What do an ancient Greek philosopher, a philosopher from the Italian Renaissance, a nineteenth century English novelist and a contemporary American business writer have in common? For Dexter Van Dango, they all make the same point: Change or die!
The Greek philosopher Heraclitus, who lived from 535 BC to 475 BC, is attributed to the phrase “Change is the only constant.” More than 2,500 years later, his proclamation continues to ring true. You can like it, hate it or angst over it — nothing will stop it. Change is with us for the long run. And unless we embrace it, change will overwhelm us.
Each and every day life serves up new challenges in the form of change. It may take the shape of a minor contretemps caused by detoured traffic, or it may appear in more disruptive forms such as death, divorce or job loss. Either way, we must deal with it accordingly.
Currently, the United States is mired with a grim New Reality of an economy that fell so fast and so far that it may take years for us to feel the impact of any measurable recovery. It is not business as usual. Instead, it’s business extraordinarily unusual. Our environment has changed and we too must change to survive.
In recent years, our industry has experienced an inordinate amount of change. Certainly the impact of consolidation took its toll on the competitive landscape as did the tsunami affect of the credit crisis. Moreover, the broadly defined financial services industry faces further change in the form of massive regulatory oversight through The Dodd–Frank Wall Street Reform and Consumer Protection Act signed into law by President Obama on July 21. How will this regulatory oversight impact your business? If you are part of a bank, is your company prepared for the business process changes and the allocation of resources necessary to meet the regulatory requirements? Are you adapting to the new environment?
The more narrowly defined equipment leasing business finds itself on the edge of a virtual abyss as we prepare for the impact of pending new lease accounting rules. The U.S. Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) are proposing amendments to the FASB Accounting Standards Codification and the International Financial Reporting Standard (IFRS) that will drive massive disruption for both lessees and lessors. After returning from the ELFA 2010 Lease and Finance Accountants Conference held in September, our company’s CFO surmised that we have neither the resources, the systems nor the knowledge base to handle the anticipated changes. I suggest that the CFO is wrong. We will adapt to the changes. We always do. But are we proactive or reactive in addressing the needed changes?
As humans, we crave stability, comfort and the status quo. However, nothing stays the same. The only certainty is uncertainty. That’s why anticipating, embracing and accepting change is important for a happy and successful ____________. (Insert any word you like — life, career, marriage, business performance, vacation — you get the idea!)
For years I have been a fan of famed author and business guru Tom Peters. In the preface of his 1987 book, Thriving on Chaos, Peters addressed the issue of choosing a title for the book. He was torn between “Thriving Amidst Chaos” or “Thriving on Chaos.” He wrote: “To thrive ‘amidst’ chaos means to cope or come to grips with it, to succeed in spite of it. But that is too reactive an approach and misses the point. The true objective is to take the chaos as a given and learn to thrive on it. The winners of tomorrow will deal proactively with chaos, will look at the chaos per se as the source of market advantage, not as a problem to be got around. Chaos and uncertainty are (will be) market opportunities for the wise; capitalizing on the fleeting market anomalies will be the successful business’ greatest accomplishment. It is with that in mind that we must proceed.”
Anticipating, embracing, accepting and thriving on change are not a new ideas. But reacting when we face the challenges of change puts us on the defensive. We merely exist amidst the change — versus proactively thriving on the change.
District of Columbia public school chancellor Michelle Rhee knows change. Last summer, she boldly closed 26 schools and fired 241 teachers for poor performance. She raised the bar for teachers, students and overall school performance. One question is: Why did it take the decisive move of a Washington outsider to challenge the norm of one of the poorest performing school districts in the nation; and embarrassingly so, the district of the nation’s capitol? One obvious answer is, because the district accepted the status quo and it failed to change with the changing environment.
Change is good. Change is required to proceed, to improve and to succeed.
More than 500 years ago Niccolò Machiavelli said: “For this is the tragedy of man — circumstances change, but he doesn’t.” Circumambient change is shaping a new playing surface for the leasing and finance business. How are you changing to adapt to the new environment? In recent issues I have written about the staleness of our industry. We lack innovation, new products and new services. Are you prepared to refute Machiavelli’s tragic statement? Is your company changing with the times?
IPED Channel Research, Consulting and Education conducts research for the information technology channel of distribution. According to online publication CRN, “IPED research shows that by 2012, more than 30% of customers’ IT spending will move outside their own data center. Between 11% and 12.5% of that will go toward a pure cloud offering in one of the following models: Software-as-a-Service (SaaS), Infrastructure-as-a-Service (IaaS) and Platform-as-a-Service (PaaS).” Many of these services will be subscription based, leaving the end customer without any tangible asset — nothing to finance. Are you prepared for this change?
In A Tale of Two Cities Charles Dickens wrote, “It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness…” In the past five years, we have experienced some of the best of times, and certainly, some of the worst of times. We’ve seen some wise people make some very smart moves, as well as a fair share of fools who misjudged the market and either crashed and burned with total failure, sold out with poor market timing, or visited bankruptcy as a last resort. Those companies that are still standing have either adapted to the new environment, or they are about to fail.
Legendary former UCLA basketball coach John Wooden is quoted as saying, “Failure is not fatal, but failure to change might be.” Perhaps what’s changing is the industry itself. As the equipment leasing and finance business has matured, the industry’s participants have also reached the maturation stage.
In the Fall 2010 edition of The Equipment Finance & Leasing Foundation’s Journal of Equipment Lease Financing, Robert C. Neagle wrote about the maturing of the leasing industry in his piece, “Leasing: A Challenged Industry of Undifferentiated Product, and Why It Matters.” In his insightful article, Neagle wrote about the challenges the industry faced in 2010 and how some players saw it as “… another business down cycle that the industry will respond to with resiliency. For others, the current challenges are not cyclical effects but the culmination of the inexorable movement from industry maturing to decline.” Some leasing folks would argue that our industry emerged in the 1960s, it went through its growth stage in the 1980s, it matured as we approached the turn of the century, and it is now in the declining stage in 2010. Are you prepared to sit back and watch the decline and submit to defeat as the industry fades to black? Will the leasing industry disappear like that of the once booming buggy whip industry?
I predict that that without an infusion of innovation — new blood and new ideas — our industry will continue to decline. Consolidation will fester and the few remaining large stodgy giants will slowly morph over time into mirror images of their banking counterparts. Differentiation will be minimal for these dominant behemoths. However, on the opposite end of the spectrum a group of smaller and more nimble competitors will emerge. You see … history tends to repeat itself.
Twenty-five years ago at the 1985 American Association of Equipment Lessors annual convention the theme was Competing for a Future. There was a lot of conjecture and speculation about the widening divide between the large national lessors on one side and a group of significantly smaller companies on the other side. The theory was referred to as the emergence of minnow and whales. We’re there again. The whales dominate the waters; they are perhaps thriving amidst the chaos, while the minnows are thriving on the chaos. The minnows may look small and immaterial today. Yet, I believe that the minnows will be the innovators who will quickly adapt to their changing environment. These agile and less bureaucratic players will help stave off extinction of the leasing industry. They represent our future.
If you agree or disagree, drop me a line at firstname.lastname@example.org.
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Ivory Consulting’s CEO Scott Thacker provides advice and counsel to equipment lessors on the best ways to improve customer satisfaction and profitability using pricing.