Last year, the people of the Middle East and North Africa raised their voices to drive regime change – in 2012, they were joined by many others, protesting over rising inequalities, austerity and lack of jobs, as well as history. It reflects a fundamental redistribution of power away from traditional institutions that have failed to deliver progress, towards communities and individuals. A shift that includes businesses increasingly stepping up to address societal challenges, often in partnership with public and non-profit entities.
Distributed networks and collaboration are becoming more important than ever, not only to address global issues, but also to create and capture value in a world where consumers and customers demand solutions and experiences, and increasingly have the tools or smart machines to create value themselves, potentially redefining whole markets. The business of the future will not be at the center of the playing field – the consumer will, as cross-industry competition and distributed production becomes the norm. Social technologies will be key linkages. Already permeating every aspect of work and life, they are becoming tools of creativity and productivity within and beyond the firm, as they empower employees and open networks to contribute – fast, because the speed of change is increasing.
Impending resource scarcity is driving tensions and protectionism as more businesses and consumers face the reality that consumption needs to change. New technologies that offer potential solutions are moving out of the lab into life, allowing us to radically rethink what resources we use and how we use them – jets fuelled by household waste and even seawater are coming soon. The privatization of space will bring new advances. Driverless cars may be legal on California roads in 2015.
It’s an exciting world of opportunity. But also one of challenge. The whole notion of value is shifting: Companies are no longer judged by profit alone, but also by purpose and contribution to society by their customers, employees and stakeholders. Profits won’t last if the company is not deemed to be relevant and legitimate by those that buy from them, or they can’t find great staff. In an overstressed world, time with family and friends or contributing to a healthier planet can be more valuable than assets and status. As value shifts, we are seeing an emerging ownerless economy, particularly among younger generations: One where sharing and renting provide what is needed and possessions are simply not necessary.
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But the young people contributing to changing our behaviors are worried, worried about their future and that of the planet: Will I have a job – and have the right education for it? What will be the impact of resource over-use? These generations will not see the same levels of social and economic advancement that their parents did, certainly in the developed world; possibly even in the BRICS and Beyond, although many more will join the emerging middle classes in the next two decades.
The world is going through a period of high instability and uncertainty, exacerbated by political changes, global economic slowdown, the continuing Eurozone crisis and social unrest, as well as a host of other fundamental changes that we outline in The Global Trends Report 2013 which are driving a more distributed world. It also stems from a human need for meaning and values, which are hard to define in a mutipolar world where trust in institutions that used to take the lead is rock-bottom. Instability and uncertainty, without clear, conscious leadership from business as well as governments, religions and communities, will drive tensions – tensions we are already witnessing today.
The challenge to our readers is to step up, understand the impact of the trends we outline for your organization and take action to prepare for the future today. So what does this changing world mean for financial institutions?
Banks are certainly not top of anyone’s “most popular” list. It’s hardly surprising, given their role in the ongoing financial crisis, as well as behaviors by some which have scandalized their customers and regulators, e.g. outsized bonuses, Libor fixing. Complex regulations such as Basel III, and talk of an EU banking union may not be the solution;some senior regulators suggest the need is to radically simplify, rather than add regulations. The financial system, from all perspectives, is broken. Regulators want change; businesses want new means of financing and the consumer wants alternatives. The “banks” of the future may not be banks. Some of the new financial power brokers we already know: Rapidly developing economy central banks and sovereign wealth funds. New state-run lenders are also emerging, notably export credit agencies and development banks lending on major infrastructure investments. But this is simply replacing existing lenders – more interesting are the alternative players and business models enabled by digital technologies. Remember bartering? It’s back – and it’s big. In 2011 over 400,000 companies worldwide bartered an estimated US$12 billion dollars of assets. Savvy consumers are swapping goods via hundreds of online sites. Alternatives to cash are proliferating: Think loyalty points, community currencies, social network currencies, BitCoin and coupons. Even if money is the medium of choice, digital is the way forward, as smartphone wallets and ebanking apps grow. At your local bank or store biometric hand readers, touchscreens and robots will become the norm, while smart appliances will allow you to order and pay for goods digitally. This brings a host of new players into the financial system, including telcos, social networks and software firms. Others, including retailers and crowdfunding sites such as Kickstarter, will be brought in by the unspoken “currency” of a connected world: Trust. In an increasingly crowded financial system the questions include: Will it be a cashless world? Probably. Will it be a simpler financial system? Hopefully. And of course, who needs banks anyway?
Thomas Malnight is Professor of Strategy and General Management at IMD. Tracey Keys is Director of Strategy Dynamics Global SA. Each year they publish The Global Trends Report (see www.Globaltrends.com).