Lessons From Swagelok

So a couple weeks ago I was in Athens, Greece, addressing a group of Swagelok executives and independent distributors of Swagelok products from Europe and Africa. (Swagelok, based in Cleveland Ohio, is a billion dollar global supplier of many vital manufacturing products like tube fittings, valves, gauges, transducers, regulators, hoses, filters, and a whole host of welding and fluid systems). My seminar was about strategic collaboration for competitive advantage, and I hope the participants learned something from it. But I myself always learn from my clients, and I'd like share with you four wonderful points that the Swagelok folks raised in the course of our discussions. 1. Simon Cooke, based in England, threw out a great observation: “Without mystery, there is no margin.” He was referring to the fact that regardless of a company’s size and marketing budget, if its product/service mix is basically conventional and “me-too”, margins will inevitably shrink. IBM CEO Sam Palmisano once echoed this sentiment: “If you do what everybody else does, you have a low margin business.” I wish more executives in all industries understood that all the size, scale, scope, reach and marketing pizzazz will not compensate in the long run for products that are mundane and “common”. It's when products and services break new ground—when they invoke some “mystery” and excitement—that margins will follow. 2. Hans-Peter Knippel, based in Germany, pointed out that one way to keep a company agile, brain-based, customer-focused and collaborative is to create digital networks that would bind all relevant constituencies—Swagelok employees, distributors, and customers, for example—together in one seamless grid. I loved this concept. Imagine, I suggested, if anyone in the Swagelok “community” could immediately access the right people in that community to obtain mission-critical information, or solve common vexing problems, or share important data and vital resources, or form a project team to pursue common goals. The capacity to digitally connect with the right people inside and outside the organization is the next wave of the future for any company, as far as I’m concerned. The people at Cisco Systems agree; they’re already pursuing what they call Cisco 3.0, the hardware building blocks for constant, real-time interaction and information exchange regardless of location. Ask your kids—they already know the enormous power of virtual communities like Facebook, MySpace and Ning. Maybe you should make sure that your company’s next consultant is no older than 16. 3. Pierre Fischer, based in Germany, with plenty of experience in Africa, observed that the most imaginative ideas about product application often come from customers in developing countries who use that product. Their resources overall are often so slim that they have to get really creative, so much so that they often use the products in a variety of ways that the vendors never anticipated. That struck a bell with me. I’ve been amazed when I’ve seen the creativity of mechanics in developing countries who fix things and make them work when they have nothing but the most rudimentary resources at their disposal. Pierre Fischer’s point is that if the vendor really “listens” to customers in developing countries—i.e., really observes what they do with products and why, rather than just view those people as a “sale”—then that vendor can glean some amazing clues as to new products, new product uses, and new markets. 4. Everyone discussed the importance of execution, and in that context the concept of time emerged. Time can either be a debilitating cost (when it drags on and on before decisions are made or things get done) or a value-adding currency (when it reflects speed and agility in individual decision-making and organizational process). Hence, the concept of “time”—as in internal cycle time, time to market, no time to waste, and don’t waste customers’ time—came up several times (no pun intended). We all agreed that businesspeople often don’t pay enough attention to time as a strategic issue and business priority. We should. If shrinking time was given as high a priority as shrinking costs (the first leads to the second, by the way), then execution would be a lot smoother, faster, more innovative, and more cost-effective.