Company alliances for market muscle

Nation's Business, Feb, 1994 by John S. DeMott

When Harry Brown took over as CEO of Erie Bolt, in Erie, Pa., a decade ago, sales were plummeting, and employee morale was low. Now, reborn as EBC Industries, with Erie Bolt as a vigorous division, the company's sales have doubled, to $7.2 million, on products ranging from circus tent stakes to exotic fasteners for the aerospace industry. Employment is at 90, up from 42 in the early 1980s.

Although many factors contributed to EBC's revival, one that was critical is called "teamnetting." For EBC, teamnetting meant joining with 14 other area companies to give itself more muscle to tackle domestic and global markets. EBC and the other team members share equipment, customer lists, and other information that entrepreneurs never would have dreamed of sharing in the old days, when cooperation was a dirty word. The result is that the 15 companies go after more business than they ever could have without their team approach.

Tough times gave birth to teamnetting. Years ago, says EBC's Brown, "small business had enough business. If I have this coming through the door, why should I look at alternatives? You only do things a lot differently if you're forced into a situation where you don't have a lot of alternatives. We did because we didn't have any choices. We were looking just for survival."

Teamnetting, or networking, is just one of several relatively new growth techniques being tried by small and mediumsized U.S. companies. EBC Industries rates a mention in a new book, The TeamNet Factor (Oliver Wight Publishing, Essex Junction, Vt.), by Jessica Lipnack and Jeffrey Stamps, a husbandand-wife research team in West Newton, Mass. In the book, they show how small U.S. and foreign firms are joining to do what none of them could do individually.

To the authors, teamnetting spells the dawn of a new age of industrial energy-- one that will "break allegiances to a single internal hierarchy," forge new intercompany bonds, and lead in their ultimate form to "economic megagroups."

They do concede, however, that teamnetting provides "formidable challenges to management."

On that point, consultant Tom Peters (In Search of Excellence and Liberation Management), whose endorsement appears on the jacket of The TeamNet Factor, certainly agrees. "It's harder than hell to manage one of these things," he said in an interview. '|You are trying to bring to bear the power of various autonomous people, and the autonomous small company has even more ego at stake than the average unit manager within the corporate hierarchy. The potholes in the road are large in number." But the payoff can be larger markets and bigger profits.

Like Erie Bolt, Advanced Circuit Technology (sales about $18 million), a Nashua, N.H. maker of systems that connect electronic components, is looking to build teams, too. Last spring the company's CEO, Joseph "Jody" Roberts, and nine other regional manufacturers who don't compete with each other formed an organization called Team Nashua to make and sell electronic components.

Roberts has personally secured three contracts and shared them with other team members, who are bound by confidentiality agreements not to disclose customer lists or other such information to anyone except other team members.

Small companies are also benefiting from an approach similar to "teamnetting," called, "vertical partnering," in which small suppliers form complex bonds with large companies to their mutual advantage. A widely known spokesman for the concept is Jordan Lewis, author of the forthcoming Customer and Supplier Allia,nces: The Missing Link in Corporate Strategy (Free Press-Macmillan).

Says Lewis: "As companies get into more and more difficult competitive situations, they're trying to cut costs and cycle times any way they can." But if companies do this by threatening suppliers, he says, those suppliers will migrate to other companies that are not as heavy-handed. That "messes up the supplier base," says Lewis, which worsens competitiveness for all. So good customer-supplier relationships are vital to competitiveness.

For small companies in particular, such partnering is seen as a way to stretch and extend a company's horizons, even to reinvigorate the business.

That's how Bruce Bendoff sees it. He's CEO of Craftsman Custom Metal Fabricators Inc., in Schiller Park, Ill. The firm has 125 employees and sales of about $12 million a year. Schiller, which is a big supplier to Motorola, Inc., makes parts for the electronics industry--things like metal card cages to hold circuit boards inside computers and medical diagnostic equipment.

Bendoff says his biggest challenge is "just moving fast enough to be a 'best-in-class' company."

The partnership with Motorola makes Bendoff speak of his company as if it were brand new, even though he's been with it 20 years. "We've got to be buying the best equipment there is available, constantly retraining employees, training new hires. We get up every morning and figure out what we can do to make a dent in the overflowing plate .... The goal is to be as close to perfect as we can."