How to compete fairly and openly.[Part of our ‘The Trouble with Innovation series 1,2,3,4,5 – Part 6]
Doing business anywhere, anytime is never easy!
That is a stark commercial reality, that most business people will accept as a given. But how? now? does is work in a climate of AUSTERITY???
(Apologies for the blatant confusion and poetic licence taken in the previous sentence).
Public and private sectors mostly have an uneasy symbiotic relationship with each other. If the public sector cannot deliver a solution, they have to procure it from a private provider and a private provider (generally, but not always) rub their hands with glee, as it is relatively speaking ‘easy money’ provided you meet and exceed certain framework thresholds.
All nice and cosy, when we are in a growth cycle of the economy; yet ever so tricky when those Framework Procurement Agreements come up for tender during the down slope side of the cycle…
It is odd how the ‘staccato’ relationship between private and public sectors work at different periods during the business cycle. And this is exactly where the public sector, with an astute “commercial hat” on, can take advantage of it’s perceived negotiating strength during the down cycle agreement drafting / tendering process.
Yet, do they take advantage of this?
Our view is that any Public Sector Procurement Framework Agreement with private sector providers will always be a FLOOR, thereby setting the minimum expectations and requirements, without ever really driving proper continuous INNOVATION and COMPETITIVE DYNAMICS to ensure players with ‘skin in the game’ continue to understand and manage their businesses with the proper risk attitude (never mind risk appetite). Rather than act as a (“floor price”) barrier to entry, they should act as ceiling, or rather more ‘bluish sky’ REACH or STRETCH agreements, setting the rules of the game, but not acting as the default pricing mechanism , meaning that the private sector provider must continue to be innovative, rather than wait and ‘cream-off’ the best bits whilst seeing out the agreement time period until the next time anyone bothers to ‘tamper with the height’ of the limbo bar…
Our summary take away from this article:
The Public Sector Procurement Framework Agreement therefore should act as an incentive to compete and have fair access, but never as the default pricing mechanism.
We decided to summarise our learning from 2011 into two brief thoughts:
The pains and strains of the economic sovereign debt melt-down in 2011, should stand us in good stead to deal with even more debt and sovereign strain in 2012, as More and Bigger Europe continue to miss the point; this being that more bureaucracy and more government and regulation will not get the INNOVATION engine started again to Recapitalise Europe!
Translational differences will matter. The CLOUD is a huge business and business model transformation opportunity. IT ‘Geekery’ and language could scupper this potential opportunity and we need to develop more ‘CLOUD TRANSLATION’ services so that a broader community and eco-system can get involved in an aspect of “INNOVATION ignition” in 2012.
As we wind down 2011 we have entered the ‘reflective season’, where due to the structure of the Gregorian calendar and the very long(est) night of the year (in the Northern Hemisphere), we naturally enter a more introspective mood.
Therefore, as we become more contemplative during this time, let’s reflect on our Core Values, both personal and organisational, and identify the gaps or misalignment between these two key areas of our daily existence.
Then start listing or rather prioritise these gaps and only focus on the one of two of the most feasibly achievable misaligned Core Values and develop a plan or incorporate it into your New Year’s resolutions.
If the gap requires coaching or input from people or personal development providers, do something as soon as possible to diarise or follow-up.
Look at utilising some common reminder tools we have available; pen and paper, notes or your mobile device, calendar reminders, or even new Cloud services and Apps, etc. in order to assist your “Oh Yes!” reminder moments later, should now not be the right or appropriate time or place to do something about the Core Value alignment activities you need to take.
Irrespective of how the twists and turns of the Greek political system plays out over the next few days and weeks, we believe that the Big EU (Eurozone more specifically) players and their leaders only have themselves to blame for Greece‘s seemingly petulant behaviour.
If at the fundamental level we cannot understand that ANY form of bail-out will always support and lead to Moral Hazard, then we have learnt nothing from the past and the more recent debt and financial crisis of the 2008.
Previously we mentioned the ‘Credit Quake’ with lots of after tremors (attributed to Dennis Cox of Risk Reward), will last for a number of years and this is exactly what we have playing out as daily deadlines in front of our eyes at the moment.
However, to return to the point at hand: The age of economic dilemma of Moral Hazard has reared its monstrous head again and is in danger of ‘nabbing us in the butt’ (yet again), because the leaders of the EU (more specifically the Eurozone 17) do not want to understand that all their actions in supporting Greece is only leading to a more dangerous form of Moral Hazard and flies in the face of the Austrian School‘s ideas of ‘Creative Destruction‘.
Without effective mechanisms in place to deal with European regions at different cycles of development (not even to mention the basic lack of sound fiscal management), is to ask for problems (on a continuous basis).
Until a sound framework of either full fiscal and monetary union with appropriate checks and balances are rolled out in Europe, with a single capital market instrument (Gilt / Bond or EuroBond) and mechanisms for dealing with localised ‘failures’ of the market to clear itself effectively (never mind efficiently); we will continue to wretch and lurch about with market confidence eroded and leaders running around like headless chickens trying and implementing inappropriate tools for the job a sound framework is supposed to deal with.
It is not more regulation we want. It is simply BETTER regulation. It is that simple.
On reflection, the ‘mechanism’ established to rescue or save the Euro is indicative of the fact that we still understand very little and can control and short-circuit systems to some extent, yet we think we value everything.
Inflation, and dare we state it openly, serious inflation of double-digit proportions must now surely be back on the cards?
We realise that we are not the only and first publication to come up with this analysis.
Bloomberg reported on 30 September 2011 that European Inflation had unexpectedly jumped to 3%, up from 2.5% in August. Yet, this is still a long way off a double digit scenario, however, the factors mentioned in the Bloomberg report included, the Greek Default (possibility) and the ECB actions still possible in terms of containing European wide inflation.
Although most economists predict that inflation will start to wane next year, we believe that actions like the Greek Debt haircut and the increase in the EFSF’s bailout fund to €1tr sends signals to the market that the value of money is now seriously ‘delinked’ from operational reality.
We will not comment here in depth on monetary policy, as it is currently applied, however, we are beginning to get the impression that inflation as ‘the silent and stealth’ taxation it really is, is now firmly (yet behind closed committee room doors) on the agenda to help “manage” the size of the European Debt mountain.
It is worth keeping an eye on the real drivers of inflation and then there is some value in keeping an open mind.