Maurizio Bragagni
Culture of Innovation Survey of Tratos, a cable manufacturing company
Yet to survive and flourish, in the most difficult of environments, Tratos has focused on niche markets and on that all-important innovation. In the 1900s it developed fibre optical products, in the 2000s it produced cables for mobile applications, such as reeling cables for port cranes, and specialised in high speed products. In 2010s Tratos won an innovation award for supplying the Superconductor cables for the world-stage Energy Fusion project referenced earlier. Cables are made from raw materials and compounds managed and controlled by large organisations, so the bargaining power of the suppliers is significant. Tratos invested in its own compounds to achieve additional control and competitiveness. It fuelled diversification and dominance in niches by investing heavily in alternative products. Tratos’ decision to engage on a differentiation platform included introducing radical technology to previously uneconomical markets. Due to years of competition on price, several markets had become innovation wastelands. Companies were losing money, and the markets were in decline. Tratos turned this to advantage, revitalising the most depressed markets with carbon fibre innovation for overhead conductors, overtaking existing players. Based on the previous analysis and my experience of the industry, I can identify two principal ways to achieve success in the cable manufacturing industry: large economies of scale or innovation. Add to this, access to a highly-skilled workforce and real insight into your business and you have something really powerful to bring change and step up to even greater innovation.
The future coming from the past - (pictured left: Egidio Capaccini, Tuscany, 1950s)
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1 INTRODUCTION This BMP aims to analyse the culture of innovation in Tratos. To achieve this I have principally used the studies of Rao Jay and Weintraub Joseph, “How Innovative Is Your Company’s Culture?” (Rao and Weintraub, 2013) (Chapter 5.4.1). Since the beginning of the EMBA, I was moved by “…understand(ing) how to manage Tratos in a period of enormous change for the company and the industry in which it operated following the deregulation of the European telecoms market in 1994.” (Moules, 2014). Especially, as I expressed during my interview in the FT newspaper of September 28th, 2014 when asked: What have you learnt from your time at Cass? “I thought that one of my company’s strengths was its ability to adapt and respond quickly to opportunities or market changes: the existing informal working practice and the ‘just make it happen culture’ encourages flexibility and an entrepreneurial approach. “During these years, I made massive changes in several sectors: [including] production, management, purchasing, IT systems and in particular I tried to change the firm’s culture. In the process, I found that all my assumptions were wrong. I now understand the company lacks the structure required to manage risk effectively, support long-term growth and optimise performance. Changing things will require a programme of training and development to address real culture change.” (Moules, 2014) This desire for exploring, understanding and experimenting has been with me since the beginning of this adventure and I want to use this opportunity to investigate the Culture of Innovation in Tratos. It is an experiment and it must be considered as such but at the same time, I have to clarify two main limitations I found in working on this research: a practical one and another connected with my job. The first (and practical one) was the maximum number of words I could use. Only 15,000 were allowed to develop this subject, with all the academic aspects involved – and it is involved! A literature review on Culture and Innovation, Survey, Analysis of the Industry – included to foster better understanding of the sector environment – the Subject and the Importance of Innovation for a Cable Manufacturer and then on to the Survey’s Methodology, Analysis and Conclusion. In order to condense, in some cases I sacrificed the fullness of the explanation for a more natural and shorter reading to highlight the core element of this job: the analysis and the conclusion of the survey. The summaries in the first chapters have been kept concise. Consequently, I have not explored the academic discussion between climate and culture in this submission, although it was part of the background work. To help navigation and keep words to a minimum, when I refer to ‘climate’ it is interchangeable and relates to one block of the Rao and Weintraub survey and the second survey I applied, “climate change perception questionnaire”, (Abbey, 1981).
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4.3 Key Success Factor Based on the previous analysis and my experience of the industry, I can identify two principal ways to achieve success in the cable manufacturer industry: large economy of scale or innovation. The first one is the traditional way of competing. It is price-driven competition and requires a guaranteed supply of raw material and significant economies of scale as the main factors. “Having a guaranteed supply of (…..) materials such as copper and plastics is necessary for cable manufacturers”. (MarketLine, 2014). “Manufacturers need to operate their plants on a large scale if they are to offer import-competitive prices”, (Paraphrased) (MarketLine, 2014). The second way is to survive through differentiation. It is rarer than the first one because it needs more hard work and imagination; talents that are much sought after in the cable industry. It also requires significant investment in research and technology and highly skilled workforce. The cable industry has been characterised (as stated at the beginning of this chapter) by a sequence of radical innovations that have shaped it. Some firms have been unable to adapt themselves; and have gone out of business. “Investing in research and development is important in an industry as technologically advanced as this” (MarketLine 2014). “Having access to highly skilled employees is important in such a technical and highly skilled industry” (MarketLine, 2014). Tratos has followed this second way since 1966, and has interpreted it via innovation, not only in technology, products, process but also through the brand and other aspects.
4.4 Tratos Success Factor Tratos is a family-owned business, strongly orientated toward exporting products around the world. The firm has four factories, three in Italy, and one in the UK. From these factories it produces the full range of cabling products from Fibre Optical cable, to High Voltage (Fig.14). Source Prysmian annual report 2014. Tratos supply cables for more than 45 different applications: maritime, oil and gas, railways, industry, utilities, ports, nuclear power station, submarine, and more. The company is confined by the capacity of its four manufacturing facilities, with a consequent impact on the ability to achieve economies of scale. However, Tratos has access to the highly-skilled workforce, as evidenced by the broad range of products, and the success of its research and development resource. It is renowned for its tailor-made solutions. A combination of flexibility and that highly skilled resource means it can produce to a brief and solve any issue around cable applications. Over the years, the company has specialised in delivering innovation. As confirmation of its reputation as an innovative company, in 2008 Tratos studied, produced and delivered Fusion for Energy superconducting wire for the world ITER reactor and the Japanese JT60SA. The superconducting Cable-In-Conduit has been used in the construction of magnets for these projects.
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Figure 14: Market Presence V Product Portfolio Range - Prysmian Annual rpt 2014
ITER is a unique international project to design and build an experimental fusion reactor based on the “tokamak” concept. The project, which is currently under construction in the South of France, is to demonstrate the feasibility of energy production by controlled thermonuclear fusion, to reproduce in the earth what occurs naturally in the sun. The Fusion for Energy Agency (F4E) awarded Tratos with a contract of €49 million thanks to the company’s long record of success on delivery prototypes. My above summary description of Tratos shows that the unique approach of this company, on examination of the industry, was to invest a significant amount of resource and money in innovation. This is one of the main motivators (since the beginning of my MBA) to investigate the elements that could affect innovation and in particular find a way to measure it and increase awareness of the Tratos approach.
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7 CONCLUSION Tratos is a traditional family-owned company that is very successful in exporting its products in 36 countries, (more than 80% of the production is export-dedicated). The company has a strong executive team, mostly family members, who make all the decisions and drive implementation. The survey gave board members, the senior management of Tratos and I the possibility to identify, classify and rank the major factors that influence innovation culture and the opportunity to have a healthy discussion on the culture of innovation. The primary acquisition, I believe, is the acknowledgement of the elements that have driven culture innovation. The survey, also, confirmed that the company doesn’t have the bench strength among its lower management level to understand the new challenges in the industry. In fact, the Innovation Quotient of International offices is 3.85 while UK site is 3.24, and Italy is 3.39. Another explanation, for the above result, could be the people at the top or near the top - the individuals who make the decisions and control activities - tend to have a much rosier view of the Tratos organisation’s culture (as International office) than do mid-to-lower-level managers and rank-and-file employees (the UK and Italy). I have also identified that the results are influenced by factors other than the organisational culture. National impact and perception of the domestic situation has a bearing (Italy score lowest on the “Work Climate Survey of Abbey & Dickson” (Abbey, 1981), (2.95) against International (3.91) and UK (3.13), even though the Italian site is the leading innovative factory of the Tratos Group). The “Work Climate Survey” confirms that either the Rao and Weintraub survey has limitations or exceptions, or the sample selected for the Tratos survey was not sufficient. The employees who took the survey gave the company high marks on external success (which was ranked 3 among 18 factors) and enterprise success (ranked 6 out of 18 factors). However, employees ranked poorly on the individual component of success (ranked 15 out of 18 factors). Employees also ranked very poorly ‘simplicity’ (ranked 16 out of 18 factors). They also scored very low entrepreneurial (ranked 17 out of 18 factors). Employees ranked the company’s leader badly on engaging the rest of the workforce; the engaging factor (3.16) ranked lowest among the 18 factors, in particular, it scored very poorly in Italy (2.84) and in the UK (2.84), yielding below the average Innovation Quotient (3.50). Employees did not take the initiative in the innovation process (ranked 48 out of 54 elements), perhaps partially because the leaders did not coach them (ranked 50 out of 54 elements). A large proportion of employees felt leaders did not provide feedback and support to them (ranked 48 out of 54 elements). Nor did they think the company rewarded individual participation in potentially risky opportunities, irrespective of the outcome (ranked 54 out of 54 elements).
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The workshops, which addressed organisational structure solutions, revealed a path to enforce the innovation culture at all Tratos levels of line management. They addressed several other potential issues, for instance that “without change, it was considered Tratos cannot be an innovative company.” Tratos has survived and flourished to date because of innovation. The work I am doing now will ensure that the company looks to new ways to innovate. Another issue addressed at the workshop was the “lack of leadership, considered to be a problem at Knowsley, which could explain the relatively negative perceptions coming through in the survey”. This conclusion was based not on data but on personal views. In fact, Tratos’ employees gave the company high marks, No.1 among 18 factors) on enabling and capturing (both 3.75). On the other issue that emerged from the workshop was the lack of communication which was confirmed by employees’ perception (ranked 31 out of 54 elements), I have decided to implement a video and camera system to share immediately information at each site. Allocating screens in meeting rooms, canteens and in the common spaces will facilitate updates on the company’s progress. The Tratos Academy has a training and behavioural change programme coupled with delegating, coaching, support and feedback systems. The low rank given to the resource selection systems (ranked 53 out of 54 elements) opened new thinking for me; probably that the employee perception is right in saying that Tratos recruiting and hiring systems in place does not support a culture of innovation. After all, they are the results of the system in place.
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