The evolution of the business of business economics

Business Economics, April, 1989 by Roger E. Brinner, Roger Winsby

Unfortunately for all concerned, one partner in the basic symbiotic relationship - the business economist - came upon hard times. Economists in large organizations quickly became threatened with extinction as increased competition and reduced demand led to corporate staff cutbacks. Many CEOs, looking for someone to blame, found the bearer of bad tidings a natural target.

Surviving economists often turn up in new departments, such as marketing and Treasury, and declare their new turf as comprising four areas: provision of a logical conceptual framework for many issues, assembly of current facts, intelligent extrapolation of trends, and risk analysis. Consulting firms are following this lead in certain industries and introducing the strategy in others.

But this new niche isn't fully established. Most new buyers in line departments prize economists' technical and computer skills and their familiarity with data sources, but they do not fully recognize their conceptual skills. Fortunately for both Economicus Consultatus and Economicus Corporatus, the transition has been aided by a second revolutionary reduction in the effective cost of computer hardware and software (the first was the availability of timesharing). With personal computers and microcomputers, we now can deliver more useful information for a much lower cost to the proliferating personal computer spreadsheets of our employers. And incidentally, a third revolution is at hand: an order-of-magnitude reduction in raw data costs courtesy of the CD-ROM. We must pitch in with our professional brethren in line departments to solve real-life problems in real-time. Among the best opportunities for this collaboration are:

Activity                           Line Department
Sales and Production Forecasting   Operations Research & Planning
Market Identification and          Market Research

Evaluation

Asset Management                   Finance, Investment Policy
Purchasing Management              Purchasing
Pricing                            Marketing and Sales
Consumer Behavior                  Marketing

In these areas, the combination of changing environments, new data sources and growing competitive pressure calls for a more structured evaluation of cost savings and market potentials. Those who employ us, executives, policymakers and investors, will continue to forecast the future and to make major decisions based on these forecasts. We economists may not regain the safe and powerful niche we enjoyed in the 1960s, but the complex, competitive decade of the 1990s will present clear opportunities for the survival and prosperous recovery of our species. The tools and skills of in-house and consulting economists match up well to these requirements for conceptual and quantitative analysis.

Table : Table 1 Evolving Patterns of Information and Service

           Information Expected        External Services Used
1965-73    Extremely accurate          Range of text, data,
           macroeconomics              mainframe computing;
                                       supplied to planners
1974-79    National, industry or       Same, plus industry-specific
           region trends;              consulting
           sensitivity analysis
1980-84    Same, plus international    Same, plus more data
           trade and macroeconomics    and PC tools
1985-88    Same, plus market segment   Same, plus help for
           evaluation and forecast     market