The Tsunami of Spending: How Businesses Are Drowning in Their Own Excess
Imagine a tsunami, but instead of a massive wave, it’s a never-ending deluge of unnecessary spending. That’s what’s happening in business today. Companies are throwing money at problems without thinking about the long-term consequences, and it’s going to take a devastating impact to wake them up.
That’s according to Matt Lawlor, a futurist and business strategist at Futureworld, who spoke at the ITWeb Brainstorm and BCX Enterprise Forum in Cape Town. Lawlor warned that the world of business is on the brink of a revolution, with companies facing disruption and innovation at an unprecedented scale. And those that can’t adapt will be left behind.
The Death of the Status Quo
The average tenure of companies on the S&P 500 Index is projected to be just 14 years by 2026, a significant drop from 33 years in 1965. This means that the battle for relevance is on, and businesses must focus equally on planning for the future and reassessing current practices to retain customer loyalty.
But how do companies avoid becoming the next casualty of this tsunami of spending? Lawlor pointed to Elon Musk’s SpaceX, which has managed to reduce the cost of space travel by rethinking its approach. Instead of building a brand-new rocket for every trip, SpaceX develops reusable rockets that can be used multiple times. And they’ve managed to cut the average cost of a rocket launch by a whopping 90%.
The Hotdog Effect
But what about the hotdog and soda special at Costco? For decades, the retailer has been selling a hotdog and refillable soda for just $1.50. And despite the low price, Costco has managed to keep the profit margins intact by producing their own hotdogs and redesigning their food courts to speed up service. It’s a masterclass in understanding what customers want and delivering value.
Spending Money to Deliver Value
So, how do companies avoid throwing money at problems without thinking about the long-term consequences? Dr Fazlyn Petersen, a senior lecturer at the University of the Western Cape, warned that you can’t reduce costs if you don’t understand what your value proposition is and what value you add to your customers. You also need to know what makes you money.
And Pragasen Pather, Sun International’s group CIO, learned a valuable lesson during the Covid-19 pandemic. When the country went into lockdown, Sun International was forced to put several strategies in place to keep the lights on. But instead of giving up, they used the crisis as an opportunity to innovate and disrupt their business model. And it paid off.
The Real Competitive Advantage
So, what’s the real competitive advantage in business today? It’s not technology, as many companies think. It’s not even innovation. It’s about understanding what your customers want and spending money on activities that provide the most value to them. And it’s about embracing different levels of innovation – incremental, radical, and disruptive – to increase revenue in different ways.
The tsunami of spending may be devastating, but it’s also an opportunity for businesses to rethink their approach and deliver value to their customers. Will you be the one to ride the wave, or will you be swept away by the tide of unnecessary spending?
