Beth Plutchak Consulting LLC

I recently attended a presentation by one of the former owners of the Penda Bedliner Company. Now, in order for you to understand his story you need to understand the meaning that the name Penda once had to pick-up truck owners. Personally, I used to think a car was just a car, a means of transportation, and that people who went on and on about their vehicle were just, well, silly.

At least I thought that until I bought my first pick-up truck. It was a lipstick red, Dodge Ram. It was not a girly vehicle, but then I’ve never been a girly, girl. I bought it the day I was promoted from Credit Analyst to Ag Lender. It symbolized my making a leap into a job which few women held and which I’d worked very hard to obtain. To my customers it symbolized that I was willing to work hard for them and get my boots dirty. Oh, and it was lots of fun to drive. (Do you know the big trucks rule? Big trucks rule!)

Once you make that emotional commitment to your pick-up truck the next thing you need to do is figure out how to trick her out. I spent hours poring over the accessories catalogs trying to decide whether I needed the practicality of sure grip running boards or the flair of ovals. It was next to impossible to pick between the tri-fold or the snap down tonneau cover. But, there was no question I had to have a Penda Bedliner. Penda’s were the best, and I wanted only the best for Alice. (Oh, yes, I named my pick-up truck).

Toby and Buckaroo Banzai in the Twenty-First Century

When The Best Isn’t Good Enough

In 2006 pick-up truck sales hit a peak. They were not only being purchased by hard-working contractors and farmers, they had also become a recreational vehicle of choice. Accessories for working trucks needed to be practical, but most accessories for recreational trucks were for show. Dozens of new accessory makers entered the market and a funny thing started happening to the sales of Penda Bedliners.

New entrants to a market often try to gain market share based on price, and all the new producers deeply undercut Penda. Penda management expected sales to come back when people found out that the quality was not comparable. But, sales of Penda Bedliners never regained their former levels. Penda had run into a truism of consumer sales – sometimes the best cannot compete with good enough. The lowest price point did not capture the greatest market share. Consumers did want quality, but after a certain level of quality they were not willing to pay a premium.

The first question I ask companies is “What differentiates you from your competition?” If they answer “quality” I try to not visibly cringe. Customers have a minimum expectation of quality. Under that minimum they will not buy no matter how low the price. But, the range from the minimum to good enough is generally fairly narrow. Competition in that narrow band is fierce. True differentiation is something that you do that your competitors don’t, and that it would be very difficult for them to copy. What your differentiator is today may not be the same as it is tomorrow. It often needs to change if you want to stay ahead of your competition.

The team who owned and managed Penda at the height of market dominance, eventually sold out their shares of the company. The company still exists and if you do a Google search you find that they are repositioning themselves on their skill at custom heavy-gauge thermoforming. People still do buy Penda Bedliners, but the company is pursuing market share based on all of their strengths, and finding new ways to differentiate itself.

Dan, my husband is what you’d call a detail person and I’m more of a big picture thinker. I usually get home from work before he does and a couple of years ago I listened as he pulled into the driveway. I heard the garage door go up and then a big Thunk. I waited a few minutes and then heard a string of language coming from the garage that I am not accustomed to hearing. At that point I went out into the garage to see what the heck was going on.

The motor for the garage door was hanging from the electrical cable, the fixture holding it in place pulled out of the ceiling. Dan came home from work and all he wanted to do was put the car away and close the garage door. Instead, he had one hand stretched over his head holding up the sagging rigging while he was reaching for an out of reach step ladder with the other. I pulled the ladder over for him and while he scrambled up it went in search of the duct tape.

A little later he scrambled down the ladder and while I yelled “No, no, no,” he went to close the garage door. What he hadn’t taken into account was the way the motor connected to the door itself. As soon as the door moved, it would move the whole system and the motor would no longer be stabilized.

Sometimes events are not made up of their parts, but are dependent upon the way the parts are interconnected. It is the same in business. The very skills that you need to deal with the day to day issues of running a business, both stand in the way of seeing potential long-term problems and impact those very problems in hard to predict ways. Not only that, the people who are the very best at the detail level are often hard-wired to be the worst at the big picture or system level.

Business management needs to be able to think sharply in a number of directions. They need to be able to put out the day to day fires of customer service, quality control, supply chain emergencies, what have you, all of this while being aware how these small decisions are impacting short and long term strategies and goals. Sometimes this is accomplished by making sure you have a good mix of personality types on your management team. Sometimes it is accomplished by making review of your goals and procedures a frequent recurrence.

Biologists like to say that change happens at the edge of chaos. That doesn’t mean that we as business owners can’t control those changes. It means we have to be ready to see the implications of all of our decision making at a moment’s notice, right when we are reaching over to close the garage door.

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It’s not just product.

I was a geek before there was a word for geeks. I got my high school letter in forensics, not the cool kind of forensics made popular by the CSI TV shows, but the kind that trained you for public speaking. I was president of the Latin Club. While other girls were trying out for the cheerleading squad I was translating the love letters of Abelard and Heloise. The odd girl with glasses. That was me. In the summer of 1962 I took a trip to the Museum of Science and Industry in Chicago and was mesmerized (does anybody but geeks even say mesmerized? just wondering) by the AT&T exhibit of the future phone where you could actually see the speaker on the other end. I was in love with computers when they were all as big as houses, although I never did get the hang of punch cards. I was a geek.

One of my early jobs in banking was to take part in a feasibility study for a regional bank that determined what kind of desktop computers to put in front of the loan documentation clerks. Up until then loan docs were produced on typewriters and there was one desktop computer for the whole department. We came up with two recommendations – IBM or NCR. These were the workhorses of business computing. The banking industry was heavily reliant on IBM mainframe processors and NCR provided the machines that read bank processed payment and credit card slips. We would never have considered a MacIntosh.

Although Apple is certainly innovative in product design, it’s real brilliance was that it sold cool to geeks. The geeks who bought Apple products were tech savvy, they were early adopters, they were in the know. The geeks bought ipods first and the cool kids followed them. Brilliant. The much promoted (by Apple) rivalry between Apple and PCs is built on an emotional appeal. What you pay a premium for when you buy Apple is the cool. Rebels, creative types, risk takers are the early adopters. What a way to protect a margin.

When I am out talking to companies and ask them “What do you do that is unique?” I often hear about customer service and quality. These are the attributes that customers expect at a minimum. I want companies to think about the things that they do that really differentiate them. Sometimes it can be hard to verbalize those things because they are so endemic to the owner’s vision and the company culture. Take a minute to think about it. What do you do that is unique to your business?

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Economic Gardening Key Concepts

Innovation is one of the key concepts behind the technical assistance associated with Economic Gardening Programs. Here’s a neat little picture to explain why innovation is so important to small businesses.  

Let’s look at Volume Versus Price one quadrant at a time

• High Volume High Prices – Wouldn’t we all just love to be here? Nobody stays here long because every competitor goes here and drives prices down.
• Low Prices Low Volume – No one can survive here for long.
• High Volume Low Prices – Small businesses can’t survive here for long, either. At some point their prices will be undercut by someone who is better capitalized and can take losses as they convert sales.
• Lower Volume with Higher Prices is the only quadrant that offers long-term stability to small business.

Conventional wisdom is that companies need to cut prices when their competitors do to maintain their sales. The more difficult strategy is to add value that you can charge a premium for.

My local grocery store did an expansion a couple of years ago, when the Super Walmart opened down the highway in Baraboo. Instead of dropping grocery prices they expanded their specialty selections and carried more higher margin items. The area is known for meats and cheeses. They carry a number of local specialty cheeses which have been branded as Opahle’s. They’ve expanded their authentic Mexican foods (we have a growing Mexican population) and their organic foods. They offer items in sizes that appeal to empty nesters that make up a large portion of their demographic, and best of all if there is something they carry you want more of or something you wish they would carry, they will get it in for you. Corporate chain stores just can’t do that.

What does your company do that differentiates you from your competition? Are you able to get the demographic information you need to make these kinds of business decisions?

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