The Danger of Complacency

Grant Thornton and the Economist Intelligence Unit have produced an interesting paper called “Retrench or Refresh”. It explores the challenges that all business faces in the new economic circumstances of post recession planning. Although it is general, I was struck by how relevant the principals it espouses are for the business media and the wider media industry.

“Business model change has been overly cost centered and left many companies unready for the future”.
The first recourse when revenues fall is to cut costs often at the expense of changing their value proposition. All media companies recognise that changes to their business model are required to escape from the malaise and yet the cost cuts have been so deep that many are at risk of losing out to more innovative companies. The report expects that cost structure strategies will continue to be the main focus of business model change in the next eighteen months. This is nothing less than a fundamental challenge to business leadership.

The problem with a downturn, especially one as deep as this, and when combined with a technology change, is that business focusses increasingly on the short term – at the very time when good long term strategic thinking is required.

This is because “Executives are pesimistic about a rapid return to market growth”. Some media companies are in danger of deluding themselves about the strength of the recovery. In my view, the better results recently declared simply show how terrible last year was. Compared to the meltdown of the first half of last year, the trading climate this year feels almost benign. But lets not forget that the year on year comparisons disguise the depth of the fall. If in our private moments we are still pessimistic that business will not return to normal then GT’s next point is very sharp,

“Complacency is preventing more widespread business model innovation”. According to the report, 89% of companies believe their company’s business model is set up to let them succeed over the next eighteen months. The danger of a dowwnturn isthat it makes us think short term at the very moment when we need clear long term strategic thinking.

Related articles by Zemanta

• The Bottom Line: Finding a Model for Media (fastforwardblog.com)
• The Media Business: It’s the Business Logic, Stupid! (trueslant.com)

About these ads