I went to a meeting with a diverse group of business owners and consultants the other evening. The only thing we all had in common was that we were graduates of the same business school in Scotland. Yet the quest for better business understanding and practice bound us together in common interest.
One of the participants invests in small- to medium-size companies. I asked him what’s most important when he takes a sizeable stake in businesses. His number one criteria is the quality of the management. He’s found through experience that management will decide the fate of capital invested, whether the company will be successful or run into trouble (as many have in this economy).
The other critical area to look at closely is the market. Opportunities for market growth attract investment. Advances in technology, for instance, in the aluminium market has huge potential in the consumer packaging industry.
We went on to view and discuss the latest developments in cloud computing and software as a service (SaaS). Here the opportunity lies in the smaller boutiques companies that can host companies’ operational IT on the cloud. If you analyse the breakdown of the various players in this market, from the large IT infrastructure providers to the boutique cloud-computing service providers, it’s possible to spot the opportunities for smaller companies.
Cloud computing holds potential for small- to medium-sized businesses who find themselves growing rapidly. They may not want to invest in capex (capital expenditure) but rather in opex (operational expenditure). What this means is simply that small businesses don’t need to invest in their own IT infrastructure but can plug into a shared service on the cloud.
The cloud helps smaller outfits with proof of concept (POC) in that a business can test or trial its business model via the cloud without making large infrastructure investments.
Cloud computing will also assist the growth of business in Africa because in areas without infrastructure or support they can access cloud computing services.
We talked a lot about business models with one basic model that helps business owners and managers understand the revenue and profit generators in their business. An understanding of business models has helped clients revitalise and rewire their businesses. Costs are being cut in this economy at the expense of sales which makes it crucial to have a holistic understanding of your business. Reduce costs but at the same time you can be inadvertently throttling sales.
All this may sound basic but it’s fresh insights that lead to innovation in business. We talk about ROI as return on investment but it can also be viewed as return on insight.