Will we have a V, U, or L future? Since the 2008 deep recession, we’ve had an upward movement of Gross Domestic Product and other measures of economic well-being. Growing income inequality and too-low wages were notable criticisms. But even these issues were being addressed. After all, there is no better anti-poverty program than a strong economy. Then came the COVID-19 pandemic. A business owner friend said it’s like a boxing match Round One when the first punch is a bout-ending knockout. He has never seen such a sudden downturn in his many years as a business-to-business CEO and owner. What will our national growth rate look like in the months and years ahead? There are three potential outcomes for the nation, a V-pattern (rapid recovery to pre-pandemic levels), U-pattern (slump followed by recovery), or an L-pattern (the economy stays depressed for years…
COVID-19 is a tsunami that will change markets. Are you ready?
Breakpoints are sudden changes in markets. Here’s a notable example. In the 1980s, the cost of Medicare was rising rapidly, and, at the same time, the Federal government was worried about resources to fund Medicare. (That was a time when federal deficits mattered, but I digress.) The two opposing trends—each getting stronger as time passed, neither giving way to the other—created a forced sudden change. In this case, the federal government rapidly changed Medicare reimbursement from “cost-plus” reimbursement to prospective payments, a set amount per clinical procedure code. The change was not just rapid but highly disruptive. Hospitals did not have cost-accounting systems yet, so imagine their plight with no insight into where their gross margins were being made or lost. Lengths of stay dropped dramatically, and medical supplies and product providers needed to deliver “better” offerings (translated into better financial results for…
Strategies for the Connection Economy Crisis
Who knew? It’s not the technology economy or the service economy that drives our nation’s Gross Domestic Product. It’s the connection economy, a sector that the COVID-19 virus has sadly brought into a swift and costly downfall, and likely business-altering event. The connection economy consists of activities where people convene proactively for fun, commerce, or learning activities. Sports. Education. Restaurants and bars. Movies. Sightseeing activities. Office, plant, and location work. In-store retail. Canceling an event has significant multiplier effects on industries that are part of the process. Consider the cancelation of the Final Four NCAA tournament. Plane fares, gasoline, restaurants, hotels, Lyft/Uber drivers, t-shirt companies, arena fees, and contract work all disappear. The cancelation of South by Southwest will cost Austin $355 million, and that does not include all the ad agencies and performance artists whose work disappeared. And these examples are merely…
5 ways to keep your brand relevant
Your business can do many vital things well. High customer satisfaction ratings. High quality at a competitive price point. Great customer experience. But if you become irrelevant to the tastes, interests, and requirements of customers, all that “right stuff” won’t matter. Therefore you must understand where markets are headed, not just what’s relevant today. Let’s think about some current trends and imagine their impact by flashing forward 30 years when the last year of the baby boomer cohort (those born in 1964) turns 96. Will gas-powered cars be relevant? Family farms (sadly)? Long-haul truck drivers? Landline phones? Printed newspapers? Going to a doctor’s office for a simple exam? Single-use plastics outside medical markets? Leaders managing brands do the work of future forecasting because they want to evolve their offering to remain relevant. When leaders fail to do so, their brand (and often company)…
Why changing healthcare policy is so messy: Part One
The market mechanism is a remarkable process. Buyers and sellers exchange money in an open system that produces prices and production levels to equate supply and demand. (Also known as Keynes’ invisible hand, the market mechanism is an alternative to central planning.) Chinese leaders added the market mechanism to its communist political system, and economic growth skyrocketed. In theory, the market mechanism leads to an ideal allocation of goods, services and workers’ efforts for society. In practice, ideal output misses the mark when prices fail to reflect societal benefits and costs, consumers are not well-informed, or monopolistic-like power exists. One area where the market mechanism often fails is healthcare. A healthy population benefits everyone, from employers in need of a productive workforce to the government (and taxpayers) who cover the costs of the social safety net to each of us as individuals…
Will the #MeToo movement improve workplace cultures?
Multiple brands have suffered reputational damage following news of abusive work environments. Fox News, NBC, Unicef, The Weinstein Company. Even NPR is on the list, following accusations against Garrison Keillor and head staff in their main office. Welcome to the #MeToo movement. The strategic question is not, in my mind, “Why did abuse occur?” Rather, it’s “How did abusive behavior happen in organizations that had everything in place we thought should prevent such abuse?” Value statements Policies from the human resources department Compliance training for all employees Compliance systems for reporting bad behavior I for one am not surprised the fortress failed. During my tenure at a Global Fortune 500 company, my project leader accosted me verbally at a dinner. The ex-marine insisted on knowing my politics, railed against political correctness, and discussed owning assault-style weapons. He would use them, he claimed, to…
The Healthcare Sector Braces for More Transformation: Is your business model ready?
The Xconomy San Diego Forum on the Human Impact of Innovation offered a window into how information technology and science, marching hand-in-hand, will shape healthcare. “IBM’s Watson is not the only breakthrough game in healthcare,” was the best summary of the afternoon. Today’s unpredictable markets demand that as you maximize performance from your current business model, you must in parallel be designing and developing new business models to disrupt the current cash generators. Otherwise, start-ups will turn your company into a dinosaur. In doing this leadership work, consider four key trends highlighted in the conference. Each one alone portends major changes for a number of players in the industry and the combined effect of which will surely reinvent the entire sector. 1) Advances in “micro” medicine Healthcare technology is increasingly leading to a better understanding of what’s happening at a genetic level. For…
“Lions and Tigers and Cyber Threats, Oh my!”
The first mistake companies make while trying to protect their digital assets is to believe they can be secure. “Forget aspiring to full protection. Hacking is black magic engaged in by a ton of bad guys from Russia to Romania whose citizens do not necessarily view them as the bad guys,” Eric Cornelius shared at Fusion 2017. Cornelius serves as the Director of Critical Infrastructure and Industrial Control Systems at Cylance, a software firm that predicts, prevents and protects its clients, many of them Fortune 1000 companies, from cyber threats. “What you can do,” he argued, “is understand and then manage your cyber security risk from sophisticated threat actors who aim to steal your data or disrupt your business.” Cornelius gained my undivided attention when he explained exactly how one of these bad guys gets past a company firewall and steals the crown…
Practice creates strategic agility for the Green Bay Packers
Hail Mary passes in American football are named after a prayer for a reason. The chances of the quarterback connecting to a receiver over a long distance make this kind of pass look like an act of desperation when the clock is close to Game Over. Did prayers miraculously come true for Aaron Rodgers’ last-chance effort to win their Green Bay Packer’s second game against the Detroit Lions? No. The final pass was not entirely an act of desperation requiring heavenly intervention. Rather, practice made the play part of the Green Bay arsenal; and practice made perfect. There is a lesson in that for all of us as organizational leaders. Apparently Rodgers and his teammates regularly practice long passes, and did so at least three times the practice before the Lions game. Green Bay’s preparation for the final attempt to score also included…
Building, shifting, and destroying value
Economist Joseph Schumpeter called waves of industry change “creative destruction.” He argued disruption of the current industry structures and companies built a nation’s wealth. Most economists agree, viewing creative destruction as a necessary ingredient for economic growth. But Schumpeter was writing in 1942. Is creative destruction still a positive force in today’s world? Or are the benefits of creative destruction more nuanced and the costs far greater than Schumpeter argued? As I reflect on this question, I observe three types of disruptions to markets: new-to-market capabilities, reshaping of the industry value chain, and consolidation. While all three create winners and losers, the net benefits to society differ. New-to-market capabilities disruptions include examples like the steam engine, the telephone, the electric bulb, genetic profiling, and personal computers, creating industries that allow us to do things previously impossible. When an entrepreneur brings new-to-market capabilities to…