Differentiation – Part One

Cement producers today face a globally competitive economic landscape and a wide variety of choices in how they approach major and minor capital expenditures. For suppliers the game is all about differentiation and defining what value they can offer. How can the producers navigate these waters? We at BGE thought it would be worthwhile to look at what “differentiation” means in terms of project relationships and how this has changed in recent history. This multiple part essay will look back at how we got where we are, and explore where we could be heading. We won’t spend much time here talking about differentiation in terms of technology. This is important, but technical advantage is a fleeting thing and, in the long run, is probably less important that the business relationships that are formed.

Part One: One big happy family

For many years, cement industry was very incestuous. The career path of many an engineer and serviceman weaved its way through the plants and corporate offices of independent producers, contractors and various equipment suppliers that dominated the landscape. This cycle was even frequently repeated as slow times in one area were boom times in another. Expertise was widely distributed, and while competitive secrets were fiercely protected, experience based knowledge was “common” knowledge. The equipment suppliers knew the demands of the plants because so many of them came from that environment. Similarly the plant people had intimate knowledge of the strengths and weaknesses of the equipment. Most importantly, the “network” was built on relationships that had a foundation in reality, from working side by side with one another, sometimes on the same side of the fence and sometimes on different sides.

Some might protest that times were simpler, less was at stake, cement plants were “local” businesses after all, and the regulatory and litigation environments were much different. Fair enough, but none of these points diminishes the effectiveness that these relationships had on the success and failure of projects.
Just as importantly none of these points makes the variety of experience that these professionals gained any less relevant. Design, build, operate and service were much more closely related “trades” and shared a large base of common experience. This variety of experience cannot easily be substituted by any amount of experience in a single area (while depth of experience is a critical success factor, that is a subject for a different time). The same engineer that designed the equipment likely worked in close tandem with the shop building it, was present during erection, and supported the customer in operation, assuring a continuity and a full life-cycle awareness. OEM’s actually included the “M” (Manufacture) in their scope of duties, rather than just being designers and suppliers of equipment manufactured by others.

This environment created a pool of “high touch” professionals and an expertise network that could be quickly called upon. Answers to questions were never far from hand as a reasonably small number of people had their arms around an entire product line or project scope. Experts were “known” across the industry and could be counted on to have their finger on the pulse of events.

As the business of cement and the “global economy” evolved, so to did the cement professional. In some cases with clear benefits, and in others with equally clear losses.

Next time – Part Two: Globalization and Consolidation