Riffing on Newton – Investing in Your Business Now
I finally saw Hamilton last week – what an astounding piece of art. I am still humming the songs and thinking about their larger meaning. I was thinking about suggesting a follow up to Lin-Manuel Miranda to explore the life of Sir Isaac Newton. Think about the rhyming possibilities: “For every action, there is an equal and opposite reaction…” What fun that would be. While Newton was certainly thinking about physics with his 3rd law, there is a subtle relationship between his observations and today’s economy.
Several weeks ago, I wrote about the need for companies to reduce costs and offered an action framework to consider. The opposite reaction to this is the opportunity to spend more money. Yes, I said it. Why would anyone want to spend more now? It’s like the explanation in the movie “It’s a Wonderful Life” during the run on the bank scene. The antagonist Potter wasn’t selling, he was buying! Why? Because he realized that the bank assets were cheap and it was a golden opportunity for him if he was willing to take some risk (fortunately for us, Jimmy Stewart realized this as well and was able to save his business). Which brings us to today. For some businesses, assets are cheaper and more available than they have been in some time and if business owners are willing to take some risk, they may very well be getting incredible deals that will pay off in the future.
Here are a few examples:
Labor – as of June 2020, there were 18 million (11.1%) unemployed people in America – white collar, blue collar and every collar in-between. Prior to Covid, the labor market was tight (under 3.5% unemployment) and it was very hard to find talented people, no matter the price, across many different business sectors. Now they are out there and many companies will be able to find and employ excellent people at a reasonable price. This does not mean that employers should try to take advantage and squeeze employees to take less than a market wage. It does mean that employers should seek out exceptional talent and pay for it. People remember how they are treated, especially when they are down. Giving someone a job when they are unemployed is one of the most meaningful things one person can do for another – and engenders loyalty like nothing else. Now is a perfect time to make specific investments in people to accelerate powerful updated long-term business strategies – perhaps new products, services and delivery capabilities that improve efficiency or can help generate revenue. This will clearly require some calculated risk taking by business owners and managers, but it represents a golden opportunity to position a business for success while building a bench of talent unattainable just a few months ago.
Training / Education – along with new talent, now is the perfect time to invest in upgrading the skills and talent of your existing staff. There are a number of online training tools that can deliver excellent technical and non-technical training to employees in a very cost-effective way. And now that folks may have some extra time, why not encourage them to upgrade their own skills by providing a robust and targeted learning platform. The ROI for your business will be significant in the long term. Many vendors will be looking to price aggressively and will work with you to build a sustainable plan.
Technology – For many businesses, there will be a need to reduce technology spend for redundant platforms or de-prioritized investments (nice to haves). At the same time, there is now an opportunity to change a business model, for example, by moving compute/storage heavy applications and related data and infrastructure (including information security) into the Cloud (in a controlled way) – which can be more cost effective with the right planning. There are many overt and hidden costs associated with developing, maintaining and running your own applications and related infrastructure. Look across the business technology stack and identify areas that have become more like utilities that do not require bespoke solutions - and pay for them like utilities. There will be some (significant in some cases) upfront investment required, but those companies willing to use this opportunity to improve their technology will be able to operate much more efficiently and nimbly in the long run when business patterns improve.
Automation of Procurement / Supply Chain – somewhat related to the cloud-based application / infrastructure investments are improvements in supply chain efficiency. Reducing waste and decreasing the amount of inventory a business needs to maintain will be critical for success going forward. Vendor technology has been built to greatly improve procurement cycles / supply chains and businesses would be well served to consider investing in these solutions and making the changes now while they have time and before they get distracted and refocused on other priorities.
Automation of Workforce Management / Finance – These are other examples of software as a service (SAAS) solutions that can be used to help businesses focus on what they do best and what differentiates them, while sourcing the non-differentiating technology externally and running it in the cloud more efficiently – letting someone else manage updates, risk and infrastructure. The trade-off can be control - a limitation on bespoke solutions and not getting enhancements as fast as you might want them. That said, most companies should be able to find a solution that works for their business without much customization at a reduced ‘all in’ cost. There are enterprise solutions for larger companies (e.g. Workday), but there are also many products with solutions designed for smaller companies and priced accordingly. These solutions are better when they are more easily inter-connected (not all of them are) so it is important that business owners consider the long-term implications even when making incremental changes. It is also important to consider the strategy of the vendor to ensure it aligns with your own needs (e.g. do they continue to innovate and enhance their product on a regular basis?)
Digital Marketing Strategy – The importance of having an effective and comprehensive digital / online marketing and branding strategy cannot be overstated. Many companies have not yet invested the time and financial resources necessary to fully take advantage of the opportunities offered by the digital economy. The irony of this is that digital marketing is proven to be just about the most cost-effective marketing available for most businesses. The emergence of specialist marketing companies that help businesses develop and execute digital strategies now provides a way to quickly catch-up and move ahead of competitors in many cases. They are able to assist with things like: Target Market Identification, Search Engine Optimization, Website Design, Social Media Presence (e.g. blogs) and Email Campaigns. While Covid may not have significantly lowered the prices for these services, it is now easier to find talented people available to help. This is another example of an investment that has potential for tremendous returns over time.
Real Estate / Space – this will be the most head scratching of them all, but while certain business will no longer need physical real estate, many of them will continue to desire some type of physical presence. Today’s Covid model of “working 100% from home” is unlikely to enable most companies to build a culture necessary for long term success. There will likely be a blend of streamlined central offices, smaller satellite offices and the work from home model. Clearly prices for commercial real estate will be significantly impacted by Covid and there are going to be amazing deals to be had. Those with a long-term view and a solid business location strategy might take advantage of a once in a generation opportunity.
There are many opportunities to strategically invest right now – it takes some courage and careful planning, but the rewards will be worth it.
So, with apologies to “Hamilton”: ‘All of you business owners and managers out there, don’t “throw away your shot” and wonder “what did I miss?”, when you apply Newton’s 3rd law to your business you might just end up in bliss.’ I’ll let you take it from there Mr. Miranda…
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