Most of my time is devoted to improving SME manufacturing businesses. I do it for a living, mine and theirs, and I have an ulterior motive.
I want my grandchildren to have a better life than me, and while I have had a great life, the pace of improvement has faltered noticeably over the last 25 years as the productivity of our economy has floundered, and the flow through benefit to living standards has reduced to a trickle.
I put it down to the decline of manufacturing.
We have taken the easy way out, as an economy and society, and taken the benefits before they were able to be sustained.
Short term gain, long term pain.
The evidence is everywhere, from the short termism of the stock market to the supposed microscopic attention span of millennials, self indulgence of baby boomers, and the politics of who gets what of the tax take ripped out by the three levels of government and their acolytes.
I believe that without manufacturing, the process by which we gain leverage, the decline will continue. There are only so many baristas and hairdressers we need, and they offer no leverage, as you can only make one coffee at a time.
To the rule in the header.
Almost all small and medium sized manufacturers I work with, from those resilient few remaining who supply into FMCG markets, to those in engineering and service manufacturing (like printing) the formula for optimisation is reasonably consistent.
70/20/10.
70% of the time, effort and investment needs to be devoted to the foundations of the business. The numbers, financial and otherwise that deliver meaningful measurable and actionable planning and feedback loops on the allocation of their resources to their core business. In effect it is improving on the things that made you successful in the first place, but which have not evolved as quickly as the competitive environment around them, so they are being squeezed.
20% of the effort and investment into adjacent areas. These are the places that will in all probability spawn the new product category, class of competitor, demanding but value driven customer, and the emerging niche market that technology has enabled. This adjacency leverages some of the capability developed in your core market in a different way, stimulates capability development, and delivers you asset productivity.
10% of the effort is playtime. This is the messy, risky, scary, and significantly disconnected from your core, innovation and change initiatives. it is from this effort that the product and business model disruption that will change everything can emerge. Way better to be on top of the changes, anticipating and planning for them, rather than being taken by surprise and belted by them.
The numbers vary, and the nature of the resources allocated varies, but in rough form, 70/20/10 seems to hold across business sizes, models and market types.
