In the 1980s I had the privilege of working closely with consultants from McKinsey & Company, strategy partners to many Fortune 1000 firms and global non-profits. McKinsey’s value promise in a nutshell is, “We’ll help you reshape your industry to your advantage.” McKinsey recently released a report on mega-trends that will shape markets. It’s essential reading for leaders of businesses of any size as they evaluate their organization’s business model strategy.
In today’s economy, “status quo” is any company’s weakest strategic direction as the world is changing more rapidly and unpredictably. While forecasting the future is impossible, understanding dynamic trends and their implications for your organization’s risks and opportunities is paramount for making solid business model strategy decisions. In McKinsey’s words:
“Managers must also gain an understanding of deep external forces and the narrower trends they can unleash. In our experience, if senior executives wait for the full impact of global forces to manifest themselves at an industry and company level, they will have waited too long.”
McKinsey consultants and I say the same thing to our clients: Rather than “external trends” being a “check the box” step accompanying annual planning, it is vital that leaders keep emerging trends front and center every day. Doing so will ensure that current decisions are not divorced from how the world is unfolding, sometimes slowly albeit decidedly.
The five global trends that McKinsey feels will define the coming era are:
- “The great rebalancing. The coming decade will be the first in 200 years when emerging-market countries contribute more growth than the developed ones. This growth will not only create a wave of new middle-class consumers but also drive profound innovations in product design, market infrastructure, and value chains.
- The productivity imperative. Developed-world economies will need to generate pronounced gains in productivity to power continued economic growth. The most dramatic innovations in the Western world are likely to be those that accelerate economic productivity.
- The global grid. The global economy is growing ever more connected. Complex flows of capital, goods, information, and people are creating an interlinked network that spans geographies, social groups, and economies in ways that permit large-scale interactions at any moment. This expanding grid is seeding new business models and accelerating the pace of innovation. It also makes destabilizing cycles of volatility more likely.
- Pricing the planet. A collision is shaping up among the rising demand for resources, constrained supplies, and changing social attitudes toward environmental protection. The next decade will see an increased focus on resource productivity, the emergence of substantial clean-tech industries, and regulatory initiatives.
- The market state. The often-contradictory demands of driving economic growth and providing the necessary safety nets to maintain social stability have put governments under extraordinary pressure. Globalization applies additional heat: how will distinctly national entities govern in an increasingly globalized world?”
The greatest long-term danger of the current economic malaise arises when leaders become so focused on current business conditions they fail to invest enough mental and change-management energy in business model innovation. Focused on today, they fail to create a company that will thrive in emerging conditions. McKinsey’s report is a good reminder to take a longer-term view and align today’s business model strategy and execution decisions with shape-shifting trends sure to drive your market opportunities and risks.
Don’t wait to be certain about how the future is unfolding. You’ll face greater risks if you do.
For insight on business model strategy, read my recently released book, Beyond Price.