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Profiting from strategic alliances

August 1st, 2011 / By: / Feature, Management

Expanding possibilities—and profitability—through strategic alliances.

A great many companies in the specialty fabrics industry are small businesses. Two people, 10 people, 50 people—they can only do so much in a day.

Crosslink, a materials development company based in St. Louis, Mo., is one such small business, with fewer than 30 employees spread across three locations. “What we’re really good at,” says vice president of government relations and operations Don Landy, “is developing specific classes of materials for very specific product applications. As such, being a small company, we can’t afford to have all the needed expertise [to develop new products] in house, nor can we afford all the facilities and equipment we’d need.” So Crosslink has allied itself with two universities to bring new products to market.

One partnership is with Missouri State University in Springfield, whose Jordan Valley Innovation Center (JVIC) is home to several businesses and two university-staffed research centers: the Center for Applied Science and Engineering (CASE), and the Center for Biomedical and Life Sciences (CBLS). In 2008, Crosslink moved into the 4,200-square-foot third floor of the JVIC building; the company subcontracts portions of its contracts to both CASE and CBLS. “It’s a very integral part of our strategy, there’s no question,” Landy says. “It provides Crosslink a much broader bandwidth in terms of expertise, facilities, equipment, and other types of capabilities that we wouldn’t otherwise have if we were on our own.”

The partnership has been fruitful. In a project for the U.S. Army, Crosslink has been developing a self-detoxifying coating for fabrics. Energized by an electronic circuit, the coating generates hydrogen peroxide via a catalytic event. The compound then attacks whatever chemical agents are present. “CBLS helped us with understanding the biological side of some of the agents that we had to deal with, as well as just testing and evaluating the different types of devices that we built,” Landy says. “And then CASE helped us design the electronic circuit that’s used in the system itself.”

For another military contract, Crosslink is currently developing a drug delivery system that can be delivered through bandages. It is intended to promote wound healing and reduce infection. Again, both of the JVIC research labs play a key role. “CBLS is checking the efficacy of the drugs that we’re releasing on cell cultures,” explains Landy. “Crosslink doesn’t have any folks with a biology or medical degree on staff, so we utilize the expertise of the folks at CBLS to bring that to the table. And then CASE is helping us with engineering the electronic circuits that we need in order to effect the release.” More recently, Crosslink forged a similar partnership with The University of Southern Mississippi in Hattiesburg, Miss. The company maintains a presence at the research center known as The Accelerator. Here, too, Crosslink is increasing its skill set exponentially without having to hire a single new employee.

Stick to your knitting

Many companies forge lasting and beneficial partnerships within the specialty fabrics industry. Not every shop has the same core competencies. Paul Glynn, vice president of operations at Portland Color, a Portland, Maine-based digital printing company, says many fabricators prefer to subcontract large-format print jobs to a company like his rather than purchase their own printing equipment. “The equipment is big,” he points out. “We have a 10-foot-by-50-foot table to work on. It takes up a lot of room, and a lot of companies don’t have the space. The equipment also needs knowledgeable employees, who can be expensive.”

It was a partnership with another Maine company, tension fabric structure manufacturer Transformit, in Gorham, that launched Portland Color into the large-format fabric printing world many years ago. “We started doing large-format fabric work based on an alliance with them, because they didn’t want to do printing,” Glynn recalls. “It was an example of not wanting to have to add the space and the employees with the expertise to do that. So we entered the fabric market with the [DuPont™] Artistri® 2020, which did direct-to-fabric. Then when we expanded to the wide-format, we went into yet another partnership with the printer manufacturer: we were the beta site for turning a solvent printer into a wide-format dye-sub printer so that it could be a dual-use machine.”

To this day, Portland Color does the lion’s share of Transformit’s fabric printing, leaving the fabric structure manufacturer free to do what it does best.

Relatively few specialty fabrics companies keep digital printing in-house. Jaime Parker, president of Shadys, Pasadena, Calif., had no intention of buying large-format printing equipment when he started a company to sell golf car shades. “Our idea for our company is to stay relatively small and be more of a marketing-centered company, if you will,” he says. “Our job is to market and grow these products. Everything else we do, we outsource—all of our manufacturing, all of our printing, and so forth. We use only one printer, who does an excellent job for us.”

Many fabricators forge relationships with other companies who do the same kind of work. Rosemary Krienke, former owner of North Texas Tarp and Awning LLC, Denton, Texas (she is turning over operations to her son Gerald but is still involved in the business), says her firm often partners with other fabricators outside its local market. If North Texas gets an awning installation request from a faraway client, she’ll often hand off the job to a shop that’s closer geographically so they’ll be able to bid it more competitively. The other shops return the favor. This strategy is all the more important, she says, now that gas prices are so high. “You have to have confidence in the people in order for this strategy to work,” she says. “Over the years, we’ve built enough relationships through IFAI that we know, from going to seminars and from people presenting at the awning symposiums, who can do a good job and who can’t. I don’t think there’s any state in the union where I couldn’t call somebody up who I would feel really, really comfortable with, to know that they were doing the same type of quality that we would expect.”

From time to time Krienke also takes on custom manufacturing work. “We have gone out and partnered with other companies to engineer a product for them that would fit their application,” she says. “They would come and tell us what they want, we send them some prototypes, they test them out, we do some tweaking or whatever needs to be done with it. We have gotten successful long-term commitments on that type of thing.” She’ll do the same for small-time local inventors who want to make a prototype of their Big Idea.

But she’s learned through experience to ask a lot of questions, and to structure the deal so that her company makes money even if the product never gets off the ground. “These gentlemen have an idea that will solve a need, but they probably haven’t got the financial ability or the marketing ability required to bring a product to market,” she says. “But you hate to bust their bubble. We just make it so the whole cost of the fabric is included in the price of the first article, so we won’t be out the money. Then we’ll go ahead and do their product for them. Because you never know; it could be the thing that somebody will pick up.”

Skin in the game

Marketing is so crucial to launching new products that many fabricators form alliances specifically to improve their marketing impact. When Parker started Shadys, he immediately targeted Club Car, a high-end manufacturer of golf cars and utility vehicles, as a marketing partner. He tracked down one of the company’s executives at a conference and struck a deal to position his company’s fabric golf shades with Club Car’s golf cars. “By partnering with them, we were able to immediately gain credibility amongst the industry,” he says. “Number one, they have a very reputable name and brand. And number two, we have access to their distribution network now, which is over 1000 distributors internationally. It was a great way for us to leverage the Club Car brand for two reasons: sales and distribution, and credibility and recognition.”

For Parker, one of the most important parts of a strategic partnership is making sure both parties have skin in the game. That’s the case in the alliance he has struck: Club Car endorses Shadys and makes sure its distributors and customers are made aware of the shade product, while Shadys is required to meet certain minimum sales requirements and is forbidden from placing its product with competitors.

When it comes to product visibility, a strategic partnership struck by SeaShell Intl. Inc., Vista, Calif., takes the cake. In 2008, Brett Hanley, SeaShell’s vice president of sales, convinced several television stations in the San Diego market to cover his company’s product launch. At one of the stations, WB affiliate Channel 6, SeaShell brought in a mobile awning unit and set it up in the parking lot for the launch event. This was serendipitous, because it turned out that the station’s news anchors loved having an outdoor soundstage. They convinced the station to strike a deal with the awning maker for a permanent structure.

“It turned into a nice partnership,” Hanley says. “Day in, day out, every morning, they use the SeaShell Awning Backlot [for part of their morning news broadcast]. They refer to it as the SeaShell Awning Backlot, and I don’t pay anything for it. If I were to actually pay for the coverage that I’m getting, it would cost me something like $100,000 a year.”

The TV station also links to the awning company on its website. Hanley says it works in concert with his other PR efforts: When potential customers receive promotional materials, they often recall the company’s name and product from the morning news.

Hanley reckons the partnership has generated a quarter million dollars worth of business for a $10,000 up-front investment. And what’s more, it has spread happiness among both parties. “We don’t do it as much anymore, but we used to go in on Thursdays and have Mimosa Thursdays with them and get air time,” Hanley laughs. “That was the other big driving force; the anchors liked Mimosa Thursdays. They wanted us to come in with the champagne and orange juice.”

Jamie Swedberg is an editor and freelancer writer based near Athens, Ga.

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