Trends and Forces Shaping the Business Environment of the Future
Some of the firmest predictions about the 21st century can sound like empty platitudes. The pace of change will accelerate. Technology will continue to drive even faster changes. Small- to medium-sized businesses will confront economic and political changes that will make survival a struggle. The century will start on a sour note as a result of Y2K problems.
Within these seeming platitudes, however, are a number of important nuggets--things you should take seriously. They can contain great opportunities for those who are prepared, or great pain for those who are not.
For example, take the last item in the list--the "millennium bug." The dawn of the 21st century will be clouded by frustrations, shortages and confusion because at least some hardware and software won’t be ready for the year 2000. The problem isn’t just in the legacy systems of big companies and the government, although those problems get a lot of press. The processors embedded in everything from your phone system to your building’s elevators could be affected. Programs as close to home as your own spreadsheets could contain land mines, and some won’t be defused. Rumor has it that even the new Windows 98 operating system is non-compliant in some corners. But the truth is, no one really knows for sure how big the Y2K problem will be--an annoyance, a problem, or a disaster.
Elsewhere on the technology front, some things are better understood. Changes in the early part of the 21st century can be counted on to affect your product, processes, corporate administration and communications.
One area with significant potential impact on manufacturing industries is new product development and substitution. High-tech substitutes for traditional materials will increase. Industries will claim to be "environmentally friendly" to support their positioning whether justified or not, which in turn will spur interest in and calls for certification programs.
Manufacturing processes will continue to become more automated and standardized. Quality will be stressed. Major manufacturers have increasingly required that suppliers be tied electronically for just-in-time inventory delivery, process improvement and cost control. This trend can only intensify in the future.
"Information will tie the entire system together--from raw material suppliers to component manufacturers, assemblers, distributors and customers."
Even the assembly-line worker will wear a process control computer not too far into the 21st century. A show of wearable computers last summer wasn’t high fashion, but drew a lot of attention. A recent edition of PC Magazine shows a belt-mounted computer about the size of a portable CD player, sporting a 233 MHz processor, 340Mb drive, headset display, Windows 98 and voice recognition software. Boeing assemblers already use headset-mounted displays to guide assembly of wiring bundles and other complex components.
Through such technology, information will tie the entire system together--from raw material suppliers to component manufacturers, assemblers, distributors and customers--in one uninterrupted chain of data. The strongest players will squeeze others in the chain. Those not in the chain will not exist.
Managers will have far more data for decision making, and the data will be available in real time, updated the instant something changes anywhere in the system. The challenge won’t be getting data, but converting it into the kind of summarized information which the mind needs to make decisions. Today’s attempts to make this conversion can be seen in the careful modeling of how skilled people make decisions--the field of expert systems. Tomorrow’s attempts will replace the "rules of thumb" which underlie today’s expert systems with totally new kinds of decision structures. The outlines of those structures are being explored in labs from MIT to CalTech, and from Bombay to Brazil.
Technology will affect marketing even more profoundly. Dell Computer and Amazon.com today sell millions of dollars of product every day on the net, with no human involved until the order hits the factory floor. A whole new class of Internet middlemen--dubbed "infomediaries" by Business 2.0--is reshaping the economics of providing everything from home mortgages to magazine subscriptions to consumer electronics. By harnessing the data available on the Internet to database systems, which make feature-by-feature comparisons easy for the consumer, these companies deliver real value at drastically reduced costs. Who will be comparing your products to those of the competition, and on what basis will the buyer make a decision tomorrow?
"A whole new class of Internet middlemen is reshaping the economics of providing everything from home mortgages to magazine subscriptions to consumer electronics."
Economic forces, reflecting these kinds of technology changes, will place businesses that operate by yesterday’s rules in even greater peril than today. Capital-intensive businesses will find themselves competing with larger, better-financed companies with access to public markets. At the same time, those companies that learn how to change the rules of their industry will be intensely successful. It has been suggested that there are two basic kinds of businesses--those who make the rules for an industry and those who live by them. Making the new rules carries a high risk, but failing to be a rule maker guarantees a secondary position in an industry over the long run.
Expect even greater globalization of the economy, markets and production, with less-developed countries and their growing populations offering the greatest potential and the greatest risk. Companies that can stand the risk, however, will often find virgin territory--somewhat analogous to Wal-Mart opening stores in markets Sears and K-Mart (then the largest retailers) bypassed as too small. And despite developments such as NAFTA and GATT, countries and regional alliances will continue to fight to maintain their own regulations to protect their interests, so global sales will not be easy. Americans are likely to find that "bureaucracy" has a whole new meaning.
Large, publicly held, multi-national companies will continue to leverage their economies of scale and ability to support each other anywhere in the world. The recent wave of mergers in banking and other industries won’t deliver all the advantages promised to shareholders, but they will create formidable competitors with easy access to lots of capital. Large multi-national companies will act more like nations themselves, with their own culture, rules and values.
Smaller businesses will compete by establishing partnerships and strategic alliances. But these will continue to be troublesome. The real advantage for small to medium-sized businesses will lie in their ability to identify opportunities and exploit them before the big companies can respond. Mega corporations can be outmaneuvered since their employees increasingly lack the loyalty, dedication and even rewards that can be major advantages for a smaller organization.
"The real advantage for small to medium-sized businesses will lie in their ability to identify opportunities and exploit them before the big companies can respond."
Taking advantage of these opportunities will often require rethinking who is buyer, who is seller and who is partner in your business. Traditional distribution channels will almost cease to exist in the decade ahead as companies vie to find new ways to serve customers at a profit. The same company will at different times be your supplier, customer and competitor. Associations can be a major player in this environment by establishing networking opportunities, standards, and encouraging communications, provided they aren’t trapped by internal political pressures into fighting to preserve yesterday’s rules.
The 21st century will see continuing global unrest and destabilized economies. Expect a new breed of terrorists that are totally committed, fired by religious fervor, well financed, and equipped with high tech weapons of destruction. Osama Bin Ladin is more a model of tomorrow’s international threat than Moscow.
The current shortage of qualified employees will be a problem well into the 21st century. The traditional assumption that employment is a long-term relationship--an assumption rapidly being abandoned by both companies and workers--will collapse completely, at least among managerial and highly skilled workers. Companies already find themselves with fewer career workers and more employees acting as (and being treated like) glorified temps.
"The traditional assumption that employment is a long-term relationship will collapse completely, at least among managerial and highly skilled workers."
For family-owned businesses, this trend will present special problems. Hiring and retaining qualified managers from outside the family is already one of the greatest challenges faced by successful and growing family businesses. As managers become even more mobile in the future, the cost of good managers can be expected to accelerate sharply. Companies will be forced to rethink the way rewards are shared between family owners and talented managers. The closely held family business model itself will be under increasing pressure wherever growth requires talents not available within the family itself.
Communication technology will also increase employment flexibility. Technology enabled work-at-home options will increase for both employer and employee. Keeping these remote workers tied into the culture, objectives and procedures which are important to the business will require much greater investment in training and new structures to assimilate highly transitory people into the firm. Technology and regulation won’t stop changing. The challenge will be to harness it in ways people can accept and at costs business can afford.
Look for additional outsourcing or subcontracting made necessary by the need to specialize in narrow disciplines. Trying to be an expert in everything can only result in marginal competence and information overload.
Opportunities for success will migrate to the prepared, the quick of foot, the wise and, especially the lucky. Unfortunately, old frustrations and familiar problems won’t go away as new problems and opportunities present themselves. Rapid market changes will make flexibility and adaptability essential survival skills. Those with the proper mindset will find a great deal of satisfaction in meeting the challenges ahead. And there will always be the opportunity to have fun.
David Bywaters and David Domsch are president and vice president, respectively, of Lawrence-Leiter and Company, a 49-year-old management consulting firm specializing in services to associations and medium-size businesses. Its focus is strategic planning with related consulting on marketing research, organization design, and finding the right executives for future needs. They can be reached at 800-821-7812.
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