THE PROBLEMS OF GROWTH
The technical textiles and nonwovens industries continue to grow. At the same time, however, they and their markets are changing and companies involved need to review their strategies to ensure that they maximise their chances of success. The following are among the important trends to which businesses must adapt.

MARKET PULL
The industry has evolved significantly over the last 20 years. It was initially based on textile production techniques, such as weaving; the emphasis then changed to types of product, such as filter media; it has recently switched in many areas to focusing on the needs of particular market segments and customers. Over the years, end-use customers have learnt about the potential of technical textile and nonwoven-based products and are now able to state very clearly their performance needs. In this sense, they are creating a market pull for products which increasingly are complex assemblies of which technical textiles and nonwovens form only a part.

SUPPLY CHAINS
The increase in the power of the final customers and the emergence of more complex products aimed at very specific end-uses has led in some areas to the creation of supply chains dedicated to particular customers and end-uses. The following are some of the features commonly found in these supply chains:

• driven by the needs of the final customer
• members at several production stages
• collaborative development by members of materials, components and finished products
• shorter delivery lead-times, including Just-in-Time where necessary
• planned cost reduction and quality improvement programmes.
  

VERTICAL INTEGRATION
The increasingly tight performance targets set within these supply chains is leading some businesses to integrate either forwards or backwards to improve their levels of control over quality and service and to increase the added value retained by them. Examples include:

• coating equipment being installed by producers of sewer linings (backwards)
• nonwovens manufacturers carrying out laminating (forwards)
• technical weavers integrating both ways by
  - inline coating (forwards)
  - texturising of yarns (backwards).
  

HORIZONTAL INTEGRATION
Similarly, companies are buying businesses making similar products in order to achieve economies of scale and/or greater geographical market coverage. Some are acquiring businesses making different, but complementary, types of product in order to satisfy a wider range of requirements for their key customers. This is often preceded by a period of sourcing products from other businesses, which is another growing activity in response to changing market needs.

TECHNOLOGY CHANGES
Nonwovens is the major area in which technology is moving on. There are new fibres (eg elastomeric, super-absorbent) and new fabric forming techniques such as the co-extrusion of spunbond and meltblown polymers to form laminated materials (eg SMMS). In other areas of technical textiles the emphasis is largely on using the already vast array of materials and processes to design better products and to address new market needs.

HOW SHOULD TECHNICAL TEXTILE COMPANIES RESPOND TO CHANGE?

THERE IS A CLEAR NEED FOR GOOD STRATEGIC PLANNING
There is a clear need for technical textile companies to take a well-considered approach to deciding on their future strategies and action plans to ensure that they adapt to change. The question arises as how best they can do this. In the past two years DRA have carried out strategic planning consulting assignments with five technical textiles companies operating internationally. These projects have covered a wide variety of production and value-adding technologies, all the high volume end-use market sectors and many speciality product/market combinations.

THERE ARE SOME COMMON STRATEGIC ISSUES
In all these consulting projects we have used a system of segmenting the company into strategic business units (SBUs), and into strategic product/market segments (SPMSs) within each SBU, for purposes of analysis. Within this overall approach we found in all these projects that we have had to investigate and resolve issues in the following areas in helping the company to decide on future strategies:

• Choosing an appropriate product/market/customer focus and a basic method of competition (choosing the business model).
• The different levels of maturity of SBUs and SPMSs and the different strategies they require.
• New product development (NPD).
• The structure of supply chains, where value is added and retained and who the major decision-makers (channel captains) are.
  

DECIDING ON PRODUCT/MARKET/CUSTOMER FOCUS
Many technical textiles and nonwovens businesses have become unfocused over the years; they have too many products, markets and customers. Market pressures are now leading companies to become more focused and to have a clear view of how they will compete in the future. We have developed two models to help companies to achieve a tighter market and business focus. The first is shown in Exhibit 1.

EXHIBIT 1: COMPANY FOCUS – TYPES OF BUSINESS

This shows how every technical textiles business (SBU) can be classified as being one of three generic types. The first type (Production Based) is focused on a particular technology (eg spunbonding, weaving, coating) as indicated by the heavy point at the apex of the triangle. It makes a few different products (eg fabrics, roll-goods types) and services many end-use markets (eg automotive, wipes, hygiene, medical). The triangle therefore broadens out progressively through products towards customers and markets. The second type of business (Product Based) concentrates on a particular type of product (eg filter media), it uses several production technologies (eg weaving, spunlacing, thermal bonding) and serves many end-use sectors. The triangle diagram therefore has a focus at the product/end-use level, indicated again by the heavy point. The third type of business (Customer/Market Based) concentrates on a particular end-use sector (eg automotive, hygiene) and supplies a number of products using several production technologies and often includes outsourcing in its activities. We find that discussion of this simple model, using fairly crude data on the market and on the business’s sales and margins by product and customer, can quickly lead to a high degree of strategic insight for our clients about their current business and how it should be evolved into the future. This model is a simplification of one we presented to the Techtextil Symposium in 1995 (1).

VALUE DISCIPLINES – HOW TO COMPETE
Closely allied to this is a model of how a business actually competes now and how it should compete in the future based on three alternative value disciplines (2).

EXHIBIT 2: VALUE DISCIPLINES

(i) Operational Excellence: a low cost producer based on best technology, lean manufacturing and high capacity
utilisation. These tend to be high volume, low margin businesses.

(ii) Product/service Leadership: a problem-solving business using several technologies. Often low volume, high margin
businesses with surplus capacities.

(iii) Customer/market Focus: concentrating on supplying the continuing product and service needs of a particular
customer set or market segment.

Again, we find that the discussion of this model with clients using crude market and company data can lead rapidly to the identification of key strategic issues. In applying both these models we carry out a strategic analysis of the company, its SBUs and SPMSs which includes consideration both of the markets the company is in and of its relative competitive strength in those markets. This latter involves a clear definition following a detailed discussion of the company’s distinctive capabilities, core competences, strengths and weaknesses.

SOME PARTS OF THE BUSINESS ARE MORE MATURE THAN OTHERS – AND NEED DIFFERENT STRATEGIES
Experience has shown that a company’s SBUs and SPMSs can typically be classified into one of the three levels of maturity shown, with examples, in Exhibit 3. At the heart of any technical textiles business there is usually 60-80% of its sales which come from a small number of generic or speciality intermediate products sold to a few customers with whom special, and often long-term, relationships have been established. These generate the bulk of the business’s sales and profits and provide financial stability. The strategic issues for this type of business usually involve finding ways of holding on to and evolving important relationships by means of cost reduction, product evolution, improved service etc. Some of them ultimately evolve into businesses in their own right (the highest level of maturity) and the significance of the technical textiles often recedes to that of being just one of the material components of fairly standard value added products, such as surgical procedure packs and interlinings, which have quite specific functional end-uses. The strategic issues for these products usually concern how to achieve the economies of scale necessary to compete against more focused competitors. Mergers and acquisitions to service better the target end-use market segments and to achieve wider geographical market reach are often an important way forward for businesses of this type.

EXHIBIT 3: THREE LEVELS OF PRODUCT/MARKET SEGMENT MATURITY

NEW PRODUCT DEVELOPMENT – CREATING THE FUTURE OF THE BUSINESS
At the other end of the maturity scale is the third type of activity, new product development (NPD), which we find is badly targeted and managed by most companies. The key to success here is to focus the vast majority of scarce NPD resources (people and money) on to problems which specific customers have identified now and want a solution to quickly. Solving non-problems, or producing solutions to problems before they are needed, are both very wasteful in resource and demotivating to NPD staff. A good NPD programme will have the following characteristics:

• A clear distinction is made among three different technical activities: true NPD, the technical evolution of existing products, and production trouble-shooting. Different budgets (and ideally staff) should be applied to each of them.
• An outline cost-benefit analysis will be carried out on each potential project comparing the likely resulting pattern of sales volumes and margins with the likely pattern of expenditure and the probability of success.
• Clear priorities are allocated to the possible projects; the top priority classification should contain as few projects as possible. The potential strategic impact of success of these projects individually, and together, should be assessed.
• NPD projects should have clearly defined budgets, timescales and milestones which should be reviewed monthly.

ARE YOU OPTIMISING YOUR SUPPLY CHAIN POSITIONS?
There are two generic types of supply chain in the technical textiles industry: processing and assembly. Some chains have elements of both.

EXHIBIT 4: TYPES OF SUPPLY CHAIN

Pressure from ultimate specifiers and end-users is forcing more, and better organised, supply chains to be created in many product areas. Technical textiles producers are at the very early stage in these chains and are likely to have little commercial power unless steps are taken to avoid this. Successful action requires a clear understanding of the supply chain and the power structures within it. In particular, it is important to identify the real decision-maker in the chain and how he can be influenced. Successful strategies of supply chain membership often include:

• Forming trust-based, long-term, collaborative, developmental relationships with both suppliers and customers
• Agreements on the types and pace of the required cost reductions and improvements in products and services
• Location of production near to the customer’s point of use
• Sharing systems (and sometimes staff) with suppliers and customers
• Back-selling to the ultimate specifier or end-user
• Strong protection of intellectual property
• Component branding
• Value pricing.
  

DRA have developed methods of analysing supply chains and how they create value which can be used both to understand a company’s current position in its supply chain and how it could be improved and to plan entry into new supply chains.

THE OPPORTUNITIES ARE THERE TO BE GRASPED
Not many industries, particularly those which are textile-related, can match the past high growth rates of the technical textiles sector. The fundamental market drivers for technical textile products continue to grow worldwide: GDP, disposable income, agricultural production, car production, demand for improved hygiene and better healthcare etc so that strong market growth can be expected to continue. Those companies with the right strategies can look forward to a profitable future. References

(1) Strategies for Technical Textile Producers in the Late 1990’s, David Rigby, Techtextil Symposium, 1995. Reprinted in Technical Textile Markets, October 1995.

(2) How to Focus your Technical Textile Business, David Rigby, Technical Textiles International, December 1996/January 1997.
Reprinted in the report "The Technical Textile Industry and its Markets: Prospects to 2000" prepared by DRA for Messe Frankfurt.