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Laboratory Trendsetters |
An Interview with Mark Loughead, COO for the Intertek Group Plc |
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By L. Wayne Collins Managing the Modern Laboratory, ALMA, Volume 7, Number 3 (Edited for space) Analytical chemistry is experiencing dramatic, turbulent change beyond control of the laboratory and laboratory management. Technological innovations, staffing demographics, new business models, automation, industry consolidation, society and regulatory expectations, and other factors are transforming nearly aspect of the business. MML Editor Wayne Collins met with Mr. Loughead to learn more about the analytical outsourcing industry. MML: What do you consider your core competency? Mark: The Intertek OCA division (Caleb Brett) of ten years ago was focused on inspection—taking samples from ships and measuring properties. Our business was tied to shipping. However, when we looked at market growth and viewed our business strategically, it didn't’ look exciting. There were several industry leaders with about equal share, a certain degree of overcapacity, and signs of a mature market. We examined our business to determine core competencies, one of which is laboratory services. We are experts in analytical testing with laboratories across the world, with skilled professionals in testing, and a great store of product knowledge. We decided that growth opportunities were in testing and that laboratory services are a core business MML: Do you still participate in the inspection business? Mark: Yes, inspection is definitely an inherent part of our business, that is how we managed to grow our laboratory network on a global scale. It continues to play a large part of our business—it is the platform on which we built our company. Even though we are growing and building more laboratories focused on testing, inspection is the backbone of the business. MML: What is your relationship with Intertek? Mark: Intertek is the parent company. It was born out of the multinational company called Inchcape which decided to build a testing services division by acquiring testing companies. One of these divisions is OCA. Other Intertek divisions include ETL SEMKO, Government Services and Consumer Goods. Inchcape sold the Intertek business to a venture capitalist group in the mid 90’s, who then issued a successful IPO on the London Stock Exchange in May 2002. MML: What is the basis of your business model? Mark: We provide service on a project basis to customers. We provide accurate, fast, and competitive service. We run labs commercially, we know how to do it efficiently and productively. Where we have outsourced laboratories by acquisition we bring the values of efficiency, productivity, and quality of service. That’s what the customers tell us—its not just our opinion, the feedback is that service is better and overall total cost is lower. MML: How did you learn to run laboratories better? Mark: Well, remember its taken us a hundred years—we’ve been at it for a long time. I think the real answer is best practices. Running so many laboratories and having such a diverse customer base allows us to learn quite a bit. We have accumulated that operational knowledge and experience in putting our model together. It is a combination of the experiences and best practices across all of the customers, labs, and industries. MML: How did you capture that knowledge? Mark: We have built an outsourcing division separate from the inspection business so knowledge and capabilities are now concentrated in a core lab function built around testing. Knowledge is concentrated in key laboratories which are technical centers and we have business development teams whose function is to use this knowledge to provide outsourcing solutions. MML: Do you have training facilities to spread these best practices throughout the company? Mark: I suspect it is possible that we train more chemists within Intertek OCA than the whole chemical industry combined because we are growing the business so fast—outsourcing and testing is growing at more than 20% per year. In the last two years, we have added maybe 2000 chemists, if you go into one of our larger laboratories like in Manchester, Deer Park (Houston) or Sunbury (London) you’ll see that lab staff expansion means we are training new chemists on a regular basis. That’s the technical training. For the business skill training, we have our own management development program within Caleb Brett—we take a person with technical skills and bolt on the skills in finance, HR, IT, accounting, and general management. MML: How is that done? Mark: We have courses that we have run for perhaps the last 15 years across all divisions of Intertek. We’ve used Cornell, UCLA, and now we are using the University of Michigan—we have our own Caleb Brett course that is taught by one of the professors. MML: What are some of the best practices that you have discovered for controlling costs? Mark: After running laboratories for a long time, we have developed a fine eye for the financial details. Our laboratories work for multiple clients so we can increase the utilization of equipment to get more value from it. In the customer’s lab, the equipment is used for only part of the day, where Intertek OCA is able to fill the excess capacity with samples from other customers. We have an advantage in equipment utilization. We gain efficiency through investment in automation. Lab managers in the chemical industry find it hard to get capital money approved, whereas the laboratory is our core business so we invest in it. We’ll spend somewhere near $70 million in capital investment on equipment in Intertek this year. We have the client base to be able to take advantage of automation. Another advantages is in LIMS technology. Most of our instruments are directly connected into LIMS which helps reduce the costs of data input and transfer. Productivity gains through motivation of the staff also reduce cost. We observe the motivation of people in the chemical industry has been low as a result of relentless staff cuts. When 50% or more of the people don’t work in a corporate lab anymore, it is a tough job for the lab manager to motivate the surviving staff to be productive. By contrast, at Caleb Brett we motivate people because they see a brighter future with growth. We value their skills and technical knowledge, and they have the opportunity for career development. A motivated workforce contributes to cost reduction. MML: Do you reduce expenses by saving on labor costs? Mark: No. I can say that in all of the outsourcing deals where we have taken over the staff from the customers, they have maintained, if not improved, their status. Outsourcing does not mean loss of benefits or take home pay. We may be clever in the systems we develop but, in the end, it is the people who are the real asset. To encourage people to see opportunity and to grow in this business is very important. Some of the people that we have taken from our customers in outsourcing deals in the last few years are now some of the most senior managers in our company. They’ve grown as they’ve taken on more responsibility and have seen opportunities for a career path. My own story is an example of that—I joined managing a laboratory with 8 people fifteen years ago and was given the opportunity to be promoted to where I am today. Go to CEO Interview, Part Two. To learn more, please us by email (Corporate Contact). Be sure to include your contact details if you prefer a phone call. |
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