As a consultant, my commitment often calls me to help clients find and use “best practices” for their industry. But, what is “best” in one economic reality is counterproductive in another. A better service I offer is helping clients discover what is “best”, given the resources they have to work with.
In a tight market, you have to do more with fewer people. You need to be a lot more conscious of costs and outcomes. Many key areas, such as R&D, IT, marketing, and training, take a hit. You can’t invest in your people and infrastructure with the same abandon. And, business cycles are shorter and tighter.
Short term goals will be a lot less ambitious than they were just a few years ago. You can’t take the same risks that were common and acceptable then. There is an almost palpable undercurrent of fear and caution in the industry. Everyone is very aware of not making mistakes. When the waves are lapping the deck, you can’t afford to capsize.
One client was recently caught half way through a new project. The projected revenue was essential to their survival, but they still needed to spend $10 million for new equipment. With an anticipated 30% reduction in the market price they could command, it was uncertain if the ROI was still there, given that most of the COGS (Cost of Goods Sold) had not decreased to the same degree.
Their previous “best practices” model was now useless and unattainable.
Every step of the project had to be reviewed and assumptions retested. Luckily, the equipment suppliers were facing a similar crunch, so while we could not get
a significant price decrease, we could negotiate more favourable terms over a longer time frame.
Instead of all the components being kept in house, I was able to find vendors that would do some of the staging for us, which decreased the need for that capital cost of equipment. They were now willing to work for less in order to keep their equipment and people going.
The most significant cause for failure comes from project managers not shifting gears quickly enough to minimize the impact of changing conditions and maximizing alternatives.
Inventory was cut back dramatically with greater JIT (Just In Time) procurement practices implemented. This was now more viable with more transportation options available. Tactics that were not as viable or desirable two years ago now were.
The bottom line is we were able to initiate the project for half the projected cost and make it profitable. We deferred many costs by subcontracting some of the tasks and leasing some of the equipment rather than purchasing. That left enough cash to cover the needed personnel in the first year of production.
Everything that comes into a company is done by procurement. We procure assets, equipment, resources, and personnel. At any given point in time, we
have to decide what we can accomplish with the resources available. It is the height of hubris to assume that, in changing times, we can still accomplish the goals previously set. Every plan a company has must be constantly re-evaluated when conditions change, starting with the desired end point. Can we reach the destination we planned on? If not, then what is the new target?
The most significant cause for failure comes from project managers not shifting gears quickly enough to minimize the impact of changing conditions and maximizing alternatives. Too many leaders simply wait too long until circumstances force them to alter direction.
This is the foundation for successful business models, such as Lean Six Sigma. Everything is in flux. Conditions are constantly changing. Options and alternatives that were not viable even yesterday may suddenly have merit allowing for a successful conclusion with perhaps less cost and resources. As Helmuth Von Moltke said, “No plan survives contact with the enemy.” Only a fool proceeds with a plan without being prepared to modify on the fly. Alfred Korzybski added that, “The map is not the territory.”
Companies and individuals spend a great deal of time and resources making plans. We have business plans, marketing plans, growth plans, and success plans. Each project has plans for development and deployment. Often, we get so enamored with these plans we fail to abandon them when conditions change. What was once a flotation device in turbulent waters can soon become an anchor dragging us under.