Join 7,000+ sharp investors and operators like yourself, and we'll send you a collection of Commoncog's best articles right away: What we can learn fr

Businesses as Ecosystem Organisms

submited by

Style Pass

2024-09-19 14:30:18

Join 7,000+ sharp investors and operators like yourself, and we'll send you a collection of Commoncog's best articles right away:

What we can learn from seeing businesses as organisms in an ecosystem ... using the particularly odd example of HEICO being the barnacle to TransDigm’s whale.

A couple of months ago we published a case on TransDigm — the king of the aerospace aftermarket. We wrote that TransDigm, in many ways, was an instance of Charlie Munger’s dictum to “take a simple idea, and take it seriously”: private equity operators Nick Howley and Doug Peacock took a close look at the aftermarket parts corner of the aerospace industry, and then realised you could exploit it in a very particular, very profitable way.

Before diving into TransDigm’s business, it’s important to understand the unique market in which the company functions. TransDigm operates in the aerospace aftermarket — a secondary market for spare parts, accessories, and non-core airplane equipment.

Airplanes are incredibly complex machines made up of many small parts. What makes the aerospace aftermarket interesting from a supplier’s perspective is the nature of the demand. Some airplane parts do not need to be replaced for decades. Other parts are replaced more often — if infrequently. But even the volumes for the parts that are replaced often tend to be low.