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GLOBAL TRENDS: Facing Up to a Changing World

March 3, 2012 • GLOBAL ECONOMY, EMERGING TRENDS, BUSINESS & INNOVATION, Frontier Markets, Capitalism in the 21st Century, Digital Transformation, Editor’s Choice, Americas, Asia - Pacific, China, Climate Change & Society, Europe, India, Middle East & Africa, Unprotected Post

By Adrian Done

How much time do you dedicate to thinking about the REALLY BIG issues that are likely to affect your personal and professional life in the next 20 years?

1876 was not a very good year for the Samurai. After hundreds of years of considerable success in ruling over Japan, several events conspired to bring their powers to an abrupt and unseemly finale. You may well have seen the Hollywood epic drama blockbuster “The Last Samurai”, starring Tom Cruise, and depicting the westernization of Japanese society towards the end of the 1800s. And, as the title strongly hints, the Samurai didn’t come off too well. A whole way of life that had emerged during the 7th century and been dominant in the region for many centuries came to an end.

As we sit in our relative 21st century comfort contemplating several worrying clouds on the horizon, the question for us is how on earth did the curtain fall on such an apparently solid political, social, economic and advanced culture? While the Hollywood scriptwriters made much of love, courage, honour and so on, my MBA and executive education classes usually respond to this question with: “Guns of course!” Yet the Samurai had had access to bomb and gunpowder since the first Mongol invasions in the 13th century, and experience in firearms since the Portuguese had arrived in 1543. In fact, the story is more complex and underlines some important human characteristics when facing a changing world.

There are countless similar examples of human societies meeting their end and these should serve as a sombre lesson to us now. The Samurai (just as the Egyptians, the Easter Islanders, the Romans, the Aztecs had been) were an undoubtedly tough, well-educated, close-knit society that had survived many challenges that, frankly, modern organizations would struggle to overcome. They had very lean operations. They were technologically advanced. They collaborated up and down their supply chains. BUT they took their eye off the
BIG PICTURE!

And guess what. The same thing happens at a company level: less than 1 in 5 of the top 100 companies in the 1960s survived unscathed to the 21st century!

So, when will Hollywood be releasing the film of the demise of YOUR company?

Apparently, every now and then something happens to bring an end to an established order. Some refer to such unpredictable and yet highly destructive somethings as ‘Black Swan’ events and clearly history is littered with such catastrophes that demolish the old and open the way for the new. This poses two problems:

1. HOW TO SPOT those darned black swans and,

2. WHAT TO DO when faced with such potential cataclysms.

After all, the world always was a pretty complicated place and we have spent centuries making it more complex still. The current subprime mortgage induced financial crisis may not rank as ultimately calamitous as that meteorite was for the dinosaurs, but it has been rather devastating in many respects nonetheless. What’s more, as we have seen due to the interconnected nature of the modern globalised world, a ripple somewhere in the pond can cause a tidal wave somewhere else.

To spot black swans requires vision. Yet, with the way that things currently are, acquiring vision, foresight, or perspective on important issues seems to be left to chance. After all:

“How much time do YOU dedicate to thinking about the REALLY BIG issues that are likely to affect your personal and professional life in the next 20 years?”

For a whole host of reasons, the overwhelming response to this question from the current and future captains of industry is “…frankly not much. Certainly not enough.”

And this is somewhat concerning given the challenges that are facing us as we move into the 21st century. Several Global Trends will change our personal and professional lives, the way societies and businesses do things and the character of the world we all live in. The 21st century will be different to the 20th. From the economic crisis, through geopolitical power shifts, technological challenges, climate change, water and food, education, demographic changes, war, terrorism and social unrest, energy, ecosystems and biodiversity, health, to natural disasters, there are plenty of reasons to expect change.

 

There are 12 Global Trends changing our world. They will shape the 21st century: how we live, how societies are shaped and how business is carried out will be determined by the evolution of these megatrends in the coming years.

The Clock is Ticking

To encourage holistic thinking (as opposed to the Last Samurai’s tunnel vision) I represent these interconnected big picture issues on a GLOBAL TRENDS CLOCK. A clock that is ticking away, and – unless we take timely and appropriate action – is likely to ring “TIME’S UP” for many businesses and organizations. (see figure on the right)

Essentially, the twelve Global Trends of the clock are what worry the US National Intelligence Services and are what keep the world’s movers and shakers (present at the World Economic Forum) awake at night.1,2

While some of these issues may well be obvious – even to the extent that you may well be bored of hearing about them – make no mistake: these 12 Global Trends are changing our world. They will shape the 21st century: how we live, how societies are shaped and how business is carried out will be determined by the evolution of these megatrends in the coming years. Have no doubt, each one of these issues has the power to turn your life and/or business upside down if you are not aware of the underlying forces and fail to take appropriate action. There are few things in life that we can be absolutely sure about, but I am certain of one thing: that many of the details will change. Nevertheless, I am confident that most of these underlying trends will continue well into the 21st century. Unless nature and/or human beings drastically change behaviour in the coming years to knock these dozen Global Trends off course, it is highly likely that:

1. The repercussions of the economic crisis are not going to disappear in the short-term. High levels of debt will be an issue for many years to come. In particular, the possibility that countries, previously considered as sound investments, will default on their debt will result in profound changes to the way things are done at international, national and local levels across political, business and personal domains. Twitchy investors, austerity measures and labour market reforms will herald a new post-crisis economic era.

2. Geopolitical power will continue shifting away from the incumbent powers of Europe and the USA and towards emerging economic powerhouses such as China, India, Russia, Brazil and others. Unless some other big events conspire to derail the increasing economic clout of these countries, they will only become more powerful at an international level. The 20th century status quo will certainly change. Whether the transition to a new world order is a smooth one depends upon the behaviour of all the
actors involved.

3. Technology will continue to develop, bringing new sources of ‘creative destruction’. Old ways of doing things will be challenged by disruptive technologies that bring potential improvements. Individuals, companies and even societies that aren’t proactive will get left behind. Our grandchildren will be doing things we could only dream about, just as we are doing things our grandparents dreamed of. However, there are likely to be mistakes made along the way that present significant risks to us and the environment.

 

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4. The world will continue warming up and climate will change. Human greenhouse gas emissions seem set to continue rising. Extreme weather events are likely to become more common, with far reaching global impacts. There are likely to be many losers, but some winners, which will complicate the achievement of international agreement. In general human beings will have no option but to rise to the challenges posed and adapt as best they can, while attempting to counter the underlying drivers behind the rising mercury.

5. The worsening problem of water scarcity will continue to impact food production for the foreseeable decades, especially as non-renewable groundwater is used up or polluted. Given that human life is impossible without water this will put huge pressure upon existing resources. Local and national conflicts are possible; new ways of treating and living with less water will need to be found. Agriculture will suffer and food prices are likely to rise. With increasing production pressures, more mouths to feed, increasing vulnerability of fewer crop varieties and emerging health problems, the world food chain is likely to change substantially.

6. The importance of sound education will continue to increase. The teaching of values, lifelong skills, literacy and numeracy will remain essential to equip future generations with the necessary tools to face-up to the challenges presented by other Global Trends. Individuals, communities and countries with poor education levels will lag further behind in many ways and be a drag on global development. Without significant effort the link between poor education and poverty will not be broken- either in developed or developing nations.

7. The population of the world will continue to increase and then stabilize around 2050. This will put pressure upon existing resources. Average ages will rise across the globe as people live longer. With low birth rates, developed nations are likely to suffer too few young workers to sustain ever increasing ‘support ratios’ of the elderly and current pension schemes. Conversely, developing countries are likely to have an excess of young people without sufficient economic opportunities. Thus migration pressures are likely to increase.

8. War, terror and social unrest will continue and potentially increase. The shift from the ‘unipolar’ and ‘bipolar’ international systems of the second half of the 20th century towards a ‘multipolar’ one is likely to have some destabilizing effect, with the emergence of strategic rivalries. Social unrest will remain a high risk in many countries. Pressures on key resources, lack of employment and economic disparities are likely to provide the conditions for social ills such as disaffection, radicalism, piracy and organized crime.

9. The world will remain, by and large, oil dependent in the coming decades, despite a decline in its share of energy supply. An energy ‘revolution’ would be needed to change this trend but does not appear to be forthcoming in the short-term. With rising pressures both on the demand and supply side, oil prices are likely to increase- albeit with volatile fluctuations. This will lead to greater efforts to develop and implement higher capacity alternative energy sources. Nuclear will remain a tempting, but politically charged option.

10. Humans will continue to destroy ecosystems and biodiversity will continue to decline. With sustained human pressure on the environment, extinction rates will continue and possibly accelerate, putting many terrestrial and marine ecosystems in danger of collapse. Possibly after key high impact food chain collapses, more sustainable behaviours will become necessary as other critical thresholds are approached. In the meantime, more nations will become ecological debtors, consuming and dumping more than the Earth can sustain.

11. Health and well-being for everyone will remain an unfulfilled goal. Chronic, non-communicable diseases will kill more people in the 21st century. Continuing economic disparity will maintain conditions for infectious diseases to thrive in poor countries. With increasing global travel, increasing drug resistance and limited drug innovation for such illnesses, the risk of epidemics of new infectious diseases will remain high. Without profound reorientation, current health systems will increasingly struggle to deliver quality, affordable service.

12. Natural disasters will affect greater numbers of people, but potentially kill less. Hazard planning and rescue of victims will continue to improve our ability to cope with disasters. Nevertheless, more people will be exposed to increasing floods, storms, extreme temperatures and droughts. Earthquakes and volcanoes will remain ever present, intermittent, but high impact hazards. Increasingly populous cities with inadequate planning and unsafe buildings will put many at risk – especially the poor. Several cities will remain disasters waiting to happen.

 

Planning for the Unplannable

In the wake of the recent economic crisis, disease outbreaks, natural disasters, online security breaches and so on, political and business leaders have come up with phrases such as: “You can’t plan for the unplannable.” Such comments may give those who say them some comfort and allow them off the hook when something bad happens, but the truth is that we can plan for such things since we actually know a lot about them. What is more, faced with the possibility of a high impact event, any sane human being carries out some form of scenario and action planning. For example, faced with the fairly low likelihood, but high impact potential repercussions of a car crash, conscious adults wear a seatbelt. In other words, any sensible person proceeds with caution knowing that the consequences could be grave. When confronted with an even higher likelihood of a serious car accident, any sensible human being will either stop, or make sure that they were well prepared for the likely crash. Beyond wearing a seatbelt, they would also take out high risk insurance, modify driving habits accordingly and proceed with considerable caution.

My contention is that similarly pragmatic scenario and action planning is necessary for the Global Trends from policy makers to business leaders. The most concerning things about these Global Trends are not the threats themselves, but the combination of a significantly negative impact along with the high likelihood of them actually happening within the next decade. As the World Economic Forum Global Risk Landscape indicates, the threats posed by the twelve Global Trends are mostly in the high probability and high impact quadrant of the two-by-two matrix below.

Given the great deal of rigorous, high level scientific, economic and historical data that exists about these Global Trends, we cannot claim we haven’t seen these particular black swans. So, with awareness, we pass to the second part of the problem…

 

 

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WHAT TO DO?

It wasn’t solely that the Samurai couldn’t see what was coming, or that we didn’t realise the economic bubble was on the verge of bursting back in 2008. It was more that, in both of these very different cases, there was an unhealthy dose of denial- for a whole host of reasons. The status quo is a very absorbing state, with a whole host of factors (inertia, comfort, vested interests, outdated bonus schemes, legacy systems, lack of conviction etc) conspiring to prevent change. But, as with that bunny in the middle of the road staring blankly into the oncoming vehicle headlights, the laws of nature often conspire to treat such lack of action in
harsh ways.

Facing-up to a changing world is not about pessimism or optimism, but about realism… It is about using an increased awareness of the big picture to take better decisions and improved actions in the years to come.

This means that if you are not sufficiently aware or not prepared to face up to these issues, you are exposing yourself to the same possible fate as the last Samurai, or – to take a more recent Japanese example – to those companies that didn’t have their eyes open to the possibility of an earthquake induced tsunami (which was by no means an unkown event in the area.) There are plenty of examples of companies and organizations that have died as a direct result of failure to act in a timely fashion.

Thankfully, in business there are a number of tools and frameworks that take such strategic issues down to the operational level of implementing appropriate actions to reduce risks and costs and increase the benefits and profits. The objective is the same when managing businesses or organizations to minimize threats and maximize opportunities. In my particular area of real-world experience and business school expertise there has always been a clear mantra:

“Do more with less”

In other words, take actions to minimize the downsides whilst accentuating the upsides. This usually takes the form of managing operations to provide better quality of product and service outputs with reduced inputs. The same can be applied to the management of threats and opportunities, and most of the successful approaches are simple ones that can be easily understood and communicated. Just one such common sense approach that I have found works in the implementation of strategic goals in complex environments is that of the ‘Pareto Analysis’. Many know of this as the ‘80:20 rule’. The underlying principle is that roughly 80% of the effects come from 20% of the causes. Because of the way things are, about 80% of the threats can be mitigated by intelligently and rigorously working on 20% of the underlying problems. Similarly around 80% of the opportunities can be exploited by intelligently focussing upon the 20% priority actions that will reap
most dividends.

While being no ‘magic wand’, such common sense approaches work and can be successfully implemented across all manner of organizational and business scenarios. I have been actively involved in many different business and organizational contexts since the mid -1980s and simple approaches such as these are the ones that genuinely solve problems rather than adding to them. So, why not apply them to provide some framework for maximizing opportunities whilst minimizing risks associated with the twelve Global Trends?

Looking backwards, it is easy to see that societies have come and gone with some regularity throughout history. And, looking towards the future, change will continue its forward march. With so many pressures so early in the 21st century, it should be no surprise that many things that we take for granted are likely to change. Paradigms will change whether we like it or not. In
other words:

‘Shift happens’. Get used to it.

Clear threats emerge from each of the above megatrends, but so too do improved possibilities. Times of change always open up new opportunities for those prepared to grasp them. My book aims to serve as guide to charting the turbulent waters of the years to come: mitigating the risks whilst maximizing opportunities. This is what facing-up to a changing world is all about. It is not about pessimism or optimism, but about realism. Not worrying about the future, but instead getting ready for it. It is about using an increased awareness of the big picture to take better decisions and improved actions in the years to come. The end is not nigh, but we are entering a new era. Those people and organizations with their eyes open and most flexible to change are most likely to prosper. I urge you to broaden your vision with a view to taking better personal, professional and leadership decisions and timely actions. After all, you do not want to be a Last Samurai.

I wish you all the best in avoiding the pitfalls and exploiting the tremendous opportunities that are heading your way… and to facing up to a chang-
ing world.

So, what will you DO now?

This article is adapted from the author’s latest book “Global Trends: Facing Up to a Changing World” (Palgrave-Macmillan 2011)

About the author

Adrian Done is Associate Professor at the IESE Business School in Spain and Research Associate with the Advanced Institute of Management Research in the UK. To find out more visit:
www.facinguptoachangingworld.com

 

Notes

1.The National Intelligence Council, 2008. Global Trends 2025: A Transformed World. Washington DC: US Government Printing Office. http://www.dni.gov/nic/PDF_2025/2025_Global_Trends_Final_Report.pdf.` Accessed March 2011.

2.World Economic Forum, 2011. Global Risks 2011 6th Edition: An Initiative of the Risk Response Network. http://riskreport.weforum.org/ Accessed February 2011.

 

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