Company founder obsesses over quality control and spends millions on patent protection, all to keep his product unique.
What's the difference between a state-of-the-art company and yours?
There's a lot of loose talk these days about 'quality.' But what happens when a company really does make quality its guiding mission -- when every decision is based on making a product that's state of the art? How is R&D affected? Marketing? Human resources? Does being state of the art transform a company? Let's look inside Mag Instruments and see. -- P. B. B.
The very rich are different from you and me.
-- F. Scott Fitzgerald
Yes, they have more money.
-- Ernest Hemingway
* * *
You can't miss it. The "scrap," as it is known, sits in open boxes just inside the factory door at Mag Instruments. It's the first thing that catches your eye when you come to work, and it's the last thing you see before going home. Scrap is what Mag calls the flashlights its quality inspectors have rejected. And on this particular day, there is more than $80,000 worth of it piled all over the place.
Oh, most of the spurned flashlights worked fine, all right -- and to a visitor, nothing about them looked wrong -- but company founder Tony Maglica felt the workmanship was shoddy. He didn't like the way the housing containing the bulb fit against the base of the light. So he scrapped the entire batch. Then he put the scrap on display. And therein lies a story.
Mag Instruments doesn't make just any old flashlight. It makes, by any available measure, the best flashlight there is -- a state-of-the-art product. Not surprisingly, its prices are state of the art, too. A MagLight costs more than twice what you probably paid for the flashlight under your sink.
But the price tag, like the showcased rejection bins, is what we -- and Scott Fitzgerald -- would have expected from a company built on the strategy of pushing quality as far as it can go. State-of-the-art companies stand apart not in degree but in kind, went our premise. They're made of different metal, not just more of it.
It would then stand to reason that everywhere you looked inside a company such as Mag Instruments Inc. -- which may do $70 million this year -- you'd find an operation transformed by its decision to be a state-of-the-art producer. Or so we imagined. Spend some time with Tony Maglica, however, and you begin to see Hemingway's point. Being state of the art, as Mag Instruments is, may be both simpler and harder than you thought.
Tony Maglica is 58, and his story is a good one to remember the next time someone tells you America is no longer the land of opportunity.
Although from New York, Maglica's family moved to Yugoslavia when he was two and didn't return to the United States until after World War II. Not knowing English well, the 20-year-old Maglica looked for jobs that required manual, not verbal, dexterity. He started in machine shops and later opened his own job shop. There, while making parts for a long-since-defunct flashlight manufacturer, Maglica stumbled across the idea that would lead to Mag Instruments.
"I was a subcontractor," he says in accented English, "and I told the company that their quality was bad. I even offered to design a better light for them, but they just weren't interested."
Maglica, though, was. Here might be an opportunity for him to have a company of his own. And so 11 years ago he came up with a simple goal: he would make the world's best flashlight.
Now remember what was going on in 1978. Tom Peters and Bob Waterman were two obscure consultants at McKinsey & Co. In Search of Excellence wouldn't appear in your bookstore for another three years. Philip Crosby was still a year away from publishing Quality Is Free. And you would have been hard-pressed to find anyone -- with the possible exception of W. Edwards Deming -- who was preaching about the need for quality. So why did Maglica set off to build the perfect flashlight? Because his ego would accept no less. His name -- or at least the first syllable of it -- is on every one. "Why would you want to be associated with something that wasn't the best?" he asks.
The display of rejected product helps him make his point. For one thing, it reminds employees what poor quality means. But it also gives them something to celebrate, Maglica says. The scrap shows that Mag Instruments's standards are so high it won't ship goods its competitors might find acceptable. This is just the first example of Tony Maglica's devotion to quality that a visitor encounters on a tour of the Mag plant in Ontario, Calif., outside of Los Angeles. There are more.
On the same day he rejected the $80,000 batch of flashlights, Maglica spent several hours on the phone with his lawyers, trying to deal with the aftermath of yet another patent-infringement suit.
The two keys to Mag's quality are its unique design and its manufacturing process. Both are patent protected. And since 1983 Maglica has employed an army of attorneys in the battle to keep either from being duplicated.
So far, the high-priced lawyers have justified their keep. Mag is two for two suing companies that have infringed on its patents. More important, the number of imitators has dropped substantially. But Maglica is about to learn how worthless a victory can be. The defendant in his most recent suit, a tiny company that contracted to copy Mag in the Far East, has filed for bankruptcy. That means Maglica won't be seeing the roughly $4 million in court-awarded damages for a while, if ever.
"We expected them to declare bankruptcy if they lost," Maglica says. He sighs. "There is nothing I can do about it. Litigation has become a part of us doing business." What's so telling is just how big a part.
Lawyers, as a rule, bill in tenths of hours. That means every six minutes the meter clicks, and another $10, $20, or $30 is added to your bill.
For Mag Instruments that clicking has been as constant as a metronome, so that by now Maglica doesn't even hear it anymore. He has long since made peace with the fact that his legal bills are going to be absurd.
How absurd? He's spent $16 million on lawyers' bills over the past six years. That works out to $1,280 for every hour Mag's doors have been open during that time.
