SAP Discusses the Future of Business, Part 2
November 01, 2013
In Part 1 of this two-part series, I indicated that I divided the facts presented in an interesting SAP slideshow entitled “99 Facts on the Future of Business” into thirteen separate categories. In that post, I discussed the first five categories: Big Data; Business Leadership; Customer Service/Experience; and Education. In this post, I’ll discuss the remaining eight categories, namely: Emerging Markets; Innovate or Perish; the Internet of Things; Risk Management; the Supply Chain; Targeted Marketing; Urban Growth; and a Miscellaneous category. SAP introduced the presentation by explaining:
“Business Innovation is the key ingredient for growth in the future of business. Changes in technology, new customer expectations, a re-defined contract between employees and employers, strained resources, and business and social networks are requiring businesses to become insight-driven businesses. In this presentation, we have gathered 99 facts that represent the changes taking place in the world today. Each fact represents a key insight and suggests where we need to focus and change to become viable, sustainable and growing future businesses.”
In large measure, the future of the global economy rests in the hands of emerging market countries or, more specifically, in their ability to encourage the growth of the global middle class.
- “The world population has more than doubled over the past 50 years and it will exceed 9 billion people by the 2040s.” (Source: Rand Corporation, 2011)
- “By 2030, 5 billion people — nearly two-thirds of [the] global population — could be middle class.” (Source: OECD “An Emerging Middle Class”)
- “1.2 billion people were still living on less than $1.25 a day in 2010, a decrease of 100 million since 2008.” (Source: World Bank, 2013)
- “The global rate of extreme poverty fell to 20.6 percent, less than half the 1990 rate of 43.1 percent.” (Source: World Bank, 2013)
- “Worldwide, more than 3 billion people are working, but nearly half work in farming, small household enterprises, or in casual or seasonal day labor.” (Source: World Bank, Jobs Report, 2012)
- “76% of the world’s 1.2 billion poor live in rural areas.” (Source: World Bank, 2013)
- “While the US has the highest internet penetration (78%) it ranks 10th in new internet users from 2008-2012 behind China, India, Indonesia, Iran, Russia, Nigeria, The Philippines, Brazil and Mexico.” (Source: Mary Meeker’s Internet Trends, 2013)
- “In Purchasing Power Parity (PPP) terms, India became the third largest economy in the world in 2011, behind the United States and China, and pushing Japan to the fourth spot.” (Source: World Bank, 2013)
- “India will add a million new workers every month for the next two decades. This is equivalent to the entire population of Sweden joining the labor force in India every year for the next two decades.” (Source: World Bank, 2013)
- “In 2011 Mongolia’s gross domestic product (GDP) grew at the second highest rate in the world, measured at 15.7 percent.” (Source: World Bank, 2013)
- “The economy with the highest recorded growth rate in 2011 was the Macao Special Administrative Region of China, which grew at 18.1 percent.” (Source: World Bank, 2013)
- “Small and Midsize Businesses account for over 99% of all businesses in developed economies and 40-70% of value added in the economy (*but are the least likely to sell online). (Source: OECD “Electronic and Mobile Commerce,” 2013)
Innovate or Perish
It used to be that so-called blue chip companies could be depended upon for profits, steady dividends, and long-term stability. The following facts, however, would indicate that there are fewer and fewer such companies.
- “Over 40″ of the companies that were at the top of the Fortune 500 in 2000 were no longer there in 2010.” (Source: Brian Solis’ Future of Business)
- “The percentage of companies new to the Fortune 1000 has grown from 35% (1973-1983) to 45% (1984-1993) to 60% (1994-2003) to over 70% (2004-2013) in each of the last 4 decades.” (Source: Brian Solis’s Future of Business, 2013)
- “73% of people surveyed wouldn’t care if the brands they use disappeared from their life.” (Source: Co.Exist)
Internet of Things
It has been predicted that the largest network ever created will be the Internet of Things, which will primarily consist of machine-to-machine communications. The Internet of Things will take advantage of embedded sensors, cloud computing, and artificial intelligence to make the world run more efficiently and safely.
- “The next wave of computing is ‘wearables’ (or ‘drivables’, ‘flyables’, ‘scannables’). (Source: Mary Meeker’s Internet Trends, 2013)
- “Wearable devices have grown by 2x month over month since October 2012” (Source: Mary Meeker’s Internet Trends, 2013)
- “In 2010, Han Vestberg, CEO of Ericsson, predicted that by 2050, 50 billion devices would be connected to the internet.” (Source: GIGAom, 2013)
- “80% of data used on mobile devices is received via WiFi connections to fixed networks.” (Source: OECD Communications Outlook, 2013)
- “The connected home segment will grow at a compound annual growth rate (CAGR) of 50 percent between 2012 and 2017 to reach 10.7 million shipments in five years.” (Source: GIGAom)
- “In the next 5 years, revenues from the sales of connected home systems will increase from $1.9 billion to $8.3 billion.” (Source: GIGAom, 2013)
- “By 2017, there will be close to $11 Billion in revenue from 35-million homes using home automation platforms across the globe.” (Source: GIGAom, 2013)
Risk management has been constant theme about which I’ve written these past six years. The following facts primarily focus on two increasing risks: consequences of climate change and water shortages.
- “[The] Top 5 risks with the highest likelihood are: Income disparity, fiscal imbalances, greenhouse gas, water supply, and aging population.” (Source: World Economic Forum, 2013)
- “884 Million lack access to fresh water. By 2040, at least 3.5 billion people will run short of water.” (Source: OECD Environment Indicators, 2013)
- “By 2050 more than 40% of the world’s population will live under severe water stress and nearly 20% could be exposed to floods.” (Source: OECD ‘Water: Governments Must Deal with Rising Risks,’ 2013)
- “The economic value of assets at risk from floods is expected to be about $45 trillion by 2050.” (Source: OECD ‘Water: Governments Must Deal with Rising Risks,’ 2013)
- “Last year’s drought in the United States nearly halved the contribution of the agricultural sector to US GDP over the 3rd quarter.” (Source: OECD “Water Security for Better Lives,” 2013)
- “The 2011 floods in Thailand slashed their 4th quarter GDP growth by 12%.” (Source: OECD “Water Security for Better Lives,” 2013)
There has been a lot of discussion about whether globalization has passed its peak. Many analysts believe that regionalization will characterize the future more than globalization. Although I agree that regionalization will play a prominent role in the future, that really isn’t anything new. Regionalization has always played a large role in the world economy. With parts now being sources from all over the world, “made in the world” products are really becoming the norm.
- “Services, such as business services, transport and logistics, account for over half of value creation in the Global Value Chains (GVCs) in many developed countries and over 30% in China.” (Source: OECD “Interconnected Economies,” 2013)
- “Today, most goods and a growing share of services are ‘made in the world’, not just produced in just one country.” (Source: OECD “Interconnected Economies,” 2013)
The group most often mentioned when it comes to targeted marketing is the Millennials. See my post Millennials: Getting to Know You.
- “Only 7% of Gen Y [so-called Millennials] work for a Fortune 500 company as startups dominate the workforce for this demographic.” (Source: Brian Solis’ Future of Business, 2013)
- “Gen Y will form 75% of the workforce by 2025 and are actively shaping corporate culture and expectations. Only 11% define having a lot of money as a definition of success.” (Source: Brian Solis’ Future of Business, 2013)
- “Millennials are 3 times as likely to follow brands over a family member on social networks.” (Source: Brian Solis’ Future of Business, 2013)
- “29% of Millennials find love through Facebook while 33% are dumped via wall posts or text messages.” (Source: Brian Solis’ Future of Business, 2013)
- “Millennials watch TV with 2 or more electrical devices.” (Source: Brian Solis’ Future of Business, 2013)
- “Millennials trust strangers over family and friends. They lean on User-Generated Experiences for purchase decisions.” (Source: Brian Solis’ Future of Business, 2013)
- “66% of Millennials will look up a store if they see a friend check-in.” (Source: Brian Solis’ Future of Business, 2013)
- “Millennials believe that other consumers care more about their shopping experiences than companies do — that’s why they share their opinions online.” (Source: OECD “Electronic and Mobile Commerce,” 2013)
- “42% of global marketers say acquiring new customers is one of the top three marketing challenges facing their organization.” (Source: IBM)
Most of the world’s population now lives in cities and the percentage of those living in urban areas is only predicted to grow. This places a lot of pressure on city planners to ensure that the infrastructure is in place to make urban living more tolerable and efficient. Smart City initiatives receive a lot of press; but, those initiatives are dependent on a “connected” urban population. Many of the millions of people living in urban areas live “off the grid.” Getting on the grid may be one of the greatest challenges in the years ahead.
- “The population living in urban areas is projected to increase from 3.6 billion in 2011 to 6.3 billion [in] 2050.” (Source: United Nations, Department of Economic and Social Affairs)
- “The developing world’s cities are expected to see massive growth, drawing 96 percent of the additional 1.4 billion people by 2030.” (Source: World Bank, 2013)
- “In 2011, 3.6 billion people (50% of the global population) lived in urban areas, compared with 1.5 billion in 1990.” (Source: World Bank, 2013)
- “Over 80 percent of global goods and services are produced in cities.” (Source: World Bank, 2013)
- “On average, the world has become a little happier in the last 30 years. Health care, education and income have the biggest impact on life satisfaction.” (Source: World Happiness Report, 2012)
- “The amount of time parents spend with their children continues to go up in the US. Fathers have nearly tripled their time with children since 1965. Mothers’ time with children has also increased, and today’s mothers spend more time with their children than mothers did in the 1960s.” (Source: Pew Research Center, 2013)
- “Behavioral patterns (smoking, inactivity, drinking, etc.) still the largest contributor to pre-mature death in the US.” (Source: Mary Meeker’s Internet Trends 2013)
- “Just to keep employment rates constant, the worldwide number of jobs will have to increase by around 600 million over a 15-year period.” (Source: World Bank Jobs Report, 2012)
As I noted at the conclusion of the last post, these facts must be interpreted by each business as they relate to their particular industry. Not every fact will mean the same thing to every economic sector. Taken as whole, however, they point to the importance of emerging markets, mobile technology, urban areas, and the generation known as Millennials. As I’m sure the SAP analysts would admit, these facts are not all inclusive (for example, they don’t really address things like additive manufacturing, biotechnology, new materials, and so forth). Nevertheless, it is an excellent list of things to consider as businesses look at the future landscape in which they must labor.