What will happen when the oil runs out? In particular to those companies involved in black gold? It’s a question that elicits fascinating responses from those involved in the oil industry, not least from Giles Verity, whose family business derives 80% of its revenue from petrochemicals.
The test equipment and quality control instruments designed and manufactured by Stanhope-Seta are mostly used in the oil industry but Verity is not overly troubled about the eventual passing of the fossil fuel because he sees room for growth in the 20% of revenue that derives from non petrochemical sources.
For example, Verity explains that their instruments could be used instead to examine the particulates inside bio jet fuel or water or beverages, and to monitor air quality. Then there’s the pharmaceutical, confectionery and plastics industries. And Stanhope-Seta are making a particular push into cosmetics, where there’s a need to test for the flammability and evaporation of fragrance.
That’s before factoring in the advent of eco-friendly fuels. Verity comments: “There’s no question that there will be an increasing move to electric cars and the use of liquid fossil fuel will decline. Even then, there will still be a need for jet fuel and the non-fossil fuels being developed are similar in terms of chemistry and will have to have the same performance characteristics, so they will need to go through the same testing processes. So when we do get a synthetic or bio derived fuel our instruments will be just as relevant, if not more so.”
“There’s no question that there will be an increasing move to electric cars and the use of liquid fossil fuel will decline. Even then, there will still be a need for jet fuel and the non-fossil fuels being developed are similar in terms of chemistry and will have to have the same performance characteristics, so they will need to go through the same testing processes. So when we do get a synthetic or bio derived fuel our instruments will be just as relevant, if not more so.”
Verity adds that shipping is another area that will see more environmentally friendly oil substitutes. “That’s a huge growth area and they will need tests that they haven’t even thought about yet.”
There are more than a hundred instruments in the range, and the company does all of its manufacturing in the UK, much of it outsourced to other local companies, with the assembly then done in-house. Outsourcing (rather than off-shoring) gives the business a safety valve for coping with unexpected demand. For example, there are sometimes increases in demand for particular types of instrument as a result of changes in regulations.So Stanhope-Seta tend to outsource production of items for which there is a predictable annual demand, while keeping production of bespoke and one-off projects in house.
The business was founded in 1938 by Verity’s stepfather and has grown organically; Verity says he has never felt comfortable with buying technology anyway, preferring the company to develop its own.
“Much of our innovation comes from listening to what the industry tells us about its future direction and the actual problems being experienced. The more we listen to customers, the more successful we will be”
The key to innovation, he says, is to listen. “A lot of companies have solutions to problems that they believe exist, but the customer doesn’t think there is an issue to address. They will go off on their own and come up with a great idea that nobody can really see a need for. Much of our innovation comes from listening to what the industry tells us about its future direction and the actual problems being experienced. The more we listen to customers the more successful we will be.”
For innovative companies to stay close to what their industry sector is thinking, Verity recommends devoting the time to sit on various trade associations and regulatory boards.
“We serve on as many committees as we can in the US and Europe and they feed into things like the British Standard Institutes and the ISO,” he says. “By actively participating we can influence the direction and help the development of standards which will have an impact on our business.”
He gives an example. “There was a discussion about the detection of hydrogen sulphates, which can be toxic. The traditional test would have been done by someone in a laboratory coat taking a lot of time to get a result which might turn out to be flaky, so we developed an automated, miniaturised test. This gives results in fifteen minutes which are accurate and the industry loves it.”
What makes Stanhope-Seta different is flexibility, says Verity. “A small business can be responsive. We don’t have to go to venture capital investors or a remote head office and ask for the OK; it stops with me and my brother. We ask ourselves ‘we’ve got this great idea, is it a goer?’ We do the due diligence but we don’t produce a hundred pages of risk analysis.”
Independence and innovation go together, he maintains. “We’re now talking to universities and university spin-offs about the new sensor technology they are producing. They have no idea what it could be used for, but we know what we could do with it.”
The company holds fewer than twenty patents; it is selective about the developments it chooses to protect that way because of the cost. Verity takes the view that anyway, it would take the competition so long to replicate a Stanhope-Seta idea that the company would by then be on to the next thing.
Verity says the various students (at graduate, masters and PhD level) who spend time at the company while studying mechanical, electronic and software engineering or chemistry can be a great source of ideas. But it’s important, he believes, to have strategic direction behind innovation, with input from the staff who are in direct touch with the customer.
One particular innovation – which will create another revenue stream – is a product performance testing service whereby customers can see how their instruments are performing against the average. Verity explains: “A user in Paris could get a result of ten while a user in Kuala Lumpur could get a result of nine point five. How much of that is down to differences in the instruments and how much to differences in operator skills? With our technology, anyone who inputs their data immediately sees if their instruments are working correctly against an anonymous mean. If they’re not, we can get the problem fixed for them. This will also provide us with a wealth of information about our instruments in use. We can see over the industry as a whole how they are performing. And the customer can see how they are comparing with a median and so satisfy their industry auditors.”
“Every oil refinery in the world has some of our equipment”
Already Stanhope-Seta have a global reach. “Every oil refinery in the world has some of our equipment,” Verity says. Sales are handled through distributors in the different countries, meaning they don’t have to deal directly with vastly differing regulations in different regions or get involved in credit control issues. Yearly workshops in locations around the world are held to give distributors and the company the chance to have conversations and ensure that they are working in each other’s best interests. In addition, Stanhope-Seta have their own offices in Russia and Kuala Lumpur to handle the Russian and Asian markets.
One of the challenges is the vagaries of different export markets and Verity says the British government can be a cause of frustration in terms of communicating any change in regulations. “Products can be held up at customs and it’s difficult to get a reason why. There’s a lot of PR about Iran being open for business, for example, but actually the sanctions are as strong as they ever were. So if we’re shipping there, or even Pakistan, the product is not always allowed through the airport, even though we have obtained the relevant licence. Sometimes it’s down to a lack of communication, with decisions made at Whitehall not being adequately communicated to airports. It’s difficult for an exporter like us to fathom what’s going on. We don’t have the clout to make a lot of noise about it, and we have to make endless calls to people who don’t call us back.” Verity says it’s particularly frustrating when he sees products made by European competitors flowing into those countries through other routes.
Turnover is currently £12million, and the strategy of doing more in niche areas should see a steady 3% to 5% annual growth. “We try to launch three new instruments every year,” explains Verity.