Caught between two stools going nowhere…a lesson from the fastener industry

by NIck Frank on December 1, 2010

‘Caught between two stools’ is a well-known phrase when we are not sure what we want to do. The same applies to companies especially when talking about services and the decision on whether to be product led or services led.

How is the going for you?

In his book S-Business, James Alexander sums up the concept from a services perspective very well.

There are those that have chosen to focus on product innovation with service as an important support organisation/cost centre: ‘Going Deep’.

There are others that choose to make the leap and become services led. In other words the solutions to the customer are created around services that pull through technologies or products: ‘Going Wide’.

There are then those caught between 2 stools.  They say they want to be services led, but act and think like a product centric organisation. They are ‘Going Nowhere’.

And it’s easier than one might think to fall into this trap.

A brief history of the fastener industry

A good example is the fastener industry, which until about 20 years ago was dominated by product companies. If you wanted to make money in this business, all you had to do was find a value added niche, work directly with your customers’ engineers to be specified into their designs and then deliver on quality. And this was a very successful recipe for many fastener companies in Europe.

Then distributors who were traditionally the ‘poor relation’ in the industry, began to realise that they could add significant value to their customers by supplying C class items to the production line on a JIT basis. In fact many customers perceived there was more cost to be saved from rationalising their fastener suppliers to a single source, then from innovative ideas to reduce assembly times and increase product quality.

Across Europe JIT distributors began to take the upper hand in many markets, depending on the dynamics of the industry and the culture of the market. As the power of Purchasing Managers increased through the 90s, they were able to insist that all contact come through the single source. Slowly value added manufacturers found themselves unable to gain access to Engineering.

Choosing the right option

What should they do?

Some manufacturers turned themselves into JIT suppliers and some gave up manufacturing completely; Going Wide.

Others chose to invest in their value added products and successfully differentiated their brand and remained profitable; Going Deep.

The companies that really suffered market share and margin loss were those whose products lost their competitive edge, who used their manufacturing focussed organisation to dabble in distribution and found themselves truly between two stools; ‘Going Nowhere’.

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