Japan, Libya and the State of Our Businesses

We do business in a fairly sheltered industry. While turmoil rages in Libya and Japan digs out from under what is possibly the largest tsunami in that country’s history, we continue to operate for the most part, unabated.

Certainly there has been some fluctuation in all of our portfolios based on the market’s response to these events. Some companies have experienced some delays in shipping and certainly gas prices are going higher based on the uneasy relationship between the west and the oil-producing countries in Africa and the Middle East. But beyond this, customers are still buying, producers are still producing and sellers are still selling. The problem is not particular world events, but the uncertainty that these world events bring with them.

Uncertainty is a key component in the downturn and eventual demise of any business or industry. Indecisiveness on the part of any large corporation all the way down to a small one-man operation can cost a company a huge amount of revenue. But what happens when uncertainty is thrust upon an organization? What happens when external uncertainty is greater than internal uncertainty?

In finance, there are two types of risk- firm-specific risk and market risk. Proceed with caution is the watchword for most companies at this time not because of the lack of ingenuity or creativity or a lack of desire to increase production, (firm-specific risks) but because of uncertainty (market risks). The United States has had its share of uncertainty over the course of the last few years. A financial system meltdown caused by unsustainable subprime mortgages, a waffling government, crazy legislative agendas and activist courts locking horns in a power-grab pandering to their respective, lucrative political bases. Add to the fire a number of seemingly inexplicable missiles fired into Libya for a cause no one is quite sure about, a healthcare bill that looks to overhaul the 1/6 of the economy. Two wars in Afghanistan and Iraq still have citizens scratching their heads over what plans for the two countries lie ahead and who will be paying their bills. In the meantime trillions of dollars have been pumped into the economic balloon that still seems too big to inflate in any meaningful way.

As a somewhat practical reminder of how all these events came upon us like a tidal wave, a real one, a tsunami, hit Japan a few weeks ago. And while no one in the U.S. suffered anything close to what the Japanese people endured, it reminds our businesses that disasters take many forms and none of them are at all predictable.

We get questions quite often from several companies about when we think business will begin to thrive again, when we think unemployment will drop below 5%, when do we think certain industry segments will begin to grow, etc. None of these answers are easy as long as there is this incredible amount of uncertainty within our current business sphere. And while we cannot prevent popular uprisings in the Middle East, or violent civil wars in North Africa or tsunamis in the Pacific Ocean, we can take a few steps towards easing the uncertainty in our own environments. While putting these things in place for your own business will not take the country into an economic boom, it will help you cope with the uncertainty in this economic timeframe.

[….our next post will include a Business Uncertainty Toolkit that will allow you to focus on new ways if thinking about cash flow, savings and investing during uncertain times.]

The Evolution of the Digital Marketplace- From Spam to the Ecosystem

How many of us remember when we typed and sent our first email? I can recall being amazed at the notion that a letter that used to take days to get to its recipient would now take seconds. The fact that one could do this several times a day- literally send hundreds of letters (emails) to hundreds of people in such a short amount of time was an astounding notion. Companies soon jumped on the email bandwagon. Everyone had to have an email address for their customers or risk falling behind. Offering customers an informational email address soon was not enough, a place on the World Wide Web, the information superhighway as it was known was needed to establish a web-based presence. Soon thousands of companies had their own addresses; the dot-com boom of the mid to late nineties saw an explosion of web-based commerce with customer information, transaction information and all types of digital data. This informational mudslide threatened to bury up and coming companies to the point where no web-surfing individual would be able to find them. (Yes it was called surfing back then)

The solution for many was mass email marketing. For decades companies had relied on the time-tested procedure of mass mailing fliers, coupons, brochures and other collateral materials to a broad range of customers. The idea quickly disintegrated into what we know today as spam. Millions of emails piled up as organizations from drug-makers to coffee wholesalers jumped on the mass email bandwagon. What was once touted as the one-to-one future, the way to connect personally with your customers on a level that was unprecedented quickly overwhelmed potential customers with offers, specials and sometimes even outright fraud. It would take years, but the government would finally put a halt (albeit an unenforceable one) to the madness.

As the millennium turned so did the outlook for digital marketing. As spamming became more rampant, customers gradually weeded out those emails that truly did not represent what they were looking for until the weeding became just another chore. New spam filters provided some relief, but the system remains far from perfect. Web advertising by this time was no newcomer, but the ads became more intrusive, larger and slowed the pace it which a user could view the internet. Web ads were far from personal and it would take a revolution in hardware and software before a new frontier in digital advertising could be established. They called in Web 2.0, a faster, more versatile and efficient way to use the internet. But what Web 2.0 turned out to be was something much more radical. What was supposed to be a better way to "surf" became a tidal wave. You wouldn't surf the web anymore, the waves of information would now be controlled by the user. In essence the web content providers would become, well, the users themselves.

It began in many forms, but the first revolution was in social networking. Sites like MySpace began to make email a thing of web antiquity. While online chatting and instant messaging had made some inroads by making messages shorter, faster and more omnipresent. It would take a hardware revolution in mobile technology to realize their true potential.

The proliferation of social networks coupled with advances in mobile computing once again forced companies to rethink their digital advertising agenda. It forced companies to become more personal, not so open-minded anymore, but more single-minded. The idea that each customer had their own personal tastes and that taking those preferences and pulling them into a circle of friends and like-minded people was now a real possibility. The information superhighway was no longer a road (speed by now was taken for granted), but an ecosystem of like-minded creatures, chatting, messaging, tweeting, blogging and sharing.

At this stage and to the present, companies focused many of their advertising on personal community pages like Face Book and Twitter. Instead of flashy graphics or other wow-factors, simple updates that personally told the user what the company was launching, what they were doing and where they were headed sufficed to bring about an customer ecosystem and less of a mass marketing campaign.

Web advertising is still very much a present factor, yet its impact diminishes the less it is linked to some type of ecosystem. Likewise, any email user will still find spam to be alive and well presently. However its effect has also diminished not only from better software filters and government regulation, but from the overall decreased use of email as a communications medium and of course any spam or email advertisement that is not part of a web ecosystem will surely be ineffective.

In short, selling ones products and services on the web has gone from simply showing up towards facilitating a biosphere, an ecosystem of like-minded or semi-like-minded individuals. Businesses on the web don’t just push their goods and services anymore; they embrace interested individuals as friends.

Now it’s on to the future. No one can say for sure exactly where social media is headed nor can anyone predict with pinpoint accuracy what new hardware will revolutionize the web experience. But at Beacon, we feel there are at least a few key trends that will unlikely disappear:

1. PCs will eventually die. Just as desktop computers have fallen to notebooks and net books, the software, operating systems and hardware of the PC will eventually fall by the wayside. Evidence of this is seen in many forms. Tablets have taken a firm hold over casual personal computing user and smart phones offer an easy way to do just about everything. Where design, graphical creativity, server functions and other large-bandwidth programs are concerned, PCs will most likely still have a place. But much like an old appliance whose purpose is still useful, yet outdated, new ways of designing and retrieving information are becoming too great for the PC to stay in its current form.
2. The clouds will gather. Cloud computing takes the hard drive out of the computer and replaces it with streaming information from some far off server or cloud. No longer will you “own” a song or software program on your device, rather the cloud will stream this information to your device such that the hardware itself is only a means of receiving all information you could ever want whenever you want it in the palm of your hand.
3. The internet will be omnipresent. Eventually, there will be no place on earth where you can escape an internet signal. The Cat5 cables and Ethernet connections of the past will no longer be needed for internet use. Simply tap on your device in the middle of the Pacific Ocean and you will have access to more information than any civilization in the world’s history.

Of course these trends are general at best; we are consultants and importers, not techie prophets. What we can say is that taking the above trends, businesses now have to take the ecosystem approach to selling goods and services. The web, once an ocean, became a highway which became a landscape which became an ecosystem. What it becomes from here will certainly present very exciting opportunities.