Экономические науки/ 10.Экономика предприятия

Волчков К.С.

Донецкий национальный технический университет, Украина

Factors that endanger companies

The emerging business climate is more punishing than ever to the slow-moving and the inefficient. Sustainable growth is no longer a bonus; it is a baseline expectation. Old ways of managing information may have worked in the past, but they are already constraining some organizations—and dooming others. It is time for enterprises to:

Reassess their ways of managing and using information;

Continually strive for systematic evolution to more competitive information management models.

Factor 1: Compressing business cycles.

The productivity-building tools that enable your organization to design, develop, and deliver faster than ever are also doing the same for your competitors. Technology-based advantages also deliver a dark side by compressing business cycles into a fraction of their previous span. Processes that once fit a 7-year cycle might now be compressed into 18 months or less. Today’s unique product or service quickly becomes tomorrow’s commodity offering. Time to market, once measured in years, is now measured in weeks. Survival and profitability demand up-to-the-minute understanding of the big picture and constant innovation. Complex global organizations require multidimensional vision.

Factor 2: Squeezing an orange.

In the last decade, companies have invested significant time and money optimizing their operational processes implementing enterprise resource planning (ERP) systems to produce huge cost savings and competitive advantage. Naturally, so did their competitors.

Operational optimization for efficiency’s sake is like squeezing an orange. The first time you squeeze it, you get a significant return on investment. The next time, you get a little less, and less. And everybody quickly ends up in a commodities war. The absolute best you can accomplish with an ERP is parity with your competitors.

Maybe the answer is not squeezing a few more drops out of the orange, but questioning whether more orange juice is really producing more profit. Maybe those efficiencies are being gained at the expense of innovation, market alignment, and enterprise-level goals.

Factor 3: New shapes of business.

For five years or more, our economy has been on a wild ride that has both challenged and reaffirmed all notions about “business as usual.” Sure, the old rules of business still apply: Money counts. Profitability matters. Customers are number one. Stakeholders rule. Competitors are hungry. Yet at the same time, the old rules of business have been reshaped by double-edged trends of opportunity and challenge. Along with new promise came new problems:

The information technology (IT) advancements that generated gigabytes of data about every phase of the process also drowned the systems that were supposed to capture and digest it.

The technologies that were supposed to be cure-alls failed to resolve root business issues, because the interdependencies of people, process, and culture had often been overlooked.

Every organization has felt the pressure to (1) respond more quickly to (2) constantly changing market demands with (3) higher quality products, while (4) trimming workforce, waste, and costs.

Factor 4: Volatile markets reward a company’s agility and willingness to evolve.

The natural corollary to Factor 1 is that change is endemic, and it comes around more often and more rapidly than ever. Volatile markets squash companies for having poor business models, and they punish harshly for indecision. In a competitive environment that is anything but static, successful enterprises need more than static processes. They need more than rearview-based planning in a world where future trends are not reliably derived from past results. They need to drive and harness change rather than react to it, to focus on what will create value for the organization in the future rather than on tallying up historic results.

Factor 5: Advantages and disadvantages of globalization.

The World Wide Web and the corporate virtual private networks it supports have transformed the smallest organizations into global entities and the largest organizations into “local” entities with virtual teams and processes that span the globe. This means:

Your potential market is as widespread as the reach of global communication networks.

Your suppliers and other outsource partners can be strategically chosen from the lowest-cost countries.

You can attract the best and brightest talent for collaborative teams, without requiring them to relocate.

But:

Your customers are increasingly crossing borders and expecting you to respond to their needs in every country in which they operate.

Process- and quality-control issues are now complicated by spanning continents, languages, international standards, and cultures.

New international outsourcing, partnering, and marketing options—while increasing choice and flexibility—also raise the complexity of doing business.

The Web itself proved to be an accelerated test bed for thin business propositions.

Factor 6: Under the oath.

In the wake of high-profile corporate accounting debacles, the U.S. Securities and Exchange Commission (SEC) has taken things personally. That is, the SEC is now holding chief executives of public corporations personally accountable for the veracity of their financial reporting—and the controls and assurances on reporting processes.

The Sarbanes-Oxley Act requires the top executives of publicly traded companies to personally swear by their financial statements—and to financial-reporting controls and procedures. Executives who willfully certify statements they know to be false can face criminal charges, fines up to $5 million, and jail terms of up to 20 years.

Just ask ex-WorldCom chief executive Bernard Ebbers. In July 2005 Ebbers was sentenced to 25 years in prison for his role in an $11 billion accounting scandal, the largest corporate fraud case in the nation’s history.

In a perfect world, corporations would have perfect answers for all of the new legislative challenges. In the real world, however, Sarbanes-Oxley asks some tough questions for which many existing information infrastructures have some shaky or stopgap answers.

Factor 7: Value of the information in business.

The natural outcome of Business Realities 1 through 6 is that companies have to be faster and savvier than ever. They have to be more innovative and adaptable. They have to achieve more with less: More growth with fewer resources. More profit in a short tenure as market leader.

Decision makers must have up-to-the-minute access to intelligence about all issues that influence their decisions—and all issues their decisions affect.

Companies must extract maximum value from the information they have about suppliers, customers, competitors, and global markets.

Information is no longer a transactional by-product of business. It is the lifeblood of business itself.

Literature:

1. Jim Davis, Gloria J. Miller, Allan Russell. Seven Realities That Jeopardize Business Survival.

2. Barbara Weltman, Jerry Silberman. Small Business Survival Book: 12 Surefire Ways for Your Business to Survive and Thrive.

3. Lakshman Achuthan, Anirvan Banerji. Beating the Business Cycle.