The Future Of Business - put simple series

Background: flickr.com
The next business
How changing economic
environment impacts
wealth creation

by Konstantyn, Atlanta, 2009
put simple

Put simple: The next business

preview
Background: www.cineboutique.fr

Konstantyn
Nov. 2009

new wealth growth points


new rules and tools


Chapter #1
Who are


Chapter #3
Legacy business instruments


Chapter #5
New business instruments



Economy:
#1 players that matter

Konstantyn
Aug. 2009

Simple model
a few players
The economy is as com-
plex as our life. Though,
big moves in economy
are always reserved to
big players. There are
just a few big players. If
big shifts happen, a
simple model can des-
cribe, help to under-
stand and predict eco-
nomic development.
Simple models compris-
ing of a few players and
their interactions en-
able strategic and
proactive business
planning.

1. Consumer

major market force

Private domestic consumption, % of GDP, 2008
USA 71%
Canada 60%
Germany 54%
South Korea 48%
China 37%
Source: Janamitra Devan,
Micah Rowland, and Jonathan
Woetzel McKinsey Global
Institute

2. Supplier
serves to consumer’s needs,
but follows its own interests

The supplier’s foremost
- Earnings interest is profit. There
Costs are two methods to
= improve profit. Increase
PROFIT earnings or decrease
costs. Focus on one
target is essential while
in a competitive race.

2A. Manufacturing

focus on the most efficient
transformation of resources

Manufacturing focuses
on the costs. Costs

Supplier reduction equals the

costs
most efficient resource
transformation into a
plurality of products.
The core competences
are production
methods, labor
utilization and natural
science.

2B. Marketing/Sales

focus on pleasing the consumers

Marketing focuses on
the earnings. Earnings

Supplier increase equals sales of
the same mass
earnings produced product to a
plurality of individuals.
The core competences
are requirements
management, custo-
mization, advertise-
ment, distribution.

3. Market controller

Federal Reserve

Market controller
regulates the process of
goods exchange
between consumers and
suppliers. Particularly, it
Financial controls the exchange
system change
medium = money. The
amount of money
supplied to the market
impacts behavior of
both consumer and
goods supplier.


The recently dominant
#2 business model

Co. & Konstantyn
Aug. 2009

Financial system changed
the way to drive wealth creation

Financial
system
change
America’s New Beginning: A Program
for Economic Recovery, Feb 18,

1981 Last time the general
business model was
forced to modify thirty
years ago. Since the
year 1981 an access to
The next business model opportunities – by Konstantyn Spsokukotskiy, Atlanta 2009
easy-to-get credit was
x GDP US credit market assets
granted. The volume of
4
money consumed by
the economy nearly
3
doubled. The
additionally released
2
credit money were not
1
necessarily matched by
the goods. This
became a source of
1951 1956 1961 1966 1971 1976 1981 1986 1991 1996 2001 2006 2008
Source: Peter Stella, International Monetary Fund, The Federal Reserve System Balance
excess money.
Sheet What Happened and Why It Matters, 2009

Consumer’s bonanza
as primary money upload model

Financial Primary
system upload
change model


money flow
Federal Reserve
primarily pours money
into consumer market.
Consumers have more
money for disposal than
earned. There were
certain reasons for
doing this.

Industry shifts priorities
Consumer is truly King/Quinn

Financial Primary
system upload
change model The business target “get
the money” results in
The next business model opportunities – by Konstantyn Spsokukotskiy, Atlanta 2009 the hunt for the excess
money. Being first in
GDP sector percentages
70%
line (here chasing after
consumers) equals
50%
service bigger pie. A big part of
service is the process of
30% product customization.
industry Customization helps to
10% sell mass produced
products into plurality of
1952 1962 1972 1982 1992 2002 individuals.
Source: Directorate-General of Budget, Accounting and Statistics


Industry neglects costs
some core competences vanish

Financial Primary Neglect
system upload cost
change model factors

Lack of local competence: Number of foreign affiliates 1999- 2005
8.5k
Earnings-side (delivering
Industrial efforts in the past two decades
manufacturing
immediate value for
sale and trade
7.5k
4.5k consumers) factors were
4k
taken under magnifying
3k
glass. Costs-side pro-
professional services
fire
duction factors had less
2k
administrative
services
managerial attention.
1k
agree, mining, energy
They were frown out of
education
construction
recreation & hospitality
the list of core compe-
health care
0 120k 240k 360k 480k tences. Malfinancing,
Efforts: employee equivalent/company 1991- 2005
Source: McKinsey Global Institute, 2009 off-shoring.

How long will it work?
The upload scheme
works until credit is
Focus on
system upload
sales
cost becoming cheaper over
change model factors
time. It allows to
refinance previous debts
Excess costs covered by refinancing and cover inefficiencies.
The next business model opportunities – by Konstantyn Spsokukotskiy, Atlanta 2009 Refinance for lower
interest and win.
Interest(2000) – interest(2004) = profit.
The leading interest rate
driver is Federal Reserve
Rate. It approached it’s
bottom limit (the rate is
effectively zero) in 2008.
No further refinancing is
available unless you
1981 1984 1989 1994 1999 2004 2009 endanger the wealth.

Background: Microsoft
Consumer goods

Game over
the business model
of the last three decades
is effectively done

Source: Federal Reserve statistical release, G.17, 2009 annual revision


Legacy business instrument
#3 examples

Konstantyn
Aug. 2009

1
diversity proliferation
“Any-One” economy

Any flavor, any time, any
place delivery.
One device, one function,
one time use design.




2 production offshoring
Service-oriented economy

More focus on marketing
and consumer design, less
on production and tools



3 aggressive sales
Push-over-pull ,
age of abundance

Unsophisticated consumer
has more money to disposal
than time to decide what to
buy.

Marketing being business
unit at the money stream
begot business.



#4 What comes next?

Konstantyn
Aug. 2009

Background: Microsoft
Optimism check up
opportunities


Help Industry In this scenario industry
upload scenario 1 has no real incentives to
please the customers
any more. It slows the
Financial Primary
Focus on
Neglect necessary changes
system upload cost
change model
sales
factors
down. More show than
go. Stricter
governmental regu-
lations are essential to
keep industry in check.
There are incentives to
sell complex products.
Production of those
products is problematic.
Hallmarks: Result: bad product
sophisticated consumer, quality and no warran-
sneaky supplier delivers old shoe with new label, ties. Stale mate eco-
minute wealth increase if at all, values shift nomy. Restricted con-
sumption.


Build Infrastructure
upload scenario 2
Also supported by
Financial Primary Obama administration.
Focus on
system
change
upload
model
sales Examples: investment in
transport infrastruc-
tures, health-care IT
infrastructures, etc. The
probability of more
stress on this scenario is
low. It requires new
(forgotten) competenc-
es. Typical results: back-
Hallmarks: shoring, in-house pro-
sophisticated consumer, duction, more students
marketing-centered businesses die-off, in engineering. Better
wealth increases slower than used to be control over long-term
product/service quality.


Scary the crowd
upload scenario 3
The scenario utilizes the
effects of world-wide
system upload
Focus on
cost deflation and/or mass
sales
change model factors hysterics. That is people
as well as businesses
save and stack money in
unusual quantities bas-
ed on gains in deflation
economy or scared by
the wave of failing (in
their perception) insti-
Hallmarks: tutions and danger of
business as usual, coming challenges.
expensive banking regulations , Banks decrease
people are scared to death by any available reason leverages. It isn’t pro-
life scenario and thus
not sustainable.


New business
#5 instruments to win

Konstantyn
Aug. 2009

1
Complex products
“All-in-One” economy

Consumer has no access to
easy money. Hard won
money will be spent wisely.
Multi-functional products
with low TCO per function
will be preferred.

Jack Trout’s

simple and obvious products
going to be extinct


2
Back to basics
The stress on particular
instrument is not clear until
a dominant scenario evolves

3
personal

participative sales
Pull-over-push,
age of scarcity

Sophisticated consumer has
more time than money to
event
marketing
direct

spend.
sales direct guerilla
marketing marketing

tele-
marketing
mass

promotion
public
relations

advertising

push participatory
Source: Pinko Marketing

picture: www.ravenwerks.com
Advertisers
establish/use trust


The future of business

What is your opinion?

coming soon

what do future successful businesses do?

1. _____________________

2. _____________________

3. _____________________

4. _____________________

5. _____________________

The Future Of Business - put simple series

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