Keeping an eye on the competition.

Epson America's Eugene Kunde knows the thrill of success and the price of complacency

When you're riding high, why look at the ground?

Gene Kunde learned why years ago at Toro Co. That super-successful manufacturer of lawnmowers and snow blowers in Minneapolis had expanded too fast, and just after hiring Kunde to develop its distributor network, the company tripped and fell. Kunde had to help mop up the blood.

"We had to cancel a custom-designed corporate jet before it was delivered, and back out of a new headquarters designed by (renowned architect) I.M. Pei before we moved in, and one day 40 percent of the white-collar workers were laid off," Kunde recalls.

"I learned a lot about watching for the danger signs in businesses," he notes, raising an eyebrow, "even as things are lookin' fine."

The former race car driver and ex-Ford Motor Co. executive can make a point convincingly.

Today Eugene R. Kunde (rhymes with Dundee) is the man watching for alligators and fording streams in America for Seiko Epson Corp., long the world's No. 1 manufacturer of low-end computer printers, and now a maker of many computer and instrumentation products. Kunde, 50, is chief operating officer for its Torrance-based marketing arm, called Epson America Inc.

The 550-employee outfit sold $1 billion of Epson products last year in North and South America. The parent, Seiko Epson of Japan, is part of the $5 billion-in-revenues Seiko group . That high-tech conglomerate evolved from a family watch business 110 years ago into a global maker and marketer of watches, robots, rare-earth magnets and computer equipment.

Dealing in computer equipment can be volatile, Kunde learned firsthand.

Just before joining Epson, the plain-speaking Wisconsin native was running his own computer wholesaler in Minnesota. He had founded the company in 1982, a real go-go year for PC sales.

With three employees and no sales, he snowballed Great Northern Data Systems into 25 employees and $20 million in sale by 1985, he recounts. Kunde's hottest product, he fondly says, was a computer printer with the brand name Epson.

So he merged with Epson America and has since pushed only Epson desktop computers, laptops and other products.

Kunde rose in five years to become Seiko Epson's senior American executive. The son of a "farm gal" mother who married at 15, and a carpenter stepfather, has helped Epson put 10 million dot-matrix printers into customers' hands worldwide. That's a world record for any company.

In 1978, Epson introduced the first commercially successful dot-matrix printer for microcomputers. In 1981, IBM decided to buy Epson printers and market them under the IBM name along with the original IBM PC.

But IBM ended that deal in 1985, and Epson's No. 1 standing has been challenged in other ways by rival printer manufacturers recently.

"A million other companies have jumped into that market, and Epson's dominance has shriveled a bit," says Editor Charles LeCompte of the "Hard Copy Observer," a monthly printer newsletter. "But that was inevitable, because they once had 100 percent of the market."

Epson's share is now about 25 percent of the U.S. dot-matrix market, says Massachusetts market research firm BIS Strategic Decisions, and 60 percent worldwide, Epson says.

Long the workhorse of small business, the relatively low-cost dot-matrix technology relies on tiny hammers striking an ink ribbon to form patterns of dots that become letters on a page. They don't need the costly toner devoured by the rival-technology laser printers -- which can produce a sharper-looking page.

But the markets are changing swiftly on Epson in the 1990s.

Laser prices have tumbled dramatically. Small businesses and home offices can more easily afford laser printers, with their superior character quality.

Thank Palo Alto-based Hewlett-Packard Co. with its break-neck introduction of ever-better, ever-cheaper laser printers. In 1991 HP knocked Epson out of the No. 1 slot for sales of all types of printers, according to BIS.

The challenge is tremendous for Epson, whose first laser printer flopped and it had to buy the machines back from the public. Today, Epson has built sales to just 5 percent of the laser market.

Being a newer technology, lasers have more room for innovation.

"There's not much more you can do to these dot-matrixes," says Senior Analyst C.J. Meiser with BIS. "With lasers, you have a lot more flexibility."

"I used to be one of those people," counters Kunde to the skeptics. "But, you know, wind-up watches are still the largest selling type of watch on the planet. And our dot-matrix printers will meet a need down in (less-affluent) Latin America for a long while. ..." predicts the salt-and-pepper haired executive confidently.

And colleagues say he's not defensive. Kunde readily admits he bombed Berlitz crash courses in Japanese and that he doesn't know enough about electron-beam imaging, for instance, to predict whether it will become the industry's future technology.

"He doesn't pretend to know every technical detail," says an ex-Epson manager who works for a rival printer maker. "But he's confident, he's comfortable in his shoes."

Kunde is even proud to say he's a generalist. Under a Ford Motor Co. college-graduate training program, he was schooled in sales, scheduling, obsolete-inventory disposal, and so on. Technical arrogance has nearly killed some high-tech companies, and some analysts believe Kunde's experience and face-the-problem attitude gives Epson staying power.

"He's very direct ... very confident ... and has a feel for the big picture, globally," says Adrian Heryford, partner with marketing-research firm J.D. Power & Associates who has worked for Epson America.

Kunde, however, announced in December he would retire from Epson this spring. He says he was not asked to leave, yet it would "help the growth of this company, and mine too."

He is weighing full-time retirement, with lots of fly-fishing, working for another company, or starting his own again. Kunde says he's "not locked in" to a computer post.

A new boss will look at this track record: Epson America's fiscal-year 1992 revenues of $1 billion were up some 15 percent, compared with a 5 percent industry average. In November, Epson announced its "ink-jet" printers -- a third technology -- will use an advanced system that puts out "laser quality" with fewer disposable parts than rival ink-jet printers.

More importantly, Kunde has shaped management -- "we hope," he says, showing modesty -- to react to the careening microcomputer industry in the 1990s.

His responses: Dovetail product planning with suppliers' planning, which he does with semiconductor-maker Intel Corp.

Baby the buyer. He has boosted customer support and service from less than 5 percent of his staff to 25 percent-plus since 1990. He's looking at manning the phones 24 hours a day. He's beefed up customer-oriented focus groups and surveys -- some done by J.D. Power.

"Epson's and Kunde's commitment to customer satisfaction is perhaps the largest single thing driving the company, from a strategic marketing perspective," says Heryford of J.D. Power.

Entire divisions have been remade. Order-taking is now consolidated under one boss, for instance, melding the division's once-separate staffs of finance, operations, sales and distribution workers. The result -- some 90 percent of all orders are shipped within 24 hours of receipt, he claims, up from less than 20 percent in 1990.

Driving these changes, he says, is his industry's realization that it can no longer innovate to please engineers and managers, with the customer left out. "That's a different world out there than five years ago."

Competition and the recession have helped halve Epson's computer sales from 1990 levels. Will it withdraw from the cut-throat desktop computer market?

In his only lukewarm response during a two-hour interview, Kunde says neither yes nor no. Epson is "rethinking" its computer direction, he says.

Kunde is encouraged by his Japanese parent firm's trust in his actions. Two years ago Tokyo transferred all design and global planning of PCs to America under Kunde. Formerly it was done in Japan (where printers are still conceived).

Kunde pushed Japan hard for the switch, knowing how much bigger the American market was than the Japanese. "You should be as close to the market as possible, even become part of the market," he explains.

"That was a major concession for a Japanese company, especially a manufacturing- and engineering-driven company," Kunde says.

The pride of his Japanese owners should not be underestimated. Company literature beams over Seiko Epson's creation of the first electronic printer for recording athletes' speeds for the 1964 Tokyo Olympics.

Kunde says Tokyo gives him great autonomy. Nevertheless, it has one company executive based in Torrance as Kunde's superior (President and Chief Executive Masahiro Kurita) and his two immediate subordinates also report to Japan rather than to him.

They are Executive Vice Presidents Shosuke Kawai and Norio Niwa. The three Japanese natives declined interviews for this profile, says an Epson spokeswoman, citing lack of English proficiency.

Kunde says his budgets and operating strategy "are pretty well accepted" by Seiko's board of directors. "They've never said to me, 'Boy, that's a piece of junk.'" He says they listen well to him.

And Kunde listens to customers. As a Ford executive in California during the 1970s, he saw Toyota and Nissan slowly eat Detroit alive by retooling cars to capitalize on buyer feedback.

"You know kunde means customer in German," he points out.

Yes, but he better handle customers, just right. In Japanese, seiko means precision.