Metroflor's Harlan Stone: Focus on Leadership - Feb 2016

Interview by Kemp Harr

Harlan Stone, co-chairman of Metroflor, attributes much of his success to his family, especially
his father, Norman. The family business originated as a building materials distributorship in New York, launched in 1912 by Stone’s great-grandfather, who immigrated to the U.S.

In the 1950s, Harlan’s father Norman set out on his own and started a retail flooring company that sold mainly ceramic and vinyl tile. It was so successful, it absorbed the family’s distribution business and eventually evolved into the prominent supplier of LVT and commercial sheet flooring it is today.

Although Stone earned a degree from the University of Pennsylvania in art history, he inherited his father’s business acumen and passion, and continues to lead the company with an entrepreneurial spirit. He believes in taking risks and embraces change, reveling in innovation.

Q: Tell us briefly about how your family’s New York distribution and retail operation became a pioneer in the LVT business.
A: Before my first birthday in the late ’50s, my father, Norman Stone, decided he needed to expand his opportunities, and went out and rented a small building in Latham, New York, which would become the first of 35 Top Tile stores in upstate New York, western Massachusetts and northern Connecticut. By the mid 1960s, my dad was on his way to Japan and the Far East in search of products that could give him an advantage in the marketplace.

He ended up in Taiwan, where the Formosa Plastics Company was then (and is still today) a strong and innovative manufacturer of a variety of synthetic products, including very basic vinyl composition tiles. By the 1970s, he had convinced several of the Formosa employees to leave the company and join him to form the first laminated vinyl tile plant in Asia—LVT originally stood for laminated vinyl tile rather than luxury vinyl tile.. This was the beginning, and it is classic entrepreneurialism at its best—have an idea, create a vision for the future, get others to embrace your idea and then go for it.

Q: How did your family handle the language and cultural barriers?
A: In 1964, if you wanted to do business in Asia, which at that time basically meant Japan, you had to learn to speak the language. Norman, a gifted linguist, became fluent in Japanese, and this was the key to opening the door in Japan, Taiwan and Korea at that time. But it takes more than talk to be an innovator.

We have always held the idea that understanding what the consumer is looking for is the key to success. With retail stores serving homeowners, flooring contractors and interior design professionals, we were able to focus on the end users first. Our job was to translate that demand in cost efficient products and production methods in Asia to bring value to market. Both my brother and I were required to work in retail at the early stages of our careers to reinforce the importance of listening to the customer. From there the trick was bridging the cultural and geographic divide between markets and manufacturing to make a product that works.

Q: Why did you decide to expand into the Metroflor branded business?
A: Prior to the 1980s, we either made products for our own stores or private label products for leading retailers and distributors across the marketplace. But at some point, we felt it would be a good idea to establish our own brand to go along with OEM business. There are tremendous advantages of having a brand, not the least of which is building national demand and true product authority in the marketplace. With the advantage of the Metroflor brand in the 1990s, we were able to upgrade our distribution network and create a deeper partnership with some of the best regional flooring players in the market today.

Q: What is the secret sauce that has allowed your family’s business, now in its fourth generation, to be successful?
A: My great-grandfather on my father’s side came to America as an immigrant with no language skills and little money in his pockets. Like so many of his 19th century generation, he had a drive to build something for his family. We have maintained that drive over the generations, and we have been willing to change, adapt and innovate to make our business relevant and sustainable. I would say that our willingness to change and a vision for the future have been the driving forces that have allowed us to keep building on that success. We all learned at an early stage that to try and fail is not something be ashamed of. Rather, it is an invaluable lesson about what to do next. To be an agent of change is much better than to be a victim of progress. I believe this is something that has been passed down from generation to generation.

Q: Your company has stuck with an Asian manufacturing strategy while many other companies have moved at least part of their production to the U.S. Why do you think your strategy is better?
A: We started manufacturing in Asia in 1973, building a factory in Kaohsiung, Taiwan that is still operating today. We started sourcing from China in 1984, and in 1999 we built in Zhangjiagang, China, and that factory is the most productive LVT plant under one roof in the world today. We have seen lots of companies come and go with temporary sourcing strategies over the years, but that’s not us.

The circumstances that led to the on-shoring of LVT production have changed quite a bit in the last 12 months, and we feel this is very relevant. The cost of transportation has fallen, the Chinese currency has stopped its decade-long appreciation and is now headed in the other direction, and inflationary pressure in the Chinese economy is no longer a factor. When you add that to the advancements in supply chain and the ability to react to changing market demands, we feel that the perfect storm may be brewing for a US-based enterprise with Asian-based production to be able to compete more effectively than ever before.

Q: You have invested heavily in intellectual property with a house full of brands, copyrights and proprietary patents. Why is this strategy the right way to go to market?
A: The essence of any mercantile activity is trust between the buyer and the seller. It is therefore paramount to use all means possible to establish that trust in the marketplace.

Today that is even more important in the flooring industry than ever before, with Lumber Liquidators’ missteps and concerns about safety and reliability. Above all else, a brand is the opportunity to communicate your quality and reliability to the customer.

Not every customer has the same expectations, so a diverse set of brands allows one to communicate precisely to the customer you are targeting. For example, our Aspecta brand was built specifically for the contract/commercial market, and we need to communicate to the architect, designer and commercial contractor. This market has very different and more complex expectations than the do-it-yourself homeowner. Essentially we have three brand strategies aimed at three different end users: DIY homeowners, homeowners who have product professionally installed, and the architect or commercial contractor.

Additionally, we feel investing in pattern development should be matched with protecting those investments, and of course the same needs to be done for patented technologies. Together this gives our customers confidence, and that translates in sustainable sales.

Q: It’s no secret that selling through distribution puts another layer between you and the end user. How do you overcome this hurdle so that you stay in tune with the needs of various influencers in the channel?
A: Our distribution partners are not only a vehicle to help serve thousands of retailers and contractors across the country, but they also are a tremendous source of market feedback for us as a manufacturer. Once a level of trust is developed, then you have an open exchange of information that leads to developing the right products, at the right time, in the right quantities and colors, at the right price.

We see significant differences in the products that are required in southern California from those needed in New England. We couldn’t do that without the honest input of our distribution partners. So I wonder if your question should have been: “How do national manufacturers develop the market appropriate products without the input of long-standing and deeply involved local distribution partners?”

Q: What is next for Metroflor?
A: We are always innovating, and 2016 will be another great year for us with a tremendous lineup of new and innovative products. It’s no secret that a new category of floating LVT has come on the scene recently. As the original floating LVT company, with deep penetration in both our Grip-Strip and solid LVT click lines, we felt it was critical that we did something special in the new multi-layer LVT category [WPC], so we have launched our Engage Genesis with IsoCore Technology, which is our patent-pending composite material. We also will be introducing a Luxury Wall product, also based o n the IsoCore Technology. There will be new breakthroughs in size, specification and performance as well. We will be implementing a brand new merchandising vehicle in the independent retail market this year. In addition we are looking forward to some exciting announcements about expanded representation for our lines north of the border in Canada. 2016 should be an outstanding year.

Q: What is the single most important green attribute that you intend to confer to your products? And what presents the biggest challenge?
A: When we introduced the Aspecta brand in 2014, we did so with the first ever Platinum Level certification for NSF-332: Sustainability in Resilient Flooring Standard. Our pre-launch marketing focus groups indicated that architects and building owners wanted something more to assure them that a product was sustainable. And thanks to the hard work of the RFCI, there is now a standard that addresses this question. We are thrilled to be a leader that is meeting the highest levels of this standard with a brand new product and helping to bring the sustainability story of LVT to the contract market.

On the other side of this issue is the challenge in overcoming some of the fallout from the 60 Minutes story on Chinese-made laminate flooring. We have worked very hard for many decades to bring a greater focus on transparency and product safety to our Asian manufacturing activities, and we feel saddened to see all the activity in the large and diverse country being swept into the same waste bin because of a few bad apples. All flooring from China is not bad, nor is all flooring from North America good. We would like to see more stringent standards applied for all categories of resilient flooring so that the end consumer remains confident in their purchases.

Q: What did you learn at Penn that has helped make you successful?
A: Unlike my father Norman, who graduated from the Wharton School of Business, or my daughter Sasha, who graduated from the Engineering School at Penn, I did not receive specific training in the career path that I chose. Rather, I learned how to think critically and, more important, how to use visual information to make informed and well thought out decisions.

My art history major required me to become more visually acute and also to argue my points with specific references to color, form and shape. I feel that critical thinking combined with visual information was the perfect training to do what I do today as co-chairman of this group.

My continuing involvement with Penn is one the most satisfying aspects of my life. To be involved with the education of the next generations of leaders makes me both humble and proud. I routinely use the engineering department to advise me on product, and the climate of innovation and contribution to improvement of so many parts of our lives just blows me away. I love to meet with undergraduates, professors, researchers and of course the leadership of the school and try to support the incredible things they are doing.

Q: What are a few of the pivotal decisions that have contributed to your success?
A: We got out of the small chain retail flooring business in the 1980s, when we realized that we could not compete with new generations of DIY retailers. We went to China for LVT production before it was possible to make direct investment in the manufacturing. I think this was a very important decision.

We also decided that LVT could be sold for more than $1 per square foot in the early 1980s. I know this seems funny, but there was for a long time a price ceiling on laminated vinyl tile, and we helped break through that ceiling by adding features and benefits that brought the perceived value above that very limited threshold. That has worked pretty well for us and lots of others in this industry.

And finally, we decided to find a new way to install LVT that was neither gluedown nor self stick. This was our patented Grip-Strip technology that led to the entire floating LVT revolution. This also has worked out for us and for the growth of the LVT marketplace.

Q: Tell us more about your philanthropic endeavors and your philosophy of giving back.
A: With success comes responsibility, not only to the employees, suppliers and customers of the enterprise, but also to the community at large. I am very motivated by three things: adequate housing for people in need, advancements in the treatments of cancer, and education. As a family involved in the building material business for over 100 years, we know the importance of shelter. Investing in housing for the less fortunate is one of the greatest investments we can make in the future, whether for victims of natural disasters, children with developmental disabilities or our war veterans—we need to support these people and give them a chance. I am committed to making the right investments to human potential and helping people who, through no fault of their own, are in need.

I am a cancer survivor, and I am incredibly optimistic about the current direction of cancer research, treatment and possible cures. Never before in mankind’s history have we had such a wonderful opportunity to impact so many lives. The power of genetic information and advances in both diagnostic and treatment technologies are changing the outlook for so many people. Among other organizations, I support the Multiple Myeloma Research Foundation, which seeks a cure for the disease my mother died of. I specifically support big data research and believe the expanded sharing of information will be the next big breakthrough in our fight against this insidious disease.

So my basic philosophy of giving is simple: invest in the future, identify things that are important to you, and make a gift that creates opportunity. Don’t check the box; get involved and understand where the biggest opportunity for impact is and make a statement. I look forward to the day when the majority of time is spent investing in the future through giving.

Q: What do you do when you are not focusing on the business?
A: I am involved with several charities throughout the year. I also enjoy traveling to new and exciting destinations with my wife Sabina. We recently returned from a great trip to Cambodia and Vietnam with friends. And I am a fan of many New York sports teams, which brings us into Manhattan, New Jersey and, most importantly, the Bronx. We also enjoy museums, music, dance and theater. Over the holidays, we were able to see the new Broadway Musical, “Hamilton,” based on the Ron Chernow biography of Alexander Hamilton. It was fantastic.

Q: You are not the first successful leader I’ve met that loves the Rolling Stones. Why do you find them so entertaining?
A: What can you say about a rock ‘n’ roll band that has been performing to sold out crowds for over 50 years, and with several of the band members past the age of 70? All I know is that Keith Richards, Mick Jagger, Charlie Watts and Ronnie Woods keep re-inventing themselves. That is something I am so impressed with, as well as their high energy, irreverent style. They are challenging the status quo and they are part of the status quo at the same time—cultural icons and renegade pirates. Who doesn’t want to be them?

Their music is incredibly high energy and their lyrics are absolutely ingenious and inspiring. They inspire you to do more. They inspire you to take chances, to be a risk taker, to be an innovator. This is what you need in life: you need energy, you need inspiration and you need to take a risk. That’s entrepreneurialism.

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