Just a decade ago, we thought we were fairly progressive and self-congratulatory about our technology, position in the global economy, and strength of our educational system. Now, ten years later, and all of those are being called into question and reviewed for opportunities to catch up to other countries. In just that short of time, things can change (and few of us could have anticipated it). For instance, in 2002, if you heard the following phrases or words, what did you think of?
- Amazon – for most of us, it was the name of a river and was not associated with one of the strongest retailing organizations beyond just books.
- Twitter – was a sound that occurred in awkward social situations, usually just under the ability of others to hear clearly. Now, it is aligned with the social networking phenomenon of connecting people together electronically.
- Facebook/Social Media – Social media and sites like Facebook, LinkedIn, and instant messaging were not nearly as universal as they are now.
- Skype – would have been identified as a typographic error and not the name of a service and business that provides video and audio conferencing.
- 4G – computer and telephonic generations were far from a source of pride or competition used to compare products.
Cloud – ten years ago a cloud solely referred to an atmospheric entity and not a way for distributed and hosted computing capability to be leveraged.
- Online Retailing – online used to mean waiting behind someone else to be checked out of a store. Now, the brick and mortar building is only one option available to the shopper to acquire products.
The facts are that attempting to guess at the next big thing may lead to huge upside potential, but also may lead to negative consequences for those companies that are not as well prepared or do not have as strong a foundation. For instance:
Barnes & Noble has declared bankruptcy because they could not adapt to the competition from online retailers and had costs that were too high to sustain growth.
Kmart has been folded into Sears (another business that has been in search of an identity) when it could not compete with the combination of Wal-Mart, Home Depot and Amazon all picking apart where it was strongest.
All the bailouts offered to the automotive, financial, and banking institutions done in an effort to prevent even greater harm to the economy.
Rather than trying to outsmart the market by betting on an unproven commodity in the hopes that it will be huge, or putting all of one’s eggs in the basket of a single company in a very challenging economy or market, it is best to be aware of how well positioned a company is to address challenges from competitors, general economic conditions, switches in costs of raw goods, labor, or other expenses, etc. By doing research into companies to identify weak spots and opportunities, the investor will be better able to weather the unforeseen and leverage the strengths of a company to respond or react to new challenges.