In a cavernous plant on the outskirts of Coventry, a massive bet is being placed about the sort of vehicles that will be trundling around cities and along motorways over the next 30 years. The factory is the result of a £325m investment by a big Chinese automotive group and adds up to one of the boldest efforts in the UK to create a new generation of electric cars.

The site is run by London Electric Vehicle Company, a UK-based company owned by Geely, a fast expanding group controlled by the leading Chinese entrepreneur Li Shufu – who is known for his spare-time hobby writing poetry, as well as for a relentlessly global approach.

A key part of Li’s plans for LEVC is to make the Coventry plant a centre for development of new types of electric car, aided by recruitment of technical specialists, many of whom are likely to start at LEVC either as apprentices or engineering graduates.

The  investment stands out against the decision by Sir James Dyson, one of Britain’s best known entrepreneurs ,to spurn the idea of starting an electric car plant in the UK, choosing Singapore.

Among the 750 employees at the site – which opened in 2017 – is Pauline Dumont, one of the factory’s 200 development engineers. The 26-year-old Belgian, pictured at the start of this story,  joined LEVC in 2015 after finishing a postgraduate degree in automotive engineering at Cranfield University.

“I was excited at coming to work here – the job gives me the chance to help create a completely new product starting from zero,” says Dumont. “It’s been great being part of a team doing something special. I feel I have learned a massive amount in a short time.”

Electric cars could change the shape of  21st century motoring 

The first products from the factory are a new series of electric black cabs for London, which in time will replace the diesel-powered taxis that form a big part of the London street scene, but which will be gradually replaced by less environmentally intrusive new models. The LEVC-produced vehicle has been expressly designed to fit in with the capital’s increasingly onerous clean-air regulations.

Diesel vehicles are regarded particularly negatively because of their strong association with pollution and widespread health problems. Over the next decade, it appears that, worldwide, increasing numbers of vehicles will be based around electric propulsion instead of petrol and diesel engines — Britain and France have already said that new cars sold in their countries must be fully electric by 2040.

Volvo, the Swedish company that Geely bought in 2010 as part of a big international push, says that from 2019, it will no longer launch models powered only by internal combustion engines and all its vehicles will be hybrid or electric.

As for Geely’s efforts in the UK, it formed a joint venture with Manganese Bronze in 2007, and took a 20 per cent stake in the business. After the full acquisition and the development of its electric propulsion plans, Geely renamed the business LEVC.

Pointedly it dropped any references to taxis in the title, signalling its ambitions. Geely plans to ramp up production from Coventry to 20,000 vehicles a year by 2020. The output will comprise not just taxis but other sorts of electric cars aimed at markets outside Britain.

Steve Fitter, pictured below, assembly manager at the Coventry factory, who started at Manganese Bronze in 2000, says the Chinese investment has been “hugely welcome”. The Chinese owners have, he says, “a broader view of the world” than the previous top management at Manganese Bronze.

Alluding to the graduate engineers and apprentices at the factory, Fitter says: “We want to embed them into the company’s development programme. We want to grow a new workforce that will create a product cycle of new vehicles.”

The initial product from the factory – the London taxi – is strictly speaking a hybrid as it combines a lithium-ion battery with a petrol engine. That gives the vehicle the ability to travel for about 70 miles purely under electric power, or a total of about 370 miles when in hybrid mode and fuelled also by petrol.

Among the novel techniques being pioneered at the plant is extensive use of plastic- based composite panels that feature in much of the vehicle’s body, in place of the more orthodox steel. The panels are fixed to the car’s frame – made from aluminium, again rather than steel – through glueing rather than the normal welding process. Basing the structure of the car on plastics and aluminium leads to a less weighty body, offsetting the effect of the heavy battery, helping to reduce energy use when on the road.

A key partner in this part of the development is Novelis, the US-based aluminium producer owned by the Indian industrial group Hindalco. Novelis has a partnership with LEVC under which it supplies the aluminium in the body from a plant in Germany. Steve Fisher, chief executive of Novelis, told Made Here Now the relationship had led to some “unique insights” for both companies that could help with the development of more vehicle models in the future with similar characteristics.

Watching from the sidelines as the Geely plans for Coventry have taken shape is Lord Kumar Bhattacharyya, doyen of the UK manufacturing scene who is the chairman and founder of Warwick Manufacturing Group, a high-profile part of the University of Warwick that is based in Coventry. It was Bhattacharyya who invited the Geely chairman Li to the city in the mid- to late-2000s, after previously meeting him in Beijing.

Lord Bhattacharyya – chairman of Warwick Manufacturing Group – introduced Geely’s chairman Li Shufu to Coventry and paved the way for the new investment. The two men are shown below.

Bhattacharyya says: “I’m interested in cars and so is Li Shufu – so it seemed natural he’d like to visit Coventry [a historic centre for UK vehicle production]. He wasn’t all that interested in taxis – taxis were taxis, and no one bothered with them – but then Manganese Bronze came to his attention and he got involved with the company.”

Bhattacharyya says Geely’s plans for Coventry are “very encouraging”. He describes Li – who has humble roots and started out in business by buying an old camera to photograph tourists at beauty spots – as a “man with ideas and a vision of the future”.

“I’ve always said that the UK car industry can do well under the right sort of leadership and what Geely is doing in Coventry bears this out,” Bhattacharyya adds.

by Peter Marsh

A version of this article appears in MadeHereNow.com. Note: Lord Bhattacharyya has died since the article was published. 

The 3Cs – code, collaboration and capability – are the keys to separating the winners and losers in global manufacturing.

Code describes the software important in linking networks of products. Collaboration covers the relationships connecting companies with suppliers, developers and users. Capability encompasses employee skills.

The 3Cs grabbed attention at the latest in a series of annual “manufacturing summits” held by the Financial Times. At the latest gathering, held in London in October 2018, the topics for discussion included autonomous vehicles, artificial intelligence, the internet of things and the challenges of Brexit.

Pictured is a taxi coming off the production line at a UK factory run by Chinese-owned London Electric Vehicle Company.The plant shows how collaboration between different businesses can lead to useful benefits.

First, consider code – the lines of software that act as the “glue” between interlinked machines. The key resource here is data. Every time a manufacturing process takes place, or a finished product interacts with the outside world, an item of data is created.

In the past, most manufacturers have failed either to collect, store or process the data- in many cases they’ve done none of these things.  Now, the position is changing as businesses realise that the data – backed up by the software that keeps track of it and uses the data to make judgements – can help them to improve.

“Everyone [in manufacturing] is a software company – it’s just that some don’t know it yet,” was one phrase heard during the FT conference.

Extracting data from manufacturing processes can help raise revenues and profits 

Driverless cars offer examples of where data and products connect. An autonomous car interacting with other vehicles and objects around it is an illustration of the much discussed “internet of things” – where the things happen to be large, expensive and on wheels.

Sarah-Jane Williams, director of smart mobility at the Ford carmaker,  says people will have to stop thinking about “user-optimised journeys”, and become accustomed to “system optimised journeys” where software takes charge. Ford aims to generate revenues from the software by teaming up with other businesses – such as public authorities or other entities that may evolve to manage driverless cars – which have a part to play in managing the cities of the future.

More prosaically, software and networks are important for many manufacturers that wish to use their production machines more effectively. For instance, a company operating machine tools can link its machines with software that monitors the equipment to generate maintenance schedules and look for faults. Manish Chawla, general manager for global industrial products at the IBM computer and data company, told the FT event:  “A lot of companies are sitting on a goldmine [of data].”

Networks and collaboration are crucial to using data more effectively, says Manish Chawla of IBM (left). Photo: FT 

The second of the Cs – collaboration –can help companies to use and share data more effectively. Kone, the Finland-based maker of escalators and lifts, is one of several companies with which IBM has formed a partnership.

Whenever a person steps on or off an escalator, an item of data is generated. If this is collected, the software reveals useful information about travel patterns, perhaps inside a railway station.

If this information is linked to sensors recording associated “people movements” (for instance about people going in and out of doors) then a fuller picture of life within the building structure can be obtained. That helps the operator of the building to manage key aspects such as energy provision and security. Schneider – the French equipment manufacturer which also has a large business offering energy management services – is another partner in the IBM/Kone relationship.

Information is all around us – many manufacturers need to learn to use it better

IBM, in its work on the internet of things, can point to its collaboration with several other firms. Examples are the Swedish capital goods company Sandvik, where the partnership is geared to creating maintenance schedules for mining machines, and Cemex, the Mexico based building materials producer. Here the data harvesting gives Cemex insights into how customers use hardware such as cement mixers, feeding information back that is useful in developing both new machines and materials.

But collaboration goes beyond simply using data more effectively.

Malte Lohan, director-general of Orgalime, a Brussels-based trade body representing Europe’s engineering industry, told the conference: “Invariably you find that innovation can be maximised through partnerships [between companies].”

Sharing ideas and insights leads to better products and solutions, says Malte Lohan of Orgalime. Photo: FT 

Steve Fisher, chief executive of Novelis, the US-based aluminium producer owned by the Indian industrial group Hindalco, elaborated on how this can work. He discussed some of the many partnerships his company has with businesses around the world – including many car makers that use aluminium to supplement the steel that most cars are predominantly made from.

A specific example is the link between Novelis and London Electric Vehicle Company, a UK-based company owned by Geely, a Chinese carmaker. LEVC is manufacturing a new generation of electric car in a £325m factory in Coventry, UK.  Some of the first models of these cars are seeing service in Britain as the latest iteration of the famous London “black cab” taxi.

Through the link with LEVC, Fisher said Novelis is learning about how the aluminium structure for the new London taxis can be bonded to the plastics-based composite panels from which – in a relatively novel departure for the automotive industry -a large part of the vehicles’ bodies are made. “We are getting some unique insights,”  Fisher said.

The final C – the capabilities of employees – stands out as another key theme.

The skills of people working in manufacturing are central to the sector’s progress  

Without the correct skills people working in manufacturing – and the firms that employ them – will be unable to capitalise on the opportunities that new technologies have to offer. Making manufacturing as a career more attractive to young people -seen by many as more receptive to taking in new ideas than older ones – is a big preoccupation for many industrial companies. This aim is behind a number of industry and technology initiatives, among them the UK’s Made Here Now project.

Fisher of Novelis gave a specific example of how his business is trying to tackle the issue. This is through a global competition, organised by the US charity FIRST and sponsored by several businesses including the aluminium producer, to encourage students to develop new generations of robots.

“By getting involved with this competition we hope to create a promising talent pool and nurture the next generation of top industry minds,” said Fisher.

Students from around the world learn about robotics in a competition sponsored by aluminum producer Novelis. Photo:  Argenis Apolinario

While Juergen Maier, chief executive of the UK arm of Siemens, the German engineering group, recognises the importance of such projects, he says that frequently educationalists and politicians divert too many resources into efforts to tempt young people into engineering and manufacturing, and fail to do enough to educate people already working in these fields in new thinking.

Juergen Maier of Siemens makes a point at the FT conference. Photo: FT 

“Upskilling [of the existing workforce] is as big a challenge as the problems [in attracting people] at entry level,” Maier told the summit. The goal for many manufacturers must be to tackle all the three Cs simultaneously and so increase their chances of success.

By Peter Marsh

A version of this article can be seen on the website operated by Gideon Franklin, a corporate  finance advisory firm specialising in helping Japanese industrial companies to become more global. For a Japanese translation of the story see here.   

Eddie Davies, who has died at the age of 72, was a resolute and imaginative businessman who made his mark in three seemingly separate areas: electronics, football and cultural institutions linked to science and technology.

In electronics Davies will be remembered for his key role in building up the Isle of Man-based Strix from a fledgling business in a niche technical area into a world leader. Davies is pictured above with the steel magnate Lakshmi Mittal and John Incledon (centre).

In football he was instrumental in turning the illustrious Bolton Wanderers Football Club into a key force in the English Premier league, arresting several years of decline. In the arts and sciences, Davies’s support through generous gifts was immensely important to organisations such as the V&A Museum in London and Kew Gardens. He is pictured below at a Bolton match.

Strix is a British success story. It has used specialised knowhow in metals technology to become the world leader in the quirky yet important field of kettle thermostats, devices that cut off power when electric kettles boil and stop the devices becoming a safety hazard.

The company’s key invention is a modification of a technical device used in the 18^th century by British craftsmen to make clock springs, later used during World War Two to create electric thermostats to stop flying suits overheating. Thanks in large part to Davies’s acumen, these odd beginnings were fashioned into the base for a global business. Like many mid-sized engineering companies in Britain, Strix is a “hidden champion” in a product field so narrow and specialised that it’s ignored by the multinational giants.

In the 1970s kettles were predominantly employed in the English-speaking world for making tea. Today the items are just as likely to be used – in places such as China and Russia – for boiling water for soup or coffee. Every day it is estimated that 1bn people turn on kettles containing Strix’s control devices.

1bn people a day are said to use a kettle containing a Strix control.

After just over 20 years running the company, Davies sold his controlling stake in Strix in 2005, netting more than £100m. Selling out to a private equity owner was the first step to transforming Strix from what was essentially a family company to what is now a business quoted on London’s AIM stock exchange . Strix has a market capitalisation of some £300m and more than 800 employees.

The company continues to operate in much the same way as under Davies’ stewardship. It keeps its HQ, key factory for precision engineering and main R&D operations in the British Isles (on the Isle of Man). It has a determinedly global approach. Like many companies in electronics Strix  uses China for the bulk of its manufacturing. Strix’s main plant is in the southern city of Guangzhou, which opened in 1997. According to a 2018 brokers’ report: “Strix should enjoy steady top line expansion. The company demonstrates product superiority and integrity in what appears a growth market. Strix’s leading [approximately] 38 per cent global market share tends to confirm product superiority while we identify ample scope for the market to grow.”

Many of the kettle makers that Strix sells to are Chinese

Davies was generous to me as a journalist in giving insights and opinions on what was going on in both football and business. He had a courteous (often reserved)  manner though could be fiery on occasions when something annoyed him, for instance referring decisions in soccer matches that he disagreed with. Davies wasn’t given to flamboyant gestures. He did nothing to make himself appear a public figure, using words sparingly in most conversations and generally avoiding media interviews. This policy ensured for many years he barely figured in newspaper articles (apart from some pieces in the Financial Times mainly written by me).

I first met Davies in the early 2000s when after much effort I went to the Isle of Man to see him as the head of Strix. Working at the FT I’d heard about Strix. It seemed an intriguing company. But Strix was notoriously private and difficult to find out about. Luckily Davies opened doors.  On the Isle of Man trip I met some fascinating characters and learned some aspects to how the company worked.

Strix’s controls have revolutionised the kettle industry

Strix had been set up in 1982 on the Isle of Man by John Taylor, who while a skilled inventor lacked the management capabilities needed to run an expanding company. Taylor’s father, Eric, was another clever technician with a bent for innovation.  He had set up an earlier electric controls company – Otter Controls, which continues to operate from Buxton, Derbyshire – from which Strix later separated triggering a family row.  In 1984 John Taylor recruited Davies – an engineer who knew about business – as chief executive. Taylor stepped aside to become the company’s chief scientist.

Davies always said he was grateful to the education he’d had that combined – highly unusually – a lot of technical insights into both physics and accountancy. Davies said of himself: “I’m an engineer who can read balance sheet “. This combination served him well over the time when he and Taylor in tandem built up Strix’s business.

When running Strix, Davies said the model for Strix’s growth was the US’s  Intel – the world’s biggest maker of microchips. While kettles are less glamorous than semiconductors, Strix has attempted to emulate the Californian company’s approach to protecting its technical secrets and branding. “The comparison with Intel is appropriate, as many of our customers in the developing markets often put stickers on their packaging saying that there are Strix controls inside [to differentiate themselves from others using competing or counterfeit controls],” Davies told me in 2004. Strix’s gross margins at the time were 40-50 per cent, very high for an engineering business and only just below those of the US giant.  A company’s gross profit is its sales, minus costs of production, excluding overheads and research and development expenses.

Strix aims to move increasingly into coffee makers, reducing the focus on tea drinkers

Helped by Davies, I went to see the company’s small factory in Ramsey, Isle of Man, where the “blades” for Strix’s kettle thermostats are made in a secret process. I pieced together details of the high-tech bi- and tri-metallic strips contained in these blades. They are made using home-produced machines using procedures almost impossible to write into an engineering manual and tantamount to a black art. The company continues to operate in Ramsey, having resisted the temptation to switch this key element of its production to its main Guangzhou plant. It seems that Strix follows still the philosophy laid down by Davies:   “We make the blades … on the Isle of Man and then ship them to China. We would never produce them in China because the risk of competitors finding out about the technology would be too great.”

In a series of later emails Davies explained that the key to the thermostats is a sudden “snapping ” action linked to the blades’ reaction to heat. This action causes the thermostats to behave as an electric switch, so shutting off power once the kettle has boiled. According to Davies, if the muscles of a human body were to emulate the capabilities of a Strix blade, the average person would be able to lift a 100-tonne truck. This graphic description made its way into The New Industrial Revolution: Consumers, Globalisation and the End of Mass Production, a book I wrote about global industry that was published in 2012. Davies was among the guests at the Royal Academy of Engineering reception to mark the publication. He is pictured below with John Incledeon (centre), Lakshmi Mittal and Peter Marsh.

After visiting the Isle of Man, and after I’d also seen Strix’s plant in China, during a trip 2004, Davies and I struck up a good relationship. We used to meet regularly in London for lunch or dinner. While Davies favoured the Savoy Grill, I reciprocated by taking him, on FT expenses, to pleasant but less grand establishments. Davies invited my son Jonny and I to see many Arsenal v Bolton matches in the years from around 2005 when Bolton were riding high in the Premiership. At these matches, I also got to know Davies’s wife Sue – every bit as keen a Bolton fan as Davies, and in her private life a notable horse breeder.  Davies – who was born near Bolton – had taken over ownership of the club in 2003 having already been a director. During the time I was watching Bolton I grew to admire the team’s battling style and refusal to buckle. Phil Gartside was the chairman and made all the public statements about the club – something he seemed fond of doing. Sam Allardyce was the shrewd and highly successful manager who had the great ability to get the best out of the players. Davies was the behind the scenes man who provided a lot of the advice and ideas – plus a considerable sum of money – to keep the club at a high level in a tough league.

Between 2004 and 2007, when Allardyce left, Bolton finished in 8th, 6th,8th and 7th positions in the Premiership, which was very creditable for a little fancied club with relatively slim resources (although with a fantastic history). During the 13 years to 2016 when Davies owned the club, Bolton could afford, thanks to his largesse, star players including Youri Djorkaeff, Jay Jay Okocha, Nicolas Anelka (pictured below) and Fernando Hierro. Referring in a typically wry way to Bolton’s stellar league ranking, Davies once said to me, at a time when the team was doing particularly well, “We’re suffering nosebleeds up here!” Bolton’s run of success ended, however, in 2012 when the club was relegated to the second-tier Championship league.

When Davies eventually passed on the club to new owners, he wrote off personal loans of around £175m. The sales process was fraught with problems. Davies wanted to find a group of owners who would look after the club’s long-term interests. In the end he transferred the club (essentially for a negative sum) to a consortium headed by ex-player Dean Holdsworth which he thought had the right ingredients. Davies told me after completion: “What a relief. At least I can sleep nights now!”But a few months later, Bolton suffered a further blow, going down another tier to League One, though bouncing back into the Championship a year later. The Bolton Wanderers’ Supporters Trust said after his death: “Davies was BWFC through and through and he was pivotal to the success of our club in recent times.” One fan told the Bolton News: “Under Davies’s ownership we saw the best time to be a Bolton fan. May he rest in peace.” Davies is survived by Sue and a son and daughter.

The last text I got from Davies was in May 2018 after a dramatic 3-2 win over Notts Forest enabled Bolton to stave off at the last minute yet another relegation and remain in the Championship. After I’d sent a text seconds after the final whistle congratulating Bolton on this escape, Davies replied, in a terse, Davies-like way that summed up the situation perfectly: “Bloody fantastic finish.”

Davies had a bloody fantastic life for which he will be long remembered.

Peter Marsh

The head office of Blaze in an old industrial building in London may look unimpressive – but it’s at the centre of a web of relationships that connect the small bicycle accessories maker with collaborators spread globally. Blaze is among the exponents of the manufacturing network, an idea growing in importance as production companies particularly those in niche fields step up ways to link with others.

A young company with just over 20 employees, Blaze is a pioneer in novel lighting for bicycles. Its best-known product is a new form of “forward looking” laser illumination that warns motorists a bicycle is moving towards them and so cuts accidents.

Emily Brooke, the company’s founder and chief executive, pictured above, is a regular visitor to China to check out key component producers. She adds: “We use Japanese batteries, some of the components [in our electronics] are Japanese or Korean, the laser is German and some of the optical components are Taiwanese.”

But Blaze’s interest in relationships goes well beyond manufacturers’ decades-old pre-occupation with finding good parts suppliers.  Like many companies, Blaze has constructed what amounts to its own ecosystem of collaborators and partners – in Blaze’s case in the burgeoning global bike industry.

The sector has mushroomed in recent years thanks to increased interest particularly among young people in urban cycling, and now encompasses thousands of mainly small businesses in both manufacturing and services. As well as keeping close to some of the big LED light source producers such as Nichia of Japan and Germany’s Osram, Blaze connects via meetings and digital links with a range of

The rapid move towards bike sharing schemes in many cities has triggered a burst of entrepreneurial activity

diverse and little-known groups including Swedish mudguard maker Ass Savers, Germany’s bike sharing specialist Next Bike and Australian clothing supplier Vegan Athletic.

Blaze illustrates how connections count. Also it has the right sort of products: many of the world’s expanding manufacturers are in a niche field shielded from heavy competition but with a big global market. At a time when many companies and policymakers are interested in new ideas to boost Europe’s manufacturing prowess, networks and niches should be put high up the list of concepts that need to be encouraged by governments, think tanks and trade groups. Such thinking should go alongside the usual exhortations – now somewhat tired – to increase investments in digital manufacturing under the broad heading of Industrie 4.0.

Driving on the idea that networks and niches are growing in importance are two broad trends – rapid technology development and the opening of the world through globalisation. As technology advances have created more possibilities for variants on products and services, individual sectors can be split into a much greater number of subdivisions than was the case 20 years ago. In this climate companies in narrow parts of a much larger industry can progress.

Examples include the US’s crop sprayer maker Air Tractor, which occupies a “sliver” of the wider aircraft business, and Cochlear, an Australian leader devices inserted inside  the ear to help deaf people, a small segment of the immense medical implant sector. At the same time a company in, say, Spain now has a much wider range of possible partners in many areas from research and development to sales, a result of the emergence of a host of new players from areas including eastern Europe, China and India. Blaze is a good example of a business which combines an interest in both networks and niches – as do many of the other firms inside its own individual ecosystem.

Air Tractor is a US maker of crop-spraying aircraft and a leading example of a “niche player”

Another company that has used the twin ideas of networks and niches  as a vehicle for both improving its products and adding to sales is Goppion, based near Milan. The 50-person Goppion is a leader in a highly specialist field – making customised museum cases to display valuable and historic works of art. Items protected by the company’s cases include the Crown Jewels in London and the Mona Lisa in the Louvre. Goppion’s ecosystem encompasses many of the world’s top international museums in countries from China to Egypt.

Much closer to home, it also has close links with a network of about 35 small businesses, mostly clustered close to Milan, and which provide key parts in areas such as lighting, electronics or structural supports.  Sandro Goppion, Goppion’s president, calls these firms not suppliers but “co-makers”. He says: “It would be virtually impossible for us to have available inside our company the range of capabilities that our co-makers have at their disposal. Our ability to work with these companies on specific jobs for customers gives us a wide sweep of options and helps us to do a better job for than would be possible were we to reply solely on what we can do inhouse.”

Mattia Vanzulli and Loredana Belardi of component manufacturer VM Inox are part of a sophisticated supply chain supporting Goppion, a leading maker of museum cases

The interest in ecosystems is shared not just by small businesses but by many big companies. It would be hard to label some of these “niche players”. The electronics giant Apple and the German engineer Siemens are good examples. It is however possible to regard these companies as instances of businesses that either started out in a niche and became a lot bigger – Apple after all started as a small producer of particularly “user friendly” computer hardware – or a business such as Siemens whose activities are split into many small slivers of the business world.

Apple has a long-term strategy of forming links with key technology companies whose ideas are important in embellishing its products. Apple’s pockets are deep enough to allow it to have bought many of these businesses, to gain unrestricted access to their development ideas. For instance in recent years Apple has taken control of the US sensor maker Fingerworks;  PowerbyProxi , a New Zealand pioneer  in power management; Regaind, a French computer vision company; and  Germany’s Metaio and Vrvana of Canada, both specialists in virtual reality.

In its data sharing and computerised analysis operations, Siemens has a keen interest in connecting with a range of outside firms, whose specialist knowledge in fields such as sensors and software the German engineering leader finds useful. For instance four businesses of varying sizes and based around the world – Germany’s Evosoft, the UK’s Senseye, Bluvision of the US and Atos of France – are all collaborators in a Siemens’ data sharing platform called Mindsphere that helps to facilitate activities such as connecting up machines in factories to assist maintenance or check on technical failures.

The idea of hooking up with other companies frequently extends to connections concerning manufacturing equipment, especially in specialist areas where machines need to be tailored to meet the specific requirements of one manufacturer. For instance, the Brazilian aircraft maker Embraer has close links with several machine suppliers – whose equipment adorns Embraer’s big production site near Sao Paulo – including Japanese robot leader Fanuc, the US automation specialists Encore, Electroimpact and Bastian,  and Norway’s warehouse picking supplier Autostore.

Brazilian aerospace company Embraer uses global connections to help develop new generations of automation equipment

Connections with customers – which clearly belong to the ecosystem of the firm that is supplying them – have always been important. It would be absurd to state that manufacturer/customer interactions are part of a new trend. But in many industries the nature of the dialogue between the maker of goods and the company it sells to has been changed by shifts in technology or consumer tastes. This has increased the  importance of the manufacturer/supplier ecosystem through making the interactions much more fluid.

One example is in making cans for beverages – where the business has been disrupted by the entry of many smaller players (for instance in craft beers) which require a range of highly varied containers to differentiate their products from rivals.

Erik Smuts, a senior executive at Nampak, a big South African can maker, says: “Our customers now make many more niche products than used to be the case. They need to show what they are selling is different. To fit in with their needs we must make a bigger range of cans. As a result, our [canmaking] machines must switch to creating different products twice as often as happened 10 years ago. That creates some challenges for us. If we are to stay competitive, we must be able to cope with the new requirements.”

What are the lessons? Companies need to become more fully aware of the opportunities from networks and niches. More case studies are needed of the specific  firms – big and small- that have benefited from

On the production line at a Nampak beverage can factory near Johannesburg – where machines have to be continually switched between making relatively small volumes of products

exploiting these trends, and how they did it. Government organisations should do more to promote the sharing of ideas by getting big and small companies in related fields to talk to each other. One way to do this is to organise “matchmaking” meetings for firms of different sizes but which share similar ideas and are involved with comparable industries.

Finally both policymakers and business groups need to think more strategically about the ingredients needed to create successful manufacturers. They need to shift their analysis from the now somewhat hackneyed rhetoric about the importance of digital technologies – the internet of things, artificial intelligence, 3D printing, smart data transfer and other parts of Industrie 4.0 thinking.

Digitisation will be increasingly important. Companies that are already good will become better by taking on the new thinking. But it’s rare to find a manufacturer where the main reason for its success is its prowess in Industrie 4.0. Behind most companies that excel in a specific field of manufacturing are almost always technologies and ideas with only a tangential link to digitisation. The ability to connect with others and to exploit the advantages of niche operations are often key elements. To build the champion companies of the future, these lessons must be absorbed.

By Peter Marsh

This article appeared originally in Eureka magazine, published by Eureka Network, Brussels, in Spring, 2018

In a hall in a big aerospace plant near São Paulo, four yellow robots perform a series of snake-like manoeuvres as they clean and paint the exterior of giant fuselages being made by the Brazilian aerospace producer Embraer. The robots are among roughly 400,000 of the machines installed worldwide by Fanuc.

The Japanese company is the world’s biggest robot producers. Over several decades it has built up a near godlike status among admirers. The picture here shows a Fanuc robot during a demonstration at an industrial fair in Germany.

Holmes Osborne, a US financial commentator who publishes GuruFocus, a newsletter, says:   “Fanuc is the best robotics company in the world, bar none.  If what everyone is saying is true, that the world is to be run by robots, Fanuc will have a ring side seat and is the stock to own.” Another view comes from a senior executive at a big Japanese machine tool company: “They [ Fanuc] have a strong record on innovation. They stay close to customers and always seem to be pushing in a new direction.”

Fanuc last year had sales of Y536bn (about $5bn) with more than 75 per cent of revenues coming from outside Japan. Its shares have risen appreciably over the past year and the company’s market capitalisation stands at just under $40bn, 10 times higher than US Steel and roughly four times bigger than Marks and Spencer.

Behind Fanuc’s stock market record is partly the perception that robotics will become increasingly important as technologies such as artificial intelligence (AI) and smart sensors amplify the powers of robots and other pieces of automation hardware. Armed with new capabilities robots could for instance start to appear in large numbers in the home, for such uses as giving meals to old people or helping to look after children.

Fanuc wants to be a leader in this area.  It has announced a collaboration with Nvidia, a US semiconductor maker working on the novel  microchips needed to process the vast amounts of data required in new AI applications.

One example could be a robot to pick up items from a conveyor belt. At present robots of this sort are programmed to work in a set manner. The objects always have to be presented to the robot  in the same way and to be  spaced a set distance apart.

In future the robot could receive images from a TV camera to find out the positions of the items -which could come down the conveyor in a random manner. With the help of new Nvidia chips if would assimilate the information and – depending on the objects’ position – adjust its actions accordingly. The extra flexibility would allow many more applications.

Fanuc does virtually all its production in Japan – chiefly at its main plant nestling in woodland at the base of Mt Fuji just outside Tokyo. It has no plans to open any factories in China, despite the migration of much of the world’s manufacturing to this country – which with the US is one of Fanuc’s biggest markets.

The company was started in 1956 by Seiuemon Inaba, a legendary engineer who remains honorary chairman. The chief executive is Yoshiharu Inaba, Seiuemon’s son.

In spite of the Inaba family owning a negligible stake in the business the Inabas have maintained a hold on Fanuc’s corporate culture, rarely giving media interviews and seldom providing investors with more than cursory guidance about strategy.

However, it appears the company may be opening up. Just over two years ago Fanuc was the subject of a sudden burst of attention.

Third Point, a US investment fund, announced it had taken a stake (of an undisclosed size) in the company. Daniel Loeb, the firm’s chief executive,  professed his admiration for Fanuc. But he said it had to change its ways – chiefly by increasing its dividend payments and by disclosing more information.

Within weeks the company caved in, announcing a big rise in dividends and also in new briefings with journalists and investors.

Gideon Franklin, an independent corporate adviser who is an expert on Japanese businesses, says the change is part of a broader shift.

“For a long time they [Fanuc] have defied gravity by being secretive towards the financial community, keeping high levels of cash on their balance sheet with low returns and shunning mergers and acquisitions. There is a strong consciousness in Japan now of corporate governance best practice which has been fostered by the government [of prime minister Shinzo Abe] and it is going to be difficult for the company to keep to some of its traditional ways of facing the outside world of finance.”

If this view is right Fanuc – buoyed by its strong long-term record while also stimulated by a new interest in exchanging information and ideas with the outside world – could become a vital company to watch over the next decade.

 This article was written in mid-2017 for the research journal of a UK-based investment group. Photograph by  Gideon Franklin.

Goodbaby is a Chinese manufacturer of children’s  “utility” products – push chairs, infant car seats and the like – with a growing reputation. With 11,000 employees and seven research centres in Asia, the US and Europe, the company dreams of establishing a name that resonates as strongly as Coca-Cola or BMW. Much the same is true of Chinese equipment giant Sany – which thinks it’s on the way to cementing its global brand through the purchase of Germany’s Putzmeister concrete machine maker. One of Putzmeister’s truck-mounted machines is pictured above.

But for all China’s progress in creating some big and powerful companies, observers are divided as to whether Chinese groups such as Goodbaby can create global brands that compete with the dominant corporate giants. By forming an impression in people’s minds, brands make it easier for companies to sell their products and services, whether to individuals, businesses or governments.  The stronger the recognition – and the more countries where the impact is significant – the greater will be the impact on revenues.

For the past 70 years, US companies have led the way in brand building, followed by businesses based in other English-speaking nations and Europe. For all Japan’s economic surge since the 1950s, many of its top companies (excluding a few outliers such as Toyota) have yet to really make their mark in establishing global monikers. In recent years, China has made its presence felt, thanks mainly to the rise of a handful of internet, telecoms and retail leaders. The question now is whether China is likely to continue in this direction.

Of the companies behind the world’s top 100 brands, according to rankings by the WPP advertising group, 54 are from the US, 14 from China, seven from Germany, five from Japan and four each from France and Britain. The remainder are shared out between eight countries. Heading the list – based on financial data and consumer surveys – are seven big US firms including Google, Apple and Microsoft. The top Chinese companies are the internet behemoths Tencent in eighth position followed by Alibaba at number 14.

Many of the top companies in the WPP specialise in IT and telecoms – business fields  that fit into areas where Chinese expertise is becoming more entrenched.  Khairy Tourk, professor of economics at Renmin University, points to gradual progress by Chinese businesses in getting their names accepted in the west, in a similar way to Samsung and Hyundai. “China is in the same place that South Korea was 25 years ago,” he says.  According to Georges Haour, co-author of Created in China: How China is Becoming a Global Innovator , Chinese companies “learn fast” about building a far-flung presence, often imitating  ideas from the west.

For three reasons, however, Chinese companies’ move towards international brands may turn out weaker than some think. The first is the dead hand of government.  For all the talk in recent years of the country embracing “Chinese style” capitalism, under president Xi Jinping the Chinese communist party has tightened its jurisdiction over most parts of the Chinese economy, including not just state-owned businesses but private ones. Four top companies with aspirations on building global operations –  Anbang, HNA Group, Dalian Wanda and Fosun – have been subject to sudden and unexplained crackdowns, including the detentions of senior executives. This hardly seems an environment helpful to evolving global brands with the minimum of restraints. Second, consider culture. For most of its long history China has been happy to wield technological or economic clout close to home rather than exploit this on an international scale,  in the manner of European countries with their taste for empire building. The lack of a long-term record in establishing any sort of global presence is reinforced by relative lack of familiarity with the English language, which seems likely to continue as the world business lexicon for some time.

Third, Chinese companies may choose not to put much effort into creating global brands simply because they feel there are more potent ways for them to increase sales and profits. China expert Jonathan Fenby says he has discerned “no real push from the top” to create Chinese business names that will resonate with consumers everywhere, and that it may be easier for companies to establish market power simply by using the brands of their foreign offshoots.

The rash of Chinese acquisitions of foreign companies underlines the point, whether these are in the domestic appliance industry, as in Haier’s takeover of General Electric’s white goods unit, chemicals (Syngenta of Switzerland was bought by ChemChina) or in industrial equipment, including the deal in which Putzmeister became part of Sany. One of Sany’s other products – a mammoth crane – is shown above.

Goodbaby has joined in, through the purchase of companies such as Columbus in Germany and Evenflo in the US, which has brought in brands including Cybex and and Snugli to add to the company’s home-grown names. As a former schoolteacher, Goodbaby founder and chairman Song Zhenghuan will know from his history books that that many political rulers and military leaders have used an indirect approach to build power – the Trojan horse being a good example of the tactic.  He – and other Chinese business leaders – may well conclude that they should follow a similar path when pursuing worldwide growth.

Escorting his visitor past an array of expensive machine tools, Damon de Laszlo explains why he has avoided seeking a public listing for his engineering company. “I’d have to start justifying my spending on investment and innovation to a board of directors,” he says. “And they might be a pain in the neck.”

Mr de Laszlo is disdainful of many public companies that he says are run in a woefully short term manner. “If I didn’t spend £1m to £2m a year on equipment and other capital investments I’d increase profits significantly, but in the longer term the company would fall apart. The inhibition at board level [in many public companies] is enormous.”

The blunt speaking Mr de Lazslo (pictured above and below, with one of his youthful employees) is chief executive and owner of Harwin. The company based near Portsmouth in southern England. It’s a global leader in a niche area of electronics – making tiny connectors for plugging together circuitry in a range of products from aircraft control systems to fire alarms.  Harwin makes its connectors – built up from collections of wires and precisely machined metal and plastic components – in 50,000 varieties.

Of its revenues last year of nearly £19m, 60 per cent was exported. Mr de Laszlo reckons Harwin is on course to reach annual sales of £30m in the next three years.

Mr de Laszlo and his company are at the sharp end of the debate about whether private companies run by families or stable groups of investors can perform better than the familiar stock market-quoted business where shareholders can – and sometimes do – switch in and out of ownership continuously.

The discussion is particularly pointed where the companies – as in Harwin’s case – are in an engineering or manufacturing sector where the availability of funds for capital imvestment can make a big difference between success and failure.

In such businesses, where spending on technology developments can take a long time to pay off, it can help to plan ahead over a decade or more rather than be governed by purely short  term goals.

Since  most family and privately run companies  only rarely offer shares for sale, the issue of how they perform might appear academic to most investors – whether institutions or individuals – looking for companies to buy into.

However for many fund managers and other investors , studying the best run private companies can provide insights from which executives in charge of conventional quoted companies may have something to learn.

Also monitoring the progress of those private companies that compete with big public businesses can indicate market trends that may have an impact on the quoted concerns and so are of interest to people investing in them.

Companies that are controlled by families or long term investors can be extremely large. Examples include Mars and Kohler, two US businesses in food and bathroom products respectively, Tetra-Pak, the Swedish packaging group, and Bosch, the German engineering giant.

Take Haniel, a Duisburg- based conglomerate owned by members of the Haniel family, and whose subsidiaries include Metro, the big retailing group. Last year Haniel, with other interests in textiles and metals, had revenues of Euro 3.8bn

Florian Funck, Haniel’s chief financial officer , says there are many positives about family ownership. “Having a private company with family shareholders can be a huge advantage. It can guarantee stability in the shareholder base, and companies can benefit from common and shared values and views. It is a good environment for putting long-term strategies into action.”

Chris Rea, chief executive and owner of AES Engineering, a UK company with more than 1,700 employees and which is among the world’s biggest makers of specialist seals for rotary machinery, says: “The main advantage of a private company is the opportunity to build an institution which may forego short term profit generation to generate a much longer-term, larger and more sustainable business.”  The photo here was taken inside AES’s factory in Rotherham.  

A study by three management experts – Nicolas Kachaner, George Stalk and Alain Bloch- published in 2012 in the Harvard Business Review supports the view that the long term focus of family owned companies can pay off.  Over the period 1997 to 2009 the authors found that  “the average long-term financial performance was higher for family businesses than for nonfamily businesses in every country we examined”.

The trio concluded that : “At a time when executives of every company are encouraged to manage for the long term, we believe that well-run family businesses can serve as role models.”

One of the chief hallmarks of a company owned by families or other tightly held ownership groups is the relative lack of constraints on senior managers over taking decisions or keeping money inside the company that might otherwise be paid out as dividends.

On this last point , the shareholders of public companies often require a relatively large proportion of profits to be paid out as dividends , while the comparable groups running private companies may prefer to keep the  funds within the business for investment.

Pointing to what he sees as the general benefits for private groups compared to the public company model, Alessandro Goppion, chief executive of Goppion,  a family owned company in Italy that makes specialist display cases for museums, says:  “I have total freedom with respect to the markets we choose to enter. I have free choice over the skills we need to maintain creativity and establish a basis for growth.”

Massimo Calzavara, director of Calzavara, another Italian company that is a leader in producing and installing towers for handling telecommunications signals, says his business has benefited from an ability to take strategic decisions quickly and ahead of competitors.

“Often, public owned companies [are subject within their corporate governance structures ] to people belonging to the financial world …. who mainly live and operate following specific financial drivers, but do not share the company’s mission or strategy.”

Private company managers on the other hand have a much freer rein. At Harwin for instance Mr de Laszlo  has recently authorised the purchase of a £200,000 3D printing machine for making tiny parts on a one-off basis. He cheerfully admits he doesn’t yet know what the machine will do.

After installing a series of smaller and less expensive machines of this sort, he reasoned it was time to push ahead into more sophisticated equipment. “I can’t justify this by a detailed plan of how my engineers will use it. But I have a lot of confidence [based on similar judgements in the past  ] that they will work out applications that will benefit the company.”

At a much bigger business , Lothar Kriszun, chief executive of Claas, a German group that is one of the world’s makers of combine harvesters, says that in a difficult economy the benefits of a family owned structure pay off particularly well. “We´re able to execute our long term strategy even in uncertain times,” he says. One of Claas’s giant machines is pictured below.

For instance Claas has continued to put new investments into emerging economies such as Brazil, China and Russia, confident that these markets will continue to grow in spite of current constraints.   Mr Kriszun believes shareholders in a comparable public company might be much more cautious.

In determining how private companies perform, much obviously depends on the proficiency of the managers concerned. There is the inherent risk that – if they are poor at their jobs – the relative absence of oversight  could lead to them making  the wrong decisions and plunging their companies into disaster.

Ralf Putsch, chief executive of Knipex, a family owned company in Germany that makes pliers and other wire cutting devices, says : “Family businesses benefit by having a common ‘glue’ – the links concerning shareholders, employees, owners, traditions, structures and partners. However, such strong connections can become harmful if the elements themselves, or the way they relate to each other, are not in good shape.”

Mindful of these potential problems , and to bring some controls  into a company where the family or other shareholding group owns the majority of the shares, some private businesses have introduced fairly rigid operating guidelines to ensure the managers keep within agreed objectives.

That is the case for instance at Freudenberg, a big family owned company in Germany that is a world leader in specialised textiles, seals and lubricants. Here the objectives include a series of targets over financial items such as operating returns.

John Goodwin is chairman of Goodwin, a UK maker of machined castings that is listed on the London stock exchange but where more than half the shares are owned by the Goodwin family.

He says the business benefits from the strong sense of direction of the family involvement, while at the same time being subject , through the impact of its minority shareholders, to a useful element of outside guidance. He says Goodwin gains from the “good discipline” that a stock market listing provides.

Other managers of private companies point to other examples of where the structure of quoted companies can bring advantages over that of a typical private group.

David Ickert  , finance director at Air Tractor, a Texas based maker of  crop spraying aircraft that is owned by its employees, says that the greater public profile of most quoted business may make it easier for them to attract new employees. That may be the case especially in areas such as engineering where competition for new recruits is fierce.

Also publicly listed businesses often have a wider source of potential routes for raising money for instance for acquisitions.  Allyn  Beard, a director of AH Beard, a large Australian maker of beds and mattresses owned by the Beard family, says a disadvantage of private complies is the relative difficulty of gaining “access to capital for expansion” through means such as issuing shares or doing deals with banks.

However  Lok Home, president and main owner of Robbins, a US maker of tunnelling machines, says the  fewer options for raising finance for private groups may be partly balanced by the  larger sums public companies have to pay out to ensure they comply with stock market reporting strictures. The picture below shows some parts of Robbins’ production.

Also some larger family owned businesses have found a way around the perceived problems in raising funds for expansion. Then have done this not by raising equity through share sales but through issuing bonds.  Claas has been a leader in this respect, following a policy of debt issue started in 2002. Last year it raised Euro 300m in debt from more than 200 investors from Germany and outside.

Overall the conclusion is that the best private companies operate with management disciplines and  procedures that public companies and investors in them would be well advised to study.

Finding out the inner secrets of the top performing private groups is not necessarily easy as many pride themselves on keeping their affairs to themselves , on the basis that this gives them a competitive advantage.

But those outsiders who can gain access to at least some details of the internal workings of the leading private businesses will almost certainly find this a useful exercise.

This article appeared in a research journal published in 2016 by Walter Scott, the investment group.