The Quick and the Dead

The Quick and the Dead – In most sectors, over the next 12-18 months, we expect to see a wave of new ventures and industry level initiatives taken by entrants and existing players. These are entrepreneurs and firms who took advantage of the downturn to take or accelerate bold moves. The results of their efforts will come as a shock to many in the sector who ‘didn’t see it coming’. A second breed of ‘dead men walking’ will become apparent as traditionally successful businesses struggle to come to terms with a new world order.

Improving M&A Potential

Improving M&A Potential – The downturn has left a number of firms struggling for survival or at least significantly weaker than 18 months ago. The risk of a double dip downturn makes many even more vulnerable. Cash rich corporates, investment funds and even private investors will be more active in seeking out opportunities to acquire and integrate or break up these ‘bargain basement’ businesses.

Open Innovation

Open Innovation – Wave 2 - While there are notable examples of businesses such as P&G and Apple succeeding with open innovation, the reality is that many have struggled to make it work. Internal processes, legal issues and a prevailing mindset of distrust have seen many such initiatives fail. We expect to see three dominant approaches in the next wave of open innovation in 2010. Firstly, some major corporations will bite the bullet and truly embrace the concept. The majority of large firms will followed the route of controlled experimentation to open up particular innovation opportunities around new product development using platforms such as Innocentive. The third will see a growing band of innovators who use open and crowd sourced approaches to conceive, develop and market their products and services.

Accelerating Innovation

One of the most interesting responses to the downturn has been the rising focus on innovation. This has ranged from a wave of new product launches to radical rethinks of entire business models and operating systems. However, many larger businesses have found their internal processes a barrier when it comes to turning ideas into reality. We think the focus of innovation initiatives will increasingly focus on streamlining decision making to allow more rapid testing of new ideas.

Free or Fantastic

Free or Fantastic – Vendors of both physical and electronic goods and services will have to face up to the fact that hyper-competition and almost unlimited consumer choice are driving prices down to zero. A range of alternative revenue streams are then required to make the endeavour viable. Those that want to generate direct payment will have to demonstrate that their offering is truly fantastic and worth paying for. For example in the UK newspaper industry, the Financial Times has successfully raised its hard copy cover price on a regular basis and charged for its premium content online. In contrast, the London Evening Standard has had to abandon the charging model and move to a free circulation model.

Customer Lock-in

Customer Lock-in - Nervousness about the strength of the recovery will drive innovation in sales and pricing strategies. Where possible, suppliers will seek to lock customers in to longer term deals during the early months of the year - with options such as subscription models, long-term discounts and staggered payment arrangements. Equipment suppliers will increasingly have to adopt an approach of providing the product for free and then charging a rental fee or proportion of the savings or increased revenues / profits where these can be attributed.