Posted by Adam Gordon on May 24, 2011 in 2025, all, leadership, strategic foresight
The World Bank on May 18 released a report “Multipolarity: The New Global Economy” with outlook for the geo-financial system to 2025.
“Multipolarity” catches the World Bank up with what has been clear for a long time: an actually, genuinely different global economic order is unfolding as growth moves to emerging economies, with countries such as China, India, South Korea, Russia, and Brazil accounting for the majority of economic growth in the next decade and beyond. And, on the back of this, the dollar will lose its pre-eminence as global reserve currency.
The report is nevertheless important at a meta-level. When the World Bank puts out a perspective, that means the perspective becomes more-or-less institutionalized wisdom. Global financial revolution, effectively, is no longer a theory out there. It is the “official future,” and financial and political institutions are more likely to act in line with it. Therein a reinforcing feedback loop.
Renminbi
A couple of things stand out. Report author Mansoor Dailami says the euro and renminbi will establish themselves on an equal footing to the dollar. This seems plausible, but one is left wondering – given the pace of innovation in finance, and in computing, and in communications and networking, and the 14 years to 2025 – will we still be looking at a system where national or regional currencies are “dominant?” Could the world financial system not evolve differently, for example away from a global reserve requirement altogether, or towards more multi-currency baskets? (The report does entertain the adoption of the IMF’s Special Drawing Rights system.)
The foresight principle: In looking at the future it’s tempting to see new agents dominating current structures, but often the structures themselves change.
The other point that pops out is an expectation that cross-border M&A deals originating in emerging markets will be an increasing feature of the new corporate landscape.
This is as solid a prediction as one will find. But it surely will not be one way. While cash-flush emerging-market companies will look to diversify into European and American companies, or take them over entirely – particularly ones that have Asian brand recognition and prestige (remember the Japanese corporate shopping trips of 1980s) – developed-world companies will be returning the favor, buying their way into emerging market companies to get a piece of their growth.
And we’re not talking passive investment here. The action will be immersive developed-meets-emerging market M&A (and surely also corporate raiding, hostile takeovers, etc.)
M&A is “speed” for corporate leaders. A big high, often followed by acrash. But if history is any guide, the lure of buying someone else’s growth, not to mention instantly enhancing a company’s industry size-power footprint, is more intoxicating than the sirens of Odysseus, so one can confidently predict it going forward.
Which is to say the spreadsheet-anticipated wins in economies of scale, scope, market synergies, or vertical integration of M&A will be up against the problems of marrying company cultures, systems, products, brand values and business models — a vexing problem that routinely defeats even the best business leaders.
But add to this, here, very significant cross-cultural management and staff issues, problems of distance, and regulatory systems that are often purposed to different ends, and you have a leadership challenge indeed for firms that venture down this path. But venture they must, because companies in low-growth markets can only buy back their shares for so long (aka “we’ve got no ideas about what to do with investor money, so we’re giving it back to you”) — witness GE’s $12bn share buy-back announcement this week.
Posted by Adam Gordon on Apr 8, 2011 in 2025, all, economy & finance, leadership, policy, politics of the future
The new axis in world diplomacy and global leadership flexes its muscles next week on Hainan Island – the southernmost tip of China – with the BRICS summit on April 14 in Sanya, and the Boao Forum the following day.
BRICS (Brazil, Russia, India, China, and South Africa) is already something of a “G5” of non-Western nations. Next week its leaders (China’s Hu Jintao, Brazil’s Dilma Rousseff, Russia’s Dmitry Medvedev, India’s Manmohan Singh, and South Africa’s Jacob Zuma) will set themselves to discuss their joint concerns in international affairs, economics, development, trade, security, etc.
More than anything, the event signals growing intention to coordinate views and act in closer alignment, and press towards future empowerment and responsibility of non-Western world leaders. Political clout has always gone with economic clout, and in this respect the future can be depended on to “rhyme” with the past.
BRICS countries already account for 40% of global population and 20% of global GDP – and they are the nations expected to grow most rapidly in GDP terms in the next decade and beyond, and to provide primary succor to neighbors in their regions.
Hainan 2011 is the third summit of the BRIC countries. The acronym BRIC was coined by Goldman Sachs (NYSE: GS) in 2001 in a chicken-and-egg prophesy: causing Russia, China, Brazil and India to see their interests as potentially aligned, and politically worth aligning. South Africa was accepted into the group in February.
Without stopping for breath, the diplomatic caravan moves 125 miles overnight up the coast of Hainan Island to Boao, where President Hu will give the keynote address the next day at the annual Boao Forum for Asia (BFA).
Boao is an undisguised knock-off of the World Economic Forum in Davos (with skiing replaced by snorkeling perhaps): a high-level gathering for policy and business influencers, with a similar nudge-and-influence mandate, here with an Asian focus. In attendence, in addition the the BRICS representatives, will be by Korea’s Kim Hwang-Sik, Spain’s Jose Luis Rodriguez Zapatero, Ukrainian’s Mikola Azarov, and New Zealand’s Bill English.
Posted by Adam Gordon on Nov 11, 2010 in all, managing uncertainty, strategic foresight
I was recently in South Africa where I had a hand in setting up an executive foresight-innovation executive training program to be run in association with the Stanford Center for Foresight and Innovation.
While I was there I couldn’t help noticing the business print and radio waves being dominated by the potential entrance of Wal-Mart, with all the jitters of local businesses considering the knock-ons and side-effects of the “über cost competitor” turning up at the end of the street.
If it goes ahead, Wal-Mart will enter via acquisition of local retailer Massmart which is, as the name suggests, a copy-cat company anyway, so it would seem all there is to talk about is price. As things stand, Wal-Mart is in its fifth week of due diligence on Massmart, currently visiting all 288 stores under acquisition, according to a recent WSJ report.
Now Wal-Mart is not busting a gut for the SA market, population 45 million, of course. The whole project is about using the South African operation as gateway into Africa as a whole. It is bet on the 5-to-10-year-and-beyond future of sub-Saharan Africa.
Massmart Chief Executive Grant Pattison is quoted as saying “you have to take the long view on Africa,” and this is exactly what Wal-Mart is doing. Enacting a long forward play for the newly strengthening African retail market.
Other than inventing the scale-based supply-chain-squeeze model of retail, which must go down as one of the great business innovations of all time, Wal-Mart is hardly known as a foresight-based player. As forward looking as the Massmart acquisition is, Wal-Mart has in fact been well beaten to the African punch by the Chinese who have been investing across the continent over the past decade (although the Chinese investment has been predominantly in infrastructure and resources, while Wal-Mart’s would be in anticipation of lower-middle class consumer enrichment on the back of that.)
The glass half full
The Chinese invasion is by far the biggest thing to happen in African economies since European colonialism, not only due to widespread infrastructural investment, and not only because it comes without “Washington Consensus” strings attached, but, even more fundamentally, because it is driving a zeitgest shift in business confidence. Deep problems remain, but suddenly the glass that was half empty appears half full, particularly to occidentals.
One expression of the new half-full perspective is McKinsey’s breathless report (June 2010) on Africa’s economic emergence, entitled “Lions on the Move,” which starts: “Africa’s collective economy grew very little during the last two decades of the 20th century. But sometime in the late 1990s, the continent began to stir. GDP growth picked up and bounded ahead…”
Asian Tigers. African Lions. Geddit? But when both Wal-Mart and McKinsey are setting their watches to the near-term future African economic growth story, you can bet other companies are set to pounce too.
Posted by Adam Gordon on Oct 25, 2010 in all, foresight tools & methods, policy, scenario planning, social change, strategic foresight, technology change
This week the Association of Research Libraries in Washington D.C. released The ARL 2030 Scenarios: A User’s Guide for Research Libraries.
Source: http://www.arl.org/rtl/plan/scenarios/
Now it would seem that a 20-year-future-gazing process for libraries is a world away from the concerns of managers making today’s critical decisions, but it is not, for two reasons:
First the study deals with the critical trends and forces changing the operating environment in just about every industry today – digitization, sustainability, social media, China, etc. The scenarios are instructive because they lay out forces changing the operating environment not only for libraries but pretty much every significant organization or company going forward.
Second, while four different “futures” are described and investigated, the organizational subject (libraries) are not explicitly written into them. As the user guide comments: “Scenarios created for use in scenario planning intentionally leave the organizations that are planning out of the picture. This allows the organization to better focus on the main forces that are shaping the environment around it. Thus, each scenario has a blank where the library can fill itself in through the planning process…
“This approach means that other kinds of organizations might also find blanks that they can explore through a scenario planning process. ARL can consider its future as an association using these scenarios, but other kinds of libraries, other actors in the research enterprise, or other participants in the scholarly communication system could find value in using this scenario set and the user’s guide.”
In fact, all kinds of organizations and businesses can use the study in this way: inserting themselves into the stories and asking themselves: do “we” still work? That is, is our value proposition, our business model, our resource or alliance base, still valid? Do our success recipes still apply? If not, what are the necessary new ways to be valuable and to engage with consumers and stakeholders? What would we need to do—how would we need to innovate to transform our organization such that it creates value for future users—given the overwhelmingly powerful external dynamics redefining our operating environment?
The organization deferred
Although the ARL doesn’t say it, it’s actually quite remarkable in the scenario world that the subject organization is NOT written into the story. Often scenarios are hamstrung by exactly this problem: Conflating what the world will do and what the firm can do in response, therein becoming no more than wishful-thinking stories. It is much better for the purposes of real-world decision-making when these two questions are dealt with sequentially, as they are here, and organizations can then think through the options and priorities they can shape within the larger future world they can’t shape.
Bearing in mind that scenarios are not predictions, and that the whole point is that the most likely future operating environment will combine elements from all, these are the four independent strands that the AFL comes up with:
In Research Entrepreneurs, individual scholars are central and their orientation matters more than institutional or disciplinary affiliations. Research institutions provide support services to these agents rather than driving the research agenda. Scenario 2, Reuse and Recycle, describes disinvestment in the research enterprise. With fewer resources, the crowd-cloud approach is widespread, producing information that is “ubiquitous but low value.” In Disciplines in Charge, “computational approaches to data analysis” force scholars “to align themselves around data stores and computation capacity that addresses large-scale research questions within their research field.” Global Followers describes a world similar to today, but where Asia is prominent in providing money and support for research, and Eastern “cultural norms” govern the process.
ARL 2030 Scenarios: A User’s Guide for Research Libraries is available for free athttp://www.arl.org/bm~doc/arl-2030-scenarios-users-guide.pdf. More information on the ARL project, “Envisioning Research Library Futures: A Scenario Thinking Project” can be found athttp://www.arl.org/rtl/plan/scenarios/.
Posted by Adam Gordon on Oct 19, 2009 in 2015, all, economy & finance, failed predictions, foresight tools & methods, managing uncertainty, scenario planning, strategic foresight
One of the benefits of scenario-based future thinking is the ‘permission’ to think through alternative future outcomes without necessarily predicting them. ‘Predictors’ focus, by contrast, on isolating the highest probability future in order not to have to think through or plan for less likely outcomes.
Predictions of the dollar’s demise are as old as the greenback itself of course, but over recent weeks the specter of the dollar heading way way below its trading range — a dollar crunch — has entered the zone of the credible, or, in scenario terms, the ‘cone of plausible uncertainty.’ That means decision-makers with lots at stake are taking it seriously.
Like the British pound, the dollar has been under a cloud due to perceptions of economic fallout from the credit crunch and global recession, but particular questions about the US currency have recently surfaced, driven by reports [Robert Fisk's 'The Demise of the Dollar' story in The Independent (Oct 6)] that “Gulf Arabs are planning – along with China, Russia, Japan and France – to end dollar dealings for oil, moving instead to a basket of currencies including the Japanese yen and Chinese yuan, the euro, gold and a new, unified currency planned for nations in the Gulf Co-operation Council” (Saudi Arabia, Abu Dhabi, Kuwait and Qatar).
The subtext is far from merely financial. Practically, it would mean that on any day, the real cost of oil to US consumers and businesses would go up or down depending on the strength of the currency. This is something America is not used to. But, more deeeply, dropping dollar-denomination of oil is a direct shot across the bows of Washington’s say over oil affairs, and the hegemony of the dollar as the dominant global reserve currency.
De-dollarizing oil would not in itself push the US currency below its 25-year range. But it is portentous of the clear trend to a genuinely multi-power world, for better or worse, in which the dollar will get no favors. That will push the dollar down, at least while the news and fallout make their way through the financial and real economic systems.
Rumors of de-dollarization have been hotly denied, as further reported here, but as the Independent points out, denials are to be expected, and are always issued in these situations. They mean nothing. Even cub reporters know that.
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Scenario thinking
What’s particularly interesting to me is that a ‘scenario’ of dollar demise has become not only plausible in the mainstream view of the future, but scenario thinking is being used as a way to consider the nature of this outcome, and how best to respond without predicting the outcome either way. As recently as directly pre-credit crunch, the media question would have been: ‘what is the best prediction for the dollar (or the housing market, or credit default swaps?) and that, rather then scoping out the implications of the lesser-likelihood, would have dominated the discussion.
So, what struck me forcefully in the Business Week video interview above, where BW Chief Economist Mike Mandel interviews the news magazine’s Economics Editor Peter Coy (see Coy’s underlying story here), is how the less-likely, non-predicted, but very significant outcome is actively addressed:
Says Coy: “It’s so hard to know what the dollar is going to do. We don’t argue that we know… what we do is we say, ‘it could happen’ and let’s take that possibility seriously, in the same way we should have taken the possibility of falling housing prices seriously…”
This is not formal scenario-building of course. But it is, fundamentally an adoption of the framework, saying in the classic ‘scenarios’ way: “we can’t predict if it will happen or it won’t, but if it does it will have significant impact. So let’s just ask: ‘what if ‘ it does and explore the outcomes and our responses. What will the word look like? What would be the implications, the knock-ons and spinoffs? If it comes to pass, what would be wish we had done today?”
Perhaps failing to predict the credit crunch has dented predictors’ halos enough to cause a mini-zeitgeist-shift towards the only real way to cope with important uncertainty: exploring all outcomes that pass the plausibility and significance test, whether or not we actually believe they will happen.
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