Preparing For The New Storm Ahead
Many influential experts have been announcing the next crisis for quite a while now. What is your opinion on that?
It is in the very nature of economy to have the cycles - short-term and long-term economic cycles. We are still living in the longest growth cycle in the history, which naturally has to switch to correction at some point. So, it is quite reasonable to expect the downturn of the long-term cycle. The question, however, is not whether this growth cycle will turn negative, but what exactly will be the outcomes of that downturn. There is a new trend lately when it comes to distribution of outcomes - the so-called bi-modal distribution of outcomes. It manifests itself by producing either hyper-positive or hyper-negative outcomes, or sometimes both at the same time, triggered by some major event, such as an economic downturn.
When you say hyper-positive or hyper-negative, does that mean the effects would be stronger than before?
Exactly. Due to rapid advance in technology which causes significant increases of both speed and intensity of change, the outcomes of any change will be amplified and move with a dramatic speed. The only way to cope with such amplified effects is to invest in learning and using the technology itself. We have passed way beyond the point when it was possible to use just human wisdom to cope with all the effects of technology on the economy and society.
What percentage of society and businesses are ready for such speed of change caused by technology?
It differs in the different parts of the world. In the developed world, Europe is actually lagging behind this time. Asia, esspecially China, is able to test and implement technologies that were unthinkable just several years ago. All the advantages of Europe are also its disadvantages, when it comes to business transformation and technology implementation. Its mature democracy evolved significantly, but it causes the slowness of decision making when it comes to regulation, and support systems for growth, such as EU funds, which are not following the real dynamic needs of the private sector.
Is it only up to governments to establish those support systems?
Government is just one of the key stakeholders. But it is important to structure a balanced ecosystem of all major stakeholders - banks, financial institutions, universities and research centers etc. In some countries that is functioning very well, but not really in the majority of the EU countries. Businesses also have to take stronger initiatives and form more efficient associations and consortiums, working together and sharing resources, especially in research and development. They should also form their internal venture funds and support their internal innovation culture.
So, what would be the best advice for businesses at this particular moment? How to prepare for the next stage in the global economy?
The best advice would be not to waste their energy and resources trying to predict the exact timing of the next downturn, but to build their capacities to be able to act fast in the case of any scenario - good or bad, and to use the opportunity to position themselves fast as the leaders in what will be The New Economy, which is a common name for all the fundamental changes of the very nature of doing business.
Many companies have some innovation or incubation program and they think they will be fine. The fact is, most of those incubation programs didn't bring the desired results, except for creating some excitement for the employees. They should start practicing higher inclusion of all stakeholders in all processes, from board level governance, to R&D and other departments.
They should also think about re-distribution of risk, co-creation, integration of breakthrough technologies (AI, Data analytics, Robotics, Blockchain...) and other fundamental changes in the way they manage their processes. Also, defining a whole new way business and success is measured, is a crucial improvement needed by and large.