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TMCNet:  Sauk Rapids' Talon Innovations Corp. set to diversify production [St. Cloud Times, Minn. :: ]

[February 23, 2014]

Sauk Rapids' Talon Innovations Corp. set to diversify production [St. Cloud Times, Minn. :: ]

(St. Cloud Times (MN) Via Acquire Media NewsEdge) Feb. 23--SAUK RAPIDS -- Just a slight detour off Benton Drive takes you to a 43,000-square-foot building that for most of the past two decades has been home to Talon Innovations Corp.

Up to now, the business has done 75 percent of its work in the semiconductor industry, but it soon could be noted for turning out surgical screwdrivers, bone screws and other medical devices.

The diversification, according to CEO Greg Olson, is an example of forward thinking, a hallmark founder Mark Eriksson, who started the company 20 years ago in the middle of his engineering education at St. Cloud State University.

"We're not going to design hip implants or heart valves," said Olson, who joined Talon last spring after 17 years in executive engineering and marketing positions for Minneapolis-based Graco -- a billion-dollar fluid handling company. "But we're going to leverage our manufacturing strengths to make products for somebody who might assemble them into something else. Our clients won't be hospitals, they'll be other medical device manufacturers. As we grow and get smarter about it, then maybe we'll think about expanding what we can do." Looking ahead has been crucial for Talon. Several years ago, Eriksson realized his company was growing too fast to be an owner-operator organization and needed to import a strong management team. Less than two years ago, he brought in a vice president of human resources, a director of operations and a purchasing manager -- all with big-company manufacturing experience.


That decision perhaps staved off disaster for Eriksson's family and about 130 employees today. Eriksson, 45, was killed when the chase vehicle he was in rolled over about 15 months ago during the Baja 1000, an off-road race on Mexico's Baja California peninsula. He left behind a wife and two teenage sons.

The company survived his loss and last September was acquired from the Eriksson estate by a New York-based venture capital firm.

Olson, who also has an ownership stake, is in the process of leading a diversification that could ensure the business Eriksson started has a bright future in an industry that has flourished for many Minnesota companies. There's a lot of work ahead.

"Our heritage was really Mark," Olson said of Eriksson, who developed seven design patents. "He founded this company on precision machining and that's our core strength and what we've done. The reason I came on board and the reason the ownership brought me in was because I had a lot of sales and marketing experience on top of my engineering experience. Talon had a great sales guy in Mark, but he was very technical and he was focused on technical relationships. What the company was lacking was a higher level sales and marketing focus. Our Internet presence was minimal and marketing tools weren't in place. I followed the strategy Mark started, though, where we brought in people from bigger companies. That gave us a discipline on processes that a small company might not have. Mark had started the company toward putting on its big-boy pants and we're just trying to continue that." Growth and new ownership During 2013, Talon hired 43 people and brought in 28 more temp-to-hire employees. The company also spent more than $3 million on new computer numerical control machining equipment to support its growth.

The new ownership, GrayCliff Partners -- which has connections to HSBC Bank -- has more access to capital and has elevated Talon's ability to acquire equipment, Olson said.

"It's been very good for us because we've got a much deeper backing financially than we had before," said Olson, who also worked for Dow Chemical, NSP and Deltak Corp. "Instead of being a family-owned business, now it's got more resources. (GrayCliff) owns a number of other companies and I personally have access to all of those CEOs that I can network with and bounce ideas off." Talon has long had its claws in the world of semiconductor equipment -- machines used to make computer chips. Olson said that industry is cyclical, though indications are the next few years could be robust.

"But we want to grow other parts of our business so we're not exposed to as much volatility," he said. "We see possibilities in medical." That's largely because some of what Talon already does is transferable to making parts for medical devices.

Dave Rietveld, Talon's director of operations, recently showed off a $2,000 proprietary design modular gas delivery system. It helps manage gas flow into a chamber where semiconductors are made.

Olson called it "high-tech plumbing." "Everything has to be very, very clean," Olson said. "The semiconductor industry has tougher cleanliness standards than the medical industry. If you're at a Samsung factory where they're making computer chips, and they get particles that contaminate the silicon wafer, it could shut their factory down and cost them a million dollars an hour until they get back up and running again." Clean and precise works for medical, too.

Talon makes many devices from high-purity machining, cleans them in a closed environment and assembles them in a clean room. Employees enter and leave the room through an air shower. Inside, people wear gowns, face masks and other sterile gear as they package items inside multiple bags so they won't be contaminated en route to the customer, who unpacks the items in a similar clean room. Some work is done in an ultra-high purity weld room, and quality control measurements can be to the millionth of an inch.

This is how Talon is a sub-supplier to companies that make multimillion dollar process modules for industry giants like Intel and Qualcomm.

"There's a company often between us and them," Olson said. "But the nice thing is, when they see our superior technology, they pull us through. They tell their suppliers they have to buy a Talon gas panel because that's what they like. A lot of the credit for that goes back to (Eriksson). He built those relationships and set the standard for Talon being a technically driven company versus just a machine shop. Now we're building on what he started." Many of Talon's customers are on the West Coast and in California's Silicon Valley. Others are in Korea and Singapore.

"Communications with customers had to improve because Mark was basically the only conduit to those people," Rietveld said. "After we lost him, our communications had to be more direct, which probably benefited us. But the good thing was Mark had hired much of the management team and had that in place before he passed. It was very fortunate for the company to be at that stage." Forty percent of Talon's products end up overseas and more than 90 percent of its revenue comes from outside Minnesota.

"We're doing our part to solve the trade deficit," Olson said.

Talon is even in the process of setting up a Korean subsidiary. Olson said Korea is a huge growth market, projecting more than 50 percent growth in equipment spending on semiconductor equipment in the coming year.

Olson said other growth options are available in aerospace and industrial manufacturing, but the company's first focus will be on medical. To accelerate that, Talon recently entered into a partnership with St. Cloud Technical and Community College to train 100 current and 20 new employees in the types of machining that will elevate the company's medical device offerings.

"The community college might turn out a class of 45 machinists and we'd hire 43 of them," Rietveld said. "We're able to get machines quicker than we can get people. We want to have three shifts plus a weekend shift. When you've got a million-dollar machine involved in your manufacturing, which we have, you don't want it to be idle for very long." In the training program, new hires will become machine operators and current machine operators will become machinists and machine programmers. The entire work force will be trained in Lean/Six Sigma strategies. The two-year arrangement, backed with a $275,000 grant from the Minnesota Department of Employment and Economic Development, is an effort to help Talon start growing its own machinists.

"They're in very short supply and we've picked all the low-hanging fruit," Olson said. "Today, we may have a machine operator but tomorrow we're going to have higher-level, high-tech machinists." Training from within Heading into February, Talon had openings in 10 positions. Pay for the jobs being added will range from $18-$25 per hour. If wages alone aren't enough, Rietveld says there are other selling points to attract talent.

"We'll bring machinists in and give them a tour and this is much different than places many of them have worked," Rietveld said. "That's a benefit in addition to the wages they're making. It's heated. It's air-conditioned. It's clean." Talon is taking steps toward a higher profile by growing its presence on the Internet. When you Google terms related to its business, Talon shows up high among the search returns.

"We were very private under previous management but now we want people to know we're here," said Michelle Squires, who joined the company under Eriksson as vice president of human relations. "And we want them to know what we're doing so we can attract talented employees." Olson said Talon has been growing faster than the industry as a whole, therefore gaining market share. As the company expands first into medical and later in aerospace and industrial areas, it will have a need for more employees and workspace. The management team is in the early stages of figuring whether to build a larger single factory or construct a second location dedicated to one of its areas of interest. Those will be decisions for the next year or two.

At any rate, Olson believes Eriksson would be proud of the direction Talon has taken.

"I think it's been a combination of the economic environment and the management team doing what we were all hired to do," Olson said. "It's been exciting. We're looking at strong, double-digit growth in 2014, 2015 and 2016." ___ (c)2014 the St. Cloud Times (St. Cloud, Minn.) Visit the St. Cloud Times (St. Cloud, Minn.) at www.sctimes.com Distributed by MCT Information Services

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