Preparing for an Uncertain Economic Future: Where to From Here?

I’ve been searching for an explanation of what’s going on out there in economics, technology, and business for a while — heck, all of my professional life.

Sometimes, like roughly the time between the last banking fiasco and the epidemic, there’s not much to report. It’s status quo, and everything seems to move along.

Then there’s a sudden change like the pandemic that put us all into an altered state for several years, and now it seems we’re trying to adjust to a new normal.

Back in the 19th century, Karl Marx called this punctuated equilibrium. But today, we mostly understand that yesterday’s equilibrium will not be tomorrow’s, and that’s why we call it the new normal.

I ran across an interesting article in Foreign Affairs, from last November, by an eminent economist, Mohamed A. El-Erain (paywall, sorry), that chided us for thinking that the normal we would return to was the last status quo. The only thing to consider in that line of reasoning was whether we’d have a recession or a soft landing.

But El-Erain went much further by asking what happens now that banks and governments are tightening the screws on credit? What about inflation? What do we do with so many people leaving their jobs and often the labor force for personal reasons? What will be the effect as China disentangles at least partly from the supply chain and leads a challenge to the western-led global order?

In truth, we don’t know, nor can we, in part because there are many moving parts. However, we can at least prepare ourselves for an uncertain future if we can remove the blinders that lead us to believe that tomorrow will be an exact replay of today.

Resilience, Optionality, Agility

El-Erain’s prescription is not specific to any individual issue. Good economic remedies can, at best, suggest how to position ourselves to optimize the present opportunities. That’s been true since Adam Smith and his generation first defined capitalism with the metaphor of the invisible hand of the market.

Instead, El-Erain focuses on three areas or competencies that will keep us on a path to improvement in the years ahead. Interestingly, some of his recommendations have been floating around the tech sector, especially CRM, for a long time. Some of that advocacy has been by yours truly.

El-Erain boils it all down to three things: resilience, optionality, and agility. They are mutually reinforcing and almost synonymous. He describes them this way:

“Resilience, or the ability to bounce back from setbacks, is often dependent on strong balance sheets and stamina, endurance, and integrity. Optionality, which enables a change in course at a low cost, is underpinned by the open-mindedness that comes from diversity in gender, race, culture, or experience. And agility, or the ability to react quickly to changing conditions, depends on leadership and governance that allows for bold moves in moments of greater clarity.”

I’d look at this from the opposite direction, though. Agility is what I’ve been harping on in CRM since platform technology and code generation became adequate for enabling businesses to change their approach and processes on a dime. It’s the platform that often allows business leaders to react quickly.

Resilience and optionality were first demonstrated in big ways when companies like Salesforce, Oracle, and Zoho were able to scrap what they were working on to devote their attention to developing technological solutions to working from anywhere. In my research, resilient businesses held up quite well during the pandemic, all things considered.

The wild card in all this is optionality, which El-Erain limits to diversity issues, but I see it in a much broader context. After all, open-mindedness doesn’t stop with diversity, but I suppose that kind of focus could be good training for the long term. It’s a way of making sure you get as many people on the bus as possible.

More Profitability, Long-Term Thinking

So where do we take this? For starters, it might be good to sell those three ideas as benefits when we discuss CRM. We might also point out other features and benefits of our systems. Still, their abilities to support customers’ needs for resilience and all the rest will be far more critical than any algorithm our engineers can develop.

Also, truth be told, there’s a lot of waste and inefficiency inherent in buying and selling companies just for their R&D. There’s even more inefficiency in investing in A-round companies that don’t get to round B.

My friend Keith Teare heads up a company that uses AI to identify better the best startups to invest in. I’ll have another piece on that strategy soon. For now, keep in mind that with liquidity drying up, finding better ways to use limited investment dollars will be a key to resilience, optionality, and agility going forward.

There’s not much to be done from the business side about war, climate, and other political upheavals, but the point of the new order should be about limiting the damage from, say, single-threaded supply chains. That will take a good amount of new technology to coordinate, and a recent McKinsey report noted that most supply chain management is still done in spreadsheets.

Yikes! We’ve got some work to do.

One of the things I like about this approach to resilience, optionality, and agility is that it gives us direction and purpose, which I think is in short supply in CRM right now. In some ways, it flies in the face of recent financial trends to make businesses more cost-effective if that initiative only looks at the profitability of current operations.

Profitability and more long-term thinking should go hand in hand. It looks to me like a framework for this is on the horizon.