When a business wants to achieve success it does so by finding its niche and producing the best work possible in that specialty. Toronto, Ontario, Canada-based StackTeck Systems, Inc. has taken this principle one step further by uniting several companies - each with their own unique specialty - into one super conglomerate, rendering them a force with which to be reckoned.
Three hundred plus employees strong, the three companies - Tradesco Mold Ltd. (Toronto, Ontario), Fairway Molds Inc. (Los Angeles, CA) and Unique Mould Makers Ltd. (Scarborough, Ontario) - work together to increase their industry presence, revenue and their reputation. According to David Brown, StackTeck president and CEO, the idea evolved out of the acquisition process. "We recognized, as we restructured Tradesco in 1996 and started on the acquisition trail, that as we looked at mold shops, each one's culture and core values were a significant part of their inherent success," Brown observes. "Each company believes they have a reputation as a leader in their niche and are therefore reluctant to let that reputation be overridden by an acquiring company. So, if we went into Mold Shop XYZ and asked the founder if he was interested in selling, he may be interested, but would not want to see his legacy disappear. He would still want to be XYZ, so the shop could retain their autonomy, identity and traditions.
"Once we realized that this was the way we would be perceived, we knew it would be very difficult to integrate two mold shops together under one banner," Brown continues. "So we took that fact and started to think of ways we could gain the advantage. The other thing that's important to realize is that when a company goes out to buy a mold, they are buying a mold from Tradesco, Fairway or Unique - not from StackTeck. It's like Kellogg'sT - you buy Corn FlakesT or Rice KrispiesT, not Kellogg'sT. We want to maintain the reputation and specialization that have been established over 20 and 30 years of history with these three companies. The entire StackTeck strategy/structure is constantly in flux, it's being edited and changed and developed. We're not done yet - each company that joins into the fold brings new and different ideas, and therein lies our strength. We're still humble moldmakers when it gets down to it."
United They Stand
Tradesco was the first company, or platform company - specializing in high-speed, thin-wall packaging molds. In 1998, Tradesco joined forces with Fairway Molds, a producer of very complex, high cavitation molds - most of them hot runner.
"At that time, we decided to create a strategic umbrella for this organization and call it StackTeck, under which the two operating divisions - Tradesco and Fairway - would operate autonomously," Brown explains. "That way, each could stay specialized within its own particular niche, and let StackTeck pull together not only the financial aspect of things, but serve as a common front for marketing, R&D and other initiatives which would be of mutual benefit to the organization. We wanted each company to stay focused on what they do best and not dilute that effort in any way - but offer them the opportunity to exchange ideas and technologies and take advantage of the synergy between the two companies."
Each operates as its own profit center and is responsible for its own management structure, communications network, mission statements and business statements. "Each division president sets his yearly budget required to achieve his specific goals for the year, and then we pull them all together and combine the three companies on a financial level to take a look at the overall performance of StackTeck from a planning standpoint," Brown states. "Because each company is in its own specific market niche, it can respond quicker or in a more proper manner to the market drivers within its niche and not have to be reliant on the overall corporate performance. So, if one company has an issue where it needs help, it stands out very clearly and we can focus on that issue collectively to try and help to solve the problem."
Henry Rozema, Tradesco's president and StackTeck vice president, expands on Brown's philosophy. "One thing about the moldmaking business is that certain moldmakers are very good at certain things and once you get outside of the area you are really good at, it's very difficult for a moldmaker to compete and remain profitable," he notes. In light of this, StackTeck welcomed the addition of Unique Mould Makers last July - a caps and closure specialist - to further expand the company's diverse offerings.
"There's very little overlap between the companies," Rozema explains. "For example, Fairway can take advantage of a technology that Tradesco developed, or Tradesco can take advantage of a machining technique that Fairway developed. There are plenty of opportunities to exchange ideas between the organizations."
It is important to realize that the moldmaking industry is very erratic and lumpy, notes Rozema. "Business goes up and business goes down," he comments. "The last mold that shipped is the last one you'll have until the next one comes in. You take them as they come and they tend to come in waves. Every moldmaker I've seen is either very busy or not busy - there's never an in-between."
Such an uncertain economic climate can wreak havoc on a business, Rozema points out. "Banks do not like when the business cycle is very lumpy," he comments. "The machine tools with which you need to be efficient in the high end of the moldmaking trade are very expensive. The bank wants to see a nice steady income coming from a company before they are going to fund a million or two dollars worth of capital for a specific machine tool."
Joining forces under the StackTeck name strengthens each individual company - providing a more even revenue stream. "If you consolidate all of the revenues, we're budgeting 58 to 60 million U.S. dollars for business this year between the three companies and that's a very significant mold shop," Rozema states. "We can take that to the bank and say we need 'x' number of dollars to fund a capital plan corporate-wide and have much more security at the banking level to allow the company to grow faster.
"On the flip side, our customer base - often we're working with large OEMs - has a comfort level in dealing with a company that has some substance to it," he continues. "They are not as worried about putting a $10 million mold program into a company that's doing $60 million in revenue, where they may be worried about putting the same program into a company with only $10 million of revenue. We call this comfort level critical mass."
This critical mass allows StackTeck to also focus on its customers' end products. "As products are being developed in the marketplace, very early on in the conceptual stages, we are able to put tooling packages together that will cover the entire product mix," Rozema explains. "In other words, there may be a part within the mix that Tradesco would be best at, another at which Fairway would be the best and one that Unique would be the best at. Essentially, they can go to a single source for all of their tooling requirements and still receive undiluted technical expertise."
As for the company's marketing strategy, they are focused on interfacing the efforts for the three companies on a corporate level, says Fernando Segovia, Tradesco VP of sales and marketing. "It is a belief of mine that we have a loyal customer base that continually feeds us business," he states. "We are concentrating on the fact that it is more important to keep our existing customers happy and continue to fulfill their needs. Those quality customers, we pamper as much as possible. We came to the realization that we need to concentrate on the 80 percent of customers that give us our day-to-day work, so I've beefed up personnel in that area. At the same time, we spend a lot of time generating new accounts and that takes a great deal of work. We have two business managers working as ambassadors for the company to generate that new business."
According to Rozema, the company's main goal is to continue to grow as an organization and as an individual operating company. "We want to remain focused, and because of StackTeck's structure, Tradesco can continue its growth by staying within its specialty and by maybe expanding more globally than we have in the past - because now as a combined company there are more resources available in greater reach," Rozema states.
The company also is looking to specifically target an acquisition in Europe. "We sense tremendous growth potential in Asia and we have some initiatives going from a sales and marketing standpoint in Asia, as Fernando mentioned, but we also feel we're going to need something on the operational level a little closer to that marketplace," Brown affirms. "Asia is very difficult to handle from North America. It can be done, but it's difficult, and it would be much better if we had an operation that was a little closer, say Europe, where there are a number of quality shops that fit the StackTeck matrix."
By putting together companies possessing unique technical expertise, Rozema asserts everyone learns from each other and each is able to grow technically. "It allows us to expand our expertise into other areas without burning our fingers along the way," he says. "We are able to service more people globally, and we have a wider range of technical expertise that we can draw on to deal with situations and solutions. Our customers are looking at StackTeck to develop something new and innovative while being on the cutting edge in the industry - and to do that we need to have a wide variety of expertise in different areas of toolmaking."
StackTeck is in the process of both acquiring and pursuing a number of companies. "If we are truly going to be a one-stop shop we need to be able to have all of the artillery here," Brown comments. "The media also is a big help. When the word goes out, the phone starts to ring, but I'd like to add that we are extremely fussy about the type of company we'd like to have in the organization. As Henry alluded to earlier, we want only the best of the companies in that specific niche that we think add value to StackTeck and our customers. "We are not just bulking up for dollar revenues," Brown continues. "Growth for that reason is not important, the strategy is more important. Ultimately the growth will come. We've walked away from a number of companies that we feel don't meet our criteria."