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Wednesday, November 22, 2017

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The global forces inspiring a new narrative of progress
Ezra Greenberg, Martin Hirt, and Sven Smit at McKinsey&Co

May, 2017

Growth is shifting, disruption is accelerating, and societal tensions are rising. Confronting these dynamics will help you craft a better strategy, and forge a brighter future.

“The trend is your friend.” It’s the oldest adage in investing, and it applies to corporate performance, too. We’ve found through our work on the empirics of strategy that capturing tailwinds created by industry and geographic trends is a pivotal contributor to business results: a company benefiting from such tailwinds is four to eight times more likely to rise to the top of the economic-profit performance charts than one that is facing headwinds.

It’s easy, however, to lose sight of long-term trends amid short-term gyrations, and there are moments when the nature and direction of those trends become less clear. Today, for example, technology is delivering astounding advances, and more people are healthy, reading, and entering the global middle class than at any period in human history. At the same time, the post–Cold War narrative of progress fueled by competitive markets, globalization, and innovation has lost some luster.

Those contradictions are showing up in politics, and the long-term trends underlying them are reshaping the business environment. Corporate leaders today need to rethink where and how they compete, and also must cooperate in the crafting of a new societal deal that helps individuals cope with disruptive technological change.

That broad narrative of intensifying competition, as well as the growing need for cooperation, contains challenges, but also great opportunity. We hear about the challenges every day in our conversations with global business leaders: How long can their traditional sources of competitive advantage survive in the face of technological shifts? How will changing consumer and societal expectations affect their business models? What does it mean to be a global company when the benefits of international integration are under intense scrutiny?

All good questions. But they should not distract from the extraordinary opportunities available to leaders who understand the changes under way and who convert them into positive momentum for their businesses. Our hope in this article is to help leaders spot those opportunities by clarifying nine major global forces and their interactions. Significant tension runs through each of them, so much that we’d characterize them as “crucibles,” or spaces in which concentrated forces interact and where the direction of the reactions under way is unclear. These crucibles, therefore, are spaces to watch, in which innovation “temperature” is high.

  • The first three crucibles reflect today’s global growth shifts. The globalization of digital products and services is surging, but traditional trade and financial flows have stalled, moving us beyond globalization. We’re also seeing new growth dynamics, with the mental model of BRIC (Brazil, Russia, India, and China) countries giving way to a regional emphasis on ICASA (India, China, Africa, and Southeast Asia). Finally, the world’s natural-resource equation is changing as technology boosts resource productivity, new bottlenecks emerge, and fresh questions arise about “resources (un)limited?”
  • The next three tensions highlight accelerating industry disruption. Digitization, machine learning, and the life sciences are advancing and combining with one another to redefine what companies do and where industry boundaries lie. We’re not just being invaded by a few technologies, in other words, but rather are experiencing a combinatorial technology explosion. Customers are reaping some of the rewards, and our notions of value delivery are changing. In the words of Alibaba’s Jack Ma, B2C is becoming “C2B,” as customers enjoy “free” goods and services, personalization, and variety. And the terms of competition are changing: as interconnected networks of partners, platforms, customers, and suppliers become more important, we are experiencing a business ecosystem revolution.
  • The final three forces underscore the need for cooperation to strike a new societal deal in many countries. We must cooperate to safeguard ourselves against a “dark side” of malevolent actors, including cybercriminals and terrorists. Collaboration between business and government also will be critical to spur middle-class progress and to undertake the economic experiments needed to accelerate growth. This is not just a developed-market issue; many countries must strive for a “next deal” to sustain progress.

These tensions seem acute today because of fast-moving political events and social unease. But earlier times of transition provide encouraging precedents: the Industrial Revolution gave rise to social-insurance programs in Western Europe and the Progressive movement in the United States, for example. Progress has won out over most of the past two centuries—indeed, at an accelerating rate since World War II, which has seen global growth rates more than double the average of the preceding 125 years. As business leaders strive to compete and cooperate in new ways, they should take heart: if history is any guide, we’re operating in crucibles of progress that can help create an exciting tomorrow.

The article continues at http://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/the-global-forces-inspiring-a-new-narrative-of-progress?cid=other-eml-alt-mkq-mck-oth-1704&hlkid=679efdbe406d417184e9ed596ae50a82&hctky=1277356&hdpid=9bcda4d1-39c2-41f7-b940-057955364d2a



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