Having a product line that is a runaway success is obviously a good thing for any company. The trouble is that, while one product line is ‘going to the ball’, the Cinderella product line gets less attention and cannot fulfil its potential.
Of course, in fairly tales these problems are easily rectified with glass slippers and pumpkins. But in the real world the solution is often to separate out the successful bit and let the rest of the company develop on its own.
This is what has happened with the Italian automation company Datasensor. Concerned it was being overshadowed by its ‘sister’s’ success, its owners created two separate companies.
Datasensor has since concentrated on its business, invested in research and development and grown into one of the world’s leading suppliers of industrial automation sensors. But it cannot rest on its laurels. Camera manufacturers are closing in on its traditional market and the time has come to fight back with its own camera products. The market may not have moved significantly away from sensors into cameras yet, but the writing is on the wall in this particular fairy tale.
Datasensor started life as Datalogic in 1972. Romano Volta, a former professor of electrical engineering at the University of Bologna, founded the company to make photo-electric sensors and control devices for machines. In the late 1970s it released one of the first barcode readers. The product line was a runaway success and the company expanded around the world, sometimes enjoying 100 per cent growth in a year. The sensor business continued, but was in the shadow of its barcode business. In 1998 it was decided to rebrand the sensor business as Datasensor and the Datalogic business unit was made into a new company, which then went public.
The Volta family controls 100 per cent of Datasensor and a significant amount of Datalogic through a holding company called Hydra, but the two companies are run completely independently.
Lamberto Girolomoni, CEO of Datasensor, says: ‘The official reason is to separate the identification and the automation business, because Datalogic wanted to be known as purely an identifications company. Also, Datalogic wanted to become a public company and it has been public since 2002. The third reason is that the combined business did not really believe in our business. For 10 years we had concentrated on the barcode business, because it was growing so quickly. It was an emerging market while the industrial automation market was more mature. Now we are a separate company we can concentrate entirely on automation products.’
Lamberto Girolomoni, CEO of Datasensor.
With its new independence, in 1998 Datasensor concentrated its efforts on research and development. It had a dedicated team working on automation and they had a lot of work to do.
Girolomoni says: ‘We used the first three years to renew our range, substituting our old range for the new one. We improved the existing range and introduced new ranges. About 80 per cent of the new products were substitutes for our existing products and about 20 per cent were brand new.
‘At the time we were mostly involved in the packaging industry. About 70 per cent of our business was through OEMs to the packaging industry. The rest was in materials handling and ceramics and so on. The first business plan was to add new products that did not overlap with our existing products. The second business plan was to expand into safety light curtains, and the present business plan is for us to add vision products for detection, safety, building automation, and inspection.
‘In 1998 we turned over E16m and last year we turned over E33m. If you take into account the rise of the Euro we have grown the company three-fold in terms of quantity. The other important thing is that in 1998 domestic sales in Italy were about 70 per cent, but last year only 45 per cent was domestic. The rest was sold in more than 70 countries and we have eight subsidiary companies.
‘We started by investing in the products and then we invested in the sales and marketing activity. We work a lot with partners and 20 per cent of our production is now branded for other companies. The emphasis has moved away from the packaging sector into wider materials handling and automation markets.’
In the separation from Datalogic, Datasensor had taken a small optics division that designed and manufactured the optics for Datalogic’s range of scanners. The relationship continued after the split, with Datalogic being the single customer for the optics line. In 2001 Datasensor decided to start selling optics on the open market to other OEMs. Its sister company is still an important customer, but the optics division has grown to a turnover of about E2m in its own right.
The other major diversification has been into vision. Some larger camera manufacturers have started to market their lower-end smart cameras as an alternative to the traditional position sensor.
This has not escaped the attention of Datasensor; Girolomoni believes the market will start to go this way and so Datasensor is fighting back by developing its own vision range. As well as its own R&D effort in 2004, it bought a company called SpecialVideo, which had 10 years of experience in robot vision systems and quality control systems.
Girolomoni says: ‘The camera will be the future sensor. At the moment it is not the case because the cost of the whole solution is much higher – but, as the technology improves and becomes cheaper, the camera sensor will become the choice of sensor for some applications when it is easy to use, easy to install and not expensive. You can use a camera in place of more than one sensor, because you can make many measurements with one camera that would require several sensors.
This is not happening yet, firstly because of the cost and secondly, because the market that we follow is not ready. Very few customers have the expertise in-house to use cameras. Some of our OEM customers are using cameras, but each time they have to bring in external consultants or a different supplier for each application. Germany is more ready and the US even more so, but the situation alters in different markets. In the German and US markets, not all OEMs are able to use vision technology. But the cost is a very strong barrier.
‘The large companies are starting to use this technology and the smaller and medium companies are watching them closely. Customers are always asking us what the market leaders are doing.
‘We are investing more and more in this technology, because we believe that vision will not necessarily replace sensors, but it might be useful in the safety field in place of the light curtain; also in the building automation market. The camera manufacturers are competing in our field, but we think the market will continue to grow and there will be space for everyone, which is why we are continuing to work in this direction.’
The most important customer group for Datasensor is system integrators and OEMs. Datasensor has created an extensive sales channel with accreditations and distribution agreements all over the world. This is one of the keys to its success – that it has relationships with the key companies in each market and identifies on its website the areas in which they have expertise. In countries where Datasensor does not have a direct presence, it has strong relationships with distributors who support their system integrator partners. This sales network is already plugged into the industrial automation scene, making it easy to introduce new products around the world very quickly, something which competitors may struggle to achieve.
Girolomoni says: ‘The network has distributors for the whole range of products and experts in various fields. But we are looking to increase this network, because not all our partners have expertise in vision or even want to sell vision, because it is too complicated. But we want to work more with vision system integrators, because they have the expertise in particular in after-sales service. In the past our system integrator partners have helped us to develop our product lines. We are also looking at using solution providers who use our products and this is a pilot project at the moment.
‘We are a small company and we want to have lots of people in the field talking about us. At the moment we do not have any serious overlapping and we are careful to consider this when choosing partners. At the moment we need to add partners who are specific to vision but in the future I think our general channel will be able to sell. We are simply a component manufacturer; we do not sell solutions to customers. We need partners who can sell these solutions and can provide a good service.’
Datasensor is prepared to invest in its partners in terms of training and other resources, but it requires partners to enter into a contract and to make a commitment in return. For distributors this includes carrying stock so that customer orders anywhere can be fulfilled quickly.
The company has maintained its commitment to manufacturing in Italy, but a small plant was opened in Hungary, as a joint venture with local contract manufacturer Fonyton, to handle the more mature product lines. Girolomoni believes that as a small company producing small volumes of specialised products there is very little incentive to move the manufacturing operation to the Far East. He accepts that the situation may change, but for the next five years or so production will stay at its headquarters in the mountains above Bologna. Most of the company’s competition is coming from the US rather than the Far East.
Girolomoni says the company is under constant pressure, mostly on price. In the industry in which it operates, the quality of the products has to be a given and the main issue in conversations with customers is around price. This means it constantly has to find new ways of driving cost out of its products without compromising the quality in any way. Any cost reductions achieved by moving to a lower cost manufacturing environment has to be weighed against the risk to the quality management systems.
He says: ‘We work with large companies that are asking us every day to improve our products and reduce prices. Our production capacity is a very important part of our sales story and we have won awards for our production quality and our logistics.’
Girolomoni has an ambition to double the turnover of the company in the next five years. He believes that the present business will continue to grow organically as the market grows and it is investing 7-8 per cent of its turnover in R&D to keep it at the leading edge. He also has plans for a significant new product line and is currently seeking approval from the board for the investment required. The third way he expects to grow is to make further acquisitions. He will not say where he is looking for companies to buy, but he says it will probably involve an investment of about E10m. He knows that Datasensor cannot stand still if it is going to continue to be competitive.
Given the company’s extensive sales network it is in a very good position to launch new products into the automation market and to take over smaller companies that cannot get the coverage. But Girolomoni wants the company to continue to be known for its manufacturing rather than simply becoming a distributor. This means that product development will always be at the top of the agenda.