Webinar: Strategy Matters in Turbulent Times: Think Big Data. Think Business Models. Reply

The Business Perspectives webinar on Strategy Matters in Turbulent Times: Think Big Data. Think Business Models took place on Thursday 13 October. If you missed the webinar or want to watch it again, it is now available to view on demand.

WATCH THE WEBINAR

The one-hour webinar focussed on business models, strategic growth, digital strategy and big data. The webinar also included video highlights from our masterclass in London on 21 September.

Our webinar panellists included Professor Thomas Lawton, Professor of Strategy and International Management at The Open University Business School (OUBS), Jerry Teahan, Head of Strategic Business Development (Network, Cloud Services) at BT Group and Dr Hilary Collins, Lecturer in Management at OUBS. The webinar was facilitated by Peter Wainwright, MBA alumnus and Consultant at Askyra Ltd.

You can also share your views and comments about the event or topic by following us on Twitter @OUBSchool, using #OU_BP

Video highlights from our masterclass on Strategy Matters in Turbulent Times: Think Big Data. Think Business Models. Reply

Understanding how Digital Technologies can impact on Business Strategy (Part 1)*

Jerry Teahan, Head of Strategic Business Development (Network, Cloud Services), BT Group

*Part 2 of this video is available via our online webinar.

Data big and small: what works? what next?

Patrick Callinan, Global Head of Data and Analytics, A.V.

Further video highlights are available from:

  • Jerry Teahan, Head of Strategic Business Development (Network, Cloud Services) at BT Group, focusing on digital value chains
  • Professor Thomas Lawton, Professor of Strategy and International Management at OUBS, looking at leveraging your business model for innovation and growth
  • Antoine Boatwright, Chief Technology Officer at Hillgate Travel, gives his perspective on digital strategy

You can watch more videos on our online webinar, which took place on 13 October. Note, you will be required to register, if you haven’t already done so.

Webinar: Strategy Matters in Turbulent Times, 13 October Reply

The complimentary webinar from The Open University Business School (OUBS), will look at business models, strategic growth, digital strategy and big data. The online webinar will take place on Thursday 13 October 2016 at 18:00 – 19:00 (BST).

Register now.

During the webinar, we’ll explore the following key questions:

  • What are the critical components to design and deliver an innovative, effective business model?
  • How do you render a growth-oriented business model robust enough to deal with today’s unpredictable world?
  • How can you factor in global disruptions driven by digitalisation, big data and geopolitical risk?

The webinar will include video highlights from our masterclass in London on 21 September. We’ll draw on the contributions from our masterclass and further develop these discussion points during the webinar, and we invite you to contribute via our live online polls and Q&A forums.

Webinar panellists include Professor Thomas Lawton, Professor of Strategy and International Management at OUBS. The webinar will be facilitated by Peter Wainwright, MBA alumnus and consultant at Askyra Ltd.

For further information, please visit our website.

Strategy Matters: Leveraging your business model for innovation and growth Reply

Photo of Professor Thomas Lawton
Guest blogger: Thomas C. Lawton, PhD FRSA, Professor of Strategy and International Management at The Open University Business School.

The purpose of our Business Perspectives event in London on 21st September is to integrate research, consulting and practice in a discussion about the interface of data, digital and business models. Questions raised will include: what is a business model and how can managers innovate existing business models to create new market opportunities? How have digital technologies transformed business models? How can big data drive a growth-oriented business model? We are fortunate to have three excellent business speakers, representing insights and experiences from large corporations (BT Group), mid-sized companies (Hillgate Travel), and consultancy (Added Value/Kantar). I will add my thoughts, based on 20 years of research, writing and advisory work.

Whilst the tone of the day will be critical but upbeat and positive, it is worth reflecting in advance on the challenges and in some ways, existential threats that exist to disruptive and often asset-light business models. Let’s take two examples: Airbnb and Uber. Investors have valued Airbnb at $30 billion and Uber at close to $70 billion. But as I write, I am in Germany’s capital, Berlin, a city that has regulated to prevent entire homes being rented through Airbnb and that banned Uber, ostensibly on consumer safety grounds. As we know, lobbying by black cab drivers meant that London came close to restricting Uber’s business model when Boris Johnson was mayor. Sadiq Khan may yet impose Berlin-style restriction on Airbnb, as research indicates up to half of Airbnb rentals in London are offered by professional landlords, limiting further the number of long term rental properties available in a city with an already chronic shortage of housing.

My point is that it is easy to be carried away by the hype and hubris surrounding new, digital, data-driven business models. What the market and some consumers value may not be valued by all and if a company does not factor in wider stakeholder engagement, it risks unravelling the very fabric of its business model. In my research, I call this an imbalance or misalignment between a company’s market and non-market strategy. The non-market refers to the political, regulatory, social and environmental contexts in which a company operates. Airbnb rushed to grow its global footprint and sign up more and more hosts without considering the impact its nightly rental business model would have on neighbours and communities. Uber focused, understandably, on customer satisfaction but neglected to make a case to political and regulatory authorities about the positive impact its business model would have on urban congestion and pollution through, for example, its ride sharing option.

For companies to maintain growth, an aligned strategy, reflecting both market and non-market engagement, is critical to the integrity and success of business models and must occur at all levels, from city to state.

We can continue this conversation during and after Wednesday’s event. I look forward to meeting you there.

If you would like to attend our masterclass ‘Strategy Matters in Turbulent Times: Think Big Data. Think Business Models’, please visit The Open University Business School website for further information and details on how to book.

Strategy Matters in Turbulent Times: Think Big Data. Think Business Models Reply

Our Business Perspectives masterclass will take place in London on 21 September, led by Professor Thomas Lawton, Professor of Strategy and International Management at The Open University Business School (OUBS). Professor Lawton is a published author on international business and strategic management and has spent twenty years advising leaders, managers and entrepreneurs on business development and market growth.

Guest speakers include:

  • Antoine Boatwright, CTO, Hillgate Travel
  • Patrick Callinan, Global Head of Data and Analytics at Added Value (a Kantar/WPP Plc company)
  • Hilary Collins, Lecturer in Management, OUBS

A symbiotic relationship exists at the heart of successful strategy between what the customer wants and what the company can deliver. In this masterclass we’ll explore:

  • What are the critical components to design and deliver an innovative, effective business model?
  • How do you render a growth-oriented business model robust enough to deal with today’s unpredictable world?
  • How can you factor in global disruptions driven by digitalisation, big data and geopolitical risk?

We’ll also look at the latest thinking and frameworks to better enable growth oriented business strategies that are adaptable and responsive to technological change.

Places are limited. For more information and to register, visit our website.

Lessons from Sir Richard Branson 1

Guest blogger:

Des DearloveDes Dearlove, Co-founder of the Thinkers50, the global ranking of management thinkers, and Visiting Professor at the IE Business School.
 

Fancy a trip around the moon, or a long weekend in an orbiting space hotel? Sounds like science fiction, but if Richard Branson has his way, it could soon be a reality. In January 2008, Branson unveiled the design for the first Virgin spaceship. Virgin Galactic is just the latest stop in the meteoric rise of Britain’s best known entrepreneur and founder of the Virgin business empire.

Branson, the man with the beard and the toothy grin, is a business phenomenon. Born in 1950, he has been walking on the commercial equivalent of the moon (or is it water?) for over three decades. In 1970, he started a mail order music business, before moving swiftly on to create the Virgin record label – and a host of other businesses.

cc by Gulltaggen

Sir Richard Branson
Photo: Gulltaggen / Flickr

The Virgin empire now spans travel, hotels, consumer goods, computer games, music and airlines. There is even a range of Virgin-branded financial products – including pensions, credit cards, loans and life insurance. Today, Branson is the driving force at the centre of a web of over 200 companies, employing more than 25,000 people worldwide. New Virgin ventures continue to be added to the eclectic collection of companies gathered under the umbrella of the seemingly infinite elastic Virgin brand. Virgin Mobile, for example, was launched at the end of 1999 to sell mobile phones and provide mobile phone services. Other recent additions included Virgin Active, a health and fitness company; Virgin Cars, an online car retailer; and virgin.com, offering a raft of Virgin products over the Internet, to name but a few.

Branson himself has distilled Virgin’s four core competencies. These are:

  • The ability to identify appropriate growth opportunities
  • The ability to move quickly
  • The willingness to give day-to-day management control to relatively small operating teams. “We try to keep our companies small,” he says. (Even though the airline now has 6,000 staff, Branson likes to think it has “retained a small company environment and informality”.)
  • The ability to create and manage effective joint ventures

Others have suggested Branson’s own real, core competence is the ability to motivate people and push them to the limit. Still others point to his relentless and sometimes ruthless negotiating skills.

Careful dissection, however, reveals that the truth is more subtle. The Branson phenomenon can be reduced to a number of lessons that can sharpen the business acumen of any manager or entrepreneur.

So what are the business secrets of the man who built one of the world’s great brands? Here are just a few of things that Branson can teach us.

1. Never give up: Like many other successful entrepreneurs, Branson has had his share of failures. And like other successful entrepreneurs, he knows that setbacks are par for the course. A combination of persistence, a strong brand and an unshakable belief in his own abilities enables him to shrug off the disappointments. When a postal strike crippled Branson’s fledgling mail order music business in the 1960s, he opened a record store. When Branson and the Virgin record label’s biggest selling recording star Mike Oldfield fell out, the resourceful music mogul signed the punk band the Sex Pistols and, later, Boy George. Even today, Branson continues to meet with the occasional failure – much as he always has. Virgin Cola, for example, which had hoped to take the American cola market by storm, lost its fizz and retreated from the US market in 2000. And closer to home, when problems at Virgin trains severely depleted the brand’s reservoir of goodwill in the UK, Branson talked about newer, faster, tilting trains with his usual irrepressible enthusiasm.

“Whenever I experience any kind of setbacks,” Branson observes, “I always pick myself up and try again. I prepare myself to have another stab at things with the knowledge I have gained from the previous failure. My mother always taught me never to look back in regret, but to move on to the next thing. The amount of time that people waste on failures, rather than putting that energy into another project, always amazes me. A setback is never a bad experience, just a learning curve.”

2. Play the underdog: The second lesson from the Branson business masterclass is to pick on someone bigger than yourself. “At Virgin, we have a strategy of using the credibility of our brand to challenge the dominant players in a range of industries where we believe the consumer is not getting value for money,” Branson explains.

He has consistently positioned Virgin as David against the corporate Goliaths. Virgin airlines took on the might of British Airways, fending off a dirty tricks campaign to establish itself as a major transatlantic airline. When Virgin Direct decided to enter the UK financial services market, Branson explained, “We looked long and hard at the marketplace and realized that although there were 600 companies selling pensions and other investments, they all charged almost identically high prices. There was always an upfront commission (often hidden), a high annual fee, and usually a Mr. or Mrs. Ten Per Cent sitting in the middle raking off a fat commission. It was like a giant cartel…”

“The consumer,” Branson announced with typical bravado when Virgin Direct was launched, “has been taken for a ride for too long by an industry which has been able to hide its charges”. His approach works. Branson comes across as the crusader, the people’s champion. He is the business buccaneer attacking vested interests and cosy cartels with a sense of fun and derring-do.

3. Keep it casual: The third lesson from the Richard Branson school of business is that a relaxed culture is good for business. While some leaders dress to impress, Branson’s legendary aversion to a suit and tie works in his favour. Dressed in his trademark sweater or open-necked shirt, he stands out from the business crowd. His casual style and anti-establishment air is perceived as hip and cool by his target market, if not always by the financial markets in the City of London.

One story illustrates the point. In the early days of Virgin, people were surprised by the sight of pony-tailed men with beards and jeans walking into Coutts & Co., one of the UK’s oldest banks. But when the fledgling firm experienced cash flow problems, and Branson had to ask the Coutts bank manager for a loan, Virgin staff argued that it was time for him to swallow his pride and put on a suit. But the young Branson grinned. “If I suddenly turn up at the bank wearing a suit and tie,” he explained, “they will know we are in trouble”. Instead, he went to the meeting in jeans and said that the business was expanding so quickly that he needed a bigger overdraft to keep up. He got the money.

4. Make work fun: Play hard, work hard is another ethic that permeates the Virgin culture – and the fourth Branson lesson. Virgin is a fun company to work for. It is an attitude that encourages staff loyalty. Ask what Branson brings to the Virgin party and his adoring employees will tell you it is the party itself. His extravagant thank you parties for Virgin staff are legendary. Branson himself explains, “I get the best people, I ask questions, and then I say: let us have some fun”.

Branson also treats employees well. “Staff should come first; if it means making £5 million less, then that is the right decision to make.”

But there is method in the madness, as the business commentator and Branson watcher Alan Mitchell observes, “He captivates the public and employees by the unexpected prospect of making the grey world of work sparkle with fun and excitement”.

5. Haggle – everything is negotiable: The fifth Branson principle – and one of his less well-known talents is his razor-sharp negotiating technique. Nice guys, so the saying goes, finish last, but not Branson. Despite – or perhaps because of – his Mr. Nice Guy image, Branson rarely comes out second best in any of the deals he makes. His charisma and affable charm belie a calculating business brain. It also helps that he has the cheek of the devil.

As Branson biographer Tim Jackson (author of the Virgin King) observed, “When there was business to be done, Branson loved to haggle: he had a street trader’s aptitude for negotiation… When the company was small and he was striking agreements on his own, Branson had enough cheek to demand far more than he ever hoped to win – but also enough patience to argue a deal point by tiny point if needed.”

6. Stand by your brand: The sixth lesson is to guard your brand at all costs. Counter to conventional branding wisdom, Branson has applied the Virgin brand to a motley crew of products and services that have little in common other than the brand itself. Some major corporations have destroyed a brand’s reputation by moving into unfamiliar markets. Yet the Virgin brand goes from strength to strength as it is affixed to everything from condoms to credit cards.

Western companies are often nervous about stretching their brands, but Branson takes inspiration from Japanese brands. “No one has a problem playing a Yamaha piano, having ridden a Yamaha motorbike that day, or listening to a Mitsubishi stereo in a Mitsubishi car, driving past a Mitsubishi bank,” he says.

Such success is down to Branson’s innate appreciation of the brand’s core values. “If you have twenty or thirty years of good reputation behind you, the public get to know you like you are a brother or sister,” he says.

In recent years, he has thought long and hard about what the Virgin brand stands for. He believes there are five key factors: value for money, quality, reliability, innovation, and an indefinable, but nonetheless palpable, sense of fun. Put the Virgin name on any product that does not come up to scratch and the whole company is brought into disrepute. “Our customers trust us,” he says simply. The Branson philosophy, then, is: look after your brand and it will last.

7. Smile for the cameras: The seventh habit of this effective entrepreneur is to generate copious amounts of publicity, rather than pay for advertising. Branson is a one-man publicity machine. Yet it was not always so, as he explains, “Up to the time I launched the airline, I was a reasonably shy person. I did not like doing interviews, avoided the press. I took my mother’s advice to let my businesses speak for themselves. But when we decided to launch an airline, Freddie Laker [the airline entrepreneur] said that if I was going to take on American Airlines, United and British Airways, I would never have the advertising spend that they employ… but if I went and made a bit of a fool of myself, I would get on the front covers.”

Branson has been making headlines ever since. Who needs legions of public relations people when putting on a dress or an astronaut’s outfit is all you need to do to promote your business? McDonald’s has Ronald McDonald, a six foot ginger-haired clown as a mascot; Disney has a large rodent called Mickey; but Virgin has its very own cross-dressing chairman. “I have worn almost every costume there is to wear,” says Branson. “It makes a back-page photo into a front-page one. And they come back for more.” No wonder. An air stewardess uniform to promote his airline; a wedding dress and high heels for the launch of a chain of bridal stores; semi-naked in bed with disc jockey Chris Evans to promote Virgin radio; with a CD player as underwear for Virgin Pulse; even in full spaceman regalia to launch Virgin Galactica.

Branson has recently been gracing US television screens in his own TV show The Rebel Billionaire: Branson’s Quest for the Best. In the show, sixteen young entrepreneurs attempt to keep up with and impress Branson as they jet around the globe undertaking a series of challenges. One thing viewers can be sure of is that their host will showcase the Virgin empire en route.

8. Do not lead sheep; herd cats: The eighth lesson is about leadership. Branson does not expect people to blindly follow him. Instead, he operates as a back seat leader. He knows when it is time to get out of the way and let others get on with building and running the various Virgin businesses. He finds talented people and then creates a challenging but fun environment within which they can thrive. He inspires and enthuses, cajoles and provokes and acts as a catalyst for entrepreneurial reactions within the company. Then – and this is important – he gets out of the way so they can run the business.

“Virgin staff are not merely hired hands,” he explains. “They are not managerial pawns in some gigantic chess game. They are entrepreneurs in their own right.”

9. Move fast: Branson’s ninth business lesson is all about speed of execution. “One should just get on with it and learn from mistakes,” he says. “I love what I do because every single day I am learning something new.”

He delights in taking on, and out-manoeuvring large corporations. To do so he relies on being more nimble than the incumbents. The strength – and potential weakness – in this approach is apparent from his cola skirmish.

Virgin Cola grew out of the development of a premium cola formula by a Canadian company called Cott. The company approached Branson with the proposition of putting the Virgin brand on the new formula. Branson’s immediate concern was the level of come-back from Pepsi and Coca Cola. In the UK, Virgin Cola was created in just eight weeks. There simply was not time for the big cola companies to put their defensive plans in place. In November 1994, Virgin Cola was launched and managed to seize a seven per cent share of the take-home market.

But hubris set in when Virgin decided to take on the cola giants in a pitched battle. Efforts to launch Virgin Cola in Australia failed and market shares in France, Belgium and Japan remained miniscule. The decision to take the fight to the cola heartlands of the American domestic market was a show of bravado rather than business sense. Pitted against the might of the cola barons, Virgin failed because it ignored the basic rules of successful guerrilla warfare: it gave up the advantage of home territory; and it lost the vital element of surprise. Without these, Virgin was just another brand. Far from home, it neither had speed nor agility on its side – and eventually it had to admit defeat.

10. Never lose the common touch: The final Branson lesson is a combination of humility and pragmatism that means he keeps his finger firmly on the pulse.

Imagine that you are a passenger flying economy class with your family on a transatlantic flight with a leading airline. Some time into the flight, a man you immediately recognize as the chairman of the airline introduces himself and politely asks if he can join you. He then proceeds to perform a few conjuring tricks to amuse the kids before producing a note pad and pencil. “What do you think of the airline?” he asks, noting any suggestions you might have. “Is there anything I can do to improve the service?”

How many airline managers – let alone chairmen and owners – take the time to talk to their customers like this? Yet we all know that they must travel on their own flights all the time, just as Branson does. The difference is that he uses the opportunity to listen to his customers.

Despite his extraordinary wealth and a privileged public school education, Branson still retains an everyman aura; people see him as the ordinary man in the street. They identify with him and he identifies with them. He appears to understand the hearts and minds of the masses. This is because he listens to others; he does not let success go to his head; he treats everyone as an equal – be they politicians, CEOs, or customers. There is something meritocratic and decent about Branson.

Not everyone sees him this way, of course. Some suspect that beneath the jokey, disarming exterior there is a ruthless businessman. How else could he be so successful? Others prefer to think of him as the hippy idealist or loveable rogue that struck it lucky. “I am lucky. I can talk to people. When I first came to London as a teenager, it was such a lonely place to be. Now people come up to me in the streets or on the underground. I am lucky to know everybody.” And that is the crux of it. We think we know him.

On 30 March  2000, plain Richard Branson became Sir Richard Branson. Knighted in the New Years Honours list for services to entrepreneurship, the habitually casually attired Branson donned a morning suit for the first time ever at his investiture ceremony at Buckingham Palace. Respectability beckoned. But so far he has stoutly resisted the temptation to join the establishment. With typical élan, party-loving Branson celebrated his Knighthood by holding a reception for the 250 other people receiving Honours on the same day. When asked how it felt to be Sir Richard, Branson answered, “It feels great. It feels odd sleeping with a Lady, though.”

Mr. Des Dearlove is the author of Business the Richard Branson Way, published by Capstone. His books are available in more than twenty languages. 

This article is co-authored by Steve Coomber, who did substantial research work. It was originally published on Australian Business Solution on 27 July 2012. 

Middle managers are strategists too, you know 2

Guest blogger:

Dr Alex WrightAlex Wright, Lecturer in Strategic Management at The Open University Business School.  

Middle managers frequently get the blame when things go wrong. They are often portrayed in both the media and academic worlds as opposing the strategies developed by senior managers; as deliberately creating roadblocks by taking ineffective actions; as ‘foot-dragging’, assigning strategic activity a low priority; and, worse of all, middle managers can sabotage the carefully crafted strategies of senior management teams

I want to argue that far from being the problem, when it comes to strategy, middle managers are often the ones that think and act strategically. In my experience, the old idea that senior managers are the strategic thinkers and middle managers are the implementers needs rethinking. I am going to list four myths associated with middle managers and strategy and then draw from my research to debunk these myths or, at least, cause you to rethink your assumptions.

Myth No.1:  Middle managers focus on operations while senior managers concentrate on strategy

© Thinkstock

Strategy or strategy work is a high status activity. It has become taken for granted that senior managers are somehow natural strategists, while middle managers are somehow natural implementers. When a middle manager gains promotion and becomes a senior manager, it is assumed that somehow their natural proclivities change and they are now competent and happy strategists.

My experience in the UK and overseas suggests that this may be the case, but equally likely is the situation where middle managers take the strategic lead in their organisations. Traditional views of strategy saw formulation and implementation as separated activities, yet we have known for some time that strategy is just as likely to emerge as it is to be planned and executed. Emergent strategy, I contend, is most likely to evolve through the acts of middle managers than of senior managers, for it is only middle managers who have the flexibility and willingness to change and adapt needed for emergent strategy to appear.

Myth No.2:  Middle managers enjoy uncomplicated relationships with senior managers and staff

This myth stems from the idea that the organisation chart represents the relationships in an organisation. It frames the relationships middle managers have as fixed, stable and functional. Middle managers have relationships with their bosses and with their staff; if they have horizontal relationships, these are most likely to be with other middle managers.

Again, this may be so, but in my experience middle managers often work within an action net of complex relationships; some stable, some transient, some clear, some very unclear. I have seen organisations where middle managers are just as likely to speak with customers, suppliers, stakeholders, trade associations and professional networks, as they are with their immediate colleagues. Through these contacts, I suggest, middle managers develop their knowledge that is then exercised when undertaking strategy work.

Myth No.3:  Middle managers have little contact with external management consultants

This myth is perpetuated by both those who write about management consultancy and those who write about strategy. The consultant/client relationship is often depicted as a relationship involving organisations not people. However, when we dig below the surface we find people interrelating, getting on, disagreeing and compromising. Once a contract has been struck, management consultants spend more time with middle managers than they do with senior managers.

I have seen examples where the relationship with the organisation was passed on from senior manager to middle manager to get the work done. Similarly, I have seen the relationship emerge and strengthen with a middle manager before being presented to senior managers. I have also spoken with consultants who tell me that they can only really be honest about the issues they have encountered with middle managers because, in their view, senior managers only want good news (another myth, perhaps). Consultants make a difference on how strategy is understood within the organisations that employ them. They do this, I argue, through their conversations with middle managers rather than senior managers.

Myth No.4:  Middle managers only implement strategy they don’t want to do anything else

This myth relates to Myth No.1, but the difference here is the assumption that middle managers do not want to think or act strategically. Again, this myth sees strategy as conventionally implemented after strategic decisions have been made. It suggests that senior managers identify themselves as strategists, while middle managers’ sense of identity sees them as implementers. Once again, this may be the case for some, but it is not a universal truth.

My research suggests that middle managers can and frequently are capable strategists. Further, I have seen situations when senior managers are not active strategists, when they are too busy doing other things to think and act strategically. When this happens, an organisation can experience a strategic void or absence. It is middle managers, that much maligned breed, that often step into the breach and fill this void, and they do this by drawing on whatever is at hand to fashion effective and relevant strategies. Middle managers are not the problem, more likely they are the solution, and organisational processes should be developed that help rather than hinder them.

Final words

In this blog I have avoided presenting the idea that strategy can be boiled down to decision making, or indeed, that organisations have strategies. This is not my position. For me, strategy can include decision making, but it involves much more and if we only concentrate on decision making we miss the vast majority of actions that can be discerned as strategic. Further, to focus on what strategies organisations have misses the point. Much more productive, I feel, is to focus on what strategists do, how strategy-work is accomplished not what it is.

Business strategy 101: What if things don’t change? 7

Guest blogger:
John Thompson

John Thompson, Open University Business School MBA Alumnus, Founder and Managing Director at Trans Capital Associates.

We are constantly being promised by politicians that ‘things’ will get better. Growth in the economy is just around the corner with all the goodies that this entails − stronger businesses, lower unemployment, better jobs, higher wages, better healthcare, improved care for the elderly, better education etc. etc.

I would just make the point that any small business owner who went along to the bank manager wanting to borrow lots of money based on a business strategy with the above forecasts would be quickly shown the door!

We all want to think that everything will soon be back to ‘normal’, because we had almost come to believe it was what we are entitled to.

But why?

Union Jack by .crig

Can businesses survive the economic gloom and doom?

If you look at it in the cold light of day, building this never-ending story of growth based on a culture of increased debt was surely doomed to some level of failure with winners and losers.

My belief is that this is going to be it for a good few years and that we should organise our businesses accordingly.

Previous recoveries

In previous dips in the economy, before the level of advanced globalisation and sophisticated communication we have today, governments have been able to use monetary policy to miraculously rescue the situation. By this I mean:

  1. firstly to devalue sterling, to make our highly regarded products and services suddenly very competitively priced all around the world, and then
  1. to ramp up interest rates, to inflate away some debt and clear out many of the highly indebted businesses (so called Zombies) and individuals who have to call it a day and make space for the new wave.

Four reasons why this is not going to happen this time

  1. Globalisation – this is not just a local problem, it is pretty much a world recession, with the US, Europe and even China all learning to live with lower levels of growth. Everyone has tried to devalue and it is therefore difficult for us to find new export markets.
  2. Turnaround lessons from the past – we can deal with massive financial shocks in a more coordinated and effective way. Interest rates are being kept at record lows, new currency has been printed around the world (QE) and fiscal policy has been suitably benign to avoid global Armageddon. Just this week, the US have neatly avoided the so called fiscal cliff and, in the blink of an eye, Spanish 10 year bonds are down to 5.6%, their lowest level for months, and the FTSE 100 is above 6000 for the first time since the summer of 2011.
  3. Bank policy – the banks have undergone a seismic shift. From being the darlings of the stock market in 2005, they are now held out as pariahs, and are charged with being pretty much solely responsible for the financial crisis (unfairly in my view). Their balance sheets are under pressure and they would now prefer to manage a situation rather than crystallise another loss.
  4. People power – we have experienced significant scandals from virtually all areas of influence: MP’s expenses, media manipulation, phone hacking, police relationships with the media…even charity chuggers!

The power bestowed upon the people by Social Media and other advanced forms of communication has enabled us to bring all these people to book and led to a significant swing in the balance of power.

I can see ‘the people’ only gaining more power; and one of the unintended outcomes will be that politicians and other policy makers will be less and less able to put in place sustainable policies that make a meaningful difference. I predict that we will continue to see more coalition governments over the next 20 to 30 years – or at least until we see some massive, as yet unpredicted, societal changes, there is a new system of electing our politicians, or, we see a significant lurch to the left or (more likely) the right.

Therefore, it may well be that we just have to get used to the current economic conditions we are working in and, like all good business people and entrepreneurs, evolve, develop and create offerings that work in this environment.

One of the big changes we are going to see as a result of all this is the advance of the trusted supplier. Businesses that up until now have been a best-kept secret, like the plumber who will come out at the drop of a hat and won’t charge you a fortune − even if you haven’t got a clue what he has done for you. This is a metaphor for all our businesses. What I have taken from this is:

  1. offer what is needed in the market place
  2. be an expert and do a great job
  3. add significant value to the business I am working with
  4. charge a reasonable fee which is invariably agreed after the value has been proven.

Do the unthinkable

So, have faith in your basic proposition but don’t be afraid to radically change the business model you are currently operating. This is particularly the case if your model is based on daring growth figures, access to equity funding or government interventions that mean everyone needs to buy from you!

Jack Welch, the ex-Chairman and CEO of GE, who would say to all his senior reports who ran the various businesses within the GE empire when it came to planning for the coming year: ‘destroy your business’.

By this he meant: don’t get sucked in to the same old same old. Bring new and innovative thinking to the fore; explore new ways to create sustainable and profitable business models within the current environment.

And that is exactly what I am saying. The environment we have right now is probably not going to change much over the next few years, so let’s all just accept it for what it is, and get on with it. Paradoxically, the potential stability of continued lower growth should make it easier for us all to develop our business models accordingly.

I would finally make the point that I acknowledge this may not be easy for all businesses, particularly for organisations that prospered in the early/mid noughties and were encouraged (seems a long time ago) to take on very high levels of debt.  I would strongly argue that if you have a sound underlying proposition, and good people, there is invariably something that can be done to preserve and develop your value, whatever the current situation.

If you would like to comment on or talk about any of these thoughts and ideas, I would love to hear from you.

Happy 2013!

(This article was originally published on Trans Capital Blog on 4 January 2013.)

To read other articles on business strategy, visit Trans Capital Blog.