Our last post overviewed a recent article in the McKinsey Quarterly that discussed the five forces reshaping the global economy that every executive has to grapple with, which left the reader with as many questions as answers. This post will attempt to shed some light in the directions the answers may lie.
The following are the forces that were identified:
- Growth and Risk Management in Emerging Markets
Multinationals will have to get in on the ground, attract local management talent, and let the local management talent craft an appropriate strategy for the local market. The multinationals that don’t do this will likely miss out on most of the growth opportunities that are available as the current economic climate, coupled with declining population growth, will significantly limit growth opportunities in developed markets. As a result, your supply chain leaders will be working considerably with local talent in analyzing product costs and sourcing for remote developments.
- Labor Productivity and Talent Management
Multinationals will have to look to developed countries for R&D talent, engineering capability, and innovation and focus on grooming talent in emerging markets to manage the new breed of talent available to them. In addition, management will have to double down on new technology, process innovation, and alternative delivery models to maintain productivity levels with a decreasing workforce in developed economies. Sourcing teams will continue to become global. At first, the team leaders will be in the developed world, and the supporting analysts, with the technical and mathematical skills, will be in emerging markets. (A couple of big consultancies are already very successfully applying this model today.) As time goes on, your leaders will move to emerging markets (following IBM’s example), and the leaders of tomorrow will be just as likely to be in Shanghai as Chicago or London.
- Global Flows of Goods, Information, and Capital
Multinationals will have to learn how to maximize efficiencies in existing trade flows as current global economic conditions will likely slow down the introduction of new channels and opportunities. They will need to adopt trade management software to automate manual processes, decision optimization to optimize carrier and route selection, and “spend” analysis to analyze trade data to identify emerging trade patterns that they can take advantage of. Your supply chain will increasingly see solutions developed by Asian multi-nationals, like Algorhythm and Zycus, implemented by local consulting powerhouses, like InfoSys and Wipro.
- Natural Resource Management
Companies will have to design new products with resource and environmental management in mind, or risk incurring additional costs, and bad press, in the future. Even if the up-front costs are higher, decisions not to use more environmentally friendly materials and processes will have to be very carefully considered. In addition, identifying the effects of forthcoming regulations in India and China will become a top priority.
- The Increasing Role of Governments
Companies will have to continually analyze the potential impact of major government programs on the economy and GDP and determine the best markets in which to pursue not only new product introductions (NPI) but new product development (NPD).