TRUE COST
Niche Focus Plus IIOW is the Most Profitable Option for Filter Companies By Bob McIlvaine
President The McIlvaine Company Bob McIlvaine is the president of The McIlvaine Company, which is helping filter suppliers understand the true cost of their products and the impact on the Serviceable Obtainable Market. He can be reached at rmcilvaine@ mcilvainecompany.com or +1 847.226.2391
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here are 100,000 filtration sub-niches with distinct value propositions and at least $1 million in annual sales. The most successful filtration companies are identifying each sub-niche where they can achieve 40% market share and 30% EBITDA. These sub-niches guide the local salesman. Ten of these sub-niches can be combined and successfully pursued with the help of product, OEM, and regional managers. Let’s call these niches: Each averages $10 million in market size, $4 million in revenues and $1.2 million in EBITA. With the right selection of 100 niches, a company can achieve EBITDA of $120 million/year. To put this in perspective, industrial companies average less than 10% EBITDA and the flow control sector less than 14%. So, our example company with annual revenues of $400 million will generate filtration EBITDA greater than all but a few companies worldwide. (1)
100,000 sub-niches
EBITDA
10,000
$120 million
revenue $400 million
niches
100 MPM niches
How can a company sort through all these subniches, pick the right ones, and then pursue them? It is a daunting task. There are discussion about artificial intelligence being the solution which can manage the worlds digital information. The problem is that it can only analyze what is on the internet. So how does a filter company keep pursuing all the best sub-niches? The answer is the Industrial Internet of Wisdom (IIOW). IIOT plus guidance from niche experts can now provide what AI only promises.
38 IFN ISSUE 1 2024
There are hundreds of facts and factors determining the value propositions in each of the 100,000 niches. Furthermore, these facts and factors keep changing with new technology developments, regulations, and competitors. At first blush it seems impossibly expensive to undertake this detailed analysis. But IIOW provides the answer. Most of the facts and factors are applicable to thousands of niches, so it is just a case of making them available. For every filter sub-niche the same hierarchy of territories exists. It starts with 80 countries and sub regions and then expands to states and provinces and then individual purchasers. In each territory the amount of iron ore being mined, the GPM of secondary wastewater treatment, the number of semiconductor chips produced and the amount of pharmaceutical ISO 4 cleanroom space in m3 are relevant for many sub-niche analyses. The wisdom of niche experts is necessary. But here again there are resources which can shed light on many filter sub-niches. Arcelor Mittal bought aging steel companies throughout the world and then centralized decision making on products such as filters for all their plants. BASF in Germany is making decisions for chemical plants throughout the world. Suez and Veolia are making filter decisions for hundreds of water and wastewater municipalities. So, there are niche experts at user, consulting, and systems companies. Another factor which simplifies the task is that some facts and factors only change to a minor extent. It has been a long while since the U.S. created any new states and more than 220 years since the Louisiana Purchase. The organized gathering of information even to include pre-internet days is valuable. McIlvaine created knowledge networks in 1974. They were utilized for decades by the EPA, other governments, end users and suppliers. Surprising as it may seem the R&D results from 30 years ago may be the most valuable facts and factors in a certain niche. Coal gasification filtration was extensively studied at that time but not recently. The new blue hydrogen option makes this old data highly useful.
