Business of Metalforming
Industry Migration: Diversifying in a Stressed Economy, Part 2
Last month we started answering the question, “In a stressed economy, how do you quickly steer your company into new industries and new sources of revenue?” We left off with an assignment to address specific objectives, given your existing market or industry focus, and identify a new industry or industries that you deem as viable for your business. Having made some initial determinations as to your match with a potential new space, we can start to look more closely at your target and take steps to move forward.
First and foremost, dust off your contact list. Networking is always your most productive means of credible introduction for any new prospect. Many trade groups are excellent sources of industry-specific information that can be very inexpensive. Consider purchasing industry-specific reports to quicken your understanding of various aspects of a given industry. Go with a reputable source, check customer references and always preview the material’s table of contents and some portion of the content to be sure that the report addresses the questions that you want answered. If available, ask the report supplier to allow you to review a section from another report that represents an industry within which you already have expertise. If you deem the material in the report accurate and complete, then chances are good that you will be satisfied with your purchase on an industry that is new to you.
Contact and evaluate trade groups to further probe, and once settled on a new target industry, scout tradeshows and join appropriate trade organizations. As you sharpen your focus, leverage social and business networks to understand as much as you can about the new industries that you are pursuing. Set aside time to cold call. Cold calling will push you out of your comfort zone and allow you to hone your ‘elevator pitch’ for concisely and clearly explaining what your company does and the value it brings—you need to be able to sum this up within a minute! Keep it simple. The goal is to capture enough interest to get 20 min. for a formal presentation.
Look for Ways to Stand Out
Be creative in offering nontraditional business models to attract decision makers. Look for ways to stand out from the existing supply base. Look at this as an opportunity to not only enter into a new industry, but as a blank slate to present your company in a new light. Be flexible, don’t confine your thinking to your present business model; be open to alternative approaches…be willing to say ‘yes’ and eager to learn. And be careful to temper optimism with some realistic bounds to ensure that you can follow through on your commitments.
Work to develop trust and to build your relationships. And work hard to demonstrate your value. Remember, you’re the new kid in town, so you will have to pay your dues and earn your place. You may even consider proactively tooling up for a part that represents what your prospects want to purchase. Then go through all of the motions to manufacture, validate, test and document the results as an example to present to prospects. This can be especially valuable if you need to enact a new quality standard, such as a TE Supplement to ISO or automotive tooling suppliers, or the AS 9100 standardized quality management system for the aerospace industry.
A broader consideration includes taking stock of your company’s identity as it pertains to your new prospective sales targets. As you continue to narrow the field, consider everything, even your company’s name or your product’s names with regard to your new prospect’s frame of reference. Is your company name so specific to what you do or with whom you do it for that it will confuse potential customers in unrelated industries? If so, consider setting up a division with a name and identity that fits. You can represent the new entity as a division or subsidiary of your company.
Don’t Over Promise; Over Perform
When approaching new prospects, don’t over-promise, but do over-perform. If you stumble, react quickly to address and resolve issues and be sure that the customer is completely satisfied with the outcome. If you’re following
| Case Profile
|| Imperial Metal Products Co.
|Location|| Grand Rapids, MI
|Production|| 8 million parts annually
| Floor space
| Quality marks
ISO 9001:2001 and
As you gain experience, complete projects and receive new work, point to your achievements as references to other prospective customers. With your customer’s permission, promote your efforts and mutual successes by contacting a trade publication or a PR agent to have a story produced. Taking advantage to showcase your successes does not need to be a costly exercise. Something as simple as sending out brief monthly or quarterly e-newsletters with an opt-in mail service can keep customers aware of your efforts and prompt word-of-mouth endorsements through e-mail forwards.
Plan on spending one to two years working to establish your company in new industries and be prepared for disappointments and rejections. Learn from these experiences, refine your efforts and find the right people to help you along the way. Resilience and consistent dedication to the process will result in success. Remember, it is possible. You can do this and it’s never too late to start.
Case Study: Aerospace Success
Imperial Metal Products Co. (IMP), Grand Rapids, MI is a precision component manufacturer producing more than eight million parts annually. As a normal part of its business-planning process, IMP’s management team tasks itself with market diversity. It compared parts that make up aircraft landing gear to parts that IMP produced for its heavy-truck customers. Ultimately, it determined it had the core competencies in place to go after aerospace, which at that time showed significant signs of growth. Fifteen months ago IMP initiated its entry into the aerospace and defense markets.
When IMP made its decision to diversify into aerospace, 35 percent of its revenue, the largest share, came from automotive customers. Initially it faced some challenges as it did not have direct contacts within the aerospace industry, nor did it have the required AS 9100 quality operating system in place to become a Tier One supplier.
Several months into the effort, it was introduced to the Michigan Aerospace Manufacturers Association (MAMA), an organization started in 2007 focused on bringing aerospace companies together with Michigan manufacturers. MAMA helped IMP management understand the nature of the industry and its quality requirements, and introduced it to prospective customers.
The investment has paid off, since only 12 months after joining MAMA aerospace now represents 5 percent of IMP’s revenue, and its additional diversification efforts have balanced its customer portfolio. Automotive now represents 15 percent of IMP revenues, placing it in a considerably stronger position as this industry continues its contraction. Additionally, while growing its stake in the heavy-truck market, IMP also is trying to determine which types of components used within wind-turbine nacelles best match its skills.
According to Erik J. Denslow, IMP vice president and general manager, its experience in entering the aerospace industry required significant dedication of resources in engineering and quality. Digesting new specifications and determining how to meet the specific project-bid specifications is time-intensive. Today, its cost of sales, compared to auto sales, is low due to reliance on MAMA. MF
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