Isola Executive Vice Chairman and Acting CEO Travis Kelly on the Upcoming Year
Isola Executive Vice Chairman and Acting CEO Travis Kelly discusses the recent milestones for the company, including the leadership transition. Travis also outlines his agenda for the upcoming year and gives an update on Isola’s new facility in Chandler, Arizona.
Barry Matties: Travis, please give us a little background about who you are and what you’re doing with Isola.
Travis Kelly: I’m the executive vice chairman and acting CEO. The senior leadership team spends most of our time in Chandler, Arizona, at our headquarters, overseeing the entire business operations. Our team’s focus is on driving operational excellence in terms of manufacturing as well as product development and delivering high-quality products to the customer on time.
Matties: There have been a lot of changes in Isola over the last few years. Your predecessor, Jeff Waters, was there for a number of years and recently left. When we talked to him within the first 10 days of his position there, he had a lot of big plans. Can you tell us about the change?
Kelly: Jeff did a nice job over the past couple of years building up new product development at Isola and getting the operations aligned with the overall corporate objectives. He had a great opportunity to be a publicly traded CEO at a relatively large company, so from a personal and professional standpoint, it was the right decision for him, and we wish him the best. Jeff was able to stabilize our platform and reinvigorate our business across our markets. Now, we’re really focused on elevating the business to the next phase. We’re launching high-quality products, driving efficiencies from an operational standpoint, and setting the company up for growth as we launch new products.
Matties: Again, in the last interview we had with Jeff, he talked about the construction of a new flexible factory. Can you give us an update on that?
Kelly: Absolutely. We did sell the Chandler facility, and we are now building a state-of-the-art facility that’s going to be more focused on quick turnarounds. We’ve heard our customers loud and clear—they want shorter runs and volumes, but higher mix—and the Chandler facility was not set up to accommodate customers’ demands. So, our new flexible facility will enable us to deliver our products to customers when they need it. Not only will the facility provide flexibility, but it will also centralize our operations. Isola’s headquarters and the R&D labs will also be in the same facility as opposed to having its current spread out footprint. Everyone is going to be under one roof now, which should help facilitate more collaboration for new product development and quick turnarounds for customers.
Matties: In the recent market shift, what are customers’ feeling towards all the changes going on here?
Kelly: With any company, change is a natural part of its evolution and growth. We think there are a lot of exciting changes happening. However, even with all our changes, the constant for us is our focus on meeting the needs of our customers. In terms of the senior leadership team attrition, you expect to see some transitions as time goes on. We’re always looking to have the right mix of insider industry expertise as well as fresh perspective. One key advantage that our parent company Cerberus Capital Management brings is they have a very large operational team. They are functional industry experts who can come in and assist companies, like Isola, in delivering against their objectives. It’s a nice mix right now at Isola with Cerberus’ partnership as well as the Isola senior leadership team who bring company and industry expertise.
Matties: The title “acting CEO” implies a short period of time. Are you in the search for a permanent CEO or what is the strategy?
Kelly: Yes, there’s a search in progress, but we don’t feel forced into making a decision. We will make sure we have the right person with the right DNA to lead the company in the next phase. But until we find that person, I’m fully committed to Isola, so when I make decisions on a day-to-day basis, it’s for the long-term success of Isola. It’s not, “I need to get through the next 30 days,” because we are not working on a definite timeline.
Matties: Whether you’re the acting CEO for five years or five months, we know this change is coming. And you’re in a state of transition, but company culture is so important. How do you bring culture into a company and know that you’re going to be able to carry it forward?
Kelly: The culture has to be more than one person.
Matties: Somebody sets the tone though.
Kelly: It is really the underlying behaviors that formulate the culture of a company. We are looking to build a company that is foremost customer-focused and also committed to operational excellence. Jeff did a great job of instilling that culture during his tenure, and we will continue to drive that going forward. I’m a firm believer that if it’s a self-sustaining organism, like a company should be; then, realistically, that culture will breed upon itself. Any leader coming in will continue to foster that culture.
Nolan Johnson: Presuming that you could be in this role for a year or more, what do you see as your agenda for your first year as the acting CEO?
Kelly: My agenda is really a three-prong approach. First and foremost, it’s focused on new product development. And it’s not just designing these products in the lab; it’s also understanding how to execute the launch to our customers. It’s about getting products from the development stage to feasibility and production, running that entire value chain, and making sure that every single milestone is met to fulfill our customers’ needs.
Our second focus as a manufacturing company is how to become increasingly efficient; part of it is being cost competitive. As we look across the manufacturing footprint, what do we need to do to be successful in satisfying the customers by delivering quality products while doing it within a less expensive cost structure than what exists today?
The third focus is growth, including pursuing new business opportunities with our products. We are also looking at how to expand the product portfolio by making several key strategic choices as it relates to the commercial environment and where we think we should be as a company over the next five years.
Johnson: Do you feel like Isola is in a place to be getting the right kind of customer feedback on what the product development should be?
Kelly: We have very nice relationships both in terms of the PCB fabricators as well as our OEM marketing department. We can triangulate on a lot of feedback coming from fabricators and OEMs to help us set what the direction should be. It’s more of a collaborative approach, incorporating feedback from both the customers—which are the fabricators and OEMs—as well as what we think our capabilities are, which is important too.
Johnson: Of course, all of this then folds into your new facility and configuration.
Matties: In terms of the new facility, what’s the expectation for having this online?
Kelly: It’s going to be in different stages. As we look from a manufacturing standpoint, including the treating of the material and pressing, it will all be done over the next several months. The headquarter move should happen later—around mid-summer of this year—so we’ll move the headquarters, and then start building the R&D lab. The idea is by the first quarter of 2020, we should have the majority of our operations within the new facility.
Matties: That would be great. That makes a big difference.
Kelly: Having everyone under one roof is important.
Matties: As a global company, how is the Asian market for you and how do your strategies play globally there?
Kelly: If you look at the Isola global footprint, it is very strategic. We have operations in Taiwan and China, and then we have an R&D facility in Singapore. We have the right global footprint. Obviously, we’re keeping our eye on tariffs and the trade environment between the U.S. and China. But in terms of our overall globalized footprint, we’re set up for success. Now, we have to capitalize by looking at conversion costs and our manufacturing efficiencies and improvement opportunities.
Matties: When you look at the marketplace, the American economy is healthy according to many people at IPC APEX EXPO. What do you look at for a future economy? What drives you?
Kelly: Realistically, it’s good to hear. I know there’s more capital expenditure spending. You see capital equipment spending and investments happening. However, there are also warning signs from a macroeconomic standpoint, showing that the economy is slowing down. It’s not just the trade environment that’s happening, but if you look at some of the key economic indicators, you can see some of it shrinking. If a slowdown is ultimately the case, we need to ensure that we are agile, which goes back to our new facility. If there should be a shrinking of the market for a period of time, we will be positioned to respond and react quickly.
Matties: And not be so heavy that it impacts you negatively.
Matties: One of the big drives and transitions that we’re seeing is smart factories. It’s a big area, and there are a lot of definitions of smart factories, but a true smart factory has to plug into its supply base. What sort of communication or interest do your customers have now, and what are you doing regarding smart factories?
Kelly: That’s a great question. If you look at the value chain, you start from your vendors. Our supply chain is all the way to the customer. We look at different Lean events, and we will do value stream mapping across the supply chain and work on certain kaizens to eliminate waste from the system. Waste elimination can be WIP inventory management, or it can be reducing your cost of labor inside every single product that you ship. As you mentioned, the term “smart factories” means different things to different companies.
We look at it holistically when we think about what we can do to be more efficient. That can be on the procurement side, on the manufacturing side from a vendor standpoint, as well as the freight costs into our facilities. We constantly focus on what we can control inside our four walls to become more efficient across the entire value chain.
Matties: When you look at a total smart factory, it’s the ability for your customers to plug into your computer system—whatever that system happens to be—check inventory, place an order, and have it expedited and done through their computer system; it’s about optimizing their workflow. Are you seeing any requests for that sort of access yet?
Kelly: We are slowly. If you look at the automotive industry, everything is done via EDI transactions where the OEM can see their supplier’s inventory. Everything is just-in-time or Kanban systems for inventory control, and that’s where we need to get to as well.
Matties: It’s a leading thought.
Kelly: Exactly. It helps the customer, and you become a better business partner to your customers. You also become better business partners to your vendors, so in theory, everyone wins. However, it’s a big investment, and it takes time to implement. First and foremost, you can’t just put a system in place or implement EDI if you don’t have good inventory control, so there are a lot of phases to ensure we are rolling it out correctly and effectively.
Matties: When you look at the supply line, you can sell products and be quite confident and capable and provide great products, or you can lead the industry to the future through great leadership and expertise. It sounds like a combination of that is a winning recipe.
Kelly: The product is extremely important, of course, but what will be important in differentiating us from the competition is our ability to deliver that extra service. You want to be known as a supplier that is easy to do business with, which is something that we need to strive for in all of our dealings.
Matties: Being easy to do business with and all that is still great, but being the thought leader drives things in today’s world because if all things are equal and I need a sheet of material, there are 10 places where I can get it. Yes, the quality has to be there. Price is something that’s negotiable across the board. All of those factors are the cost of doing business. What sets you apart?
Kelly: That’s a great question. We have leading products, high-quality service, and competitive pricing, but what sets a company apart is its ability to be an innovative solution provider for customers. It is working with customers on their end product and figuring out a technological solution that integrates their product design. That’s the game we’re all playing. For example, if a company wants to build a certain satellite, a thought leader works with that OEM and solves the problems for them, saying, “We understand what you want, and this is what we can do for you, which is an even better solution for you.” That’s how you become a thought leader and go-to vendor. We are focused on reaching that phase and have already started doing some of that with our customers.
Matties: You’re on to it. When you say you’ve already started, are you building a dedicated team to provide engineering services in that capacity, be it technical sales? I know you’ve worked with Insulectro and others.
Kelly: Yes. We’ve invested in what we call OEM marketing, which is working with the OEM, end user, and end customer on helping design products, integrating our products into that design, and also assisting with some tactical sales. It’s definitely a focus of ours and something we’ve invested capital in; we’ve built up the team. We hired the last person of that team over the last two months, so we’re excited because we believe that is the future.
Matties: The approach of helping an OEM not just improve their product, but also lower their total cost may not mean that you’re selling your product for a lower price, but in the end, they wind up with lower cost. That’s extremely valuable.
Matties: What’s the greatest challenge for you in this role?
Kelly: With any company, the greatest challenge is continuing to drive the culture. I am focused on building on the foundation Jeff established and making sure that we have collaboration, not only within the organization itself but also with the OEMs and our suppliers because that’s something that people always forget to mention. Our vendors are extremely important in our business relationship, so driving collaboration when we want to develop new products is essential. When working with customers, our vendors are at the table too because they have great ideas. All of us working together can launch very successful products. So, that is the biggest challenge—continuing to drive our culture of collaboration across the entire value stream.
Matties: Is there anything that we haven’t talked about that you think we should cover today?
Kelly: No, I think we’ve covered the main topics. I appreciate everyone’s time, and we’ll look forward to having a discussion next year where you can see what we’ve been able to execute based on this discussion.
Matties: Great. We certainly appreciate your time today.
Kelly: Thank you.