A week in Mexico

I have just spent an enjoyable week in Mexico at the annual conference of the MDNA (The Machine Dealers National Association of the USA). It was a useful week in several respects. I was able to expand my social circle within the US machinery industry, acquire many new business contacts and practice my ever-improving Spanish! My overall objective was to find a strategy to exploit the American market from both a buying and selling point of view.

Historically, our countries have always been strongly intertwined. Ever since the descendants of the Pilgrim Fathers voted to speak English rather than German we have been friends, notwithstanding the small matter of the Civil War. Certainly for the entirety of the 20^th century the USA was our major ally and prime trading partner.

The growth of the EU and our increasing inclination to face East rather than West has seen that bond begin to unravel. But cultural and emotional links are still strong – look how many Americans and Canadians enthusiastically lined the routes at the Royal Wedding!

When contemplating doing business in the USA, there is a temptation to be bamboozled by the sheer size and scale of the market. We think that because they like us, talk a version of the same language, watch the same movies, eat the same kinds of food, then the business culture will be the same as well. And yet subtle but important differences need to be taken into account.

Firstly, you must take heed of American self-sufficiency and insularity. It used to be the case that their manufacturers produced primarily for home consumption. Their great industries, such as automotive, aerospace, computers, food & drink, produced goods for the people, employed the people, provided their healthcare, education and pensions, with little or no outside help.

All of this has changed. The great manufacturing powerhouse that was America is in deep crisis. It all started with the emergence of Germany and Japan after World War Two and has now taken on a new dimension with the growth of China, Brazil and India. Many American citizens have become heavily dependent on the State and the US economy is heavily dependent on imports, not a healthy scenario.

So where are the opportunities for our own industry? Well, for starters, many of our UK finishing sector OEM companies have been American owned or represent American manufacturers. Just think Wheelabrator, Westinghouse, Donaldson Torit and Harper Canning.

The USA relies on its UK subsidiaries and many other independent partners as its gateway to the lucrative European market. In the UK we are on Europe’s doorstep as a prominent if semi-detached member of the EU. We are governed by the same rules and regulations, we have reluctantly embraced metrification. Sometimes we can even talk some of their languages, and they can certainly talk ours!

From our company’s point of view, the great opportunity is in buying redundant US finishing machinery from OEM manufacturers with European links in order to repatriate them for sale in the European market. Due to the downturn in their manufacturing, they currently have a great deal of equipment that is surplus to requirements. On this side of the pond, we are growing again, even if it is from a smaller base, and the European market is ready and waiting. All we need is reliable partners to assist with inspection, purchasing and logistics.

Every other UK company has a different pitch to make. We have a solid and trustworthy base in engineering, innovation and specialist skills, particularly in the finishing sector. We can coat, paint, polish, clean and apply our finishing skills to many American products and prepare them for the European market.

The opportunities are there, we just need to exploit our already strong relationship to help to bring them to fruition.

The Chinese are coming

The Chinese are coming. This is the mantra that is being repeated everywhere you look at the moment, on our TV screens, internet and in conversations in the workplace.

A recent television documentary about the Chinese in Africa came to the conclusion that they were a threat to every indigenous industry and to every walk of life, from railroad builders to diamond miners and even chicken farmers. The decimation of much of American industry is largely attributed to China, whilst here in my home city of Birmingham, the monolith that once was Rover is now firmly in Chinese ownership.

I seem to recall similar alarm being expressed in the 1970s when Japan was on the rise. Everything from screws to aircraft carriers were going to be made in Japan, with a corresponding decline in home manufacturing and a marked loss of quality in the goods that were produced. Remember the Datsun Sunny? Outdone in shabbiness only by the Austin Allegro!

The reality is that Japanese engineering excellence, quality controls and manufacturing facilities have become deeply embedded in the UK industrial landscape. There are the major car plants at Nissan on Wearside, Toyota in Derbyshire and Honda in Swindon, all employing thousands in their direct workforces and generating work for thousands more sub-contractors, including many in our own industry.

Meanwhile, the perception of Japanese goods has evolved from cheap, basic and reliable to competitively priced, ultra-reliable and highly desirable, all in a generation. Indeed, brands such as Lexus, Sony and Toshiba have now become aspirational in their respective fields.

This cycle is now being repeated for China and it must be embraced, for the domination of Chinese products in every walk of life is an inescapable fact. Most of the technology, processes and machinery that our surface finishing industry employs, both in the UK and Europe, already have Chinese-made equivalents that are available at vastly reduced prices in comparison to their European, American or even Japanese counterparts. This equipment is no longer simply for production in South-East Asia. It is set to become the technology of choice in nearly all industrialised countries.

Chinese industrial plant and machinery is mainly produced by vast, state-sponsored enterprises that benefit from being part of a command economy. But unlike the grossly inefficient industries of the old Soviet empire, these companies are run on capitalist principles.

By contrast, British manufacturing is undergoing an SME-led private sector rebirth. Where once there was British Steel, British Leyland and British Rubber, now there are hundreds more specialist manufacturers producing everything from farmers’ tyres to non-standard socket sets, and from bullets to balustrades. Just as there is no limit to the relentless rise of Chinese production and control, there are also no barriers to British design, innovation and enterprise.

And as China creates so much wealth, so the affluent Chinese consumer is criss-crossing the world absorbing new cultures, enjoying new experiences and acquiring designer clothes, handbags and sunglasses. Remember the news reports about Selfridges on Boxing Day?

We cannot compete with China on its own terms, but we can take full advantage of its low-cost, high-value technology to forge our own future based on specialist products and services that, with help from government and the banks, we can sell on to the whole world – including China itself!

The spur of recovery

I had my knuckles metaphorically rapped recently for describing our company to a prospective customer as ’A little family business’. Colleagues tell me that I need to get out of this habit and start talking the company up rather than down. ‘After all’ they say ‘our publicity states that we are a world leader in what we do, we are no longer that small’.

Talking ourselves down is a very British trait. In the days when we still had the semblance of an Empire and our industry, along with our navy ruled the waves, we still had the stiff upper lip and a reticence towards blowing our own trumpet.

Of course, there are always exceptions to the norm. Who will ever forget Harry Enfield’s ‘Loads of Money’ character in the Thatcherite 1980s? Or the misplaced hubris of the dotcom generation? Sometimes, self-confidence can be mistaken for conceit unless it has solid foundations.

So are there good reasons for talking ourselves up again? Public sector cuts are starting to bite, house prices are on a downward spiral and unemployment is rising rapidly. Even Tesco had a poor Christmas. Despite it all, either by accident or design, the UK economy is rebalancing itself. Manufacturing is growing at 5.6%, the fastest rate apparently since Victorian times and the heyday of the Industrial Revolution. The UK monthly purchasing managers’ indices (PMI) is running at a very healthy 58.3, better than China or India. Something significant is afoot.

Those wishing to inject a note of caution say that manufacturing only accounts for 13% of our economy, way down on the glory days of the 1950s and 60s. Furthermore, overall growth in the UK economy during the final quarter of 2010 was a much more modest 0.5%. But the spur for recovery has to start somewhere, so much rather manufacturing than anything else.

As long as we can maintain low interest rates and a weak pound, our manufacturing growth will lead to success in export markets, essential if we are to become a world player again. The much-maligned banks and government agencies should give their full backing to this sector, as it gives our country the greatest hope of a long lasting recovery.

As UK manufacturing recovers, it is time for the surface finishing sector to start talking itself up again, as we are the best in the world at what we do. You may be a little family business in a niche industry on a small island in a very large world economy. But it is those kinds of companies that have made us world leaders in the past and will do so again.

The more new products that are produced in this country, the more pre-treatments, special coatings and finishes will be required. It is essential that we try to maintain our capacity for this kind of work, so that the experience, innovation and skills base are not lost to other countries.

Our company will do its best to keep the industry supplied with high value, low cost equipment to keep the wheels turning during this critical phase of growth. It is up to others to keep talking the talk on behalf of all of our excellent British finishing companies.

So, from this world-class little family business in the heart of the Black Country, let’s hope for sustained growth and prosperity in 2011 and a happy new year to all!

The importance of brand names

A Rolls Royce engine appears to have failed on a Qantas flight from Singapore. As well as the distress caused to passengers and crew, this has resulted, at the time of writing, in an 8% fall in the company’s share price.

The incident was doubly worse for British interests as the engines are part of the Anglo-French Airbus 380, the most advanced aircraft of its kind in the world. This follows on from the fate of another iconic, world-class British company BP, whose value has been decimated by the Gulf of Mexico oil spill, and is only now starting to recover.

Even the quality-conscious Japanese are not immune to these problems, as high-end Lexus cars are recalled for safety defects and the cachet associated with the brand takes a battering.

It only serves to illustrate the importance of brand names to consumers, industry and financial markets. When things don’t go to plan, as in the examples mentioned above, fixing the defect or re-calibrating the engineering process is only half the battle. How many times nowadays do you hear the phrase ‘bad for PR’ in association with all kinds of mishaps? It seems to be applied to gaffe-prone CEOs, greedy bankers, misbehaving footballers and hypocritical politicians.

So what has all this got to do with product finishing? Surely our industry operates below the radar of such high profile incidents?

But perceptions of brand integrity work on every conceivable level. Rolls Royce may be an extreme case, but in the finishing industry, those companies with the vision to employ professional marketing in order to build a strong brand are usually rewarded with lasting success.

For instance, stop any person in the street and ask them to name a brand of surface coating and I guarantee the only name they will come up with is Teflon®. There is nothing remarkable about this process; it is a form of powder or liquid coating with both industrial and domestic applications. And yet, because of clever branding and association with household appliances, it is a name that sticks in peoples’ minds (excuse the pun!)

Three years ago, I had misgivings about re-branding our company as ‘Riley Surface World’, spending a significant amount of money in the process. Now the only regret I have is not doing it earlier, as the investment has paid off handsomely. The key is to make the name synonymous with the products or services. Riley Industries could be any industrial conglomerate. But under our new label, there is no doubt about the business that we are in.

In our industry, it is the chemical companies that do this best. They are able to distil complex formulae into cogent, end-user benefits and communicate them with clarity.

In the equipment field, companies like Wheelabrator, Rosler and Nordson also make a good fist of getting their messages across in clear and simple terms. In all cases the brand names and their associations are enhanced.

Indeed, it is to the credit of Rolls Royce, BP and Toyota that when their brands take a knock, it seems so out of character. Like Arsene Wenger allegedly ‘playing away’ with a Parisian rap artist. But let’s not get carried away!

To summarise, we may all seem to burrow away down in the grimy basement of manufacturing industry; cleaning, polishing, coating, blasting, baking and generally getting our hands dirty for insufficient remuneration. But it is those companies that build brands that are synonymous with excellence that always have and always will be rewarded well in the longer term.

Cobham Mission Equipment Project Complete

The final stage of the decommisioning program at Cobham Mission equipment has now been compeleted, with all equipment removed form site and licence surrenders approved

Family business since 1966

Our company has been trading since 1966. Indeed, if you trace back to the roots of the family business, you will see that my grandfather was a dealer in general machinery as far back as the 1930s.

When my father started Barry Riley and Sons in the mid 1960s, much of his early success was down to opportunism in exploiting the great nickel shortage in those days. By recycling and reselling unwanted nickel stocks, he was ahead of his time, as recycling has become such a major factor in our industry today.

We have only been specialists in the surface finishing sector for 44 years (not a bad innings). But as a linear family business unit, we have survived the great 1930s depression, the Second World War, post war austerity, the Cold War, numerous recessions, the 3-day week, the miners’ strike and so on.

So when there is talk of ‘double-dip’ recession just around the corner, I may be apprehensive but I have little fear.

Much of the real success of British industry has been due to family businesses. For instance, there is one that I know only too well as I live very close to their headquarters. That company is JCB, but how many people around the world who associate the name with heavy digging machinery realise that the initials stand for Joseph Cyril Bamford, the company’s illustrious British founder?

This is a great British company, which has survived some horrendous construction industry downturns, not just here but all over the world, and is still standing.

There are many reasons why a family business is often stronger than the sum of its parts. Let’s explore just a few:

In a sustainable family business, ownership is passed from one generation to the next. Loyalty is expected because of the need to protect the family’s inheritance. This often leads to a greater incentive to innovate, diversify and grow the business.

Specialist skills and knowledge are passed from one generation to the next. The surface finishing industry is renowned for its patented processes and ‘black arts’, many of which are the exclusive preserve of a particular family and bear its name.

A well-run family business will often treat its employees like members of an extended family. This engenders greater loyalty and commitment and creates a more tightly-knit unit with a fighting chance of riding out the challenges of recession, industrial decline and foreign competition.

And if, like ours, the business name is synonymous with the family name, its builds a strong and trusted brand, as the products or services are associated with real people, whether alive or dead. Just think of Ford, Austin, Morris, Rolls Royce, Marks & Spencer, Dyson, W Canning, the list goes on and on.

Of course there are always exceptions. Who could forget the misplaced honesty of Gerald Ratner, or the reckless optimism of John Delorean? But, on the whole, the family business model is a good one to follow.

So as the ominous drumbeat of government cuts, market forces and the usual prophets of doom gather at the gates, I take strength from the knowledge that my forefathers faced much greater problems and came through relatively unscathed.

I believe that the traditional British family business, both in our own sector and manufacturing industry in general, is an excellent template for companies to follow if they are to survive and prosper.

The Industrial speed dating session

I recently attended a speed dating session in Coventry. The intimate face-to-face meetings were strictly limited to 20 minutes for each couple, after which a burly organiser blew a very loud whistle telling us all to move on.

The truth is I am happily married and the event was organised by UK Trade and Industry to promote their export services provided by embassies and consulates all around the world. Each delegate enjoyed one-to-one sessions with trade representatives for a selection of countries in order to explore opportunities to develop more overseas business.

It is a practice that is not unfamiliar to me as once a year, normally in more exotic locations than Coventry, I attend a similar session with other machinery dealers from around Europe, known as the Merchants Market. Modern digital communication may have its merits, but sometimes there is no substitute to looking someone in the eye and agreeing a deal.

In our company’s early days of exporting, we were fortunate enough to receive government financial support as well as expert advice. As the recent experience of Sheffield Forgemasters has demonstrated, the massive government deficit means that those heady days have gone. UKTI is not simply holding these events for altruistic reasons. Now, in the nicest possible way, they are after our hard-earned cash!

Of all the noises coming from the very top of government now, the one that is most resonant for me is ‘Britain is open for business’. We may be technically bankrupt, but we are certainly not bankrupt when it comes to ideas, innovation and enterprise. A country that can produce jet engines, nuclear submarines and Formula One racing cars has to be taken seriously.

A major focus of the latest UKTI initiative is to find local partners for exporting companies. All the resources at their disposal are utilised in researching, marketing to and interviewing prospective companies. This work is carried out by hardened professionals that know the local language and customs. I think sometimes we underestimate the commercial clout of our diplomatic service.

Having experienced trading overseas with and without formal partnerships, I have come to appreciate how valuable they can be.

For instance, until last year we had done almost no business in France, our closest potential trading partner. I had always assumed that the French viewed British engineering with disdain and would only buy from us as a last resort. How wrong was I!

Now the power of the internet has brought us an excellent agent in France. He is well-connected, passionate about the surface finishing industry and pro-active in matching the production needs of French companies to the equipment that we have to offer. This encompasses cleaning and degreasing plants, automatic shot blasting systems, conveyor ovens and much more.

This shows, not just for our company but the industry as a whole, the opportunities that are right on our doorstep. And as long as the Sterling/Euro exchange rate is in our favour, we will always be competitive.

As a result of the UKTI initiative, we are actively seeking export partners both in Europe and other developing parts of the world. I know that investment in the kinds of professional services that our embassies offer will be money well spent. An example of how speed dating pays dividends.