A sander works on a casket at the original Hillenbrand plant. (Hillenbrand Inc)

The big idea: For years, Hillenbrand’s death-care business looked good on paper — healthy profit margins in an industry that historically presented itself as stable, profitable and highly predictable. How does one know when being better isn’t enough?

The scenario:

Hillenbrand was a 120 year-old leading casket maker when spun off from Hill-Rom in 2008. The company’s reputation as a reliable provider of quality products and service commanded premium prices. Add in cost-conscious lean manufacturing and efficient logistics capability, and the company enjoyed earnings before interest, taxes, depreciation and amortization of more than 26 percent, well above competitors.

But a decline in the annual death rate and increased demand for cremation reduced profits and revenue. The president and chief executive, Ken Camp, was convinced that it was time to move Hillenbrand in a new direction and saw three main pathways — acquisitions, divestitures or financial restructuring. Which might represent the best opportunity?

The resolution:

Hillenbrand intensified its focus on lean manufacturing, authorized a stock repurchase program and decided to use acquisitions as a vehicle to diversify outside of funeral products. In developing its acquisition strategy, Hillenbrand asked four key questions: “What are we good at? What end markets do we want to serve? Where do we want to operate? And what don’t we want to do?”

They knew their core competencies, culture and financial resources. “We are metal benders,” Camp said. “We thought something square, metal, big and painted, within one hour’s drive that generated around $40 million in sales would work.” Hillenbrand did not strive to be first to market or an innovative new product developer.

The team considered companies that made casket-like products — safes, gun cases, school lockers and pianos. They looked at options in terms of size, materials used, process capabilities, geography, platform potential and ability to apply Hillenbrand’s core competencies to that business. By fall 2009, they had profiled more than 400 acquisition targets, including one called K-Tron, a business that manufactured feeders, conveyers and crushers.

It was a giant leap away from what Hillenbrand had historically done. Camp was intrigued and asked Hillenbrand’s outside investment banker, Scott George, to contact K-Tron. “Initially they wouldn’t even take my call,” George said. “And once they did, they laughed at the notion of their company being acquired by a casket maker.”

By April 2010, Hillenbrand acquired K-Tron for $435 million. A year later it bought Rotex Global for $240 million and in 2012 acquired Coperion for $545 million. In less than three years, Hillenbrand’s revenue tripled — $1.2 billion from outside of funeral products. And more than half from geographies never before served by Hillenbrand.

The lesson: Hillenbrand faced a complicated and changing market. Many companies do acquisitions and fail. Camp considered that fact and the industry fundamentals facing Hillenbrand. He decided that success would depend on the ability to transform Hillenbrand into a globally diversified industrial enterprise. His triumph came from his training in the art and skill of strategic analysis. Focus shifted from rivalry in the death care market to possibility and opportunity in the broader global market place.

— Gerry Yemen and Gregory B. Fairchild

Gerry Yemen is senior researcher and Gregory B. Fairchild is the E. Thayer Bigelow associate professor of business administration at the University of Virginia Darden School of Business