velo
again i would partially agree. dotcoms and the barrier to enter are good arguments. technology made it all available, that is for sure. technology did not cause their fail, it was a human element. the lack of proper mgmt imo and proper business plans. to serve up a business plan based on ad revenues turned out to be wrong. it was not the technology that put mgmt in that position, business plan. most of these companies were allowed to go public as a result of one thing, demand. not until supply exceeds demand will there be a case for saturation. in those types of co's depending on ad rev's the business plan is what saturated them, fueled by an appetite to own anything internet that made them appear viable in the first place. their survival/demise is a function of mgmt's business plan. some of them will survive. as a perverse example, do you see porno sites contracting? barriers are the same across the board, but apparently smut is a better business plan than ad rev's.
when you look at productivity and margins, it seems its more a function of supply and demand than technology. you can have a case where productivity is a function of increased output. as a result company abc now makes 105 widgets as opposed to 100. if the demand remained for those additional five widgets, then nothing has changed. now if demand slows and output is not adjusted, then those extra five are a problem and show up in inventory. saturation is more a function of a perceived demand by mgmt than productivity. technology is then a function of demand, and just a tool. does the co view the need for extra widgets beneficial. is it not an over estimate of perceived demand that would cause excesses in supply, saturation? price is also a function of supply and demand. excess supply will result in reduced prices and affect margins. this is the mgmt side of output. not a fault of technology.
the other way to look at it is if the productivity gain results in a reduction of cost . bigcap co abc makes a steady stream of revenues of 200 like clockwork, now the cost thru technological improvement has gone from 160 down to 120. perhaps in a more cost effective material used in production that was developed by some technology advance as an example. technology didn't allow you to make more product, just improve how its made. the net improves, mgmt knows its output and it remains unchanged. abc will have no problems as a result of a margin increase thru technology. there is no contribution to supply/output in this example, just cost reduction.
additionally some technological improvements, as stated by greenspan and which i agree with on this one, should have been in the forms of inventory mgmt and s,g & a. these are dead money areas in accounting. for companies technology should have improved margin, but in general would have had no effect on production in the form of output that would result in saturation. the 2nd example should indicate this just by assuming the shift from cog to the sga side.
so really i see two forms as illustrated here, technology improvements that assist in mgmt in cog or sga improvement, and technology that improves in the form of output.
it all depends on where the improvements originate imo. and if it is on the output side, then mgmt error in estimation of what demand will be, is how saturation occurs. either way i think technology could be viewed as tools of mgmt and how mgmt applies them, properly or improperly.
milesov |
