Market Volatility: A Driving Force for Corporate Strategy
Dr. Andreas Ludwig
The increasing propensity for fluctuations on sales markets is described as one of the megatrends that industry has to face. Increased volatility, complex market contexts and economic developments on international markets influence decision-making processes in business.
The Umdasch Group which has two divisions, the Doka Group and the Umdasch Shopfitting Group, is widely diversified throughout the world, meaning that it can absorb different fluctuations from market to market. As a whole, we are expanding. It will rarely if ever be the case that all markets perform well or poorly. That is the advantage of an international positioning. However, regardless of our international focus, it is clear that the global economy is fluctuating more than it has in the past.
LEAN MANAGEMENT RESULTS IN THE ABILITY TO ADAPT RAPIDLY
Market stability has changed especially since the last economic contraction. Volatility on international markets has increased. In the past, while economic activity followed a certain system that made it possible to calculate individual periods, these individual phases have now shrunk significantly. The intervals are shorter, and the volatility of global markets is increasing. This means companies have to be even more flexible and react rapidly and proactively to market conditions or, to put it briefly, they have to be able to adapt. And that is our duty as entrepreneurs.
This ability to adapt must be implemented consistently in all business segments, but above all in Research & Development and Production. Shorter development times and faster go-to-market processes are absolutely essential. Similarly, in administration, the principle of lean management has not just been the order of the day since the last crisis. A lean organization can change course rapidly, but one that is unwieldy will take longer.
TURBO-CHARGING RESEARCH AND FIRST-TO-MARKET
As entrepreneurs, we have to take a positive approach to the increase in fluctuation intensity and see it as a “driving force” and opportunity to shake up established processes and redefine them. Potential for optimization can be identified almost everywhere in an effort to react more dynamically, more rapidly and, ultimately, more flexibly to market circumstances. This also implies turbo-charging research. Innovations and the processes behind them need to be accelerated. Innovations provide the basis for top-performers and guarantee future success. As soon as innovations identify quantifiable added value, they have to be directly incorporated in products, services, organization and processes.
This is why Doka is already testing new formwork systems on building sites parallel to their development. This way we acquire valuable insights right from fieldwork to supplement the laboratory situation during the development phase thereby reducing the time to market.
We also view the changing times as a positive and exciting challenge in the Umdasch Shopfitting Group. In the future, the retail trade needs to establish closer links with the online marketplace to remain viable. And it is precisely here that we need to find the courage to convert ideas on paper to reality and to experiment. We are working with our customers on completely new technologies and products which support the new business models. Our virtual business, or vibiz for short, will develop tomorrow’s shopping experience. This includes digital price labeling, indoor navigation, and an interactive shopping wall.
In any case, the goal remains to be first-to-market and to make our pioneering achievements transparent and highly visible. As a driver of innovation, we not only keep pace with the times but we also set the benchmark, ideally for an entire sector or beyond.
LIBERALIZATION OF WORKING HOURS
In production, changes in market conditions are reflected one-to-one in the work capacity. This in turn means that fluctuations in production have to be evened out. It is important to understand that maintaining substantial inventories is not only uneconomic but offers no long-term prospects from an entrepreneurial perspective. Firstly, products that are presently in demand seldom remain in stock and, secondly, substantial inventories tie up considerable capital.
We have to adapt our production to actual long-term demand and with the greatest degree of flexibility. Political framework conditions are also needed here. To begin with, the legal basis to allow us to operate flexibly needs to be established. Measures such as short-time work when demand falls cannot be a permanent solution due only to insufficient entrepreneurial flexibility, which is attributable to the straitjacket imposed by statutory working times. Covering peaks in orders by hiring agency staff is not a sustainable strategy either. Well-trained staff with company-specific expertise is a valuable asset for any company and its culture. Long-term staff loyalty secures internal knowledge and is crucial to maintaining quality leadership.
FLEXIBILITY STARTS IN THE MIND
However, flexibility does not start with the topic of adjusting capacity but, rather, it is a mindset. Improvisation and intuition are positive. We do not always make our decisions simply on the basis of perfect data; an entrepreneurial “gut feeling” or experience is also required. Sometimes, we should simply try something out. Perhaps we will make a mistake in doing so but we can learn from mistakes. Only those who do nothing make no mistakes. However, doing nothing implies a standstill and a standstill means going backwards, not just in the long term.
SHORT-DECISION MAKING PROCESSES, SPEEDY CONSENSUS
Since our company is family owned and operated and not listed on the stock exchange, we have the basis for flexibility. Decision-making processes are fast and quick.
The heterogeneity of different stakeholders, representatives of interest groups or shareholders always makes it more difficult to reach a consensus. Different opinions and objectives are par for the course. Often valuable time is lost in implementing measures and leeway is limited. Having quick consultation processes that lead to fast decisions is a crucial competitive advantage. Being the first to tap new markets or launch new products is of enormous value. The ability to react rapidly when it comes to project business, both at the Doka Group and at the Umdasch Shopfitting Group, is a must. For example, access to large quantities of Doka formwork material thanks to our international network with 160 bases worldwide is a decisive advantage.
To conclude, flexibility creates security. To search for a “stable environment” in the future would be unrealistic and a denial of reality.