To Grow or Focus Inwardly?

The beginning of the year has seen a number of “consultants” talk about continuing to focus on inventory management, pricing management and other inward focused initiatives. While they all are valuable in either getting to, or improving, profitability, they are all missing a key issue … you need to sell “stuff” to make money.

Don’t get us wrong, inventory management is important as you want to turn a non-performing asset into either cash or a performing asset (through more turns). And if you didn’t improve your inventory management in 2009, doing it in 2010 may be too late.

Pricing management is similar. Many companies intuitively know that they can improve their profitability by improving matrices, updating their price files more frequently, recategorizing products based upon new velocity codes or even simply increasing the price of B, C and D items (let alone either filing, or better managing in the case of manufacturers, their SPAs).

The bottom line, however, is you need to sell products to 1) pay your bills and 2) make money.  Unfortuantely, focusing solely on operations will not enable you to thrive for tomorrow.

In recently talking to a name brand manufacturer who has had frequent conversations over the past couple of months with one of their national chain accounts on a number of operational issues we asked “How many conversations have you had about ‘selling’ and growing the business?”  The answer … “none”.

The issues of growth are beginning to come back onto center stage. In an article in yesterday’s WSJ, Andrew Liveris, the CEO of Dow Chemical was asked “Now what are you focusing on?” His answer, “January 2010 and this next period is about execution on a growth agenda, not losing site that the economy is still tenuous.” And in another article regarding strategic planning, Lowell Bryan, a senior partner for McKinsey and Co. said “Businesses are saying ‘It’s time to think about going on the offense again.'”

While the electrical industry, as a whole, isn’t expected to have growth you can write home about, if you want to grow, you need to go on offense and 1) take the business from others, 2) identify niches / segments where you can expand, 3) seek input from customers while 4) managing the back of the house. Focusing on the inside of your house does not make the outside inviting.

Where do you see growth opportunities?