If the US is indeed headed toward or in a recession, what lessons from 2001 will you apply this time around?

JH: We all read a lot about this but, frankly, our business really doesn’t reflect this, at least not yet. As far as what lessons from 2001 we now can apply, our business has already integrated many of those lessons. Our recurring revenue model is much more advanced than in 2001, which allows our businesses to continue to interface with customers and provide value even when capital equipment budgets are down. Finally, our whole organization is leaner and more flexible.

Last Updated on Friday, 25 April 2008 08:57
 

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