The business world is going through some strange times. First, we are experiencing full employment in this economy for the first time since the 1960s. Meanwhile, inflation is the highest it has been since the Regan administration. These two factors combined make business people nervous and shareholders restless. Even bankers struggle to understand how to be profitable in an environment of full employment and high-interest rates.
Furthermore, this environment of uncertainty is being made worse by layoffs in the technology industry and the media exposure of advances in Artificial Intelligence. What is a professional to do in this chaos? It is necessary to discuss it.
The last time the economy was such a tangled mess was during the 2007-2008 financial crisis. Banks loaned money to people who had no intention of repaying them. Using sophisticated investment tools like credit-default swaps and collateralized debt obligations concealed recklessness like this. Everything was going well until people began to default on home loans, and the entire house of cards fell, triggering the Great Recession, which would linger in the economy for over eight years.
During the panic and with the credit markets beginning to petrify, I read a book by William H. Janeway entitled “Capitalism in the Innovation Economy.” Janeway points out that during times of economic stress, venture capitalists demand two things: cash and control. When markets go sideways, shareholders want to hoard cash to lock in profits and avoid losses. For the business, the money supply from investors will slow down. For the investor, control means ensuring the business generates the profits necessary to justify the initial investment of money. Investors will allow a company to operate with little interference when things are going well. All is well as the share price increases or the dividend checks keep coming. When situations change, investors will micro-manage the money flow through the business. Executives will get fired, projects will get canceled, and ordinary workers might face layoffs.
With interest rates increasing and tight labor markets, it is no surprise that investors want more cash and control of the businesses they are financing. The good news is that agile gives you the tools to provide the money and power that investors demand. It begs the question of what an agile professional should do when this situation arises at your office.
First, the agile process allows for rapid iterations and inspection cycles. It is what people who desire control want. Every two or three weeks, you can show venture capitalists and investors what their hard-earned money is purchasing. If changes or corrections are necessary, the agile team can pivot to respond to those changes. It also allows people seeking control to have intimate knowledge of how the business is operating. At first blush, it looks like micromanagement, but it is close collaboration with the customers who are paying the bills for the organization.
Next, investors and venture capitalists demand cash during uncertain times. As a professional, you must prove value for each technology decision and show how money flows into the organization from the first mouse click until the customer provides a credit card. Show skeptical investors how quickly a customer pays their invoices. Another good metric is showing how revenue improves with each technological improvement. Net Present Value is one of the most fundamental calculations an investor can make. So, calculate the figure and show the investors that the people and technology will pay for themselves quickly. The approach will calm the nerves of jittery investors.
In these strange times for business, each professional plays an essential role in building wealth. So agile development and management are uniquely designed to provide cash and control to nervous investors. If we collaborate closely with shareholders and investors using agile methods, we will survive these strange days more robust and innovative.
Until next time.
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