The Case Study Crypt

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When Generations Clash over Innovation

'Tarryman Machinery' builds special purpose machinery for the plastics moulding industry. The company is neither a toolmaker nor a machine builder in the accepted sense. It has found a niche building special purpose machine accessories that no-one makes for off-the-shelf purchase. Over time, the company has developed a very strong customer base, with just about all the plastics moulders in the region dealing from them. Since its inception, Tarryman Machinery has developed a very strong industry reputation for outstanding quality and workmanship.

James Thompson had started the company by working in a garage he leased from a friend, and he remains its owner and manager today. When asked about the unusual name of his company, James tells the unfortunate story of his mother, and his determination to perpetuate her memory. In 17 years of business, he feels sure that he has built a reputation for fair dealing and providing direct and reliable product and engineering advice. Everyone in the industry who is asked, describes James as a real 'good bloke', a straight shooter, and a very dependable source of advice and help.

Because James has always been a very good craftsman, he made his first products well and economically, so 'Tarryman' made a good income for James right from the outset. Part of the benefit of James' thoughtful craftsmanship was a high degree of innovation and component standardisation across the range of the tailor made products 'Tarryman' offered. James had manufactured some of his own machinery, again making use of his innovative ideas to create special purpose machines for his own use. These special purpose machine tools gave him an advantage over others who use regular, run of the mill machine tools.

Using standardised components had made it relatively easy for others to copy the 'Tarryman' products by reverse engineering them. Over the years, at least three new competitors had come into the market. Mostly, these new competitors appeared to find the going hard against a competitor who was both well established and well regarded. Time and again, James had heard horror stories of how poor his competition was, and how they would stumble in meeting the same high standards in products and delivery James had always set.

Despite an outstandingly good reputation and very strong client roll, business was getting harder. Each order was fiercely contested with other 'copycat' suppliers offering the same products and support at much lower prices. Looking over recent events, it seemed that now, more often than not, clients wanted a completely special product, rather than one using their standardised components and processes. Last year's net profit had been $67,000, down from $89,000 the year before, and this was despite an aggressive effort to use their standardised components, and a determined effort to keep down costs.

'Tarryman' employs thirteen people in the workshop, three administration staff and an engineer. In all, eighteen families depend on this company for their income, and one of those families is that of James' eldest son, Tony. Tony has recently taken over day to day running of the workshop. From James' point of view, this is good training for his son, who had always been around the place, and it had always been assumed that Tony would start working there as soon as he left school. Things did not quite work out that way, since Tony, like most young people, decided that he needed to see the world.

After Tony's return to Australia, he did join his father's business, and it looked as if he was settling down to it quite well. He married, started a family and bought a house.

Naturally no-one was surprised when James made the announcement about his son's promotion, it had been expected anyway. The long term workers there had seen Tony grow up around the factory each school holidays, and took it for granted that one day Tony would be the boss. Tony accepted the challenge, and has performed in a thoroughly business like manner in applying all the routines and standards his father had established.

James responded to this troubling trend by telling his people to work harder at selling the benefits of dealing with the company and taking advantage of its long experience. Tony felt that a business with that number of employees, and a reputation like it enjoyed, should be making much more than it was, and criticized James for pricing too low.

At the same time, Tony felt that the business needed a new kind of 'excitement' to make it really thrive again. He wanted to add a range of over-the-counter accessories he thought they could source from China. These, he said, would provide a very useful new slant to the sales pitch, and supply what Tony saw as a growing demand. Looking at the indicative pricing they had received from the exporters, this new range appeared to provide a very healthy margin compared with anything else they did, and it looked set to get them out from under the price burden their own manufactured goods were carrying.

James, on the other hand, was adamantly opposed to this idea. He claimed instead that the innovation in their products provided operating economies for clients that were not being sold strongly enough. If 'Tarryman' could only demonstrate the 'value for money' benefits its innovation should provide, he argued, there would be no price competition and no need to venture into the unknown waters of import and trading.

Whenever this argument arose, Tony would always remind James of the discussions they had had about new equipment for their own workshop. While Tony and others pointed to the huge cost savings offered by modern machinery, James pointed to the difficulty in translating those sales claims into solid, demonstrable benefits for 'Tarryman', compared with the known benefits of using dedicated, special purpose machinery as they had done for many years.

So, nothing is changing, and each month there is a struggle to meet the monthly payments. Both James and Tony know something needs to be done. Is there a course of action you would recommend to James or Tony, and what is it?

* This case study and its solution are based on issues and solutions found or provided by McNicol Williams in typical cases. All the characters and situations described are entirely fictional, and any similarity to any person, living or dead, is entirely coincidental. This advice is general, and should not be relied on in any specific situation without a full consultation.

© Copyright 2012-2016 - Hallmark Crest Pty Ltd trading as McNicol Williams Management & Marketing Services. All Rights Reserved.

© 2012-2016 - Hallmark Crest Pty Ltd
trading as McNicol Williams
Management & Marketing Services.
All Rights Reserved.