The (global) consequences of Chinese demographic trends

Due to its size China has an undeniable impact on megatrends such as the rising middle class, global power shifts and resource scarcity. However, its got challenges of its own, some of them I've reported on in a previous post 'The end of cheap China'. But undoubtedly the biggest challenge facing China is its demographics:

The trouble is that in 20 years the amount of youngsters that need to support the elderly will fall dramatically. As stated in The Economist interview here under:

• The overall fertility rate in China is about 1,5 (2 parents have an average of 1,5 children), which in itself indicates a declining population over a generation (since you need 2 persons to replace 2 persons); in some regions the fertility rate is below 1 !
• Today there are about 120 million people in their early 20's entering the Chinese labor market, but in 20 years they will only be 60 million - which will be a drag on the innovation and fresh energy in the economy, according to the Economist editor.

This will have an important impact on economic growth, but also on Chinese consumption patterns -not a trivial matter given its population size. In a recent article from McKinsey Quarterly 'Meet the Chinese consumer of 2020', it observes:

"Most people in China over the age of 55 experienced the harsh conditions of the Cultural Revolution, in the late 1960s and early 1970s. Not surprisingly, they think it important not to spend frivolously. Among residents of tier-one cities, 55- to 65-year-olds allocate half of their spending to food and little to discretionary categories: only 7 percent goes toward apparel, for example. People who are ten years younger devote only 38 percent of their spending to food but 13 percent to apparel. Indeed, our consumer surveys have revealed that although today’s older consumers behave very differently from younger ones, today’s 45- to 54-year-olds—the older generation come 2020—have spending patterns similar to those of 34- to 45-year-olds (who allocate 34 percent of their spending to food and 14 percent to apparel). This finding implies that companies will have to rethink their ideas about what older Chinese consumers want."

One of the advises McKinsey gives to global companies is to take China as a test market to service the aged population worldwide. I'll certainly keep track of their findings...

Is 3D printing the prelude of the 3d industrial revolution?

Well, it might very well...

First and foremost, 3D printing is a direct attack on the principle of 'economies of scale' on which much of our production processes (and, hence, our economies) are based since Henri Ford. Simply put, economies of scale indicate that the cost to produce one item declines if you produce more of them. In many cases it is 'cheaper' to produce one million product rather than just one. With 3D printing, the cost remains the same, whether you are producing just one or one million items.

Secondly, with 3D printing you can make incredibly complex things just as easily as you would make a coffee cup -the design will take a bit longer, but the production wouldn't. This might unleash a wave of completely innovative products.

Lastly, just imagine that every house or community would own such a 3D printer. This is not science fiction, as you could own a 3D printer for 300$ now. What would be the effect on traditional manufacturing? Companies will not be producing things anymore, they would produce the code or the software to produce things.

Regardless of when 3D printing will become mainstream, it will definitely signal a profound change of the economic organisation of our society, perhaps even an industrial revolution...

Google's biggest product failures... the world that could have been

The mantra of consultancy company IDEO 'fail often to succeed sooner' could easily apply to Google. For all the nice and useful things they have delivered so far, they have at least as many failed ones. You may laugh at this, or even see it as proof of bad management. But, to me at least, this shows how even big companies can still keep a entrepreneural spirit. You practically have to make mistakes in business today. And learn from them...

And, even in retrospect, not all the failed ideas were completely ludicrous.


Infographic by WordStream Internet Marketing Software

Is technology ruling our lives?

It's always dangerous to take things for granted. Even more so if it concerns our personal lives, and there's no way around it: technology has been invading our personal lives in recent years. Time to stop for a moment and think about what this means - or listen to Sherry Turkle telling us what it means:

• children compete with technology for the attention of parents;
• technology (at least social networks) give us the illusion of companionship without the efforts of friendship;
• the 'always on' mentality makes us vulnerable, as we lose the habit (and the benefits) of being alone
• online communication make it harder to fix problems since we only share what makes us look good.

Probably the most striking quote: 'if we don't teach children to be alone, they will only know to be lonely'

I must admit I was a bit skeptic in the beginning of her speech, but in the end it gave me plenty to reflect on...

The end of cheap China?

Many projections show how China will become the biggest economy in a couple of years. The calculation is simple enough, since China in average grows at 3 times the pace of the US (currently the biggest economy).

What is often omitted in these projections however, is that China has its own challenges as well. The Economist panel discussion beneath mentions the avenge of 3D printing and the lack of protection for the rising middle class. Strangely they forgot to mention the dramatically aging population in China.

On the positive side the panelists mention China's productivity growth and a solid supply chain in comparison to other Asian countries. But still, the big question for China's near future is how manufacturing will evolve, and whether China is able to morph into a different economic texture in order to benefit from the next wave job growth (wherever that will come from).

Democratizing the workplace, a good idea or not?

Reading the fascinating story of how Brazilian company Semco democratized their company for the past 20 years... to quite a radical extend... just imagine that in your company:

• managers would be appointed (and potentially fired) by their subordinates;
• everyone determines his or her working schedule;
• every unit determines its own quota and budget;

...and so on. The story is fascinating for its visionary qualities and audacious analyses. One would start to hope that these practices are a prelude to how businesses will be run in the future.




For a quick tour of Semco:



The story has lost nothing of its compelling charm and visionary power... the best business book I read so far this year:

Social entrepreneurs innovation... hyper-segmenting the market for micro-financing

Since I'm researching social entrepreneurship for a chapter of my new book, I'm finding a lot of fascinating initiatives. InVenture, basically a micro-financing venture for really tiny local projects, is a good case in point. Micro-financing is already well established -the inventor Muhamed Yunus even received a nobel prize for it. But there's room for innovation even in existing markets, as InVenture proves. It's also a sign of a mature market: hyper segmentation...

I just started to wonder whether this would work in the 'developed' (Western) world as well...

Can any business turn social?

Wonderful anecdote of social entrepreneur Muhammad Yunus, where he tells how he convinced the CEO of Adidas to move (part of) his company and -more importantly- his core product to a social cause. It also shows how hard it is for big incumbent companies to morph into a socially responsible business.

Social good is counter-intuitive to business logic, but more and more companies find ways to combine both. What truly is a prerequisite is the belief of the CEO that this is something his company just should do, regardless of the challenges and the business logic.