Where TenCate is purposefully heading
The foundation underpinning the TenCate technology group’s activities is currently of a distinctive calibre. Over the past years specialization in the production of functional, technical fabrics with high-grade characteristics has come to occupy a central role. In fact, TenCate started to specialize, at a higher level, in what it had already been good at for centuries: the development, production and finishing of high-grade textiles and extruded materials. New potential applications and new markets have come to take pride of place. Focus, product renewal, technological innovation and a long-term vision provided the framework. As a result, achieving added value has become the company’s guiding principle.
Technology clusters (sectors) have been formed within TenCate, in which – based on distinctive technologies – the purchasing of raw materials has been concentrated (buying power). At the same time, market windows (market divisions) have been created with clusters of related product-market-technology (PMT) combinations, in which the technologies involved play a pivotal role. These basic technologies are complementary.
The market windows were selected so as to meet the following criteria:
- Market growth is required to be at least 10%
- Market requirements are based on critical, functional characteristics
- Specifications of materials are subject to national and international standards, legislation and regulations
- The market or markets concerned have relatively high access thresholds
Through its existing and new clusters of PMT combinations TenCate follows global trends and developments. Its solutions and system approach – known as the TenCate Solutions – predominates.
By seeking solutions and operating its system approach (single product systems, multi-product systems and integrated systems), TenCate is coming ever more frequently into contact with other technologies and players. TenCate will to an increasing extent operate in open innovation networks in which its own specific knowledge and experience will form part of the solution. This will result in the creation of exciting new PMT combinations and relevant market windows.
TenCate has two basic technologies: the first of these, in addition to fibre and fabric technology, is finishing technology. The related market windows are: protective fabrics, outdoor fabrics and composites for space and aerospace, automotive products and armour. The second, in addition to non-woven and grid technology, is extrusion technology. The related market windows are: geotextiles, industrial fabrics and synthetic turf.
The creation of maximum added value through value chain management forms the framework for the TenCate strategy. Applying the TenCate business model the company operates from its own strength. Outside-in thinking has become its guiding principle. System-oriented solutions provide the answer to the ever-changing needs and expectations of the outside world.
End user marketing
Thanks to the expertise the company has acquired, in-depth consideration can be given to customer requirements. Each new product that TenCate intends to develop must be grafted onto prevailing customer demand or new national and international standards, legislation or regulations. Pull marketing is the sales tool that is used to draw up or develop specifications together with the customer (the end-user) at an early stage. Being able to respond to new or existing specifications is an important competitive tool. The key points here are: brand strategy, time to market (including the R&D process) and the creation of standards relating to specifications that apply in the market.
The standard can constantly be raised by influencing end markets (decision-making units) on standards in a variety of ways or by creating or enforcing new standards with the aid of innovation. This will have the positive effect of encouraging both existing and potential customers to approach TenCate with innovative questions and requirements. Market potential plays a key role in solutions of TenCate.
The context within which TenCate operates may be described as ‘the risk society’. By specifically monitoring global social trends and derived market themes, the company remains connected to the world around it. At the same time social trends and their underlying themes also drive up the demand for certain materials. The global trends on which TenCate focuses are: safety and protection and sustainability and the environment. The market themes that are important to TenCate include: increased threats, personal safety, fuel savings, environmental protection and water management.
Everything that TenCate does must be embedded and have a certain consistency, underpinned by its vision. The core of the TenCate strategy is based on the one hand on its Buy & Build component and on the other hand on its Fix it – Exit component. This creates a focus on markets for advanced materials. The preconditions for the TenCate strategy are:
- Market leadership (critical mass)
- Balanced product portfolio (for example the BCG matrix, with two dimensions: market share and market growth)
Fix it – Exit
Anything that is not related to high-tech materials (such as technical textiles) – in other words, anything that is not part of the TenCate core business – comes under the Fix it – Exit component of the company strategy. These business units will first be made healthy and then sold. The funds released will be used for new acquisitions.
Buy & Build
The Buy element of this strategy component is driven by the mission to establish market leadership and to achieve growth based on TenCate technologies. This involves complementary products, complementary markets and complementary technologies. This means that an acquisition or interest may no longer be of the same kind, but must always expressly add something, with a view to securing a stronger position in the value chain.
This strategy requires value chain management, a firmer grip on the chains in which TenCate operates. This will entail strengthening purchasing power at the back-end of the value chain by increasing critical mass. And at the front-end of the value chain – towards the customers of TenCate’s customers – better positioning of the brands and making the added value visible through commercial alliances, joint ventures and acquisitions. This last constituent is the Build element within this strategy component, which focuses on investments in advanced materials. In this way step by step new life is being blown into technical textiles.
As part of its Buy & Build strategy, TenCate aims to make horizontal acquisitions within the value chain management business model that it operates. The company will grow horizontally within the value chain; there is no forward or backward integration. Joint ventures with – or full acquisition of – companies that have the same, related or complementary technologies will help the company to grow. Its position in the value chain is the decisive factor for such a candidate. If this candidate is in approximately the same link in the value chain, then TenCate may well be interested.
TenCate has made a large number of acquisitions, which strengthen the positions of the company on all four cornerstones. TenCate prefers to buy companies with a hidden value - certainly if the company involved has a particular technology which TenCate considers to be of crucial importance for implementing its strategy, and which it does not yet itself have in house. By very specifically rationalizing superfluous costs and linking hidden qualities (patents, brands, people, machines and manufacturing potential) to existing business units, new profitable sales can be generated relatively quickly.
While managing its position in the value chain a company can be assessed on its flow of goods and the added value that this generates. This begins on the input side with the raw materials. By operating worldwide from a position of leadership benefits can be gained from regional price differences and economies of scale, thus creating buying power.
In the business model, product differentiation and cost leadership follow on naturally from each other, just like end-user marketing and technological innovation. The higher the added value, the sooner customers discover how unique the products and solutions are that TenCate offers. In the field of cost control and product differentiation in particular there is complementarity: purely and simply focusing on costs leads to little product differentiation, while focusing entirely on a differentiated product range results in less efficient production (small production runs, changeover costs, additional working capital, etc.).
Cost leadership is seen as the last line of defense, whereas product differentiation is considered to be an aggressive market approach. Business units will constantly have to assess the comparative benefits of these two extremes.
The four cornerstones of the TenCate business model are (clockwise, from bottom right):
- Cost leadership (internal focus, relates to flexibility). The first cornerstone relates to cost leadership. This involves both volume products and specialties. It forces the company to become extremely conscious not only of costs, but also of its production methods (and the related cost aspects), pricing policy, the smarter use of processes, organizing logistical streams, reducing environmental costs, etc. At the same time it ensures that a balanced product portfolio is maintained with expansion products, exploitation products and elimination products.
- Product differentiation (external focus, relates to the value propositions). This is an aggressive element in the TenCate strategy and is closely associated with the product lifecycle. It forces the company over and again to bring new products to market, because in practice an expansion product will eventually also become a commodity, with its high quality, unique characteristics, distinctive capacity, low price and large market share slowly or quickly petering out. The precondition for a good balance between product differentiation and cost leadership is a flexible organization (through social innovation). It is important in daily practice to continue to link ‘effectiveness’ (doing the right things) with ‘efficiency’ (doing things right). Ultimately, this is all about people’s motivation.
- End-user marketing (external focus, relates to market pull). The key principle here is not to ‘push’ products onto the market, but to allow demand to be created by the end-user. This is spec selling: specifying the product to the right people or authorities. This must be combined with a marketing strategy that increases the visibility of the products in the market. One of the activities involved in this is well considered industrial branding in accordance with TenCate brand architecture, thus putting both the corporate brand and the aligned product brand clearly on the map.
- Technological innovation (internal focus, relates to creativity). Technological innovation and product innovation are not identical. Groundbreaking, technological innovations are necessary to safeguard the future. It is essential to develop existing products further by means of technological innovations and here the importance of an active intellectual property policy (patents, formulae) must be recognized. Acquisitions will enable TenCate to acquire technology that will strengthen its position in the market or will produce related PMT combinations.