Host Bryan Pearce, Director of Strategic Business Planning at Gray, Gray & Gray, interviews David Model, CEO of Triton Systems in Chelmsford, MA. Triton Systems is continually focused on what's next - the next invention, the next breakthrough, the next innovation that can unleash new possibilities in engineering, science and technology to impact our lives. David has over 40 years of business experience in biotech, biomedical, aerospace and other high technology fields and he has served Triton Systems and its affiliates in an executive role from startup through self sufficiency. During this interview, David discusses how Triton Systems has been able to create and sustain a culture of innovation over their nearly 30 years in business.
Host Bryan Pearce, Director of Strategic Business Planning at Gray, Gray & Gray, interviews David Model, CEO of Triton Systems in Chelmsford, MA. Triton Systems is continually focused on what's next - the next invention, the next breakthrough, the next innovation that can unleash new possibilities in engineering, science and technology to impact our lives. David has over 40 years of business experience in biotech, biomedical, aerospace and other high technology fields and he has served Triton Systems and its affiliates in an executive role from startup through self sufficiency. During this interview, David discusses how Triton Systems has been able to create and sustain a culture of innovation over their nearly 30 years in business.
Bryan Pearce 0:12
Hello and welcome to Strategic Thinking, a podcast series produced by Gray, Gray and Gray featuring CEOs, founders and other senior business leaders discussing what's happening in their industry, and how they are strategically guiding their companies for growth. I'm Bryan Pearce, Director of Strategic Business Planning for Gray, Gray and Gray and your host for this series and my guest today is David Model, Chief Operating Officer of Triton Systems in Chelmsford, Mass. David has over 40 years of business experience in biotech, biomedical, aerospace and other high technology fields and he has served Triton and its affiliates in an executive role from startup through self sufficiency, including COO and CFO of two of Triton's public company affiliates, and CEO, CFO and COO of seven privately financed affiliates. And in these roles, he has led many rounds of private and public equity financing, set up joint ventures, acquired and sold businesses, and in or out licensed numerous technologies. David holds a Masters of Business Administration from Wharton, and a Bachelor of Arts from Yale and as you look at Triton Systems, they are relentlessly focused on what's next - the next invention, the next breakthrough, the next innovation that can unleash new possibilities in engineering, science and technology to impact our lives. And that often happens whether it's a commercial client or a government client and in so doing, they have created more than $4 billion in shareholder value in the last 15 years alone. So David, great having you with us. Thanks very much for joining me today. And I'm certainly looking forward to our conversation. So I thought, David, we would start off, as I look at Triton Systems, you have been a leader in innovation with impact since the company was founded back in 1992, nearly 30 years ago now. And one of the things that I was curious about is how have you been able to create and sustain this culture of innovation in the company over that length of time? And how do the three pillars that you talk about at Triton - inspiration, innovation and investment all fit together to build that culture?
David Model 2:32
Great question. And first of all, let me thank you, Bryan, for that very generous introduction and thank you for the time to tell people about the Triton story. So Triton is primarily and historically a US federal government contractor. And our customers are departments such as defense, energy, Homeland Security, and health. And people don't always realize but those branches of the government are doing really interesting work. And they are our leaders really in the world in terms of soliciting cutting edge research from their supplier base. And their supplier base can be the traditional suppliers, like the big defense contractors, but also leading universities all over the country, get tremendous grant funding from the government. And companies like ours - respond to requests for proposals and propose innovations. So there's a huge need of things that the country needs. These branches of the government are working hard to try to fill that need. And one thing that they do, which is kind of different than the public sector, or the commercial sector is there's much more freedom to present new ideas. They're really up to brand new ideas. They're not as constrained by quote unquote market ability in the beginning. They want to solve the problem. So what we do is we respond to those interests, and we propose things and we are pretty free range as well, with creativity. We really encourage that. So the second piece, of course, is who's going to respond and we seek to hire the best engineers, scientists and business leaders we can find. We try to train them in how we want them to be able to present and how they can articulate their ideas. And we give them lots of opportunity to let their creativity run free. And we develop partnerships with many leading institutions, from academia and other subject matter experts to round out our complete offering. And the last of which is we have very good physical facilities where people can do interesting, creative work at a lab scale before they roll out their ideas in actual products. If all of that is successful, we're also very innovative with respect to different business models to take it to market. As you mentioned, we've done public, we've done private, in license, out license, joint ventures. If we need independent investment, we create a separate company for that. But we also build things inside. And as I said, we also have creativity on the business side. So we try in all those aspects to just embed that innovation from the very beginning.
Bryan Pearce 5:33
Yeah, that's so interesting. And we often forget the importance that the government does play in driving new products, innovation, and certainly the new business models, I suppose for companies like yours that are partnering with academia and with the government. It really is an important engine of innovation, by the sounds of it. So it's hard for me to think of three more important markets than the ones that you're in, in the current environment with defense and homeland security. And we know many of the challenges that we continue to face there, certainly the energy and environment and the climate and all of the things that go along with that, and, of course, medical and human health. So I wonder if you could talk a little bit about the history of Triton - how you ended up choosing those and continue to be in those today? And in particular, how has the diversification between these three major areas enabled the very successful growth strategy for Triton?
David Model 6:38
Yes, another good question. So if we go back 30 years ago, as you mentioned, we started as a bunch of material scientists. There's a rich tradition of material science, particularly polymer science in the sort of Metro West area, or North Eastern Massachusetts, going back historically to the the mills, that powered the textile industry in the Lowell area two centuries ago. From that came fiber knowledge and eventually became plastics knowledge. So it's a very interesting sort of historical reference. But we were a bunch of material scientists and materials is an extremely broad category. Again, something people may not think about, but everything's made of materials. When we started in the 90s, we were in the middle of a really innovative - one of the great innovative periods in material science, where the use and the methods of producing polymers was exploding. The electronically active materials, polymers, and others was kind of growing up alongside the micro electronics industry. And hybrid combinations of metals, composites and ceramics was a thing that we explored. So there was just a lot of innovation happening at the time we started business, and we focused on those material problems that the government had. But innovation in materials is really way down the value chain. And so it's necessary to do that and we feel it's a really key piece to what we do, but it's not sufficient to create products. Our customers were not and are not specifically interested in a pure improvement in the material property. They may like that, but they want the product. They want a system level solution. As we grew up, and we needed to develop system level expertise, which includes hiring designers, engineers, product specialists, a whole variety of skill sets that would take those material innovations and fold them into products. While we were doing that, so that's sort of after the first few years, that's really part of our growth path - as that was happening, the commingling of previously disparate disciplines continued to accelerate. So for example, I'll give you a recent example, we have a very large program with the university to create organ on a chip, we're recreating a synthetic ear with hearing devices. Now, organ on a chip combines synthetic materials, biologic materials, we need micro fluidics, we need electrical engineering, we need chemistry. It's all on one little chip. So all of these disciplines get drawn together. So as we look back, I'd say both the science and our customers have pulled us into diversification. And as I mentioned in the first question, our willingness to constantly innovate just led us that way, that's how we kind of get to really be agnostic as to where you get the innovation and what disciplines you pursue in creating solutions.
Bryan Pearce 9:56
And that diversification also it sounds like really moved you towards greater value add moving from the materials to finished products and so on. Correct? Excellent. So within the three markets, you have a number of focus areas as you call them at Triton - things like artificial intelligence and machine learning and robotics. And just recently on October 11, writers reported that Nicolas Chaillan, the Pentagon's first chief software officer resigned in protest against the slow pace of technological transformation in the US military, which obviously you're very familiar with. And it actually said that China has won the AI battle with the United States and is heading towards global dominance because of its technological advances. And I just wonder, you know, how you react to such a statement? Where do you think the US really is in all of this research and technological advancement? And what do we need to do differently as a country, perhaps, to make sure that we stay ahead in the race?
David Model 11:03
I am really glad you asked that question. So first of all, I would agree that artificial intelligence is changing everything from how your home operates to where drones will fly in future conflicts. So AI has become a cornerstone of a lot of our system solutions and everybody else's. The US military is aware of this as any other technologically sophisticated organization. And there's lots of smart people both inside the military, and within its supplier network, who are working hard on the solutions. But the military does suffer from certain structural impediments, which make it a less nimble organization than say, Amazon or Apple. The first thing is that the DOD manages a huge number of legacy systems, from fighter jets to dining halls, NASA halls. I mean, the amount of assets that they have to manage is astonishing and every single system, the service by 1000s of techs, and other support people and every purchase is dominated by 1000s of pages of procurement specifications, maintenance specifications, decommissioning specifications, so it takes a long time to just turn a supertanker. Every single system has that so when they think about adding AI, they have to then think about how they're going to integrate it. And they get caught up in some of their own sort of bureaucratic requirements which are necessary to function in the day to day function. So that's one sort of base impediment. The second impediment is that the whole process of the government soliciting proposals for a problem, the bidding, the negotiating, and the execution on these, which is something we do every single day is just slower than the private sector. The DOD recognizes this problem every few years, they try to make a big pitch to streamline, but they never quite get there. They just have this bureaucratic process. So that slows them down as well. So they have two things, I guess, the two things I mentioned, make them slower than maybe the private sector and possibly slower than other governments. But that being said, when it comes to cutting edge innovations, like AI, the government certainly has the resources to commit a huge amount of funding to solve the problem. Now, some of these programs are classified, so outsiders may not be aware of all the developments that are going on. The other thing I would say is that Americans, just by our nature, we're always late to a party, we just are late. Churchill, I think, said, the American Congress can be counted on to do the right thing, only after it's exhausted every other possible opportunity. So we are late, but whenever we get in, we catch up. So I'm not really at the core of it worried that China or any other country will beat us to the AI battle. But I will say and I appreciate the opportunity to say this, that our current immigration policy, which basically educates the world's best scientific minds, and then kicks them out of the country, is the single stupidest thing we do as a country. It's been said by others, and I agree that we should staple a green card to every single technical diploma we issue from a higher education from a Bachelor of Science through PhD. Our university system is far and away the world's best. And we are giving away our crown jewels of scientific exploration and academic freedom every day. Our company and every other US technical company cannot hire enough talent. We're in a recruiting war. And we typically can't hire these students. We just can't. They don't get the right visas. And these students would love to stay. So we're honoring our most precious resource and, you know, that's the pitch. I mean, if I could do one thing to change in this country, I would change that policy.
Bryan Pearce 15:22
Yeah, I fully agree with you, David. I think that's a very important point that we put a lot of effort into training the brightest and best, and then we don't let them optimize their career and their potential by staying in the country. So very good point. It's interesting, I was listening, as you were describing, it doesn't sound as though our challenge here is coming up with great ideas, great innovations. It is this, as I call it, getting through the belly of the snake, with government bureaucracy, and so on. And I draw the analogy to what we're seeing in space, with, the likes of Tesla and SpaceX and Richard Branson with his initiatives and the Amazon initiatives and things like that. And I wonder if you think that is a different model than what we might have seen in the NASA days? And also, do we think we'll see any initiatives like that around military or healthcare and so on that may help to accelerate these developments? What do you think?
David Model 16:30
Well, it's certainly happening in healthcare, really any private sector dominated business is moving along those lines. I think the military does have again, they've made a sort of a shadow organization, I think it might be called RDU. I forget the acronym, but it kind of aims to try to be a startup type atmosphere to solve some problems. I just think they get buried in their own inertia. They talk about it, they may start it, but when it comes to actually acquiring technology, and getting it through the system, they just don't know how to do it and I don't really see that. The things I guess I do see changing is just generationally, the younger generation as they ascend into leadership, that they're just not going to put up with some of the clunky ways of doing things. The other thing I would say is there's sort of a shadow technology, for example, pretty much all the soldiers anywhere in theater in the world are using iPhones, right? The government doesn't really have great ways to procure it - they're texting, they're doing things kind of as a shadow way of, say, managing information. But when it comes to large systems, complicated systems, embedding as we said, ai or cyber, which is another huge thing, you know, into the thing. It's very difficult. I think people just don't appreciate- you can't just slap it in, you know, they run under a whole different set of situations that have to be absolutely specified out. It's a challenge and it's great to be part of it. It continues to be interesting.
Bryan Pearce 18:14
Well, that's right and that's why we have companies like Triton, that can move things closer to being ready for market than they maybe would otherwise do if they had to be bred inside of government. So as you look across your focus areas and markets, the three markets that we've talked about, what do you think are currently the areas of greatest potential and interest? Obviously, we're seeing developments in all three of them, but where do you think the great potential might be going forward? And also, how do you look at commercial contracts and customers versus government as a growth engine?
David Model 18:57
Yeah, so I would say, first of all, as we said, AI and cyber are kind of embedded in everything now. But that's not a focus area, that's just maybe a skill set. In terms of end applications, our top strategic focus areas are what we call sustainability, and health. So sustainability means managing scarce resources, such as energy and water, both at the soldier level and at the national level. For example, we make a high throughput water pump that a soldier can carry instead of carrying the actual water when on an extended mission. It allows that soldier to quickly go to a brackish stream and extract drinkable water. But we also launched a company. There's a whole public company we launched that provides decentralized wastewater reclamation to areas of the world that have no such infrastructure. The wastewater reclamation in this country is a total infrastructure play. It's like big vats of concrete. And lots of countries don't have it and the water just goes untreated. The company's called Fluence and we make prepackaged units that are affordable and small that can be placed in rural areas, they can be put in resorts, they can be put all over the world to cheaply and easily reclaim water and a lot of it is greywater. It doesn't have to be drinkable. It just has to be usable, which solves you know, huge problems. So we're kind of at both ends of the scale.
Again, you have two very different customers. You could have an extremely high end resort, that might be on a tropical island, and you think about that they need to water the golf course, they need to wash the sheets every day. And these are typically water challenged areas. So the cost of water is huge for them. And they can reuse lots of the water, they don't have to drink. They water the golf course, or they wash the sheets. So that's been a huge play. But then you go over to say China where we do sell a lot of units in rural China. And based on nothing, you know, there's just no infrastructure whatsoever. So that's a really great place. But at the small scale, the soldier sustainability is equally important. Energy is another area where we manage that. We manage that. We have refrigeration units that don't use CFCs, that are portable, that we make for the warfighter. And then on the big scale we're doing anchoring of floating wind turbines. Floating wind is the coming deepwater wind energy solution. And traditional anchoring systems that oil and gas use don't fit at all. And so we have a really innovative anchoring method that we're scaling up to right now. And that scale is huge. That's hundreds of feet high.The other area, as I mentioned, is health. And we all recognize the challenges of living longer, there's more technology available. And there's also deteriorating environmental conditions. So there's both people living longer, and the tools to live longer and a more challenging environment that's affecting health. And this creates huge opportunities for improved therapies, devices, care and training. Training is an area that we spend a lot of time. We are developing virtual reality methods to teach large numbers of soldiers, for example, to be first line responders. The army has made a point of wanting everyone to be a first line responder, not just a medic. The tip of the iceberg for providing low cost effective tools that will scale to the rising demand. For example, an AI innovation you can buy today - an Oculus headset is used widely in AR VR environment. We're adding our own wristband that's got a tactile simulation, so that the first responder not only sees what's going on, but actually feels what's going on without a physical object. Or you go to a simulated training environment, you can add overlay realistic experiences, like gunshots, helicopter noise. You can add other features that will allow these trainees to actually experience what they may eventually experience in the battlefield. Now, you can take that and just move it in any different direction for virtual training. And I was, for example, even this morning, I was listening to a piece on public radio about the extreme shortage of nurses. And one of the reasons is the main reason really is the bottleneck of training nurses, because trainers who are themselves nurses don't get paid enough. And so they stay in nursing. And, you know, we have to be able to scale up these training technologies to meet the demand we're going to have coming forward. And the AR VR what they call xR now is absolutely the place to be in. Just to answer your second part of your question about commercial versus government. As I said earlier, the government is pretty good at outlining big challenges in funding early development efforts. So almost everything we do starts with trying to solve a government customers problem. As soon as we get to a system level solution, in addition to our own people, we need to engage partners. We try not to reinvent the wheel. And and that often leads to a discussion about commercial markets. Now the focus in most commercial solutions is to design an appealing solution at a competitive price. The government's problem is more, I want a breakthrough solution and I'm willing to give you a price premium. So the government sector is the place to start if you have real innovation. Because they will typically pay a premium for what you offer. Later as the cost curve comes down, I think is the time to move it into the commercial.
Bryan Pearce 25:23
So both are important as time progresses. Well, the final question I wanted to just explore with you briefly was, as you've led strategic planning processes for Triton and the different business units, you know, and other CEOs that we talked to, it's always a challenge to strike the balance between revenue growth and profitable growth and profitability. And I just wonder, you know, for your thoughts on that?
David Model 25:54
Yeah, for us that's the multi million dollar question. Survival depends on growth and growth requires investment. And our business model has always been to promote the creation of shareholder value over operational profits. As you mentioned earlier, we've talked about it, we've stuck to a spinoff model, where solutions that require independent investment are spun off into their own businesses, and our shareholders end up with a portfolio of these companies. It's worked well for us so far. We've done five public IPOs, and we've got one soon to be public. And we've had several private company successes. We've also created over $2 billion in shareholder value for our investors. What we've done at Triton, the things we spent most of the time talking about, is what we call Triton Central, which is the innovation engine that keeps it all going so our model really is keep Triton Central strong. It's got to be profitable, but its primary goal is to spit out innovation and to then take that innovation and creatively develop something - a joint venture, separate company, a product and serve both our shareholders and really the nation in that regard. So we're very proud. We have been in the past what's called the Tibbets award winner, which is recognized as Small Business Innovation Program, one of the leading ones in the country. And we take our stewardship of government funds and of the environment very seriously. And we also, of course, know that you have to reward the shareholders.
Bryan Pearce 27:45
Yes, well, David, it's easy to see why what you do every day at Triton is very, very interesting and really is contributing to so much of the development we have in the country here with regards to the military, Homeland Security, energy and environment and medical and human health. So thank you for sharing your insights with us this morning. Thank you for all that you're doing at Triton and really look forward to continuing to follow the Triton story and appreciate you being with us this morning.
David Model 28:17
Thank you so much. It was a great interview.