Episode 35 – Why Strategy Matters More than Ever

Welcome to the TRSA podcast. Providing interviews and insights from the linen, uniform, and facility services industry. Most Americans might not realize it, but they benefit at least once per week from the cleanliness and safety of laundered, reusable linens, uniforms, towels, mats, and other products provided by various businesses and organizations. TRSA represents the companies that supply, launder, and maintain linens and uniforms. And in this podcast, we will bring the thought leaders of the industry to you.

 

Happy New Year to everyone. It’s our first episode of 2021, and I want to thank everybody out there for listening and also give a special shout out to 6 Disciplines Consulting Services for once again sponsoring the Linen Uniform and Facility Services podcast. Your support of our show is greatly appreciated. I’m your host, Jason Risley, the senior editor of digital and new media at TRSA. And on today’s episode, we’ll discuss why strategy matters more than ever.

 

Strategy encompasses two sides of the same coin when it comes to defining both short term and long term strategies. Linen Uniform and Facility Services companies need to continue to closely manage the 9 key elements of operational focus in the pandemic, also known as the pandemic operational checklist, but you also need to lay out your recovery strategy for 2021. The approval of vaccines and the optimism of a gradual economic recovery indicates a need for solid, well defined strategies ahead of the curve. You need to protect and prepare yourself for short term challenges and long term opportunities. Joining us today to discuss this topic is Eric Kurjan, the President of 6 Disciplines Consulting Services.

 

6 Disciplines delivers management and executive consulting, coaching, strategic advisory services, leadership development, and Malcolm Baldridge National Quality Award Consulting to clients across North America, including several linen, uniform, and facility services operations. Hi. This is Jason Risley. I’m here with Eric Kurgan of 6 disciplines. We’re talking about why strategy matters now more than ever, building a plan to thrive.

 

So, Eric, why does strategy matter now more than ever? Great question, Jason. You know, in previous webinars and articles, I’ve shared a perspective of how organizations can get back on track. We examined the phases of independent laundries and what they were experiencing and offered several different tools to consider beginning the steps toward recovery. And although much has changed since the webinar last summer, we’re still faced with very similar scenarios.

 

There remains a focus on how to manage capacity, how to manage expense against a shortfall in revenue, how to manage efficiency and productivity. But with very little focus on what is next, staying in survival mode has been the only call to action for many. And with this second round of shutdown or limitations, many people who were moving forward had to go back to these earlier phases, especially to the phases that we referred to as reduce and remain. So there’s a series of checklist items that we’ve put together that we need to consider in these phases and I refer to it as the pandemic operational checklist. And I really believe these are things organizations need to be doing in order to survive.

 

And there are 9 items that they could consider, managing and leading the business in a better way. The first is revenue generation. And so that’s introducing temporary or permanent new offerings whether that’s with existing customers or new customers. Obviously, reducing spending, expense management. And what that leads to is the 3rd item, which is conserve cash wherever you can.

 

Because we don’t know what the true length of the pandemic is and how how long it will take for our clients to come back to us, We need to make sure we have cash, and so either we need to conserve cash or we need to have access to it in some other fashion. AR management, accounts receivable management, really, really important to get leads back to cash flow. So, I know many organizations have really pushed hard on ACH and or credit card as a means of payment to shorten that, AR management concern. Inventory management. What could we reduce out of our inventory that we really don’t need anymore?

 

Are there things that allow us just to reduce the overall inventory? Supply chain, access to product. Boy, you think back several months ago and that you could not get a mask, you could not get hand sanitizer, you had difficulty getting a whole variety of products. And that possibility still exists, especially as organizations come online later in the the spring time frame. And, I think it’s really important to be multi sourced.

 

So what are the best deals, but you also have to have a way to get access to to products. This next item, the 7th item is really, I I believe, one of the most important and that’s the staffing model. And so do we have the capacity to meet the needs of production? Because the staffing model is the most expensive component within any organization is their their people. And we we’ve really need to understand what that capacity need is and what that staffing need is.

 

Customer retention, doing what almost whatever is needed in order to retain customers. It takes great effort to get a customer to begin with and then it takes even more effort to make sure they stay yours. So making sure that you’re flexible helping them in their scenarios stay viable. So you want them and that you wanna be able to demonstrate your ability to help what they need. And then the last item is communications.

 

And this is communications to your teams and communication to your customers and you can never do it too often. Communication is a critical element. And one thing I have observed is because of, if you will, COVID fatigue, some organizations have actually become a little bit lax in terms of staying in touch with their their people. So, I think it’s really an important point. So those 9 items part of that operational checklist are are really critical.

 

Do you think this protracted pandemic has impacted the survivability of laundry operators? Well, we’ve seen an increase in the number of potential operator consolidations as the protracted economic slowdown has caused many businesses to move from surviving to closing. And, in the study that TRSA actually commissioned with The Economist, the Economist predicted a move toward consolidation in an industry and we are seeing it firsthand. There was a a period of time over the summer where there was really no conversation around consolidation. And then as the fall wore wore on and now we’re into the early part of winter, we’re seeing more and more of it where organizations are, in trouble.

 

They’ve run out of cash or they were over committed in some form, and now they’re looking for someone to help them out. And so, as I speak to clients across the nation, more and more I hear of opportunities that they are pursuing, which is a really good strategic component for them, is can I, buy this this organization and buying this organization can be many mean many things? Everything from, just buying routes and customers to, literally buying plants and buildings. So, it’s something that they really are are we’re seeing more and more of. And, there’s a that’s a really it’s a chilling ripple effect with fewer customers to serve and smaller invoices at the same time, and this has really caused some operators to call into question whether or not they can make it.

 

It’s been a tough operating environment this year, but have you seen any bright spots out there? Well, it’s not all gloom and doom. Many organizations have taken the right steps to begin their recovery and to manage their business properly and they’re taking actions to move forward and they’re managing staffing. Remember I said that’s one of the most, expensive components that an organization has and so they’ve been matching their staffing to the capacity of their organization. And revenue, of course, finding ways to generate revenue is important.

 

So we’ve seen lots of organizations add PPE to their mix or some other component tied to facility services, and that’s been helpful. I’ve also seen organizations, get really good at, if you will, trimming off the dead wood. So these are customers of theirs who are either low or no profitability accounts. And this is where utilizing profitability by account PBA or some other metric revenue per mile has been used to determine whether an organization’s worth keeping based on the true profit generated by each dollar of revenue. Remember, hey, if you’re just adding top line revenue, that doesn’t mean that you’re, you’re doing well.

 

So if you bring in a dollar but it costs you a dollar and a quarter to service them, then your customer’s a cost center, not a profit center. These are tough decisions for organizations because no one likes to give up customers, no one likes giving up that that top line revenue, especially when we’re looking at dollars per week or dollars per route. But there aren’t many options here. You can raise your price, you can get a new contract with them potentially, potentially, but if you can’t, you really can’t afford to keep them. And as a colleague of mine, used to say, revenue is vanity and profit is sanity.

 

So what can an operator do to survive and then thrive? Well, from my perspective, it has to start with a solid strategy, and that means where do you want to go, and then we’ll need to determine the steps to get there. So where to go, then we’ll build steps. So, this is a little bit of a side story, but, in working from home during this pandemic, it’s caused me to do many things from home, as many others have as well. And in this particular case, the pandemic has caused me to rearrange my home office.

 

So after going through my large collection of business books, I came upon an old Harvard Business Review article, named What is Strategy by Michael Porter. And Michael Porter served as a professor of business administration at Harvard Business School in Boston. And rereading this article showed me it was amazingly relevant even after being written nearly 24 years ago. The point that Porter made in the article is that businesses of all sizes have lost their way and have become so focused and enamored and committed to operational effectiveness, that’s productivity, quality, benchmarking, and speed, they have failed to connect the dots back to what their strategy is. So this is where I believe we are now.

 

So it is truly time to rethink how to reconnect to a strategy that will allow us to move forward. And, the unknowns, they’re they’re huge. We we don’t have all the answers. But I do believe organizations need to stop wringing their hands and move forward. So there’s a number of steps that are mentioned in the article and I’ll share the those with you.

 

And they are ways to help get the organization more well defined and get the organization in a position where they can succeed. Is there a good way to start forming a strategy? Yeah. As I mentioned a moment ago, I was gonna share some some thoughts with you on that, and the 5 questions that Porter put in the article, I think, are are pretty telling. So first, what makes us unique, our products or services?

 

So what’s the uniqueness of our organization? What makes us stand out and why would someone wanna do business with us? The second item, which is critical, which is tied to core competency. What do we do best? What are we really good at?

 

So organizations can dabble in things, but organizations can also be really good in certain areas. And if they’re really good in those certain areas, they should continue to take advantage of that. The third item is where does profit come from? Which of our products or services are profitable? And understanding that is is critical.

 

I mentioned it earlier in our discussion about using PBA profit profitability by account as a tool to help us understand, which are our products or our services and our customers are profitable. And then what satisfies our customers? Who are our customers who really appreciate what we do and why is that? We need to, dissect that, make sure we understand why those organizations really like us. What is it?

 

Is it our timeliness? Is it our service level? Is it our people? What what are the things that really drive us to build a satisfied customer? And as I mentioned above about products and services profit, I did mention about customers as profit.

 

That was the whole conversation around deadwood. So those 5 questions are really important in terms of forming strategy. There’s some other things to give consideration to as well. Things like really need to understand what our plant is capable of doing and what the capacity of it is. So, if we gained a new client and the volume that that new client was bringing to our plant was so substantial, it could be very expensive in order for us to be able to fulfill that.

 

And that could be mean, running additional shifts that might require new hardware. It might mean we’re out of space. I mean, these are important things to give consideration to. We also need to look at our staffing. So do I have enough staff or the right staff to do that work?

 

Funding sources. What if I do need to go out and buy merchandise? What if I do need to go out and buy new equipment? What if I need to buy more trucks? Where does the money come from?

 

Another consideration is what is the geographic coverage that we’re willing to take on? So how far away are we willing to go in order to get this business? That goes back to that revenue per mile question as well. And I think something that’s often overlooked by organizations is who are our competitors in that geography? So we say we want to expand into a given area, but if we don’t understand who the competitors are in that area, we might be making a big mistake because they may, they may have already solved many problems, may be excellent at what they do, and us coming in thinking we’re gonna take that business, may not be accurate.

 

Now if they’re doing a poor job in an area and you have the ability to pro provide or produce a better product than they do, that could be a win. But that’s part of the analysis of understanding what your your strategy is. So if we want to add a new sector to serve as an example, healthcare or even a new product offering, we really need to understand its impact on the business. And again, goes back to, do we have the right capacity and right equipment? Do we have the staff to to run this?

 

Do we have the staff to manage this new offering? Do we have vehicles to deliver it? What do we need to buy? What’s our selling price going to be? These are all really important questions about forming and, beginning to drive a strategy.

 

Do you think people should get started now even though the pandemic may linger on for many more months? Jason, absolutely. Yes. I I would say don’t wait. At a fundamental level, the questions raised in Porter’s article gives us a basis for building or rebuilding the business.

 

To be honest with yourself about the strengths and weaknesses is challenging work. You need to take that close look at yourself. It forces you to make tough decisions about how you run the business. It may push you out of your comfort zone, but it needs to be done and it needs to be done now. You can’t afford to wait to see when the pandemic will end.

 

If you take that approach, you’ll miss the start of the race and you’ll still be sitting putting your shoes on when the starting gun sounds. We’ve been working with multiple operators to look beyond today and to start to prepare themselves to capture future market share, future customers, and to position themselves for the long term. Those who are doing so, they will come out well ahead. I certainly understand that it is hard to ignore the feeling of being up to your elbows in alligators, but you have to define a plan to move beyond the current situation. Thanks for sharing your thoughts on strategy today, Eric.

 

Do you have any more resources that our listeners can access to get more information? Or how may they get in contact with you if they have any questions? I would encourage anyone to, take a look at our website. That’s 6dconsultingsixdconsulting.com. There’s some resources out there.

 

There’s some items that, we actually shared in our webinars over the summer time frame, that deal with strategy, so I would encourage organizations to do that. And if anyone would have any questions, I’d be more than happy to address them directly at e kurjan@sixdconsulting.com. Alright, Eric. Thanks for sharing today. It was a pleasure.

 

Always. Thanks, Jason. For more information, you can email Eric at e kurjan@6dconsulting.com. That’s e kurjan@6 dconsulting.com. Also, visit the 6 disciplines blog online at 6dconsulting.com /blog.

 

Search for the post titled 2 sides of the same coin. If you liked what you heard today, don’t forget Chris Steyrwalt, the digital politics editor at Fox News, on the latest from the nation’s capital and a look ahead at the new administration’s priorities as we prepare for the January 20th inauguration. Steyrwalt will give a keynote address at TRSA’s 11th annual legislative conference scheduled for March 24th 25th, 2021. You can find more information about the legislative conference on our website at www.trsa.org/legcon. Thanks again to our sponsor, 6 Disciplines Consulting Services.

 

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