On Alliance Day of NIWeek, Don Roberts, Principal of Exotek, a consulting company who focuses exclusively on system integration companies in our industry, gave a presentation entitled, Surviving and Growing in Trying Times. He discussed what actions integrators are taking or should be taking to protect their investments and position themselves for a solid future through strategies around customers, markets, employees, vendors, management, and cash. Here are some of his thoughts (mingled with my own):
Hope is not a strategy
92% of small business owners believe they can withstand financial difficulties, almost two-thirds were so confident that they had no contingency plan in place in the event of an economic downturn — Harris/Decima 2009
The reality of our current economic situation is that we have hit ‘reset’ button. The economy isn’t likely to come roaring back to 2008 levels, but rather build slowly from this new level. So, integrators would be better to view this as a permanent condition. Shutting your eyes will not make it go away and holding your breath could be fatal. You must be proactive in facing your challenges.
You should develop and stick to Key Performance Indicators (KPIs). If possible, reflect against prior periods to establish baseline for your business. Then, monitor your KPIs closely and establish triggers for required actions. You should develop and execute on contingency plans. Assess your risks, not just on individual projects, but for your business as a whole. Be honest and deal with key parts of business plan that haven’t materialized. And, be careful about internal projects and R&D that could deplete cash reserves. Act in a timely and decisive manner. Putting off decisions just undermines the credibility of management. Not to mention, it is likely bad for the bottom line.
Some markets are still showing life such as Energy, Green Energy, and Medical that continue to see investments. Stimulus money will fuel Government, Military, and Infrastructure projects. Food and beverage are still doing well (people still got to eat). You can also be creative and look for adjacent markets. For instance, the ‘tin’ industry is strong as more people by canned foods to prepare from home. But, you should use exercise caution when moving to new market. This turf will be defended by existing players. So, know your limitations and be realistic about what you can go after. Also remember, this is a global issue. So, you may have the opportunity to broaden your business to new geographies, but expect the same from global competitors.
Capital spending of your customers is tight and manufacturing utilization is under capacity, so look for new angles to improve their bottom line. Emphasize energy/cost savings and efficiency/optimization. And, look for ways to prepare your customers for the recovery. Also, continue to look for R&D projects that may be more likely than manufacturing. It is also critical to sell your unique value. Make sure your customers know you have staying power and never underestimate the power of great customer service. Finally, it is important for your sales people to Always Be Closing. Distinguish your ‘hunters’ from your ‘gatherers’. You need folks that will drive to decision and follow decision-making process up the chain.
Cash reserves are critical during this time period. History is littered with ‘good’ companies that ran out of cash. So take care that you don’t use up all your cash and negotiate for more every chance you get. You can look for ways to improve cash flow. For instance, don’t let your customers use your money. Define and stick to milestone payment terms and be persistent about getting them to pay you on time. Make sure that you don’t over engineer your projects – just meet the defined system requirements. Project your cash flow for at least 12 weeks, so you can predict your situation. Your banking relationship more important than ever. Remember that bankers don’t like surprises, so avoid the temptation to avoid communication. Keep in mind that you don’t have to be perfect, just better than the rest of their portfolio.
In a service-oriented business, your people are your most critical asset, but they are also your biggest cost. So, ultimately, you may be forced to make some difficult decisions including pay-cuts, furlows, and lay-offs. This is obviously a complex and personal issue. Be prepared – educate yourself and be ready to act if necessary. For instance, create a forced ranking of all your employees and implement ‘performance’ management where necessary. While being firm in these matters, you can still be compassionate. Communicate often and honestly. Now is not the time for spin. When people don’t know, they will think the worst. Encourage bi-directional communication. Listen to their concerns.
Tough times require true leadership. The biggest mistake is failure to plan and act. So, work on your business, not in your business. The old adage applies – that which does not destroy us makes us stronger. NI is confident that we are still gaining market share and believe there may be a fundamental shift in the marketplace. When the economy does recovery, our system-level business will again be the fastest growing part of our business which correlates to our growing portion of business through our partners. So, for those that weather the storm will be in a stronger position on the other side.
Get in Touch with Exotek
If you are interested in getting a copy of the presentation slides or better yet seeking further assistance from the experts at Exotek, please contact them at exotek.com.