Steven's Blog

Business Trends in 2019

As 2018 comes to a close, I foresee three trends based on my experience with clients. Here are business trends to keep an eye on in 2019.

1. Companies will cut business as a growth strategy.

The dearth of qualified labor will continue to bedevil businesses throughout 2019. That will surprise no one. However, successful companies will not allow the lack of people to limit their growth, nor will they turn to artificial intelligence and automation as a panpharmacon. Rather, they will ruthlessly cut business—even profitable business—to make room for growth.

The key to cutting for growth is minimizing labor intensity, which is to say how much effort and labor does it take to achieve what value. Low labor intensity generates higher value with the same number of people or even fewer. The only catch is that, to transition to a higher value, businesses require a higher level of individual capability among staff—better business acumen, ability to think and act independently without fear of failure, viewing failure as learning, and comfort with ambiguity to name a few. My most successful clients invest heavily in their best people for this reason. They are not squeamish about firing people who don’t learn and improve. They apply strict standards in hiring without compromise. Do you do the same?

2. There will be a growth in the service business even for product companies.

Growth in the service business for a company that sells services is a no-brainer, but for product companies, it is less evident. Many of the product manufacturing companies I know charge customers only for the product they sell and give away the service for free, even though the service can be just as valuable if not more valuable than the product itself. Their leaders view service only as a sales or marketing tool and something with little inherent value. However, many of my clients, who are selling highly technical products that are used in complex product designs, are part of a long supply chain leading to a final product or a highly distinct added ingredient in a final product offer. Their customers attach tremendous value to expertise in manufacturing, production, product improvement, streamlined manufacturing, and reduced risk of requirements failure upstream in a product lifecycle that my clients often give away gratis. Some of my customers are even involved in the product design process early on, advising how to achieve the capabilities demanded by their market. What product company would not want that kind of expertise?

Growth through services is one way that a product company can get a return on the expertise of its people and grow the business without having to add more people. Such is also one tactic for reducing labor intensity. Click To Tweet

In addition, services tend to be impervious to trade wars, something which is on the mind of many business people as I write this.

3. Scales will fall from the eyes of aficionados of artificial intelligence and automation.

Expectations from artificial intelligence and automation are excessive, and many managers incorrectly believe that these can replace humans. However, there is no ersatz for human empathy and judgment, and outsourcing these to a machine is not without danger.

I wrote last week about how Amazon not long ago developed a system to identify the best managers with strong leadership capabilities early on in their careers in order to eliminate human bias in human selection. The system unexpectedly, however, displayed an aggressive bias toward men, never recommending women candidates. The machine merely mimicked male-dominated leadership biases of the company with a perfection that even humans could not match. Amazon abandoned the system.

Imagine what would have happened at Amazon if they had kept the system in place.

Would managers ignore or go against the machine? I have my doubts. HR directors frequently tell me how they rely on expert systems because “machines are unbiased.”

Artificial intelligence and automation will also lead to increasingly unforeseen failures of the kind that they were ostensibly intended to prevent. Not long ago, I read about how a self-driving car drove off the edge of a bridge under repair because of the driver’s over-reliance on the car’s navigation system. In Los Angeles, an inebriated man got behind the wheel of his Tesla and passed out while on the highway with automatic driving engaged. The car duly stayed in its lane and maintained a constant distance between it and the car ahead. It was fine as long as conditions did not change—unlikely on any highway in a major city to say nothing of in Los Angeles. The California Highway Patrol had to maneuver a patrol car in front of the Tesla and gradually reduced speed until the car’s autopilot brought it to a stop.

I have to ask myself if this man’s confidence in his ability to drive home safely was not boosted because of the automated features of his Tesla. Automation has the side effect of emboldening fools.

So be on the lookout for these trends in your business, or otherwise make your own trends for 2019. Wishing you a happy and safe holiday season and success in the new year!

I have identified five common characteristics of robust strategy among my most successful clients.

If you would like to know what these are and where your business stands, send me an email, and I will send you a free PDF.

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