Monday, October 12, 2015

The Brilliance of Bad Economics

“when management with a reputation for brilliance tackles a business with a reputation for bad economics, it is the reputation of the business that remains intact.”
----------Benjamin Graham, Warren Buffet

While it's clear the status quo would not hold in a marketplace where more of what we do and experience is digitalized, there is little evidence out there on which kinds of technology
and business changes will bring success. We have to disrupt ourselves before the market does.

For instance, in a study on the digital maturity of French companies; six in ten French people shopped online while only one in 10 French companies sold
online that same year. This gap means that, for most organizations, the consumers digital maturity offers significant untapped potential.

A research by Interim Partners found that a third of senior insurance professionals felt that spending more on technology would have the greatest effect on
boosting their company’s profitability, while 21 per cent said that investing in new staff to develop new products should be top of the agenda. This compared
with just 6 per cent who thought that increasing margins by raising average premiums was the key to boosting revenues.

In some cases, companies’ competitive advantage have enabled them to survive multiple technology disruptions and industry shifts over time, making their founders some of richest
people in the world: think Bill Gates, Carlos Slim, and Larry Ellison.

Steve Kaplan’s found that 50% of venture capital investors described the management team as the most important factor at the business plan stage, this emphasis had dropped remarkably
by the IPO stage in favour of non-human assets — i.e., their competitive advantage —

The implications: first choose the right industry and company, then pick the right management. If the managers don’t perform, they can be replaced much more easily than the
basic business idea or industry.

See You at The Top

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