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Views from the Prairie

June 09

Dinosaur Extinction or Mammalian Thriving?

According to the scientists, about 65 million years ago, a massive chunk fell out of the sky causing a huge change in our earth's climate. The result was that the dinosaurs died out. (Although there are some who claim the cause was the huge volcano eruption occurring about the same time almost exactly on the other side of the world spewing out so much noxious gasses that the atmosphere changed.) No matter what the cause, the point is that most animals alive at that time died while a number of them thrived.

When we look at the differences between the animals that survived and those that didn't, there are a few characteristics that could be valuable in today's business climate. When the huge companies are failing, almost all the major banks are gasping for air, and large automobile companies are facing bankruptcy, what would help other companies survive this changed climate?

It is tempting to simply say that the little guys survived when the big dinosaurs did not, but size alone is not the answer. In that mass extinction, a lot of little animals went extinct also.

There are two types of "critters" that survived. There are a few "living dinosaurs" that are still around today, animals such as the shark, the crocodile, and turtles. All of these have a period in their lives where they are quite small. Many have a slow metabolism and can live for long times between feeding. We know of companies that are like that also - small, very low cost, can last a long time between sales, and not fast moving. Because of the low cost, they can survive even when the rest of the economy is falling apart.

The animals that thrived during that process have different characteristics. During the worst of the times, they, too, were small but that smallness wasn't the reason they thrived. The key characteristic of most of the survivors was that of fast change. They had high metabolic rates and changed genetic material quickly. So, small ferret like mammals survived, some small birds survived, and the insects survived - all "critters" who could have high rates of genetic changes and be able to test out which change would work. However, it took a few million years to demonstrate that they were the ones that were going to survive.

We can gain some key points to help our businesses survive these times. Being a small company is no guarantee of survival. Small companies will go out of business by the score in these economic hard times. Fast change is the key to surviving and thriving. We will make a lot of mistakes while trying out those changes, but as long as we manage the risks of those mistakes, those will not destroy us. Keep in mind that evolutionary changes like this may take a while to result in major growth. A small group of companies will survive by reducing costs to near zero but they will not thrive in the long term. They will be more like the loggerhead turtle that lives 100's of years, but can't do it very fast.

Major economic traumas are an opportunity, but we have to be able to adapt in order to survive.

Ramen Profitability

A few years ago, a startup company could blow $3 Million on a Super Bowl Ad. Today, the new trend is to look for companies that are "Ramen Profitable". That means that the company is generating enough money to support the founders in the "least cost survival mode". The founders are eating Ramen Noodles but not much more.

For those of us who were worried about Americans being able to compete with the cut throat competition of the rest of the world, this is a good sign. Americans are figuring out what it means to compete with foreign labor and they are surviving. The internet has opened up the world to international competition and it is brutal.

In the last 40 years, we have had industry after industry fail after being opened up to international competition. We had it with steel, airplane manufacturing, televisions, PC manufacturing, computer programming, and now, the automotive industry. Yet, we still have steel companies in this country. The survivors all respond quicker to what the customer wants. They all have faster development cycles and put prototypes into customer hands faster. They also stand for high quality.

There are now startup "incubators" and investment companies that are pushing startups to move that direction. One of these is the Y Combinator out in Silicon Valley. Others exist all over the country. The idea is to start cheap, get something that can be put in front of a customer, and move forward. The investments are incredibly low by "dot com" standards, often less than $25,000. Yet, companies are being created and new products invented and sold for that little.

Part of the process is being willing to take the idea and change it when the market changes. Company after company have started with one idea and modified the idea when the market changed under them. It takes a willingness to change and willingness to go after what the customer wants. All these are good.

So, the emergence of companies that seek to be "Ramen Profitable" is a good sign for our country.

Box: Major economic traumas are an opportunity

Quote: You have enough information with which to make a decision when you have 80% of what you need. Colin Powell


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Prior Years

  1. 2008