Chip Emery's World is Round

MTS’s sensor markets include agriculture, aerospace, food and beverage production, pharmaceutical and biotechnology manufacturing, and many more. Seagram’s Indiana distillery, for example, has replaced an old float-and-counterweight system used to measure the volume of its gin, vodka, and other beverages inside distilling tanks with more accurate MTS sensors. The original system was too prone to breakdown and inaccuracies, which cost Seagram a fortune in annual excise taxes it pays based on volume.

MTS’s sensors can also be used to control other materials and conditions. For example, inside a tractor seat, the sensors apply a magnetic field that changes the mechanical properties of the liquid inside the shock absorber, which helps it stiffen to resist shock. In conjunction with microprocessors or other electronic controllers, MTS’s sensors help control boat steering and active or “smart” suspensions in cars, the position of snow-plow blades, and the output of paint sprayers.

“There are growth opportunities across multiple industrial sectors because more machines are incorporating microprocessors that necessitate use of these sensors,” notes John Franzreb, an analyst who follows MTS at New York City–based Sidoti & Company.

The Earth Shakes

So far, MTS’s high-tech engineering expertise has protected it from outsourcing Minnesota jobs. But that doesn’t mean it has been immune from economic pressures to become more focused and efficient. In the late ’90s, Emery says, MTS learned this lesson the hard way when its test segment built a tyrannosaurus and other mechanical monsters for the Islands of Adventure at Universal Studios, a theme park in Orlando.

“We thought it was a straightforward application of force and motion control that engineers do very well, so we took on a number of big contracts” like this, Emery says. The problem was, “We didn’t ask, ‘Is this a good business to be in?’” MTS soon found that the entertainment world didn’t operate like its other customers did. There was no recurring revenue stream for MTS in servicing the machines, not enough new markets for it to pursue, and not enough flexibility in the contracts.

In 2000, partly because of bad business bets like this and partly because of the global economic downturn, MTS posted a quarterly loss for the first time in its history. The loss caused the company to look closely at itself and rethink its mission. “We stepped back and decided we were trying to go in too many directions at the same time,” Emery says. “We started to figure out what we do best, and where we add the most value for our customer—our core competency.”

This was no easy process for a firm whose engineers can solve virtually any technical problem a potential customer might bring, and whose business has relied heavily on large customized orders. But Emery, a former Honeywell executive who had joined MTS in 1998, knew the company could improve what it did by engaging employees company wide to talk candidly about MTS’s strengths, weaknesses, and goals. “Yes, we’re damn good mechanical and electrical engineers who can do anything,” Emery says. “But we decided we’re really good at making mechanical testing solutions.”

MTS outsourced work that didn’t fit, such as electronic circuit board manufacturing, and stopped pursuing non-core opportunities, like building theme park rides. It also discarded some businesses that fit within MTS’s defined core, but that required too much capital investment for the expected return. Emery cites engine testing and noise and vibration testing as two areas where competitors have shut MTS out. “Even though these were in the center of our core, in both cases we decided that relative to our other opportunities, they weren’t worth it and we walked away,” he recalls. By 2003, MTS completed its review to focus on mechanical testing and high-performance sensors.