Cracking the Genetic Code of High-Performing Manufacturers
At this year’s Executive Summit, top manufacturing executives heard from leading thinkers on some of the major forces impacting the industry, including technology, changing talent needs, and globalization. Take technology, for example. It’s revolutionizing the shop floor at Lockheed Martin and supporting best-in-class pricing at Parker Hannifin, but it’s also presenting major risks in the form of cyber-attacks. Our vision for a smarter tomorrow is based on the fundamental belief that high-performing manufacturers can capitalize on these megatrends, whether by creating new types of value or building a world-class talent engine. So, in this brave new world, what are the capabilities that set high-performing manufacturers apart? How can they consistently excel, differentiate themselves, and prepare for the future?
Deloitte Vice Chairman Craig Giffi, Lincoln Electric Chairman and CEO Chris Mapes, and Caterpillar Group President Steve Wunning tackled these and other questions during a great dialogue on Cracking the Genetic Code of High-Performing Manufacturers. (I should note that Chris and Steve are consistent high performers, and both have long associations with MAPI; I may be biased, but I like to think there’s a connection!)
Deloitte has done a variety of work in collaboration with the Council on Competitiveness and the World Economic Forum on growth and competitiveness, which formed the foundation for its efforts with MAPI on best-in-class growth attributes of manufacturers. Deloitte also recently published a book, The Three Rules: How Exceptional Companies Think, which evaluated more than 25,000 companies based on return on assets, from 1966 until 2010. From this they were able to formulate three rules for running an exceptional business:
- Better before cheaper
- Revenue before cost
- There are no other rules ((my favorite as a marketer!)
This is all well and good, but why focus on high performers in the first place? The differences between high performers and all other manufacturers are striking. Compared against bottom quartile companies, high performers enjoy:
- An 89% better return on capital
- A net income margin that’s 251% higher
- An operating margin premium of 312%
- Gross margins that are 459% higher
So what is it that high-performing companies do that sets them apart? They excel in key strategic areas that will only increase in importance in the future, including: globalization of sales (new markets), disruptive product innovation, top-tier and engaged talent, outstanding manufacturing capabilities, exceptional customer care, stellar brand image, and a laser focus on strategy. Generally speaking, for high-performing manufacturers, market and revenue-focused capabilities are much more important than cost-management related ones. Even for top-quartile manufacturers, however, growth and growth-related talent remain the major challenge.
Stay tuned for a follow-up article summarizing some of the key insights from a joint Deloitte/MAPI survey of manufacturing CEOs and division presidents on what their top growth-related challenges are. If you'd like to sit down with your peers and drill down on these and other issues, consider attending one of our excellent best practice sharing forums on topics such as sales training, cybersecurity, and product management. Interested in learning more about the topic in the meantime? Here are two excellent resources: