"It's the economy, stupid"

"It's the economy, stupid" was a phrase in American politics widely used during Bill Clinton's successful 1992 presidential campaign against George H.W. Bush.

The recession at that time cannot be compared to the current one (in size and matters) but when looking at corporate campaigns the phrase has lost a lot of value.

Corporate spending on information has drastically been reduced as part of a total cost cut. This looks relevant and necessarily but what about economic intelligence?

Since May experience learn a lot about corporate spending behavior. Where outlooks remain grey and lacked with visibility it is not a surprise budgets for information have been cut.

Market conditions still show a volatility that should keep professionals informed of the potential business opportunity, even the smallest, which world wide is much decentralized.

This requires more time and stress testing to make sure when getting back into markets risks remain under control as far as possible.

Professionals in prosper times easier can make decisions as market conditions remain profitable but why not exploring better tools in desperate times?

To answer this it might be a false accusation but is it logical when economic outlooks are missing any visibility to continue with existing data providers or tools?

What makes decision makers decide to maintain essential economic information to support operations while the past 12 months no additional value was seen?

There can be five explanations for these questions:

1. They simply do not care or miss time to care. Business leaders, although referring to the economic impact on corporate development, do not look at macroeconomics or find them relevant in their decisions. They have other priorities.

This can be true because at certain levels, at the top, there is not time to monitor every country of interest. But what about lower levels of corporate finance & control, strategic planning, business development, market intelligence etc?

Why would in these departments managers not consider more effective tools for macroeconomics?

2. They leave these decisions up to their teams. Why would professionals not inform their upper management of possible improvements?

3. Only in good times it is allowed to spend on secondary information, such as macroeconomics. In other words when there is a budget left over.

4. A change would implement extra attention and labor to make the change successful. The fear of a change to distract people and learn another tool seems to override the potential benefits.

5. As discussed in other blogs it is fear itself of making a wrong decision. Rather no changes than any change that can jeopardize someone’s position.

Combining the above it still does not justify not welcoming improvements in terms of less spending, more time efficiency and overall benefits for each employee using macro to complete micro. What happens when nothing changes?

1. Total costs remain at the same high level or are even increased. While with current information providers discounts could be achieved any kind of synergy will be missed as long as additional benefits cannot be integrated.

2. Besides costs such as fees labor expenses are often higher because not all employees have access and need to find alternatives (internet is the worst alternative). People often forget to be on the pay roll.

3. Costs of risks cannot be calculated but when not improving any efficiency level operational results will rather decline than remain stable. Professionals in downturns often face higher work pressure and risks will be higher.

What can happen when making the right changes?

1. Total costs will be reduced as no longer (over) expensive and overvalued information providers are used or new tools are added to compensate them.

2. Corporate time savings will lead to lower labor expenses. As people have more time for core business, core business will directly benefit which increases the ROI.

3. Less stress and better time management can help risk assessments in for example market analyzes, financial reporting or strategic planning. Even business decisions are better supported.

Conclusions;

Instead of walking away from changes or being afraid of them it is better to consider them. It is too easy to claim satisfaction or sufficient access to available alternatives.

The past period has learn there is no such thing as “security”. When not being open for change will harm your corporation. It is then no longer the economy but corporate inefficiency, stupid!

p.s. This blog is written on personal title but related to my work as Global Sales Manager of FocusEconomics

"Reliable is no longer realistic"

How reliable is current business / market intelligence?

Global providers have earned a lot of credit before the financial crisis and economic meltdown started. Projections about sectors and industries were often very realistic and producers used this guidance to the top.

Analyzing markets in a downturn is a different ball game. First analysts have to get rid off their wrong projections. What was predicted in 2007 did not happen in 2008 and in 2009 etc.

Secondly adapting to more challenging market conditions must not be underestimated. This will not lead to better advises while clients should demand more values for their (high) fees.

Third and perhaps most important information providers can no longer rely on their historical performance. Without changing these promises to clients it would be harder to keep them.


Was it really quality info or just benefiting friendly market conditions?

Without doubt experience counts. Explaining an industry and the trends or competition and pricing can only be done after years of study and involvement.

Information providers could claim therefore for years their knowledge and valuable analyzes. Selling it for large amounts was not difficult as budgets were available and in an upturn there is less doubt (worry / fear) about the outcome.

Until two years ago. Without having to study all predictions made in 2007 or before half 2008 it can be said that 99% did not happen due to the fast and unexpected turnaround in global markets.

Exceptions were hard to find and therefore a lack of quality information is nowadays a reality.


What is left of the value of current industrial analyzes?

While facing difficulties in most markets and countries up till now the past two years many information providers continued with making wrong predictions.

It seems the strategy of pleasing customers with positive information about their industry, even though at much lower levels than before 2008, was for many the only or best option.

Reports about recoveries in all sectors are floating to the markets and many use historical excuses for explaining their projections.

Instead of becoming more conservative most remain focused on what the client would like to hear and not about the very small chance of a fast recovery.


As historical performance is no longer a guarantee for offering realistic future information, what should information providers do?

All main information providers claim to be reliable and being the best alternative for their clients. But do they learn from this set back and can they adjust to keep the client on board?

Information providers must stop selling their past performance. Until now they got away with it as most clients kept buying information.

But what happens when this buying dries up completely due to the ongoing budget cuts inside companies?

When information providers cannot adjust and offer a better service, becoming another value for their client than only delivering the same wrong conclusions it will be a tough short term future.

Conclusion:

There are too many similar information providers (wrong). Too many offer the same reports about a certain sector or industry but instead of being critical they remain positive or at the save side.

Probably out of fear of losing the client. Some still can afford to warn their client that what is ahead is not delivering same profits as 2-5 years ago. Would it not be normal that current analyzes are less positive to make them more acceptable or at least more understandable?

Here lays the difference between quality and price/value. Consolidation is good for every industry and also for information providers. From large providers to small consultancies there will be tough times ahead or already facing.

Changing the core business to improve it is best to do. Offering a better service including discounts could work for now. But what really would help is stop selling unnecessarily optimistic expectations which finally do not occur.

At the end that only creates false hope, intimidation and wrong assessments. It will not help any company reaching final goals. Reliability based on only analyzes is no longer realistic in this business climate.