“Strategy starts with answering the question: what are we not doing anymore?” 

With the help of Staufen, you analyzed the cost drivers. What was the starting point? 

Dr. Christoph Weiss: Our starting point was a clear diagnosis: In which markets, with which customers, products and product groups are we making or losing money? We decided to withdraw from 60 import countries in order to streamline sales. We did the same with products. Fein was very successful with so-called high-frequency technology, but this was at the end of its life cycle. We also exited this product group, as well as some other products, some of which were 30 years old and older. 

What benefits have resulted for Fein? 

Dr. Christoph Weiss: We were able to reduce work preparation, work schedules, manufacturing and quality assurance, thereby removing complexity from the company. I’ll make a rough estimate: We have taken away 10 million in sales, but in this way we have also created cost free space for further growth. We have brought a focus on products that are excellently established in the market. 

You have already achieved great success at Festool by applying market segmentation. 

Dr. Christoph Weiss: That was in 1991, and I’m a little proud of that. I was – I think – the first in the power tool market to say: “No, we no longer produce power tools for all industries and for everyone! We want to be the performance leader that makes the best power tools for carpenters, painters and auto painters. So we segmented the market by industry and application. At that time, the power tool market was about 4 billion – we had 1 percent of that. And then we say, “We’re focusing on a niche!” 

A bold decision! 

Dr. Christoph Weiss: That has indeed been a bold decision. We have always followed the motto: Recognize your customer’s problem, solve it better than anyone else, and you can no longer prevent your success. We have understood very well what requirements craftsmen have for power tools, the accessories and the consumables, and we have succeeded in meeting them. An originally small niche has become bigger and bigger through intelligent problem solving. Today, Festool very likely makes 1 billion in sales; up from 45 million 30 years ago. 

What strategy can a company use to successfully master segmentation? 

Dr. Christoph Weiss: The starting point is certainly always the existing customer and product portfolio. I have to segment my existing clientele. In the market for power tools or technical products in general, this is usually a cube. I have some product groups that I sell to specific industries or industry groups. Behind that there is usually a specific application. In this cube, I have to find my little corners where I can position myself accordingly.

What is the next step in this process? 

Dr. Christoph Weiss: Once I have made this basic definition, it is crucial to think from the outside in: What do customers need? How can I fulfill that in the best possible way? Many companies still think from the inside out. So, I have some idea and search for my market, so to speak. But when I conduct in-depth interviews with customers, I understand what they need. That changes over time. Then it’s my job as a provider to evolve and follow my customers. 

What is your expert advice to entrepreneurs for successful strategy implementation? 

Dr. Christoph Weiss: Strategy begins with the answer to the question: What do we no longer do? This is precisely the question that most entrepreneurs fail to answer. They cling to every euro of sales and find it difficult to take anything out of the portfolio and forgo customers. But this is the only way to create the necessary strength. Figuratively speaking: If I compress water in a powerful high-pressure cleaner, 1000 bar of water pressure comes out the front. That’s how strategy works. I have to bundle the energy in the company and focus it on one point. In this way, even as a small company, I will be more profitable and successful than average.