Strengthening the Industry.

When the economy turns for the worse and some foundries (along with their suppliers) start going belly up, the wailing, gnashing of teeth and wringing of hands that goes on throughout the industry is because most people view these closings as bad. Some people point to the loss of jobs and the hurt placed on the families and communities affected. Others point to the "export" of jobs overseas. Still others decry the shrinking of membership within the various industry associations.

That's only one spin on the age old cycle of what some call "boom and bust," others refer to as "expansion and shakeout," and still others, myself included, consider "creative destruction." The spin to which I subscribe holds that:

* plant closings are bad for the people who worked there, but only in the short term--most find better, more stable jobs elsewhere within a short period of time;

* exporting some jobs overseas is good for our nation's economy--what we all need are the highly skilled and/or high-tech jobs that are created at the world class organizations that remain strong and viable in North America;

* shutting down the industry's "weak sisters" is best for our industry associations--such cutting of dead wood removes bad examples from among the membership, poor foundry and management practices from the committees, and outdated thinking from the boards of directors.

What lessons do this point of view teach? Here are five:

As in all things, quality counts, not quantity. The industry has learned during the past 20 years that tonnage doesn't make a company successful, profits do. The same is true of the industry as a whole--it's not the number of plants that counts, but the financial strength, ingenuity and competitiveness of those that remain. As an industry, we should look to the winners as role models and sources of inspiration instead of focusing on what we can do to prevent the losers from succumbing to the reality that only the strong survive.

One of the CEO's primary responsibilities is to constantly lead the charge to reinvent his or her company, so it can keep pace with ever-evolving customer demands and improving competitive offerings. Continual destruction of the old and building of the new--in facilities, personnel, management practices, systems, organizations, technology, etc.--is central to maintaining competitiveness and market position and is key to creating long-term shareholder value. A fact of economic life is when companies fail to reinvent themselves, the marketplace does it for them, usually with disastrous consequences.

Reinventing companies is a complex and difficult process, one roughly akin to changing a fan belt while the motor is still running. Such undertakings require time, careful planning, accurate information and a success-prone, inclusive process. All this has nothing to do with bulging strategic planning notebooks, expensive classes at the local university or full-time market researchers. The key is a CEO who is willing and able to lead, and smart enough to get the help he or she needs to make things happen in the best possible way.

Reinventing companies also is an expensive proposition, but not necessarily as expensive as one might think. A wise man once told me that with five years and five million dollars any problem can be solved. While that may be true, what I'm focusing on is much more manageable and less time consuming than that. Prudent annual investments to keep facilities and equipment up to date are, of course, necessary. The biggest bang for the buck, however, comes when companies invest in their people. One of TDC's clients, a jobbing foundry making large iron castings, describes its plant as "older than dirt" but is the leader in its industry segment because of the significant investments it makes to train its people and arm them with the best possible management ideas and systems. The lesson to learn here is that destroying the old ideas, bad habits and inbred perspectives of a company's workforce--from the factory floor to the board room--is most important of all.

Industry associations should throw their weight behind companies, technologies, ideas and practices that represent the best the industry has to offer. Rather than catering to the needs of the lowest common denominator, our associations should provide leadership and direction that contributes to building and strengthening the industry of the future. In some cases, that may mean actively working to destroy--and I use that term in the best possible way--rather than try to protect, the industry of the past.

While industry cycles affect us all, they do so in different ways and to different extents. For some companies, this economic downturn has been a disaster and set them on the edge of bankruptcy. For others, current conditions are simply a slow period that must be weathered until the economy picks up again. What separates these two realities is, as always, the quality of management, the attitude toward change and the willingness of CEOs and management teams to reinvest and, more importantly, reinvent.