Global Trends: What next for business? Joe Nellis Steve Macaulay The world is undergoing some seismic shifts; some people call these megatrends. How do they affect business and how do they affect managers, particularly in the long term? This is an issue we are going to put to Professor Joe Nellis. Now, Joe, it is a big subject; I am going to split this into three big areas – some on the economics issues; looking at some of the society issues and lastly, at the business issues. So let’s tackle the economy first; tell me some more about the big trends that you can see and how they affect managers. Joe Nellis Well Steve, let me identify three major megatrends at the economic level. First of all, we are seeing a massive realignment of economic activity from the West to the East – the rise of China, for example. But the scale of this is something we have not seen before and by 2050, countries like China and India will be at the top of the ladder, although America will still be very dominant. Today China accounts for less than 10% of GDP; by 2050 it will probably be 25% ‐ the biggest economy in the world. The second economic trend that I would mention, which is an unusual one, is that as economies are seeing a growth of living standards in the emerging and developing world, so people are demanding more schools, hospitals, roads, police – in other words, growth of the public sector. Not in the Western world, but in the rest of the world and this is a going to be a phenomenal growth that we will not have seen before. The third economic trend is one that perhaps will interest managers most. It is estimated, it is guessed, that within ten years there will be another one billion people on this planet that will have incomes approaching the average of Europe. In other words, one billion more consumers who can buy the things that you and I buy. That has never happened in such a short timescale and that will change the world of business. So those are the major economic trends that I would emphasise. Steve Macaulay So let’s pick up some of the implications of this in terms of society and the environment. Joe Nellis Yes, and the society ones are many. Again, I will just choose a few of these. I think the first thing as a megatrend in terms of societal impact is the fact that for the first time in the history of mankind, virtually everybody on this planet can talk to each other. Now, since this has never happened before, it is difficult to anticipate the implications for business and for society, but it does mean that we are © Cranfield University www.cranfieldknowledgeinterchange.com 1 Joe Nellis
going to see many more companies interact with other companies. We are going to see companies interact with consumers in other parts of the world. We are going to see individuals interact with each other and that is going to change the world of business and society. A second megatrend at society level, is the fact that today there are 16 million university graduates from the so‐called developed world. The rest of the world – developing and emerging markets – they are graduating about 33 million students. Now if we assume that university graduates are some measure of the future talent pool, then in the next ten, twenty, thirty years, that 33 million is going to become 100 million. People who come from villages in poor countries who get to university, when they get jobs and they have families they want their children to go to university. We are going to see an exponential growth in the talent pool coming from the emerging and the developing world. A third trend at the society level is one that we are all well aware of, it is the fact that we are facing a shortage of natural resources and that is not going to go away – that is going to shape all of our environments in the next ten, twenty years and beyond. So natural resources – the shortage of them – is a major trend we must wake up to, and we are. And lastly, in terms of societal and environmental trends, is the word trust. I think we are seeing an emergence of a lack of trust in big business and therefore corporate governance is a trend that companies are having to grapple with, to embrace, and to use it to their advantage and for the benefit of society. Steve Macaulay Lots of implications there for business and industry; let’s develop that a bit more. What do you see are the key things that managers need to pay attention to in this area? Joe Nellis If we take the technology element that I mentioned, for the first time we have now got virtually an infinite amount of information at our fingertips – the Googles, the Wikipedias of this world. Information overload is a challenge for management: what to do with it? How to mass customise their products and services, not for market segments, but for individuals because we can do that, we can almost predict what people will buy next week. And that is going to be a huge opportunity for businesses, but dealing with information overload is a challenge. Another one at the industry level, or business level, is the fact that as the world is growing and the emerging markets and developing economies are getting larger and larger, I am certain there will be new industry structures, new global alliances, new global networks as well as bigger companies. So I am anticipating different business models, © Cranfield University www.cranfieldknowledgeinterchange.com 2 Joe Nellis
how companies interact with each other. And finally – and last, but not least – the world as I see it is becoming more complex, the business world is becoming more complex. So one of the issues I think managers will have to grapple with is how to deal with greater complexity. And my advice to all managers is, if you don’t like complexity, don’t go into management! And that is not a criticism of any manager; it means we are going to have to find the right people to managers companies in a much more complex environment. Steve Macaulay Now finally Joe, this is all very well for futurologists and so on, but managers have got day to day problems. What do you say to people that say let’s leave this to people like yourself to work out, we have got other things to deal with? Joe Nellis Good question; I think that was probably a relevant comment maybe twenty or thirty years ago when things changed very slowly. We used to talk about Kondratiev cycles – fifty year cycles, the long wave cycles, in other words, it takes time for economies to change fundamentally. What I would say is we are seeing Kondratiev cycles now collapsing down to ten, fifteen years. In other words, managers who may have started their career not expecting to see major seismic shifts, are now seeing them several times in their career. So short term decision making, target hitting is very important, but the world is changing so quickly you have got to be on top of these types of megatrends. Steve Macaulay Joe, that is a key message, thank you very much. © Cranfield University www.cranfieldknowledgeinterchange.com 3