It’s quite interesting to watch certain businesses and industries succeed and fail, and try to identify the factors that lead to these very different outcomes.
For example in Leon, Guanajuato, the shoe-making capital of Mexico, the industry is under severe pressure from imported product, and lower costs from China, Vietnam, Brazil, and other countries.
It’s quite clear to everyone in the industry that there are several solutions to the problem.
- Ask the government to create trade barriers and import tariffs. This will only support the inefficiencies in the national industry, postponing the inevitable.
- Invest in design and create a brand. Shoes are purchased for two reasons, fashion and protecting your feet. The fashion market has much higher profit margins, but requires constant investment in research and development and marketing.
- Invest in technology. If your product is focused on low prices in the market, you must have low costs, and lower costs than your competitors. This might be achieved with new technologies.
- Create alliances within the industry. If China production costs are cheaper, but it takes 60 days for the product to reach the US, doesn’t it make perfect sense to create an alliance where the initial production comes from Mexico (5 days to market), followed by the mass production from China?
- Purchase the shoes from the overseas competition and close your production facilities.
- Create new markets, export to new markets.
Those are the choices, and what do you think is happening?
The majority of companies are pointing out the danger and requesting government intervention, but not implementing any other strategies to avoid the “doomsday” scenario.
The few companies (industry leaders) that have invested in branding, design, technology and purchasing from competitors are thriving, earning money and making profits.
Why is avoiding the obvious or inevitable, such common behaviour in most organizations and groups?
I believe it has to do with the failure of the leaders to move out of the Thinking-Identifying stage and into the Planning and Implementation stages.
The cycle of business leadership and management consists of:
- Thinking-Identifying. Thinking and identifying important internal and external factors and understanding how they interact.
- Planning. Using the data and information to formulate a plan and strategy
- Implementing the strategy. Putting the resources and motivation behind the plan and “making it work”.
- Reaction-Modification. Reacting and modifying the plan as the conditions change.
Many leaders are uncomfortable or unable to identify the major factors that are and will affect their companies. They are unable to create strategies and delay important and critical decisions because they lack data, or have too much of it, or don’t know how to properly analyze it and find conclusions. Without a strategy there is obviously no implementation, and the organization begins to react to situations created by others (crisis management).
This inability to read the market, identify market forces, create strategies and adapt to changing conditions will eliminate those organizations from the market. Creating strategy is not easy, and creating successful strategies is even more difficult. It requires excellent leadership and management decisions.
What are the known problems in your organization and industry?
What strategies are waiting to be created and implemented in order to prepare your business for the future?
Why isn’t it happening now?