Bookonomika "Mastering Decline. Stories and Lessons from a Company Making Profit Against the Odds" (Alain Liebaert)
This book (*) is the story of a company facing a structural decline in output and turnover, told by its company leader, who managed to increase profitability. Alain Liebaert, CEO and owner of the family business in textiles Liebaert Textiles located in Deinze near Ghent, gives us an insight into how he achieved this. During my professional career, I had the privilege to meet Alain Liebaert on several occasions. He is an inspiring and wise company leader.
To get right to the point: this book is NOT about degrowth. On the contrary, the goal of the company is still to grow, or at least to strive for economic growth. But due to the circumstances, it is rather impossible to achieve this goal. Indeed, circumstances outside the company make it sometimes impossible to grow. What circumstances? For example, unfortunate market developments, or the emergence of new competitors. Despite all the company’s efforts, a declining market makes it very difficult to grow, even when a business is excellently managed.
Alain Liebaert is already the fourth generation in this family business, with the fifth generation recently joining. He has been running the business for more than 30 years after his father passed away far too early. Alain was only 28 when he had to take over the company which makes elastic knitted fabrics for lingerie.
One of the key messages throughout his long testimonial in this book is the importance of the team. He states: ‘Within a few years, I was able to build an exceptional team that eased the burden of my loneliness.’ Yes, it is lonely at the top, especially when you have to fight decline day by day. ‘You can never win a war by yourself – you will always be stronger if you are surrounded by loyal managers, friends and family.’ Yes, family as well. For Alain Liebaert his wife and kids were and are crucial to his success in business. ‘My wife and our four children are our greatest achievement and our greatest pride.’
“Positioning is key. What position do you want your brand to have in the market?”
Strategic choices
A few striking figures illustrate the rise and fall of the Liebaert Textiles company. In the 1990s there was growth both in terms of turnover and in terms of profit: the turnover rose from €25 million to €45 million and the cash flow from 3.8% to 23%, with a workforce of 300 people. In the new millennium (2000-2021) the turnover shrank from €45 to €16 million, and the workforce shrank to 150. However, the cash flow increased from 23% to 25%.
As might be expected, the main reason for the loss of output and turnover was globalization in the worldwide textile sector. The rise of Asia and China in particular ate away the bulk of the Liebaert business as well as that of many other Western European textile companies, at least on the manufacturing side. Western fashion brands caused that huge shift eastward. They preferred the cheap offshoring to local production in Western Europe.
In this ‘unfriendly’ environment, Alain Liebaert had to make strategic choices. Should he follow the desire of his customers, the fashion retailers, to move his manufacturing activities to Asia? Or should he look for new solutions for his manufacturing business in Belgium? He chose the latter. He decided not to go to the east, as many others did. But then, how could he compete with the new competitors from Asia? Upgrading became his new strategy with a focus on high product quality and excellent service. He knew very well that this strategy would cost him a lot of volume and turnover. But focusing on the higher end meant higher added value which made it possible to achieve a higher profitability even with less quantity.
New products
However, can this upgrading strategy continue forever? Going further up the value chain implies the danger of an even smaller volume, ending up in a very small niche. Such a niche could no longer be profitable, due to too high fixed costs, for example. At the moment this is not yet the case and taking this eventuality into account, Alain Liebaert developed a second strategic option: new products that could be manufactured on the same machines.
Two of his children who recently joined the company, pushed the introduction of innovative products. The first was in sportswear and activewear: RV-Elite, a tailor-made compression garment for elite athletes. It has proven to provide superior performance for sportsmen. But since it is more expensive than lesser-performing products from competitors, it is an uphill battle to convince cost- and profit-oriented sportswear manufacturers. A second new product is RectoVerso, high-quality ‘athleisure’ or leisurewear for athletes, such as leggings and shorts, made by Liebaert Textiles.
The challenge for a company operating in a declining environment is marketing. Marketing new products, new brands, is always very expensive, but in a declining landscape budget constraints are extreme. In the book, Alain Liebaert uncovers elements of his approach to counter this when marketing high-end products: ‘Make sure you have a good story to tell’ – ‘Know your brand’s consumer before you build the brand’ – ‘Positioning is key. What position do you want your brand to have in the market?’ – ‘Work with freelancers and smaller agencies’ – ‘In B2C, an omnichannel approach wins’ – ‘Take a balanced approach; beware of extreme, one-sided trends’ – ‘Hire motivated students’ – ‘Get government funding for your projects, for example for R&D’.
Good advice
Will this strategy work? Alain Liebaert clearly realises that diversification is easy to talk about, but very difficult to achieve. Anyhow, he is a believer: ‘I am confident that our turnover will rise again to €25 million by the end of 2023. My confidence comes from our diversification efforts – primarily our branded projects: RectoVerso and RV-Elite.’
Alain Liebaert is well aware that things can always go wrong. It puzzles him and leaves him looking for a clear answer. In return, he puts the following question on the table, not only with regard to his own company but actually for all family businesses: ‘Would you rather saddle your children with a company in decline with the risk of destroying family harmony forever, or manoeuvre safely and slowly toward an exit strategy? It is always sad to end a legacy but it is better than prolonging a bitter one that might alienate you from your spouse, children and possibly even grandchildren.’
Alain Liebaert gives good advice to anyone in the following areas: People – Product – Structure – Money – Evaluation – Outside forces. All of Liebaert’s ideas in these different areas are interesting, but let us just have a final closer look at ‘Money’. Liebaert: ‘Cash is the key. Cash gives you options. No cash means no options.’ He knows that in manufacturing you have to invest to keep up with the new technologies. But why buy brand-new machinery and equipment? ‘You always have the option of buying second-hand as well.’ And don’t rely too much on banks. Of course, in business you need banks, but… Alain Liebaert: ‘Basically, do not count on banks – you are on your own. Learn to live with it!’
Fa Quix
(*) Alain Liebaert – Mastering Decline. Stories and Lessons From a Company. Making Profit Against the Odds – LIDpublising.com