John Murphy discovers why the recent acquisitions by Gooch and Housego will now all be known by their parent company's name
Photonics is a new and exciting field. This means every new company in the field has to have a modern and exciting name. Usually they sound like the names of characters in children’s TV sci-fi fantasy shows.
But one of the funny things about optics is that, while your technology can be 21st century, the systems are dependent on rather old-fashioned crafts like grinding and polishing. Lasers like straight lines and, at high powers, are extremely unforgiving of the slightest blemish. These are the sort of values exemplified by a crusty old guy in brown overalls rather than a feisty young thing in a silver miniskirt.
Gooch and Housego is a very well-known name in the optics field, with a reputation for old-fashioned quality. When it went public, it started to buy up other companies as well as spending money advancing its own technology. It decided that what the new group of companies needed was a single name to bring them all together and present a united image to the market. After much deliberation the company settled on Gooch and Housego.
Gooch and Housego chief executive Gareth Jones explains: ‘The company is 60 years old and we have evolved from a family-owned optical engineering company through to a hightechnology international group of companies. A lot of that has happened over the past 10 years and we have acquired a lot of companies. We were acting as semi-autonomous companies and, clearly, by bringing them together we are presenting a united front to our customers. ‘The name is quirky and unusual, and it is very much like some of the German optical companies that still carry the founder’s name. People don’t forget it easily. When it came to bringing the companies together, we searched high and low for names and thought very seriously about adopting a very modern “optronics” name, but there are so many start-up companies around with these contrived names. We thought that, if we adopted one of these, then we would lose some of the brand value. So we decided to keep the name Gooch and Housego.
‘The family are still shareholders. They are not involved as they were a few years ago. Mr Gooch retired in the 1990s and, when we floated in 1997, he was one of the oldest chairmen of a floated company on the London Stock Exchange. Even when he retired, he continued to take a strong interest in the company up until the end of his life. We have always been an unusual company and having an octogenarian chairman was just part of that.’
Jones was actually the first graduate scientist the company employed, some 30 years ago. He rose up through the management and, although he did briefly leave the company to work in venture capital, he was eventually brought back to take the company forward with its acquisition strategy.
Gooch and Housego was founded by Archie Gooch and Leslie Housego in 1948. Gooch was trained at Barr and Stroud and worked on rangefinders and periscopes. During the Second World War, the Royal Air Force started using crystals in the radios used by bombers. They had to be cut from natural crystal and they needed people with optical expertise to cut and polish quartz. Gooch and Housego started working at STC in Greenwich but, when the Blitz started, they were evacuated to Illminster, Somerset, in the west of England. After the war, they founded their own company in Illminster, while STC moved on to a new factory in Devon. The two founders were always very proud of working for the best company and always wanted the company to be known for making the best optical devices.
The company was basically an optical jobbing shop, making devices for larger manufacturers making prisms, lenses, mirrors and windows for other companies making scientific instruments. Over the years it started designing and making its own line of optical devices and eventually acoustooptic devices.
One of Gooch and Housego’s high damagethreshold crystal quartz AO modulators.
Jones says: ‘The development continued until the early 90s, by which time about half the company’s business was in designing and selling its own range of products. And the new, hightechnology business was growing very rapidly. Revenues grew rapidly, as the newer products were more profitable. It left us with the resources to start acquiring other companies and to gain a foothold in the US. Eventually we floated on the Stock Exchange in 1997.’
Jones believes the secret of the company’s success is that it comes from a solid background in the craft skills of optics. It works hard to retain its skilled workforce and has an apprenticeship scheme to ensure that it will continue to have these skills passed on and kept alive.
He says: ‘We leverage the skills we have in making very good optics and coatings. Many companies in acousto-optics have come from either an electronics or a physics background, but we come from an optics background so we could just do those things better. Because we are dealing, on an OEM basis, with most of the world’s leading laser companies, we also had volume so we could reduce prices and keep costs down. This means we have been very profitable.’
Gooch and Housego has also had to deal with the threat from countries where labour costs are much lower and the quality of the products made there are getting better every year.
This means that the company also has to keep a technological edge while at the same time making sure it can make the best quality on the market.
Jones says: ‘The culture of the company, firstly in the UK and then with the companies we acquired, was to keep one step ahead. What we do is very special, but we have to keep ahead of the game and strive all the time for excellence. We aim to be the best, not just because it feels good to say that, but because if we are not the best we will lose our business to those who covet it and are able to make things for less. We have long-standing relationships with a lot of customers and they trust us. They get what they need and their requirements are going up all the time while they want better prices.
‘It’s a combination of the technological advances that we are pushing forward, but underneath it all are these exceptional craft skills that allow us to make them. You can pick up a book and design yourself a device, but that does not mean you can make it. If it can be designed then we can make it. Optics is different; you can’t just buy a CNC machine and let it push them out.
‘It’s interesting that China has become an important market for us. Chinese customers are saying they want one of our Q-switches in there. The better Chinese companies who are looking for markets outside China realise they have to specify the best components. If we want to keep that reputation we have to advance the state of the art continually. Even with our Q-switches, which is a longstanding product and probably our best-selling line, we have just announced some new advances at Photonics West in January.’
Over the past 10 years the company has been on the acquisition trail. It has sought to broaden its technological base, but has concentrated on companies that serve a very similar customer base.
It has always intended to form them into a single integrated company, which is positioned as a key supplier to its main customers rather than just a point product supplier. It believes that the more products that are supplied, the more attention the customer pays and the more it is prepared to work in partnership. Jones also believes that they simply want to be dealing with fewer companies, with each one supplying a bigger piece of the cake as part of the fight to reduce costs. Jones says: ‘We needed to act as an integrated global business. There is a lot of consolidation in the market and the laser companies want relationships with key suppliers and they do not want to deal with thousands of suppliers. We were a critical supplier, but often they did not realise we were a critical supplier, because they had five separate accounts with five separate sales contacts.’
The first acquisition was in 1995 when it bought Optronic Laboratories, an instrument company that made spectrophotometers. This was partly to diversify into the instruments business, and also gave it a foothold in the US.
The next, in 1999, was Cleveland Crystals. Gooch and Housego knew this company well as it grew some of the crystals used in other parts of the group. It had some overlap in its customer base, but also had a significant foothold in the research market with its electro optics products. In 2000 it bought Neos Technologies, which was a competitor. This allowed Gooch and Housego to consolidate its presence in the US acousto-optics market. In 2004 it acquired Landwehr Electronics, which had always been a key supplier of RF electronics for its acousto-optics devices. It was also the company’s distributor in Germany – and this became the basis of its growth in the European market.
In 2006 it acquired Chromodynamics, a spinoff company from Carnegie-Mellon University that was working in hyperspectral imaging. This was part of the company’s bid to move up the value chain by producing modules in the biomedical imaging field. It had previously been buying components from Gooch and Housego to make modules, and it made sense to buy the company rather than set up its own module manufacturing operation. The latest company to join the group is Sifam Fibre Optics, a nearneighbour in Torquay, Devon, which was bought in May last year. Jones believed that the group needed some capacity in fibre optics in its longterm strategy.
The formation of these companies into a single group has involved more than just reprinting its commercial stationery. While each part of the group has carried on doing the development and manufacturing work it always did, the sales forces have been fused into a single international unit.
Jones says: ‘There are seven companies in the group and we divide them into two divisions. Optronic Laboratories and Chromodynamics make instruments that are big-ticket items selling for tens of thousands of dollars. They serve a completely different customer base in life sciences and measurement. The other five businesses, rebranded under Gooch and Housego, share a very similar customer base so it made sense they should have a single image. Previously every company could only offer its own products when it spoke to customers, which was an important but limited offering. Now we have a single image and one website offers products from all five companies and we can offer a better service to our customers.
‘We used to try to leverage the advantages of having similar customers, but it was surprisingly difficult in terms of communications between each site, and making sure each site knew what each other site was doing was nearly impossible. We decided that what we needed was one sales team, with one database and one management information system. Each geographical team is now representing all five companies in their territory. We have also set up sales offices on the US west coast and in Hong Kong to serve the Far East.’
The sales teams have been cross-trained and a vice president for global sales has been recruited to take the resources at each site and pull them together into a unified team. In addition there are distributors in other territories, usually where there is a need for support in a local language. They are also holding some stock of components, particularly high-powered laser components, which are considered ‘consumables’ even though they are becoming more reliable over the years. The top-tier OEM accounts are all handled direct.
Jones adds: ‘We now present ourselves to customers as a supplier of a broad range of key components and technologies. As a larger supplier, we can sit down with them and share road maps. It has given us a much better understanding of the trends in the market and what our customers want and expect next. It also informs our acquisitions strategy, because it tells us what technologies and markets are going to be important so we can make better decisions about what companies we should be adding. Five years ago we were reactive, but I want us to be more proactive about what customers want and anticipate the market. Unless you have the information and can make acquisitions, you are working in the dark.
‘Customers have probably been surprised that we were such an important supplier; that is why we are working so hard to present ourselves as a single entity.’
Jones says that the group will continue to grow by acquisition. Being a quoted company, it can raise finance more easily and purchase new companies with its stock. While he will not be drawn on which companies it is looking to buy, he says that Gooch and Housego is looking to build its capacity in manufacturing more complete subsystems. This could be by adding capacity to its existing facilities or by acquiring another company that shares its values and already has this capability.
Whatever happens, Jones is determined that the optical components market is going to be hearing the ‘Gooch and Housego’ name a lot more in the future, even if they do think it’s a bit quirky.