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BOOK REVIEW: Reacting to a brave new world

No Ordinary Disruption: The Four Global Forces Breaking All the Trends, by Richard Dobbs, James Manyika and Jonathan Woetzel

BUSINESS leadership has never been easy, but it becomes especially difficult when more of what you thought you knew, turns out to be wrong or somewhat off the mark. I am not referring here to data, but rather the shifts in direction that some impactful changes are making.

American consumers have always led the world in holiday consumption; now China’s consumers do. The world’s largest oil producer is no longer Saudi Arabia or Russia, but the United States. WhatsApp, bought for $19bn, is worth more than the Standard Bank Group, and with only 55 employees. The current leader in space exploration is India, which launched a spacecraft into orbit around Mars for less than the cost of a science-fiction movie - $78m.

Author Richard Dobbs of global consulting firm McKinsey has identified four “great disruptive forces” which are both easy to recognise and to accept. What is more difficult is grasping the full impact of these forces and their second- or third-order knock-on effects.

The first of these disruptive forces is the “Age of Urbanisation” we have entered.

We will see nearly half of global gross domestic product growth coming from 440 cities in emerging markets by 2025. Mumbai, Dubai, and Shanghai will be among these, but so will Hsinchu in northern Taiwan with advanced electronics and high-tech, and Brazil’s Santa Catarina state with electronics and vehicle manufacturing. The GDP of Tianjin was about the size of Stockholm, but by 2025 its GDP should be the same as the whole of Sweden!

Huge consumption growth will be coming from cities that are hard to locate on a map today, such as Kumasi in Ghana. In fast-growing cities like these people will see their first movie, have their first taste of fast food, their first experience of the internet, their first full medical check-up, and their first bank account. In other words, their first primarily urban experiences. Cities have always attracted the talented and educated, and these 440 cities will do so too.

The downside to this movement of people is the problem of underdeveloped business and physical infrastructure, and the huge costs to companies these limitations impose.

In Mercer’s Annual Cost of Living survey the most expensive city for business was not San Francisco or Tokyo, but Luanda in Angola. Here the shortage of quality office space and quality housing and poor public services and poor supply chains, together with underdeveloped infrastructure, impose huge costs to businesses.

The second disruptive force is the “acceleration in the scope, scale, and economic impact of technology”.

The difference today is the sheer ubiquity of technology in our lives, and the speed of change.

“There have been slightly more than 32 doublings of performance since the first programmable computers were invented during World War II,” according to the futurist and computer scientist, Raymond Kurzweil. Now try to imagine the next 32 “doublings”.

Twenty years ago, 3% of the world’s population had a mobile phone, and 1% used the internet. “Today, two-thirds of the world’s population has access to a mobile phone and one-third of all humans are able to communicate on the Internet,” Dobbs reports.

With technology we are seeing the very building blocks of things change. New materials are being created that have attributes of enormous strength and elasticity, as well as capabilities such as self-healing and self-cleaning.

Technology is now able to create economic progress for billions faster than would possible without the mobile internet.
The third disruptive force is that the world’s population is getting older.

To replace each generation requires 2.1 children per woman. About 60% of the world’s population lives in countries with fertility rates below the replacement rate. Thailand’s fertility rate, for example, has fallen from 5 in the 1970s to 1.4 today. (The consequence of a greying world is relevant to South Africa despite its relatively young population, because so many of our trading partners will be greying.)

Employers will have to see their older employees not as legacy costs, but as assets and resources. In Japan, companies like Toyota have started re-employment programmes that enable retiring workers to apply for positions in Toyota or its affiliates. The company rehires about half of its retiring employees to retain their skills and experience. In return, the retirees have an income and social interaction on a part-time basis.

The focus of consumer companies today on the 25-to-54 demographic will have to shift as older consumers, still active and consuming, make up a larger portion of the market. Fujitsu, for example, produced a prototype walking stick with a built-in navigation system that helps people direct the user, and also allows them to be tracked.

The fourth disruptive force is the connectedness of the world through the movement of capital, people, and information.
For the past decades, oil was the main commodity moving around the world. Today it is a different commodity – money, which does not require a tanker or a container ship to move smoothly about the globe.

Oil is shipped from Congo to China, soybeans from Brazil are shipped to Malaysia, Indian pharmaceuticals are shipped to Algeria. China’s bilateral trade with Africa has grown from about $10bn in 2000 to nearly $ 200bn in 2012.

Twenty years ago, the prototypical traded object may have been a $3 T-shirt. Now it could be a 30 cent pill, a $3 e-book, or a $300 iPhone.

The number of people living outside their birth countries has grown from 75 million in 1960 to 232 million in 2013. The labour market is becoming truly global at all income and skills levels for the first time.

These four disruptive forces will affect every market and every sector of the world economy, directly or indirectly. “Our world will change radically from the one in which many of us grew up, prospered, and formed the intuitions that are so vital to our decision-making.”

These discontinuities will not only bring challenges to our ways of living and thinking, they have also lifted 1 billion people out of extreme poverty between 1990 and 2010. In the next two decades these discontinuities will help propel even more into the $10-a-day consuming class.

“The new world will be richer, more urbanized, more skilled, and healthier than the one it replaces,” Dodds predicts. This, however, will require that leaders act appropriately to what is actually happening.

This is a stimulating book, filled not only with insights, but with plenty of suggestions for reacting. Read it slowly.

Readability:    Light --+-- Serious
Insights:        High -+--- Low
Practical:        High --+--- Low

* Ian Mann of Gateways consults internationally on leadership and strategy and is the author of Strategy that Works. Views expressed are his own.

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