Back to Business, the Old Fashioned Way

Regardless of when and how the current economic “contraction” reverses itself, I think we can agree that the face of business as we know it is going to change… at least I’m hoping it does.

I remember in the late 90’s, when I was an analyst for a venture capital firm, the number of “pimply-faced” self-styled entrepreneurs that would come in with a hastily written business plan, seeking 7- and 8-figure series A financing. Without exception these business plans had one thing in common: no prospect of positive operating cashflow or income in my lifetime.

When we would interview these young “visionaries” and ask about the prospects of positive cashflow or income, they would often suggest “that was the old economy”. The “new economy” at that time apparently had more to do with market share and “eyeballs”. This “new economy thinking” had a predictable result, demonstrating that history does repeat itself.

Not that the parallel to recent “innovation” in the financial markets is perfect, but I find myself wondering when we’ll just return to plain old business values, measures and principles? The Canadian banking system has been considered one of the strongest in the world, thanks principally to common sense regulatory constraints on capital-to-lending ratios, aggressive acquisitions and the use of highly “creative” financial instruments.

A recent article by McKinsey & Company’s then-Worldwide Managing Director Ian Davis points out that the change in “business as usual” will be a boon to competitiveness and market efficiency suggesting that there will continue to be substantial strides in technology-led innovation and knowledge management. He later concludes that “the result will be an environment that, while different from the past, is no less rich in possibilities for those who are prepared.”

In fact, with the increased participation of governments in the global economy through nationalisation initiatives and public investment through to increased levels of regulation and oversight, organisations may find that state- and federal-government may be their largest and most significant trading partner. Developing strategies to work more effectively and efficiently with government should be priority for every chief executive.

We believe that in order to be differentiated in the “new economy” organisations will need to develop unprecedented levels of connectivity with and between workers, trading partners and even the underlying systems and processes that define your business. This is what we refer to as the “Connected Business” and developing mature capabilities in this area will deliver demonstrated outcomes that contribute to real gains in productivity and returns to equity.