Those who wait, may be lost
Things might be better than we thought
The alphabet soup of business models has left everyone speculating about the shape and timing of the recovery. Those who believe in a “V” shape believe in a sharp recovery, a “U” shape expect a prolonged recover, “W” believers are betting on an episodic recovery, while “K” believers think there will be both winners and losers. No matter how you spell it, leaders have discovered that the manufacturing sector is experiencing positive results.
In countless first-person interviews over the last six months, the storyline for most C-Suite executives has been one of cautious optimism. This viewpoint is backed by forward-looking metrics by the U.S. Census Bureau and other credible sources that indicate that all sectors, except transportation, are at or above last year’s demand for durable goods, with strong forward momentum. Some manufacturers are racing to quickly ramp up after cutting too much production earlier in the year.
What we are discovering is clear. Things are getting better for those who used the lessons of 2020 to transform for 2021 and beyond.
Learning from COVID-19 lessons
The lessons were different for each company depending on how they approached these novel events, resulting in three categories of organizations:
- Belt Tighteners. Highly reactive and focused on bottom line profitability, they moved beyond surviving the economic downturn to managing costs. Daily stand up meetings and a stringent cost focus means that these companies will have a better balance sheet moving forward but are not as growth oriented as the next group.
- Transformers. These organizations capitalized on the chaos of COVID-19 by investing in transformative actions and strategies to create differentiated growth and improved value for stockholders. Our research indicates that in the manufacturing sector, companies who achieve growth rates of 1-2% above their competition see substantially higher valuations. In 2020, these market leaders focused on creating a new culture and aligning top line growth to new buying behaviors, instilling a customer centric culture. While still monitoring costs, they invested significantly in 24/7 digital enablement tools, resulting in higher, more qualified leads, enhanced pipeline volume and velocity. The lessons of 2020 required that they focus on sustained changed adoption and continuous improvement for 2021 and the coming years.
- Waiters. There are still many organizations who are waiting for things to return to “normal,” longing for the pre-COVID-19 days of 2019. They have not capitalized on pandemic lessons, nor did they invest in growth, or created value. Why? Even though they could have moved their company culture forward into a new era, they chose not to upset it and while they waited for the past to return. These companies may end up not just frozen in time but getting left behind entirely.
The “Waiting Trap”
It is not uncommon for companies to cross their fingers and hope for the best, relying on past successes. Embracing the lessons of 2020 requires a dramatic cultural change to survive and thrive in the coming years. We discovered that some leaders felt that their employees had “been through enough,” showing a hyper abundance of caution for reinventing their culture.
Waiters also focused on traditional go-to-market paradigms, including time-worn sales motions and channels, assuming that buyer behaviors had not changed. Bringing back furloughed sales staff without examining account lists and failure to prioritize virtual selling environments result in fewer competencies in the marketplace. The competitive landscape also changed, requiring leaders to review new competitive threats, often from non-traditional sources.
What fueled this reticence to change? Fortune 500 leaders reveal that Waiters did not make the appropriate investments in digital enablement and engagement. They did not cut costs. They did not map out new buyer behaviors or align their organizational capabilities to emerging needs. They were neither proactive nor reactive but laid stagnant as the world around them changed.
Who will succeed in 2021?
No matter what recovery model you believe in, quickly embracing the lessons of 2020 while remaining attentive to market conditions, has been the key for manufacturers to move forward. In discussions with forward-thinking Fortune 500 leaders, they are rethinking how their products and services will lead to outcomes that benefit their clients. They are willing to make calculated investments that will move them forward while still watching the bottom line.
Belt Tighteners and Transformers stand to make the most of the coming year. They quickly realized that in crisis, there is an opportunity to survive and grow in a new economy, but only if they moved past outdated business models. They had to be willing to throw out what did not work, experiment with new go-to-market models, and use detailed analytics as proof points to guide their behavior.
Is there any hope for the Waiters? They must first learn that waiting is not a strategy. Not making decisions is making a decision, potentially to fail. Waiters need to look to both Belt Tighteners and Transformers to leverage the lessons that both COVID-19 and 2020 taught the marketplace. For Waiters to change, they must:
- Adapt to changing buyer behaviors. Buyers no longer use traditional pathways to purchase. Those who are succeeding are clarifying who their new buyer is and creating updated buyer journey maps to understand their routes to purchase.
- Evaluate channel relationships and selling structure costs. As the buyer changes, so do the selling motions and associated costs. To optimize expense to revenue ratios, organizations must understand how they sell and the related costs. We found that many organizations have expanded their inside sales and digital marketing presence to reduce costs and sell effectively for the future.
- Evolve company culture. Fortune 500 leaders firmly believe that there will be more business and economic disruptions. Learning to handle dramatic business changes is now a core competency that must be embedded across the entire organization. Buyers are the new center of company culture and organizing around them is the guiding force for successful companies.
Things are better than we thought because the manufacturing sector learned to immediately respond to business disruption by lessons from an emergent crisis to create a new future. The year 2020 will soon be behind us but embracing these lessons learned is how we will evolve and grow our economy.
For more information on how Alexander Group can help your firm succeed in 2021, please contact a manufacturing practice lead.
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Author
Kyle Uebelhor is a principal in the Chicago office. He is a leader in the firm’s Manufacturing and Distribution practices. Kyle’s clients include leading companies throughout manufacturing and wholesale/distribution. By applying deep industry expertise and a pragmatic approach to each situation, he helps companies achieve their organic growth objectives. He brings nuanced perspective to the complexities of sizing the total available global market, delivering differentiated value, creating omni-channel designs, and motivating partners and the commercial team. Kyle frequently speaks on sales enablement topics. He has authored several articles and whitepapers including “The Power of Playbooks: Execute Your Vision” and most recently “Digitizing the Revenue Growth Model.”
