Alliance Day – Surviving and Growing in Trying Times

August 11, 2009

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.

General Management

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.

Marketing

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.

Sales

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.

Financial Management

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.

Human Resources

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.

Leadership

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.


Your Business Foundation – Part 5 – Putting Plans into Action

April 27, 2009

With the annual strategic plan completed, you can now bring your new corporate objectives back to the organization. Take the opportunity to call a company meeting. It’s a good chance to show the organization your commitment to the business as well as eliminate thoughts about hidden agendas. You can then chart new directions and announce necessary adjustments.

Tie Corporate Objectives to Management Goalsplans-into-action

You also want to meet with your managers. Even if they participated in the strategic planning, it is a good idea to follow up and ensure that there is as seemless integration from mission/vision to business plan/objectives and down to goals/actions. The goals and actions should be: specific, short-ranged, obtainable, and measurable.

Speaking of measurable, you should agree on how to monitor and review them. Finally, check for understanding and agreement to complete the delegation process. Consider tying them into their compensation (e.g. MBOs).

Use KPIs to Create Corporate Dashboard

Once you have established the metrics by which you will monitor if you are on track to meet your business plan, then you determine which ones are most critical. These are commonly known as KPIs (Key Performance Indicators). Note there may not be a KPI for every single element of your business – just those critical to your success or perhaps important to a new aspect of your strategic plan. These KPIs become your Corporate Dashboard. Similar to a car, you’re corporate dashboard contains the vital information about where you are going and how your vehicle is performing.

apna-metrics-dashbrd

During my business consultation with APNA, our second Select Alliance Partner in India, they showed me their corporate dashboard – actually a LabVIEW VI with nothing but LEDs that were either green or red for each of their KPIs in each of their business areas. I was particularly curious about the Project indicator. So, I asked Gigi Mathews, their quality officer, who I would also learn was affectionately known as the ‘evil metrics woman’ by her colleagues. She responded, “If 100% of all projects are on time and budget, then it’s green. Otherwise, it is red.” I wondered if it had ever been green. She said, “No.” So, I suggest to her with all due respect that I didn’t know of any system integrators for which the indicator would be green. Nevertheless, I appreciated their efforts to define and track KPIs to build a corporate dashboard for their business.

Question: What are some of the KPIs on your corporate dashboard?