Duncan Ross
President of Barnstead International

TH: What sports were you involved in?
DR: I ran cross-country and track and I was the goalie on the hockey team. We were a Division 1 Massachusetts high school. A fairly large high school, 525 in my class. In junior high school, up through junior high school, up through freshman year, I played catcher on the baseball team. But then I switched over to track in the spring, opposite to cross-country in the fall.

TH: In addition to the importance of quality people, are there others things that you learned from running a business in college?
DR: I think it taught me the benefits of leverage. I don't get that involved in debt financing and issues, but it clearly taught me the flexibility of leverage. It taught me quite a bit about accounts receivable from the standpoint that depending on where you are in the food chain is how quickly you get paid. Luckily, there were a lot of family friends that paid me pretty promptly, but a lot of people that I didn't have a personal relationship with, you know after they paid all there other bills, they paid the guy that cut the grass and did the leaves in the fall and did the fertilizing, which was me. So those are the types of things I learned.
Also, I learned quite a bit about step function and scale. When you think about businesses, you have step functions in your infrastructure. When you first step into a new level many times, because of the fixed-cost investment, you can be upside down in your profitability, as compared to where you were at the previous level. But it's a necessary step to take to get the economies of scale as volume increases. Clearly, we went through some of those challenges of understanding the right balance of debt, of capital investment in new equipment versus what we could take out from a return standpoint.
Finally, I think it also helped illuminate - and I'm thinking back on this now because you're asking me these questions - but the pricing model. You know, at first, we probably had to be a little more aggressive in our pricing because it was a commodity-type service. But as we built our brand, built our reputation, we were able to move our price point above what a typical college business would be able to demand in the market. We did do a very good job and we did run the business, in some ways, in a more professional level than people that were doing it full-time. Just based on some of the skill sets we had inherently from learning in school, etc. It was a great experience.

TH: Your education and background really lean toward the sales side, the marketing side, of business. Is there a particular challenge that you have running a company that has so many different products?
And some of them, at least to laymen, seem very specialized.
DR: Clearly. I was trained really more in school with a double in finance and economics to be more of a financial analyst or a securities analyst. But right after college, when I sold the business, I went into a family business in Fort Lauderdale. For three years, I ran my uncle's restaurant on the Intercoastal down there, which was another entrepreneurial experience. It was like a TGI Fridays. Then, when he sold that to a Canadian corporation that ran multiple specialty restaurants, I decided not to stay in the restaurant business, and that's why I got into the laboratory business.
I did come up more in the sales and marketing side, even though that always scared me, but people said that was my natural profile and that was the door that I went through. It was a good learning experience to learn business and commerce. But clearly the challenge that someone like myself is always going to have coming from more of a business background than a scientific background is I've really had to work hard over the last 20-plus years in understanding some of the applications of the products from a technology and a scientific standpoint.
Probably the biggest challenge we have in our business here is our blessing and our curse. We are the most diverse lab equipment company on the planet. It's always difficult to say how should we ... focus versus breadth. Because clearly there are a number of products we have where we're the No. 1 or 2 shareholder and the No. 1 or 2 position in technology. But that also puts a tremendous burden on our people in trying to stay focused and stay ahead of the competition and watching these other segments where there are a lot of lab equipment companies that have a much narrower focus than we do.

TH: How many direct reports do you have?
DR: I have 13 people that report to me directly.

TH: Are they all here in Dubuque?
DR: Basically, out of the 13, 10 are here, one in the U.K., one in Chicago and one in New Jersey.

TH: Does your job involve much travel?
DR: I'm gone about 75 or 80 nights a year. I generally go to Europe two to three times a year and to Asia once a year. A lot of trips to Chicago because Lab-Line is the second-largest company we have. We also have a number of large customers in Chicago.

TH: With your number of direct reports (13) and a lot of business units and products and all that, that's a lot for one guy to keep track of. How do you manage an organization of this size?
DR: First of all, I have a very good executive team with a high energy, committed team. Dubuque is really the headquarters of the Apogent Technologies Lab Equipment Group. So a lot of the corporate functions for my particular businesses we have integrated here in Dubuque.
You just have to have the right people on your executive team to get that done. As I mentioned, we have some very good people on our team. Our HR function, for both this facility, the vice president of human resources, Lynn Osterhaus, handles both this facility and also the global responsibility, employee issues and other things. There are local HR managers here that still report to the facility people, but they all have dotted line responsibility back into the functional departments here in Dubuque.

TH: I want to ask about your competitors. Are many of your competitors also so multifaceted in terms of product lines?
How do things stack up?
DR: Well, we're the most diverse, but there are some focused competitors. For example, Millipore Corp., up in Massachusetts, which is heavily into water infiltration, they're very focused on a narrow breadth of product.
We have other competitors.
If you look at the laboratory equipment segment - and it's difficult to get an exact turnover sales number for this business, when you get outside of the hospital market - there's little good data on sizes of markets and total available share and served available market. But we look at the business that we play in as about somewhere around $3.5 billion global market for the products that we are in.
If you look at the top three, of the two companies that are larger than us and only one has jumped up above us through an acquisition they did recently, Kendro Laboratory Products, which is part of SPX Corp., is about $325 million. They don't report that out publicly, but my inside knowledge is that that's the size of their lab equipment business. But well over three-quarters of that is really focused around centrifugation. Just one major product category. Which is one that we're not in and we don't want to be in.
Then the second largest company is Thermo Electron company. They again are fairly diverse, but nowhere near the breadth of product that we have. For example, I would say that they probably have maybe 1,000, at the most, end-user stocking units, where we have 4,000. That's even without the Ever Ready Thermometer Co. We've got 5,000 different types of thermometers and data loggers. So you can see that our breadth is fairly wide.
I think to answer your question as succinctly as I can, I think you're going to find maybe, from a diversity standpoint, you won't find anyone else that's got, has no more than 50 percent of the end-user products that we have, stocking units, catalog numbers. We are very diverse. But I also think it's very important that you have good vertical depth because you do have different applications and different uses within departments, within laboratories, within accounts.
For example, if this researcher needs a specific level of a hot plate and stirrer or water system based on liters per hour that they need to generate and the quality of that water, then maybe our Barnstead Easypure System fits there. But where this other researcher that's working with DNA technologies needs very high purity Type I water, then the Diamond System is appropriate for them. So you want to be able to provide the customer, so you can go into those large accounts and do an enterprise-wide sell and meet all the different needs.
We've really been refocusing in the past two or three years in bringing new product to market. In doing that, because we had bought some of these other businesses where we may have a portfolio of hot plates with two or three different manufacturers that we brought together and maybe we have a situation where we have 40 different offerings from top to bottom.
If a customer calls up with a specification, it's not unheard of that three products will meet the specification. So when we're all done with that rationalization and next generation using concurrent design and engineering, we may end up with 25, but we'll meet the needs of the entire market and we'll still be the deepest in the industry. But we'll be able to take significant investment out of inventory and be a much more focused company. Turn our inventory faster and still provide the full enterprise-wide solution piece.
We've also been able to take products and bring out new technologies, like our MaxQ shakers or our new Thermolyne Cimarec hot plates and stirrers, where we're replacing technology that's 15 years old. We've up-featured it, but because of our concurrent design and engineering and building basic platforms, like the difference between a Lexus EF300 and a Toyota Camry, we're able to take costs out, so we're bringing more features to the market, hitting higher needs than our competitors, higher capabilities than our competitors, at or below the costs that we produced the product for in 1984, as an example, in constant dollars.
Clearly, we've been very focused on that.

TH: In addition to developing leadership and right-sizing your product portfolio, what is another major challenge facing the company?
DR: The third challenge we face is really one of market access. We have some very good brands, and we primarily work through distribution. Part of the challenge in this industry, as compared to other industries, is distribution has a lot of leverage between you and the customer. What we're doing is our strategy is still to work through distribution, but we've termed it selling direct through distribution. The old model was you could have a technically-oriented sales force that went out and assisted the distribution organizations. Distribution now has scaled back the amount of real selling they do. They're more of a customer service, trucks and warehouse, supply chain function, which they do very well. More and more of the responsibility of driving the business, if you're going to be successful, has to come back to the manufacturer. So we've retooled and retrained so our people are as good as any competitor they may go up against that is selling direct and not using distribution.