Reading Between the Lines to Find New Business Ventures
Your customers and market position offer clues to new revenue opportunities
By Slobodan Puljarevic, President and CEO of EBV Elektronik, an Avnet Company
You're surrounded by clues about new business opportunities. Not big, loud clues, but subtle clues that require some reading between the lines.
Do you know where the lines are and how to read between them? Some of them are in your customers' feedback, harboring clues that point to profitable business ventures. Others are in your supply chain, which can offer opportunities to broker deals and create new relationships between your customers and suppliers.
Companies with deep connections to their customers and an appreciation of their place in the market, possess the key ingredients of powerful competitive differentiators. They can use these ingredients to create customer relationships based on far more than product portfolios and price structures.
We have harnessed the power of "reading between the lines" at EBV Elektronik, an Avnet company. EBV is a semiconductor distributor in the EMEA region. With changes in our market over the last few years this meant that we could no longer rely on traditional competitive differentiators, such as our product portfolio and price structure, to retain our leadership position. We needed to innovate and evolve our business model.
My team and I created a venture called EBVchips, a unique service which is outside EBV's traditional sphere of operations yet still grounded in our core competencies. The venture offered our customers and suppliers new growth opportunities without infringing on their business strategies.
EBVchips' success rests on a deep understanding of our customers' needs and our role in the semiconductor supply chain. Several best practices emerged from the process that I think can be applied to almost any company in any market.
Built to listen
Your customers are the most important source of clues to new business ventures. Customers ask you for things. They tell you their challenges. They talk about their competition and how their customer base is changing. You know their strengths. You've helped them before.
There are opportunities in these conversations that extend far beyond the next sale. Is your company structured to collect, process and act on customer feedback?
To start answering that question, first look at your sales structure. Companies that really know how to listen to customers use their sales forces. Their sales teams are charged with learning customers' needs and putting the resulting knowledge to work. Sales team leaders are responsible for processing feedback and sharing it with other sales team leaders. This is where clues start to form viable ideas.
As ideas arrive, organize them according to operational business areas so you approach operating units with innovations that are relevant to them. For example, if you are a product companies, your sales team leaders will vet the best ideas that emerge from customer feedback with technical specialists. Is the product concept technically feasible? Would modifying an existing product meet the customers' needs, or do they require a new design? What is the production cost range? Service companies will perform their own version of this analysis based on the time and expertise involved, plus logistical considerations.
At EBV, we used a similar process to create EBVchips. Our sales organization was structured around vertical markets. From the front lines to the executive level, we heard our customers consistently express a need for specialized semiconductors that didn't exist on the market. None of the customers on their own had the critical mass to make producing specialized semiconductors economically feasible. However, we evaluated and compared customer feedback and identified the common thread that ran through it. We saw a huge opportunity!
We recognized that it was both technically possible and economically viable to develop customized semiconductors and created EBVchips to do just that. Our ability to turn this idea into a business grew from our position in the market. We realized that we could define our own semiconductor products and develop them with and for our customers.
We decided to rely on our suppliers to manufacture the products we developed with our customers. This would strengthen our relationships with our suppliers because it would open new business opportunities in new markets for them. Meanwhile, we fulfilled customers' special requirements for products not available on the market and created a competitive advantage for them. We became the first semiconductor specialist in the world to offer such a service.
As you look to your own company, examine your role in the supply chain with an eye toward identifying innovative opportunities. Innovation in this case means outside your normal scope of business. Start asking questions.
Who relies on you for products and services? Do you supply them directly, or do you own a relationship between them and a supplier? If you provide products, what services would make them more valuable? If you provide services, could products enhance them?
Whether or not you're in a middle-man position, don't let it limit your thinking. Consider the point of delivery. Is your customer an end user, or do they serve a customer base?
How can you expand beyond your role between them to help them improve how they serve their customers?
That's the kind of thinking that went into the EBVchips venture. EBV is neither a semiconductor designer nor a manufacturer, and has no desire to be either. However, we occupy an advantageous position between customers and large semiconductor manufacturers. We aggregated the demand into a piece of business large enough to attract interest from suppliers. The suppliers got new customers. The customers had the specialized semiconductors they needed.
The trust factor
The clues pointed you toward a new venture. You vetted the business case for it and secured executive support. The natural next step is to start assembling the critical building blocks in preparation for rolling it out to your customers.
Except that it isn't the next step. The next step is to deepen your customers' trust in you.
While you wouldn't have gotten past the idea phase without strong customer relationships, you need to remember that you are now proposing a much deeper relationship than you've had with your customers in the past. To build the kind of venture we're talking about in this article, you're becoming a strategic partner. You need access to sensitive information to determine whether you and your customer can collaborate on a mutually profitable venture. You might need product roadmaps, specifications for proprietary technology and market strategies.
Your customers know you're talking to other companies at the same time you're talking to them. Some of those other companies might be their competitors. How do you convince them they can trust you with such critical information?
First, offer non-disclosure agreements that specifically address the venture. They should include explicit language saying that the customer's intellectual property will only be used for them. You should also offer exclusivity periods that restrict sales to the original customer for long enough so they can cement their first-mover advantage and build a comfortable barrier to entry.
After you've developed that deeper trust, then it's time to build the venture's business structure, which would include:
Calculated risk equals success
Rising globalization makes differentiating from competitors harder every day. Between offshoring and overnight shipping, manufactured products are available anywhere at competitive prices. Local sources no longer enjoy an automatic advantage. Exclusivity, another former pillar of competitive differentiation, is now rare, fleeting or non-existent. Similar realities have emerged in service industries. Consumers can now source once fiercely local services, such mortgages and car loans, from any institution they can find on the Web.
It takes more effort to differentiate from your competition if you've reached capability parity with them, but it isn't impossible.
The EBVchips experience illustrates that it's possible to profit from taking calculated steps outside of your core competencies. In this case, we stepped beyond our expertise in semiconductors, logistics and supply chain management and became a combination of a consultant for our customers and a market researcher for our suppliers. Without EBV, it would have been hard or impossible for our customers to combine their various needs into a cohesive proposal for a supplier. Similarly, without EBV our suppliers were unlikely to identify an opportunity that only existed in bits and pieces across thousands of customers.
There are opportunities like this in your market. All you have to do is start reading between the lines.