2. OVERVIEW
| Chronology (Click on images to enlarge) |
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THE BEGINNING OF THE FIRST SUCCESSFUL PLASTIC OPHTHALMIC LENSES
The Rise
On 1 July 2010, SOLA Optical celebrated its 50th birthday, a time to remember that SOLA was one of the three earliest successful plastic lenses manufacturers: Armorlite, Essilor and SOLA.
Initially, Armorlite concentrated on SF blanks*, Essilor on finished lenses*, and SOLA on planos*.
* Explanation:- There are three main types of lenses. Planos are zero powered lenses used in sunglasses and safety lenses. Finished lenses are cast (i.e. made) to the correct power to fit a particular prescription. The lenses just need to be edged to fit in a frame to give the required pair of prescription spectacles. However, there is such an enormous variety of prescriptions that it is not practical to cast all the required lenses in a finished form; so semifinished (SF) blanks are also made where the front surface has the required curve and the back surface is rough shaped. The back of each blank is then ground and polished in an Rx (jobbing) workshop to produce the required finished lenses which are then edged to fit in a frame to give the required pair of prescription spectacles.
The dramatic increase in CR-39 lenses in the USA is shown in the following timeline:
- 1956 100% glass
- 1975 70% glass 30% CR-39 (SOLA USA start-up in Sunnyvale, CA)
- 1983 50% CR-39
- 1993 80% CR-39
SOLA, Essilor and others took advantage of this growing market.
Armorlite initially prospered but eventually was sold to 3M in 1979, then merged with Signet, and then was acquired by Essilor in April 2010. When Armorlite was sold to 3M, the original investors, who paid US$1.00 per share for their stock, received US$4,164.88 per share under the terms of the sales agreement (better than SOLA investors who were paid AU$2.65 by Pilkington for their 50 cent shares in 1979).
Essilor continued to prosper and is now clearly the dominant player in the industry.
SOLA also prospered and, during the late 1990s, claimed to be the biggest in the world (i.e. bigger than Essilor). Such a claim depends on the definition of "biggest", but by whatever definition SOLA was certainly "up there with the best".
| Quick facts (from PPG publication 'CR-39 – CELEBRATING 50 YEARS') |
| 1940: |
CR-39 resin first developed by PPG. |
| 1947: |
Armorlite Corporation formed and begins experimenting with CR-39 resin. |
| 1953: |
Essilor orders its first ½ litre of CR-39 from PPG. |
| April 29, 1954: |
the first CR-39 lens is cast |
| 1956: |
the first CR-39 ORMA 1000 lens is sold, with commercial quantities sold in 1959 |
| 1956: |
SOLA first experiments in casting CR-39 lenses. This began in Laubman and Pank, with SOLA being formed in 1960 |
As late as the mid to late 1990s, SOLA remained one of the darlings of the New York Stock Exchange. On 20 August 1996, Morgan Stanley wrote, "We continue to award the shares of SOLA our highest rating of Strong Buy". And on 12 August 1997, Merrill Lynch wrote, "Reiterate Buy rating based on strong fundamentals and attractive valuations".
By whatever definition, SOLA is an amazing success story.
This video, made around 1996, provides an insight into the company at that time.
By 2000, a typical SOLA catch-cry was:
Twice a second, every second, every day, somewhere in the world we sell a pair of spectacle lenses
This catch-cry was written by Jeremy Bishop. Essilor later copied this, upping their quantity to 7 times a second. (Jeremy based his statement on a 24/7 calendar, Essilor were single shift, 5 days a week; hence the big difference in the numbers.)
Kevin O'Connor, a long time SOLA employee who now works for Essilor, noted when discussing the Progressive story that ,"SOLA was for some considerable time regarded by our main competition as the ones to beat in the battle for market dominance, and Progressives were the battleground. We had no real idea then that our technology was ahead of our European competitors – and so far ahead. We can be justly proud of this fact."
Explanation:- Minus powered lenses are used to correct myopia or short sightedness while plus powered lenses are used to correct hyperopia or long sightedness. Most lenses have spherical surfaces. Some combine a spherical and cylindrical surface to correct astigmatism. To correct presbyopia, which generally only occurs when one reaches the age of 40+, bifocal lenses were originally used. Bifocals have two different powers in the one lens, one for distant vision and one for near or reading vision. However such lenses have a visible segment, provide no intermediate vision and are also considered unsightly, by some, as an indicator of old age. The breakthrough came with the development of progressive lenses that have a complicated lens surface that allows good vision in the distance, intermediate and near, i.e. at all focal lengths. Most progressive lenses can generally be made at a similar cost to normal semi-finished lenses but are sold at a substantial premium over normal semi-finished lenses. Thus progressives became the battleground for market dominance.
The Fall
SOLA was still appearing to be going well as late as 1998. Predictions in 1998 by Ted Gioia, SOLA's corporate strategy analyst, were that by 2003:
- annual sales would approach US$1 billion
- SOLA would cast its 2 billionth lens
- operations would be conducted in 40 countries
- employees would number over 10,000, with two-thirds in China and Central/Latin America.
However, sales actually dropped in 1999.
The income trend was even more disturbing:
SOLA then went sideways and backwards. Its darkest days were in April 2001 when it came within 2 weeks of filing for bankruptcy/Chapter 11 administration.
The Rise
Under the leadership of Jeremy Bishop, SOLA reorganised, refinanced and survived. Some statistics July 2001....
The following years saw the company return to profitable growth, eventually leading to the merger with the ophthalmic division of Carl Zeiss in March 2005. This merger led to the formation of a new company, Carl Zeiss Vision (CZV), a 50:50 joint venture between Carl Zeiss AG and EQT, where the SOLA name continues today.
The improved financial performance in the years preceding the merger is clearly illustrated in the following graphs:
When the company was sold in 2005, it was a strong #3 globally (after Essilor and Hoya), with good financials and a capable leadership team. It was growing at around 8% p.a. and was delivering value to its shareholders and employees.
Thus a suitable title for this history update is The Rise and Fall and Rise of SOLA OPTICAL.
SOLA's three CEOs
SOLA's history is very much linked to the skill of its Chief Executive (CEO) at the time deciding what course he must take to drive the company forward.
| SOLA only had three CEOs: |
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1. |
Noel Roscrow |
July 1960 – late 1981 |
~21 years |
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2. |
John Heine |
October 1981 – March 2000 |
~19 years |
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3. |
Jeremy Bishop |
April 2000 – March 2005+ |
~5+ years |
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Note – Jeremy became CEO in March 2005 of Carl Zeiss Vision following SOLA's purchase by Carl Zeiss AG and EQT with the formation of Carl Zeiss Vision. He remained CEO until Norbert Gorny took over in October 2006 (and was stood down in January 2009).
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The company really went through three very different phases with each CEO. Each CEO made major contributions but changed strategy to reflect the changing environment.
As has been comprehensively recorded in Breaking the Mold, in Noel Roscrow's time, the company went from zero – just great enthusiasm to pursue a fantastic opportunity – to a well respected manufacturer with factories on four continents and many sales offices around the world. Excellent technology was developed in product design, manufacturing methods and economic production.
There was always a severe shortage of capital which was somewhat relieved by the sale to Pilkington in 1978.
The rapid growth led to largely independent companies around the world mostly led by excellent local managers who fitted in well with their local culture. There was little need for great central coordination except in keeping manufacturing and products up to date. The main aim was growth, and this was extraordinarily successful.
Noel Roscrow had great qualities of leadership and introduced a spirit of personal involvement to all his original employees. This enthusiasm eventually became the SOLA Culture all over the world (see section 'Culture and people' for further detail) – even to the latest operation in China. As so well described in Breaking the Mold, he was almost continuously travelling the world looking for opportunities for sales, new products or opportunities to set up new manufacturing.
He regularity visited SOLA's main customers and suppliers and was welcome almost everywhere he went.
Upon Noel's retirement, chairman David L Pank captured Noel's contribution in one sentence "Roscrow's mix of knowledge, entrepreneurial drive, energy and sheer cheek contributed to helping achieve the company's success".
Wise people who have studied SOLA's history will agree that Noel built the company from virtually nothing but there reached a point when it was time for a leadership change to take the company to new heights.
Obituary - Noel Roscrow. Click to view article on Noel Roscrow in Australia’s leading ophthalmic newspaper, Insight, October 2011. (Reproduced by kind permission of Neil Forbes)
“John initially performed well when there was a strong board in place, i.e. one that contained proactive people that had industry experience.”
Colin Perrott
“Undoubtedly, the strategic direction from 1996 onwards was pretty disastrous; it was of course of John's own making, as, from around 1997/98, he became progressively and uncharacteristically dictatorial and mostly deaf to advice from then on. It was the time when John, for health reasons, totally gave up cigarettes and alcohol. Prior to that time he was a good and thoughtful listener (i.e., unless one of his hot buttons was pushed! – e.g. mold making transfer pricing…).”
Barry Packham
When John Heine took the helm in 1981, it took him a while to understand the industry, and there were executives recruited who had similar problems. However the momentum from previous years kept sales rising. The move of the headquarters to California rather changed the management outlook. Emphasis on developing new and different products mainly for the USA market increased.
At that time, SOLA companies in several parts of the world were growing more and more determined to do their own thing and John Heine was given the task of centralising control. This difficult task was never quite achieved. However, John decided some way along the path that a balance between regional autonomy and centralization was the more desirable state, and only in the last couple of years of his tenure did he again warm to the goal of centralization.
Acquisitions costing US$ 770 million were made during John's period as CEO, some of which failed to produce satisfactory results. (See section on Acquisitions for further detail.) With high research and development costs for products which did not succeed in the market, cash flow was badly reduced.
During this time, competition became substantially greater. Competition was moving manufacturing to lower cost countries. Additionally, key competitors were expanding their market by vertical integration into Rx. John had the opportunity but refused to do this. SOLA relied more heavily on the Mexican plant for its lens supply to the USA market and Petaluma, California became more of an R& D and Marketing centre, although still maintaining considerable manufacturing capacity. The USA market was steadily eroded as competitors took over large chains of opticians and other Rx labs. SOLA needed increasingly to reduce significantly the manufacture of simple products in developed countries – Italy, Ireland, USA and Australia, but tenaciously resisted this need.
As time passed, it became obvious that cash flow was rapidly declining. Barry Packham was assigned to decide the most efficient method of manufacturing that all the "independent" SOLA companies were using and to quickly standardize on the lowest cost methods. This project not only made substantial savings but underlined the need for more central control, especially on financial matters.
One excellent project established under John's management became the first wholly owned plant in China. This is a very successful outfit producing today a large quantity of lenses of all types at low cost.
SOLA continued to prosper until ~ 1998 and John's contribution should not be underestimated.
Jeremy Bishop who had become associated with SOLA from the acquisition of American Optical in 1996 took over as CEO in 2000, principally on the back of his very successful leadership of then SOLA subsidiary AO. He was experienced in the industry, knew SOLA and knew what had to be done. Jeremy was instrumental in achieving the last rise of SOLA. He appointed Barry Packham to undertake a major unit cost and stock reduction to provide cash while significantly improving customer service levels and quality, while battling to refinance debts which he inherited when he took over. Miraculously he was successful, saving the company from bankruptcy. He developed a more stable market for products in demand and greatly improved customer service. Eventually he negotiated the takeover by Carl Zeiss AG and EQT and eventually left the company in a stable but improving state.
3. KEY FACTORS that had a significant effect on SOLA -
ordered roughly in descending importance
SOLA Culture and Personnel
The culture in SOLA was arguably the key factor that contributed to its success. Noel Roscrow, the first CEO, hired some outstanding personnel and he and his fellow executives nurtured a culture that brought out the best in people and motivated them to work "above and beyond the call of duty". It was a major factor that separated SOLA from most other companies both in Australia and overseas.
Some of the outstanding overseas appointments were Franco Gaslini in Italy, Benny Sato in Japan, Ray Seco in Brazil, Alan Vaughan in Ireland, Dick Kapash in California, Chan Ngai Kong in Singapore and Sampson Li in Hong Kong. Another later, but key, appointment was Alejandro Flores in Mexico who was instrumental in growing the Mexican operation to be the largest CR-39 factory in the world. All these overseas appointees made enormous contributions to SOLA's success. Also, each of these men was able to assemble and motivate a local group of outstanding people.
(Refer to section 4.10 for some "culture" examples. Breaking the Mold also has other good examples.)
Refinancing at the 11th hour (2001)
When listed on the New York Stock Exchange, the SOLA share price rose from US$16.50 to US$43.75 and then slid to US$3.50 in December 2000, culminating in the dismissal of John Heine in March 2000.
Jeremy Bishop was appointed CEO in April 2000. The first few months of Jeremy's leadership were complicated by cash flow uncertainty through poor cash reporting systems and processes, and the discovery in late 2000 that the major portion of SOLA's long term debt was to fall due in only a few months and that SOLA's principal lender, Bank of America had decided not to roll over the debt. Hence if a new financier couldn't be found the company would become insolvent. Jeremy would be faced with having to put the company into Chapter 11 administration almost as his first significant act as CEO.
(See "4.6 North America – Strategic Chronology 1999 – Mar-2005" and 4.8 Refinancing at the 11th hour - early 2001 for more details.)
Rx – delay in SOLA responding to the trend of vertical integration (1990s)
i.e. do nothing while Essilor bought up many Rx laboratories around the world – laboratories that used SOLA lenses. At one point in time Essilor was SOLA's biggest customer!
Barry Packham:
This strategic divergence of paths by Essilor and SOLA was the turning point in the modern ophthalmic market, leading directly to Essilor’s pulling away from SOLA and the other larger players and establishing an almost unassailable lead position in the global ophthalmic market place.
Essilor's strategy to vertically integrate coincided with SOLA's pursuit of the Matrix in-office manufacturing system that some thought would reduce the dependence on prescription laboratories to deliver finished prescription and coated lenses.
Eventually SOLA realised the logic of Essilor's strategy and commenced buying Rx labs. In many instances however it was too late as Essilor, Hoya and Rodenstock had already purchased all the "good" Rx laboratories in the USA, and elsewhere, and only the second tier ones were left. Also, quite cleverly and very significantly Essilor restricted access of independent Rx labs to their flagship "Varilux" products unless they signed an exclusivity contract with Essilor, which placed considerable restrictions on the use of other manufacturers products. Through heavy support of the Varilux brand almost all of the signed labs became dependent upon their profitable Varilux range, and thus minimizing sales by SOLA to these labs. The Varilux contracts also contained a "poison pill" clause, where-by if the independent owners sold the lab to anyone but Essilor, the Varilux contract would automatically be terminated, thus depriving the potential new owners of the major source of income from the moment of take-over. This threat worked effectively for many years, completely discouraging any non-Essilor take-overs of "Varilux" labs until successfully tested by SOLA in mid-2003. Refer Americas 2003-2006.
Barry Packham:
I was visiting Menlo Park for discussions with John Heine on the morning that the Omega Rx lab network acquisition was announced. John told me this, and was quite buoyant, saying that "Essilor has just placed a huge millstone around their neck – high acquisition costs, high capital cost, equipment soon to be obsoleted, and becoming competitors to their customers", plus a few further choice Heine expletives. Following my meeting with John I went into the adjoining office occupied by Ted Gioia, our corporate strategy analyst – Ted's face was literally white – he was quite distraught – I sat with him and his opening remark, without any preliminaries was "this is the beginning of the end…" Ted was clearly much nearer the mark than John.
Contact lens development and acquisitions (1976 - 1985)
In 1976, SOLA became interested in contact lenses. The first step was to see if CR-39 casting technology could be adapted to cast finished contact lenses, with a view to substantially reduce the manufacturing cost.
Pilkington had acquired SOLA in the late 1970s as they could see the end of glass spectacle lenses. The next logical step beyond plastic spectacle lenses was to expand into the contact lens arena and they vigorously supported SOLA’s contact lens research.
The problem for a new company entering this area was that it was already hugely dominated by two companies - Bausch and Lomb and Cooper Vision. The only way to enter the market was with a novel product. Fortunately SOLA possessed the technical expertise to do this - the ability to mold lenses at a very low unit cost. This led to the concept of a disposable system. It was further felt that the other factor of appeal would be to aim for an 'extended wear' lens i.e. lenses that could be worn continuously day and night for a month. Thus the aim to make an emphatic entry as a new player into the market was the production of an affordable, extended wear lens that could be worn for a month and then replaced with a new, sterile lens.
Enormous progress was made in solving the myriad of technical issues. Animal trials carried out by Tony Phillips at the Institute for Medical and Veterinary Science in Adelaide showed that the material was safe and 30 to 40 human patients wore the lens over a two year period.
In spite of being several years ahead of the competition the project was abandoned in 1986. This arose for several reasons (including the fact that SOLA [then Pilkington Visioncare] acquired the contact lens company Syntex, based in Arizona, for US$60 million in 1985) and must rank as one of the most disastrous decisions made by SOLA - according to Tony Phillips.
Tony continues - Perhaps the greatest compliment to the SOLA extended wear contact lens and its concept was that Johnson and Johnson in the USA brought out a similar lens around three to four years later and within a short time were producing US$0.5 billion worth of lenses a year.
See Contact Lenses by Tony Phillips and The SOLA Contact Lens Project by Rod Watkins
US$100 million down the drain
The following largely unsuccessful investments during the latter years of John Heine's leadership burned $100 million of SOLA's cash:
| Polycarbonate Matrix |
$25 million |
| Building a second Spectralite Matrix manufacturing facility in Ireland |
$5 million |
| Miami Sunlens manufacturing facility |
$20 million |
| OLMIL India Joint Venture with Essilor |
$5 million |
| Neolens polycarbonate acquisition and equipment upgrade |
$18 million |
| Goldfish/Enigma |
$8 million |
| China plant expansion (underutilised CR-39 plant capacity) |
$11 million |
| FIST |
$8 million |
Note – details on all these investments are included in Section 4 – Detail.
Karen Roberts:
The quality of SOLA's creativity and inventions in many of the areas was impressive but negated because the commercial potential wasn't, or couldn't be, fully exploited. The substantial and associated R&D, manufacturing and marketing effort on these concurrent projects also distracted from creating a steady output of less ambitious new products and business changing initiatives, further contributing to SOLA's decline.
Acquisitions
Significant acquisitions totalling US$ 770 million** were made during the Heine era:
- Syntex, Arizona USA (contact lens manufacturer) US$60 million in 1985
- Revlon lens interests in USA (plastic and glass lens and mold manufacturer) £361million (US$ 578 million) in 1987
- Neolens, Miami USA (polycarbonate lens manufacturer) US$16 million in 1996
- AO, USA and Tijuana Mexico (plastic and glass lens and mold manufacturer) US$100 million in 1996
- Oracle, Rhode Island USA (polycarbonate lens manufacturer) US$ 17.4 million in 1999
The acquisitions occurred during the Pilkington period, during the AEA era and when SOLA was listed on the New York Stock exchange.
Other smaller acquisitions were:
- Mazzuccelli's interests in SOLA Italy, SOLA Ireland and SOLA Germany all in1980
- IOSA, Goetzenbruck France (glass lens manufacturer) in1981
- OEF, Florida USA (metal mold manufacturer) in 2002
** neglects a few Rx labs
Photochromic plano manufacture – pulling the plug (1988)
The decision to pull the plug on the photochromic plano casting in SOLA Italy in 1988, i.e. several years before Transitions Optical had any saleable photochromics resulted in a major missed opportunity for SOLA.
SOLA could cast the product with good yields in SOLA Italy but the lens had a "hoop stress" at the edge when viewed under polarising light. The area would have been edged off when fitted to virtually all frames so was not really a problem but the Sunlens marketing folk said they could not sell the lens with such an imperfection. Ian Threlfall & Bob Sothman went to Italy but could not solve the problem - so the plug was pulled.
By way of background, SOLA started working in the late 1970s on developing a photochromic plastic lens (to compete with the glass photochromics). SOLA was experimenting with photochromic materials developed by the Royal Institution in London (the place where Michael Faraday did much of his groundbreaking research on electricity). After Pilkington purchased SOLA, the development accelerated as Pilkington had some interesting photochromic materials. Good progress was made and the first product to be commercialised was a blue photochromic plano lens. However, as stated above, this never eventuated. The history of SOLA (& Transitions Optical) would, most likely, have been very much different if the plug had not been pulled as SOLA was several years ahead of the pack at that time.
(See 'The SOLA Photochromic Story' for further details.)
Inability to form a JV with PPG to commercialise photochromic plastic lenses (1989)
In 1993, PPG approached SOLA after they had an agreement with Essilor in place. However, discussions between Heine, Kapash and PPG didn't progress. The implication was that PPG were happy to go it alone with Essilor and went to SOLA as a courtesy to avoid backlash. It appears Essilor was already a partner and refused to allow SOLA to come into the partnership in a meaningful way.
(See 'The Story of Plastic Photochromic Lenses' for detail.)
The history is.....
Transitions Optical generated sales of:
- ~US$50 million within 3 years
- ~US$300 million by 1999
- US$700 – 800 million currently.
The AO purchase (1996)
Compact Ultra1
Some SOLA people have argued that spending US$100 million on the acquisition of American Optical in 1996 was Heine's biggest mistake. Adding a business with substantially the same capability in CR-39 and mineral manufacture in a market where both were declining did not fit with SOLA's long term growth strategy. In hindsight, perhaps if SOLA had spent US$100 million on North American Rx labs instead then SOLA would have maintained its competitive footing with Essilor.
Despite these arguments, American Optical proved to be a vehicle for steady growth through new products at a time when SOLA was largely consumed with high risk, speculative projects.
AO's sales and operating profits:
In fiscal year 1999/00, American Optical contributed $25 million of SOLA's operating profit from a $102 million revenue stream. AO also accounted for over $15 million, or 75% of the SOLA groups' cash generation. Both were critical at a time when SOLA's sales were declining, its profits were slim and cash was in short supply. At one senior management meeting, John Heine remarked that "AO was saving SOLA's bacon".
The success of products such as AO Compact the good yield of progressives from the AO glass manufacturing plant in Tijuana Mexico, the enduring business and relationship with Specsavers and the entrepreneurial learnings from AO France are just some of the things that stood SOLA in good stead at the time and continue to be significant contributors to the business today.
The AO Lensmex facility in Tijuana proved to be a major challenge with the migration of manufacturing into the OSM facility creating much contention and distrust between the SOLA and AO operations staff.
(See 'American Optical's Lens business 1990 – 2006 for more detail.)
Compact Ultra2
Project Rooster (Appointment of Barry Packham 1993)
John Heine noted in 1991 that, "SOLA's basic problem is that it was not generating cash and its margins and profitability were not high enough to support ongoing investment in working capital". Trading profit and cash generation had declined from the mid 1980s so it became imperative to take a number of actions, including the reduction of manufacturing costs, which eventually became known as Project Rooster.
Barry Packham started with SOLA in early 1993 to run the Rooster program. Barry had an almost immediate impact. He focussed on identifying common practice across international barriers through benchmarking of each production sub-process. This involved the cataloguing of the group's best demonstrated practices (BDP): the "How-To-Make" part of the "How-To-Make"/"Where-To-Make" global manufacturing strategy.
With some considerable analytic effort by Bob Sothman, assisted by Michael Gilbert, SOLA was able to determine which manufacturing plant in its group was the best at yield, productivity and quality for each of the production sub-process, and the reasons why.
Rooster was an enormous success with major global manufacturing cost reductions. The original target of a reduction in COGS of 5% over three years was achieved inside 24 months, bringing savings in the order of US$10+ million p.a. The early and dramatic success of this project was a key selling point used in the initial public offering (IPO) on the New York Stock Exchange float of SOLA in 1995.
(See section 'Rooster' and also p 220 of Breaking the Mold for more detail.)
The Matrix System - Laminates (1990**)
Matrix was a revolutionary technology developed in SOLA USA. It was a delivery system for use in the optical stores which made finished lenses by bonding together two ultra-thin wafers using a desktop unit located in the retail outlet with no grinding or polishing required. Lenses were ready in a few minutes and AR coating could be delivered in under an hour (no other technology could achieve this).
To be commercially viable, the Matrix System was required to cover 85% of Rx scripts. A full portfolio of materials and treatments was also required, including CR-39, Spectralite, polycarbonate along with photochromic, polarised, mirror coated, hard coated and AR coated treatments.
By 1 January 1999, 850 Matrix bonding units (bonders) had been installed in customer labs with projections of 1,500 bonders by Mar-2002. Lenscrafters became a major customer for the bonders.
One of the enduring challenges in the Matrix system was the ability to make ultra-thin wafers that were low cost and dimensionally stable during storage and bonding.
The casting and molding challenges of producing such thin components were significant and SOLA’s R&D teams made significant technology breakthroughs attempting to solve these problems.
As the molding of thin polycarbonate wafers continued to prove difficult for acceptable yields and costs, SOLA implemented a surfacing process as an interim solution. As time stretched on it became apparent that costs were unsustainable and the plug was eventually pulled on this program in September 2000 after more than $20 million of development and implementation investment and an all-consuming effort by the whole SOLA USA team for several years.
Without polycarbonate, the system was no longer a viable business solution for interested chain retail customers. SOLA continued to explore opportunities to commercialise this in the European markets where polycarbonate was not in high demand. With this objective, an additional Spectralite Matrix wafer production facility was set up in SOLA Ireland at a cost of another €5 million. This facility was eventually closed in 2004.
At one time the technology was offered to Essilor who turned it down.
Although it consumed enormous resource and cash, some of the technology innovations that came out of this program were used to implement other products and to solve operation problems and continue to be in use today.
(See section ‘Snatching Defeat from the Jaws of Defeat: The Laminates Adventure’ for more detail.)
Barry Packham:
In the first months of joining SOLA in 1993, one of the initial tasks assigned to me by Heine was to visit Petaluma R&D and give him an assessment of the prospects of the Matrix program. I visited Petaluma R&D on a number of occasions for this purpose, sat in on various Matrix project team meetings, inspected the state of product development and spoke at length with Peter Coldrey and key team members. I then visited Heine at Menlo Park and spent a morning with him in his office discussing my findings. I’d concluded that SOLA didn’t have the R&D resources or expertise to make the technology either robust or cost effective, and that it should be discontinued in favour of more promising projects. He confessed that it wasn’t the answer that he was hoping for. This was the last conversation that he and I ever had on the topic.
** First patent was filed in the USA on 02 Nov1990 and granted in Sept 1992.
Polarising via Matrix – Opportunity lost (1996)
The US$20 million+ spent on laminates (Matrix) with minimal return was another big factor leading to SOLA’s decline, according to Peter Coldrey. SOLA USA did launch a single base curve polarised Percepta progressive which was made (expensively) in Petaluma and, without any enthusiasm from the marketing department, was selling over US$1 million per year in the late 1990s.
Peter Coldrey:
Had SOLA gone the laminated polarised route (which SOLA USA were able to do in 1996) the investment in laminates would have been more than recovered including a gainful use for the many hundreds of laminating modules which were eventually dumped. It would have provided a high margin product across our entire lens range and we could have delivered product (with back side AR coating if required) within 24 hours.
Tom Balch grabbed the polarising opportunity when he went to Younger: certainly a missed opportunity for SOLA.
Peter Coldrey:
SOLA's greatest missed opportunity (and in my view a symptom/contributor to its decline) which I consider to be the passing up of the opportunity to make polarised lenses via in-house lamination (Matrix). Had this opportunity been taken, I believe the fate of the company would have been very different from what it is now. The facts of the story are largely contained in a Company report written by Peter Coldrey around 1999-2000. By then the company was starting to unravel (panic!) and even though Peter Coldrey, Barry Packham and Mathew Cuthbertson pushed like hell to get the polarised deal up, we didn't succeed.
(See ‘Snatching Defeat from the Jaws of Defeat: The Laminates Adventure’ for more detail.)
The polarized Percepta product made via Matrix was replaced with polarized Percepta made under contract by Younger Optical (‘run’ by Tom Balch) with a full base/add range, for a lower cost than SOLA could make it in-house. With the closure of Matrix production in Petaluma, it seemed sensible to source all the polarised products from the one source and manufactured with a common technology and polarising film. This method of delivery was not capable of delivering AR coated polarised lenses in one hour however.
Polycarbonate - wrong acquisition (1996)
SOLA launched a major initiative in 1996 to develop and implement a full global polycarbonate product line to address the short term market demand and also position SOLA as a reliable supplier of competitive and good quality polycarbonate products in the future.
A new product manager, Christa Nicholas was recruited by SOLA USA’s VP Marketing, Leslie Gardner, to champion this initiative. She was supported by Barry Weitzenburg, Jeff Kingsbury, Jose Ramirez and Karen Roberts to help prepare a strategy and execution plan.
SOLA USA had already developed a proprietary compression molding process for manufacturing polycarbonate SF blanks. This work was championed by Jeff Kingsbury and Dave Spector for a number of years with significant technology innovation and several corresponding patents.
For SOLA to be competitive in the polycarbonate category it needed to supplement its semi finished product portfolio with a finished single vision range and more competitive coatings.
After reviewing various options, a company called Neolens in Miami, Florida was identified as a possible acquisition target. Jeff Kingsbury, Christa Nicholas and Karen Roberts visited Neolens in June 1996 to evaluate their capability. Jeff prepared a trip report which covered all aspects of the equipment and process. He identified major area to address with mold making, coating, quality, and safety issues. The general consensus from the group was that Neolens would expedite SOLA’s presence in the poly finished single vision business if the purchase price was no more than $4 to 5 million; otherwise it would be better off purchasing the injection molders and metal molds and starting production in-house.
John Heine and Jim Cox took this information and then negotiated the acquisition in apparent isolation of the recommendation. Everyone was shocked by the eventual purchase price of $16 million: what had motivated the investment jump from the $4-5 million recommended to the $16 million paid?
SOLA then spent several years trying to fix up the operation with new molds, new coating equipment and resins, retraining personnel in the ‘SOLA way’ to improve quality, yields and safety. After several years of effort and another couple of million invested, this facility was eventually closed because of the inherent quality problems and so SOLA lost the investment and delayed their entry into the finished single vision business by another couple of years.
SOLA then worked with American Polylite in Taiwan to contract manufacture and support its polycarbonate finished single vision demand as another interim solution.
The subsequent purchase of Oracle Lenses in Providence, Rhode Island was a much better investment decision. This did however bring with it its own unique problems with the ex-owner who initially stayed on as manager of the facility, cultural adaptation issues, quality and yield issues when subjected to main-stream customer scrutiny, etc., which took a number of years to resolve. It however did form a cornerstone of SOLA’s polycarbonate presence in the crucial North American market for many years.
American Optical had a relationship with Oracle prior to being acquired by SOLA. Oracle had supplied AO’s finished single vision and semi finished single vision for years. A recommendation was made to partner with Oracle to develop a capability to make AO Compact polycarbonate to support the launch of the product in 1998. There was some discussion with Jeremy Bishop and Jim Cox about taking an equity stake or entering some agreement with Oracle as part of this initiative, so that any know-how transferred to Oracle, and growth in the value of the Oracle business as a consequence of the success of AO Compact, would be acknowledged and shared.
For various business reasons this was not pursued at the time and the eventual purchase of Oracle for $17.4 million in 2000 ironically reflected a growth in their business that was largely driven by SOLA with AO Compact and a progressive manufacturing capability that was the result of many years of collaboration.
However, the options for making and delivering the AO Compact polycarbonate product were limited at the time, so it was still an expedient decision to ensure the AO Compact was available in all key materials to ensure the product was successful. The eventual success was beyond what anyone had projected and so was testament to this being a good decision for the time.
SOLA and Essilor (1995-97) – a brief period of attempted rapport with the enemy
John Heine and Xavier Fontanet (CEO of Essilor) began having regular meetings following the failure of a domestic Chinese ophthalmic market to emerge (as projected earlier by McKinsey). One outcome of these meetings was when India began to be touted in the financial press and the consulting industry as the next domestic growth market, they decided to do a Joint Venture (JV) to reduce their respective financial exposures rather than repeat the mistake of China.
The JV was seen by both Heine and Fontanet as an opportunity to develop further collaborations. Areas of special interest to Heine were using Spectralite as a joint flagship mid-index material, and ensuring that the growing Essilor-acquired lab network didn’t replace SOLA products. Of interest to Essilor was sourcing low cost semi-finished CR-39. None of these aspirations were realised.
Barry Packham:
Having attended a number of these meetings I concluded that interest was considerably greater on the SOLA side than the Essilor side; that Fontanet wanted SOLA as a tame competitor if at all possible rather than an aggressive one, so played along while conceding nothing of real value.
Joint Venture with Essilor in India (1998)
The respective contributions of the partners to the JV very much reflected the level of good faith (or the absence of it) by the respective parties. At Heine’s insistence, against strenuous argument to the contrary by Barry Packham and others SOLA provided its best casting technology (diverting a BDP line destined for SOLA China to India) while Essilor provided off-the-shelf third party coating equipment. Hence Essilor gained insight into the best SOLA technology and processes while SOLA gained little insight into Essilor technology and processes.
However by the time that the JV went into production (March 2001), it became quite obvious that the aspirations for the Indian domestic market was China revisited – the market remained almost non-existent, and through India’s archaic import/export rules, it continued to be cheaper to import lenses into India from China than to make them in India. As a consequence, the JV lost money from the day that the doors opened for business. Both partners searched extensively for ways to staunch the losses – from putting external volume into the plant to lobbying the Indian government for a more rational import/export policy. In the end SOLA JV directors Steve Neil (SOLA CFO) and chairman Barry Packham negotiated the sale of SOLA’s share to Essilor – amazingly Essilor finally paid US$1 million, together with restricting the use of all SOLA technology only to the JV and all sourcing of all molds and gasket material from SOLA. The ongoing and projected loss situation of the JV was such that SOLA would in the extreme have given its share to Essilor gratis, just to be free of the snow-balling losses. Essilor bought SOLA’s interest out and paid $1 million because Jeremy Bishop asked Xavier Fontanet to do so, and he agreed.
Recent history is that Essilor has gone on to make OLMIL a major lens manufacturing site producing a lot of the generic Transitions for Essilor. Their production is substantial and expanding. OLMIL as a JV did not succeed but Essilor got out of it what they wanted and ended up with something that is a quite significant business that they have continued to invest in.
(See ‘India Manufacturing’ for more detail.)
Failure to adequately resource CR-39 lens casting (1995 onwards)
By about 1990, SOLA had the best CR-39 manufacturing technology in the world. (It is difficult to prove this statement conclusively but is highly likely to be true, based on SOLA’s best intelligence at the time.)
The generally held view at this time within the industry, and especially within SOLA, was that the % of CR-39 lenses would fall significantly at the expense of polycarbonate, high index and other niche products. Thus inadequate funding occurred in basic maintenance of SOLA’s existing CR-39 facilities let alone any process improvement because of this view that CR-39 was a declining lens material. Related issues were:
- tight cash constraints
- cash spent on product failures (e.g. Matrix polycarbonate)
- a reasonable yearly Group-wide cost-down in manufacturing cost per lens due to Rooster and a trickle of migration of manufacturing from high to low labor cost sites.
Consequently SOLA lost its technological advantage in CR-39 lens manufacturing and thus came under increasing cost pressure due to the emergence of low labour cost manufacturers in countries like China.
It became an ever increasing downward spiral within SOLA. As volumes dropped, costs increased due mainly to the high fixed overhead component. To make matters worse CR-39 continues to enjoy strong demand.
Execution of Barry Packham’s “where-to-make” proposal (1999)
The looming financial crisis became obvious in early 1999, with Heine making impassioned presentations at several International Executive meetings for significant overhead reductions and sales initiatives. The response from the commercial leadership was a deafening silence, apart from Jeremy Bishop, the then CEO of AO. Barry Packham submitted a comprehensive plan for the rationalization of global manufacturing and distribution, which involved factory and distribution centre closures and the migration of several thousand jobs to low labour cost countries. Heine shelved the plan as too radical. This proposal in its later final form, implemented after Heine left, consisted of 19 separate projects involving a comprehensive consolidation of manufacturing and distribution throughout the world and multiple plant and distribution centre closures with some 2,000+ job migrations to lower cost environments. Savings achieved were around US$15-20 million p.a.
(See ‘North America – Strategic Chronology 1999 – Mar-2005’ for more details.)
WC Reduction – Supply Chain improvement (2000)
When Jeremy Bishop took over the CEO position in April 2000, he appointed Barry Packham as Executive Vice President, Manufacturing and Logistics. Barry’s mandate was to expedite the back office reorganisation to deliver the necessary cost reduction, product migration and service objectives that were critical to SOLA’s future performance.
Pressing issues of profitability required urgent attention to cash flow, and customer service needed equally urgent attention. The biggest single source of cash was in managing inventories much more effectively: to have the right lens in the store at the right time and in the right number, rather than a couple of million of the wrong lenses sitting there for years.
Achieving this goal would simultaneously achieve the customer service delivery goal: the right lens in store at the time that the customer wants it. In mid-2000 SOLA was losing customers due to very poor delivery service. The problems of stock outs and poor service were exacerbated when large retail chains ran a promotion that tripled demand, and had given SOLA only a very short period of advance notice.
People like John Rosser in the UK plotted every day their lost sales as a consequence of no service; SOLA actually dropped more in sales than it gained.
All of the 18 SOLA factories were running enormous back order lists while SOLA was holding more lenses in inventory than in its whole history – unfortunately mostly the wrong lenses.
The cash flow and customer service repair jobs became part of the overall Global Operations restructuring and improvement program. Supply chain functions were formalised where they were not previously recognised, and a complete review of the process of forecasting and inventory management was undertaken. Shop floor systems were also installed to ensure that only ordered lenses were made. A list of KPIs for each factory and distribution centre was developed and rigorously monitored. By 2002, the North American supply chain was recognised by the market as being at the leading edge of delivery service, receiving formal acknowledgements from both Luxottica and Wal*Mart, as well as a legion of smaller chain retailers and independent labs. Similar performance followed in Latin America, Europe and lastly Asia Pacific.
(See ‘Supply Chain’ for more details.)
Lens material (monomer) development (1980)
Most lens casters relied solely on purchasing the monomers to make lenses from the likes of PPG for CR-39 and later Mitsui for high index. SOLA also purchased these monomers but was one of the very few lens casters to develop successful lens monomers in-house. The key person who led the development was Huan Toh in the SOLA R&D facility in Australia.
The most successful material was Spectralite which enabled SOLA to market a “thinner and lighter” lens material with a good balance of optical, mechanical and process performances. This monomer had the additional advantage of being UV curable which resulted in a cure cycle of 20 minutes compared to 21 hours for CR-39. Spectralite made SOLA a lot of money.
Spectralite also led to development of “Velocity”, a lens substrate compatible with the Transitions photochromic imbibation process, which, at the time, delivered the fastest fade-back speed on the market. This was achieved through the clever manipulation of the Spectralite material chemistry with the Transitions imbibation process.
(See ‘SOLA materials R&D for Spectacle Lenses and Coatings’ for further details.)
Finalite high index material, also developed in the SOLA R&D facility in Australia, was another success.
Goldfish/Enigma – fantastic idea but abject failure (1996)
Goldfish/Enigma was a revolutionary product developed by SOLA that offered a lens that was different.
The distinct looking highly curved single vision eyewear resulted in extraordinary surround vision with 40% wider field of view and less chromatic aberration when made in polycarbonate.
Goldfish/Enigma met the criteria of how to differentiate visually and performance-wise SOLA’s product from that of its competitors. Mike Morris started the classic Goldfish concept with spherical lenses that placed the centre of rotation of the eye at the geometric centre of the lens, so avoiding off-axis error. Colin Perrott found the breakthrough. Steve Spratt was the detail man who converted the concept and general calculations into precise surfaces. Peter Joy, the talented marketing executive with limited optical knowledge but great enthusiasm for the project, was recruited by John Heine to lead the marketing program. Paraic Begley led the technology development.
A joint venture was formed with Safilo where SOLA provided the lenses, Safilo provided the frames and the lenses were processed through SOLA USA Rx labs.
In terms of technology and manufacturing, major innovation was required to deliver the product. Because of the high curve and the non-rotationally symmetric surfaces, innovation was required in the lens design, molding equipment, molding tooling, inserts, molding process, metrology, hard coating, and edging.
Significant technical issues were solved to deliver the product to the required specification. This really was a massive achievement. However the project failed and was abandoned in December 2001, almost 5 years after it commenced.
It cost in excess of US$8 million and delivered zero cash returns.
The failure was due to both marketing and R&D:
- Marketing failure. Regardless of the ground-breaking nature of the technology of the product, the key to its commercial success was always going to be in its effective marketing in the US market place. After Peter Joy departed in mid-2000, the crucial marketing effort failed to gain any traction. The frames were old fashioned by European standards (and that's where SOLA had the labs to process and thus sell the product) and hence, virtually unsalable and
- The Rx range was too limited.
However, two significant tangible inventions flowed from Goldfish to Freeform, which became a significant earner for CZV. Metrology and the ability to make non-rotationally symmetric parts were the precursors that shortened the lead-time for developing Freeform capability.
(See ‘Goldfish/Enigma – fantastic idea but abject failure’ for more detail.)
Freeform
FIST – brilliant idea but lack of finance and commitment to complete (1998)
The FIST concept (Fast Innovative Sputter Technology) offered exclusively to SOLA by Leybold promised to be a radically new way for the cost effective mass manufacturing of UTMC type coatings on ophthalmic lenses and Matrix wafers.
The plan was for the substrate to be handled in a pair-wise fashion and to be hard and AR coated in one process. Lenses were to be simultaneously coated on their back and front surfaces. Alternatively, wafers were to be handled as pairs of front and back components which were to be simultaneously coated on their respective outer surfaces.
A cycle time of under 1 minute per 4 surfaces coated (i.e. 1 pair of lenses or 4 wafers) was targeted.
A frame agreement was signed between SOLA ADC, Wexford and Leybold in September 1998. Leybold’s perspective was that it would not attempt such a project alone, i.e. without considerable input (e.g. 20%) from a technically knowledgeable lens partner. SOLA R&D was to provide the technical leadership on SOLA’s behalf and would thus work closely with both Leybold and SOLA ADC in bringing the FIST technology into production in SOLA ADC.
The hardcoat was to be applied via PECVD (plasma enhanced chemical vapour deposition) and the AR coat via Sputtering.
The innovation was that FIST would offer the first small batch (pair-wise) in-line continuous vacuum hard and AR coating process. The system would be inherently more cost-effective (in cost per surface coated) than any other existing system by virtue of combining two processes into one and by a high throughput. Leybold’s fast in-vacuum plasma hardcoating process PECVD has at least one order of magnitude higher deposition rate than any other known plasma process. The in-line process would ensure a superior coating consistency at a higher coating quality. In addition, this concept (i.e. in a smaller version) could be applied to a fast turnaround Rx situation. The system was ideally suited to just-in-time manufacturing especially if combined with similar small batch or single part pre- and post-processing steps (i.e. polycarbonate injection moulding).
The key challenges were:
- holding the lenses to stop distortion
- getting the coating on both sides of the lens
- loading and locking, i.e. the ability to move lenses while under vacuum.
Through 1999 and 2000 work to develop the concept to prototype stage was on-going between SOLA ADC engineers, SOLA R&D and Leybold.
Design concepts were tested and critical issues such as carrier system and transfer between chambers under vacuum were resolved. The FIST system was brought to prototype phase in early 2001.
The project was cancelled in 2001, due to the poor state of of both SOLA & Leybold’s finances, and the border-line advantage of FIST at that stage of its development. A further year or so of development and several million more of investment may have seen FIST a clear winner – however that was a gamble that neither SOLA nor Leybold were prepared to take. See the attached report from Jon Westover & Tony Donegan
Key personnel from the SOLA side were Kieran O'Dwyer, Project Leader SOLA ADC, Ken Dolan & Donal Cosgrove Technology SOLA ADC, Frank Samson R& D Australia and Dave Bohling R&D SOLA USA.
Steve Daly:
FIST was a statement of the innovative minds in the company at the time. At another time in SOLA’s history, or with another caster with deeper pockets, it would probably have been successful.
Sunlens manufacture in Miami, USA (1997)
A manufacturing facility to produce value-added sunlenses using clear planos from SOLA Brazil was set-up in Miami in 1997. An office/warehouse facility was leased just west of Miami airport and AR coating, mass tinting and edging facilities installed.
The justification to setup such a facility was the need for speedy service to the USA sunglass customers, possible from a Miami facility but not from Brazil. It was in addition to a distribution centre for the full range of SOLA sunlenses, including CR-39 from SOLA Brazil, polycarbonate from SOLA Italy, glass polarised blanks from Pilkington, and polycarbonate polarised blanks from Japan and Korea.
Perhaps there was some merit in the reason to set-up manufacture in Miami but there never was a proper evaluation of the cost-effectiveness of the proposal. The justification was based around market projections and wildly optimistic “guesstimates” of Miami manufacturing costs and yields. Very quickly the cost of “running” the small Miami facility became uneconomic and the levels of work coming in were just not sustainable. The manufacturing side was closed down in late 1999 with the office and distribution centre closed down completely in 2000.
The cost of this manufacturing endeavour was US$19.7 million. There was little real return although some of the equipment was sent to other SOLA sites following closure.
(See ‘Sunlens’ for more detail.)
In-house SIP (catalyst) manufacture (1981)
In-house SIP manufacture gave SOLA the ability to set up significant lens casting sites in relatively remote locations (e.g. Brazil). Initially SOLA Australia made IPP in-house on a relatively small scale. As production increased it was able to source IPP from Interox in Sydney but the problem was the high cost. Interox realised that they had a “captive market” and continually raised the price of their IPP to such an extent that Noel Roscrow and Ron Ewer realised they had to find a way to make IPP on a production scale in-house. Peter Hutchinson, an ex-Interox employee, designed all the manufacturing plant and equipment for the Lonsdale, Australia site and taught Bob Sothman and Robert A Digiusto the fundamentals of IPP and SIP manufacture.
SIP plants were then setup in Brazil, Ireland and Venezuela. Over the last 30 years SOLA/CZV has safely made more than 1,200,000 kg of good quality SIP which has saved SOLA/CZV well over US$ 24,000,000.
(See ‘SIP’ for more details.)
Fracture Analysis (1979)
Some of the key advantages of the takeover of SOLA by Pilkington were that it gave SOLA access to Pilkington cash, technology and some outstanding personnel such as Ian Gillies, Ted Ellis and Barry Sheridan. While this is covered in Breaking the Mold one example is not, namely the technology of fracture analysis.
Barry Sheridan was a world expert on fracture analysis and taught many SOLA personnel to use it to successfully identify the origins of mold damage (breakage, pullouts, etc) and origins of lens separations. Once the origin was know, it was generally possible to identify the cause and thus put in place steps to eliminate the cause. Over the years, the use of this technology contributed many millions of dollars to the bottom line. It was a major factor in significantly reducing mold damage, in some cases from ~1% (100 casts per mold) to ~0.05% (2,000 casts per mold) as happened for progressive molds that cost in the order of US$100.00 each. Even after he retired, Barry was sometimes called on to study broken molds to resolve disputes between a casting site and a mold making site over mold quality.
Manufacture in Mexico (1985)
The decision to set up manufacturing in Tijuana, just over the USA border turned out to be very successful as it allowed a significant sales increase in the USA. The factory was set up largely by SOLA USA and expertly run by Alejandro Flores. By 1999, SOLA Mexico was the biggest lens factory in the world, producing over 220,000 ophthalmic lenses per day.
After Alejandro retired, Jon Westover and then Jorge Mario ran the facility which is now back under Mexican management with Rodolfo Rubio in control. Mexico continues to be the major plastic lens manufacturing facility in CZV as well as the key mold making and glass lens site. Additionally it has provided a very effective platform for the establishment of one of CZVs high volume Rx laboratories, guaranteeing the future of the site for many years to come.
(See ‘Mexico Manufacturing, including Lean’ for more details.)
McConnell / Deming philosophies in SOLA Australia (1992)
After McConnell / Deming was introduced in SOLA Australia manufacturing in1992/3, bottom line cost savings were significant. A fairly typical casting yield improvement:
Gerry Loots and Geoff Ward (Manufacturing Manager in SOLA Australia) introduced McConnell / Deming training to all production leaders and then to all general staff. In fact, this training continued many times over, such that every SOLA Australia employee attended a three-day McConnell course. (John McConnell is a Deming and Shewhart disciple. He consults with a number of companies in Australia and some large US companies.) A key outcome of the course was the ability to draw and interpret Shewhart control charts with a focus on the analysis and control of variation and using data to draw conclusions.
Geoff Ward’s favourite quotes became:
- I value your opinion but show me the data
- In God we trust....all others must have data.
As well, each production department had improvement teams whose goal was to reduce cost by reducing variation. The specifics of what they did were left up to each work group but through strict adoption of the McConnell/Deming teachings, they had a methodology that worked.
The outcome was a major success with significant improvements in quality, yield and mold damage and a much more consistent manufacturing process.
Attempts to “export” this methodology to other SOLA sites met with some good but limited success.
(See ‘Deming/SPC Implementation at SOLA – never a fad but a real success story and Metamorphis at SOLA Optical Australia’ for further details.)
Manufacturing expansion in Guangzhou China (1998)
By the early 1990s, SOLA had two manufacturing plants in Greater China: SOLA Taiwan and Norinco SOLA in Xi’an. The size and growth potential of the China market for plastic lenses were obvious, and the environment for foreign investment was getting better in China after years of economic reform.
While Norinco SOLA was profitable, it was a 50:50 joint venture. Management decisions were controlled by the Chinese partner under the prevailing JV rules, and were slow or non-existent. By 1994, the Chinese Government further opened up the economy so that SOLA was able to build a lens manufacturing plant without the requirement of a majority local joint venture partner.
ly 1990s McKinsey report on the prospects of growth of the domestic Chinese market, three of the major ophthalmic manufacturers (SOLA, Essilor and HOYA) decided that it was timely to set up their own domestic ophthalmic manufacturing facilities to be on the ground floor of the anticipated rapid growth. In late 1995, SOLA found a suitable piece of land on the northern outskirts of Guangzhou and the first lens was cast on 21 March 1998. The Guangzhou factory incorporated the best of SOLA’s technology, culture and work practices.
However, the postulated growth didn’t occur, and all three manufacturers found themselves with vastly under-utilised operations. This situation continued with the SOLA factory operating at barely 20% capacity for several years. Following a series of spirited discussions between Barry Packham and John Heine, which was the start of the “Where-To-Make” dialogue that became crucial to SOLA’s survival in 2000, Heine eventually agreed to use the factory for export. Heine’s reluctance to do this was based on his view that although unit costs were far lower than any other SOLA stock lens site, CR-39 sales had plateaued to some extent, and volume to fill the new Guangzhou facility would have to come at the expense of developed country factories, namely Wexford and Lonsdale. However, once the decision was made, volumes gradually ramped up, and over a period of years reached full capacity.
Under the leadership of Wilson Peng, the China plant grew from strength to strength and today is arguably the best manufacturing facility in Carl Zeiss Vision (CZV) allowing CZV to better compete on price and quality.
(See ‘China Manufacturing’ for more details.)
SOLA Brazil – Rise and Fall and Rise (1973)
The decision to setup SOLA Brazil was taken in 1973. Production began in 1975 with temporary Australian staff until Ray Seco was appointed manager in 1977. Under his drive, the factory grew from an operation in a small building of 40 square metres until in 1995 it occupied over 12,000 square metres. The factory produced most SOLA ophthalmic lens products, plus sunlens and frames; built most of its production machinery in a large engineering workshop; installed major gasket manufacture; contained laboratories for quality control; and established a SIP plant. It also provided an excellent staff canteen and office space. Apart from a few complex molds, it was proudly self-sufficient.
By 1993, SOLA Brazil’s staff had grown to 900. At that time, it had around 70% of the Brazil plastic lens market; exported very large numbers of sunglass lenses to Europe and USA; and supplied most other South American countries through its subsidiary, SOLA Pan-American in Miami.
It also established small plants, one in Manaus in a Brazil free-trade zone, and one in Argentina, which was later closed in favour of a sales branch in Buenos Aires. It also set up and built most of the machinery for the new plant in Venezuela.
Thus, Ray Seco presided over an amazing period of growth, much of which was carried out independently from the rest of the Group. Credit must also be given to Regina Lessa, who managed production while Ray was involved in other developmental and administrative tasks and travel.
After 1995, differences arose between corporate and local management as Ray concentrated on expanding into new buildings on a new site that he had acquired. Meanwhile the company did not react to the much increased sales competition from SOLA’s rivals with low cost imports, e.g. Essilor set up manufacturing in the free trade zone of Manaus. The SOLA group was also pressing for much greater group control and more efficient systems, while the volatile local management fought to retain their independence. Sales continued to fall and morale was low.
Eventually, in 1999, both Regina and Ray suddenly and simultaneously resigned leaving, they expected, a critical situation.
However, Jorge Mario, Paulo Frias and Marcos Venicius, with Corporate help maintained stability until shortly thereafter Brett Olsen was recruited from Black & Decker Latin America and appointed Director of Latin America. Brett then quickly appointed Lee Johnson as manager of finance. Jorge was appointed general manager of manufacturing and Paulo continued as general manager of Sales and Marketing. Lee attended to the financials. Under Brett’s direction the key strategies adopted by Jorge, Paulo and Lee were:
- Discussion with customers to see what they actually required
- Elimination of second and third quality lenses
- Improved customer service.
Good progress was made in reducing factory costs and recovering some of the lost sales to Essilor, Rodenstock, Hoya, etc. Sales increased 40% in the first year.
Jorge presided over a period of recovery and expansion onto the new site. His success was eventually rewarded by him being also placed in charge of both the Venezuelan and the major Mexican manufacturing facilities.
Jorge, Paulo and Lee were a very effective team in Latin America, becoming known affectionately as “The Three Amigos”
(See ‘Brazil Manufacturing’ for more details.)
Hard coating development in Petaluma, USA (1980)
Hard coatings significantly changed the ophthalmic plastic industry as they allowed previously unacceptable lens materials to become acceptable, such as polycarbonate which has excellent impact resistance but very poor abrasion and solvent resistance. A successful hard coating allowed polycarbonate to gain significant market share, especially in the USA (because of their impact resistance requirements). Around 1980, Bernie Friewald realised one of the limitations of CR-39 lenses was its scratchability. At about that time Amorlite/3M came to the market with a scratch resistance coating to a plastic lens.
Key SOLA managers in Australia were sceptical of the merits of hard coating as they assumed the abrasion resistance of CR-39 was adequate and they were very slow to do any R&D on hard coatings. Meanwhile Petaluma could see the merits and were “allowed” (as it was then the Pilkington era) to do R&D. Petaluma developed a very successful method of applying the coating, through a spin coating machine that ended up in most SOLA manufacturing sites around the world.
On the other hand, SOLA never did any meaningful work on developing hard coating resin – today it remains totally dependent on external suppliers.
Regional versus Front Office/Back Office management structure
Several times during the last 40 years, SOLA/CZV alternated from a global structure based on regions to one based on Front Office (global sales/marketing) and Back Office (manufacturing/supply chain). Each had its advantages and disadvantages. In the early days the regional structure sometimes caused much friction between regions (sometimes to such an extent that another region of SOLA was viewed as the enemy).
The Regional structure did allow greater synergies between sales and manufacturing within a region, but not always to the good of the group. In the 1990s and 2000s the alternate structure resulted in generally amazingly constructive cooperation between the manufacturing sites. Barry Packham presided over a fantastic group of manufacturing and supply chain managers (with a wide cultural diversity) that worked well together for the overall good of the company, followed similarly by Jon Westover with global manufacturing. The 6 monthly face-to-face meetings generally over 3 days at a manufacturing site, also helped the bonding process and was a key to ensuring the ongoing cooperation of all manufacturing sites.
RSI (Repetitive Strain Injury) (1978)
During the late 1970s and early 1980s, RSI was a big issue on the production line in SOLA Australia. At the time SOLA had the highest incidence in Australia. A key contributor was the repetitive open and shut process which, when coupled with other factors such as emotional strain resulted in an unsustainable number of production workers reporting in sick and requiring long and expensive rehabilitation. It led to a push to automate some steps in the process and also a major overhaul of the allowable hand and wrist movements in the open and shut process. Dr David Mitchell was the industrial doctor at SOLA at the time and, along with Nurse Joan Ramsey, helped produce a Super8 movie on correct (allowable) hand and wrist movements for all parts of the manufacturing process. This movie became a key part in the training of operators at the Lonsdale factory and subsequently at some overseas sites. Dr Colin Mills followed Dr Mitchell and introduced such initiatives as job rotation that went a long way in getting the problem under control.
It is worth recording that RSI only became a major issue at one overseas SOLA manufacturing site (SOLA USA) while it continued to be an issue, to some extent, right up to the end of manufacturing at SOLA Australia. In SOLA USA, Vicky Villanueva was instrumental in addressing this problem. She was given the monumental task of training everyone in the proper techniques for each process. Her work made a huge impact.
One factor that prolonged lens manufacturing in Lonsdale until 2009 was the enormous financial payout of many millions of dollars to the significant number of factory workers on “light duties” from RSI and other injuries.
The only other significant OH&S issue in the early days was monomer rash. This was successfully brought under control by improved hygiene, better monomer fume extraction, and improved monomer handling.
Ground water contamination – Petaluma, USA
The SOLA Petaluma factory was built on a site from which ground water was extracted for the town’s water supply.
Thus a major problem occurred when it was discovered that SOLA had contaminated the ground water with chlorinated hydrocarbons used to clean the assemblies and/or molds. The massive cleanup required by SOLA occurred over many years and at considerable expense to SOLA. SOLA was to some extent lucky in that the authorities mistakenly included acetone in the list of contamination chemicals. Fortunately Tom Balch was alert enough to challenge this and it was discovered that the acetone came from cleaning the glassware used to do the analysis. This mistake by the authorities allowed Tom to negotiate a less onerous cleanup program.
Standard Costing System (1961)
Noel Roscrow:
A key advantage for SOLA in the early days was Dean Sherry’s ability with costings - an advantage as it allowed SOLA to price its products competitively and importantly to know what the minimum sell price should be.
Details on the standard costing system are in section ‘As I saw SOLA 1958 – 1987’ by Dean Sherry.
First Export Award (1966)
SOLA’s first export award in Australia, according to Dean Sherry, “put SOLA on the map” as previously it was seen largely as an off-shoot of Laubman and Pank. It opened doors, helped with getting bank loans and extended credit as it could be seen SOLA made foreign currency. SOLA also won export awards in 1971 and 1976 and in 1979 the Governor General’s award for export excellence – only one of two Australian companies to do so.
SOLA also gained the Prince Phillip Prize for Australian Design in 1975 for work on the Commido.
Election of the Liberal Government in South Australia (1968)
The year 1968 saw Steele Hall’s Liberal Party have an unexpected election victory over the incumbent Labor Party. This was to set in train the momentum that led to the SOLA factory at Lonsdale. When in power, the Labor Government was vague in outlining its support for SOLA’s inevitable expansion. It spoke of government-backed bank guarantees and so on but nothing definite was ever put on the table. Soon after the Liberals took power they had a well laid out plan of how it would work with SOLA. In conjunction with SOLA, the Government provided the land, the design of the building, complete construction, and the finance. SOLA rented the building with an option to purchase it at any time.
The Lonsdale facility was a major factor in SOLA’s ongoing success.
SOLA as a market leader
During the last 20+ years, SOLA achieved limited success when it tried to be a market leader, e.g.
- Goldfish contour optics achieved no cash return after a lot of expenditure and success solving major technical and manufacturing issues (brilliant work was done by technical and manufacturing personnel).
-
Matrix consumed enormous resources but had limited market success. It was possibly a flawed concept as some lenses were too thick and there was insufficient market for “1 hour AR coated lenses”. Matrix was offered to Essilor who declined). It was championed by John Heine right to the end of his tenure.
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Teflon AR coating led the way but did not lead to significant incremental sales. It became the marketing flagship brand and product for the belated North American Rx lab acquisition program of 2004, but never reached the aspirational levels initially set.
SOLA’s failure to be a market leader has been attributed to:-
- a weakness in Sales and Marketing
- ineffective interaction between R&D, Manufacturing and Sales and Marketing
- R&D taking too long and spending too much money
- the initial development of a too narrow product range requiring Mandrake to make it a market success
- beyond SOLA’s R&D capability but the CEO wanted it and no-one in R&D would tell him that they weren’t up to it, or that it simply couldn’t be done
– probably all a weakness since Noel Roscrow’s time.
Around 2004, Herbert Weiss at a G14 meeting in Europe made the very astute observation that in his long experience in SOLA, that SOLA did poorly whenever it tried to lead the market, and did very well when it acted as a follower.
There were many examples where SOLA was the first to market and created new categories in the market. However, during the last 20 years there were a number of areas where SOLA tried to be highly speculative and had a number of things running at about the same period but lacked the ability to implement. (See ‘SOLA as a Market Leader?' for more details.)
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