2022 - A Consequential Year
Speaker's Corner - Issue 1
“There are centuries in which nothing happens and years in which centuries pass” – Homero Aridjis, Mexican novelist and poet
I suspect future historians will describe 2022 as the end of an era that began with the collapse of the Soviet Union in 1989. During the ensuing decades, financialized capitalism and neoliberal principles of deregulation, privatization, and free trade displaced the interventionist government policies of the 1930s; economic considerations generally outweighed national security concerns; globalization created new free-trade zones, new currencies, transnational corporations, and just-in-time supply chains; and the only business of business was maximizing shareholder value. In short, the era in which today’s senior business executives learned their craft.
2022 began in the wake of the Covid-19 pandemic and Ukraine conflict that exposed the extreme fragility of today’s post-89 supply chains. The resulting shortages in energy, food, labor, semiconductors, and other key inputs – and their impact on inflation, monetary policies, and wealth – completely disrupted a business environment that was designed for a different world. A world that was supposed to be increasingly flat, connected, and free. A world that was governed by global institutions, such as the UN, WHO, IMF, and World Bank, that provided much-needed stability and ensured that everyone played by the same rules – more or less.
A very different world order began to take shape in 2022. Previous superpowers were relegated to the minor leagues: Russia with a bang, after its disastrous miscalculation in Ukraine; the UK with a whimper, following the ignominious departure of yet another Prime Minister and with Brexit already having reduced the size of its economy by some 4%. Meanwhile, the U.S. and China girded themselves for another cold war, this time not via proxy conflicts in post-colonial developing countries, but over economic and technological supremacy in the 21st century.
In 2022, it also became clear that global climate change targets will likely not be met and that we should shift our focus from mitigation to adaptation. It was the year in which the Biden administration fully embraced the industrial policies of the past and the midterm elections definitively ended the GOP as the party of Ronald Reagan. And it was the year in which Twitter, increasingly our main forum for open discussion and public opinion, fell under the control of an eccentric and erratic billionaire.
What path are we on? And what are the implications for senior business executives? The post-2022 era will undoubtedly offer tremendous profit opportunities, as the competitive deck is being reshuffled in many sectors, opening the door to new products and services, business models, and technologies. At the same time, everything will become far more complex, uncertain, and risky. Politicized capitalism will replace financialized capitalism; competing ideologies and political systems, great-power conflict, trade barriers, and industrial policies will all be back with a vengeance; shareholder value must live side-by-side with the interests of other stakeholders; and the primacy of economic considerations may simply prove unsustainable in light of resource constraints, environmental degradation, and climate change.
The next decade will be crucial. Senior business executives will have to decide how to develop and commercialize new technologies while simultaneously steering their organizations through exceptional challenges. Many will have to rethink their business portfolios and models, upgrade their organizations’ capabilities and workforces, and reconfigure their supply chains and operational footprints. Most will have to consider multiple potential end-state scenarios and make bet-the-company decisions under unprecedented levels of irreducible uncertainty. And virtually all will have to improve their organizations’ resilience against continual business disruptions while still remaining agile – ready to respond quickly to the next crisis.
Few are ready today. Business strategists, in particular, must up their game well beyond the traditional strategy formulation and planning approaches of the past. They will need to serve the interests of shareholders as well as a growing number of stakeholders. They will need to think in terms of ecosystems and their desired strategic role within each ecosystem: as the developer of the ecosystem’s platform itself, or as the provider of complementary products and services that enhance platform attractiveness, or merely as platform users only. And they must do so in an increasingly bifurcated world economy that presents its own set of strategic and operational challenges, including incompatible technology standards and at least a partial commercial decoupling of the U.S. and Chinese economies, irreversible decisions about whether to stay or go as well as the political and consumer blowback associated with either decision, and the uncomfortable reality of having to compete globally with competitors who play by a different set of rules altogether.
Overcoming these challenges will require most organizations to better integrate their strategic foresight, planning, and risk management activities across organizational boundaries. They must also become far more adept at managing with dual strategies – one for the present and one for the future – to avoid the danger of a single “grand strategy” neither sufficiently protecting the existing core business nor properly positioning the company for future opportunities and challenges. Many will have to invest in developing much stronger in-house strategy capabilities instead of relying on consultants and other professional services firms. And it means finally getting serious about adding a few under-utilized techniques, such as scenario planning, wargaming, game theory and real options, to the traditional strategy toolkit. For business strategists, the bar just got a whole lot higher.
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