1 July 2001
The phone is ringing, but is anyone home?
By Greg Hale
Don Davis made some big news the other day when he got on an analyst call and said his company will take a huge earnings hit this quarter. One of the end results is that Rockwell will now lose around 1,000 jobs.
"People keep talking about how we don't have a recession going on, and as measured by GDP, that may be the case," said the embattled chairman and CEO. "But I'll tell you one damn thing: That does not apply to the manufacturing sector of this economy."
He went on to name a couple of industries that are treading water: "Pulp and paper is dead on its feet. Metals is another sad story."
It is admirable that Davis is not afraid to loudly point out what everyone else only talks about in hushed tones: The industry is in a recession, and a ton of changes have to happen to get back in the black. In his analysis Davis blamed the performance of his company's products for a chunk of his company's trouble. Fair enough. But then he talked about his company's lone bright spot: the services it offers.
"Our services business has actually grown very significantly, and as you know, we have been investing in that business and have been trying to use that as a growth engine for what we are doing."
I'm glad Davis has finally caught the religion that services is a growth area. I am not sure if Davis — or most of the rest of the industry's decision makers — realizes the importance of services to his company's well-being. Services is not just a growth area-it is the future.
Do you get it? Is your company relying on the hope that your product sales will rebound in the third and fourth quarters? Sooner or later, companies in our industry are going to have to learn that revenue from product sales is going to remain flat. In the long run, services we develop and market will be the cash cow.
The idea of selling an intellectual product vs. a widget is not easy to grasp. But when is any revolution easy? Engineers today have the intellectual skills to master the new demands of a paradigm switch to a more services-oriented model. Now it is up to engineers and the suits to work together on a plan that leverages those skills.
What Davis did during that analyst meeting was give the industry a strong wake-up call. Now the bigger question is, who will answer?
Talk to me: ghale@isa.org or (919) 990-9275. IT
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