The typical AV entrepreneur is a shoot from the hip, go with the gut, seize the opportunity cowboy. The 1980-90s was the wild, wild west for the AV industry and this was especially true in the Rental & Staging sector. The closest any of us came to strategic planning was to make a conscious decision to either 1. Buy a video wall, 2. Hire our first video engineer or 3. Get out of the video wall business. Sitting down to talk about stuff seemed like a waste of time when all that was really needed was to buy the latest technology and then sell some more shows. That was then. This is now.
My December column laid out my predictions that 2007 will spawn a period of mergers and acquisitions in the AV industry. My advice to those companies that wish to sell or buy was to first shore up the management team. Perhaps the preamble to that should have been First, do some serious strategic planning.
I recently had lunch with a Rental & Staging company president who is a veteran of the events industry but new to the AV business. He asked some very astute questions that, unbeknownst to him, zeroed in on three of the biggest issues facing mid-size stagers today. He started out by asking if there was any strategic planning (emphasis on any) going on inside AV rental companies. In studying competitors he was having trouble finding differentiation much less innovation. Secondly, he wanted to know why companies (including his) were bent on competing on price when it was clear to him that equipment pricing was dictated by the wholesale market. Finally, he was very interested in whether national sales models held any advantage over regional approaches. The answers will explain why so many stagers never breakaway from the $3-5 million regional staging model.
My lunch partner was correct that AV rental companies pretty much look alike. The ones that venture into strategy sessions generally do so without outside perspective and spend most of their time focusing on the competition. Sometimes they end up mimicking companies they admire instead of choosing a path that cant be imitated. When these businesses look at what the competition is doing, the number one question is, How do they make money with those prices? After that, the pattern becomes fairly predictable. They begin to compete on price, see their margins start to shrink, panic sets in, and they try to fix everything by growing revenue. That leads to chasing national business hoping for bigger margins. At the end of the day their sales force doesnt know what not to sell so they end up doing a lot of things poorly.
By the end of lunch, my new colleague was convinced that he was right about needing to keep his company from drifting into the AV rental doldrums. We talked about some strategic planning options and agreed to visit again. But he had one question left and that was whether regional or national focus made the most sense. As I visit with more and more companies, this question is becoming almost as moot as the pricing issue and for the same reasons. If prices are set by the market (ie: what the customer will pay, what reasonable substitutes cost, and what the wholesale price index for that product is), the only difference between regional and national deals is the cost of doing business for the Rental & Staging company.
Granted, some customers still seem to care whether the vendor is local or not, there is a perceived added cost if the vendor is from another region even when there are no added costs visible. There is also a customer viewpoint that national companies must be better than regional providers. But if the company knows how to present itself, there is really no obstacle to regionalizing a national business or vice versa. The question at the end of the day is whether or not you can sell your services for a profit. Are you in control of your expenses well enough to wander away from home? Regional or national is a cost control issue. And effective cost management by the way, can be a strategic advantage.
If you are frustrated by the business practices of your competition, the buying preferences of your customers, or think there might be greener pastures than the market you are located in, then its time to look at your business like a strategist instead of a tactician. There are lots of types of strategic planning processes that fit every company size. The most common mistake small companies make is trying to formulate a plan without some outside help. Asking for assistance is not a sign of failure its what successful companies do. Enlist an objective viewpoint and welcome some outside perspectives.
Your banker or accountant may know other businesspersons who would share their time to help you along. You might contact the Service Core of Retired Executives (www.score.org) and enlist a mentor. The American Management Association (www.amanet.org) has seminars on Strategic Planning in cities all over the country. If all else fails, hire a consultant or planning facilitator. Dont take planning lightly and dont go it alone.
What will the computer rental industry look like in five years?
The computer rental industry has been gradually adding large displays and projection to their inventories and competing for exhibit floor, trade show, and now meeting room contracts. This month we ask AV industry executives how this was affecting their businesses. The responses suggest that next to AV equipment wholesalers, this is one of the industrys biggest new challenges.
Over 52 percent of our survey respondents said that they occasionally bid against computer rental businesses for AV contracts. 15 percent said they do so frequently. The tactical response of this majority has been to either: add computer-related inventory and staff (42 percent) or redouble sales efforts (10 percent). Many of those who added inventory have also struck up a strategic alliance with at least one computer rental vendor (29 percent). Of the companies who occasionally compete against computer companies 100 percent have added computer hardware and/or tech support. No one in the survey indicated that they were backing down in any way.
Looking forward, AV executives seem confident that the AV model will endure with computer rental firms evolving into AV companies or failing. It would be interesting to hear what the computer folks are thinking. All this sounds like the opening salvos of what will become a significant marketplace battle.