Chickens and Eggs

There is no doubt that changing economic conditions force changes in business operations.  Unfortunately, as things have been turning sour, a number of digital businesses have been downsizing.  In fact, ClickZ is beginning to track what’s been going on with respect to industry layoffs although I think their numbers are way low.  However, it does raise an interesting question.

Are CEO’s having to make these kind of tough decisions because they’re good executives or because they screwed up earlier?  As they were growing their business, did they spend their capital too quickly in an effort to grow too fast or have conditions really taken a turn that no one could have imagined?

Unfortunately, in my experience it’s usually the former.  When resources are available to you because you have a full bank account, your instinct as the head of an operation is to do all of the things you’ve wanted and do them all now.  The reality is that very few operations can take that kind of stress and moving too rapidly in too many directions at once can mean taking your eyes off key metrics such as ROI.

It doesn’t have to be that way.  Smart operators like grow themselves more slowly than they probably could, stay lean, and are able to get funding (as Blip did today) even when times are bad.  The digital business is growing – just not as rapidly – but the accountability that should always have been there is now there in spades.

If anyone thought the days of the dot.bomb era spending on $1,000 desk chairs were over, think again.  Maybe it’s people that were overbought this time and, unfortunately for everyone involved, they’re not warehoused as easily as chairs.  So which is it – smart operators scaling to fit the business or stupid ones paying the price for excesses?

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1 Comment

Filed under Helpful Hints, Reality checks

One response to “Chickens and Eggs

  1. Thats the million dollar question. I would have to say its a bit of both. Having clients in many idustries, Ive seen the smart operator profits scale downs the the economy and consumer confidence has dramatically taken a toll. For these guys, image what happens when payroll taxes go up? Hmmmm. I can but I know who that are voting for.

    For the stupid ones paying the price, it’s too easy to call them all stupid. Many are but there are also tons who fall inline with the stupid category but werent aware of the signs or didn’t have the right tools to scale down. I’ve seen companies preparing for this by tighting and shopping insurance policies such as work comp and benefits. ive seen employers increase telecommuting to save on engery costs with their employees working from home. True many are paying the price for a healthy economy but the ones truly hurting are small business. The major employmen source for americans period.

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