The Collapse of Lehman Bros., One Year Later
A year ago today, financial services firm Lehman Bros. collapsed, triggering a 500-point drop in the stock market, the toppling of other businesses considered "too big to fail," and signaling the start of the worst recession in modern times. Now, a year later, have businesses learned that short-term gain and isolated profit motives aren't sustainable?
According to the NY Times, sadly little has changed in how the investment community is run.
"Backstopped by huge federal guarantees, the biggest banks have restructured only around the edges. Employment in the industry has fallen just 8 percent since last September. Only a handful of big hedge funds have closed. Pay is already returning to precrash levels, topped by the 30,000 employees of Goldman Sachs, who are on track to earn an average of $700,000 this year. Nor are major pay cuts likely, according to a report last week from J.P. Morgan Securities. Executives at most big banks have kept their jobs. Financial stocks have soared since their winter lows."
This afternoon, President Barack Obama will speak to Wall Street about the economy, pushing for stricter oversight of Wall Street and regulatory changes. I'm curious to see if those regulations will include oversight based on customers' best interests.
Over the last few months, many businesses panicked and turned to price discounts to stay afloat. But of course that isn't a sustainable proposition, and over the long-term price is no differentiator. Some companies, however, have sustained and even thrived, owing much of their success to a commitment to current customers and innovation. Still, they are a small minority.
Last year automaker Hyundai's global sales bucked the industry's decline and rose 5 percent to 4.2 million cars and trucks, for example. The car company led the industry with the Hyundai Assurance program -- buy a car, and if you lose your job, Hyundai will take the car back. And, the company added a fixed-price gas program onto the popular program as well.
In a podcast with the winners of the Gartner & 1to1 Customer Awards, all of the executives interviewed said the economy forced them to refocus efforts on building relationships with their current customers. (The podcast will go live on 1to1media.com tomorrow afternoon, once the winners are announced).
As the economy improves, the common sense thing to do is to continue this relationship strategy and not revert back to a short-term, sole acquisition focus. Only time will tell if that happens. After all, it was a lack of common sense that got us into this mess in the first place.
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