I heard someone on the radio the other day talking about bankruptcy. [BBC Radio 4, InBusiness, 18 December 2008] One of the features of the current economic crisis is that there seems to be a much shorter leadtime between a company's getting into difficulty, its creditors and suppliers getting edgy, and the company directors calling in the administrators.
Once upon a time I worked for a company that sometimes had threadbare cashflow, limping from month to month, the accounts department constantly trying to press customers to pay early and suppliers to accept late payment. (I should say I was not a director of this company, and didn't know much about this until later.) This company survived and prospered; I am sure many now-successful companies have had similar periods of uncertainty in their history.
Directors know they will be held personally liable if the company collapses, especially if they continue to trade when the company is non-viable. This is not just a question of being risk-averse, it is also that there has been a systemic change over the past few years. New kinds of regulation (such as Sarbanes-Oxley) combine with new technologies (such as SOA) to promote and enable maximum transparency and minimum latency. This greatly reduces the ability and willingness of company directors to wing their way through a crisis, thus making the crisis worse.
SOA is in no way responsible for the current crisis, but the presence of SOA and related technologies may have had some effect on the way that the crisis has developed and is continuing to develop.
The answer for risk-averse company directors is not to turn their backs on transparency and rapid-response, but to embrace these things, not just for the sake of their companies but to preserve their own wealth. "SOA or debtor's prison" - now that makes a compelling argument doesn't it?
This is one of a series of posts on Broken Business Models
See also Two Kinds of Business Model (December 2008)
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