An unremarked-on aspect of the 1.5% interest rate cut last week. Namely, are we already living in a near-real time planned economy, as Stafford Beer foresaw? It sounds like I must be joking. But how else are we to interpret Sir Terry Leahy’s trip to see the Bank of England and the Treasury? Tesco boasts that one in every eight pounds spent in the UK passes through its tills; this bit is always in the papers. They rarely mention their huge management-information system, except to the trade.
If you wanted close to real-time information about the consumer economy, I can’t think of anything that would work better. After all, even at KwikSave you’d get a daily cycle of cashflow information. And Tesco runs a hell of a lot of deliveries; their visualisation dashboard must provide a fearsome amount of data on what flows where. Chuck in the Clubcard voluntary-surveillance stuff. The tills are, unlike Kwikkies, presumably networked.
Back at the start of the…well, at the start of the latest frantic wave of the world financial crisis, I messaged Dsquared to say that I had the impression his workplace was suddenly full of Bakelite consoles springing out of forgotten compartments. In fact, of course, the people going into manual reversion for the first time in 30 years were the good folk at HM Treasury. According to David Scott and Alexei Leonov’s memoir, there was during the launch of the Apollo spacecraft a T-handle in front of the pilot. If you turned it one-quarter of the way, the launcher’s computer and those of the capsule were locked out and the rocket’s control systems slaved to those of the capsule, so you could then fly the whole thing by hand.
Well, with the financial intermediaries choked up reprocessing all the stuff they shipped off the balance sheet – or rather, into the twilight zone – someone has to control these things. Ordnung muß sein. Now we’re well into T-handle country. What are we going to do with it?
Alex – sort of with you up to a point. (As soon as I got familiar with Excel it occurred to me that one of the chief problems for the Bolsheviks was that they came to power 70 years before PCs and spreadsheets emerged – imagine what they could have done with a really well set-up SAP implementation… oh, hang on…)
But what are you driving at in part two?
Just as we’re having to learn on the job how to manage the climate, we’re having to relearn on the job how to manage the economy…but this brings some huge opportunities as well as menaces.
OK, it’s my hobby horse, but Roger Ford has a memorable anecdote about British Rail realising the 1990-92 recession had started a week later when the InterCity sales returns were analysed and showed the first drop in years.
That gives an indication of the speed things shrink at – I’d imagine with Oyster and online ticket sales that they’d know quicker than that now. I’d hazard it’s not just Tesco, but any reasonably large company should at least have the capability of doing this. The bottleneck is probably the number of statisticians and analysts available, rather than the data. Tesco, one imagines, must have some seriously good ones, but a lot of companies are probably sitting on tones of un-analysed data. I know we’ve been approached by various people offering to analyse things for us – I suspect this is an enjoyable growth industry, but it would be nice if one didn’t suspect they were intel service fronts.
Of course, if discretionary rail travel does contract too much, every major rail operator is in serious difficulty, since their franchise premium commitments are predicated on continuous magic pony growth levels. The DfT shares the risk.
Similar conclusions can be (have been / are being) read from Open University regisration figures. There’s quite a lot of noise in them, mind.
I would imagine that National Express are quids in either way. Coaches are getting more crowded, which is a good recession-o-meter in itself.
Chris Williams
Thanks, Alex – gotcha.
On the first point, lots of CFOs I talk to have great ERP systems that generate oodles of data and KPIs. But very few of them get the luxury of the daily take a retailer or railway has. (The then-CFO of Boots once told me that the hardest thing about moving into retail as a finance director was resisting the temptation to check the cash situation every hour – not the best way to stay focused on strategy…)
For a manufacturer or even service business, the key is the rolling cash flow forecast with a close eye on order book and enquiries. The X factor is conversion rates – seasoned CFOs know to adjust their probabilities down in a recession, but sadly all too many companies aren’t being run by veterans. Younger execs with no real downturn experience run the risk of miscalculating either way – and, in any case, you’d be shocked – SHOCKED! – at how many businesses don’t even do the basics (like the 12-week cash forecast) that could allow them to plan effectively, even with all the technology available.
Sorry, that should say “13 week cash flow forecast”.