Magazine article Management Today

Profit Goes to the Swift and Lithe

Magazine article Management Today

Profit Goes to the Swift and Lithe

Article excerpt

Blue-chip giants are exposed as the dinosaurs of cyberspace while young predatory rivals embrace change and chip away at clients and business

How the mighty are falling. Drooping sales at M&S, massive mismarketing at Sainsbury, wobbling strategy at ICI, shattered profits at Shell, a disastrous takeover for BMW - the list of giant victims rumbles on.

Some of the shambles represents passing affliction. The rest is symptomatic of rampant and chronic disease. Companies are living in the past when a future is rushing upon them, at a breathtaking pace, in which size is less relevant than speed, and muscle less important than litheness.

The continuing orgy of mega-mergers reflects a dangerously different view. Management after management bet billions on the proposition that the battle goes to the biggest. In the real world, the race is won by the swift. Lumbering elephants are exposed by the aggression of speeding midgets.

Competition from upstarts is one development placing unprecedented pressure on the mighty. The other is the internet and all its works. Cyberspace has brought global competitiveness within the reach of any entrepreneurial spirit with modest resources. The same technology has become a decisive weapon for revolutionary companies that are strong on people policies and low on hierarchy.

The financial services sector shows what must happen on a widening front. Virtually everybody follows the same strategy. Nobody has new ideas. Nobody mobilises human assets to win growth: sackings are the favoured strategy. Piece by piece, the profitable business gets chewed away by newcomers such as Direct Line and Charles Schwab, the cyberspace investment king.

Many more upstarts will start up. Whole industries will fragment and reform. As the computer industry churned, IBM lost its stronghold in hardware to small PC and workstation rivals; in software to Microsoft and other midgets; in services to upstart EDS; in microcircuits to start-up Intel; and so on. Each challenger seemed insignificant on entry but, soon, the fastest emerged as new giants, billionaire companies with wealth measured by equity markets and predicated on their ability to mine more paper gold.

Small wonder that such unlikely bedfellows as Microsoft's Bill Gates and Rupert Murdoch have united in deploring the overvaluation of internet stocks. The p/e ratios of 350 on America Online and 700 on Yahoo! are insane. But young Mr Gates and old Mr Murdoch are equally threatened by what these lunatic ratings represent.

Both may be yesterday's men. Microsoft's near-monopolies in PC operating systems and office software are threatened on all sides. …

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