Thirty years ago, Michael Porter introduced three best generic strategies—cost leadership, differentiation, and market segmentation (or focus)—in his 1980 book Competitive Strategy: Techniques for Analysing Industries and Competitors. Since then, these three strategies have helped explain numerous success stories in the business world. While looking at Lectra with Porter’s theory in mind, I had to accredit market segmentation as a winning strategy for the company’s success.
Headquartered in Paris, France, Lectra provides software, hardware, consulting, and related services to its global customers. Its software ranges from design to pattern-making, 3D prototyping, marker-making, and product development collaboration. Its hardware is high-performance automated knife and laser cutters for fabrics, leather, industrial fabrics and composites. Fashion is the major industry that Lectra targets, however the company also serves the automotive, furniture, aeronautical and marine, wind power, and personal protective equipment industries. With that being said, Lectra looks quite diverse in terms of the product lines and industries it serves. However, when examined for the purpose of using Lectra products and services, the company’s focus is clear—Lectra helps companies develop and, to a certain degree, manufacture specific types of products that use soft materials. The commonalities amongst these products allow Lectra to service multiple industries and business functions and remain focused.
A Brief History of Lectra
Founded in 1973, and offering its first computer-aided design (CAD) systems for apparel pattern-making and grading in 1976, Lectra has maintained its key target customers with reasonable expansions.
1) Vertical expansion: Starting from pattern-making and grading systems, Lectra has been able to support more business activities within the fashion industry throughout its 37 years of evolution, for example, computer-aided manufacturing (CAM), textile and fashion design, product development collaboration and management, 3D virtual prototyping, etc.
2) Horizontal expansion: Realizing that its expertise and products can benefit some adjacent business needs outside the fashion domain, Lectra expanded its services and technologies to address the needs of developing and manufacturing products that require significant use of soft materials, for example, upholsteries for the furniture industry and seats, interiors, and airbags for the automotive industry.
3) Geographical expansion: Lectra established most of its global reach during the 1990s. Nowadays, the company generates 89 percent of its revenues outside France—93 percent directly with customers through its network of 31 sales and services subsidiaries, five International Call Centers, and five International Advanced Technology Centers.
There were ups and downs in Lectra’s history, but the dedication of the company and the leadership demonstrated by the management team saved the company whenever there was an internal or external hardship. Although Lectra has had vertical, horizontal, and significant geographical expansions, the company’s move has always been built upon its core competency: the fashion industry. Today, after its expansion in other industries, about 60 percent of its revenues still come from the fashion sector.
Lectra Product Portfolio
As discussed previously, Lectra’s vertical product development allows the company to cover its customers’ product development and production cycle with necessary specializations for each industry. In short, Lectra’s offerings fall into the following categories:
1) Collection Development Collaboration and Life Cycle Management
Lectra Fashion PLM: A comprehensive, modular, and scalable product lifecycle management (PLM) solution designed specifically for fashion brands, retailers, and manufacturers to create, develop, produce, and manage fashion collections from the designer idea to the final end-product.
2) Product / Collection Design and Development Tools
Kaledo®: Lectra’s fashion CAD solution that allows the digital design of fashion concepts (story boards), styles, prints, knits, and woven fabrics.
Modaris®: The CAD pattern-making and grading solutions, covering the apparel product-engineering process, that not only accelerate the pattern-making process but also simulate the “look and fit” results using 3D virtual prototyping.
Diamino®: Automated or interactive creation of cut-ready markers that prompt material savings and productivity gains.
Romans Cad®©: Specialized CAD for footwear and leather goods, covering 3D design, 2D pattern-making, model specification, and technical data management.
DesignConcept: Specialized design solutions for automotive, aeronautical, and marine interiors, furniture, industrial fabrics, and composite and furniture materials.
3) Digital Manufacturing and Cutting Room Solutions
Optiplan®: The solution that simulates, optimizes, and automates the material cutting process—a critical step in apparel manufacturing.
Progress® Brio: Automated spreaders functioning for continuous production during the cutting process.
Vector®: Automated cutters catering for various production volumes and material types.
ProSpin®: Single-ply cutter specifically for prototyping and small runs.
Leather cutting (MFC and CLS): Designed for automated leather cutting for the furniture industry (MFC) and the automotive industry (CLS).
FocusAirbag®: Lectra’s laser cutter specialized for producing vehicle airbags.
Where Is Lectra Standing Now
With €153 million ($214 million [US]) in revenues in 2009, Lectra holds a large market share in the fashion CAD/CAM and PLM market. Hit by the economic downturn—like many other software vendors—Lectra had noticeable decrease in revenues in the past couple of years mainly due to the decrease of new systems sales. However, Lectra was able to bring some exhilarating news by posting €43 million Q1 2010 revenues, up 15 percent relative to Q1 2009. More importantly, revenues from new systems sales (€17.9 million) were up 31 percent.
The in-depth knowledge that Lectra has accumulated through its long-time practice serving the fashion industry is the most significant competitive advantage it holds. From the artistic optimizations of the fabric cutters and cutting processes to the know-how and libraries embedded in the fashion collaborative solutions, fashion-specific expertise is a critical differentiator between Lectra and many of its competitors with shorter presence in the fashion PLM market. As a software and equipment provider purely dealing with soft materials, Lectra may not be quite effective at managing both soft-line and hard-line products at the same time if a customer needs to do so. However, soft-line along should give Lectra enough opportunity to grow.
Organic integration between CAD/CAM and its collaborative platform is a winning factor for Lectra. This factor becomes an even greater advantage when domestic fashion brands in emerging markets start to boom. Due to fashion manufacturers in North America and Europe outsourcing their production to lower-labor-cost countries, manufacturing process management (MPM) hasn’t been a big concern within many global fashion players’ PLM adoption plans. However, to these domestic brands in emerging markets, they need not only to design and distribute products, but also to manage the manufacturing process directly. In emerging markets, Lectra has already secured its ground on CAD/CAM products and has started marketing its fashion PLM.
Looking into the Future
Based on recent interactions with Lectra, my understanding of Lectra’s future growth is that the company will keep focusing on serving its current target market with greater breadth and depth in its product and service offerings.
Rooted in point solutions such as pattern making and fabric cutting, Lectra’s moves to product data management (PDM) and then PLM indicate the vendor’s growing interest in helping customers manage their business processes. As Lectra’s capability keeps expanding to supply chain collaboration, business performance management (BPM), and enterprise integration, the vendor’s future offerings may trigger another time of discussion on whether enterprise resource planning (ERP) or PLM should be the backbone for a company’s entire information environment, a topic that has been on and off during the past decade.
On the depth side, I’ll expect Lectra to support product design, development, and manufacturing process in a more granular manner. Enhancements in collaborative concept development, line planning, order management (for prototypes and samples), and vendor management will probably be seen in the near future.
I’d like to discuss Lectra’s future in the cloud and to the crowd. The globalized fashion business has such a sophisticated value network with so many stakeholders contributing to the creation and delivery of a single product. Facing the shortening product life cycle, fashion brands and retailers will find that moving to the cloud is a way to further facilitate collaboration to tackle the ever-changing consumer demands.
In order to tighten the connection between product developers and consumers, companies are experimenting crowd-sourcing and social product development through proprietary and/or social media channels. As a PLM vendor with in-depth capability in creating, presenting, and managing product definition information for fashion goods, Lectra has great potential to help conduct effective and content-rich collaboration between manufacturers/retailers and consumers.
Get into the cloud and connect to the crowd. This is how I see the future of Lectra.