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DPI Client Interview
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The next time you're cruising along in your luxury car and you can barely feel the engine's hum, you can thank the Lord Corporation for pioneering the vibration-damping technology that makes that silky ride possible. Since Hugh C. Lord first figured out how to sandwich rubber between metal to make engine mounts that absorb vibration, everything from the 1934 Hupmobile to the original Curtiss Wright radial aircraft engine to the Space Shuttle has benefited from this small bit of genius.
Since 1924, Lord has hummed along, and despite a few bumps in the road, the North Carolina-based company has grown to about $440 million in sales. Its two divisions, Mechanical Products and Chemical Products (a Chemical Division grew out of the adhesives developed to bond rubber and metal), are recognized technology leaders in their industries.
Yet a couple of years ago, the need for new growth became more acute, and the company had developed an inertia problem. Product development, though it produced elegant technical concepts, was often out of step with market needs and lacked nimbleness. As Lord President Charles Hora put it, "At Lord, we had a tendency to polish the polish. Have you ever spit-shined a shoe? You're never done. We had a saying, 'We don't launch products. They escape!' "
In addition to accelerating new product development in existing markets, they realized they needed to root out new market opportunities. Said Hora, "If you're sitting on top of a mountain, that's great, but the mountain's not getting any higher. You either move down the mountain, or find new ones to get to the top of."
Other forces such as globalization, new competitors and the need to integrate a series of acquisitions also made it clear to Hora that a new strategy was needed. But he didn't want to dictate direction, and he believed that the knowledge and experience to create a strategy resided in the minds of Lord's management group. "Besides," he says, "I'm not possessed of universal wisdom. And my vision needs to be challenged as much as anybody else's." He felt they needed a process that would give them an objective forum to challenge the status quo and coalesce their ideas into a coherent strategy they could understand, agree on and, most importantly, implement. So about two years ago he brought in DPI and its Strategic Thinking Process to accomplish that result.
"Our business had been healthy and robust and growing," says Hora. "So on the surface it looked like we didn't need to change anything. But in fact, we did. Increasing globalization and competition from global competitors raised the need to manage the worldwide marketplace including pricing, technical services and new products. We needed to restructure the organization, moving from a product line approach to regional management, so that we would show one face of that Lord Division to the customer in Japan, for example, whether he's buying floor coatings, epoxies, automotive adhesives or whatever it happens to be. We had also made a series of four acquisitions which helped us move into the electronics adhesive business, getting us strongly into PCs, cell phones, electronic equipment of all types. We needed to figure out how to integrate them and see what kind of synergies we could develop."
Any one of those issues would present a strategic challenge. Add seventy-five years of inertia, and the need to develop a strategy that would shake things up became an imperative.
So Lord took the top management groups of its two divisions, first Chemical Products (CPD) and, a year later, Mechanical Products (MPD) through DPI's Strategic Thinking Process.
The Process provided the framework to extract the experience and knowledge of people immersed in the business and enabled those same people to examine every facet of the company, its capabilities, and opportunities. This detailed, structured assessment allowed the group to get all the facts on the table to see how they had arrived at their current state. Then the DPI process offered them a methodology to envision the future business arena they believed they would face and construct a vision of where they needed to take the company tomorrow to thrive in the business climate that lay ahead. The picture that emerged forced the realization that significant growth would depend on bringing a sharp definition to the products, customers and markets they would focus on. In the past, the company had tended to pursue all opportunities equally, and no company has the resources available to do that effectively.
Defining those clear targets depended on the concept at the heart of the process called the Driving Force--the one aspect of the company that gives it its edge, propelling it toward a specific set of products, customers, and markets. At Lord, in both divisions, the Driving Force debate was revealing, and helped create that definition.
Recalls Charles Hora, "We looked at Market, Technology and Product. We played out the scenarios for each one. Two of them, as much as we tried to make them work, were bankrupt. When we did the test at the end, they didn't work.
"For example, we could say we're Market-driven, but we are very selective in the markets we serve. We're not in all aerospace, but in very selective aerospace markets. If you say you're serving aerospace, then any aerospace opportunity that comes along, you should be sniffing at it. And we don't. And we're not in all aircraft. There are various rotorcraft and fixed wing aircraft we want to be on, but not all of them.
"We went through Product-driven--and we do make products for bonding and adhesion and accommodation of motion, but we don't make them all. We make what we make--Lord stuff. Everybody at Lord knows what a Lord product smells like. It's the Lord gift for technology that sets us apart.
"The only Driving Force that worked was Technology. The distinctive competency we determined we have in the Chemical Division is the ability to formulate and do selective molecule bending. We are not a synthesis company. We do not feel that is our expertise, but rather formulating and developing, in a rather short period of time, specialty adhesives. In the Mechanical Division, we developed the same kind of definition of what we do--the application of the sophisticated Lord way of designing systems that damp vibration and accommodate motion in a very special way at the high end. Anybody can sell a rubber grommet with a bolt through it, and a whole lot of people do that, but they don't do what we do. We are at the top of that food chain."
In the Mechanical Division, for example, this realization of Driving Force and the resulting Strategic Filter has opened up new growth areas that represent substantial new product potential.
Hora describes it this way, "We needed to find a way to broaden our scope. If you're sitting on the top of that mountain, one way for you to increase your fiefdom is to move down the mountain, which means for Lord to move into lower-tech products, which we don't do as well and goes against the Lord DNA. The other way is to occupy other mountaintops. And this was a direct discussion from the DPI sessions. We had already begun to do that in the Chemical Division with the acquisitions we made getting us into electronic adhesives. But how do you do that right and where else should we go with our mechanical systems? One concept that came out for MPD was special active isolation in ways that we hadn't thought about--not isolating an engine on a Boeing aircraft or a rotorcraft, a helicopter blade, but isolating a table that an atomic force microscope moves upon that has micro-miniature oscillation that disturbs the ability to select an atom, things like that. It's just as high tech as we're already doing. It's just the application that's different and we're using some technology that was developed elsewhere.
"We're no longer status quo," says Hora. "Before we would have said, 'It's got to have rubber to metal in it.' But there are other ways to damp motion that involve computers, motion sensors, actuators and don't have any rubber in them at all. In fact, they don't simply damp, but are actually capable of providing counterforce. And that is the latest. As the needs for our product become more sophisticated, we have to become more sophisticated in attempting to satisfy and serve those needs. It doesn't mean we abandon the old because it is still the bulwark of our product line. But if we don't occupy the other mountaintops we cannot grow."
Progress, since the initial sessions, has been impressive and some fundamental changes have taken place in the way management looks at the business.
As Hora comments, "I think the Chemical Division is much more comfortable about who it is right now, and where they're focused. A business that we were thinking about exiting has become central to the strategy--getting involved in additional aspects of Auto. Chemical was already heavily involved in Auto because our products get into everything from coatings, weatherstrip, hose and belt, auto adhesives, etc. But pursuing the Auto aftermarket, getting involved in body in white, and post-finishing, galvanic e-coat, corrosion protection in addition to being a primer for an adhesive--all of that came out of this. And we were seriously considering exiting the whole body in white area and selling that business. Instead, we decided to focus on it. It fit our technology. It fit our formulation ability. It was a broadening thing. And we had expertise that we were walking away from. As someone was once fond of saying, 'The Automotive Business is a business of zeros, lots of zeros.' So if you can make a penetration you can get lots of zeros."
To assure timely deployment, a list of Critical Issues was drawn up--initiatives critical to the success of the strategy--and ambitious targets set with the help of DPI partner Mark Thompson, who facilitated the sessions.
As Hora recalls, "At the end, Mark said 'Okay, here it is. Where would you like to be a year from now?' We said we needed to restructure, change the sales and marketing groups, add some technologies and reorganize the way we operate the plant--a whole lot of things. And Mark said, 'How soon?' and we said 'Well maybe September or October,' and this was February. And Mark says 'I'm leaving. You've talked about a two-year horizon. If you don't have plans in place by the end of May, that won't happen. If that's your timeframe, I'm leaving.'
"Now he was being facetious, but he was making a very powerful point. We needed to commit to these plans. Mark asked us powerful questions when we were not asking them of ourselves. You need the facilitator to keep you on the road. Otherwise people may flee from it. Without that help, the strategy could end up like a wave lightly washing up on the shore and winnowing out instead of crashing on the beach. I have a lot of respect for Mark Thompson and this process. You need someone like that to push you through those fledgling times. By June, the Chemical Division was reorganized. Dave Lewis who heads up Chemical, managed all of that extremely well and it got done. MPD, I'd say is about three-quarters of the way through its strategic renewal and working the Critical Issues is its stock and trade. Things like developing e-business. But they'll get there."
Hora cautions that while the process produces exceptional results, it requires total commitment from the entire management team. It is that total buy-in to the conclusions that emerge that drives the organization to break the existing inertia and forge ahead in a new direction.
"This process challenges you. There is an atmosphere of scariness because you're embarking on things that you're not certain you can do. But the data say if you don't, you'll be in trouble. So it adds determination in the minds of senior managers.
"I like the crispness of the DPI process. I like the challenge of it. I like the self-check feature of it. Just when you're getting comfortable you get a lightning bolt in the fanny.
"It's a lot of work. It's a commitment of time. But this strategy is the lifeblood of the business. It's a serious effort and you've got to do it right."
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