Business leaders should ask themselves, which of these technologies will disrupt our markets and products? Which can we leverage to improve our products and services? Which new industries can we serve? What can we add to the list?
The latest Wall Street Journal economists poll shows an expected growth rate for 2013 of 2.4 percent, a decent though lackluster pace. However, the same group assesses the risk of recession at 21 percent. So we're more likely to have light-to-moderate growth, but there's a significant risk of recession. What can a business leader do to manage in an uncertain economy?
Check out my five videos, Business Planning with Risk of Recession:
I am developing a checklist for people trying to build more flexibility into their businesses. Email me if you would like a copy.
If you have seen me speak recently, you can re-live some of those great moments. Or if you have not, you can whet your appetite. If you are organizing a meeting, give me a call about how I can share my expertise (and humor) with your group.
A construction rebound is coming, but it will be a soft rebound, leading to a mild recovery in wood products demand. Although somewhat better times are coming, businesses need to be prepared for the challenges that improved sales bring—it’s not all beer and skittles.
The rebound has to come because our recent level of construction has been unsustainably low. Our population is growing, albeit not as fast as when we attracted lots of foreign immigrants. The increased population triggers a demand for homes, stores, offices and other places to work.
Don’t get too excited about the rebound, because we are not returning to the go-go days of 2005 when we built two million new housing units. However, we need a lot more than the 612,000 we built last year. Further softening the rebound is the steady decline in average square footage of new housing since 2007, down about five percent for single family houses and ten percent for multi-family.
Attitudes have also changed. People now think of a house as . . . a place to live! Young couples are not speeding to home ownership as fast as they can, preferring to rent for a while.
All things considered, construction and wood products demand will improve over the next two years, but not at a break-neck pace. Even the soft rebound, though, will present challenges to the wood products industry.
Sales: are your sales people ready to book more business? You may think so, but don’t be so sure. In slow times, sales representatives get discouraged and too often become order takers. When the rebound starts, the new business goes to young people too inexperienced to know that times are bad.
Staffing: if you’ll need more people when business improves, do you know where you’ll find them? Too many managers are embarrassed to stay in touch with people they laid off, yet those may be the best potential hires in the recovery. Suppose that a manager calls a previous employee and says, “We are not re-hiring quite yet, but we’d like to know if you’re available when we do.” That former worker is going to feel great, appreciated, respected. Even if he or she has found a new job and won’t return, the phone call is a very positive event. More importantly, you can determine ahead of time how much of a challenge you’ll have if you need to staff up.
Vendor Performance: You rely on other companies for materials, which could range from logs to maintenance, repair and operations supplies. Are your vendors ready to deliver? A little work assessing their ability to supply you can help avoid major headaches down the road.
Cash Flow: Orders come in, which is good news. Suppliers may need to be paid in 30 days, and employees definitely must be paid promptly. Are your customers going to wait 60 or 90 days to pay? If so, you’ll be making money on an accrual basis but hemorrhaging cash. Do some cash flow projections now under a moderate growth scenario to see if you’ll need more financing.
This is a great time to do economic contingency planning for stronger sales. Make sure you’re ready, even if the rebound will be soft.
Strategic planning should not be a waste of time, but it often is.
Confirmation of this common notion comes from a recent McKinsey Study, "How to put your money where your strategy is." They found that most corporations do not reallocate capital among their business units, or at least not in a significant amount. The study further found that those corporations that do reallocate capital significantly outperform the others. The value of those corporations is 40 percent higher after 15 years, on average.
There are a number of important reasons why this occurs, including maintaining a collegial working environment. It's hard for the boss to play golf on Saturday with the vice president whose division had to give up capital on Friday. However, the CEO is being paid to deliver results, not to make friends of the executive team members.
How to get started with a more valuable process? I recently was gathering my thoughts before meeting with a CEO to discuss his strategic planning process, and I pulled off my bookshelf the old Strategic Planning Management by my corporate planning professor, Tom Naylor of Duke University. The short book is full of wisdom, such as that stategic planning cannot be performed by staff; decisions must be made by the CEO and division heads who will be responsible for implementing the plans.
An audit of your company's strategic planning process is the place to start, according to Naylor. I've seen plenty of planning processes fail because their objectives were not clearly identified, or the corporate decision-making culture was ignored.
The annual planning season will start in just a few months. I recommend preceding that with an audit of your process. Call me; I'd be happy to help.
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