Posted on Feb 3, 2014

The Competitive Advantage of Independence

Not many would consider the deep knowledge of metallurgy, friction management or power transmission as a conversation starter at a cocktail party. Most would likely consider it rather boring to talk about how to improve the reliability and efficiency of heavy machinery.

Yet, the nearly 20,000 employees at Timken live and breathe this world every day.

Consider the following story being told by the folks at Timken about working on a deep-water oil-drilling platform:

Out here, where the closest land is the bottom of the ocean, it never stops. Not for one second. It’s the ultimate test – of you and your equipment – that you never stop preparing for. Because when it’s this deep, nothing ever comes easy.

Or consider this story being told by Timken employees about the difference they’re making on huge airplanes:

Six million parts, all riding on a handful of wheels and struts. And you. The unsung hero. The one person everybody’s safety depends on. Remember signing up for the easy stuff? Didn’t think so.

Last year, Timken was #493 on the Fortune-500 list of companies. Even though this ranking was a slightly lower from the previous year, at $5 billion in revenue they are still a large company.

Stronger. By Design.

Timken’s tagline is Stronger. By Design. The company clearly feels their products are stronger – and thereby better – than their competitors. And “how” they do this can be answered by the second part: the way it’s designed.

Yes, this is clever. Yes, it’s solid branding.

But what is the real driver of their innovation? What motivates the better designs that lead to stronger and better products?

It’s their people. And the common element driving their people can be found in their core values.

Timken’s Core Values

Timken lists the following as their core values:

Ethics & Integrity (to me, ethics is a subset of integrity)
Quality
Innovation
Independence

Based on my current research, the first three – Integrity, Quality, Innovation – are fundamental values that are shared by most businesses. While they are critically important, they rarely create a competitive advantage.

At Timken, it’s the value of Independence that’s making a difference.

The Value of Independence

As a differentiation value, Independence means freedom from control, constraint or influence of others; or autonomous.

Not many organizations would promote independence. It’s considered risky business to allow employees to go off and “do their own thing.”

The value of Independence requires

A high degree of trust.
An open door to challenge the status quo, while maintaining respect.
A solid understanding of the mission and vision

At Timken, the value of Independence is encouraged as follows:

We leverage independent thinking to create collective action for the benefit of our stakeholders. (Too bad they don’t state just customers. It would be more effective)
We encourage independence in thought and action.
We maintain the ability to control our own corporate destiny.
We demonstrate an ability and willingness to do things differently.

To highlight the importance of this value, Timken claims that 30% of their steel business today didn’t even exist five years ago. The ability for employees to think and act differently has enabled the company to adapt to an ever-changing market.

Splitting the Company

For many years now, Timken has been one of the best performing companies in the steel industry. It’s a positive sign of their competitive advantage.

However, to unlock additional hidden value within the company, Timken’s board decided in September 2013 to split the company into two separate publicly traded entities:

The bearings and power transmission business, generating about $3.4 billion per year. This business operates globally.
The steel business, generating about $1.7 billion a year. This business operates primarily in the U.S.

When Jim Cramer, host of Mad Money on CNBC, interviewed Jim Griffin, CEO of Timken, he suggested this was a positive sign for the future of the company. I see this as yet another sign that the value of independence is working well for Timken.

Now it will be interesting to see if both companies preserve these core values, particularly Independence. To-date, it has been a key factor in providing a competitive advantage.