"Perspectives", a monthly column authored by
Todd Grimm and Terry Wohlers
for "Time-Compression Technologies."
This column was published in the
September 2002 issue. For more great articles,
visit the "Time-Compression Technologies'"
Web site at www.timecompress.com.
Surviving Tough Times
From these challenging economic times, the RP industry will gain strong leaders, new applications and exciting solutions.
Todd Grimm and Terry Wohlers
The U.S. government stated that the recession began in March 2001, but many in the rapid prototyping industry believe that it started months before. Although the financial reports show that the recession has ended, the rebound has been slow to develop and the impact continues to be felt among those in product development and rapid prototyping. Everyone hopes that the turnaround is imminent, but many believe that this is overly optimistic. To act on these hopes, or to avoid the difficult decisions that come with tough times, may prove to be a gamble costing some their jobs or businesses.
For years, sales have covered many "sins." With a decline in sales, problems and doubts have been exposed. The recession in the U.S. caused stagnation in the RP industry and placed it in a holding pattern. Tightened spending trickled down to product development. Projects were cut or put on hold, which decreased the need for prototyping and prototyping equipment.
Many challenges have, and will, result from the recession. Yet, some good also can come from difficult situations. For those with some remaining optimism, there is a silver lining in these hard times.
Sales Cover Sins
When the economy is strong and times are good, it can feel as if no wrong can be done. Why fix a broken process or mediocre product when sales are strong? It is more likely that attention is given to those actions that can further grow the business. Take away the sales and the situation changes -- the broken wheels begin to squeal at a deafening level. In effect, the sins of the organization are exposed as sales diminish.
As the focus is turned to the stabilization of sales revenue, preexistent problems become readily apparent. Further into the down slide, attention shifts to the protection of the bottom line and maintaining a positive cash flow, revealing additional problems within the organization.
The difference between the weak and the strong in this situation is how effectively it is addressed and managed. The weakest wish and pray for better days while making no lasting change. The strongest use the situation as a catalyst to affect long-term change that will support growth well into the future.
The major difference between the weak and the strong is how each addresses the ultimate sin: a lack of differentiation. This is the crux of the problem for companies in the RP industry whose constituents have not clearly identified and announced the value that they deliver to their customers.
In the early years of RP, the value of the technology was powerful and obvious, compared to alternative methods. Today, this value is diminished. Other processes and technologies have risen to the challenge to decrease delivery times while offering advantages not found in RP. The result is that RP, as a whole, is poorly differentiated against competing technologies and industries. And when products and services offer no differentiation, they become commodities.
To break free from the commodity trap, RP needs more innovation and greater differentiation, which is what future leaders are working hard to do.
The first recession of the new millennium became the first recession to have a significant impact on the RP industry. Other industries that have battle scars from past recessions have learned that price cutting is not the obvious answer that some believe it to be. To stimulate sales, many in the RP industry resorted to this "obvious" answer and have learned that it may return unwanted results.
As illustrated in the sidebar, dropping price to stop the hemorrhaging only leads to more bloodletting, without making lasting change. The weakest in an industry reduce price without a reduction in costs. In effect, these organizations are relying on price as the differentiator.
When price reductions don't work, deep cuts are made in a frantic attempt to keep the business afloat. In survival mode, cost cutting may even include basic services such as plant and equipment maintenance, sales and marketing, and product development. Unless this cycle is broken, companies may get caught in a downward spiral of repeated price cutting and cost reduction.
It is possible to reverse the downward spiral using the strategies of the strong. There is a reason, however, that most do not follow this course of action -- it is difficult and challenging.
Tomorrow's leaders are using the economy as a lever to improve processes, products, people and the company, but they are not immune to the sales, profit and cash flow issues. For future leaders, the issues at hand are the same, but the goal is different. Attention is directed to simultaneously reducing costs, improving the process, gaining efficiencies and improving the product. These actions are taken to support both the short-term goal of survival and the long term goals of strength and growth. These companies are seeking to use the softness of the economy and the RP market to their advantage, and these companies will take actions that position them for leadership well into the future.
Although the forward-looking company aggressively seeks to reduce costs, it is not adverse to investments that further position it for growth. For maximum value, these investments are closely tied to strategic plans that create new markets, capture market share or build undeniable differentiation from its competitors. The common element among these strategies is innovation.
Leaders deliver new products, applications and technologies. Rather than competing in a highly competitive arena where price is everything, these companies will change the rules and alter how and where RP is applied. There will be innovation that delivers value to the customer, and this value will further differentiate the RP industry from all other prototyping and manufacturing methods.
The Industry Emerges Stronger
In spite of the tough times, the rise in economic indicators shows that the recession is over and recovery is on the way. Although this is good news, the best news is that necessity will create innovation. Tomorrow's leaders are using necessity as a catalyst to create innovations and differentiation. These innovations in turn will create a dramatic difference, powerful differentiation and a stronger value proposition that will fuel the rapid expansion of the RP industry.
Equipment manufacturers, material suppliers and service providers have weathered the storm. Many are surprised that the economic downturn has not left casualties in its wake. Perhaps this is an indication that the RP industry, as a whole, is well established and positioned to move forward as product development returns to the levels of the late 1990s.
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