President, Topcon Positioning Systems
The geospatial industry as a whole is still in a stage of infancy, believes Raymond O’Connor, President, Topcon Positioning Systems. The number and scale of infrastructure projects going on all over the world only indicate the huge potential to be tapped. Further, he sees the whole sector moving towards being a solutions-oriented industry.
What are the advantages offered by machine control and what is the kind of acceptance among new customers?
A major benefit of machine control is productivity gain. Be it fine-grading in construction or sowing seeds or harvesting in agriculture, cost savings accrued with the technologies available today can enable 30-40% increase in productivity at a conservative estimate. In some cases, customers even report doubling of productivity. Machine control is now widely adopted in the US and European markets. With the cost of machines, fuel, labour and everything else going up, businesses can focus on productivity improvements to make money.
In new or emerging markets, projects do not have the same kind of standardised cost structure as it happens in the more mature markets. When we introduce machine control business in emerging markets, it is more difficult to fully convey the advantages over the entire project. This is very similar to our pioneering efforts in mature markets a few decades ago. Therefore, the cost benefits are only in a quarter or one phase of the project initially. Translating that to the overall project is a little more complicated. In many cases, customers do not have the required tools to save money on other aspects of the project. And speeding up the project in just one area doesn’t always give the same return as in the US or Europe.
Even in the mature markets we faced a lot of resistance initially from people handling the machinery because they were concerned that the productivity tool will take over their jobs. Though it is not always the case, but this kind of resistance slows down introduction and acceptance of a new technology.
Which are the promising vertical industries in terms of machine control?
The verticals benefitting from machine control are all very different from each other. We have been very successful in the mining industry but it has a limited size with a limited number of machines. The biggest and the fastest growing industry at the moment is agriculture. In 2000, the farm industry’s use of precision measurement equipment was less than $100 million; last year, it was more than a billion dollars. The agriculture sector is adopting advanced precise positioning technology much faster than any other business; it has been adopted by equipment manufactures even faster. The trend started with John Deere in the 1990s, and it was based on the premise of precision farming throughout the farming cycle. Agriculture is the fastest growing segment of Topcon’s business at the moment.
However, the adoption of advanced technology in construction machinery is also moving very fast. Construction and agriculture are the two largest manufacturing industries in the world representing between $8 to 10 trillion a year but are the least automated. So, these two are the areas to look out for.
Is Topcon aiming to create and nurture new verticals?
We are doing it, but I wouldn’t want to comment on it due to competitive reasons. The core of our business is the areas I have just mentioned. Technology is being adopted and it is growing in both mature and emerging markets.
When I joined Topcon in 1993, the surveying industry was doing a business of about $800 million a year globally; today it is a $5-billion business. So the opportunities have grown exponentially and in some areas the growth has been tremendous — in construction, civil engineering, mining, agriculture and mapping.
The industry as a whole is still in a stage of infancy. Look at the kind of projects going on all over the world — highways, infrastructure, buildings, pipelines, mining — the cost of constructing all these is a fraction of the cost of maintaining the entire infrastructure for a lifetime. And until recently, we didn’t have a good way of capturing all this data, but now capturing, handling and managing this data throughout the life of the project has exploded into the marketplace.
What are the future business directions of Topcon?
Till mid-1990s, Topcon was an optical surveying instrument company. Then we got into laser and machine control; then came GPS, and finally the software side of the business. Obviously, the core of our business remains surveying, civil engineering, construction and agriculture where positioning technologies are being adopted. Our goal is to be the top supplier in those industries and we have two major competitors there. The key advantages lie in the area of technological advances.
Customers are asking for solutions and not just products. What is Topcon’s strategy in such a solution-centric market?
Our whole industry is focused on moving from a product-and-technology industry to a solutionsoriented one, where a company not only supplies a product or a piece of hardware but also the supply integrated solutions and the software. We have been working in that direction — with acquisitions as well as strong partnerships.
The solutions business is an absolute necessity in order to grow. But whether we will be buying or partnering with another company depends on our own strategic direction and how we want to evolve the business. Everybody is trying to develop solutions, but how Topcon gets there will be different from others.
Without providing the total solution, it is very tough to get into the emerging markets. Our goal is to provide total precise positioning and machine control solutions to the global marketplace.
Topcon has been acquiring companies since 2008. How are you capitalising on the acquisitions?
The acquisitions were done for different reasons. Sokkia was done with the focus on being the top supplier of optical surveying equipment in the world. The deal made us the largest global supplier of about 35-40% of optical instruments across the board. The Voxis acquisition was purely a technology purchase. In some geographical areas, our acquisitions have been done purely for tactical reasons. Topcon is not focused on being in the distribution business in certain areas of the world. Our acquisitions are for investment reasons, for gaining a foothold in a specific market or market niche and maintaining and enhancing that position.
Surveying is evolving as an integrated technology discipline but is surveying as a business facing a dead end?
A lot of people are concerned about what machine control would mean to the surveying business. I can confirm that we sell a lot more total stations today than we have ever had. When GPS came into the market, a lot of people were concerned about the optical survey business. But again, the GPS and optical survey business evolved together and grew together.
There is a perception that surveyors do not have much surveying options because of all the sensors and machines available. However, we have found that in the mature machine control markets, surveyors sometimes are paid more than the actual dataset costs to mark the sites and produce the 3D data in order to get the machines work on the projects. In some cases, laborious jobs like driving stakes into the ground and monitoring areas has gone up. So there is a transition in responsibility but work hasn’t become less for the surveyor.
Obviously, everyone in the industry has to hear about why “we have to do it the old way.” But it is just a matter of time before everyone understands that these changes save time and thus contribute to the bottomline.
GIS was becoming more important than surveying about 10 years ago. But today, surveying, machine control and laser scanning have taken a leadership role and GIS is adding value to these in the overall workflow management. How do you look at the GIS industry?
GIS is exactly like the workflow and management of data we had earlier — the limited sets of data. A popular technology today is mobile mapping. Last year’s InterGeo trade show witnessed the new trends in mobile mapping — helicopters, airplanes, UAVs — being deployed. Our ability to manage the huge amount of data, and to process it quickly, didn’t exist even five years ago. All that was developed when the Googles and Maptechs decided to map the world. This has led to a tremendous amount of development and growth in that area.
We now have the ability to go out and collect huge amounts of very accurate data. The whole GIS industry is moving to “in-house” workflow and so we are going to feed all that data in the GIS model. It is natural to assume they will grow together.
Apart from the cost structure and workflow management, what are the other challenges in operating in emerging markets?
There’s more money in educating those who make up the core markets because there are tremendous savings and environmental benefits involved. If a company can complete its work in half the time, it also means it is using only half the amount of fuel. But technology and the savings realised are not yet a priority in many areas, especially in the emerging markets.
Trying to increase market share from a pioneering standpoint is a very difficult undertaking. And manufacturers have to spend a lot of money to break into emerging markets. Companies have to work together to develop those markets. It is beneficial to the countries, beneficial to governments from a cost perspective, beneficial for the environment and for all our businesses. We need to collaborate more to open up new markets.
Do you have any specific strategy for the emerging surveying and positioning markets like the BRICS, Africa and Eastern Europe?
In the BRICS, particularly in Russia, we have a strong distributor liaison and we have a very high market share. It’s the same in Brazil. In China, we have invested in our own manufacturing and distribution organisation and have grown the business exponentially over the last 10 years. Working with an in-country distribution partner typically works very well but where we can’t, we open up our own company. In India, we set up our own distribution company last year.
Your distributor in Latin America is the same as that of your competitor Trimble. How does it manage a balance?
That’s a very unique situation and I think the distributor is doing a very good job being married to two wives! The reality is that the company was a very strong distributor for both Topcon and Trimble before we treaded into each other’s product territories. Trimble was a GPS company and Topcon was into optical instruments. Now, Trimble sells on its own the products that the joint distributor doesn’t sell and we do the same.
Positioning contributes to a little over 35% of the Topcon group’s revenues. What kind of growth are you visualising here?
Our goal is to double the growth in the next five years. It is a very exciting time to be in this industry. The competition is fantastic and I am a big promoter of competition. But I would like to see our competitors also trying to help the market by doing more to educate it because there are a lot of things we can do to build the markets, expand them more rapidly in more areas, expand our networks, standardise data formats and educate the emerging markets. By cooperating in certain areas, we could do so much to educate the industry to use the technology; that grows the business for everybody.
Sometimes I think our competitors lose sight of the bigger picture and get focused on the day-to-day business rather than the long-term picture of the industry. But I prefer our approach of having a long-term view of the overall industry because not only it is a good and profitable business, but we also are doing something to really help the world.