TransDigm: Esterline & Korry Electronics Case Study

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Why don't other companies adopt this structure?

I recall when TransDigm took over, there was a lot of talk about in other companies about economies of scale and leveraging the enterprise, among other buzzwords. However, these were almost considered taboo at TransDigm. While these concepts can work, they often come with bureaucratic bloat. TransDigm's focus is clear; price profitability and price productivity and profitable new sales. None of the other stuff plays. If you can’t show either hard savings in terms of real dollars or new business, it’s not real.

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I'm curious why other aerospace companies don't adopt this approach. It's a philosophical question, really, as it impacts how you structure your business, whether you decentralize and push power to the end of the organization or maintain a typical structure.

That's a great question, and I don't have a definitive answer. It's not just about the numbers. Many companies claim to be all about the numbers, but TransDigm is the first company I've worked at that truly operates in this way. All the metrics matter. For instance, there would be a president's letter every month that went to all the presidents, which required a significant effort to put together. So it was a lengthy document, maybe twelve pages, covering your operating division.

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Could you clarify what you mean by market segments?

It was crucial to understand these market segments and accurately project sales for each. The significant difference between TransDigm and Korry Electronics was how we looked at sales. At Esterline, we focused on the projected sales in different market slices. However, TransDigm would look at the market volume based on the previous year's prices. For instance, if I sold 10 items for $100 each last year, that's $1,000. If I plan to sell ten more this year, that's another $1,000. But if I raise my prices by 5%, my sales are then calculated as market volume plus price. They implemented this method to gain a better understanding of margin changes.

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