WESTLAKE, Ohio—Sundaram Nagarajan took over as president and CEO of Westlake-based Nordson Corp. in August 2019.
He was drawn to the company's strength, but that strength presented a challenge. Nordson didn't need a CEO to come in and turn around the business. It needed someone who could figure out what was next, what would take it to the next level.
Less than two years later, Nagarajan has implemented a new business strategy aimed at growth and at empowering employees. And the company is embracing a shift from a focus on fluid-dispensing equipment to precision technology at large.
Usually when a new CEO joins a company, they're "fixing something that's broken," said Allison Poliniak-Cusic, senior analyst for industrial technology and transportation at Wells Fargo Securities L.L.C.
That wasn't the case at Nordson.
"Nordson was actually in a unique position in the fact that it was growing, and it was expanding margins, and it was on the right path," Poliniak-Cusic said.
The concern was that the company needed to find a new leader who could keep that momentum going. Nagarajan has done "exactly that," she said. In an unusual year, he managed to introduce a new structure, hire a chief financial officer and divest a business.
Full-year sales in 2020 were $2.1 billion, just a 3 percent year-over-year decline despite the pandemic. A news release noted that strength in the company's medical product lines and its test and inspection product lines for electronics end markets was offset by weaker industrial and automotive end markets.
First-quarter results for 2021 saw net income grow by 49 percent year-over-year to $78 million.
Nagarajan has a "strong legacy to build on" at Nordson, said Chris Dankert, senior equity analyst at Longbow Research in Independence. The company has been steadily growing organically, with some M&A activity, and a strategy focused specifically on growth is the next step.
One place this is happening is in the broadening beyond Nordson's core in fluid dispensing. It's good to see a business through a "fresh lens," said Jeff Hammond, managing director at KeyBanc Capital Markets. But Hammond doesn't see Nagarajan as taking Nordson in a completely new direction. Instead, this is a logical evolution for an already strong company.
"It feels more like fine-tuning than a major shift in direction," Hammond said.
The approach Nagarajan is implementing is called the Ascend strategy. Nagarajan said it's made up of three "interconnected" parts: a growth strategy, a talent strategy and an organizational structure.
"I think what we're trying to do with the Ascend strategy is really take a strong Nordson and make it even stronger," Nagarajan said.
The organizational structure, which Nagarajan calls "owner mindset," aims to give divisions more autonomy to make decisions close to the customer. Instead of making changes go up and down the leadership chain, a more entrepreneurial approach lets the company's leadership make decisions faster. And with the autonomy comes more accountability, he said.
That makes the importance of the talent piece clear. Nagarajan calls that portion of the strategy "winning teams," and it's focused on creating an engaging place to work so the company can attract and retain strong employees.
And the growth framework, NBS Next, is dependent on that more autonomous organizational structure, too, because the way it's deployed in each division will be different, Nagarajan said. NBS Next uses data to assess the best growth opportunities in each divisions, and it includes strategies around both organic and acquisitive growth. This is a new approach for the company, identifying and "doubling down" on the best opportunities for growth, Nagarajan said. And those opportunities will change over time, so division leaders need to stay agile.
"You just can't have your feet planted in concrete," Nagarajan said. "You've got to move."
Nagarajan said the company's core businesses still have room to grow by adding market share or adjacent products, but he sees more acquisition opportunities in the businesses that have grown beyond that core.
Nordson is not just a fluid-dispensing equipment company anymore; it's a precision technology company. That's a shift that's been happening in recent years with the growth of the company's medical business. That business had its foundation in the company's core of fluid dispensing, Nagarajan said, but it's become much more than that. And there are scaling opportunities in that space, he said. Similarly, Nagarajan sees opportunities to scale up the company's test and inspection business, which began as part of one of Nordson's electronics businesses.
Nordson launched the Ascend strategy in March 2020, shortly before the pandemic hit hard in the United States. The company started by piloting the full strategy in four of its strongest divisions, Nagarajan said. Overall, though, Nordson will implement the new strategy throughout the company over the next three to five years, one part at a time.
"This is not a broken company. It's a great company. This Ascend strategy will add to the company," Nagarajan said. "And so we're going to take our time. We want to do this well."
