Price competition reduces the incumbent’s margins to a lesser extents than its competitors’, but it also reduces all players’ return on capital below the level needed to encourage any investments.
Better an egg today than a hen tomorrow is the everlasting adage of all dropouts.
On the other hand, it’s the same old business dilemma of providing immediate benefit to buyers against putting a venture capital at stake to foster innovation and gain returns that will be certainly diluted over time but will eventually prove profitable.
For the last two decades, technology has been making translation obsolete, at least in the forms we have known it for centuries. Translation is becoming an ancestral holdover for a saturated market where LSPs have lost to content producers. Competition has been successful, but today margins no longer pay for new investments and are detrimental to the survival of a large number of players. And it is no surprise that profitability comes from any markets other than the classical FIGS.
The path to follow is then consolidation and streamlining to gain scale economies, cut costs (not prices), increase margins, and have access to new investment sources, without reaching critical mass. At least not too quickly.
However, streamlining for process efficiency requires a deep understanding of aberrations with the associate reasons. In this respect, the path to quality system certification could help. Most often, though, certification is only the representation and formalization of a not necessarily efficient — and possibly legitimate and ethical — modus operandi. This is especially true for EN 15038 and alike, but often even for ISO 9000s.
In fact, quality system certification only provides the acknowledgment of three basic principles applied to business operation:
- Describe in writing with as many details as possible what you do, and how you do it;
- Do what you have written, how you have detailed it;
- Allow a third independent party to audit your system for compliance.
The everyday practices of most of the biggest players in the translation industry, even with sophisticated quality system certified by high-end, renowned, accredited certification bodies are largely disappointing, discouraging, disheartening.
A typical sign is the way these companies follow the growing trend of reducing the size of projects while maintaining volumes. Not only is this an operating step, from drops to drips, but a business model resting firstly on financial levers.
This model, however, generates a huge overhead for all the parties involved.
MLVs at last, and the largest ones in particular, are naturally and obsessively in search of big clients and big projects as a basic source of livelihood. By their very nature, in fact, MLVs are typically free of operational structures, and they outsource most of their jobs to SLVs and freelancers, being their costs essentially due to operating expenditures.
The quest for clients and projects leads these MLVs to take on almost every kind of job, in every language combination, with every deadline, relying on a base of vendors they are constantly engaged to grow.
The general strategy is to parcel every job into micro assignments for fast turnaround and low compensation. However, a micro-job is not convenient for any freelancer and SLV for the administrative overhead involved. Moreover, in this industry, and especially within MLVs, the project manager profile never coincides with the one commonly found elsewhere, and it is extremely unlikely that project managers can sketch a critical path or even a basic Gantt chart. In the translation industry, a project manager is usually a clerk in charge of sorting files, sometimes a coordinator. This explains why young graduates with no experience are increasingly covering positions that elsewhere are reserved for highly experienced and skilled staff as involving challenging tasks.
This also explains why, to outsiders, these MLVs generally appear underdeveloped and their strategies often endorse the general perception of translation as a minority activity. The management of these companies is, in fact, very traditional, from all points of view, and exposes them to slow growth and low profitability.
Surprisingly, every LSP is aware of the consequences of certain adoptions and of their inescapability, and that without translators no middlemen can survive, while translators can, even without LSPs.
This reinforces the arguments for the applicability of information asymmetry and Gresham’s law to the translation industry: finance is not the only world in which neither customers nor sellers understand the products they are dealing with.
Forty years ago, in a paper in American Scientist, Herbert Simon and William Chase drew one of the most famous conclusions in the study of expertise: it takes a lot of practice to be good at complex tasks.
Recently, in an article for The New Yorker, Malcolm Gladwell, author of Outliers, recently stated that “in cognitively demanding fields, there are no naturals,” that “the amount of practice necessary for exceptional performance is so extensive that people who end up on top need help,” and finally that “it is a mistake to assume that the 10,000-hour idea applies to every domain,” arguing, anyway, that “there’s a reason the Beatles didn’t give us The White Album when they were teen-agers.” Or maybe The Beatles weren’t really that fabulous.
Made it thus far, two questions have to be asked:
- Can we even trust the rules of the game?
- Would players even be capable of establishing an ethical industry?
For an ethical industry to emerge, three out of Paul S. Mills’s four basic rules for an ethical business should be borrowed:
- Be informed: what you don’t know will most probably hurt you;
- Take responsibility: profit should not be earned at the cost of others;
- Take risks: losing something in the process is part of the gain.
So, being transparent is not a choice.
And yet, not even the need to conserve the means of existence is a strong enough argument to conjoin over common overarching interests, and only temporary alliances persist.
The problem, then, is not in raising prices, but in having them accepted, the problem is not in reducing prices, but in fair reduction, the problem is not even in firing or losing a client, but in finding new ones, because big players can be large, but not great when they knowingly thrive on information asymmetry, exploit their own source of operation, and dump their business risk on staff, thus sawing off the tree branch on which they sit.
And going around pretending to know and tell how to hire, manage, and motivate resources won’t make your company a better employer. Especially when you are not.