On Tuesday, April 28, 2009, Jason Caldwell of WENCOR, was my guest on my weekly online radio show, The Growth Strategist™ and provided some great advice about how to diversify without creating chaos. A well known distributor within the aeronautics industry, WENCOR has been expanding internationally, gotten into manufacturing, and acquired a few businesses.
Many distributors lose their shirts when they try to become manufacturers. WENCOR has been successful because they maintain their identity as a distributor. They got into manufacturing to improve their control over the quality and cost of some key products. Their customers still count on them to provide the right products at the right price. Whether WENCOR is the manufacturer is relevant to WENCOR but not their customers.
Being fiscally conservative has also helped WENCOR succeed through diversification. Their employees are encouraged to look for opportunities, but when they bring ideas to be considered, they must present well thought through business proposals.
Like other companies that successfully grow through diversification, WENCOR uses a check list/criteria for its acquisitions that includes “cultural fit.” Interesting tidbit: 8 years after the acquisition of DIXIE Aeronautics, Jason Caldwell is the President of DIXIE and still serves as the EVP Sales for the parent company, WENCOR.
When your CEO is having difficulty passing the torch to the next generation of leaders, it pays to have the members of your executive team take the lead on the strategic initiatives. If your President is too busy thinking like a project manager, he/she won’t have sufficient time available or the mental clarity needed to help your CEO become a teacher and resist the urge to tell people what to do. Most CEOs, especially Founders, don’t like surprises. To retain the CEO’s trust, it pays to maintain the schedule of CEO briefings… especially during particularly hectic times.
You’ve spent several months buying out your business partner. You tolerated the unfair balance of responsibility and effort for an even longer period of time before forcing the buy out question. And something was apparently missing for you before that to have ended up in such a compromised situation in the first place.
If you identify with this situation, PAUSE. Make sure you are centered before you make big commitments.
You may feel like a cat that has been just been released from a cage. You may be tempted to jump right into implementing ideas that weren’t possible while you were dealing with partnership issues. But be aware that opportunistic vendors will be more than willing to help you spend your money. In a few short months, you can easily feel trapped … again.
What advice would you give to a friend who just recently divorced? Should he/she quickly relocate? Immediately buy a big new house or an expensive car? Marry the first person he/she meets? Switch careers?
One of the reasons the growth of my business(es) has always accelerated during recessions is that we have a “HUB” positioning strategy. I admit it. It’s fun to be a center of influence, a place where people can feel free to call us to ask questions and think out loud before their ideas are completely formulated. We hope that people feel important when they contact us, know that we’ll do what we can to help, and realize they can get referred to great resources through us.
The HUB positioning strategy pays off big time during recessions because folks who may have been going it alone may now be concluding that they need you. During recessions, some people even realize that they should try to make the relationship a bit more balanced (offer you something instead of only taking). Inquiries can lead to new products, powerful joint ventures or acquisitions.
Becoming a HUB doesn’t happen over night. Often it requires investment of time, effort, and resources in professional or trade associations. A HUB does research, develops an extensive data base, and compiles information about complementary businesses. It often involves speeches, published articles, earning awards, and media visibility.
For most “HUBS”, focusing on target industry(ies) or going deep into an approach is helpful. Ironically, a HUB is often viewed as a generalist, but the wealthiest ones I know are actually specialists.
If you choose this positioning strategy, remember to refine your telephone reception and screening process. You can quickly become very scattered when your screening process is tested during recessions. Make sure you are receptive when you experience the onslaught of requests for in person appointments from sales people who are desperate for new customers to replace lost accounts, unsolicited resumes from folks who have been laid off, phone calls from business owners in similar or related industries who want to establish “strategic alliances”, and voice mails from frustrated financial planners.
As a HUB, you need to protect your time so you don’t drown in the process of providing free advice, and it’s important to try to do it in a way that everyone still feels important.
A few of my executive clients have recently volunteered to personally fund a portion of their new business model projects to convey their commitment to employees, the process, and the future.
How impressive is that!?
It doesn’t have to be very much money.
The gesture helps employees see that everyone is “in this together”.
And it prevents misdirected employee resentment of the consultants who have been brought in to save their jobs.
Weaknesses in a business model become exaggerated during a struggling economy.
A few of my executive clients have volunteered to personally fund a portion of their new business model projects to convey their commitment to employees, the process, and the future.