Lately, for most of our industry, doing business has been a lot like rowing upstream with oars the size of spoons. No matter how hard you row, you're lucky to stay in the same place. Rather than fighting it, consider letting the current carry us downstream...

Based on recent AMTDA surveys, it's clear the future profitability of our companies — for manufacturers and distributors alike — will not come from the margins we gain from selling iron. Profitability will come from the services we provide before, during and particularly, after the sale.

There is, and will continue to be, product overcapacity in our industry. Since 1995, world machine tool consumption has stagnated. With the amazing productivity of today's equipment and the unused capacity in most shops, it's unlikely we'll see any big surge in orders.

What the customers are asking for is not new equipment, but services and programs to maximize the equipment they have at the least expense. These services and programs include ongoing technical support, training, service and maintenance agreements, CNC programming and remote diagnostics.

What customers want is a full service relationship — one that doesn't stop with the sale or the occasional visit when a machine goes down. They need ongoing assistance in cutting costs and running a leaner shop which means:

• Helping manage or managing, from cradle to grave, the machines you sell (maybe even the ones you don't!)
• Renting machines or charging by parts per hour rather than selling machines
• Managing and employing your customers' maintenance and service staff to lower their overhead
• Anything that makes a customer's products less expensive for his customer, more profitable and delivered to his market faster than any of his competitors.

Moving full service "philosophy" to actual practice entails recognizing and creating value in everything that "surrounds" our product rather than just the product.

Manufacturers are recognizing "downstream value" and are implementing strategies to create less dependency on their manufacturing operations. For example, Boeing's decision to move its headquarters from Seattle to Chicago is all about downstream value. Recognizing its core manufacturing business has limited future growth, Boeing chairman Phil Condit explained the shift as a fundamental, strategic bid to reduce reliance on the company's airplane and defense manufacturing businesses. Boeing intends to become a provider of "aerospace solutions" including aircraft servicing, space communications, air traffic control services and Internet access for air travelers.

The concept of downstream services is not new. In fact, for the past decade organizations have begun providing integrated supply agreements to customers. Today, downstream value has become more relevant due to the margin pressures on product sales and the need for our customers to reduce overhead in areas beyond their core competencies.

Few organizations have strategies for providing downstream value. The market is ready for this shift, but it will require a fundamental change for organizations traditionally focused on moving iron and measuring success by units.

Now it's time to lift up your oar, reposition it as a rudder and go with the current, steering yourself into areas that provide the best opportunity for sustained growth and profitability.