Speakers at the Manufacturing Business Conference offer practical tips for businesses seeking growth in a recovering economy
5/5/2010 - Signs of an economic recovery are a welcome sight to those in the manufacturing business, an industry that was particularly hard-hit by the recent global meltdown.
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But these days, manufacturing companies should look beyond recovery and focus on opportunity, said Sunil Chopra, interim dean of the Kellogg School, who offered welcoming remarks at the 2010 Manufacturing Business Conference on April 28.
“Every dislocation represents an opportunity,” Chopra said. “Difficult times are the greatest times for opportunity.”
Speakers and panelists echoed those sentiments throughout the daylong conference, which explored a range of issues related to the manufacturing industry, including entrepreneurship, transformation in the automotive industry and internal production versus outsourcing.
Discussions generated practical advice for a wide range of manufacturing professionals — from leaders of entrepreneurial startups to seasoned industry professionals — on how to become “positioned for opportunity” in the wake of the economic upswing. Develop a process discipline.
Focus on building according to customer demand, said Sam Allen, chairman and CEO of Deere & Company, who delivered the keynote address, “Positioned for Growth.” Allen explained that Deere & Company’s commitment to process discipline generated $1.4 billion in cash in 2009. “You go from guessing to knowing what a customer wants,” Allen said. “You’re better able to produce equipment and you don’t end up with excess inventory.” When it comes to growth, be patient.
Allen emphasized the importance of “disciplined growth,” explaining that Deere & Company started rethinking its business model in 2000 but didn’t reap the benefits for several years. “It was not a one-year process for us — it was a seven- or eight-year journey,” he said. Entrepreneurs should seek like-minded investors.
When seeking capital, “think about the goals of the [potential] investor and whether they align with your goals,” said Paul Wormley ’06, partner at Hadley Capital, who participated in the panel, “Manufacturing Entrepreneurship: Too Small to Succeed?” Jeff Bell ’96, president of Concordant Industries, added that entrepreneurs should consider the tradeoffs between equity and debt. “Equity is great, but when you can’t outvote the uncles on the board, it’s not so great,” he said. Small manufacturers sometimes have an advantage.
At M4 Sciences, “our go-to-market strategy was to focus on small companies,” said Jeff Bougher ’02, president and chief financial officer of the company, who explained that the typical time between “first introduction to cash in the bank” was two months, compared to 15 months for large manufacturing companies. “The organizational inertia is something that small companies always win on.” Pursue liquid assets.
In this market, “people want to own hard assets,” said Wormley. “So the less commodity, the better. Liquid assets and land assets are best.” Businesses that solve problems get funded.
Hadley Capital recently invested in a Mexico-based manufacturer that makes its own resin out of natural resources, which has a cost advantage and can be marketed to consumers as a green product. “We look for businesses that solve problems,” said Wormley. For automotive manufacturers, China equals opportunity.
“China is emerging as a design center with its own technology,” said Joseph Palchack, president of the vehicles group for the Eaton Corporation and one of the panelists in the session, “Transformation in the Automotive Industry.” Palchack noted that China is currently number one in terms of auto production, followed by India. “China is quickly becoming the place to be. It is a market that has huge opportunities for those that have the capital to expand globally.” Consider competing forces — and the impact they can have on your business.
When it comes to the automotive industry, the U.S. government is focused on energy and greenhouse gas emissions, while customers have economical concerns, said Robert Reppa, vice president of Booz & Company. “The majority of consumers just care about whether a car meets their needs. Is it safe? Is it economical? They’re acting pretty rationally.” “Keep your feet on the ground, and eyes on the horizon.”
The manufacturing industry has “hit a bump in the road,” said Allen. “But if you look at the dynamics over the next 30 or 40 years, the prospects are tremendous. There are tremendous growth opportunities.”