Changing demographics will mean changes to regional, national and global markets, changes to the ownership of private and public companies, changes on how society deals with its social responsibilities, and changes to the balance of economic and hence political power. 

In short, this is a period of major economic and social transformation that will create many opportunities, but there will be winners and losers.

Western world baby boomers are growing old and this will have many major impacts on our society and economy. In the area of business ownership, the very high incidence of privately owned businesses in developed economies will mean that many baby boomers will be looking to exit their business within the next decade (or sooner). The value of businesses that will change ownership is extraordinary.

The aging population will put increased pressure on public funding particularly in the health care and aged care areas, and new ways of both delivering these services and financing them will be a focus for governments.

Labor markets are experiencing a growing shortage not only of skilled tradespeople, but also in management ranks. This can be satisfied in some part by a labor force from emerging economies, which means a growth in outsourcing and greater migration. Traditional views of when we retire will also change as we live longer and want to remain active in some capacity till later in life. This will be accommodated by many employers who will use technology to allow extended and flexible working arrangements.

Our aging populations are saving for retirement and there is substantial growth in funds under management. At the same time, there is greater competition amongst fund managers to acquire good assets. Capital markets are changing and private equity is growing. Public infrastructure will continue to become a target asset for funds, and with it there will be growing pressure for regulatory protection of the service level obligations to users (who are also the electorate). In emerging economies, locally owned assets will become attractive to investors as political stability reduces country risk, and growing domestic markets reduce commercial risk.

There is a changing of the guard in terms of national economies. We are all aware of the growth of China and India as powerhouse economies and the pressure being experienced in some sectors of developed economies. This trend will continue and it will not be restricted to India and China.

The ongoing problems of the lack of skilled workers, the Generation X phenomena, the increasing underlying cost of production differentials, and the ballooning costs of maintaining an aging population will put growing strain on western economies.

For the emerging economies there are the clear cost advantages (although at a labor level this will reduce over time), a depth of well qualified, educated and hungry young managers, a growing knowledge base and a progressively wealthier domestic market.

However, there will be further changes within national economies. Economic power bases will not be necessarily driven by natural resource bases or labour markets but by financial centrers and centers of Intellectual Property Rights.

One major consequence of the growth in the emerging economies is the rising number of new consumers with mid-to-high disposable incomes. The impact of this on demand for goods and services is one thing; the additional strain on the environment caused by more cars, more energy consumption, more carbon emission, and so on will be significant.

International trade will flourish and the real growth will be in services and high value-add products rather than resources. It seems certain the “big boys” are just going to get bigger. Multi national corporations (MNCs) have an insatiable need for growth and will create their own opportunities in emerging markets. They have the capital, the resources and the need.

Their continued expansion will be both in terms of acquiring new markets and expanding production capacity in lower cost countries.

For privately owned businesses, major opportunities to trade internationally will continue to open up. Global communication systems are now more reliable, more cost effective than ever and most importantly they are ubiquitous. You no longer need an overseas operation to find and do business in offshore markets.

Free Trade Agreements, deregulation and technology are all opening the way: privately owned growth enterprises will increasingly look to export their products and services; or, to outsource either some or part of their production or back office operations to low cost countries. While the advantages of cross border business are attractive, both the strategy and the implementation must be right.

The amount of money people have to spend will increase substantially over the next decade. Who we sell to, and what they want, will change dramatically. Coupled with this, an aging population, immigration, relocation, changing social structures and different life priorities, will make understanding what consumers want increasingly difficult.

People with money to spend will know much more about want they want (internet information) and the best places to buy. One thing for sure, customers are not homogenous, they all want something different, and an assumption that one size fits all will not work well in the future.

The need to segment customers and track their spending behavior and preferences will become mission critical. Customer loyalty programs, customer relationship management systems, demand prediction systems (knowing when your customer is thinking about buying) and personalized offerings are all going to play a very important part in the future.

WWW - three letters say it all. Businesses of all sizes can now put up their electronic window to the world. Market space, whilst not replacing the market place, certainly complements it. The on-line world has dramatically changed the way people do business in both B2B and B2C.

On-line marketing is growing at far greater rates than traditional electronic and print media. This area is a new art and many businesses simply have not come to terms with its power or indeed, how to exploit it. E-commerce allows business to be done on-line. Secure payment systems have removed consumer concerns around buying on-line. Enhanced web sites have made ordering easier and more intuitive.

Communication networks and greater bandwidth have made this process faster, and the use of video is giving the on-line customer more information upon which to make their decisions. A major trend is the emergence of wireless broadband and the camera capability of mobile phones. 3G (wireless broadband) is going to make video and high-speed data readily available to mobile phone users around the world, providing a new and even more convenient way to reach billions of consumers over the next five years.

Business is coming under increasing scrutiny. We have just experienced a decade of corporate collapse from corruption, and this activity has forced regulators to tighten up significantly in all areas. Whilst the pendulum will swing back, it has not finished swinging in this direction yet; there will be more scrutiny of public and privately held companies in the future.

The concept of Corporate Social Responsibility is now a major agenda item. Why is this so, and what does it mean to a privately owned business? The escalation of MNCs into gigantic proportions will result in even greater examination. Overseas businesses expanding into local markets will create tensions. Environmental concerns will continue to mount. The disparity in the distribution of wealth will generate pressure at many levels, social and political, as well as economic.

Religious fundamentalism will aggravate the divide between people and exacerbate the conflict between democracy and capitalism on one hand, and the alternative political and economic systems on the other. As the global village grows into a global city we will see some of the challenges of traditional urbanization. Certainly the accepted traditions within each country (customs, laws, how business is done) will have to deal with the international norms and practices of the ‘invaders at the gate’. This will create conflicts.

Wherever there is conflict there will be calls for greater examination. Businesses of all sizes will be subject to demands for more corporate social responsibility. This translates into the need to be transparent, espouse good business ethics and be ready to contribute in positive ways to help ameliorate the social disruption these various changes will cause.

Governance will become the catchcry for accountability, and it will not just be the regulators who will be placing demands on business. Expect employees, customers, suppliers, financiers, environmentalists, welfare groups, consumer groups and other stakeholder groups to take a keen interest in corporate responsibility.

Technology is without a doubt the most significant driver of change in business today. Information technology, manufacturing technology, internet protocol technology, bio technology, nano technology – where does it stop? It doesn’t, but if businesses cease to adapt and fail to take advantage of technological advances, they’re dead in the water.

Technology, it has been said for more than a decade now, is changing the way we live, work and play. How will this translate to the way we do business? Production processes, employee management (and flexibility), marketing, customer service, service delivery, support functions and every aspect of business will change – and what’s more important and very challenging, it will continue to change. Utilizing technology will no longer be a source of competitive advantage because it is so readily available to competitors. It will be a source of competitive disadvantage if a business falls behind in the utilization of technology.

Whilst one of the management challenges is managing technology risk and making decisions on technology investment, there is a greater challenge in managing the changes in your organization that constantly evolving technology will bring. People do not like change and there is usually a resistance to doing things a new way. Smaller organizations, fleet of foot, flexible, and not committed to major technology platforms that rapidly become legacy systems, can punch well above their weight if they get their technology decisions right.

A major trend with all products and services is commoditization which is substantially the result of technology. Once upon a time (not so long ago) products were made by tradesmen and crafts people – people with skill and a high level of mastery in their work. Mass production and the division of labor, i.e. breaking a production process into smaller tasks and using technology to automate these tasks, means that the end product has less personal mastery in it and can be duplicated by competitors using technology.

Add to this shortening product life cycles, and a much quicker time frame from product concept to market, and it means that today’s unique product will have far less time to be exploited on the market before “me too” products arrive.

The same story applies to the services industry. Individuals with knowledge that they use as a vital input to the delivery of a service, are being replaced by computerized knowledge systems, on-line data bases, voice recognition systems and a vast array of other technological advances. Even professional services are facing pressure from commoditization as lawyers, accountants, architects and other professionals use computerized systems to deliver much of the service they provide.

The key to future success in competing with commoditization lies in differentiating your offering with customer service, and using technology to achieve this. The key words in the future will be integration and interactivity. Integration will be in the development of on-line communication within an economic community (an eco system), i.e. suppliers, customers and employees all being networked and working together. Interactivity is dealing with customers on-line in real time so that they can get customized (as against personalized) service whenever they want it.

In an environment of changing consumption patterns from an increasingly diverse customer base, commoditization of products and services, the need to exploit technology, growth in internal trade, growing competition for a skilled work force and increased corporate scrutiny, making decisions is going to take a more considered approach.

The growth in available information will help, because we will know more about our business, more about our customers, more about our suppliers and more about our competitors.

Information will not be just financial. Non-financial information such as activity analysis will be available. This information needs to be analyzed fully so that decisions are based more on facts than gut feelings. Of course the first challenge is converting data overload into valuable and meaningful information. Management information systems that provide (near) real time information to executive management and to middle managers responsible for day to day operating decisions will be vital.

The way strategy is being developed will be revolutionized. Traditional approaches to strategic planning are not sustainable and are being replaced. The days of going offsite and doing some navel gazing before setting ‘the five year plan’, will be replaced by a strategic decision making framework with much more focus on reacting to market changes as information becomes available. Long term direction with short term tactical flexibility will replace the five year plan juggernaut.

Management will need to have a very clear understanding of what business they are in, where they are competitive, and be ready to respond to opportunities and threats as quickly as they emerge. Being in touch with the market and being flexible and responsive are the key elements that will underline the strategic decision-making framework.

Where will the next generation of business leaders come from? As the baby boomers exit their businesses who will buy these. As MNCs get even bigger who will manage these? As the work force in developed economies ages, how will we get the people we need from an ever-diminishing talent pool?

Whilst there is no doubt that the next generation of managers will be well educated (MBAs galore) is there going to be enough of them to meet the demand? And are they sufficiently driven to want to do this? Management is going to have to deal with a range of issues in managing people over the next decade. We have a work force that seeks a different career path; they want job flexibility, they get bored with repetition and they prefer new roles and new stimulation to accepting a career position with a single employer. They are going to need childcare, they are going to litigate on termination and there is just not going to be enough of them.