Issue link: https://iconnect007.uberflip.com/i/1505694
72 PCB007 MAGAZINE I AUGUST 2023 expending resources without really getting anywhere. One of the big challenges for PCB fabrica- tors is trying to figure out how to differentiate themselves, and that's really difficult. So many fabricators are basically the same; they use the same manufacturing processes, the same oper- ating model, and there's not a lot of opportu- nity for differentiation. ere are still break- throughs in production capabilities and oper- ating models, but it's getting harder and harder because the whole industry is becoming "com- moditized," and when you start selling the same thing that everybody else is selling, then the power shis to the buyer; the buyer has the power to basically do price comparisons. It's a difficult situation to be in. A lot of what we teach about strategy comes from the work of Harvard Business School Professor Michael Porter. About 30 years ago, he published his idea that there are really three different ways to compete. One is based on dif- ferentiation, another is based on cost leader- ship, and the final way is appealing to a niche market of some kind. Cost leadership basi- cally means we will make the same thing, and provide the same services that everybody else provides, but we'll do it at a lower cost. We will beat everybody on cost. Walmart and South- west Airlines figured out how to compete at very low cost and they can compete very effec- tively on that basis. Differentiation means we will offer a product or service that is different, and customers will buy from us because we provide something they can't get somewhere else. A great exam- ple of that kind of strategy comes from Apple, which has a very clear differentiation around its operating system. I'm a Mac user, and I can get a cheaper PC, but we Mac users choose to spend more money in order to get what we think is a differentiated experience. e real question is how we can apply that to the world of printed circuit board fabrication. e third one is niche. Can you appeal to a particular niche? If you can, your business will be small because it's a niche market of some kind, but it could be quite profitable. A good example of that might be trying to appeal to a specific kind of market, maybe medical devices, for example, manufacturers for the medical device industry have to submit to audits of their manufacturing practices. If you choose to spe- cialize in this particular market, you may not get very big, but this strategy can help ensure competitive advantage in that niche market. Barry Matties: Now, how does the smaller guy develop a strategy? It's really tough to compete on the basis of cost; it tends to be a downward spiral as we keep cutting margins. With low margins, you don't have the money to invest in additional opera- tional improvements, technology, and exper- tise. e alternative is to figure out what your customers are looking for, and really double down on that. It's not necessarily technology; you can differentiate yourself based on other kinds of services that you can provide. Tim Rodgers