Supply shortages, inflation and geopolitical tensions echo an era thought long past.
Over the past year or so, the world appears to be an episode of Back to the Future, with events eerily reminiscent of when I commenced my career in the 1970s. Some call the “good old days,” yet regardless of whether they were – and there’s some debate to that – they certainly appear to be back!
Then, as now, there were shortages of various products and materials. Yes, a shortage of toilet paper is not quite in the same league as a shortage of copper, but it did have similar collateral consequences for some industries. Ditto the price of gold and silver, which were skyrocketing, while global shenanigans wreaked havoc on oil supply, leading to long lines and designated “fill-up” days. And all the above contributed to runaway inflation that topped 12% for several years. Given that, I don’t think of that era as necessarily the good old days. They did offer excellent experiences to learn from, however.
Learning is a relative and ongoing activity, of course. An experience from 50 years ago may not have relevance today. Many assume that events of years ago will not reoccur. Which brings me to thinking about growth.
Growth is measured many ways. Take us humans. Our height, weight and knowledge can be good measurements of our wellness and growth. Yet weight gain might not be an indicator of good health, and may lead to reconsidering your dietary approach.
In business, growth is measured differently. Typically, businesses are measured on a combination of sales growth, profit growth and balance sheet growth. In addition, growth of market share, product offerings and employee size are viewed equally as indicators of growth.
For many of the past 50 years, showing growth has been fairly easy. When the resource supply is stable, global inflation relatively low and the geopolitical environment calm, a steady 5% growth rate is close to ensuring long-term success. In the current environment, however, material availability is tight and volatile; inflation – especially for precious metals, rare earth minerals and other industry necessities – is uncomfortably high and expected to continue rising; and with wars raging in several areas, the geopolitical environment is anything but stable.
When I think back to when I started my career, I realize that the more things change, the more they stay the same. Back then, companies increased raw-stock inventories to ensure they had what they needed, especially for items with limited supply and long lead times. While just-in-time has become the mantra for most manufacturing companies, these times may require revisiting old ways of operating.
Measuring growth, especially sales and profit growth, may also need to be rethought. If inflation reaches, say, 5%, then sales and profits need to rise closer to 10% to show sustainable growth. As a reference point, in 1979 Wall Street drubbed the publicly traded company at which I worked for showing only 16% sales growth and 14% profit growth when inflation was 12.5%! Pivoting to discussing growth based on unit sales may not be an ideal way to go. It is great to say “volume is up 20%,” but only if sales are up by at least that number.
Reflecting back, I can attest that when a series of extraordinary events is taking place, it does make for excellent learning experiences. A few takeaways that resonate with me in today’s environment as they did back in the day include flexibility, a willingness to experiment cautiously, and sticking to the basics – the fundamentals – as they always seem to work best in turbulent times.
Flexibility is essential in turbulent, changing times, as assumptions may quickly become moot. Current-day tariffs are a good example of a dynamic that is constantly changing, and as such, being light on your feet and flexible is the best way to work through it.
That leads to cautious experimentation. Try new approaches, but be aware that changes beyond your control may require further, different experiments. When an approach appears to work is the time to become less cautious.
And finally, the basics: a strong balance sheet, treating others with respect, seeking input from all – those are just a few of the basics that are most valuable in turbulent times. None of these is groundbreaking or revolutionary, but today they are as appropriate as they were in the eerily similar 1970s and early ’80s.
Peter Bigelow has more than 30 years’ experience as a PCB executive, most recently as president of FTG Circuits Haverhill; This email address is being protected from spambots. You need JavaScript enabled to view it.. He is vice chair of the PCEA PCB Management Symposium, “Strategic Leadership in the Age of AI, New Technology Adoption, and Talent Scarcity,” taking place April 28 at PCB East.
