After 25 years of working with organizations, The McLean Group’s experience spans nearly every type of performance improvement project, from dramatically increasing pre-sale business valuation by 9 figures to recovering an additional 30% manufacturing capacity in under 60 days to the fundamental redesign of business models.
Our unconventional process is all about liberating latent capacity. We draw on a number of disciplines to identify what we call “levers”—the key factors that limit throughput and control potential for dramatic change in capacity, profitability, and value.
This focus on throughput has watershed effects. It may seem counterintuitive, but speeding up throughput not only increases revenue; it also improves quality and decreases cost by removing needless opportunities for waste and error.
Below are several notable examples of the improvements we’re able to make when we remove limiting levers from the equation and redesign business models.
Duration: 60 Days
Challenges: Multiple facilities facing imbalance between capacity and demand
When we started working with the company, they had plants open in the Midwest and the West. The Midwest flagship facility was operating at what they believed was maximum capacity, while the plant out west had recently lost a few large customers and was operating at a large deficit each month.
The company planned to purchase a piece of custom equipment costing $2-3 million and install it in their flagship plant to add capacity, but the machinery wouldn’t be ready for production for 11 months.
Results: Within 60 days, we were able to increase capacity at the flagship plant by 30%.
By creating so much additional capacity at that location, we enabled the company to close the western facility. This prevented the loss of about $2 million(the projected loss during the 11 months the plant would have been waiting on the machinery). The closure of the plant also substantially reduced operational and staffing costs.
The company elected to keep the machinery on order for future use, but they could also have chosen to cancel the order and save an additional $2-3 million.
Durable Goods Manufacturer
Duration: 1 year
Challenges: Operating capacity and business valuation
The company was struggling to complete its major orders, and as a result, suffered major penalties that were cutting deeply into their profit margin. On top of this, they had other large orders pending from current customers that would push them far outside of their operating capacity and undoubtedly lead to more penalties.
A major international consulting firm had already tried and failed to make a positive change, and the company’s leadership needed support immediately to overcome the late penalties and liberate capacity to accept new orders.
On top of this, the owners were planning to sell the company in the next few years and production issues were impacting the business valuation.
50% revenue increase
40% increase in monthly throughput
240% profitability increase
$100 million increase in business valuation
How were such dramatic increases possible? As with all our clients, we followed our unique multi-disciplinary improvement process, spending time on the factory floor and finding levers that would liberate capacity within the organization.
We were able to generate these results without the use of additional capital, and the company saw a profitability increase very quickly. In fact, the owners chose to sell right away because of the dramatic increase in value, and the final sale price was $100 million higher than the valuation before we began working with them.
Global Chemical Company
Duration: 2 years
Challenges: A 7-year period of stagnant growth and the commoditization of the core product
One of our most interesting and successful projects involved a multi-billion-dollar specialty chemical company trying to extricate itself from a 7-year stretch of stagnant growth. The value of its key product was threatened by a growing commodity market and the leadership needed an outside perspective to create substantive change.
Their request was expansive and exciting: they asked us to re-imagine their entire business model in a way that would not only work globally, but also promise growth for the next 10-12 years. The only boundary conditions were that we retain their code of conduct as it stood, and that we build the new model around the chemical element that was their core competency.
Results: Extending far beyond process improvement, this project included significant hours spent modeling scenarios, working with subject matter experts, and forecasting market changes, not to mention working with teams around the globe to ensure that the new business model would be culturally appropriate in a variety of locations.
After extensive research and business model redesign, we presented our plan to the CEO. We advised that the company create a new brand with a different pricing structure and innovative delivery channels.
For a global specialty chemical company, this was a radical change that demanded a change in thinking. After the company shifted a significant portion of their business to this new sales and pricing model under a rejuvenated leadership team, the company saw the results they were hoping for: revenue doubled and their operating margin tripled over the next few years.