Xanadu?

Palo Alto. An oasis in the midst of economic pressures. A fantasy land of upscale shops, Bentleys, and beautiful people, all of whom seem to exude intelligence. Stanford casts its golden glow down University Avenue where scary-smart people huddle in cafes pondering the next Google, or eBay, or some other changetheworld.com. It is a greenhouse for ideas that will succeed and fail, providing safety for progressive experiments and thinking. Compared to the stress I find in many other parts of the U.S., it seems unreal. Maybe they just hide it well.

I'm here visiting with clients, and talking with the press. My press interviews are mostly on the economy (no surprise), so I need to climb out from under from the Palo Alto Pleasure Dome and get grounded.

The overarching advice to clients in these down times is "Simplify". Examine closely how to extract the most benefit out of existing investments and people. Determine which projects are critical to your ability to weather the storm, and delay those that can be delayed.

But simplification should not stifle innovation. Companies that can afford to innovate and invest in an economic downturn are more likely to survive. Some innovation can be implemented tactically, whereas other innovations help shape the future state. The worst thing that can happen is that innovation is shut down in favor of the purely tactical (I've written about this extensively). The best case is that simplification increases the ability of the corporation to focus on innovative ideas.

The great thing about Palo Alto (and other similar places worldwide), is that it is an engine for turning innovation into products and services. So much of the output of these engines fuels the economy, personal productivity and enterprise efficiency (consider virtualization technologies, predominantly spawned from the brain of Mendel Rosenblum at Stanford). In turn, innovation-turned-product fuels more innovation, keeping the Xanadu engine working.

So, Palo Alto is more of an Eden...a generative place...below its Pleasure Dome exterior.

The Big Squeeze

The US Economy continues to put the squeeze on individuals and organizations, and the impact of that squeeze is increasingly global. Many clients I have visited in the past month seem winded, bracing for another blow. Almost universally, budgets are shrinking. For many organizations, those budget cuts will lead to staff reductions. It is not as simple as “the economy”, however. The combined forces of the subprime mortgage crisis, oil prices, and geopolitical instability create an emotional, economic, and increasingly intransigent gravitas. Personal reactions to the economy— from “staycations” to the avoidance of large purchases —clearly influence the behavior of corporations. After all, the corporation is, as its etymology suggests, a virtual body: a collection of humans acting as a single entity.

The various corrective actions taking place, especially in financial services, are necessary. Like the resetting of a broken bone, much pain is involved, but it ensures that the injury heals correctly. The end state is unknown: predictions about recovery are mocked by the markets. We need to stop thinking that the recession is ending (it has already begun) and look realistically at the moment. Stand firm. Use what you already own.

Yet even in their weakened state, corporations (or other types of organizations) must continue to function. IT has a role to play in this functioning, but it may not be the exciting, heroic role that some have described. The role of IT in this downturn is more like a trusted mechanic: one who works magic on your aging vehicle without fleecing you. The time for that mechanic to be honest about the viability of your vehicle will come, but not now. They just keep it running.