Be Distinct or Become Extinct, DPHA Advises

“Cost cutting is not a strategy,” stated Michael Rockstroh of the RB Strategy Group, speaking to more than 400 industry professionals attending the annual Decorative Plumbing & Hardware Association (DPHA) breakfast at last month’s K/BIS.

DPHA invited Rockstroh to provide an intelligence report on the decorative plumbing and hardware industry to help its members better understand competitive threats and actions that they can take to respond to them.

Rockstroh claimed that these are recessionary times for all segments of the kitchen and bath industry, ranging from commodity products to the very high end. “What is relevant,” he explained, “is how to manage your business in this challenging market.”

He noted that home industries in the last 20 years have seen unprecedented growth and record profits. From 1990 to 2007, the size of the average bath increased 180%. Products that were once the exclusive province of a small segment of the population became readily available to consumers of almost all income levels looking to “trade up.”

Handling Change

But while market conditions have changed, economic downturns do not necessarily spell disaster. To the contrary, Rockstroh stated that previous economic downturns were precursors to major change in all tiers of the value chain. “Pain is the best change agent,” Rockstroh said.

All links in the supply chain – dealers, manufacturers and rep agencies – will need to adopt a “change forward” attitude to maintain competitive advantages, he said.

Looking ahead, dealers, manufacturers and representative agencies need to establish new strategic directions. Rockstroh cited management guru Tom Peters’ claims that businesses must be “distinct or be extinct.” This is the mantra for competitive strategic thinking, he said.

During the boom years, there was little need to change. Business was good, profits were high, and shortcomings were tolerated. Manufacturers produced an increasingly larger number of products that showrooms willingly added without much regard to whether the products fit, produced results or contributed to the merchandising mix.

This is no longer the case in the decorative plumbing and hardware industry. According to David J. Collins, writing in the Harvard Business Review, “an astonishing number of organizations, executives, frontline employees and all those in between are frustrated because no clear strategy exists for the company or its lines of business.” I venture a guess that a number of dealers, manufacturers and representatives don’t have a strategy, and if they do, it’s not clearly articulated or easily understood by employees, suppliers or customers.

Rockstroh believes that setting and articulating strategy is the responsibility of the boss. Strategy involves defining your business and determining how you compete in a particular market. Strategy is your game plan. It must identify goals that the company is trying to achieve, processes used for achieving them and the metrics employed to measure progress. Developing a strategy requires dealers, manufacturers and representative agencies to determine markets that they want to operate in and the customer base and geographic territory they want to serve. Setting a clear strategic direction requires showrooms, manufacturers and rep agencies to possess competencies that distinguish their operations.

Independent businesses in the kitchen and bath industry that have a strategy establishing clear points of distinction consistently outperform big box and multi-branch retailers, according to Rockstroh. Speed and agility are keys to superior performance.
He explained, “Over the last six months, volumes have shifted from leading national retailers to independents because they have adapted more quickly to market conditions. Too much complexity in your business will slow you down and hamper the need for speed.”