Recession and Strategy: Tracking the path to a new world.

In my January 2009 Executive Briefing I argue that we are dealing with far more than a recession.  We are on the edge of a tipping point where the business world will probably undergo the biggest shift that we will witness in our lifetimes.

If we thought that in the mid 1990s the emergence of the Internet was a tipping point for business strategy, then what we will witness is a wholesale earthquake.

My position is that the current recession (in the developed economies) and slowdown (in the emerging economies) is not the end game.  The recession is a catalyst to a new world.  The twist is that nobody knows for sure what the new world looks like.  If you read the above briefing you will see that I put forward four different scenarios or snapshots of what the new world could look like:

Four scenarios of a post recession world

Broadly, the two scenarios on the left assume a relatively short recessionary period and we then return to life very much as it was back in 2007. In “Focused Change” we see some new regulatory activity to reduce the systemic risk in the banking sector. In “Globalisation Ahead” we see the BRICs (the emergent economies of Brazil, Russia, India, China) emerging to take a dominant role on the world stage – China and India in particular win through.  However, even these two optimistic scenarios have their downsides for developed economies.  For example, this recession has brought under the spotlight the fragility of financial services led economies (like the UK’s).  Even in the optimistic scenarios these sectors shrink – so what will fill the employment gap?

The two scenarios on the right are even more challenging and assume a further banking crisis and failure in a major employment sector – e.g. automobile manufacturing.  The outcomes could go two ways – globalisation does continue but the emerging economies assume a position of global influence faster than has been previously envisaged.  The result could be the decline of the primarily US led definitions of “Capitalism”.  New views appear as to which is the “best way”.  In “The Jigsaw”, the final scenario, we see the emergence of protectionism and effectively the death of globalisation.

I use two shaping events to track the possible trajectory of change – where we are going – industry contagion and global co-operation.  Using views on where these shaping events are going, we can form an indicative view of where the world is going.  My personal view is shown below and it can be seen that we may be rapidly approaching the Rubicon, or the point of no return:

Tracking the course of change

I will be continuing to track and comment upon the trajectory of change in this blog.  If you would like to received the underlying working paper describing these propositions in more detail please click here.

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