The New Faster Business World

The New Faster Business World

October 7th, 2013 // 5:09 pm @

081209_trainartOne of the greatest challenges to managers of businesses is the sheer speed of change. It can be a huge opportunity to those who understand it and embrace it, or it can destroy those who do not.

To demonstrate the swiftness of change, lets look at some of the winners and losers of recent years, and most importantly the speed of change in their fortunes.

Firstly lets look at some of the winners, those relatively new companies that now have significant market value. Google opened it’s doors in 1998, and is now worth $US 290billion, Steve Jobs started Apple in 1976, and it is now worth $US400billion, Facebook started 2004, and is now worth over $US100 billion.

This is a new phenomenon, traditionally companies have taken decades to reach these sorts of dizzying valuations, but now it can and is being done in years.

What is even more significant are those organizations that have failed, for if the speed of growth can be excitingly fast the speed of loss can be terrifyingly quick.

Nokia was valued at over $US40 billion just six years ago, now it has lost 95% of that value. Myspace went from launch in 2003, to a value of $US580 in 2005, and had lost 95% of that by 2011. Blackberry (Research in Motion) was worth $US77 billion in just 48 months ago, and now under $US5, that involves losing around $2,000,000 an hour in valuation, consistently for four years!

Even the great Microsoft at its peak in 2000 was worth $US642 billion and has now lost two thirds of that value.

Changes in the fortunes and the values of businesses are shifting at never seen before speed. It is however important to see this speeding up of business, not as an abortion of the past few decades but as part of a trend that has been accelerating since the early nineteenth century.

Had we been able to visit the UK in 1066, and again in 1700, we would have seen change, but little significantly would have changed in social structure, manufacturing or the general way of life.

From around 1800 that all changed, we have in the past two hundred years seen massively more change than in the previous thousand years. These changes have radically changed social structure, ways of governing ourselves, wealth, and every other part of our world.

The driving force behind this change is technology, from the early water powered machines, through canal transport, to steam power, railways, flight, electronics and computing.

The driver is not just what is technologically possible, it is that these technologies are now available to very significant parts of the worlds population. For example one can walk the streets of any African city and a very significant part of the population will have mobile phones. It is in bringing the benefits of technology to the mass of our population, that will be marked as one of the greatest success’s of the past 200 years.

These changes have been very significant, but it is worth noting that the speed of change is actually continuing to accelerate. Technology continues to leap ahead, held back only by our ability to assimilate to the change it brings. We have seen more change in the past decade than we did in the two decades before, and the next decade will bring even faster change.

This changing world brings to managers of businesses real opportunity and dangers. Those managers who can understand and use this will succeed, those who do not will perish.

There are a number of key impacts worth considering in this fast changing world:

  • How businesses are valued has not kept up with this changed business cycle. It has historically been possible to have a business, which is worth considerable amounts based on its high market share, and the expected long-term profits that will come from that. What valuations have failed to adequately factor in is the possibility the business’s market share may fall more dramatically that traditionally was possible. Facebook’s $US100 billion valuation is largely based on the expected long term profits it can make. I doubt many shareholders are factoring in the possibility it will go the way of Myspace and be overtaken by some other networking system, rendering Facebook near worthless.  I have managed two businesses as CEO deliberately building their market position at the expense of short-term profits. This making them attractive acquisition targets, then selling them when this was achieved, and making my shareholders very considerable profit.
  • Change management has always been a key to a successful business, but in these fast-changing times it is now critical. However there is a reality of the human mind, which makes such change difficult. We do not like making tough decisions, and when everything looks like it is going well, we positively shun the idea of radical change. This linked to a limited ability to see future threats to the business and an even lower willingness to accept them, makes change in successful companies managerially very difficult. Had one sat in the board room of Blackberry just 4 years ago, and proposed the radical changes required, and warned of a 95% drop in business value that would ensue if these changes were not made, I suspect you would have been escorted from the board room to a waiting white van, and thence on to hospital to deal with what would have been seen as a mental breakdown.
  • Speed itself has become in many business’s a key business driver in itself. Getting that new technology to market even weeks ahead of your competitor can be the difference between success and failure. Apple used to make its products, but outsourced that production and one of the key reasons was to shorten the time to market. Several companies are now setting up manufacturing again in the US of technology products, accepting it will be more costly, but the speed to market could be critically faster.
  • The quality and leadership of management has always been important, but historically if you had a weakness in management in some area you had time to redress it before it had massive impact. Traditionally many companies have even weathered a poor CEO for several years without their value collapsing. The time for such complacency is now very limited.

So we live in an ever-faster business world with all the opportunities and risks that come with that. That said the true leaders are still those who can understand this new speed of change, yet not be caught up in frenetic thinking and decision-making.

It is as critical as it always has been to think calmly, make decisions after reflection, set the correct strategy, understand the business drivers, allocate resources, communicate clearly, and provide real leadership.

 

 

 

 

 

 


Category : Blog &The Future

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