Eight Supertrends Shaping the Future of Business

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Success in the business world of tomorrow

By Karl Albrecht

means recognizing the sweeping changes of today.

Eight Supertrends Shaping the Future of Business A

fter reviewing many trends occurring in the global marketplace, My associates and I at Karl Albrecht International have summarized the most important trends in terms of eight overarching developments that are altering the face and dynamics of commerce. Although the selection is subjective in nature, and possibly open to some discussion or even debate, these “eight supertrends” are intended to help managers, entrepreneurs, and investors contextualize the fast-moving changes taking place around them. We’ve also included examples of these trends at work. One of the key handicaps inherent in the study of the “generic future” is the lack of clear sense of time span and a fuzzy conception of the sequence of developments that will presumably get us to the future that is forecast in a futurist’s scenario. In business, “long-range planning” was once a hallowed concept; one should think in terms of decades at least. Japanese companies were credited

with thinking on a scale of 100 years or more. In recent times, businesses have been thinking much more tactically and immediately. While a planning horizon of 10, 20, or 30 years invites some inspired and creative strategic conceptualization, the simple fact is that most executives focus their attention and resources on time spans that are considerably shorter. In presenting these supertrends, I hope to paint a moving picture, if you will, of where business is and where it’s going in the next five to 10 years. 1. Customer Supertrend: The Microsegmentation of the Marketplace Monolithic markets, customer segments, and product categories are continually breaking up into smaller clusters of demand and preference. Customers are becoming ever more differentiated in their lifestyles and interests, with smaller and more specialized groups responding to more narrowly targeted commercial messages.

First articulated by Alvin Toffler in his landmark book Future Shock (1970), “demassification” is the disintegration of mass communication, mass values, mass behavior, and mass preference. As a result, the cultures in the developed world are becoming ever more heterogeneous. Human communities are no longer limited to specific neighborhoods, classes, ethnicities, or locations; the emergence of Web-based “virtual neighborhoods” is rapidly changing our definitions of community and fellowship. Diversity in lifestyles, values, and priorities is becoming more apparent with demographic changes. People of varying ages now feel the freedom to exhibit attitudes and lifestyles outside of those traditionally associated with their age group. Demassification and microsegmentation are making it more difficult and costly to reach specific groups of customers based on their unique values and needs. Broad appeals won’t work. Enterprises of all kinds are therefore finding it necessary to develop more focused value

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packages to reach these smaller groups of customers sharing more specialized clusters of preference. An example of this microsegmentation can be seen in the rapid rise of blogs or online personal diaries and news columns. Internet news sites are also gaining popularity, illustrating how small-scale media outlets are getting the scoop on national TV networks and newspapers that provide more generic content. 2. Competitor Supertrend: Value Targeting Value targeting, simply put, means aiming for whatever matters most to individual consumers. Enterprises that have traditionally offered a broad range of products or services are now facing specialized competitors who provide more specific, targeted solutions, often in new ways and at lower prices. The customary “one size fits all” packages are losing their appeal as customers increasingly “cherry pick” the offerings, selecting preferred options a la carte. The reciprocal relationship between the Microsegmentation trend and the Value-Targeting trend means that competitors increasingly focus on a few selected areas where they can hope to achieve an advantage. Webbased sources in particular are threatening the “one-stop shopping” premise of enterprises that provide information and knowledge, such as educational institutions, publishers, associations, and advisory services. “Customer loyalty,” having always been a questionable proposition, has become less of a priority as enterprises must compete for customers on an item-by-item basis. For example, IBM—perhaps the world’s oldest still-operating computer manufacturer—sold its personal computer division to the Chinese firm Lenovo in 2005. IBM has since put more focus on its individual service and consulting practice, providing tailored IT infrastructure services to business, often over the Internet. 3. Economic Supertrend: “Chinafication” The phenomenal growth of the Chinese economy is having global impacts, which are apparent even to 26

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A Lenovo sales professional examines the latest IBM computer designs at a technology fair in Beijing. Lenovo’s acquisition of IBM’s personal computer division in 2005 illustrates the strong growth of the Chinese economy.

enterprises that have never thought of themselves as operating globally or internationally. China’s rapidly growing consumer class will compete ever more intensively with First World consumers for needed resources such as oil, water, energy, grain, manufacturing raw materials, and luxury food items, including meat. Western manufacturers and consumer-product marketers will face ever more intense competitive pressures from the “China-Mart” axis— i.e., low-cost manufactured goods from China marketed by America’s retailing giant Wal-Mart, among others. China’s vast pool of cheap labor may dominate world labor markets for decades, giving that country a near-permanent monopoly on cheaply manufactured goods. Chinese industrial firms and cartels (often indistinguishable from the Chinese government and the Communist party) are using accumulated foreign exchange reserves to buy up foreign firms and capital assets, seeking to secure a grip on supplies of critical resources such as oil.

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Chinese trade practices, competitive strategies, currency manipulation, and piracy of intellectual property are causing protectionist reactions in the developed countries, which will probably increase for some time. Economic growth in China was 9% in 2005, compared with 3.5% in the United States. China has become the world’s second-largest oil consumer. The U.S. trade deficit with China was $201.6 billion in 2005, which represents a 25% jump from 2004. Chinese manufacturers currently produce more than 70% of the world’s toys, 60% of its bicycles, onethird of its television sets and air conditioners, and half of the world’s microwave ovens, according to The Chinese Century by Oded Shenkar (Wharton, 2005). 4. Technological Supertrend: From Information to Knowledge Information is rapidly becoming a profitless commodity, and knowledge is becoming the new competitive advantage.

The inexorable reconstruction of opened a Centre for Internet Addic- ever more provocative methods of Western societies and economies, ac- tion Prevention and Counseling after capturing the attention of a jaded celerated by the pervasive impact of a young man collapsed and died fol- public, creating a pervasive “culture information technology and the lowing an 80-hour Internet gaming of amusement” that tends to devalue rapid spread of the Internet, is re- session. and displace thoughtful discourse. quiring us to rethink Alvin Toffler’s Restoring, rediscovering, or reinJust as bad money drives out “Third Wave” concept—the shift venting this personal-virtual balance good, it can be said that “dumbedfrom industrial societies to informa- will be an important challenge for down” content drives “wised-up” tion-based societies. Many low-level both business and community lead- content out of circulation. The ever employees previously thought of as ers. Information-based enterprises more desperate use of sexualized, knowledge workers are now being will find themselves increasingly violent, antagonistic, and voyeuristic recognized as “data workers,” who challenged to move beyond com- content as an attention-getting stratcontribute very little added value to moditized products and service ex- egy in news, advertising, publishing, the processing of information. In periences to new levels of added and entertainment is causing more other words, information technology value and life enrichment through people to perceive the social values is doing more of the work formerly knowledge. projected by the popular commercial done by humans, even in high-tech Ironically, the developing state of culture as narcissistic, hedonistic, areas such as sorting data for rele- all-pervasive “connectedness” im- anti-intellectual, and regressive. This vance. posed by Internet use, cell-phone relentless dumbing-down of the To the extent that digital citizen- technology, instant messages, and popular channels of discourse is acship correlates with income and edu- other wireless technologies may ac- centuating the differences in world cational level, the socioeconomic tually give rise to a greater appetite view between fully conditioned mechasm between the haves and have- for meaningful personal contact. dia consumers and a smaller number nots will reinforce a corresponding of self-educating citizens who seek digital caste system, characterized by to counteract these influences in 5. Social Supertrend: Dumb and Dirty “knowledge-haves” and “knowledgetheir own lives. have-nots.” America’s rapidly saturating mePerhaps one indicator of pop culThe Web-based scientist “match- dia environment is forcing marketers ture’s dominance over public life can maker” InnoCentive connects corpo- of the popular culture to resort to be seen in “voter” behavior. There rations with freelance or even novice scientists who work on a “per solution” basis. According to its Web site, InnoCentive “enables companies to tap into the talents of a global scientific community for innovative solutions to tough R&D problems.” This trend, which Wired magazine has dubbed “crowd sourcing,” is having unanticipated consequences for technical workers who long thought of their jobs as completely secure and themselves as irreplaceable. New psychopathologies, such as “Internet addiction,” “digital depression,” and “connected aloneness,” are underlining unfulfilled needs for social connections, particularly in the “geek” population and RCA RECORDS among young people. The top 12 contestants in the 2006 American Idol competition. A sign of cultural dumbing down? More In fact, South Korea votes were cast for the two finalists than were received by any U.S. presidential candidate in history. THE FUTURIST

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were more total votes cast on the American Idol finale in 2006 than for any single U.S. presidential candidate in history. 6. Political Supertrend: “CyberMobbing” The emergence of Web communities, “smart mobbing,” and “swarm” advocacy are spawning temporary or transient political entities that outflank traditional channels and methods of influence. With political argument becoming much more popular in the broadcast media, and smaller and more-spe-

cialized advocacy groups forming and disintegrating over time, elected officials and public agencies are under increasing scrutiny and pressure for accountability. This “peasants with pitchforks” phenomenon is increasingly prevalent, as causedbased political activists can more easily assemble temporary constituencies through online marketing and fund-raising. Web-based “news” producers are outpacing traditional radio and TV broadcast sources, as well as print media, in getting news products and alternative points of view to the market by short cutting

Rise of the Wise Consumer and Investor Beyond the realm of media, ad- been a large enough group to warvocacy groups are forming rant a blue-chip corporation around various aspects of the changing its business practices. “restoration” agenda, such as the However, according to the group reaffirmation of “family values,” Lifestyles of Health and Sustainopposition to the commercial ex- ability (LOHAS), a $228.9 billion ploitation of children, corporate market exists for goods and sersocial responsibility, ethics of vices focused on health, the envielected officials, improvement in ronment, social justice, personal public education, and attention to development, and sustainable living. environmental and social priorities. The importance of corporate reAn example here may be the sponsibility is also growing rise of ethical consumerism. While among investors. In a recent surstill a small segment of the U.S. vey by the LOHAS group, nearly population, an increasing number half, 49%, of those questioned of people have grown hostile agreed that “it is important for toward corporations that exploit companies to not just be profimpoverished labor or who wan- itable, but to be mindful of their tonly degrade the natural envi- impact on the environment and ronment. These consumers are society.” willing to pay a higher premium for the same item—cofBuying Green fee, for example—if that item is proUsage Growth Rates of Select Environmentally Friendly duced in a manner Products, 2004–2005 that’s consistent with their social Hybrid Vehicles +267% values or sold by a Compact Fluorescent Light Bulbs +22% vendor who seems Energy-Efficient Windows +18% to share their core Solar Panels +17% beliefs. Defenders of traditional, exploitaOrganic Foods/Beverages +8% tive business pracNatural Household Cleaning Products +13% tices have argued that ethical consumers have never Source: LOHAS, www.lohas.com/journal/trends.html

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the conventional weekly news cycle. The increased “noise level” in the various channels of political influence is making it more challenging for interest groups of all kinds to get their views considered and to attract support for their agendas. The success of political action committees and grassroots organizations that conduct operations primarily over the Internet is having a big effect on politics in the United States. A group called MoveOn.org is considered one of the largest and mosteffective online advocacy groups, and many see it as a counter to the influence of moneyed corporate lobbyists. MoveOn supports a wide array of progressive causes, such as curbing global warming, preserving Internet neutrality, and protecting minority voting rights. 7. Legal Supertrend: Knowledge Warfare Competitive struggles between knowledge-intensive enterprises are increasingly fought both on the legal battlefield and in the marketplace, as the creators, producers, publishers, distributors, and consumers of intellectual-property-based products pursue their separate interests. High-profile lawsuits—and legislation—have highlighted the increasing vulnerability of copyrights and other intellectual property protections. The entertainment industry in particular may be driven toward zero-profit levels and mass mediocrity as media-based products have ever shorter profitable lifetimes. The open-source software movement, currently challenging Microsoft Corporation’s dominance of the PC sector with products such as Linux, may drive down software prices and profits. Piracy and theft of intellectual property, particularly in Asia, continues to threaten creators’ return on investment. While intellectual-property battles are typically considered the province of large corporations, the fallout and side effects from these battles can affect many smaller enterprises and individuals: When publishers lose revenue from books, they publish fewer books or go out of business. Authors can’t afford to write, and good books go unpublished and unread.

ARIF ALI / AFP / NEWSCOM

Intellectual property industries or “core copyright” industries make up 6% of U.S. GDP. 8. Geophysical Supertrend: CounterAmericanism “Made in America” is no longer “cool.” Political counterreactions to an increasingly unilateral and militarized U.S. foreign policy, together with nationalistic and regionalistic coalitions, are eroding the taken-forgranted dominance of American styles, values, products, and business practices. Americans traveling abroad and employees of U.S. businesses operating in other countries must increasingly consider personal-security risks in planning their activities. Threats of violence against Americans and U.S. enterprises are significantly increasing the cost of business operations. As the United States continues to lose its unique competitive advantages in science and technology, as intellectual capital continues to develop rapidly in competing countries such as China and India, and as competition for oil and other natural resources intensifies, an “American twilight” of influence is increasingly likely. As more business enterprises seek to go international, localized business practices are resisting the global reach of the Americentric model. Enterprises seeking to develop globally will need to partner with local entities, develop an authentic local presence, and evolve more relevant business models. In October 2001, shortly after the U.S. invasion of Afghanistan, an angry mob in Karachi, Pakistan, set fire to a locally owned Kentucky Fried Chicken franchise. A similar event occured in Lahore, Pakistan, in February 2006. In 2003, a Ronald McDonald statue was torched in Quito, Ecuador, following the U.S. invasion of Iraq. A boycott of American goods, organized primarily through the Internet, contributed to a 55% decline of U.S. exports to Saudi Arabia between 1998 and 2002, according to the Middle East and North Africa Business Report. Nusrat Choudhury, writing for the Princeton Project on National Security, has

A KFC restaurant burns in Lahore, Pakistan. The restaurant was set on fire by an angry mob during a protest in February 2006. Anti-Western, and particularly anti-American, sentiment is on the rise, warns author Karl Albrecht.

speculated that the price U.S. firms may pay for rising anti-American sentiment may be directly related to the visibility of their presence. Reacting to the Trends Several key points emerge immediately from this overview of supertrends. At least half of them relate directly to the emerging Knowledge Age. It’s time to stop marveling about the coming age of information and knowledge and get serious about coping with it and capitalizing on it. The most important key point to consider may also be the most obvious: These trends (by and large) represent both threat and opportunity. A pessimistic first reading might perceive many of these ongoing developments as “bad news,” an inventory of challenges. A more

careful reading, however, could well see them as strongly implying an action agenda. Clearly, enterprises that want to avoid the slow slide into irrelevance will need to respond proactively to these findings. ■ About the Author Karl Albrecht is the author most recently of Social Intelligence: The Science of Success (Pfeiffer, 2005) and founder of the management consulting firm Karl Albrecht International, 3120 Old Bridgeport Way, #100, San Diego, California 92111. Telephone 858-576-3535; e-mail [email protected]; Web site www.karlalbrecht.com.

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