Written by John Spender, Director of Business Advisory at William Buck Chartered Accountants and Advisors
Australian advanced manufacturers, have the power to contribute to the growth of the economy and be competitive on the global stage through sophisticated business processes, involving innovation and technology.
Small to Medium Enterprises (SME’s) are in the best position to excel in advanced manufacturing because their size makes them agile; allowing them to be more flexible, innovative and take more risks. However, their barriers to long term growth are their lack of planning and organising.
The Industry 4.0 era is one of automation and data exchange, with new markets, new products, new technologies and new ways to manufacture existing goods.
For an SME to succeed in Industry 4.0, the question manufacturers need to ask is, where do we want to go and how do we get there?
The answer is reliant on two key factors:
1. Assessing practical areas of business management - namely strategy
2. Utilising grants to help develop their strategic plan and increase budgets.
Getting strategy right – redefine the long-term
Technology is an ongoing strategic negotiation which challenges businesses to evolve rapidly. The rapid pace of change means business owners are working in compressed time frames making it harder to plan.
A common misconception is that planning isn’t relevant in the changing environment. However, more than ever a business needs a strategic plan, because it presents a vision for the future and without it, there’s no direction or accountability. It also makes an organisation more responsive and provides clear focus by outlining objectives with actions.
The key difference that plans of the past and plans of today have, are that owners need to redefine what long-term is.
While historically a long-range plan was approximately ten years, today business owners should not be forecasting a period any longer than 2-3 years. It’s also best to divide the strategy into manageable stages.
This is a good timeframe to create a framework with achievable goals and when used in conjunction with monitoring tools such as a balanced scorecard, enables a business to see areas that need improvement. A strategy should also carefully align with budget, cashflow and forecasts.
Today’s manufacturers are experiencing the benefits and challenges of new interconnected and intelligent manufacturing technologies and system changes such as automation. In last year’s Making Western Sydney Greater report, 88% of Manufacturers in Western Sydney believed that automation would be good for their business, with 65% believing it would displace more jobs than it creates by 2030.
Technology is having a huge impact on the industry and businesses, leading to increasing profits, changing workforces and driving efficiencies. Companies of all sizes are realigning their business and operational models to take advantage of new, disruptive technologies. Those that thrive and succeed in this space, will be the ones who can distinguish between what is new and what is useful.
What’s the point of getting ‘buy-in’? While it’s one thing to have a plan in your head, an owner / executive must write it down so that they can share their direction and in doing so the organisation can rally around. Having a strategy sounds straightforward but a well understood and executed one can:
- Increase engagement
- Presents new opportunities
- Gives agreement on goals
- Builds culture
- Strengthens the business through good management and governance.
Strategy takes time and effort. It requires a comprehensive assessment of both positive and negative internal and external conditions, accompanied with best ways to leverage the positives and minimise the negatives with clear goals, tasks and methodology.
Implementation of a plan requires buy-in from all the management team and strategy days are a good way to achieve this. A strategy day has agenda items with a focus area around building achievable goals.
The balanced Scorecard
A balanced scorecard is a tool, used to assess and measure the progress of a business and its path toward the business overall strategy.
It helps an organisation translate their vision, communicate, plan, learn and enables feedback so they can continue to grow.
Balanced scorecards allow owners/executives to understand how each department is functioning through a variety of perspectives. From our experience, manufacturers face either one of two key issues; not knowing what KPI’s to track to allow for improvement, or being unable to gather enough data to accurately assess the measures you want to.
There are four drivers known as KPI's in a balanced scorecard.
These KPI's help managers develop their resource needs by focusing on the areas of finance, customer satisfaction, internal business functions and innovation, to ensure growth. These areas are evaluated by looking at whether current objective, targets and initiatives are being met and measures are efficient.
For example, it may find areas of skill gaps, which is a major issue in manufacturing, which could mean devising a plan to collaborate more with external bodies.
Costs of strategy
While developing, strategy sounds good in theory, often business owners say that they are too busy, or the costs are too high. Yet, successful business outcomes have been proven to be from having a strategy in place. One thing we’ve noticed is that the most effective strategies don’t require a huge investment, but do need vision and dedication. You need to plan for growth, you can’t wait for it to happen organically.
As part of your plan, it’s important to see if there are programmes or grants for your business, which give you extra money in your budget and can aid in cashflow. Furthermore, it is common now for manufacturers to collaborate with industry networks, research bodies and even competitors to gain competitive advantage. Creating these knowledge networks will assist in your business management.
With SME’s making up 97 per cent of the Australian economy, incentives to boost SME’s – particularly in high growth areas such as manufacturing are available.
The Australian Government has developed an entrepreneur programme, specifically for SME’s, which enables them to be more innovative, productive and competitive. More than 10,000 businesses have accessed the programme and it’s grants and 98 percent of these participants have said it has contributed to their future success and improvement.
The programme gives tailored advice and assistance to businesses operating in growth sectors such as advanced manufacturing, to improve their business management through the engagement of independent, skilled and experienced business advisors with private sector experience.
In particular, the Entrepreneurial Growth Grant, is available to SMEs. There are a number of projects that the funding can be used for, including strategic planning, where the entrepreneurial growth grant will match dollar for dollar of expenditure for the use of a professional services firm. The program has helped businesses increase turnover, and improve or develop new products and services.
There are eligibility requirements, including having an eligibility turnover between $1.5m and $100m, a 3-year trading history, have an A.C.N, being financially solvent, not be a tax exempt organisation and be participating in one of the growth sectors.
To prosper, the manufacturing sector must improve access to global supply chains and international markets; engage with numerous networks, improve management and workforce skills, develop leadership capabilities and improve internal capabilities within the business. To achieve this requires careful business management, beginning with strategic management, so visions can be realised.
Australia’s manufacturing industry is volatile and unpredictable for any business. Understanding and analysing the experiences of business owners and managers helps us to identify the important issues and priorities impacting the industry. If you’d like to take part in the MWSG Survey click here
Reference: Aus Industry Group.