Working On My Business: Nimbleness or Numbness - The State of the Business
Rethinking the Future Strategically
For most companies, it's that time once again where they look back over the year and evaluate the state of the business. Most will focus on only a few areas such as:
- Are we still alive at the end of this first year of the new millennium?
- Did we make money?
- Did we get some new equipment?
- Did we pay down some of the debt?
- Did we acquire some new customers?
- Did we achieve the kind of growth that we planned?
All of these questions must be answered. The questions and the corresponding answers are important but they provide only a short-term introspective snapshot. The answers tell us the results of our decisions and actions over the last four to five quarters. What about next year and the year after that?
This is the time to also evaluate the state of the business within a larger context.
At the Strategic Management Conference held several years ago, the senior executives of 2,500 major corporations discussed the issues that would drive business in the twenty-first century. These issues were categorized into five major challenges. The findings were that companies had to master all five areas just to survive, let alone grow. The five challenges were:
- Nimbleness - the ability to manage and capitalize on change and to be essentially capable of turning on a dime in terms of responsiveness and adaptability. This relates to the ability of a company to effectively manage shorter runs and mass customization, switch over production operations at a moment's notice and minimize total downtime in the process.
- Speed - equates to shortened (and decreasing) leadtimes in every aspect of a company's business, quicker turns and rapid changeovers (job-to-job, prototype-to-production and vice versa).
- Customer development - finding ways to create unmatched value that helps your customers become more successful as an organization and as individuals.
- Leadership - leading an organization (i.e., a group of people with the same goals) during a rapidly changing business environment.
- Asset management - the effective focus of all intellectual assets (i.e., human capital, structural capital and customer capital) to achieve near-time and long-term goals.
The nimbleness factor and the role of speed in a company's success have been discussed at some length in previous articles. Implementing a time-based strategy is the one single strategic initiative that enables companies to turn nimbleness and speed into a company's core competencies.
Recently this column addressed some of the measures and standards that one might use for doing a self-evaluation versus the first two challenges (see Strategic Measures - Results-Based Leadership, MoldMaking Technology magazine, November 2000, page 53). Some of these measures include annual revenue per employee, leadtime, number of new value-based customers, profit before tax, customer capture rate, acquisition time, revenue risk factor, time-to-market and new products, the breakeven point and new products, market risk factors, inventory turns (WIP) and total inventory turns.
Use these questions as a check-up on yourself:
1. How do you stack-up against companies that are considered world-class (today)?
2. What are you doing to become world-class tomorrow? (Remember the rules will change tomorrow and again the day after that and so forth, non-stop.)
3. How will you position and leverage your internal capabilities and core competencies in the global market? Who will listen? What results do you expect and when? What can stop you?
Now let's take a look at the business from the standpoint of your customer base. This is part of the customer development initiatives.
1. For each customer, identify at least one - but preferably more - actions, services or special initiatives that you have implemented this past year to specifically help that customer be more successful (as measured by that customer's standards for success) within their market. Quantify the results in real dollars, present or future.
2. For each customer, identify how much revenue was acquired from that customer and the distribution of orders over the last three calendar periods. Define how long the period was between initial discussion of the project, the quoting process and the actual order placement. Define what you knew and when you knew it. Define what you could do to shorten the customer's cycles.
3. Define and categorize how the product or service purchased (via each order) supported the goals and performance measures of a customer organizational entity or product group.
4. Define the value equation of the company's performance (i.e., start to finish) for each order from the customer's perspective. Relate the value equation to the performance goals that are used within the customer organization to evaluate the performance of customer staff. For example, what have you done to enable the purchasing person to receive a favorable performance review based on the way you performed the jobs for which the purchasing person had accountability? Do the same for engineering, the customer's sales staff, product design department, the customer's quality team and the customer's management team.
5. Evaluate how the industrial or commercial segment of your customer's market performed over the last twelve months.
6. Assess and quantify how well your strategies played in the market.
7. How many new customers were added to your base? What revenue growth potential and profit opportunities does each new customer bring to your company's portfolio? What other benefits might you expect from these new customers and other potential new customers?
8. When do your customers place orders and why do they choose that time? Relate to their market segment dynamics.
9. What scenario could put your customer out of business? How is your organization protected against this type of problem in terms of recovery, growth and survival?
10. What specific strategic measures do you have in place to provide an early warning for potential problems in your customer's business and/or their market?
Don't have all the answers? If you want to lead a customer to success and have that customer place value (other than price) on the services that you provide, get the answers! Analyze how you are positioned and then take definitive action. It's worth the effort.
This brings us to the fourth strategic challenge - leadership. Leaders develop strategies and have their team involved in the process. Leaders set the course, define direction and inspire others to aspire to greatness - organizationally and personally.
Leadership is not a management issue alone - it is a treasured trait that needs to become a core competency throughout the organization. Leaders can be found virtually anywhere in an organization. Some have learned the skills and behaviors needed for effective leadership. Others have the raw potential but have yet to hone their skills.
An engineer recently inquired as to how to develop a management style. All people have a style! Some styles are conducive to creating a motivating environment - enhancers. Other styles can be categorized as less positive - detractors. Style, regardless of position, is a leadership issue.
The way one changes or fine-tunes their style (reflected in their attitudes and subsequently their behavior) is through a learning process called development. This is typically accomplished over an eight- to ten-week period, working about two to three hours per week and using adult learning techniques. The development process is one that focuses on the individual in their environment, inside and outside the workplace. The key is to learn and practice behaviors that create balance in the individual's life. These behaviors should help them to make effective decisions, deal with conflict, look at change as an opportunity, create collaborative work habits and excel at their chosen profession. These are all leadership-focused - sometimes leading groups; other times leading oneself to success as defined by the individual.
This approach can be employed throughout the entire organization. It should be tailored for individual challenges and demands as defined by their operating landscape. For some the process happens on-site. The process used with engineers, designers, project leaders, program managers and group managers features distant learning in small groups. For others, the process is conducted using distant learning one-on-one through coaching. The process is about developing human capital. Thus, it is position and function independent.
Today, the leadership challenge has never been greater. Markets appear to be moving targets in quick time. Competition is surfacing from all points on the globe. Customers appear to be less organized - even fickle. Change is the norm with the speed of change being the only real variable.
Go back and answer the questions above. These questions amplify some of the business challenges in the new world dynamics. They also identify some of the key differentiating variables that will ultimately impact a company's successes and failures.
Last but not least are issues related to the management of critical intellectual assets - human capital, customer capital and structural capital (e.g., processes, buildings and equipment). Do you have the right mix of each applied to any one project or job at the right time such that you accomplish the goals?
The bottom line is that every organization must diligently reinvent itself daily. That's why strategies must be focused in more than wishful thinking.
There must be strategies for customers, learning, innovation and financial strategies (i.e., investment). Make time the core competency that enables these strategies, and you have built a solid platform for creating growth and capitalizing change into opportunities. It's the one formula that addresses the Strategic Management Conference's challenges head-on and builds the foundation for sustained performance.
If you are not constantly rethinking the future strategically, then you are really making a choice between nimbleness and numbness. If you think you are confused but aren't sure, you are probably in the numbness category.
A very wise person once said that we get what we are willing to accept! Unparalleled growth? Exciting challenges? Being a player in the global sandbox? Victim? Wealth? Mediocrity? There is really no specific differentiation between organization and the person since they are highly interdependent and integrated.
What is the state of your business? Maybe the real question is: What are you willing to settle for personally and organizationally and what are you going to do about it?
Reducing changeover times will eliminate waste, moving a shop closer to becoming lean.
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Within each person is unlimited creative potential to improve shop operations.