2010: Malaise or Renaissance?
Business Success May Depend on a Subtle Shift in Mindset
by
Thomas Schinkel
December 2009
What can we expect in 2010? Pondering what the immediate future will bring is a popular pastime, especially at year’s end. There are plenty of prognosticators out there who will tell you with the utmost certainty that one group of trends or another will prevail. Economic growth, unemployment, housing starts, the condition of real estate markets, the stock market — the targets are too numerous to begin to list. It serves no practical purpose to parrot any of those predictions here.
Does 2010 have a malaise in store for us or will it be the beginning of a Renaissance for America? My own sense is that there are so may unresolved issues that it is too early to tell. In other words, not much of a forecast!
But I do want to draw attention to something more subtle, less tangible and definitely not measurable by the sort of mainstream metric that economists love. It has to do with a subtle shift in thinking about business and strategy, the traditional domain of the Chief Executive Officer. How to structure the organization, how to allocate capital, innovate in house or acquire knowledge from the outside, etc. – in the traditional paradigm the CEO is in charge of planning for the company’s growth, especially long-term. This mindset is captured in the following drawing:
But the crisis of 2008/2009 has shaken up many conventions and traditions, and today
especially going forward into the next couple of years, another mindset altogether is required. This new mindset has to do with coping with uncertainty of a new magnitude. The crisis has exposed many vulnerabilities in the global economy and, while a collapse of the entire global infrastructure has been avoided, unfortunately many of the unpredictables are still out there.
In view of this persistent condition, I have a different prediction to make: The crisis of 2008/2009 will have an overhang into 2010 in that it will have triggered in the minds of more senior business executives an urge to refocus their attention on something different from what they have been accustomed to during the last twenty years.
A Paradigm Shift for Business Leadership
Post-crisis management preoccupations at many a corporation will have shifted from the traditional realm of planning for growth to preparing for unpredictable events, as depicted in the following:
Many a business model has been affected by the crisis in ways that would have been unimaginable even a few years ago, and not always in a positive manner. To the contrary, the crisis has exposed weaknesses in even the largest and seemingly invincible corporate enterprises.
Since many of the factors that provided the underpinning for the crisis are still there, the timing of this paradigm shift is perfect. For example, during the next few years, it is not unreasonable to think through scenarios of inflation and deflation, combined with obsolescence and cluster risk.
Vulnerable Value Chains Present the Greatest Challenge
In my view, the greatest challenge facing many corporations is the issue of trend reversals in the value chain. Most value chains have become global, and the crisis of 2008/2009 has proven that these value chains are vulnerable to “black swan” disruptions. Preparing for and anticipating these disruptions is a sensible exercise – just as sensible as installing hurricane clamps in your house if you live in Hurricane Alley. In this context, some companies are better prepared than others. The French author and publicist Jean Jacques Servant Schreiber noted in 1967 that the American model of competition distinguished itself not because of its access to technology but more because of its manner of organization, combining resources and talent in new ways that made it so competitive and disruptive.
Today, forty years later, the world has changed many times over, and globalization has transformed the American economy into something unrecognizable the 1967 model. Many of the industries Schreiber identified as powerful soon entered a steady trajectory of decline, including the giants of the automotive industry, such as General Motors.
Prepare for the Unpredictable
But many countries — and especially specific companies — have taken a lesson from Schreiber’s observations, and today there are hundreds of companies spread all over the globe that distinguish themselves not because of their technology but because of the way they organize themselves, how they handle information, how they learn (from mistakes), how they share knowledge, where they focus their energies and why.
What seems to be a lost art at the national level has taken hold within some of the companies that will make history during the next five years. It has nothing to do with size; it has to do with how they prepare themselves for unpredictable events. Like hurricanes, these events will come, with the timing and intensity remaining unpredictable. The organizations and companies that are prepared will reap the benefits of extraordinary new opportunities that will provide the groundwork for renewed prosperity, distributed unevenly as ever around the globe.
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