The opening line of Charles Dickens’ “Tale of Two Cities” is “It was the best of times, it was the worst of times.”
Another famous, and more contemporary, quote is “When life gives you lemons, make lemonade.”
What do these two sentences have to do with service growth opportunities? If your business sells and services the manufacturing industry, then I think you are at an opportunity point right now!
First the bad news
On September 3, 2019, MarketWatch reported the following:
ISM manufacturing index falls below 50, signals contraction
By Greg Robb
Published: Sept 3, 2019 11:47 a.m. ET‘Notable decrease’ in business confidence seen, ISM says
The numbers: The Institute for Supply Management’s manufacturing index fell to 49.1% in August from 51.2% in July.
Any reading below 50% indicates a contraction in activity. This is the lowest reading since January 2016. Economists surveyed by the Wall Street Journal forecast the ISM factory index to slip to 51.0 in August.
The manufacturing sector since 2011
What happened: The new orders index sank 3.6 points to 47.2% and the production index fell 1.3 points to 49.5%. Only nine of the 18 manufacturing industries reported growth in August and only three reported gains in new orders.
Comments from supply managers reflected “a notable decrease in business confidence” in August, the ISM said.
Now the service growth opportunities
But first a short story
I have a friend, Steve Daniel of Daniel Research Group, who specialized in economic forecasting using key data from the Bureau of Economic Statistics. Over the past months, Steve and I have been meeting over lunch and Steve has been sharing his knowledge and ideas at an incredible pace. When I started thinking about this idea of taking advantage of the decrease in business confidence, I went to the BLS website and started looking around. I found this chart that tells an interesting story.
One year Productivity Change By Industry Sector
Productivity is output per hour worked. And this chart shows the change in productivity during 2018. Notice that there are only five industries that show any gains, including machinery with a super tiny gain. All the other industries had either lower output without making corresponding employee count reductions or they added people faster than they grew output.
The opportunity for OEM service businesses
In the coming months, there will be a broad focus on headcount control; especially if you are starting your annual budget process. With the job market as selective as it is, the companies will be very willing to replace employees with yesterday’s skills with new employee’s prepared to be productive tomorrow. And you can help them.
Many manufacturers fall into one of these three segments when it comes to maintaining their manufacturing equipment.
While the size is not precise, many industries follow a similar pattern. You can figure out where your customers fit by looking at your service records and doing some focused interviews. And look at the BLS chart above to see with industries may be the best short-term targets for you.
Using these segments, here are your service growth opportunities:
Of course, you can also invest in IIoT (Industrial Internet of Things) technology and the like but first make sure that your primary customers are ready and willing to implement it. I recently finished a project with an OEM whose customers were primarily in the “small” category. Many did not have Wi-Fi in their plant and had no desire to do any remote monitoring or reporting. They were too busy fixing things!
One of the services offered by Middlesex Consulting is our Customer Centered Market Discovery Methodology. You can read about it here. Then call us if you think we can add value for you.