The race to survive and thrive in the next decade

A leadership agenda for preserving and building

businesses in the 2020s

Introduction

“Winning the present is challenging enough, but the more essential task of leadership is winning the future.” — Bruce Henderson, Founder BCG

The top 10 companies in the world by market cap in 2010 were spread across 5 countries, and of this only 2 were in the technology space. Further, none of them achieved a market capitalization exceeding $400 billion. Today, this ratio has drastically altered as the majority of these firms have vacated space for technology behemoths. The top 10 list is now dominated by only two countries, the US and China. A couple of these firms have also crossed the $1 trillion market cap, albeit for a short time.

The last decade was an era of tremendous technological advancement and continuous disruptions. China has emerged as a leading economic power and is challenging the global economic order and multilateral institutional frameworks developed by western powers.

Looking at this rapid transition, the next decade is fraught with challenges and further disruptions. Building sustenance and winning the next decade will require a fundamental re-thinking of the tools, processes and management ideas/frameworks we’ve relied upon for decision making in the past.

Here are the key trends BCG has identified which are setting the tone for the next stage of transformation and is a window for the c-suite and business leadership to peek into the challenges of the future and the steps you need to take to keep your organization relevant and productive.

Key challenges

The world of business in the next decade will be influenced by the following major trends:

1. AI at scale
2. Emergence of multi-company ‘collaborative eco-systems’
3. Technology redefining the nature of work as well as human-business relationships
4. Rising China challenging the global economic order
5. Major economies seeing rapid aging resulting in global GDP growth deceleration
6. Society will increasingly assess the social impact of businesses and technology
7. Private capital and investor activism will be on the rise
8. Traditional planning and forecasting models, and planning based approaches to harness the future will become irrelevant to manage and provide solutions in an era of multi-dimensional uncertainty

Tip: As a leader, you will need to question your current assumptions and retool your company for the coming decade.

Tip: Whether you’re a digital giant or a traditional business, the need of the hour will be to collaborate and learn from each other.

Tips for digital first enterprises: Opportunities to build for and dominate broad, consumer-oriented digital ecosystems will evaporate and digital power players will need to marry digital technology with physical assets. This will require managers and leaders of digital businesses to manage the messier world of specialized assets and industrial consumers.

Core Insight

Five emerging themes to set the agenda and win in this decade of change and constant evolution

Though many aspects of the agenda will differ by industry, these 5 trends will be the bedrock upon which disruption and transformation will unfold.

1. Winners will pursue economies of learning instead of economies of scale
2. Visionary leaders will build Organization 2.0: Humans + Algorithms
3. Creating a sense of urgency for organizational change
4. Embracing diversity to speed up innovation and become resilient
5. Empathize with social and societal challenges, and build strategies to manage their expectations

Economies of learning

The last wave of technological innovation powered by internet and mobility ushered the era of information age and disrupted technology intensive and consumer-facing industries like electronics, telecom, media and retail. However, the emerging wave like sensors, IOT and artificial intelligence are turning all businesses into ‘information businesses’.

The exponential rise in data, better tools to mine insights and an evolving business environment means that companies are now going to compete on the ‘rate of learning’.

In the new learning, company ‘scale’ will have a whole different meaning. Erstwhile leaders who banked on the idea of ‘economies of scale’ will make way for ‘economies of learning’ based on fulfilling customer needs by leveraging data mining tools and technology.

The standard definition of ‘competition’ which essentially pops in our head gives an idea of a handful of companies producing or delivering a common product or service and competing within a well-defined boundary. The new learning economy will replace this definition with one where competition and collaboration will work in conjunction within and between ecosystems.

Finally, you will need to build resilience as a leader in all acts and interactions with your firm. Rapid technological shift, political uncertainty, shifting global geopolitical map, increased social scrutiny on businesses and polarization of society point to an era of prolonged uncertainty which will continue to shrink corporate life cycles.

Tip: Think and build a sustainable moat which not only fends of competition today but also helps you stay relevant for the challenges of tomorrow and weather unanticipated shocks.

Tip: Reinvent the organizational model to survive and win the next decade.

Building Organization 2.0: Human + Algorithms

New technologies and data ecosystems have transformed out learning outcomes. History has shown that applying new technologies to isolated structures and processes only yield incremental gains. So, experimentation and co-evolution should replace traditional top-down management decision making. Management should focus on replacing hardwired structures and procedures with flexible and dynamic systems.

Tip: Build a self-tuning organization that learns and adapts to its environment.

Tip: A new model of management based on biological principles such as experimentation and co-evolution should replace traditional bureaucratic top-down decision-making structures.

Tip: Trust the algorithms at crunching large data ecosystems, provide real-time insights and act on them autonomously. Use humans to validate the algorithm and use their imagination to further improve and evolve the human+machine driven organization ecosystems of the future.

Creating a sense of urgency to embrace organization change

Reinventing organizational structures is one of the toughest things to do. A preemptive approach to change is often resisted within legacy entities either because of risk aversion or complacency stemming from today’s concentrated industries and elevated profitability levels. In an era where powerful multi-dimensional forces are revolutionizing how organizations function, building repeatable transformation capabilities will be more important than ever.

Tip: Research shows that successful implementation of a change program is primarily a function of ‘how early it is implemented’.

Tip: Evidence also shows that most large scale change efforts fail. Leaders need to adopt evidence-based transformation rather than relying on rules of thumb.

Tip: Embed and institutionalize ongoing change imperatives as a permanent replacement to episodic change programs and inflexible programs like Gantt charts or Project Management Offices.

Embrace diversity for innovation and resilience

Multiple pieces of research point to the power of inclusiveness and diversity as the cornerstone to unlocking long term and sustainable growth and change initiatives. Embracing all sexes, race, religion and ethnicity drive a company’s ability to generate new ideas. The rapid acceleration of global transformation needs an organization to build a war chest of ideas and innovation, and improving organizational diversity is the shortest, fastest and the most efficient method to do it.

However, diversity along isn’t enough. Organizations will also require giving up hierarchies and bureaucratic frameworks to make way for flat structures with free flow of ideas and innovation.

Did you know? BCG’s recent study of over 17,000 companies globally shows that having diversity boosts innovation by enlarging a company’s ideas and options war chest.

Tip: Some of the most successful tech startups have created an island of entrepreneurship within the firm. Companies like Google, Intuit and Facebook are all testaments of what a flat organization with a diverse workforce can achieve provided the top management is ready to embrace change and trust the talent and experiences of their human resources to provide the next level of growth and evolution.

Empathize with social and societal expectations

Impact of businesses on climate change, fear within humans of automation taking away their jobs, and the growth of some leading companies becoming global behemoths is creating fear and panic in the hearts of many societies around the world. As a result, the role of businesses in society is gaining increasing scrutiny.

Businesses in this era of change need to address these social challenges and adopt new measurable metrics to show how they impact society positively.

Tip: As a leader adopt corporate statesmanship, and proactively track and bridge the gap between social and economic value.

Conclusion

The world of tomorrow is based on data, progressive thinking and co-existence, and how businesses evolve within their environment and ecosystem. Winning the next decade will require proactive leadership, preemptive planning, and an iterative learning & application model to survive and thrive in the era of multidimensional change.

Is your organization and leadership gearing up for the change?

Full Report: http://bit.ly/BCGleadershipagenda