Twelve factors in business to watch in 2011

With 2010 behind us and the GFC imposed short-termism of the past few years becoming less prevalent, the start of 2011 is a good time for business and political leaders to consider the factors which will shape the months and years ahead.

Here are twelve significant factors which I think will have real impact on the way we live and how business is done.

1) Low growth

In the developed world, this generation’s version of the 30’s Great Depression mentality is starting to form. With higher rates of saving, aversion to debt, and acquisitiveness becoming “uncool”, a consumption-based recovery will be more challenging to stimulate than in the past. Socially aware consumers will become more considered in their purchase behaviour: e.g. “Do I really need a 3-D TV?”

2) The China syndrome

The emergence of China as an economic powerhouse is already having a significant impact on the global balance of power. The fiscally weakened US will bristle as Beijing flexes its muscles geo-politically, with increasing friction seeming inevitable at some stage. Australia could find its role as middleman between the Americans and the Chinese empowering, but uncomfortable.

China is an attractive trading partner for the West and an enticing potential market, but business leaders must keep in mind that “win – win” is not China’s guiding commercial principle.

3) Dumbing down of politics equals government gridlock

The once solid line between entertainment and politics has virtually disappeared. Sensationalisation of the media has enabled a tolerance for misinformation. Political dialogue has devolved into the “sound bite challenge” and the cult of celebrity has spread to our civic leaders.

The electorate is distrustful and the government is prone to let the latest opinion poll drive policy, fearful of raising unpopular taxes and reluctant to push “big ideas” which might get them voted out. As a result, party platforms have less real substance and less stuff ultimately gets done.

4) Business driven social change

Government inertia will put the onus on business to fill the vacuum on such issues as the environment, energy conservation and community outreach. Corporate good citizenship will be rewarded with customer preference and staff loyalty. Non-compliance will be exposed.

5) Skill gaps

Prior to the downturn, talent shortage was frequently cited as a looming problem for CEOs. GFC belt tightening has meant that recruitment and training have been cut right back. When the recovery eventuates, companies will scramble to fill the vacancies while working diligently and creatively to hold on to good staff.

6) Gen X & Y cynicism

Feeling the pinch of recession more intensely than anyone else, jealous of the Boomers who appear unwilling to let go and generally disillusioned with the state of politics and economics, the cohort of “30 and 40 somethings” will be sceptical about promises made to them, difficult to motivate and generally hard to “sell” to as they become the preeminent demographic.

[Next: Transparency in hyperdrive]

7) Transparency in hyperdrive
In the age of Web 3.0, there is literally nowhere to hide.  Employers have utilised Facebook to ferret out undesirable applicants, neighbours post videos of community infractions on YouTube, and the last stronghold, state secrets, has now been breached by WikiLeaks.  Withholding information, maintaining a point of difference or a pricing advantage will become increasingly difficult with access universal and transmission instantaneous.

Individuals, companies and government officials will find that honesty is the best policy, whether they like it or not.

8 ) Credibility a treasured commodity

In a transparent world, it is essential that you “say what you do” and “do what you say”.  Customers are drawn to “brands” that they believe are authentic and principled.  In an environment of price parity, your “why” will be as important as your “what”.

9) Escalating energy costs

The true extent of global oil reserves is a topic of ongoing debate, but the demand that China and India will place on production can only push prices up. As the world economy is calibrated on cheap petroleum, the return to more than $120 a barrel pricing will have a significant effect on cost structures, as well as the way we live and work.

10) Drying up of outsourcing options

While labour will remain a competitive advantage in emerging markets, the cost of goods “holiday” that the first world has enjoyed for the last twenty years may be coming to an end. Year on year, double digit pay rises will force producing nations to export their own inflation back to their overseas customers. Many predict that this, along with increasing transportation costs due to energy pricing, will lead to repatriation of certain industries.

11) Formation of ad hoc communities

One of the consequences of a networked world is the ability to reach and mobilise disparate groups efficiently and effectively. The emergence of the Tea Party in the US is a testament to how social media, “shock news” on cable TV and online grass roots campaigning can bring together a fragmented constituency united in the belief that it has been disenfranchised.

As the traditional institutions of belonging (church, civic groups, and bricks & mortar clubs) continue to lose relevance to a multi-cultural, fragmented, and time poor public, electronic media will bring individuals together in virtual affinity groups with political and social influence and buying power.

12) The health and wellbeing crisis

We have engineered activity out of modern life. We are blessed with an abundance of food. We are addicted to a sugar/salt rich diet. We can’t seem to kick the nicotine habit no matter what scare tactics we employ. The net result of this affluent world lifestyle is expected to be an overtaxed hospital system, a decline in productivity and a decline in life expectancy.

David Simpson is a chairperson for The Executive Connection (TEC) in Melbourne, Australia.  He is former Managing Director of JWT New York with forty years of international business experience in North America, Asia-Pacific and Africa.

David will be hosting a complimentary business breakfast at the Studley Park Boat House, Kew, Victoria on Tuesday, 1 February, 2011, on behalf of TEC. Melbourne business leaders are encouraged to attend to discuss strategies for better leadership and management in 2011. Please contact Mae Lee Sun at mls@maeleesun.com for further information. More information about TEC can be found at www.tec.com.au

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