Darwin posited that life on earth evolved to make the most of its environment. Too much competition for low hanging leaves, he concluded, prompted giraffes to grow long necks so as to have all the juicy high branches to themselves. A great concept, impossible to prove of course, that tends to ignore the disadvantages of specializations. That long neck makes it tough to hide from predators and can result in loss of consciousness if the critter wants to try some tasty low hanging fruit.
The same can be said of manufacturing enterprises. There was a time when industrial giants made everything. Today’s farm equipment companies once made highway trucks and appliances. Auto companies also had appliance divisions; one even made aircraft for a while. On the finance side, each of the Big Three had finance operations bigger than all but the largest banks.
Business schools use the “case study” method to explore why the pendulum has swung in favor of “sticking to your knitting”, also known as “core competency.” As a result we have seen perfectly good auto brands closed down and somewhat successful product lines sold off at fire sale prices. Investors, now hooked on stock price appreciation instead the traditional operating dividends, reward management for giving up.
In our segment of the manufacturing world you get rewarded for perseverance, not surrender. High capital investment is needed to enter the business; the learning curve is long and steep. This barrier to market entry also serves as an impediment to cashing out. Ask any of our used machine tool dealers; the value of the equipment can vary dramatically over the course of a year or two. Herringbone machines, for example, that were bought at the peak of an oil patch boom were barely drawing scrap prices when the demand for pump jacks plummeted.
Many gear shops rely on their adaptability to survive in this unpredictable market. They understand that they will not be competitive in all market sectors and that some departments may not busy for weeks or months at a time. Staff that can figure out the “best” way to maximize output without unplanned expenditures is the key to their long term prosperity.