How is Your New Reality?By Ron Slee
Article Date: 10-01-2010
Copyright(C) 2010 Associated Equipment Distributors. All Rights Reserved.
After a year and a half, let’s have a quick review of the changes.
I still have scars from the “New Reality” exposure that I introduced in 2009. I talked about the need to adjust and change our business model – to drive a higher percentage of the business through parts and service. I am sure everyone believes this point at least intellectually, but the number of companies that actually live it is much smaller. Everyone needs to drive a higher performance level on parts and service. But that wasn’t the contentious side of the discussion.
I posited that this was not just another business cycle, that this was a fundamental change in the way we do business. Now, that got a lot of people riled up, but that’s because change is extremely difficult to get comfortable with.
Let’s look out into the market. Thankfully we are seeing a modest increase in equipment activity on a month-over-month basis. We are not, however, anywhere near the unit levels of 2007. Nor do I believe we will get there for a long time to come. If you read my columns regularly, you will remember that I think we will be keeping capital assets longer, that we have been trading in assets much too early in their expected lifespan.
You also are living in a world where we have exceptionally high levels of our workforce that are underemployed, to put it mildly. Reported unemployment levels between 9 and 10 percent, (and much higher in our industry) are a serious byproduct of our debt-induced growth, which has been with us since the late 1980s.
You would think that we would have no trouble finding willing workers for any job we needed, but you all know this isn’t true. We have trouble finding skilled technicians for nearly any job you want to mention. What is going on here? We have an unemployment level in excess of 20 percent for younger people. We have job skill needs the market is not satisfying for us. All of this means we are loading work onto a smaller number of employees, running the risk of burnout. We need to make changes, which is easier said than done.
The advances in technology have been dramatic. Yet we are slow to make changes. I understand that just as readily as you do. It is expensive to retrain employees to use new systems and processes. But what do you think about burning out your employees? I have never before in my career seen the levels of stress as I see today, and never have I heard the discontent from employees as I am hearing now. This is not a phenomenon that can continue indefinitely. We need to either find methods to ease the pressure on the employees or add to the number of employees – again, easier said than done.
What Can Be Done?
We’re talk about parts pricing, inventory control methods, Internet ordering, the use of customer kiosks, GPS, RFID, VoIP, customer purchase patterns, suggestive selling by computer, schematics delivered to a terminal in the bay, parts delivered to the technician, standard times and flat rates, inspection programs and maintenance programs. Change is not just coming; it is here – in most every other capital goods industry except ours, right?
Don’t get me wrong. I am not nagging. I am not complaining. I am asking for each and every one of you to look at your business. Ask yourself the questions that need to be asked. Business activity levels will not be the same in 2011 as they were in 2007, and if a “normal” business cycle does return it won’t be before 2015, at the earliest. There, I put it on paper. I said that at my presentations at Summit in January and heard a lot of groans. But I believe there are more and more people who are saying the same things today.
Bill Gross, the famous investment and financial guru from PIMCO, the bond king, calls it the “The New Normal”. I call it “The New Reality.” Whatever you want to attach as a name – it is here. Don’t forget we are in the middle of a societal and business change as dramatic as the Industrial Revolution. The trouble is, we are in the middle of it. We don’t know when it will end and we don’t know how it will look when it does end. Welcome to the final phases of the Technology or Information Revolution. Make it work to your advantage. Good luck.
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