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Future Perspectives
1 The 21st Century Business
Future Perspectives
are thought pieces with
The 21st
concise, focused insights
into important issues
Century Business
of interest to marketing
and business strategists.
For more information please visit The corporation is at a crossroads.
www.thefuturescompany.com
The businesses that we have grown
up with and the business models that
underpin them face deep challenges.
They are being reconstructed, from
within and without, by pervasive
technology. Their values, and the
values associated with work and the
workplace, are increasingly being
questioned. Their model of resource
use, of “use it and throw it out,” is
increasingly running up against
constraints of supply costs.
New ways of designing and managing
businesses, and new business
models, are inevitable.
What to do
Do you understand...
The whole The whole
What leading- How wider
context in life cycle
edge brands trends are
which your of your
and customers shaping the
customers products and
are doing in expectations
are using your services?
your sector? of your
products and
people?
services?
3 5
In our Future Perspective Food: The trends Climate change:
The World in 2020, we reviewed shaping food The effects of climate
some of the macro-forces that consumption are change are unlikely to be
were creating this squeeze on broadly negative on both the seen in day-to-day weather for
space and resources, and have demand side and the supply another two generations,
revisited and updated them side. On the supply side, the but there is increasing
briefly here:4 number of hectares per head evidence that the extreme
available for food production weather events across the
is falling, and the proportion globe are being intensified
1
Population: The world of agricultural land that is by climate change.
population has passed degraded is increasing. On the
seven billion and is demand side, as per capita
expected to reach eight billion incomes increase in emerging
by 2030. Most of those new markets and more meat and
people will be born in Asia and dairy produce are included in
we expect to see the rapid diets, demand becomes
growth of mid-size cities on more intensive.
the continent.5 But population
and resource consumption
4
need not be directly related. Energy: Demand for
energy is falling in richer
countries (because of
2
Water: A whole swathe efficiency and social change),
of countries and regions while it is rising in emerging
on both sides of the economies that are far less
equator are showing energy-efficient. Supply,
increasing signs of water meanwhile, is static or falling.
scarcity. Because water is The cost of renewables is falling
difficult to transport, its rapidly, but the transition from
scarcity tends to be a serious fossil fuels to renewables will be
local or regional uneven and disruptive, and the
phenomenon, as seen in impact of shale-based energy
California’s 2014 drought. will be a blip.
8
insurance and changes to the most significant changes in Digital technology:
supply chains. values at present is the shift Social relationships,
towards wellbeing, at both a communications and
The collision of these macro- personal and public policy level. management systems are all
forces means that, first, the hugely affected by the
current model of capitalism development of digital
7
is running up against limits Sustainable technologies. From an
on many fronts. We can see development: There is individual perspective, this is
counter-trends in different also an increasing focus increasingly about mobile
forms, such as identity on the principles of sustainable networks; from a corporate
politics, “slow” and “transition” economic development, which perspective it opens up
movements or increasing is about the fair fulfillment of monitoring, analytical and
interest in ideas of wellbeing needs within our planetary tracking functions, as well as
and holistic health. limits. Researchers have the ability to automate new
demonstrated a weak areas of work.
Second, these five macro- connection between economic
forces speak to the idea of growth and wellbeing.7 This current information and
the “VUCA” world (volatility, One effect is that economic and communications technology
uncertainty, complexity, business outcomes—including wave creates its own forms of
ambiguity).6 positive and negative abundance; we have moved
“externalities”—are being from an abundance of oil to
At the same time, there are assessed more holistically. an abundance of processing
two significant macro-forces power. The long-term business
that are likely to mitigate question is, “What source of
these effects. abundance will come next?”8
The idea that the corporate Manifesto, Umair Haque One outcome is a plethora
model, which has dominated makes a distinction between of proposals for change, as
for the last two generations, “thin value,”11 which creates discussed in the introduction.
has now reached a transition value by taking it from others, The clothing company
point is increasingly and “thick value,” which Patagonia talks about the
commonplace. Michael Porter creates meaningful, durable “Responsible Economy,”
and Mark Kramer, in an article gains socially, environmentally while others, inevitably, have
in Harvard Business Review, and economically. written about “Capitalism
said that companies had spent 2.0.” What that looks like is
too long simply extracting There are many reasons why still unclear, but some of the
value from their suppliers, a corporate model built on the characteristics are likely to
workers and the communities premise of continuing growth be a greater attention to the
in which they operated, and is reaching its limits. We live value of shared “commons,”
needed to share value with in a world of increasingly more diverse forms of
them instead, if they wished to saturated markets, with high ownership, such as mutuals
ensure their survival.9 resource costs by recent and co-operatives, which
historical standards, notably move beyond the shareholder
Geoff Mulgan, in his book in energy.12 The rate of return model, and greater use of
The Locust and the Bee, on technological innovation open knowledge as a source
framed a metaphor about may be slowing down, of innovation.15 Harvard
two types of corporations: the although this is contested.13 Professor Jim Heskett has
locust represented "predatory Also its argued that we are asked recently if we are
capitalism" and the bee moving towards the end of a moving towards a post-
“value-creating capitalism.” long financial shift, going back capitalist society, centered
Both types always exist in four decades, characterized around the creation and
market systems, and the by falling productivity, sharing of goods and services
center of gravity oscillates increasing debt, and rising that have marginal costs
between them. He argued inequality.14 In every sector approaching zero.16 Jeremy
that the share of the locusts there are high levels of Rifkin makes the same point
had reached a high and the economic concentration, in his recent book.
pendulum would swing back.10 restricting the opportunities
Similarly, in The New Capitalist for growth by acquisition.
The macro-forces outlined The second box (top left), lightly in terms of resource
above have been clear since is about managing external consumption to reduce
the Club of Rome published change. This tends to be resource flows by increasing
The Limits to Growth in through a risk management flows of data and knowledge.
1972.17 Although widely framework, assessing In this quadrant, businesses
criticized at the time, the potential external impacts on reimagine their markets as
base case model from The existing business processes being about delivering against
Limits to Growth has proved and mitigating risks. The real wellbeing needs rather
to be a fairly accurate guide left-hand side of the journey is than creating wants, thus
to outcomes in the characterized by a defensive retuning the business to new
40 years since.18 response to a changing approaches to innovation.
business context.
Over the past two decades, The internal configuration of
since John Elkington On the right-hand side of the the business is an essential
published his influential journey, we see disruptive platform for its external-facing
Triple Bottom Line approach, innovation that reconfigures business. Taken together, the
progressive businesses have current business models two right-hand spaces on
wrestled with how best to (see Exhibit 1). In terms the matrix represent the 21st
respond to sustainability and of the internal business century business. In the rest
resource issues.19 environment (bottom right), of this Future Perspective, we
this includes innovations such will unpack what that means
The typical sustainability as closed-loop production (for for how you understand your
journey starts (at the bottom manufacturing businesses business and construct it. We
left) by looking internally, at or those selling goods) and will explore six pillars that build
the elements of the business lean systems (for services the business of the future.
that it can control. The businesses).
elements of such programs
include measurement of inputs Finally (top right), when the
and outputs along the supply business engages actively with
chain, and can often include its external environment, it
“quick wins” such as reducing can create business structures
energy consumption. that allow it to tread more
2 4
Activity Activity
Severe weather, supply Shared economy,
chain disruption, raw collaborative
material or stock consumption, a shift to
shortages. values aligned around
wellbeing.
Outcome
Risk assessment Outcome
Optimizing models The company is
Expert consensus embedded in society and
Cost-benefit analysis has moved beyond to net
Aggregated beliefs positive resource use.
Activity Activity
Analysis of sustainability/ Migration to closed-
carbon/water impacts in loop production,
supply chain. network-based input-
output models.
Outcome
Supply chain redesign, Outcome
1 3
changes in procurement. The end of waste,
resource neutrality.
The business of the future understands that its different processes that respond to
implies a number of design parts form a single system, external change.
principles. It has moved from and uses information and
resource efficiency to resource communications to link the 4. From volume to value
neutrality. It understands system together.
its flows of value—not just The 20th century was the
of materials, but of data, of 2. From closed to open age of mass production.
knowledge, of participation. Increasingly, the 21st century
It is more outward-facing, The conventional business will be about reducing mass, in
seeing a changing external model is about ownership, both senses of the word, and
environment as a source of especially of patents and wrapping products in a tailored
potential rather than risk. intellectual property rights network of services. It is about
It is designed for resilience, that are regarded as sources doing more with less.
but also is more porous. In of competitive advantage.
short, it is a business designed The open business operates 5. From risk to opportunity
for a different world. If this in a more porous way, letting
seems like a familiar list, what the outside world in and Instead of treating its external
does it look like in practice? listening to and building environment as a series of
mutual advantage. threats, managers will see the
We believe that the 21st century external world, and especially
business will have six critical 3. From fixed to fluid the regulatory landscape,
characteristics. Briefly put: as a set of signs about the
Businesses are dominated boundaries that society
1. From disconnected by fixed processes set by places on markets. Regulation
to networked management models of becomes a platform for
monitoring, control and innovation and change.
Whatever the business direction. It makes them
rhetoric about seamless unresponsive and inward-
integration, businesses are looking. The fluid business
often internally disconnected instead takes its rhythm
silos separated by function. from the outside world, using
The networked business budget, planning and other
becomes a source of
competitive advantage. It’s
about who you know not what
you know—or rather about
whom is in your network, and
who trusts you to do business
with them. In their book
Wikinomics, Don Tapscott and
Anthony Williams write about
the rise of what they call “mass
The 20th century business The characteristics that make collaboration” as a driver of
was like a castle: a mostly the open more valuable than business innovation.31 The first
closed world where goods and the closed are, in summary: pillar described a structural
people arrived through a set shift towards flatter, networked
of carefully controlled gates, ■■ trust organizational structures;
and left the same way, counted this pillar describes the way
in and counted out. The new ■■ free28 (think of the global knowledge starts to flow
model is more ecological—a commons and open source around and between
model of systems that interact, ideas)29 such businesses.
and exchange resources and
ideas that sustain each other. ■■ sociable (cooperation, The management thinker
As Hagel and Brown argue in community, mutuality) Charles Leadbeater
their report The Shift Index, summarizes this in his recent
sources of economic value are ■■ emergent (crowd sourcing) book We-Think. “Innovation,”
moving from stocks of capital he writes, “flows from
and knowledge to flows of ■■ diverse (of perspectives, collaboration as much as from
new knowledge.27 interpretations, heuristics jealously guarded commercial
and predictive models)30 secrets. The web’s significance
is that it makes sharing central
It is a move to a relationship to the dynamism of economies
economy, in which your ability that have hitherto been built
to be a “social business” on private ownership. In the
“Markets without
The way the 21st century Without laboring the point, this regulation would
business thinks about risk explosion is partly because
and acts on it will become these businesses have
not have delivered
a significant source of tended to see risk as creating unleaded gasoline,
competitive advantage. In the business and social costs,
autocatalysts or
last 30 years, the bureaucracy and risk management as a
of risk has mushroomed. As system either to be gamed seatbelts and
the Bank of England’s Chief in the search for fine lines of airbags, nor would
Economist, Andy Haldane, has competitive advantage, or
noted, the Basel I agreement, to be evaded.50 So it is worth they in isolation
the “first-ever genuinely restating the obvious point: have delivered
international prudential that markets are always social
regulatory agreement,” ran to constructions, as writers as
clean air to London
30 pages.49 Basel III, agreed different as John Kay, Ha-Joon after the killer
in 2010, runs to 616 pages, Chang and Michael Sandel
smogs of the
although Haldane notes have reminded us.
that this “understates its Kay writes, “Markets work, fifties.”52
complexity.” While banking is but not always perfectly…
obviously an extreme example, Social and economic Sir Mark Moody-Stuart,
we have moved from guiding institutions manage the Former CEO of Shell.
principles, in effect, to rule- transmission of information
based systems. in market economies.”
From a business perspective, An added dividend for brand The New Economics
then, attracting a relationships is that these Foundation’s theory of Five
disproportionate number intrinsic values are deeply Ways to Well Being is similarly
of “perfect consumers” as held and long term, whereas built around intrinsic values,
customers comes with a cost. extrinsic values tend to be and is well-evidenced.62
It effectively raises the external short term and lightly held.
costs of doing business, and Communicating around This represents a deep shift
increases the social and intrinsic values creates for both brand and marketing
environmental impact of a deeper, more durable messages, moving them
your operations. brand relationship with your away from engagement with
customers. As argued in a products or services and
The other business imperative recent WEF/Deloitte report, towards social and
here is the engagement that The Consumption Dilemma, personal engagement.
an individual has with many it also creates a platform for
products or services is often transformational change.60 There are risks here:
vanishingly small. If you believe companies which change
that you are a brand with What does this look like their language without
purpose, you need to be able in practice? Some of the changing their behavior will
to engage people more broadly messaging in Unilever’s be found out—in the same
to achieve that purpose. innovative new Project way that companies were
Sunlight platform is talking criticized for “greenwashing”
Understanding this to us as citizens, reinforcing rather than developing
distinction between intrinsic intrinsic values and wellbeing- sustainable principles.
and extrinsic values enhancing practices.61
supports the development
of products, services and
brands that reduce the
footprint of both business
and individual, and increases
the level of the individual’s
wellbeing-based satisfaction.
Environment-People) helps
to bring these into focus for
a business.63 It is clear that
this is a journey that involves
considerable change for
most organizations. Task
Structure
As you set out to transform is not a new insight—it Costs and customer
your business or your function probably originated with Peter experience are both driven
into a 21st century business, Drucker—but it is one that by connection. The only
these three guiding principles businesses find hard to act on. reliable way to manage cost
will act as a framework to tell reductions while improving
you if you are on the right path. Intrinsic values trump customer experience is by
extrinsic values. For your taking a whole-system view of
Culture is more important staff and your customers, the your function and service, and
than strategy. The 21st route to a high-performance by identifying the ways in which
century business is driven business is through intrinsic your customers can “pull” value
by its people, and its people values. For staff, these values through your organization. To
end up guiding the strategic create trust and motivation. spell this out, many customer-
choices that need to be For customers, intrinsic experience models are still
made. The evidence suggests values represent their whole driven by the structure of the
that organizational culture identity as citizens, not just business and its technology
is a far more effective lever the fraction that interacts with platforms rather than by
for creating productive and your products and services. an understanding of what
profitable organizations Because such citizen- customers need or expect.
and workplaces than any customers are more socially As we reach the end of the
amount of strategy, especially engaged, they help you achieve savings that can be made
in turbulent business your goals as a sustainable through the introduction of
environments. Businesses business. And understanding technology, the only reliable
with engaged workforces the underlying intrinsic way to reduce costs is to
outperform those without wellbeing needs of your redesign systems so you
by a significant margin. And customers puts you one step are managing them against
when employees are enabled ahead of your competitors who customer value. This resolves
and energized, as well as still focus on creating wants an issue that's normally seen
engaged, profit margins are and driving extrinsic values. as a dilemma: in the traditional
three times as high as those mindset, customer experience
of companies with low levels costs money and cutting costs
of engagement.66 The idea damages customer experience.
that culture eats strategy
The big change, sitting across And this is the reason why the As we head towards the
all of this, is from extrinsic transition to the 21st century 2020s, many societies are at
values to intrinsic values, business is both deep and a tipping point. Businesses
and this is true of both your disruptive. It is being shaped that don't change will find
customers and your staff. both by structural factors themselves beached by the
Mounting evidence shows that and by changes in people’s changing tide.
we are moving away from the perceptions and values. On
late 20th century consumer- their own, the macro-trends
driven world, where extrinsic reviewed at the start of this
values were celebrated and report—resources pressures,
promoted, to a world of climate change, and so on—
internally-driven values. would represent a significant The big change,
challenge to business as usual.
We are, according to But when our personal and sitting across all
analysis of U.S. data by the social values shift as well, and
futures researcher Hardin shape the way we respond to of this, is from
Tibbs, on the cusp of a those changes, the challenge
significant values transition becomes critical. We already extrinsic values
from “moderns” to “post- see businesses that struggle
materialists” or “cultural to recruit staff because their to intrinsic
creatives” who are more values and their purpose are
intrinsically driven.67 Similar looking backwards instead values, and this
shifts are being seen in of forwards. Businesses
Europe. This is more true in that don’t adapt to the new is true of both
emerging markets. imperatives will start to
struggle to recruit customers your customers
as well.
and your staff.
1
Redesigning a business is something Understanding the whole
context in which your
that typically starts with the CEO and customers use your product
or service
the board. But it’s possible to start the
learning process within a category, Going beyond the typical
market model, you need to
function or division. Jonathan Brecher, understand the whole life of
your product or service in the
quoted earlier, changed the culture of the
lives of your customers as
marketing department at SAP when he citizens and consumers, up to
and including its cultural value
became CMO. and meaning. This involves
using human and cultural
We recommend four places to start insight to understand the
whole picture and identify
that make the journey visible and underlying needs. The
tangible, create learning and alignment, purpose: to understand
aspects of your product or
and that are likely to deliver immediate service over its whole life
cycle that may be hidden to
business benefits. you, but have a high value
to your customers, or that
you take for granted but
We have worked with companies to your customers dislike. For
example: research into urban
redesign their businesses to succeed in shared car services found that
the 21st century, and we will be delighted one of the things that people
liked most was that it sparked
to talk to you about the challenges facing new conversations with their
your business or category. neighbors, which contributed
to their wellbeing.
Geoff Mulgan,
The Locust and the Bee.
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The 21st Century Business was written by Andrew Curry and Jules Peck.
Production was by Tomi Isaacs, and design by Augustus Newsam.