Lesson 9: Knowing When to Grow
What You’ll Learn: Growth, even exponential growth, is a key strategy for most businesses. The challenge is knowing when and how as the economy. In this lesson, we’ll take you through the process, including things you should consider before giving the go-ahead to grow.
Knowing When to Grow (continued)
Building In Resiliency
Often the market dictates where and how fast you grow. As the economy reopens, some businesses will suddenly be flooded with demand; others will experience a slower path to recovery. Future disruptions may happen in specific supply chains, not only because of the pandemic, but because of a rise in ransomware and system hacking. This has already been evident with disruptions to fuel and meat supplies post-pandemic in 2021.
As money begins to flow back in, heed the lessons of 2020 and realize that a crisis can strike your business at any time. As you reopen and rebuild, you need to maintain a broader view of your operations along with external factors that can create peaks and valleys in your business flow. You need to become resistant to further disruptions, whether it’s a sudden closure from a health threat, damage to your business caused by an earthquake or an attack on your computer networks.
Supply chain redundancy. It was far easier to shut down an economy than reopen it again. Production lines closed, raw materials were left where they were and orders dried up for even the most common part or product. As you rebuild your supply chain, think about regionalizing it instead of using vast global networks. This trend began just before the pandemic and will only accelerate going forward as businesses seek new ways to become more resilient and less dependent on global disruptions. You may find that increasing your use of external suppliers to supplement your internal operations may have secondary benefits, such as increased innovation, reduced time to delivery and tighter coordination in bidding for larger projects or volume purchases.
Return to Main Office
Increased use of digital technologies. Supporting this new supply chain model is increased use of digital analytics and inventory control systems. Reducing the size of your inventory and optimizing a just-in-time supply chain will help you keep costs low and increase your flexibility to scale up or down as market conditions change. There is an increased cost on the front end granted, as well as a significant learning curve. But using artificial intelligence, predictive modeling and inventory control systems will lower your costs long term while increasing your resiliency in the process. Regardless of the size of your business, digital tools can be extended to all levels, from the factory floor to the executive suite. Digitization can help you improve your procurement-spend analyses, analyze the ROI of capital expenditures and turn fixed capital costs into variable ones by leveraging “as a service” models.
Explore residual capabilities. Launching a new product or service is a logical pathway to further growth. But it can be expensive and time consuming. One way to shorten the development window is to utilize technologies, products or services you already have to create new ones. SpaceX does this brilliantly. When they built their Falcon 9, they didn’t spend billions developing a new engine for it. Instead, they used nine of the proven engines from their first rocket. They did the same with their Falcon Heavy, strapping three Falcon 9 boosters together to create a new launch vehicle. This not only allowed them to expand their business lines, but allowed them to finance future Moon and Mars based projects with the profits from their incremental changes to their offerings without making huge capital investments.
Reassess your footprint. It’s hard to put the genie back in the bottle. Remote work, telework, flexible scheduling and other work models are part of the landscape. Reducing costs is a great way to improve your ability to weather economic disruptions. As you consider future growth, think about how you can grow without increasing your physical square footage. Use these new work models to add capacity without increasing overhead. This will allow you to scale rapidly in either direction since much of the workforce is virtual and overhead is reduced. In addition, rethink the work itself and automate, consolidate or contract out wherever it makes sense.
Focus on the customer. As you re-engineer your company as you grow, focus on customer expectations. Shift your work so that it is as close to the customer as possible. Use the rebuild period to create a new competitive advantage. This can be in the form of shorter product development cycles, increased customization, improved customer experiences, increased focus on environmental sustainability and a more responsive customer engagement process.
Become more nimble. The market has learned how to become fast and furious. What used to take months now takes weeks, sometimes days. Sales and operations planning used to be a monthly exercise; now, it’s daily. Data and analytics will help you move at a faster pace, making critical decisions more quickly and upending old, outdated ways of doing work. Flexibility will allow you to scale rapidly to changing market demands, competitive pressures and customer needs. This can also be applied to your management approach. For example, the use of cross-collaboration among teams and matching projects with workers instead of letting everything remain in unproductive silos will help you become proactive rather than reactive in the recovery phase.