Global Megatrends: What next for business? By Joe Nellis Massive, global megatrends are heading towards us. Business survivors will need to know what these are and act upon them so that they can continue to prosper, drawing on a clear vision of the new future and quickly Identifying and seizing market opportunities. Three major megatrends will transform business over the coming years; these are associated with economic developments, society and environment issues and business and industry issues. Companies will only continue to be successful in the future if they identify and understand the changes that are taking place and take the necessary actions that address their new business environments. Such transformations will impact their customers and the way they are organised. At the economic level there will be particularly substantial changes ahead. In particular, we are seeing a massive realignment of economic activity from the West to the East – the rise of China, for example – and 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. A second economic trend may be less obvious to spot: as economies see growth of living standards in the emerging and developing world, so their populations will inevitably demand more and better schools, hospitals, roads, police and this means a growth of the public sector – on a scale that has never been seen before! The third economic trend is the rise of new customers. Some forecasters are predicting that over the next decade there will be 1 billion more consumers who can buy the things that you and I buy. Such an explosion in demand has never happened before in such a short timescale and that will change the world of business. Society and the environment The society trends are considerable. The first thing is that for the first time in the history of mankind, virtually everybody on this planet can talk to each other! We are now all connected in some way or another. 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 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 these developments will have profound implications for the world of business and society. A second megatrend is that today there are approximately 16 million university graduates each year from the so‐called developed world. The rest of the world – developing and emerging markets –are graduating about 33 million students. 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 reach university, when they get jobs and they have families they want their children to go to university. We will see an exponential growth in the talent pool coming from the emerging and the developing world. www.cranfieldknowledgeinterchange.com © Cranfield University August 2011 1 We will have to confront a shortage of natural resources that is not going to go away and is going to shape all of our environments in the coming decades. So natural resources and the shortage of them is a major trend we must wake up to, and we are just beginning that process. Also, we are seeing an emergence of a lack of trust in big business and therefore the growing importance of corporate governance is a trend that companies are having to grapple with and embrace, and use it to their advantage and for the benefit of society. Business and industry implications We will need to face up to massive issues in business and industry. For the first time we have virtually an infinite amount of information at our fingertips – through Google, Wikipedia and so on. 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? 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 will undoubtedly be a significant challenge. Another business issue is the fact that as the world is growing and the emerging markets and developing economies are getting larger, new industry structures, new global alliances, new global networks will emerge, as well as bigger companies. So I am anticipating different business models and developments concerning the way in which companies interact with each other. Big Change is coming The world is becoming more complex. We must learn how to deal with greater complexity. A headline warning to all managers is: if you don’t like complexity, don’t go into management! It means we must find the right people to manage companies in a much more complex environment. We can no longer claim that there are more important issues than addressing the future. That could have been a relevant comment perhaps 20 or 30 years ago when things changed very slowly. Long term cycles of change are collapsing to 10 or 15 years. Managers who may have started their careers with no prospect of seismic shifts, are now experiencing several ‘new paradigms’ within their working lives. If short term focus is important, the world is changing so quickly that the successful manager must stay focussed on the horizon. The pace of change is quickening as we have never seen before: address these longer term drivers of change now, or you may heading towards extinction. www.cranfieldknowledgeinterchange.com © Cranfield University August 2011 2