When your customer base is in trouble, find new customers 

By Todd Phillips

It's all but impossible to pen a column about manufacturing in December 2008 without addressing the elephant in the room. The elephant, of course, is the global economic upheaval. He's hard to ignore because he’s noisy, stomping on margins and profit and reshaping industries.

You know the world is getting strange when economic conservatives are urging for more government intervention and regulation, and even when bailing out the richest doesn’t seem to be working.  

But all is never as bad as it seems, and at the risk of sounding a bit like Prime Minister Stephen Harper, there are indeed opportunities out there. But not for bargain shopping on the stock market - the opportunity is for manufacturers to retool and create new products, particularly greener products for new and emerging markets.   So before you dismantle your manufacturing infrastructure, get your best and brightest in a room and see what you can come up with.

Why not set out, as some manufacturers do, to cannibalize your own products and use concurrent engineering to chart your way forward?

In a 2005 report titled Mastering Innovation (based on research from 650 leading manufacturers from around the globe), the consulting firm Deloitte found manufacturers agreed that new product development was the number one driver of revenue growth.

These manufacturers projected that in only five years, products representing more than 70 per cent of their current sales would be obsolete due to changing customer demands and competitive offerings.

But knowing what you need to do and being good at it are two different stories. Despite the findings above, the manufacturers also ranked supporting product innovation as one of the least important priorities.  

This could be partly due to risk aversion. The report found that 50-70 per cent of manufacturers said their new product innovations fail. In Canada, the problem is worse. We barely try.

Canada’s record on commercializing innovation stinks. The Conference Board of Canada released a Report Card on Canada in October and gave Canada a "D" grade on innovation, coming in 13th out of 17 peer countries. The report is a benchmarking tool to assess our country’s performance against other highly industrialized countries. It’s worth checking out. (www.conferenceboard.ca/HCP/default.aspx)

This is why we need to act decisively while we have this rare window and start to shift some product lines to support the world's shift to greener and more environmentally sustainable products.

The global demand for more fuel and energy efficient products is not going down anytime soon - regardless of the current economic malaise. Simple economics dictates the growing demand for these types of products and services - and the limited availability of these services equals a market opportunity.

There are tools available to help with your transition to making more energy efficient products. You also don’t have to necessarily invent something new. You likely have lots of room to improve some of your current products.
 
The U.S. government, for example, has established a portal of resources available to businesses to help them on their green product development journey. There are several good links and guides located there to help you get started with your research (www.business.gov/guides/environment/product-development/index.html).

There is also going to be more "soft" money to pursue green as governments are starting to tie incentives and bailouts to the pursuit of more energy efficient technologies.  

U.S. House Speaker Nancy Pelosi and many of her counterparts in Washington are keen to help the struggling Big Three automakers -  but not without green strings attached. Pelosi says her fellow Democrats are trying to "use cutting-edge technology to transform blue-collar jobs to green collar jobs for generations to come."

Something else that seems obvious but is still too often overlooked is the need to talk to your customers. Right now, they might be struggling, but they might be making similar decisions and won't necessarily see you as a partner who can help them. Maybe you can work jointly on products and projects to speed time to market.  

These might be dark times, but it’s worth looking hard for silver linings.   

Contributing editor Todd Phillips (tphillips@clbmedia.ca) is a longtime observer of Canadian manufacturing and the founding editor of Advanced Manufacturing magazine.

< Prev