When Gordon Hunter looked at Littelfuse Inc.’s strategy, he knew something had to change.
While the company already had a global presence and solid customer relationships, its products were easily copied and sold by competitors. Simply being a manufacturer of commodities was not going to sustain it.
Littelfuse, the Des Plaines-based company with net sales of $467 million in fiscal 2005 is nearly synonymous with fuses and other circuit protection devices. It had been performing on the worldwide manufacturing stage for some time, but changes needed to be made for the company to compete.
“I think the strategy had been evolving really over a 10-year period, because if you’re in the electronics industry, you kind of get pulled into being global, you get pulled into Asia because so many things have been moved to Asia over the last few years,” says Hunter, chairman, president and CEO of Littelfuse.
It was apparent that Littelfuse needed to establish an even larger global presence and get even closer to more of its customers. To avoid the commodity trap, the company had to move toward becoming a total solutions provider in circuit protection, one that could provide solutions that new products demanded in terms of reliability and sophistication.
Littelfuse started its strategic analysis with a relatively clean sheet of paper.
“We certainly had some presumptions and we had some activities ongoing, but what we did very well was be prepared to question everything: Should we be global, should we be in all of these technologies, should we be in all these market segments?” Hunter says.
He says pushing the assumptions aside was important, and he made sure there was some outsider involvement in the process. He brought in a professor from a local business school and made sure that there were members on the team with varying tenure with the company.
“Sometimes, people coming in from the outside might be more challenging, they might say, ‘You know, you guys think you’re good at this, but I don’t think you really are,’” Hunter says. “So you have that internal discussion, and I think that’s really healthy to formulate a solid strategy that everybody buys in to.
“It’s really a good exercise to formulate it and write it down and say, ‘You know, we are good at moving factories, we are good at project management, we have demonstrated that that we can continue delivery and maintain quality levels to a customer while moving a factory from country A to country B,” Hunter says.
“There’s a real good value in working through things, even if they’re assumed, to really get them solidified for everybody.”
Formulating and forcing his own vision of Littelfuse’s future wouldn’t create the buy-in necessary to make it a success or, just as important, achieve the best result, so Hunter handed the process over to a group led by a promising manager, assuming the role of coach for himself.
“What I didn’t want was this to be my strategy,” says Hunter. “I came here after working for Intel, and I didn’t want people to think I was coming with an Intel strategy, or some preconceived idea. The strategy for this business is going to be best formulated by getting the best brains and people working through and challenging each other and formulating the strategy based on the capabilities of this business and the market conditions that we are in.”
But while there was outside help in the process, Hunter says it was important to have the company team formulate the strategy and not implement an off-the-shelf solution from a consultant.
“I really believe that you do it with internal people rather than have it done by an external consultant, as an example, where he hands it to you,” says Hunter.
Hunter knew that getting buy-in from everyone — not simply from management at headquarters — was important, so he made sure there was representation from all of Littelfuse’s operations.
One challenge in that was getting Asian team members to speak up in the sessions, a behavior that runs somewhat counter to their cultural experience but that Hunter thought was crucial for the success of the plan. The Asian team members were brought in to headquarters for the first strategy meeting, and Hunter used an outside consultant to heighten the sensitivity of American team members to the cultural differences and coach them on how to interact with their counterparts.
“If they’re not comfortable speaking in a group of 30 people in a conference room, you have to maybe ask them specific questions, you might have to spend some time with them one-on-one, in smaller group sessions,” says Hunter. “You also have to get our local managers, our American people here, to be more sensitive to them and realize that they have to approach them a little differently. It’s getting people to be sensitive to other cultures and getting people to realize that if you have a corporate culture which is encouraging people to speak up and contribute, you have to get people to work at it from both sides.
“They may not have been educated in this country, they may not have sat through strategy sessions in a business school, so I think it’s important for them from the beginning to know that they’re a critical part of us getting to the best strategy we can for Asia. We can’t do it without their input, so they have to feel comfortable speaking up.”
Rolling it out
Hunter says that once the strategy was developed, the company wasted little time in communicating it to the entire company, with senior managers playing a key role in the rollout.
“This can be the other side of coaching, of making sure people meet their commitments, getting a timeline that was challenging but realistic, making sure we’ve got people signed up for the sites ... being seen at the front of it but realizing that you can’t be leading it everywhere, so coaching people and making sure those commitments were met was a high priority,” Hunter says. “That meant going out to all of our employees around the world, all plants, and that the senior team, along with the local management ... we’d make a big effort to get the strategy communicated to people and make it clear that they were an important part of one aspect of it.
“For example, if we’re investing in Asia or we’re investing in what we call being a total solutions provider, that can impact people quite deep in the organization.”
The responsibility for implementation of the strategy is up to the managers, who have financial incentives tied to specific goals.
“Ultimately, the managers are responsible, but we feel we achieve buy-in throughout the organization through communication and accountability by communicating to everyone what we’re doing, why we’re doing it and how we’re getting there,” says Hunter. “The hope is that people will come on board, but ultimately, it’s up to the manager of each department to make sure that things are getting done. We give managers aggressive goals, and we ask for constant feedback.”
Hunter says moving quickly to put the plan into place was critical in creating a sense of urgency and priority in the company.
“Part of it was to invigorate people,” says Hunter. “We’re in a business that’s very competitive. The electronics business moves fast, prices come down. We need to get the message out to people that we have to make decisions, we have to move on, and we have to put a lot of energy in our business. We’re in a very fast game. Communicating to them in that manner told people this is the industry challenge that we face.
“We expect to have increased volume but lower costs, very high quality standards, very rapid delivery, and that’s the very competitive nature of the business.”
Littelfuse sets timelines for its projects and tracks to those timelines, using key process indicators to measure progress.
With the indicators, there is constant attention, with monthly reviews with upper management. Hunter says those tend to bring focus to key activities, and that helps to motivate people to make sure they get things done.
“We also do quarterly reviews with the businesses to make sure everything is moving in the right direction,” he says. “It’s during these reviews that managers down the chain get solicited for input on how things are going. With the (indicators), it really helps us focus the problem areas.”
To reinforce the strategy, it’s recapped at every major company meeting. Littelfuse produces a video each quarter that updates the company’s performance and that is presented at all of its locations. At least one element of the strategy is featured in the video, and a business unit manager presents something that is occurring in his or her unit and relates it to the strategy.
Hunter says a strategy presentation is prepared for shareholders, customers and suppliers, and employees are encouraged to talk about it with those parties, as well.
“So it’s not just hearing it; having them tell suppliers and customers reinforces it throughout the organization,” Hunter says.
Measuring the results
Ultimately, the value and effectiveness of any strategy, no matter how it is conceived or constructed, is measured by its results. Littelfuse uses several metrics to judge how well its strategy is working.
“One of our strategic objectives, what we call total solutions provider, we measure by the percentage of new products we design for customers and the percentage of revenue that comes from the new products,” Hunter says.
Hunter says measuring the number of customers that buy more than one technology demonstrates that they are paying more attention to Littelfuse as a solutions provider, even though they have traditionally recognized it as a fuse company.
To measure its visibility, Littelfuse does market surveys that measure its brand recognition by certain groups — for example, by purchasing managers and engineers — to determine how well the Littelfuse name is recognized in different markets and among potential end-users.
The financials also measure success. Hunter has increased net income from $4 million in fiscal 2001 to $17.7 million in fiscal 2005. Diluted earnings per share have also increased, from 19 cents to 78 cents in that same time period.
Hunter talks a lot in terms of teams and coaching, and it’s no surprise that he likens business and strategy to sports. Teams have to have a clear, well-thought-out game plan, players who have a thorough understanding of their roles, a coach who can get the best out of them and the ability to make quick decisions to course-correct if the plan isn’t working.
“Running a business is very much like coaching a sports team,” says Hunter. “You can’t go out and play all the positions on the field, and you need to be able to have the right strategy, the game plan you’re going to have.
“You clearly need good players, and then you’ve got to get them to play as a team. And then once the game starts, the competition does something different, so you have to constantly course-correct in your strategy if you want to win the game.
“Your competitors don’t just lie down and do everything you like, so you need some flexibility.”
How to reach: Littelfuse Inc., www.littelfuse.com