Last time I focused on the newly released report from The McKinsey Global Institute on the changing landscape that is manufacturing worldwide. This time I want to seek out the opportunities in the report that demonstrate that there are significant opportunities in the sector that will require agility and new capabilities.
Conventional manufacturing strategies will become increasingly risky for those firms that choose to stick to the business-as- usual approach. Manufacturers can no longer cut and paste but must be granular in their understanding of the fast pace and changing world around them. They must connect to the specific inputs and dynamics of their speciality segment (i.e energy, labour, innovation) and how those trends can impact their competitive advantage. Secondly, the granular view will push manufacturers into specific sub-segments. Nokia, for example in Africa determined that consumers there have a very different notion of what is needed in a cell phone – a radio, built in flashlight and waterproof case.
Total Factor Performance – Companies need to look past the basic math of labour cost and consider total factor performance, where all inputs and forces that determine the true build and sell costs for products including labour, transportation, leadership talent, materials and components, capital, regulation and trade policy. Implement the use of scenario assessments that identify key factors and drivers and away from simple point forecasts.
Invest and operate with agility – Fundamental shifts in demand that are now underway make it extremely challenging for firms who now require long-term strategic commitments and investments that may not bear fruit for ten-year’s time in emerging markets. Agility in operations is the second component part of this equation – agility goes beyond exploiting business continuity but exploiting opportunities and building resiliency for daily shocks. Pre-empting disruptions like the food manufacturers that have developed recipes that can accommodate different forms of sugar in case of supply shortages is a good example of this agility.
Build New Capabilities for new times – To remain agile companies must develop operational capabilities and methods. New analytic tools can aid in determining how to service new markets, better manage supply chains and drive innovation and service delivery.