Looming GM plant closure reminds SMEs of the need to adapt to changing customer demand and technology
When General Motors announced plans to shutter its Oshawa assembly plant after more than a century of production, headlines bemoaned the end of an era, not to mention the further decline of the once-impressive Canadian automotive industry.
Commentators debated whether the move—which GM said was part of its wider global restructuring plans, and not reflective of the productivity and innovativeness (or lack thereof) of the company’s Oshawa workforce—was more evolution or enfeeblement of a sector that was once a bellwether of northern industrial might and economic success. Less discussed in the coverage of GM’s plans to close Oshawa at the end of 2019, was that the harrowing news followed far sunnier plans to invest in areas such as engineering and software research and development.
As Globe and Mail business reporter David Parkinson noted in a December article: “Once the Oshawa plant closes and the Markham technical centre is fully staffed, engineers will make up somewhere between 15 per cent and 20 per cent of GM Canada’s employees. A year ago, they made up about 3 per cent.”
That’s a dramatic buttressing of tech-focused talent, one that’s reflective of the gradual transformation of Canada’s manufacturing sector from makers of commoditized widgets to producers of high-value, complex goods, often coupled with a service component—think high-end office furniture makers who include workplace design services as a complement to their core manufacturing offering.
An opportunity for business analysis
The news of the planned closure of GM’s Oshawa assembly plant was significant for small and medium-sized business owners, as well—and not only those directly tied to the automaker’s supply chain. It served as a reminder of the need to step back and reflect on their own businesses, then take action to make sure their products and or services will still be relevant in the next three to five years.
Consider it a wake-up call: While your organization may be thriving today, rapid advancements in technology, increased globalization (even as trade wars strain global commerce) and heightened competition could pose existential—and at times, even direct—threats to its ongoing success. Take retail as just one example. If an industry powerhouse such as Sears is forced into bankruptcy due to lagging investments in areas such as technology (not to mention questionable operational moves) that made it vulnerable to the likes of digitally-minded competitors such as Amazon, Target, and others, the same fate could easily befall a smaller organization. The challenge is that many business leaders don’t know how to mitigate these operational risks.
A recent global survey by global accounting and consulting firm PwC found that 63 per cent of operations leaders said understanding what consumers value was a challenge for their companies’ operations. Further, 61 per cent said it was difficult to change their operations and direction when markets, customer needs or enterprise strategies change. The conundrum is a familiar one to any business leader: How to translate customer expectations into a tangible operations strategy.
A customer-centric approach
To overcome this obstacle to success, companies need to put customers at the centre of their operations strategy and be prepared to work constantly to adapt to technological change. That means orienting a company’s operating model around customer needs. Putting the assets and capabilities (policies, processes, technology, data, and ways of working) in place to make timely decisions and make appropriate trade-offs required when change inevitably arrives, is a crucial step to achieving this goal.
That also requires a refocusing of human capital priorities. Why? Because Millennials are becoming the primary driving force behind business, the economy and the world. In three short years, the cohort will represent more than one-half of the global workforce and will soon reach the peak of both their influence and affluence. As we’re reminded ad nauseum, this is a group raised on digital technology. It is the most wired generation yet and has already forced businesses to shift to more tech–savvy operational models.
Has your organization worked to align customer expectations with burgeoning technological opportunities? Better question: does your leadership team know how to work towards achieving this ambitious goal? Consider these five key building blocks when modernizing your operations strategy for today’s fast-changing business environment:
- Work to not only understand your customers’ needs and habits, but also what they’re looking for in future. Then begin to define a sustainable strategy to guide your operations for at least the next five years—and be prepared to shift gears when necessary. Consumer data may already exist across your industry to aid in making the right strategic and operational decisions.
- Entrepreneurs must not only understand what the customer wants, but how it’s translated to the bottom line. Operations should be tailored to deliver the greatest value to the best customers for the least cost. For example, in a manufacturing environment, understand which product is contributing more to the bottom line or delivering a higher contribution margin. This reminds me of a long-term client of mine in the plastics industry. The company’s recycling operations were highly successful on the revenue side, while it also produced a small amount of plastic piping. Recycling had low margins, but generated high-level sales volumes, while piping was more specialized with lower sales, but significantly higher margins. When the son took over the business, he realized the increased need for high density polyethylene conduit conforms, which are used primarily for optic cables used by telecom and utility companies across the world. He branded and patented his product, transformed his operations, purchased new equipment and, as a result, sales of higher-margin piping have since outstripped sales of recycled plastic across his organization. The lesson: sometimes leaders need to make hard decisions and be prepared to transform their operational model to ensure the long-term financial success of the business.
- Keep costs aligned with your new business strategy by working with a professional team comprised of your Chartered Professional Accountant and/or a business consultant who understands your industry and its strengths, weaknesses and threats. Many organizations have been felled by over-spending and lacklustre oversight of key financial metrics such as cash flow.
- Advances in digital technology have created immense opportunities for organizations to collect data, develop customized web or sales analytics to understand where their customers are and how best to engage with them, while using affordable tools such as cloud computing platforms to better understand and meet their clients’ operational needs or consumer preferences. In addition, hardware and software solutions have become increasingly easy to use. An inventory information system, which at one time could have cost hundreds of thousands of dollars and many months to implement, in some cases can now be set up using off-the-shelf software with minimal time needed for training and deployment.
- Online visibility, particularly on mobile devices, should be a focus for your sales and marketing strategy. The rise of Millennial influence means an increasing portion of your existing or prospective client base will use their mobile devices to buy, sell, shop and find local businesses, no matter the industry. This trend is here to stay, which means it’s well worth the digital investment to ensure your organization is easy to find, and is well-equipped to convert potential sales leads using widely-available and affordable digital tools—yes, that means building and maintaining an highly-navigable website and updating it regularly with relevant information. Whether that’s using targeted promotional e-blasts and online advertising, or creating peer-worthy content and distributing it via carefully-curated social media accounts that allow you to market with no regard to traditional geographic obstacles, put digital at the forefront of your operational, sales and marketing strategies, and allocate budgets accordingly. And remember—in a digitally-focused, 24/7 business environment, building a credible brand is one of the keys to demonstrating your organization’s experience and expertise en route to navigating consumer demand and addressing technological change. Don’t think of it as a one-time spend. This is an area that requires sustained, significant investment.
Hartley Cohen, Partner
