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Now, almost three years later -- with the company expecting to hit about $23 million in sales in 1996 and with profit margins up about 50% -- Patrevito remembers well the realization that struck him even before he and Kosowski had figured out how to cope with it.

In talking it out, the owners of Booklet Binding came face-to-face with a disturbing truth: they had lost sight of why they were in business. They really didn't know how to make money anymore.

What's startling about what happened to Patrevito and Kosowski is not so much the insight they gained or even the path they took in steering the business toward more profitable growth. It's how easily they could have begun dismantling the business without ever identifying the forces that were undermining their efforts. "If you've tried all the options you know, you finally come to believe that 'this is all the business there is. There isn't any more," explains Kosowski, 50.

It makes sense; besides, for Patrevito and Kosowski to believe anything else would be to call their company-building skills into question. "Somebody has to show you that what's happening is a natural occurrence and that you didn't do anything wrong," says Max Carey, founder and chief executive of Corporate Resource Development, an Atlanta consulting firm. "It's an unstoppable and predictable dynamic. There shouldn't be guilt associated with it."

The inevitable "it" to which Carey refers is a phenomenon that hits nearly every business eventually -- these days faster than ever. And even if company builders manage to glimpse its form, they can reflexively make exactly the wrong move, surrendering even further profit or, as in the case of Booklet Binding, unnecessarily diminishing their goals for the business. The beast is called commoditization.

You may think you know exactly what commoditization looks like: increasing volumes, decreasing margins. But there are other, subtler signs (see "Are You Selling a Commodity . . . Yet?" below), and spotting them is only the beginning. As Patrevito points out, Booklet Binding offered its customers state-of-the-art equipment and further distinguished itself from competitors by hiring salespeople, a move most binderies still disdain. "We've been here since 1941, so I guess people know who we are," sniffs Peter Broustis, president of Bee Bindery Inc., in Chicago. Beyond that, Patrevito and Kosowski were always looking for ways to help customers, typically small printers, make smarter business decisions. Want to save $5,000 on packaging? they'd ask. Try using big, telescopic cartons instead of individual boxes.

That kind of informal advice may have been as valuable to their customers as the fact that Booklet Binding could perfect-bind a book as thin as one-sixteenth of an inch, meaning that a scrawny annual report could be spared unsightly staples. But until dissolving profits forced them to look hard, the company's owners settled for thinking they knew what mattered most to customers. It never occurred to them that the surest grip any company can have on its customers may originate outside the specific products or services it touts. In most modern-day markets, where laser-fast competition breeds spontaneous commoditization, "expertise is the better mousetrap," claims Carey, who studies differentiation strategies. "Rather than see you because of what you sell, customers see you because of what you know."

If that sounds abstract, imagine that Booklet Binding had been in the business of selling an obvious commodity from day one -- eggs, say.

In order to pitch the spherical product on anything other than price, a salesperson would have to get beyond the egg's universally appreciated properties. Will you be making an omelette, baking a cake, or throwing one against the wall? It may turn out that fast turnaround matters, or that minimizing breakage is important. "With any commodity, you've got to move the discussion toward how the customer is going to use it, and therefore toward what the important attributes would be," advises Jim Morrissey, president of Market Share Catalysts, a sales consulting firm in Wayland, Mass. "The value added is not in the product anymore; it's in the relationship between the sales rep and the customer."

Booklet Binding wasn't selling eggs, but it may as well have been. After years of scrambling to build capability and gain marketplace recognition, the owners found themselves with less profit than they'd wanted -- though the figure was on the high end of the industry's typical 2% to 5% pretax net -- and with no prospects for upping it. "My competitors all do the same thing to the product," says Patrevito.

As for price -- well, every industry breeds start-ups that are happy to eat profits, hoping to fatten their market share. Three years ago, when Denver Worker and his brothers Dean and Dale started 3-D Binding Inc., in Orland Park, Ill., they undercut Booklet Binding by 20%. "We're just three guys who own our own equipment, and we're trying to make a living for ourselves," says Worker, who had been a shift supervisor at Booklet. Isn't everyone? "The simple things -- some folding, some gluing -- everybody can do," says Jack Rickard, president of Rickard Circular Folding, a Chicago bindery. "The market for those sorts of things works like it does for grain or corn." In other words: throw your bid into the hopper and hope it gets the nod. "I'd give customers the quote, and then I'd ask, 'How does the price look?" recalls Bill Chalifoux, a salesperson at Booklet Binding. "If it looked OK, great. If not, I'd ask, 'Where do we have to be?"

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