Five forces that shape the future threats and opportunities for business

For those who didn't see it yet, in the coming months McKinsey Quarterly will zoom in on the 5 global Forces it considers will have the most impact on the world's economy and -hence-businesses.

As Peter Bisson, Director at McKinsey, points out in the video introduction, these are trends that take shape very slowly, and hence might escape the attention of Business Leaders. But these are forces that undoubtedly exist, and those businesses that ignore them face the risk of discovering a whole set of well established new competitors in ten years from now. It also offers huge opportunities for those who can assess the impact the five forces will have on their industries. (Worth having an internal workshop about that !)

Those who follow my blog will know I share this opinion. What makes the McKinsey story compelling though are the way they structure the trends around the five 'forces'. Only the shifting power and behavior of consumers is missing -though one might argue that this is an effect of the 'global grid' force.

The Five Forces are mentioned below, but it's well worth watching the video introduction first:




The five forces McKinsey takes into consideration:

• 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?

'Future Files' from Richard Watson -an introduction

A few days ago I started reading 'Future Files: A Brief History of the Next 50 Years' of Richard Watson ...
 The book offers a highly compelling view of over 220 trends happening in 8 domains. Most of the predictions look perfectly realistic, albeit that Watson leaves some room for pure (fun) speculation as well...


The book unfortunately doesn't explain Watson't way of mapping all these trends (he does so on his website:
 http://www.nowandnext.com/PDF/trends_and_technology_timeline_2010.pdf ). The trend map does look a bit like a map of the London underground. Though complicated at first, it still offers some compelling reading!

As soon as I finish the book I will write a full review -as usual- but in the meantime I've been watching some of Watson's presentations on Youtube. The one beneath offers the best introduction to Wtason's work -and his way of mapping the trends. It's in 3 parts, unfortunately, but it's worth the 22 minutes.

PART I:


PART II:


PART III:

(book review) Future Savvy - Adam Gordon

This book forms a valuable addition to my quest for finding the best way to use megatrends in corporate strategy, even if it doesn’t provide any insights in any trends as such. Rather, this is a book about how to choose which prediction to take into account in your strategy, and about how to make a distinction between good, useful forecasts and loose, worthless predictions.


In his introduction, the author explains that everybody uses forecasts to take decisions , not only corporations, but also individuals (the forecasted growth of your income will help to decide which house to buy, the weather forecast to decide whether you’ll spend the weekend at the coast, etc.). Hence, being successful only depends on the selection of forecasts you base your decision on.


That’s an appealing starting point since it assumes that you can use existing forecasts to build your strategy on, rather than build your own, and secondly that choosing the right forecasts is a matter of sound judgment rather than specific skills or wisdom.


By drawing our attention to every bias and misconception that might occur in a forecast, Adam Gordon prepares us to make better judgments of which trends/forecasts to take seriously and act upon. And, as his book shows, there are plenty of considerations to take into account (I only comment on those that I was interested in or disagreed with, the book contains a lot more):

1. Categorization of forecasts

When looking at a forecast, one can better ask himself what purpose the forecaster has with the study. The important distinction is between ‘future aligning’ (are we taking the right measures to act upon a trend) and ‘future influencing’ (can we turn this trend into our profit) reports. Basically, the latter ones are about ‘lobbying’ towards a specific direction, and hence are often biased.


I’ve often experienced myself that, when confronted with the same data, people can have very different interpretations and conclusions. As Gordon rightfully points out, the interpretation often unravels which real purposes people have with the forecast.


2. Quality of the information

I work in an industry where even the size of the market is not and cannot be known accurately (I won’t go into details of why that is in this article, but if there’s interest I can develop this in a next article). So, to me, knowing the assumptions that forecasters make is more interesting than the figures they come up with. This is a point that Gordon misses in this chapter I think (that assumptions can be more revealing than the data).

But he is right in pointing out the things that can go wrong when using data in forecasts: incompleteness; taken out of context; ‘overhyped’, out of date. It’s sometimes the only data  one might have (it often happens in my professional activities), but still you should never be blind about the exact nature of the data you use.


3. Zeitgeist

This is the chapter that was most inspiring to me. A walk through the philosophers Foucault and Kuhn brings us to the concept of ‘paradigms’, patterns or structures that shape our mind’s ability to understand our environment and that are often prone to influences from our cultural belongings or the period we live in.

9/11 was in a way an example of this. While all the elements existed to predict such an attack, there was a lack of ‘paradigm’ that took into account the possibility of a globalized terrorist force that would eventually proceed with it. Hence it wasn’t ‘expected’, while it could have been –and most probably is from now on.


This is a kind of a ‘zeitgeist’-bias: we are limited by what our times consider as likely or not. No doubt none of the forecasts made hundred years ago would have considered a globalized, instantly connected world. But even closer to us: the end of the Second World War, in conjunction with an increase in technological innovations, led people to believe my generation would be spending holidays on the moon, or have robots doing all of the domestic activities for us. The oil crisis in the Seventies made all forecasts dim and gloomy. The fall of the iron wall in the 80s changed the paradigm again, which led to the 90’s believing in never-ending growth in wealth and stability.


What are the chances of us being limited in our forecasting activities? Will global warming look like a non-event fifty years from now? Will our children look back pitifully at our expectations about the ageing population, the emerging power of the emerging countries, or even the ever increasing connectedness of things?


Perhaps... There’s very few ways to know. But we should take this into account in our forecasting. And this accounts as well for all the experts in the field, which we sometimes survey in a Delphi-study in order to know more about the future. The consensus that is reached is most likely a reflection of our ‘Zeitgeist’.


4. Technology

Two chapters of the book are dedicated to drivers and inhibitors of trends. Gordon rightfully points out that it is the perceived ‘utility’ of the ultimate beneficiary of a trend, which will make it happen or not. If there’s no incremental value to something, it will not be adopted; hence it will not become a (lasting) trend.


While this is not applicable to all trends (ageing population is hardly something people can adopt or not), it is certainly applicable to one of the major drivers of new trends: technology.


Technology can create (not only drive) new trends in itself, and Gordon somehow fails to present a full scope of this –but probably this would take another book- but as he rightfully points out the availability of technology in itself is not a driver, it is the perceived utility of the technology that will.


“The future is never just about what is possible to do. It is always about the choices people and the market will make from among what we can do” (Adam Gordon).


5. System forecasting

Another interesting approach is to investigate the ‘systems’ in which trends occur. Looking at the causes and effects of all the influencing elements help s indeed to discover tipping points of trends, although Gordon states that this method doesn’t help to show drivers and inhibitors of these trends.

This systemic analysis would’ve deserved more thought –or a separate book altogether. There are probably more models to be found other than the reinforcing or balancing loops, and I’m certain there would be ways to show the drivers and inhibitors in such a systemic modeling. Food for thought.



But all in all this is a valuable reading. Gordon develops the caveats with using forecasts in a very complete and lively fashion, enabling his readers to be more critical when using them and to select the most useful ones in their own strategy.

The only weakness of the book lies in the lack of positive examples of good forecasts. Gordon excels at criticizing trend predictions and forecasts, but is very careful in developing his own…