Countless business articles prescribe resiliency and agility as a means to survive unforeseen market shifts. As Gerent’s Manufacturing Practice Lead, I wanted to understand what “embracing resilience” means from a practical perspective — or, in other words, how effective doing so has been for the companies weathering 2020’s storm of disruption.
Last year, McKinsey conducted a study to review downturn-era performance in 1,100 publicly traded companies and found that only 10% of those studied performed better than their peers. The commonality linking these high performers was their universal ability to clean up their nonessential budgets and accrual accounts — and thus free up cash flow to reduce debt. As well, all had the correct data in place to make decisions with confidence.
Identifying priorities can help companies bolster liquidity
In one case taken from MicKinsey’s review, a leading global manufacturer took decisive action before the last downturn to reposition its balance sheet and become even more competitive in the medium to long term.
The company refocused its portfolio by divesting less-relevant businesses and product lines and focusing its capital on its prioritized core product lines. It also took tactical steps to improve its liquidity by accessing capital markets early enough to obtain favorable terms before a credit crunch hit. These efforts resulted in substantial increase in capital that helped the company more effectively withstand the recession and improve its competitive position relative to its peers.
Several similar case studies occurred in 2020. Three global manufacturers of well-known B2B and B2C brands and products reported earnings in Q3; two had breakout years with significant growth and earnings well above the market, while the third underperformed.
The earnings reports made it clear that the two organizations that pivoted their capacity were able to satisfy increased demand. Both credit their strong analyses and communications as central to the success of the strategic decisions.
Having a strong cash position coming into the recovery curve means that you can afford to fund growth. Many companies will struggle to fund or secure finance as the market recovers. One outcome for companies with access to funds will be attractive mergers and acquisition opportunities — often, at below-market valuations.
Involve Your Finance Teams At The Product Level
Involving financial analysts in the process of building resilience and making agile decisions is crucial. Finance needs to be a stronger partner at the product level, providing analysis and details for stronger and more effective decision making. Deciding to reduce inventory can be a mistake if done without analyzing the demand patterns for the products that inventory supports.
Strategic goals must support the overall performance of the business. Finance teams need to engage in strategic planning sessions and provide the data analysis so business decisions can be made, executed, and tracked for performance.
Of course, this is often easier said than done — especially in organizations with siloed data. Teams’ reluctance to change the status quo can be difficult to work around; however, getting employees onboard is an imperative. Digital transformation can only deliver results if the entire organization is aligned around its goals. Working with the right partner to scope and architect scalable solutions of value is central to this process.
Why Partner With Gerent?
Gerent LLC has served as a Salesforce transformation and implementation partner for over 12 years, with almost 1,000 projects completed successfully. Gerent’s work varies from simple data migrations to more complex undertakings — such as connecting multiple business units utilizing different ERP systems into a common platform.
If your strategic goals are measurable, they can be built into Salesforce and tracked in near-real-time. Rather than updating reports prior to every meeting, your team can come together to check execution and determine adjustments as market conditions change; simply hit refresh and collaborate cross-functionally.
Gerent’s process is robust and generates the least disruption to your business — existing technology is not disturbed but simply interconnected. For more information on how our team can support your operations, contact us!