the future of companies report

8/21/2019 The Future of Companies Report

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The

FutureofCompanies

Authored by Global Futures and Foresight


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P2 The Future of Companies | Authored by Global Futures and Foresight

ContentsIntroduction

Executive Summary

Global Conditions 08

Economic growthGrowth industries 08

Population growth 08

EducationFit for purpose? 12

Quantity or quality? 13

The foundations of a new system? 14

Talent WarsA changing of the guard 15

Scarcity and plenty 16

Shortages all round 17

Corporate strategies to cope with talent wars 17

Ageing Societies

Greying societies 18Booming wealth 18

Unretirement 18

Life expectancy 19

Obesity 19

The Environment and ResourcesFood and water 21

Business responds 22

Company dynamics

OutsourcingDemand side 24

Supply side 25

Externalising InnovationLearning to connect and develop 26


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Company dynamics cont... . . . . . . . . . . . . . . . . . . . . . . . . . . .

Corporate Structure and Business Models

Future trajectories 28

SaaS and Open Source 29

The era of the Mash-Up business model 30

The rise of the networked company 30

Portfolio working rising? 30

Generational Issues and ValuesFuture trajectories 31

Is the tail wagging the dog? 31

Tensions 34

Shared values 34

CultureUnited nations? 36

Technology and Communication 38

Growth of the internet 38

Communication: Avatars and the 3D world 39

Virtual training 39

Smart phones 40

New payment methods 40

VOIP Internet telephone calls 40

ipTV - Internet television and video 41

Communicating with customers: Word of Mouth 41

Shaky foundations? 42

Information risk management 42

Moores law and humans 43

Social NetworksBusiness doubts 44

The value to business 44

Advertisers dream 45

Conclusions 46

Action 47

About the author 48

About Global Futures and Foresight 49

About Shirlaws 50

References 51


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IntroductionThis White Paper explores some of the powerful forcesset to change the way we do businessaroundthe world in the near future.Not just how we dobusiness, but who will do it and where we will do it and

under what conditions

Drawing on a range of published resources, which are

fully acknowledged, the purpose of this paper is to alert the

reader to the drivers of changelikely to impact theirorganisations and to propose potential outcomesand raise questions which will help the reader better

prepare their business for the future.


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ExecutiveSummarySince people started trading we have continually changed how we undertook business to

suit the circumstances prevailing at the time, from the rst cash crops bartered for goods and

services to sophisticated international exchanges and the formation of global corporationsAs trade has become more complex, increasingly globaland fasterwe have adaptedto these changes creating new organisations such as DHL, and the World Trade Organisation

and new tools such as ebay and paypal Its highly unlikely that the way we currently organise

ourselves for business will remain the same for very long either

Peter Drucker, the management guru, foretold the end of the corporation as we know it

today back in 2000 We at GFF have been tracking the rise of the networked companyfor seven years Our research now tells us that nearly four out of ve of us believe that the

networked company is likely to become the preferred model for business in the next ve years

Understanding which structure of company will be the successful model of the futureisimportant Understanding that the existing models are unlikely to prove successful for very much

longer is even more important however Understanding that we need to change is the first steptowards embracing change

For many years companies have been seeking to reduce cost by engaging with othercompanieswho can bring their expertiseand focus to bear on their own processes andthereby reduce costs, thus outsourcing was born This has accelerated in recent years astechnology has allowed some functions of the business to be performed overseas in lower

labour-cost markets This is unlikely to stop but there is plenty of evidence now that doing this

purely for cost savings over a long term can be a risky strategy Engaging with third parties in aexible manner gaining benets of improved service and innovation is likely to be the new reason

to engage with external companies in the future

Our labour resources are changing at an even faster pace than ever Generally populations areageing rapidlyand the mix of cultures and nationalities now making up our nations workforceis changing faster than before Europe, the USA and Australasia are experiencing some of

the fastest changes in demographics, which will result in a very different make up of citizens,

customers and staff available to them than today Responding to this is todays challenge


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The world economy is set to grow at about three percent a year for the nextdecade, with certain states, such as China, India, Brazil, Mexico and others pulling ahead of thisaverage There will only be three of the existing G7 in the top seven economies in the world in

the next few decades and that will have a profound affect on the culture and business norms of

international trade

Technology is about to blow us awayin its ability toenable global communication.Be prepared to see moving images, television and video on every device as the IP (internet

protocol) revolution continues and information in all its forms converges on this standardised

transport layer The young people around the world intuitively engage with this capability, which

is one of the reasons we have seen an explosion in the take-up of social networks in the last

ve years Today over one billion people around the world are connected in socialnetworks If you arent ask yourself why?

The next revolution even the next big thing is very likely to be online virtual worlds These

worlds are populated by avatars (graphical representations of people) interacting with one

another, exchanging information and ideas and buying and selling to one another As your service

costs increase, how much simpler might it be if your customers engaged with you in avirtual worldwith avatars that are sometimes operated by real people and at other t imes byarticial intelligence systems think how much lower costthat might be?

Some would argue that our education systems have let us down, that they are not producing

graduates with the critical and analytical attitudes and capabilities suited to todays changing

and challenging markets Global corporations are increasingly engaging with the educators toincrease their chance of being able to hire appropriately trained and developed graduates for

their rms What we do know is that the emerging economies, as the fast developing, non-

industrialised parts of the world are frequently referred to, are in dire need of management,

technical and engineering staff and their education systems are currently not able to supply them

These economies will be looking abroad to recruit the talent they need So whether you like it or

not, whatever business youre in youre just as likely to be competing with Dubai,India and Kazakhstan for your new employees as with the firm down the street.


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Today, we are well aware that the world is warmingand that there is a strong body ofevidence that mankind is contributing to this warming The consequences of global warming,

if left unchecked, is likely to be 100 million climate refugees by 2050, sea level rising byup to 20 feet over the same period and world shortages of food and fresh water At a time when

global populationsare set to rise by another 2.5 billion people, can we ignore thesewarnings? Most companies are reorienting their Corporate Social Responsibility (CSR) energies

to face this crisis head-on and become part of the solution To do this effectively however, we

may need to look to halve our waste and carbon based energy usage and reduce our use of the

wrong sort of packaging and limit our carbon mileage (transport using carbon energy sources)

If the public are increasingly convinced of the necessity to embrace the above changes,

companies who have not yet responded may be forced to change, through government

intervention or through market forces

Put together; changing people,changing planet,changing technology,changingeducation,changing global wealthwill all have a profound impact on how we do business,where business is done around the world and who sits on its governing bodies Its forecast that

in the next thirty years China will overtake the US as the worlds largest economy, I wonder what

impact that will have?

All of these issues and more are discussed in this report, which has been compiled with the aim

of helping you better understand the futureand therefore being better prepared forthe future Please let us know how you get on and if we can help you in any way wed bedelighted to support you.

David A. SmithChief Executive

Global Futures and Foresight


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Global Conditions

There are many factors impacting upon the issues companies are likely to face in the future,many of which are specic to the industry, location, size, or stage of development of the individual

organisation There are however, some important drivers of change at the macro level which are

increasingly likely to impact rms around the world

These drivers can be summarised as political, economic, social, technological, legal and

environmental This paper will examine; economic growth, population change, education, access

to talent, ageing societies, environmental sustainability and resource shortages We will also

look at the l ikely development of outsourcing, the externalising of the innovation process and

organisational structures, generational and culture issues, technology and communications

trends and the impact of social networks

These drivers of change have the potential to radically change how we lead our lives and

undertake business in the next few years

Economic GrowthThe next 15 years (see diagram next page)

Almost 40% of the increase in global GDP in the coming 15 years will come from China (27%)

and India (12%)1

The other BRIC (Brazil, Russia, India and China) economies will only contribute

2% each The United States, which will account for 16% of the worlds growth, will remain aworld leader and will continue to outpace other major developed economies between now and

2020, growing by an average 3% a year That is greater than the 21% forecast for the EU 25

China will have closed the gap in economic size with the US by 2020 and Asia will increase its

share of world GDP, measured at purchasing power parity/PPP, from 35% in 2005 to 43% in

2020 The annual growth rate of the world economy will likely range between 32% and 29%

until 20202

The shift in economic growth will likely manifest itself in altering global consumer spending

patterns As a percentage of global spending, the US will decline from 325% to 309%

from 2005 to 2020 The EU 25 will also drop by 49% down to 223% Russian spendingwill increase more than 100% to 27% whilst China will nearly triple its share to 84%, up

from 33% in 2005 This degree of radical change in spending patterns will likely alter the

consuming economies and the consumer product producers design and focus of attention


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Share in world GDP (at PPP ) (%)

Share in world Consumer Spending (%)

2010

2005 2020

US 20.8

EU 21.0

Asia 35.7 of which

China 13.7 India 6.2 Japan 6.7 South Korea 1.8

Russia 2.6

Latin America 7.7

Middle Eastand North Africa 4.1

Sub-Saharan Africa 1.9

Other 6.2

US 20.3

EU 20.2

Asia 39.5 of which


Russia 2.7

Latin America 7.7



Other 3.3

US 19.0

EU 19.1

Asia 43.2 of which


Russia 2.5

Latin America 7.6



Other 2.5

US 32.5

Japan 9.8

EU 27.2 of which

France 4.5 Germany 6.2

Italy 3.9 UK 5.4

China 3.3

India 1.9

South Korea 1.5

Russia 1.3

Brazil 1.6

Mexico 1.9

US 30.9

Japan 6.6

EU 22.3 of which

France 3.4 Germany 4.6

Italy 2.6 UK 4.4

China 8.4

India 3.0

South Korea 2.2

Russia 2.7

Brazil 1.4

Mexico 1.4

Note: The EU is expected to have 28 states in 2010 and 33 in 2020.

Source Economist Intelligence Unit.

Note: The EU is expected to have 28 states in 2010 and 33 in 2020.

Source Economist Intelligence Unit.

2005

2020


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Growth IndustriesDriven by technology

The energy, defence and nanotechnology industries are all set to record strong growthGovernments and businesses worldwide spent $59 billion in 2006 on what is being called the

homeland security industry due to its recent growth in the US The market for security goods and

services is to increase to $178 billion in 2015, or triple its current value, whilst another major attack

such as 9/11 has the potential to balloon the industry to $730 billion Either way rapid growth from

Europe, China and India is expected to leave the US with a 42% market share by 20153

Nanotechnology in the Automotive Industry alone holds vast potential, not least as it is seen by

some as the answer to the many issues on sustainability The worldwide automotive industries

turnover in nanotechnologies was $86 billion in 2007 and is forecast to top $542 billion in 2015 By

2020 nanotechnology in the automotive industry is expected to hit $1374 billion It is also estimated

that more than 95 applications from nanotechnology will enter cars in the next ve years alone

The market volume of renewable energy worldwide is set to increase from $958 billion in 2007

to $1244 billion in 2010 and $1981 billion in 20154 It should also be noted that the above list

does contain some major omissions - it is only meant to alert the reader to the extent to which

technological innovation can revolutionise, rejuvenate or even create an industry The issues for

business will be how to adapt and change to the new opportunities in terms of stafng with talent,

understanding it, making it work efciently whilst making a positive social contribution


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Population Growth

The overall world population is expected to reach about 91 billion by 2050 according to the UN

The United States, UK and Australia will all see growth in their workforces out to 2030 The storyis quite different in continental Europe only Norway is set to experience anything other than a

shrinking workforce

It is evident that much of the increase in global population will be due to longer life spans

rather than rising birth rates Of the major economies, only India will see a gain in the share of

the 15-59 age cohort in the period to 2050, according to UN statistics By contrast Australia,

US and UK will all experience a loss of 5 to 10% of this age group, whilst Turkey, Indonesia,

Mexico and Brazil will all experience a decline of around 5% and China will see a 15% reduction

in this age cohort

These forecasted declines in the size of the workforce available to hitherto well-supplied

economies will undoubtedly impact on how work is organised and expose industries most at

risk from these labour shortages Automation and off-shoring of work have emerged as leading

means of supplementing dwindling labour forces and to reducing unit labour costs overall In

Europe the recent accession of thirteen new countries has resulted in dramatic migrations of

workforce from Eastern Europe to the west leaving the new entrant EU states with an even more

severe labour problem than the existing members This migration of labour has been particularly

acute amongst the better educated workforce who nd themselves welcome in many countries

Indeed, education amongst the higher labour cost countries is a vital issue in their drive to

develop service and Intellectual Property (IP) driven economies

5

Most advanced economies face shrinking workforces.

The U.S. is an exception


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Education

High schools are obsolete,Bill Gates

6

Education is behind the curve compared with other sectors of society,Chandru Rajam, CEO of online assignment grading specialist, EduMetry

7

.

In a recent business survey,8

nearly 90%9

of respondents said that the core competencies

needed by their companies were changing, with half of those saying it was changing by a high

degree In an era where art and design students are actively recruited into in-house management

schemes, and creativity and innovation increasingly drive bottom line margins, the nature of work

is set to change at an increasingly rapid pace

Deutsche Bank believes that by 2020 the project economy will deliver 15% of value creation in

Germany10

(in 2007 the gure was about 2%) The project economy usually refers to temporary,

collaborative and frequently global processes of value creation Likewise Developing the Future,

a recent survey from Microsoft reveals that the knowledge economy, which includes nancial

services, information technology, business services and the creative sector, accounts for 40 per

cent of gross domestic product and is expected to rise to 50 per cent by 2010 in the US

Fit for purpose?

Existing education systems were designed in the 19th century to produce workers for industrialjobs Now, and in the future, companies need graduates equipped with different, more-exacting

skills than before, and education systems are struggling to respond The problem with many

school systems, according to Sir Ken Robinson11

, is that education doesnt promote creativity

It actually does the opposite12

Many governments have responded by increasing testing in an

attempt to show improvements, but experts within the corporate world and outside alike believe

that this is mere tinkering with the system rather than the wholesale change some say is needed

As a result of this dissatisfaction with the existing system, some global corporations are deciding

to spend more than ever before on education and developing their own workforces The manner

in which corporations invest in education is also changing Previously, the corporate world wouldcomplain from the sidelines while offering scholarships, adopting schools, and contributing

nancially to educational institutions Now, partnerships are becoming more common and in

the future outright ownership of educational projects may become the norm for companies

We strongly believe companies should get involved by bringing their expertise, experience and

processes to the table, as well as a willingness to listen and learn, says Will Swope of Intel,

talking about education


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Quantity or quality?

The most important question for business to consider is whether the skills gap is the result

of universities not producing enough graduates, or the wrong kinds of graduates with thewrong skills?

The problem appears to be one with no clear cut answer For Information Technology (IT) in the

UK it is evidently a lack of numbers that is the issue The IT sector is growing ve times faster

than the economy as a whole, but the uptake of IT-related degrees has almost halved in the last

ve years13

The issue is compounded by the fact that 70% of information technology graduates

chose jobs outside the profession in 2005-200614

Others, such as Tim Ambler, a senior fellow at London Business School and a former executive

with a global company, believe that quality is an issue Education is failing in terms of mental

discipline, application and the 3Rs, he says

Professor Jonathan Gosling, director of the University of Exeters Centre for Leadership Studies,

agrees There is now a much greater recognition of the need for students to integrate their

real-life learning with the new cognitive concepts, he says Exeter now offers leadership training

modules to every undergraduate, no matter what discipline they are in By 2008, every Exeter

graduate should have had some leadership and team-work training, he says

In his second report on skills in the UK, published last year, Lord Leitch outlined some of the

solutions and ambitious targets to make skills at all levels world class To be among the top

eight most skilled countries in the world, the UK will need: 23 million more people with literacy

skills; 51 million more with numeracy skills; 57 million qualied to Level 2; 21 million at Level 3;

and about 55 million with experience of higher education This is the equivalent of every second

adult in the UK gaining a higher level qualication before 202015

Even if this were to happen, many do not see this as a sign that the necessary skills would be in

place For example, in 2004 the United Kingdom graduated more media studies students than

physics and chemistry students combined16

In the United Kingdom over 70% of the 2020 workforce is already over the age of 16 This trend

puts increased importance on the ability to re-skill the existing workforce17

The foundations of a new system?

Intel: Spends annually more than $100 million to educate more than 4 million teachers in 35

countries about how to incorporate technology into lesson plans

ExxonMobil: Sends current or retired employees into public schools via its Science

Ambassadors program to serve as maths and science teachers In the companys Houston

home base, more than 500 ambassadors volunteer in 22 schools


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The foundations of a new system? continued

Microsoft: After three years of planning, the Microsoft-designed School of the Future

opened its doors in 2006 The school is being touted as unlike any in the world, with notonly a high-tech building but also a learning process modelled on Microsofts management

techniques The high school uses an education competency wheel, patterned after a set of

desirable traits Microsoft encourages among its employees Ofcials, teachers and students

are trained in dozens of skills, including organizing and planning, negotiating, dealing with

ambiguity and managing relationships

US School district CEO Paul Vallas said he was impressed by more than just the companys

technology I was also taken by their culture, Vallas said They created a culture within

which ideas can be generated and acted upon Interestingly the project was paid for by the

Philadelphia School District at a cost of $63 million

18

Conclusions

Depending on the sector of the economy, there is a denite mismatch between the supply

of quality (or quantity) of graduates and the demands of business Importing the brightest

talents from overseas may also prove more difcult as the Asian economies overtake those of the

west, and as they do so require more talent than they can skilfully develop Education can and

will change to meet this need, probably through a combination of private and public funding and

running but until it does, continuous in-house training may continue to be the best

mid-term solution

What action have we taken to ensure we attract and retain the best talent?

Do we link with or have any relationship with local education boards/organisations?

Is our company committed to re-skilling the workforce to adapt to future conditions?


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Talent wars

98%19

of business executives and human-resources professionals polled in a survey in 2007

in the US said that competition for talent was increasing in their industry This sentiment is

frequently echoed globally, but which industries and geographies specically are going to be

subject to the greatest pressures?

A changing of the guard

The current situation is one that strikes resonance with much of the common wisdom on

offer namely that Asian countries have a distinct human capital advantage over the western

economies A ManPower survey of 200720

reveals that 62 and 61% of companies respectively

in New Zealand and Australia had trouble lling positions in 2007 The US at 41% and Franceat 40% along with the UK at 34 and Germany at 27 had high but variable gures India and

China by way of comparison had gures of 9 and 19% respectively The key issue is whether

this current advantage is set to continue, and more specically, at what industrial level will the

seeming talent gaps in the more developed economies be most acute?

It is estimated that between 2010 and 2025, up to 95 million baby boomers will leave the US

workforce, but that only 40 million members of Generations X and Y will be available to replace

them21

Similar sentiment is expressed by the US Bureau of Labor Statistics (BLS) It forecasts

the civilian labour force (supply) will grow to 621 million and the jobs available (demand) will grow

to 1645 million by 201422

In 2006 the BLS also estimated that 42% of those workers classiedas Executives, Administrators or Managers were expected to retire by 2008, leaving companies

with close to three million positions to ll23

The American Petroleum Institute (API) foresees similar struggles in its eld In 2004 the average

age in the US oil industry was 49 The API also indicates that by 2009, there will be a 38%

shortage of engineers and geoscientists and a 28% shortage of instrumentation and electrical

workers In a similar vein, the National Petroleum Council projects a personnel shortage of

approximately 40% as a result of workforce retirements over the next decade to 201424

Are projections of a shortfall across what appear to be a number of key sectors in the US

enough to suggest that the US will be the number one victim of the talent war and concurrent

shifting of global labour forces? Not if a study between Heidrick & Struggles, the executive

headhunters and the Economist Intelligence Unit (EIU) is to be believed Using a weighting

including demographics, FDI (foreign direct investment) ows, quality of primary and tertiary

education mobility and a host of other metrics, they have forecast in their Global Talent Index

2007 (GTI) that by 2012, the US will actually be ranked no1 in terms of talent25


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Part of the reason for the seeming paradox of the US facing a multitude of talent-relatedproblems and yet ranking rst in the Global Talent Index is that its problems are not exclusively

internal indeed they are a reection of a global phenomenon This phenomenon is accentuated

by, but not caused by, the ascent of China and India into the globalized world

Scarcity amid plenty

According to Nasscom, the Indian software organisation26

, every year over three million graduates

and post-graduates are added to the workforce in India Yet only 25% of the technical graduates

and 10-15% of graduates from other elds are considered employable by the growing IT

sector It is noted that even after employing these graduates, most companies have to spend a

considerable amount of time and resources on their training, so as to develop the skills required

by their industry And so despite its current position of having a strong human capital pool, India

is prone to the same pressures evident in the US Nasscom predicts that by 2010 India could

face a shortfall of 500,000 IT professionals This challenges the widespread belief that the West

cannot compete with such a low cost pool of almost inexhaustible labour, or at least to the notion

that talent is innite in a land of over a billion people

More importantly, talent shortages in places such as India and China are rapidly inating prices

putting more doubt on outsourcing as a holistic method of mitigating domestic shortages Wages

in Indian outsourcing operations are reportedly growing at 15% a year27

The situation in China

is similar - a recent McKinsey report, titled Addressing Chinas Looming Talent Shortage, said

surveys had shown that fewer than 10% of Chinese graduates across a range of technical and

professional disciplines would be suitable for employment in foreign companies28 Arguably rapid

growth in both economies form part of the explanation given both the demand from domestic

industries and western afliates keen to capitalise on such potentially lucrative markets But such

booming rates of growth are not evident in Europe, Australasia or the US

1

2

3

4

5

6

2012rank Country Rank Change

GT l2012

GT l2007

United States

United Kingdom

Canada

Netherlands

Sweden

China

0

+2

-1

-1

0

+2

53

48

47

46

45

44

52

46

47

46

45

42

7

8

9

10

11

12

2012rank Country Rank Change

GT l2012

GT l2007

Germany

Australia

France

India

Spain

Malaysia

-1

-1

0

0

0

0

44

43

43

41

37

37

43

43

41

39

37

37


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Shortages all round

By 2012 the UK will need an extra 19,000 skilled foreign IT migrants to ll the skills gap29

In Australia the talent war is set to intensify in the long term During the 2020 2030 period,125,000 new entrants will annually enter the Australian workforce, compared with 170,000 now30

For the EU as a whole, IDC estimates a shortage of skilled people of some 350,000 in 2008,

representing a skills gap of 139% in 200831

Corporate strategies to cope with talent wars

Contrary to what be might be expected, a lot of companies arent taking the remedial steps

needed In the aforementioned SuccessFactors survey, 75% of respondents wanted their company

to concentrate on developing a real, useful talent management program, but only 57% said their

companies had a real plan to identify, develop, and retain talent Given the nature and size of the

decits evident in some industries, this should be of concern to the other 43% From a western

point of view, the gravity of the situation is accentuated by the arrival of Gen Y which as a cohort

has very different expectations and ideas about the world of work and the meaning of loyalty

Nevertheless, companies have started the process of innovating their talent-attracting methods

Any employee joining P&G India has access to a car loan at no interest on the rst day They are

also eligible for a housing loan after three years at P&G and they can take the loan more than once32

Why is it that the big accountancy rms top the most desirable places to work for Generation

Y? Arguably because these companies are acutely aware of what young people want Deloitte

for example has invested a lot of time and money in studying generational issues and within that

company, workers move laterally or up or down depending on their personal goals and career

aspirations Such exible corporate structures are one such strategy that can differentiate a

business from potential rivals in attracting, and more importantly, retaining, the best talent

Conclusions

Demographics in western economies and the emergence of Asia may have contributed to the

skills gap in the west indeed the speed of Asian growth is surely one of the reasons that India

and China themselves are beset with imminent talent shortages in key sectors However theunderlying driver that links western and Asian economies with regards to talent appears to be

structural How is it that the world has more people than ever competing in the global economy

and yet a scarcity of talent? Education

How does our companys talent attraction and retention policy differentiate

us from our field competitors?

Do we know the specific demographic profile for our industry and customers?

Do we have a global talent sourcing programme beyond outsourcing?


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Ageing Societies

Greying societies

In 1957, the year of the European Unions founding, every one of the 27 countries that are now

EU members had fertility rates above 21 (the replacement level); now none does The EUs

overall population will fall by 7m by 2050 Europes share of global population will fall from 12%

now to 7% by 205033

By 2015 the EU will have 26% more people in the 50-74 age bracket and a third more aged over

65 This will be accompanied by a 16% decline in the 15-44 cohort In the United States, the

proportion of the population aged over 65 years is projected to increase from 124% in 2000 to

196% in 203034

The story is similar in Australia where those aged 65 and over are expected to

account for around 22 per cent of the population by 2040

Booming wealth

In Australia, boomer discretionary spending is estimated at just over 30% of the discretionary

spending market and is growing Americans over 50 control 75% of the countrys wealth35

In

2004 the UK baby boomers held 80% of the UKs wealth and bought 80% of all top of the range

cars, 80% of cruises and 50% of skincare products

With older people controlling such high percentages of national assets, expect more and more

businesses to increasingly re-orient their marketing to target this cohort Perhaps the onlyuncertainty surrounding this group is the affect of any housing bubble burst More baby boomers

(78%) own their own home than any other UK age group36- any prolonged downturn may

strongly affect spending in this cohort In the US the typical Boomer household holds nearly half

of their wealth in the form of housing equity It is estimated that a return to 2002 house prices

(from 2007 levels) would lower the typical Boomer households net worth by 14%37

We have yet

to understand the full impact of the collapse of the US sub-prime mortgage market on wealthier

Boomers They may not have taken out these mortgages themselves but they may have

investments linked to this market

Unretirement

Some 712% of Japanese men in their early 60s were working in 2003, far higher than the

15% gure in France, 33% in Germany, and 57% in the USA38

With Japan leading the greying

of societies and with insufcient immigration to replace their ageing workforce, could this be a

foreshadowing of events to come in other advanced economies? Research suggests that this is

already happening In the United States, 66% expect to work for pay after retiring Of these 27%

plan to keep working to make ends meet and 19% so that they can afford extras39


19/54


In the UK the under-employment of older people is currently costing the economy 12 billion

each year, possibly as much as 30 billion If older people become economically active, says the

TUC (Trades Union Congress), both the supply of labour and older peoples spending on goods

and services would increase

Life Expectancy

As scientists identify new remedies for life-shortening ailments we can expect to see life

expectancy continuing to lengthen year after year Since 1945 life expectancy of citizens living in

the wealthier countries around the world has increased by one year in every ve The American

Life Extension Institute believes that average life expectancy in the US will reach 100 by 2029,

in just 21 years Some scientists hold strong views that ageing is a curable disease and that in

our own lifetimes it may be curable and life expectancy of even mature adults extend to 500 or

even 1,000 years of age40 Even a fraction of this life expectancy increase challenges any idea that

we should retire in our 60s But of course there are always pandemics, which we are warned to

be alert for, which could wipe out millions of people in a few months The last major worldwide

pandemic was the inuenza outbreak of 1918, when around 40 million people died The other

current challenger to an older workforce is obesity, a by-product of our wealthier and more

sedentary lifestyles

Obesity

The impact of obesity on business in the US is signicant, weighing in at $13 billion annuallyin direct health costs combined with the costs of disability, absenteeism and lost productivity

Companies today are paying about eight% more in health claims costs alone due to overweight

and obesity41

The obesity trend is a global phenomenon according to the World Health

Organisation (WHO) By 2015 23 billion adults will be ofcially overweight with a further 700

million classied as obese If this comes to pass it would imply a 45% increase in the number of

overweight people and a massive 75% increase in those who are obese42

This would impose a

greater nancial burden on business worldwide and further reduce the availability and quality of

labour available for them to hire


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Conclusions

Ageing societies and their associated conditions will have an impact on both the supply and

demand for businesses products and services Companies deemed to be in any way ageist maycome under increasing scrutiny with the rise of grey power Similarly, companies may be missing

out on major opportunities if they do not seek to market to this age group, or employ their talents

in their workforce

Are we actively encouraging workers to stay on after age 65? How are we accommodating this?

Do we actively encourage healthier eating within our business?

To what extent is our current product or service range geared to the needs of older people?


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Availableto use

EU AustralianConsumption

CalifornianConsumption

The Environment and Resource shortages

If everyone around the world lived as those in America, we would need ve planets to

support us If the rest of the world led the kind of lifestyles as in Australia, we would require

three-and-a-half planets to provide the resources we use and to absorb the waste

If the world lived as Europeans do we would require three planets worth of resources whilst to

live like Californians would require seven planets43

Overall, people are consuming the Earths natural resources 20% faster than

nature can renew them44

It is now also generally accepted that climate change has a large

anthropogenic component

Number of planets required based on regional consumption

Findings of the Recent Stern Report on Climate Change

One% of global GDP must be spent on tackling climate change immediately - it warns

that if no action is taken then oods from rising sea levels could displace up to 100 million

people Concurrently, drought could create tens or even hundreds of millions of climate refugees,

whilst melting glaciers could cause water shortages for one in six of the worlds population45

The economic impacts of unabated climate change could cost the world 5% of GDP (gross

domestic product) per year However, shifting the world onto a low-carbon path could eventually

benet the global economy by $25 tril lion a year By 2050, markets for low-carbon technologies

could be worth at least $500bn46

Food and water

The global demand for water already exceeds supply by 17% whilst the World Bank estimates

fresh water demand will double every 21 years47

Global agricultural output must at least double over next 30 years to meet the projected

population growth This is problematic on at least three fronts The rst is that agriculture already


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consumes 65% of our global water use and by 2020, the world will have an additional two billion

people who will need feeding The additional population will also require at least additional 20%

more water than is currently available

The second problem is that global warming has the potential to cut worldwide food production

by 20%48and worldwide income from agriculture by 16% by 202049 just as further production

is needed

The third is that existing land under cultivation around the world is increasingly being set aside

for the growth of bio-fuels It is estimated that 40% of the land currently under cultivation in the

EU will be required to grow bio-fuels if the EU is to meet its target of growing 20% of its energy

needs from bio-fuels by 202050 By 2010, ve per cent of UK road transport fuel must come from

renewable sources

Business responds

Interest in sustainable business models is moving into the mainstream among banks One

example is that of HSBC, which has committed itself to a more sustainable business model

achieving carbon neutrality in 2005 and monitors the environmental impact of 94% of their total

operations In their words, HSBCs entire corporate responsibility strategy is focused on achieving

sustainable development

It also cooperates with WWF to establish the Investing in Nature project to help restore water

habitats and ensure that water sources are used sustainably

HSBC is also promoting customers switching from paper to electronic statements in order to

reduce paper use The efforts include HSBC donating to Trees for Cities as more users switch

during 200751 Far from being solely a western pre-occupation, evidence shows the practice to

be spreading More than 100 banks from 51 countries entered the 2007 FT Sustainable Banking

Awards - more than double the 2006 total The interest in banking sustainability outside the

developed economies is shown by the involvement of nancial institutions from China, Russia,

Pakistan and Uganda among almost 50 entries from emerging markets52

The sea change is not conned to banking either Walmart has established three aggressive goals

in their sustainability efforts: the rst is to be supplied 100% by renewable energy This meansthat existing stores will be 25% more efcient in seven years and new stores 30% more efcient

in four years The second goal is to create zero waste with the immediate goal of creating a

25% reduction in solid waste in three years In order to meet their third goal of selling products

that sustain our resources and environment, Walmart is aiming to have 20% of the supply base

aligned within three years whilst designing and supporting a Green Company Program in China


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Conclusions

The environment is no longer just an adjunct to business and will consolidate its position as

core to the successful business Increased focus in the future will revolve around water, energy,

waste and food shortages forcing changes in corporate behaviour but also opening a potential

new direction for CSR Opportunities exist for organisations who can nd economically viable

solutions to position themselves as low carbon energy consumers, low waste producers whilst

conserving water resources

What attempts are we making to mitigate the environmental impact of our business?

Does our CSR policy cover the countries in which we operate?

Can we run our business using half the energy and produce half the waste we do today if so can we do it now?


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Structural issues

OutsourcingAlthough the TPI gures do not include public-sector contracts, deals worth less than $50 million

or contracts renewed without the use of an adviser, they do perhaps point to a maturing market

There is a raft of evidence that seems to suggest that this may be the case53

Demand side

A 2007 study by Cap Gemini Ernst & Young shows that only 54% of companies are satised with

outsourcing - down from more than 80% a decade ago54

Added to this, 59% of the FTSE 350

has had to exit, or re-negotiate an outsourcing contract before the end of its term, typically due

to poor service from the supplier55

There is also a belief, one supported by Gartner, that Business Process Outsourcing (BPO)

contracts save organisations money in the rst year they are in operation but do not necessarily

pay off in the long run Given how cost saving was a major driver of the initial wave of

outsourcing, it is not surprising that many businesses retain this way of conceptualising the

contract However, given wage ination of some 15% (ie in the Indian IT industry), there is

a likelihood of needing to renegotiate contracts Perhaps viewing outsourcing and offshoring

as principally a cost saving measure is approaching its logical end With increasing costs, the

service provider is being forced to add value to justify the increasing supply costs

Number ofcontracts

50

$bn

45

40

35

30

133 119

165

169185

139

03 05 06 072002 04

Source: TPI * First half of the year

Global outsourcing contracts with total contract value > $50m*

Growing pains


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Outsourcing that enables an organisation to gain access to specialist skills, increase its service

quality, create new competencies, or enable refocusing on the bigger picture will become

increasingly in demand This doesnt mean growth will necessarily be impinged upon as the

global market for shared services and outsourcing is expected to grow to $143 trillion by the

end of 2009, from $930 billion in 200656 But the drivers behind the growth will almost certainly be

shifting away from costs savings alone towards added-value services

Supply side

A divergence along geographical and technological lines is probable within the next ve to

ten years India, hitherto the worlds outsourcing hub, will retain its pre-eminence but will be

challenged by geographical and technological trends Part of the reason is an expected 30%

shortfall in the Knowledge Process Outsourcing capacity by 2012 in India, owing to labour

shortages and poor institutional readiness to rapidly educate people with the

necessary skills57

Gartner forecasts that by 2010 about 30% of Fortune 500 enterprises will outsource to three or

more countries, from less than 10% today58

Estonia, Uruguay, Azerbaijan and Sri Lanka are just

some of the countries attempting to carve niches for themselves in this market Further evidence

that the low-cost, human intensive approach to offshoring is nearing an end is the imminent

impact of emerging human replacement technologies In the next ve to 10 years, software will

increasingly take the place of human gatekeepers and human intervention in business process

outsourcing operations59 The demand for BPO outsourcing may not be compromised but the

increasing effectiveness of articial intelligence (AI) and handwriting and speech recognition

systems will eliminate the need for wholesale job transfers abroad Blended BPO and voice

operations will become more common, perhaps even reducing the political issues that currently

surround outsourcing and offshoring particularly

Conclusion

The nature of outsourcing is set to change - both from demand and supply aspects To leverage

this shift to their advantage, business must focus on building quality outsourcing links that are set

for the long term Business will want to consider taking on these external services primarily for the

acquisition of skills, innovation and the intellectual capital rather than seeing them as long-term

cost reduction strategies

If we outsource now, what benets do we expect from our provider now and in

ve years time?

Has our company considered outsourcing beyond India and China?

Does the shift to value added outsourcing signal a deepening towards truly globally

collaborative business networks?


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Externalising Innovation

Even the most powerful organisation with a research and development (R&D) centre full of PHDs

cannot hope to have even a small percentage of the potential talent on offer globally In 2005

Ford led the world in corporate R&D spending with $8 billion spent annually on research and

development activities In 2006 the company lost $17 billion and a reported $4,000 on every

car60

Structural problems aside, analysts pointed to a lack of exciting products or at least a lack

of ones that people wanted to buy Would spreading the ideas net beyond Dearborn, the Ford

headquarters, have helped?

Learning to Connect and Develop

A case study at Procter and Gamble.

As of 2000 the innovation rate (percent of new products that meet nancial objectives) had

stalled at around 35% at P&G

About 20% of P&Gs ideas, products, and technologies came from completely external

sources and only 10% of those nally marketed did so

It was estimated that for every P&G researcher there were 200 scientists or engineers

elsewhere who were just as capable of contributing, resulting in a total knowledge pool of

some 15 million people

P&G took some of its internal R&D staff and turned them into external technology and ideasscouts, thus limiting organisational resistance

Decision making on new ideas was speeded up through a use it or lose it approach that sees

patents sold on if not used

P&Gs open model for innovation now generates in excess of 35% of the companys

innovations rather than the 10% of 2000

45% of the initiatives in their product development portfolio have key elements that were

discovered externally

Through its developed network of over 3 million people, many projects are outsourced or jointly

collaborated on with outside sources

They aim to derive 50% of innovation from external sources up from 20% in 1999 to 35%

today, 45% now have external input

Product launch time from laboratory to roll-out reduced from 36 months to 18

Innovation rate has topped 75%, more than double the 35% seen in 2000 From 2004 to

2006, over 100 new products were launched


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To maximise the effectiveness of the connect-and-develop efforts, Larry Huston took on the

newly created role of vice-president for innovation and knowledge Each business unit added

a manager responsible for driving cultural change who communicates directly with Huston,

who also oversees the technology entrepreneurs and managers running the external innovation

networks The reasoning lies in developing an integrated company-wide strategy

The ideas tend to be bigger when you have someone sitting at thecentre looking at the companys growth goals, says Huston 61

Conclusion

Return on capital employed within R&D is not in any way guaranteed the right structures needto be in place as a precursor to success Externalising innovation is set to become a key part of

the innovation mix but requires a radical shake up from the norm today and an end to the not-

invented-here syndrome

How many of our innovation ideas are sourced externally to our organisation?

could this be usefully higher?

To what extent does our network help support our current innovation attempts?

To what extent do we partner with local institutions and alliances?

Venture

Capital Consumers

Retirees

Suppliers

Contract Labs

Alliances

ResearchInstitutes

VirtualNetworks

JointDevelopmentPartners

IndependentEntrepreneurs

Trade Partners

Individuals

GovernmentLabs

P G&


28/54


Corporate Structures and Business Models

The corporation as we know it,which is now 120 years old, is notlikely to survive the next 25 years.Legally and financially, yes, butnot structurally and economically.

Peter Drucker, Business 2.0 (08.2000)

Microsoft Chief Executive Steve Ballmer says he

no longer thinks of his competition as individual

companies Instead,

Its alternative business modelsthat well have to compete withor embrace,But its not the companies,its the phenomena (of open source)that present the greatest challenge

Steve Ballmer, Microsoft CEO.

The conuence of globalization of markets and labour, the internet and other technologies,

and an ever-competitive business world means that small changes can lead quickly to majordisruptions in business models and indeed entire industries The rate of and need to change is

set to continue to be inuenced by geography and industry

Future trajectories

97% of mergers by UK companies fail to completely full their strategic objectives, whilst

the failure rate for Europe is 91%62 54% of business leaders said that not properly auditing such

non-nancial assets increased the risk of making a wrong acquisition

Despite this trend (ostensibly more damaging amongst higher level M&A), there seems to be a

trend amongst larger companies of acquiring venture capital-backed startups much earlier in

their development63

Although cultures do miss-match and ultimately result in failure, there are

examples of the culture of the smaller partner giving the larger a shot in the arm of innovation

One such example is the 2004 acquisition of Worth Global Style Network (WGSN - akin to the

Reuters of the fashion world) by London-based publisher Emap Following Emaps purchase of it

for $280 million, WGSNs business doubled In return Emap has become increasingly effective at

using the internet as a medium Managing Director, Dharmash Mistry says WGSN gave Emap a

rock-solid new business at a time when Emaps existing model was agging


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Hewlett Packards corporate culture has been in turmoil in recent years The HP Way, the

companys management code, was once Silicon Valleys innovation model, with executives

mingling with lower-level employees in an attempt to utilise the rms full human capital for its

innovative potential For decades the companys engineer-led approach worked, generating a

ow of popular, affordable, and utilitarian products However, the approach became synonymous

with complacency and high costs Since its dismantling by ex CEO Fiorina starting in 1999, HP

had struggled it had successfully scrapped an increasingly inefcient system but had done so

at a huge cost to morale The bigger issue presiding over the company was that (They) were

missing the DNA of an organisation that had its nger on customer desires, says Phil McKinney,

a chief technology ofcer of the Personal Systems Group and head of the HP innovation ofce

So in 2006 HP launched the Innovation Program Ofce, to help buy hip, nimble start-ups for

its huge Personal Systems Group, which makes PCs, mobile devices, and workstations One

such start-up purchased, Voodoo PC, claims to have taken the ult imate wish list from customers

and rolled it into the product line The hope of procuring innovative culture must surely run

the same risks as any merger and is quite the opposite of approaches evident elsewhere of

externalising the operations of R&D Although both models aim to preserve the status quo of

large corporate power, the beginnings of an increasingly networked economy / incubator type

models are discernable

SaaS and Open Source

SaaS (software as a service) is arguably the most disruptive business model to hit not only

software companies but anyone who uses software and is set to solidify as a business model

SaaS is forecast to grow substantially over the next ve years to the point that by 2011, 25% of

new business software will be delivered as SaaS64

Take law rms since PLC FastDraft (which is

software that produces advanced rst drafts of all transactional documents quickly) was adopted

by Cobbetts, the time spent on the main documents has been reduced by around 70%65

Not only are some online legal solutions faster and therefore cheaper compared to traditional

lawyering, but in some cases they may be available for free, with online advertising funding the

service Freewilldocscom is already experimenting with an ad-funded business model Darryl

Mountain, in his paper Disrupting conventional law rm business models using documentassembly, argues that most law rms are ripe for disruption He predicts that resistance to

document assembly will be their undoing and that regulatory changes - such as the relaxation

of rules regarding the unauthorized practise of law, and reforms giving law rms greater access

to capital - could be what tips things over the edge66

Several experts agree that this sea change

represents the greatest threat to small, generalist law rms in the short term


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The era of the mash-up business model

China will generate new models of internet business that will spill over to the West Jack Ma,

the self-made Chinese internet guru, believes e-commerce will lead Chinas economy into anew era in which innovation, customer focus and responsible business practicesrather than

relationships with people in powerbecome the main determinants of success67 Interestingly,

whereas C2C (consumer to consumer) and B2C (business to consumer) models have remained

largely distinct in the West, in China they will continue to blend together, with consumers

visiting single marketplaces to buy from individuals, small retailers and large retailers alike A

growing number of entrepreneurs may buy in volume from China on sites like Alibaba and sell to

consumers on Western sites such as eBay, for example

The rise of the networked companyAs companies become increasingly aware of the need to be quick to change and respond

to market conditions, new competitors, changing labour force structures and costs and new

technologies and business models, they may begin to turn away from the hierarchical command-

and-control structure developed for the industrial economies in the 20th century The networked,

agile company will engage, and more importantly, disengage from markets, business partners,

intermediaries, suppliers, outsourcers and geographies faster than ever before The age of

the networked company may be upon us Companies who are adept at managing these

relationships and understanding their markets may well have sustainable advantage over the

own-it-all, command-and-control, highly centralised decision making rm of the past

Portfolio working rising?

More than 20 years ago, management guru Charles Handy predicted that in the 21st century,

more than 50% of jobs would be something other than full-time He envisaged a burgeoning

number of part-time, exitime, temporary and self-employment options68

According to the Trades

Union Congress (TUC) in Britain, by 2010 more than four-fths of male employees and over half

of women employees will still be working full-time, however69

If employers fail to react to an increasing clamouring for work-life balance, which the TUC and

others believe will intensify in the next few years, then portfolio working (working for many

employers at the same time) may become an increasingly viable option for many sought-after

professionals thus depriving companies of their number one resource human capital

Again this shift is likely to bias certain industries more than others and be driven by further

technological progress


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Conclusion

Kendall Whitehouse, a senior director of information technology at Wharton, notes that

there probably isnt one model that will win out (within software) Instead, you will have a blendof business models70 That much is certain, as the life cycles of business models are increasingly

shortened with the advent of disruptive technologies, cultural shifts towards work-life balance

and the rise of alternative business models from China and other emerging countries will require

business to be more agile and responsive than has been the norm in the past The rise of the

networked company a collection of collaborating organisations from around the world with

co-incident short- to medium-term aims is upon us Sustainability is likely to underpin

long-term success

Have we audited and acted upon issues of sustainability in our business model?

Are we aware of our Chinese, Indian or African equivalents and their business models?

Do we have collaborative relationships with external organisations to develop our business?

Generational Issues and Values

Although there is no evidence suggesting that Generation Y (under 30 years of age and older

than 5 years of age) forms a homogenous block globally, the emergence of three generations

within some companies is creating a need for better communication and understanding Whether

as revolutionary or not, as sometimes depicted, the emergence of Generation Y in the workplace

is having an effect

Is the tail wagging the dog?

Generation Y, also dubbed Generation Why or the Selsh generation are variously described

as lazy, disloyal, in fact nothing more than revolutionary trouble that business is loathe to hire

But, of course we should remember that they are still in their 20s

Demanding exibility in the workplace, seeking a fast ascension through the ranks and frequentlychanging companies are portrayed as characteristic of Gen Y In something approximating a

trickle-up affect, Peter Sheahan, an Australian consultant in workforce trends, believes that the

tightening in the labour market has resulted in a change of behaviour, previously readily attributed

to Gen Y, to a more assertive and demanding employee


32/54


To better appreciate some of the differences discernable in developed economies between the

age cohorts being discussed, the table below sets out some of their more distinct and important

instincts, values, beliefs and attitudes

Source: Shirlaws BusinessCoaching/Booz Allen Hamilton

Builders60s & 70s

Unstructured

Spontaneous

Interactive

Knowers

X Gen30s & 40s

Y Gen20s

Classroom style

Control

Thinkers

Baby Boomers40s & 50s

Lifestyle

FunCommunity

Self-discovery

Class of values

No absolute

Relational

Security

Work ethicCountry

Advancement

Variety

Freedom

Achievement

Round-table

style Cooperation

Thinkers

Unstructured

Consensus

Feelers

Beliefs, Valuesand Motivations

Primary Instinct Think Think Feel Know

Learning and

Leadership styles

Money

Respecting Elders

Loyalty to employer

Sex

Technology

Buying decisions Price Choice Simplicity Relationship

It is not

everythingGive it to meScarce Earn it

Serve my boss Working my wayto the top

Short cutto the top

Give meSaturday off

or I quit

Ignorant Aware ComfortableLive and

Breath it

Living Together OnlineAfter Marriage On the back seat

Polite WhateverSeen & not heard Automatic


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A 2007 survey by CareerBuildercom71

points to more pronounced generational gaps in

communications styles and job expectations in the workplace

49% of employers surveyed said the biggest gap in communication styles between Generation

Y workers and older ones is that Gen Y workers communicate more through technology than

in person

25% say they have a different frame of reference, especially in terms of pop culture

87% of all hiring managers and HR professionals say some or most Gen Y workers feel more

entitled in terms of compensation, benets and career advancement than older generations

74% of employers say Gen Y workers expect to be paid more

61% say Gen Y workers expect to have exible work schedules

56% say Gen Y workers expect to be promoted within a year

50% say Gen Y workers expect to have more vacation or personal time

37% say Gen Y workers expect to have access to state-of-the-art technology

55% of employers over the age of 35 feel Gen Y workers have a more difcult time taking

direction or responding to authority than other generations of workers

There is evidence that this is changing business behaviour Sun Microsystems telecommuting

program, for example, has increased to the point that today more than half of Suns employees

work remotely yet Gen Y does not constitute the corresponding%age of Sun employees more

evidence perhaps of Gen Y proving a catalyst for change rather than the actor Sun is not the

only company increasing telecommuting - the Yankee Groups report on mobility trends states,

According to a recent survey of 319 companies, 40% of todays workforce is mobile, dened as

spending at least 20% of their time away from their primary workspace72

Herein lays an apparent

contradiction - 60 per cent of Gen Y in the US say they want to hear from their managers at

least once a day73

In 2007 CISCO, the networks infrastructure giant, polled more than 600 business and IT

directors across the UK in companies ranging from 20 to 1,000 employees and found that UK

businesses that embrace new technologies grow faster and hold on to their employees for

longer As was identied in the Shirlaws/Global Futures and Foresight 2007 survey, business

managers top concern was nding and retaining talented staff Yet 47% of business managers

said that their company did not allow remote or tele-working and that home working ranked

as the lowest inuencing factor on IT managers technology investment priorities over the next

12 to 18 months Smaller businesses lag behind larger companies in providing the necessary

infrastructure to facilitate home or tele-working In wireless network adoption (41% by smaller

rms versus 64% of larger organisations) and remote or home working capabilities (46% by

smaller companies compared to 67% of larger rms)


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With employees increasingly asking for the option to work from home for part of their week at

least, companies that adapt to this model of work may nd it increasingly easy to attract and

retain the talent they have At the very least its one more reason why someone might join you or

stay with you

Tensions

More than 60% of employers say they are experiencing tension between employees from

different generations in the US

The Lee Hecht Harrison74

survey also found more than 70% of older employees are dismissive

of younger workers abilities And nearly half of employers say that younger employees are

dismissive of the abilities of their older co-workers The differing approach to work between

generations is seemingly complicated and perhaps accentuated by a deeper cultural issue forexample in the US, one in three of Gen Y belongs to a minority

Shared Values

Members of the Generation-Y set have the same work-life concerns as baby boomers, according

to a survey from Robert Half International and Yahoo! HotJobs in Canada Salary, benets and

professional growth are the top concerns when evaluating job opportunities concludes the report

In fact when polling students in the US for their most preferred work places, the top three

choices for Generation Y are all Big 4 accounting rms75

Andrea Hershatter, director of the undergraduate business program at Emory University and

veteran of college recruiting believes that Gen Y is inherently conservative

There is a strong, strong millennial dislike of ambiguity and risk,leading them to seek a lot more direction and clarity from theiremployers, in terms of what the task is, what the expectations are,and job progression.

In China this age cohort are referred to as - Little EmperorsChinas one-child policy has resulted in a generation of little emperors many Chinese between

the ages of 18 and 24 grew up as the only child in their household

Data from the most recent Gallup Poll of China suggest that the youngest Chinese adults,

especially those in Chinas growing urban sector, are bucking the imperialist and collectivist

traditions of Chinas past and dening themselves as individuals


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When presented with a list of philosophies toward life and asked which one comes closest to

their own, 37% of urban Gen Y Chinese choose Dont just think about money or fame, but

live a life that suits your tastes Another 15% believe in living for today, as characterized by the

response, Live each day as it comes, cheerfully, without worrying

http://wwwgallupcom/poll/15934/Chinas-Gen-Bucks-Traditionaspx

Conclusions

The workplace of the future will have up to four different distinct generations working

together, requiring better management and placing an increased premium on interpersonal skills

Evidence points to Gen Y being just as conservative as previous generations, but their effect on

the workplace will still be powerful

Has our company designed a communications plan that accommodates generational issues?

Do our Gen Y workers have access to instant feedback?

To what extent have we prepared mitigating factors to help reduce tensions

between generations?

81%

47%

62%

21%

25%

8%

55%

27%

41%15%

16%

48%

Urban residents 18-24 Urban residents 25 and older

Attended a Western language movie

Purchased Western music/record/CD

Purchased food at an American fast food restaurant

Visited a Western or American-themed

bar/nightclub/restaurant

Visited a Western brand clothing

Read a Western magazine, book newspaper

Which of the following have you, yourself, done within the last 12 months?


36/54


Culture

With the vast majority of baby boomers in the US heading for retirement and Europe greying,

culture within companies will undoubtedly change as corporate decision making further falls into

the realm of Gen X and Gen Y Another interesting adjunct to the rate of change is the cultural

composition of the future workforce

Uniting Nations?

In 2006, 510,000 foreign migrants came to the UK to stay for at least 12 months and at the same

time 400,000 people, more than half of whom were British, emigrated The rate of ight amounts

to one British citizen leaving the country every three minutes The gures suggest that only

one-sixth of the immigrants were from the states which joined the EU in 2004 with more than200,000 coming from the subcontinent76 The net effect on business may not yet have become

apparent The average number of children born to British-born women is 16 and for foreign-born

women77

in the UK, 22 The highest birth rate in the UK is among Pakistani-born women, who

have an average of 47 children each Last year, 22% of births in the UK were to foreign-born

women Immigrants from India, Pakistan and Bangladesh will outnumber their white neighbours

in predominantly Asian cities such as Leicester, Birmingham, Luton and Slough starting in 2019

The white population is also expected to fall in other cities including London The proportion of

white Britons will fall in every region of Britain by 202078

Ofcial statisticians now expect net

immigration to run at 190,000 a year for many years to come


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But this trend is not conned to Britain In the US, Latinos account for 137% of the population

and number approximately 40 million today It is estimated that in 2020, one out of six workers

in the US will be Latino; in 2050, it will be one out of four79

The issue is important in the sense

that only 10% of US Hispanics have a college degree, as opposed to 28% of whites and 20%

of African Americans80

Of more consequence is that 41% of Hispanics have not nished high

school Immigrants without a high school degree have 33 children on average, 74% higher than

the 19 children for college graduate immigrants81

The birth rate of illegal alien women in the US was almost 31 children on average in 2002,

or about 50% higher than the two children natives have on average The birth rate for legal

immigrants is 26, or about one-third higher than that of natives An estimated 280,000 children

were born to illegal alien mothers in 2002

Countries with a points-based immigration system appear to have less bias with regards to birth

rates amongst immigrants Part of the reason is that they usually accept well educated people

- who statistically are more likely to have fewer children Not allowing for variations between

differing groups of migrants, overall migrants and Australian-born women for example have

virtually identical fertility rates Cultural considerations also weigh in the accounting of birth rates,

however within Australia women born in Lebanon had by far the highest fertility rate at 365,

while women born in Hong Kong had by far the lowest at 06582 Nevertheless with the average

fertility rate forecast to be 085 by 2016, increased immigration looks likely

As of 2005, almost 20% of the population in New Zealand was born overseas83

Government

projections indicate that the ethnic populations will increase in both the North and South Islands

during the period 20012016 In the North Island, the European, Maori, Asian and Pacic

populations will increase by 4, 22, 112 and 44%, respectively, while the corresponding South

Island increases are projected to be 6, 26, 95 and 42%84

Europes native-born workforce will likewise shrink - by 44 million by the middle of the century

with skilled workers forecast to be in especially short supply85

Conclusions

Mass migration is something of a mixed blessing for business Whilst it helps creates whole

new markets, can lower unit labour costs for a while and can introduce new innovative methods

of working, it will also transform management practice across almost all industries Coping or

otherwise with differing religions, customs and even language will go a long way to differentiating

successful businesses from the failures

Do we cater for different cultures inside our business?

Are we prepared to increase the amount of in house training offered in order to source talent?

How do the statistics fit in, if at all, with our recruitment and CSR policies?


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Technology and Communication

Technology... is a queer thing. It brings you great gifts with one hand,and it stabs you in the back with the other.C.P. Snow, New York Times, 15 March 1971

86

For a list of all the ways technology has failed to improve the quality oflife, please press three.Alice Kahn.

Questions concerning which technologies to adopt, the lead time in implementing them, along

with the level of employee and customer acceptance are key issues for business today Given the

rate of increase of technological progress, the days of technological ambiguity for business may

be drawing to an end indeed a technology-led consumer evolution is already underway

Growth of the internet

It took 36 years for the Internet to attract its rst billion users, which was achieved in 2005 The

second billion will probably be added by 2015 with most of these new users in Asia The third

billion will be harder, and might take until 2040 to be reached87

The dominant business model on the internet today is making money by giving things away

Much of that is merely the traditional media model of using free content to build audiences andselling access to them to advertisers An increasing amount of internet business falls into the

free-sample model Because it is so cheap to offer digital services online, it doesnt matter if 99%

of your customers are using the free version of your services so long as 1% is paying for the

premium version After all, 1% of a big number can also be a big number

In 2008, the year of free, Yahoo! will go one better than Google and expand its free webmail to

innity More music labels will give away music as a promotion for concerts, following Princes free

distribution of his album in Britains Daily Mail in 2007 and Radioheads offer to let fans choose

their price - free, if they wantwhen they download the latest album And more newspapers will

publish their content free on the internet

All this marks a pattern When the cost of serving a single customer is trending to zero, smart

companies will charge nothing Today, the disrupters motto is Be the rst to give away what

others charge for as long as thats not your only means of income! If you listen to the technology,

it makes sense88


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Communication: Avatars and the 3D world

IBM has introduced a new customer

interaction model that could be a preludeto a new era in services In the summer

of 2007 it announced that a virtual IBM

Business Center is open for business

in Asia What makes this different from

any other contact centre, though, is that

customer-service and technical problems

are dealt with by avatars located in the

virtual realm of Second Life89

However the amount of electricity needed to create a deeper sense of virtual reality forexample by using avatars to sell nancial services over the net or else assist in shopping - may

be more of an issue than anybody has hitherto considered It has been estimated that annually

an avatar in Second Life consumes 1,752kWh90

per year based on the energy consumption of

the technology supporting the avatar and its environment, not far off the average citizen of Brazils

consumption of 1,884kWh It will be interesting to see if these cyber footprints become politicized

in the event of any acceleration of global warming

In any event the promise is clear A whole new customer services workforce can be opened

up - those who need or wish to work from home for example, can be brought back into the

virtual workforce

Virtual Training

PIXELearning, a British company, has developed a simulator for a big international accounting

rm in order to train interns who are fresh out of university The role-playing simulator lets them

develop their skills For example, users can interact with a difcult client who is being aggressive

on pricing Thus mistakes can be made and learned without any loss of face or loss of client for

the business91

Fire and rescue services and surgeons are just two of the many other trades and

professions turning to virtual reality to perfect their skills and techniques Many other businesses

make use of virtual worlds - more routinely for communications or meetings across dispersed

geographies Take a look for yourself at wwwsecondlifecom

Avatar of ibmcom General Manager Paula Summa in

IBMs virtual Business Center


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Smart phones

Research indicates that between ve and 6% of

the total 11 billion mobile phone sales this year willqualify as smart phones, telephones that have text-

messaging, web access and other data services along

with voice Unsurprisingly the market is expanding

rapidly and it is expected that by 2012 at least

the future of companies report

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