Troy Media – by Rohit Talwar
In this latest set of predictions we explore key developments that indicate either the start or reinforcement of major changes taking place at the individual, societal and national level.
1) International institutions – new kids on the block
International institutions will come under intense pressure to reform and others will rise in prominence to reflect changes in the global distribution of economic power and influence. New alignments are emerging – for example the ASEAN grouping and the Shanghai Co-operation Organization are already becoming more visible and vocal in the representation of their members’ interests. Some of the post-World War II institutions and practices will come under increasing pressure to reflect the interests of the developing world. An Asian presidency of the IMF and continuing debates surrounding a permanent Indian seat on the UN Security Council could accelerate the process of change.
2) China’s modern military might
China’s growing military strength will become an increasing cause of international concern, for the U.S. in particular. Over the next 18 months we can expect to see an acceleration in the pace of reform of the Chinese military – turning it into a modern fighting force. Key advancements will include symbolic hardware launches, such as the J-20 stealth fighter, and a modernization of the training and equipment of the rank and file soldiers.
3) The return of gunboat diplomacy?
We expect tensions to rise in the South China seas as a result of the anticipated launch of China’s first aircraft carrier. This will seal China’s position as the dominant regional power, and cause alarm to its oceanic neighbours such as Japan and the Philippines. Over time, we expect China to become increasingly assertive in its use of naval assets to apply additional pressure in regional diplomacy.
4) Capitalism in crisis – time for reform?
Debate will grow over whether capitalism in its current form may have run its course and what its replacement(s) should look like. Further expected deterioration in the stability of the global economic system and a worsening sovereign debt crisis will lead increasing numbers of voters to conclude that current models of governance and government are the problem, not the solution.
With many countries’ fiscal situations becoming seemingly untenable, the debate over tax rises vs. smaller government will become louder. Increasingly serious attention will be paid to the new modes and models of economic and political governance required to steer society through the decades ahead. Issues such as the purpose of an economy, inequality, human rights and needs will all feed into the debate.
5) The age of the grumpies
As government austerity measures set in across the more heavily indebted nations, a marked downward psychological shift will become increasingly apparent. The age of anxiety will evolve into a new grumpier era. The negative attitude shift will be fuelled by rising unemployment, withdrawal of social protections, reduction in public services and declining living standards amongst the previously comfortable middle classes. The impact will be felt in areas such as declining public trust, workplace behaviours and family dynamics.
6) China effectively abandons the one-child policy
We expect China to quietly set aside the enforcement of its one-child policy. Rapid economic growth, cultural norms and the effects of the one-child policy have created a significant age and gender imbalance which could hamper China’s progress as a global leader. Without major public pronouncements, China will progressively ease restrictions on family size as it seeks to manage an increase in population growth. A concerted effort will be made to foster a rise in female births.
7) A clear case for transparency?
Consumers around the world will demand increasing simplicity and clarity in everything from pricing structures to ‘Corporate Social Responsibility’ (CSR). Pressure will mount for governments to step in and enforce simpler and more easily comparable pricing structures for utility providers, transport operators and mobile phone networks. The demand for clarity will extend to businesses’ social and sustainability causes.
Customers will demand transparency on what’s actually being spent and the impact of these CSR initiatives. Those guilty of false promises, green-washing or other cynical marketing campaigns will increasingly be punished at the checkout.
Is University worth it?
Sharp rises in university fees across the UK and proposed rises in other countries will result in an intense scrutiny over what return students are getting on their investment. Research from accountancy and finance recruiter Marks Sattin suggests that if faced with today’s spiralling university fees just 40 per cent of current accountancy and finance professionals would have gone to university.
Increasing focus will be placed on the ‘value added’ by different subjects in different university faculties. Alternative funding models for higher education will become more popular – such as the sale of entire courses via discount aggregators such as Groupon and company supported courses such as that offered by Durham University and KPMG.
9) Experiencing the news – the rise of immersive journalism
Immersive journalism will become more popular – employing gaming platforms and virtual environments to convey news and non-fiction stories to a generation that want a more experiential approach to consuming the news. Typically, these stories are set in online virtual worlds such as Second Life, making use of avatars.
Immersive journalism will become increasingly mainstream, accompanied by the rise of content curators advising on where and how best to consume the news based on your personal learning and engagement preferences.
10) The race abroad
Developing economies will receive an increasing share of all foreign direct investment (FDI) globally. A 2010 UNCTAD survey revealed that by 2012 only one of the top six FDI recipients worldwide, and only three of the top 10, will be a G7 economy. China, India and Brazil are forecast to be the largest recipients, with the U.S. 4th and Russia 5th.
With emerging economy infrastructure, retailing and many other market opportunities generally considered more attractive, Western multinationals will funnel their investments to where they think the growth will be. We expect this trend to deepen further, short of a hard landing for the Chinese economy.
11) Chinese consumption accelerates
While the developing world hesitates, recycles last years’ outfits and cuts up the credit cards, the growing Chinese middle class will exercise their growing spending power. Research suggests that China will have enough purchasing power to consume 14 per cent of global goods by 2015, up from 5 per cent in 2010. As the global economy and export markets slow, the Chinese government will put greater emphasis on encouraging domestic consumption to ensure growth continues.
12) Bountiful Baltics
The Baltic states of Estonia, Latvia and Lithuania will receive increasing attention as models of economic management and as centres for low-cost accelerated product development for European markets. Admittance to the EU and Eurozone over the past decade has highlighted the growth of the Baltic States in the post-soviet era. Although the recent economic crisis hit the Baltic States particularly hard, the region responded rapidly and is back on track for growth again.
The jewel in the crown is Estonia – ranked 33rd in the world on competitiveness, 30th on business environment and 23rd on innovation. The country has kept its budget deficit below the EU limit of 3 per cent of GDP every year since joining the bloc in 2004.
13) Economists dethroned?
The disquiet with most economists’ failure to predict financial crises and the wide range of divergent views about how best to reignite the global economy will lead to growing calls for other sciences to contribute to the field. For example, mathematicians, biological scientists and physicists all study complex systems and algorithms whose behaviour may offer better insights into the behaviour of markets and economies than traditional economic tools. These approaches are gaining serious interest in the financial markets. We expect further new paradigms to be suggested and explored in the months ahead.
14) Safe as houses?
The focus for professional property investors in particular will shift towards key growth cities in emerging markets where property prices will continue to rise. Despite an oversupplied U.S. housing market and forecast price drops in some Chinese cities, real estate will still be a prime asset class for domestic and institutional investors alike. Leading and emerging global cities will still hold investment appeal for the rich looking to diversify their portfolios in the face of indecisive policy making, weak currencies and turbulent commodity prices.
15) Business strategy – new tools for turbulence
Businesses will increasingly begin to accept that turbulence is the new norm and start to adapt their strategies accordingly – national and local governments will take longer to adjust. The warning signs of continued turbulence are increasing – economist Nouriel Roubini suggest that a slowdown in China, Japan’s tsunami clean up costs, Europe’s debt crisis, and the burgeoning U.S. deficit have a combined one third chance of damaging the global economy. The search for cost reduction, partnerships, risk sharing innovation and new business models will dominate the new strategic agenda.
16) The new global titans
The business world will pay increasing attention to the threats and opportunities presented by ambitious and rapidly globalizing firms from the emerging economies. For example, Boston Consulting Group (BCG) has identified 100 companies from rapidly developing economies that are overtaking more established multinationals in global industry rankings. BCG projects that if these new titans keep delivering average annual revenue and profit growth of 18 per cent, they could collectively generate $8 trillion in revenues by 2020 – an amount roughly equivalent to what the S&P 500 companies generate today.
17) Aviation meets inspiration
2012 will see the airline industry globally pursue a range of new business models and strategies to bolster revenues and profits in the face of global economic uncertainty. IATA has downgraded its global airline profits forecast for 2011 to $4 billion from $8.9 billion in 2010. The industry is faced with continued vulnerability to the global economy, consumer uncertainty and oil price volatility and must find ways to insulate profits without damaging customer loyalty.
In response, the sector will invest heavily in developing new business models and ancillary revenue streams. Tactics will range from auction pricing of flight tickets to broadband-enabled in-flight sales of a wide range of goods and services.
18) Reverse innovation
We anticipate that more and more multinationals will incorporate and roll out innovations and best practices sourced from the emerging economies. Ideas such as the $10 insurance policy, $50 laptop and $2,000 car developed for relatively low income emerging markets will become increasingly relevant in more developed economies.
19) An open embrace of innovation?
In a hesitant market, firms will increasingly embrace more open approaches to accelerate innovation and drive down costs. Opportunities will arise for those who can help customers cut costs, speed process times, reduce resource requirements and create new opportunities.
To achieve low cost, high speed innovation, firms will turn to more open ‘payment by results’ approaches to generating new ideas. Concepts such an innovation contests, ideas markets, crowdsourcing, open and social supply chains, open innovation, will reinforce the trend of open networks becoming central to the business model.
20) Morphing models
We anticipate a proliferation of new structures and models for business – particularly at the start-up level. For example, with high and rising unemployment in many towns and cities, new community-based funding models may emerge as a hybrid of traditional mutual models. In return for the community investing personal savings, these new businesses will be expected to create local employment and reinvest profits to fund further start-ups.
Next up: Big Science