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THE BEGINNING. In the beginning, a bunch of scientists only shared the same Idea !No objective perception of what the market was or could be in the futureNo objective perception of what kind of problems were between the idea and its commercialization Need to find funding !Resources, time, costC
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1. Ladies and Gentlemen. The title of my presentation today is: Challenges in Developing Products / for the Environmental Monitoring Market.
I will discuss / the relatively short history / of a Finnish company called Gasmet Technologies / that manufactures analyzers / for gaseous emissions monitoring applications. These analyzers operate /
with the principle of FTIR / or Fourier Transform Infrared Spectroscopy.
The company was started in 1990 / when Finntemet Oy acquired Scanoptics Oy / where the first prototype product /
had been developed / during the eighties. A team of four scientists / continued the development work at Temet / and soon /
Temet Instruments Oy was established / to commercialize the innovations. Later, in 2005, the company was sold by an MBO /
to its Managing Director, and the name was changed to Gasmet Technologies. Today, the company employs / a total of 34 people, and has a turnover of 8.5 Meuro, of which 90% is export sales.Ladies and Gentlemen. The title of my presentation today is: Challenges in Developing Products / for the Environmental Monitoring Market.
I will discuss / the relatively short history / of a Finnish company called Gasmet Technologies / that manufactures analyzers / for gaseous emissions monitoring applications. These analyzers operate /
with the principle of FTIR / or Fourier Transform Infrared Spectroscopy.
The company was started in 1990 / when Finntemet Oy acquired Scanoptics Oy / where the first prototype product /
had been developed / during the eighties. A team of four scientists / continued the development work at Temet / and soon /
Temet Instruments Oy was established / to commercialize the innovations. Later, in 2005, the company was sold by an MBO /
to its Managing Director, and the name was changed to Gasmet Technologies. Today, the company employs / a total of 34 people, and has a turnover of 8.5 Meuro, of which 90% is export sales.
2. There is always a beginning for everything. For our company, it was in the beginning of the nineties / when the company was founded. However, the scientific work
behind the technology / began already in the early seventies / at the University of Oulu. Thus, we can surely say that it took a very long time /
for the technology to emerge / from research laboratories into industrial use.
One of the many problems / that every invention encounters in its long path / before it is commercially utilized / is the funding. Our case was not an exception. The only thing / that the scientists had / in the beginning / was a strong belief / that the idea was sound / and that the technology / could be developed to the point / where it could be used /
in the applications it was thought for, even though the main market /
matured only many years later. Only a vision / in the heads of the inventors existed /
that environmental concerns in the future / would someday / result in demand driven by legislation / for a product / that was being developed /
with the technology and science / that had matured at the university /
for a couple of decades.
Since the primary market, namely gaseous emission monitoring, was underdeveloped / and very difficult to access / in the early years, other types of applications / were investigated, and the first prototype product / was tested in these alternative uses. Even though this was a necessity / at that time / to generate turnover / and further develop the technology, it also led us astray from the right path.
There is always a beginning for everything. For our company, it was in the beginning of the nineties / when the company was founded. However, the scientific work
behind the technology / began already in the early seventies / at the University of Oulu. Thus, we can surely say that it took a very long time /
for the technology to emerge / from research laboratories into industrial use.
One of the many problems / that every invention encounters in its long path / before it is commercially utilized / is the funding. Our case was not an exception. The only thing / that the scientists had / in the beginning / was a strong belief / that the idea was sound / and that the technology / could be developed to the point / where it could be used /
in the applications it was thought for, even though the main market /
matured only many years later. Only a vision / in the heads of the inventors existed /
that environmental concerns in the future / would someday / result in demand driven by legislation / for a product / that was being developed /
with the technology and science / that had matured at the university /
for a couple of decades.
Since the primary market, namely gaseous emission monitoring, was underdeveloped / and very difficult to access / in the early years, other types of applications / were investigated, and the first prototype product / was tested in these alternative uses. Even though this was a necessity / at that time / to generate turnover / and further develop the technology, it also led us astray from the right path.
3. After several contacts and discussions, a private investor was found / who was sufficiently interested / in the prototype product / that had been developed.
Even though many companies and investors / were contacted, all but one /
did not see an opportunity / or were just unwilling to take a risk / to start a new business.
Temet Instruments was established in 1990 / as a subsidiary of FinnTemet /
and the development work was continued at Temets premises / by a team of four.
TEKES loans were applied for / and granted / to finance the first two years of work / before the product / was supposed to be ready for the market.
But the market / did not really exist / for the new technology product / at that time. It was only realized / when the first end user contacts had been made. The company and its entrepreneurs / had worked with great labour / and with great passion without checking /
if there really was a need / for the product that was being developed. I think, that this is quite normal / with engineers and scientists: Since something seems such a good idea / and wonderful science, the others must think the same way. It is very easy to live / in such a dreamworld / without really testing the idea, especially when financing has been secured /
for the most immediate future. This was the time of great enthusiasm.
The other problem / that became evident / after the first end user contacts / and first product demonstrations / was / that the technology we had developed, was quite far from the end users needs. Further development / was clearly needed, with added cost / and postponed time of market entry. This was the time / for some of the enthusiasm to end / and realism to take over.After several contacts and discussions, a private investor was found / who was sufficiently interested / in the prototype product / that had been developed.
Even though many companies and investors / were contacted, all but one /
did not see an opportunity / or were just unwilling to take a risk / to start a new business.
Temet Instruments was established in 1990 / as a subsidiary of FinnTemet /
and the development work was continued at Temets premises / by a team of four.
TEKES loans were applied for / and granted / to finance the first two years of work / before the product / was supposed to be ready for the market.
But the market / did not really exist / for the new technology product / at that time. It was only realized / when the first end user contacts had been made. The company and its entrepreneurs / had worked with great labour / and with great passion without checking /
if there really was a need / for the product that was being developed. I think, that this is quite normal / with engineers and scientists: Since something seems such a good idea / and wonderful science, the others must think the same way. It is very easy to live / in such a dreamworld / without really testing the idea, especially when financing has been secured /
for the most immediate future. This was the time of great enthusiasm.
The other problem / that became evident / after the first end user contacts / and first product demonstrations / was / that the technology we had developed, was quite far from the end users needs. Further development / was clearly needed, with added cost / and postponed time of market entry. This was the time / for some of the enthusiasm to end / and realism to take over.
4. The additional expenses / related to the delayed market entry / were quite difficult to explain / to the financer / especially because the forecasts / that had been made at the time of the companys acquisition, had been very optimistic. Objective information / was not given to the investor / in fear that the financing decision / would have been negative. This all resulted in lack of confidence / and subsequently / in many long and bitter meetings with the financer.
The organization consisted of / scientists and technical staff only, no professional business manager / was on board. Thus, the feedback from the market / from the outside world / was very limited. The development team / lived its life / within the safety of the companys walls. Development resources / were naturally very limited /
like in a typical start-up company. It basically meant / that there was only one person / to work with electronics design, one / for optical and mechanical design / and one / for software. Additionally, there was one person for testing / and one for applications and customer demonstrations.
Maybe the most long-ranging negative effect / came from the unfocused operations / of the company. Even though there was a leader / of / the development team, there was no leader / who could have organized the development process / to focus all its resources / towards a single target: A commercial product. The plans changed almost everyday / when a new, more promising idea surfaced / in the minds of the scientists. Soon, all this led to a chaos / which almost resulted in closing of the company / in 1996.The additional expenses / related to the delayed market entry / were quite difficult to explain / to the financer / especially because the forecasts / that had been made at the time of the companys acquisition, had been very optimistic. Objective information / was not given to the investor / in fear that the financing decision / would have been negative. This all resulted in lack of confidence / and subsequently / in many long and bitter meetings with the financer.
The organization consisted of / scientists and technical staff only, no professional business manager / was on board. Thus, the feedback from the market / from the outside world / was very limited. The development team / lived its life / within the safety of the companys walls. Development resources / were naturally very limited /
like in a typical start-up company. It basically meant / that there was only one person / to work with electronics design, one / for optical and mechanical design / and one / for software. Additionally, there was one person for testing / and one for applications and customer demonstrations.
Maybe the most long-ranging negative effect / came from the unfocused operations / of the company. Even though there was a leader / of / the development team, there was no leader / who could have organized the development process / to focus all its resources / towards a single target: A commercial product. The plans changed almost everyday / when a new, more promising idea surfaced / in the minds of the scientists. Soon, all this led to a chaos / which almost resulted in closing of the company / in 1996.
5. As it is very common / for Finnish hi-tech companies, we also shared the passion / to enter the US market / as early as possible, since we understood / that it represents roughly / half of the global environmental monitoring market. A lot of money was wasted /
in several and serious attempts / to form a firm presence in the USA.
As it turned out quite early, the emissions monitoring market / of that time in the early nineties, reached its short lasting peak / and then rapidly went down / with devastating results / for many American emissions monitoring companies. With the unfinished technology / of our products / and frequent hickups / in their performance and operation reliability, it soon became evident / that major development / was needed / before we could sell the products successfully. Not only / to the US market, but elsewhere as well. In the USA, it practically meant /
a complete shutdown of our marketing operations.
A major technology revision / meant / huge added costs /
in a situation / where our company had produced / losses / larger than the revenues we had generated. We practically had to start from scratch again. We finally ended up with / complete management and organization changes / which, now in retrospect, should have occurred a long time earlier. Luckily, the owner and financer of the company /
was a patient person / with sufficient financial means and understanding / not to give up / but to continue the work with a new start.
As it is very common / for Finnish hi-tech companies, we also shared the passion / to enter the US market / as early as possible, since we understood / that it represents roughly / half of the global environmental monitoring market. A lot of money was wasted /
in several and serious attempts / to form a firm presence in the USA.
As it turned out quite early, the emissions monitoring market / of that time in the early nineties, reached its short lasting peak / and then rapidly went down / with devastating results / for many American emissions monitoring companies. With the unfinished technology / of our products / and frequent hickups / in their performance and operation reliability, it soon became evident / that major development / was needed / before we could sell the products successfully. Not only / to the US market, but elsewhere as well. In the USA, it practically meant /
a complete shutdown of our marketing operations.
A major technology revision / meant / huge added costs /
in a situation / where our company had produced / losses / larger than the revenues we had generated. We practically had to start from scratch again. We finally ended up with / complete management and organization changes / which, now in retrospect, should have occurred a long time earlier. Luckily, the owner and financer of the company /
was a patient person / with sufficient financial means and understanding / not to give up / but to continue the work with a new start.
6. Even though the novelty of the technology / that was developed / felt superb /
in the minds of the scientists / who had developed it, it was not so for other people. Strong opposition / was generated by competitors / and even the academic world / since the new technology / was completely contrary / to the traditional ways of making / quantitative measurements of gases. Only a few gurus in the field / had a sufficiently open mind / to look deeper in the new technology / and form an opinion / only after testing it properly, not relying on what others said about it. But it all meant / that selling products based on the new technology / became / an extremely slow process / which required a lot of work and resources /
to achieve successful results.
Most of the first sales required / not only one, but many product demonstrations /
at the customers site. The users wanted to see / that the product could measure correctly the gases at their plant; they were not satisfied with the knowledge /
that the analyser could measure similar gases / on some other plant. Many times,
the product had to be left at the customers site / for weeks or months / before the customer was willing to make a purchase decision. After the positive decision, it still took one to six months / before the payment was received. For a small company,
it meant a very difficult financial situation / and in our case, we could not have survived /
without the financial support from our parent company at that time.
One important factor / that has made the control of growth / difficult / is the nature of environmental business: The market demand very often grows / not smoothly / but stepwise / because of the distinct deadlines / of environmental legislation. This can impose / serious demands / on the companys resources / and across the complete manufacturer and supplier chain. It is not trivial / to increase the production capacity / of parts and products / that are specially made for our company by 100% within one year !
Another important problem / that we immediately faced with growing business / was /
the financing, since the payments in international business / often seem to come very late. The parts for the sold products / usually had been / fully paid / 4-6 months / before the payment for our product was received, forming a serious gap / in operating capital / especially when the turnover was growing rapidly. Without the help from the parent company the growth / could not have been realised.
Even though the novelty of the technology / that was developed / felt superb /
in the minds of the scientists / who had developed it, it was not so for other people. Strong opposition / was generated by competitors / and even the academic world / since the new technology / was completely contrary / to the traditional ways of making / quantitative measurements of gases. Only a few gurus in the field / had a sufficiently open mind / to look deeper in the new technology / and form an opinion / only after testing it properly, not relying on what others said about it. But it all meant / that selling products based on the new technology / became / an extremely slow process / which required a lot of work and resources /
to achieve successful results.
Most of the first sales required / not only one, but many product demonstrations /
at the customers site. The users wanted to see / that the product could measure correctly the gases at their plant; they were not satisfied with the knowledge /
that the analyser could measure similar gases / on some other plant. Many times,
the product had to be left at the customers site / for weeks or months / before the customer was willing to make a purchase decision. After the positive decision, it still took one to six months / before the payment was received. For a small company,
it meant a very difficult financial situation / and in our case, we could not have survived /
without the financial support from our parent company at that time.
One important factor / that has made the control of growth / difficult / is the nature of environmental business: The market demand very often grows / not smoothly / but stepwise / because of the distinct deadlines / of environmental legislation. This can impose / serious demands / on the companys resources / and across the complete manufacturer and supplier chain. It is not trivial / to increase the production capacity / of parts and products / that are specially made for our company by 100% within one year !
Another important problem / that we immediately faced with growing business / was /
the financing, since the payments in international business / often seem to come very late. The parts for the sold products / usually had been / fully paid / 4-6 months / before the payment for our product was received, forming a serious gap / in operating capital / especially when the turnover was growing rapidly. Without the help from the parent company the growth / could not have been realised.
7. Only after the technology had been thoroughly revised, was it possible to start marketing seriously / in a very focused application area, namely / emissions monitoring. Interesting enough, this is exactly the same application / that the product was designed for / already from the beginning.
When the product was finally / able to meet the requirements / of this demanding application, it became possible / to sell it effectively. Additionally, the quality and performance certificates / that were received / after testing projects / of more than two years / played a crucial role / in the growth of the sales volume. Without the approvals, we were practically shut out / from our main market.
The assembly work / was at first / partly outsourced / which turned out to be an unbearable situation / for the company. The sales margin / was very low, most of the manufacturing cost / came from that part of the product / that was manufactured elsewhere. The part / that included the core technology / comprised only 25% / of the manufacturing cost.
It soon became evident / that it was not possible / to make the company profitable / unless all manufacturing was done in-house.
Only after the technology had been thoroughly revised, was it possible to start marketing seriously / in a very focused application area, namely / emissions monitoring. Interesting enough, this is exactly the same application / that the product was designed for / already from the beginning.
When the product was finally / able to meet the requirements / of this demanding application, it became possible / to sell it effectively. Additionally, the quality and performance certificates / that were received / after testing projects / of more than two years / played a crucial role / in the growth of the sales volume. Without the approvals, we were practically shut out / from our main market.
The assembly work / was at first / partly outsourced / which turned out to be an unbearable situation / for the company. The sales margin / was very low, most of the manufacturing cost / came from that part of the product / that was manufactured elsewhere. The part / that included the core technology / comprised only 25% / of the manufacturing cost.
It soon became evident / that it was not possible / to make the company profitable / unless all manufacturing was done in-house.
8. Even though my talk should deal with challenges, I would like to bring up / some of the key factors / that I believe have been essential / in overcoming the challenges /
and in achieving the success / that we have experienced so far.
The success / or even survival / of the company / after the difficult first years /
would not have been possible / if the technical features of the product / had not been developed to the point / where they met / or exceeded the expectations of the users. Having said that, it only formed the basis / for the success.
It soon became evident / that also other features / played a crucial role / in winning projects from our competitors / that are much larger / and resourceful companies /
than what we were / and still are. For that purpose, a concept of turnkey product /
for each client / was utilized. That means, we offer a customized package / including
customer-tailored / and / application optimized hardware,and software, together with installation / and commissioning, service, maintenance as well as remote application support / to the client.
Since the products and systems / that we sell / are typically used / continuously /
24 hours a day, it is / of utmost importance / that the products are / reliable / and /
that we can offer / technically skilled service / at a very short notice. This has imposed
/ very high demand / on the technical personnel / of our company / and our distributors. The application support / that we can provide to our clients / is regarded / very effective / especially by those users / who use our products / in varying types of measurements.
Quite early on, after the set back / that we experienced in the USA, we focused our resources / first in European countries / and soon after / in the Far East. For our European distributors, we have arranged / frequent product and service training /
in addition to regular visits / by our export managers.
Distribution / is arranged / mostly / by independent local distributors / with exclusive rights / in addition to an OEM client / with worldwide rights. In 2005, we opened our own sales and support office / in Hong Kong / for the Far East market. This has been absolutely necessary / to become a / plausible / Continous Emissions Monitoring Systems supplier / in that region.Even though my talk should deal with challenges, I would like to bring up / some of the key factors / that I believe have been essential / in overcoming the challenges /
and in achieving the success / that we have experienced so far.
The success / or even survival / of the company / after the difficult first years /
would not have been possible / if the technical features of the product / had not been developed to the point / where they met / or exceeded the expectations of the users. Having said that, it only formed the basis / for the success.
It soon became evident / that also other features / played a crucial role / in winning projects from our competitors / that are much larger / and resourceful companies /
than what we were / and still are. For that purpose, a concept of turnkey product /
for each client / was utilized. That means, we offer a customized package / including
customer-tailored / and / application optimized hardware,and software, together with installation / and commissioning, service, maintenance as well as remote application support / to the client.
Since the products and systems / that we sell / are typically used / continuously /
24 hours a day, it is / of utmost importance / that the products are / reliable / and /
that we can offer / technically skilled service / at a very short notice. This has imposed
/ very high demand / on the technical personnel / of our company / and our distributors. The application support / that we can provide to our clients / is regarded / very effective / especially by those users / who use our products / in varying types of measurements.
Quite early on, after the set back / that we experienced in the USA, we focused our resources / first in European countries / and soon after / in the Far East. For our European distributors, we have arranged / frequent product and service training /
in addition to regular visits / by our export managers.
Distribution / is arranged / mostly / by independent local distributors / with exclusive rights / in addition to an OEM client / with worldwide rights. In 2005, we opened our own sales and support office / in Hong Kong / for the Far East market. This has been absolutely necessary / to become a / plausible / Continous Emissions Monitoring Systems supplier / in that region.
9. CRITICAL SUCCESS FACTORS Resources
Personnel Training
Personnel Awarding
Competitiveness
Distinguish the product positively from your competitor in all features relevant to the client, not only price !
As for all companies, human resources / play the most important role / in the success of our company, even though it could be thought / that the technology has been / and still is / the key success factor. This is naturally true / at least in our case / but it has to be remembered / that the technology has to be developed first / and for that purpose / highly skilled and motivated personnel / is required. In our company, we actively promote internal / and external training / for every employee / who is interested in / developing his or her personal skills. Motivation /
is boosted by giving employees / a say in planning / and developing their everyday work / and / by distributing part of the companys annual earnings / directly to personnel / as bonus salary.
In environmental business, which is driven and controlled very strictly / by legislation / the price of the product plays a very important role, as long as the product itself / fulfills the minimum requirements / in the law. When this is the case, all products are often considered / equal /
in the minds of the buyers. However, our experience has shown /
that by being able to present / other features / like cost of ownership /
or considerations / of what / future legislation / may bring / has made the decision makers / select our product / that is more expensive to purchase / but has certain and clear benefits / in the longer term of use. This is very important / to the client / since the average lifetime / of an emissions monitoring system / is roughly ten years.As for all companies, human resources / play the most important role / in the success of our company, even though it could be thought / that the technology has been / and still is / the key success factor. This is naturally true / at least in our case / but it has to be remembered / that the technology has to be developed first / and for that purpose / highly skilled and motivated personnel / is required. In our company, we actively promote internal / and external training / for every employee / who is interested in / developing his or her personal skills. Motivation /
is boosted by giving employees / a say in planning / and developing their everyday work / and / by distributing part of the companys annual earnings / directly to personnel / as bonus salary.
In environmental business, which is driven and controlled very strictly / by legislation / the price of the product plays a very important role, as long as the product itself / fulfills the minimum requirements / in the law. When this is the case, all products are often considered / equal /
in the minds of the buyers. However, our experience has shown /
that by being able to present / other features / like cost of ownership /
or considerations / of what / future legislation / may bring / has made the decision makers / select our product / that is more expensive to purchase / but has certain and clear benefits / in the longer term of use. This is very important / to the client / since the average lifetime / of an emissions monitoring system / is roughly ten years.
10. As already mentioned, environmental business / is driven by legislation. Thus, it has been / and / it still is / a big challenge / to try to guess / what kind of monitoring regulations / the future will bring, even though information / of certain standardization committees /
in the EU / for example / is quite easily available. The timing / of the implementation of legislation / is also important to know / beforehand /
to optimize the use of development resources / of the company.
More companies / are beginning to offer / FTIR products / for emissions monitoring applications / increasing the competition / and price erosion in the market. This may pose a serious challenge to our companys profitability and lead, to the transfer of manufacturing to less expensive countries/ at worst.
New technologies / are being developed all the time / by competitors. These technologies / may someday / take over the market / that is currently using FTIR technology. Naturally, our company is looking at / new, completely different technologies / than FTIR / as well.
It means / that more resources / have to be used / for research and development / increasing the companys expenses / and risks. On the other hand, it also gives an opportunity / to expand into / completely different business areas / diminishing the dependability / on the emissions monitoring market / driven by legislation.
As already mentioned, environmental business / is driven by legislation. Thus, it has been / and / it still is / a big challenge / to try to guess / what kind of monitoring regulations / the future will bring, even though information / of certain standardization committees /
in the EU / for example / is quite easily available. The timing / of the implementation of legislation / is also important to know / beforehand /
to optimize the use of development resources / of the company.
More companies / are beginning to offer / FTIR products / for emissions monitoring applications / increasing the competition / and price erosion in the market. This may pose a serious challenge to our companys profitability and lead, to the transfer of manufacturing to less expensive countries/ at worst.
New technologies / are being developed all the time / by competitors. These technologies / may someday / take over the market / that is currently using FTIR technology. Naturally, our company is looking at / new, completely different technologies / than FTIR / as well.
It means / that more resources / have to be used / for research and development / increasing the companys expenses / and risks. On the other hand, it also gives an opportunity / to expand into / completely different business areas / diminishing the dependability / on the emissions monitoring market / driven by legislation.
