Not so long ago – in the 20th century and before – boom-to-bust business cycles may have been 20 years long, or longer. Although the cycles in those days were quite pronounced, with the Great Depression representing the granddaddy of them all, they were less frequent. They were pronounced because there was little that central banks, governments, or business leaders could do about them. Moreover, important safeguards like banking and securities laws hadn’t yet been put into place. So people – and businesses – were literally wiped out in those days without ever knowing what hit them.
Today’s business cycles are more frequent, generally shorter, and generally turn faster. More potent economic management through monetary and fiscal policy tends to reverse the cycle more quickly. But the biggest change over the years is the change in the speed of business – the rapidity in which business decisions are made and products and services are developed and sold. The pace of information about those products, as well as the economy as a whole, has become so much more rapid that entire sectors of the economy can change on a dime, in much the same way in which the latest military conflict or supply change can change the energy industry.
Put simply, new technologies of yesteryear last longer than their counterparts today.
Railroads, the great new technology of the 19th century, had a huge impact on business and commerce nearly everywhere. Their dominance as a transportation technology lasted over 100 years. Fast forward to radio. As a major communication and advertising medium, its dominance ran for 40 years until eclipsed by TV. Fast forward to PC’s and their key components. Seen a 3½-inch floppy disc lately? Then there’s VHS video. Dial-up Internet service. The Internet itself – how long do products last these days before they must change or evolve?
The obvious answer: not very long. In almost all industries – even industries where the product doesn’t change (like coal mining) but the process does – companies must deal with change, and rapid change at that. Not only does the “speed of business” make change happen faster within the enterprise, but the quantity and facility of rapid communications between customers and businesses has also played a role. The Internet has increased customer awareness, expanded feedback, and provided a medium for customers to share experiences with each other – all serving to level the playing field among large corporations and much smaller companies in many aspects of their business. The Internet has also increased pricing transparency, enabling customers to make price comparisons at a speed that was unheard of 30 years ago.
There are two upshots.
First, combining the availability of product information, price information, and peer review of many key products, customers have become far more conscious of the net customer value they might expect to receive from a purchase.
Second, competitors can copy or imitate even the most breakthrough technologies very rapidly. Trendy or market-leading products risk becoming obsolete almost instantly, and as the world becomes a global marketplace, competitive pressure is both wider and faster.
This isn’t an economics book, but it’s clear that innovation must respond to this environment. And it may not be enough to respond – true innovation success – and I’ll argue this point in good times or bad – means that successful organizations must drive the environment. The good ones will pace the change, not just respond to it, in good times and bad. For information on innovation consulting and training visit https://mylearnlogic.com/innovation/ for information on innovation speaking visit https://www.nickwebb.com/innovation/