COLUMBIA CITY, Indiana — Brian Emerick wanted to be a farmer.
This was back in the 1970s, when he was still a kid in northeast Indiana, growing up right off a rural two-lane, selling pumpkins in his front yard for spending cash. His goals have changed considerably since then.
Today, Emerick is the president and CEO of Micropulse Inc., privately held and focused on precision manufacturing for the orthopedics device industry that is so prevalent just 20 miles west over in Warsaw. Implants, instruments, clean packs. Those are some of the products that fill days and nights inside the headquarters and plant situated less than the length of a corn row from Emerick’s home. He still lives next door. “I have a 50-foot commute to work,” he said. “My biggest danger is falling on my butt on the ice between here and there.”
Micropulse was not always so focused. When Emerick founded the company out of his garage in 1988 — he owned one used CNC machine back then, purchased another one three months later, and still worked his day job at a local tool and die — he took any and every job offered to him.
“I had four, five local customers,” he said. “Some medical, some auto, I didn’t really care who it was. I didn’t target a specific industry. … My model was buy a machine, get some work, hire some people, and do anything for anybody. If I thought I could make a buck at it, I’d try it. It worked, but I was a rabbit chaser. It was not sustainable.”
Thanks to a self-described painful process of bringing in outside consultancy, developing a longer-term business plan, shedding customers and mortgaging practically every major asset he owned, Emerick positioned Micropulse — which has a headcount of about 300 today and plans to grow to about 500 by 2021— as a market leader. It’s a lesson in specialization applicable to any manufacturer who wants to narrow the focus, or even any business that just wants to grow a little leaner. That transition has also helped him develop a successful incubation program. We’ll let him tell you more.
Brian Emerick: Through the 1990s, about 40% of my business was medical, more by accident than by design. Looking back, how could we be any good at any it? We were OK at a lot of it, but we weren’t experts. ... It was more about the thrill of the hunt, growing a business, paying our bills. It was all working. Not a lot to the bottom line, but it was all about growth rate. We weren’t building reserves for a rainy day. I didn’t have controls, any board of directors. We all thought we knew what we were doing.
IndustryWeek: When did you realize that you didn’t really know what you were doing?
BE: The bank made us get consultants to help us. They didn’t tell us who, but they told us to get somebody. We brought on some retired business leaders. They came along side us and really began to challenge us in a lot of ways, worked us through some common business tools to explore our strategic vision, our capabilities, what we wanted to be when we grew up. And after a lot of work, the light bulb came on: The medical part of our business has always been good to us, and there’s obviously a great future there. We have the equipment and the expertise to participate in that. We made the decision that, within three years, we were going to be 100% medical. We literally burned the bridges, we had an auction to sell off equipment, we fired all our customers who weren’t medical, and within 12 months, we were all medical.
We were about $9 million or $10 million then. We ended up going from 90 people to 65 in a short time, but once we went through that molting process — chickens lose their wings, and for a while, they’re pretty ugly — that fire was lit.
IW: You shifted from a jack of all trades to a medical specialist within one year? What was the transition like after those 12 whirlwind months?
BE: It was humbling. I darn near lost everything. I mortgaged everything I had, my credit cards were maxed, I was playing games, doing everything I could, but it was challenging. Didn’t draw a salary for several years. There was a lot of adrenaline flowing. Everyone wanted to survive. And since 2003, we’ve been very profitable and very disciplined.
Going through that process, I also realized I had no formal business training. Yes, I had experience with what not to do, but I decided to pursue an executive MBA. Decided on Notre Dame because it seemed to fit my availability, and spent two years doing that. I was kind of withdrawn from the company at the time, immersed myself in it, and after that, I realized the company didn’t need me in the same capacity. That was a good thing. In the early years, I did everything, whether I was good at it or not. … It really helped me come to an awareness of myself, figuring out what I was good at and doing more of that, letting others do other things.
IW: And in terms of profitability …
BE: We’ve experienced an average growth rate over the long haul of about 11%, and over the last five years it’s been 11%. I’m privately held, so we’re not trying to grow super-fast — we don’t think that’s healthy for our company or our customers — and it’s been very organic.
IW: What do you still think about, in hindsight, from those years of pain and transition? And what advice would you give to manufacturers maybe considering a similar move toward specialization?
BE: Read every Jim Collins book you can get your hands on. It’s the business Bible. Going through this, a couple years into this, we’re patting ourselves on the back. It’s easy to fall into the trap that anything you touch turns to gold, and that’s exactly what Collins addresses. Some of these companies, massive companies, even 3M, think that everything they do will work. What a humbling reminder. I’m always looking over my shoulder, challenging our business model — I think in a good way.
From Specialization to Incubation
IW: You’ve also managed to develop a healthy incubation program on site, all also in medical, particularly orthopedics. How and when did that start?
BE: Our first experience with incubation was Micropulse West. (A satellite version of the company Emerick established with his nephew, who started working at Micropulse while still a teenager. They operated it out of Phoenix for about a decade before selling it.) In 2004, I met a couple gentlemen from large companies in Warsaw — two engineers — and we formed a company called DVO. We set out to design a better shoulder, and did that. Long story short, that was acquired by Tornier, so that was a good thing for everybody. At the time, Micropulse was doing about $3 million of manufacturing a year for that, and we’re still doing about that much for it today.
Light bulb came on: I wouldn’t mind doing more of this. We provided some space, some engineers, most of the first-round money, accounting services, IT, clerical, whatever they needed, and that’s worked out really well. The orthovation model, for us to be interested, it has to be tightly in our core competency of orthopedic product, and we have to be aligned with the partners, the people. Not all of them have worked out. Some have crashed and burned — and when that happens, it’s usually about the people.
IW: These businesses operate from your headquarters. I imagine there’s a different sort of dynamic for them and for you, for Micropulse?
BE: The orthovation goal, outside of being fun, we’ve had to become more disciplined with what we get involved with. There’s a finite amount of resources. … We have to be careful not to overextend ourselves. When we incubate a company, we provide some seed capital, contribute services, but we seek out outside investment. We don’t force the incubator companies to use our services. Sometimes, they go to our competitors. … That’s fine. The whole model is to develop, with an equity play potential and the manufacturing opportunities.
IW: What sort of ground rules do you have for bringing in startups?
BE: 10% is kind of my minimum. I don’t want anybody in my facility unless I have at least that big a stake. … There are many examples of companies raising $20 million, $50 million, $100 million, of going too far too fast, and they end of giving all their ownership away. We’re not afraid of giving some of it up, but we want to be cautious. We’ve found that bootstrapping and being tight on capital makes for good discipline. Having too much capital is almost as bad as not having any. You may build too much inventory you don’t need, all sorts of things. When you’re tight as tight can be, you vet your decisions well.
IW: And you’ve had some success stories.
BE: You never know where you’re going to wind up with a startup business. It’s all about tenacity, about not giving up. Nanovis (a spine company licensed from Indiana-Purdue Fort Wayne in 2006, with headquarters in Carmel, Indiana, and one employee on site at Micropulse), for example, finished 2015 with about $1.3 million in revenue, somewhere between $3 million and $3.5 million this year, and a forecast next year of $7 million. It’s been a long road, and it’s not for the weak of heart. This company incubation stuff is brutal.
IW: Do you worry that what happened in the auto industry could happen in the medical industry?
BE: I have a healthy paranoia of a lot of things. I’m not a worrier, though. I’m addicted to risk. There’s all kinds of cost pressure in our industry. We know our industry — I study it, I live and breathe it — and there’s been plenty of shift to offshore manufacturing in our industry. We were pretty worried about that, but we don’t feel like we’re at that scale. We’ve looked at manufacturing in Costa Rica, the Dominican Republic, thought about China and other places around the world. But we’re a low-volume, high-degree of difficulty manufacturing business here, and we’re not trying to do commodity things like hips and knees. We watch that, but our model is to do the hard stuff, lean out the organization, automate.
There are companies here in northeast Indiana that are 100% automotive and they’re doing wonderful. I would argue that we picked medical, but shoot, aerospace is tremendous in northeast Indiana and there are other strong industries. We’ll navigate any rough waters of the orthopedic industry. I used to think focusing was going to limit my opportunities, but it did the exact opposite. The deeper we got in orthopedics, the more opportunities we got, but we have a diversity within the industry.
IW: New tech is always a talking point. Are you getting into robotics or additive manufacturing?
BE: We don’t use a lot of robotics. Most of our robotics are off the shelf, pre-manufactured robots you can integrate into your machines. We’ve been watching additive manufacturing for a long time, and we’ve had the small bench-top units for the engineers to make plastic stuff. But we just invested $1.5 million in two laser sintering EOS machines, knowing it will just be a boat anchor for a while.
IW: What is your goal with those machines?
BE: It’s almost comical, the hype: Additive is going to be the end-all for everybody everywhere. It’s not anywhere close to that. It is a very interesting technology for parts that are almost impossible to make otherwise. We knew we were going there sooner or later, and we had a customer who wanted us to do a cobalt chrome part, a knee, and that’s something almost anybody is doing on an additive machine. It can be done. So we basically bought a machine for one customer. We’ve figured out with them that it’s not a great application for laser sintering. If that wasn’t pain enough, we ordered another machine for titanium, with nothing lined up. Nobody is going to give me an order before I have a machine. There’s so much trial and error, and debugging. Anybody who makes additive sound easy knows nothing about it. There are so many variables.
Rather than cannibalizing existing manufacturing, it’s going to open up more opportunities to create new, innovative products. We think it will be significant in the future.
IW: Any other words of wisdom — general knowledge, or more specific, toward specialization and narrowed focus?
BE: Patience. Every time we’ve started something, it’s taken three to five years for it to really get momentum.