Dr. Stephen Hummel, P.Eng
Strategy Guide, Berlin KraftWorks Inc.
COVID-19 has caused massive disruption. No matter the industry, every business has been reassessing, changing plans, and trying to find their way through the uncertainty. Manufacturing had already been evolving, but in the wake of this global pandemic manufacturers need to change incredibly fast in order to survive.
Global trade has seen escalating tariffs, supply chain shortages, and closed borders. Advances in technology are accelerating, resulting in product and industry life cycles becoming even shorter and shorter. And on top of all that, social media is amplifying the good with the bad, resulting in escalating customer expectations. For years competitive manufacturers have known that their products must have a complementary service component to support the product. This has become even more prevalent with all this disruption. It’s no wonder traditional goods producing firms are finding it harder to sustain their competitive advantage.
How can manufacturing firms keep up with all of this change? Time has always been an important factor for success. Now, time is the competitive advantage. Firms need to look at their agility, ability to innovate, and the timeliness of their analytics if they want to keep up with their customers.
If we have learned anything from COVID-19, it’s that businesses need to be able to pivot. This applies to employees, capital equipment, supply chain, the whole team. In other words, firms must pivot not just one element of their business but their entire “system” to create and sustain a competitive advantage. Examine those firms who were able to pivot their production to needed medical supplies, equipment, or PPE. They were able to keep their teams working and ultimately supported the front-line workers. Firms who have agility can recover faster and with higher quality of results, for themselves and their customers.
Successful businesses collaborate. By fostering relationships with employees and suppliers we can create partnerships rather than strictly transactional relationships. Allowing employees room to experiment can generate agility through increased knowledge and understanding. Using this same approach, we can turn suppliers into partners, they work with us to deliver success. After all, it is a “system”.
How quickly can your business scale to meet increased demand? If your company cannot keep up, customers will move on. When looking at capital equipment, flexibility is critical. Assessing your entire operation for additional capacity can show how changing certain aspects can reduce waste and deliver higher value. If your firm can scale quickly, faster than competitors, then you have an opportunity to keep their customers, perhaps forever.
There are three key sources of innovation for a company – employees, supply chain partners, and the customers. Employees are a company’s preeminent resource. Not only do they know the products inside and out, they understand all the details of the equipment that makes it. They must be partners in development and improvement. Their tacit knowledge gives insight that can lead to incredible innovation and efficiency, if given the opportunity.
Supply chain partners can be another source of innovation. Once again this is where a deeper relationship allows for better understanding rather than simply fulfilling orders. Capturing their tacit knowledge can be a game changer.
Take the time to listen to your customers. Find out what makes your customers successful and ensure your product is fulling actual needs. Listening and adapting with customer feedback is a key component of service, and an additional source of competitive advantage as service is a very difficult for a competitor to copy. Monetizing your customers’ tacit knowledge results not just in better recurring business but a stronger sustained competitive advantage.
Data leads to decisions. While most businesses track a number of different statistics, unfortunately many of these are not measured immediately (financials are a good example of this). Businesses need to focus on what they can do right now. Start by measuring one day – Were all of the orders that came in fulfilled today? Was there any excess capacity? Could there be? By using timely data, businesses are in a better position to adapt to changing conditions. The trick is to find those leading measures that link directly to lagging measures such as financial performance.
The manufacturing industry is rapidly changing. Firms that are agile, innovative, and able to access timely data can position themselves to successfully evolve. Please remember - many ideas may fail, but you have to keep trying! By looking ahead and experimenting, your team gains valuable knowledge and will be ready when it is time for change. Bottom line, time is the only resource that, once used, cannot be replenished. Agility, Innovation and Analytics optimize the time that your firm has.
We’re living in interesting times. Presently, companies of all types and sizes are scrambling to figure out how to survive, and how to successfully restart their operations thanks to COVID-19. Social media platforms have been inundated with information. Some helpful, some, well…not so much.
Just before the pandemic, these same sources were filled with starkly different messaging: You need to go faster, cheaper. You need to buy this software package. Lists of things you need to buy, types of people and consultants you must hire, otherwise there will be world-ending consequences for your business. Then my all-time favourite myth – manufacturing is dead. Well, we all just realized at once, that manufacturing and supply chain are critically important to our nation’s well being and must be viewed strategically, not transactionally. Our economy, our health and our safety depend on it.
Recently, I’ve enjoyed the shift in topics to discussions about how business may reinvent itself. I’ve been excited to hear and read about firms taking exceptional leaps, and even how competitors have become stronger collaboratively without giving up their respective competitive advantages. Effectively doing away with symptomatic solutions and focusing on the bigger picture for every business.
Over the past 20 years I’ve worked with hundreds of suppliers from mined raw materials to electronics to food to massive capital equipment and everything in between. Yet, one supplier relationship stands out for me as I look back, as having been the most trusted, most reliable supplier I had ever worked with. They achieved this with such a simple approach that required nothing other than effort, and which any company anywhere, could implement immediately without outside assistance.
This particular supplier was based in South Korea, and their business provided a technology that was not produced here in North America. There was a bit of a language barrier, but almost immediately from the first contact something became obvious – this supplier demonstrated an unwavering focus on listening to their customers.
The first 6 discussions with this supplier around technical requirements and capabilities specific to the project I was involved in at the time, whether by phone or email, resulted in the same answer: “I don’t know.” We don’t ever want our suppliers to say “I don’t know”, right? Isn’t that why we contact them, because we expect them to have the answers and then once they provide them, we’ll decide for ourselves if we agree and move on to the first supplier who seems to have the right information at the right price. Or do we?
In business, people feel compelled to give an immediate answer rather than make their colleague wait, or due to fear of not appearing knowledgeable. When we call suppliers, we expect them to have all the answers, even if we haven’t properly articulated our needs, or even if we don’t yet fully understand our needs. These expectations, on both sides of the conversation, set the stage for problems because we aren’t creating dialogue. Instead it becomes a transactional approach, which ultimately won’t satisfy the true needs for supplier or customer as gaps always present themselves down the road. Yet firms of all kinds will do this dance day in, and day out.
As it turns out, my favourite supplier of all time almost never had the answers when first asked, and most certainly was not the cheapest. However, they were the most reliable, most honest, and had the best quality by miles.
“I don’t know” was immediately followed up with “but here’s what I’m going to do to find out for you,” which was then followed up with action. He would tell me when he would respond with the information and did exactly that - on time, every time. If the question was about deliveries, he would respond on time with specific information, and goods would ship and move exactly when he said they would. If the answer was ever bad news such as “we can’t provide it to you that fast” or “we can’t meet that technical requirement”, there was no sugar coating, no excuses. Just factual information, and then suggestions for alternatives and an openness to seek creative solutions. If the answer ever required talking with someone else, he would set that up and facilitate it.
That blunt honesty, followed up with demonstrated commitment to action, still remains (to me) as the most powerful value any supplier has ever offered me. And yet it's challenging to quantify at all if the measure is unit cost alone. However, in this instance I could extrapolate how much time I was saving through clear communication, virtually zero quality problems, and only one late shipment due to a labour strike at a North American port. I could also estimate the savings of avoided late penalties from our own customers, avoided lost time and delayed production, because I was able to accurately plan my own business, manage my own costs and subsequently deliver the same commitment of information to my customers. This supplier absolutely didn’t have the lowest price, and cost accounting and unit cost metrics would have insisted I dump them for cheaper options. But I estimate (with the values I can calculate) that their strict adherence to honest responses, and equally strict commitment to do what they said they would when they said they would, saved my firm 10.5 times over the cost of buying the “cheaper” alternative from other suppliers over the same time period.
Today more than ever, companies could find space to survive or even scale in a cost margin that big. And that was just one supplier, imagine how much it could impact your entire supply chain.
COVID-19 has caused our world to change daily. While it has been forced upon us, more and more we are becoming comfortable with saying “I don’t know”, and that opens the door for a real exchange of ideas. It sets the stage to build solid supplier relationships that are based on listening and data and not on saying what we think the customer wants to hear which sooner or later ends up costing time and money for both supplier and customer alike. I love the power of “I don’t know” for all the opportunity to collaborate and deliver real customer-focused value that follows that statement.
Sourcing Specialist, Berlin KraftWorks Inc.
Supply Chain professionals should continually evaluate and push to understand the multiple layers of their supply chains. Not only is it a matter of due diligence and very relevant for day to day operations, it can produce tangible benefits in the forms of risk mitigation, technical engagement, and building a socially responsible supply chain.
Through the start of a new calendar year when organizations reflect and refresh goals and metrics – strategy moves to the forefront. Within supply chain teams, it is a time for brainstorming ideas, charting direction and evaluating supply chain objectives. This time often results in discussion around deepening the understanding of the complex and multiple layers of supplier partners supporting the organization’s goals.
Supply chain teams operating with a systems-thinking approach will often strive to connect with and understand the supply web extending out of their facility, engaging further, pulling additional information and proactively reaching out to establish connections and make introductions to their supplier’s suppliers. These initial engagements will lead to discovery of a supply chain that reached much further than previously known, both in layers of suppliers, and geographical distance. It also allows the Supply Chain team to view supply issues through a different lens with much more context, and to ask more informed questions of tier 1 suppliers when working to solve a problem.
Understanding the Multiple Layers of Your Supply Chain
As COVID-19 circulated the globe and supply chains started feeling the effects with extended closures of Asian businesses, and then European companies before spreading across North America, understanding multiple layers of the supply chain has become paramount. Business continuity is hinging on the ability of the supply chain to continue to support ongoing operations, and now has company-wide visibility up to the C-level. Supply chain teams that understand the tiers of suppliers and maintain relationships with critical lower tier suppliers will have an advantage in terms of faster communications, and the ability to develop mitigation plans and responses ahead of those who do not. This is starkly visible during the current pandemic but often fades to the background during normal operations – and is equally applicable during regional weather events, or instances of political or labour unrest.
It must be noted that the development of these relationships does not happen quickly or easily. Often tier 1 suppliers are reluctant to divulge their own supply base, and especially to provide contacts or access to these key resources. Supply chain professionals must build an environment of trust and be clear on intentions or requirements for mapping the supply chain. Initial discussions or visits can be held between all three parties to ease any tensions.
A further benefit when engaging critical sub-tier suppliers is the potential input and impact to designs, and the ability to release new designs faster. For instance, when dealing with electronic contract manufacturers, if a direct relationship exists with the printed circuit board supplier, design choices, reviews and feedback can be done much faster than working through the contract manufacturer as the conduit for communications. This could save days in a design cycle, and weeks over a new product development. It also fosters trust between all parties’ engineering teams, and can lead to the discoveries or introduction of new materials or processes. A similar approach is also true in the design of plastic or metal components, working directly with potential third-party suppliers such as tooling manufacturers or coating providers.
Creating a Socially Responsible Supply Chain
By understanding multiple layers of the supply chain, teams can build and employ a socially responsible approach when selecting and working with supply partners. The approach to review supplier networks for socially responsible reasons is a relatively recent development which has gained momentum after the passage of the Dodd-Frank Act in 2010, and its implementation in 2012, which requires reporting on conflict minerals by publicly listed companies in the US. More recently, reporting on the carbon footprint of supply chains with the goal of becoming carbon neutral has become the focus of highly developed companies and their supply chains. Volkswagen has committed to becoming carbon neutral by 2050 in compliance with the Paris Climate accord, and other large companies are following suit.
All in all, getting to know your supplier’s supplier is a critical element of strategic supply chain management. It is fundamental to the entire system, a keystone to risk management, and critical to business continuity strategies for successful companies. Engaging directly with engineering teams brings speed and new technology to new designs and brings new products to market faster. And socially responsible companies need to know who is supplying their products all the way through the chain, to build a sustainable supply chain and drive continuous improvements.
COVID-19 is forcing a rapid redistribution of resources, wealth and economic mobility. Only those firms who are willing to reinvent, shift, and act quickly will survive the wave. As a small or medium business, adaptability, agility, and collaboration will be the key to your success. Here are 4 steps you can take right now:
1) Stop and assess on two horizons
We’re offering free consultations to help firms identify their current needs and next steps during the COVID-19 crisis. Our team have all navigated manufacturing operations through severe economic crisis before, and we’re happy to help and offer any other assistance we can. Give us a call at 519-588-2900 or email Matt Weller at firstname.lastname@example.org.
Manufacturing has been around for a long time. From the time early humans picked up a sharp rock or stick and grasped the concept of a tool, we have had to consider how to make things to survive and thrive.
Manufacturing is simply the process of converting something into something else of greater use/value. Although the methods and materials we use have, and will continue to evolve, the requirement to produce physical things will never go away and the need is ever increasing. But there seems to be endless confusion about what manufacturing is.
So why then if manufacturing is a part of our survival, have we become content to be so vague in our understanding of it? On a global scale it does make sense to trade with other nations for different aspects of manufacturing, but this does not relieve us of our responsibility to maintain our manufacturing knowledge and innovation. To do so is to cut ourselves off from opportunity.
Confusion caused by disconnected points of view
There’s a lot of terminology out there: Industry 4.0, Advanced Manufacturing, Additive Manufacturing, Lean Manufacturing, IoT, Digital Transformation in Manufacturing, Technology Adoption for Manufacturing, etc. The confusion comes as each of these approaches to manufacturing splinter the focus into separate solutions bringing with it contradictions and generalizations. The resulting confusion translates into lost productivity and lost opportunity, for individual firms and for Canada.
If we focus on individual tools as universally applicable, we gloss over the opportunity to understand the true operational challenges facing the majority of Canadian manufacturers, who happen to be manufacturing start-ups and small and medium enterprises, at a macro level. There is no substitute for going out and listening to folks at individual firms who can tell us those things which are not written down, unlocking the experience and tacit knowledge that lives in individuals, and individual firms, which can then develop into new knowledge for innovation collaboratively. This cannot be done in isolation, or through any kind of automated method.
Manufacturing is more than factories and folks in coveralls
There are many firms who produce physical products (in some cases the physical products are simply a device to deploy software as a core product) who vehemently reject any association with “manufacturing” in favour of being “tech” or “IoT” (Internet of Things, which from a purely manufacturing point of view is simply any manufactured product with connectivity). In doing so, they set down a path of reinventing the wheel with the belief that their firm or product is unique, and they disconnect themselves from over a century of knowledge advancement around how to produce things effectively, and competitively. All the while, time to market is extended, as is cost and risk. While not the sole cause, this is a major contributor to Canada’s decline in productivity on the global stage compared to other nations.
It’s a little like watching someone starve while they sit in front of a feast.
To be clear, this is not the fault of “tech” or “IoT”! My belief is that it’s the fault of all of us who call ourselves professionals in manufacturing.
Manufacturing is our best kept secret
Canada has a strong manufacturing sector and in fact, is exceptionally good at manufacturing and product development. It’s a massive part of our economy. However, misinformation runs rampant and we hear myths like “You can’t develop product in Canada”, “Canada can’t produce products economically” and “manufacturing is dead” which is frankly, garbage. As manufacturing splinters itself into the categories mentioned above, we miss the forest for the trees.
Ultimately the decision of where to produce is a data-based equation specific to each product and there is no one-size fits all answer. But many products can be developed right here, quickly and economically, regardless of where they are ultimately produced, and this has been demonstrated time and again by many firms. For the most part however many of us in manufacturing are guilty of saying “we’re too busy getting the job done to talk about it”. We really need to shift that perspective.
Collaboration is key
Our friends in tech have an approach that we should definitely learn from. Many tech folks regularly share information, articles, celebrations, etc. through LinkedIn and other social media outlets. While it may seem time consuming, it does demonstrate a different approach – let’s share knowledge, let’s collaborate, and let’s solve common problems together so we can focus our individual innovation effort on the things that make us different and competitive. While many firms divorce themselves from being “manufacturers” and therefore from manufacturing knowledge, Canadian manufacturing itself hasn’t adopted the same external collaborative philosophy common to tech and common to manufacturing in other nations, and so we also sit and starve at a table full of food.
I’m as guilty as anyone. But because of that, I know that for any firm which produces a physical product – any physical product - there is a definite path to break through the fog.
Manufacturing is strategic, not transactional
If your firm generates revenue from a physical product, then your manufacturing is the engine that enables your firm to deliver the value your customer will pay for. Often, it’s viewed as just the opposite, as an afterthought or as transactional activity. The reality is how well you manufacture will decide how well your firm will survive. Supply Chain is the connective tissue from your customer’s customer to your supplier’s supplier. But manufacturing is the one element of overall Supply Chain that must be supported by the whole organization, and in turn it supports the organization itself. Manufacturing by its nature can multiply value (or waste if managed poorly), so its worth placing it as front and centre if your business relies on physical product to make money.
There is tremendous opportunity!
Canada sits on the edge of massive opportunity! The connectedness of our modern world affords opportunities to re-imagine manufacturing. Specifically, Canada is very well positioned to be a global leader in the manufacture of low volume, high value/complexity products. Think MedTech, DeepTech, Machinery, Automation Equipment, and virtually any other product where the volume will not be that of consumer goods, but precision as well as reliability is critical. This is Canada’s future, and its ours to lose!
From my point of view, here’s how we can collectively improve Canada’s productivity from the grass-roots on up, and get past manufacturing’s identity crisis:
1) Seek to understand your own firm and your own business case
Applying a system thinking approach to your firm’s challenges will separate symptoms from root cause problems if applied horizontally across all functions and not localized within one department. Understanding how to select the right data to base decisions on is key, since too much data (and over-complexity) can be as problematic as none at all.
2) Seek to understand manufacturing beyond your firm, for better context
A common truth around all of these manufacturing approaches is that they all have value, but none of them can solve all problems for all firms (nor should they). Its up to each firm to acquire knowledge specific to their manufacturing first in order to identify the right tools and then know how to apply them effectively. Application is key.
3) Finally, collaborate outside of your firm.
Both your competitors and your colleagues in manufacturing will face common operational challenges. It is a waste of money and worse, a waste of time for firms to work separately to find solutions to common challenges when they could leverage knowledge across industries to solve them. Instead, grow your involvement and awareness of your own ecosystem, who the players are and ways to work together for common benefit which will increase knowledge development, and innovation. This will increase the time and resources you have to apply internally to those things that differentiate your firm from others – your competitive advantage.
Canada’s manufacturing can have a bright future, and we have all we need today to get there if we collaborate under a system thinking mindset. Who’s in?
At BKW we're very proud to have our Value Stream Mapping projects guided by Brian Watson. Brian is a supply chain system thinking expert, and he has spent his entire career helping firms across various sectors improve their performance. Brian spent 21 years in manufacturing, enjoying much success improving the performance of the firms he managed. For 18 years, Brian was a Professor of Supply Chain & Operations Management at Conestoga College. Since 2017, Brian has been the Director of the Magna Centre for Supply Chain Excellence at Conestoga.
Through his role with Conestoga College, Brian has been able to share his knowledge and increase awareness of the importance of system thinking in improving firm competitiveness in this dynamically complex global economy. Recently, he authored a whitepaper focused on Canada’s productivity and how system thinking enables businesses to strive for sustainable competitiveness.
The following is an excerpt from the whitepaper, Addressing Canada’s Productivity Challenge: Sustainable Competitiveness Through Integrative Supply Chain System Thinking (May 2018).
Canada’s economy lags behind many other nations in terms of productivity. It is projected that Canada’s productivity growth rate will be slower than many of its peers over the next thirty years. Addressing Canada’s productivity is a dynamically complex challenge, impacted by international, national and organizational factors. While governments hammer out trade agreements, tax and business policy regimes, there is much that individual organizations can and must do to address productivity improvement.
The predominant argument put forward to address productivity improvement is that of investment in technology. While investment in technology is necessary, it is not sufficient in addressing Canada’s productivity challenge. Many SME’s do not have the resources or skills to invest in technology, while other firms invest in technology without truly understanding its impact, often resulting in unintended negative consequences. Organizations must first place their efforts and resources on improving system effectiveness in delivering ever increasing customer value. Only then should investment in technology occur. Effectiveness first, then selective investment in technology where appropriate, in a never-ending process of innovation, knowledge creation, continuous improvement and value creation. Doing so generates much needed financial and human capital and improves operational and financial performance, allowing the organization to leap ahead of the competition and establish sustainable competitiveness in the process. To achieve this, a transformation in thinking and behaviour is required.
This paper will identify two key areas requiring the immediate attention of executives and senior management across all organizations. The first is the development of mission critical integrative supply chain system thinking competencies in their organizations. Integrative supply chain system thinking marries training in effective supply chain management with system thinking, then applies these in addressing the productivity challenge. In the process key competencies are developed, necessary for improving an organization’s effectiveness in delivering ever increasing customer value and improved productivity in today’s (and tomorrow’s) dynamically complex global economy. Of note, in 2016 the World Economic Forum (WEF) identified the top ten skills required by organizations needed to thrive in the fourth industrial revolution.* Those top ten skills include;
Integrative supply chain system thinking competencies, when developed as outlined in this paper, and in concert with effective leadership, embodies all of these skills.
The second key area requiring immediate attention is that of organizational culture. An organization’s culture must be one that encourages collaboration, risk taking, is focused on customer value creation, adopts continuous improvement as foundational to its strategic approach, and regards all employees and key supply chain partners as critical to the creation of innovative new knowledge. Developing such a culture requires organizational leadership that values and adopts such principles and approaches in the day to day managing of the firm. Unfortunately, such leadership is at odds with traditional cost-focused management culture found in many organizations today yet is absolutely essential to achieving sustainable competitiveness in today’s (and tomorrow’s) dynamically complex global economy.
World leading productivity, and with that true sustainable competitiveness in the global economy, comes through the effective application and leveraging of all of an organization’s resources, not just technology. This is true for organizations in all sectors of the economy. It takes skilled supply chain specialists trained in system thinking to effectively leverage all resources including technology; integrating, coordinating, and optimizing them to achieve world leading productivity and system performance. It also takes a leadership culture that fosters an environment in which knowledge creation, innovation, and continuous improvement toward true sustainable competitiveness can flourish.
This paper reviews the work of a number of key thought leaders in defining integrative supply chain system thinking. Additionally, a case involving a manufacturing firm is outlined throughout the paper in an effort to better understand the importance of integrative supply chain system thinking to improving organizational effectiveness.
Improving productivity in Canada is an urgent matter that must be addressed by governments, business, and education systems alike. Unless taken seriously and accompanied by specific action, Canada’s productivity, and with it our competitiveness and standard of living will continue to fall behind. This paper is a call to action to all organizational leaders to address the productivity challenge. It is also a review of what needs to be in place for improved productivity and sustainable competitiveness to be achieved. If you are an organizational leader charged with the responsibility to improve your organization’s/supply chain’s performance then I encourage you to continue reading.
If you would like to read the full whitepaper, please click here.
*The Future of Jobs, Employment, Skills and Workforce Strategy for the Fourth Industrial Revolution Report, World Economic Forum, January 2016, as summarized in, Alex Gray, The 10 skills you need to thrive in the Fourth Industrial Revolution, January 19, 2016, https://www.weforum.org/agenda/2016/01/the-10-skills-you-need-to-thrive-in-the-fourth-industrial-revolution World Economic Forum, Retrieved February 26, 2018.
Scale (or Scale-Up) and Growth are two terms commonly heard these days when talking about just about any kind of business. More and more these terms seem to be used interchangeably, but they are in fact two very different things.
To “scale” fundamentally means to increase your firm’s overall revenue without adding significant increase in fixed and/or variable cost spending. Essentially this is the challenge every start-up will face, however Small and Medium Enterprises (SMEs) and even large multinational companies also have this challenge when attempting to respond to a changing environment. For a start-up, resources are constrained, however the business must find a way to advance especially if it has not reached break-even. For an SME or a very large corporation, the market may dictate the selling price for their product - therefore the only way to beat the competition is to find a way to provide more value than others at the same price. The only way to do that is to scale - to offer greater value without taking on greater cost to do so.
Growth is the opposite strategy to scale. Growth is the commitment of resources and money in order to make more money. We see this scenario all the time: a company has a great idea and receives an investment, which is intended to give them the tools they need to get to the next level. If it were this simple, why do so many companies continue to struggle and at a far greater cost post-investment?
Our experience has illustrated to us that many companies that believe they have a growth challenge actually have a scale challenge. You may be aware of Dr. Peter Drucker’s seminal research over 60 years ago that resulted in the popular expression: “before you can be efficient, first you have to be effective”. In a manufacturing business, this relates to the idea that there’s a hierarchy in the development of any product or service - where no product or service can be optimized until it is first capable of producing the requirements dictated by the business. If the product is poorly engineered and can’t be supported by supply chain or operations, no amount of optimization will improve it. We have seen countless efforts to optimize or continuously improve business processes that aren’t effective, and the result is wasted effort, cost, time (time being the most expensive, non-renewable resource), and often a lot of fire-fighting and churn in an attempt to delay the inevitable failure of that product.
The only way to know if something is effective is to measure it against the business case, the primary objectives of the company. If the process or product isn’t delivering what is required by the business, the solution is often to take a scaling approach versus a growth perspective.
Once you’ve managed to scale, strategic investment in resources and technology can expand the firm’s scaled operations and leverage the knowledge developed through the preceding scale process.
That knowledge is a firm’s competitive advantage, particularly if it enhances the value that customers experience with that firm’s products and services.
When a firm has been able to scale, they have developed the internal knowledge of their product and operations without adding significant capital expense or investment. Their cost to produce and deliver has remained more or less the same, but they are realizing greater value for each sold unit. Often however, scaling leads to lower costs with higher value, so the firm enhances its performance at both ends of the profit equation: price and cost. Beyond this however, this newly developed product and operational knowledge is difficult for an outside competitor to replicate. A firm that has scaled successfully has changed the behaviour of its employees and supply chain. This usually results in even further improvements in both effectiveness for customers and efficiency of production. At this point, carefully targeted growth strategies can leverage a firm’s effectiveness - while the unscaled firm lacks the internal knowledge and capabilities required to effectively utilize investment.
Scaling is possible here, in Ontario
The number of times we have heard people say that manufacturing companies can’t scale here in Ontario (or Canada) is staggering - yet it’s simply not true. Here in Waterloo Region, we are the 4th largest manufacturing sector in Canada, virtually any type of high-performance service you can imagine is within a 250km radius.
Scaling efforts need to be guided by hands-on experience, for which there is no substitute or magic technological bullet. Scaling effectively means taking a whole-business (or “systems”) approach versus a “silo” approach (focusing only on individual business functions or symptoms as disconnected challenges) to unlock value. The silo approach is the most obstructive barrier to achieving successful scaling. However, once a firm has developed its own “system” knowledge around scale, the sky is the limit for what the firm, its employees and supply chain partners can achieve.