Will our fundamental beliefs be challenged in the coming decade? In a recent book titled No Ordinary Disruption, the authors talk about the need for an intuition reset, where everything we thought we knew about the world seems to be wrong. They see our world changing radically from the one in which those intuitions that drive our decision making were formed. Skeptics abound, but I for one see the writing on the wall. In the future-of-business series kick-off, I focused on Future Scenarios as a major force in altering the future of business. Let’s continue the series by focusing on other forces.

In the book referenced above, the authors compare the coming transformative period with the Industrial Revolution of the late 18th and early 19th centuries – where one new force changed everything. As I have tried to depict in my future scenario Visual, we are dealing with multiple forces or shifts that are converging. In their analysis, the authors conclude that our world is undergoing an even more dramatic transition due to this convergence. They focus on four forces (urbanization, technological change, aging, and connectivity) and deem that any of them would rank among the greatest changes the global economy has ever seen. Compared with the Industrial Revolution, they estimate that this change is happening ten times faster and at 300 times the scale, or roughly 3,000 times the impact – digest that as you consider whether our fundamental beliefs will change in the coming decade. Here is a quote from the book: “Although we all know that these disruptions are happening, most of us fail to comprehend their full magnitude and the second and third-order effects that will result. Much as waves can amplify one another, these trends are gaining strength, magnitude, and influence as they interact with, coincide with, and feed upon one another. Together, these four fundamental disruptive trends are producing monumental change”

I use the driverless car scenario when having this discussion with leaders, and that experience aligns with the perspective of the authors. It’s an insightful moment for folks when they see the depth and breadth of driverless car impact. To be fair, leaders have day jobs, and very little time to keep abreast of these emerging future scenarios – but that won’t lessen their impact. The authors describe the four global forces they see breaking all the trends (and therefore requiring intuition resets):

The age of urbanization

The confluence of social change is a major driver of future scenarios (and vice versa). Here, the authors focus on the simultaneous industrial and urban revolutions happening in emerging markets. They state that as recently as 2000, ninety-five percent of the Fortune Global 500 was headquartered in developed economies. They expect that by 2025, half of the world’s large companies – defined as those with revenue of $1 billion or more – will be headquartered in emerging markets. Nearly half of global GDP growth between 2010 and 2025 will come from 440 cities in emerging markets – ninety-five percent of them small and medium-size cities. In emerging markets alone, the authors state that urban consumers will spend $30 trillion a year by 2030, up from $12 trillion in 2010. They will account for half of the world’s spending. Intuition reset: where and how to drive growth, consumer needs

Accelerating technological change

The authors, like many others, see acceleration in the scope, scale, and economic impact of technology. But many leaders consider this business as usual – just another cycle in a world of on-going technological change and disruption. I fear this mindset creates a false sense of security. As the authors describe, technology (e.g. printing press, steam engine, Internet) has always contributed to overturning the status quo. But they see both the ubiquity of technology and its speed of change as being different than past eras – and I agree. They state their case with a belief that accelerated adoption invites accelerated innovation (really like that). Whereas it took more than 50 years for the telephone to enter half of American homes, it took Facebook six years to attract 600 million users. While it took radio 38 years to attract 50 million listeners, in 7 years, iPhone users had downloaded more than 75 billion apps. This quote from the book captures this phenomenon nicely: “As fast as innovation has multiplied and spread in recent years, it is poised to change and grow at an exponential speed beyond the power of human intuition to anticipate”. Intuition reset: from linear to exponential

An aging world

We are getting older and fertility is falling. That’s the bottom line behind this force, as the authors raise the prospect of the world population plateauing for the first time in human history. The aging phenomenon is spreading to China and soon Latin America, broadening the challenge beyond developed economies. From a fertility stand point, fertility rates of 2.1 children per woman are required to replace each generation, and by 2013, about 60 percent of the world’s population lived in countries with fertility rates below the replacement rate. The authors provide us with some projections:

• The European Commission expects that by 2060, Germany’s population will shrink by one-fifth, and the number of people of working age will fall from 54 million in 2010 to 36 million in 2060
• In Thailand, the fertility rate has fallen from 5 in the 1970s to 1.4 today.

A shrinking workforce makes productivity critical to driving growth and caring for an older population puts severe pressure on government finances. Intuition Resets: work, pensions, elder-care, retirement, healthcare, consumer needs, etc. 

Greater global connections

The connectedness of the world is the final force explored by the authors. They see a world that is more connected through trade and the movement of capital, people, and information. The trading system has shifted from linear connections across major trading hubs, to a complex and intricate sprawling web – with Asia becoming the world’s largest trading region. Movement between emerging markets has doubled the share of global trade over the past decade. Some supporting statistics:

• The volume of trade between China and Africa rose from $9 billion in 2000 to $211 billion in 2012, and global capital flows expanded 25 times between 1980 and 2007
• More than one billion people crossed borders in 2009, over five times the number in 1980
• More than two-thirds of humans have a mobile phone, and one-third of the planet is online – those proportions are rising rapidly. Internet-related consumption and expenditure is now bigger than either global agriculture or the worldwide energy sector 

Connectivity is a major force on so many levels, as it is a foundational piece of a high percentage of future scenarios explored in my last post.  Intuition Reset: global inter-connectivity.

According to the authors, these four disruptive forces got faster and larger, collectively impacting the world economy around the turn of the 21st century. They see these forces disrupting long-established patterns across the world economy. So, our intuitions must indeed be reset, and our experiences and ideas formed during a time of incremental change no longer serve us well. Forecasting the future by focusing on the past or present is a sure way to get it wrong. Without foresight and a shift in a belief system that served us so reliably in the past, we are destined for failure. This holds true for executives, world leaders, policy makers, and individuals. As the authors state, for all our ingenuity, inventiveness, and imagination, we tend to be slow to adapt to change, and there is a powerful human tendency to want the future to look much like the recent past. We’ll dive into more forces driving the future of business and the need to reset our intuitions in the next post.