During a recent tour of manufacturing plants in the Toledo, Ohio region, I decided to write an article about , Inc because of the interesting story about Dr. Tom Brady who founded the company in 1985. Brady worked for Owens-Illinois, Inc. from 1971-1984, and became the vice president and director of technology. He led the development of the first PET (polyester) plastic soft drink container and directed the technical activities for all of O-I’s plastic product lines.
Asked what led him to start PTI, he said, "In late 1985, I happened upon a unique opportunity to start the company. Several of the major Coca-Cola bottlers were seeking to expand their already successful PET bottle manufacturing operations and to develop new and innovative PET plastic soft drink packaging products. The four largest Coca-Cola regional bottling cooperatives agreed to jointly sponsor and fund product development and engineering projects, and they approached me to manage those project development efforts. Not having an interest in just changing jobs, I made a counter offer to those Coca-Cola cooperatives to establish a separate independent company for the purpose of managing their projects. When they agreed, I left O-I to start Plastic Technologies, Inc. and signed long-term contracts with all four Coca-Cola cooperatives.
"Because of my industry experience, I was quickly able to identify additional customers that were non-competitive to Coca-Cola and I hired a small, but highly experienced professional staff, to do the technical development for the Coca-Cola cooperatives and for other customers,” Brady continued. “Because of our professionalism and experience, we were quickly able to establish a reputation in the industry as a high quality PET R&D and technical support company. As our technical staff expanded and our revenue grew at compound annual rates of 35%, we moved to a larger facility in 1989 and set up both analytical testing and process development laboratories, with the capability of prototyping and testing PET containers and preforms. We founded Phoenix Technologies International LLC in 1991 in nearby Bowling Green, Ohio and have since then expanded the plant three times to produce recycled PET using proprietary technology.
“Because PET had become the material of choice for new packaging during the 80s and 90s, we were able to quickly expand our customer base and to become involved in developing many different products and businesses, including health care packaging, plastic recycling, specialty compound development and even leisure products. Our experiences outside the PET packaging field provided a basis for us to hire additional technical professionals to staff our laboratories and establish a reputation in the plastics industry as a substantial technical development company.
“Since those early days, we have developed relationships with most major manufacturers, resin suppliers, machinery builders, brand owners, and converters. Today, we even supply preforms for blow molding to customers needing specific quantities or unusual designs. We have also learned how to work effectively with competitive customers and we have become recognized for our excellence in protecting customer intellectual property and confidentiality. Today, our customers are involved in every step of the PET value chain from raw material supply through end of life recyclability."
I asked if they were affected by the recession of 2008-2009 and if so, what did they do to survive it? Brady said, "The recession did have a big effect on PTI’s business, but the recession, per se, was not the most significant issue. Rather, the recession just added to the challenge of changes that were already happening in the world at large.” As is true for almost every business today, one of the challenges for PTI today is to redefine its business going forward. Brady said that what PTI has done successfully for 30 years is no longer as different and special as it once was. The challenge for PTI, and for every business today, is to find the "gaps" in the markets of the future that can be filled by employing the experience and knowledge that has been developed over many years.
Brady did say that “we had to do some things differently during the recession. We had to get more professional about sales because there are many more companies selling the same technologies and services now. The biggest impediment to our continued growth is that there are more competitors, so that staying ahead of the competition is a bigger challenge.” When he started the company, he was working with the top levels of management at his major customers. Now, he says that business is being done at a different level. More business is handled today by professional purchasing agents, so you have to be more price competitive than in the past. They also went through formal training in Lean, which has been beneficial to their manufacturing businesses, because, he says, "You have to be more efficient to be competitive in every aspect of your business today.” However, the Lean initiative didn't affect PTI’s testing lab, where becoming ISO certified had more of an impact.
Speed, Not Patents
Since I had seen a whole wall of patents PTI had been granted on display at their headquarters, I asked if the change in patent law under the America Invents Act of 2011 affected his company. He replied, "We have to take the steps to be ‘first to file’ instead of being able to rely on being ‘first to invent.’ We have to file more provisional patents than we ever had to in the past, which adds another big burden and costs that we didn't have previously. Our number of patent applications has shrunk now that we can't depend on being first to invent. Anything that adds bureaucratic activity becomes a burden on business."
[W]e find that patents are less valuable than they used to be. It is more important to be first to the market and to be innovative."
—Dr. Tom Brady
After my visit, I had emailed Brady information on the proposed patent legislation (H.R. 9 and S.1137) and asked if these bills would have an effect on his company. He responded, "You don't have time to fight everything that comes up. You try to work around it. In fact, we find that patents are less valuable than they used to be. It is more important to be first to the market and to be innovative. Our growth hasn't been about becoming a bigger and bigger company. We started Phoenix Technologies and our other companies so that those teams could be more entrepreneurial themselves. Our growth model has been to expand by creating our own ‘Intrapreneurs,’ by offering those intrapreneurs ownership and by growing as a family of companies. Our PTI family of companies now includes two manufacturing companies, two technical development and engineering service companies and three joint venture companies that license technology or sell specialty services to the packaging industry (Preform Technologies LLC, Phoenix Technologies International LLC, PTI Europe SARL, PETWall LLC, Minus 9 Plastics LLC and The Packaging Conference). Today, many PTI employees are owners and are in a position where they can truly feel it’s their company. Any employee can be considered by the management team for an opportunity to buy an equity stake, and 40% of PTI employees are owners today. We have more than 200 employees worldwide and many of the products you buy every day are sold in plastic containers designed by one of our companies."
During my visit, I was astonished to learn that there are only 11 states that have bottle deposit programs to encourage recycling ─ California, Connecticut, Delaware, Hawaii, Iowa, Maine, Massachusetts, Michigan, New York, Oregon, and Vermont. In these states, about 80% of bottles are recycled, while in non bottle-deposit states only about 20% of bottles are recycled. Asked why more states didn't have bottle deposit programs, Brady responded that many major companies oppose the programs because they say it would add to their costs. He explained, "You have to have an infrastructure in place to get enough material to make recycling profitable.” However, he emphasized that everybody, even those who think deposit systems cost more money, would win if there was more recycled material, because the costs for virgin material would go down. He also pointed out that a lot of the recycled material goes offshore to China and other Asian countries because it is cheaper to ship the material in the empty containers that are going back to Asia than it is to ship the material to Ohio.
“We are a big enough company that we can buy recycled material from other sources in Mexico, Canada, South America, and even Iceland, and, we also benefit because we put it back into the highest value end-use products ─ food and beverage containers,” said Brady, who pointed out that when China and India get to our standard of living, there isn't going to be enough of all the raw materials to go around. That means that reusing all materials will eventually become necessary and that recycling will become a significant industry, rather than remaining a “nice thing to do.”
In 2009, Brady took a leave of absence from the company to become the interim dean of Education at the University of Toledo. He said, "At first, I was judged by the faculty and staff at the college to be a poor choice as the interim dean. However, I actually had the advantage of being completely dependent upon the expertise and experience of the faculty and staff at the college. I made a personal commitment to get to know each and every person in the college and to understand the personal and professional backgrounds of everyone. As a result, we were able to work together to craft a mission and strategy for the future and to create a climate of success going forward."
Education Critical to Economy
Therefore, I wasn't surprised to learn that Brady's grandfather founded the University of Toledo’s college of secondary education. His mother, an aunt, his two sisters and both grandmothers all taught school. He doesn't just "talk the talk," he "walks the talk." When he was interviewed by Plastic News prior to being inducted into the Society of Plastics Industry Hall of Fame in
, 2012, he said, "My goal is to help anywhere I can to make education better. If we don’t educate our kids in this country, we’re lost. Our only competitive advantage is being able to be entrepreneurs. The rest of the world can catch up in everything else, so we better figure it out. And, there are not going to be enough unskilled jobs in the future, so you better educate people so they can go out and create their own jobs.”
Dr. Brady emphasized the importance of education and training to economic development. "In a sense, I think I could reduce the entire economic development issue to just this one issue. That is, if we spent every one of our economic development dollars on building a world class K-16 education and training system, I truly believe that economic development would happen naturally as a by-product of that initiative." He reiterated a point that he had made to the mayor of Toledo a few years earlier:
- Higher per-capita income is a by-product of higher-paying jobs
- Higher-paying jobs are a by-product of knowledge-based commerce
- Knowledge-based commerce is a by-product of education and talent
- Talent and education are by-products of a superior K-16 school system, substantive trade and skill development institutions, and a superior teaching and research university.
I completely concur and made similar points in my book, Can American Manufacturing be Saved? Why we should and how we can, as well as the several blog articles I have written about workforce development and attracting the next generation of manufacturing workers. Manufacturing jobs are the foundation of our economy and the middle class. We must strengthen our manufacturing industry to create more jobs if we want our children and grandchildren to have an opportunity to live the "American Dream."