How SME manufacturers can survive the coming downturn.

How SME manufacturers can survive the coming downturn.

In contrast to the rosy picture politicians of both colours are painting about the prospects under their  government, and the disaster looming if we elect the other, I think we are in for a rough ride.

I am not an economist, so have no numbers apart from those in the public domain to support this rather pessimistic view. However, I have been around a long time, and the feeling in my guts from the anecdotal stuff I see everywhere has a familiarity to the lead up to several tough periods I have seen before. 

Part of the challenge is that many now in so called leadership positions have never seen a downturn in their working lives.

So, following are a few tips on commercial survival in a tough period, and dare I suggest it, prosperity, if you are bold enough to see the downturn as an opportunity.

Act early.

If you agree that it might get nasty, batten the hatches before the impact gets to you. Even if the worst does not happen, you will be better off anyway by seeking greater productivity from your resources.  If it does get nasty, you will then be in a much stronger competitive position for being prepared. 

Focus resources.

Pareto rules, and focussing on the 20% that generates the 80% is always a good strategy, and essential to thrive in tough times. Doubling down on areas where you have a competitive advantage, increasing your share of key customers wallets, being explicit about your value proposition,  sending high cost low margin customers to competitors, and so on. In effect, you set out to do more with less, increasing the productivity of your assets. 

Take a long term view.

Economies work in cycles, every downturn is followed by the good times, again, it is just a matter of time.  Many times I have seen a few businesses double down on marketing activity when others are cutting to preserve short term profit, grab market position at relatively low cost, and keep it when things improve.

Be opportunistic.

In a downturn, opportunities arise that may not normally become available. Some of those I have seen in the past:

  • Customer acquisition becomes less costly
  • Distressed sales of inventory, businesses, capital equipment, premises, all sorts of opportunities emerge as others scramble for cash.
  • Lead times for capital equipment, and contractors with specialised skills become shorter.
  • Great people with the capabilities you need to grow suddenly become available.

The challenge is to remain externally observant, while everyone else has their eyes on their own internal problems.

Be collaborative.

Tough times are usually the best to forge lasting relationships. Assisting others when they really need it creates trust, the foundation of  collaboration, which will pay off in many ways over time. 

Expect the unexpected.

While this may be akin to being optimistic, in my experience, planning to be opportunistic does help. Anticipating the opportunities before they actually emerge enables planning, and therefore better use of resources. It amounts to being prepared to be proactive rather than just being reactive.

Hoard your cash

To act on any of  the above, you need cash. While interest rates are at historic lows, having cash when others are struggling is like being the only one in a rainstorm with an umbrella. Everyone wants to be your friend. Hoarding cash is not a matter of being mean, it is an outcome of discipline in your expenditure, removing waste from your own processes, maximising your own revenue generation strategies, and collecting from debtors.

When you would benefit from the experiences of others, give me a call.

Header photo courtesy Sarah Macmillan

 

 

 

 

Believe what they do, not what they say.

Believe what they do, not what they say.

Last week I was reminded, again, to take what people told you with a grain  of salt, and to watch closely what they did, rather than believing what they said.

I watched as the CEO of a significant business took a decision that was in direct conflict with the values he regularly espouses to staff and customers, in the interests of a short term cost mitigation.

He did not seem to accept the inconsistency when it was pointed out.

In the early 70’s as a student, I did a couple of holiday stints as a door to door market researcher. In one project, we were banging on doors and asking which brand of cigarette was smoked (in those days, smoking was widespread). When the answer was one of a couple of premium brands, we had to persuade the respondent to show us the packets in the house, and half the time, it was one of the cheaper brands.

Had we accepted what they said, rather than confirming with what they did, the research results would have been even more rubbish than they were.

Putting yourself in the shoes of a research respondent is really hard. It requires empathy, close observation, robust but sensitive questioning, and savvy choices in who you talk to if the results are to be reliable. It also offers the opportunity to gather insights into behavior that enables better product and service design, uncovering unstated or unrecognised problems being faced.

I hesitate to mention, we are about to go into an election campaign, the reality is we are already there, with the welter of blather, tired clichés and bullshit about to overwhelm us, again. As a community, we should really point out to all who want our votes the truth of the post headline.

Illustration credit: Tom Gauld from Instagram.

Managing the Jenga tower of marketing

Managing the Jenga tower of marketing

Have you ever set up and played with a Jenga tower?

As the game progresses, some blocks can be removed easily, with no impact, others are really sensitive to any movement and can bring the tower down with a crash.

Problem is, the difference is really hard to tell.

This is a  bit like marketing.

There are a lot of variables, all with differing impact on the outcome, and all differing again, depending on the circumstances of what has gone before, and the manner in which the remaining blocks, or variables, are arranged..

What is important for one customer, in one situation, may be irrelevant to another, or even to the same customer in different circumstances.

Experience with Jenga, and careful testing of the ‘stickiness’ of different blocks before you pull them out can deliver you a win. Similarly, in marketing, the more analytical tools you can bring to bear that account for the minor variations, and differing configurations of the variables, the more likely you will be to get a favourable outcome. Increasingly, this task will be done by machine learning and pattern recognition, that accommodates the specific circumstances of the ‘marketing tower’, in this case,  the customer.

However, AI will never completely replace the wisdom of experience, creativity, and domain knowledge, which the truly successful will continue to observe, gather, and ultimately, rely.

 

Photo credit: Wikipedia

How to build a hierarchy of performance measures.

How to build a hierarchy of performance measures.

 

Corporate KPI’s should be evolved as a hierarchy, that measures the cause and effect relationships through an organisation, and be largely agnostic to the individual. After they are in place, you can develop the KPI’s for a role to be filled, for which an individual allocated to that position has responsibility.

There are 4 levels in most organisations that I see.

Measures of  sustainability.

These measures are connected to the purpose of the enterprise, they answer the question, how do you know if you are successful?. Sustainability is used in it broadest sense, commercial, cultural, and ecological.  In effect they are the harbingers of future success as well as current levels. Most organisational KPI’s that I see are all about financial success, which is critical, but is an outcome of success in other areas, not in itself a driver of success.

Measures of  strategic success.

These measures are directly related to the strategic priorities set. As strategy is about choices, so the performance measures should reflect the quality of  the choices made, and progress towards the agreed objective. Some will be financial, ROI, shareholder value, but the most effective ones will be about customer churn, geographic footprint, innovation, customer satisfaction, reflecting the strategic resource allocation decisions made to prioritise activities.

Process measures.

Process measures are those tactical measures that reflect the performance of the processes in the business that deliver value to customers, and feed the measures of strategic success. These will vary widely dependent on the type of business, but logically they include things like customer satisfaction, delivery performance, lead conversion, revenue, customer profitability, and so on. They tend to be the measures most appropriately reviewed on a shorter time scale than those above.

Operational KPI’s.

Operational measures should deliver a picture of  how the individual cogs in the wheel are operating. They should be directed at the items that are at the root of process productivity and efficiency. Measures such as machine availability, lost time injuries, rework, inventory turn, daily output to plan, and so on.

Together these measures should offer a complete picture of the way the separate parts of the organisation mesh together to deliver the enterprise purpose, the ‘Why’ you are here.

Ensuring measures are transparent across and through the organisation gives them ‘life’ beyond the dry review process.

Financial measures play a role at each level. However, because it is generally easier to gather financial information, and they are more commonly understood, they have become the default and only measures many use, which is to their detriment. They also fail the test of telling you why an outcome occurred, they just tell you it did.

Mapping the cause and effect chains summarised as KPI’s is always a useful exercise. Many people learn and understand visually, particularly when they have a role in the process mapping, and such an exercise enables a connection of KPI’s throughout an enterprise to be made. Experience shows it is a great way of generating the strategic alignment and buy-in so hard to find in most businesses.