Dallas' Overhead Door Company and NCMM's Tom Stewart discuss mid-market manufacturers for Manufacturing Week.
Transcription
When you open your garage door tonight, chances are it was made by the Overhead Door Company-- a company outside Dallas. Their story tells the story also about how mid-market manufacturers are thriving in America today.
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Welcome to The Market that Moves America-- a podcast from the National Center for the Middle Market, which will educate you about the challenges facing mid-sized companies and help you take advantage of new opportunities.
October 6, 2017 is Manufacturing Day in the United States but when you say "manufacturing," you really mean middle market companies. We'll talk about what it takes for manufacturers to succeed and how to help them do better. I'm Tom Stewart. I'm the executive director of the National Center for the Middle Market at the Ohio State University Fisher College of Business. We're the nation's leading research center studying mid-sized companies, which account for a third of private sector employment and GDP and the lion's share of economic growth. These companies, with revenues between $10 million and a billion dollars, are the market that moves America. The National Center for the Middle Market is a partnership between Ohio State and SunTrust bank's Grant Thornton LLP and Cisco Systems.
With me today are three special guests. The first is John Wilson, who is the CFO of Overhead Door Manufacturing Company just outside Dallas. John, welcome.
Good afternoon, Tom. Nice to be with you today.
And with him, also from Overhead Door, is his CMO. So we have the CFO and the CMO together. Joe Dachowicz. Joe.
Hey, Tom. It's pleasure being here. Thank you for having us.
And with them is Jeff French who's actually not with them. He's due north of them but about as far north as you can get. They're outside of Dallas and Jeff is based in Appleton, Wisconsin. And Jeff heads the manufacturing practice for Grant Thornton LLP-- the tax audit and advisory firm. Jeff, thanks for joining us, too.
Tom, thanks very much for having me. And I'm happy to be here and celebrating Manufacturing Day in America.
And you know, every year, the Manufacturing Institute sponsors Manufacturing Day, which is designed to do that-- to celebrate and support the manufacturing sector in the US. When most people think of manufacturing, they think of big factories employing thousands of people-- automobile assembly plants, and aluminum rolling mills, and gigantic shops where Boeing assembles aircraft-- but 40% of US manufacturing comes from the middle market, and one of those companies is Overhead Door. John, tell us about the company.
Well, we're a leading manufacturer of garage doors and openers for residential and commercial applications. We're headquartered here in Lewisville, Texas, which is just near the DFW Airport. We have five divisions in the company. First is the Access Systems Division, and this is the part of the company that actually manufactures garage doors under the Overhead Door and the Wayne Dalton brands.
We also have the Genie Division, which designs and manufactures commercial and residential garage door opening systems and we have Horton Automatics, which design and manufactures automatic doors for pedestrian use. We have another division called TODCO, which produces upward rolling truck doors. And then, finally, we have our Installation and Services Division, which includes about 30 branches that install and service garage doors under the brand Creative Door Services in Western Canada and NationsServe in the United States.
So, Joe, when did this company get started? I mean, the overhead garage door was invented by the founder of Overhead Doors. Is that right?
That's correct. C.G. Johnson actually created the original overhead garage door in 1921 and he also developed the first electric garage door opener a few years later in 1926.
When I heard that, that surprised me because in my family we had a garage door for a long time but the electric garage door opener came a whole lot later. I mean, I remember growing up outside Chicago, jumping out of the car and running to open the garage door. Maybe it's because my dad was too cheap to buy the electric garage door opener. But I'm sort of amazed that the electric garage door opener is as old as what-- nearly 100 years old? What is it? 191 years old.
Yes. It wasn't very prevalent, of course, in the early years-- the opener. Later on, Overhead Door acquired the Genie Company and it was actually Genie that really commercialized the garage door opener and made a unit that was mass produced-- and that began around 1954.
Amazing thing is this is one of those products that everybody uses every day, and somebody makes it. And we sort of forget that somebody makes it. How's business? You guys must be pretty dependent on the construction cycle, I would imagine.
Yes. We've been growing steadily really since 2010. And that marked the beginning of a recovery in both commercial and residential construction. 2010 was also our first full year following the acquisition of Wayne Dalton, and that was a competing garage door company at the time. So with Wayne Dalton, it gave us a strong position in residential and that went along well with Overhead Door's strong commercial business.
Cool. Hey, Jeff, you've worked with these guys, and Grant Thornton does. I mean, when you look at a company like Garage Door, look at them in particular, what are some of the strengths they bring to it, the things that they can do to hold competition back or really, you know-- what do they bring to the table that makes them succeed so well?
Well, I would say that, obviously, they have a long history so they have weathered the storm many times in terms of the economy, construction growth, those types of things. Obviously, quality products, they do that. They're obviously in high demand. They have a high market share, and that probably helped. But innovation is something that I think is key. And as security and those types of things become very important, they've been able to innovate, I believe, and create quality products, which all of that helps stand the test of time.
Joe, talk to me a little bit about that, the innovation, as you think about it. You're the CMO. And how important is innovation in-- I mean, it sort of seems, again, like a standard product. But Jeff is talking about the central role of innovation. How does that show up?
Absolutely, Tom. The innovation in garage door industries is a little different than what most people would think. Yes, there is innovation around electronics and we do have many products that connect to the internet. We have Overhead Door Anywhere and Genie Aladdin, which are products where you can control your remotes and your door from anywhere in the world through the internet. And we're connecting to smart homes all across the country with products like that.
Where we also see a lot of innovation on the residential side would be on the design side. People are realizing that the garage door takes up a fair amount of space to the front of their home and they could do a lot to their garage door. It's no longer just a white garage door-- people want various colors, various designs. So we spent a lot of time as a company focusing on how could we innovate around design and make the homes more attractive to consumers.
That's funny, I was just in Santa Fe, New Mexico and walking down the street and there was a garage door that was printed, or painted, or whatever so that it looked like it was a barn door with Mr. Ed looking out.
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One of the things that I think is-- we're talking here about a manufacturing company in America on Manufacturing Day and when you listen to the public discourse about manufacturing, you hear two things. One of the things you hear is, oh, there's a crisis in manufacturing. We don't make things anymore. It's impossible to make things in America anymore. American manufacturing is going away-- it's in deep trouble.
And the other thing you hear is, there's a renaissance in American manufacturing. Things are coming back from offshore, things are growing, we're learning to manufacture in ways with ingenuity and innovation that nobody else can do. As you look at the situation-- and I'd love to hear all three of you talk on that. So maybe we can-- let's do it now alphabetical order. So that would be Jeff, Joe, and John. Crisis or renaissance?
Well, Tom, I think that if you talk to our client base at Grant Thornton, I don't think you would hear that the industry is in crisis. I mean, clearly there are companies-- you know, there's mixed experiences. There are companies that are growing and those that are not. And the ones that are not may take a different view, but we do see challenges, especially with finding labor. That continues to be a pervasive problem around the sector.
But yet, we're seeing clients that are automating. They're doing things to really improve operations and innovation much like at Overhead Door is happening with products, but it's also happening on the shop floor. And I think those are the reasons that people are talking about a renaissance. Technology side is really improving to improve quality, to improve efficiency. So I think that's what most of our clients are seeing and what they're saying about it.
Joe, do you think-- I'm trying to remember what alphabetical order is. How do you see that? Do you see crisis or renaissance?
I would see closer to a renaissance. And maybe "renaissance" isn't the right word. Me, I would use the word as, you know-- it's really an evolution. And you know, there's points of time where the economy is soft where companies fall behind in investing in manufacturing and then they wake up one day and they realize they are behind and they have to scramble and do something. Well, what we try to do is stay on top of that. And I think the evolution is what Jeff talked about in regards to, how do we continue to increase efficiency, improve labor, and increase our output?
And I think as long as companies are focused on those areas and looking outside their industries for new technology or for new process improvements, then-- and that's something that hasn't changed since the beginning of manufacturing. And that's why I see it as much more of an evolution than maybe a renaissance.
As you think, John, about being mid-sized, how does being a mid-sized-- I mean, in the environment that Joe and Jeff have described, how does being the size of Overhead Door-- is that an advantage? Is it a disadvantage? Jeff mentioned earlier, you've got a long history and an install base, and you've got the resilience. You can take a licking and keep on ticking. But do you also-- would you rather be a lot bigger? I mean, everybody wants to grow but do you like being the size you are, though growing?
Well, in our business we have one of the broadest product offerings and that does give us the opportunity to meet most of our customers' needs from our factories and distribution centers across the country. A smaller company, sometimes, it could be more specialized on certain products and potentially a little bit leaner in some respects, so that does keep the competition fierce.
I would say, considering our size-- mid-sized-- we're large enough that we do need to have some of the corporate functions that the larger companies have. And we are owned by a public company so that brings some requirements. And so, probably, we could grow larger and get more leverage out of the investments that we already have.
There's an interesting sort of sweet spot between being big enough to be resilient and small enough to have a lot of runway and enough agility. And I think that's one of the reasons that we see so much manufacturing concentrated in the middle market, precisely because-- as Joe was saying-- you see that evolution. And giant companies-- you remember the history of Bethlehem Steel or of GM-- it's hard to move those battleships and sometimes they don't even realize they need to move until it's pretty late. And there may be a certain advantage in being close enough to the market that you really feel its hot breath on your neck as you go ahead.
I want to ask a question of each of you because there's also a lot of talk about trade and other things like this. And companies of all kinds have to interact with government. And I don't want to get political here, but you know how sometimes in performance reviews people are asked this question-- what's something that somebody should do, or should keep doing, should start doing, and should stop doing? And I'm wondering-- taking a look at any level of government, thinking about regulations, infrastructure, workforce investment, whatever it might be, who would like to offer some suggestions about something that government should stop doing, keep doing, and start doing?
Jeff, you want to take it first?
Yeah, I'll start out. And maybe I'm going to give you a little more broad perspective than you're looking for, but I would say that most of the manufacturers that I talk to, you know, they would like government to be more balanced-- I guess that's how I would say-- and have a pro-growth agenda, pro-business agenda. Not that they're looking to give businesses unusual benefits, but that they're just creating an environment where manufacturers can grow, where they can sell their products, and find new markets, and those types of things. So I think they're looking for more balance on regulation, more competitive tax rates when you look at global competitors, and even more collaboration on developing workforce skills that are needed for manufacturing.
Joe and John, do you see an infrastructure issue? I imagine that as people who ship things, and also people who are putting doors on the backs of trucks, that may also be an area where you think that the government could do more or do better?
On the infrastructure side, I don't know. We live here in Texas and we build a lot of roads here, so we don't really probably see some of the problems that might exist around the other parts of the country. I don't really look to the government to provide the demand for the products.
I would say though that from an input perspective, our products are mostly made from steel and we do source most of our steel in the US. And so excessive protectionism would become a problem for us if it started to drive the cost of steel up even higher than that it is already. Our concern there would be that the cost of products-- cars, building products-- would start to get to a point that it would reduce the end consumer demand. So that'd probably be the number one, I think, thing that I would point out is not to interfere so much with the current market forces.
And John would you make a similar observation?
Yeah, absolutely. I mean, as far as the government and what they stop and start, one of the things that we would find very helpful-- and if we were to ask for assistance in something the government started-- is Jeff mentioned earlier about labor. You know we, like many companies, could struggle to find labor and, oftentimes, the government has access to a large labor pool through their various programs that they have, whether it's local or state at the state level. And a company like us, we don't necessarily always require fully skilled labor. We're just looking for motivated labor that we could train. And so I think there is a partnership that is a strong potential between the government and companies like us, who we could work together on solving some of the labor issues. The government has access to labor and we need labor. And if they could help us with that, then we would help train and develop those folks as well.
The National Center for the Middle Market just released, a couple of weeks ago, work we did with Brookings on that very problem. And because the middle market is growing so fast, it's where the talent shoe pinches the most. And a lot of the workforce development system, which is at local and state as well as national levels, it doesn't connect very well with the capabilities and resources of mid-sized companies. There's a real opportunity, I think, to make that bridge work better and you've just underscored that.
We're coming to the end of our time and I want to sort of put a couple of things that I heard. One, I mean, just a reminder of the richness, and interestingness, and ubiquity of manufacturing in the United States. And the fact that when people think about it, it's companies like you guys at Overhead Door who are making a tremendous difference and, Jeff, people like you at Grant Thornton that are helping these companies get the most out of all their resources and operate efficiently.
I think one of the things we also heard-- and this is really interesting-- is the role of innovation coming at you in sort of surprising ways. And I hadn't thought of before this conversation, of course, smart homes are going to dramatically affect the garage door business. And here we have the internet of things showing up as a potential great innovation for you guys or a potential source of competition and disruption for your business. And so we see this sort of constant interplay of really established companies and technologies that they can either exploit or struggle to deal with. And I thought it was really interesting to hear you guys talk about the pros and cons of size and being mid-sized and this sort of needing to react quickly and being able to, but also struggling sometimes to get all the resources you need.
So I want to, with that, thank you guys very much. Jeff French from Grant Thornton, John Wilson and Joe Dashowicz from Overhead Doors-- Dachowicz from Overhead Door-- thank you very much for joining us. If you want to learn more about Grant Thornton, you can go to GT.com, more about Overhead Door, you can go to overheaddoor.com. And I want to thank you all for listening to The Market that Moves America. Never miss an episode. Subscribe to the podcast on iTunes, Stitcher, Google Play, or wherever fine podcasts can be found. Or you can subscribe and learn more about us at our website, middlemarketcenter.org. Thanks very much.
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