The Times are a Changing in Business

The times are changing and I put my money on the fact that they are are changing faster than most people realise.

For example, if I was a young engineer with my eye on the motor vehicle industry, I am not sure I’d be putting my money on one of those mature old time vehicle manufacturers that President Obama runs. I wouldn’t be looking to work for a Euro car company about to be pulled out of a former Eastern bloc country to die quietly in the backyard of its mother country.  No, I reckon I’d be stepping as far away away from the old dinosaurs as possible – maybe develop some green technology, or perhaps some new bicycle design- cheap and fast – which would go well in Asia.  It doesn’t have to be a bicycle – just something that moves people quickly and cheaply to their destination of choice.

 

Anyway – so the point being that I can’t see how a lot of these old industrial revolution companies are going to have much of a future.  While their all talk and enthusiasm about re-strategising, re-structuring, re-vitalising, re-generating; its pretty uncommon for this to actually happen ever, and its my money its not going to happen this time.  The simple reason is that they are inflexible monoliths.  The whole point of  corporatising is to  make the company robust – deepen its foundations and arc its power  to influence and control markets and crush any on-coming competitors.  But God help the mature monolithic company if there is structural change – re-invention just isn’t one of its talents.  Like all good dinosaurs, it can stamp the crap out of a slow moving predator (no wonder its still so hard to buy cars which run on alternative fuel), but by gosh if its fleet of foot there’s no chance.  

To my knowledge there have been very few mature industries which have been able to recast the die – shift the paradigm, and actually redefine or even start up a new product or service market.  Apart from the fact that they all their eggs in their current product basket (that it, massive capital investment, immobile workforces etc..) they don’t attract the sort of people who are going to come up with that great new idea which is going to catch on and change the way we live.  The sort of people who work for big mature industrials want to play it safe – their low on risk taking, for whatever reason. They’re tolerant of the bureaucracy and politics which is the backbone of a mature monolith, but which makes it so unable to turn corners and change gears quick enough to avoid the bump in the road of consumption preferences.  OK?  So their just not entrepreneurial.

 

So who am I really talking about?  Well there are quite a few mature monoliths tramping around the western economies.  Obviously the car companies – but they’re easy (saddest in the US where they just don’t get it – like no one there has any money to buy 8 cylinders and no one anywhere else can possibly understand why they would buy 8 cylinders. ).  of course its not just cars – but really anyone producing anything to do with oil production or consumption – it’s about to become oh so 20th century…).  How about newspapers,  daily’s  in particular – never saw the internet come up and bite their backside – it’s over for them – also like free to air television (the idea that you can dictate when I am going to watch my show is so 20th century – and if you one of the product’s still paying to advertise in that industry – what can I say?).  

 

Oh – and I’d put my money on Asia being the new economic power region.  I wouldn’t put my money on the $US or the Euro (no ones put it on the pound for about 30 years a anyway).  I would put my money on India as a place for innovation and teamwork and with China for the cheapest production for many years to come.  Oh and blogs – I think they might have been twittereed.  

In fact if you’re in the West – try and think of something Indians are going to want that you’re better at than they are …..ummmm.,

Can Governments Spend Their Way Out of the Economic Crisis

Of course, what to do about the current economic situation, is perplexing many Governments. It a bit like the fish after its been hooked, thrashing about as it’s reeled in to a certain death…But maybe if it can just twist and squirm it will slip off the hook to live another day…

In most countries, Governments have a few big macro bulldozers to push around such as flood money into the market and lower interest rates (which might take some subtle conniving with so called independent central bank – but whose taking orders from who anyway).  The problem wit the bulldozer strategies is you don’t have much control.  Lower interest rates are OK if it turns into lower credit and stimulates a bit of business activity.  But when there’s such an imbalance between haves and have’s not’s, its hard to point it in th right direction.  (I doubt anyone’s got the courage to set up business in Detroit at the moment.)

Then there are micro economic activities which generally no one wants to talk about when growth is strong but everyone justifies during the hard times – industry protection and subsidy policies which keep farm and motor vehicle companies going in most modern economies.  (The exception of course is in the US where the cars are clearly made to cross-subsidise the local oil industry – why else?).

But the popular one is infra-structure development because a government has some control over how the money is spent.  It sounds good.  Spend it on education roads and highways, health and the like.  Sure if a government can operate efficiently enough to find and approve expenditure strategies it employs lots of people.  This is the difference between just giving a tax cut because people might save it rather than buy something.  Even if they buy something it will probably be from  Asia, so won’t appeal to the western markets.  At least if you build a road, you employee locals even if they save some of their pay, after they’ve paid the rent or mortgage and bought the food.

I’m not sure why government spending plans should be any more successful than private sector.  If they ever get it off the ground then I hope its worthwhile – its my (or my kids) taxes they’ll be spending.  Worst case is it  just means a lot of employment for do nothing public servants but that’s definitely not the intention.  There aren’t to many desk jobs for bricklayers down at Council…

Here’s hoping.

Ooops …. They’ve made a mistake (Okay – NOT)

The BBC Business Daily Report of 5 January 2009 suggests its not okay to make the mistakes in business.  Their on the mark. The old chestnut ‘ if your going to try new things in business be prepared to make mistakes and learn’ has got to be one of the biggest of the many furphies to come out of popular management theory in the last 20 years.   Over the past year we have seen what happens if you make big enough mistakes….  it’s all over (for some at least).   Furthermore, make a big mistake, or enough little mistakes and you won’t get a chance to see if you’ve learnt anything.

The idea that selling lots of sub-prime loans to lots of people who couldn’t afford them constitutes lots of mistakes and not much learning, is pretty tempting.  Lots of people in lots of businesses down the supply chain, being careless, with insufficient knowledge, evaluating things wrongly – making mistakes.

If making mistakes isn’t actually a good thing then what is the solution?  Maybe it’s about thinking things out before you make the decision.  Disciplined planning and analysis, careful thinking and review and questioning  – all the hard things.  Its also about having a culture which supports honest and free speech – which not only encourages (and enforces) disciplined analysis but reinforces the exercise and debate of considered opinions.   The latter in my experience can be difficult  to achieve – as challenging as good analysis in the first place.

Does this mean you don’t take risks or fail on occasions?   Many decisions or plans have a risk (be it a known risk, a known unknown risk or an unknown unknown etc.) and even the most detailed decisions/plans have an element of judgement initially and along the way.  You don’t always fail because you made a mistake.  You can fail for any number of reasons beyond your control, but you need to hunt them down and pull the plug straight away.   A mistake occurs if you don’t look for problems and find them and then act on  them.

I know – sometimes there isn’t the time or money to do the analysis required.  This can lead to all sots of trouble – be it on your own head.   Its your call but maybe its better not to go into the jungle in bare feet.

The idea that we don’t learn from mistakes has interesting consequences for senior management and Boards.  If the solution to a mistake is to implement stronger regulation then why should those responsible for the mistake continue to hold responsibility in the aftermath?  Why should we think they have learnt the skills necessary not to make the same mistakes again, let alone other is a new environment?

“I Can’t Trust Nobody…(in business)”

If there are any lessons from 2008, it’s about trust – or who not to trust. It’s a bit of an issue really, because trust is a pretty important part of doing business. In fact its the foundation of an efficient economy. If your a business, you need to trust your staff and your suppliers, your banker (dare I say it) and your insurer. If your a consumer, you need to trust the producer and the product description.

The sub-prime events have revealed a lot about trust – or at least what happens if its misplaced.  If you trust people who don’t deserve to be trusted then the whole system of business can break down.  We trusted financiers we thought were smarter  and they weren’t.  We trusted mortgage salesman who sold unnafordable loans , we trusted banks offering credit that couldn’t be repayed and on so on.

The world is too big and complex not to trust others – we need too believe that they know what they are doing and will give us good guidance and advice.  Without trust it all breaks down – and it did.

Many countries in the world who had prior experience of misplaced trust and have the benefit of regulations to underpin financial integrity are responding better to the sub prime mess.    But unless we want an army of regulatory bureacrats overseeing all our decisions, we must all start taking reesponsibility – learning more about what we can afford, learning to ask the hard questions of those in positions of responsibility.

To trust others we need to be confident in their ability to understand and act for the benefit of everyone.  Those who are take a role which effects the lives of others need to ask themsleves ‘do I have the capacity and knowledge to do this job competently and with integrity?’.  Those that allow them to take the job need to ask them the same question and piss them off quickly if they can’t.

The fact that so many in positions of responsibility performed so poorly gives no excuse to place any individual on a pedestal beyond accountability.  No manager, CEO or Executive is that much of a superstar that they shouldn’t be made to stand and account for their actions.  There are no Gods of business – just ordinary men and women. When they perform well we must rteward them and when they stuff up, we’d better find them before they bring us down.