Herman Miller Driving Innovation

September 8, 2004
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HOLLAND — The business has changed. The core strategy has not.

So as Herman Miller Inc. and its competitors in the office furniture industry rebuild from a traumatic three-year downturn, the company is following a path toward the future that, much like the past, is predicated on product innovation.

An 18-month review of Herman Miller’s corporate strategy reconfirmed a strategic direction, with minor alterations, of creating new products and identifying new and under-tapped markets to grow the company, President and Chief Executive Officer Brian Walker said.

“What we have concluded is (that) our strategy is, and has always been, about innovation. We believe that issue is the best way for us to differentiate ourselves against the competition going forward,” said Walker, a veteran Herman Miller executive who moved into the CEO’s role in late July.

The transition in the company’s top management came when former CEO Mike Volkema decided to step aside as chief executive after nine years at the helm to focus more on his duties as chairman and to work in Herman Miller’s Creative Office, a business unit dedicated to developing new products for existing markets and carving out new markets.

That dedication to creating new products is apparent in Herman Miller’s spending on research and development, which remained high the last few years as sales dropped more than one-third during the downturn, from a peak of $2.01 billion in the 2000 fiscal year to $1.33 billion in FY2004.

Herman Miller spent $34.6 million on research and development in FY2004, $33.3 million in 2003, and $33.9 million in 2002, according to the company’s annual report filed with the U.S. Securities and Exchange Commission.

Herman Miller, the regulatory filing states, “draws great competitive strength” from its research, design and development programs.

Volkema and Walker expect one of the first business initiatives from the Creative Office, dealing with acoustics in the office, to come out in six to eight months. Further innovations are on the way, Walker said.

“We will begin to do them slowly and incubate them,” Walker said.

The importance of R&D in Herman Miller’s future is part of what led Volkema to give up the role of CEO to work in the Creative Office. Describing the work as a “passion,” Volkema said he has been migrating toward the Creative Office over the years.

As the office furniture industry and the company began to build momentum coming out of the downturn, it was the right time to transition the chief executive duties to Walker and put his creative energy to work elsewhere, Volkema said.

“Coming out of the downturn, this felt like a new beginning for both our industry and for Herman Miller. It seemed like a logical time for that handoff to take place,” said Volkema, who gets high marks from industry observers for steering Herman Miller through turbulent waters the last few years.

“This becomes a point of renewal for me as well,” he said.

The key to bringing the company through the tough period is clearly articulating values and direction, he said.

“There’s no question Herman Miller has learned to manage through good times and bad,” Volkema said. “I think that’s important in a world that’s going to become more volatile over time and is going to be a capability that serves us well.”

Also contributing to Volkema’s decision was his conclusion that Walker was ready to move up. Succession, Volkema believes, is more about the successor’s readiness to move into a higher position, rather than an executive’s willingness to give up control.

And Walker, Volkema said, clearly “is ready for the task” of writing “the next chapter of the Herman Miller story.”

Walker previously served as Herman Miller’s corporate president and chief operating officer for 16 months prior to his appointment as CEO. He joined the company in 1989 and has held a series of senior management positions with Herman Miller, including president of North American operations and before that as chief financial officer.

As he settles into the role of CEO, the 42-year-old Walker sees a period of transition where he works closely with Volkema — whom he considers a mentor — in charting the future, innovating new products and tapping new markets, and pushing continual improvements in operations and performance.

During the downturn, Herman Miller became a far leaner company that operates much more efficiently than before. In a business environment that’s more volatile and competitive than ever before, the push to drive cost out of the business and improve operations is an ongoing venture, Walker said.

“We’re able to do an amazing amount of stuff with much less today,” Walker said during a recent interview. “We’re not stopping that journey.”

And that journey in Herman Miller’s most recent past yielded some valuable lessons. The biggest: “We can accomplish amazing things when we put our minds to it,” he said.

Now, with the crisis of the downturn over and business recovering, Walker hopes that same energy Herman Miller’s work force put into steering the company through a difficult period translates into developing new products, growing sales, serving customers and planning for the future.

“If I can take that same sense of accomplishment in terms of speed and energy and focus it on innovation and solving problems for customers, that’s almost unstoppable,” Walker said. “In the end, business is about people, and if we do the right things for people, they will enable us to do great things.”

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