Yoke Har Lee: Investment in intellect pays off

Bruce Davies says the right mix of skilled staff is vital. Photo / Dean Purcell

When he saw that his company could no longer depend on being a contract manufacturer, Bruce Davies set out to transform it into a creator and owner of intellectual property.

The writing was on the wall for New Zealand manufacturers as cheaper producers from China and other developing countries replaced higher-cost producers.

It was in 2002 that Davies decided he needed to morph his business, Modtec Industries, from one that got 80 per cent of its work from contract manufacturing, to one where that 80 per cent came from its ownership of intellectual property.

"That was when we began to be aggressive, to invest in our own IP," says Davies. "Initially, when we were concentrating on building our team, we concentrated on tradespeople. [To create IP] we needed to get graduates - we have a total of 14 on board now."

Today Modtec is a niche designer and maker of the Integ range of modular arms used for computer monitors. Modtec's arms are used on Southwest Airline's counters in the US, in every hospital in New Zealand, and in the financial industry.

Modtec, based at Silverdale, north of Auckland, has won several awards, including last year's NZ Trade and Enterprise Best Use of Design in Business Award.

Before Davies became a business owner, he worked in the clothing industry, having done courses to train himself in industrial engineering. He was also a production manager at Bendon, where he learned to respond to change quickly.

Davies attributes the company's design success to a strong adherence to the Lego philosophy, where bits and pieces of components can be deconstructed and reconstructed at ease, without excessive change to the original template.

"We use this in our design process - it is like the 26 alphabets, you use them to make words, then different sentences, or poems or songs or to make things never yet thought of. We have the capacity to engineer different solutions."

Davies hails from South Auckland and went to Otahuhu College. His life now is far removed from what it was - his father was an orphan, and Davies himself is one of six children. "We had to work out how to be successful, how to earn our money."

Success, he says, has everything to do with staying positive, being good at planning, and learning that "cash is king".

Success also takes time. Modtec, he says, is finally getting its Indian manufacturing going after nearly five years of planning and development.

Modtec's key intellectual property is its human resources, Davies says. He has spent time creating the right mix of engineers and tradesmen.

"Our people are our strategic resources. We have a strong culture here; I know the wives and kids of our staff."

He is confident that Modtec can become a $100 million company over time. The firm made its first modular arm in 2004, and the Integ brand arms now provide 50 per cent of turnover. The company expects total turnover to reach $10 million late next year.

The beauty for Modtec is that the cost of sales for the arms is not high. In fact, many sales come over the internet. Design is done using software that produces life-like images that look like real products.

The key to customer satisfaction is anticipating their problems and delivering solutions, says Davies. Monitor arms for dual screens, for example, can boost productivity by as much as as 40 per cent, keeping customers coming back for more.

Another challenge is that many overseas customers demand environmental sustainability. "We are proud to be able to say 100 per cent of our [aluminium] casting used is post-consumer, meaning they are recycled."

Davies challenges his team to think about design excellence. A product has to be functional, effective to manufacture, and easy to use and install.

Price ranks relatively low in the scheme of things. "There is no point in having the lowest price if you can't deliver on time," he says. "There is no point in having the best delivery performance if you can't provide the best service over time." And most of all, he says, there is no point in having the best quality if a product is solving yesterday's opportunities.

Modtec has come a long way since a British financial trading company bought its first monitor arms. "When we started, it was a very new concept - the market didn't understand the value we created."

These days Modtec works closely with original equipment manufacturers to integrate the arms into their designs.