The Times They Are a-changin’
Is the hit song from Bob Dylan that premiered in New York on October 26, 1963. He was living at a time of growing social and political awareness - the Vietnam conflict was escalating. The US failed in their bid to overthrow Fidel Castro in Cuba. The Civil Rights movement was active and Martin Luther King gave his famous “I Have a Dream” speech in August 1963. Lives were being impacted and people had to take positions. The hippie movement was gathering steam, although it would be a few more years before the term was formally introduced.
Now, 50 years later we have recovered from the Global Financial Crisis and the protests of Occupy Wall Street have receded, although job growth is stuttering. Rightly or not, responsibility for the financial crisis was placed at the foot of “greedy” bankers, currency traders and hedge funds. This time, though, one wonders who is going to be held responsible for the disruptions that will arise from the Fourth Industrial Revolution. There are far too may companies involved in this revolution and whilst the aggregate gains to the economy appear to be positive, dislocations within and across sectors will be significant – there will be winners and losers!
Are technologies going to displace jobs or create more interesting ones?
We really don’t know the answer to this question, although in the short term, and especially in the developing countries we are going to see job losses. These will be mainly in manufacturing but also in transaction processing. In the start-up circles, we see a number of new companies create jobs, albeit, in small numbers, that attract young entrepreneurs’ keen to make “tomorrow better than today”. However, several companies have made layoffs and announced plant closures. Layoffs and job losses at the larger companies will exceed jobs created by startups. This is the sad reality of the Volatile, Uncertain, Complex and Ambiguous (VUCA) world that we live in.
STOP! I've had all the change I can take!
Change is the new normal – so do people really resist change?
We are of the view that people do not resist change. But, yes, they will resist being changed! Leadership needs to address this issue and answer the question that is being asked by the rank and file, which is; What’s in it for me? And the answer needs to be sensible and coherent. Instead, CEOs who struggle to grow top-line revenues turn to cutting jobs. Ginny Rometty, CEO of IBM in 2012 was paid a salary of US$1.6 million for 2015 and picked up 90% of her target bonus amounting to US$4.5 million, plus stock options. She then announced huge job cuts amounting to almost a quarter of their 377,000 (2015) workforce! Jack Dorsey, CEO of Twitter cut 336 jobs (8% of the workforce) in October 2015 offering departing employees a generous severance package and at the same time contributed a third of his shares in the company to the equity pool for employees. He tweeted, “I’d rather have a smaller part of something big than a bigger part of something small.” It’s the right thing to do and something that comes naturally to entrepreneurial managers.
Management often does not read the market correctly until it is too late
Kodak waited till Fujifilm established a lead in the digital camera market before it realized that their plan to slowly ease into the digital world was not going to work. Companies today need to change before change is forced upon them. The tragedy at Kodak was the reluctance of senior management to evolve a new business model that would allow them to stay relevant. Instead, they desperately hung onto the film sale business.
Using Technological from yesteryear is not going to work!
Business models, or frames as we prefer to call them [it is a more accurate description], that do not take advantage of currently available technologies are destined for failure. The ambitious mobile phone communications consortium, Iridium, formed by Motorola is an example of a flawed business model. Conceived of by a Motorola engineer, the idea [business model] was to put a constellation of satellites into a low-Earth-orbit (LEO, about 780 km) allowing individuals to make phone calls from special-purpose mobile phones. The first satellites were launched in 1997 and Iridium went public in June 1997. The service commenced in November 1998 but by August 1999 the company filed for bankruptcy!
The business model was flawed for several reasons, the cost of the call was too expensive, the handsets were too bulky, and using the phone required one to be in the open and establish a line-of-site with the satellite. US cellular subscriptions were at 10,000 in 1985 but by 1998 there were 69 million subscribers and call costs were falling rapidly. Unfortunately for Iridium, it meant that their market was shrinking daily. This was the problem of thinking about the business in a static, business model sense, rather than a flexible business frame.
Will Malaysian icon, Proton survive?
In April 2016 Proton was given a RM1.5 billion rescue package, bringing temporary relief for the 12,000 employees and about 50,000 indirect employees at vendors. Motor Trader statistics for the period Jan to May 2016 reveal that Proton market share of 13%, is down from 16% the previous year and a long way down from the 70% share of the 1990’s. The fall from grace for Proton has been steep and with changing car technologies it is unlikely that this small player, with an annual volume of about 80,000 units will be able to survive as an independent company. One hopes, unlike the management of Kodak, the folks at Proton realize they don’t have much of a runway before the company falls off the cliff.
A longer version of this article appeared in Digital News Asia, July 26, 2016.
And in the Edge Weekly of August 8, 2016