Navigating Through Tough Market Conditions
Saab Grintek Defence has seen incredibly impressive growth over the last few years, all while operating in a tough market that is global in scale and heavily regulated. CEO Trevor Raman explains how the company navigates this complex environment.
Trevor Raman started as CEO of Saab Grintek Defence (SGD) in March 2016. When he took over, SGD was already looking strong, having solidified its position through some key acquisitions over the last few years.
But that does not mean that Raman's job is easy. SGD operates across some very competitive industries where price is not only crucial, but constant innovation is also a necessity. Then there's the issue of regulation. When you're dealing with defence, civil security and telecommunications, it goes without saying that you'll be dealing with some strict rules and parameters.
How do you handle all of these challenges successfully? Entrepreneur spoke to him about his approach to leading such a large and complex operation.
How do you stay competitive when you play on a global stage and deal with very tough competition?
You must invest in research and development — it's an absolute non-negotiable. We spend about 10% of our income on R&D and 15% on product development. This is obviously much easier to do when things are going well, but we still view it as a necessity when markets are down.
It's often tempting to trim back those budgets during lean times, but that's a mistake. Sure, you can save some money in the short-term, but you can also irreparably damage your organisation's ability to compete.
We live in a world of constant innovation, and if you allow yourself to fall behind, you might never catch up again.
What are some of SGD's biggest barriers to growth?
Well, R&D investment can reduce bottom-line growth in the short-term, but I believe that it leads to more sustainable long-term growth. That said, you need working capital if you're going to grow successfully. If your expansion plans are very aggressive and you don't have the capital to back them up, you can run into trouble.
Regulations are another barrier, though these are largely just a reality of the industries we operate in. Also, we have the added obstacle of having to abide by both South African regulations and those of Saab's home country, Sweden.
Our biggest barrier, however, is a lack of skilled workers. SGD requires very specific high-end skills, and these skills are quite scarce. It's a global problem, but it's a severe issue in South Africa. We struggle to find people with the necessary skills and experience.
We've tackled the problem by creating close relationships with centres of excellence around the country, like universities and other tertiary institutions. As a large industry player, we view it as our responsibility to help develop these skills, so we're creating programmes in niche fields like avionics with the help of these partners.
We also prioritise in-house training. Even if you employ great people with excellent skills, it's important to prioritise training. You always want to strive for improvement, both on the individual and organisational level.
Large companies often struggle to remain proactive and agile, which can result in an unnecessary loss of opportunities. How do you stay lean and competitive?
You can't be too careful or risk-averse, and this extends to the whole organisation. Employees should have the power and courage to make decisions. In other words, the authority to take risks should be delegated to people in the company.
If every decision has to pass through too many layers within the organisation, you end up missing out on opportunities, so you have to allow employees and divisions to take risks. That doesn't mean that the company should be reckless or have too big an appetite for risk.
The decision-making process should be well documented and carefully discussed by the key people involved, but at the end of the day, employees should be empowered to make a decision before a chance is lost. If it all becomes overly bureaucratic, sales and productivity will suffer.
The key is just to make sure everyone stays accountable, while also maintaining a sense of urgency. Measuring performance is important — things like sales and internal deliveries.
Keeping the above in mind, how do you implement systems and processes that actually make an organisation more productive and successful?
As a company grows, systems and processes become essential, since they provide some sort of commonality. You need your entire operation to run on the same IT and financial systems, for instance.
However, systems and processes should empower, they shouldn't make it harder to do business. You need to do your research and make sure that anything new you implement is necessary and beneficial to the operation. Once you're sure it's worth investing in, you need to clearly communicate the reasoning behind the change to all the people in your company.
You need buy-in from your people, and you can only get that if you explain why a change is needed. In my experience, you also don't want the subject-matter experts to be the champions of a system or process change.
You want some of the users — the people who will be impacted daily — to be the champions. They should see that their work has actually become easier, and that should motivate them to champion the change.
If you find it hard to get buy-in across the organisation, you should investigate the reasons behind this. Why are people being resistant? Is the change really making a positive impact on the company?
It should also be mentioned that implementing great systems and processes is never cheap. It requires money. We have an IT system that allows our employees to easily work across the globe. They can work remotely, and they can also be up and running in seconds when they visit a foreign office.
Putting this sort of system in place across an international organisation is expensive, but you need to weigh that against the boost in productivity. Solid systems and processes improve the speed and agility of an organisation, which ultimately translates into less missed opportunities.
Even successful companies are faced with constant challenges. What is your approach when it comes to the challenges SGD encounters?
When it comes to challenges, we try to reframe them and instead view them as opportunities. This is something that we try to instil in people across the organisation, since we think it can have a profound impact on the success of the company.
The easiest way to explain our approach is with the help of a real-world example. One of our partners recently requested that we reduce our lead time to market from 12 months to eight months. This obviously seems like a massive challenge at first, but once you consider the potential consequences of it, your view starts to shift.
What would be the impact on our ability to compete and turn a profit if we succeeded in shortening our lead time so significantly? We would spend less time on production, we would be more agile and our margins would be bigger.
Suddenly, you're viewing it not as a challenge, but as an opportunity that should be grabbed. And once you have that perspective, you generally start coming up with solutions that you probably wouldn't have found if you were only looking at the situation purely as a challenge.