14.01.2013

Year of the Snake

Those companies whose fiscal year equals the calendar year have had their budgets most likely confirmed for a while now and are soon kicking off their new year. How will the year eventually unfold?

According to Chinese horoscope, 2013 is the year of the snake which entails some interesting omen, prediction and beliefs that I hope will prevail also here in our hemisphere. Ancient Chinese wisdom says that a snake in the house is good omen as it means the family will not starve. People born in the year of the snake are intelligent and wise – they are great mediators at doing business. Word of caution is also in place – one should control spending and use ones talents wisely.

In the business world of our hemisphere, it is unlikely the Chinese horoscope and its predictions have been the basis for 2013 budgets and guidance. The assumptions and game plan will have striking resemblance nevertheless.

What comes to the economic conditions in Finland, the Ministry of Finance expects in both the 2013 Budget as well as the latest Economic Bulletin that market conditions will remain challenging for the year. GDP growth is forecast to be 0,5% and in 2014 only 1,7%. This is low indeed, but finally the projection and trend is positive. The ministry and associated public instances are putting in place structural reforms to accelerate growth. Expectation is that private spending will decrease year-on-year and as to talents, at least the public sector is giving more latitude for investing in R&D.

In the private sector we operate under the same overcast conditions. The competitive environment will be tougher than ever and this will be amplified with caution caused by flat-line demand. All investments are scrutinized and only those with certain returns and preferably within one fiscal year are easier to get approved. Purchasing processes have become more scientific and justification for purchases will be sought after from more decision making instances than before. In the public sector this has been the case already (although there are finally now signs of more sane development). Although is little evidence that markets are recovering very quickly, there is a growing appetite for positive signs to improve the bleak mood. Not all of these signs are visible to the naked eye.

But indeed there are positive signs in the market, especially for software and other ICT solutions. And harsh conditions, like those of today, typically fuel innovation. In these days of cost consciousness, control, seeking efficiencies, automating processes, driving down costs per unit, improving process visibility, improving planning, endorsing cross-company networking etc. there is a clear need for adopting new solutions. If you cannot expect to drive top-line revenues, then you need to renovate the downstairs of your profit and loss account. There is also a growing demand for alternatives what comes to competitive services, agile delivery and wise spending.

Buyers are much more cost/quality conscious and avert risk whenever possible. CEOs will listen to suggestions which improve customer satisfaction, customer retention and customer profitability, CFOs will listen to investment proposals which switch CAPEX to OPEX, improve financial planning and number credibility, CIOs will listen to any low-risk proposition that resonates well with what the CEO and CFO hear.

The year of the snake is therefore indeed one where wise use of talent will pay off. It will not be an easy year from a financial or commercial perspective, but we will need to position ourselves differently. We need to listen more carefully to our masters in the market and encourage them also to listen to what we have to say.

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Mika Tanner

Bilot Alumni