Category Archives: Economy

It’s a great day for an IPO!!


Admittedly, on any given day, I don’t pay a lot of attention to the stock market. That said, I noticed this morning that five companies, across a wide band of industries, chose today to launch their IPOs. There was a sixth one that pulled out at the eleventh hour, but we’ll get to them later. The five newly minted stocks belong to a drug maker (Versartis, VSAR), a  network software play (A10 Networks, ATEN) , another technology company (Amber Road, AMBR), a finance company (TPG Specialty Lending, TSLX, and an e-commerce platform provider (Borderfree, BRDR). Each leverages new technology, innovative thinking, creative applications, and a clear focus on the customer.

Not surprisingly, the investment community reacted overwhelmingly positive to the offerings of all five, sending their prices spiraling up, as subscribers exceeded shares available, and the laws of supply and demand took hold. It is on days like this that I am reminded why we are in business. The companies that demand more of themselves than their customers do, the ones that challenge their paradigms and get outside their comfort zone, and reinvest consistently, appropriately into resources, both technological and human, are the ones that will stick. They possess what it takes to achieve a solid, enduring relationship with their marketplace, and they stand create value, for their customers and their shareholders.

Having read the prospectuses for at least two of these companies, I was encouraged by what I saw. They have a clear, distinct and market-centric leadership vision… They know what they are in business to do, and they have carefully managed their funds to date to provide them with a runway to profitability… They have invested in things of substance, like innovation, people, and the community they live in.

I mentioned earlier that there was one company that decided, on the eve of its public offering, to pull out of the process. I had to wonder: Could it be that the very forces that propelled the other five companies to success, when inverted, became the detriments of this one, failed attempt? If innovation, creativity, market focus, and fiscal conservatism, are turned inside out, what do you have? The opposite of innovation is to be a commodity provider, lagging in thought leadership and execution. What is not creative is by definition stale. Firms that lack a tight focus on their marketplace will demonstrate that they are short on new ideas to be harnessed and adopted by their customers. And, as we have seen so many times, especially with the memories of the “dot com” bubble, financial shortcomings can lead to all sorts of maladies, including organizational death or corporate dismemberment.

The one company that could not launch today, a reseller of retail gift cards (Globoforce PLC) may be analogous to what it means to swim inside a riptide. There are very few ways to survive in a fast-moving current, especially when you lack the skills necessary to save yourself.

Buying a product at retail (in their case, a gift card or gift certificate), marking it up 30-50% from its face value, and selling to corporate customers for employee gifts, is notably short on the scale of innovation and creativity. Lacking any unique or patented technology that affords the buyer something that they can’t get from any number of alternative sources, is not exactly a recipe for success. Ask JCPenney or Kmart about that.

One would have to question where the market focus is here.  And, having read their prospectus, the financials of this company would leave one scratching his head as to why the savvy investor would willfully participate in the offering at all. With short-term obligations far in excess of liquid assets, the balance sheet is unattractive to the point of questioning why anyone would choose to have it published for scrutiny. Marketing will only go so far. At some point the numbers have to be there.

Instead of needlessly pondering the vagaries of one failed launch, I would far prefer to hoist up an Irish brew and toast the five wonderfully exciting and invigorating companies that set a new course for themselves today. Congratulations and a hearty “Cheers!”  to all.

Hugh MacLeod, whom you have seen me quote on many occasions, famously said, “The market for something to believe in is infinite”. I believe this is true on many levels, from the spiritual to the pragmatic, and particularly so in the investment community. It’s what has made the capitalist system work, and has elevated many great inventors and tinkerers to positions of national prominence. Here’s to those who toil, ceaselessly, to be the best there is!

I’m no economist, but….

…the graphic below scares the bejeebers out of me. What it says is that there is a potential tsunami of commercial real estate foreclosures coming in the next couple of years that could quite possibly derail any hope we have for a sustained economic recovery. In fact, if the doomsayers are anywhere near correct, the US economy is in for a mighty big fall.

A recent report from the Congressional Oversight Panel (COP) apparently indicates that there are roughly 3000 small to mid-sized US banks that are projected to fail should the commercial property foreclosure rate maintain its current trend. The COP is “deeply concerned” that commercial real estate losses could jeopardize the stability of these banks and the damage will contribute to prolonged weakness throughout the economy, according to chair Elizabeth Warren.

This blog is devoted to understanding emerging trends, in business development, marketing and organizations, and to echoing the need for proactive leadership to drive positive change. From time to time there is something that comes across the net that points to a shift that could have massive implications on our personal and professional lives. I would classify the potential for a collapse in commercial real estate, to the tune of $160BN+ as being one of those.

What to do? Hmmm. Good question…

I would say to be abundantly aware, and to increase the rate of personal savings, which most of us have been already doing for some time now. Maybe the best advice would be to fine tune your gardening skills. If this hits the fan like some are prognosticating, the one with the biggest subsistence farm will be the winner…

Keep your eye on this in the coming quarters. If I hear or see something that indicates that these numbers are skewed or otherwise misinterpreted, I will pass it along. Will you do the same for me and the rest of us?

Non-performing Commercial Real Estate Loans

Dealing in the new reality…

I speak with people every day who seem to be waiting for the economy to “straighten itself back out”… as if somehow, at some point in the next 6 – 12 months things are going to improve and commerce will return to the state it was in back in 2007 or 2008…  As if somehow there is a giant switch that is waiting to be flipped… And we will all return to the glory days of yesteryear…. I want to say, “excuse me, but you are delusional.”

Folks, in case you have not quite accepted where we are at yet, let me break it to you: Welcome to the new normal. This is what we are going to get. It isn’t going to change appreciably anytime soon. In fact, I have doubts as to whether your market is going to improve much in the next two or three years. That’s an eternity. This is what we have. Stop waiting for something that isn’t going to happen.

If you  are marketing goods or services to consumers, this is your market. Figure it out. If you are in B2B sales, it’s time to stop trusting that the economy is somehow going to turn your business up. It is not going to happen. In the best of situations over the next five to seven years, you are not going to see demand bounce back.

This is what you’ve got to deal with. Sorry. That’s it. Now what are you going to do. You see, if you are willing to take whatever measures you need to in order to manage your business from where you are today, and stop thinking back to where things were two or three years ago, you just might have a shot at survival.

Take a pause. Look around you. Where are your customers headed? Your existence is going to depend on how much more quickly you can get there ahead of them. Everything has changed. Buying patterns, consumer preferences, confidence, credit, and risk-tolerance have all been reset. This is not an anamoly. This is normal. Forget what you think you knew before. That has no bearing on where you are, or where your market is today.

So stop comparing your business results to 2008 or 2009. Instead focus on what you need to do differently to get in synch with your market today and tomorrow. I hate to bust your bubble, but this is it. This is where you are going to be for the foreseeable future. Start remaking your market from today going forward. Ready? Go.

The risks of disengaged employees grow more real…

We have said before that this economic downturn won’t last forever, although it may seem at times to be doing just that. Whether it is in 2010 or 2011, the US economic engine will fire up, consumers will start spending, earnings will lift, and unemployment will finally begin to subside. Early indicators are telling us that the process is already underway (in a way analogous to the start of the recession, which began months before we felt it or saw it in a material way).

For those who run a business, either as a CEO, COO or VP of Human Resources for a large multinational, or as the owner of a small, local services provider, the implications are becoming clear: Your most valued employees are going to be tempted to see what other opportunities exist in the job market unless, or until, you engage them fully with your firm.

Employee engagement is a big topic, with many subtleties and nuances that need to be visited upon. However, there are some looming issues that HR leaders are identifying as the most important.  One alarming statistic says that 20% of employees see themselves as “disengaged” from their employer. Where do you suppose these folks are headed when things turn around?

Another study cited in a recent article from HR Executive (a link to the complete article is included below) is that 25% of “high potential” employees are already looking for new jobs.

A number of core initiatives are being explored now by HR leaders. Some of these include:

  • making it easier for employees to lattice within their company
  • revising executive compensation to ease perception issues with employees, customers and shareholders
  • bolstering efforts around on-the-job development and coaching
  • improved sight lines and more clearly defined roles for employees and management

One big “A-ha!” which was surfaced by Aon Consulting, is that while actively dis-engaged employees may be too far gone to focus on, there are many (often top-producing) others who are “not feeling the love” and are becoming increasingly vulnerable to leave. For these, it is most important to revisit a proven tool that is too often overlooked in a recessionary economy: individual employee recognition. According to a 2009 study, the desire of employees to be recognized by their supervisors or management has jumped 15% since October 2008. As budgets were cut, recognition suffered, and the level of differentiation between top and marginal-performers was eliminated or minimized. One research report found that when employees trust that the best producers will be rewarded, overall discretionary effort rises by 11%.

If you could improve workplace efficiency by 11%, trim voluntary terminations of top performers by a significant margin, and generate a more favorable level of overall employee engagement simply by building a culture of recognition, why would you not do it?

The economy will change, and the need for companies to change and build employee loyalty is now. By the time the job market ticks up, it may be too late.

Some additional food for thought on the subject:

\”Recovery Bound\” – HR Executive (January 2010 issue)

\”Confronting Six Enemies of Post-Recession Performance\” (Corporate Executive Board site)

Understanding what comes next: Economic deleveraging…

The economy is moving through unprecedented trials for the US, as with other developed and emerging  economies. What comes next? And what can we anticipate for a return to growth in GDP, particularly as it impacts our businesses and our lives as consumers?

The podcast below from the McKinsey Global Institute walks through the potential for significant and protracted deleveraging, as debt to GDP ratios come down from the heights of the bubbles that created the problems of 2007 on. How we got here is way over my pay grade… Suffice it to say that massive and increasing debt levels brought about an inevitable bubble that led to a near China-syndrome in the financial system here at home and around the world.

Beyond the big-picture economic impact that has been wrought on us all, some more than others as unemployment levels soar, is the question of what happens next? Will we begin to dig out of this in 2010? 2011? 2012? Ever? The short-term is one thing… the longer pull on an economy that relies so heavily upon consumer spending is a question that has to be on everyone’s mind.  Tighter credit markets and reduced consumption portend ongoing difficulties for thinly capitalized companies, as well as businesses needing to retool or grow revenues to perpetuate themselves.

One thing is certain: This is not going to just “straighten itself out”. The pain that we have experienced is a long way from ending, and when it finally does go, the economic and commercial landscape is going to look quite different from where it was a couple of years ago. If you are waiting for business to rebound so that you can get back to BAU, you are on your way out of business.  This is a one-way track to the future. The economy is dead! Long live the economy!!

MGI: Debt and Deleveraging

Growing Your Business In The “New Normal”

Someone (I don’t know who) once said, “Success is not spontaneous combustion…You have to set yourself on fire.” Wow. What an intense visual, and so apt for the economy as we move into this new decade. Recently, I delivered a presentation entitled, “Building Your Business In A Down Economy”.  While things are improving on certain levels, the economy remains mired in record unemployment and under-employment (lagging indicators) and remarkable volatility (witness the equity market, which moves up and down in fits and starts, while seeming to  trend in a positive direction). Consumer purchasing and confidence levels are slow to move, and there is much hyperbole around the future state of the US  economy, as our country sinks deeper into debt.

With all that said, I’d like to share some of the salient points around how you and I, individually, might adapt to the realities of the marketplace. Essentially, there are 5 elements, and conveniently, they all begin with the letter “R”…

  1. Reach – You need to be in more places (sometimes all at once) than ever before. Decisions are made at higher levels, sometimes requiring buy-in by the CEO or COO where historically funding could occur at a lower level of the organization. This upward migration requires that you be willing and able to carry an effective conversation at the senior executive level. For some, this means a crash course in strategic thinking, finance and a broader viewpoint in how business decisions are made. Are you competent to shift your focus from product or solution “features and benefits” to a meaningful dialog around driving business results? If not, you should consider some sort of personal change. Truly, this is a time to “grow or die” if you are in Business Development.
  2. Relevance – Your customers’ definition of relevance has moved from where it was a year or two ago. The economy has accentuated that “not every good idea is a good idea”.  For some companies, operating in a survival mode, what was a necessity two years ago may  be an unaffordable luxury today. If you can’t bring more value, more results, more efficiently and perhaps be willing to work on a “pay for performance” basis, your client may be on a permanent hiatus.
  3. Relationships – More than ever, your customers must view you as trustworthy, reliable, and consistent. There are too many solutions chasing too few dollars. Your  credibility means looking out for them (both personally and as organizationally). Your future success is riding on your ability to deliver to,or beyond, your customers’ expectations. Now is not the time to cut a corner or over-promise.
  4. Resilience (or Resolve, you pick) – Plan on every decision taking longer, requiring higher-level acceptance, with more involvement than ever by Corporate Sourcing (Procurement) and margin pressure. Nothing will be easy. For most companies, there is no “silver bullet” that will help them to turn up sales or profitability. You need to aggressively network, getting in front of everyone who can share insight or become a coach for you. Give away as much of yourself as you can. You will need to access as many “side doors” as possible to get to the decision (and the decision maker).
  5. Results – The only thing your customers really care about. Forget about your products or your services or your integrated solution or your applications or your patents…Nobody cares. Trust me. Not one person has the time or the inclination to hear what you have to say, unless your conversation is linked to a critical outcome that they must achieve. It’s not personal. It’s business.

Each of the factors above could easily become a focus of more in-depth discussion and analysis. For now, I would offer up that you consider how (and who) you are targeting, what your core message is, and the rationale as to why you or your company are critical to the success of your customers. It’s been said that the internet has rendered many salespeople obsolete, as there is so much information and product/service availability online. Unless you are willing to exist in a world where commoditization will eventually lead to your very role being sacrificed at the altar of efficiency, you must redefine your value proposition.

One thing is certain: The past is long gone, and it isn’t coming back. You can assume that your competition is not standing still. In fact, looking ahead a year or two, you may not even know who your competition is going to be. It’s time. Grow or die. You pick.

Morgan Stanley walks before it has to run MarketWatch First Take – MarketWatch

You have to wonder why Morgan Stanley would incur the risk of a potential (highly likely) media backlash in an environment where executive bonuses are receiving such massive scrutiny. The fact that they are paying out 63% of their revenue in bonuses is astounding in itself. How they are going about determining the bonus levels the executives receive is altogether unique and likely to be a bit controversial in the press.

Either way, it points to more change on Wall Street and in the financial sector, which is sure to continue to undergo massive re-engineering in the coming year. Stay tuned….

Morgan Stanley walks before it has to run MarketWatch First Take – MarketWatch

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