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Business Planning for Amara’s Law

I am writing this in a week that has seen considerable turmoil in the financial markets around the world and one in which we have seen for the first time a true, fully connected, global storm.  It has been a merry go round with Europe reacting to Chinese and far eastern turmoil and the US reacting to Europe and then China and the far east reacting to the US and so on.

It hasn’t quite yet turned into a full blown global crisis, but it could have done and much of the blame can be placed on technology.

As someone said on the radio the other day, before the Big Bang in The City (of London), trades were made on the trading floor, eyeball to eyeball and, like all such human interactions, the true situation might be read in the other dealer’s eyes, rather than in what he said. But there was time to pause and think before the trade – trades were made in minutes and hours not seconds and milliseconds.

There are of course many components to the situation over this past week, but one undeniably important factor is the speed at which the computer systems react to negative sentiment and as a result create a negative storm which can result in wild downward swings.

Roy Amara (1925-2007), was a researcher and scientist who worked at Stanford Research Institute who’s lasting legacy (according to Wikipedia at least ), seems to be a single quote that posesses such a strong strand of truth, it has become known as Amara’s Law.

He said: “We tend to overestimate the effect of a technology in the short run and underestimate the effect in the long run“.

There is no doubt the Big Bang when it came, heralded massive change, but looking back now we can see that, without a doubt, the full effect was underestimated.

But of course the virtual trading floors of global bourses are not real life. Financial turmoil and statistical games, even if they mean losses of trillions, have no effect on the man in the street – short term at least.

However, technology generally does. Not too long after the Big Bang (in fact about halfway between then and now) we had the dot com crash. A hugely inflated bubble was created on the back of an internet that was back then really just finding its feet. And then the bubble burst. There may have been many reasons, but number one reason had to be a realisation that the short run expectations of the hugely optimistic investments being made were just not going to pay off before the money ran out.

Looking back, chief among the realisation problems was lack of infrastructure, but the world was also still not ready yet. The technology was not actually up to it and neither was the general public. The internet was, back then, still mainly used by geeks and early adopters – everyone else was just dipping their toe in the water.

Fast forward 15 years and we find ourselves in a world that has now exceeded by some way the expectations of the dot com bubble, with concepts such as social media and technology such as tablets and smartphones coming at us out of the sun. The game has changed radically, black swans fill the sky and we can see now that in 2000 the long term effect was definitely underestimated. Since 2000, 52% of the companies listed in the US Fortune 500 have either gone bankrupt, been bought out, or found other reasons not to exist. These were big companies.

All of which makes you wonder how short of the mark are our current estimates of the impact of technology, both on society as a whole and on our own businesses in particular.  Should strategic business plans perhaps take account more fully of technological undercurrents that risk literally chopping the legs from under the business? Should the SWOT analysis always contain in the Threats section: ‘unkown unkowns’?

Here are some things to thinks about to reflect back into future (more robust) strategic plans.

Mobile Technology

smarthone with QR CodeIf you think that mobile technology is just about email and texts on the go, then think again. Mobile technology is a game changer in the B2B market every bit as much as it is in the B2C market in terms of both front end delivery and back end operations.

From appified web pages to actual apps, mobile technology makes it easy to communicate directly with customers no matter where they are and this idea is now much more widely understood and accepted. However, changes to how the business is delivered is not always so easily accepted, or understood.

Mobile technology can make it easier (possible even) to run distributed operations, maintaining good communications with employees wherever they are. Perfect for field agents, sales personnel, technicians, etc, it can also mean that the business is delivered in different ways. Desk-bound employees can be freed to be much more mobile and opportunities may be there to change the business model completely.

Consider that Uber, now the largest taxi company in the world, does not own any taxis. Mobile technology makes such a company possible, but it also represents a huge threat to conventional taxi businesses. This didn’t sneak up – it stormed up and has been largely unresponded to until it was too late.

Social Media

Social Media BoxFrankly, sometimes it is difficult to say the phrase ‘social media’ without swearing. Social media has become disruptive in every sense of the word. From being a pointless distraction for employees who should be working, all the way to being a new primary channel for communication with customers and prospects.

Just this week Mark Zuckerberg,  company founder of Facebook, boasted in a post that, on Monday 24th August, “1 in 7 people on Earth used Facebook to connect with their friends and family”. In other words, a billion of their users were all using Facebook on Monday. At the time of writing, Facebook has almost 1.5 billion users who log in a minimum of once a month.  A business that was founded a little over 10 years ago.

Facebook is a media company that publishes no content. Everything runs on content provided by its members in one way or another – even down to advertising. Whole businesses run on the back of a Facebook presence and you just cannot get away from the fact this platform is a prime way of communicating with members of the general public at least.

Social media may be about to disrupt your business in the long term in ways you haven’t even considered yet – business planning should factor this in.

Automation

Automate ProcessesIf you think automation cannot apply to your business think again, because there is a good chance your competitors are already considering it. By competitor I could mean someone in a garage living on beans, funded with a small startup loan.

To get a good idea what this means, why not pop in to your local bank branch. Chances are it is not there any more and you have to pop into town where even there tellers have largely disappeared and the remainder are now out front teaching people how to use the new paying in machines. You will also have seen similar changes in the local supermarket where there has been an unexpected drop in the number of checkout employees in the bagging area.

These new machines may be expensive, but are very cheap indeed over time when compared with employees. Yes they push some work back on to the customer, which is not always well received, but they slicken everything up and reduce costs which may well be fed back into pricing overall and the underlying competitiveness of the business.

However, automation does not always mean robots, or big machines for that matter. It can be computerisation of a small step in a process, leading to most steps in the process which in turn can lead to the whole process (for people at least) disappearing all together.

In their 2013 paper, ‘The Future of Employment: How Susceptible Are Jobs to Computerisation?’, Carl Benedikt Frey and Michael A. Osborne outline some of the factors that dictate whether a job can be automated or not.

Perhaps unsurprisingly, sales, services generally, office & administrative and production all came out as hot contenders for automation. These areas were also cited as areas of high employment meaning massive potential savings where automation is deployed. However, few areas were excluded completely, with even some areas of health care practice being identified as susceptible to future computerisation.

Again, clever automation applied to your own business can be a huge opportunity, or a huge threat if applied to a competitor’s business – not considering this is not really an option.

Final Word

It has been a fun week in the financial markets this week, but also further evidence of massive changes in the world economy and ultimately how we all do business.

Just remember, that is probably an underestimate of the effect in the long run.

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