Here is an interesting thought experiment for the next time you plan on investing in an asset for your company. Ask, who will benefit from this investment?
I used to be in an organization of CEO’s and one of our members owned a machine shop. This was a high tech affair doing precision machine work using the latest and greatest machining centers. Every time I would see him he would tell me about the latest machine he was buying and how much it cost. Many of these machines were $500,000 or more.
While it was great that he was keeping up with the latest and greatest in terms of equipment, the problem is that all the increased productivity these new machines gave him ended up benefiting someone else. His customers. The reason for this is that his business was very competitive. Any benefit he derived in terms of productivity or capability from the acquisition of a new machine was also being derived from his competitors who were buying the exact same equipment. And they were all too happy to pass the benefits along to his customers to get them to switch vendors so in order to keep them, he had to pass the benefits along as well. He investing all this money, taking all this risk and reaping none of the rewards.
There are many industries like this. Where an investment in new technology goes directly to the customers, not the owners. Textiles, electronics, and machine shops are three. I am sure you can think of many others.
So next time you are going to invest in equipment for your company, ask who will be the most likely beneficiary. You as the owner or your customer? Here is a hint…I you are not making a proprietary product or offering an exclusive brand to a set of loyal fans, then I don’t think you will like the answer.
