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September 6, 2017

Strategy Consulting for George Tippins, Pittsburgh steel magnate

by Frank Sowa
SteelSlabforming-Tippins,jpg

White hot steel slab rolling out of a Tippins Rolling Mill.

A reader of my blog posts has requested that I select and share a story or three from my days when I was earning my experiences as a strategy consultant. In the early ’80s, I arrived in Pittsburgh and started The Xavier Group Ltd. (1981). I started the company with experiences that centered around the personalities of three significant individuals — three of the first seven companies for which I was a young strategy consultant: George W. Tippins (founder/owner of Tippins Machinery Company, owner Allegheny Ludlum Steel – now Allegheny Technologies, and Tuscaloosa Steel, Alabama); Donald H. Jones (founder/owner of Control Systems Research, Technology Recognition Corp., Who’s Who in Technology, International Cybernetics Corp., Automation News Network, Industry.Net, and Draper Triangle Investments; Jones was also was adjunct faculty at CMU’s Tepper School of Business (where he founded the Donald H. Jones Center for Entrepreneurship)); and finally Edward George Sr. (founder of The Tangier Restaurant (5-stars) and Vegas-style Cabaret/Nightclub), West Akron, OH. It’s hard for me to single out a single story, so instead I will publish a few stories in the next few blogs.

I arrived in Pittsburgh, PA in the early spring of 1981 from Akron, OH where I had been a creative-director at Quadrathought, a business-marketing services company (until it was forced to close just months after I had joined it). Before Quadrathought, I worked for a Davy McKee Headquarters_Independence,_OHFortune 500, Davy McKee, Cleveland (Independence), OH, as a director in senior management. Davy McKee Engineers and Constructors had been the sixth largest such firm in the world. Davy McKee was a merger between Davy Ltd., constructors and engineers of processing lines in multiple industries, as well as shipbuilding. It was based in Birmingham, England, UK, and Arthur G. McKee, Cleveland, engineers and builders of steel plants worldwide (including most of them in Cleveland, Chicago/Gary, Detroit, and Pittsburgh). I had been hired on at the onset of the merger process (during legal/financial analyses — before they merged or began reorganization).

When I left Davy McKee, during its post-merger reorganization, I had contacted executive search firms throughout the region, as suggested by Davy McKee’s human resources team. One week later, the Quadrathought creative-director position opened, and I thought that might be fun, so I took the job mainly, because it was close to home and felt it would add some unique experiences to my background.

During the months I worked at Quadrathought, I was approached by numerous executive search recruiters who felt I may still desire a job more closely-related to my backgrounds in chemistry and engineering. When the tax man came, and closed Quadrathought, I called the elderly and experienced recruiter in Pittsburgh who had said he had five interviews I was highly qualified for. Most, he said, were in the steel industry — an area in which I had become quite knowledgeable (including advanced technologies), while employed at Davy McKee.

I set up a few days to go on five interviews, booked a cheap motel room (Knights Inn), and within two weeks, all five had made distinctive offers for my employed services. Not knowing much about the firms, I asked the recruiter which firm he thought would be the best match for my job skills. He said, “They’re all world class.”

Then he asked me the question that changed my life. He asked,”They all want you so bad based on my exit follow-ups, have you ever thought of going into business for yourself?” I was young in my 20’s and energetic — but being a self-employed entrepreneur wasn’t something I had ever considered. He added, “You should think about it. Opportunities like this are rare.” It got me thinking of the possibilities — and the dangers ….

The recruiter, himself, was the retired CEO of a large Pittsburgh firm (Ketchum Communications). He had great connections. He instructed me step-by-step on how to approach all five and see if they had even “ever considered” using a ‘contractor’ as an alternative to outright hiring. After mastering the “pitch” delivery approach, he sent me back out, explaining that if any are interested, then I could decide whether it would be better for me to become self-employed, or better to take one of the other offers and become a senior manager again. I went out to all five, and all five liked the ‘contractor’ approach to the hiring alternative. In fact, one of them, Tippins Machinery Company, Etna, PA — who had me interview with the founder/owner George W. Tippins — suggested that “contractor or employee,” he (George) wanted me “on the job at 8 a.m. the next morning.” As a contractor, Mr. Tippins said, I would “receive double the pay of an employee if I chose that approach.” (It was his demeanor and nature that made me decide to form my own company and go the contractor route from there on!)

I went back to the recruiter, told him my decision, and he went out of his way that day to get me the professionals I needed to file the right paperwork and become a legitimate sole proprietorship (and all of this before I even had a permanent physical residence in Pittsburgh, or had become a Pennsylvania Commonwealth citizen). The recruiter explained that Mr. Tippins was a “dear friend and former associate who’d saved my [his] ass a few times over the years,” and he wanted to make certain everything would work out between us, because Tippins was one of his best search customers, and (he felt) his reputation was on the line. “You’re nothing,” he said, “if you lose your reputation.” That was good advice that I followed as I entered self-employment.

When I arrived at Tippins at 7:45 am the next morning from my “luxury one-room economy suite” at Knights Inn (on the day after I switched from day room rental to month-by-month rental), I announced my arrival to a sleepy receptionist who said that “George” (it seemed part of the culture to call Mr. Tippins by his first name if you knew him) wanted to brief me on what he had in mind, and would come down to take me up to his office soon. I sat there and read about the history of the company.

Founded by Leon H. Tippins (George’s father), in 1923 as Tippins & Springdale Inc., Springdale, PA (about six miles north on the Allegheny River), Tippins originally was a small machinery-refurbish-resell company that bought and sold coal power plant and coal mining machinery.

Tippins Machinery

George W. TippinsIn 1946, George Tippins who returned from the military with his electrical engineering degree from Yale, took over the company his father started in 1923, and began to transform it from a company that refurbished coal mining equipment to one that refurbished, designed and built rolling mills and other equipment for the steel and metals industries. In 1961 he renamed it Tippins Machinery Co., and moved it into the old Spang & Company facilities in Etna.

Tippins, president and owner of the Tippins Machinery Company, who I was about to meet with, was by then a gregarious multi-millionaire, and well-known throughout the tiny borough of Etna (I had found from having lunch in a nearby restaurant when I first interviewed there). The restaurant owner said that it was not uncommon that each morning, often before 7 am, to find Mr. Tippins stepping out of his engineering and design offices — a renovated bank building and adjoining retrofitted cinema building down Butler Street from the Spang facility where his machinery workshop was — to walk six blocks down the Butler Street hill to get a cup of coffee and two morning papers — the Pittsburgh paper and the Wall Street Journal, and then to return the six blocks up the hill. Often,  I was also told, he would return at lunch time for a “quick bite,” and was very friendly with the local “regulars” who he would often discuss steelmaking subjects with him. I found these stories added to my understanding of the man and to his aura as a relatable individual.

A few months before I visited Tippins, though, George had stunned the steel industry world, when he helped save the multinational Allegheny Ludlum Steel Corp., now part of Allegheny Technologies Inc. (ATI) from being sold to Texas financiers who had intended to close it and sell it piecemeal to the Chinese. It was in late December 1980, that he provided a $60 million certified check, the cash needed to support the 80% management-led buyout of the specialty steel business of the former Allegheny International Inc. led by Ludlum’s CEO Richard P. Simmons. Tippins served as board chairman and majority owner of Allegheny Ludlum from 1980 through 1986. By 1986, the company had a successful financial turnaround and was growing to become a world leader in the stainless and titanium steel markets.

As I’ve stated, George Tippins held an electrical engineering degree from Yale University and later, in 1963, earned a graduate degree in industrial administration from the Carnegie Institute of Technology (now Carnegie Mellon University) while operating Tippins. He had also been a commissioned lieutenant in the Navy Reserves, serving stateside during both World War II and the Korean War.

From his Navy experiences, he had come to believe that there was going to be a growing market in the 70’s and 80’s for thicker and wider steel slab (which would then be turned into flat sheet and rolled steel). He was right! He spent the next 25 years from 1963 coming up with both the company and the means to service that new sector of the industry.

By the time I had met him, George Tippins already held more than a dozen patents forUS4455848-1 machines and metals processes. His designs were leading the concepts in the steckle and rolling mill markets a quarter of a century before his nearest rivals. “His innovations really helped his U.S.-based company compete with all the “biggies” in the industry throughout the world, particularly companies in Germany and Japan, who became George’s primary competitors,” George Knapp, a lawyer and president of Tippins Industries Inc., a holding company for other Tippins family interests would later explain.

Mr. Tippins, I found, was also an avid reader and liked to envision where the world of steelmaking was heading. By the mid-60’s, there were many voicing concerns about how Electric Arc furnaces and a new concept called “mini-mills” would eventually replace big steel and the basic oxygen furnaces that created steel from scratch using iron ore, coke, and other alloys. As he had explained it to me, most of the other companies were “in lockstep” with what US Steel, Republic Steel, Bethlehem Steel, and LTV Steel were preaching regarding the future of steel. But, he had thought, as early as the mid-60’s, that these two new steel developments would make the steel giants vulnerable, and allow new companies to produce steel from used scrap in mini-mills. He seriously believed these new technology companies would eventually jeopardize “big steel’s” hold on the industry and overtake it. From what I had analyzed at Davy McKee, I had to agree with his forecast! George wanted to be the leader in providing steel machinery and rolling mills to all the markets — both the traditional “big steel” (by selling machinery that could produce bigger and thicker slabs), and by catering with special “packages” to the new mini-mill markets. I had learned about this shift when I worked at Davy McKee, and would later experience it in 1983 when the bottom fell out of the Pittsburgh steel market.

George Tippins envisioned being the “one-shop stop” globally for steel production projmgmtwrldequipment. He had the focus and foresight to transform his family’s machinery business into an “end-to-end” mill producer — what the industry called a “turnkey approach.” Turnkey meaning “from conceptualization, through engineering and construction, to where it could be turned over fully operational to the customer — who could then turn the key and it would start.”

When he took me up to his office that day, it was precisely that “end-to-end mill producer concept” that he was ‘contracting my services’ as a strategy consultant for. He had seen my work when I was employed at Davy McKee, as George was a customer and provider to Davy McKee, and he said he wanted “to create a strategy and marketing approach that took his company from being well-regarded as a traditional major supplier of new and rebuilt steel and metals equipment” to be seen globally as a well-established inventor and innovator of proprietary rolling mill equipment, and an engineering firm of turnkey facilities.”

Though it sounded like more of a marketing job than one of strategy, in time, while I contracted there, I came to realize it WAS a strategy consulting project. Mr. Tippins had me become immersed with his patented designs and the engineering, fabricating, and sales operations of Tippins Machinery (in 1982, we changed the name to Tippins Inc. to better reflect the new turnkey strategy that was being deployed and executed throughout the operations. The advantage, I found, of being a contractor was that I had many other companies that were catering to the primary metals and advanced automation manufacturing markets among my original customer-base, and the synergy and interrelatedness of many of the concepts helped me both as a strategist and in early sales.

droppedImageThe Xavier Group eventually created this flowchart (see image) of our “Total Solutions Approach” to project management as a result of our five-year stint working alongside George Tippins to help the world see that helped improve this company into becoming a premier turnkey developer and provider of important advanced and cutting-edge technologies for the steel and metals industries.

In 1984, George Tippins founded Tuscaloosa Steel Corp. in Alabama, based on his patented design that more efficiently produced steel plate in continuous-casted coils.He had developed the company to showcase his innovative approaches to the mini-mill markets, and Alabama had provided a tax abatement to get Tippins to build the facility there. Later, Tippins sold the company in the early 1990s to British Steel.

By 1986, when I left Tippins, it had grown to become a business of 300 employees and over $115 million in machinery and turnkey “package” facility sales.

Upon George Tippins’ death at 79 from cancer, Charles Queenan Jr., senior counsel of Pittsburgh’s leading Kirkpatrick & Lockhart law firm, a longtime friend who served on the board of Allegheny Ludlum Steel Corp. with Mr. Tippins said, “George Tippins was a significant force in the steel industry both in Western Pennsylvania and around the world, who had innovations that were really ahead of their times.”

 

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