Permanent Changes arising from the Economic Crisis

Changes? What Changes?
Change InvertedThe ongoing worldwide economic crisis has created many obvious changes in behaviour, mostly focused on the effects of reduced funds. Whether it is the fear that makes a salaried person “tighten” his or her budget or someone who actually has less money coming in (for example, an entrepreneur struggling to make ends meet or, worse yet, someone who has been fired), there is less money floating around. However, given human nature, once the world’s economies recover and businesses reignite, with fuller employment, most of these shifts in behaviour will inevitably revert back in pavlovian style to the habits of the past.

The question that interests me most, however, for this post is which of the changes will be permanent. The profound changes in culture and the creation of related new processes are what will cause the change to stick. Many of the changes pre-date the recession, at least in their origin. The recession has also provoked new business models and practices. Among the lingering changes in behaviour, clearly, from a corporate standpoint, managers who have never had to face such difficult times will have plentiful learnings which should augur well for being better prepared in future downturns. A perfect example is how management at internet companies have managed this crisis much better since getting their proverbial fingers burned in bursting of the internet bubble in 2000-2001.

I will present below which four major changes I believe will have staying power, at least in the much of the developed world.

Durable Sustainable Development Effects
Instant Sustainable Development

As the need to green has invaded mass media, I have three thoughts here about the more lasting cultural shifts: (1) There is clearly a move away from heavy consumption of fossil fuels (SUVs and cars in general), creating new habits such as walking to work or taking public transport which may, in turn, help justify and finance more public transport development. (2) Purchasing “green” for the long term should have, by definition, a long tail. An example is the purchase of long lasting LED lights whose benefits of durability and low energy consumption are slowly gaining traction, even if they present a higher upfront cost. (3) Attention to reducing water consumption has meant walking away from bottled water (at restaurants as well as at home) and perhaps showering a little quicker and, perhaps, less frequently… On average, every minute under the shower represents 2 gallons or 7 1/2 litres. (Find out how much water you use daily with this handy USGS calculator here). There’s a continuing business opportunity for the water filter companies, although it is not so good for the shower gel business.

ChangeGoods that are good for you and the end of consumerism
I would argue that, for an ever growing part of the population, there is going to be a true and lasting trend away from hyper consumerism. Ownership is not all it is be cracked up to be. Beyond the worry of reduced finances, the issue of buying and owning goods is one of quality of life: people will come to the realisation that owning too much is actually a burden, a headache, often times actually creating additional embedded costs and hassles; and, it certainly does not lead to greater happiness.

Someone who owns more than two homes knows what I am talking about: each home creates multiples of paperwork, presumably having to adjust to different rules and regulations. Just making sure that each house is stocked with the basics, much less complete dinner settings, etc. is quite the ongoing exercise. If you are someone who owns a super expensive car, you know that investing in spare parts and getting little scratch marks fixed is a hassle — especially as you roam away from the local dealership. Finding “protected” parking when you decide to take your jazzy car for a ride in town is an extra constraint. Of course, having too much of anything means that you need to have the space to store it… extra hassle and expenses. One of the more potent trends that plays to avoiding owning yet another holiday house: swapping homes (whether for the holidays or not). Here’s a plug for a friend’s initiative, Geenee, which allows for a swap with the “world’s best.”

Slow FoodOn another level, eating at home as opposed to going out to the restaurant will create a new culture of homecooking, with a sharper attention to the ingredients (not just their cost). There has apparently been tremendous growth in cooking school enrollments. And, in a similar vein, there is also the notion of SLOW FOOD*, as promoted diligently and valiantly in the US by Alice Waters (check out her restaurant Chez Panisse in Berkeley CA where they serve only in-season fruit and vegetables).

So, the lasting trend here is a move away from amassing goods that crimp my space, burden my mind and waste resources. Instead, people w
ill focus on goods that bring mental freedom, physical health and, hopefully, a smile to the face. As the literature and media coverage latches on to this trend, I see this trend going mainstream even in the rich circles. Recommended reading: The Story of Stuff by Annie Leonard and The Art of Simpe Food by Alice Waters.

Buy Local
Buy Fresh Buy Local LabelThere are two driving forces to buy local: “sustainable development” and latent protectionism. If you buy locally produced goods, the concept is that the items didn’t use as many resources travelling from faraway lands, and at the same time that you are supporting your local community. There are two sBuy Local Posterubplots to this trend: the potential revival of the feelgood effect of buying from a local shopkeeper who knows you (even by name!), and greater attention to the content (“made in” labels) and ingredients (“made of”). In economic tough times, this may be a counter-intuitive trend in that mom & pop stores have a hard time competing on price. Nonetheless, I would look for this “Buy Local” trend to prosper on the other side of the recession.

How Well do You ShareSharing, renting and leasing versus buying

There are certainly economic reasons for not being able to buy something and, to the extent the item you are looking to buy is for limited use (e.g. a new dress for a party, a bigger car for a 2 week family holiday…), the option of sharing, renting or leasing becomes more inviting. Sharing & renting may also be collateral plays on the reduced need/desire to buy and own (point 2 above) as the need to preserve and store the item(s) is less onerous. Sharing & renting also pander well to the green conscience. With this burgeoning trend, there are many new offers that have cropped up. I cite a few of the more interesting ones that I have come across:
  • Zipcar: a for-profit, membership-based carsharing company providing automobile rental to its members, billable by the hour or day.
  • ArtRentandlease.com: providing “rotating monthly rental packages, Fine Art Leases and direct sales… Individual prices start at just $20 per month, including eco-friendly Green Art.”
  • Avelle, or BagBorrowSteal: Rent by the week, the month or for as long as you’d like top fashion brand names for jewelry, handbags, sunglasses, watches, etc. “There’s never a late fee.” You don’t have to be a member, but if you are, the prices are better.
  • Babyplays: A membership-based online toy rental site. About time kids’ closets stopped bursting with just-opened, barely used toys, no?
Craigslist, Olx and eBay are the leading internet plays on the circulation of second-hand goods (and services). With Craigslist and Olx, there is the local play as well.

Underpinning virtually all these structural changes in behaviour are (1) the internet and (2) sustainable development.

I wrote a while back about how inter-related I felt web 2.0 and sustainable development are (read here), and when you overlay the evident economic benefits, I can only reinforce how this crisis will accelerate the changes and how, coming out on the other end, we will all be that much more on the web, taking advantage of new behaviours and goods & services, indeed creating a kind of new ‘unpop’ eco-culture.

*Slow Food, a non-profit, eco-gastronomic member-supported organization, was borne out of the anti-fast food movement in France in 1989 and is headquartered in Bra, Italy. Slow Food stands against “the disappearance of local food traditions and people’s dwindling interest in the food they eat, where it comes from, how it tastes and how our food choices affect the rest of the world. To do that, Slow Food brings together pleasure and responsibility, and makes them inseparable.” The organisation boasts over 100,000 members in 132 countries.

Henri Meiresonne Presents the State of Recycling in Europe

Henri Meiresonne Eco Emballage ParisHenrie Meiresonne, CEO of Fost Plus Belgium and newly appointed President of PRO Europe, gave a speech in Paris on June 22, 2009, regarding the efficiency and effectiveness of the Green Dot (“Grüne Punkt” or “point vert“) in France.  Here are some of the interesting points and facts raised by Mr Meiresonne:

1. There are 22 million tonnes of recycled materials in Europe each year.  This represents 27 million tonnes of CO2, or the equivalent of 8 million middle sized cars, or 11 million passengers going round-trip Paris-New York.

Point Vert / Grune Punkt / Green Dot

2.  Mr Meiresonne explained that the success of a recycling programme is measured along two criteria: the penetration of recycling as well as the cost of doing so.  Since 1994, recycling has tripled in France and the cost of recycling is lower today than it was in 1994.  In France, 95% of all packaging have the Green Dot and Eco-Emballage (the organisation in France responsible for recycling all household refuse) manages to cover 95% of the French territory in terms of recuperating recyclable waste.  The cost of the Eco-Emballage recycling system is evaluated at less than 7 euros per year per inhabitant.  In Belgium, the cost is closer to 5,50 euros per person, whereas in Germany the price is closer to 17 euros.  In Holland, the tax is 21 euros/pp, while at the bottom of the proverbial barrel, Denmark, the cost is 26 euros per inhabitant.

3. Mr Meiresonne is completely opposed to the system of “returnable” cans for a small coin (which exists, for example, in the USA).   He underscored the expense and the negative CO2 footprint of such a “consignment” system.  And, one can certainly see his point if each consumer has to drive back to recuperate the nickels and dimes.

4. In terms of penetration of household recycling, France manages to recuperate 70% of the packaging for recycling.  Belgium is at 90%!  One could say that it is time for some healthy competition between recycling organizations.  Chief among the reasons for the Belgian success, according to Meiresonne, is that there are only 39 inter-municipal offices in Belgium (for a population of 10 million) as opposed to 1,300 communes in France (62 million pop).  This might provide another justification for Sarkozy to rationalise the number of local bureaucracies.

Meiresonne’s final comments were to encourage eco-conception to diminish the amount of plastic used in packaging (i.e. at the source), to find solutions for more a cost efficient recuperation of waste, and also to avoid price wars on recycled materials (I inferred here he was refering to the dramatic price drop of PCR paper, aluminum, etc., which has occured since the recession settled in).

The Timing of Recessions

Macro and Micro Consequences of When A Recession Begins

Down Arrow - Recession Sign

In a recession, timing plays an absolutely vital part at the macro level.  Much of the debate about when the current recession will end is related to when it actually began.  The “reality” of a recession — as defined by the numbers as opposed to perception or sentiment — is subject to much variation, interpretation and retroactive restating.  As we continue lower and deeper into the current recession, and as the various governments (USA, Germany, France, Spain, UK…) worsen their economic forecasts, there is growing evidence to believe that the recession began earlier than previously thought.  And, at the very same time, the [US] stock market has started to show signs of life and confidence metres are bouncing off the very low levels.

Timing CalendarYet, if the duration of the recession is related to the timing of the start on a macro level, there is also an interesting phenomenon of timing on the micro level.  When the existence — or indeed the potential existence — of the recession sinks in, people and companies get into battle stations.  Common wisdom says that the companies that react most quickly (cutting costs and focusing on the essential business drivers, etc.) are those likely to do best.  This is especially true these days because, over the last 25 years, the recessions have tended to be rather short.  Three of the last four recessions in the US lasted on average 7 months (the school book definition states a minimum of two quarters is necessary).  The other one, 1981-1982, lasted 16 months.   (See here A History of Recessions from CNBC).

There is much written about how companies ought to respond.  I am not going to add to that catalogue.  The point that I want to raise here is the importance of the month(s) of the year when the recession is perceived as starting (as opposed to when it is post-factum marked as officially beginning).  The nature of the timing is more than psychological.  If the moment when people perceive the recession is at the end of the year, as opposed to the beginning or the middle of a year, there are logical consequences as to how the following year will be planned and budgeted.

RecessionThe effects are almost mechanical.  Here is a typical scenario if the recession is identified in the autumn (i.e. the fall, the last quarter of the year).  Budgets for the new year are created in an environment of uncertainty.  According to the dose of reality, for the companies who have recognized the recession, contingency reserves are bolstered, hiring freezes are imposed, costs are constrained and forecasts are trimmed.  Heading into the first months of the calendar year (assuming a calendar fiscal year), the company faces comparisons against the healthier first quarter of the year before.  And, if the effects of the recession are under-evaluated, the cutting of costs is accelerated and marketing budgets are further trimmed.  However, since much of the first half of the year’s expenses are already engaged, investments to drive the second half of the year are most affected.  With forecasts falling, unit volume decreases putting pressure on cost of goods further crimping profits.  Quite the vicious circle and one that suggests that the quicker a company realizes and reacts to the recession — to take the painful decisions quickly — the more prepared that company will be to see itself through.

On the other hand, if the recession were to be identified in the spring, the budget of the current year is put out of commission.  Companies have to scramble into battle stations and start to cut back according to the speed at which they identify the challenges.  As results deteriorate, the planning phase in the autumn for the following year’s budget is also very precarious, but at least it is created in fuller knowledge of the poor macroeconomic environment. 

Recession 2001Looking at the 2001 recession, the curious aspect was that, only with 9/11 did economists start clarioning about recession.  It turned out that the recession began in March 2001 and ended in November.  However, companies only started to react truly after September 11th.  As a result, budgets for 2002 were tossed up and around like straw in a hurricane.  And yet, the economy was actually rebounding as the new year rolled in.

It strikes me that, even if the length and depth of the recession ends up being longer than usual, the way a recession is experienced does vary according to the timing in the year of the perceived beginning.  I would be curious to know if studies have ever been done to see if companies with non calendar year fiscal years have a markedly different experience to those who have calendar year fiscal years.  What do you think? 

If, as they say, timing is everything, does it make any material difference when in the year people identify that a recession has begun?

The Guns Crisis Continues – How can it be reversed?‏

Gun sales in the US have gone [blasted a hole] through the roof since the end of last year.

Time Magazine: The Gun in America
In November 2008, after the election win of Obama, requests for gun licenses in the U.S. spiked +42% to 1.5 million. The following months have seen year over year increases of between 23% and 29% (through March 2009).

Numerous theories abound for this gigantic leap, centering on Obama’s anti-gun past and a fear of a clampdown. Obama suggested a 500% tax hike on gun sales in 2000. With the continuing headlines of daylight massacres (57 people killed YTD in the US), you wonder how the gun lobbyists and fervent 2nd Amendment defenders resist. Yet, they maintain a lethal stranglehold on Washington, pushing back enough to have dropped the latest proposed ban on assault weapons.

Meanwhile, underneath the increase in gun purchases — hardly your regular anti-crisis remedy or an expected recession-resistant category — some speculate on a fear of increased violence and social instability generated by the crisis. Is it possible that the violence of gangs — that so desperately turn the impoverished (or immigrant’s) dream into a nightmare — will bleed into normal society? Is the US social fabric that weak? While racism and social tension admittedly abounds in many cities, one has to hope that very presence of Obama and his campaigns will bring the US through to the other side; at the very least, so that there is no massive breakdown in social order. I have to believe that we are observing, in this hike in gun sales, more exaggerated and outrageous fear-mongering.

What can be done to reverse this trend or, more importantly, undo the US proclivity to buy and use guns? On this the tenth anniversary of Columbine (April 20 1999), maybe it could be via the viral internet that a mass anti-gun movement could be started to aide the White House and the DC crowd to see straight. I remain deeply saddened by the American violence that is so hardly reconcilable with the world’s leading democracy.

Any such action should also be accompanied, in my opinion, by an element of greater controls on the video gaming worlds (PG, G, R, X-ratings?) that have clearly contributed to the wild dreams of the gun frenzied youth. At the same time, parental leadership and guidance must also play a major role in instructing their children, providing them love and solid (non-aggressive) values. The blame for the gun craze and the rampages is spread around: parents, schools and society at large. We must all take responsibility. Spread the word to un-gun the American Dream!

Change Management – Cutting Dollars & Making Sense in Recession

Budget Cuts ScissorsIn these times of recession, a change is certainly gonna come… For the companies feeling the hit (not referring to Sam Cooke), there is plenty of talk of cutting budgets and payroll (though much less of the latter in France). In such environments, one speaks of light at the end of the tunnel with caution, especially if the gouging is severe. Speaking of light, sustainable development typically takes a less sustainable position in the hierarchy of expenses.

On the other end of the scale, there are those more fortunate companies that are planning major breakthroughs, profiting from a reservoir of cash and investing strategically and/or opportunistically to reap serious market share gains.

Then there are those companies flush in cash, investing strategically and that should also be taking the opportunity to eliminate dead wood.

As many managers cut dollars, it seems at times that as many are eliminating cents and plenty of good sense, too. Whether in a cash-strapped or cash-rich company, the need or opportunity to slash unproductive expenses, in my opinion, must be accompanied by two key actions in order to sustain an optimal customer satisfaction level throughout the downturn:

Clear Communication1) A clear, consistent and frequent (not necessarily regular) internal communication plan to keep everybody on board down the chain of management with the strategic thrusts and associated cuts. This assumes a clear vision. The visibility of [an aligned] top management is critical to communicate the vision, receive feedback (according to the company culture) and create unity of purpose.  When given the right resources, a well constructed internal intranet network (with web 2.0 functionality) is surely an interesting solution across a larger organisation — according to company culture.

2) And, in order to ensure optimal execution, there must be a culling of the unnecessary tasks and actions, often times associated with the prior, fatter budgets.  This is important to do in order that the remaining work and allocated resources are that much more effective.  The decision NOT to do is as strategic as what you decide to do.

Change ManagementThe first point above is about genuine leadership and getting the team behind you.  The second point revolves around the strategic execution of the plan.  These two actions are vital because, especially for the larger (older) businesses, at the heart of the issue is change management. As we all know, fear and psychology have generously contributed to the current predicament. And, going through the changes, employees at all levels experience fear (at one or other stage of the SARAH principle: Shock-Anger-Rejection-Acceptance-Hope/Healing/Help).  Consequently, they will start to act out of selfishness and defensiveness which inevitably creates breakdowns, inefficiencies and the dreaded internal politics.   Among the many typical faults made by top management are laying out a strategic plan, but not aligning expectations and creating too many exceptions.  Are the individual Goals & Objectives of the people in the different business units and functions updated and aligned?  Another common mistake is dogmatically and institutionally cutting budgets (by percentages) rather than involving the teams to find where and how to cut.  Getting the team to own the solution (strategy) means having them own the problem.

This line from Cooke’s song magically resumes the process of change management at the individual level:

“Oh, there been times when I thought I could not last for long, But now I think I’m able to carry on…”

Twitter: Global Village or Recessionista?

Twitter, it seems, is making mainstream headlines daily these days. Yesterday, the IHT featured on page 2, an article “A truth renewed online: It still takes a village,” which begins: “Twitter and Facebook are, OMG, so last millennium”. The article, written by Anand Giridharadas, actually suggests that today’s social media are a modern representation of the old-fashioned [Indian] village, providing “ambient love.” Giridharadas writes that social media “maintain not your 10 key relationships, but your hundred semi-key mini-relationships. They are not about understanding or soul-baring, but about being simply, ambiently present…”. It is a well expressed point of view. In today’s ice cold economic climate, the ambient warmth of a Twitter or Facebook poke or birthday wishes are a welcome reprieve.

And, on another level, speaking of the economy, I read yesterday how Mr. Martin Schmeldon, a Harvard professor, correlated the rise in twittering to the fall in the stock market and, in a case of brazen marketing, said that Twitter was at fault for the current economic crisis. Read here: http://www.gaebler.com/Economist-Blames-Twitter-for-Down-Economy.htm.

As the article goes on later to say, however, the validity of Schmeldon’s research is a little curious. Pat Sooshisif, an associate professor of public policy at the Yale School of Management is quoted as saying, “I think an informed reader of this research paper should be able to determine that Schmeldon wasn’t engaging in serious statistical analysis of this data.” [From March 2009 issue of The Journal of Economic Perspective and Analysis.]

If you listen to MSM (mainstream media not to be mixed up with MSN!), you might be excused for concluding that the global village — via Twitter’s 7 million unique visitors a month — is running, if not ruining the world.

I maintain that Twitter’s ascension is reflective of a society that is in search of itself: a community that is communicating, without having found a greater meaning or sense of purpose (akin to the general chatter one can hear in the Indian village). It is certainly not a society that is creating value. However, even if 65% of twittering is happening at the workplace, Schmeldon may yet find a better field of research in measuring the twitterers and the performance of the companies for which they work. He might potentially be surprised to find these companies doing rather well, for being more online, more open minded and, potentially more plugged in to social trends. That is a mere supposition, but likely more plausible than pointing to Twitter as the fallguy for the current recession.

Luxury market on the decline in France — What deeper effects will occur?

A Return to Values

Recession brings luxury down to earth…but what of the more urgent changes needed?

The Herald Tribune ran a front page article entitled “A return to Values?” (15 Jan 2009) on the situation of the French luxury market.  What struck me about this article was the inherent contradiction about how France, the country that frowns heavily on the bling bling nature of the nouveaux riches, should also yet be the country of reference and, along with Italy, the leader in luxury wares.  Both the French and Italians have essentially got a wrap on the luxury market (at least in terms of reputation) through masterful craftsmanship, suave marketing and a culture of developing taste and sophistication.  The curiosity is that, in France (or in Italy), you really cannot be seen sporting too overtly any of the luxury items.  The socialistic veil would claim that all people should be made equal… But, beyond the impact on luxury consumption, the bigger question for me is whether this crisis will also have a deeper paradigmatic change in France in the way the economy is actually “engineered” for growth.

Decline PricesMajor luxury brands are talking of bringing prices down (some are even talking about discounting) and cutting back personnel.  End of November 2008, LVMH dropped prices by an average of 7% in Japan.  Many brands in India have announced major discounts (read here for the story from Business Standard India).  Chanel announced the cutting back of 200 temporary employees.  Champagne sales (with the proper appellation) were off 16.5% in the month of October 2008 versus the year before (having been -2.4% in the first nine months of 2008).  Karl Lagerfeld, Chanel’s designer, is quoted in the IHT article as saying “Bling is over.  Red-carpety-covered-with-rhinestones is out.  I call it ‘the new modesty.’”  Another IHT article in early December already traced the fall in luxury prices in the US.

The IHT article, written by Elaine Sciolino, writes that “only in hyper intellectual France could a sharp economic downturn be widely lauded for posing a crisis in values.”  The statement is inaccurate on two counts.  First, the hyper intellectual are a clique of people (a portion of which are often given the moniker “la gauche caviar”) which, by definition, is limited in number and therefore cannot also be “widely” praising such a crisis.  Secondly, the economic crisis that is hitting so many countries will also give rise to criticisms and rejection of the past “systems and values” that are at the root of the current situation.

For example, I believe that the USA, among other countries, is clearly reviewing its own value systems.  In coordination with the arrival of President-Elect Obama, there is a true opportunity for the US to revisit its values.  Hopefully, going well beyond the issues of financial liquidity, credit living and low savings rates, such a re-evaluation will look at the three biggest problems: (1) the lack of curiosity and poor general education levels, (2) the excessive consumerism and a reconsideration of the value of money, and (3) poor health levels, including poor eating habits combined with the terribly low medical coverage.

Great Depression: Jobless Men Keep GoingDuring the Great Depression, many people were no doubt forced to change their habits.  But, as the years went by, perhaps blurred by the impact of WWII, it seems that the Depression did not provoke any long-term change in values — at least not beyond the generation that was directly affected.  Will the countries hit by the current recession — assuming it gets deeper — truly change the paradigms on any long-term basis?  To talk of the need for a revolution is misguided in ambition; but, there will surely be enough people where the impact of this current recession will enter into their psyche.  As with the recession itself, you see that the psychological issues play a hard-to-overstate role in the duration and depth of the crisis.  But, what scar tissues will linger in the fabric of society?

In France and other mature countries, the removal of excesses [in the luxury market] and a return to values are seemingly upon us, at least for now.  Whether the crisis also cleanses the economies of its excessively inefficient components would appear to be the bigger question for France and its mature and less dynamic European partners (i.e. Italy, Belgium…).  The ability to restructure in down times–to help create a healthier base in the upcycle–will be critical for the future of France.  And, if there were such change brought to bear, then one could imagine that the luxury market will flourish with as great, if not greater fanfare in the next upturn.  If not, we might truly want to batten down the hatches.

What do you think are going to be lasting effects of this recession?

Market prices for metals and paper fall off the charts…

With falling market prices, what is to become of the recycling market?

Falling Prices GraphIf it were not difficult enough to raise funds in the current economic conditions for sustainable development, market prices for aluminium, paper, plastic and steel have been falling through the [corrugated] roof, making recycling a far less attractive business. As reported by Gannett News Service, the prices took a turn for the worse once the Asian markets, specifically China, stopped buying at the end of the year. According to RecycleNet Corp., the national price of aluminium has dropped from $2,040 to $1,020 per ton since June. Steel has fallen from $210 to $77/ton. As a result of these lower commodity prices, recycling companies have had to cut back on services, including curbside pickups, and to lay off personnel. Aside from the financial difficulties for the recycling companies, a more harrowing risk would be that consumers get out of the habit of recycling. This will depend in part on how long this depression in prices lasts. More on the subject of falling market prices here from the Times Herald-Record (NY State). These price drops reinforce the notion that sustainable development may well take a back seat in the ongoing recession. Hopefully, the recycling companies will survive this downturn and, perhaps, find more efficient means to do the recycling in the process. That said, if the recession were to reduce considerably production and hyper-consumption, maybe that would be some kind of victory in the fight against global warming? Wherefore the quality of life after that shake-up, though?

This Crisis will bring a Paradigm Shift on the Internet

Crisis, What Crisis? Bring forth the Internet

As we spin into the depths of this worldwide economic crisis, the opportunity for companies to move to more Crisis in Chinese Charactersefficient, effective and measurable marketing activities online seems perfectly obvious, if not natural. The time has never been more appropriate for companies to ramp up online activity because their consumer will be increasingly on the other end waiting for them. I identify below five main reasons why the consumer will be more than ever present on the Internet specifically because of the economic downturn.

(1) In this period of crisis, there is a very real likelihood that people will spend even more time online in the near-term because the web will offer a cheaper alternative way to spend time (watch YouTube or Daily Motion videos) and find entertainment (on a myriad game sites) than, say, going out to dinner in a restaurant or going to the flicks. Rather than going outside to buy a newspaper, free subscriptions will bring people online (or the news will be downloaded to their mobile phone). Doing banking/finances on line (a cost benefit for the embattled banks to save on bank tellers), paying your paperless bills (save on postal costs) and other administrative tasks will bring people to their computer.

(2) The internet is the most expedient way to do networking — especially important for those people without a job (linkedin, monster, etc.). The Millennials will need to have the “older” generations on board to hire them, but in general, the custom of business networking on line is beginning to build already. This notion reinforces a tenet I have long held which is that your presence online will become your most effective CV or resumé (see here for a prior post).

(3) There are plenty of new applications and sites that now make searching for a bargain substantially easier, specifically the price comparison machines, such as Kelkoo, PriceGrabber, Shopzilla… And this point goes beyond the notion that you can get better information from internet sites (and peer-to-peer reviews, etc.)

(4) In times when travel may be too expensive, there are now many virtual ways just to stay in touch with your friends and family (skype for face to face, facebook for group hugs or twitter, jaiku for group pecks). Essentially, the internet social media networks are intrinsically designed for harder economic times. Not all of them will survive, of course, but each will be forced to carve out its niche, its purpose and the likelihood is that the economic crisis will bring much needed acuity to each social media network’s positioning.

(5) And, finally, the truth is that items sold on line will be cheaper in fact and in perception. When you add the cost of getting in your car (time is money…), consuming fuel with the risk of traffic infractions to go to the brick & mortar (only to find a less informed salesperson) the chances are that the consumer is in effect going to find the Internet a cheaper way to consume. With people and companies forced to work harder and longer hours to survive, time for personal shopping will decline ipso facto. Retirees who have already shown a propensity to hit the ‘net, will do so even more (note to self: big business in keyboards will large keys). Driving to the store hardly eases with age. And, lest we forget that, with driving, there is the added nuisance of polluting the environment. Clearly, on the supply side, more and more companies will move to e-commerce platforms (expensive as they may be initially) because they offer a higher margin business model once the critical mass is reached. Moreover, having one’s own e-commerce site is a useful counter force for the brand/company against a distribution network whose strength in the balance of power has become hard to manage.

Vortex Internet

With the backdrop of the demographic and sociological surge of online traffic, plus the terrific growth numbers in developing countries, it all makes me believe that we are truly in the vortex of the paradigm shift. Beyond the crisis, we will come out different, truly changed in our behaviour and, specifically, our relationship with the Internet. With the oft mentioned Chinese expression (pictogram above), in times of crisis, yes there is danger and great opportunities. The danger lies in the fact that the crisis may be worse than expected and certainly the Internet will not solve everything. And the Internet has its own dangers in terms of potentially dehumanizing relationships or rendering us captive to the 17″ screen…  That said, nonetheless, it is worth noting that since the Internet and the e-companies have already experienced their own bubble-bursting and crisis, they have created more durable models, filled with more substantial content and purpose.  In the process, Internet companies are (perhaps inherently less fat and) potentially more resistant to the current crisis than many brick & mortar brethren.

All the same, the economic crisis presents a golden opportunity for the Internet. How to play it? That will be the subject of another post. 

UPDATE FEB 8, 2009: I found this article written by Le Monde on Jan 30, 2009, showing that clearly this idea above is gaining traction in France:  La Recession accélère la rupture entre le virtuel et le réel.

INSEAD – Celebrating the 15 Year Reunion (2008)

15 YEARS LATER : MY 15-YEAR REUNION AT INSEAD

I have just completed my 15-year reunion at INSEAD in Fontainebleau. There were some 59 fellow classmates (out of about 205) who came in from 16 countries (3 came from Australia). It was a lovely way to reconnect – among other things to remind us of the importance of facetime and networking. As big a fan as I may be for virtual worlds and social media networks, the prescient words of John Naisbitt in High Tech/High Touch ring as ever true today.

There were three themes that seemed to keep coming up, no matter the topic at hand:

- The financial crisis
- The work-life balance
- Sustainable development

On the heels of the record-setting one-day stock market swings (the DJIA gyrated from a low of 7773 to a high of 8989 only to finish down 1.5% on October 10th), a devastating eight days of doom and gloom and a drop of -22% on the DJIA, the financial crisis had a bearing on absolutely every activity discussed. How is the financial crisis going to impact sustainable development? Will the financial crisis hurt social media and “metaverses” (with Professor Miklos Sarvary)? There were no contrarians to be heard. The concept of a worldwide recession was widely used. Clearly, we have not seen the end of the bad news as it will now roll out into other fields, including a predictable credit card crunch and down swing in sales of large ticket consumer goods. And, of course, it certainly will have an impact on executive MBAs coming to INSEAD and current MBAs looking for jobs.

The question of work-life balance was systematically raised, and not just by Gen Y MBA students. I think my wife summed it up rather accurately: work-life balance is a myth. There may be moments when when you are able to achieve more family life, but you are inevitably compromising work and vice-versa.

And on sustainable development, much of the conversation seemed to be focused on reinforcing the existence of global warming, and less about the [clear cut] solutions. We heard from Mohan Munasinghe, Vice president of the United Nations Intergovernmental Panel on Climate Change (IPCC) (and Nobel Peace Prize Laureate, 2007 along with Al Gore), who exposed the framework of “sustainomics.” The notion of sustainomics “draws on three basic principles: (1) making development itself more sustainable through immediate actions, (2) balancing the economic, social and environmental dimensions of sustainable development, and (3) transcending traditional boundaries of academic discipline, space, time, and stakeholder actions, to produce the most effective solutions.” Of course, I am not sure of the application in my immediate world. Anyway, good to listen to. {Read more on the subject here}.

Bottom line, attending the reunion was grand. Reunions are about seeing old friends, but I also got a lot out of listening to some good lectures and panels on contemporary topics. One of the recurrent conclusions of reunions, though, it is clearly NOT a French thing. Of the 34 French classmates, a total of 7 came (un grand merci à vous d’être venus), of which 3 live overseas — and only a couple of the French came for the whole weekend–too many other priorities elsewhere! Without talking about their lack of participation in alumni giving, it is a shame that the French culture does not seem to enjoy these types of reunions. I am, nonetheless, hoping that for the 20th year reunion (2013) we will get a fuller turnout — and with a bit of luck will be talking about rosier economic times. Thanks to all of you who did come. We certainly have our work cut out for us to bring some order to the world. In the meantime, all 1993 INSEAD alum are welcome to join the Facebook INSEAD ’93 group (assuming the company Facebook survives the current management exodus).

See you next time.