Project report about the expansion of Jacob GmbH in the USA
IMIG has been working with Jacob GmbH for several years. Part of the initial activity was the development of a strategic plan focused on increasing active participation in the US market. As Jacob and IMIG looked at growth opportunities it became clear that there were significant market opportunities outside of the German / European market.
Jacob GmbH is a German company that was founded in 1922 near Stuttgart by Wilhelm Jacob. Wilhelm Jacob had stated “We don’t do everything but what we do, we do perfectly”. Today, Jacob is a family owned leading manufacturer of Cable Glands, Cable Entry Systems and Accessories. Jacob has 200 employees focused on quality, reliability and safety. Jacob products can be found in most industry and market segments. Machine building, automation equipment, panel builders, renewable energy projects, transportation and infrastructure enterprises all have Jacob products built in. With the network of subsidiaries and partners, Jacob supplies parts to more than 50 countries all over the world.
With a focus on growth, Jacob invited IMIG to participate in the development and deployment of a strategic initiative to expand within the US market. Jacob had been participating in the US with several partners for more than 20 years. Most of the Jacob products were private labeled and there had been limited growth.
The initial challenge was to determine how does a traditional German manufacturer expand in the US? What are the opportunities, what the potential is and how do we approach and develop the structure to compete within the US? Jacob as a company has had very little experience within the US market. With close to 90% of the company sales coming from Germany and Europe, the idea to grow the business in the US fit with the desire to compete in the global market.
Consistent with the traditional German approach, Jacob is not the low cost manufacturer and had very little interest in competing globally on price alone. Cable glands, cord grips, cable entry systems and accessories are rarely part of an engineering specification in the US. The Jacob components are considered a commodity or “off the shelf” part. One of the challenges was to identify and articulate the competitive or differential advantage of Jacob products versus the incumbent cable gland suppliers. In reality, it is very difficult to identify any competitive or differential advantage with component parts where there is minimal interest. It was beneficial to leverage the German image and reputation associated with engineering, design and manufacturing capabilities.
As Jacob launched the plan to compete in the US market and grow the US business, there were several questions that needed to be answered. Do we have an adequate infrastructure to support the US market requirements? Does Jacob have the right product to compete in the US? What is the difference between the European market products and what the US market will demand? Do we have the capacity within manufacturing and production to meet increased volumes? What are the compliance requirements within the US market versus the European market? To compete in the US electrical component market, it is an absolute requirement to have Underwriters Laboratory (UL) marking and compliance. Does Jacob have the engineering experience to understand the UL compliance requirements? Does Jacob have an understanding of their competitors in the US? Overall, what is the “readiness” within Jacob to compete in the US marketplace?
Expansion in the US – but how?
Once the decision was made to expand in the US marketplace, the next question is how. How do we structure the operations within the US? The initial approach focused on the Energy segment and the Industrial market segment. It became evident quickly that the economy would not support the focus on the energy segment (specifically oil and gas). There was a quick change to the approach to focus on the industrial segment and work to build awareness of the renewable energy segment.
One of the most important findings was that while we worked to expand our presence in the US, we needed to protect the current established partnerships. Our established partners expressed concern with the Jacob decision to expand and compete directly in the US. The general feeling was that we were going to compete with our partners and essentially compete against ourselves. It was important to structure pricing and activities to protect the existing base business within the US. Some of our initial effort was focused on leveraging the existing relationship between Jacob and German based companies with manufacturing operations in the US. This became complicated due to the engineering and technical decisions being made in Germany and the assembly and installation operations in the US. There was little opportunity to expand with the German companies here in the US.
The approach within Jacob operations in Germany was to integrate the US operation within the existing product and sales support structure. That is, the same resources that had been supporting the needs and inquiries from the European market would be expected to provide support for the US operation. This caused an immediate increase in the work for the existing resources. The new US inquiries were somewhat confusing and different than the typical European inquiries. The additional work and confusion made it difficult at the start. It was difficult to get the resources energized and engaged with the decision to expand (and support) the US initiatives. The computer systems and CRM system were slow to evolve and we experienced problems with timing and data availability. Another question was how do we function and overcome the time difference between Germany and the US? Germany is six hours ahead of the US (Eastern Time Zone). Although this was initially considered a barrier to supporting the US from Germany, we have turned this into an advantage. When we submit a question or send an inquiry from the US to the inside sales group or product support, we can generally get a response overnight. This enables us to have an answer available in the US first thing in the morning.
The overall approach was to add the US operation to the existing structure within Germany. We may have underestimated the differences, impact, complexities and the overall reception of the planned strategy and approach within Germany.
Where are we today?
While we are maintaining the established partnerships, we are still knocking on doors and chasing lead generation. We have worked to establish sales channels here in the US with several multi-national distributors. Several opportunities have developed from global projects and evolved from existing relationships in Europe. Having a resource available in the US with the ability to respond and coordinate related activities has been an important success factor.
There have been organizational changes within the management team at Jacob in Germany. This has created a challenge to continue to articulate, share and understanding the “vision” of the Jacob US operation. We have had to share the linking and alignment of the activities and the overall strategy to gain credibility and engagement.
New products are still being designed with the focus on the European market. UL (Underwriters Laboratory) is still somewhat of an afterthought. We have to continue to work closely to overcome the German thinking toward and the perception of the US market. We have had several discussions with our German colleagues that to compete in the US, we need to be “less German”. We need to be more flexible, understanding, responsive and act with a sense of urgency. At the same time, we must continue to leverage the strong German pride and design, engineering and manufacturing reputation. We are learning together.
Jacob in the US continues to grow and increase revenue. We have added a “US Champion” in Germany to work closely with the US operations. Although we may not be meeting the initial aggressive and ambitious targets from the original strategy, we are making progress and building strong sales channels to sustain the long term stability of Jacob in the US market.
“What If…..”- results analysis
As we look back at the past three years working with Jacob GmbH in the US, there are several key learnings. What if we had established a structure in Germany to provide direct support for the US operation? Could we have identified resources to focus specifically on product management, inside sales support, research and development and engineering for the US market? Should we have built an infrastructure aligned with the activities and strategy to develop the US market? What if we had spent more time understanding and learning about the manufacturing and production operations at the German plant? Could the growth in the US market support this added expense? As it is today, we have one resource in the US that is consumed by sales activities, product management activities, marketing, post-sales support and customer service. The resources in Germany have been responsive and reactive to the inquiries and needs to support the US operation. What if we were proactive and forward thinking? What if we were engaged and established a structure of ownership and accountability linked and aligned with the US operation efforts?
We continue to work closely and cooperate to build the foundation for future growth. Working together, we have overcome many of the initial barriers to entry in the US market. We have demonstrated our ability to standup and compete with the others in the market space. Our products have been well received and are currently being designed in on projects and being included in new project opportunities. Our existing partners in the US have accepted our engagement within the US and have learned to trust the Jacob approach. There is a vision and strategic framework for the US operation that continues to evolve and adapt to the changing economy and political climate. It is encouraging to see the progress and recognize the accomplishments. The working relationship between Jacob GmbH and the US operation is respectful, positive and productive.
Managing Director I IMIG USA
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