Homes. Businesses. Schools. Cable for broadband applications is everywhere. Much of that cable comes from one well-known company, Belden Inc. In fact, Belden offers 1,000s of wire and cable products, such as multi-conductor, paired, coaxial, and flat and optical fiber cables. With the gradual decline in the traditional market for cable products, Belden, with corporate roots going back almost 90 years, has worked hard to transform itself into a new company – one that can meet the demand for wireless communications and the need for broadband cable products in emerging countries. The current Belden was formed in 2004 through the merger of Belden Inc. and Cable Design Technologies Corporation. Today, the $1.3 billion company is one of the largest U.S-based manufacturers of high-speed electronic cables. It focuses its products for the speciality electronics and data networking markets, including connectivity.
Like many companies, Belden saw a sharp decline in 2009 revenues from 2008. John Stroup, Belden’s president and CEO, said, “By focusing aggressively on technology innovation and investing in global growth, we have seen a stable demand for our products in most of our major markets. We have demonstrated our ability to perform well during these uncertain times. We are also in a good position to excel when recovery re-ignites demand for our products.”
Enterpriseleadership.org recently sat down with Stroup to talk about Belden’s innovation initiatives, its customer-centric, go-to-market strategy, and the move from a legacy brand to a provider of special transmission products for key global vertical markets. Here it what he had to say:
EL. Can you describe your business model or business strategy?
JS. We try to help our customers transmit data and signals in what we consider mission-critical applications. We go to a very diverse set of end markets. Most of our customers use our equipment — whether it is copper cable or fiber optic cable or wireless or industrial networking — in applications that are important to them. We help them get their information from point A to point B correctly, quickly, and reliably. These three things matter. We service hospitals, college campuses, large enterprises, medium-size enterprise, industrial applications such as factories, and infrastructure applications such as alternative energy.
EL. How has the economic downturn affected your business?
JS. It had a significant impact on us. Our 2009 revenues went down 30 percent from where they where in 2008. Some amount of that was correction and inventory, but much of that was role reduction and demand. Most of our customers buy our equipment for capital projects. We saw decreases in manufacturing utilization and in commercial real estate development.
EL. What have you been doing to expand into new markets?
JS. The recession has been an impetus for us to be more aggressive. When core markets like ours are declining, you need to focus on how you find growth. We have been aggressive geographically in emerging markets. We also have been aggressive in some of our market segments that have not suffered the same decline, such as wireless, as well as our industrial Ethernet businesses. Both of those businesses actually experienced growth during the downturn. We tried as hard as we could to deal with the recession affectively from a cost point of view. We tried to reinvest in the dollars we felt could give us a good return.
EL. Can you describe some of your key technology investments?
JS. We continue to invest in some product-related technology that we consider to important regardless of the environment. For example, we have made significant investments in wireless technology, which is important to our future. Customers are continually converting to wireless whenever possible because of the advantages of convenience. We are investing much money in our industrial networking applications. It turns out that industrial applications now use commonplace technology, such as routers and switches. We are a leader in this space. We are always making investments in expanding the bandwidth of our coppered fiber cable products. For example, we have been investing in 10G copper cable. It allows our customers to use copper instead of fiber, which is less expensive and easier to use.
On the manufacturing side, we continue to make the typical investments in ways to reduce out costs. In addition, we are also making many unique investments so that our machinery is more conducive to our Lean manufacturing environment. We work very hard to build our products according to the just-in-time manner. The cable industry has been a batch-manufacturing environment largely because of the long changeover times in the machinery. We have been working hard in the manufacturing environment to find ways to reduce the changeover of our machines and reduce the amount of scrap we incur in a changeover. We see this as an innovation area that is important to our business’s success. It is also a unique innovation in our industry.
EL. You joined the company a year after the merger of Belden and CDT. How did you folks handle the integration of the product lines from the two companies?
JS. There was an aggressive integration on the manufacturing and the product roadmap side. We have fully integrated the product roadmaps and the technology innovation between both companies. We did aggressively consolidate the backoffice function and the manufacturing function. The customer-facing resources are largely dedicated to the individual brands. The behaviors we go after with those brands differ. In the front end, you can have many different value propositions, brand propositions, and customer-facing resources. Today, a common organization services most of our product, technology, and the backoffice. Our strategy in the beginning focused on trying to leverage the backend as best we could, and to create an environment where we could use common processes as best we could.
EL. What is your customer-centric, go-to-market strategy?
JS. We have a history of being a product-oriented company. We needed to become more customer-centric. We organized our resources around vertical markets and around customers rather than around products. Our goal includes doing as much as we can for the customers we target with our key markets. We have made many investments to support that.
Out most significant investments includes expanding our products lines beyond our flag ship copper cable to now include wireless, connectors, active connectivity components, and fiber optic. When we go in and work with anyone of our customers, whether it is a big hospital or a casino in Las Vegas, we can now help them solve their entire problem with a broader range of products. We are doing so with customer-facing resources that we organized around the customer and the market segment rather than around a product. We do not have five or six different product people calling on that same customer. We have one customer-centric account executive who navigates and organizes our resources to make certain that we help that customer solve its problems.
EL. Do you have a formal process for innovation?
JS. Our innovation process starts with the definition of our markets. Every year we have a strategic planning process, and a plan to execute it. The process always begins with our served markets. We subdivide that into sub-vertical markets, and then within those sub-vertical markets, we define the applications. Within those applications, we have the desire to offer unique capabilities in that application. We want to become the preferred supplier. When we think about innovation, we do not try to limit it to just technology. We think that innovation can happen in all areas of the company. We try to focus our innovation and our resources around a model that starts with the served market.
A great innovation we did in 2009 had nothing to do with products. It had to do with the way we package our products. We did this innovation in our channel group, the people who work with our distributor partners. We had a specific distributor partner that struggled with how it could profitably sell a certain type of product to an important customer segment. After spending time with the distributor, we completely reinvented the way this cable product comes off the reel. Now our partner can profitably deliver that product to the end customer. The innovation here was not how much bandwidth or how much copper we use in the product to get the same level of performance. Instead, the innovation was the new way the distributor got the product.
EL. What is your corporate governance model for making these investments?
JS. We take our full board through our strategic plan every year. It is part of an approved three-year plan. We share with them the investments we plan to make. Our sources of funds are the things that are going to happen year after year. These investments provide incremental margin dollars. We can give these dollars to our shareholders as dividends, or we can reinvest them in the company. We take our board’s buy in and approval. This process has much detail in it.
We then construct an annual budget, which the board has to approval. Again, it is part of our three-year strategic plan. We also have a capital plan. Most of the innovation we do has to link to some form of capital investment — whether it is a manufacture innovation or a technology innovation. If we do it right, the board sees several views – the 36-month strategic plan, the annual budget, and the capital budget. We give the board a quarterly update on how those programs are performing compared to the commitments we made in the strategic plan. Like any company, we do not always bat 1,000. Some programs do exactly as we predicted. We have other problems that need to do better. In this case, we do our best to describe why – What was the problem? Where did we go wrong? Was it a conceptual issues or an execution issue? Where did we make the mistake?
EL. You have Lean. Do you have the balanced scorecard for measuring investments?
JS. We use a methodology called strategy deployment. It is similar to ocean planning. It works as follows: We identify the critical improvement priorities for the company. It cascades throughout the organization. No matter what part of the organization you are responsible for, your priorities will link in someway to the overall corporate objectives. For each one of those improvement priorities, we ask you to identify a few metrics. We call them targets to improve. Typically, they consist of two or three for each initiative that you will track. You consider these things as a barometer of how your improvement priorities are doing. We track that monthly. We use as a mechanism to report on our performance – if we have fallen short, what is our cause, what is our counter measure, and what are we going to do differently to try to get us back on track. It enables us to measure our strap plan and our breakthrough. We also have our key performance indicators. We track the things that tie to our budget. These metrics really do not change year and year out. They are mostly financial, but they also include things such as safety, incident rates in our manufacturing locations, inventory turns, and other metrics for forecasting accuracy.
EL. How global is your company?
JS. More than half of the revenue comes from outside the U.S. That is a big change from where we were three years ago. The largest market after the U.S. is Western Europe (Germany being the largest). We are trying to be in the largest countries in Asia. Our business has become more significantly global since I joined in 2005. We would expect that to continue.
EL. What is next for the company? More expansion outside the U.S.?
JS. We think emerging markets are going to be very important especially in the next five years. We feel that it is quite likely that the growth rates in Europe and in the U.S. are not going to be very strong. Other capital-intensive vertical markets we serve include China and India. We are planning to make an investment in Brazil. Today we do not have much of a position there. It is an important area for us. Product extensions are important to us. We still have a relatively small share within the verticals that we serve globally. These vertical include the areas of connectors and connectivity. We want to offer a greater portion of the entire solution beyond the cable piece. It is where our legacy is and where our foundation is. It is very important to us.
EL. Is it hard for the company to shake the legacy identity?
JS. There are two sides to the coin. Many customers see our legacy identity as a good position to be in. Our reputation stands out in this area. It surprises me a little bit. The number of people I meet who know about Belden amazes me. They all have a good opinion of the products. Not having that would be horrible. On the other hand, because we are so well known as a cable company, we have had to work hard to do more things within industrial networking or within wireless. Some times, it can be more difficult because people think of us a cable company. Through our acquisitions, we have been able to leverage the brand of our acquired company.
EL. Have any technology investments turned out to be a mistake?
JS. Yes. We have made our share of mistakes, mostly going down the wrong path. For example, a path we took for wireless technology did not work the way we had hoped it would. We had to stop that and move onto another path. In manufacturing, some of our process improvements did not give us the results we wanted. As a culture, we do not want people to be afraid to make mistakes, and we also want people to feel comfortable raising their hand when they do. I believe that you do not want to spend good money after bad.