Bucking the Trend | FAD Equipment

We can get side-tracked by trends, as the raging debate about renewables vs. fossil fuels proves. And how can we boost our immunity to the dreaded curve? David Ayling explains

Thrill-seeking shouldn’t be part of business strategy, I say.

True, trends are great wayfinders for businesses; we can use them to point us towards hungry markets and steer us away from those that are flat. Further, they create knock-on opportunities that wouldn’t be there if it weren’t for a hotbed of other activity. When construction booms in a region, there is heightened demand for cranes, which leads to a spike in orders for lifting and rigging gear. When favorable market conditions lead to an expansion of warehouses, up go requests for forklift trucks and the protective guarding equipment that keeps an expanded workforce safe. Manufacturers and suppliers of personal protective equipment (PPE) are happy too.

However, there are some problems with chasing trends, or at least doing so in a headless fashion. For a start, they might not be a trend for long, which can lead to a boom and bust scenario. Such temporary favorability can prompt a company to invest in equipment, workers and protocols, while making new supply chain connections, only for it all to become redundant before costs are even covered.

Pursuing trends can lead to top-heavy markets, where too many suppliers race to the bottom on price. It can also see traditional, more sustainable customer bases become neglected. Be careful about calling on an old client for the first time in months because you’ve been off pitching somewhere else, just when that customer needed you most because the very trendsetter you’ve been wooing had led to a contraction of their profits.

I could go on but I want to really use this platform to present a case for less trend chasing and more market interlacing.

A mug’s game

I’ve heard a lot recently about renewables vs. fossil fuels, as though we need to go all in on red or black. Will oil and gas get the hot year we spoke about pre-Coronavirus? Will renewables, particularly in the U.S., be powered by the Paris Agreement to never-seen-before heights? I want to throw some cold water on the debate, indeed, all such comparisons, especially from the perspective of equipment and service providers that can get side-tracked by matters that cloud judgement.

I read an article recently suggesting that wind and solar were once perceived to be “deflationary” markets, whereas fossil fuels were “inflationary”. Yet, renewables now compete head-to-head with fossil fuels in economic terms, let alone the popular environmental issues. But that’s investment spiel, really. Why can’t a provider of, say, lifting, rigging, safety or load monitoring equipment, supply to both and stay away from the clammer for uncontested “boom market” status?

Headlines can be misleading; they imply that everything is a competition, with winners and losers. Further, they create isolated freeze-frames of time. Listen to some commentators, hailing Joe Biden’s recent election success, and you’d think the U.S. had never seen a wind turbine. In reality, it’s not as if these whirling blades are exclusive to European horizons. Texas, followed by Iowa, Oklahoma, Kansas and California are ramping up wind energy all the time, particularly onshore. Offshore, Hawaii and California are ploughing on. The U.S. is probably behind only China right now for the most installed capacity. What’s the trend here—that we’re on a growth curve? Whoopee! But so what? Is it Renewables 1 Fossils 0?

Not really: at the time of writing, Reuters reported that in the U.S., the number of operating rigs had surged since last August. U.S. crude traded at around $48 a barrel shortly before Christmas. Analysts said that higher oil prices had encouraged several energy firms to drill more. So, more like 1-1, then.

Intersperse the purse

It’s clear that anyone supplying to these markets needs to interweave them in their plans, not follow the headlines, or trends. They’re both trendy. Renewables is on the crest of a wave and oil and gas is hotting up too. Anyone thinking the former will replace the latter, next year or any other year soon, isn’t giving an evolving oil and gas sector the credibility it deserves. We’ll still be powering our cars with diesel for the foreseeable future and plastics (another product of crude oil) won’t disappear overnight.

Listen, I’m not championing polluting products—I’m an advocate for carbon neutrality—but for any supplier to oil and gas to join the renewables fanfare and neglect the more traditional market would be business suicide. Oil and gas knows renewables is here to stay so it’s got to adapt, which is why its leaders are constantly looking for cheaper ways to get oil out the ground in a world that might never see it return to pre-crash value.

There’s something of an irony about the mass hysteria around renewables, given that many companies were forced into emergency diversification mode in the wake of the oil crash a decade or so ago; prices fell from $140+ a barrel to just $33 a barrel in early 2009. I was the owner of load monitoring equipment manufacturer Straightpoint at the time and, although we had products that could span many industries, our overall fate rested very much in the hands of the offshore oil and gas market, as one or two particularly hairy months revealed. We redoubled efforts to promote our wares to the construction and entertainment industries. The headlines were about oil and gas being in a slump, but we supported our clients there, while exploring new markets.

When businesses get good at serving different markets at all stages of their growth curve, they spread their offering across the breadth of those vertical marketplaces. For example, in wind energy, The Crosby Group provides the plate clamps, pipe hooks and shackles used during monopole and tower manufacturing, in addition to the load cells utilized for inspection of installed equipment—and everything in between. It’s amazing how product features can be transferable too; ingress protection is important on a wind farm, fish farm and oil rig, regardless of which market is attracting the attention of investors and the media. Of course, if one flies and consumes more product, so be it.

The tide goes in and out

Never is the adage, “a rising tide lifts all boats” more applicable than at trade associations. But there’s another truism about the tide, in that in comes in, goes out, and comes in again.

Trade associations are a good place to start if a business is looking to be less reactive to cyclical markets and more part of multiple industries as their fortunes ebb and flow. This is a prudent strategy because the chances of them all peaking or dipping at the same time are very slim. Quality trade associations do a great job of bringing a market’s leading stakeholders, thought leaders and commentators together. They do this regardless of where their markets are in their cycle. That’s important because it reiterates the point that it pays not to chase the fastest moving market and then move onto the next one. Few firms can be that agile, successfully, over a period of time.

As suggested above in relation to oil and gas, there’s a long game to play—and win—for suppliers willing to network in the ballroom of a hotel with buying decision makers who have no immediate budget.

Pick your trade association memberships carefully, though. And use them to plot your way to contacts at various points of a supply chain. To reference Straightpoint, again, we were involved in a number of federations. The Specialized Carriers and Rigging Association (SC&RA) put us in front of a different audience to Associated Wire Rope Fabricators (AWRF). Sometimes a particular product or service dictates, as was the case with our Clamp On Line Tensionmeter (or COLT), used for measuring tension on static lines. The Communications Infrastructure Contractors Association (NATE) allowed us to present ourselves as a utilities component manufacturer and promote a solution perfectly tailored to the market’s requirements.

In conclusion: don’t get too starry-eyed.

Sometimes it pays to hedge your bets a little.

There’s a reason people scream on the way down on a steep roller-coaster.