EMAIL#149 - 12TH DECEMBER 2021 - "THE RULES OF BUSINESS HAVE CHANGED"
With the work year screaming to an end in a week and a half, it's hard not to sit back and reflect on what it means and feels like to be running a business at this point in time. To say it's a huge challenge is the understatement of the century as the rules of business have changed and every business owner is being affected.
A business is simply delivering goods or services for a profit and throughout human history there have been three key attributes of a business, price, quality, and speed. All business owners try to minimize the price and speed of delivering their goods or services, whilst also trying to maintain the best quality. These have been the golden rules of business for hundreds of years. But business owners have always struggled to successfully achieve all three of these key attributes and end up having to focus on and deliver two attributes at the same time.
"You can have it all, just not all at the same time" Betty Friedan
"For example, if you want a building project to be done quickly and at a high quality, that will cost you more. You can also have a project done quickly and cheaply, but you’ll be sacrificing quality. Finally, you can get high quality work for a lower price, but you’d better be prepared for a long wait." Robert Glazer
As consumers, we always want the best quality for the best price delivered as soon as possible, and we have now added a fourth key requirement, convenience. Whilst almost all businesses struggle to deliver on two of these key requirements, consumers expect all four requirements to be consistently achieved. The internet and Covid have greatly amplified these expectations which has created a business landscape where Mega-businesses like Amazon, Walmart and Apple have become so dominant and profitable that it is almost impossible for average businesses to realistically compete. Why, because only these mega-businesses can consistently deliver all four key requirements that us the consumers have become accustomed to receiving. With the click of a mouse, you can have almost any product delivered to your door in a couple of days at the best possible price. No driving, no parking, no carrying, no haggling, just pure convenience.
How big and dominant have these mega-businesses become over the last few years? Below are some startling facts and figures according to Wikipedia.
Apple is the largest and fastest growing company in history. It passed a market cap (total value of all its shares) of $1.0 trillion US dollars in 2018 whilst employing 132 thousand people. In 2021 it's market cap doubled to pass $2.0 trillion US dollars, but it's number of employees only increased by 22 thousand.
Amazon currently employs 950 thousand people globally, (which is more employees than the entire US construction industry), and it's market cap is $1.75 trillion US dollars.
Walmart, which interestingly is by far the largest company in the world when measured by the number of employees (2.3 million employees) but it only has a market cap of $400 billion US dollars. This is due to the fact that Walmart is still mainly a bricks and mortar retail business (much less convenience and speed), whilst Apple and Amazon are largely online retailers and are the world leaders in speed and convenience. So, the future does not bode well for bricks and mortar retailers.
For a business to succeed and grow it must be able to consistently deliver three of these key attributes, which is a huge challenge. But to dominate and grow rapidly on the global stage a business must also deliver the level of convenience we have all come to expect from Apple and Amazon, or die trying...
Thanks for reading,
Stay safe and welcome to the new world!