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Banks, Lenders & Investors Business Development & Marketing Cash Flow & Forecasting Finance General

As businesses resume operations it’s a good time to take stock with a strategic review

a strategic review helps your business move forwardI would normally be recommending a strategic review of your business at this time of year, when activity slows down for the holiday season.
This year, of course, things are very different because of the pandemic lockdown but as you resume business activity my advice remains the same because a strategic review will help you to identify the resources, costs, opportunities and capabilities that will help your business move forward.
It may be that carrying out a review will help you identify new products or directions in which you can take your business as in a changed economic landscape innovation is likely to be a key to future success.
A business needs to be sustainable and profitable so firstly you need to identify the resources that are already available to you and these can be divided into physical resources, human resources, intellectual resources and financial resources.
To use the example of a manufacturing business, physical resources would include equipment and inventory and manufacturing plant, but also the premises, if the business owns them. However, over time for all their longevity such assets as manufacturing plant can become obsolete or inefficient and it is important to plan for when their lifespan will run out and for updating them perhaps with automation to improve efficiency.
Human resources will include existing employees and their skills, perhaps suppliers with whom you have a long-standing relationship, the board of directors and shareholders if any. Do you have the right skills and capabilities in the organisation to help it move forward, perhaps even in a new direction?
Intellectual resources include any processes or products that are already protected by patents, anything emerging from research and development or perhaps potential demand for a new but related product identified via marketing activities or customer research. The talent within your business could also be potentially an intellectual resource.
If you have identified a new product or direction for the business it is important to establish as far as possible how much it is likely to cost and where you may need to invest to turn it into a reality so current costs are an essential element in the equation.
If reflections during lockdown or insights following a strategic review give you ideas for a new direction you will need to know your business’ financial position to fund working capital and afford any investment so forecasting your cash flow is imperative as your reserves may be have been depleted by the lockdown and you may need further finance.
Doing your homework now while business activity is still quiet could make all the difference to a successful business development.

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Banks, Lenders & Investors Business Development & Marketing Finance General

Is it time to stop propping up traditional so-called UK Key Industries?

UK Key industries of the futureThe main UK Key Industries are often still considered to be aviation, aerospace, steel and car production.
As a result of the Coronavirus pandemic and subsequent lockdown the UK Government is working on a plan, called Project Birch, to provide short term bail-outs to those companies “considered strategically important” to the national economy.
However, how to define strategically important? Is it in terms of their contribution to UK GDP (Gross Domestic Product), or to the number of jobs they account for, or to their ability to be viable and profitable businesses that can operate in more normal times without state aid?
It would be reasonable for a Government to consider a business to be strategically important in terms of employment during a crisis, such as now, especially given that some of the above-mentioned Key Industries are in parts of the UK where there is traditionally high unemployment with few alternative job sources, especially when whole communities are dependent on a major manufacturer.
This would apply to the car industry in the North East and to the Steel Industry in South Wales.
However, given that many are foreign-owned, there is little certainty that their owners will invest in them for the future benefit of UK, and often their commitment to keeping them open is in doubt, as previous negotiations for Government help have already demonstrated. It is therefore questionable whether they should be regarded as UK Key Industries in the medium and longer term.
According to the ONS (Office of National Statistics) the UK Key Industries today are in the services sector, including banking and finance, steel, transport equipment, oil and gas, and tourism: “the services sector is the largest sector in the U.K., accounting for more than three-quarters of the GDP”.
So, as former Treasury minister and architect of the Northern Powerhouse project Jim O’Neill has warned, any short-term bail-out of the UK Key industries identified in Project Birch as strategically important must be linked to strict conditions: “If the lion’s share of the equity is simply going to preserve jobs at any cost, that’ll ultimately just add to our weak productivity problem,” he said, in an article in CityAM.
It is a point echoed in an article in the Financial Times about the UK’s “age-old” problem of identifying winners and losers. In my view there are still far too many zombie and borderline insolvent businesses in the UK; most of them have been propped up by lenders not wanting to write off their debt, not because they will contribute to the future of UK PLC.
My blog on Tuesday focused on the opportunities for business innovation that are likely to come post-Coronavirus as a result of changed priorities for consumers and investors towards a greener and more sustainable economy rather than a largely consumer-oriented one.
Perhaps in orchestrating an economic recovery it would be wiser to focus on stimulating and investing in new and innovative businesses and in re-educating and training the workforce for the future and not leaving them untrained and propping up the past.
Identifying new potential UK Key industries, such as pharmaceuticals, innovative technology and the manufacture of sustainable new products is imperative for our future prosperity instead of propping up ailing industries simply because they employ large numbers of voters.

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Business Development & Marketing Cash Flow & Forecasting General Turnaround

Directors should plan for innovative UK manufacturing to revive their businesses post-Coronavirus

UK manufacturing innovation UK manufacturing was in dire straits even at the onset of the Coronavirus lockdown, with the CBI (Confederation of British Industry) reporting output dropping at its fastest pace since 1975 in the first quarter of 2020.
As it progressed the pandemic and lockdown revealed many weaknesses in the global supply chain, most notably in the availability of PPE (Personal Protective Equipment) for frontline health and care workers.
However, it is often said that in disaster there are also opportunities and many businesses demonstrated their agility in switching their usual production to manufacturing both PPE and sanitising equipment, for example.
But, as attitudes change, so the opportunities for innovation increase and it is a good time for directors to start planning strategies for not only producing essential supply chain elements within the UK but also for devising new products to fit the new agendas.
The UK Government has announced two initiatives aimed to protect UK business and promote innovation, Project Defend and Project Birch.
Project Defend aims to identify and protect vulnerabilities in business supply chains, with project leader Liz Truss recently describing three aims: reducing the use of suppliers from countries seen as “unreliable partners”; encouraging UK manufacturing; and, stockpiling key items such as medicines and components.
Project Birch is a short term initiative whereby the Government will “temporarily guarantee business-to-business transactions currently supported by Trade Credit Insurance, ensuring the majority of insurance coverage will be maintained across the market” potentially until the end of the year.
Meanwhile support for a recovery plan with projects that support the environment has been given added impetus with a letter to the Government from 200 businesses urging it, among other things, to drive investment in low carbon innovation, infrastructure and those industries that support sectors covering the environment, increase job creation and recovery.
All this should encourage UK manufacturers to think in terms of innovation rather than striving to recover their existing operations.
A report by McKinsey in 2019 in the context of post-Brexit UK business and supply chains identifies several key issues directors should consider when planning their strategy for the future. Their findings are relevant in the current post-Coronavirus recovery context.
The key issues for directors, it says, will be to: redefine their sourcing strategy; revisit their footprint; review inventory build-up; and, crucially adjust their product portfolio to exploit their capabilities and experience.
I know of at least one company, supplying a unique range of insulated, environmentally-friendly products to the construction industry, which is already well-placed to grow post-Coronavirus as the Government seeks to stimulate the economy, jobs and housebuilding. Build Homes Better proposes to use its technologically advanced products to build environmentally and energy efficient housing based on its rapid building system. Check them out at https://buildhomesbetter.co.uk/
The time has never been better for a revival in UK manufacturing with innovative solutions for both new products, developing a greener economy and for strengthening the in-country supply chain.

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Banks, Lenders & Investors Business Development & Marketing General Turnaround

What are the prospects for UK manufacturing?

UK manuafacturing prospectsUK manufacturing output growth held steady in the three months to May, according to the Confederation for British Industry’s (CBI) monthly industrial trends survey.
In July, the CBI reported that in the three months to June UK factory output had turned in its slowest quarterly growth since April 2016.
Furthermore, the CBI reported that ten out of sixteen sub-sectors experienced growth with chemicals, food, drink and tobacco being resilient, while car manufacturing struggled.
Confusingly the CBI also reported that order books deteriorated in the quarter.
By comparison the monthly snapshot from IHS Markit and the Chartered Institute of Procurement and Supply showed that activity levels in the UK manufacturing sector in June had dropped to the lowest level since February 2013.
IHS Markit/Cips found that high stock levels, ongoing Brexit uncertainty, a deteriorating economic backdrop and rising competition contributed to the drop in output. Weak export demand amid a faltering global economy also had an impact.
These figures, while confusing, support the hypothesis that UK manufacturing prepared itself for Brexit in March by building up stock levels and in doing so increased output. However, since then much of this productivity has been ratcheted back.
So where are we?

What is the true state of UK manufacturing?

The publisher, The Manufacturer, takes an up-beat view.
It argues that “Contrary to widespread perceptions, UK manufacturing is thriving, with the UK currently the world’s eighth largest industrial nation. If current growth trends continue, the UK will break into the top five by 2021.”
In their annual manufacturing report for 2019 they argue that there is a “surprisingly resilient mood among manufacturers with 81% saying they are ready to invest in new digital technologies to boost productivity.
But they do not deny there are challenges.
Of course, Brexit and ongoing uncertainty, is having an effect on strategic-planning and business prospects with 51% arguing that the Government should be doing more to promote exports, especially given the currently favourable exchange rates from an export perspective.
Among the challenges the 2019 survey identifies for UK manufacturing is the need for a clear strategy and strong leadership when introducing smart technology into the processes, citing lack of coherent digital strategies and in some cases an inability to understand the practical applications that technology can offer.
Another issue is the lack of skilled engineers. Some respondents argue that the education system and the Government’s approach are both failing. The survey reports that some companies are now establishing their own training schemes and academies because the situation is so bad.
However, I would argue that while the mainstream education system undoubtedly plays a big part, there is actually no reason why businesses should not be doing  so as well. After all, they are in the best position to know precisely what skills they need in a way that schools and colleges perhaps cannot.
On exporting, there were some in the survey that argued that Brexit might be a good thing in stimulating more UK manufacturing rather than being locked into and dependent on complex transnational supply chains.
One manufacturer in Cheshire is reported as saying in a Guardian article in June this year: “We are under the threat of closure all the time.”
But the article goes on to describe how this particular manufacturer is fighting back: “If we didn’t have a drive on productivity we wouldn’t be in business.”
Their solution has been to drive forward with robotic technology and with the support for their proposed changes from their workers. They have involved everyone in the process, mocking up robotic workstations in cardboard to see how they fit in with the workforce, with the result that “while robots have replaced some jobs new ones have come and staff have been trained up along the way”.
All this is without considering the opportunities for completely new businesses that will arise from the growing drive to clean up the environment and make activity more sustainable which will no doubt create opportunities among the more innovative producers for new processes and ways of doing things.
Perhaps we should not write the obituary for UK manufacturing quite yet.
 

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Business Development & Marketing General

Flexible working can foster innovation and creativity

flexible working is good for businessA set of annual awards launched seven years ago is demonstrating the positive benefits of allowing employees to work flexible and part time hours.
The Timewise Power Awards winners for 2019 have just been announced and, as the founders say, they demonstrate the art of the possible.
Among them is Srin Madipalli, a wheelchair user who works 85% full time for AirBnB and combines this with public speaking to raise disability and accessibility issues at forums including the United Nations, Rio Paralympics and the Tech Inclusion Summit.
Chris Bryant, a partner at Bryan Cave Leighton Paisner, works three days a week helping clients from all sectors to prepare for Brexit, and at the same time cares for his daughter and writes for musical theatre. His work has been performed at the Edinburgh Festival and is now being developed for a nationwide tour.
Amy Haworth, a director working on an 80% contract for Deloitte, combines her working life with 60 to 80 performances a year as an international classical singer, and Joanna Munro, creative head of Fiduciary Governance at HSBC Global Asset Management, has managed to combine her three days a week working for HSBC with completing a Masters in creative writing and is now writing a crime novel.
While others have combined their flexible working with starting up a new business, developing an app or caring for relatives, what they all have in common is that the businesses they work for are able and willing to accommodate and see the benefits of allowing their employees to work flexibly.
Often their work feeds back into their work for their main employer, to the benefit of both parties.

How a willingness to accommodate flexible working could benefit your business

There is some truth to the adage that a change is as good as a rest and certainly if you want to retain key people it is important that they feel valued and fulfilled.
However, it is perhaps taking too narrow a view to assume that their focus should be only and entirely on their work for the business.
The stimulation of an outside interest, or the possibility of pursuing a related interest that is not directly within the scope of their primary role can lead to innovative ideas being brought back into your business.
Also, the success stories of the winners mentioned above can benefit your business reputation, not only by demonstrating that it is a forward-thinking company when it comes to the terms and conditions of employment but also in the additional kudos from those employees’ successes in other pursuits.
Such enlightenment can also help a business attract and retain both outstanding and highly motivated people.
Please do respond with your own stories about similar examples.

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Business Development & Marketing Finance General

The fourth Industrial Revolution will need a fundamental change in business thinking

the fourth Industrial RevolutionA day after my last blog, on skills shortages and Brexit, the Migration Advisory Committee published its analysis on migrant workers and the future.
The report, commissioned by the Government ahead of Brexit, suggested there should be no special status for EU migrant workers and extending access (called Tier 2 visas) for higher-skilled workers from non-EU countries should be extended to all countries.
It also said it was “not convinced there needs to be a work route for low-skilled workers” from the EU” with the possible exception of seasonal agricultural workers.
Not surprisingly employers and businesses gave the report a mixed reception, generally negative from those who depended heavily on low-skilled migrants for production line, hospitality and farm-related work.
But given that the world is at the start of what is being called IR 4.0, or the fourth Industrial Revolution, is this an example of politicians’ and businesses’ thinking being out of date and, along with trade wars, fighting the wrong battles?
This is the thesis of Paul Donovan global chief economist at UBS Wealth Management who argues that global trade has now hit its peak and, in the future, thanks to IR 4.0 everything, from supply chains to transportation will become much shorter, with locations of production much closer to their customers.
The reason is that with the advent of robotics, AI and automation much of the production of goods could be carried out locally and affordably without the need for the constant worry about sourcing enough low-skilled workers to carry out what are essentially tasks that could easily be automated.
This would reverse the offshoring trend of the past 20 years or so that was driven by the pursuit of lower labour costs. Indeed, the onshoring of manufacturing in US has been gathering pace due to automation, exchange rates, higher transport costs and lower energy costs.
The construction industry is an interesting example, where there have been shortages of skilled tradespeople for some years and it is currently using EU workers to fill the gaps.
In the last few days research published by Altus Group with 400 UK property developers postulated that we could soon see “armies of robot bricklayers” making up for the skill shortage.  Already there are trials taking place on some building sites. Drones, meanwhile, are being used for surveying, inspections and progress monitoring.
Of course, there would be a period of disruption during the transition and the World Economic Forum (WEF) has already predicted around 75 million jobs being displaced globally by robots by 2022, and not only in the most obvious sectors.  However, WEF also predicts that a technological revolution could create around 133 million new jobs. This prediction has also been backed up by PwC.
Professor Klaus Schwab, WEF Founder and Executive Chairman, in his book The Fourth Industrial Revolution, calls this a time of great promise and potential peril.  In his book he says: “decision makers are too often caught in traditional, linear (and non-disruptive) thinking or too absorbed by immediate concerns to think strategically about the forces of disruption and innovation shaping our future.”
This suggests that business leaders will have to begin questioning everything, from their strategies and business models, to making the right investments in equipment, training and disruptive R&D.
Arguably this revolution in thinking applies equally forcefully to governments.

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Business Development & Marketing Finance General Turnaround

Don’t discount the awkward people in your business

awkward people are coolSocial misfit, loner or nerd. These are all words that are often used to describe awkward people.
In this context awkward does not mean deliberately difficult, disruptive or aggressive, but describes people who don’t quite fit in or interact socially with their group, peers or colleagues. Indeed, all too many amateur psychologists ascribe people with these character traits as being socially dysfunctional, or being ‘on the spectrum’, or worse, as having Autism or Aspergers.
But US psychologist, author and relationship expert Ty Tashiro argues that such people often have striking talents.
The author of AWKWARD: The Science of Why We’re Socially Awkward and Why That’s Awesome, argues that while such people are less likely to be socially skilled or good communicators they also have what he calls obsessive interests.
However, being socially awkward is not synonymous with being on the Autism spectrum.
Tashiro says socially awkward people are likely to have considerable focus and energy and to deliberately practice something that interests them repeatedly until they achieve mastery of it.
How can this benefit a business?
It is almost a cliché that to achieve mastery in an activity or discipline requires a single-minded focus and hours of practice.
So awkward people can often achieve a high level of expertise in what interests them.
The pace of technological change is being driven by innovation and advances in science so it is easy to see why having some awkward people in a business can be a huge benefit.
With the right level of understanding and support, an awkward person’s skill is a resource that can result in a ground-breaking innovation that could put the business ahead of its rivals.
So, it makes sense to recognise that an awkward member of your team may have hidden depths and to find ways of nurturing their interests and skills for the benefit of the business, its profitability and the security of everyone involved in it. Respecting, understanding and supporting them takes time and effort but the rewards can be stunning.
It is also called “leadership”.

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Business Development & Marketing Finance General Turnaround

How do you inspire employee loyalty to your business?

respect employeesFar too many businesses rely on money to incentivise and reward employees, assuming they are motivated primarily by money.
However, there has been plenty of scientific evidence for at least 20 years that has shown that this is not the case, according to Daniel H. Pink the author of five books about business, work, and behaviour. (Washington).
The prolific contributor of articles on business and technology to publications, including the New York Times, Harvard Business Review, Fast Company, Wired, and The Sunday Telegraph, explains his argument in a popular TED talk.
Numerous tests over the years have shown that actually offering a money “prize” to groups who solve a defined problem more quickly than others is counter-productive and actually slows them down.
However, problem solving actually speeds up if there are no constraints and people are left free to think laterally.
Pink illustrates how this has been used to productive effect by a US software company that allowed employees to spend almost 50% of their time on anything they wanted, but they had to then present the outcomes to the rest of the company. Another example he cites is Google, which operates a system where engineers are free to spend 20% of their time working on anything they want. The results have accounted for up to 50% of Google’s new products.

Employee loyalty is about respect and recognition

While financial incentives might work for a clear set of simple, routine tasks with clearly defined objectives, the majority of business growth in the 21stCentury relies on innovation and conceptual ability. While obviously paying people adequately and fairly is important, what matters in the latter context is to give employees self-determination and control over their work.
It plays into their desire to do better, to use their imagination and to feel trusted.  The “reward” in this context may be the respect and recognition from management and from their peers.
Rewards or recognition do not need to be explicitly stated at the outset, but loyalty depends on being listened to, consulted, respected and recognised. The mechanisms can range from suggestion boxes to a post on a noticeboard for a particular achievement but the essential ingredient is acknowledging that people are responsible, able and adult and can be trusted to do their best without over-controlling management. Suggestions that are not acknowledged discredit management, and suggestions that are ignored or rejected without consideration make people feel undermined.
Get it right and a business will be able to rely on its employees’ loyalty, get it wrong and your staff will know you don’t really care about them.

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Business Development & Marketing General Rescue, Restructuring & Recovery Turnaround

Conflict is an opportunity for transformation and innovation

conflict and mediationA former peace monitor in South Africa during Apartheid and now the founder of a niche consultancy called Questions of Difference says conflict is “our greatest natural resource”.
Charles Irvine argues that, if handled properly, conflict resolution can lead to new ideas and innovative solutions and can be used to transform people and businesses.
He cites the example of an organisation where there was a deep disagreement over paper from a supplier that was deemed too expensive.  However, the technical people within the organisation insisted it was the only paper suitable for the job.
People from both organisations were invited to a lunch to resolve the issue. It emerged that the paper supplier’s vehicles were delivering to customers all over the country, but their vehicles were returning to base empty.
A solution was found that cut the paper company’s bills dramatically, enabling it to supply paper at a lower cost to its customers.
Honesty and a willingness to listen and learn are crucial to making the best use of a conflict, however. In some situations, an impartial mediator may be the best way to resolve conflict.

How can mediation help?

The advantage of having a mediator is that they have no vested interest in the outcome, beyond resolution, and are better placed to identify innovative ways and opportunities that can be hidden to those involved.
Neither avoidance nor sticking to one’s guns are helpful in resolving a conflict. Too often, particularly when a disagreement has been ongoing for a long time, people end up in entrenched positions and refusing to engage with their opponents.  Alternatively, one side can choose to give in without their issues being properly addressed or resolved.  Avoidance of the core issue is no solution.
Compromising is another option, but runs the risk of satisfying neither side nor resolving the issue once and for all.
Some mediators advocate keeping the two (or more) sides apart, allowing each to express its views in complete confidence.  The mediator will then go back and forth between the parties clarifying, perhaps seeking suggestions and eventually arriving at a solution that is acceptable to all.
Other mediators, having taken initial positions from each party separately, will choose to engage in further discussion with both parties present.
Successful resolution of a conflict means antagonists being willing to engage, being open to looking for new ways of doing things and perhaps collaborating.
In that sense, a conflict can turn out to be a positive stimulus to innovation and creativity, as Charles Irvine suggests.

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Banks, Lenders & Investors Cash Flow & Forecasting Finance General

Is short term investment damaging future business prosperity?

For many years, the UK economy has depended heavily on consumer spending and on property speculation.
This may have led investors, even pension funds that require steady returns over many years, to focus too heavily on short term investment and gain and, therefore, on quarterly or annual reports and results thus undermining their willingness to wait for future returns.
However, the creative infrastructure that led to such inventions as the steam engine depended not only on “lightbulb” moments but also on people who were educated, skilled and above all had the time to think slowly and in depth.
Recently the Bank of England’s Chief Economist, Andy Haldane, has been worrying that the development of the internet has also undermined the ability to think slowly and in depth and thus the patience needed for business innovation and progress.
If UK businesses, from SMEs to large corporations, are to remain at the forefront of innovation they will need continued investment in the best brains, in research and development and in a decent infrastructure and that means investors willing to be patient for the long haul.
Is it time that more emphasis was put on education, training, employee development and perhaps even public investment in longer term projects to emphasise the importance of sustained effort and patience?