The Importance of Zooming Out

Zoom Lens Thinking

Last week’s essay, The Diesel Dilemma [1] , took a zoomed out view of Volkswagen’s situation with diesel engines. That zoomed out view provides context that may affect any manufacturing firm that directly or indirectly supplies the automotive industry, or that may wish to in the future. This essay takes a zoomed out view of three current news items that, like the diesel situation, may affect your business, sooner or later.

#1 – Wal-Mart’s Earnings Forecast

Doug McMillan, Wal-Mart’s CEO, advised investors that earnings are forecast to decline by 6% – 12% next year. Apparently, sales aren’t growing fast enough to offset the billions of dollars that Wal-Mart will spend for employee wage increases (Wal-Mart employs about 1.3 million people). [2]

There are three zoomed out points here:

First, there is considerable political and economic pressure for employers to raise wages, never mind productivity, margins or sales volumes. Large employers like Wal-Mart will feel those pressures most acutely – but others will follow.

Second, the wages distinction between part time employees seeking incremental income and full time employees seeking a livelihood – that is, primary support for themselves and their families – is decreasing. The American economy is producing far too few new traditional livelihood jobs, as manufacturers are aware.

Third, this huge reduction in forecasted earnings calls Wal-Mart’s business model into question. This emphasizes that even very large, wildly successful business models may become obsolete in the rapidly changing 21st century economy.

#2 – Tesla’s Autopilot

Tesla announced that software version 7 had been downloaded to Model S automobiles. The new software version includes autopilot features that are a significant step toward self-driving vehicles. [3]

Here are the zoomed out take-aways from this:

First, the autopilot features offer a channel toward much safer driving. The software takes input from multiple optical, radar and sonar sensors which are constantly alert. The car’s computers can react and take evasive actions much more quickly than humans can. The combination is not unlike that in military aircraft. In 2013, there were 35,500 people killed in automobile accidents. Proactively safer cars promise to reduce that number considerably.

Second, the software download was conducted remotely, like Windows updates to your computer. Existing automobiles were significantly updated with new features, without visits to a shop.

Third, this instance emphasizes the trend toward increasing importance of electronics, computers, interconnection and software in equipment. This trend is increasingly apparent in industrial equipment. In industrial equipment, expect this thinking to lead to safer operation, lower product variation, improved uptime and less waste. Don’t disregard the Internet of Things.

#3 – Gasoline Price Prosperity

There are numerous reports in the news that speculate on the present and future price of crude oil. As everyone is aware, about a year ago the price of crude oil began to drop sharply. By the beginning of last year, the global price of crude had dropped by about half. As a consequence, a typical American who drives about a thousand miles a month at, say, 20 miles per gallon saved around $50 per month due to decreased fuel prices. Add to that the similar fuel cost savings in other forms of shipping and transportation and you have a bigger real cash stimulus to the economy than a major tax cut.

Wait – there is more. When the global price of crude oil drops by half, the number of U.S dollars spent on imported crude drops by half. Those shiploads of greenbacks stay in the U.S. economy instead of being shipped abroad. If you were wondering why the U.S. economy has improved over the last year or so, follow the money. The spending money that motorists discovered in their pockets, the shipping cost savings that everybody has seen and the lubricating effect of boatloads of additional greenbacks circulating throughout the American economy.


The real point to this post is the 21st century necessity for continuously zooming out. There is so much global change that can affect your business – for better or worse –that you have to see it coming. However, smaller manufacturers have plenty to keep them busy zoomed in on the factory, their customers, their suppliers and a thousand other things. Zooming out is every bit as important, but may appear to be less urgent than matters close at hand. Do it anyhow – have a Board member do it, get your trade association to do it, hire a consulting firm to do it or whatever makes sense in your situation. If Wal-Mart’s business model can go kaput, so can yours. Quickly.

Chuck in FranceThoughtful comments and experience reports are always appreciated.

…  Chuck Harrington (Chuck@JeraSustainableDevelopment.com)

 

P.S: Contact me when your organization is serious about thriving in the globalized 21st century … CH

This blog and associated website (www.JeraSustainableDevelopment.com) are intended as a resource for smaller manufacturers in the pursuit of Sustainability. While editorial focus is on smaller manufacturers, all interested readers are welcome. New blog posts are published weekly.


[1] For more about VW and diesel engines see: http://jerasustainabledevelopment.com/2015/10/10/the-diesel-dilemma/

[2] For more on Wal-Mart’s situation see: http://www.bloomberg.com/news/articles/2015-10-15/wal-mart-ponders-closing-stores-selling-units-to-revive-profit?cmpid=yhoo.headline

[3] For more on Tesla’s software see: http://money.cnn.com/2015/10/14/news/tesla-elon-musk-autopilot/index.html