In one way or another it seems we are in a world that has changed so much that we ended up in an economic turmoil causing job destruction. Has something changed and we have not adapted to it? If yes what is it? Let us go back a bit into history and I am going to narrow my focus onto Europe only.
After the 2nd world war and its consequent destruction there was demand for whatever you name it. End 40s and beginning 50s entrepreneurs started companies to cope with this demand. The founders where the fathers and mothers of the so called baby boomers. Many of these companies did very well and growth started because of the high and growing demand. In order to keep up with demand, production methodologies became more sophisticated in the 50s and 60s. In the 60s and 70s the baby boom generation started to enter the company of their parents and learned together with them how to handle demand and how to supply.
The following 80s and 90s were the years of increasing the quality. Do you remember TQT? Total quality management? ISO? Quality had to improve because the demand side of the equation had reached higher levels of buying power and had become more sophisticated. Competition started to be important. A competition in product features and in quality.
How was their marketing and sales? Let me say very traditional, with sales agents, sales reps knocking on doors. Advertising talked about the features of the product. Demand was still growing but not that steep anymore. Supply also was growing and perhaps faster than demand.
In the 80s and 90s the baby boomers were now trained and running these companies. Most companies would supply on a regional or national scale. Some exported already.
Around the change of century we see the start of globalization, we see the birth of the web and we suddenly find ourselves with some sectors in overcapacity in supply. All problems that management was and perhaps still is not used too. Remember they had learned how to run a company in the 60s,70s and 80s. Also politicians, trained in these years now started to wonder how to create growth and jobs and in most cases failed and still fail to keep their promises. General comment is that it is not fair that Asia is cheaper. They cause the problem, it is not our fault mentality.
In Cohen & Simons we use the following graph to explain this situation:
Therefore we have ended up with companies still very product oriented, trying to sell with sales reps with many contacts, knocking doors and making the best product that everybody will love and buy. The CEO of a 20M UK company once asked me “why is it that with our superior quality there is not a queue waiting to buy our products?”
Today companies have to compete on their marketing and sales skills, something current management is not used to. Remember they learned their job in the 50s, 60s and 70s. Interesting is that if you look at startups, many of them still invest the majority of their cash in adding features. And sales? We will go viral or people will love this product and become excited and buy it.
Time to shift gears and redesign the business. Unfortunately a vast majority of companies still uses and wants to use the business models they grew up with. Product features, hiring technical skills instead of attitude, paying sales commissions only and management by control and command are not the way to go anymore. Yes it is difficult to get out of the comfort zone.