Disruption of traditional models of business and a shift of global power eastwards have been the themes of many a business book and management conference in recent years. For the most part, this has focused on threats to the established world order.
Viewed from a conservative western perspective, much of this is frightening and deflationary, if not downright depressing.
Richard Dobbs, a director of the McKinsey Global Institute and co-author of No Ordinary Disruption sees a more positive flipside to this. He sees a world that contains exciting possibilities for those who can adapt and respond to these challenges.
Dobbs is resolutely optimistic. "Powerful forces have been at work in recent decades and the forces that lifted one billion people out of extreme poverty between 1990 and 2010 will help propel another three billion people into the global middle class over the next 20 years," he tells The Irish Times.
From humanity’s viewpoint, this will save lives on a greater scale than the eradication of smallpox, which was considered one of the great advances of the 20th century, he says. The rapid spread of technology will have an empowering effect, he says, driving down the marginal cost of delivering new products.
The rapid population growth of cities will be a force for good, with network effects and cost savings because of economies of scale.
New normal
The new normal is a world in which China leads the globe in holiday consumption, the United States is the largest oil producer, a mobile messaging app (WhatsApp) is worth $19 billion and India is a leader in space exploration presents difficult, often existential questions to the leaders of companies, organisations, cities and countries.
That leadership challenge is accentuated by the fact the formative years of many of these leaders were spent in some of the least dramatic years in modern history.
The 25 years leading up the financial crisis of 2008 were known as the great moderation, with low interest rates driving up the price of assets such as stocks, bonds and houses. Natural resources became cheaper and generally a good balance existed between supply and demand in the labour. The prospect was that children could aspire to become richer than their parents.
Four great disruptive forces are at work, Dobbs and his co-authors maintain. The first is a shifting focus to emerging markets, such as China, and particularly to cities within those markets. The second is acceleration in the scope and scale of technology. The third is demographics, ageing being a key issue. The fourth is the degree to which the world is much more connected through flows of people, capital and information.
These changes gathered pace at the turn of the millennium and are now disrupting long-established patterns in virtually every sector of the world economy.
“The winners will be those who are capable of adopting. Companies increasingly need to look outside of themselves and the traditional models that have served them.
“There is a fear of cannibalism that needs to be overcome and risk taking is not something that can easily be avoided now,” he says.
Embrace innovation
It is also important, Dobbs says, not only to embrace innovation but to consider the wider, unintended implications of progress.
Take the case of driverless cars, pioneered by Google and others. Their widespread adoption will reduce road fatalities by removing human error as a factor.
However, road fatalities are a huge source of human organ donations. An alternative source will need to be found, presenting a challenge and an opportunity.
The real winners of the new paradigm are consumers. They will live generally healthier lives, have cures for diseases that previously will have killed them, will have access to products and services that were once unattainable and will generally be more prosperous.
Increased urbanisation is one of the key global trends identified in the book and the authors emphasise the positive aspects of this, suggesting every doubling of a city’s population size – and many cities in emerging markets are enjoying such explosive growth – makes the average inhabitant 15 per cent wealthier.
Cities create networks and knowledge clusters, and economies of scale make them more attractive for companies to service. But the benefits of this new world order are not universal, says Dobbs.
The US middle class, among others, is shrinking; incomes for many since the 1970s have fallen in real terms; and a cohort in many developed countries is, as Dobbs puts it, “increasingly unhappy with the world”.
The problem is more pronounced in countries with inflexible labour markets. Southern Europe is a case in point. “There is a rise in extremism that embraces both the right and the left, with the common denominator being rebellion against the establishment.”
Changes in the labour market will be among the most difficult to manage and the role of robots, for example, will make many low skill jobs disappear.
Dobbs remains optimistic, however, suggesting that while this new world order presents a series of seemingly daunting challenges, they will not be insurmountable to the human race, which has a proven track record in adaptability.
No Ordinary Disruption by Richard Dobbs, James Manyika and Jonathan Woetzel is published by Public Affairs
