MFG.Com: Going Global With a Unique Leader
Perhaps I'm difficult to impress. That's because after meeting most CEOs of Spend Management related vendors, I come away with a positive impression of them as executives and individuals, yet I'm not often sold on their ability to thrive and lead in what has proved a tough market over the past decade for vendors. Often times, this comes down not to the general characteristics that make a good CEO (e.g., management style, strong executive track record, etc.), but the challenge of creating and executing on a winning business model that maps to what procurement organizations are willing to pay for (which is not much, and you better negotiate "not much" down from there ...) This skepticism is founded on watching so many vendors flounder over the years in the sector. Indeed, far more Spend Management providers have failed, in fact, than those which have had strong exits.
But some leaders you just want to bet on. One of those is Mitch Free, of MFG.com. Mitch is incredibly passionate about his company, and even though I have some questions about whether MFG.com should serve as a stand-alone direct materials sourcing application for organizations, I have no doubt his model is creating tremendous value and is resonating in the manufacturing world by taking supplier search capabilities to the next level, offering a true "parts marketplace" approach that is free to buyers. And you can't help but love his story and gritty style. Perhaps this explains why Jeff Bezos volunteered to put his own money into the venture. Mitch's success is a wonderful *&$#-you to all of the HBR graduates who wrote B2B business plans in hopes of taking over the world, but knew about as much about procurement and supply chain as they could cram into a few study sessions. Mitch is the opposite of the b-school type -- gritty, school of hard knocks, and personally knowledgeable about how a machine shop actually works (and how to get the attention of their owners). Yet he's also humble and inquisitive. He cares so much about improving what he has that he reaches out to even small customers soliciting feedback and input directly, wanting to genuinely know how he can improve his sourcing mousetrap.
Most recently, MFG.com announced its acquisition of Sourcing Parts, a European-based provider with similar marketplace capabilities on the Continent. This should help MFG.com take its model to Europe, yet it appears to do little to address the need to help companies with how best to balance spend aggregation with individual piece-part purchasing -- a topic for future debate and discussion on this blog for sure. I'd also love to see MFG.com continue to build out a capability for working with Indian and Chinese suppliers as well, including technology and services to help manufacturing companies transition parts into the region -- not just to identify suppliers in the first place. But perhaps that is in the works as well.
- Jason Busch
But some leaders you just want to bet on. One of those is Mitch Free, of MFG.com. Mitch is incredibly passionate about his company, and even though I have some questions about whether MFG.com should serve as a stand-alone direct materials sourcing application for organizations, I have no doubt his model is creating tremendous value and is resonating in the manufacturing world by taking supplier search capabilities to the next level, offering a true "parts marketplace" approach that is free to buyers. And you can't help but love his story and gritty style. Perhaps this explains why Jeff Bezos volunteered to put his own money into the venture. Mitch's success is a wonderful *&$#-you to all of the HBR graduates who wrote B2B business plans in hopes of taking over the world, but knew about as much about procurement and supply chain as they could cram into a few study sessions. Mitch is the opposite of the b-school type -- gritty, school of hard knocks, and personally knowledgeable about how a machine shop actually works (and how to get the attention of their owners). Yet he's also humble and inquisitive. He cares so much about improving what he has that he reaches out to even small customers soliciting feedback and input directly, wanting to genuinely know how he can improve his sourcing mousetrap.
Most recently, MFG.com announced its acquisition of Sourcing Parts, a European-based provider with similar marketplace capabilities on the Continent. This should help MFG.com take its model to Europe, yet it appears to do little to address the need to help companies with how best to balance spend aggregation with individual piece-part purchasing -- a topic for future debate and discussion on this blog for sure. I'd also love to see MFG.com continue to build out a capability for working with Indian and Chinese suppliers as well, including technology and services to help manufacturing companies transition parts into the region -- not just to identify suppliers in the first place. But perhaps that is in the works as well.
- Jason Busch
MFG.com is indeed making some bold moves and putting the pieces in place to be quite disruptive. We are in the process of merging the MFG.com and SourcingParts.com data models and business logic. We'll end up with a single marketplace full of buy from North America and Europe that supports 14 languages, multiple currencies and provides enterprise level sourcing / SRM functionality to our buyer members in an on-demand and extensible rich internet application. Extensibility is the key from the previous sentence. It’s not our goal to compete with spend management and sourcing vendors. They are much better at that business than we intend to or want to be. Our expertise is in building community and operating the marketplace. Our goal is to compliment and extend their offerings, allowing them to provide their customers seamless access to the MFG.com marketplace and tap into cool services such as our rating system (similar to eBay) or RFQ templates that convey deep manufacturing expertise.
It took me a while to come to the reality that the community was our greatest asset. Take CraigsList for example. I could duplicate their technology for a relatively small amount of money, but what would it get me? The huge investment would then be made trying to generate a critical mass of users. The point is you can spend a finite amount of money to build any technology, but an infinite amount of money to move a community. Once a herd gets established, it's very hard to move that herd and prohibitively expensive for would be competitors.
We have garnered that herd and are fortunate to have a profitable and rapidly growing business with fans as opposed to users who we love and care deeply about their success. It may sound old school, but helping them be successful, ensures our success.
As you know, I built MFG.com the old fashioned way by bootstrapping and leveraging everything I owned. I wasn’t smart enough to know how to raise money. We would sell a subscription and buy a chair, sell another and buy a stapler, etc. In hindsight it was best thing that could have happened, it caused me to focus on delivering value and growing in lockstep with the adoption rate of our market. It was really hard, but when you have everything you own on the line, you have to keep your finger on the pulse of your customers. I tell my team almost every day - "love our users, they are the reason we exist... listen to them intently and make sure we are adding value to both buyers and suppliers.”
I was as surprised as anyone when I received a call from Jeff Bezos saying how intrigued he was with what we were doing. We hit it off and found that we have similar ideas about how to grow large global web based businesses. Jeff’s private investment company Bezos Expeditions purchased part of company and to have someone with his experience to help me has been a wonderful thing. There just aren’t that many people in the world that have taken web based business from their garage to global businesses with multi-billion dollar market caps. I feel incredibly fortunate to have him as a friend and business partner.
Do we have it all figured out? Hell no, we still have a lot of hard work, listening, learning and zig zagging to do. But all the pieces are coming together to build a large and lasting company that forever impacts the manufacturing industry and most importantly adds more value than we extract.
Again, thanks for your thoughts on MFG.com. Your characterization of Mitch Free and the success of MFG.com is on the money. To the qualities you mentioned --- his attention to detail, his passion for each and every customer and his down-to-earth grittiness --- and to Mitch’s emphasis on the value of boot-strapping, I’d like to add Mitch’s deep domain expertise. Working his way up from machinist to running a machining operation for a major airline, Mitch’s natural inquisitiveness and intuitive sense resulted in a deep understanding of manufacturing processes and technologies.
Mitch’s rapport with our customers is no surprise; he understands exactly what they are going through because he’s been there and done that. To my mind, this is why MFG.com has succeeded where other sourcing solutions have failed. It’s also why I am happy to be a part of MFG.com.