Volpato sees Cannon growing with the PU industry

Marco Volpato is the chairman of Italian machinery company Cannon. He spent an hour talking to Simon Robinson about his company, his life, and his plans for the future.

Discreetly positioned by the entrance to Marco Volpato’s office at Cannon’s headquarters is a framed copy of cheque for $500,000.

The story of that cheque, and the company which won it, is a story of persistence in the face of adversity, considerable intelligence and a level of complexity, which is unfashionable in the world of business today.

The man responsible for most of this is Marco Volpato, who gave up a promising career in advanced mathematics and computer science to drive one of Italy’s leading family companies to one of the top spots in polyurethane machinery.

That story was recognised last year by Germany’s foamed plastics association (FSK), which presented Marco Volpato with a medal of honour in September 2015.

Cannon was founded in 1962 by Volpato’s father Leonardo, who originally made equipment for spray polyester systems.

As Volpato explained, “My father was on a business trip in France and saw a Drostholm machine, working. He saw the foam come up and he was fascinated. Then he decided that he needed to concentrate on this technology.”

Volpato senior was joined by Carlo Fiorentini in 1965 and together they started making polyurethane machinery. “It is a very challenging and beautiful field.”

For the first nine years of its life, Cannon produced low-pressure machinery because the original Bayer-Hennecke patent, which covered the idea of mixing the energy, was still valid.

However, as the end of the patent’s life drew near, the small Cannon company, with Carlo Fiorentini, started considering new ways to produce high-pressure machinery.

This did not interest young Marco Volpato, “I graduated in applied mathematics, and wrote a thesis about game theory, developing a corollary of J. Nash’s theorem” he said.

Game theory holds the key

“Game theory, according to these principles”, he explains, “studies the way that systems made up of competing units come into equilibrium, and how the strategies of different units change that equilibrium”.

“Imagine,” he said, “when you change the variables in a game where each player is pursuing their own strategy to try and win, although each tries to dominate or get to a certain point, there is often no overall winner, finally there is an area of equilibrium with no one winner.”

Game theory applies even if the numbers of players is very large and systems are complex. This means it finds application in areas from weather forecasting to chemistry and the flow of streams of liquids.

“From this experience I got a passion to look at strategy, strategy, strategy. We ask ourselves: ’where do we have to go?’; ‘what are the variables?’; ‘what about the market?’; ‘what about the competitors?’; ‘what about the technology?’; ‘what about raw materials suppliers?’ And from that,” he said, “we try to find the winning strategy.”

“We like complex scenarios”

After completing his thesis, Volpato was offered the chance to study language mathematics in Russia, but chose to stay in Italy and study cybernetics before working for Honeywell developing models of applications for the first computers. While he was doing this Volpato also took an MBA from Bocconi, Milan, with additional specialisations at Harvard University and MIT in the US.

Then, he explained, my father died suddenly, with no warning in 1973.

“I took a good nine months to decide what to do because I was already inside an international business structure. Finally the great motivation was just to come here and grow a great project, polyurethane.”

Cannon was small at the time, Volpato said. “My father spent the second part of his life inventing things and so the motivation was to pick up his last invention and make it a success.”

“I say this with humbleness and logic. If you really want to succeed, you have to define what it means and do a lot of things. It means first of all, to generate really great value; more than the others. You can always do better than the others, and better than yourself.”

“At the time I was 29 and now I’m 70. And I’m still here,” he said.

The landmark came in 1988, after the settlement of the patent battle with Krauss Maffei, over the FPL mixing head.

A bruising encounter

“This big fight, which started in 1979 and lasted until 1986,” saw 23 separate patent disputes brought by both companies, Volpato said.

“Finally we won in the US, and from there we would have won in many other countries including Japan and Germany,” said Volpato. Cannon and KM agreed to settle all pending cases and to cross-license patents. “I consider this to be a great idea, they paid a royalty fee for years. So the both competitors were making the same model and concept of mixing head which has generated a lot of business.”

Following the victory Volpato decided to consolidate the business in Germany.  If you can win in hard markets, everywhere else will be much easier”, he said.

The second plank of Volpato’s strategy was to ”keep the leadership in the field of dispensing units and machinery.”

Cannon pursues a number of tactics to support this second strategy.

Firstly, he said: “We have competences spread around the world. This is not the same as an international organisation. You can have international agents or your business overseas can be about distributional service. But to give these guys competence that may be higher than the competence in the centre is another way of doing things”.

Volpato said this relies on developing an internal culture where it is possible for managers and technicians from different cultural backgrounds to come together and freely share ideas in constructive ways.

“We have 10 production facilities plus 31 sales offices in our consolidated turnover in the polyurethane business spread all over the world .”

“The second recipe for our success from 1988 onwards was to provide education in R&D focusing on innovation and new applications:  “to think of the future, in terms of technology, we ask ourselves, ‘what could we be able to do?’; ‘what can we do better and more simply?’;‘what would happen if we used new raw materials?’ ‘How can you make use of this experience?’”.

Idea machine 

“You can imagine young engineers straight out a university coming into this culture, first they may have a shock but 97% of them really enjoy it,” Volpato said.

The by-product of this process is that Cannon generates a lot of ideas, which have to be sifted through.

Currently Cannon has around 35 different areas of technology in reactive polymers, and Volpato explained:” If some are going badly, a few are going so-so, and the others well, I am happy and that means Cannon is happy. We have also learned from failures that we can recover easily.

“Thanks to these two ingredients, internationality and innovation, we were well-prepared to take advantage of both big changes in the globalization process and in chemistry between 1988 and 2000. And now we are ready to face complexity,” said Volpato.

The global perspective helps Cannon to stay ahead of changing trends in its customer industries, Volpato said.

One area where Volpato has seen a considerable amount of change is domestic refrigeration. “Around 90% of all refrigerators made in US were made using Cannon technology,” he said. “This,” he said, “came because of the experience generated with the Italian appliance industry.”

“The world is moving away from comfort and compact design of fridges as well as in automotive interiors for example,” he explained.  “Because there has been considerable progress in both of these areas, it is getting harder to take further steps”.

The greater driver now worldwide is improved energy efficiency, energy-saving, and cleaning.

Volpato believes that the polyurethane industry is well-positioned in this area. He joined the Minister of Environment to the United Nations, who signed the Kyoto protocol on behalf of Italy.

It is very difficult to predict trends but polyurethane will clearly grow in the future, because of this trend to improve energy efficiency.

Cannon is ready to take advantage of these developments, as it is involved in water treatment, polymer processing machinery as well as in electronics for other applications.

Looking ahead

This leads Volpato to suggest some areas where Cannon could grow in the future, possibly at the intersection between new generation of electronics and technology. “I would like to pick up ideas from other areas, such as medical care or military and uses in Polyurethanes and energy,” he said.

The changing shape of the refrigeration market points to an increase in complexity for Cannon.

“Two or three years ago our platform of dispensing units was much more standard. The FPL mixing head was about 70% of output, we see around 15 types of mixing head families sold generally. Technology is changing a great deal at the moment”.

“To make the change to microcellular foams will mean different mixing heads because the isocyanate is changing and so is the polyol. There is a change of chemistry.”

“Our old refrigerator plants are still moving along,” Volpato said.

“I know that a financial institution would find it hard to handle the business model I have developed,” Volpato said.

“We are honoured to be a family company, which means not only that we are two families on top [Volpato and Fiorentini], but there is a family style between management. That is a matter of strategy. We need good communications between people.

In Germany there are 30,000 family companies that are generating more than 50% of the industry value for the benefit of the people in Germany and Europe. In Italy there are 1800 of a similar size”.

Volpato sees no advantage in any form of public listing or sale to a larger company.

He explains: “We have found peace of mind. Fortunately we don’t need money, because we have learned to make use of our money. To generate value we have to generate profit. We see growth that is related to our size, financial possibilities and the capacity of the company.

Whatever Cannon does the next five or 10 years, Volpato said “there could be no big acquisition, but we will take the future one step at a time.”

Succession planning is also in place at the company, Volpato said: “there are two guys, one Fiorentini and one Volpato, both well educated, both engineers, and there are plenty of good middle-aged managers who are ready to lead the company in the future. “