Is the customer’s customer a tipping point for enterprise IT?
June 2, 2011 Leave a comment
In early 1996 we spun out a radical concept from my consulting firm on the newly commercialized web that attempted to level the playing field between small business and large. The vision was grander than the technical capabilities at the time, but despite our many weaknesses it became a niche market leader.
Even though we had recent experience representing clients who were competing with market leaders, I was still surprised by the response in some sectors. In our attempt to partner with multinationals, we found primarily fear and defense, including in finance. It was quite clear that the majority of leaders in the corporate world were not terribly thrilled with our efforts. From my perspective, however, given the advantages of incumbents, the long-term risk was far greater to most of their companies if such efforts did not succeed. Having been on all sides of this issue, I was closer to the challenges than they were (and had deeper intel).
Fast forward to 2008. During the initial wave of the global financial crisis I had a private email exchange with one of the leading economic editors, who is a respected centrist thought leader I had known for over a decade. While we have very different backgrounds and experiences, we were in agreement that the initial reaction to the crisis, even though understandable, were misguided. Due to a myriad of factors, including consolidation, centralization, internal financial conflicts, expediency, scale, political activism favoring large institutions, and technology, the small business engine was already in trouble in the west, buoyed primarily by easy credit and the housing bubble in previous years. Based on the evidence in previous recessions, we had very little confidence that the existing financial infrastructure could serve the needs of small business, particularly in current form. One need only travel in the rural U.S. or observe a few SME P&Ls to conclude in hindsight that we were correct.
Fast forward to the present day. On Meet The Press last Sunday, David Brooks sent a warning that I fear will go unheard in the very ivory towers that need to heed the message: “I was up on Wall Street the other day. I know political risk better than they do; they are vastly underestimating the source of political risk out there. We could have a massive problem in the next couple of years.” The source Brooks is referring to, of course, is the American citizen and consumer.
A headline on Wednesday (6/1) at CNBC echoes the disconnect: Wall Street Baffled by Slowing Economy, Low Yields. These are not isolated cases, but rather symptoms of a greater problem at work in the decision process found in every crisis over the past 15 years. I don’t know what data these analysts are consuming, or what tools they are using, but their systems and methods continue to fail them if these and other reports are true.
A glance at the quarterly reports of even the largest consumer companies would reveal a combination of inflation and weak spending that is beginning to negatively impact earnings. Given the massive scale and tight margins facing most of these companies, it should serve as a long over-due wake-up call that it’s time for the IT industry cluster to execute competitive, cost effective solutions to help the customer’s customers compete. This is not an immediate crisis begging for knee jerk reactions, but rather a trend long in the making, dealing with underlying structural problems in the economy that are essential to overcome.
One does not need to search far and wide to discover a variety of profitable methods and models to extend high-end functionality to the SME market, provided of course one is looking, not consumed with protectionism, and obstacles are removed. Regardless of what sector of the economy each serves, ultimately there is no escaping the impact of macro economic conditions, to include the impact of technology on customers of customers.