Chuck Anderson had started and grown a remarkable company. But a few years back, it reached a point where its direction was no longer certain.
Since founding Midwest Rubber Service & Supply Company in 1976, Anderson had built the Plymouth-based company into an international manufacturer and distributor of conveyor belts, hoses, and other industrial rubber products, with 90 employees and operations in Shanghai and the Netherlands.(One of its most successful specialties is a line of squeegees for use in professional floor care machines.) Midwest Rubber President Doug Turk credits the company’s distinctive die-cutting technology as being a key factor in its growth.
Then, about four years ago, Anderson told his employees that he planned to retire and transfer oversight of the business to his five children. Midwest Rubber had been guided by an energetic, visionary entrepreneur who made all of the big moves. Now crucial decision-making would be spread across more people. To accommodate that new leadership, Midwest Rubber would need to make significant changes in the way it conducts business.
But what changes would those be? How would the company begin to make them? For Midwest Rubber and numerous other smaller manufacturers, the answer to these questions are coming from a formal strategic planning process. Such a process requires a company’s leadership to develop a clear and detailed picture of its business—its operations, its products, its competition.It uses that picture as a basis for drawing up initiatives for the business going forward, then act upon them.
All businesses plan, of course. But strategic planning is about looking further ahead — and getting more of the organization involved. The reason? Companies are realizing that they need to evolve. Turk sees the planning that his company has been pursuing as a response to big changes not only in his company but in the world as a whole,as an older generation of leadership transitions to a younger one with new ideas, new ways of thinking, and a deeper understanding of new technologies.
Strategic planning helps a company adjust to those changes and challenges by planning not for the next quarter but for the next few years. It isn’t a simple process, and it requires hard work. But it also can mean the difference between a company simply surviving and successfully thriving.
Businesses that pursue strategic planning realize that doing things the way they’ve always been done, even if their businesses remain profitable, no longer works as well they used to. John Connelly, director of consulting with Enterprise Minnesota, uses author Tom Collins’ famous pronouncement, “Good is the enemy of great,” and adds: “Good is the enemy of getting better.”
What’s wrong with simply being good? If a firm is producing steady margins and has some rock-solid customers that are happy with the products, why not just stay the course? Because these days, staying the course means falling behind the competition, which for more and more manufacturers is increasingly global.
“At least some of those competitors are not satisfied with where they are,” Connelly says. “And they will make an effort to do something faster, cheaper, better to distinguish themselves. As soon as they do that, the area that you thought was good is no longer good enough. And the recovery from being not good enough is really difficult.” Connelly sums it up this way: “The marketplace doesn’t stand still, and the only safe place is out in front.”
So what are the ways to come out ahead? How can a company find a map for the road ahead? That’s where a formal strategic planning process can help. Thoughtful business managers are “used to doing very tactical things—‘we need to get a shipment out, our quality is inconsistent today,’” notes Mary Connor, an Enterprise Minnesota business growth consultant based in Rush City. “But they’re not looking at strategy.” That’s largely because of the intense focus on day-to-day performance a manufacturing operation requires. That daily focus is essential, of course. But you can think of operating a business like running a household. You need to make dinner, wash dishes, do laundry. But you also need the longer-term perspective that maintaining the house requires—painting, repairs, yard work and so on. What drives businesses to pursue strategic planning, Connelly says, is that they know they need to develop that longer view. An organized research method, he says, “provides a framework for today from which you can figure out how to get to that future.”
Enterprise Minnesota’s research methodology begins by having the company gather together a group of thought leaders who can provide useful insights into a firm. These thought leaders would certainly include the president or CEO, another top manager or two, and perhaps a key salesperson and one or more longtime employees. For maximum benefit, the group also might include a top legacy customer, a key vendor, and a relied-upon advisor, such as a banker, lawyer, or accountant. People not involved with the operations day to day can look upon a company and its processes in a more detached way. For example, in order to get a firmer grasp on customer needs and wants, a company shouldn’t rely on one salesperson’s perspective, no matter how good a salesperson he or she is. Instead, it should be talking with the customers themselves and getting their insights.
From there, Enterprise Minnesota consultants such as Connor help direct the thought leaders to research 21 areas (see below) in order to describe and evaluate the firm’s current state. Examples of these areas include the company’s marketplace, its operational requirements, its competition, customer and employee wants and needs, as well as the owner’s wants and needs. The research typically includes elements such as employee surveys and customer interviews.
“So much of the present condition of a company is legacy,” Connelly says.
“These are the things that we do—these are the customers that we serve, these are the conditions of the marketplace that we feel are beneficial. Things that happened in the past often define that present state.” What the research should also uncover is what those customers need and want now—so that a company can begin thinking about how both it and its competition will respond to those evolving needs and wants. Past decisions and processes might have been good ones; but as customers and other aspects of a business change, how a business operates will need to change with them. Once the research is gathered, the people handling each area, along with other thought leaders, gather for a day to listen to and discuss the findings. The next day, the group reconvenes to come up with a list of five initiatives that will move the company forward. Enterprise Minnesota consultants do not dictate the process; rather, Connelly says, they share their experience with what other firms have done so that the company involved in the strategic research can find its own way and determine its own priorities.
Often, consultants such as Connor also introduce different ways of communicating, such as conducting company-wide meetings. She also may bring in other consultants for projects such as marketing and lean manufacturing techniques. Throughout the process, Connor encourages the researchers to look as deeply and broadly as possible. “Keeping it moving is a really important part” of her work, she says. But what is most important is not the process itself but the changes and initiatives that come out of it. As Connor says, the tool is less important than how it is used.
Connor notes that a business needs to be clear on what its current position is before going forward: “Is the company in transition mode? Are they in accelerated growth mode? Are they just starting to add a leadership team? Are they adding a new product or service?” The type of plan a company needs to pursue, she adds, “really depends upon the lifecycle of the company.”
In some cases, the process can reveal the need to make changes, sometimes major ones, in the leadership team. This can occur,Connor notes,when the company learns that that team “needs important development to lead them to the next level.”
That points to another aspect of strategic planning. It can be very challenging, especially for a smaller company,where even nonfamily members can be like family, to move people to different jobs or hire outsiders over them. But for such planning to be successful, a firm needs a clear sense of its strengths,weaknesses,and threats—of where it is now,and where it wants or needs to be.That’s why the Enterprise Minnesota approach to research has such breadth and covers so much ground. As Connelly says, the company should strive to reach the point of articulating, “This is where we’re headed.”
THE WAY FORWARD
Ten years ago, Alliant Castings wasn’t quite clear about its direction.Founded in the late 1800s, the Winona-based manufacturer was losing money as well as its direction.“We needed to change and adapt to the current market needs,” company president Tom Renk recalls. Starting in 2009, Alliant Castings tried to put together a formal strategic plan on its own,but those efforts went nowhere until it engaged Enterprise Minnesota’s help in February 2010.
The company finished its planning process two months later.“We had five key initiatives come out of that,” Renk says. They included employee engagement and facility improvements—initiatives i inspired largely through the involvement of the company’s employee base in the process.
“There was a completely different workforce in the ‘80s and ‘90s as compared to today, ”Renk says. In the not-so-distant past,the company’s employees were highly skilled, “the kind of guys who worked with their hands and knew how to make a mold or hunt for a mold.” But with such employees becoming more difficult to find, problems kept cropping up—a high scrap rate, for instance.In response,one Alliant Castings’ initiative called for more automation in the facility, “so that we weren’t dependent on the skill of the operator like we had been through the years.”
Nearly four years later, Renk says that the planning process “worked out really well. Basically the company has turned around because of this.” He cites a few key metrics: “Our scrap is down 44%, our sales are up 50%, gross margins are up 80%.”Renk adds that “had we not worked this plan, if we weren’t really disciplined and really diligent, we would not be in the position we are today.” In addition, he cites as evidence a 25% improvement in productivity and a more diverse customer base.“The largest market we had, at 67%, is now reduced down to 25%,” he says. All told, “we’re in a much better position today than we were 3½ years ago.”
Alliant Castings, which manufactures abrasion-resistant castings used in road construction,agriculture,mining and other industries, now has 35 employees, and has plans to hire a few more in the coming months. While its market is mostly North America, “a lot of our parts do end up overseas," Renk says.
Midwest Rubber’s Turk is optimistic that his company, now in the midst of its own planning process, will yield rewards similar to those of Alliant Castings.“We’re getting a better handle on the structure of our company,” Turk says. For one thing, “We’re putting job descriptions together [and working on] how we tie that back into the structure and how employees manage subordinates as we go forward.” In other words,Turk says, Midwest Rubber is transitioning from a company where the decisions were made mostly by an entrepreneurial leader to a more structured organization with broader employee involvement.
The small businesses that pursue strategic planning “have a desire to be better,” Enterprise Minnesota’s Connelly says.“It doesn’t mean that what they’re doing now is wrong, because many of them are good.”Still,“They have a sense that things can be different, more organizational.They could be bigger than they are, they could do more than they do.”What’s more,“they want to be able to capture and articulate what ‘better’ is, in a way that the whole company could move towards it.”
In other words, contributions from the entire company, as well as from other “stakeholders” (customers,vendors, advisors), will lead to a successful strategic planning effort.That, inturn, will help a company navigate more successfully in an ever-changing business environment.
“In today’s world, you can‘t just operate on gut feeling,” Turk notes.“You have to have a greater understanding of where you are going.”
ENGAGING THE TEAM
In Enterprise Minnesota’s methodology for strategic planning, the purpose of the research phase is to engage the team in discovering information and building an accurate picture of the company’s current state. Those working on the exercise are encouraged to collect data, information and opinions that they can use to help inform the rest of the group involved in the planning effort. The questions are divided into 21 categories designed to help guide the discovery.Team members are encouraged to develop others that they think will help inform the process. The 21 research categories are:
• Organization viewed as a system
• Principles of management (values)
• Ideal conditions
• Customers’ needs and wants
• Employees’ needs and wants
• Owners’ needs and wants
• Internal conditions
• External conditions
• Operating requirements
Gene Rebeck is a Duluth-based business writer.