A manufacturing company can be successful – for a limited time – by making and selling a breakthrough product; something that is new and unique like the hula hoop or the first Blackberry. Relatively few companies can turn that initial bit of serendipity into long-term market dominance.
There is no single key to success, no magic bullet or secret sauce. To be truly successful, to grow and be profitable, a company has to execute across all areas of the business from design and engineering to sales and marketing, purchasing and production, supply chain management, customer service, and more. It can happen by luck and brute force – sometimes, and for a while – but luck and great timing will only take you so far. Successful companies understand the reasons for their success, the things they do that are not unique but still contribute to the overall effort, and how those strengths and characteristics fit in with the markets and the competition. I am talking about strategy.
SWOT analysis (Strengths, Weaknesses, Opportunities and Challenges) is a good place to start. SWOT is an organized way to identify internal (strengths and weaknesses) and external (opportunities and threats) forces and capabilities for you to understand your place in the world. The next step is to formulate a plan and take action to build on (and exploit) the strengths, overcome weaknesses (which might include outsourcing those things that you don’t do particularly well), all with an eye to how they can add value for customers and improve your position in the market.
Market-leading, long-term successful manufacturers continually change. Even the ones selling commodities (essentially the same product, decade after decade) must watch the competition – and there will always be competition – and understand what they do and how they do it so they can respond and stay out front.
SWOT is one of the tools that is often used in the sales and operations planning (S&OP) process. S&OP is a formalized approach to developing a strategy for applying the company’s strengths to meeting the opportunities that are present in the market. On a more practical basis, S&OP is all about matching supply and demand. The S&OP plan adds focus and provides clear direction for both sales/marketing and operations (production and purchasing) from day-to-day through the intermediate and long-term. S&OP brings the vision into reality like nothing else can.
Long term success takes a lot more than a unique product and a little luck. A company must understand their place in the world (SWOT), and work hard at building on strengths, overcoming weaknesses, recognizing and pursuing opportunities, and countering threats. Every aspect of the business must execute effectively and continually adapt and change. There’s no better way to understand markets and capabilities, organize and coordinate activities, and move forward towards long term success that a formal sales & operations planning process.
S&OP is a great tool and arguably a necessity for long-term success, but it is no magic bullet. You also have to execute. Do the things that you do well. Improve (or outsource) the things that are not competitive strengths. And keep a close eye on the market and the competition to recognize, as quickly as possible, where and how you need to improve, adapt or innovate in order to stay ahead.