What to expect in 2009?

The year MMIX is here. While we are keen and happy to leave 2008 behind as an unpleasant memory, the events of the year will have a profound effect on our lives in 2009. One thing is certain. Everyone – even, or perhaps that should be especially, Bernard Madoff’s investors – begins 2009 a bit poorer and more motivated than we began 2008. Here is what to expect this year.

Technology: innovate-and-monetise or bust

With everyone from car manufacturers to biotechnology industry expecting handouts in their begging bowls, there simply isn’t enough money to go around. Governments of developed nations are leveraged to the hilt, ignoring their own fiscal rules while emerging nations like China are begging off investments in western economies. 

Car manufacturers in America have for years ignored innovation. Their direct and indirect influence on public policy is wide-ranging, their role in catalysing America’s oil dependence second to none. Apart from the huge numbers employed, the industry needs a root and branch overhaul. Some are already taking advantage of the opportunity. Expect that advantage to grow – in their continued favour.

The biotechnology industry’s case for a bailout is even weaker. Private patenting of publicly funded academic research outcomes is seen as a hindrance to innovation. Research suggests that the patent system has failed to deliver actual benefits in the form of better health or reduced hunger. Gary Pisano expresses bafflement at how the biotech industry remains in existence despite its sustained unprofitability. Arthur Levinson, Genentech’s CEO, once described biotechnology as “one of the biggest money-losing industries in the history of mankind”. Governments have however provided continued support to the industry through research funding, subsidies, tax cuts, and helpful regulation, such as the Orphan Drugs Act which some see as being ‘co-opted by the biotech industry’. How long should public money prop up an industry which is all promise but no delivery? 

Then there are the creative players in the Web 2.0 world who are yet to find a profit-making business model.

In MMIX, as money remains in short supply, there will be essential weeding – and possible consolidation but valuations will remain low – in nearly all business sectors. In other words, the choice for businesses is stark: innovate-and-monetise or bust. 

Regulation: I am here from the Government and I am here to help, well, some of you 

Amid the NINJAs, the credit crunch and the Madoff scandal where the SEC has admitted not being too alert, regulation and enforcement in the financial services sector is ripe for an overhaul. However, first, the regulatory agencies need to come to grips with the, um, innovations in the sector they regulate. So expect this overhaul not to be any time soon, even as the proverbial revolving door between industry and regulatory agencies swings into action again. 

Regulation of other sectors will change too, but instead of becoming harsher, it will become friendlier to innovation and business so that new jobs can be created for those seeking refuge from retail and manufacturing, and so that smarter spending can be kick-started.  

I expect both pensions and public health provision systems to start a process of reinvention, creating both investment opportunities and social gains.

Investment: Where’s the party? 

Smart investors and companies will manage market access through maintaining a good understanding of not just regulation but also regulatory trajectories and futures.   

As valuations drop and businesses go bust, there will be opportunities to purchase valuable assets cheaply. Some smart people may be up for grabs too but not for long, as regulatory agencies seek to beef up their commercial nous by upping pay packets to attract good talent. While closing-down-sales can hardly be classified as an innovative offering, new businesses will emerge in their place. They will offer value and quality, over random posturing and stylised nothingness. More Tom’s Kitchen than Tom Aikens if you will.

Consumer conversation will grow in 2009 as they seek information and demand better customer service in return for their spending. We can happily bid good-bye to the nail-filing shop assistant this year!  

For businesses and investors, these changes will mean the need to understand consumer conversations better. They will therefore seek to get actively and visibly engaged in social networks and communities, and the smarter ones will ask for help in bridging the gaps

Here’s wishing you a productive, creative and bullish 2009!

3 thoughts on “What to expect in 2009?

  1. I too feal that 2009 might be an inflection point for technology and investment.

    However rather than Innovate I would champion businesses to serve a need well. To oftan when talking to senior executives in the Mobile Industry I here that they have benchmarked themselves against their rival and the metrics are good, rather than we will improve customer service because we are below the standards of BMW/Mercedes, our segmentation model has be adapted to reflect that used by Tesco/Unilever/Nestle. When it comes to mobile too oftan I see the ideas are based on the mobile web rather than new voice services.

    The liquidity issue will be with us for al of 2009. Too many people have forgotten about saving and until we start doing so again the Banks will not have the money to lend others. Not only do individuals need to start saving, businesses also need to build up cash on the balance sheets. The crash of 2008 will also slow the advance of the BRIC economies with the effect being that they might stall rather than grow.

    Reglation will be something that is talked about but I see little implementation. The EU is now too big to react quickly and the power of the new members means that it is no longer a cosy club. The risk is therefore that any new legislation they draft looks more like the Dangerous Dogs Act than somethng that will control the markets. The current compliance regulation does not seem to work thanks to the formation of telephone advisary panels aimed at informing small groups of Fund Managers seeking to get an edge on the market.

    I will be looking with interest at just how many more firms go to the wall in 2009 and if the consumer reaction will be to stick with the Big Brand Names rather than save small amounts by going independent. Over the last week an number of adverts have been run by the big two holiday companies here in the UK saying that if a tour company goes bust and you book with them you get a full refund within 24 Hrs. The Newspapers have also written about the winners in the downturn naming the likes of IKEA, Boots and HMV as those who will prosper.

    The good news for those of us in Consulting is that Clients will seek opinions rather than assumptions which will favour the Boutique over the major players.

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  2. Hi Shefaly –

    Whilst I digest the full range of information you so insightfully offered in the above post, I wonder if you might consider a blog post recommendation from a reader:

    How profitable are companies like Confused.com? As you know, the telly in the UK is constantly showing ads from websites offering to get the lowest rate of this kind or that kind of insurance for visitors. From where do they generate income? Adverts is one source, but you do know if they are working an angle from the insurance providers as well?

    Thanks for considering the question. I appreciate that you are busy and have not asked for readers to submit topics for posting.

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  3. @Ian: Thanks for your vision. In the almost 7 weeks since this post, biotech has seen consolidation while ‘pre-revenue’ Twitter has raised $35Million. More financial fraud, namely Allen Stanford, and greater losses have come to light. Several high street names have vanished in the UK, while car factories are bleeeding jobs all round. The EU leaders meanwhile are busy pointing fingers at each other while brewing their own version of protectionist potions in their respective countries.

    But some of us are working on a growth strategy by identifying the right markets, segments and sectors to monetise. So you are spot-on.

    @Liam: Thanks for your note. The reply wouldn’t need a post. These businesses are aggregators who make money on commissions from the purveyors of the products they manage to sell. Since they have deals with many of the providers, they make money regardless of whose product they sell.

    They also do not play in a small market. An estimated 4 out of 10 insurance policies in the UK are purchased via such aggregator/ comparator websites.

    Usually they are owned by one or the other insurance provider. Confused.com for instance is owned by Admiral. Hope that answers your question.

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