22/2/2024

Oskar Pilch

Innovative Thinking:

Your Company is Going to Die

Key takeaways:

Why preserving value is crucial for long-term business stability.
The importance of innovative thinking in small and medium-sized companies.
The role of psychological security in productivity and innovation.
How Rocksoft plans for long-term, mid-term, and short-term financial stability.
The significance of community and collaboration in creating and preserving value.

Will you prevent it?

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Providing and preserving value

I was pondering on the topic of innovative thinking and providing and preserving value for a long time already. I think we all understand that as individuals we create communities to help each other out. We specialise in certain things to provide value - something useful - to others and in exchange we get or buy things we need and which are produced by others. Win-win.

So if we were to simplify it, we could say that:

each one of us is an individual that produces some value and consumes some.

Going further, we can say that:

most of us produce something because of our needs for consuming basics that allow us to live.

So in essence we produce value in order to feel comfortable about being able to meet our own (and our family’s, friends etc.) needs. Would that mean that if we get better at preserving (or saving) the value that we produced in the past, our incentives for producing value in the future would start disappearing?

Would we be more or less productive if we “didn’t have to” work?

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Long-term stability vs innovative thinking

One of the biggest tasks and main purposes that mostly the private sectors in general and small or medium size companies have, in my opinion, is to innovate. We are the ones who try to and who actually find ways to make people’s lives better - help them get healthier, happier, save them time, save them money, help them learn new things etc. In order to be able to innovate, we need to be able to experiment.

We need to be able to afford failing.

Some ideas need tens or hundreds of tries in order to actually start providing any value at all.

So that means that there’s a (huge) cost of innovation. There’s a need for long-term stability so that inspired people with ideas can focus on what they do best. 

This is the aspect that I think many overlook nowadays.

When they look at companies' profits or the fact that some save or invest in assets that will help them stabilise their long-term financial condition, they don’t think about it as a way for companies to be able to innovate. Yet this is what I - as Rocksoft’s CFO - see and focus on.

How would we be able to help provide value to our current and potential customers if we went bankrupt during the covid-crisis?

Would we be able to provide more value if we had to fire 50% of our competent staff?

I don’t believe so and that’s why it’s so important to me to focus on the ways to provide the company with long-term stability, by being better than most others at preserving value so that it can be used to innovate and provide value in the future.

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All companies die

Historically speaking, all companies die at some point. Either by going bankrupt. Or by getting acquired by another company. Or in other strange ways.

but I think that no company is going to live forever.

What is the average lifespan of companies? Studies paint a grim picture for businesses. The statistics on company failures vary by region and industry, but a commonly cited figure is that:

About 20% of new businesses fail within their first year,

Around 50% fail within their first five years,

And approximately 70% fail within their first ten years.

There are several key reasons for business failures, include:

Lack of market demand for the product or service

Cash flow problems

Poor business planning and management

Ineffective marketing

The inability to adapt to a changing market environment.

So we need to realise that it’s not about the company itself - it’s about the people and the value we are providing as a group to the other people. We can clearly see, looking at Rocksoft and all our staff, that the success of us being able to provide value to our customers is a reflection of how well we - as Rocksoft’s employees - do our job. How inspired are we to engage in innovative thinking, to put in the effort, how much we care about others, how much we help each other on a daily basis and if we like to spend time with one another. It’s never perfect, but we strive to make sure that we get better at those things everyday, so that we with each day’s work pull our group further from dying and towards helping people.

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Psychological aspect - decrease uncertainty

The psychological aspect of human nature that views uncertainty as dangerous is deeply rooted in our survival instincts.

The more experience and skill people have in preserving value, the safer and more productive they feel.

This perspective is driven by a fundamental need for security and stability, which is why individuals and organisations strive to mitigate risks and ensure sustainability.

Mastering the art of value preservation allows for things like:

a more confident navigation through uncertain environments

fostering a sense of security that enables higher productivity

innovation within safer boundaries.

As Rocksoft’s CFO I work on several different approaches for preserving value in different time horizons. We think long term: +10-year, mid-term: +5-year and short term: 1-2 years. We work hard on budgeting and monitoring our expenses, making sure that we reinvest all we can back into our company (people, tools, equipment, get togethers, office etc.) plus, if possible, use some of the funds on investing in the long-term horizons. For that we use tools like – bitcoin, loaning out funds and saving in different currencies among others.

This approach underscores the importance of risk management and strategic planning in both personal and professional contexts. And the personal side of things here is also overlooked, I feel.

By running a company - and our personal lives too, of course - in a certain way built on a good foundation, we inspire people around us to improve their personal decisions and ways of preserving and providing value as well.

It spills out onto all other parts of our daily life as well, actually.

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Future is bright

I mentioned communities earlier - looking at this article from Aluminati, we can see at through the history of humanity communities get created naturally as a grassroots movement and out of specific needs. Different people find ways to help each other out, provide different specialisations and together they are able to do more. That’s why we - and probably most founders - decided one day to join forces and start providing our customers with broader and better services and products. Now that things are going, we want to build further on that - and in order to be able to do that, we need to preserve our value in the best possible way to accelerate providing more value in the future.

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