The world of wood industry companies began its remarkable journey of change in the mid-nineties and hasn’t stopped since. In fact, the rate of change has increased all the while. For more than twenty years, industry companies have struggled to adapt to a continuous cycle of dying markets, emerging opportunities and ever-changing technology.
Think about the changes with which the wood industry has had to deal between 1995 and 2017. It’s profound. The impact of foreign competition that began quietly in the mid-1990s, particularly the Chinese, then exploded. What began with the early adoption of CNC controlled woodworking machinery by a few quickly spread widely to a competitive necessity. The desktop PC, CAD/CAM systems, the World Wide Web forever changed the operational configuration of industry companies; each struggling to find a way to deal with the consequent uncertainty.
For many owners and leaders the uncertainty persists to this day. Who knew the impact that the Internet would have on the retail industry? Which store fixture manufacturers could foresee the struggles of large, dependable retailers like Macy’s or BestBuy? Some manufacturers adapted, others did not. For many, the painful descent in revenues resulted in closure.
None of us has a crystal ball, nor can we know with certainty what the marketplace has in store for our customers or our business. The one certainty we do have, however is that, as we have learned, we cannot control either our customers or the markets in which we both operate.
That said, there are some things we can do to mitigate the risk inherent in today’s marketplace. As leaders, it is our job to be aware of and understand the risks that present themselves to our customers and our company.
So, what can you do when your market is contracting and when you become fearful of the future? Here are some things to think about to help you sort out which direction to take.
Before you decide to search for greener pastures, make sure that the problem is not your company. Customers will send business elsewhere if we are not performing well and we won’t know it till the orders stop coming.
Never assume that customers are completely happy and committed to the relationship. Never assume they won’t find another supplier. And never assume that price is the only factor basis for the relationship.
Look closely at every aspect of your customer relationships. Ask them how they are doing and listen closely to their responses. Ask them questions about their challenges. Ask them what can you do to help.
Only after you are absolutely certain the problem is not with you should you begin the search for new opportunities.
Know thy Market
Is your customer’s market growing or contracting? Don’t assume your customers know and don’t rely on your customers to provide you an opinion about the outlook for their own markets. Neither abandon nor enter a market until you know the answer to these questions.
Look past them into their marketspace. Create your own understanding of the pressures or future opportunities that may or may not exist. Research, research, and research any new markets you are considering. Identify the trends and make sure you are not relying on only one data point alone to make your decision.
Home is Best
It’s an old axiom, but a true one. The fastest, cheapest way to stabilize, grow and secure your future is to sell more of your existing product to your existing customers. It’s also the least risky.
If you can’t do that, the next best way to position your company for the future is to sell your existing products to new customers, but customers that look just like your current ones. Analyze your current customers. Identify which are your best and know why. Develop a profile of those customers. Develop a plan to go out and look for more customers who fit your profile.
The Grass isn’t Always Greener:
Many a company has departed for greener pastures only to discover it to be very crowded and the grass too sparse. It’s a common mistake and can be a costly one in terms of both time and money.
If you intend to enter a new segment of the market, say from residential frameless cabinets to commercial casegoods, be aware that while the differences in the products may seem insignificant, the differences in go-to-market processes are stark. Make sure you understand how these differences will impact your organizational design, knowledge and skills.
Different segments usually have differing payment terms. Make sure you understand the potential capital requirements of a new market any potential impact on your cash cycle. You may be surprised by unexpected capital needs if you don’t.
Last, but not Least:
Do you know what business you are really in? The question seems almost absurd. Yet, think about the frame of reference by which you describe your company. Are you a residential kitchen cabinet manufacturer? Are you a manufacturer of storage and organizational casework? Are you a service company specializing in organization and storage solutions?
Be clear about how you define your business. Be even clearer about how your customers define what they need from you and all of what you do for them. Changing your reference point from product to capabilities or service may help you think differently about how to reposition yourself in your existing marketspace or how you want to be perceived in a new one.
As you think about what business you are really in, keep one fact in mind: while you can do anything, you cannot do everything. You and your team will explore many new market opportunities, but as you do, you will need to decide on only one.
The decision on which one you pick should be based on market information, a clear understanding of your capability to serve that market, your appetite for, and ability to withstand risk.
Approaching new market opportunities in an informed, deliberate and disciplined way will improve you odds of success and it will keep the organization focused on where the business is headed.
If you need help extending your market reach or growing your company, I can be reached at 608.279.8089 or firstname.lastname@example.org