STAFDA State of Manufacturing – Allenbach: Business is Still War

John Wolz

Many of the early Specialty Tools & Fasteners Distributors Association leaders were part of the �Greatest Generation� and �as a result they approached their businesses as if they were going to war,� Danaher Corp. vice president John Allenbach told the 24th annual convention last month in Nashville, TN.\
�The war STAFDA businesses fought in 1977 would best be described in today�s military terms as a ground war,� Allenbach said. �The armament then, as it is now, is your product. The strategy is your service; to call on the job site and out-hustle the competition and ultimately develop an impenetrable defense with your relationships.�
Allenbach terms product, services and relationships as �now the ante and no longer the differentiator. The war has changed because of the market landscape. Users are more demanding, and the competition is fiercer than ever.
Allenbach noted that the �big boxes� didn�t exist in 1977, and today Home Depot and Lowes alone total 1,600 stores. Home Depot is renting equipment, and bought Maintenance Warehouse and competes in the STAFDA peripheral market.
�The big boxes are driven by growth. As the products they carry look more like a STAFDA member, can a strategy to capture significant market share be far behind?�
Allenbach termed the Home Depot partnership with Hilti as �troubling.� �Research shows that Hilti, in many ways, is just as viable a competitor to STAFDA now as they were in the late 1970s.�
Allenbach noted Hilti�s sales in 1999 were up 7% to $1.6 billion.
Hilti is aggressively attacking the rental market with Home Depot, added several products, started in e-commerce with hilti.com and now has more than 90 Hilti-only branded stores.
�Hilti continues to present a significant threat by selling direct to our job sites,� Allenbach warned. �The addition of very good quality products like strut and firestop show they continue to listen to what their users are looking for. At Danaher, we call that Voice of Customer, or V.O.C. Hilti, from all indications, is still very in tune to their V.O.C.�
Hilti�s 800+ person sales staff brings information back to engineers for new product development, Allenbach explained. One-third of Hilti�s expenditures are for R&D. �Based on the new products we have seen introduced in the last couple of years and the 16% sales increase last year, I would say their process works pretty well for them,� Allenbach observed.
The dot.coms
BuildPoint.com, Construction.com, Buzzsaw.com and Cephren.com are among the new competitors to STAFDA distributors.
�Your guess is as good as mine as to where these will impact our business long term,� Allenbach hedged. �E-commerce is certainly something we need to keep in front of us as we develop our specific market strategies moving forward.
�Another key industry trend is that most end users are looking to consolidate their purchases to significantly fewer distributors, thus reducing their acquisition and ownership costs,� Allenbach added. �All of this says that you as a STAFDA member are faced with a multifront war in which you need to carefully pick the strategic territory you are willing to fight for.�
STAFDA distributors must know their market and strengths, �if you pick up and deliver grass seed to the job site because that is what your customer wants, you must decide what you will do differently to stave off the most significant threats to your business wherever they may come from,� he advised.
�The military changed its tactics over the years from the traditional ground war to one that emphasizes air power,� Allenbach reflected. �I challenge each of you to look closely within your companies to go beyond your traditional approach of products, services and relationships to develop your �air cover.��
Focus on �your people, their training and your company�s brand,� Allenbach advised.
Generation X
�As you hire new employees, understand that Generation X is dramatically different from the �Greatest Generation.��
Generation X has entrepreneurial spirit and willingness to take risks, along with Internet and e-commerce knowledge.
Jack Welch, CEO of General Electric, recently mandated executives to acquire working knowledge of electronic technology. GE developed an �e-mentor� program matching senior managers with �e-savvy� associates, Allenbach noted.
Very few companies invest enough in training, Allenbach suggested.
�For product training, look to your manufacturers,� Allenbach referred to his and other product training programs.
�How much have you, the leaders of the businesses, invested in training for yourselves?� Allenbach challenged. �I assure you an investment in training in your people as well as yourself will come back to you several-fold.�
Your Most Important Weapon
�People are your most valuable tangible asset,� Allenbach acknowledged. �Your most valuable intangible asset is the equity represented by your company�s brand name.�
MTV just passed Coke as the most recognized brand in the world, he noted. �Each of these companies is very focused on managing their brand. It is a significant part of their overall equity.�
Building a viable company requires three factors: It must be relevant to the customer, it must be distinctive and separate your product or service from the rest of the market, and it must be trustworthy.
�If you claim it, you�ve got to deliver on it,� Allenbach emphasized. �The underlying value of a brand name is its meaning to people. The brand message must be directed to employees and customers or prospects.
�Your company�s brand or identity is what you stand for,� Allenbach emphasized. �It has to be pervasive throughout everything you or your employees do. Your people should understand your brand identity, how they fit into your company�s brand picture and how they deliver that message in every contact they have with a customer. You have to create zealots or disciples to really drive a brand.�
�Your people must be able to explain what your company is all about during the three-story ride on the job site elevator,� he explained.