Megatrends: Tailwinds for Growth in a Low-Growth Environment

Megatrends: Tailwinds for Growth in a Low-Growth Environment

          
Title image

Megatrends: Tailwinds for Growth in a Low-Growth Environment

  • Add To Interests
  • SAVE CONTENT
  • PRINT
  • PDF

  • Related Articles
    Challenges to Complacency

    As megatrends evolve, they form what we call trend clusters—groups of mutually reinforcing trends that come together in ways that spur their momentum and rearrange the competitive landscape. Perhaps the biggest trend cluster today is the “Asian ascent”—the growth of China and India. Of course, most major global companies already have China strategies, but few have taken into account the fast pace at which the middle and affluent classes in China are expanding beyond the coastal cities thanks to other economic and demographic trends. (See Exhibit 2.) In 2005, for instance, a consumer company doing business in 70 locations in China could reach 70 percent of consumers in the middle and affluent classes. To achieve the same coverage today, a company must be in nearly 240 locations. By 2020, that number will exceed 400.

    exhibit

    The rapid changes in China’s market have implications for companies at all levels and positions. Companies currently enjoying growth need to ensure that their economic model will enable them to stay ahead of rapidly accelerating trends. Laggards can capitalize on market dynamics and catch up to the leaders by winning in newly important locations. Knowing where, when, and how to move will require rigorous market analysis based on the latest data. Getting it wrong could mean incurring huge costs in a land where local scale is king.

    General Electric, recognizing that rapidly developing economies (RDEs) represented not only a major source of growth but also a critical battleground for future market leadership, has embraced the Asian ascent in truly transformative ways. In a recent article in Harvard Business Review, CEO Jeff Immelt described GE’s realization that building a leading position in China and other RDEs would require capturing not just the top of the market but also its heart, and that the organizational processes and policies that have made GE a global leader in established markets were likely to work against it in RDEs. So GE’s management team moved the company’s center of gravity closer to the economic and geographic locus of the sources of growth. They pioneered a “local growth team” model that gives select local operations the entrepreneurial autonomy across the value chain to design RDE-specific products and the business models needed to bring them to market successfully. This approach has ramped up GE’s RDE growth—and has yielded a series of innovative, low-cost products that have opened up new applications in the developed world as well.

    Another powerful cluster of megatrends reshaping the strategic landscape is “e-migration”—the movement of customers and companies to online channels. This trend cluster is growing faster now than before the downturn. A new generation of Web applications that allow dynamic user participation, social interaction, and collaboration has been growing, and innovative business models are starting to emerge. It took only five years, for example, for more than 50 percent of the North American travel market to move online. Players are entering the field with low-cost online options for stock trades, books, banking, and even education.

    The pace at which this trend is accelerating—replacing old business models with new ones—has surprised even the leading technology companies, which are in the business of tracking e-migration. The ability of businesses to manage multichannel complexity will increasingly define winners in the new frontier. And when you consider e-migration in the context of the rapid growth of mobile connectivity, it raises even more challenges for retailers. In a world where GPS-equipped mobile phones can read bar codes and provide instant comparison shopping, for example, retail stores risk becoming unwitting and uncompensated “showrooms” for lower-overhead, low-price online rivals—or for savvier, more tech-enabled brick-and-mortar competitors that may be offering a better price that day.

    Jeffrey Immelt, Vijay Govindarajan, and Chris Trimble, “How GE Is Disrupting Itself,” Harvard Business Review, October 2009.