Interview with Brian May, CEO of Grayhill, Inc.

(March 27, 2007)

Brief Bio of CEO :

Mr. May received a BSEE degree from Milwaukee School of Engineering in 1980 and a MBA degree from the Illinois Institute of Technology in 1985. He began his career in Engineering with International Harvester before joining Grayhill in 1983 as a Project Engineer. Before being named President of the Company, he also held positions of Division Vice President, Business Unit Manager, Marketing Manager and Chief Engineer. In 1996, he was the Project Leader for the implementation of Grayhill’s enterprise software, hardware, and computer network.

Background of Company :

Grayhill, Inc. is a $90M electronics company with three domestic manufacturing facilities and one in Asia. The company designs and manufactures standard and custom electronic components (primarily switches), sub-assemblies and complete systems for military, industrial, telecommunications, automotive, and medical customers around the world. The company employs 750 people worldwide.

Interview Transcript :

Munoz : What is your view on globalization and how has globalization affected your business ?

May : For a company like ours, “globalization” means finding best-in-class suppliers from around the world ,having multiple manufacturing facilities, and soliciting business from prospective customers around the world.

Munoz : What are the key challenges in global business ? How may these challenges be addressed ?

May : Many of our customers require custom, highly engineered solutions for their applications. Our major challenge is to convince customers in Europe and Asia that we can be just as effective as their local alternatives at understanding their requirements and executing their projects in spite of the language barrier and time difference. We achieve this by having a local technical salesman who can assist with translations and rely heavily on the internet to close the time zone gap. Using the internet, customers can look at their project schedules, engineering drawings, pictures and video tapes of their prototypes being built and review cost estimates.

Our other challenge is meeting our international customer’s delivery schedules. To address this, we opened a manufacturing facility in Shen Zhen, China in 2001 and rely on 106 distributors outside of North America to inventory products for our local customers.

Munoz : What are opportunities brought about by globalization ? How did these work for you ?

May : New customers, lower cost raw materials, and lower cost manufacturing.

In the past five years, we’ve made inroads with the European Automotive market. We now do over $6M in business annually with Audi, BMW and Mercedes Benz.

Of our $45M in piece part purchases last year, roughly $15M was sourced in Asia at a 10% savings over local alternatives.

The labor rate at our U.S. facilities, including fringe, is eight times higher than our China facility.

Munoz : Which organization would you consider as a role model in the practice of global business ? Why ? What are this organization’s attributes ?

May : General Electric. They are pioneers in developing new markets around the world. They were also the first to introduce “24 hour a day product development”. By that I mean they have engineering centers located in Connecticut, India and China. When the engineer in Connecticut is about to leave for the day, he “hands the project off” to his counterpart in India, who works on it for eight hours and then “hands the project off” to his counterpart in China and, at the end of his workday, returns the project to the engineer in Connecticut. The cycle continues until the project is complete, resulting in the product getting to market in 1/3 the time it takes an U.S. based competitor.

Their primary attributes are deep pockets, risk takers, a diverse workforce and very structured internal procedures.

Munoz : Who would you consider as a successful global business leader ? Why ? What are the characteristics of this person ?

May : Jack Welch. G.E.’s business flourished under his leadership that included the innovations listed in #4 above. He was very competitive, a risk taker, and fairly ruthless.

Munoz : In your view, what types of policies should governments provide to effectively support globalizing companies ?

May : Any which level the playing field and reduce the red tape involved in doing business in their country. There are still markets that are protected by taxing imports or by making the customs process difficult. Foreign governments in many parts of the world also need to crack down on corruption.

Munoz : What resources are potentially beneficial to globalizing companies ?

May : There are many U.S. organizations that routinely hold seminars or webcasts to educate U.S. based companies about doing business in Europe and Asia.

In addition, any of the big tax/audit firms have departments familiar with the unique business laws and regulations of foreign countries.

Munoz : What is your view of globalization in the future ? How will it affect business ?

May : U.S. manufacturing jobs will continue to be lost to low cost regions such as China and India. This will keep consumer prices low but continue to erode our middle class. Many workers will have to be re-trained to perform service jobs.

In my opinion, the greatest risk to U.S. based companies will result if we lose our technological advantage over foreign countries. When global companies share their intellectual property with their foreign subsidiaries, they risk having their technology copied and sold in competition to their own products.

Munoz : How is your company responding to the challenges and opportunities brought about by globalization ? How has it affected your corporate strategies ?

May : In recent years, we have placed more focus on the military market in the U.S, which is isolated from foreign competition. At the same time, we are hiring additional international sales people and ramping up our production in our Chinese facility to remain competitive.

Munoz : What advise will you give students and young professionals in order to help them prepare for global business success ?

May :

If you’re able, spend time in another country to experience their culture and how they view America and Americans.

Gain an understanding of the major currencies used in the world and what factors impact them.

Read Thomas Friedman’s book “The World is Flat?”

(This interview was facilitated by Bradley May, B.S. Finance ’08)