Can US Precision Machine Manufacturing Survive? – Part 8

business developmentSpecialization (Another name for Focus)
It sounds paradoxical, but the longer the list of a company’s claimed services, the broader the level of expertise claimed appears to potential customers. Company’s do probably believe that they can do it all, but clients won’t believe it, and the company won’t be considered among the best. To a potential customer, the company looks like it’s flailing, just hoping to hit something.

Customers want the best, and the most for their money, their gut tells them that they will more likely get that from a specialist, than from a generalist. To the potential customer, depth of knowledge is much more important than breadth of knowledge. The reality is that PMPI companies are in a commodity driven competitive market, where the market dictates the price.

Previously we discussed the commodity we are dealing with; in the PMPI market “it is not the products manufactured that have become commodities, it is machine-hour, materials, and skill level applied that have commoditized.” Price has been removed from the equation, so some of the most effective options to help companies overcome the challenges of an inherently commodity driven market are as follows:

1.   Product/Service Innovation (maybe the best type of specialization)
2.   Packaging products and services
3.   Discovering New Market Niches, Especially in Unsophisticated Areas
4.   Developing Unique Business Models
5.   Generating More Referrals
5.   Offering Increased Service
6.   Offering Guarantees
7.   Partnering With Complementary Product/Service Provider

Product/Service Innovation
Clearly, when you add features or functions to your product, you can command a higher price, or at least defend your products from being ‘Wal-Mart-ized or Home Depot-ized’. Both of these companies demand that their suppliers build continuously cascading prices into their product offerings and bids.

Innovative cost saving, or premium getting features, can be added by an in-house product development team, regular employees, or by licensing complementary products, or feature sets. A model that Microsoft has used very well for years, developing strategic alliances with leading companies (Business Development); this allowed them to acquire differentiating feature sets.

Regardless of how you feel about Microsoft, and how they achieve product improvements and benefits, it is widely acknowledged that their approach has been very effective. It can be shown that there are at least three key areas that affect a company’s innovation successes:

1. Managements Strategic outlook with respect to innovation
2. The company’s actual ability to innovate
3. Monetizing the results of their innovations

Firstly, and maybe the most important success factor outside of the company’s ability to deal with competition, is the company’s strategic outlook with respect to the process of innovation, and how it affects the company’s operations.

Secondly, a company’s ability to actually innovate, i.e. create genuinely productive ideas, and manage the creative process to completion (deliver an innovation to a customer) to where it has a meaningful and positive effect on the performance of the company.

This may require that the company has established a culture of innovation within itself; i.e. one that allows the individual or group generation and free-flow of ideas, and the ability to utilize available resources such as new or existing technology to its advantage.

And thirdly, the company must be able to monetize the results of its innovations by selling them to customers in existing or modified markets. The results may be new or enhanced products or services that satisfy needs and deliver more value to customers. This process in fact will require a separate innovation, the creation of a new business model.

This new business model will include and influence all facets of the business, such as key resources, key activities (planning and commitments), sales & marketing channel plans and activities, etc. as well as the company’s profit plan.

Jeff Dobbs Statement