It is in Lebanon, of all places, that the tale of Technica unfolds. The company manufactures and customizes automated end of line solutions — those machines that prepare products after they’ve been individually assembled, or wrapped, for shipping. So, if you were to say, eat a Twix candy bar in Cairo, it would have been Technica’s machines that prepped the boxes of candy bars for shipping, separating products by the barcode number and sending them to the warehouse by automated conveyor belts. Or, for example, if you were to pour yourself a glass of milk bottled by Almarai — one of Saudi Arabia’s largest dairies — it would have been Technica’s machines that collected the milk bottles, sanitizing and sorting them before carrying them off to a refrigerator warehouse for shipping — all completed automatically with little human interface. And these machines are all designed and built in Lebanon, who would have thought?
Tony Haddad, Technica’s founder and general manager, is on a mission to transform the way other factories package and prepare their products. The family owned business and manufacturer of robotics and automated assembly solutions has completed expansion of its Bikfaya factory with an eye on further entrenchment in the GCC markets and new opportunities in Africa.
If adversity produces champions, then Technica is Lebanon’s poster child. Especially as in the world of industrial manufacturing big usually conquers small. But for firms operating in niche fields, such as robotics, small yet aggressive companies can thrive in even the toughest of environment. Technica is aiming to be the preferred partner for automated solutions in the Middle East and African markets by 2020. According to Technica’s survey of the Middle East market, the sales of automated solutions have reached $10 million annually.
[pullquote]Today, Technica is going head to head with large European players already entrenched in the business[/pullquote]
Today, Technica is going head to head with large European players already entrenched in the business, such as Krones (a large German conglomerate) and OCME (an Italian automation firm), as well as a few regional companies offering more niche solutions. Yet Technica has rooted itself in the Middle East market — its client list stands presently at 276 — serving local divisions of global corporations like Mars, Nestle, Procter & Gamble and Coca Cola, to name a few. And by 2020 Technica hopes its client base will reach 325, partly driven by further expansion in the GCC markets but also propelled by the push into African markets.
All of this started in a tiny garage during Lebanon’s Civil War. When the war became too intense to continue operations, Haddad packed everything on a boat and moved the business to Cyprus. When tensions eased in 1991 and the Syrian occupation lent some stability to the country, Haddad moved the company back and began construction of a new factory in Bikfaya — the site of their present operations. By this point one starts picking up on a recurring theme, and maybe Haddad took note from Warren Buffet — the American billionaire investor — who is famously quoted as saying “Be fearful when others are greedy and greedy when others are fearful.” That is to say that where others in Lebanon have found war and conflict to be insurmountable, Haddad has perceived them as mere “bumps in the road.”
Bumps in the road
In its first two decades Technica’s sales progressed steadily, the company was growing and revenues were roughly doubling every five years. By 2006, with the July War unsettling the country, Haddad set out to again expand operations, adding factory floor space to the existing facility with growth driven by entry into new markets in North Africa. By 2009 the company’s revenues had reached nearly $8 million.
[pullquote]There have been hiccups along the way[/pullquote]
There have been hiccups, Haddad points out, along the way. A broader look at gross revenues shows continuous growth apart from two years, 2009 and 2010, where Haddad admits that the company’s sales were stagnant. He links the issue more to the slowdown of the global economy and a slump in GCC markets — like the slowdown of Dubai’s economy in 2008 — as projects were put on hold or simply canceled. Likewise in 2013, the worsening of the Syrian conflict halted Technica’s transportation of goods across the territory for delivery to factories in the GCC. Now the company, like other firms in Lebanon, has to export by sea on routes that are just as expensive. But what at first was a negative for the business, Haddad describes, has turned into an advantage — Lebanon’s ports have expanded and the shipping companies have developed their maritime routes. For Technica, the costs of shipping by sea to the GCC are not substantially different — reliability has become the most important factor. And according to the company, shipping by sea to Jeddah, for instance, now takes only five days when transit times by land were 11 days — “We’re using faster shipping routes now and we’re saving on that in terms of the cost of time. It became an opportunity stemming from a problem,” Haddad explains.
By 2011 the company was again flush with cash and Haddad announced plans for another expansion of the factory — despite civil unrest budding to the east. With the war raging in Syria, Technica undertook capital expenditures totaling $1.5 million — the expansion was to double the size of the factory while creating an additional 18 technician and engineering jobs. This latest expansion phase was completed in 2014 and by the end of the fiscal year the company’s revenues had risen to nearly $16 million with exports amounting to 90 percent of the company’s sales.
Now Haddad is eyeing new markets in Africa — places like Ghana and Nigeria, which are themselves looking to develop value chains in the production of food products, providing big opportunities for companies like Technica to supply solutions to new and expanding factories. Ultimately, Haddad says Technica’s strategic vision is to double the size of the company by 2020, with a goal of increasing revenues by 15 percent each year. This, Haddad says, would give Technica greater capacity to build bigger, more complex automated systems and multiple projects simultaneously.
Into the future
And here’s where Technica’s story gets really interesting. The company has been built by the family from the ground up — yet Haddad has been the integral figure driving Technica’s evolution since its inception in a garage in the early 80’s. So after a 30-plus year career he is starting to think about easing his workload, and with this come questions about executive leadership. For all businesses, let alone a family owned one, this is an important issue — leadership drives the culture and defines the company’s strategic vision. Yet, if this idea of executive leadership were suggested to Haddad, he’d clarify that his style is to lead from behind. Technica subscribes to what is called servant leadership — a philosophy with its roots in the annals of history but adapted for modern application. In organizations employing the servant leadership philosophy, diffusing power through the organization and the development of employees into top performers are the priorities. The general notion is that top management serves the middle managers who serve the factory workers so that the entire organization can better serve its customers — similar to an upside down, pyramid structure. Indeed, it was from the factory floor and then the employee cafeteria that Haddad initially spoke with Executive.
[pullquote]The important question is whether Technica, and manufacturers in a similar position, can continue in such a hostile local environment[/pullquote]
By 2018, Haddad reaffirms he’ll no longer be Technica’s general manager — and similar to most family businesses, the assumption is that one of his children will take over when Haddad steps back. Yet it is not only the GM position that will need to be filled — Haddad is also Technica’s sales manager. There are four children in the Haddad family, each owning a 24 percent stake in Technica (Haddad retains a 4 percent minority stake in the company), three of whom work in the family business — Cynthia Haddad Abou Khater as stategy management officer, Cyril Haddad working in customer service, and Michel Haddad in multinational account sales. While being a family member has been a prerequisite to own shares of the factory and receive a dividend, having the same blood has never guaranteed a job in the factory. “If you have something to bring to the table we want you to work in the company — being a family member is not a guarantee,” Haddad says, somewhat sidestepping the question of who will run the company when he gives up the reins.
Technica has no formal board of directors. Its top management team sets the strategic vision of the company — its managers of operations, finance, human resources, sales and strategy. So while Haddad fills both the role of general manager and sales manager, his daughter, Abou Khater, is the company’s strategy manager. Currently the team is working internally — Haddad says they might bring in a consultant at a later stage — to develop its corporate governance to formalize succession plans by refining the descriptions for each managerial position while cultivating the leadership attributes desired for the top position. Haddad says his plan is to continue grooming his replacement so that in three to four years he might be able to step out of daily operations and assume a more strategic advisory role. “I’ve already put the right people in place,” he adds. When reached by telephone Abou Khater tells Executive that the process of succession planning began last year to formalize Technica’s corporate structure — job descriptions were drafted and key attributes to be honed were identified. But Abou Khater was also vague when discussing who might lead Technica in the years to come, “We would prefer an internal candidate and have shortlisted maybe two or three individuals.” But Abou Khater also rationalized that the company just isn’t yet in a position to say who will take over when the elder Haddad steps down — some three to four years from now. “We also don’t want the rest of the factory finding out who our next GM might be from a magazine — the candidates names will be announced on our terms.”
Succession planning aside, the important question is whether Technica, and manufacturers in a similar position, can continue in such a hostile local environment. There is support from the government but it remains limited to plans executable over the long term. The rehashing of policies toward mitigating production costs, the introduction of new industrial zones, and the promotion of links to education have helped manufacturers little in the short term. According to data published by the World Bank, manufacturing has been contributing less than 10 percent to national GDP in each year since 2005. For some, long term plans sometimes become indefinite.