There's no ways such an ambitious title could be followed by merely a few words in a blog article, so with a little bit of tongue in cheek, here's a quick view of the future of business in the context of the 'new normal' of economic uncertainty and of increasing rates and scale of change:
The micro-view: The firm/company/enterprise/corporation:
- Traditional economics taught us that scale mattered.
The bigger we were relative to our competitors, the lower our fixed costs per unit, so the higher the profitability per unit sold. However, today's economy is demanding agility, the ability to respond to rapid, unexpected change, now often occurring increasingly at the macro-level. Since a business enterprise cannot respond with appropriate speed to change as a behemoth, new business forms need to be more compact, and agile. This will demand a new views of operations productivity.
So where will future growth come from? No longer necessarily from scale enterprises selling more of the same to more customers, but by being able to respond better to new opportunities as they happen, continually finding new solutions to new markets that will come and go in a state of accelerated change and increasingly rapidly evolving tastes and preferences
- No longer is human resources merely about industrial relations, payrolls, leave, recruitment, termination and requirement.
A more and more appropriate response is being demanded to the up-to-now pretentious assertion that people are an organisation's greatest asset. This means you must increasingly care about who I am, about my dreams, and my aspirations. This means that we becomes partners in making the enterprise successful, that you appeal to my intrinsic motivators to achieve the desired levels of performance. Looking at the 'Occupy Wall Street' movement, maybe the time has come to reduce the gini coefficient and to have all positive contributors share more of the spoils of doing good business. The world of work is changing in that more people will need to create their own economic futures as more corporates begin downsizing to increase their agility, and there will be increasing demands for governments to facilitate the ease of doing business, especially for SMEs. Personally, I'm not that thrilled with tight job descriptions and rigid performance contracts as they seriously inhibit creativity and have a pathetic response to change, but unfortunately people themselves abuse 'the system', making it more difficult for everyone. In this context, they're unfortunately here to stay.
- In the world of information technology, changes to the old enterprise scale hypothesis above will also impact technology.
Megalithic IT solutions will increasingly inhibit the requirement for rapid change, rather than support it. Just as these huge projects try to address a legacy of many disparate systems, how they are put together will need to be rethought with increasing flexibility as a design objective. I have seen so much lip service paid to IT flexibility over the years, where every salesman under the sun claims that their platform is flexible, so maybe we should add the adjectives 'rapid' and 'cheap' to the specification for future IT flexibility!
- Finance and governance should expand their scope beyond mere historical reporting.
While SOX, King III, the Combined Code etc all increasingly require reporting on maximising the social impact and on minimalising the environmental impact of our commercial endeavours, the fact of the matter is that it's grudge reporting. Few seem to feel that the real future of business is being driven by society, and by society's views on how harmful a business is to the society and environment it operates in. The more business actively acknowledges and contributes to a purpose of creating wealth in economically responsible ways, the greater the attraction of that brand to society, and the more society will support it, with the profits quickly following. Furthermore, financial reporting is going to need to become much more strategic, much more directional, rather than the simple analysis we see in financial reporting today.
- Marketing will be driven by the customer, not the company.
The evolution of social media in particular has driven a customer and non-customer activism unheard of five-odd years ago. In fact, social media is probably as true a rendition of customer-centricity as we've ever seen, in that unless we are blind, we are increasingly forced to respond to a customer to minimise the risk to our reputations, and therefore to our brands. In other words, customers and even non-customers matter more than they ever did. It is no longer enough to sell and then to offer levels of customer support ranging from zero to the quite exceptional. Now all our customers truly need to be served as if they really matter to us, as if they are our only customers. Their choices are increasingly endless, it is up to you to keep your customer, and to stay in business. In fact, the power of social media to build brand equity is phenomenal, and cost-effective!
The macro-view: The global economy, the socio-economic environment and environmentalism
- I've said it on many occasions - we are in the 'new normal' as far as the economy is concerned, one very comfortable with perpetual, accelerated, grand, global change.
There is no going back to pre-2008 business. In case you haven't noticed, the whole climate of business has changed.
The 'Occupy Wall Street' movement seems to be gathering momentum, bemoaning corporate greed and the gini coefficient. This will apply pressure on corporate governance.
Our water resources are increasingly polluted by industrialists not concerned with accounting for the full costs of their economic activity - and it seems the resource companies couldn't care less, unless they're under duress like BP was last year in the Caribbean disaster. Again corporate governance will come under pressure.
Education is not equipping our youth for managing rapid change and self-sufficiency, and there have been outcries about the exorbitant costs of tertiary education in Europe and North America. Educational institutions will come under increasing media scrutiny.
Banking will change dramatically given the requirements for increased capital adequacy, which will reduce their top line, reduce their balance sheets, and constrain lending to SMEs and increase the cost of debt to companies lucky enough to qualify for it under a much tighter credit regime. Their will be political implications to consider if banks don't find it in their means to maintain and even grow the requirements for lending to SMEs
The rise of China and India as manufacturers, and of Brazil, Russia and Africa as the new resources powerhouses will change the balance of power over time, as has already been identified a decade ago when the BRIC (and subsequently the BRICs) groupings were identified as amongst the economic powerhouses of the future.
Ultimately, irrespective of which business discipline you consider, change is abundant in whichever direction we look, and will increasingly force change the way we do business. Are you ready for it?
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