Avoid Cutthroat Competition that Bleeds Red Ink

June 8, 2011
At Hytrol's Executive Summit and Sales Meeting held in Little Rock this week, the conveyor manufacturer's president, Gregg Goodner, proudly announced that it sold $11.6 million in product in May. He attributed this to his company's attention to lean ...

At Hytrol's Executive Summit and Sales Meeting held in Little Rock this week, the conveyor manufacturer's president, Gregg Goodner, proudly announced that it sold $11.6 million in product in May. He attributed this to his company's attention to lean practices and eliminating non-value added work. He acknowledged that going to a lean philosophy came with a painful four-year learning curve, “but if we're not growing we're not surviving,” he reasoned.

Taking Advantage of Pain

In that spirit of survival through learning, Hytrol hosted this Summit to help its suppliers and integration partners share in business best practices. Kicking the conference off was Dr. Rajan Kamath, associate professor at the University of Cincinnati and founder of Artesiaa Consulting Group. “Raj,” as he asked attendees to call him, talked about the need for business breakthroughs in competitive environments and outlined how to establish “blue water” environments (where you're the only fish in the sea) and avoid “red water” (where you and your competitors are in a bloody feeding frenzy for business).

Raj said breakthroughs can be designed—that there is a structure to them. It involves creating opportunities for your customers and presenting the value to them so they're willing to pay a premium for them. He cited the example of a textbook publisher, Thomson Learning. This is a market that is extremely price driven. In April of 2006 the company decided to transform its “Principles of Marketing” textbook—a 900-page, 6 lb tome. This book presented a number of problems to its profit-hungry publisher. At its price level—over $100—it was popular on the used-book market. Thomson needed to create a new value for this product in the eyes of its student market. Raj worked with the publisher to form customer committees made up of students, professors, bookstore employees and accreditation staff. Each of these groups presented a different—but equally valid—picture of the target customer.

They discussed rules of the game—four to five value drivers representing dimensions of value. Where is the competition investing? What do customers receive? An accurate description of the current situation is the beginning of finding a breakthrough, Raj explained.

From these focus groups Thomson learned that if students couldn't read a chapter within 20 minutes, interruptions would break their rhythm and take them away from the material. Also, most students also have part-time jobs, further taking time away from the book.

After digesting all the input from these groups, Thomson came out with a new marketing textbook with chapters that could not only be read in under 20 minutes, but they could be downloaded as MP3 files and conclude with one-page summaries. They priced it at less than $50, because at that profit margin, they learned, the bookstores wouldn't buy it back for resale—thus Thomson eliminated competition—blue water.

During the customer focus groups, Thomson asked students what they wanted. In summary, they didn't want to work and they wanted an A. While that's a pretty funny response, Raj recommends you don't dismiss off-the-cuff remarks like this. In such responses are the key to “blue water” environments. The point is, extra demand is out there waiting to be tapped. There are customers in pain who don't know that their pain can be relieved—therefore don't know to ask for relief. You just have to identify those pain points and find innovative ways to relieve them using a business model that saves you money. Success?

Don't Think Success; What Works?

Business consultant Paul Brown followed Raj with a presentation on business strategies, and he suggested not thinking in terms of success or failure, but what works and what doesn't. As president of Leadership Dynamics , Brown goes beyond transactional training and focuses on changing behavior and building skill sets in sales organizations. Poorly developed skills are among the things that keep CEOs of these organizations up at night, and this problem is manifested in a lack of leadership, poor knowledge of company strategy and a misalignment between what people do on the job and the company's goals.

It's important to do a talent assessment of everyone in your organization, identify the processes that need to be done, then match those talents to the processes.

Most companies fail to grow because they don't identify their high-payoff activities. By raising consciousness of these activities you can develop and grow them. The problem is, by focusing on the wrong activities, companies run out of time and energy to get important things done. Brown recommends a SOD analysis, identifying strengths (what are you good at), Opportunities (focusing on possible gains by developing and applying those strengths) and Dangers (and how they can be eliminated).

Important Players

The evening's dinner speaker put all these principals into an even more digestible form for the sports fans in the audience. Walt Coleman is a National Football League Referee, in addition to being the 6th generation operator of Coleman Dairy. He noted that football is the only game where every player doesn't get an opportunity to handle the ball. That means the only time those players' names are announced in public is when they make a penalty. But the team couldn't function without these players. Be sure to recognize those underappreciated players on your team for their strengths—and treat them as important contributors.

Coleman recalled the first game he ever officiated. The LA Raiders' owner Al Davis made it a point to ask Coleman before the game not only how he was but how his family was—reciting each of them by name. Coleman remembers that moment to this day, and summarized his takeaway for the Hytrol Summit audience: “When you're around successful people, pay attention. The details are what got them there.”

The following morning, during his “State of the Business” report, Hytrol's Gregg Goodner summarized the principles that have led to his company enjoying the third best year in its history ($41 million in sales over the past five months). Among them were incentivizing employees to meet the company's cost structures. But the conveyor industry is a “red water” business, and he concluded that Hytrol plans to diversify and go after new markets with new products. With the Panama Canal opening up traffic for East Coast Ports, he believes 3PLs will establish more facilities serving these regions—and therein lies the potential for market growth. And maybe water that's not quite blue, but less red.