Expanding Your Business in a Saturated Market
Executive Roundtable is a weekly column by TEC Worldwide, an international organization of more than 7,000 business owners, company presidents and chief executives. TEC members meet in small peer groups to share their business experiences and help one another solve problems in a round-table session. The following questions and answers are summaries of discussions at recent TEC meetings in Southern California.
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Question: My $15-million company custom designs and fabricates underground fiberglass boxes that contain equipment to dispense utilities to aircraft on the ground. We have 85% U.S. market share and 65% worldwide. I want to double the business over the next five years, but our highly specialized market has nearly reached the saturation point. With most traditional growth options out of the question, how can I take our existing technology and grow the business doing what we do well?
Answer: Most companies would kill to have your market share “problem.” Nevertheless, it does represent a real challenge for many highly specialized companies--how do you grow in a saturated market?
Before exploring strategies, says Don Dressler, president and chief executive of Western Growers Insurance Services in Newport Beach, examine your motives. Why do you need to grow the business? Have you become bored with it? Has profitability declined? Are you growing the company to sell it or exit in some other manner? Your answer to these questions may well dictate your approach to growth.
For example, if lack of personal challenge is the issue, you may want to hire someone to run the company while you find a new sandbox to play in. If profitability is the primary driver, you may want to focus instead on tightening up operations through quality improvements and cost containment measures. If you intend to sell, you might get a higher price now, when there is still some growth left in the market, rather than five years down the road.
Once you clarify your own issues, says Michael Valentine, president of Tustin-based DMK Inc., conduct some research on your competitors. How do they deal with the constraints of a limited market? Do they perform in other markets, such as for the components used in your utility boxes? Do they provide after-sale maintenance or ancillary services? Do any of them have other successful product lines that you could benchmark against and take advantage of? Finally, is there an opportunity to acquire one or more of your competitors?
According to Steve Driscol, president of Thermal-Vac Technology Inc. in Orange, another area that merits exploration involves your customers. Have you ever sat down with them and asked what problems they are encountering that your technology and/or core competencies might offer solutions for?
From there, Driscol suggests, identify the strengths of your product and use them to expand the boundaries of your market. “Where else in the world do people need underground dispensing facilities?” he asks. “For example, might there be a way to adapt your product to serve the needs of municipal water markets? If so, what are the barriers to entry in the new market? Could you afford to do a test or demo project with the cooperating water agency?
“Is your fiberglass product weather durable? Does it offer any advantages in extreme heat or cold conditions? Might there be any potential application in the petroleum industry or other market niches related to aircraft maintenance or servicing? Are there any emerging world markets where you could get there first and grab market share from your competitors? The key is to identify your core competencies and explore how and where they might translate into new markets.”
In addition to conventional brainstorming, Dressler suggests using higher-order creativity techniques to get your management team beyond “we’ve always done it this way” thinking. One technique for stimulating innovative thinking involves presenting a totally unrelated idea and asking how it applies to the problems your customers experience.
Another involves challenging the unspoken assumptions that shape your thinking. For example, one assumption may be that your product has to go in the ground. To counter this assumption, ask, “What if our product didn’t have to be in the ground? What could it do and whom could it solve problems for?”
To go a step further, take the individual strengths of your product and ask how they could be applied in different ways.
For example, if your product has phenomenal weight-bearing capabilities, what other things (such as bridges and garage structures) bear tremendous weight loads? Where else do people need access to things that bear weight? How could you adapt that product feature to new products for those types of situations?
Finally, Valentine suggests looking at your management process as a core competency. “You’re a $15-million company with 85% market share, so obviously you must be doing something right,” he notes. “Pinpoint your successful management techniques and look for ways to apply them to similar niche businesses. Or make an acquisition with another niche business and apply your niche management expertise to build market share in that business.”
Ultimately, you might determine that your business has reached its fullest growth potential. In that case, you might want to consider selling while you’re still on top.
Another option is to turn your company into a cash cow (by focusing on operational efficiencies) and take as much money off the table as possible. Keep in mind that you can’t take market share to the bank. In the end, you may get better results by improving profitability rather than market share.
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If there is a business issue you would like addressed in this column, contact TEC at (800) 274-2367, Ext. 3177. To learn more about TEC, visit https://www.teconline.com.
