The future will not be what it used to be…

August 5, 2012  

In a previous post I observed that “The rules of the game changed forever when the financial markets imploded in 2007, precipitating what many consider to be the worst economic crisis since the Great Depression of the 1930s.” There is a continuing stream of data that keeps underlining the extent to which this is true and the seemingly troubling implications for enterprise.

A couple of recent articles in The Financial Times have, in different ways, shone a light on some of the tectonic shifts confronting us. I’m particularly indebted to Andrew Sentance (“Time for west to adjust to ‘new normal’”) and David Rosenberg (“Brace for an era of crisis aftershocks”) for their revelations.

What is clear from articles such as these is just how sluggish economic recovery in the Western world is likely to be. After what might be considered a reasonably strong rebound in 2010, when the G7 economies grew on average by 3 per cent, growth in the three years 2011-2013 is expected to average about half that rate. Looking further out, the International Monetary Fund expects the G7 economies to pick up to around 2.5 per cent in the period 2014-17, which would still leave the average growth rate from this year until 2017 at just over 2 per cent.

The most popular explanation for this disappointing state of affairs is a lack of demand, reflecting the aftermath of the financial crisis (for example, the Fed recently revealed that US median household net worth collapsed an epic 39 per cent from 2007 to 2010) and fiscal retrenchment by
governments. But this lack of demand is not true for the global economy as a whole, with emerging market and developing economies performing strongly, so that, in the years 2011 to 2013, average growth across the world economy is still expected to be in the 3.5-4 per cent range, which is above the 3.3 per cent long-term average for the preceding three decades. So maybe, rather than convincing ourselves that opportunities are limited, we should become more alert to shifting opportunities.

This won’t necessarily be easy to achieve, as many business models are still better suited to what was the old “normal”. In particular, before 2008, growth in the west was sustained by easy money and cheap imports. Unfortunately the world of cheap imports has been steadily eroded by the successive waves of energy and commodity inflation since the mid-2000s, a trend which is now being compounded by the impact of domestic inflation in Asia and other “low cost” producing economies. And the world of easy money came to an abrupt end in 2007 and 2008, heralding the need for western economies to adjust away from activities that are heavily dependent on these easy financial conditions – particularly speculative property and construction.

As Paulo Coelho observed, “You can become blind by seeing each day as a similar one”. To thrive and survive organizations now need to be able to see each day differently. This is likely to require a very different business model, one that deliberately builds awareness of and ability to identify opportunity throughout the entity. Each organization will need to find its own ways of becoming systemically aware, but will almost certainly need to ensure that each of the following conditions is

  • The organization must have a clear purpose that it is widely understood and pursued.
  • People throughout the organization must be continuously involved in monitoring the degree to which it is achieving its purpose.
  • Everybody must be confident that their opinions can influence how the organization pursues its purpose.
  • Everybody must feel motivated and able to share relevant information in the best interest of the whole organization.
  • The organization must have deliberate ways of harnessing its collective imagination when exploring its options.
  • Everybody must believe that the organization is committed to experiment and innovate when necessary.
  • The organization must always takes time to explain the reasons behind any changes in its direction, so that everybody can remain alert to emerging opportunities and threats.

In many ways ensuring the above involves aligning people around shared values and behaviours. The crucial thing to realize is that these are not the values and behaviours that were generally evident during the “old normal”. As Paulo Coelho also observed, “We have to stop and be humble enough to understand that there is something called mystery”. Today’s leaders have to be humble enough to embrace everybody’s contributions to solving our mysteries. What does this say about the desired attributes of leaders in the “new normal”?

Ciarán Beary

Ciarán is a skilled facilitator and story-teller. Of our founders, he takes a keen interest in designing facilitative processes that work. His favorite quote is “Be all you can be”. Based in the UK, sometimes you can even find him there. More about Ciarán