If you’re like many job shops and contract manufacturers, you’re working hard to evolve from being entirely dependent on a couple of strong, probably long-term relationships into a larger organization with capabilities to sell a wider range of products and/or services to a broader customer base. In other words, you’re looking for profitable growth.
To do that, though, you need a healthy pipeline of work. But how do you develop and sustain it?
Strategy and Action Plan: Parts I and II
This post is intended to help you do both—develop and sustain a robust pipeline of work —by outlining the very basics of strategic mapping, a process that identifies where you want to go, and helping you determine the activities you’ll undertake to get there. As an old saying goes, if you don’t know where you’re headed, any path will take you there; only with a clearly define strategy and clearly defined steps will you reach your goal of becoming a profitable and growing manufacturer.
I. Develop a Smart, Actionable Strategy
To reach your goal you need a strategy that fits within the construct of your business model; what works for one business doesn’t necessarily work for any other, so your strategy should reflect your specific circumstances (your products, equipment, markets, capabilities).
Examples of a growth strategy are “to be the best laser cutter in southern Wisconsin” or “to be the preferred replacement blade manufacturer for farm implement OEMs.” Strategies shouldn’t be too broad (“to be the best laser cutter in America”) because they’re not achievable – the steps necessary to get there would be prohibitive. In fact, the narrower the strategy, the better.
Determining Your Growth Strategy
Here are the questions you need to answer in order to develop a viable strategy for your job shop or contract manufacturing organization:
- What trends influence your business? If government regulations, the current political landscape, distinct seasonality, energy costs and trends, material availability and costs, demographics or technology affect what you do and how you do it, factor this into your strategy. You can’t get past some of these (government regulations) and others simply mean you must account for them in your strategy.
- Market forces. Social media, mobile, analytics, and cloud are all factors influencing product development and acceptance today. Look for opportunities to incorporate these into the way you do business. Use social media, for example, to improve the service you provide; monitor the channels appropriate to your business to learn what customers like and don’t like about your industry (or your business specifically) and take steps to satisfy them. Or, put some of your services on the cloud, allowing customers to have greater visibility into parts of your supply chain that are meaningful to them.
When it comes to “hot” market forces, IoT (Internet of Things) is top of the list. Today, 82 percent of manufacturing companies are deploying IoT in some respect to reduce their operational expenses and/or to build better products. IoT presents a number of revenue opportunities, too, like predictive and preventive maintenance.
One example of how businesses are making themselves invaluable to customers with IoT is General Electric (GE). GE makes engines for many of Delta Airlines’ planes, each engine embedded with dozens of sensors that make it possible to optimize performance and improve engineering of their engines. Delta essentially turns over responsibility for their engines’ efficiency and performance to GE, confident that costs are minimized and risks are mitigated, making them a highly valued partner. Where are your opportunities to use market forces like IoT to make your products, and your company, assets to customers’ businesses?
- Technology. Disruptive/transformative technologies, those that create a new market and disrupt the existing one, are a trend manufacturers will take advantage of if they want to grow. Autonomous vehicles, FitBit, Skype, Netflix, Alibaba and 3D printers are just a few examples of approaches that upset the status quo. What product or service could you develop that offers greater ease, more features, connects devices, cuts out a middle man—something that challenges the conventional market and creates a new one?
II. Establish a Purposeful Series of Activities that Align with the Strategy
To some extent, setting a growth strategy is the easy part; executing that strategy effectively is another story. In fact, 85 percent to 90 percent of all business failures are directly related to lack of discipline around the deployment of the tactics.
Whose “fault” is it when the activities aren’t successful in reaching your goal? Leaders alone are responsible for setting the right strategy, but everyone within the company must fully understand the activities in order to execute that strategy successfully. You’ll get stronger buy-in and better quality of execution when you articulate very specific action items and clearly outline the reasons for doing them.
The best way to identify the right activities to engage in is to start with the end in mind (your strategy) and work backward—reverse engineer it, in other words.
If you want to be the best laser cutter in southern Wisconsin, what activities make sense and which don’t? What new products and services can you offer that will make you more valuable to customers? If you don’t have a good sense of what would appeal to customers and prospects, reach out to them and ask. Describe to an OEM, for example, all the ways you could be making their lives easier and let them tell you which they may value and be willing to pay for.
Building a healthy pipeline isn’t something we can cover in a single post; this is just the start of a complex topic worthy of deeper discussion. In the next few posts we’ll cover additional elements of a successful growth goal and strategy, like your value proposition (the value you deliver to your customers), who your best prospects are, the right channels for your products and much more. We hope you’ll stay tuned!