Three smart strategies to dodge the manufacturing downturn: part 1 of 3

Friday, May 27, 2016

This Target Online mini-series addresses three Smart Strategies to achieve success in the economic downturn we have been facing since 2008. In these next months, we will cover the strategies and how to understand and implement actions to leverage them. The mini-series consists of:

Smart Strategy #1 Dodge the manufacturing downturn by driving NEW business from OLD customers

Smart Strategy #2 Dodge the manufacturing downturn with 2 ways to find 1 percent everywhere

Smart Strategy #3 Dodge the manufacturing downturn with 5 ways to get the sludge out


Current State

Trouble looms across the manufacturing sector according to the Purchasing Managers’ Index, which is at the lowest reading since 2009 as production and job creation grew marginally, new business expanded at the slowest pace so far this year, input cost increased while output prices decreased further. If your business is feeling the pinch as you complete the first half of the calendar year, here’s how to go beyond conventional measures you may be taking and get back on track quickly and easily… without waiting for government intervention or a change in the economy...

Smart Strategy #1:  Drive NEW business from OLD customers

When you extend lean thinking beyond the shop floor into the new business development side of your organization, you’ll see opportunities that go far beyond chasing new customers and enduring long sales cycles for low margins.  Compare these two scenarios:

  • In any given year, 40 percent of the companies that INCREASE revenues will DECREASE profits – they’re “growing” in the wrong direction!  Low margin business and lack of profitability magnifies the problem of increased input costs and decreased output prices.  New clients are often costly to bring on board, with margins that hinder rather than help.  It just doesn’t make sense to play the “volume” game this way anymore.
  • At any point it time, 5-30 percent of your existing customers could be doing more business with you.  Sales complacency often results in failing to capitalize on the low-hanging fruit, and that leaves a lot of business that could help ramp up production lying on the table for your competitors. Increase volumes this way, and you’ll usually see higher margin business that can see you through the crunch.

Use this lean approach to find efficiencies by developing your existing customers first, and using what you learn to improve your efficiency and effectiveness in identifying the right new customers to pursue.

How to Realize Rapid Results:

Get your senior leadership team out having Value Creation Conversations (VCCs) with your customers at executive levels at least once a week for the next quarter to shake that fruit loose.  Learn the art of a great VCC with this free training video, but you don’t need to get it perfect to see results:

A $45M kitchen cabinet manufacturer shook loose an extra $600K from an account that had slipped from being a million dollar account to less than half that, and all it took was the CEO taking time to express concern about the state of the customer’s business and ask how he could help to uncover it.  The business owner replied “what do you mean, business has never been better!”  A new purchasing agent had been telling the cabinet sales rep that “business was down” while quietly shifting volume to another supplier he favored.  Do you think that could be happening in your business too?  Darn right!

The owner turned that around in a hurry, and manufacturing volumes went back to where they needed to be.  Needless to say after that success, the CEO has continued using VCCs as a strategic tool to side-step the “manufacturing downturn” very successfully!

Value Creation Conversations are not sales calls, they’re not meet and greets and they’re not ride-alongs with sales reps.  They’re strategic level conversations about how you can be a better partner to your customers and serve them in new value-add ways.  They can be done by anyone on the leadership team regardless of function to divide and conquer the workload.  And when done well, they always uncover hidden opportunities for new business that’s being overlooked by even the best sales teams, simply because fresh eyes and fresh conversations lead to fresh insights.

The outcome is profitable new revenues, increased volume, increased loyalty, and increased competitive advantage.

Skeptical?  No Time?  That Would Never Work?  Hint: Only Customers Create Cash Flow

Consider the fact that you probably spend 90 minutes or more every day simply pushing email, which never moves the needle in your business.  Connecting with customers in a meaningful way does.  If you have time for email every day, you have time to meet a customer every week.

Sam Palmisano, the legendary retired CEO and Chair of IBM, used to meet with a customer every single day, and his successor, Gini Rometty, has continued the practice.  Why?  It was that practice that enabled Palmisano to consistently generate returns that were four times the industry average, right through the 2008 recession and beyond.  As a manufacturer facing an increasingly commoditized market (perhaps just as you are), those customer insights gave IBM the knowledge they needed to serve their customers in higher-value add way, and continually expand their business.

What’s possible for you if you make it a lean practice to get more new business from more old clients?  How are you limiting what your business could really achieve and becoming part of the downturn instead of dodging it, by NOT making time for this core strategy?  Just getting out there is the first step.

Get Lean In How You Use Executive Time

The next step is to get very strategic about how you use executive time in the leanest way possible for the optimal results, using the powerful 5Rs approach for driving sales volumes and margins higher by uncovering hidden customer value.  Take this free 20-minute training video to your next leadership meeting to change the conversations so that you can start to change your results, and create your plan for dodging the downturn.

#1 Bestselling Author and AME Contributor Anne C. Graham is a profit and growth expert on a mission to help manufacturers thrive in any economy, providing tips and tools that deliver rapid results, in less time than you’re spending on email.

Next Month:  The second Smart Strategy: Dodge the Manufacturing Downturn with 2 Ways to Find 1% Everywhere