Man cannot predict the future, but he can certainly try. Before and during the Second Gulf War, comment from politicians, journalists, letter-writers and observers of all shapes and sizes was full of 'wills' 'woulds', 'shalls' and 'shoulds' - words used to dress up predictions in the language of fact, invariably to support a statement of previous belief.
Some peaceniks who opposed the war, for example, stated that the attack on Baghdad 'would' result in months, perhaps years, of debilitating and bloody house-to-house fighting. The warniks, on the other hand, said that the regime 'would' collapse like a house of cards as the tanks entered the capital. The latter, as it happened, were proved right. But they had no more actual evidence for their previous arguments than the peaceniks who proved to be wrong.
WISHFUL THINKING
Business management is continually beset by the same difficulty; and business managers are likewise tempted into wishful thinking that flows, not from the facts, but from their preconceptions. You have to take a view of the future: without doing so, even arriving at an annual budget would be difficult, and capital spending plans downright impossible. Yet every manager knows how to slant, or spin, the forward figures so that the budget or the project wins the necessary approval.
Is there no alternative? The Global Future Forum, whose Futurescene conference I've just attended, obviously believes, not only that futurism is vital, but that it has a solid base. For a start, fortune-telling begins at home. There is no substitute for thorough understanding and recognition of the present trends - what is actually happening, as opposed to what may (or may not) occur. A clear example lies in demo-graphic trends. The facts are unassailable. Nothing can change or will ever disprove statements such as these. In today's industrial societies...
• The population is stagnant or shrinking
• It is also ageing and...
• Getting more multi-ethnic and...
• Living in smaller households/families and...
• Participating less in work
It follows that anybody who plans ahead on the basis of rising populations, a youth profile, large families and a growing work force must be making a very costly mistake. Companies are more likely to fall into such error because the above developments are totally unprecedented. Younger people always used to outnumber their elders. By the Millennium, however, a balance had been achieved. By 2050, world-wide, children and adolescents will be outnumbered by their elders.
As Karlheinz Steinmuller of Z_punkt observed at Futurescene, this is not a forecast, but an achieved fact: 'the middle-aged of 2050 are already born'. At the same time, fertility rates in every major country save India and the US have fallen below the 2.1 births per female that are required for a stable population. In Italy, Germany, Russia, and Japan, the decline is quite spectacular, with fertility rates between 1 and 1.5. The consequences are staggering: a births shortfall of just 1% annually adds up to a critical population loss of one third in a 30-year generation.
SHRINKING BOAT
In contrast, the US is heading for a population of 400 million: i.e., the all-dominant, newly aggressive superpower will loom even larger, especially against a declining Europe. The latter's workforce has already started to contract (in Italy and Germany). The Hispanic countries will follow before 2010, bringing the whole EU Fifteen into the same shrinking boat.
By 2011, even the relatively buoyant France and UK will need immigrants to maintain workforce numbers - and both countries have already met serious political opposition to this remedy. Steinmuller sets out some alarming consequences:
• slower economic growth as the labour supply contracts
• loss of human capital as retirees are not replaced
• lower taxation receipts
• further pressure on State budgets as expenditure on the elderly rises
• a rundown on personal savings, also to finance old age
• lower business investment as savings are eroded.
Note, however, that the discussion has moved from Stage One of futurology (fact-finding) to Stage Two (logical consequences). As Steinmuller says, the above 'detrimental effects are no destiny'. Action could in theory be taken - a political campaign to promote immigration, say, or an intensive development of robotics.
Such actions might offset or avert the otherwise inevitable emergence of a European labour supply shortfall that will number a huge and threatening 47 million.
How does this relate to your own futurology? After Stage One (factual analysis) and Stage Two (solid hypotheses), Stage Three is the vital arena: that of 'consequent action'. The futuristic manager looks at the analysis, weighs up the probable results, and decides on action. What is required to forestall the threats? How to seize the opportunities that, never forget, always arise from change?
A static world, if such a thing can be imagined, is one in which established forces are nearly impossible to dislodge. A fast-changing world, such as that of the 21st century, offers few such certainties; flux makes all business vulnerable.
That's very clear from the picture that Liselotte Lyngso of the Copenhagen Institute for Future Studies painted for Futurescene. Her analysis shows how much markets have changed.
Traditional marketing aims to satisfy real needs. They still exist, of course - but today 'completely superfluous' spending is on the rise. In 2003 the 'superfluous' category still ranks well below the 'life necessities', 'basic consumption', 'important' purchases and then 'luxuries'. Spending on the first two sectors, not surprisingly, has levelled off, and growth in important buys is very slow. The latter are being overtaken by luxuries; and superfluous expenditure is also rising.
FROM BRAIN TO HEART
If these trends continue, by 2012, luxury expenditure will be double that on important purchases, while today's negligible spending on the superfluous will be more than double that on luxuries. The projections are, of course, only hypotheses. Are they founded in today's observable and verifiable facts? Lyngso bases them firmly on a strikingly obvious shift in consumer focus from 'brain' to 'heart'.
The brain is eminently practical and commonsensical, interested in physical need, comfort, sensible buys, sensible responses, and rationality: all 'hard' attributes. But today's buyers have become more interested in experience, identity, aesthetics, esteem, impulse and emotions: the 'soft' factors. Their hearts are reshaping markets, so that familiar categories - like food, housing, insurance, transport, finance, and electronics - no longer tell the vital story.
Instead, new categories are arising: consumers seek love and friendship, care, peace of mind, identity, conviction, and adventure. To tap these changes, the marketer has to engage emotionally with choosy customers - with the result that fragmentation is undoubtedly increasing, while brand values are harder to sustain. The impact of brands is no longer singular. Their power in the marketplace - the image that leads the purchasers to buy the branded product and none other - is diminishing: even though brand power as key symbol of reputation is as strong as ever.
Thus, IBM's world-famous branding hasn't prevented its hardware sales from slipping behind, sometimes far behind, a legion of opponents: a far from agile performance. Yet, if you ask informed people which companies they think best equipped to succeed in times that demand corporate agility, IBM will be near the top, along with Microsoft - another IT giant whose overall brand is more powerful than its sales branding. Customers left any choice by the Microsoft quasi-monopoly are very willing to take that option: witness the strong rise of Linux software in the server market.
SPLIT PERSONALITY
The split personality of the power brand is even more painfully evident in the case of McDonald's. The name and the image have enormous global currency. But the products and the outlets that serve them are out of step with the change from brain to heart. Customers want more than the rational attribute of VFM (Value for Money). They want varied, special dining experiences. But the 'consequent actions' that McDonald's might take are hampered by its past success and in-built inability to accept all the strategies that all businesses now need, according to Lyngso:
• New competitive and efficiency measures
• Life-long learning for all employees
• A strong, sustainable corporate identity (or 'story')
• A recognisable link between the story, the staff, the services and the products
• Profound change
One strength of adopting this prescription is that managers will not be gambling on their reading of the future - at least in taking the first four actions. Any well-managed firm should be striving to make these strategies part of the corporate way of life. Without that striving, the company will be outweighed and outwitted by managements that have achieved better mastery of these modern business basics. Not only is successful futurology built on complete understanding of today's basic realities: the successful execution of that future vision depends on today's effectiveness and its continuous development.
But how you manage, when it comes to effectiveness, is inseparable from what you manage. Hence the fifth item on the above list: profound change. This may mean change in management aims (away from the discredited 'shareholder value', for example, and towards more objective performance criteria); or in leadership (devolving it to leaders right down the organisation); or in assessment of managers (towards holistic, longer-term judgment), or technology (where many new marvels await exploitation).
There's also what I call 'constructive destruction', which sets up companies within the company to handle new products, projects and breakthroughs - all of which are less likely to flourish, and more likely to die, if subjected to the same pressures as established operations. The latter, in turn, will suffer if they are not encouraged to seek their own destinies, but left imprisoned in somebody else's structure. This freedom is liable to be associated with regime change - meaning not the replacement of people (which may be needed, though), but a new concept of the corporation.
As in the Second Gulf War, regime change may mean the removal of dictatorship - and possibly of a dictator. In my own contribution to Futurescene I sketched out a conceptual, practical alternative: the Five F Firm, which is organised to have five key attributes. It is...
• FAST: designed and operated to reduce process times and optimise reaction and proaction speeds
• FOCUSED: built round core activities to which all other business units are truly related
• FLEXIBLE: willing and able to change whenever change is called for, and whatever needs changing
• FLAT: non-hierarchic structure, with a broad span of control, and with authority given to expertise
• FRIENDLY: collaborative, trusting and relaxed both inside and outside the organisation
With those Five Fs, management has nothing to fear from a sixth - the Future - because it is well equipped for the best method of prediction: making the future happen the way you want.
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