Finding Growth and Success in Old Line Industries
New high-tech industries hold a special appeal to investors and entrepreneurs. I have always believed that you don’t necessarily need high tech to create an exciting business opportunity or to produce really nice returns. It’s great to see civic efforts to bring new technology companies into the area. But there are great low tech opportunities for “old line” industries to become reborn into exciting growth. Making that happen often requires thinking beyond the “way it’s always been done in our business” to create new rules and to set new standards of performance.
I worked with a company that is providing strong credence to this theory. The ownership of this company changed about three years ago. The young, entrepreneurial owners have a goal of growth and expansion. They are making a large commitment and investment in both time and money. This investment is not in an electronics or other high tech company but in one that is in a very unglamorous industry that is not very attractive to investors. They are in a very labor-intensive service business. The standard industry operating model has been the same for many years. That model is to utilize the lowest cost unskilled labor to provide their customers with a commodity service at the lowest cost. Customers have typically accepted the meager level of service and quality as the way things were in this industry and therefore have very low expectations.
The new management team determined that they only had two options. They could stay with the industry model, continue to perpetuate the inherent problems, and remain simply another provider of a commodity product in a crowded field. Or they could find a way to change the model and differentiate themselves. They adopted the latter strategy. This was the opportunity they originally saw in the company and why they became owners. They felt that if they could change the status quo of the industry, they could successfully grow the company and reach their goals.
They believed that the opportunity for them was based on their ability to differentiate their product and service from all of the commodity providers. Since their service was so labor-intensive, accomplishing this would require a focus on the people in the organization. They would have to improve the quality and skill of the employees. They would have to change the typical employee in their industry into a caring, customer relations oriented, quality-minded employee. They understood that this was going to be a huge task but they envisioned the results that they could achieve. They made great progress. They have, in fact, differentiated their people and their company over the last three years. Their better trained and caring workers have enabled them to reduce the number of people required on individual service teams. This allows them to pay their people more than their competitors while still remaining price competitive.
Their success in redefining the industry model is enabling them to expand geographically. They are duplicating their new model in new regions and the reaction of the customers and competition is always similar. The customers, once convinced that they can really get a better product, are signing up and are very pleased. The competition has two responses. They either ignore them and continue business as usual or they try, with various levels of success, to play catch up to the new model.
Their success is not because they have developed a new technology or have the ability to automate a process. It is because they understand that differentiating an old-line business is not “rocket science”. They understand that the key to their success and the success of most other businesses is satisfying the customer beyond their expectations. The good news is that so many companies have been so ineffective, that customer expectations in many industries are very low. What great low tech opportunities this presents for companies who recognize it and for entrepreneurs seeking a low-tech challenge.
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