For decades, Thogus Products supplied custom injection molds for the automotive industry. But to its president, Matthew Hlavin, it felt more like running a savings and loan -- except he wasn't setting the terms. The customers were.

At the time, the automotive industry represented 56% of Thogus Products' business base. But with the auto giants having a hand in how the company aligned its production system, determined the price of its product, set up shipping and scheduled payments, Hlavin had had enough.

He fired his auto customers and laid out a diversification plan for the company, moving into industries ranging from medical to pharmaceutical to food and beverage, aerospace and plumbing. As a result, Thogus Products grew to just over $14 million in business in 2010, an increase of 76% over 2009, and Hlavin is anticipating growth of another 60% this year.

Matthew Hlavin shifted Thogus Products away from primarily serving the automotive industry with custom injection moldsto more focus on engineering and product development. Photo: IW/Peter Alpern

Firing your largest customers is not exactly conventional practice in business circles. But at a time when small and midsize manufacturers are being squeezed on profits and facing increased competition from home and abroad, some have had to re-evaluate their company's future and make changes accordingly.

For Thogus Products, that meant Hlavin had to come to terms with the fact that the company, which his grandfather had built more than 60 years ago, was operating under a corroding business model.

"We had no debt, but we were still in trouble," says Hlavin. "We were still thinking linearly and following the traditional manufacturing path. We had to change our model if we wanted to shape the landscape of our business."

That meant shifting from being a mass producer of plastic parts to one that emphasized engineering and product development. Just as important, Hlavin wanted to stop fighting for smaller and smaller slices of densely competitive industries and identify "blue ocean space," a reference to the best-selling 2005 book Blue Ocean Strategy, by W. Chan Kim and Renée Mauborgne. Blue oceans are a metaphor to describe the wider, deeper potential of market space that is not yet explored.

View article on one page