October 16, 2018
“Factory Activity Slowed Last Month” was the headline to an article in the Wall Street Journal on October 2, 2018. As the commentary in the financial media increasingly suggests that the US economy is at a peak and that a new, less favorable environment is imminent, we thought we would take a step back and look at the underlying numbers in the manufacturing sector to see what it tells us about the health of the sector.
March 1, 2018
Various studies have demonstrated what business leaders understand instinctively. Sales expansion is the most significant contributor to overall enterprise value; and while there are several ways to achieve it, organic growth is the highest quality means to do so. Organic growth measures a firm’s ability to deliver higher unit volumes and prices in the business portfolio without distortions such as acquisitions, divestitures, and currency fluctuations.
August 1, 2017
While Texas and Pennsylvania are readily identified with the U. S. Energy sector’s resurgence, few seem aware of the presence Ohio has quickly established. At least this is the case in Pittsburgh, only an hour’s drive from the handful of counties in rural eastern Ohio where the story is taking place. Why should you care? Because the general investor skepticism stemming from the late 2014 oil and gas price collapse could be misplaced when applied to Ohio. From essentially no position as recently as 2013, Ohio’s natural gas production has grown each year to now represent 5% of total U.S. output. In 2106, Ohio surpassed West Virginia as the second-largest producer in the tristate area (PA, OH, WV).
March 9, 2017
Speakers at this year’s Economic Policy Conference hosted by the National Association for Business Economics (NABE) tended to be skeptical of the growth expectations reflected in current stock market valuations. Estimates of the impact from enacting prominent fiscal and monetary policy options are positive, but few of these economists expect U.S. GDP to achieve 3% annual growth, let alone surpass it. They expect structural drags from fiscal deficits, low productivity and emerging labor tightness to impede progress. Concern is also high with respect to potential setbacks to global trade. So, while animal spirits have been lifted by the new administration, meaningful growth acceleration is not a given. Business leaders need to stay focused on driving revenue growth, the backbone of enterprise value.
February 1, 2017
A brief discussion with a sandwich maker and a cashier at a nationally franchised chain caused me to reflect on the importance of employee engagement to company vitality. This dialogue took place at a rest stop along an interstate highway. Being momentarily the only customer, I inquired how many sandwiches each thought they sold in a typical day. Neither could offer an answer other than “a lot.” While my customer experience was satisfactory and they seemed to be a cheerful pair, their inability to estimate production suggested they could not see the link between their work and the health of their employer’s business. Were they simply performing a task in exchange for a paycheck? When I later posed the same question at a different location of the same franchise, the answer was a crisp and immediate “100,” followed by unsolicited commentary about things that made the restaurant tick. The contrast between the two restaurant staffs might have had something to do with the people involved, but the organizational climate created by management probably had more bearing.
December 1, 2016
Family-owned businesses remain the most common form of business enterprise in the United States. Inevitably, the question of the options available to the founder to exit the work-a-day life arises. Often, when family members are involved in the business, the choice made is to pass it to the next generation. Sadly, while statistics vary, the success rate for second generation owners is low, and it continues downward for third and fourth generations.
November 1, 2016
In his compelling presentation about a fourth manufacturing revolution, BCG’s Oliver Scalabre makes the case for an inevitable resurgence of manufacturing in developed economies. The convergence of new technologies such as advanced robotics, 3D printing, big data and the industrial internet will upend manufacturing models based on scale economies and low cost labor. Those paradigms have fostered global trade flows but have resulted in lower growth and displaced labor due to offshoring. In the future, companies that are able to harness the potentials for highly flexible manufacturing systems, capable of delivering higher quality goods more rapidly and at lower cost than conventional practices, will be the winners. Why? Because manufacturing activity will reposition so that production is adjacent to demand. This will be true in traditional industries and businesses yet to be imagined.
October 1, 2016
Imagine a steel distributor, specializing in a small but profitable product category and seeking new ways to grow after a generational change in leadership. It has already pursued regional sales expansion, so management considers two additional options: either become a full line steel distributor, or expand offerings to include custom processing and light manufacturing. In choosing the latter, this firm begins a migration away from its history as a trading house and towards being a specialty steel service center. Early in this journey the company experiences moderate growth in a stable market environment. Then, as the industry comes under cyclical pressure, managers begin to express doubts about the selected strategic course.
August 1, 2016
Many companies view innovation as a cost with uncertain payback. In spite of this, a recent PWC survey shows that CEOs across the country are starting to see innovation as key to their business’ success. Only 3% of CEOs responded that innovation was not a priority for their particular market. Conversely, 75% of respondents viewed innovation as being either as important as, or more important to their company’s success than operational effectiveness
March 1, 2016
The US economy has been in a slow growth mode for several years, and it is unlikely to experience meaningful acceleration before the next recession. Meanwhile, stock market indexes and private equity EBITDA1 multiples suggest that businesses (generally) are achieving valuations based on favorable labor, commodity and debt financing costs. Because the next leg for these cost drivers is likely to be higher, companies will be under increasing pressure to generate top-line growth.
September 1, 2015
The dragonfly’s ability to identify and concentrate on what will bring it success amidst chaotic and confusing environments is analogous to what truly market-driven companies do to succeed. They zero in. Deep analyses of markets and customer transactions are what enable rich, solutions-oriented strategies that can position a business to capitalize on market shifts for growth, increase customer loyalty, and dictate competitive developments. They also lead to discoveries about unmet customer needs, creating new options for growth by selling more to existing customers, penetrating new geographies or product adjacencies, and/or migrating along the value chain.
Does your company's growth program lead to differentiation?