Growth is vital for manufacturers, but it requires commitment — long-term investments of time, effort and resources to develop what you need to succeed. This includes everything from inspiring leaders who establish and support growth objectives companywide, to suppliers who can keep pace with your company’s growth.
You need engaged employees who want to grow the company and their own careers, who exhibit behaviors that create a growth-oriented culture. You need processes and systems that scale for growth, as well as due diligence procedures to evaluate growth opportunities. And you need performance measures that monitor growth in real time. So, how do you get there?
Two critical growth factors
According to the Wipfli Resilient Manufacturers Study, many manufacturers have not embraced two critical growth factors:
1. Develop a detailed growth strategy and goals
A growth strategy defines why a company needs to grow, how that growth can be achieved and what success — actual growth — will look like, both in terms of lagging indicators (e.g., revenues, profits) and leading measures (e.g., customer complaints, supplier delays, labor turnover) that predict whether organizational countermeasures are required.
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Some 42% of manufacturers have dedicated growth strategies and goals aligned with other strategies. Yet 39% don’t have a dedicated strategy for growth, instead addressing it via other strategies. Incredibly enough, a full 19% have no growth strategies.
Roughly 37% of executives describe their companies as growth leaders; among this group, 47% have dedicated growth strategies versus just 40% of other manufacturers. A growth strategy is important for more than just revenues and profits — without a well-communicated plan for growth, company stakeholders may see reasons for concern:
- Employees may fear downsizing or potential closure, limiting their motivation to improve operations.
- Customers may see a vendor unable to support future needs.
- Suppliers may focus on price increases and margins today, assuming that lack of growth will limit partnership opportunities tomorrow.
2. Pursue a variety of growth opportunities
According to the study, a majority of manufacturers plan to pursue only a few growth opportunities over the next three to five years. The most likely paths to growth are:
- Product sales to new customers in existing markets (65% plan to grow in this manner over the next three to five years)
- Product sales to existing customers in existing markets (56%)
- Product sales to new customers in new markets (48%)
- Service sales to existing customers in existing markets (45%)
- Product sales to existing customers in new markets (44%)
Service-oriented growth opportunities — e.g., service sales to existing customers in new markets — are underexplored, leveraged by only 30% of respondents. And growth by acquisition — capturing product or service companies in existing or new markets — are favored by less than 25%, likely due to inexperience with the M&A process. Yet the complexities and risks involved in M&A can be navigated efficiently with the help of experienced advisers.
Read more: How to use customer experience and digital tools to differentiate your business
How to grow your manufacturing business: People
A majority of manufacturers report “strong” or “good” leadership and management capabilities across company functions in their organizations — characteristics that are necessary to support growth. For example, 87% rate production leadership as “strong” or “good.” But nearly one in five report that leaders and managers are only “adequate” or “in need of improvement” for many functions.
Inability to retain and develop talent can derail growth plans. The pandemic, Great Resignation and/or self-inflicted workforce issues have made labor turnover a problem for many manufacturers:
- Leadership and management: 25% of manufacturers report annual labor turnover of greater than 10% among executives; only 46% reported turnover of 5% or less. Yet a majority of manufacturers have succession plans for 50% or less of their senior-leadership positions. This lack of planning hurts manufacturers in the long-run, as there is no strategically developed employee waiting in the wings to immediately and more seamlessly take over.
- Frontline associates: 37% reported annual labor turnover of greater than 10% among workers; just 26% reported turnover of 5% or less. About half of manufacturers have 50% or less of employees in self-directed work teams, and they train each employee 30 hours or fewer per year. A lack of empowerment and development often forces workers to look elsewhere, so growth depends on retaining and developing these employees.
Only 6% of manufacturers report that all of their suppliers could adequately respond — with on-time, high-quality deliveries — to a 20% or more increase in demand within three months; 16% reported that half or fewer suppliers could adequately respond to such an increase. Growth leaders are more likely to have supply chains prepared for growth.
Read more: How automation can lead to more committed customers — and employees
How to grow your manufacturing business: Opportunities
Growth leaders thrive via continuous updates and reinventions of their business growth strategies
and plans by:
- Evaluating new markets: Identify untapped sales opportunities (e.g., new customers in new markets, services for existing customers) and quantify the resources and effort required to succeed in each.
- Exploring new acquisitions: Assess M&A opportunities that could reshape the company overnight. Quantify ROI.
- Working with new allies: If your company doesn’t have the skills inhouse to evaluate growth opportunities, look to external experts for a fresh perspective.
Wipfli can help you develop business growth strategies
At Wipfli, our manufacturing specialists understand the many factors that drive growth and have a full suite of capabilities to help you assess, understand and prioritize opportunities. Learn how you can become a growth leader and increase your margins and competitive advantage.
Explore our Resilient Manufacturers Study to learn more about what else manufacturers are doing around innovation, growth, automation and resilience. The study reports on a range of manufacturing trends and concerns — from how long it takes manufacturers to get new products and services to their customers, to annual turnover rates for managers and frontline employees, to the number of data breaches manufacturers are experiencing per year. Download your copy today.
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