Monday, July 20, 2009

The New Normal and Implications for Business

The 90s seemed to venerate vision, exit strategies and marketing communications, but the New Normal is changing this and businesses that want to survive need to understand the implications.

More than one year ago visionary investor Roger McNamee reviewed the ways in which the New Normal differs from previous business cycles. Before the recession and the onset of the New Normal, the business world was enthralled with the belief that "the Internet changes everything" said McNamee, and, "people used it as license to defer profitability."

This Internet fixation encouraged business people to favour growth over due diligence, market share over leadership.

In contrast, the New Normal is about creating real value and reflects the understanding that although technology is woven into the social fabric, it is only one --albeit important-- facet of multi-dimensional success factors. The New Normal also returns us to more rational timelines. "Internet time measured everything in days or weeks. New Normal time is measured in years."

In the New Normal everything takes longer, the era of fast money is over. Although capital is more expensive, the market now favours those with strong business plans that can produce tangible near term results. "the big shift is from a focus on growing market capitalization to a focus on creating real economic value."

Businesses still have a long way to go to adjust to the New Normal. The first steps involve carefully reviewing cost structure, leadership and long term strategies. It takes a lot to be successful in the New Normal because businesses not only need a great product or service, detailed planning and strategies, and a team that can deliver they also need to have paying customers.

One of the major challenges associated with the New Normal is that there is no single strategy companies can employ to adjust. Effective leadership will come from a combination of flexibility and responsiveness.

The demands of the New Normal make today's economy harder for business, so it should be expected that there will be many who will not be able to stay afloat. Businesses should focus on their core strengths because those that are too diversified are not going to perform as well. Further, those businesses that have effective strategies will be much more likely to prosper than those who simply look good on paper.

The New Normal is forcing businesses to become more efficient and better oriented for the long term. Businesses need to be more practical and more realistic because in the final analysis the New Normal is about "real life and real time," this translates to tangible results from strategies that create real value.

Through a process akin to Darwinian evolution, businesses that are built on unsound foundations are succumbing to the New Normal. However the New Normal should not be viewed with contempt, it is actually helping to create a more rational and sustainable economy better positioned to meet the demands of a changing world.

The New Normal represents a momentous leap in the evolution of business. Those businesses that adapt to the new normal will be competitive while those who do not are threatened with extinction. The implications for business are obvious, get real or die.

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