In a recent interview, Terry Scuoler (Chairman of the Institute of Export and International Trade) insists that the manufacturing sector needs to be “bold” as it emerges from the pandemic. He acknowledges that whilst the pandemic has posed huge challenges (in every sense), there are opportunities for businesses now beginning to emerge – and you must be ready to grasp them. His general message for businesses is to have ‘confidence and courage’ to invest during the downturn. In a previous blog post we have discussed the importance of investing in the right areas – have a read of our article ‘Investing in More Capacity Could Actually be Damaging Your System…’ to understand where you should be focusing your improvement efforts.
As the UK emerges from the current recession, we can look to history to learn that the businesses that have prepared and emerge quickly are the ones that succeed. You have probably lived through at least one recession in your lifetime – the 2008 recession stands out as the worst so far, huge institutions folded, and it took a shocking 21 quarters for the UK economy to return to pre-recession levels. Prior to that the average recovery time was just 13 quarters. Today we find ourselves looking at an even greater recession. What we have learnt from the past is that it is always the companies that respond quickest and reopen their doors the fastest that win – everybody else loses. So, the question is: how do you make sure your business is a winner? In an environment where supply chains have shut down, furlough schemes have been enacted, companies’ capacities have been reduced, and customer and supply bases have dwindled… how do you make sure your organisation succeeds whilst everybody else is struggling? Where do you need to invest? When we say ‘invest’ we don’t just mean money (although there might be some costs associated), we also mean time, effort and focus. To determine where you should invest in order to win, you need to define what ‘winning’ looks like. Being the forerunner out of your competition and securing the most sales from the (burgeoning) client base will probably sound good. So, how do you achieve that? You need a compelling offer. You need to be deemed the most attractive option to those customer bases that are returning and looking to place orders with suppliers, or for the end-users looking to place orders for your products/services. For either to happen, you need a compelling offer.
You are currently faced with somewhat of an opportunity. How often, pre-pandemic, during regular peak business did you sit down and discuss that you need to make your business stand out more from the competition? In business, those conversations are relatively common. However, the reality of running a busy business means that we are rarely able to carve out the time/capacity to develop and build the capabilities for us to then be able to market and sell and become the better option to a customer than our competition. The pandemic, while terrible, does give us this opportunity. The lockdowns have offered many people headspace; now is the time to think about a way you can differentiate yourself from your competition. Now is the time to develop, build and capitalise on one or more compelling offers. Building these offers isn’t enough though, you must make sure the market is fully aware that your organisation can deliver these offers and you are the best supplier/producer of the goods they are looking to buy. With the worldwide vaccination programme underway, the market’s full return is fast approaching – if you haven’t been preparing, you had better get started.
Before you build anything, you have to be sure it’s a good idea. So, let’s work backwards. What would make an offer so good that customers would not only give you their business, but also allow your company to demand the best prices and terms. It would have to be an offer that either solves a problem they currently have, or one they are going to have when they come out of the pandemic (that no other competitor is also offering!). To do that, you need to understand what your customers are suffering from today. Some customer needs are predictable at this point. For example, if you are a supplier, you – alongside your competition – will have reduced or shut down your capacities when the orders tailed off, the result of this is that the supply chain won’t have all the right inventory in the right places as companies come back. So, customers who were buying from you and your competition will buy from you if you are the only supplier that has the stock available and ready to go when the market opens up.
If manufacturing and reselling organisations have been shutting down their operations, reducing their production and reducing their inventories during the pandemic, then not all the needed inventory will be in the right locations for when companies requiring those goods start opening up again and increasing their volumes. The cutting of capacity and inventory makes sense for these organisations, workforces cost a lot of money to keep going – the furlough schemes have enabled companies to keep their employees on the books but has meant capacity has been dramatically reduced. That is, if the headcount hasn’t already been permanently reduced. The sad reality is that many people have lost their jobs. Some companies simply cannot afford to keep paying salaries with a lower level of sales coming in. So, it makes sense, in isolation, to have reduced their operations and inventories. However, thinking ahead means understanding that companies will soon be ramping up and needing that inventory. If it is not in the right place, then suppliers of that inventory will need to source it from somewhere – customers will go to the first supplier that has it available. This means that if you can produce the right product, of the right quality, you can command and win new sales through having faster response times and higher availability than your competition coming out of the pandemic.
However, this requires the opposite of cost cutting – it requires investment. So, you should be looking to really understand the pain that your customers have, or will have as they emerge from the pandemic, and you should be looking to put things in place that will solve these for them so you will be the best, most desirable supplier. But be careful, because whilst everyone is keeping their costs low, you are considering how to invest in your business. So, you must choose the right things – in this example: the right products, in the right quantities, in the right stock locations. Essentially, you need to be sure you know what the demand is, and in what sort of quantities and timings – and be ready for it. If you do this, you will have an availability offering and a fast response offering that your competition will not. This means you can command not only more sales, but also more new accounts who potentially were not buying from you pre-pandemic. So, you need to build an offer as compelling as the example.
Then you need to make sure your customer base knows you can deliver it – marketing becomes very important. The offer, and why it’s good for the customer should be communicated during the shutdown (right now!), before customers ramp up and need the inventory – because you want them to come to you!
First, build the capabilities; second make sure the market knows you have the capabilities. Then, that leads you to the last challenge. Once you have won all these new accounts and these new customers, how are you going to keep them one business returns to normal? You will need such good customer service that they would be crazy to go back to their previous supplier. You may even need a second compelling offer to keep them buying from you and not reverting to their previous supply base. So, once you have built and efficiently marketed your initial compelling offer to win the business, consider building and marketing a successive offer that solves a different client problem once business as usual resumes. This way you will always be the first choice.
Contact us at [email protected] for more information on how to develop, build and capitalise on a Decisive Competitive Edge (DCE). Goldratt UK works with clients to separate them from the competition through developing and implementing DCEs – don’t hesitate to get in touch to find out how we could help your business seize the opportunity from the pandemic.
By Phil Snelgrove, Lauren Wiles