We’re on the cusp of something big. But we’re not talking about the cliched “new normal”—we’re heading into the next economic era, which will be shaped in part by pandemic-induced disruption, as well as ongoing geopolitical turmoil and the advancement of paradigm-shifting technologies.
Untangling these knotty issues will require a mindset shift because our brains are wired to believe tomorrow will look similar to today. In the past, this presumption has been more or less a safe bet. However, we’re entering a state of multi-faceted disequilibrium, with the waves of change hitting faster and harder at an accelerating rate. We must adjust our thinking accordingly, or risk being swept up in the storm.
We’re not in Kansas anymore
Several factors have led us to this critical inflection point, including high inflation and uncertain market conditions coupled with (still) record-low unemployment and dizzying advances in technology. It’s not the first time in recent history we’ve encountered turbulence; there was the dot-com bust in 2000 and the global financial crisis in 2008. But what we’re approaching now is not your standard downturn. And while the red flags that signal a potential recession have indeed been raised, business leaders cannot respond to these indicators as they might have in previous times.
Inflationary concerns and fears of a slowdown in consumer spending are driving too many business leaders to focus on the short term at the expense of taking a longer-term view. But by playing the long game, businesses will stand a better chance of clearing the next decade’s oncoming obstacles, including deglobalization, the emergence and application of new dimensions in tech, and increasingly complex labor force challenges.
As the adage goes, we can’t control the wind, but we can adjust the sail. Adjusting and adapting is the bare minimum—the leaders who can do so with speed and at scale are the ones who will end up on top.
Disruption for days … weeks, months, and years
When over 4,000 CEOs were asked what economic disruptors were likely to have the biggest impact on their organization’s profitability over the next 10 years, 52% cited labor and skill shortages, while 49% said new and emerging technologies, followed closely by supply chain disruption at 43%. The operative word here is likely—it’s human nature to use the past to help predict future events (and mitigate risk), but even the most educated guesses are still guesses and should be taken with the proverbial grain of salt.
Our takeaway? With so much disruption on the horizon, companies will need to completely rethink their approach to innovation to stay competitive and leading in their respective industries. Innovation is just one of many topics we’ll explore as we continue sharing insights about the next economic era. In the meantime, here’s what we know to be true about the major forces shaping our future:
- Innovation: Successful innovation efforts begin with clear ambition and intent, but the nature of innovation opportunity is shifting as digital drives heightened change. Focusing the bulk of your investment on core innovation—your existing products/services for existing customers—will all but guarantee disappointing ROI.
- New and emerging technologies: Despite the wave of artificial intelligence (AI), machine learning (ML), and other evermore sophisticated tech, we’re ironically in an era where people need to be at the center of every executive team and business decision. Hint: identify what needs to be improved in the way your people work together, then figure out the tech.
- Labor force characteristics: As the labor force continues its steep decline, the skills gap widens—but that’s not the only trend shaping the future of the workforce. From a more dedicated stance on climate change and renewable energy to swift, meaningful responses to emergent social issues, expectations are rising across the board as employees and consumers alike seek more corporate accountability.
- Deglobalization: It isn’t the first time we’ve heard rumblings about deglobalization, and although we don’t subscribe to the notion of total deglobalization, executives should take note that the trend is accelerating. As a result, they’ll need to figure out how to navigate the pendulum swinging back in the onshore direction.
So, how will the next economic era manifest? Some aspects already have, with further changes and challenges ahead. That means the time to seize opportunities to adjust future strategies, capabilities, and ways of working is now. Even organizations that aren’t directly impacted by the shifting tides of disequilibrium will feel the downstream effects and pressures and must be prepared to act.
At Navigate, we prefer to take a glass-half-full approach. Yes, the future is riddled with uncertainty and yes, that can elicit pessimism. But we’re here to help you navigate the ups and downs, victories and setbacks. Over the coming weeks and months, we’ll unpack what these economic impacts mean for your business functions and their leaders. Stay tuned for more.