How to manage the crisis

The good news about any crisis is that it's highly predictable: it's bad and probably will get worse! So how can IT enable your business in wheathering the storm? I guess you've done you're homework and arranged for ample metrics and measurement systems; so you'd know how bad it really got... great! You must have also started to downscale; re-use, all these things that drive down costs... great!

I think IT provides 2 routes to business: increase revenue and decrease cost. The gap in the middle is named many things by finance experts but usually it helps to have a gap as wide as possible.

However, with putting in new IT no-one is going to pay you more or buy more and with putting in more IT costs aren't automatically coming down either. So IT as an enabler of something else then?

IT can help you define and measure what it is your sell best. And what you sell best is measured through receivables; what are customers paying for? what not? Start an initiative that measures exactly what is supposed to be done (according to your agreement with the customer, the specification or the service level agreement) and map that information against the invoiced amount: chances are they don't match... Then, what else is done? Can you stop doing anything that cannot be billed according to the agreement or start charging for it?  Finally, when you've done it and delivered, do you send an accurate invoice (=according to what you've agreed) right away or is there a time-elapse between completion/delivery and invoicing (i've seen up to one year-wide gaps in my time) and guess what happens to your Days OutStanding (DOS)...

To earn the customer over to you and distinct from your competition, what is that you do -say for government reasons- that you need to do anyway that delivers information that could be of use to your customers. For you there's no or very limited added cost to produce this information and you're customer could actually see a lot of value in it and prefer you over competition.

Finally you could share your suppliers information. Say all is gloom and doom in your business and your suppliers knocks on your door to raise his prices... what's going on? is he out on a revenue hunt just like you or is there something else going on that can be passed on through the value chain? that's good news as your customers can soon start to raise their prices too (after you've done so of course).

IT can bring a lot to the table when it comes to revenue increases. The first few lines seem to say little but actually there's a lot of work in them. Think of the revenue pipeline from in the Order to Cash process; there's operations inthere somewhere; how do you capture activity that's linked to an order? how can you make sure all activity is adding value to that order? these are relevant questions which can only be answered through the right deployment of IT. Then the speed of invoicing is a clear IT issue; straightforward and relatively easy to implement. To be able to charge your customer with all adding value activities (or just stop these) you need a firm grip on your tracking mechanisms through IT.

The role of IT in the crisis

The crisis has transferred from a credit crisis into an economical crisis. In fact these crises should have been prevented but at a minimum forwarned by IT. Now they are both here, IT plays a vital role in solving the crisis.

Albert Einstein has once said that the secret of success lies in (1) how to get the right information and (2) how to use it. Based on the age of this quote (well before the digital era we live in) it is astonishing when one realizes how true this is in light of the current circumstances.

As a first -prevention- the crisis started with the debt crunch of the USA. Big money made on collateral debt products based on house mortgages. It is not unusual to work with extensive risk management systems in investing, but apparently it considers the first next risk; the one that we are directly faced with. This is very much the same if the Netherlands only considers the dike that faces the sea; waterfront defense. This first line of defense didn't suffice in 1953 when a large part of the south-west of the country fludded. The response to this disaster was to engage in a near 40-year project called "Delta Werken" and build a structured defence that would prevent something dramatic as that happening again and at the same time making sure that the ecology of the Delta was not threatened or damaged.

in a later blog I want to emphasize on the importance of these lessons, but one major difference with the situation here must be made. Back then the technology currently deployed that make up the defense mechanisms didn't exist; my claim is that the technology to being able to signal, recognize and prevent such a crisis are readily available!

In a financial system looking at the first line of defence only is apparently not enough. The depth of any risk-analysis should be to the source of the capital need. Such as Venture Capitalists performs due-dilligence on any investment and make the best results. A due-dilligence is a deep dive in the source of the capital need; the collateral the potential and therefor the risk. This calculation is in mortgages done by income assessments and risk-mitigation is done by downpayments. However the potential failure of income is completely neglected. Regardless of what the method of assessment is, there is no watertight evaluation. On top of this, the system was fueled by higher house prices and benefited by a high volatile market; no long bureaucracy! None of the institutions (brokers, banks, investors) performed an automated check on either of the applicants, in a country where credit ratings are/were at the core of the system. A 'trust' mechanism that has proven to be obsolete. In today's society -particularly- in the USA it is absolutely no rocket science to create a widespread credit-profile on any subject within seconds.

Finally, today's systems offer ample opportunity to predict and analyze any trend. Even forecasting wheather has become reliable by the use of information-rich systems. For financial risk forecasting and assessment of exposure on large portfolio's it musnt be necessarily a daunting task. in fact in investment management the tools and algorythms are readily available. Combine those with powerfull algorythms in search engines and information retrieval (IR) methods, it must be very do-able to build the financial "Delta Werken" for the financial credit world.

With this in hand it must be possible to re-instate trust and re-fuel the world's economies. Trust and information are closely related; in fact as Einstein says; the key to success.

I have invited a fairly broad group of contacts from my personal contact list who "join" on a few area's:

- enterpreneurial ambition

- tecnhology and trends

- business 

- personal effectiveness

I welcome thoughts on these topics

Revamping the Blog.

I've decided to go a step further with the blog site and post thoughts and comments here with a clear intention to provoke feedback from a wider audience.

Hopefully this will not go unnoticed and will create lively discussion