THE EXPERTS' ADVICE: JIMMY DUIGNAN displays the typical characteristics of an entrepreneur. He is innovative, creative, a calculated risk taker and the creator of opportunities. He believes in an integrated operation for his customers. Duignan needs to conduct a cost benefit analysis of all aspects of his business to examine which aspects of the business are profitable, which are not, and also what area has the greatest future.
Duignan needs to conduct market research on his customers to examine what their needs will be in the future, which should help to inform the strategy of the business.
The contribution per employee to turnover is quite low, which indicates that the business is overstaffed, so Duignan needs to conduct a review of the functional operations of his business. I would recommend that he analyse the functions and responsibilities of the human side of the business and, where necessary, cut back. This would result in much needed savings.
It is understandable that Duignan is reluctant to lose control by outsourcing areas of the business. He could consider doing this on a short-term contract basis. This means that when business improves, he can re-examine the situation and consider incorporating it into his business model. If this is not an option for the transport aspect of the business, he could consider buying second-hand vehicles or finding a transport company that is closing and offering to take the trucks off their hands.
Duignan is faced with a situation every businessman comes up against: realising that the business has grown too big to be run and operated by one individual.
He needs to bring in help, perhaps in the form of an experienced professional management team who can take on the day-to-day running of the business and leave Duignan to formulate long-term plans and consider other markets and opportunities.
This is a good time to consider whether there is a family member he can take on to relinquish that control to now or later. Duignan needs to manage his cashflow. Remember cash is still king for any business – especially in today’s climate.
One way of doing this is to subcontract out the finance function incorporating debt collection within this role.
The businessman also needs to also consider his own state of mind and health. If he hasn't done so already, he needs to ensure that he is covered by a life insurance policy so as to protect the business if he is not able to continue in the short or long term .
– Naomi Birdthistle
JIMMY DUIGNAN IS right to rely on his native business acumen. He knows his business best. Any approach to creating a strategy for the future needs to be built firmly around his knowledge of what his customers value, what resources and capabilities he has or can reasonably develop to support value creation for customers and, above all, how he can capture economic profit from this business.
Where he has done best in the past is very much in line with strategy theory. He has focused on creating value for customers by agglomerating their needs, thus creating sufficient scale to manage the costs of transport and logistics at a price and quality mix superior to that which individual customers alone could create.
He has done less well where he has not achieved scale, or where the job of work is costly and peripheral to the valuecreating process of his clients.
Duignan needs to consider what his core value propositions for customers are. How does his firm create value that customers cannot create as efficiently themselves and for which they are willing to pay?
What are the jobs of work that are done inside his own firm that are not critical to embracing his own customer, or that he cannot do efficiently?
Would losing the trucking business disconnect him from the customer, leaving warehousing an isolated business with limited ability to sense and respond to changing customer needs? If so might he consider partly outsourcing the trucking business? He could retain some trucks so that he keeps a relationship with customers, can respond to sudden changes in needs that the outsourcing contract did not consider, and also as a hedge against an outsourcer not delivering his promises to customers.
The same goes for all his other service supports. How do these create value for his customers or ensure that he can do the job of work more efficiently and effectively than either his customers or rivals?
I would be reluctant to outsource trucking completely. I suspect this is what connects Duignan to his customers and enables him to explore the evolving needs of his customers, matching what they want with what he can deliver given the resources and capabilities at his disposal.
Accounting enables him to quickly establish which ventures are generating economic profit. An accounting outsourcing contract needs to give him access to rapid analysis of business unit profitability as and when needed.
Duignan’s natural business acumen has brought him far. What he needs now is some structured support, say from his local university strategy department, to look into his current business model and consider what needs to be changed to respond to the recent successes and setbacks in his business.
– Peter McNamara
THIS CASE STUDY clearly illustrates a company that was keen to embrace change in line with its core competencies allowing the firm to grow beyond haulage to providing distribution services.
It would appear that the decisions taken by the owner, although successful, were driven by gut feeling rather than a strategic vision. The concern is that this gift for insight may not last.
The company clearly has numerous distribution offerings, so this may be where the issue lies. It may be time for Duigan to re-evaluate what should or should not be offered in the future in light of changing business conditions and customer needs.
There is evidence that the company is progressive but Duigan, when faced with significant change, is resistant.
In light of the information provided, the company has a number of issues that need to be reviewed urgently: over extension of offerings; over reliance on existing customers; difficult industry conditions changing the playing field; high staffing levels and costs; poor cashflow management; high costs and reducing margins with a need for external borrowing to fund advancements in services offered and improvement of assets in business functions that are just about breaking even.
Making decisions based on gut feeling or tradition is not logical. A strategic review is necessary. It should be undertaken with a view to evaluating such things as staff numbers, costs, productivity, in-house services, revenue generation, borrowings, customers and competitors.
This would allow an informed decision to be made as to whether, for example, some in-house departments should be out-sourced or whether the haulage business should be making use of owner-drivers, or whether the sporadic nature of JIT renders it no longer feasible.
A brief analysis of the company clearly highlights that there are numerous weaknesses and threats it needs to consider. Such a simple management tool would allow the company to evaluate how best to build on its strengths and seize opportunities within the market while ensuring that weaknesses are reduced or eliminated, and threats are acknowledged and embraced with a view to minimising their effects.
– Laura Bradley