Good business stands tall on principle.

Short can be a benign term used to describe length, but so often it conveys a sense of insufficiency. For example, coming-up-short, short shrift, shorting a company’s stock, shortness of breath or being short-handed. Indeed, life is short so we want to make the most of it, right?

A distant friend I telephone with most Saturday mornings (to solve all of the world’s problems) reminded me of Benjamin Franklin’s saying: “Those who would give up essential Liberty to purchase a little temporary Safety deserve neither Liberty nor Safety.” Ben was narrowly applying, to one problem, a much larger principle — that of falling victim to short-term thinking, a trap that also ensnares many small business (SmB) managers. Reapplied to this context, we might adapt the quote and say:

DSC01573“Those who would give up renewable (or sustainable or long-term) Profit to gain a momentary Sale deserve neither Profit nor Sales.” Does it also ring true? Most would say so, yet many SmB owners, who might agree in polite conversation, make decisions on a daily basis that ignore the principle. Why? Why, for instance, do so many small businesses, who have taken the risk and done the hard work of building up a local customer base and courting quality suppliers, discount their goods on eBay and Amazon, or offer them for less on their own websites than to the walk-in customer who took the trouble to come and visit them? Why damage supplier and their own brand images in the attempt to convert a quick buck on a playing field where low price is the only factor and someone else will always come in lower?

That elephant is trampling through many-a-room in all kinds of industry conversations, publications, trade association meetings and trade shows today as we have arrived at roughly the 20-year anniversary of the Internet and the rise of eCommerce. Now, please understand that the Internet is a completely benign communication medium. Neither the internet nor eCommerce, as technologies, have any inherent impact on business management decisions. Until Cylons emerge, those decisions remain completely with humans who decide how they use their tools to do their work.

Amazon, in its 20ish years not having made much profit as a percentage of revenue all this time, has been quietly moving into that last bastion of local SmB opportunity – physical services (labor). Already owning the space in volume of hard goods being sold, they have begun to invite local SmBs to be on their approved or preferred provider lists for physical services in exchange for a ~20% cut of the action and no investment or value added on the eTailer’s part (their order engine being already built). Bezos was never kidding when intimating that he wants to own “every”thing(s), yet by killing profitability and never making any real money for long-term investors other than himself, he is still trying to figure out how to boost the bottom line while still discounting the top line.

And SmB service providers come running to get in early on the action.

Brands, merchants and friends, what good has come from cooperating with the latest generation of tycoons using internet technology to subject all of our goods to a global price war? We were not forced to comply, we simply failed to look at the effects down-the-road and apply disciplined distribution practices. We could have fully embraced eCommerce and yet maintained local focus and price competition without destroying profitability. True, consumers who think that online discounting has enriched them cannot see the longer term effects coming to roost in the loss of locally good-paying jobs that online discounting has engendered. While they spend less, as a class, they(we) also earn less in the process. What exactly do we believe generates salaries and annual raises??

I asked above why SmB managers fall victim to the thinking in order to ask the greater question: are we all going to race to the bottom with our service prices, too, and let Google do that to us? History predicts we will — and why?

I think the answer is this: having already failed to protect our specialty marketplaces in most of our goods, the SmB landscape is so bloody and under-profitable that owners are desperate for sales. Their self-justification is in asking what good there is in thinking long-term about the future if they can’t survive long enough to reach it? They have no use for crop seed when they haven’t enough food to get through Winter first, so they squander planting in exchange for a meal today and this short-term thinking enslaves them to scraping for an ever-shrinking meal the next day without a rational theory for where food will come from if everyone is eating and no one is planting.

There are many books and teachers imparting the philosophy and wisdom of avoiding short-term thinking in all kinds of contexts. Most of us understand the folly of kicking the pain can down the road because pushing problems out just grows the pain we will experience in the future exponentially (national debt lobster and entitlement butter, anyone?). But when asked in the moment to sacrifice today in order to see a better future tomorrow, we suddenly forget what we have learned. eCommerce is indeed the new way and future of things. But giving up local control of price and then, once hooked, being sucked into a price war that robs us of any concern for doing excellent work is not my idea of a brave new world. Somehow, we need to reconnect with principled decision-making and get even our consumerist selves to understand that profit is not an unearned, unfair windfall. It is the reward for honest effort and represents the opportunity for everyone’s prosperity to increase in the future.

Or should I have saved myself the time to write this, and instead tweeted out a short “hey everybody, discount local services available now on Amazon — woo hoo!”

Jeff Koenig

 

© Jeff Koenig and Open 4 Business (www.openfour.com) 2008-2016.  Unauthorized use and/or duplication of this material without express and written permission from this site’s author and/or owner is strictly prohibited.  Excerpts and links may be used, provided that full and clear credit is given to Jeff Koenig and www.openfour.com with appropriate and specific direction to the original content.

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