Starbucks recently announced the closing of 600 underperforming stores and, at the same time, the planned opening of 200 new locations. This was on my mind the other day as I stopped by my bustling local Starbucks to pick up some coffees for the office.

I don't think anyone expects that Starbucks is headed toward failure. Instead, the general opinion seems to be that - as hard as the decision was to make - Starbucks is being smart in the face of a flat or contracting market. Starbucks understands the precept of successful business practices in uncertain economic times: Go where it's profitable. Underperforming stores dilute the company's profitability and overall health. A net loss of 400 stores - provided the new ones are in profitable locations - can mean more to the company's bottom line than maintaining all the old locations.

Just like Starbucks, the U.S. PCB industry has been working its way through a well-documented softening in the market over the past few months. Since 2001, we've seen a steady decline in the number of PCB fabrication companies as fabricators continue to close their doors at the rate of 30 or so each year. Growth in total PCB fabrication sales year-on-year in the U.S. is marginal, and this trend is due to more than just industry consolidation. While healthy U.S. companies are absorbing lesser performers (consolidation), the industry's current dynamic is also a case of businesses moving overseas, making the U.S. manufacturing pie smaller overall (contraction), while the weaker players struggle in a difficult economic environment.

And yet, it isn't all doom-and-gloom in our industry. The PCB companies that stick to some basic principles for good business can not only survive, but also thrive. Successfully navigating a contraction cycle is much like other things in life; if you understand what you're up against, you can take appropriate action. It's not knowing that makes it most difficult to compete effectively.

Specialized for Survival

In the current U.S. PCB market, the key to survival is developing a business strategy built on your core competencies (sweet spots), and then being disciplined about executing that plan. Finding innovative or creative ways to make the best possible use of your core competencies completes the strategy.

We are in an age of specialization. At many levels of society, we are becoming less generalized. For example, at the high school in my town, one doesn't see nearly as many three-letter student-athletes any more. Now, depending on interests and skill sets, there is a movement for many children to play one sport practically year-round. One result is that children are becoming even more masterful at a smaller set of skills. This idea parallels the current demands upon PCB manufacturing: Figure out what your company can do both efficiently and profitably. Then, chase that business.

The Strategy

Once company competencies have been identified and a strategy developed, executive leadership must ensure the strategy is communicated to all levels of the organization. Execution on this new strategy will occur at all levels; the message needs to be conveyed all the way from marketing and sales through production, and on to shipping. In some cases, a transformation of culture might be necessary. As the Starbucks example illustrates, passing on business that you can do - but which depletes your overall profitability - is a difficult decision to make.

Once you've identified your core competencies and aligned the company culture, your identity can now be defined, and even strengthened, within the customer community.

Next, use innovation and creativity to develop the processes that further strengthen those sweet spots in your capabilities. Make the operational investments in equipment and talent to strengthen your differentiators. Don't overlook systems requirement (IT/IS), engineering, documents and certifications requirements, and staffing. These activities often occur behind the scenes, yet they are as important as plotters, drills, and plate lines. Continued attention to systems takes discipline and is vital to success.

Finally, collaborate with other manufacturers who have complementary products or services. It's tempting in difficult economies to say yes to a customer wanting something barely in the fringe of your core competencies, but why utilize resources to do work that runs counter to your standard mode of operation? "Co-opetition" is a word bantered around in NASCAR circles, referring to competitors who also collaborate to improve their performance and mutual success.

Successful Execution

In the PCB industry, we need to compete but cooperate at the same time. Here at Sunstone Circuits, for example, we've developed a strong core competency in the high-mix, low-volume production that serves prototype fabrication exceptionally well. In addition to setting up the factory specifically for this mix, we also play to that strength with our extreme 24/7/365 customer service, tailored to the needs of prototyping engineers who use our services. Overall, we strive to be the easiest PCB company to do business with. Those are our strengths.

If you're a PCB fabricator whose strength is in production runs, for example, then it makes sense for you to work closely with a prototyping specialist. After all, it's the successful prototype jobs that will become your next production part number. Instead of competing with the prototype specialists, work with them as a new sales channel. Innovation-minded prototype shops like Sunstone will undoubtedly want to create handoff protocols that help their prototyping customers move seamlessly into production.

Competitive Differentiation

Identifying core competencies, then leveraging partners that can complement areas outside of those strengths will allow you to excel in the marketplace, even when faced with today's tough industry and economic climates. It is possible that those companies struggling or forced out of business could avoid unwanted hardships by honing the skill sets that differentiate them from their competition and using that to their advantage. If we do not narrow our scope, focus on the sweet spots of our specialization, and cooperate, then stateside PCB companies will continue to disappear.

Rocky Catt is the executive vice president and COO of Sunstone Circuits.