2018 Davos Focuses On Creating A Shared Future In A Fractured World

The World Economic Forum (WEF) kicks off January 23rd to 26th in Davos-Klosters, Switzerland.  This year’s theme is about “Creating a Shared Future In A Fractured World”.  From the program notes for this year’s event, WEF sees the following:

PESTEL Approach Powers The MegaTrends In Constellation’s Outlook

Ever three to four years, Constellation publishes its futurist framework based on the PESTEL model of systems thinking.  Constellation approaches 2020 with this systemic point of view.  The full PESTEL report examines the political, economic, societal, environmental, and legislative (PESTEL) macro trends that will affect the business disruption ahead.  This framework serve as the basis for Constellation’s research foundation across seven business themes.  These PESTEL trends can be summarized as:

• Political (P) outlook reflects governments’ quest to quell unrest not resolve structural issues
• Economic (E) trends reflects global optimism
• Societal (S) shifts showcase self awareness and mass personalization
• Technological (T) trends boost digital opportunities
• Environmental (E) factors frame long-term scenarios
• Legislative (L) lethargy drives knee jerk reactions

Success in navigating these trends will require executives to develop a strategy for dominating digital disruption.  Board rooms must be cognizant of such changes in order to make the tough decisions required to thrive in the disruption ahead.  This blog post focuses on the second area Economic Outlook

Societal (S) Shifts Showcase Self-awareness And Mass Personalization

The widening societal shifts that fracture today’s society transcend age. Societal trends and norms reflect a society split across digital proficiency, the union of understanding a technology and use of that technology.  In fact, age is no longer the deciding factor of digital proficiency.  For instance, millennials may not be more tech savvy than individuals of other generations.  However, urbanites may have more of an affinity than rural dwellers.

As technology ever deeply weaves into the fabric of life, these perceptions impact social shifts and drive populist movements fueled by mass personalization and a growing self-awareness movement.  In many cases, emotions have overpowered logic.  Convenience has taken over ethics and norms.  As society seeks simple explanations to complex problems, technology companies can expect to bare the brunt for “all good” and “all evils” of society going forward.

• Social justice efforts move from inequality to unfairness (2018). The debate intensifies around unfairness versus inequality.  From diminishing worker powers, gig economy workers, short-term stock market incentives, cost of higher education, and mergers and acquisitions, some economic and social processes have exacerbated inequality.  Early efforts to combat this inequality reveal deep structural and societal issues. However, inequality due to lack of opportunity remains differentiated from inequality due to unfairness.  The focus on removing elements of unfairness will drive new social movements that towards a more meritocracy based model than a victimization and shaming approach.
  
  Constellation’s POV: Expect social justice movements to look at structural unfairness and identify how to improve access to opportunities without the bias of race, gender, religion, sexual orientation, and other traditional forms of discrimination and move towards logic vs emotion.

• A movement grows for the right to be disconnected (2018). The frenzied, always-on, connected world has spurned a backlash in behaviors.  Information overload, jittery fingers, panic attacks spawn new psychological disorders.  Internet gaming disorder, electronic screen syndrome, internet addiction have all been considered for updates in the Diagnostic and Statistical Manual of Mental Disorders.  As humanity grapples with the connected world, many seek the right to be disconnected without being judged.  A movement is on to retain the right to pay in cash, not be electronically tracked, and connect when only needed, while  not being seen as a terrorist or social misfit for being disconnected.
  
  Constellation’s POV: Privacy will emerge as the new luxury for the super rich as they spread disinformation, remove records, and hide identity as best as they can.  Expect new services to provide these capabilities to the common person for a price and expect pressure for legislation to enable a new level of privacy – disconnection!

• Super star elite cities exacerbate the digital divide. Cities such as Amsterdam, Austin, Bangalore, Beijing, Berlin, Boston, Dubai, Johannesburg, London, Nairobi, New York, Seoul, Shanghai, Singapore, Sydney, Tel Aviv, and Toronto have emerged as both tech hubs and knowledge hubs.  These Tier 1 superstar cities bring together the talent, the money, and the opportunities in a winner-takes all model at the expense of rural areas.  The result – the most innovative industries, impactful exponential technologies, elite talent, and concentration of wealth will disproportionately impact society.
  
  Constellation’s POV: These super star elite cities will create a spiraling stagnation and job loss of other economic regions if society fails to intervene.  In order to address the digital divide, decentralization and federated models will be required to share in the progress.  Expect technologies such as autonomous vehicles and market forces such as high real estate costs to create some opportunities.

• The new suburbs emerge with autonomous vehicles. Lower density, higher quality living gain favor with autonomous vehicles adoption. Autonomous vehicles will shift forecasts for real estate demand and population density to Tier 3 and Tier 4 centers. The ability to afford lower cost real estate, enjoy lower population density, and improve commuting productivity, will create a new mass migration to the lower density, rural living.  These hubs will be easily connected to the super star elite cities as commuting options improve.  Moreover, autonomous delivery will reduce the time for shopping and procurement of goods as well, freeing up time and leading to a higher quality of life.
  
  Constellation’s POV:  Humans like to be near other humans as much as they like to have their own space.  Autonomous vehicles enable the quest for personal space and less density with access to super star elite cities.  This new movement to the suburbs will spawn new societal trends over the next 10 to 15 years such as the anywhere workplace, all day dining, and binge partying.

• The self-quantification movement shifts to health and self-preservation.  Growing self-awareness and new technologies enable a greater level of self-improvement.  In fact, the quest for self-preservation has grown with the ability to measure and quantify the human condition.  Beyond fitness trackers, this movement has led to new fads such as wellness cocktails, fitness vacations (fitcations), and VIP c-suite physicals.  As new genetic techniques such as CRISPR arrive to do live, gene-editing, more human augmentation will occur.
  
  Constellation’s POV: Greater average human life expectancy from 81 years to 150 years of age will spawn a new set of societal trends. Self-quantification will increase self-awareness and test the limits of humanity as humanity augments itself.

• Block chain and cryptocurrencies will change banking forever. The prospects of efficient peer-to-peer payments sans government and financial institution meddling have led to an exploration of new models of value exchange.  From currency to credits to bartering, the ability to exchange value among individuals creates new business models.  For example, in China the ability to handle peer to peer payments with ease for the common person and wide spread internet access has created a paid content model that has yet to emerge in other countries as citizens are cash rich, time poor.  Cryptocurrencies will improve efficiencies in emerging markets where the overhead of financial institutions and over regulation cannot serve the average citizen
  
  Constellation’s POV: Cryptocurrencies and block chain test the usefulness of centralized monetary policy. The first credible country to boldly issue a cryptocurrency will topple the centralized banking, and reserve currency, Ponzi schemes of today’s governments.  Expect individuals to shift their holdings to a model that is more efficient and vastly more private.

• Resentment and backlash emerge toward Silicon Valley for disruptive technologies and business models (since 2014).  Societies now realize the good, the bad and the ugly with how disruptive technologies can affect business models.  Expect a growing backlash against Silicon Valley, the venture capital firms, technocrats and tech geeks who decimate high paying jobs and against businesses using technology as a weapon without considering the human toll.  In addition, the growing gap in wealth and an increase in power allow Silicon Valley to reshape the world to its needs. Similar to the Occupy movements against Wall Street, these movements represent the tip of the iceberg in social unrest and populist action.
  
  Constellation’s POV: The technology companies will expand their tech for good programs in their fight to change public perception.  Most have an ethos to address inequality, yet expect the media to take an aggressive stance in serving a check and balance role as a growing backlash erupts.

• Access trumps ownership in a sharing economy (since 2014).   From car sharing in the late 1990s, to vacation rentals to collaborative financing, the sharing economy has been inching its way into the forefront of the consumer’s mind.  Since, thought leaders such as Rachel Botsman, Lisa Gansky and Anne-Sophie Novel, have been chronicling the forces, underlying trends and players behind the movement.  Key success factors in this new business model require the identification of underutilized assets, optimization of value through time slicing of access, trading on the goodwill and generosity of others and building a reputation economy
  
  Constellation’s POV: A sharing economy model is not for every industry, yet this trend may affect how products and services companies shift their offerings and business models.  Expect brand promise and authenticity to power future sharing economy models.

• Sacrificing privacy for convenience, loyalty, status, and security, in a post-NSA/Snowden world (since 2014).  The proliferation of digital exhaust – the plume of signals and artifacts left behind in our digital world – begs the questions of data ownership and privacy.  As organizations move toward data-driven business models, consumers and enterprises must find a balance between individual privacy rights and the desire to deliver prediction and mass personalization at scale. Moreover, the concepts of trust and transparency become paramount, as authenticity remains the Holy Grail of corporate and personal brands..
  
  Constellation’s POV: There is a battle for Personally Identifiable Information (PII) at the heart of many digital business models; consumer awareness of how their PII fuels business will lead to agitation for transparency and a better deal.  One will expect to see new privacy compacts emerge.

Your POV.

Have you taken account a futurist framework in your 2018 to 2020 planning?  Afraid of a business extinction event like Kodak?  Would you like to join a network of other early adopters?  Are you ready to begin your digital transformation journey?   See you at Davos! Learn how non-digital organizations can disrupt digital businesses in the best-selling Harvard Business Review Press book Disrupting Digital. 

Join like minded folks at the Constellation Executive Network. 

Add your comments to the blog or reach me via email: R (at) ConstellationR (dot) com or R (at) SoftwareInsider (dot) org.

2018 Davos Focuses On Creating A Shared Future In A Fractured World

The World Economic Forum (WEF) kicks off January 23rd to 26th in Davos-Klosters, Switzerland.  This year’s theme is about “Creating a Shared Future In A Fractured World”.  From the program notes for this year’s event, WEF sees the following:

PESTEL Approach Powers The MegaTrends In Constellation’s Outlook

Ever three to four years, Constellation publishes its futurist framework based on the PESTEL model of systems thinking.  Constellation approaches 2020 with this systemic point of view.  The full PESTEL report examines the political, economic, societal, environmental, and legislative (PESTEL) macro trends that will affect the business disruption ahead.  This framework serve as the basis for Constellation’s research foundation across seven business themes.  These PESTEL trends can be summarized as:

• Political (P) outlook reflects governments’ quest to quell unrest not resolve structural issues
• Economic (E) trends reflects global optimism
• Societal (S) shifts showcase the digital divide ahead
• Technological (T) trends boost digital opportunities
• Environmental (E) factors frame long-term scenarios
• Legislative (L) lethargy drives knee jerk reactions

Success in navigating these trends will require executives to develop a strategy for dominating digital disruption.  Board rooms must be cognizant of such changes in order to make the tough decisions required to thrive in the disruption ahead.  This blog post focuses on the second area Economic Outlook

Economic (E) Trends Show Global Optimism

In a world where the cost of capital is effectively zero and financial institutions such as pension funds must return 10 to 12 percentage annual growth, the economic outlook remains challenging.  Almost ten years after the global financial crisis of 2008, Western economies have printed their way out of shock by providing short-term liquidity.  With improving economic conditions in sight, monetary authorities must reverse quantitative easing without creating inflation or economic collapse. Meanwhile, countries with good population dynamics will drive consumer gains while those aging populations must address man power and rejuvenation. Population gains and a new middle class power Malaysia, Indonesia, Nigeria and Turkey (the MINTs) on to the global economic scene.   Amidst this backdrop, moderate inflation appears around the corner as high debt to GDP ratios and stimulus policies accelerate growth.

• Expect US tax plan to drive greater investment in the United States (2018).  Constellation estimates between $353B to $417B of overseas cash to be repatriated in the United States. Long term investment in US infrastructure will also mean a modernization refresh budget cycle.  Meanwhile, rising U.S. interest rates and the pullback from quantitative easing will result in declining foreign investment in BRICs and MINTs without population growth as investors seek to capitalize on higher returns in the U.S.

  Constellation’s POV: The changes in the US tax code and the emphasis on fair trade by the Trump administration will result in the collapse of tax havens and less investment outside of the US.  With overseas revenues no longer taxed by the US government, organizations will expect more headquarters to remain and move to the US as tax conditions have improved.

• Merger and acquisition activity will accelerate (2018).  The influx of cash into the US will lead to an accelerated round of inorganic growth with record mergers in the next 18 to 36 months.  The US can expect the reduction of inversions while foreign based companies will see an increase.   Corporate boards will be on point to enforce efficiency on metrics such as return on cash and inorganic growth rates.  The impact on global employment will result in reduction of jobs as mergers and acquisitions will fuel stock growth but not employment growth.

  Constellation’s POV: The rush to mergers and acquisitions must be paired with regulatory requirements for reinvestment of savings in innovation.  Since 1950, the growing reinvestment of profits into stock buy backs and dividends from 50% to almost 100% at the expense of research and development has led to stagnation.

• Long term growth continued to be short changed by short term gain (2018). Short termism continues as shareholders seek operational efficiencies and higher profits at the expense of innovating new offerings.  This risk averse nature has hampered overall growth as profits have been mostly reinvested in stock buy backs, dividends, and mergers and acquisitions instead of new product development, innovation, and infrastructure.

  Constellation’s POV: Shareholders and board of directors must take a tougher stand on the long term view of an organization.  While operational efficiency and cost optimization must be part of the overall plan, increasing investment levels in new offerings development must be prioritized to create sustainable growth and defend from non-traditional competitors.  Boards must emphasize this balanced approach to the investment portfolio and resist the calls for short term stock buy backs.

• Cryptocurrencies pave the way for block chain trusted commerce (2018).  Despite the hype around bitcoin, the benefits of block chain will create new opportunities in trusted commerce.  Block chain applications include land titles, cold food supply chains, academic transcripts, healthcare records, and more.  By reducing the friction in establishing trust, efficiency will be brought back to trading networks.

  Constellation’s POV:   Leaders must move beyond the hype of bitcoin and understand how block chain will transform commerce.  Expect trading networks to emerge as the back bone of new network economies and business models.

• War for talent and brain power amidst wave of automation and AI (2018).  With the cost of capital effectively at zero, the war for human capital will intensify.  Top talent will command massive premiums while automation, AI and robotics will drive down commoditized talent.  Hard skills and left-brain prowess will be table stakes.  However, organizations will pay premiums for right-brain expertise with a focus on creativity, soft-skills, and and leadership.

  Constellation’s POV: A massive dichotomy in pay for talent will create the new digital divide as humans compete with machines.  With a very limited pool of top talent, organizations must be prepared to pay regardless of location.  Expect manu mergers and acquisitions to be acquihires for top talent.

• Cost of human-based employment drives a push to automation (since 2014).  Legislative and regulatory burdens on employment lead to increasing investment in technology to automate or eliminate the human factor.  A November 2013 poll from The Wall Street Journal’s Real Time Economics blog showed that 86 percent of organizations did not intend to hire in 2014. Hiring will be limited to the highly skilled and extremely talented. Budgets will prioritize human work that can be automated. Investment in automation has led to the growth of kiosks and chat bots for customer service.  A simple walk into any global McDonald’s will show how orders are now kiosk not human based. Expect automation to go up the stack from manual labor to professional positions such as accountants, lawyers and physicians.

  Constellation’s POV:  Augmenting humanity remains a large focus for organizations relying on human employment. In cases where machines lack fine motor skills, physical presence, or still do not understand the algorithms human based employment will prevail

• Population dynamics and open markets play a key role in growth strategies (since 2014).  Brands and organizations must focus on rapidly growing markets.  Traditionally, Brazil, China, Malaysia, Nigeria, India, Indonesia and Turkey hae led the way due to population growth and the rise of a middle class.  According to the International Monetary Fund, the size of emerging market economies surpassed more than half of the world’s GDP in 2013.  These markets represent the future of hyper economic growth and are a leading indicator for enterprise growth.  Investment in Western economies and more developed economies will continue to remain from flat to up 7.8 percent.

  Constellation’s POV: Along with population growth, political stability plays a key role in overall growth strategies.  Growth projections must be balance by political unrest in Brazil, China, and Turkey.

Your POV.

Have you taken account a futurist framework in your 2018 to 2020 planning?  Afraid of a business extinction event like Kodak?  Would you like to join a network of other early adopters?  Are you ready to begin your digital transformation journey?   See you at Davos! Learn how non-digital organizations can disrupt digital businesses in the best-selling Harvard Business Review Press book Disrupting Digital. 

Join like minded folks at the Constellation Executive Network. 

Add your comments to the blog or reach me via email: R (at) ConstellationR (dot) com or R (at) SoftwareInsider (dot) org.