Changing the business strategy of FTSE companies is often necessary, but by no means easy.
While all businesses have their own challenges, there are some that focus the mind more than others. The day before I joined Low & Bonar as chief executive in 2014, the company issued a profit warning. If the business needed a wake-up call, this was it.
Since then, working closely with the board and senior leaders we have put in place a new strategy, which has seen us make good progress towards each business unit achieving 10 per cent return on sales and a 12 per cent return on capital invested. So how did we get from an unfocused organisation in 2014, to a growth company today?
On joining the company, I was briefed by the board to deliver growth and improve performance, focusing on what we do best: taking plastics, converting them into yarns, fibres, and coated fabrics from which we produce woven and non-woven materials for many applications, from green roofs to car carpets to ground stabilisation. From day one, however, it was clear that strategy alone would not get us to where we wanted to be. In fact, where so often strategy is the very first step in changing a company’s course, it was self-evident that the company structure was holding us back.
When I took over, we had divisions that grouped together all the activities in a given region or geography, making it difficult to assess performance. By re-aligning the business into one company, with a global portfolio of business units focusing on specific markets and applications, I could immediately see what was profitable – and what required further improvement.
I also found a “rear-view mirror” mentality throughout the business. This was never more obvious than in one of my first business reviews. Bogged down with huge month-end reports, these meetings didn’t add value to me because they highlighted irrelevant past data, with little on future targets – and, crucially, how we would get there.
We quickly ditched these reports in favour of future-facing plans, containing detailed portfolio plans, what I refer to as the “windscreen” view. As a more proactive approach to running the business, this allowed us to identify and map out critical strategic milestones: alongside sales, profit margins and capacity expansion plans.
Once the business was more transparent and the management team was fired up to be more forward-thinking, we devised the new strategy. With over 2,000 people across 20 countries selling into numerous markets, it was important to keep it simple.
We identified four key strategic pillars which continue to sit at the heart of what we do: commercial execution and customer focus, operational excellence, geographic expansion, and ensuring our technology differentiates us from competitors. Each pillar delivers value to customers and shareholders. This is done through initiatives like moving into higher-margin businesses, and investing in growing markets, as with our new China factory.
This has transformed our approach to manufacturing. Where manufacturers typically just make and sell products, we focus on partnering with customers to identify their unmet needs. This marks a real shift towards innovation, not unlike the startup ethos.
It takes vision and resolve to come into a business and persuade established managers and employees that their current approach needs overhauling. Fortune favours the brave, however, so the willingness of my colleagues to embrace the bold changes means we are now on a strong footing. The next three years will show if the strategy has the longevity required, but the indicators to date provide positive impetus for the years ahead.
Brett Simpson is chief executive at Low & Bonar.