Illinois Tool Works
Careers at Illinois Tool Works
Mission
ITW’s mission is to drive solid growth with best-in-class margins and returns in markets where highly innovative, customer-focused solutions are required.
Business segments
ITW is a provider of industrial products and equipment. The firm operates seven reportable business segments:
- Automotive OEM – Produces components and fasteners for automotive-related applications.
- Test & Measurement and Electronics –Produces equipment, consumables, and related software for testing and measuring of materials and structures, as well as equipment and consumables used in the production of electronic subassemblies and microelectronics.
- Food Equipment – Produces equipment for the food institutional/restaurant, foodservice, and food retail markets.
- Polymers & Fluids – Produces adhesives, sealants, lubrication and cutting fluids, and fluids and polymers for auto aftermarket maintenance and appearance.
- Welding – Produces arc welding equipment, consumables, and accessories for a wide array of industrial and commercial applications.
- Construction Products – Produces engineered fastening systems and solutions.
- Specialty Products – Produces beverage packaging equipment and consumables, product coding and marking equipment and consumables, and appliance components and fasteners.
History
Byron Smith grew up with entrepreneurial influences. His father founded the first-ever banking institution in Chicago in 1857. After he graduated from college, Byron went to work there. However, in 1879 he decided to strike out on his own, launching the Northern Trust Company, another bank. By the early 1900s, the business was highly successful, and Smith explored other opportunities.
At the time Chicago was becoming a transportation and manufacturing center thanks to the Great Lakes and new railroad construction. Smith observed that there was a growing need for machine tools to serve these industries. However, small machine stores were incapable of providing the products at the large-scale volume required. He figured he could work to change that.
In 1912 he placed an ad in a newspaper seeking workers experienced in manufacturing. He selected four respondents and then founded Illinois Tool Works. It experienced good early fortune, selling tools to many manufacturers. When he died two years later his son Harold took over as President. Harold expanded the firm’s portfolio to include pumps, compressors, and truck transmissions.
Under Harold’s tenure the company invested significantly in modern equipment and plants. It also developed a reputation for making high-quality products. In the 1920s it diversified further by creating the Shakeproof fastener, the first-ever twisted-tooth lock washer. It was such a hit that the firm created a separate division manufacturing fasteners and related products such as screws.
Harold died in 1936 after having transformed Illinois Tool Works into a major player in the areas of manufacturing components, metal-cutting tools, and industrial fasteners. His son, Harold C. Smith, took over and pushed the company towards a greater emphasis on research and development. He decentralized it in order to give individual divisions greater freedom to experiment with ideas.
The new approach yielded many new innovations. These included plastic and metal-plastic fasteners (leading to the new division Fastex in 1955), solid-state switches and switch panels, and specialty gearing products. Harold C. eventually decided that because the company had moved far beyond tools, its name was too limiting. In the late 1950s it began going merely by its initials, ITW.
Business model of Illinois Tool Works
Customer Segments
ITW has a diversified market business model, with customer groups that have very different needs. The company targets its offerings at firms in the automotive, electronics, foodservice, manufacturing, and construction industries.
Value Proposition
ITW offers three primary value propositions: accessibility, innovation, and brand/status.
The company creates accessibility by providing a wide variety of options. Its products can be found in almost every type of application, ranging from deep-sea oil rigs to bridges and wind turbines to aerospace technology to mobile devices. It is partly able to accomplish this because of the many acquisitions it has made, which have enabled it to add many new capabilities and technologies.
The company embraces innovation as part of its culture. It maintains the proprietary 80/20 business process, which it has practiced for 30 years. Through the process, each ITW division focuses on the 20% of its customers that account for 80% of its revenues and structures the business so that it grows relationships with these essential customers. It uses insights from the relationships to design, develop, and patent new products and components that solve their specific problems. The company believes that the efficiencies obtained from 80/20 deliver strong free operating cash flow, best-in-class operating margins, and differentiated returns on invested capital.
The company has established a strong brand due to its success. It is a Fortune 200 firm that generated revenues of $13.4 billion in 2015.It has over 51,000 employees working in 84 divisions in 57 countries, including developed and emerging markets. Its portfolio features several problem brands, including Miller Electric, DUO-FAST fasteners, Foster Refrigerator, and the Wolf Range Company. Lastly , it has won a number of honors, including recognition as the World’s Most Admired Company in the Industrial Machinery category by Fortune in 2016.
Channels
ITW’s main channels are its direct sales team and its network of independent distributors. The company promotes its offering through its social media pages.
Customer Relationships
ITW’s customer relationship is primarily of a self-service nature. Customers utilize its products while having limited interaction with employees. That said, there is a co-creation element. The company works with key clients through its 80/20 process to co-develop innovative new solutions.
Key Activities
ITW’s business model entails designing, developing, and manufacturing its products for customers.
Key Partners
ITW’s key partners are the suppliers that provide it with the raw materials it needs to manufacture its products. These materials primarily include steel, resins, chemicals, and paper.
Key Resources
ITW’s main resource is its intellectual property. Its portfolio features over 16,000 granted and pending patents, including 3,400 unexpired U.S. patents and 7,200 foreign patents focused on articles, methods, and machines; 1,500 applications for patents pending in the U.S. Patent Office; and 4,500 applications pending in foreign patent offices.
It also maintains important physical resources in the form of 502 plants and office facilities around the world, and important human resources in the form of the engineers and scientists that design, develop, and/or manufacture its products.
Cost Structure
ITW has a cost-driven structure, aiming to minimize expenses through significant automation. Its biggest cost driver is cost of revenues, a variable expense. Other major drivers are in the areas of sales/marketing, research/development, and administration, all fixed costs.
Revenue Streams
ITW has one revenue stream: revenues it generates from the sales of its products to customers.
