A New Year means cutting out what didn’t work last year and setting new targets. For those in management positions at UK manufacturers, this means defining a plan for business growth.
Too often manufacturers rush straight to implementing new shop floor technologies, software or other productivity tactics. Instead, the first step should be to focus on creating a strategic plan created by answering challenging (and sometimes uncomfortable) business questions that often lead to surprising findings.
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In working with manufacturers of all sizes across the UK to implement strategies around continuous improvement, Lean consulting and the Fourth Industrial Revolution, I’ve found that there are five key questions that must be answered while creating a rigorous Business Growth Plan.
1. What is your value proposition?
This is about determining what your customers actually value about your business and why they choose to work with you instead of your competitors. You may have certain assumptions, but you know what they say about assumptions.
Many businesses will send out a survey to get these answers – in fact, today it seems like you can hardly buy a product without receiving a follow-up survey. However, surveys are inherently flawed in that you will only receive answers to the questions you think to ask. And if you’re actually going to learn something valuable from your customers, it’ll probably be from something that’s never even occurred to you.
Instead, I’ll often work with a manufacturer to identify and visit their customers to conduct interviews using established methodology. As a third-party, I’m able to get honest feedback and through an interview you can ask the right probing follow-up questions. This isn’t just about the nuts and bolts of what you’re producing, but the nitty gritty of all the ways your company’s decisions affect the customer. Is it the way you package your product that makes it faster to unload? Does Purchasing appreciate that your invoices are always correct?
It is only once you know what your customer values about working with you that you can effectively design your processes to deliver this.
2. What does your ideal customer look like?
Imagine your ideal customer – what characteristics would they have? Perhaps they would buy regularly and pay on time. Or perhaps they would let you know six weeks in advance when they need a change made to a product or to put in a new order.
However, are all these characteristics actually necessary or realistic? Are you losing potentially great customers because of a long lead time for new orders or changes? If so, it’s time to figure out how to improve these processes to open up new markets. If customers indicate they need products within a certain lead time, you need to find a way to deliver to the manufacturer in a way that meets ‘real world’ conditions.
3. How are your KPIs communicated across your organisation?
Most businesses have KPIs for the year, but does everyone from the shop floor to the front office understand their role in achieving them? Is every employee properly motivated?
While some of this comes down to good managers (consider an Essential Management Skills course for those who haven’t taken it yet), it also comes down to providing visibility for KPIs throughout the organisation. An ROI of 20% on shareholder funds means nothing to most people who actually have the ability to make this goal a reality. It is important to ensure that the people who are delivering customer value understand what they have to achieve and are provided with feedback on how they are actually doing. The company needs to foster a culture of continuous improvement and help employees to make that improvement. Furthermore company leaders need to support this culture by getting out on the shop floor and see what’s going on, in order they can be seen supporting the employees delivering the business goals.
It may seem obvious, but a key success factor is having a firm understanding of your revenue stream to ensure you don’t run out of cash. It is amazing the number of viable, profitable businesses that fail simply because they run out of money.
This means manufacturers need to find ways to fund their day-to-day business while they wait for the growth they hope will come.
It also means keeping a firm eye on when expenses are going out versus when payment is coming in. If a customer increases their order by 20%, what will that mean for the rest of the business? Will you need sub-contractors, overtime work or more supplies to meet this demand? What if the customer doesn’t pay for 60 days? Answering these questions is part of a responsible business growth plan.
4. What are your competitors doing?
Any business growth plan should include a SWOT analysis of strengths, weaknesses, opportunities and threats. And typically this involves looking at competitors – where are they growing and what opportunities have they overlooked that you could scoop up?
Rather than simply analysing your competitors from the outside, talk to your competitors’ customers. I’ve gathered this type of information in value proposition interviews I’ve conducted on behalf of UK manufacturers with their customers. You can glean important information about how you compare to your competitors and their products are perceived in the marketplace from these interviews.
5. How do you attract and retain the right talent?
As EEF’s Skills Report found, attracting and retaining the right skills is one of manufacturers’ biggest worries (and this was only amplified by Brexit).
For example, last week, I was with a manufacturer that was very concerned about the fact that they had 20 people on their production line reaching their 65th birthday in the next couple of years. How would this huge skilled labour gap be filled?
While robots are often thought to be the answer, they aren’t a quick fix (and often create their own skills gap to operate and maintain them) and are not as flexible as people. Instead there are a variety of ways a business growth plan can address skills, from apprenticeships to actively recruiting from competitors to up-skilling the existing workforce through training.
Profitable and lasting business growth rarely happens on its own. It requires strategic planning and a deep, evolving understanding of where the business sits today. There’s no better time to investigate the answers to these questions than at the start of the New Year.
EEF, the manufacturer’s organisation, works with UK manufacturers across all sectors and sizes to improve their productivity, plan for the Fourth Industrial Revolution and ‘Be Business Ready’. Get in touch, to talk to one of our Business Growth experts on your particular business situation and needs.