Much management writing is taken up with telling eager executives how to ride the roller-coaster. But should you be aboard in the first place? Shareholders don`t want their money tied up in a vehicle designed to deliver excitement and thrills. They much prefer a steady stream of dividends, allied to realistic capital growth, over an extended period of time. So don`t worry about trends and how to buck them; instead concentrate on the basics of your business.
At MIP Holdings, we centre on a simple philosophy. Business is about making profits, and profits are measured in rands and cents, which means cash in the bank.
The most famous trend in recent times was the dot-com boom. As it started, we asked an obvious question: how would a dot-com add value to an ordinary business? It might, but, in essence, was there truly a difference between Amazon.com and CNA? Both were selling books to a consumer base, but CNA probably had a much better one to start off with. Doing business better, or even changing the way the business is conducted, need not necessarily involve IT.
It was also clear that if you were selling books over the Internet, then you had to have a physical mechanism to deliver them. But that applies just as much to other consumer commodities like pizza - hence the success of Mr Delivery, for example. We saw that successful businesses would be those that had good delivery mechanisms in place, whether they were Internet-based or bricks and mortar. So the role of IT in a business is to support the business basics. If you`re in home delivery of pizza, you need a system that supports you just as much as Geoff Bizos needs a different but equally supportive one at Amazon.com.
Looking at the market then and looking at it now, we can see that companies that deliver quality support are still very much around and in business. In fact, they sit with satisfied customers and wonder what all the fuss is about. Good, cash-generating businesses using IT or the Internet to support the basics are very much around; however, those that designed a glitzy Internet front-end and then tried to build a business to fit behind it are history. Another mantra concerns the role of the CEO. Here`s why. If you, as the boss, are busy chasing the share price, or looking for the latest quick fix or path to easy riches, then your company will certainly wind up following or trying to buck trends. It`s known as management by fad. But if your sleeves are rolled up, and you are in touch with your customers and your staff, if you are continuously involved in the detail and watching the cash like a hawk, then you`ll be OK.
A critical distraction in trend-avoidance is the so-called "analyst". They are normally attached to very large and influential financial institutions and can wield enormous influence. But how many have ever run a business? Many are youngsters. How many have put every penny they have into a business and built it from scratch? Watching the post-Enron and WorldCom clean-out in the US, it`s clear that certain analysts indulged in unhealthy, even criminal, practices. I have no doubt that SA is identical. Yet the analysts pick one stock over another and create the trends that we suddenly have to follow. It`s a herd mentality and to ignore the trend, you will have to learn to ignore the analysts.
In particular, they can spot companies with large piles of cash. At which point, they exhort the CEO to spend it. Several big, local IT companies burnt cash on a string of poor overseas acquisitions because of analysts. The market turned and some teeter on the brink of bankruptcy.
At MIP, we have cash in the bank and we sleep at night as a result. It`s a security blanket. But when the time is right, cash also enables us to make bold decisions that are based on sound business fundamentals - as opposed to decisions that are based on trying to follow or buck a trend.
Share
Editorial contacts