Finish Strong® Podcast Series The journey to excellence is not a simple one, nor does it follow a straight line. This podcast series addresses issues important to manufactures worldwide. Becky's insights include commentary on global, strategic, and tactical issues, as well as observations on current challenges and opportunities in manufacturing businesses. Feel free to suggest topics of interest to you; no doubt Becky will have something to say that will make you think.

Building Business Muscle

Maximizing current profits by definition sacrifices the long term investments that attaining your mission requires. My concept of “strategic profits” addresses how to think about profitability in a way that ensures you can always invest in the muscle instrumental toyour organization’s long term success.

First, can you identify those company muscles that are required now, and will be next year, next decade, and likely next century? If not, it’s impossible to build strategic profits. And without strategic profits, your core muscles will get flabby quite quickly.

For some, it may be the ability to forecast and react to the mix of short-shelf life requirements of your business. If you are trying to feed people high quality natural foods at an affordable price, that would make sense as at least one of the muscles you must build and always develop.

For others, it may be the constant state of flux that a dependency on constant new product development requires. Does your mission demand that you continuously create new offerings? Then you cannot afford to forego investment in your NPD processes and capabilities, market and material research, and global challenges threatening your markets regardless of how tough times may be.

Identify those very few muscles that underlie attainment of your mission, and think strategically about profit management to preclude risk to investing in them at all times. No one can afford to take a month or a year off from developing crucial muscles.

Make Better Decisions

Do you ever say “what was she thinking!” in exasperation? Most of us do. And if we’re honest, we also ask “what was I thinking?”

No one bats 1000 in making great decisions, but all of us can improve the quality of the decisions we make. And we can help others do the same. As leaders, we need to do both.

A few easy-to-implement steps include asking these simple questions:

1) what happens if you are wrong?

2) what alternatives did you consider and reject?

3) what are the downsides of this decision?

If you and your team ask yourselves these three questions when making any decision beyond snacks for the meeting, you’ll find improved decision-making becoming your reality.

This podcast includes a few other suggestions for you to consider. The important idea is that you not see poor decisions as a fact of life with no way out.

Stop the Pendulum!

Following the inflation, high interest rates, and economic downturn of the late 1970s and early 1980s, American manufactures felt significant price pressures. They, wrongly, believed that offshoring production and sourcing to low wage rate countries was the only way to remain competitive.

As they complicated the supply chain and extended lead times, they also began to listen to select parts of the Toyota Production System. Select, as in they chose to see Just-in-Time as reducing inventories rather than designing systems to meet customer demand just in time.

The combination of offshoring, adding complexity, and reducing inventories locally was a bomb waiting to be lit. Covid did just that.

So what are a number of US manufacturers doing now? They are swinging the pendulum back the other direction by jacking up inventories and relocating sourcing to the US.

That makes no more sense now than the decisions to offshore made before. The unintended consequences are in most cases foreseeable, if only we look.We shipped middle class careers to other countries. Wage pressures in the United States are mounting as every industry faces labor shortages. Just how will re-shoring solve your problems now?

When is the last time you spoke with “customer support” that is located in the United States? We outsourced our customer relationships to India — an educated and English speaking country with low wage rates. Because services are less impacted by supply chain disruptions, no one is discussing moving that back to the US.

While the thinking of businesses advances in some areas, in critical ones it seems to swing as a pendulum. Core competency, or vertical integration, or conglomerate? Look at the historical trends, and its easy to see the near future. Outsource, face a problem, then in-source. Lower inventories, run out of things, raise inventories.

Where is the strategic problem prevention and solution? Going back to what we used to do may be quick and comforting, but that doesn’t make it wise.

If you haven’t developed a robust supplier selection and development process over the past decade, you’ll regret making changes now. Bouncing from one undesirable situation to another is not the goal.

While speed is important and highly valued, actual strategic thinking is more important.

If you insist on moving quickly, and for some of you there is little choice, at least identify the very predictable problems that the quick moves will create. Develop plans quickly to minimize the negative impact.

Agile was never intended to mean bounce from one bad decision to another. The value in agile capabilities within your company is its fast learning, fast change incorporating that learning, and then fast learning again.

If you skip the learning, incorporate learning steps, you’re not agile. You’re just chaotic.

Stop the pendulum from returning you to prior problems.

Think. Analyze. Rely on robust processes you’ve put in place.

Leveraging Diversity

Could your manufacturing company utilize a retiring Brigadier General who has led small and large international groups in theaters of war and in standing up government infrastructure in countries in turmoil?

The typical immediate response is “wow! what a background. But what could he do for us with no experience in manufacturing?”

Hiring someone because they look different, or come from somewhere else is too often an effort to hit a target rather than hire the best.

When I was in the corporate world a global corporation was looking for a female executive to lead the operations of a technical division. I was told by the executive recruiter I had a head start because I am female. I had no problem gaining an interview because I not only had a strong background but also am a woman. I would have had a problem with getting an offer because I am a woman.

My confidence is sufficently high to know I was offered the role because I am competent. Competency and diversity are not mutually exclusive. I honor that company’s leadership for working to become more diverse in the 1980s, before it was “a thing.”

A room filled with Ivy League grads will generate less creativity than a room filled with intelligent people with diverse educational and life backgrounds.

When an organization repeatedly chooses to hire people with the same look, the same background, and the same thinking, the organization will fail. Maybe not today, but sooner than later.

If we can’t figure out how to leverage the experience and thinking of people unlike ourselves, we’re not very smart.

And that is true whether “we” are a group of black women, a group of middle-aged college-educated citizens, a group of McKinsey alum, or a group of new immigrants.

How do you recognize and leverage diversity?

Product Rationalization

We all know we have to be innovative. Many of us demonstrate that by introducing new products regularly. Do they all make sense? Should we simply add to the number of offerings without subtracting?

The process of ensuring that the products and services offered by a manufacturer are optimal for the company and its customers is call product rationalization. Too many of us don’t do that, don’t build it in to our new product development/introduction process, and waste time trying to determine the profitability of each and every product.

Some sales folk insist we never eliminate a product because someone might want it someday. Some insist that “line breadth” is fundamental to gaining business with large customers. And some focus only on the products that are easy to sell and that provide healthy commissions. None of that is inherently wrong or bad.

Topics like market confusion, internal complexity, cannibalism, brand reinforcement, and offense vs defense products should all be part of your product rationalization process.

The primary need is to have one. Just adding products is rarely the right strategy. Whacking the old ones is rarely the right strategy. But there must be a strategy governing what you develop and introduce, what you eliminate, how you present options to meet the needs of your customers, and how you leverage internal competencies to position your company for strong market position.

And please don’t let Standard Cost Accounting lead you to ill-informed decisions on what makes and loses money for your business.

Firing Customers

Not all markets are good markets for you. Not all customers are good customers for you. And not all orders are good orders for you.

How do you recognize the distinctions beforehand? And how do you fire a customer once you’ve already accepted them?

A good customer for you is not the same as for others, and cannot be based solely on top line potential. Sadly, too many get sucked into that revenue potential and make commitments later regretted.

Examine these six attributes before deciding a potential customer is one that enables the two of you to succeed together:

1) If you are mission driven, and enduring manufacturing businesses are, a company that does not have a viable externally focused mission will not be a good customer for you.

2) If their demonstrated, not written on the walls, core values are not consistent with yours, they will not be a good customer. When the going gets rough those distinctions will rise to the top.

3) Do their current “partners” tell you that the potential customer really knows and behaves in concert with the true meaning of partnership? Partners do not unilaterally change payment terms. Partners do not take your parts out for bid without you knowing about it. If you want to serve companies that respect you, look for true partners.

4) Do the needs of the company match the direction you want to go? If not, the relationship will be short and will add nothing to your business.

5) Are they committed to getting better in all ways? If not, they will stagnate, bringing you with them. While I have little respect for WalMart as a company, it has taken the lead in many important new technologies, bringing its major suppliers along. Is there a near term advantage to a potential customer, knowing you will want to leave them in a few years?

6) Is their risk tolerance aligned with yours? Larger companies can afford to swing and miss a few times. Smaller ones must be very selective on which pitches to swing for the fences. But mission, core values, partnership, near-term alignment can be insufficient if risk tolerance is very different.

But now you have them, and realize they are not a good customer for you. How do you fire them?

First, realize you must. They cannot be part of your healthy future. It is merely a question of how and when. Yes, there is a financial reality to this process, but there is also the very important opportunity cost aspect. What could you be doing that you’re not because of that customer?

Saying “no” is not easy for many of you, but it is a requirement to running a healthy and enduring business. Is it optimal to quote new parts for that existing bad customer? No. Is it optimal to give cost reductions you cannot afford to that customer? No. Is it optimal to obtain a certification that bad customer requires? No, unless they are in a market you want to pursue. Then, yes it is.

A bad customer is part of your overall asset allocation. Consciously decide how much you want to invest in them, now and tomorrow. They are likely costing you more than you realize.

How to Deploy Your Strategy Effectively

Every one of your employees must clearly see how his actions and decisions impact execution of the business strategy. This is accomplished through a line-of-sight deployment process.

It is not enough to describe the strategy at an all-hands meeting, or even add to that the down-one-level strategy. Stopping the formal deployment process at that points leaves entirely too much to false assumptions and bad guesses.

You are familiar with the 5-Why problem solving process in which we keep asking why until we identify the root cause of the problem we’ve defined.

Strategy is similar. We have a strategy defined at the high level, but must roll it down level by level to understand what its implementation requires.

You know you have accomplished that when every employee can reverse that thinking process by describing their priorities and actions “so that.”

An example:

“I am reorganizing the warehouse and receiving area so that we can flawlessly add new materials and components to our storage so that we can begin producing samples of our innovative new products for market test so that we can expand sales of those new products to the most receptive markets so that we can grow our sales and profits so that we can deliver on our owners’ mission of providing reliable employment as we serve the evolving needs of the automotive aftermarkets.”

By using a line-of-sight deployment process surprises are reduced and prioritization and decision making are improved.

Choosing Your Digital Transformation Partner(s)

No manufacturer can afford to ignore the concept of Digital Transformation. Yes, there continues some small need for manual lathes, but don’t plan your future on that.

In the past several editions of this podcast I discussed several business-side categories of digital transformation, from machine health to connected employees to using blockchain to create and maintain internal quality records.

That information was intended to help you envision the future you are trying to create through digital. It was also intended to help you prioritize.

Now it’s time to act.

No manufacturer has all the information and capabilities needed to design and implement a digital transformation — not even the Siemen’s of the world. They too reach out to external experts.

It’s possible you’ll choose to start slowly with a small company helping you get your arms around machine sensors, data collection/quality/storage/security, and the information you can gain. But that company will not be the best one to lead you through your full transformation.

Research systems integrators, talk with your peers, and visit several executives of manufacturers ahead of you on the journey. Attend trade shows and manufacturing conferences to gain a foundational understanding of the opportunities and challenges you will face.

This electronic data world is rapidly evolving. Whomever is best today may well not be even among the good tomorrow.

When choosing your partners, examine their history of staying in front of the pack, explore their investments and their financial commitments to the future of technologies, and reduce the chances of getting someone whom you outgrow in your first few years.

This is an important choice, and not an easy one. It is no place to focus on lowest bid, but rather on most informed and most driven to stay informed.

Digital Transformation: Blockchain

It is always smart to start with a business case before deciding to move forward with a specific technology in your digital transformation. The same is true with blockchain.

In prior podcasts I’ve described several categories of business benefit to consider in creating your digital transformation roadmap. We’ve considered machine health, connected employees, and more, without focusing on the technologies that make those things possible and effective.

In blockchain, it is important to understand the high-level capabilities of the technology and then determine if that capability is of potential value to you right now.

First and foremost, understand that blockchain is NOT cryptocurrency. It is the technology that underlies much of those, but it is not the same. Think of Excel as the technology that underlies the financial spreadsheets you use. They are not at all the same thing; your spreadsheet is of value to you and uses Excel as the enabling technology.

Blockchain is extremely valuable in creating an agreed upon and verified history of transactions. One use case is known as “smart contracts” in which blockchain recognizes when conditions are met per a contract and can initiate the next step, for example payment approval. This is especially useful in financial transactions and those related to import/export trade.

A second use case is that of traceability.

Now American manufacturers must sign something that assures the minerals used are not conflict minerals. The reality is that very few actually know. We ask our supplier to assure us of that, and based on their word, we assure the next company in the process. Blockchain can enable traceability from the beginning to the end-point of interest.

This is currently in use in much of the diamond industry, where guaranteeing that product is NOT blood diamonds is important to value. Walmart is beginning the process of requiring food suppliers to join their blockchain network to enable traceability of fresh foods from the store all the way back to the field.

If your business is transaction light and traceabilty is unimportant, you can likely put blockchain on the back burner for now. But you do owe it to the future of your business to know what it is and what it is not as you draft your digital transformation roadmap.

Should Your Products Be Smart?

Prior podcasts have introduced the digital transformation business categories of “machine health” and “connected employees.” In this episode we discuss “smart products.”

Some manufacturing products are easy to visualize as electronic sources of volumes of data; others, not so much. Yet a significant portion of the products developed, manufactured, sold and/or serviced by manufacturers have great stories to tell, if only we’ll listen.

The two primary reasons to consider smart products are: (1) to simplify or improve the user experience, and (2) to provide information for you — the manufacturer — to improve design by understanding use in the field with specifics.

Kinetico® is a water treatment company that sells both commercial and residential units. Those units have consumables that the user must track and address. To make that much easier for the customer, Kinetico has embedded smart technologies in the units to highlight approaching maintenance needs.

Printers have done something fairly similar, in indicating when they are getting low on ink.

What would make usage of your products by your customers in their various environments, usage patterns, and other variables easier?

Jet engines are made of complex metals (currently) produced through very advanced metallurgical techniques. They hardly seem a candidate for generating masses of electronic data. However, both Rolls-Royce and GE have added data collection, analysis, and prediction capabilities. They now receive a premium, through the “as-a-service” business model for significant improvements in fuel efficiencies and flight routes that save their customers literally millions of dollars. This real-time data capability not only facilitate those immediate operational gains, but also provide information to the design engineers to determine how to develop much improved jet engines.

Without data, so many things we take for granted today would be more difficult.

When considering your digital transformation, smart products is one arena you cannot afford to overlook. Where you prioritize it is one question, but to ignore the potential is short-sighted.