NOW WHAT?
If much of the intuition you have built up over your life is wrong—or, at least, seriously questionable—how should you go about managing your investments, your career, and your business?
In the previous chapters, we’ve laid out some examples of how the twenty-first-century business and economic climate could be different. It is typical, even compulsory, for how-to books in diet, nutrition, exercise, investment, remodeling to end with a snappy, ten-item to-do list that guarantees life-altering success within a matter of weeks. Simply check off the items, and you’re golden. As readers will have surmised by now, this is not that kind of book. The transformations we describe are far too complex and powerful to be broken down so simply. The trend break era is too swiftly changing, too full of opportunity, and too fraught with peril for us to boil down a menu of action items and takeaways that the generic global executive can latch onto, matrix out, and execute. Despite our most diligent efforts, the world we see in our work every day cannot always be reduced to a bunch of bullet points or a few PowerPoint slides.
Any one of the great disruptive forces discussed in this book and the trend breaks they are creating has significant implications for organizations—whether they be companies, governments, or nonprofits—and the people who lead them. Together, they will be profound. The coming decades will redefine who runs the world economy: which countries, which companies, and which individuals.
The global economy is poised at a set of historical, technological, economic, political, and social inflection points. The transformation we’re living through has sometimes been likened to the Industrial Revolution. In fact, the Industrial Revolution pales in comparison to today’s convulsions, because the shifts today are happening much faster and on a much bigger scale. Because they are so interlinked—urbanization and consumption, technology and competition, aging and labor—and because they amplify one another, the changes are harder to anticipate and more powerful in their impact. And they challenge our imaginations as much as they do our competencies and skills. One of the factors that makes managing today so difficult is the ever-present potential for second- and third-order effects of the changes we’re witnessing.
Consider one example. Several companies, including Google, are working on self-driving cars. Equipped with wireless communications technology, these vehicles will theoretically be able to navigate effectively while avoiding collisions. Should self-driving vehicles become standard, that would likely lead to fewer accidents and road deaths. This indisputably desirable outcome would have a series of effects on other industries and sectors. It might reduce the need for professional drivers, sap demand for emergency response workers, or bolster the bottom line of health insurance companies. But we might also expect to see a growing and urgent demand for artificial hearts. Why? Thanks to the growing number of people who check the “organ donation” box on their driver’s licenses, fatal automobile accidents have become a significant source of donor organs used in transplants. Should they work as advertised, then, driverless cars might indirectly disrupt the brilliant system through which a tragic accident winds up saving a life.
How many of us would be able to make the link between the technology behind driverless cars and the fourth-order impact on the need for artificial hearts, and then plan for the scenario? It may seem far-fetched, but this is how our world works. Like a stone tossed into a placid pond, a breakthrough or innovation in one sector will create ripples that spread outward.
Readers may feel an overriding sense of alarm and confusion as old certainties evaporate and established economic relationships break down; as volatility increases, necessitating a speed of decision making beyond most current capabilities; and as challenges come at them on all fronts. Executives report that dealing with uncertainty can be overwhelming and any solution can feel like it costs too much or takes too long. Uncertainty can breed paralysis. This is particularly true for incumbents with established market positions. Those who have already made it have the most to lose.
But the trend break era should also be a time for great optimism—and not just from the upstarts who are storming the palisades. Even in this complex and challenging age, some trends are clear. The world is getting richer, and countries are becoming less unequal. We are generally living longer and healthier lives. “The context has changed, without a doubt—and I think it will continue to evolve,” said Daniel Vasella, the chief executive officer of Novartis. “So you’ve got longer life spans, expanding populations, and more wealth in emerging economies; all of those imply opportunities and risks.”1 An ever-larger universe of products and services is becoming available to us as consumers. The miracles of modern life that so many of us take for granted—electric lights, vaccinations, freedom from hunger, the ability to communicate freely—are become more widely available with each passing day. In the years to come, hundreds of millions more people in emerging countries will rise from poverty and enter the middle classes in a democratization of global wealth. Technology is opening economic opportunity to millions of people, enabling a new wave of entrepreneurs, and transforming the building blocks of society, from education to health. What’s more, these developments are providing executives with a new set of tools that will help them stay on top of breaking new trends, develop new approaches, and drive them through complex organizations. “The world has always been a complicated and volatile place,” Alan Mulally, then the chief executive officer of Ford, said in 2013. “[I]t is just that we now have the tools to recognize it, to try to make sense of it, and to respond to it.”2
The question, of course, is how to surf the wave without getting wiped out by it. In the preceding ten chapters, we have laid out the types of tactics, strategies, and mind-sets needed to thrive in this new, emerging world. In some instances, that is easier said than done, especially to the extent that it involves resetting our intuition. Intuition is a product of life experience, knowledge, and a hard-earned, time-consuming understanding of the world. It builds up over the course of decades or a career. People who have succeeded and risen to levels of responsibility trust a great deal, explicitly and implicitly, in their intuition. Asking a veteran leader to reset her intuition on a range of subjects quickly is like asking a courier whose horse has crossed a continent—through storms, wind and cold, over high mountains and through deep valleys—to swap it for an entirely new, untested, unfamiliar form of transportation. Like, say, an automobile. Doing so may be counterintuitive, difficult, bewildering, and alienating at times. But the rewards—for individual couriers, for their customers, for the economy at large, and even for horses—can be significant.
Even so, it is difficult to shift gears. Social scientists and behavioral economists find that human beings are biased toward the status quo and resistant to changing their assumptions and approaches even in the face of the evidence. In 1988, William Samuelson and Richard Zeckhauser, economists at Boston University and Harvard, respectively, highlighted a case in which the German government needed to relocate a small town in order to mine lignite, which lay beneath it. The authorities suggested many options for planning the new town, but its citizens chose a plan that looked “extraordinarily like the serpentine layout of the old town—a layout that had evolved over centuries without (conscious) rhyme or reason.”3 Faced with the opportunity to design an entirely new, rationally laid-out living space, the burghers chose to replicate the familiar. Similarly, businesses, which often pride themselves on their ability to make and execute far-reaching initiatives, suffer from a surprising degree of inertia, especially when it comes to backing up strategy with hard cash. McKinsey found that, between 1990 and 2005, US companies had almost always allocated resources on the basis of past, rather than future, opportunities. A third of the companies actually allocated almost exactly the same as they had in previous years.4 This passive behavior persisted even during the global recession of 2009.
So what can leaders do to reset the intuitions of their organizations?
One fundamental realization is that to drive the necessary change, leaders must first develop the capabilities to reset their own intuition. McKinsey research and client experience suggest that 50 percent of all efforts to transform companies fail either because senior role models fail to drive change or because of the inherent tendency to defend the status quo. Many leaders react to a changing landscape by focusing on a technical solution. They will concentrate on changing policies, processes, or organizational models, which is necessary but hardly sufficient. If the sea level rises by three feet, traditional thinkers are inclined to add another three feet to the existing seawall, pipe in new sand, or put beachfront homes on stilts, rather than fundamentally rethink the logic of building, insuring, and protecting properties that face the ocean. The first step for all leaders is self-awareness. Understanding their own tendencies and biases, and recognizing the factors that drive their decision processes, is fundamental if they are to effectively respond to change.5 And they must invest the time and effort necessary to change the mind-sets and behaviors of those tasked with carrying out solutions.
Another key to survival is to embed curiosity and learning in an organization. In an era of rapid change, full of examples of companies that have become casualties of stasis, successful leaders must adapt to “be students in a way that maybe we haven’t been before,” as management guru Tom Peters puts it.6 The ability to understand, monitor, and navigate a sea of ever-changing trends will be greatly rewarded. At our firm, the McKinsey Global Institute functions as an internal think tank and research arm, taking deep dives into big trends and producing useful analysis and perspective. Simply setting aside time each day to keep up with the changing external environment—and encouraging others to do the same—can make the difference between responding to a new trend and allowing it to leave you irrelevant. When he ran Microsoft, Bill Gates would famously disconnect for a week or two in a lake house where it was difficult to reach him and spend his time reading on a wide range of topics. Larry Fink, CEO of BlackRock, one of the world’s most powerful asset management firms, claims he still learns as much each day now as he did when he started in the investing business: “Here I am running this company not quite 25 years. And I still spend an hour a day studying the world and the markets,” Fink said. “In my view, if you don’t believe you’re learning, if you’re not a student, you’re probably going backward.”7
It is also essential to surround yourself with the right people, those who are able to act as “reset catalysts” for an entire organization. Large organizations and groups of people don’t simply respond with alacrity to commands and edicts issued from on high. The twenty-first-century corporation does not function like a nineteenth-century military unit. Rather, people tend to respond to the actions and inspiration of peers, competitors, and colleagues. We rethink what is possible and desirable based more on what we see and less on what we are told. For many years, running a mile in under four minutes was believed to be impossible. But that was largely because no one had done it yet—there was no immutable law of physics that would prevent a human from moving 1,760 yards in 240 seconds. In 1954, Roger Bannister broke the four-minute barrier in a race in Oxford, upending decades of conventional wisdom almost instantly. Bannister went down in history as the first sub-four-minute miler, but he wasn’t the last. Indeed, by 1957, sixteen more runners had broken that once-insurmountable barrier. By demonstrating what was possible, Bannister had acted as a catalyst for the running community, which quickly reset its collective intuition surrounding the limits of distance runners. We have seen this happen time and again—in mountain climbing, the speed of computer processing, and vehicle fuel efficiency. Resetting the intuition of a large organization can at times feel similarly impossible, but often all it takes is for one person to embrace a new perspective and actively discredit the old way of thinking.8
Agility is another vital attribute necessary to thrive in the trend break era. In professional sports, training regimens that once relied on brute strength and speed have come to include yoga, stretching, and other exercises aimed at boosting flexibility and balance. Why? It turns out that athletes who develop greater agility, be they 300-pound defensive ends, 200-pound tennis players, or 100-pound gymnasts, tend to avoid injury and react more effectively during competition. This analogy translates to business. As changes unfold in the external environment, companies that can adapt nimbly will be able to grab new opportunities. But they can do so only if their leaders prioritize agility instead of dismissing it as too expensive, too defensive, or too difficult because of all the “unknown unknowns.” Unfortunately, the only alternative to agility is a wait-and-see approach that does nobody any favors. In the twenty-first century, agility does not always require expensive capital investment up front. A satellite sales office instead of a new headquarters, a pop-up store instead of a big box, a food truck instead of a large restaurant, even the basic “lean” skill of continuous improvement are all ways that companies can respond quickly to disruptions and experiment, even while delivering ongoing improvement in a stable environment. Agility is hardly a defensive posture—successful firms have used technological flexibility, build-to-order capabilities, and even dynamic labor arrangements as ways to build agility in their organization.
Lastly, and most importantly, all leaders will have to resist the temptation to focus on the hazards of the period ahead instead of the opportunities it presents. Looking around the world today, there is ample reason for pessimism, especially when it comes to geopolitics. Living through a searing experience like the financial crisis of 2008 or high youth unemployment can leave significant scar tissue. But while pessimists have surely had their share of days in recent years, it’s important to note that the long-term trend of so many indicators points up and to the right. In 1930, as the Great Depression spread around the world, the great British economist John Maynard Keynes boldly predicted that, one hundred years on, progressive countries’ standard of living would be between four and eight times higher than it was at the time. Despite the Great Depression, an enormously destructive world war, and the Cold War, the higher end of his optimistic expectation has turned out to be our reality today.
We believe that optimism will still win the day, even in the trend break era. Thanks to the forces at work, the world we inhabit ten or more years from now will be a better one. Those who understand the magnitude and the permanence of the changes that we are now witnessing, reset their intuitions accordingly, and see the opportunities will shape this new world—and they will thrive.