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Finding Clarity (and Growth) In an Age of Transformation

Wharton School Publishing introduces two new titles that address global business forces.

Powerful Times: Rising to the Challenge of Our Uncertain World
By Eamonn Kelly

The world has always been uncertain. But, says Global Business Network CEO Eamonn Kelly, not like this.

Technological, financial, social, economic, cultural, and political systems are accelerating towards ever-greater complexity and interdependence, says Kelly. The changes we see are paradoxical: as humans, we seek patterns, but our simplifications obscure more than they clarify, and our "either/or" mindsets risk catastrophe. No single actor—no person, institution, ideology, marketplace, religion, region, or nation—is powerful enough to control the future. Meanwhile, deep, fundamental dynamics may be unraveling much of what we've taken for granted since the Enlightenment dawned some 400 years ago.

In his new Wharton School Publishing book Powerful Times, Kelly aims to help leaders make sense of this extraordinary moment in history, and safely navigate its shoals. That's no small goal. But Kelly brings a powerful tool to bear: the scenario planning approach GBN has used to help hundreds of companies and governments manage the future.

Paradoxes Create Dynamic Tensions

Scenarios organize perceptions about the future into stories that are easy to understand and work with. They make it easier to consider alternate futures and reflect diverse perspectives. By recognizing the potential for sharp discontinuities, they encourage decision-makers to consider the unthinkable—invaluable in an era when the unthinkable is occurring with frightening regularity.

To frame his scenarios, Kelly identifies seven "dynamic tensions": paradoxical forces he sees reshaping the world. For instance, the secular worldview continues to spread, largely driven by "rational" business practices. But, of course, fundamentalism is also resurging—from the madrasahs of Pakistan to the megachurches of California. Progress in computing, biotech, and nanotech is accelerating. These fields are becoming "mutually catalytic," and promising to transform human beings at the most fundamental levels. Meanwhile, the "pushback" grows.

From a geopolitical standpoint, while the U.S. is positioned to retain military dominance, it faces new vulnerabilities, both perceived and real. Meanwhile, writes Kelly, overall global prosperity appears to be widening. But 21 countries lost ground in the 1990s—and, even in the developed world, millions feel more vulnerable than they have in generations.

Some of Kelly's dynamic tensions are less familiar, but also vitally important. For example, while value will continue to migrate towards the intangible—services, experiences, relationships—improving physical infrastructure will take on ever greater urgency. The world is growing more transparent, thanks to a deepening web of computers, networks, sensors, and surveillance systems. However, "conspiracy theories and falsehoods will travel the world instantaneously," and the technologies of transparency will also promote more sophisticated theft and fraud.

Meanwhile, beneath it all, arguably the greatest dynamic tension of all: the troubled relationship between humans and their planet—a relationship complicated by massive migrations, demographic shifts, and the intertwined issues of energy and climate.

For some, successfully navigating these tensions may seem unlikely, if not impossible. However, Kelly is reasonably optimistic. He sees significant progress in two key areas: "how we relate—the realm of governance—and how we create—the realm of innovation."

Top-down, Taylorist organizations are being supplanted (or at least supplemented) by structures that are more fluid, self-organizing, decentralized, and collaborative. In Kelly's view, the move from organizational "citadels" to "webs"—while not inexorable—is currently moving more rapidly than many decision-makers recognize.

Kelly also envisions the gradual emergence of de facto "global governance." Not sinister black helicopters or overweening centralized bureaucracies, but the organic result of "experimentation across a diverse range of processes, approaches, policies, actions, and actors that are overlapping and interlocking in a complex and evolving system."

Down at "street level," Kelly uncovers some surprising innovations in local governance. In British Columbia, 160 randomly selected citizens recommended important changes in the province's electoral processes. In Zeguo, China, the local Communist Party secretary offered detailed briefings about several proposed municipal projects to 257 citizens, then polled them on which projects should proceed. In Brazil, Guatemala, and Mexico, enlightened local governments are experimenting with new ways to involve citizens year- round, not just on election day.

Meanwhile, notes Kelly, we'll increasingly look beyond large Western corporations and institutions for tomorrow's most important innovations: those that improve sustainability, extend learning, and address the unmet needs of 4 billion people. Many of them will come from "places finding their power... those parts of the world that are ready to 'come of age' as creators, to be exporters as well as importers of breakthroughs."

Three Scenarios for the Future

Which brings us to the scenarios themselves. Kelly outlines three in detail. The first, "New American Century": "The U.S. employs a combination of diplomacy, military power, and market-driven incentives to transform the global order... Bold, risky moves pay off... faltering steps toward democracy in Afghanistan and Iraq become more surefooted..." Europe and China back America's geopolitical leadership, competitive capitalism prevails, and "the global economy is operating by a clear and shared set of rules based on the Western model." Even in 2020, however, the world faces deep, unaddressed problems of equity, health, water access, and environmental sustainability.

In a second scenario, "Patchwork Powers," Kelly posits a spaghetti-like future, where power and influence are spread across many regions, nation-states, and international bodies. China comes of age: economically, scientifically, and militarily. The E.U. becomes "cogent and strategically vital," even as Europe maintains steady, unspectacular economic growth. The U.S., weakened by economic fragility and chastened by overseas failures, reluctantly accepts a new, multipolar global order.

Kelly's third scenario, "Emergence," may be the most radical. Conventional institutions largely fail: neither the U.S. nor the U.N. can meet their new challenges. Tensions within the European Union become insurmountable, and China suffers successive waves of internal political and cultural strife. Meanwhile, coherence "of a sort" emerges from the bottom up. As nation-states fade, cohesive city regions vie for influence. Innovation flourishes locally, where people and communities find new, low-cost ways to solve their problems. The bad news? Growing international lawlessness; more failing states; and the growing risk of bioterrorism: for every "next Singapore," a "next Somalia."

All three scenarios posit major shifts in economic power; even New American Century envisions China achieving unprecedented success, albeit by Western rules. In fact, the emergence of new regions is a theme that recurs repeatedly throughout Powerful Times. Observes Kelly: "Some of our most basic assumptions about the rules of the global economic game will increasingly come under attack in the coming decade."

The 86% Solution: How to Succeed in the Biggest Market Opportunity of the Next 50 Years
By Vijay Mahajan and Kamini Banga with Robert Gunther

One such assumption appears especially obsolete: the belief that profits can only be made in developed markets. Thanks to the work of C.K. Prahalad (The Fortune at the Bottom of the Pyramid, 2004), Stuart Hart, and others, many companies are abandoning this view. In fact, some now see emerging markets as their most promising source of rapid, sustainable growth.

If the opportunity is immense, executing on it is immensely challenging. How do you sell electronics without reliable electricity? How do you distribute consumer goods without reliable transportation? What does your brand mean to your new customers? How do you introduce innovations that align with their deeply held values and beliefs?

In The 86% Solution, recently published by Wharton School Publishing, Vijay Mahajan and Kamini Banga offer specific, realistic guidance for profiting in developing markets—and some very creative strategies.

The title refers to the 86% of the world's nations with average annual per capita GNP below $10,000. Begin by designing products that reflect local environment and culture, say the authors. In building a car for rural India, Hindustan Motors recognized its true competition: not Ford, but the traditional cattle-drawn bullock cart. Hence, the boxy Rural Transport Vehicle: slender enough for narrow streets, with a tight turning radius, high clearance, excellent shock absorbers, eight gears, and folding seats for hauling up to two tons of cargo —or 20 people.

How do you sell "time-saving" laundry detergent where hand scrubbing is a powerful symbol of familial love? You reformat it as a bar of soap, adding superior hard-water performance. Now, mothers throughout the developing world can continue to show their love in time-honored ways—and get cleaner clothes, too.

Many obstacles can be recast as opportunities, say Mahajan and Banga. For instance, where infrastructure or technology doesn't exist, you may have an opportunity to "leapfrog." (Classic example: the breakneck growth of wireless networks throughout Africa, where reliable wired phone service is scarce.)

Similarly, you can sometimes gain competitive advantage by building your own distribution systems, or effectively leveraging idiosyncratic channels that already exist—such as the tiny shops known as sari-sari stores in the Philippines, tiendas de la esquinas in Mexico, and paanwallas in India. Create multiple levels of distribution, the authors recommend—and exploit temporary "distribution bubbles" such as carnivals and market days.

Finally, don't neglect the "ricochet economy": global social networks connecting emigrants with friends and family back home. Increasingly, companies are marketing products that can be paid for in North America, but delivered to relatives half a world away.

Mahajan's previous work has earned a lifetime award from the American Marketing Association. So it's not surprising that he's especially strong on marketing issues. In particular, he carefully walks you through the tradeoffs associated with localizing existing brands; buying and harnessing local brands; or building new local brands from scratch.

Diverse Emerging Markets

Unlike some recent writing in this area, The 86% Solution goes beyond reaching "the poorest of the poor." The authors certainly introduce techniques for marketing to impoverished customers. (For instance, they discuss single-use packages, a.k.a. sachets, which account for roughly $1 billion of Hindustan Lever's sales on the Indian subcontinent. That's roughly equivalent to the revenues of leading Indian IT outsourcer Infosys.) But they also offer guidance on accurately segmenting emerging markets, so you can reach fast-growing middle classes and the newly affluent.

The 86% Solution's diverse case studies range from room-temperature "ready-to-eat" meals to MTV's localized programming initiatives ("The Osbournes" makes even less sense in India). "Day-in-the-life" snapshots add humanity to the authors' strategies and statistics. Here are devout Muslims wearing chadors and plastic surgery bandages. Photographers earning their livings with battery-operated HP cameras and printers. Unilever distributors working on foot in rural villages. Here, too, are South Koreans watching the flat-screen TVs built into their LG refrigerators (which also contain web-connected video cameras, so they can oversee their children from work).

While all these customers fit into the 86% sector, they obviously inhabit very different markets. Still, there are commonalities. For instance, most emerging markets are disproportionately young—and more brand-aware and quality-sensitive than you might expect.

Emerging markets are evolving rapidly, and in certain respects, their evolution can be predicted. Mahajan and Banga offer seven strategies for "developing with the market": from uncovering opportunities associated with the "growing pains" of development, to exporting locally-made products back to North America.

Simply stated, The 86% Solution heralds a new era for western business leaders: the moment when you can go beyond watching powerful new markets emerge, and start profiting from the opportunities they already offer you.