How times have changed
Here’s an opening thought for you
We are not in a recession
The press and Government describe our present economic position as recessionary, which simply points to the fact that GDP has shrunk for two consecutive quarters. Former recessions have been temporary, short term blips in our constant quest for growth, the need to grow in order to satisfy our constant desire for debt and the need to service it.
For those more enlightened business leaders however, we understand the following key points
The world economy has shrunk and “corrected” itself by a factor never seen before. We talk about the worst recession since the 1930’s but this time around, the dip in GDP is twice as deep and three times as long as the 1930 crash. So why are we not experiencing the social disruption seen at that time, huddled around burning oil barrels, hunger prevailing and people evicted from housing. Well the answer is simple, we have today, that which we didn’t have in the 1930’s, which is the support of the welfare state. It is this difference which provides for the basic human needs and prevents the social unrest that we would normally expect.
Wages as a percentage of GDP have fallen by 10% over the last ten years, and continue their downward trend, as financial services and automation reduce the need for human labour. For those economies relent upon consumer spending this is a worrying factor.
So what of the opening statement then- why is this not a recession?
Simply this, the Western economies have shrunk significantly, and at the same time the rules of financial structure have changed, that a return to the “old” is no longer possible. Gone is the easy access to capital, we now call it unmanageable debt.
Gone is the support cushion of the rising housing markets, we now refer to negative equity and the need to find significant deposits to purchase property, which in turn have lead to many falling off the property ladder altogether; this is a trend that experts believe will last a decade, and affect at least one generation of people.
Gone are the gilt edged pensions that support many of our parents generation today, instead we talk of the shortfalls in schemes that in some cases will be uncorrectable.
Turning to the global economy, we find that the Chinese economy is now not only providing the manufacturing base for the worlds markets, but are now becoming the global consumer market as well. BMW have just seen their Chinese market rise by 84% in the last 14 months, and expect this to continue in the same upwards curve for many years to come.
The Reset Economy refers to the shift of power that has happened due to this downturn and the balance of economic strength that has demonstrably moved as a result; it has been there for some years in fact, but never as visible as it is now.
The facts speak for themselves, as we celebrate our UK companies successfully exporting to the tiger economies; those that export have a future, those who don’t find themselves serving a reducing western economy, or being relegated into a subservient position in the supply chain, becoming subcontractors instead of primary suppliers with the margin and pricing pressures that accompany that shift.
I have taken the time as above not to cause my reader to feel depressed or despondent, but to cause a jolt of awareness, a call to do something as opposed to sleepwalking into future poverty and downsizing of their companies.
So I will now present the Five Factors that are considered by many leading CEO’s to be those that will establish the best recipe for western businesses success, starting now, so pay attention!!
The following factors are in no order, nor to they apply to any sector, specialist or product. They do in fact apply to every business who wishes to grow in the future, or indeed protect the current position in the markets they serve. The factors are not dependent upon the number of employees- simply put they apply to everyone reading this Blog.
Factor 1. Access Capital When it is Available
Cash is available at different times for different rates and amounts with differing conditions of security and term allowed at any one time. Those businesses whom are able to plan ahead, map out their requirements for cash and then use this information to choose when to reach out for this cash, will benefit from the best rates, terms and conditions and be better placed than those who go cap in hand to institutions when time is against them. This will give those business leaders the edge in financial management, reduce finance costs over that of their competitors and allow smooth business management to exist.
Factor 2. Act Globally
You already deal with foreign owned clients, but just may not realise it. You may also read of overseas companies either buying, investing or partnering with UK companies. If you are not one of those, what opportunities are you missing? Trading beyond geographical boundaries is needed to keep up with international clients. We are no longer constrained by geographic countries, we can move goods and services worldwide, and before you interject with the notion that this only applies to products, please understand that the IP, designs, patents and services export markets are massive and our technology, training, management theories are in demand by those emerging economies.
Understand currencies exchange mechanisms, trading laws and customs is the only homework required, and significant assistance is available, by the UK BIS for those who reach out.
Factor 3. Be Green
Your Green credentials will come under increasing scrutiny by customers, suppliers, your stakeholders, investors, general public and your own employees. Don’t write this off to a marginalised few as a means to tick a box, think about it. This is not about paper recycling, a few low wattage bulbs and an off the shelf copied policy. This extends to your supply chains, the treatment of your employees and their conditions, your operations, locations, and the list goes on- take is seriously. Have a publishable plan and strategy and be sincere or you’ll be found out!! Customers, employees, suppliers and partners alike will be increasingly attracted to those companies who are able to prove their green position
Factor 4. Embrace all available technology
Adopt adaptive and progressive approaches to technology. if you produce a product, look at the opportunity to invest in equipment that gives you productivity improvements and reduce costs. If you are service industry or retail based, then look at using web based latest technology that will enable your business to reduce costs, be flexible, faster and more customer focussed
Continued obsession with using proven IT to automate, create ubiquitous client/supplier/stakeholder relationships and look at social media as something that can be harnessed not regulated, adopted within your business relationships, not to be written off as a social deviation. The world becomes a small place once your business becomes technology savvy. One last point about technology- our business owners and leaders are often in an age bracket where we don’t have the level of knowledge to be comfortable with some of the newer technologies – don’t let that hold you back, seek out experts and listen to their interpretation of the benefits. Your job will then be as a business person to lead the result, not to understand the detail and the “how it works”
Factor 5. Hire and Retain the VERY Best People The new hires of today are your potential managers and even CEO of tomorrow, yet so many place a limit of the skills or salary they are prepared to invest in. They find a candidate who wants £5k more than the “budget” and end up hiring the number two candidate. It may turn out to be the most foolish £5k ever saved.
Great people make great companies, so find them, retain them and don’t be afraid of them. There is a saying that says we should always seek to hire the person who is better than the hirer in the area of work, so why do so many ignore this advice due to their own insecurity?
Constantly offer developmental opportunities, and they needn’t be pay rise driven, or indeed promotion. The use of “Company development projects” can be highly effective in both getting the best from the person assigned, but also to create a training ground for future work. Personal development is considered very highly as a psychological rewarded and a motivator for engagement and performance.
Now Tell Me Again
1. Access capital markets, when you can, for the best deals 2. Act globally to address international ownership and supply chains 3. Be green – people want to see your business is caring and responsible 4. WEB 6.0 – use technology to constantly lower internal costs and develop more effective customer relationships 5. Hire and retain the very best people – don’t flinch, hire them and keep them!
This is it – the new normal
We need to accept this as fact
We need to re-plan our businessesWe need to address the five factors – quickly
We mustn’t delay – or we lose ground
The new order of things is about speed, flexibility, technology people and money
All of the tools are here – now – we need to reach out and bring them into our businesses
In the “reset” of anything, there is the Stopping, the Pause and the Restart.
How long will it be before your restart your business, this time in the new style and direction demanded by the current global economic climate?
Or will you continue to travel the old road, of lowered profits, smaller margins and workforce, greater pressures and lower returns?
The choices are yours alone, the future challenge is set out above.
Change is not always easy, but to stay where you are will be more difficult in the medium term.
To leave you with quote from history,
“Progress occurs when courageous skilful Leaders seize the opportunity to change things for the better”
Harry S Trueman 1945-1953
For information about the TAM programme of Organisational Change visit http://www.tamplc.com