A couple of days ago, I went back to Auto Marine Cables Ltd, where I’d helped directors (and brothers) David and Peter Hammond to create a new business strategy in 2006. The results they’ve achieved illustrate an important point about business planning.
I’d run into David at an event a few weeks ago, where he’d told me ‘we’ve made more money in the past three years, since working with you, than we did in the previous fifteen‘.
Naturally, I wanted to learn how well they’d been able to put into practice all of the changes we’d discussed, and confirm the influence I’d had on their 48% increase in turnover.
In the business planning project three years ago, Peter and David provided me with a lot of facts and figures about their business – far more than is often the case in businesses of their size, or ones much larger. There was a level of detail there which you wouldn’t have been surprised to find in a multinational, but was unusual in a business turning over seven million pounds.
Volatility of Orders, Pressure on Production
Auto Marine make cables – which you no doubt guessed – for a wide variety of customers. For many of those customers, Auto Marine is their supplier of choice because they’re able to make precisely the product needed, delivering it quickly and on time. Enabling that responsiveness to customers appeared to place great stress on production. Looking at the day-by-day numbers, there appeared to be great volatility in the type and number of products ordered.
I encouraged Peter, who’s the managing director, and David, who’s responsible for sales and marketing, to stand back and take a longer view. I showed them that when you looked at the numbers on a quarterly or annual basis, the volatility wasn’t apparent. Each customer ordered fairly predictable amounts of a subset of the product line. They just placed orders at short notice.
Focusing on the Right Problem
So rather than focus on managing volatility, we turned our attention to increasing the range of products that customers bought, and ways of increasing forward visibility of orders – amongst many other things in the business strategy.
Peter said the other day, ‘Once we could see that we didn’t need to deal with volatility after all, it was possible for us to spend time on the things that really did matter’.
In the business strategy I produced with Auto Marine I recommended that they simplify the metrics they use to manage the business and increase their visibility. There on the wall of the conference room in which we met was a clear and simple list of objectives, together with measurement of progress towards them, and identification of who was responsible for their achievement. Clear direction was there for every person in the company to see.
It was great to be able to go back and revisit a project, to see how much had been accomplished by the people I’d worked with. And it illustrated very clearly that before you can solve a problem, your analysis has got to clearly identify what the problem really is.