“In chaos theory, the butterfly effect is the sensitive dependence on initial conditions; where a small change at one place in a nonlinear system can result in large differences to a later state. The name of the effect, coined by Edward Lorenz, is derived from the theoretical example of a hurricane’s formation being contingent on whether or not a distant butterfly had flapped its wings several weeks before”. —-Wikipedia.
Many small and mid-market businesses did not survive the turbulence caused by multiple “butterfly effects” during the decade of 2000 that began on September 11, 2001 in New York. Wars in Afghanistan and Iraq (along with spending on social programs and bank bailouts) resulted in record federal deficits by 2010. Earthquakes 2004 in the Indian Ocean led to disasters in Indonesia and the Philippines. The collapse of the US housing market in 2007 led to an unprecedented global financial crisis. Hurricanes devastated New Orleans and the Gulf Coast in 2008. The impact of China and India as emerging global powers had a direct impact on US unemployment during the entire decade. Rising commodity prices led by oil and gas pretty much finished the job
on consumer spending the collapse of the housing market had begun. Rising unemployment, soaring health costs and a continually shrinking middle class added to the difficulties of the US business owner, and the cumulative effects of these events had dramatic impacts on business large and small.
The business gladiators who survived the decade endured multiple “butterfly effects” from these and other hardships. Banks denied access to credit, consumers stopped spending, and businesses reduced buying from other businesses. They cut expenses including people to the bone. They halted
marketing and business development initiatives in their tracks. They learned how to get by with less because there was no other alternative. Somehow they made it through the decade and now are wondering “what could possibly happen next”? They’ve become reluctant to hire new people even though there’s a flickering flame of demand, they want to hoard what little cash they still have because they are afraid of “what happens after what happens next”.
My question to these gladiators is does your preference for safety create its own risk? What will the decade of 2010 bring? More
chaos and uncertainty is a given, but it’s always darkest before dawn. There are nascent signs of recovery ahead. Unemployment has begun to reverse its trend, large companies have record levels of cash reserves, and reports indicate a good start to the 2011 holiday season relative to consumer spending. The housing oversupply over the next few years will return to some form of equilibrium. The playing field is currently absent of competitors that did not survive the past decade.
Technology advances in cloud computing and smart phones will create new opportunities for those who can monetize the business opportunities they present. Outsourcing non core competencies will keep costs down while bringing much needed people resources on a “just in time” basis. No business ever expenses its way to profit over the long term. Today’s gladiators have an excellent grasp on costs; they’ve developed that core competency to survive. But will they miss the next big opportunity?
Now is the time to rethink how to grow their businesses profitably. They owe it to their families, employees and investors who stayed with them. Its time to take some risks.
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