Page 45 - MetalForming January 2015
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of this article. When assessing each of these components, consider exist- ing customer compilation as well as customer opportunities that exist on the horizon. Let’s look at how to arrive at a reasonable outcome for each component.
Customer Value
If value is in the eye of the customer, then understanding customer needs is the only way to deliver value. Invest- ing in the business requires that we always consider what our customers value to ensure a significant and sus- tained return on the investment.
Consider a client of mine who invested heavily in new waterjet-cut- ting technology, only to have its largest customer pull its business just six months later. The investment decision was based solely on improving the per-
I call this assessment of market needs a scan of the horizon, as it chal- lenges us to consider what lies ahead in existing and new markets. Contrary to common thought, ensuring a robust vision of market needs requires insights from across the business.
This is not a sales exercise so much as it is a robust vision of opportunities, to clarify those opportunities and delin- eate advantageous areas for market growth.
Margin Potential
I find that all-too-often considera- tion of margin potential gets lost in a growth-investment strategy. Struc- turally, it is only after you have con- sidered customer value and market need that you can be fully prepared to assess margin potential. I prefer to err on the side of caution in most instances by finalizing a margin oppor-
tunity of no greater than 75 percent of the pre- dicted mar- gin. By doing so, I can create a margin of error to account for unexpected costs and
obstacles that most likely will impact margin expansion.
There is little doubt that the mar- ket has changed, and for now it would appear that skittish customers will continue to place greater demand on receiving shorter lead times, reduced prices and increased value. Despite this, however, we cannot stop invest- ing in growth because being unpre- pared is the fastest way to miss opportunity.
By applying the model above we can invest in growth in strategically, and increase existing and new busi- ness opportunities, maximize the return on investment and improve our customers satisfaction. Sounds like a winning proposition. MF
formance of
tomer, any
value of
which was
not commu-
nicated or
shared with
the customer.
By returning
to the model
above, we
identified
how the
technology
could be repositioned to increase value to existing and new customers, result- ing in new business opportunities.
Market Need
As noted above, shops investing in technology, equipment or skills to help better manage operations today are already behind. When considering mar- ket need relative to investment, it’s imperative that metalformers paint a picture of the future—specifically, what lies on the horizon for your customers. If you supply the automotive market, for example, customer needs continue to shift to lighter materials. Investment in anything other than these areas may result in a sunken investment as the market for heavier steels declines.
its business with this cus-
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