When a butterfly flaps its wings on one side of the earth it causes a hurricane on the other side of the world. Everything is connected...
After the murder of George Floyd, I took a Peloton bike class that was themed as an anti-racism memorial for him. The African American instructor’s pain and anger were eloquently voiced as she connected that pain and anger through the toughness of the ride. I was breathless by the end of the class and I know that was her goal; she wanted us to understand how George Floyd’s breath was stolen from him. What stayed with me after the ride was her statement that All Lives Matter can only be true if Black Lives Matter. The connection she made between the two was overwhelmingly powerful. Connections matter!
We must believe that everything is connected. The Chaos Theory example of the butterfly effect, shows how the beating wings of a butterfly on one side of the world connects to the formation of a hurricane on the other side of the world. The same holds true for corporations. Everything in an operation is connected. Land, plant, equipment, labor skills, entitlements, suppliers, logistics, stakeholders, cash and liabilities all have to be in sync to produce value. Connections matter.
A 360 degree holistic view of a corporate operation will lead to better decisions, better use of resources, better relationships with stakeholders and better relations with the public sector. How does it work? It really starts with adopting an unorthodox view of what is a corporate asset.
Enterprise value creation is underpinned by various traditional fixed assets and some unconventional assets. Some of these assets may not show up on a company’s balance sheet but they are important factors in a company’s success.
Labor and specifically labor’s skills are an incredibly important asset. A corporation increases its value today by training their employees to be world class and technologically up to date. One of the connections that benefit the company in this respect is integration with public stakeholders, including the surrounding community. A concept that should be promoted is what I have labelled Manufacturing Education Clusters (“MEC”s). This is an idea that should be at the forefront of every community, county and state economic development agency’s strategy to attract new business and expand existing business.
How does it work? Communities who look inward to see what existing assets they can take advantage of such as abandoned manufacturing facilities, closed military bases, high schools and community colleges to create programs for training the next generation of American Workers who can compete on the global stage. These communities will have a leg up on attracting new industries; one of the important goals of a MEC initiative will be to promote reshoring and expansion of home-grown industry. Additionally, local and state governments who set up financial incentives for technology training will attract and retain manufacturers to and in their communities.
Additionally, there is opportunity for industrial equipment manufacturers to work with these stakeholders to contribute to the MEC’s. It’s a built-in showcase for their products and for a potential manufacturer to be able to acquire a skilled workforce and up to date equipment for their factories. A recent survey of members of the Site Selectors Guild, indicated that site selectors working with corporations looking to expand or relocate in the next 12 months were looking outside of large urban areas. Of those selectors queried, 64% chose suburban areas, 57% chose mid-size cities, 31% chose rural areas, and just 10% chose large urban areas. There is opportunity for smaller communities to lead a resurgence of American manufacturing and warehousing.
Fixed assets support operations literally and figuratively. A holistic view of all assets will promote an optimized footprint and more efficient, sustainable and resilient enterprises. Working with local community and state connections will help companies make better location, expansion and contraction decisions.
As part of this analysis one must ask a critical question, what makes a particular location attractive to an operation? Locating in a community with access to a skilled workforce, access to state-of-the-art utilities, access to other infrastructure like roadways, suppliers, local educational resources (think, coding programs, trade schools, access to higher education and continuing education, etc.) should be the answer for senior management.
Understanding local and state stakeholder needs and wants will attract entitlements to operations and expedite permitting, zoning and other legal requirements. Additionally, anticipating these needs and wants promotes better public relations and minimizes and mitigates any negative publicity associated with the operation. The power of these connections cannot be underestimated.
This holistic understanding of the corporate ecosystem leads to value creation, resilience and sustainability for shareholders and stakeholders. Another addition to an Integrated Asset view is how suppliers and the operations’ logistics fit into the picture. As the recent pandemic highlights, off-shoring to LCC’s is not always a contributor to long term security and value. Severe disruptions to operations because of product and raw material shortages left US manufacturers vulnerable. Creating shorter inbound and outbound connections to suppliers and to the moment of demand enhances resiliency and sustainability in the face of these unforeseen challenges.
In the end, we all need to make the connection to the importance of connections. The Peloton instructor I rode with, highlighted the connections between humanity and the need to create equality in society, and so to, companies need to understand that fully integrated and connected assets create and sustain operational value and resiliency.
About the author: Edmond “Ed” Prins, AIA, is an architect and urban planner by education and a life-long corporate asset integrator who has provided financially-driven Integrated Asset solutions to over 40 of the Fortune 1000 C-Suites. Throughout his career, he has created bottom line returns of over $1.6 billion through the creation and implementation of these Integrated Asset solutions, which have produced enhanced transactions, operational improvements, sustainability, and resiliency results.
Copyright 2020 Edmond L. Prins AIA
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