16 August 2010
I’ve long understood that in the short term, profit or less are far less relevant than cash. Over time, we can address loss making situations or make profitable trading even more so. But if we just don’t have the cash to pay the electricity bill, then we really are in trouble.
Being extremely old (according to my family!) I’ve worked through at least four recessions, but this latest one has been so different. I worked in banking and finance in the days when humans were trained to underwrite and we learnt what was good lending practice and what wasn’t.
No surprise that in those days we got back most of what we lent to business and to consumers and apart from the odd ripple in the secondary banking market, the sector was undoubted. Nowadays with very inexperienced lenders relying on computer based credit scoring is it any wonder the Banks got into the dire positions they did and now are relying largely on the public sector downsizing to bail out our economy.
Still, so long as they promise to serve us in under five minutes in the branch, or continue to make us feel good with their cheesy radio station adverts, I’m sure we’ll all forgive them soon........NOT!!
And that’s what made this recession different. (Paraphrasing) - in recessions gone by, businesses and individuals went to the cellar, pulled out a little more security, gave it to the banks and maintained or increased their borrowing, often to paper over the cracks in their Business Strategy that the recession was uncovering.
Didn’t happen that way this time – the banks said no and, ironically, refused to lend us back our money that had bailed them out!
So more and more businesses took the sensible decision to confront their shortcomings and work with external advisers to strip out the old inefficiencies and develop better business strategy aligned working practices. Guess what happened, as wastage and inefficiency reduced, cashflow improved.
Don’t you love self help!
09 August 2010
Identifying and entering new markets is key to business growth and something that should always be on the strategic agenda of your company. I love the challenge of market development – the analysis of all the market segment options, addressing the barriers to entry, creating the competitive proposition and sneaking up behind the competition to mug them in their own backyard!!
It was the legend Igor Ansoff that gave us the four strategy model for business growth – market penetration / market development / product development / diversification. Watch this space to see how, over time, his model has been entirely misrepresented and reconfigured to suit the arguments of others! There’s a very interesting piece of work going on by my Levitt Group colleague Laurie Young that will expose a series of misrepresented strategic marketing models when he publishes his next book – can’t wait!