When Cash Is The King - Business Networks Triumph
The story repeats in industry after industry whenever testing times arrive, as they eventually do in most industries. In fact, the data from a systematic study carried out by the Aberdeen Group reveals two critical insights.
Firstly, the companies with more robust business networks have far superior cash conversion cycle (we will discuss the cash conversion cycle in chapter 7) - nearly 6 times better cash conversion cycle. Take a look at the figure 1 below:-
Secondly, and more importantly, their cash conversion cycle actually improved during the 2 years of testing times leading up to the global financial crisis, while the rest of the industry went backwards. As you can see in the figure 2, 92% of business network masters have improved their cash to cash cycle over the two years leading up to the Global Financial Crisis (GFC) while only 18% of business network laggards have improved it, while for 29% of them it became worse.
Is the result shown in figure 2 surprising?
Hardly, if you reconsider the story of Nokia vs. Ericsson.
Same catastrophic fire nearly decimated one company while left the other one even stronger to face onslaught of another heroic business network - that of iPhones.
In the book The 5-STAR Business Network, we examine that story in Chapter 8 when we discuss how New Product Development cycles are shortened immensely by appropriate use of robust business networks.