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Wednesday, September 23, 2009
Born in the Recession
Millipore built from military filtration system roots
By Julie M. Donnelly
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Millipore Corp. began operations in 1954, following the Korean War, when inflation was through the roof. The U.S. military declassified patents for filtration membranes that had provided soldiers with clean water. The patents were picked up by Lovell Chemical Co., where a guy named Jack Bush worked. Bush was the son of the famous Vannevar Bush, co-founder of Raytheon Co. The younger Bush purchased the technology from Lovell, and the Millipore Filtration Co. was born.
The filtration technology had applications in fields such as food and beverage, electronics and health care.
In the first 20 years, Millipore stuck to what it knew best, filtration, and kept a diversified portfolio of customers. One factor that influenced Millipore’s success, even though it launched during a recession, is that the product itself wasn’t new. Bush knew there was a market for the filtration technology. But management also knew that wasn’t enough. Current CFO Charles F. Wagner Jr. summed up the company philosophy by saying, “We had to have differentiated products that made us stand out from competitors, we had to work with customers, refining the products to their needs, and we had to focus on customer loyalty and longevity.”
Millipore invests 7 percent of its revenue back into research and development, amounting to $120 million this year. Wagner said some of that R&D is to develop new products, and some is to improve old products. But don’t get the idea that the 55-year-old company has gotten stodgy. Wagner said 15 percent to 20 percent of revenue is from products launched in just the past three years.
There are two changes that the company has made in response to recessions throughout the years. Over time, the company has diversified the kinds of products that are offered, greatly increasing the amount of consumable products it sells. Now over 90 percent of the products Millipore sells are considered “consumables.” This strategy blunts against a downturn — when labs and hospitals are reluctant to buy new pieces of capital equipment, they still need to buy the chemicals and disposable bits to keep their existing machines going. The other change came when, during the dot-com bust in 2001, the company decided to focus on its core business and spun off its microelectronics business.
These days, filtration accounts for 40 percent of sales, Wagner said. But now the majority of the business is focused on newer technology, like antibodies and stem cells used in pharmaceutical research. In 2005, the company completed its transformation to a life sciences company. Wagner said, “All of our products are now used to discover, develop or manufacture drugs.”
Since making that switch in 2005, Wagner said, the company has almost doubled its revenue.
Millipore: On Globalization
At the end of World War II, many soldiers remained abroad in occupation and reconstruction roles, in France, Germany and Japan. One thing the military wanted to be sure of was that they would always have fresh water.
Jack Bush looked at the filtration systems that the U.S. military used to provide clean water to its troops and decided the technology used for the soldiers could be a gold mine if applied commercially. He eventually bought the technology from the U.S. government, and Millipore Filtration Co. was born several years later in the wake of the Korean War.
Kathy Allen worked at Millipore Corp. for 25 years. She retired in 2008 as a corporate vice president, CFO and treasurer. She talks about keeping the mission of the company steady, even as globalization has reshaped the competitive landscape.
What is the biggest difference in the business environment between 1983, when you joined Millipore, and now? In 1983, competition was more regional. Globalization, since then, has fundamentally changed the competitive landscape. Millipore has always been driven by technological advances, but the pace of those advances has definitely picked up. The company’s goal is to continue to provide value to customers even as things change.
Has globalization helped or hurt the company overall? One of the reasons that the company fared well in the past few recessions is that Millipore did go into some of these global markets so early. Millipore went into Europe and Japan in the 1960s and 70s, which gave the company a competitive advantage, and also helped blunt against recessions that were confined to the U.S. We could diversify in terms of having assets in different currencies, etc. But this recession is different. Business in Europe has been significantly affected as well. There aren’t standalone markets anymore.
Did the company have to change the way it marketed itself to appeal to customers overseas? Millipore did have to adjust its branding strategy as the company became more global. We couldn’t count on the name recognition the company enjoyed here. In the U.S., Millipore is almost considered like a generic name for certain lab products. But the company never changed its overall business strategy, which is to build long-term relationships with customers.
What will Millipore be like in 20 years? The company will continue to grow in developing markets. It will continue to increase business is China and India. Because we got there earlier than some, I think Millipore’s will win more than its fair share of that growth. I also see the services part of the business- advising and consulting - becoming increasingly important, as Millipore is seen, more and more, as a company that is valued for its knowledge as much as its products.
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