Growth Opportunities for an Environmental Testing Lab
Client Problem
Our client was an environmental testing lab which had recently been purchased by a much larger comapny. The testing lab had been founded by scientists working in the 1980s on new ways to test the environment for contamination — including cutting edge GC/MS (Gas Chromatography / Mass Spectroscopy) techniques. The lab had grown to about $100 million in annual sales, but suffered poor profitability. One promising division in particular was struggling: the Hi-Resolution GC/MS group, which had developed pioneering equipment and procedures to detect even very low rates of contamination for dangerous materials such as dioxins. While the group's technology was industry-leading, it suffered from low utilization and uncertain growth prospects, which also contributed to high staff turnover and significant training costs.
Approach
Our main focus was identifying the prospects for the core testing market (dioxins) and evaluating other markets where Hi-Res GC/MS could make headway. For the dioxin markets, we first pursued comprehensive research about the occurence and regulatory framework for dioxin. In addition to the core dioxin market already being pursued by the lab (testing sites where PCBs from electrical transformers had deteriorated to dioxin) we identified 2 other promising growth areas: local water utility testing regulations creating pending requirements for dioxin testing, and EPA requirements for dioxin testing at the handful of remaining U.S. kraft-fired (bleach) paper mills. Beyond identifying key addressable market segments, we also examined channel alternatives and determined that the current approach of marketing directly to industry environmental departments (largely through word-of-mouth and ad-hoc contacts) needed to be qugmented with partnerships with environmental consulting and remediation firms, which were handling an increased share of environmental testing projects. Additionaly, we identified further compounds beyond dioxin such as arsenic and nitrogen oxides where Hi-Res GC/MS could participate in "creating a market" — replicating the process by which the dioxin market had been born. Finally, we identified some changes in pricing structure and level mapped to these new segments and made recommendations on how to best manage growth internally.
Results
The client immediately implemented our recommendations to widen its marketing efforts — both to broaden the range of potential substances and to more fully develop the emerging dioxin testing market. Within a year, volumes had almost doubled and the Hi-Res GC/MS group had returned to profitability. While the future segments (e.g., other compounds) market is not yet clear, the group had established a strong pipeline of candidate compounds and industries for future growth. And, with the stronger channel parterns posed by environmental consulting firms, the group had found an effective means to broadcast its capabilities and find promising new applications for its cutting-edge testing techniques.
