The 2am Talk Radio Show Recent

Wednesday, July 20, 2005

Volume 8 - How to Predict Success for Architectural Door Hardware distributors

Success isn't about having the right people, the right tools, or the right structure. They all help, but they don't put a company over the top. Instead, success is all about having the right partners in your supply chain with the understanding of what causes what, and why.

As I have preached from day one, your business isn't built on the differentiation that manufacturers have attempted, in vain, to build into their products but on the quality, reliable services, and fair value for your money on those products. Yet, most companies consistently fail to meet even these basic customer needs.

The importance therefore of what causes 'what', and 'why' takes on a greater importance for the understanding and prediction of what's next within our industry and our particular businesses success. Obviously, we all have choices regarding our individual businesses. These choices are as varied as the description of an architectural door hardware distributor, with everyone doing and operating to their preferences, strengths and abilities. But, regardless, of these choices, we can all better predict the future if we understand, accept, and then act on the causes of 'what' and 'why'.

We have all read and heard about the over used phraseology of rapid growth and changing end-user demands rhetoric for decades. If you have a thriving business in the material supply construction industry, you already know that times change, demands change, products change and so on. What we should focus on is that disruption creates opportunities as well as threats. I believe that recognition of events and interpretation of such allows us to see the future clearer and therefore we can make better choices today which subsequently leads to better success tomorrow.

I believe that there is a value chain attribution that states that companies who take control of any activity or combination of activities, within the value chain, that drives performance in ways that matter most to their customers, regardless of historical experiences or personal preferences, are able to look into the future and show greater profits (not necessarily growth or topline sales) than ever before. Are there signals of change that have been ignored within your company in reference your present vendors? Are there signs that someone is capitalizing on opportunities at your expense? What are the likely result of battles between industry combatants? Are you making decisions that increase or decrease your ultimate chances of success?

All important questions to be individually answered. More importantly, are there clues that something is taking place, and believe me after two decades of working under different corporate ownerships, executive advisory committees, board meetings, inside-out looks into the public giants of our industry, the merger and acquisition fallacies and private conversations regarding door hardware distribution, you can count on it that something is taking place and, just maybe, not to your benefit. So, what to look, listen and pay attention too while building value into your door hardware architectural business is key.

Are you receiving more or less attention from your vendors? Is the emphasis from your vendor's operation tending toward growth, top-line sales, raising prices, excuses for delivery and less from customer input? Is your contacts (sales and customer service) with the company informed about the company or do you have to tell them what is going on about their own company? Is your frustration growing with the rhetoric of the vendor? Limitation of product or constant upcharge for performance enhanced attention that historically had been part of the original deal? Is the disruption with change creating market innovations or is it cutting into your profits? Are you being told that your vendor has reached all of their mid-year goals, that their sales are double digit but your service levels, pricing and attention doesn't reflect those statements? Are your vendors touting the high cost of steel, health care, and rise of petroleum based materials yet their concern for your business costs are never discussed? Do they tout their great employees yet your conversations with those employees are less than enthusiastic? Do they tout their obligations to the employees and concern for their families yet their working conditions are barely tolerable, employee turnover is double digit and your sales contact changes with regularity? I'm sure you get the point about honest questions and their subsequent meanings.

One of the very overlooked pieces of analysis regarding this subject is the process of evaluating or predicting industry change involving competitive battles. This will help you understand the companies' strengths and weaknesses, and when it is better to bet on an entrant to a market versus an incumbent. Remember when AT&T assumed MCI was an insignificant blip on its radar screen. Almost all incumbent leaders similarly discounted the ability of their disruptive competitors to move into the arena and take business. It is rare to predict what specific innovations, take-overs, mergers or consolidations will occur to boost a distruptive atmosphere but you can always predict that the disruptive firms will be motivated to figure out a way to do it more profitably for the customer.

And more importantly, when evaluating this potential battle within competition of vendors consider not only what is taken for granted, in that it is visible and obvious, such as fixed assets, technology, management, and product lines, but more importantly its established processes and values which define its strengths. Winners succeed at opportunities that fit their individual resources, processes and values, and struggle with those that run counter to those strengths thus emphasing, those that know themselves and their customers best, do what they do best.

The resources of a company can be assessed somewhat easily but the company's 'processes' are much more difficult to understand; yet, are telling in the final analysis toward their customer. Processes are the patterns of interaction, coordination, communication, and decision making employees work resources into products, services and other resources of greater worth to the customer. In other words, the best way to determine a company's processes from the outside is to imagine the kinds of problems it must have repeatedly solved in order to somewhat succeed. Yet, if companies must solve the same problem repeatedly, they develop a business double speak that simply changes the color of lipstick on the same old pig.

The company's values are the criteria employees use when making prioritization decisions. Every employee at every level of the company makes these sorts of decisions every day. These values drive a company's resource process that directly impacts the customer in both negative and positive ways depending upon the philosophy of the company toward its employees and customers. The historical data of individuals (record of philosophy toward customer) will always run true to present dealings. It is your obligation to recognize these keys for what they are and prepare accordingly. Even though companies should always seek to disrupt their competitors, they should never seek to disrupt their customers.

Until the next issue, stay healthy, be happy, and keep your friends close.