Will smaller companies stand a better chance of survival during the coming financial turmoil ?
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Posted by Peter (1) on 2007-Sep-19 15:28
It cant have escaped anyone's attention that things are afoot in the financial world, the sub-prime lending crises, Northern Rock's bank run, Oil prices breaking through the $80 per barrel for the first time in 20+ years, Mortgage lenders imploding and stock market jitters.
I expect everyone will have their take on the reasons for all the current problems and I expect most of it will boil down to greed, stupidity, dishonesty and lack of confidence.
Here are some more reasons why I think small, local companies ("Dingoes") will have a better chance of survival than larger companies.
- Trust When everyone is under extreme financial pressure who are you going to trust ? the small, local and reachable businessman or the huge corporation hiding behind an army of lawyers and call center drones ?
- Localisation When oil reaches $100 / barrel (2008 ~ 2009) who will have to raise prices the most ? the local shops who can get their products easily from local suppliers / farms or the huge global corporation who has to transport their products from half way around the world ?
- Flexibility If market conditions change, who can adapt the fastest ?
I will add more to this list as they occur to me or you can add yours below.
In the meantime the Cluetrain Manifesto (The End of Business as Usual) might give you some interesting ideas. Here is a small snippet :-
A powerful global conversation has begun. Through the Internet, people are discovering and inventing new ways to share relevant knowledge with blinding speed. As a direct result, markets are getting smarter—and getting smarter faster than most companies.
These markets are conversations. Their members communicate in language that is natural, open, honest, direct, funny and often shocking. Whether explaining or complaining, joking or serious, the human voice is unmistakably genuine. It can't be faked.
Most corporations, on the other hand, only know how to talk in the soothing, humorless monotone of the mission statement, marketing brochure, and your-call-is-important-to-us busy signal. Same old tone, same old lies. No wonder networked markets have no respect for companies unable or unwilling to speak as they do.
But learning to speak in a human voice is not some trick, nor will corporations convince us they are human with lip service about "listening to customers." They will only sound human when they empower real human beings to speak on their behalf.
While many such people already work for companies today, most companies ignore their ability to deliver genuine knowledge, opting instead to crank out sterile happytalk that insults the intelligence of markets literally too smart to buy it.
However, employees are getting hyperlinked even as markets are. Companies need to listen carefully to both. Mostly, they need to get out of the way so intranetworked employees can converse directly with internetworked markets.
Corporate firewalls have kept smart employees in and smart markets out. It's going to cause real pain to tear those walls down. But the result will be a new kind of conversation. And it will be the most exciting conversation business has ever engaged in.
||Comment by David (2) on 2007-Oct-04 11:22|
You pose an interesting idea Peter. Is small and local really beautiful. Can we predict what type of company/organisation or, to use a term from Peter Drucker, enterprise, will survive the change?
I believe the question is more complex than just small and local versus global. The business ecosystem is changing rapidly. Enterprises will survive and thrive if they meet the new and changing requirements of their environments. My guess is size may not come into it.
Since the situation with economies is so complex, it will be difficult to predict which enterprises will thrive, survive, or, go to the wall. However, we might be able to gain an insight through looking at an analogy. Business environments have many similarities with biological environments or ecosystems. They are dynamic systems with feedback. perhaps by looking at biology, particularly the fossil record of periods of discontinuous change, we might be able to gain an insight into the business world.
Our understanding of evolution is based on the fossil record and observations of current ecological systems. What this strongly suggests is that in periods of rapid change, it is the specialised species that become extinct first. It is also the generalists that survive the initial shock. As environmental turbulence subsides and the ecology becomes more predictable, these generalist's decedents, then mutate and form specialise species to occupy the emerging new niches. It is not size that predicts extinction; it is specialisation.
So, if we look at the current entrenched and powerful enterprises in our business world, which ones will go to the wall? If my analogous reasoning is correct then we can describe these enterprises. These will be specialists whose business models are dependent on a particular set of factors in the market or society. They will be very efficient as exploiting one particular opportunity which was abundant and now becoming scarce. Their organisations and cultures will tend to discourage changes from the established ways of doing business. In essence, they are what the Americans call, "One Trick Ponies". Such organisations are at grave risk when "The times, they are a-changing".
It is ironic that in the last 3 decades, enterprises have pursued downsizing, outsourcing and operational efficiency without due consideration of how this affects an organisation's flexibility to respond to changes in business environments.
So, if you are working fir an enterprsie that exhibits these specialist tendencies, then worry!
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