Everything works until it doesn’t. A simplistic and unusual statement, but I think this market warrants such a thing. It is prophetic from the standpoint that fund managers and their various strategies worked for years with great returns and seemingly perfect investment models. Then something like the severe credit tightening causes almost a complete freeze across the board and their models no longer work. The statement is also true for companies’ sales strategies, business models, executive compensation and growth prospects.
This market has humbled even the heartiest of souls and the best of companies. The complete and systemic tightening of the credit markets, the crashing of the “creative” derivative instruments and the global slowdown in overall consumer purchasing has created a new paradigm. It has put a glowing spotlight on companies and management teams who were wholly unprepared for this current economic climate. There is an old saying or better yet mantra with US business which is be your own competition. What does this mean? I believe the best example of this is Starbucks Corp (NYSE – SBUX). How many times have you seen a Starbucks literally a block away from another one. This is a classic example of intense growth just for growth’s sake and being your own competition. That model is broken and domestic companies large and small are learning that growth only works if it is done strategically, through innovation and/or through targeted marketing and sales efforts.
A classic, old school, example of companies lacking innovation and growth are the Michigan automakers. GM (NYSE – GM
) and Ford (NYSE – F
) are perfect examples of this archaic thinking and slow to move implementation. The American automakers were slowly trying to figure out where they went wrong with quality, pricing and consumer demand but in the meantime they were caught utterly unprepared and in a situation where they went hat in hand to the US government for bailout funds. The status quo has changed forever and unless US companies can now understand and streamline their respective operations they will be relegated into second tier status, or worse, obscurity. Many industry watchers are literally pinning GM’s hope on their new electric vehicle the Volt. This could be the car giant’s last chance at redemption from the domestic auto consumer.
Innovation has typically come from smaller companies and it is what America has been built on. Going back again to the automotive industry for a moment, there is a small company that has been on the leading edge of drive train and power system development for alternative fuel vehicles. Quantum Technologies (NASDAQ – QTWW) is a leading developer of alternative fuel technologies. With such technologies they are building hydrogen powered vehicles and their most innovative product the, Q-Drive system, which is a plug in hybrid electric vehicle fuel alternative. This new innovation is being used in Fisker Automotive’s new vehicle, the Karma, which competes directly with the Tesla Roadster, an electric sports car. Quantum is leading in automotive innovation which will power tomorrow’s cars. In other words, everything works until it doesn’t. That is why the nimble companies will be best positioned to capitalize on the state of this new economy. There is an old saying that the definition of stupidity is doing the same thing over and over again expecting a different result. Let’s see if US industry can learn and lead.
Disclosure: The author, Me, does not own any of the companies mentioned in this article.At Bertram’s Hotel video
3 responses so far ↓
1 Gary // Feb 23, 2009 at 8:39 pm
Andre,
Good blog. American business needs to get back to being creative.
Gary
2 Rick Glass // Feb 23, 2009 at 8:43 pm
I think your next article should be on Congress doing the same thing over and over and expecting new results. What company keeps spending more than they bring in and every year adds more to the outgoing side of the ledger? How can Congress be upset with CEO’s giving themselves a Golden Parachute–when they themselves have done the exact same thing.
3 Erik Martineau // Feb 23, 2009 at 11:23 pm
Very good article Andre. The fact is the US needs to be more innovative and groundbreaking in their approach to new things. They need to stop relying on other countries to supply what they can easily be making themselves and at an even better profit margin. There is a saying among groups that if you want to be successful you hang around succesfsul people, so the US needs to learn from the countries that thrive and expand on that instead of giving in and hoping for the usual government hand out.
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