Few people know Valley Forge Fabrics, but if you’ve ever stayed in a hotel or sat in a hotel lobby, then you have probably experienced the company’s products without even knowing it. This once small, mom-and-pop business now sells more decorative upholstery fabrics to the hospitality industry than any other company in the world.
Valley Forge Fabrics was founded by a husband-and-wife team who had a simple idea – to sell high quality fabrics to hotels. Over the past three decades, the company has emerged as the dominant player in its niche.
My friend, Jill Hellman, chief innovator at The Leland C. and Mary M. Pillsbury Institute for Hospitality Entrepreneurship at Cornell University, which focuses on innovations in hospitality, turned me on to Valley Forge Fabrics. After interviewing the Senior Vice President Mikey Dobin, I learned that Valley Forge Fabrics has clearly separated itself from the competition.
My interview also uncovered how the company has been so successful – Valley Forge outthinks its competition across multiple dimensions. Mikey and his family have put in place at least four powerful innovation patterns that keep their competition at bay.
Jump Deeper Into The Supply Line
Mikey officially joined his parents’ business in 1999, when he was just out of college. But as with a lot of family businesses, Mikey had already spent several summers working and learning the business. Mikey wasted no time helping to expand Valley Forge’s horizons. He flew to Singapore to open a Valley Forge office and there he came upon an innovative, yet ancient, opportunity.
Mikey saw an opportunity to reorganize his supply chain, which ended up creating a compelling competitive advantage.
Mikey said that he "realized that everyone was selling very similar things to the hotel industry. Everyone was on the same playing field. And it wasn’t our playing field or even our competitor’s playing field. We decided that we had to create our own field and make something different."
He realized that everyone was offering hotels very similar products because they were all sources from the same set of vertically integrated suppliers. These suppliers made several fabrics in various color schemes, but none of it was custom. Hotel designers would provide suppliers with a style, plan and color palette to help the suppliers design the fabric, but the designers wouldn’t actually see the fabric until thousands of yards had already been woven. The fabric suppliers would, in essence, tell designers, "This is not exactly what you are looking for, but it is close."
Business schools teach MBAs that vertical integration lowers costs. But luckily, Mikey had not learned that lesson. He started going directly to yarn makers and fabric weavers and asked them what it would cost to buy raw materials directly and weave smaller, customized fabrics for specific designs.
Mikey found that that he could match the prices of large, integrated manufacturers, even by orchestrating the material sourcing himself. By going directly to yarn makers and weavers, Mikey was able to develop and order customized, durable fabrics.
This radical sourcing strategy worked for Valley Forge Fabrics. While its competitors all bought fabric from large, integrated suppliers, Valley Forge bypassed these companies and went directly to weavers. So when competitors offered a fabric that was "not exactly what you want but close," Valley Forge offered a custom-woven fabric with the precise properties – color, durability and weave – that its client desired.
This innovation tactic has ancient roots and plays on a common trap many companies fall into. Usually, once a company or an industry finds a particularly successful path, they stop questioning and searching for new and improved methods. They just accept its path as the norm or best practice.
Like Valley Forge Fabrics, Dell is a good example of a company following a different path. Dell was such a phenomenal early success because while it was selling computers to its consumers directly, its competitors, HP and Compaq, could not initially bring themselves to give up the obvious path of reaching consumers through retailers.
This innovation shows up several times in history, and when I was in Sweden last month, I met an executive who shared the story of Sweden’s 1658 conquest of Denmark. Apparently, Denmark expected the orthodox path – that Sweden would cross over their shared border. But Sweden took the unexpected route of first entering territory that is now part of Germany, and then attacking Denmark from the side. Denmark was taken by surprise and was forced to give up half of its territory. Genghis Khan used this same tactic to conquer the ancient stronghold of Bucara in 1220 AD.
This strategy can be applied to your own industry. When your market fixates on the obvious path, to the consumer or to the supplier, it can become complacent.
Ask yourself the following questions to see if you have an opportunity to take your competitors by surprise.
- What path is your company on?
- What path are your competitors on?
- How can you jump deeper into your supply line or reach your client more directly than your competitors?
- Can you identify an unorthodox path?