Simple formulas are often wrong or do not grasp the whole issue. Of course, but sometimes a simple formula shows a very important relation.
For example in the world of investments and trading on the stock-exchange. It is all about managing change; the change is that where one trend is followed-up by another one. And it is your task to manage all that.
A first requirement is to understand what is going on. In business a manager, a team a specialist is to know what is going on in the market and adjust the business approach on it. If there is a turn in the market, the company should either cut costs and or increase its sales resources. But the first thing is to understand that something has changed; why don't customers buy as easy as before and how to formulate the product on this change?
In the stock market this is more or less the same, as the change-cycles are much more frequent. Until the beginning of March we had the bear market motivated by fear, now there seems to be a euphoric phase where bad news no longer drives the stock prices. Somewhere in between the trend has changed and if the investor didn't acknowledge that change he will loose - that is according and depending on his trading or investment approach.
The formula in either case is simple:
- acknowledge the change (trend)
- act (accordingly)!
Of course the whole formula is much more complex. It is not only about signaling a change of trend, but also understanding the fundamentals of it. If a trend is only based on fear, the trader should act on it, but also be prepared about the strength - credibility - of the change. How fundamental is it?
Another example: Twitter.
This is something new. The early adapters get in directly, the more skeptical and conservative "investor" professional, ... will wait to see how fundamental the change is.
Remember Second life? I don't hear anyone about it. Whereas it was a real trend where people and especially companies invested heavily... many just before the trend ended...
If you want to manage a change (in either investment or in business):
- keep track of the trends
- check how it fits with your strategy
- change - your investments, resources according to the new situation and on the assumption that the new trend will continue for some time.
In business the trends are less visible and less easy to anticipate or react on. But the idea to change is more or less the same as in other areas: join the new trend if you think it will continue and if it fits your approach; so you will benefit from it.
One important difference between investments and business management is the organization of the portfolio. An investment can be sold in minutes; an organizational change requires much more effort and energy and ... will take time to be effective.
Copyright © 2009 Hans Bool
For more information on similar and a wide range of different topics have a look at the writer's block note.
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