As if developing a corporate strategy wasn’t already challenging enough, the increasingly complex external economic environment adds a thick new layer of complexity to corporate strategic planning. With technological advancements occurring at a break-neck pace, consumers increasing demand for low-price or free products and services, and a monumental shift underway in western world governmental economic policy, corporate strategists have their work cut out for them in devising strategic plans and advising senior leaders through decision making processes.
According to McKinsey’s “The four Global Forces Breaking All the Trends,” the pace of economic change “is happening ten times faster” with “3,000 times the impact” as the Industrial Revolution of the 1800s. This change is particularly disruptive to companies in the technology sector, where start-ups are plentiful due to low barriers to entry. Further, switching costs in this sector are generally lower (with a few exceptions, such as MacOS vs Windows, iOS vs Android, etc.), enabling customers to bounce from app to app, service to service. This volatility requires company leaders to be informed, decisive and innovative to stay ahead of and anticipate customer demands; companies reacting to demand without a significant differentiator are likely too late to compete.
An extension of the difficulty faced in the technology sector by the pace of change, consumers expect many of the products and services provided to be free, or almost free. Historically, companies haven’t been in the business of giving their product away for free, herein lies the challenge. McKinsey’s article “Ten IT-enabled Business Trends for the Decade Ahead” states that “users will probably never pay for many valuable technology-enabled services, such as search – and the list seems to be growing rapidly.” The article goes on to cite Google, who derives their revenue from selling ads and “insights” to third-parties. Some technology companies are more naturally geared toward revenue from these alternate sources, others will have to get creative in their pursuit of revenue and profit.
The recent shifts in US and UK toward isolationist economic policies further complicates an already complicated market. DNI’s “Global Trends 2030: Alternative Worlds” from 2013 theorizes a few plausible scenarios of the worlds state of affairs, many of which paint a grim portrait of the world to be in 13 years. Declining, aging populations, constricted natural resources, and the shift of economic power from the west create an instability that affects all markets and industries. Isolationist policies seen in the UK’s Brexit and the U.S. 2016 Presidential election could disproportionately affect the tech sector, which relies heavily on a global reach in offering its products and services. Outside of lobbying governments to adjust their policy decisions, there is likely little direct-action companies could take to reverse this trend, but corporate leaders must be aware of these external factors when mapping their strategies.
The speed of advancement and volatility of today’s economy necessitate strategy be a living, breathing plan, changing at the whims of the world. Executives will need to be prepared to make informed decisions quickly to remain ahead of the curve.