Interview with Robert J. Shillman, Chairman and CEO of Cognex Corporation

This article is an interview that I conducted with a recognized leader in the machine vision industry — Dr. Robert Shillman, Chairman and CEO of Cognex Corporation and past winner of the AIA’s Automated Imaging Achievement Award. Under Dr. Shillman’s leadership Cognex has become the foremost supplier of configurable machine vision products in the world. His answers to our questions reveal quite a bit about the management philosophy that lead to Cognex’s success.

1. How would you describe Cognex to a new neighbor? I know I have difficulty describing what a machine vision consultant does.
I would describe Cognex as the world’s leading provider of machine vision sensors and systems—we are the leader in terms of systems shipped, cumulative revenue (since inception), annual revenue, annual profitability, and range of machine vision products.

When I’m asked what our products do, I describe them as devices that can 'see.'  Our products capture images of items moving by, instantly analyze those images, and come to conclusions about what they have seen.  Those conclusions are then transmitted to other pieces of equipment that take action based on the information that our systems provide.
Our technology enables machines--such as factory automation equipment, robots, or vehicles--to act on the information that we provide from analyzing the scene. 

2. How would you describe your role within the company? I do not sense that you are a typical CEO.
As a co-founder of the company and its first employee, I have played lots of different roles at Cognex over the past 25 years---including salesman, accounts payable clerk, logo designer, and facility manager!

Today, there are many professionals in our growing organization who run the day-to-day aspects of our business.  And, the appointment of Jim Hoffmaster as President of Cognex in 2004 has freed me to play a more strategic or 'visionary'  role—primarily looking for new business opportunities such as partnerships and acquisitions, and investigating new technology that can improve our existing products and enable the creation of new vision products for entirely new markets.

I always believed in both working hard and playing hard, and that has become an important part of our corporate culture.  I have worked hard to create a unique community in which people take their work seriously, but they don’t take themselves seriously.  And, I am the head cheerleader of that effort—whether it is dressing in costume for the company’s annual Halloween party, pulling practical jokes on April 1 (Aprils Fool’s Day), or dressing up as Uncle Sam and riding a motorcycle to lead the July 4th parade in Natick, Massachusetts where our world headquarters is located. 

3. Tell us a little something about yourself – family, passions outside of work, future personal goals, etc. I understand you recently purchased a home in Southern California. Care to comment on the significance of that?
I was born and raised and educated in the Boston area.  I received my undergraduate degree from Northeastern University, and my master’s degree and Ph.D. in Electrical Engineering from MIT.  For the past 25 years I have commuted to Cognex’s headquarters (and to its other offices around the world) from my home in Weston, Massachusetts, a suburb near Route 128 ('America’s Technology Highway').

About two years ago, after more than 50 years of living in the Boston area and suffering through the long and grey winters and the hot and humid summers, I decided to move my family to San Diego which is known to have the most moderate….and from my viewpoint, the best…climate in the U.S.  I still maintain a home near Cognex and stay there for about one week each month when I return for management reviews.  About six months ago, Cognex established an office in San Diego, where there are now six employees, including me.

Outside of work and family, I have two main passions:  The first is philanthropy and the other is racing cars (to relax!).  My goal as a philanthropist is to share some of the success I have achieved at Cognex by contributing to organizations that are working to make the world a better place.  Education is a key both to keeping America vibrant, and it is a key to personal advancement. I believe it is important for society to devote resources to training new generations of engineers and entrepreneurs.  Because of that, I have endowed Professorships at MIT, Northeastern University and Waseda University in Japan.

I no longer take a salary for my work at Cognex, and at my request, each year the company donates that amount, along with any bonus that I may have the right to receive, to a public charity. I tell everyone that my Ph.D. no longer stands for Doctor of Philosophy, but for Doctor of Philanthropy!  

4. What specific decisions did you make along the way that you consider pivotal to Cognex’s current success? Decisions about strategies? People? Markets? Technology? Etc.?
As an outsider I view your recognition of the potential for normalized gray scale pattern recognition to replace binary pattern recognition techniques that were being embraced by the semiconductor equipment companies as a major one. Another was your recognition of the importance of getting Japanese equipment companies to embrace this idea and how you convinced so many of them that Cognex should be their supplier of choice.

Briefly, Cognex initially grew out of some work I did as a fellow with the National Science Foundation in the late 1970s, which concerned programming computers to recognize handwriting.  In the early 1980s, I recruited two MIT graduate students, Bill Silver and Marilyn Matz, to help me commercialize that work.  And, together, we founded Cognex.

Cognex’s first product was an industrial OCR system called DataMan™, which was designed to read character strings directly off of the surfaces of products.  We sold our first system to IBM for wafer tracking....and that was the start of Cognex’s machine vision business.  Bill and Marilyn are both still with Cognex, and continue to play important roles.  Bill is a Senior Fellow, focusing all of his time on inventing new vision technologies for new products that will help Cognex grow in the future.  And, Marilyn is manager of one of our largest businesses which has a primary focus on the semiconductor industry.

There are many decisions and events that were critical to our success, and that helped us outlast a large field of competitors over the past 25 years.

On the technical side, I think the development of normalized correlation pattern matching by Bill Silver provided a big boost for the technology in terms of reliability and performance.  And it also gave a significant boost to our business by helping convince many users that machine vision was going to fulfill its promise as a useful tool in the manufacturing sector. It was the first of several technical innovations developed by Bill and other engineers at Cognex...another was geometric pattern matching... that also helped distinguish us from our competitors. 

Deciding to go to Japan in the mid-1980s...and to do whatever it takes to be successful serving the Japanese semiconductor and electronics OEMs...was another very significant decision. 

Meeting the extraordinarily high expectations and demanding technical requirements of these customers was not an easy thing to do, and required a major shift in the way we had been doing business up to that point.  However, we persevered, and the effort paid huge rewards to Cognex...not just in terms of revenue, but also because it “forced” Cognex to expand our technology and to develop very powerful core vision technology which we’ve been able to apply in all of our other products. 

Another very important decision we made was to keep our company focused exclusively on machine vision.  Once you are in a position to start acquiring companies, the temptation is always to make purchases in related areas, such as factory controls or automation or even to acquire companies that make capital equipment that uses vision.  But, in the past, Cognex made a conscious decision…and we continue to decide…. that machine vision is our only business, and we have dedicated ourselves to being the leader in this particular technology.   
5. What is the process within Cognex associated with making key decisions about the direction of the company (products, R&D, markets, acquisitions, etc.) today? Your success suggests the process works.
Our product development philosophy at Cognex is very simple….we believe in the saying, 'necessity is the mother of invention.'  We talk to a lot of customers, and they tell us what they need.  Then, we go out and build it.  It is this philosophy…listening to customers, and then doing what they want…that has made Cognex a success.

In terms of markets, we invest a great deal of effort evaluating applications before entering a market.  Our goal is to identify good opportunities, but also to avoid markets and applications where we believe that vision is not yet capable of doing the job that customers want, or can’t provide the level of performance they really need.  We may enter those markets eventually, but not until we are sure that the problem can be solved, and that the business proposition makes sense.  

6. Over the years part of your growth strategy has been acquisitions. What are lessons that you have learned with these acquisitions? How do you measure success and why were some more successful than others?
In the past 11 years, we have completed 11 acquisitions.  In every case the entity that we acquired met our acquisition criteria:

• Must be machine vision, and only machine vision
• Must be small….so that operations can be easily integrated into Cognex
• Must have a culture similar to Cognex…so that institutionally it can be easily integrated
• Must have revenue from selling products
• Must be able to become profitable within two years

Looking back at those acquisitions, I can tell you that they have been good for Cognex.  We have a remarkable track record on acquisitions.  I think that we have done well because of the criteria that we use, and because we are not 'pushed' to do more acquisitions than we can handle.  We want to grow Cognex…both from within and from without…but we will not sacrifice our culture or our profitability for the sake of growth.

7. Are there events taking place in the marketplace or in the underlying product technology that you see will shape the future of Cognex?
Over the last 10 years or so, we have seen a trend towards simpler and smaller systems and vision-powered devices, and Cognex has participated in that trend.  I believe this trend will continue, and vision systems will continue to make major advances in both cost and ease of use.

I also think we’ll see a growing demand for ultra-simple, single-purpose vision products…we call them 'Expert Sensors'… that can be purchased off the shelf and installed in a matter of minutes, to solve specific common problems.  Cognex has started to address that market with Checker™, an extremely simple, low-cost sensor that only does one single thing…but it does it VERY WELL and VERY FAST.  And, what about ease of use?  Well, Checker is our first product that doesn’t come with a user manual….it comes with a single page instruction sheet!

In addition to the technology moving forward, the market for machine vision is expanding.  Machine vision is now widely accepted on the factory floor, and it is becoming accepted in new markets such as transportation, building automation and security.   It’s a very exciting time for machine vision, with lots of new opportunities opening up as the technology gets less expensive, smaller and easier to use.

8. What do you see as major competitive threats? Technology related? Market related? Competitor related? Etc.?
Cognex is the only machine vision company that offers a full range of vision products—from vision sensors, to vision systems, to ID products, surface inspection, etc.--so we compete in many markets.  While we face smaller competitors in each of the markets that we target, there is no one competitor presently on the horizon that offers the same range, technical depth and years of experience as Cognex.

However, one of the challenges that Cognex faces as we grow larger and more successful is how to stay flexible enough to respond quickly to changes in the market.  In many cases, being small and hungry can be a competitive advantage. So, the question we ask ourselves is how can Cognex continue to function as an entrepreneurial enterprise, given that we are now a large corporation? 

We have answered that challenge by dividing our business into smaller, entrepreneurial units, each focused on a different segment of the vision business:  PC Vision, Vision Sensors, Expert Sensors, ID Products, Surface Inspection and In-Vehicle Vision Sensors.  Each group has its own dedicated marketing and engineering resources.  We expect that these smaller groups, which are each focused on their own particular market, will be far more nimble in responding to competitive threats, and faster in getting products to market.

9. How will you describe Cognex to a new neighbor five years from now?
Cognex is still the world’s leading provider of vision technology!  But, we have expanded our product line and our technology to serve a wider range of markets: from vision for factory automation, to vision for building automation, vision for transportation, vision for security…and more. 

In five years, I hope to say that Cognex has grown from a company with annual revenues of $200 million to a company with annual revenues of $400 million-- yet, despite our size, we have managed to maintain our entrepreneurial spirit and our very special 'work hard, play hard' culture.