You are on page 1of 120

The Icehouse

Owner Manager Exchange

14, 15 & 16 November 2013


OWNER MANAGER EXCHANGE (TAUPO)

DAY 1 THURSDAY 14 NOVEMBER 2013

Time Detail Presenter

Welcome, introductions & overview of


10:00am 12:30pm Team Facilitation
programme. Introduction of BIQ

12:30pm 1:30pm Lunch

Distribution of individual BIQ scores for


1:30pm 3:30pm
Offering

Design your offering for the market Dorenda Britten and Ruth Fisher

3:30pm 4:00pm Break

Distribution of Individual BIQ scores for


Market
4:00pm 6:00pm
Market case: Proform
Darl Kolb and Rex Howe
Market and Offering learnings for your own
Panel discussion
business

6:00pm Guest speaker over drinks Nick Smith, Proform

7:30pm Dinner
DAY 2 FRIDAY 15 NOVEMBER 2013

Time Detail Presenter

Distribution of Individual BIQ scores for


Processes
8:30am 10:30am
Processes Case: Tru-Test Darl Kolb and Ian Walsh

Processes learnings for your own business Panel discussion

10:30am 11:00am Break

Distribution of BIQ scores for Leadership


11:00am 1:00pm
Leadership case: Mainfreight Darl Kolb and Emmet Hobbs

Leadership learnings for your own business Panel discussion

1:00pm 1:30pm Lunch

1:30pm 3:00pm Workshop EDISQ self/social diagnostic tool Steve Barnett

3:00pm 3:30pm Break

Distribution of BIQ scores for Governance


3:30pm 5:30pm
Governance case: Prolife Darl Kolb and David Irving

Governance learnings for your own business Panel discussion

5:30pm 6:00pm Break

6:00pm Speaker: David Irving

7:30pm Dinner
DAY 3 SATURDAY 15 NOVEMBER 2013

Time Detail Presenter

8:30am 12:30pm Resilience revisited Sven Hansen

Reflection on areas that need strengthening


12:30pm 1:30pm
and planning the way forward

1:30pm Lunch
CONTENTS Owner Manager Exchange

PROGRAMME PROFILE BOOKMARK

Welcome and Overview 01


Speaker and Facilitator Bio 02
Design your offering for the market 03
Marketing and Offering 04
Guest Speaker Nick Smith, Proform 05
Processes 06
Leadership 07
EDISQ Self/Social diagnostics
Governance 08
Speaker David Irving
Resilience revisited
Welcome
to OMX
(Number 1)
This is
where you
take a look
at yourself
in your
business.
We provide the expertise, networks and funding to
enable Kiwi entrepreneurs and business owners
to accelerate growth.

Were committed to changing the entrepreneurial


landscape in New Zealand to create an
environment that inspires, supports and
celebrates business growth.
This is
where
you find
advice.
Taking time out.

Personalised feedback.

Working with others.

This is where you reflect on whats possible...


How is this different from OMP?

1. Introducing a first-of-its-kind diagnostic tool for SMEs.

2. Inspirational New Zealand business cases up close.

3. Work with the OMP panelists you loved (or hated).

4. Revitalising you, so your business can take a big step up.


Overview of OMX Owner Manager Exchange

Innovation expert Derinda Britten


Featured case studies
Proform
Prolife
Tru-Test
Mainfreight
BIQ Diagnostic Analysis
Offering
Market
Processes
Capital
Governance
Leadership
Revitalisation and resilience reminders with Dr. Sven Hansen
Conversations and inspiration
Speaker & Facilitator Bios

Dr Darl Kolb:
Darl is Professional of Connectivity at the University of Auckland Business School, where he has taught
undergraduate, postgraduate and Executive MBAs since 1992. His theory and research on connectivity
(social and technical communication) in organisations is internationally recognised. He is a faculty facilitator
for The Icehouse business growth programmes and co-author of the best-selling business book, Changing
Gears: How to take your Kiwi business from the kitchen table to the boardroom (2009, Auckland University
Press). He holds a BSc (Illinois State) in sociology, an MA (Colorado) in education, and a PhD in
organisational behaviour from Cornell University.

David Irving:
David is the retired CEO of Heinz Watties Australasia and founder of The Icehouse, Chairman of Prolife
Foods, AS Wilcox and AuCom Technologies. He is also an advisor to Stolthaven Australasia and other
owner managers of New Zealand medium sized businesses. David led the establishment in 2001 of The
Icehouse and the Icehouse Business Growth Programmes for the University of Auckland Business School.
David was recognised in this years Queens Birthday Honours and was named as an Officer of the New
Zealand Order of Merit for his services to business and education.

Dorenda Britten:
Dorenda is internationally recognised as a design strategist and is well known for her promotion of design
thinking in business. She has spent much of her career defining and refining the philosophy and tools
required to achieve the goal of raising the value of New Zealands products and services. For the past two
decades, Dorenda has worked alongside CEOs and their leadership teams to challenge and then enhance
their organisations view and relationship with design. She believes the strength of New Zealand enterprise
and our countrys brand will increasingly be determined by our ability to back ideas that align and have
genuine value both commercially and socially. She has worked with tertiary institutes and business support
agencies to imbed design principles into course material, and with clients in both the public and private
sectors across a wide range of industries and specialities including Science, Technology, Finance,
Manufacturing, Health and Construction.

Emmet Hobbs:
Emmet is a company director, consultant and business advisor. Emmet retired from executive management
in 2002 after nine years as an Executive Director for Brambles in Australia and Europe. Prior to joining
Brambles, Emmet worked with Qantas as Director of Freight and was the general manager of freight for
Australian Airlines from 1989 to 1991. Emmet is a Director of Mainfreight, Chairman of NZ Rental Group,
Carr Group, Hydraulink NZ & Australia, Director of My Practice and a facilitator with the University of
Auckland Business School.

Ian Walsh:
Ian has over twenty years experience in world class manufacturing in a wide range of industries throughout
the world. His experience includes projects to Thailand, Indonesia, UK, Ireland and USA across a number
of major companies. Since returning to New Zealand in 1999, Ian has completed major assignments for
Lion Breweries, Fonterra and Hubbard Foods. The industry sectors Ian has worked in are food, beverage,
plastics, paper, cosmetics, pharmaceuticals, transport (airports/airlines).

Nick Smith:
Nick Smith attended OMP 3 with his father Tony. Proform specialises in large-part thermoforming of
automative accessories and specialised industrial parts. The simple key to Proforms success has been
innovative thinking coupled with a strong desire to please customers. Proform combines novel materials,
tooling methods and manufacturing technologies to produce world-class products at competitive prices.
Rex Howe:
Rex spent the last 20 years working overseas for an American Multi National company with 16 years in Asia
and 4 years in Europe. He has a financial background with his last 3 positions as Chairman/Managing
Director of country subsidiaries in Turkey, Malaysia and India. Rex is currently involved in mentoring SMEs.

Ruth Fisher:
Ruth has built an impressive career integrating human resources, training services and information
technology across diverse organisational cultures. Her natural understanding of technology combined with
a rare ability to translate its benefits into everyday language make her one of New Zealands most gifted
business architects.

An accountant by profession, Ruths experience runs the full gamut of accounting and business leadership
roles. She spent her early career with Ernst &Young before being exposed to a range of industries including
training, FMCG, software development and systems design. She has held general management roles with
national and international technology companies and chairs an Asia Pacific technology body. Her business
experience encompasses everything from change management to strategic planning to resource allocation
to business process review.

Steve Barnett:
Steve is a Kiwi farm boy who left farming to qualify as a plastics R & D chemist. From there he experienced
production management, industrial engineering, venture analysis, general management, start-up and
development of several construction and engineering businesses (among them Allied Workforce, now a
public company), corporate management, re-qualifying in advanced management, teaching and doing
organisational change management at the University of Auckland Business School to his current main
occupation: business owner and practitioner in communication and change for growing small and medium
sized businesses. Steves role in that is typically development-project manager and specialist in achieving
behaviour change for collaborative growth. Steve is also part owner and developer of a Property
Maintenance firm serving residential rental property managers in 10 agencies covering around 5,000
properties.

Sven Hansen:
Sven is a medial practitioner who has pioneered preventative medicine, stress mastery, emotional
intelligence and cognitive training. As a regular conference presenter around New Zealand and Australia,
his key message is the imperative to integrate physical, emotional, cognitive and moral resilience. He works
with both groups and individuals, helping people develop and refine the personal disciplines of success. He
has a specific interest in developing leadership teams and the application of biological principles to
leadership, strategy, influence, creativity and decision-making.
ICEHOUSE
OWNER / MANAGER EXCHANGE
User Focus Practical Tools

designindustry.co.nz linkedin.com/company/designindustry 1
How do you
currently
decide what to
create?

designindustry.co.nz linkedin.com/company/designindustry 2
Design Focus
The Designer

Competitive

Aesthetics
Products

New Technology
Push

designindustry.co.nz linkedin.com/company/designindustry 3
Design Focus

The User/
Customer

Your capabilities
and resources

designindustry.co.nz linkedin.com/company/designindustry 4
designindustry Ten Design Principles
Purpose PROCESS
Insight
Inspiration PRINCIPLES
Exploration
Idea Bank
Contextuality
Simplicity QUALITY
Functionality
User-focus
PRINCIPLES
Refinement
Foresight
Sustainability
designindustry.co.nz linkedin.com/company/designindustry 5
Capabilities
Internal

Contextuality Simplicity

Idea Banking Functionality

External User-Focus

Purpose Foresight

Sustainabiliy
designindustry.co.nz linkedin.com/company/designindustry 6
USER-FOCUS:

Design empathises with the


user, and seeks to empower and
make an emotional connection

designindustry.co.nz linkedin.com/company/designindustry 7
GETTING INTO THE MIND OF THE
CUSTOMER
PERSONAS
The tool for achieving and maintaining
User Focus

designindustry.co.nz linkedin.com/company/designindustry
designindustry.co.nz linkedin.com/company/designindustry 9
What are Personas?
Tools to help guide design decisions

Fictional users created to represent a user group

Aggregates of real users observed and interviewed

Short descriptions including behaviour patterns,


goals, skills, attitudes and personal characteristics
that can be modified over time to reflect changing
needs

designindustry.co.nz linkedin.com/company/designindustry 10
Personas are not real people,
but they represent them
throughout the design process.
They are hypothetical archetypes
of actual users.

Alan Cooper, The Inmates are


Running the Asylum
designindustry.co.nz linkedin.com/company/designindustry
CREATING
PERSONAS

designindustry.co.nz linkedin.com/company/designindustry 12
HANDS-ON:

WHO BUYS
BREAD?
designindustry.co.nz linkedin.com/company/designindustry 13
Questions
How did you form conclusions about the
personas?

Did you start to think of the personas as


real people?

How would you build and develop these?

If you sold bread, how would these be


helpful?

designindustry.co.nz linkedin.com/company/designindustry
Personas are used to
guide decision-making
during the design
process, ensuring we
constantly challenge our
beliefs about our
customers.

designindustry.co.nz linkedin.com/company/designindustry
WHO SHOULD BE
INVOLVED?

designindustry.co.nz linkedin.com/company/designindustry
Considerations
Who needs to know the personas most intimately?

Who is involved in the design process?

Would these people benefit from understanding


user needs better?

Would it be useful to have these people undertake


the research directly?

designindustry.co.nz linkedin.com/company/designindustry
What will your next successful
product or service be?
Are you prepared to do the
ground work to ensure its
success, rather than spending
more money on sales and
marketing?
designindustry.co.nz linkedin.com/company/designindustry 18
Market Case Study
ProForm Ltd

Developed by Professor Darl Kolb, Graduate


School of Management and Dr. Lisbeth Jacobs, ICEHOUSE.
Proform

Proform designs and manufactures bedliners and other related accessories (i.e., tyre covers and canopies)
for ute (pick-up trucks) to a growing international market. Based in Hamilton, the companys humble,
but creative beginnings are recalled by the Founders son, Nick Smith.

In 1994, nearly 20 years ago, my dad (Tony Smith), and another guy, Ferris Townsend,
had this vision to start making vehicle accessories in New Zealand for supply in the
international market, primarily focussed around the back of pickup trucks, or utes as
we call them in New Zealand. One summer, in a chook shed in Cambridge we built
some moulds and a thermoforming machine, put them into a building, plugged it all in
and started making what we call bedliners. A bedliner is a plastic liner that goes in
the back of the ute, in the load space, to protect the vehicle from wear. That year we
had a business plan with the bank which had us making around about 2,000 of those
parts which was roughly a breakeven budget. We achieved that that yearjust.
From there its grown hugely.

The companys premises are testimony to its extensive growth, as the tool and dye development,
manufacturing and storage are linked throughout several buildings, most of which are now on a single
site. R&D has its own building, where design engineers contemplate how to improve materials and
efficiency, as well as performance and looks in a product area that is evolving quite rapidly. Moreover,
not only is innovation important, but each OEM (Original Equipment Manufacturer), which is normally a
car company like Holden or Nissan, wants bs to match each model variation and sometimes even colours
to match its new model lines.

Bedliners are formed from blank sheets of plastic that are rolled out of specialised extrusion machines.
The flat blanks are then placed over moulds and heated until the plastic can be vacuumed into a mould in
the shape of a bedliner. A separate mould is required for each size and shape of pick-up. A major
logistical challenge, therefore, is the on-going design, development and storage of so many types of
unique moulds. Of course, competing customers do not have the same body shapes and thus the more
customers you have, the more complexity is pushed on the R&D function.

Alongside national OEM sales, there is a sizable post-production (after market) demand for those who
want to install bedliners and accessories after or along with their purchase of the vehicle. Tony
recognised a potential market for direct sales to the public and vehicle dealerships and accordingly
established a direct sales entity, called Beut Utes, with the intention of direct marketing Proforms
products to the NZ market. Beaut Utes is now owned and operated separately to Proform, but still has
facilities right across the street from Proform and in several other major markets around New Zealand.
These businesses are very well integrated. In Hamilton, in particular, new products can be manufactured
by one business and wheeled across the street for installation in the other business.

This case was developed by Professor Darl Kolb, Graduate School of Management and
Dr. Lisbeth Jacobs, Director, Strategy and Development, ICEHOUSE. 2013
The companys production processes began with classic Kiwi ingenuity, as Nick recalls how things
were done in the early days.

We were very much the Kiwi number 8 wire company from the beginning. My dad
literally built all the machines that make our parts, and were talking pretty significant
kinds of machinery. We invented a way of making new moulds, which is much cheaper
and more effective than the competition.

Underlying the innovation was a deep drive to please customers every demand.

The real reason for our success has been through our customer service or the Kiwi
willingness to please at all costs, and that really remains our key strength today. I cant
really stress that enough. We did, and continue to do, whatever it took to get things done.
I remember times that over a weekend, my dad and a bunch of guys would work right
through the weekend building a mould to get something done the next week. On Monday
morning, they'd run the parts, stick them in a container and send them off overseas. That
was very symptomatic of the business, and it worked very, very well for us at the time
too.

Nick recalls returning to the company after getting his qualifications and outside industry experience.

I left university in 1996 and went to work at Fisher & Paykel Healthcare and was there
for 6 years. When I left for university, Proform was only a couple of years old. After 6
years working, dad and his business partner at the time, gave me a ring and said we
think its time you came back down to the business - you've spent enough time in
Auckland.

I came in as manager of the extrusion plant and over time I've been involved in pretty
much every part of the business. I went from extrusion into thermoforming, and then
R&D -- I'm trained as an engineer -- and then into a managing director role, which is
where I am now.

Contract manufacturing (CM) does require customer focus and responsiveness, and original design
manufacturing (ODM) requires innovation, but OEMs like car manufacturers also demand consistency
and process, not just product excellence. Over time, however, the companys design and manufacturing
had to be more process-driven in order to match the expectations and demands of its larger customers,
i.e., the ute manufacturers.

The secret coming from an entrepreneurial background, or the number 8 wire thing, is
not about developing the process, but its about sticking to the process, and thats
certainly been a challenge for us. But as weve grown and have more process-orientated
managers, that cultures becoming more imbedded in Proform. So its starting to work
really well.

I suppose the best example in terms of the rigour around process for us is that we
supply General Motors in Australia with a tier one part. This is a part that we make in
our factory and it gets fitted on (the manufacturing) line in Australia. The implication of
us getting that wrong for the car makers is that stopping the line costs $100,000 an hour
and if we stop the line, that potentially comes to us as a penalty so we have to be dead-
on every time.

-- 2
Besides high expectations from customers, as Proforms profile and reputation grew, it came into contact
with other outside influences and challenges to the way it did things. For example, it was chosen to
participate in NZ Trade and Enterprises Better by Design programme, which meant, among other
things, that its internal processes were scrutinised and held up to global industry standards. During that
process, the companys leaders were introduced to the concepts and philosophy of lean manufacturing.

Around 2007, New Zealand Trade & Enterprise launched their Better By Design
programme, which was a process where they brought a team of auditors into the
business. They looked at everything we did and, and gave us recommendations on how
to do things better. The result of that audit was a whole raft of different improvement
opportunities, one of which, and I think on reflection the key, was around the complete
lack of governance we had in the business at the time.

Having recognised a need for better governance and business advice, the question became where advice
and support might be found. As often is the case, when the need for governance arises, there are often
potential resources around the company. On the other hand, and in every case, networks and
investigation may be required to find the right sort of person to advise a family-owned business. As Nick
recalls,

At the time we had my dad as CEO, myself and a management team , but we didn't have
any external expertise. Talking to the team that did the audit it became pretty obvious
that Proform is actually a big organisation. We employ 130 people so the decisions we
were making werent just affecting ourselves, but also affecting the lives of a whole
bunch of other people as well. And wed made some bad decisions leading up to that
point. So we made a decision to engage one of the auditors at that time, a guy called
Ralph Marshall, as a director for the business.

And that thinking started us working through the process and I think we quickly realised
the shortcomings we had in terms of thinking outside the square, or making robust
decisions. Subsequently, we made the decision to recruit another director and because
our business is in the vehicle manufacturing industry, i.e. we supply customers very
similarly to the tyre industry, Christine Woods at the University of Auckland suggested
we give Rex a call. Hes exactly what you're looking for. We did call and met one day,
and Rex has been involved with us for about 4-5 years now and its worked out really
well.

Rex Howe had a long career in the automobile industry working for Goodyear Tyre and Rubber Co. Rex
worked in NZ, India, Philippines , Malaysia and Turkey, in roles including finance, sales and marketing
and general management, including chairing the boards of joint venture manufacturing companies.

As Dr. Woods saw it, Rex not only understood the the similarities between manufacturing plastic parts
like bedliners and manufacturing tyres, but more importantly, Rex understood how to deal with
automobile OEMs and how to manage marketing relationships in offshore markets. Rex recalls meeting
Tony and Nick and the beginnings of their relationship.

I started off by having a couple of meetings with Tony and Nick, and then spent some
time down at the offices in Hamilton. And I was impressed that it was a tightly run
manufacturing operation, and very family oriented. It was obvious that a lot of the
people that were working there had grown up with Tony in the business over the 10 or
12 years it had been running.

-- 3
I was particularly impressed by the export business that they had generated over the
years. I think they were exporting to something like 50 countries at that stage of the
game, and I'm sure theres not many businesses in New Zealand that could put their
hand up and lay claim to that. They were very involved in growing the business, and I
felt I could offer help in a number of areas. I'd had a lot of experience in marketing and
sales. I did have a finance background, and also I'd had good exposure to
manufacturing. So we decided I would join the board on a trial basis, which I did. It was
obvious that if I was going to add value we had to be thinking on the same wave-length
and we had to develop a relationship, because family businesses, as we all know, are
pretty special, and to break into a family requires a little caution, maybe a little bravery
along with a lot of common sense. I would say that it probably took 2 or 3 board
meetings, which were fairly relaxed, not too many rules and regulations, before we were
really starting to share each others strengths and weaknesses. To me it was obvious
that Tony had run the business very well, and was the architect of the factory that was
producing a product that was second best to none in the marketplace. Nick was
supporting Tony in R&D and in operations and learning quickly, Nick is a person that
likes to learn, he spends a lot of time exposing himself to management techniques.

Rexs expertise ranges from marketing to product development, to finance and planning. In fact, Rex is
known for insisting on detailed plans, which allow a business to know exactly how it is performing on
multiple dimensions.

At the start of the relationship I made it very clear that I felt the benefits of planning
were paramount to running a strong business. So we spent the first few meetings
discussing what we needed to do with planning, and thats covering everything across
the realm, from strategic through to operational planning. It was obvious that some
degree of planning had been done within the organisation, but we decided that we
would strengthen that side of the business to go forward. The first concentration really
was in the production area, because it became very evident that we were not meeting
the customers requirements. The lead-time that was involved, from collecting orders to
delivery was really driven by the plant, it wasnt driven by what the customer required.
In discussions with sales, their major problem was getting orders out on time. So we
decided that we would spend some time in the plant and cover all the bottlenecks and
find out what the real problems were there. Proform had taken on board the lean
system and that journey was just commencing. And I think it was beneficial for them in
terms of understanding that their systems were really not the best in the world. So we
spent a lot of time on the manufacturing side of the business to look at how it would
better perform.

Nick now agrees that such planning and monitoring is essential practice in a high growth company with
capital demands and the cash flow challenges associated with growth and expansion.

We used to do budgets for the bank, but they were mostly based on what we thought
the bank would want us to be doing. There was certainly no sort of over-arching
strategy or sense of where we were trying to get to over a period of time. Rex has come
on board and reinforced that discipline of setting plans and we now know exactly what
were trying to do. We have strategies for every part of the business and every part of
the business knows exactly what they're trying to do. And overarching all that is the
ultimate goal of what we are trying to be in that 5 to 10 year period of time. I know that
in the last 3 or 4 years that growth wouldn't have happened if it hadnt been planned
for. And I think the growth is going to accelerate because, without thinking about the

-- 4
future to the extent that we do now, we would still be bumbling along and growth
would be happening in spite of what we do, not because of what we do.

Proform now serves 130 customers in 65 countries around the globe. Its key markets are Australasia,
which accounts for 50% of its current growth, Europe, Middle east and Latin America. Asia is a critical
growth market for Proform as vehicle manufacturing has become more active and concentrated in the
region. Thailand, for instance, produces vast numbers of new vehicles every year for several global car
companies, many of which are exported throughout the world and other markets in which Proform
operates. Chinese companies are increasingly joining the compact pickup truck market and challenging
the traditional Japanese manufacturers.

Understanding a market is more than generating a customer survey or market analysis. It also involves
understanding the business model that best underpins trading in a given market. Supplying an Australian
OEM, for example, is different than selling after market products into Europe. There is a temptation to
treat any and all orders in a business as equals, but that is not the case. All orders are not created equal,
from a business case perspective. Rex sees his role as helping companies re-think what theyre doing
and how they do it, including who is doing what in the business.

Its been my experience in family businesses that these businesses grow up as part of
the family and the people that are employed first off are either good friends, or good
mates, or somebody that knows somebody, and they become part of the family. It
probably was a good time when I came in, which was 10 years after they'd been in
business, to start to have a look at those relationships and just see that we did have the
right people in the right places doing the right things. And as would be expected, there
were a few adjustments needed to be made to make sure that we were getting the
productivity out of the plant through management who were capable of doing that.

After some internal adjustments got the company better aligned for performance, the next thing Rex
addressed was the sales, marketing and market development aspects of the business. As Howe recalls,

Once we got the factory working it was then time to have a look at the sales and the
marketing effort. With all due respect the business was built up as a manufacturing
business, and that is not unusual for that to become your strength, and for that to be
what management focussed on. Going through the crisis in 08 and 09 we did lose a lot
of orders. We did downsize the factory numbers, the people involved in the factory.

But at that stage I think we made a critical decision to have a look at our strength in the
sales effort and we made a decision to increase the number of people that were in the
sales organisation so that we could go out and start to build the business. My experience
is that you start a business and you tend to sit back a little bit once you reach a certain
level of sales. At that stage, Proform were looking at somewhere between 20 and 25
million dollars worth of sales. Profitability was quite good, but it was time to look at some
opportunities for real growth.

Proforms board, under Rexs leadership, helps Nick and the senior management team understand and
keep perspective on growth, including the needs and feelings of the family, which is still at the heart of
the business.

From a family business point of view, the most important aspect for us around
governance was maintaining the ability to make the decisions that we wanted to make.
We prided ourselves on being very quick to react to a situation, so we could make a
decision at the drop of a hat, and start doing it that same day. I think the fear was,
certainly for my dad the biggest fear was that, we were going to lose that ability. And

-- 5
we did to a certain extent, but it was needed. There was a fear that we were going to
lose the autonomy and become a controlled beast. So, in terms of fit for Proform, it was
really important that we had someone that we could work with that understood that
dynamic and our family situation, and that both dad and I could work with really well. I
think weve been really lucky in that regard.

In recent years, Tonys personal health has made it difficult for him to participate full time in the
business, which has put more responsibility on Nick. As Founders son and now Managing Director,
Nick has also grown and developed tremendously along the way. He reflects.

In terms of my own growth, I've progressed through the company naturally as a result of
being part of the family and feel really lucky to be given the opportunity. I've been
hugely supported by the family. I've learnt a lot as I've gone through, but I think the
most important thing for me has been the governance support. Being managing
director of a company like ours is a pretty lonely place at times, particularly when there
are problems that were trying to solve and I'm the only one that sees the issues and is
forcing the changes through. Having someone like Rex that I can ring any time and talk
to has been really, really important for me. Its great in terms of confidence building,
and also just getting validation around what were doing.

Rex Howe has witnessed Nicks growth and development as he takes on more of the firms operations.

Its required Nick to stand up and virtually run the business, with Tony in the
background. Nick was charged with running the business, putting the plan together and
implementing the plan. Everybody within the organisation was reporting directly to Nick
through the management structure, and Tony sat outside that, but certainly offered a
lot of his expertise as we went forward. Nick has developed the management team;
hes introduced regular management meetings for communications purposes and to
drive the plan. That is something that I felt was probably lacking in the past. With any
organisation, communications are meant to just happen, but good communications
happen according to a good plan. And Nick grappled with that nettle and has put in
some very good communication meetings and programmes so that the whole
organisation knows what is expected of them and he works very well with them.

From the classic Kiwi start-up in a chicken shed to international supplier to the global automobile
industry, the Hamilton-based company has proven itself to be highly capable of growing along with its
dynamic market. From a niche product, bedliners and other accessories are now becoming part of the
mainstream production of vehicle manufacturers, who have exacting standards on consistency and
reliability of supply, not to mention price pressure.

As Proform considers entry into the more competitive Asian markets, operational excellence and cost
control will become increasingly important. The company will have to consider moving some operations
to the region, most likely Thailand, to get closer to their customers and their customers markets. With
better management structures, systems and governance, including expert industry sales and marketing
advice, the company is a place where its next moves may be challenging, but also rewarding.

-- 6
Proform Plastics Ltd
Proform Incorporated 1994
50/50 Partnership between Tony Smith & Ferris
Townsend
Subscribed with around NZD240k capital
Established to specialise in Pickup Truck
Accessories with strong focus on Export.
First year budgeted 2,000 parts (financial
breakeven target)
F2013 (18 years later) made 138,000 Bedliners
Proform Today
Export to 50+ countries (90% total sales)
Employ a team of 120
Occupy 12,500 sq.m buildings.
Budgeting turnover of $30M this year
Produce approx 150 tonne of plastic product per
week (5,000 tonne per annum).
Export approx 500 containers this year.
Primary markets:
Australasia, Europe, Latin America, Middle East
Historic Sales
35,000,000

30,000,000

25,000,000

20,000,000

15,000,000

10,000,000

5,000,000

-
Regional Sales Split

ASIA

AUSTRALASIA/PA
CIFIC

EUROPE

LATIN AMERICA

AFRICA

MIDDLE EAST

2,009 2,010
Proforms Customers
Automotive Accessories Wholesalers - Country
Distributors
Automotive companies, both regional and
national.
Genuine accessory programmes (branded
product)
Tier 1 supply to GMH Vehicle Assembly Plant,
Adelaide
Proform
Products
Bedliners
Canopies
Sprint Canopy

FORMING THE FUTURE


Sportlid 1
Sportlid 2
Cargoliners

FORMING THE FUTURE


Special Project for Toyota NZ
Tier 1 to General Motors
Core
Competencies
Research & Development
Pattern Making
Tool Making
Plastic Sheet Extrusion
Thermoforming
Robotic Finishing
Assembly
Packaging, Logistics and Export
Markets and
customers
Direct Sales to 135 customers in 64 Countries
Whats made
Proform a
Success?
Planning Ahead
100% NZ Based
Relationship Selling
Manufacturing Led
Range Development

Innovation
Direct Marketing
Engage with Consumers
Regional Presence
Proforms Big Questions

Why are we manufacturing in NZ?


Should we be manufacturing at all?
What can we be best in the world at?
How do we create value for Proform?
Proforms
Governance
Story
Processes Case Study
Tru-Test Ltd

Developed by Professor Darl Kolb, Graduate


School of Management and Dr. Lisbeth Jacobs, ICEHOUSE.
Tru-Test Group

In 1963, John Hartstone a King Country dairy farmer developed the first commercial proportionate flow
milk meter. Fifty years later, mention milk meters to dairy farmers anywhere in the world and they
will probably recognise the brand Tru-Test. Milk meters were a break-through technology for the
dairy industry as monitoring and measuring milk liquid amounts, along with milk solids, became
essential for dairy herd improvement and, ultimately, for the commercial success of dairying as a
business. Being able to measure to the production of each cow allows dairy farmers to identify and
breed their best cows, which over time improves the overall production of their farm.

Tru-Test still leads the industry in milk meter technology, which has come a long way since those early
days. According to the companys web site, the current model, the Tru-Test Electronic Milk Meter, is
a patented, ICAR (International Committee for Animal Recording) approved, portable device that
will automatically record milk yield, dispense a representative sample, read uniquely identified milk
sample vials and communicate wirelessly with the Tru-Test Data Handler. Other forms of animal
data collection and handling include advanced animal (e.g., sheep and cattle) weighing systems, which
feature algorithms for improved accuracy and reliability of weights, even from the most active animals.
These devices can robustly weigh up to 150 cattle per hour or 500 sheep per hour.

The company is truly global, with sales to over 100 country and turnover of over $150 million. In 2013
the company was recognized with two international exporting awards. Its web site recorded the events
as follows:

Agri-tech manufacturer Tru-Test Group was honoured to win their finalist category
in the 2013 ExportNZ Awards - the Westpac Exporter of the Year Award in the over
$25 million category. It was their first year entering the awards and a very proud
moment for the company. Being named the Air New Zealand Cargo Supreme
Winner was a double delight for the company.

CEO Greg Muir sums up the company feeling, saying This is a truly outstanding
result for Tru-Test Group. We have really focused on developing products that truly
add value to our global farmer customer base - so being recognised by New
Zealands most prominent business leaders as an exemplary exporting business is
quite a stunning achievement and one which I firmly believe is the direct result of
the quality and efforts of our global team.

Both awards were judged on: Outstanding profitable and sustainable foreign
exchange growth, Quality planning, leadership and direction, Excellence in export
marketing and Operational excellence.

This case was developed by Professor Darl Kolb, Graduate School of Management and
Dr. Lisbeth Jacobs, Director, Strategy and Development, ICEHOUSE. 2013
Given the calibre of the other entries, to be first a finalist and then ultimate
winners based on these factors is testament to the tremendous work all staff have
put in to grow this company whilst focusing on what is important to us: operating on
lean principles and being an outstanding customer-focused, design led
manufacturer, delivering products and services that really make a difference to our
global customers business says Greg.

Muir attributes much of the firms position of excellence in manufacturing and design to its dedication
to lean principles and practices. He observes,

I think you cannot come to any other conclusion other than if you're in
manufacturing anywhere in the world, but particularly in New Zealand, and
exporting to a lot of countries, then you have to be in lean. Its a tough, aggressive
competitive world out there these days and to have the lowest cost, the most
efficient manufacturing base that you possibly can is really, really important to us,
and should be important to any New Zealand manufacturer. And, without lean I
doubt we would be anywhere near as competitive as we are today. In fact, I often
say to our people, had we not started lean several years before the GFC (Global
Financial Crisis of 2008), I would have been quite concerned going through the GFC.
As it happened, we sailed through the GFC relatively unscathed. Our profitability
was down of course, mainly because trading was down in most of our geographies.
But, the concept of lean allowed us to scale down and scale up with nimbleness
that we would never have had, had we not gone down the lean path.

Lean is the term used to describe a general philosophy of organisation and management that is focused
on exact measurement of everything that can be measured in the organisation, with the end-goal of
continuous improvement. Sometimes called the quantitative school of management, it is associated
with the pioneer Edward Deming, who, following the Second World War, developed the notion of
careful attention to detail in manufacturing. Though Deming was an American, his techniques were
first adopted in Japan and the adoption of his techniques is now legendary in companies like Toyota.
The Japanese added their own cultural disciplines and principles to the pursuit of excellence and
concepts such as Kaizen were initiated and adopted throughout the world.

When lean returned to the US, it was advanced and evangelised in companies like 3M, who advocated
an extreme approach called Six Sigma, which refers to defects per million operations (DPMO) (the 6
referring to the 6th decimal place of one millionth). Ironically, according to some commentators, Six
Sigma almost destroyed 3M and the lesson for would-be followers is that lean is a never-ending journey
and that is not for the faint-of-heart.

Greg Muir came to the CEO role at Tru-Test after it had already starting down the lean pathway, but he
still recognises the key role that senior leaders play in the implementation of the lean methodology.

Well, I guess you'd have to say if you're implementing lean in an organisation you
need to have the support, or stewardship and sponsorship from the very top.
Because I arrived and this was already in place, I didn't have to be the one that
gave the impetus, or indeed gave the stamp of approval to go on. My predecessor
did that. I'm very fortunate that Jason Kiteley, our group head of Operations is
enormously passionate about this and has engaged a team around him that are
also enormously passionate. So, really this thing is self-sustaining inside our
organisation now and it almost doesnt matter who the chief executive is. This
way of life will carry on, I think, for years and years and years to come. It would
take an act of significant sabotage from a chief executive to actually stop it. Its
that well engrained in our organisation now. I have played a small role in

-- 2
migrating it out of manufacturing and across other areas, so its now becoming a
way of life in our product sectors, in marketing and in finance. And, over time, it
will just become a way of life in every single thing that Tru-Test does.

Jason Kiteley recalls bringing lean to Tru-Test and why it seemed important at the time.

Back in 2005 we realised that we werent as competitive as we should have been


and we were certainly getting more and more competition from our lost cost
Asian suppliers. So for us it was about survival, about making sure that we had a
plan so that we were going be competitive in the longer term. Wed been aware
of lean and even had a couple of practices of lean inside the business when we
first started looking at what it was we wanted to do. But what we did was we
went back to the fundamentals and did some benchmarking and visited a large
number of companies across New Zealand and Australia. What that taught us was
that we were really comparable with most New Zealand and Australian
companies. But unfortunately, we were also aware that many companies trying
to manufacture in New Zealand were closing or consolidating.

Through that benchmarking it became clear that lean had some real value to us
and that it was going to be a long-term journey. Some of the key fundamentals
that we created were about the fact that we wanted it to be sustainable, not a 6-
month consultant-driven implementation, but something that we took ownership
of and could own in the longer term. For that we needed to bring back ownership
to ourselves and we also felt that it was very important that we had a good
structured process to work through.

Efficiency, however, is not the sole, nor primary driver of the lean philosophy. Ultimately, the purpose
for reducing waste and achieving productivity improvements is to deliver more value to the customer, as
Jason Kiteley sees it.

One of the fundamentals of lean for me has really been customer-centric


behaviour and having the customer at the forefront of our mind. This applies
regardless of which operational side of the business you're involved in, whether
its in marketing, or research and development. What weve found in our
research and development team is that by putting more focus on the problems
that the customers have and having a far better view of that enables us to build
the right products. And, then were using the lean principles in terms of visual
management and maximising flow in order to speed up our research and
development activities in order to have a good product out in the market thats
going to be successful in a shorter timeframe.

Jason clearly saw the benefits of lean, but he also recognised the challenges it presented in terms of
change management. In particular, new ways of doing things are often perceived as fads or fashion
that the management have fallen in love with, but which will not stand the test of time. Kiteley
understood the importance of having a clear, consistent message and knew that repetition of the message
was one of the key role for middle and line managers.

A common failing is that you talk up the change too much and don't deliver. So
for us to make sure that it wasnt seen as a fad, we needed to take it in bite-sized
components. And, to make sure that we then delivered quick wins. That meant
that we were reinforcing the behaviours and the story consistently throughout
the process, making sure that the fad-type approach didn't happen. Theres also a

-- 3
huge responsibility on the frontline management in order to continue to reinforce
messages. In some cases, that turns into nagging around workplace management
and organisation, etc. And, its a difficult thing to do, to suddenly get into that
role of nagging, but without creating that type of atmosphere then you're not
reinforcing the right behaviours.

The most important role in the organisation, in my view, in this type of change, is
the frontline manager. Those are the people that are reinforcing and making sure
that the behavioural changes happen consistently. From a change fatigue basis, I
think its important to understand that, as opposed to introducing lots of changes
that are disconnected. You effectively paint the future state for people to move
to. Then all of the changes that are occurring start tying into one picture.

Like many management initiatives and fads, lean has a reputation of being consultant-centric and
expensive to implement. However, this does not need to be the case. As Kiteley suggests, the more a
company owns and drives its own process improvement programme, the more successful and less
expensive in terms of consulting fees the programme tends to be. On the other hand, most companies
need some outside assistance from consultants who understand the process steps necessary to implement
the lean principles of reduced waste and organisational efficiency. Ian Walsh, from INTENT Group was
asked to assist Tru-Test on its pathway to lean. The INTENT Group introduced the company to the
TRACC methodology, which helps firms implement lean principles.

Ian Walsh and his team came to believe in lean as a way for New Zealand companies to become more
competitive. As he sums it up,

In my view, over the last 20 years New Zealand has fallen behind the rest of the
world in terms of productivity and performance. People are familiar with our
performance in the OECD. They're familiar with the endless discussions that we
hear on TV and other places about how were doing. And, the reality is its true,
we have actually fallen behind. There are ways that we can improve, but New
Zealand manufacturing and New Zealand organisations in general have been slow
to adopt what is now commonly accepted as best practice. And, to me its a
strategic competitive advantage if you understand what are the best practices in
your industry and adopt them rigorously and relentlessly through your business.

Of course, lean manufacturing is not the only strategic option available to firms hoping to become more
competitive. Out-sourcing is an alternative and, indeed, several notable New Zealand companies have
shifted their manufacturing facilities off-shore. But Walsh finds this is not always the silver bullet that
many perceive it to be. In fact, even lost-cost manufacturing can remain in New Zealand, if done well.

This has been a challenge over the last few years. The attraction is that you can
find a lower cost producer in another marketplace who can provide your goods to
you, and then you can on-sell them. The reality is that there have been a number
of issues with that approach for a number of companies. These include
maintaining quality control, control of the supply chain, and even control of the
innovation and their ideas if you like. So the attraction of low cost offshore
manufacturing often has some serious complications. However, if you're in a
commodity environment and there is a lower cost producer in the world, your
choices are to discover how to become a better lower cost producer, or
effectively lose that part of your business, if not your entire business. In Tru-
Tests case, they've chosen to become a better low cost producer--here in New
Zealand.

-- 4
As is often the case, the first attempt to implement lean at Tru-Test had a rocky start, according to
Walsh.

My first interaction with Tru-Test was probably 8 or 9 years ago and they were
trying to implement some of the elements of Six Sigma. And Six Sigma is a
fantastic methodology, it has a lot of good elements, but for where the
organisation was at that time, in terms of their maturity of understanding, their
leadership engagement, and a few other fundamental things, they werent really
ready for some of those tools. And so they struggled with them and some of
them failed.

I think a lot of companies do fail because the understanding of the level of


commitment and the energy required to transform the culture of your
organisation into a continuously improving culture is quite a major transition.
And, its usually under-estimated, so theres usually a learning process, and
hopefully the leadership team resets themselves to steal themselves for the next
stage of the journey. But some of them get off the journey at that point, I like to
think of it as Everest, you know the first piece is base camp and each stage
thereafter is a little bit harder. And you have to apply yourself to the whole
journey.

Having started the journey, the companys management had to determine if it was worth it. At that
point, they re-invigorated and re-committed to the process of continuous improvement. Even with
commitment, processes dont change over night. It takes time for lean or similar initiatives to have an
impact on business outcomes. Ultimately, Tru-Test has become one of New Zealands best examples of
lean implementation, as Ian Walsh observes.

Tru-Test in my view are one of the leading implementers of best practice and
what some people term lean in New Zealand at the moment. They have been
implementing for well over six years. They've been on a journey of discovery
around what is best practice and how to be better for probably 8 or 9 years. And
then about six years ago they committed themselves to a journey of
improvement. They committed the leadership team and the resources to drive
that journey over time. They created realistic expectations about what they
would achieve and when, and they measured themselves relentlessly against
those expectations. They had the pressure as manufacturers to be cheaper. The
threat of China and all of the implications of that to their business meant they had
a burning platform. And that galvanised the leadership team around a sense of
urgency and the need to change, which I think was the fundamental beginning for
them.

So, how does lean work at Tru-Test? Ian Walsh recounts how the mindset of leaders transforms how
problem-solving becomes a central practice throughout the organisation.

What happens is as you create a leadership culture, which is encouraging, and


nurturing, and empowering, and inclusive, people start to feel more secure. And,
as they feel more secure they become more able to share their great ideas and no
one knows the process better than the people who work in it every day. So, if you
can nurture that, and harness that--that capability--then the ideas come forward
and you know the team will improve the ideas. The first idea might not be great,
but the team will evolve and they'll develop something that they want to try.

-- 5
And, if you allow them to do that they'll improve their process and their
outcomes. What you see at Tru-Test is a culture now where they get lots of
suggestions all the time and they work through them, and they try to implement
almost all of them. In fact this is what has powered Toyotas improvement
journey for the last 20 years. It is the number of suggestions that come from the
workforce to improve the process.

Though lean is a long journey, there were nonetheless some measurable improvements at the company
within a few weeks. For example, they had reduced the changeover time on one of their primary lines
by 40 to 50 minutes, which was a significant drop and allowed them to bring in extra work. Ian Walsh
recalls another evolving reduction in production time.

Within Tru-Test, they've reduced their lead-time on milk meters from 30 days, I
think the last check was down to 3. I know we got it down to sort of 20, and then
15, and 12, and then 9, and, and so they've had a journey over 6 years of just
reducing that lead time, which has been phenomenal to watch. And, the same is
true with load cells and energisers. Throughout the business those kind of tools
and techniques have been applied to the same effect.

CEO Greg Muir offered another example of how lean processes changed the ways things are done at
Tru-Test.

Most companies that run injection moulding machines have a series of gantry
cranes where they lift the die? out of the moulding machine. These dies can
weigh anything from 50 to 150, maybe even 200 kilos if they're big dies. So you'd
bring the crane into position, you pull the dies out, you put it to one side, you put
a new die in and away you go. Now, we run a night shift here with our injection
moulding and because we do small manufacturing runs wed like to change the
die quite regularly during the night. But its a time-consuming process, it could
take 40 minutes by the time you stop the process, pull the old die out, put a new
one in. So we threw that as a challenge. Well, in fact, I don't even know whether
we threw it as a challenge. I think the team took it as a challenge themselves and
said weve got to be able to do this quicker.

And, ultimately weve come up with an ingenious solution, and this was done by 2
or 3 guys that actually operate the machine day-in and day-out. They created a
turntable. At the start of the shift, say the start of nightshift, you'd load the
turntable up with 3 or 4 dies that are going to be used during the night. They put
little runners on the bottom of the dies and when each job was finished they'd
turn the turntable round, pull the old die out, slide a new one in. We went from
doing a 30-40 minute turnaround to a 2-minute turnaround! It was a massive
saving, and this is just the perfect demonstration to me of how lean works. Its
people on the job taking ownership of the job, making the job so much faster,
eliminating waste and allowing us to continue to be competitive.

As they started applying the Five Ss (acronym for: Sorting, Straightening, Shine, Standardise,
Sustain), the company reduced the space in their factory initially by 20%. Currently there has more than
50% reduction in space with an increase in throughput, which has implications for profit and loss and
asset utilisation. Walsh estimates the savings would be several times multiple of their investment and it
is now one of their strategic imperatives.

-- 6
Another strategic element of lean is its implementation across multiple companies following an
acquisition, which is an issue for Tru-Test, who have grown to a large extent through an acquisition
path, as CEO Greg Muir summarises.

Our focus is on producing technology that is used mostly in pasture-based


agriculture in the red meat or the dairy sectors. We probably have more of a
focus on dairy right now than we do on red meat, but red meat, be it sheep
production or beef production, is still a big deal for us. We have grown by a
combination of M&A and organic growth in the last 5 or 6 years. Weve made
about 9 acquisitions or disposals, so weve been quite active in that sector and we
continue to look for new businesses that fit that overall theme. Weve got 3
pieces of M&A underway at the moment, one in South America, one in the US
and, and one in New Zealand. So my CFO and I do spend a lot of time looking at
new businesses that might fit with us across a large range of sizes. The smallest
business weve bought cost us a half a million; the largest one that we bought last
year cost us north of 70 million. So there are a lot of opportunities out there. The
GFC threw up some really interesting opportunities for us and we were able to
buy some businesses at great prices that we might not have been able to buy a
few years earlier. Theres that wonderful old adage of never wasting a crisis.

Integrating businesses after an acquisition is often more challenging than purchasing them. In
particular, when lean processes are in use in one part of the business, how can they be incorporated in
other, newly acquired businesses? Muir suggests,

An important part of M&A to me is understanding how you're going to run the


business when you own it. So we put quite a lot of work into an integration plan
that wed present to our board before we get final sign off to buy. So they have to
be convinced that once we own it we know what were going to do with it and we
know how were going to integrate it. And so, for example, a business that we
bought in New Zealand last year had a significant manufacturing capability. They
had had an initial introduction to lean, but it was really a once-over-lightly, so they
understood a number of the lean concepts, but they really werent practicing lean
the way we believe lean should be implemented in a business. So weve set about
a multi-year process of bringing them further up the lean chain to get to a point
where were at.

And, we recognise that that doesnt happen in 5 minutes. You know, its a culture
change; its a work habits change; its a complete change in the way of life for that
manufacturing facility. So we need to set steps that are realistic and that are
achievable, so weve had their team leaders up to our plant. They've looked
through what were doing and understand how were doing it. We send people
down there regularly, and weve set milestones, saying here we want to be at this
point, and by here we want to be at this point. And so far were ticking them all
off and we think thats the better way to do it rather than try and lower in a whole
lot of consultants and force lean onto an organisation from day one.

The history of lean is littered with failures and did not completes. As Ian Walsh sums it up, such
programmes only succeed where there is persistence and dedication to truly making things better in the
long term.

You have to be absolutely resilient and committed to stay the course and to keep
having those tough conversations. I have a saying, which is, all human progress

-- 7
depends upon unreasonable people asking for unreasonable things. I think if you
want to change a culture you have to be unreasonable. You have to have some
people who fanatically, passionately believe that you can change it, otherwise
were doomed to repeating what weve already done and we know thats not
good enough.

Greg Muir sees it slightly differently. He says adopting lean principles is not difficult, but that
continuing with the processes as a way of life is the challenging part for organisations.

Moving to lean is actually not difficult at all, its really, really easy. Its a little bit
like getting fit, or being on a diet, the hard part is continuing it. You know, you
can run the start of it and its sort of evangelical, everyone turns up at the
sessions, and they listen to the consultant and they think this sounds fantastic,
and I love this idea, and yeah I can be part of that. But actually living it is a whole
lot harder. So, that to me is the single thing that people need to contemplate if
they're looking at going down the lean path. Are they prepared to make this a
way of life, like losing weight or getting fit? Its actually like buying a membership
to a gym and committing to going to the gym for the rest of your life.

And its the same with lean, if you're going to spend the money on going down
the lean path, you have to have a series of committed people in the business who
will own this, and will make sure that it stays a part of your life for as long as
you're in business. That, to me, is the single biggest message about lean, because
its actually, once you're in it, its not hard at all. In fact, its fun and its
stimulating and enjoyable for the team, but perpetuating it is the real challenge.

As for perpetuating the movement within New Zealand, Jason Kiteley reflects on the importance of role
modelling, mentoring and sharing better ways to achieve excellence. In their own case, Tru-Test has
few peers in New Zealand, but has been welcomed overseas by companies willing to show and tell their
approaches to continuous improvement. Giving back to the New Zealand business community has
subsequently been part of Tru-Tests mission to help manufacturing survive and thrive in New Zealand.
As Kiteley puts it.

It has been one of our challenges to find other companies that we could go and
visit and learn from. What we found is that we often needed to travel overseas in
order to do that. But when we actually went we were also always hosted with a
great amount of openness and willingness to share. Unfortunately, its very hard
because you end up with 1 or 2 leaders who are able to travel overseas, as
opposed to whole work teams. One of the key principles at Tru-Test is that we try
and share our experiences with other companies so that they can understand lean
and how it might apply to their business. Weve hosted a huge number of tours
and visits from external companies coming to see what it is we do, so they are
able to visualise the change and then consider how it might apply to elements of
their business.

-- 8
Leadership Case Study
Mainfreight Ltd

Developed by Professor Darl Kolb, Graduate


School of Management and Dr. Lisbeth Jacobs, ICEHOUSE.
Mainfreight

Mainfreight Ltd is a New Zealand-based global trucking and logistics firm. The firm was
founded by Bruce Plested in 1978, with $2700 and a 1969 Bedford truck, which still sits in the
lobby of the companys international headquarters in Otahuhu, South Auckland. Bruce Plested
describes the founding of the company as one of recognizing opportunities as they presented
themselves, along with personal contemplation and clarity on what one is good at doing.
The beginning of the company came about because I didnt have a job and I thought
very hard about what was I good at. I was a trained teacher and a trained accountant. And I
thought, shall I teach? And I didnt, I wasnt much good at that. Should I account? I wasnt
really that good at that either. And I kept thinking, what am I good at? And Id been in the
freight industry for a few years and I thought I do really know how to move freight. I
wonder if I could get into that business. But it was impossible, seemingly impossible, to get
into because all of the freight belonged to the railway system. You had to move your freight
on rail. And there was no way that the rail was going to entertain a person trying to start a
business.

Anyway, I realised that there was a ship called the Coastal Trader that ran up and down
the coast that was outside those regulations. And so I approached the operations manager of
the Coastal Trader, which was run by the New Zealand Shipping Corporation. And they said
theyd guarantee me some space out of Auckland if we started a business. So thats how it
started; with two of us doing the work, a wonderful fellow called Howard Smith and I.

As the highly regulated New Zealand transport market was deregulated in 1982, the firm quickly
took advantage of the opportunities presented and won a large share of the freight market. The
firm listed on the New Zealand Stock Exchange in 1996. From those humble beginnings, the
company has grown to be a player in the global logistics, with operations in in Australia, the
Netherlands, Belgium, France, Poland, Romania, Russia, Finland, China, Hong Kong,
Singapore, Chile, the United States of America and New Zealand.
Don Braid joined the company through an acquisition and still recalls his impression of the
company and how distinctive it was from the competitor company he had been working for.

The leadership of Bruce was pretty evident at the time. You know, this enjoyment that
Bruce talks about as a place to work grabbed me in the first six weeks. I was coming from a
business where people had never been together for 14 years, yet they depended on each
other in a network business. And here at Mainfreight I was in amongst a family of people
who really cared and were trying to do well for their customers. High quality standards and a

This case was developed by Professor Darl Kolb, Graduate School of Management and Dr.
Lisbeth Jacobs, ICEHOUSE.
pride in their business. And that all came from the leadership vision that Bruce has got. So, if
you talk about his leadership, you know, from my point of view it was visionary.

Moving from freight to logistics has seen the companys core competencies expand to including
information and communication technologies, as freight moves from destination to destination.
Company Director Emmet Hobbs summarises how easy it is to get things wrong in logistics.

Theres a huge amount of learning along the way because if you dont load a container
with sufficient goods at sufficient rates you wont make any money on the shipment,
whether its domestic or international. So a lot of it is the skill and the safety in taking a
product thats come from one customer, dispersed maybe between five different destinations
and linking that particular customers goods in a container or a unit thats going to be either
flown, or taken over the road, or railed, or goes by sea, and ensure that it actually maximises
the packaging, maximises the loading so its safe and arrives in the same condition in which
we received it. Theres a lot to be done and its a lot of people. I suppose we look at the
process and I think there is something like sixteen different operations that are performed
and can be charged for en route from leaving an exporters premises to arriving at an
importers shelf.

Notwithstanding the complexity inherent in large-scale idiosyncratic systems, Bruce nonetheless


likes to keep things simple and straightforward, a mindset shared and developed by Don Braid,
the CEO.

Once you start sharing information and you start giving people the statistics to deal with,
to make decisions with and have those statistics shared across the business, youre all buying
in to the one goal that were all trying to achieve.

Theres quite an attempt to share that information, on whiteboards, written with a felt-
tip pen, rather than having it hidden in the computer. And so were trying to put the stuff
that really matters onto whiteboards. And weve got whiteboards all over the world that are,
and people think youre old-fashioned. But, once they actually get their whiteboard up and
realise how much information it conveys, just by you walking past it, its very strong.

And, the best branch managers, who understand their P&Ls, are those that handwrite
their P&L. Theres nothing better than handwriting the revenue of this week versus the
revenue of last year for the same week and understanding the difference and asking yourself
why is it less or why is it more, likewise your costs and your margins.

Now, weve got young intelligent branch managers who want to do this on a spreadsheet
in the computer. Worse, weve got branch managers wanting people to do that for them and
they get the sheet put in front of them. You can go to Bruces diary or my worksheet and
youll see that the profits are handwritten in. It might be a bit old-fashioned, but theres
nothing more powerful than handwriting the number. And if its a loss, the power of, how
am I going to fix that next week?

The benefits of transparency are not just for managing the company, but also serve the customer,
contractors and, of course, the balance sheet.

-- 2
So many companies leave all that stuff to the end of the month and then theyre trying to
find out what was the cost of getting the freight from Los Angeles up to Seattle. And they
wait for that bill and then they add something to it.

And, we just dont buy in to any of that. We force the bills out every week. The
customers got em every week. So he can charge out what he sold plus freight, or whatever
way he does it. And, we can control our debtors really well. Because we havent got this great
drag of stuff that people are too scared to charge out, or they dont know how to charge it
out. So a great intensity goes on charging out. And what could be better than that?

Corporate culture is one of Mainfreights points of difference and competitive advantage.


Culture is a central purpose for the firm, as seen on the companys main landing page on their
website:

The Mainfreight Difference is our people, our culture and how we can improve YOUR
business.
Our approach is fresh, our solutions are unique. You can measure the difference by
your results.
Mainfreight where customer service is an attitude, not a department.
Special People, Special Company.

There are several distinctive characteristics of the Mainfreight culture. These include effective
communication, rapid decision-making and transparent metrics, and a low-hierarchy structure
along with effective leadership and governance.

As described above, the company has developed and relies upon uniquely simple, but effective
communication approaches, such as the use of whiteboards and weekly reports, called
Weeklies. In the main company support office in New Zealand, all employees have lunch
provided for them every day and the meals are taken togetherexecutives, managers and all
other staff, including fork lift and truck drivers--at a single long table. Mainfreight was
breaking bread together long before the notion of free food for employees became associated
with Silicon Valley iconic cultures like Apple, Google and Facebook. Meals are generous and
wholesome. They also provide opportunities for idea exchanges and cross-department
collaboration.

Mainfreights leadership also pride themselves on making rapid decisions and having the right
people make each decision, whether it is right or wrong. Bruce Plested describes Braids
approach to decision making.

I think that Don has speeded up the decision-making process. And, I think its important
to demonstrate to people who are watching him branch managers and so on that you
clear the decks of the stuff that you can make decisions on. You know, if somebody says, do
you want the wall painted white or do you want it painted blue? It doesnt matter if its blue
or if its white; its our colours. And so we dont spend time having a meeting on that.

And the thing is, and as a CEO, if you let yourself get bogged down in decisions where
you can make a decision fast, then you will fail because you build up more and more and
more of them and you start thinking about them at 3:00 AM in the morning when you wake
up. But, if you wipe them out, youre just left with the tough decisions, which are usually

-- 3
people decisions. Youre much more in control. And I think Don has been absolutely
superb at fast decision-making.

Braid agrees that his decision-making style helps others in the company be clear about their
priorities, which also benefits customers, which in turn helps the business.

Yeah, I think the attitude that I have to decision-making is to try and get as much
decision-making as close to the customer as possible. So you know, if a decision needs to be
made around freight or the way the freights been handled or it hasnt been loaded, allow the
loader, allow the person handling the freight, to make the decision as to what they do to
satisfy the customer. If you can get those decisions made quickly and efficiently every day,
those people firstly grow with the responsibility theyve got. And, theyre not pushing it
upstairs all the time. Theyre growing as an individual and in the business youre getting
decisions made.

Overall, there is a sense of timing that timing embedded into the culture of Mainfreight, in large
part due to one of Bruces perspective on time.

I think that quite often at senior management level you have this propensity to work to a
date, where and its a pet hate of mine and I think it should be a pet hate of the business--
where we say, okay, weve made that decision. Well make it effective from the 1st of July.
Well, if its effective and youve made the decision, make it effective now. Dont wait till the
1st of July. You know, its just delaying whats going to happen. And you dont get the
momentum that youre looking for. Some decisions perhaps with customers, where you need
to give them time, you might work to a date; a specific date. Thats fine. Thats external. But
internally, make the decision and get on with it.

Of course, not every decision is the right one and, once a culture develops around rapid-fire
decision-making, sometimes things can go wrong. But, the organization can still benefit as long
as it continues to learn from its mistakes.

Now, some might not be right. Some might be wrong. But learn from the decision-
making; learn from the mistake. Just dont make the same mistake twice. So therefore if that
flows through the business, you have branch managers and senior country managers making
many of the decisions for the good of the business. And thats healthy.

And once you get that speed of decision-making, you know, the worst thing is to be in a
question mark. If you sit in a question mark, not being able to say yes or no, not being able
to say blue or white, you go backwards. And your people feel that too. And they lose the
momentum and the passion thats going on in the business. So if we can get this decision-
making made readily, often and by those closest to the customer, then its only some of
those big decisions that well debate and take our time over, you know, that perhaps are a
little bit harder than whether its white or blue.

And we do have an expression that we have used for many years, which probably is not
suitable for learning but we say, you fucked it; you fix it (laughter). If somebody says, you
know, I ran over the customers dog when I visited him; its no use bringing that to us. You

-- 4
fucked it; you fix it. If youve got to take him another dog, go and do it. And weve found
that a very powerful tool to stop people passing stuff upwards.

Strong cultures have their benefits. Translating and extending a strong corporate culture from
one context or country to another, however, can be challenging. In Mainfreights case, the
weekly reporting structure provides a common business behavior that transcends geographies
and provides a bridge of common practice around the world, as Don Braid describes it.

I think these weeklies that we talk about and how we measure this business, its great
that on a Tuesday morning we can show the rest of the world in our network what money
weve made. And we can share whether were up or down and the celebration or the
commiserations that come with a poor week or a good week. More importantly, the branch
manager understands. He or she can see what money theyve made and why, last week, and
what decisions they made last week are fresh in their minds as to what theyre going to do
this week.

Now, thats powerful. Its having that common discipline across the business that also
starts to unite this business. It unites the entrepreneurs. And, theres no doubt we have this
internal competition and it used to be Auckland was the most profitable branch and
Palmerston and Wellington and Christchurch were always trying to catch them up. Well,
today its Melbourne trying to beat Auckland, or its Sydney trying to beat Los Angeles.

Other aspects of culture are more subtle and require more energy and attention from leaders. On
the one hand, cultures become self-perpetuating, but on the other hand, even strong cultures
require attention, energy and refinement to local circumstance, as Don Braid has discovered.

The culture is like a very big flywheel. It will run itself better and better and better the
longer we go and the more successful that we are. And of course youve got to always keep
your eye on that flywheel, but it is very self-sustaining. I mean, if we were to tell our guys we
want dirty trucks we would have a massive rebellion. Theyd say, we do not have dirty trucks.
We have clean trucks. And when we first tried to get people to take their ties off, we had a
rebellion. You know, guys said, look, its taken me years to get these guys to wear a decent
shirt and a tie and now you want to take it away. But you know, theyve changed, gone along
with it and its worked. But, the flywheel effect of having the right culture is extremely
powerful.

I dont think you should underestimate the energy thats needed to keep that flywheel
going. I mean, you cant get lazy about the things that matter. And Bruce underplays the
effort that he places on getting that culture right. I mean, we sometimes might get that
wrong as we get around the world. We were in Romania and everybodys got a little boxed
office and you know, we were quite close to kicking down walls to try and get some
momentum around having open-plan offices. And then some young graduate in the
Netherlands tells us the importance of having offices in Romania is just as important as it is
with the Chinese. And you know, we could have made some mistakes in that regard.

When extending an organizational culture around the world, some core aspects of the culture
maybe applied to every region or country, but others have to be modified, as Don Braid has
learned.

-- 5
I think the lessons we learnt, particularly in the early 2000s, about whats right for
Australians is not necessarily whats right for New Zealanders. So the disciplines around how
we run our business are the same and are expected. But theres an Australian tweak to it.
And those lessons that we learnt there have taken us into Asia and into America and now
into Europe. The differences between New Zealanders and Australians are difficult at times.
Just because we like rugby and a beer and the beach, it doesnt necessarily mean we think the
same way about business. So, therefore try working with the Belgians, the French and the
Dutch. I mean, thats a difference in culture that goes back hundreds of years. But the
disciplines remain the same and those lessons that we learnt in Australia are worth taking to
those other countries. So Im not saying at all that weve got as intense a culture family
style culture in those other countries yet, but were working very hard to do that.

Learning can also go both ways as companies expand into new geographic and social
environments, Emmet Hobbs describes when the New Zealand firm purchased a European
company.

When we arrived in Europe having purchased William Bosman, the first thing we noticed was the
beautiful cleanliness of the floors of the warehouses where the logistics took place, and the number
of women, and the silence. And what we realised was that they were using electric forklifts, and
they didnt belch out any fumes and they were easier to handle. And they were silent and clean.
So we have tried to introduce those in other parts of the world. And, also the fact that there were
women on the floor changed the dynamic in terms of the mixture of people and wed always
wanted to have more women within the organisation, not just in a desk job but in a working job.
And this actually provided a far greater attempt to integrate women into the business.

Strong cultures are built on strong leadership, but strong leadership does not have to be aloof or
distant and demanding to be effective. The senior management team of this global business sit
together in a single open-plan room, with no walls between them. And, their shared office space
looks out over a large loading dock where freight is being shifted and sorted for domestic
delivery. There is no separation between these leaders and those doing other roles on the team,
the term they use to describe the whole organization and its members. As Don describes it,

We try not to have any bureaucracy, hierarchy or superiority in the business. So you know,
its about having the freedom to contact anyone; we call it two-up/two-down. We deal
directly with the branch managers or the storemen or the salesperson and nobody takes
offence for it because were not trying to witch-hunt. Were actually trying to find whats
going on in the business and how best to fix it.

Bruce likes keeping in touch with those working in the business he started.

We have a pretty flat management structure and I purposely make an effort to make sure
that the correct channels dont build up and get cholesterol in em. So, I walk onto the floor
and talk to loaders, talk to foremen, salespeople, branch managers, without permission from
their supervisor or their branch manager or even their general manager. And people
sometimes wonder if thats a wise thing to do. But when youre the founder of the business
youve got a little bit of extra reign I suppose.

-- 6
Freight and logistics companies often struggle to attract and retain good help, as it is a
demanding industry with hard work and not much glamour. Mainfreight, however, has been able
to find and bring talent into its high-performing organization, and develops its own leaders
internally.

We try not to use the term HR. In terms of recruitment, what were asking branch
managers to do is to employ the people that they are going to be working with. And, they
need to employ the next branch manager, not just another worker. They actually need to
take responsibility for the future of the company. And it comes with this decentralised
approach in that we arent trying to centralise all that decision-making.

So, whilst we might have a graduate recruitment programme put together by our training
team, its up to the branch manager to say yes or no to the particular individual that they
wish to employ. And if we keep giving them those responsibilities and dont give up on that
and keep being decentralised in that approach, then weve got a great opportunity to get the
right people in the business for the long term.

Those with leadership potential are shoulder tapped to participate in what has become a
legendary leadership development programme with Mainfreight. It is an Outward Bound course,
customized for the company by New Zealands Outward Bound School at Anikiwa, on the South
Island. Leaders from Mainfreights branches around the world arrive at Anikwa to experience a
wilderness challenge that creates a bond among participantsfuture leaders of the company
through an intense shared experience.

I think in terms of developing leadership in the business, promotion from within is


extremely important, so that you are not diluting the culture. What were trying to do is to
have people young, intelligent, passionate, energetic people employed, who learn the
business from the floor up. And we take our time getting them through the business and
then assuming leadership roles. And, we dont get it right all the time. I suppose the one
thing that people ask us at times is what keeps you awake at night. And the one thing always
is, have we got the right people to open the next branch in the next country in the next
region, who are capable of taking this business to its next level. And that, were trying to
work on at all times.

If youve got a bunch of young, passionate, energetic people, mostly graduates, it doesnt
necessarily matter about their degree that theyve got. Its about the discipline theyve learnt
their ability to learn and have a passion to learn more about our business and know that
theyve got a career with us. That if theyre good enough and work hard enough at it, that
theyve got a long-term future, just the same way as we think about this business for 100
years, rather than just next year or the year after.

The Outward Bound courses are a classic example of that; of pulling people from all
around the world together to learn new skills, but also Mainfreight skills. Being put out in
the bush for a couple of nights on their own to think about their own lives and their own
capabilities, to go for a run every morning and a cold swim to get their minds active for the
day. All those things have created a bond between the people that attend those courses. And
Im sure between the course participants, you know, the other courses that have been there,
theyve understood what theyve done. And, ultimately, the people that were on those
courses will be in leadership roles around the world and theyll help each other out because
of those combined experiences that theyve had on an Outward Bound course.

-- 7
Thats not the only thing but its part of that training programme that weve got going
on, to make sure that were creating leadership for the future. If youve got a vision for 100
years, you sure as hell need some leadership coming through from the floor on an ongoing
basis to make sure that youve got the growth youre looking for.

The long-term vision for the company is reflected in both the search for leaders and leadership at
the entry level of the organization as well as at the Executive and Board levels of leadership. For
a start, Bruce is proud and supportive of his choice of Don as successor, but as Don notes, this
does not mean the two never disagree.

There are some directors sitting around our Board table that suggest that its a
democracy of two. But I dont see it that way at all. I mean, we discuss things and well
debate things. Theres many times we dont agree, but its all about understanding whats
right for the business. And theres no ego with this guy. He has an ego for the business and
thats what we try and portray in all our leaders. If they can have an ego and a passion for the
business rather than for themselves then weve got great leadership that will have good
support from the people.

Bruce recognizes Dons capabilities as believes that a close hands-on working relationship is
both possible and advantageous in a company like theirs.

I think that Don has grown absolutely wonderfully into the position of leading the
company and in a very professional way--less ad hoc than I certainly had been. Maybe I
would have become less ad hoc as the business got bigger. But, its quite a good partnership
I think. I think that the combination of an involved Chairman and a good CEO is a good
combination. People kind of want you to have an independent Chairman and rubbish like
that. The intimacy that Don and I can have when we try and nut something out--and theres
a huge amount to try to nut out when youre all over the world like we are--to me its kind of
a perfect combination.

Supporting the executive leadership at Mainfreight is a strong and involved Board of Directors.
Emmet Hobbs joined the company as a Director in the early 2000s, but is still one of the junior
members of the Board. He recalls his experience joining the Board, even though he knew the
company well before joining them as Director.

The first one was using the word staff. They said, we dont have any staff here, there
are only team members. Understand that, and dont say it again (laugh). And I made a few
more mistakes and so did others at different times. But when you get your head around it,
were all part of the same family. There is no hierarchy and they can come and talk to you,
which they do, and you can go and talk with them, which I do. So that was the first sort of
introduction, and the second cultural change was we dont have any budgets.

So, youre pulled in, ribbed, made fun of, cajoled, etc. in a very, very pleasant way, by not
only the other Board members and the senior management, but other people in the group.
You might ask yourself, why? Most of them have been there fifteen to twenty years, and so
you ask yourself, why do they stay there? From Bruces perspective it was very simple. I
want to bring people into this organisation who want to make it theirs for the rest of their
life. Quite a fascinating approach to take. And, he and Don are prepared to put up with
quite a number of what we might call idiosyncrasies in some cases, management

-- 8
inadequacies in some cases, for continuing loyalty and cultural understanding of what were
trying to do.

But one cant actually overestimate the feeling that youre in a group that genuinely
enjoys having you around, and you being part of that team. And Ive worked for some good
companies but nothing like that. Theres not a feeling of aggressive competitiveness, but
there is certainly a competitive edge to actually trying to improve the whole business and to
do as well as they possibly can.

Mainfreight wants its directors involved for the long haul, because it takes a long time to fully
understand the business. Their perspective spans operational excellence to the future leadership
of the company. Hobbs recalls that talent management has been taken seriously by the company
as a way to build capacity for the future.

In acquiring Europe we found not only more women working in part of the operation,
but many more graduates. And that had been something that Bruce was really keen to
emphasise within the organisation. We need to have people who are brighter than us taking
this business on. And that process has been enforced at Board level. How many graduates
have you got in your team, how many graduates are you going to get? If they leave after two
or three years is that a problem. What are you doing to maintain and keep them interested?
What are you doing to listen to them?

When somebody comes into Mainfreight they dont start in a role, like a salesperson or
something like that. They actually start their first year on the ground moving freight across
the dock. So they understand exactly what the business is about, and then they move up
fairly quickly into a particular role, normally a selling role.

What weve found, and its the most marvellous, unexpected--and there are always many
unexpected growths in culture--is that they are beginning to redefine the culture itself. So
they are adding to it from their understanding and their brighter perspective. Its meant that
we can actually say these people are taking over and theyre developing the concept of
culture within the organisation. So, its not just led from the Founder, because hes got a
limited lifetime. Its not just led from the leaders like Don or the country managers. Its
actually led by the people who have come in, and they are largely the graduates.

The company also expects its Directors to have an active contact with the operations of the
business, requiring two international trips to various branches each year. Instead of managers
coming to the Board, the Board comes to the people on the team, in the field, be that in Brussels,
America or China. Such extensive traveling further allows the Board to interact and exchange
ideas on the companys operations around the globe, based on their first-hand experience in its
markets. The company that connects the world logistically sees itself as an interconnected
whole. Its founder and leaders act independently, but always toward the goal of collective
success. The culture is data-driven, but family-like. Its most famous financial management tool
is a weekly profit and loss summary, but its vision is to be a 100-year company. It is proudly
based in New Zealand, yet is expanding its culture and ways of working around the world. As
CEO Don Braid sums it up.

But to come back to then how do we maintain that cultural and leadership philosophy
across the group no matter what country were in, you know, the idea of sharing the profits

-- 9
and understanding the money thats made or lost in each particular operation, that all starts
with the noticeboard in the cafeteria. So the storemen who were loading the wagons--who
could well have a proliferation of young grads working with him, who ultimately will be
good leaders in this business--can go to the noticeboard on a Tuesday morning and see what
money was made the week before. Likewise, that information is shared across the world on a
Tuesday afternoon as to what money we made in each division. And, thats shared amongst
the leadership team.

So you know, youve got the guy in Australia understanding what New Zealands done
and what Americas done. So hes not on his own. Hes not on an island. He feels and knows
that they are linked together. And in fact, their performance is part of the overall global
performance. And as you start trading globally between the countries and start intensifying
that trade between each country, they start to understand that they are relying on each other
just as back in 1978 the guy in Christchurch was intimately important to the way that the
Auckland branch ran, and that if he delivered the freight on time for Bruce that would give
Bruce the opportunity here in Auckland to keep that customer and perhaps improve margin,
while giving Neil the opportunity in Christchurch to make sure that he was gaining a
reputation in the local marketplace.

Well, today thats so for Shanghai as it is for LA, and so it is for Amsterdam and France
and Paris. So theres a lot to be said for the style of leadership, but also the sharing of
information. And once you start sharing information and you start giving people the
statistics to make decisions and have those statistics shared across the business, youre all
buying in to the one goal that were all trying to achieve.

-- 10
Governance Case Study
Prolife Foods Ltd

Developed by Professor Darl Kolb, Graduate


School of Management and Dr. Lisbeth Jacobs, ICEHOUSE.
Prolife Foods

Prolife Foods provides bulk, packaged and branded products and services to the food industry throughout
New Zealand and Australia. The company began its life processing and packaging healthy, natural foods,
such as fruits and nuts. Their unique model was to serve the supermarket industry with in-store bins,
where consumers could choose the amount of product they wanted to buy by scooping it into a package
and paying for it by weight. Ninety percent of their customers are supermarkets. The self-serve bulk
bin concept is attractive to end consumers, but not so attractive to retail food stores, as the presentation
and management of bulk foods is challenging, if not almost impossible in a supermarket setting. This
niche, however, is where Prolifes obsessive service and partnering capability has paid off for both their
retail customers and the company itself.

A short history is that Bernie always wanted to initiate and grow businesses and as Crosby recalls the
beginnings of their Hamilton based business Prolife Foods.

Most people in life know they want to be a fireman or a jet fighter pilot. My interest was
being in business, where I wanted to explore my capability to grow a business from an
embryonic initial start-up phase into something significant, and Prolife Foods is about the
fourth company Ive started. The irony of it is we lent a fellow in Auckland some money
to import apricots from Argentina. He imported the apricots and we had a debenture over
his rest home. When he failed to sell the apricots, our money was at risk. So we had two
choices. One was to repossess the apricots and sell them all, or alternatively become
custodians of an aged people home. Repossessing the apricots and selling them seemed to
be a better choice.

So it was by default we entered into this game. But although it was by default its been a
truly wonderful story. The business has essentially been founded by Kaye--my wife--and
myself. And shes been actively involved in the business all through its existence, since the
mid-1970s.

Prolife has evolved and grown rapidly from those humble beginnings, with sales expected this year to be
$150m+, recent vertical integration of its products and processes, including chocolate and more recently
honey and peanut butter. Significant production facilities have required major investment and to support
a family of successful retail brands, such as Mother Earth and Alisons Pantry. According to the Chair
of Prolife, David Irving, much of the companys scale and scope comes down to the vision and ambitions
of Bernie Crosby.

Well hes an ambitious owner, you know hes not a half-owner. Hed set budgets that were
unable to be achieved, but when people didn't achieve them, they still had the thrill of the
growth on last year. And so he likes to stretch it, I don't quite agree with that, and weve
now set budgets that can be achieved. But, I tell you that to give you a sense of the
ambition of the man. Now in his ambition it can be quite raw, and so before, you know I

This case was developed by Professor Darl Kolb, Graduate School of Management and Dr.
Lisbeth Jacobs, ICEHOUSE.
joined and before we had decent governance and a good CEO who could, knew what it
took, would take to grow a company from 40 million to 150 million +.

Growth has not been without its challenges. The company has faced fierce competition in Australia and
New Zealand, its home market. Moreover, its primary customer base, e.g., supermarkets, wields
considerable power over their suppliers in any market. In the words of Chair, David Irving,

Bernie got the idea he needed to take what he was doing in New Zealand and do it in
Australia. And so he went and bought a business over there, it wasnt a good buy. He lost
a lot of money. Hell probably tell you how much money he lost, but it was a lot of
money. Now, why did he do that, you know? Well why wouldn't he do that? Hed been
successful with what he was doing in New Zealand, and thought why couldn't I take what
I'm doing here in New Zealand, just go over there, see a business that works well and buy
it? Well he didn't appreciate the challenges, the things that would go wrong, it wasnt all
under his own roof, its in Melbourne, its not in Hamilton. The people were Australians,
bless, them, but they werent his own people. The customers were new customers; they
werent like the Foodstuffs Group, like the New World owners or the Pak n Save owners.
It was altogether a new experience, and retailing over there was a quite different
experience for him. It didn't work.

Bernies account of the incident reveals just how significant the losses were in Australia, but also how
powerful supermarkets are in the food chain of the food industry.

And that was an amazing exercise because within three months of going there, we were
invited in by a major supermarket chain to discuss our trading terms. And they advised us
that they were seeking a 23% discount off invoice. And we said, yes, but prior to saying
yes, they said by five oclock tomorrow night, we will need to know your decision. And if
the answers no, thats fine, well find someone else.

So we said yes, we could meet it, because we were given an ultimatum. I should have said
no because from that point on we lost $10,000 a day for two years. And when you lose $5
million in Australia as a learning exercise its very, very brutal learning. So I addressed
the issue, closed the office in Melbourne. Well, rather than close it I gave it, I gave the keys
to a fellow organisation that we did some business with. And I brought a painting back of
the Melbourne skyline and I hung it in the office and that was a constant reminder of the
need to plan, resource and review.

While the companys first foray into Australia was not successful, Bernie learned from the experience. It
was around this time that Bernie also learned that he had Parkinsons disease, something that would
reduce his ability to participate directly in the business over time. As he reflected on his personal needs
and the needs of the business to grow internationally, he knew that he would have to find others to help
along the journey. He understood that he didnt know everything he needed to know in order to take the
business to international markets.

I realised that there were some flaws in our management structure. And the flaw was, there
wasnt a collaborative or a governance programme where we could get guidance and
direction. And the learning there was I needed a Board and I needed astute people to
support me in that governance thinking level. David Irving had recently retired from his
operative (CEO) days at Heinz Watties and I read his book, It Must Be Watties, and I
thought, this is the man I need. It took me two years, in Davids words, to seduce him to
become the Chairman of our Board and to become a director. And David and I have now
formed a tremendous friendship. We are great pals, great allies and I am very proud and
very privileged to call him a friend and he likewise.

-- 2
Surrounding yourself with capable people, more capable than yourself, is a dictate that I
firmly believe in. So David came on board and then we expanded our Board to three
independents. And those independents are important if you want highly intelligent, very
profound thinking. You need to go outside your field of normal connections and
expertise.

David Irving recalls how he got to know Bernie and how he finally decided to come onto the Prolife
Board.

Yeah I met Bernie Crosby on the first Owner Manager Programme (of the ICEHOUSE).
He was energetic and boisterous, and I think coming out of the programme he asked if I'd
have any interest in being a director, or chair of his company. I was too busy and it wasnt
something that had crossed my mind, but I liked the man. And we carried on talking
about business itself and I started to introduce him to my networks. He was interested in
the finance and M&A work, and I was able to introduce him to various people in
Auckland that he wouldn't have known. And I found myself getting to a point where I
was giving a lot of advice, but it was really the advice that should come from someone on
the Board. You know, it gets to a point really where you're better to be inside the tent
than outside the tent. And, I took the chair straightaway, I think really for the role I was
going to play in the company--and I've done that ever since in other companies--its better
I get completely engaged in the responsibility of the leadership.

When David Irving arrived to take up the Chair of the Prolife Board of Directors, he recalls vividly the
state of affairs that many owner-managed business present, i.e., the governance function is not well
understood and Board meetings involve either too much micro-management or too much meaningless
passing of amendments, voting to accept the minutes and financial reports, etc., and with too little real
strategic engagement with the firms present or future challenges and/or opportunities.

And, the first thing I can recall was the size of the bloody board papers! I mean they were
inches deep! This is a business at that point doing about $30 million, $35 million. And, I
said you don't need that, you know. And why had that happened? It was because Bernies
got an irrepressible enquiring mind that wanted to know more and more, and more and
more, so of course all the staff had to respond to that and, and they got more, but they
didn't get knowledge, they just got data. And thats an example, I think, of someone whos a
bit more experienced in governance. What are we meant to be doing here? What is the role
of our Board? And so I, you know I started the process of really getting clarity around
strategy, and things around the core competence, and thinking about the capability of the
business.

Irving also used his extensive network in the food industry to identify other directors as well as key
industry contacts as the company expanded and grew into new markets and products. For example,
when Prolife was attempting to get a foothold in the Australian supermarket chains, David knew the
senior managers to call to get a meeting to pitch the Prolife proposition.

As the company developed more formal leadership and governance, there was a move to change the
nature of the core business from food processing and logistics toward branded foods, which meant
moving into fast moving consumer goods (FMCG) categories. As a former CEO and marketing
executive at Heinz Watties, Irving understood the nature of FMCG markets, particularly those
involving perishable foods. Though he could support and guide these new prospects, it was not his job
to manage the implementation of such a strategic shift.

Prolife needed to grow its management capacity to fit with its strategy. With a new Chair and
reinvigorated Board, the company needed a new CEO and senior management team. The Board
initiated an experiment to determine the suitability of some internal candidates for the role of CEO.

-- 3
Each of three senior managers took the top role in the senior management team for a year. In the end,
it was decided that the firm should look further afield and they appointed an executive search team to
find a CEO for the company, which led to Andrew Smith being appointed as CEO of Prolife.

Smith joined Prolife from Fonterra, where he had worked for several years in the FMCG space. Smith
grew up in Hamilton and attended Oxford as a Rhodes Scholar, attaining a PhD in physics. He had
held major roles in global companies before returning to New Zealand and had a significant role at
Fonterra when Prolife approached him.

My background before coming to Prolife was very much an international FMCG career. I
started in the UK with Proctor & Gamble, worked with them in Ireland, and then moved
to this part of the world with Unilever. I worked in Australia and New Zealand, before
eventually joining the Dairy Board, which became Fonterra. I spent 8 years with Fonterra
in roles involving international strategy, did a lot of work in Asia and the Middle East, but
then finally worked on the New Zealand and Australia business. At the time I joined
Prolife I was running the marketing and innovation division for Fonterra in New Zealand.

The move from Fonterra was a major decision for Andrew as he would be leaving the countrys
largest food company to join a relatively small entity. The Prolife Board were seeking someone with
FMCG experience and was pleased to have found Smith, but the new CEO had to be certain this was
the right move for him. Smith recalls the process of discovering and establishing his role in the
relatively small company.

At that stage I'd never heard of Prolife Foods, so they were a new company to me and I
had to kind of get my head around what it would mean to go from very big companies to
something that was a family-owned New Zealand business. It was going to be a difference
in scale and size, but I guess as happy as I was with my Fonterra journey, I was looking for
something different. And maybe actually when I look back after 5 years I only realise now
how much I was looking for something different. I was quite happy where I was, but this
has shown me what a great opportunity being a CEO of a company can be.

And so I went through a process and learnt a lot about Prolife Foods, a lot about Bernie
Crosby as the owner of the company, and a lot about David Irving as the Chairman. And
the process in terms of joining was quite personal. I got some good advice from people in
the industry who knew Bernie particularly, and could give me a sense of what he would be
like, because I was going to be the first professional CEO of Prolife Foods. So in order
for that to work I had to know that he could give me the space to become that CEO. And
if he was going to over-interfere and not really release, then there was no point in me
joining. It was going to end in tears. So I went through as much of a due diligence process
on Prolife Foods as I think they did on me.

Once committed and on the ground as CEO of Prolife, Andrew Smith realised there would still be
hurdles and stages for the company to move through as it developed from a family-owned, owner-
managed company to a professionally managed, albeit still largely family-owned company. To his
pleasant surprise, the Board and Bernie were ready and prepared to make the necessary changes. As
Smith recalls,

It was exactly what the Board wanted, so I can imagine a situation where the first
professional CEO of a family company comes into a situation, a business that might still
be grieving for the loss of their Owner as CEO. I don't think that was the case in my
situation, so it was a very easy situation. And, we did a lot of work to kind of make that
transition possible. Bernie and I had discussed a lot about what he was going to do and
what I was going to do so that wed make it easy. But as it is, I don't think we really
needed many of those contingency plans. Actually things fell into place pretty smoothly.

-- 4
Since accepting the role of CEO, Smith has seen Prolife grow substantially in size, scale and
operational complexity. The company has doubled its turnover twice since Bernie first met David,
from roughly $30 million to $60 million, then from $60 million to $150 million with Irving as Chair,
and is aiming at $250 million in the next three years. It employs 700 staff, consumes 200-300 tonnes
of butter a year, 80 tonnes of honey and sells 450 tonnes of chocolate a year to other food
manufacturers. Other products such as cashews of 1,500 tonnes per year, Brazils and almonds of 800-
900 tonnes per year make Prolife NZs biggest importer of dried fruits and nuts sourced from
throughout the world

So, during, during the last 5 years weve had a period of very rapid growth, one of the
challenges to the company is how do you live with that. Because actually growing
businesses have a whole lot of tensions in them. You've got lots of new people coming in,
you've got systems that are stretching to cope with the next bit of growth. And also you've
got people who are quite happy with where things were before and they're hankering back to
the old days. Fortunately, within Prolife thats not been much of an issue because our
change has been such that we have people who enjoy that level of change. And if they
didn't they would have left long ago. But, it is a big challenge.

Much of Prolifes rapid growth will be off-shore, in international markets. Bernie describes the
companys successful return to Australia as an adventure.

Were in the process of putting bulk bins - self-serve units into 288 Coles supermarkets in
Australia. So that is the biggest opportunity weve ever been able to identify. And we have
completed installations in 145 stores, so weve got over 150 yet to go. And weve won that
business against existing Australian companies.

The culture of Prolife, including the staffs willingness to change is likely a reflection of the culture
the founder, Bernie Crosby, helped shape over the years. Prolifes corporate culture reflects Bernies
personal values as well as the collective values that employees bring to the company and express in
the way they go about their work. Cultural values are not always visible nor articulated, but Crosby is
clear on the foundations of Prolifes values.

Our guiding principles and values are quite simple. Its not in any confused language.
Anybody can understand it. Its obsessive service with great food and that becomes our
commercial strategy; just to perform to an extraordinarily high level and really give our
clients no reason to ever leave us and give them every reason to subscribe to our support.
Simply put, we want our clients to always choose us.

The four pillars are passion, accountability, performance and success. And theyre quite
simple for anyone to get their heads around. But we like them as living aspects of our
company. And we have a view that everybody in our organisation is critical to the success of
the organisation. The person who sweeps the floor or does some of the menial tasks, we
want them to believe that theyre as critical in getting the spaceship to the moon as is one of
our senior executives. We look for participation, contribution and commitment from all.
And its that combined energy, horsepower and reliability that really gives us comfort that
we do deliver and do perform. But we dont take that granted; we go and ask our clients
what they think. And its what they think thats more important than what we think.

Innovation has always been natural for Bernie and for Prolife. Growth in the food industry requires
considerable investment in innovation, research and development, but there is also considerable risk
with R&D spending. The challenge is to understand consumers needs and/or desires, design and
introduce products that sell at a cost that deliver profit margin. But this is easier said than done, as
Andrew Smith summaries.

-- 5
One of the things we don't have is a massive home market that we can leverage to grow into
these other markets. And so we have to be really smart with what we do, and so one of my
big drivers that I have with my management team in explaining to the Board, is that we have
to be quite tight on our overhead costs. We have to grow and stretch, and once weve
grown and stretched and are confident that weve got there, then we can kind of backfill the
resources. And its a balance. If you don't put enough in you'll fall over, but if you put too
much in then you'll kind of saddle yourself with too much cost before youve started. So
thats a big discussion and probably one where I've provided a good anchor to Bernie and
David who are probably both more naturally expansive, if you'd call it that, in a discussion.

So I have to manage their expectations as well, and its probably not a bad thing for a CEO
to have a chairman and owner who want you to spend more and invest faster than you are.
But two things tend to happen with New Zealand businesses when they go places. The first
one is their investment dip is much bigger than they planned, and the second thing is it takes
much longer to get out to positive returns. And so weve been very careful and very
conscious of that, and thats one of our really big stories, that weve gone into Australia,
weve invested. But, actually we then pay back that investment over the timeframe that we
thought we were going to. And thats been a lot of careful management and board
governance to make sure thats occurred.

Smith sees the tight relationship between CEO, Chair and Owner as a critical dynamic and one that
has to be carefully attended to in order to keep it from getting out of balance. As he notes, if the trio
becomes two-against-one, that would be problematic. Alternatively, if the three-way leadership
dynamic lacks robust debate and constructive tension, their decisions and ultimately the company
will suffer the consequences.

One of the really positive things about Prolife is the strength of the relationship between
David and Bernie, and that really has built a strong togetherness. As the CEO I have to
work with that, and its interesting sometimes. That dynamic can be a challenge, because if
those two guys are together, then in comes a third person and its two against one. So, one
of the things that we talk about a lot is making sure that this dynamic doesnt keep
reinforcing itself. And, one of the other pieces we need to do is to make sure we keep
challenging ourselves to disagree. You can get into a situation where you won't disagree with
each other anymore because thats too hard, you know each other too well. And I think
thats one of the things that the three of us challenge ourselves on, to actually make sure we
are making the right business decision. We are prepared to challenge the facts of the other
person. I think that when done well, it can really add a lot of power to the company.

Dynamic though it may be, Crosby is clear on his intention to not interfere with the CEOs job. He is
also clear on the distinction between being a director and a shareholder in the company.

Im a believer that the owner of a company should never be the Chairman of the Board,
because why have a Board if youre the owner and the Chair. And I also believe that
shareholders are different from directors. And when we have a directors meeting I have
one vote, and that is as a director. I do not walk in there carrying the mantle of being a
shareholder as well. We have directors meetings, which have proper protocols and
disciplines and structure around them. And then we have shareholder meetings, which are
different and they are held at a different time with different attendees. And I dont ever
intend to play the card of being a shareholder when Im in a Directors meeting. You do
not have the freedom of interfering and playing that card in my view. And, as a
shareholder, you do not have the privilege of dealing with the CEO. The CEO is dealt
with by the Chairman of the Board and the Board.

-- 6
Bernies role in the business has evolved and changed over time, in part due to the Parkinsons, but
also as a reflection of a much more mature and complex business, for which he has hired other
competent managers to lead and manage on his behalf. Instead of Owner-Manager or CEO, Bernie
transitioned into the roles of Director and Founder, a role suggested by David Irving, which keeps
Bernie involved in the company, still doing what he enjoys.

Bernies probably in there once a week. Hes a very engaging man. He enjoys seeing the
people on the factory floor or wherever. If theres a sales conference hes likely to be there,
senior management conference, hell be there. So, he takes part in areas where he can,
where he loves it, and where he can make a difference. I think its a terrific role,
Founder. I think its a stunning term, and I think its one thats really worked for him.

Prolife has grown dramatically, while maintaining connections to its roots, but true to their way of
doing things they did not risk the organisation losing its sense of purpose, according to CEO, Andrew
Smith.

In terms of a business, Prolife has always changed through its kind of history, getting up to
30 years old. It certainly took a while, as businesses always do, to get to a scale where it can
really afford to do things in any consistent and positive way. But, in my 5-year timeframe
the business has gone from about 60 million dollars to 150 million dollars. And weve
maintained that thirst for growth and that kind of purpose that the company had. One of
the things we did do was to work out what the companys purpose was, because the
company had existed for a period kind of knowing its purpose, but not having explained it
or written it down. So we went through quite a big process internally in the company and
with the Board, and weve come up with a purpose, which is: Prolife Foods is all about
great food with obsessive service. And that really does define us. It provides a great link to
the original heritage of the company, the obsessive service that Bernie showed as an
entrepreneur. We now challenge ourselves to keep that alive.

-- 7
Participant Profiles
Participant Profiles for OMX Taupo

NAME Andrew Giltrap


Position Managing Director
Company Name Giltrap Agrizone Ltd
Address 16 Albert Street, Cambridge
Phone 07 873 4004
Cell Phone No. 027 493 6641
Email andrew@gaz.co.nz
Agricultural Machinery - Sales and Service for three quarters of a
century the Giltrap name has been synonymous with quality, quality
products and quality business practice. The Giltrap family have been
in the Otorohanga area for 75 years with 4 generations of the family
Nature of Business involved in the district with Wilfred Giltrap forming Giltrap Engineering
in 1959. In the early 90's the Giltrap Company split into two divisions.
"GILTRAP Farm Machinery" which focused solely on tractor and
equipment sales and service, and the Giltrap Engineering products
made a separate company.

NAME Chris Johnson


Position Managing Director
Company Name Johnson Gluyas Tractors Ltd
Address 252 Hilton Highway, Washdyke, Timaru
Phone 03 688 1133
Cell Phone No. 0274 326 451
Email chris@johnsongluyas.co.nz
Johnson Gluyas Tractors' history starts back in 1990 when Chris
Johnson started the company then called 'Johnson's Tractors and
Machinery' which mainly serviced tractors and trucks. During that time
he was appointed the South Canterbury dealer for Nissan Diesel,
Croplands Spray Equipment and also many other farm machinery
brands. In March of 1995, with the addition of a business partner, Peter
Gluyas of Gluyas Motor Group in Ashburton, the new company of
Johnson Gluyas Tractors Limited was started and upon doing so were
appointed the Ford Tractors distributorship for the South Canterbury
Nature of Business
region.
This was followed with the Fiatagri distributorship in March 1997 and
then both brands combined to become the New Holland Brand which are
sold and serviced today.
Over the years many brands of Farm Machinery have been added
including the large range distributed by Norwood Agriculture. The
company now sells and services everything from ride-on lawnmowers,
tractors, balers, trucks to combine harvesters. We employ 21 staff who
all commit to offering the best in customer satisfaction.
NAME Jason Everett
Position Director
Company Name Design Windows
Address Brilliant Place, Stoke, Nelson
Phone 03 547 5454
Cell Phone No. 021 229 3729
Email jason@designwindows.co.nz

Designwindows are the South Island's leading aluminium window


systems manufacturers. We manufacture one of the most respected
brands in the building industry, Altherm Window Systems. We also
have other brands from Architectural Profiles Limited, New Zealand
Nature of Business largest aluminium windows supplier.
The business concentrates on delivering the finest aluminium joinery
solutions available. These solutions are for both the discerning home
owner who needs a good looking design, through to hard wearing and
long lasting solutions for commercial operations.

NAME Jason Still


Position Director
Company Name Complete Bathrooms Ltd
Phone 09 309 3991
Cell Phone No. 021 442 220
Email jason@stillmgt.com

Complete Bathrooms has evolved from a plumbing company. We found


ourselves doing more and more bathrooms, but with this growth we
became more and more frustrated as we were not involved in the
complete process. This meant that we had to rely on other companies'
project managers, designers and trades people. We discovered a lot of
inefficiencies, which wasted a lot of time, and we were not always happy
Nature of Business with the overall quality of the jobs. They were delivering bathrooms late,
of poor quality and over budget.

Complete Bathrooms was formed so we could ensure better designs,


and higher quality workmanship, so that projects would be delivered on
time within budget while providing a substantially higher quality
bathroom for our customer.
NAME John Fowler
Position Managing Director
Company Name Monaghan Plastics
Address 295 A Church St, Penrose, Auckland
Phone 09 636 9488
Cell Phone No. 021 911 582
Email john@monaghanplastics.co.nz
Monaghan Plastics is a plastic injection moulding company specialising
in technical components and assembly.
Nature of Business Our aim is to work together with our customers to design and
manufacture innovative products for niche markets.

NAME John Turkington


Position Owner
Company Name Farman Turkington Forestry (FTF) Ltd
Address 180 Broadway, Marton, Manawatu-Wanganui
Phone 06 327 5263
Cell Phone No. 0274 458 410
Email john.turkington@xtra.co.nz

Farman Turkington Forestry is a forest company based in Masterton that


operates in the Wairarapa/Wellington regions. Our main speciality is
Harvesting and Log Marketing of forests and woodlots. We currently
have 7 logging crews working for us however we are also involved in a
Nature of business number of other aspects of the Industry, from ETS work, Establishment
and Forest Management. Our main goal is to operate as a successful
forest management business by maximising profits for forest owners and
providing an affordable professional service that is based on integrity,
honesty, accountability, and delivery.
NAME Kevin White
Position Director
Company Name Bradfield Farm Ltd
Address Ngahape Road,Ngahape, NgahapeNgahape,Te Awamutu
Phone 07 873 2807
Cell Phone No. 027 4929 444
Email kevin@bradfields.co.nz
Bradfield Farm is owned by Kevin and Kirsten White and is located
halfway between Te Awamutu and Otorohanga. The large operation
includes two dairy units, one of 420 cows, and a conversion
which will support about 800 cows in the coming season. Additional land
Nature of Business is devoted to growing grass and maize for hay, baleage and pit silage.
The Whites also manage a contracting business that does everything
from cultivation to harvest, runs10 transport trucks, and provides a range
of other services such as spraying, fertiliser spreading,earthmoving and
animal bedding.

NAME Mark McCarthy


Position Owner
Company Name McCarthy Transport
Address 361 Heads Rd, Wanganui
Phone 06 344 1620
Cell Phone No. 027 497 8019
Email mark@mccarthytransport.co.nz
Log transport logistics company responsible for full logistics for a
Nature of Business number of companies in the southern north island. In the past decade
grown from 3 trucks and multiple ownership in Raetihi to nationwide.
NAME Richard Krebs
Position CEO
Company Name Hyspecs
Address 32 Crooks Road, Highbrook, East Tamaki
Phone 09 274 9985
Cell Phone No. 021 953 733
Email richard@hyspecs.co.nz
Hyspecs (Hydraulic Specialties Ltd) is a 100% New Zealand owned and
operated company with branches in Auckland, Christchurch, Melbourne
and locally based representatives in Taupo. Hyspecs was formed in
1972 as an alternative to the single brand, multi-national suppliers in
existence at the time. We offered then, as we do now, full hydraulic
Nature of Business
system design backed by an extensive range of hydraulic equipment.

We specialise in hydraulic system design, specification and component


selection, servicing and maintenance of existing plant and equipment.
Our sister company Hytech manufactures hydraulic manifolds.

NAME Tim Barrett


Position Managing Director
Company Name Farm Venture Consultancy Limited
Address 34d Wairau Road, Oakura
Phone 06 758 3688
Cell Phone No. 027 451 7427
Email tim@farmventure.co.nz
Farm Venture creates and manages syndicated farm investments.
Each farm is an entity on its own with an elected board of directors
Nature of Business
and share milkers (who invest). Dairy Industry is selling its own
success now & in the future.

You might also like