Investment in Future Growth

It may be a little naïve to suggest that some top managers of modern corporations follow the actions of squirrels in the fall, by storing away some nuts for the cold months ahead. There are far too many CEOs and other managers overly concerned with showing a profit now, and not worrying about the bottom lines of the future. It is the thrill of exciting stockholders and financial institutions now that has helped the downfall of the Enrons and Tycos and many of the e-commerce and dot.coms.

Instead of anticipating cold climate, the general managers ought to consider the icy blast from competitors, from innovative products that challenge existing product lines, and perhaps even compete with a better price. As we have seen in some of the cases studied, non-integrated competitors have sharply reduced product introductions from four to as little as one year. We have seen a lack of communication between a parent company looking for profit windfalls and designers, engineers and marketers of hospital beds who know what their customers want, and are willing to buy, given a good price.

What is needed, therefore, is for a general manager (and his parental CEOs) to concern themselves with making some investments in, and preparations for, future market opportunities. No company can afford to produce prop planes for the airlines in a jet age and survive. However, merely to justify a ten percent investment without a specific R & R plan is as useless as having a squirrel store nutshells without anything inside. It is a waste of effort. What is needed therefore is a carefully worked-out justification for that ten percent investment, with the potential that a market opportunity that becomes clear-cut and competitively innovative may deserve more than that ten percent "contribution" t\o the company's future.

For the moment, however, let's call this R & D ten percent investment "tithing for the future". It is also a means of subscribing to the Prescriptive S-Curve Strategy (p. 398) in which a maturing product line is boosted by additional technological advances, propelled by R & D investment resources.

The idea of "tithing" current profits for future product and competitive successes makes sense if the general manager realizes (as many shareholders may not) that markets mature and product families must either expand, or suffer decline at the hands of innovative competitors, or generic price-cutters. While the text focuses on technology, one can also see that the general manager of a pharmaceutical company or division must invest at least ten percent of his current profits to keep the pipe lines filled with new products, or product extensions.

Any general manager has to understand that R & D is expensive, and cannot be funded merely by an annual budget. Presented as part of an overall breakdown of fiscal allocations. Ten percent seems like a reasonable, perhaps in some cases meager "allowance" to put financial muscle into future projects and products. Again, one can see that Hospital Equipment Corporation's management made a decision to move away from a broad spectrum of product market potential and concentrate on just one- a mass market not maturing. By putting aside long-range investment dollars for products not generally associated with the company- in this case, everything from control columns to chairs, tables and architectural room designs, the company was able to weather the economic health-care downturn.

Economic "tithing" creates a fail-=safe opportunity: there is money for plan A, but also a reserve for Plan B, depending on the future markets, the overall national economy, and even the possibility of mergers and acquisitions. Long term technological and R & D strategies and investment now has an international flavor: Again, using the pharmaceutical industry as an example, by applying R & D funds for the future for overseas expansion, the long wait for the FDA approval is not the same in most other nations. Therefore, one can easily see that "Ten percent for the future of our company" is a strategy that even the naive shareholder looking for immediate returns on his investment can approve of. No general manager can permit his markets to mature without preparing for new market opportunities.

SUPPLY CHAIN DECISION DATA BASE

More than 80% of the data transactional databases are irrelevant to decision making. Decisions must be based on facts, not guesswork. At the same time, wasting time with having to sort out the relevant data may well be costly in our highly competitive business world. However, much like a patient may want a second opinion from a surgeon before contemplating surgery, the company will require multiple supply chain decision databases developed for at least two important reasons. First, at a given level of strategic or tactical planning... Second,. integrated intertemporal planning requires coherence... What the company is facing is having to sort out the important from the irrelevant, the "today" facts from the "later" data bases.

The fact that some people who access the data bases either do not understand them, use them incorrectly, or may not really know what they are looking for causes confusion and indecision. It would seem useful to have someone in charge of data bases, and making the needed data available on a project basis to hold down confusion and even misinterpretation. While there may well be a complaint that there is a problem of access for those who need the data, today's information technology requires proficiency and expertise that can and should be limited to a few, not the entire workforce. It is clear that data should not be available to everyone on a first come first served basis, especially when so much of the data is unnecessary for specific requirements.

Communication is one of the key elements in a successfully-run company. That may mean either sharing data, helping quantify it, or creating a team, each member responsible for certain parts of data- which then come together for proper results. As one delves into cost accounting, forecasting, product families, customer information, etc., it comes to mind that there is indeed too much information which is unnecessary. And yet, curiosity, the desire to know as much as the guy in the next cubicle or on the next floor knows is often paramount in a competitive company atmosphere. This recalls that old adage about knowing the cost of everything and the value of nothing.

What is of major concern to anyone looking for either an information Technology career, or moving up the corporate ladder is a need for information/data updating, upgrading, removal if outdated, and, to some extent data exclusivity; limiting the right to know. Given an assignment to quantify and qualify data accessibility I would create a strategy of tiers: first and foremost to the decision-makers and their staffs, and then to the forecasters, and then only to those (marketing, sales, for example) who need real time data that is accurate and precise. One can easily see from Figure 6.23, the multi-period decision data base that in addition to a number of time periods, there are reasonable constraints involved, as well as modes for managing inventory, among other management concerns and requirements.

Given that there is tiered access to pertinent data, someone (or a group of someones) are needed to sort out what is pertinent, what is prioritized, time-sensitive, future-oriented, or multi-=task requirements. One often hears the term "raw data" which seems to be nothing more than unmanaged, and perhaps unmanageable data. Raw data is really like a picture puzzle: until someone manages to put the pieces together and achieves the goal (it must look like the picture on the box) all those pieces are of little value. his tiered structure also positions management's responsibility for getting the facts, analyzing them, making changes or additions or corrections, even eliminating some irrelevant data. In other words, the pieces must be in place for the decision maker, so he (or she) won't need to waste time in trying to figure out what the completed picture looks like.

Having become involved in the supply chain decision database now, one comes to realize that- tiered as the structure may be, it must also provide a continuum, a logical beginning and end. Recognizing marketing opportunities, for example, are valid only when the data provides the means of pursuing them.