What's the meaning of your business?

If there's an industry that's been through a more disruptive and challenging time over the last few years than the music business, then I don't know it.  And, within the music business, I don't think there's been a bigger distraction from the challenges at hand than the Terra Firma / Citibank saga. In light of that, it's encouraging to see what, as reported in The Guardian, EMI's chief executive, Roger Faxon, said recently to their employees about becoming owned by Citibank:

"The history, tradition and heritage of this company cannot, and will not, be erased by a change in shareholding. We are EMI not because of who owns us, but because of who we are - the home of the greatest artists and songwriters of the past, present and future."

A great example of knowing, and being able to communicate, the meaning, the real identity, of a business.  Which, despite what some leaders say, is almost never "growing shareholder value".  That's just something you have to do. Like breathing: you do it, but it's not what life's about.

In the midst of change, turmoil and distraction, a strong sense of what your business is really about - and how you personally contribute to that - is perhaps your biggest asset.   What's the meaning of your business?

The Hidden Limit to Change

Many organisations struggle to react fast enough to the ever-increasing rate and unpredictable nature of strategic change. Sometimes that's because it's not clear what needs to be done.  However, even when that's obvious, leaders face huge difficulty in getting change to happen quickly enough.

Let's Take It Up Again...

Not long ago, I facilitated a strategy session with the management team of a new business within a leading financial services company.  They had big hopes for the business, but faced questions about which specific goals to pursue and how to go after them. The team felt it was critical to get these questions resolved, so had set aside time to focus on them - and had brought us in to help. 

As we always do, we were working hard to get tangible outputs, to get clear actions nailed down. But, to my great frustration and embarrassment, there were still some fundamental questions unresolved at the end.  I expected we would form a sub-group to get together to carry things forward, meeting again perhaps later the next day or - at worst - later in the week.  Instead, the collective decision was: "let's take it up again...next month".  

Organisational Clockspeed

Now, I'm not criticising that team: they had deeply engrained habits for operating on a monthly "clockspeed" basis. 

And, they aren't alone.  Through our work with multiple clients, we've identified clockspeed as an often-hidden constraint on the rate of change.  We've found that each organisation has a clockspeed, a heartbeat as it were, that determines how fast it can make decisions - and therefore how fast they can move.  For many businesses, the clockspeed for the top team is monthly at best.

In most large organisations this clockspeed was set years, if not decades, ago - when the pace of change was much slower.  The things that determine this clockspeed are usually invisible: at least to employees, for whom they are like water to a fish, just part of "the way things are".  As a result, leaders often don't address these factors, and therefore their change initiatives don't have the impact they desire.    

Tesco: the empire starts to crumble

Tesco. You just have to love them. Tremendously successful, innovative, with a straightforward mission well delivered. Their high-water mark is still some years away, I suspect.

But when the corporate history of their decline is written, the turning point will be seen as the sending of heir apparent Tim Mason off on a "must win" mission in the US - a mission that will inevitably fail. They are in essence taking on the entire US grocery system - without most of the advantages they have in the UK.

The amount of top team time already taken up on discussions about Fresh and Easy, and the huge investment, will shrink into insignificance as they feed ever more money, expertise, and reputation into an losing battle.

In the meantime, the widely discussed "brain drain" continues.

Social networks and the global financial meltdown

The ongoing meltdown in the financial world is leading to a massive layoffs in the investment banking world, which are widely expected to spread to the economy generally. This will result in a make or break test of the value of business / career oriented social networking sites like Linked In and Xing.

If they really do help people find their next role faster, they will become a key way large numbers of people manage their careers (with consequences for search firms and HR recruitment teams in large corporations). Even more so if they are instrumental in people finding roles that better suit their talents and interests than the ones they've been tossed out of. At the extreme, this could be the time when there is a permanent shift in the mainstream mindset, and most employment relationships take on a significantly stronger "freelance" flavour. (Ah, don't you just love that phrase "at the extreme"? As if we have any sense of what that really means any more.)

On the other hand, if they fail to deliver value, with many users finding them a waste of time (if looking) or a major distraction (if one of the lucky still-employed), then the sites are likely to face any or all of the following: slowing membership growth, abandonment of profiles (which happens today more than is generally acknowledged), and - again, at the extreme - public vilification and negative user reaction to ads.

Personally, I hope they do work. So, if you're looking and I'm on your network, feel free to contact me.

There is no China after China

Does it happen to you that a thought sometimes just appears, and then won’t go away? That happened to me when the phrase “there is no China after China” flashed across my mind.

I’d been thinking about how low-cost labour in China has driven much of what’s been happening in the global economy: massive imports of low-priced goods dampening inflation leads to central banks allowing an excess of liquidity, then to a global asset price bubble, and then (eventually) to the inevitable re-pricing and the exposure of a growing number of financial institutions as bankrupt.

What struck me wasn’t the long chain of consequences with a disruptive ending. (It’s just one example of the intertwined and unexpected nature of our global economy - which creates what we call The Age of Discontinuity.) What struck me was that a key idea that has been true for a long time probably won’t be true in future: “there is always somewhere with cheaper labour”. Not just slightly cheaper – but lots cheaper; enough cheaper to drive major shifts in economies, enough cheaper (and enough of it) that businesses have to respond. This has been true for the last 20 years or longer, if not about China then about some “somewhere”. It’s been true for so long, it’s probably an unexamined part of the mindset of many business executives and a key part of the strategy of a growing number of businesses.

But, the real cost of labour in China has started to go up and there’s reason to believe that we aren’t far from the point where China’s labour surplus is effectively used up. “So what?” one might say: there’s always somewhere else – Indonesia, Peru, Nepal, somewhere. But, around the globe, there’s no labour market nearly the size of China’s. While there might be enough additional low-cost labour for any one company, here are lots of companies where a key element of the strategy is lower cost – ever lower cost, lower than competitors’ costs – and a large part of expected future profits are predicated on having this lower cost. And it can’t be that they all will get the low cost labour they expect – there just won’t be enough at low enough cost.

I can’t know what the full implications in will be as we reach the end of new pools of low-cost labour joining the global economy. At one level, it will probably be a great thing; it should mean the end of the massive unemployment so pervasive in the developing world with huge benefits in terms of length and quality of life. But, for business leaders in the developed world, it means a need for a major rethink about competitive advantage and growth plans – a rethink that won’t get started without a recognition that “there is no China after China”.