The recent financial crisis caused more than just an economic downturn. Major shifts are taking place in almost every industry around the world as new rules for success and failure are written. History tells us that the major winners and losers of a recession actually emerge only in the aftermath of the downturn – as the upswing begins. We therefore need to prepare ourselves for a decade of turbulence as we live with the after-shocks of the “Great Recession”.
The most successful companies will be those that find ways to be strategically responsive. To do this, it is important that everyone – at every level in the organisation – has an understanding of the forces that shape the next decade. Only then can they contribute meaningfully to your company’s success. You can develop these insights through regular analysis of your environment and strategic conversations with all of the people throughout your organisation. Their understanding will help them buy into your vision and strategies. And it is also essential for problem solving, creativity, innovation and the proactive identification of opportunities and threats in your industry and marketplace. Here’s a helpful framework: consider, on an ongoing basis, five key disruptive forces that will reshape the world in the next decade. These are the tides of change. Use this framework on a regular basis in your team meetings and informal conversations to make sure that everyone is ready for the next few years of turbulent change. Let me explain. There are five tides of change, each one outlined below.
Continued increases in computing power and the rapid development of digital tools to enhance and simplify our lives will dominate the next decade. The workplace has never been so far behind the technology curve as it is now. When I first started work (at KPMG in the early 1990s), the office had the best technology (the latest computers, mainframes, fax machines, colour photocopiers and more). I arrived early and left the office late in order to spend more time on the Apple SE/30s KPMG Johannesburg had just purchased (they’d make good doorstops now). But today, instead of trying to take things out of the office, young people are desperate to smuggle technology into the workplace. They’re frustrated at the out-of-date hardware, old software and restrictive IT policies that characterise many office environments. Companies need to catch up quickly and take advantage of the most important technology trends for business in the next decade: social media, augmented reality and mobility.
This is being driven not by teenagers who want to tell the world what they had for breakfast, but by our human desire to connect and interact. At last, computers have stopped creating space between us and are providing ways to connect us. This will change how you communicate – if your website is just a brochure and does not encourage interaction, feedback and conversation, you’ll be left behind. But it has even more potential to change your entire business structure, with collaboration at every level. For a detailed look at what social media might do to our industries, see http://tr.im/socialmedia2.
This is our ability to see the data associated with the physical objects around us. We’ll quickly get used to doing this, and your organisation could be left behind if you don’t make all the data anyone might like to see available to them in visually stunning ways.
And all of this will need to be done in such a way that it can be accessed and interacted with via mobile devices. Cloud computing will drive our ability to access any (and all) information anywhere, on any device or platform, all the time. In this world, geography counts for nothing and competition is everywhere. How mobile can your staff and customers be? How mobile is your offering? The next steps in the technology revolution are all about how we use technology to connect us and help us interact. Don’t be left behind.
2. Institutional Change
Almost every sector is in the midst of a period of disruptive change where the old rules for success don’t seem to hold true. This is because many industries are currently experiencing deep structural changes, including changes to the nature of relationships, the means of producing profit, how companies are structured internally, their risk profiles, where and how capital can be accessed, the basis for success – and failure, and the structure of the industry itself. Kenichi Ohmae foresaw this in his 2005 book The Next Global Stage: “Over the last two decades, the world has changed substantially. The economic, political, social, corporate, and personal rules that now apply bear scant relation to those applicable two decades ago. Different times require a different script.”
The key to understanding this disruptive trend is that we are finally being forced to deal with the implications of the shift from the industrial to the information age. We should not be surprised that it has taken nearly half a century for the implications of this transition to be fully felt. It took longer than that for the first motor vehicles and steam trains of the industrial revolution to mutate into the consumer economy epitomised by Henry Ford’s assembly line. By “institutional change” I mean that the very rules of an industry are changing. Most industries have these “rules” – the unwritten laws for success. It is inherited wisdom that everyone in the industry accepts as gospel. It’s hardly ever questioned. As we emerge from this recession I suggest two things:
- That the rules have changed – not all of them, but enough of them to make your industry feel like an unfamiliar place
- That competitors will question the rules and make changes that would have been unheard of just a few years ago. It would be better for you to be ahead of this curve, than behind it.
Each industry will be affected differently, but there is no doubt that institutional change requires new thinking from you and your team. Our default reaction to such seismic change is to protect ourselves. This will happen in your industry too. But now would be a good time to go against the flow, and question the assumptions that threaten to constrain you and your competitors.
The third of the five tides of change is demographics. There are many trends we could consider as we look at the study of changing populations, but the most important ones that will impact business in the next three to five years are: an ageing population (and changes in retirement), rising life expectancy, plummeting fertility rates, the potential for generational conflict, migration and diversity.
We took nearly a century to reach one billion consumers (roughly defined as the middle class people around the world who have disposable income and can purchase appliances). It will take us less than a decade to grow that number by another billion (or more). And almost all of these new consumers will come from the developing world – they will have different mindsets, languages, cultures and worldviews. At the same time, the developed world will get older, and migration from rural areas to cities, and from poor, overcrowded countries to rich, ageing countries, will increase. This points to a very different looking world in ten years’ time. A key part of management’s role in the years ahead will be to manage conflict between competing worldviews and demographics, and to find ways to release the wealth locked up in true “mindset” diversity – in both staff and customer pools.
4. Environmental Issues
You can’t walk past a newsstand these days without a host of magazine covers shouting something “green” at you. More often than not, it seems the articles are trying to fuel debates about whether climate change is happening or not. But, regardless of what you or I think about these issues, the governments of the world have made up their minds and are instituting policies and programmes to deal with carbon emissions and energy usage.
Energy will cost more, and therefore so will transport. Input costs will rise. Money will be made – and lost – in carbon trading schemes. But it’s more than just global warming we need to be worried about. As James Martin points out in his excellent book, The Meaning of the 21st Century, there are at least 16 major issues facing the world in the next few decades – each one of which could ruin the planet and change life on earth forever. These include pollution, extreme poverty, pandemics, runaway computer intelligence, dwindling water and food supplies, increasing violence and weapons of mass destruction, and more. Not only must you consider the possible threats of these issues to your business in the next decade, but you should also anticipate where potential opportunities will emerge for you. With activists and ethical consumers becoming ever more vocal, this issue has game changing potential in the next decade.
5. Shifting Social Values
If the previous four trends are changing the world as I have suggested, then it should not be surprising that people’s values, their dreams and aspirations, their expectations of what a good life looks like, their desires for their lives, work, families and careers are all changing, too. Many companies are hoping that we will soon get “back to normal”, but it isn’t going to happen.
The downturn has been more than economic – it has served to catalyse many social, political and values changes that had already been underway, and will now change the world forever.You need to consider how your staff, customers and business partners have changed their own expectations – not just in relation to you and your offerings, but to their entire lives and how what you do for them fits into these. This trend has the most potential to surprise you. Therefore, it is also the key to gaining access to the hearts and souls of your stakeholders – and that’s where the new sustainable competitive advantage in your industry is to be found.
Facing the Future
It’s not just the short-term challenges caused by the recent economic difficulties that have made business more complicated. Over a period of time, competition, the speed of change, globalisation and the technology that we’ve implemented have simply led to greater complexity. One of the ways that businesses have responded is to reduce layers of management and bureaucracy, passing responsibility and authority further down the line into our organisations. We thus expect people at all levels to act with the type of understanding, critical thinking, initiative, agility and responsibility that just a decade or so ago were largely reserved for people in the executive suite.
To be successful in the coming decade of turbulence and opportunity will require the involvement and commitment of everyone throughout your organisation. Nothing can guarantee your success. But by using the tides of change framework to guide your formal meetings and informal conversations, and to help focus your team on the forces that will disrupt your industry and change your market considerably, you can be off to a great start. The point is to make the most of turbulent times.