Global trends reversal: lessons to be learned.
Written September 2009, by Professor Bettina Buechel and Darren Willman.
Published in IMD’s Tomorrow’s Challenges.
September 2009 marks the one year anniversary of the collapse of leading American financial institutions, which triggered the full effects of our current financial crisis. We live in a new business landscape. Our annual IMD global trends survey has confirmed this fundamental shift in business approaches in the external environment in 2009 compared to the 2007 and 2008 surveys, which both tallied consistent results. In fact, business priorities have literally flipped. This raises some interesting questions and provides some important insights and reminders for today’s managers.
The IMD global trends research is part of an ongoing project started under the vision of Professor Thomas Malnight and Tracey Keys – see Tomorrow’s Challenges article “Surf the Storm” .The trends help us and our participants to understand the external business environment and how it impacts strategic decision-making. They are presented in many IMD programs, including Orchestrating Winning Performance (OWP), where we survey participants, asking them to prioritize the impact of the trends on their organizations. Between 2007 and 2009, we  used this crowd-sourcing technique to track the evolution of the importance of these trends to executives within companies.
A snapshot of the 2009 survey results shows a telling picture when compared to the results for 2007 and 2008. Remembering that 2007 and 2008 saw the escalation of the boom period, and 2009 the first survey collection after the global financial crisis and recession, we recognize what we see as a pre- and post- crisis change.
Before looking at the results, we expected that Changing Nature of Capital, a trend focused on finance and financial markets, would fare as the number one trend important to business today. In fact, as seen in figure 1, Changing Nature of Capital was rated the sixth most important trend behind our top four: Changing Consumer Landscape; Market Landscape Shifting; Changing Technology Landscape and Economic Power Shifting (tied); and Growing Stakeholder Demands on Business, a trend about ethics and corporate responsibility. Admittedly, each of these trends did offer some financial crisis and economic downturn content, but the Changing Nature of Capital represented the heart of the issue. Back in late 2008, it was the reason behind the nervous behaviors of consumers, investors, managers and governments. Logically, this should have ranked in the top. But in fact, it barely outranked Changing Industry Landscape, the trend about internal business processes and industry comparison and competition.
The top six most important trends for 2009. In this graph, 68% of respondents for 2009 said Changing Consumer Landscapes was an important trend for their businesses. Five trends ranked above Changing Nature of Capital, the financial crisis trend.
Figure 2 shows something even more surprising. In comparison to 2007-2008, a curious reversal of trend priorities has occurred: the top trends of 2009 were hanging down the bottom half of the trends ranking ladder in 2007 and 2008. They switched places almost exactly with the top pre-crisis trends.
What does this mean for managers? If your company is worrying about the war for talent, talent retention and where to find the best labor costs, then think again. If you are looking at internal knowledge creation, collaborations and networks reconsider. If your strategy is about looking at your business model, your processes and your competition against others in your industry, consider re-evaluating your decision. These focus areas are not on the current mindset of managers.
In 2009, managers are extremely interested in the latest consumer trends, the fragmentation of consumer groups and the channels they can communicate through. They are curious about the macro-level too, such as which countries and sectors are expected to grow and contract in consumer spending, why and until when. To a lesser extent, they are looking into the economic power shifting from West to East, the macroeconomic impacts of the recession, the US economy, and the growing protectionist attitudes of political leaders. The managers of 2009 are also interested in technologies. They want to know which ones are coming and how businesses are interacting with them in order to be prepared for new growth opportunities. Linking back to consumer spending, they particularly want to know about communications technology.
These findings raise some interesting questions that are speculative at this point. Could it be that the global financial crisis really provoked this flip, whereby this dramatic economic event caused managers to switch attention around to areas they had not focused on for a couple years? Was the flip in attention an indication that managers had the wrong priorities on the global trends? Were these the “blind spots” and did we see a bandwagon effect with everyone following the hype?
The results provide us with an important insight and a key reminder. What was important pre-crisis may clearly have lost relevance. A new set of priorities has arrived onto the agenda. Pay attention to your consumers and markets, technology and the changing economic powers. As managers, we need to be constantly engaging with and understanding the external environment. We need to be especially attentive to those paying our bills. Trends and their priorities are shifting faster; it is dangerous to assume stability. To stay ahead, practice critical thinking and open mindedness, and allow an evolving perspective of how your business interacts with the external environment. That way, you will start forecasting these insights, before others will tell you.