View from the top: Southco
How does a company differentiate itself in a commoditised market? Paul Fanning asks Pascal Testeil of Southco.
First impressions matter a great deal to access hardware manufacturer Southco. Indeed, according to managing director Europe Pascal Testeil, this concentration on first impressions is very much at the heart of the company's philosophy. He says: "We are all about trying to create a good first impression with our customers because we're making the 'touch points' of our customers' products. There is an interface with the end user – be it on a car, a bus, a truck, a plane or any type of industrial equipment.
The first impression given to the interface with the end user is absolutely critical. In the modern, highly competitive market place, the aesthetic gives a key differentiation between us and competitors."
This sort of differentiation is critical to Southco, particularly as the company is operating in a market where many of the products are often regarded as commodities. Says Testeil: "That's one of our key challenges: how do we make differentiations in product ranges that tend to be commoditised a lot of the time. When you're talking of latches and access hardware, how do you differentiate yourself against a huge amount of competition from local and international players?"
This is where the company's 'touch point' philosophy comes into play. By enhancing the perceived value of its customers' products, Southco believes it is possible to avoid the commoditisation of its products and raise them far above its competitors. "Successful differentiation is coming down more and more to the level of detail," says Testeil. "And that can be a hinge or a latch, which can play a significant part in the initial user reaction. That cannot sensibly be overlooked or underestimated. The way that such a system looks, feels and performs will influence the end user's perception of our customers' products and corporate profile."
Over its 112-year history, Southco has had to adapt to a lot of different challenges, something Testeil makes clear, saying: "A company like us has a remarkable history of adjusting our business for different economic cycles. Recently, for instance, we had to change our business models going through the recession, but we always kept one constant – our determination to invest and adapt for long-term growth and value creation."
By its nature, this growth requires a constant search for new markets and competitive advantage. For strategic reasons, Southco does not allow any one market to provide more than 10% of its business.
While this obviously makes sense on one level, it does mean that there is a constant need to explore new markets or expand existing ones. Says Testeil: "In the automotive market, we do a lot of glovebox latching systems, centre console access hardware – the whole transportation market is a key one from our perspective. That would cover interiors for cars, buses, trucks, but also the rail industry, where they have more and more requirements for weight savings. The aerospace industry is also very innovative in terms of the passenger surroundings – head rests, latching for tables, overhead lockers and everything that could interact with the end user."
One new market in which the company has seen success lately has been the medical industry. Says Testeil: "There are a lot of flatscreens in every industry, but particularly in the medical sector, where imaging systems are becoming a key part of many devices. When you have a screen in front of you, you need to be able to adapt these screens to the individual user, so we're providing a lot of positioning systems. We recently had a key win with a leader in that market where we developed a whole positioning control for the arm on these medical devices."
In completing this project successfully, Testeil claims that Southco "solved a lot of problems" for its client and this sort of collaborative approach is again a way in which it seeks to differentiate itself. He says: "it is very critical that, when you move into new technological developments, you are working with customers who are committed with you on a journey where you can learn from each other. A collaborative approach that goes beyond a supplier/customer relationship and is more an engineering-to-engineering, manufacturing to manufacturing, cross-fertilising sort of relationship is a much more productive model."
Ultimately, Testeil believes, it is all these factors that will ensure that Southco continues to flourish regardless of economic conditions. He says: "Our CEO always says that we need to plan for the worst and try for the best. That has been our motto for the last three to five years because it is about balancing our long and short-term investments without missing out on tomorrow's growth opportunities. In our context, we have to work for the next two to three years. We have to stick to our long-term value creation or we won't be as successful as we are."
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