In a special end-of-year discussion, SmartCompany editor James Thomson and publisher Amanda Gome take a look at the trends and opportunities that we will emerge in 2009, which promises to be a difficult but exciting year.
James Thomson: Amanda, maybe a good place to start is by having a looking at the business environment. How difficult do you think 2009 might be as the economy slows and things get generally tougher for companies?
Amanda Gome: March and April are going to be terrible. We know that particularly in retail; companies are going to be putting up their prices at a time when credit cards are maxed out and there will be great difficulty getting people to spend at that time. Manufacturing will be doing it harder than ever but many of the segments will be doing it hard. Nevertheless, if we looked at February 2008, we had this sense of gloom about 2009 and the good news is James, we are actually here now, and things will get better towards the end of this year.
I too hope for a recovery around mid 2009, but the big question is unemployment. I think if unemployment were to spike then it will cause a bit of a domino effect. What sort of outlook do you have for the unemployment rate? Can companies hold on to their workers and get them through this?
Well as you know, the SmartCompany readers are telling us that about 40% were reducing their staff in 2008 and intend to again in 2009. However, I think it won’t be nearly as bad as the early 1990s.
I think companies have got better at managing and they had such difficulty recruiting the good people and looking for talent that the memory will be seared upon their brain. They know that there is always a talent shortage, so I think that they will be hanging on to their good people. So I think it won’t be one of those things that people will rush to do.
Nevertheless, as we can see there will be a lot of blood letting and companies will be taking on more casual staff, more part-time staff. I think around June there will be some nervousness too as the Government’s IR laws kick in. So that could also put people off hiring or making any big changes around that time.
Are there any particular sectors that will do worse or better than others? You mentioned retail and manufacturing, what about sectors like IT and service-based industries like property and financial services?
I think parts of IT are going to do very badly. One of the huge things that has happened this year is changes in technology – there’s a lot more software-as-a-service, there’s crowd sourcing and there’s open source. I know we have looked at this in SmartCompany, where businesses have cut budgets by moving from proprietary systems to open source. You can get some very good systems now for nothing.
A lot of companies are going to be looking hard at their IT and we also know that they will be deferring spending on IT; that is going to affect the industry. On the other hand, if you are offering good solutions and building good websites, then that is only going to continue as the move to online services just speeds up in this whole downturn.
Let’s have a look at online. Talk us through some of the trends in the online space around marketing and technology, and of course web 2.0 which we are trying to embrace as much as we can.
I think with web 2.0 has been a shock this year. When we started SmartCompany, yes people talked about web 2.0 and we got a few emails saying “you are not web 2.0 enough” – people were saying “we can’t comment after every story” and “you haven’t got forums”. But at that stage people weren’t ready for it.
What we have seen this year is a huge shift to web 2.0 where social networking is really very accepted, not just among our readers but in the general population.
We had some interesting figures from Forrester Research just showing how many people are actually using web 2.0, and I think it was only 25% of people online that weren’t using social networking sites. That is extraordinary. It wouldn’t have been anything like that last year.
Even our lunchtime conversations around journalism has changed so much. When we were at BRW for example, we used to talk about which pub we might go to have a steak. But now our conversation goes around things like “have you Twittered, have you checked Google, can we link to more stories, can we RSS this?”. It is a completely different language and that language is now pretty much the norm. That is going to continue next year as companies really start to look at what they can do further online and almost become mini publishing sites themselves.
But that does create a bit of a danger as there is a heck of a lot content on the web now. What are some of the secrets of cutting through the noise and trying to convince people to look at your site and not your competitors?
We’re seeing a lot of our really advanced entrepreneurs doing this really well. They’re putting more in-depth content on their site that they update very regularly. And this gets picked up by the Google bots and makes sure they’re highly ranked in Google. They’re also putting white papers on their sites (these are in-depth reports looking at a specific topic), they’re putting calculators on their site, they’re blogging regularly. They are working very hard to make sure that first they are on the front page of Google and that second they’re constantly engaging with their customers.
What about the online retail space? It’s been a bit of a busy year in this area and obviously the growth is still very impressive. But we’ve seen JC Penny come to Australia and then leave suddenly despite the fact their website seemed to be doing well. And then late in the year SmartCompany brought you the comments of Gerry Harvey who declared that online retailing was a dead end.
Obviously we had a lot of reader response to that, but what’s your opinion to Gerry’s comments? Is there still scope to grow in the online retail sector during the downturn?
Absolutely. Any retailer that isn’t looking to do online has rocks in their heads. What did you think of Gerry’s point?
I could see where he’s coming from, because I agree that we haven’t had a flagship Australian online retailing business yet. We’ve got a lot of smaller success stories, but what I think what Gerry was saying was that there is no equivalent of a Harvey Norman or something big like that.
Then again, I think that might miss the point. Online is not about mass market, it’s about niches and the long tail. You’re going to naturally have a lot of different stores serving specific niches and doing that very well and – as our readers have told us – very profitably.
We had a lot of letters about that and I like this one particularly from Greg who says Gerry’s no fool but he underestimates how much business is being done online. “We’ve not bought anything from one of Harvey’s stores or any other bricks and mortar retailer for years, they’re too expensive. We go and look but we go back home and place our order online.” And he says that’s for everything; sports goods, car parts, footwear, clothing, wine.
So it’s not just that they’re looking, they are shopping online. This is a case of where the consumer is way ahead of the business provider. It’s usually the other way around – people go broke because the consumers don’t get what they’re trying to do. In online retail it’s the opposite and I think next year we’re really going to see a big push by the smart online retailers into that space and there will be a lot of innovation.
We were talking at the start of our conversation about preparing for the recovery and realising that this is a cycle that we will emerge from. What are you seeing smart entrepreneurs do now to get ready for the uptick?
For a start they’re not being put off by all this negative reporting that the media’s being blamed for. And James, I don’t know about you, but I’m quite sick of being blamed by people. We have warned our readers that tough times were coming.
But when we turn around and start talking about the good things, the good signs on the horizons – and I actually think they are just starting to emerge now – things will still feel really bad and people will be saying, “what the hell are you talking about?”
But I do think the really smart readers are geared up to looking for the opportunities. Your competitors are going to be slower, have more debt than you, and locked into systems. This is a very good year for smart entrepreneurs to grab market share, to pick up any companies at a very good price.
And I think unfortunately that our small listed companies are going to be very vulnerable this year as larger competitors come in and take strikes at them.
But 2009 will be a very good year to take out some competitors. A very good year to pick up good staff from competitors. Look at who they are putting off and see if there is anybody there that you can actually put on.
It will also be a good year to innovate. If you can come up with anything better and new for your clients that the competition isn’t offering, they’ll be excited by that. They’re going to be looking at new things too.
Absolutely, I think there is a lot of opportunity for people if they’re willing to look in the right places and be aggressive in their management style – although this might go against the logic, there’s room for growth.
Now Amanda you’re an entrepreneur, what are some of the challenges and opportunities that SmartCompany, as a business, is facing in 2009?
We are gearing up for a very big year. We’re relaunching our web site early in the new year, and that will be very web 2.0. Our readers will be able to comment under every story and go into our forums.
Our challenge is actually looking into the business opportunities from that. How can we also make sure that not just our readers but our advertisers who want to reach our readers can get the most out of that? That’s going to be an interesting opportunity.
I think another challenge is making sure that the big wave of people that are going to leave middle management and start their own businesses are properly educated.
This is when we see a lot of entrepreneurs that are “necessity entrepreneurs”. That is they’ve started their business from the necessity to make their own money. They are forced to start up, they haven’t got time to do their homework, and they blow their retrenchments.
In the middle of the year we’re going to be holding some seminars that will basically teach you how to research and then start your business within 200 days. And some of that James will be based on my own experience starting SmartCompany.
So they’re the challenges ahead for us. What do you think the challenges are?
Well I guess we are going to be operating in a difficult environment in the first six months, but I think the challenges are continuing to keep our editorial quality up.
That’s one thing that we’ve been very good at when the big newpapers are cutting back. The big media organisations are facing some huge difficulties; we’ve continued to invest in quality journalism and keep striving to do things a little differently. So that’s what I think we’ve got to keep doing.
And probably too pointing out all the growth opportunities. This will be a big year I think that will be just back to basics for business. No tax schemes, no financial get-rich-quick stuff – this is about old fashioned “how to grow your business”. And of course that is what SmartCompany is a specialist at, so it will be a big year for us.