Last week (20 Oct), we had the privilege of hosting the 2022 IndustryNext Anniversary Event focused on “Leading through Uncertainty”.
We had a fantastic event, with participants representing $250B+ in revenue across multiple equipment manufacturing verticals. We were fortunate to have a truly all-star line-up of 5 world-class leaders from private equity, field service, pricing, and digital transformation to share their perspectives.
The backdrop of the event is the uncertainty facing the equipment manufacturing industry: inflation, supply chain issues, workforce challenges, rising interest rates, and expanding geo-political turmoil. These all contribute to a wide range of scenarios that leaders must be ready for and develop plans for.
A highlight of the event was having Nick Santhanam, Founder & CEO of Fernweh Group, talk about his new book “The Titanium Economy”. It was very exciting to hear Nick talk about how the industrial technology sectors are really in their ‘early innings’ in the United States and can be a big driver of future economic growth. The analysis that Nick, and his co-authors, Asutosh Padhi and Gaurav Batra, paint an exciting picture of how the US economy can continue to see growth from this set of industries.
The event was packed with insights directly applicable to helping OEMs navigate these turbulent times:
1. Focus on recurring revenue,
Especially as interest rates could reduce new capital expenditures. This is not only critical to the business, but it also will increase the value of the business as this revenue is valued with a higher multiple than new equipment sales due to its higher profit margins and recurring nature (i.e., it is more likely to happen again tomorrow than new equipment revenue)
2. Strengthen customer relationships.
Focusing on the basics – Communication, Credibility, Consistency – across the economic cycle and the customer lifecycle. This will open up expansion opportunities as well as provide the relationship to soften difficulties that are more likely to occur in today’s challenging environment. Patrick shared some real-life examples of how that investment in customer relationships helped him and his teams navigate tough situations and secure those relationships for the future.
3. Improve your ‘Pricing Fitness’
Improve your ‘Pricing Fitness’ to protect revenue, drive EBITDA and maximize customer value. This is especially important during inflationary times and when the revenue mix may shift between new equipment & aftermarket or between customer segments. Dr. Leo and Dr. Ian shared 4 very pragmatic levers to start with:
- Increase list prices and leverage discounts/promotions as needed
- Minimize ‘traps’ in your commercial policies
- Segment your products and focus your strategy by segment
- Train & guide your sales team on value & behavioral pricing
4. Invest in Digital Transformation.
While there is a natural instinct to play defense, those who have invested during prior downturns have come out stronger, and that performance gap has only grown over time. These investments enable the productivity and efficiency gains necessary to strengthen the business as well as the new business models and customer engagement to drive growth.
Making the decision to invest is only part of driving value with 74% of digital transformations failing to achieve the desired results – driven by incremental approaches, misaligned deployment models, and capability gaps. Mitesh walked through the keys to achieving success:
- Develop a business-led technology roadmap
- Ensure talent, agile delivery, technologies/tooling, and data management are addressed
- Ensure that the operating model changes as well
5. ‘And’
Especially in uncertain times, teams need to be able to think creatively about how to address multiple priorities. It is likely not sufficient to wait and tackle your initiatives in sequence – critical items need to be addressed in parallel, and your teams need to think outside the box about how they scope and approach these to make that happen (without adding resources).
Despite the challenges facing the industrial sector, it was inspiring to assemble a group of truly world-class leaders to share their perspectives with a broad range of participants from across a range of equipment manufacturing verticals. Thanks to Nick Santhanam, Patrick Dell, Dr. Leo Stevens, Dr. Ian Tidswell, and Mitesh Prema for taking the time to prepare and share their deep expertise with the audience.
While the industrial space has had to deal with multiple challenges over the past few years (Covid, supply chain, etc.), the current environment is not letting up, with inflation, interest rates, and geo-political instability making it even more uncertain. By focusing on the right things and leveraging best practices, leaders can position their organizations to navigate through these challenging times and come out stronger.
