The business growth conundrum

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23 January 2013

For the last few years, most of us have been living in a low growth or no growth economy. It’s true there have been patches of growth in areas of IT such as tablets, smart phones, mobility, BYOD, wireless, virtualisation, Big Data, storage, but in many instances these have been at the expense of other, more established areas. I don’t have the resources to analyse how much of this "growth" has been cannibalised at the expense of declining areas so I can’t state categorically whether, overall, there has been any actual increase in the IT market. Still, I’m sure somebody out there can (and will).

Anyway, given the current situation, I wonder if companies, including channel partners, might be better off if the business world were to change the focus of how it defines corporate performance by overhauling the way in which it is reported. At present, most attention is focused on company revenue and profit. In many cases, scrutiny occurs every three months when the quarterly figures are published.

A number of voices have already called for businesses to report their financial performance less frequently, arguing the intense focus required every quarter is a distraction that can have a distorting effect on a company’s operations. They suggest six-monthly intervals would be sufficient and also engender a more long-term view from business owners, analysts, shareholders and the market.

In the current climate, when companies are struggling to maintain any level of consistency, it might make better sense to introduce a regime that gives them an opportunity to provide a more balanced outline of their performance and smooth over the fluctuations that can prove so disruptive when measured in a shorter time period.

Admittedly, this doesn’t apply to many smaller companies as they usually only have to file financial figures on an annual basis, but it can affect their customers or their suppliers. Any upheaval or instability can filter down to them, particularly if it makes customers revisit or delay their purchasing decisions or leads to suppliers dropping manufacture of certain products or changing their marketing strategy. This can be especially true for the channel if vendors decide abruptly to shift more of their business to direct sales or to concentrate more on larger resellers.

Another thing which would make sense is if we were to be more realistic about the level of profit growth and revenue increases that businesses report. Far too often, we have been guilty of looking on revenue growth of less than 10 per cent as somehow sub-standard, barely worth registering even. But in today’s world, that’s a lot of growth. In fact, any growth at all is a lot of growth in some industries. The way I see it if a company can keep functioning while still employing people, that’s pretty impressive. There may well be some areas where we could even recognise that growth as such isn’t actually all that important.

IT has always been a high growth industry so it is hard to think of it as a slow growth, low growth or no growth sector, but there are lots of other industries out there in exactly that situation. They still matter because customers still need their product or service. Growth isn’t everything.

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