Seeing tomorrow, today

By Keith Barrett

A great many people believe the next few decades will be a golden age for the Australian economy, shielded from volatile global markets by the seemingly insatiable Chinese demand for Australian resources. Is our future insulated from harm by this export buffer? If you listen to a respected futurist from FutureWorld, a global business and technology think tank, it almost certainly is not.

Wolfgang Grulke has spent the better part of 20 years encouraging big business to change its thinking, helping it realise that inevitable changes to a business model, including external pressures on the market or business plan, do not necessarily need to equate to problems. With a different attitude and a willingness to adapt, every change can represent a new opportunity.

“It is not an easy thing for executives to change their way of thinking, to view the arrival of unforeseen events as a positive, because they have been programmed with a sense of business that has existed since the Victorian age,” Grulke says.

Grulke’s reasoning is that established businesses usually react to new market forces by treating them as threats to their established business. By comparison, new entrants, without the drag of historic baggage, see every new change as an opportunity to be capitalised on. By dedicating some executive time to actively thinking about the future (Grulke recommends 10 per cent of executive time), and new market forces, the executive team becomes better equipped to capitalise on these new market opportunities, as well as protecting their current business against unseen new competitors. “We typically see companies double their strategic outlook after a short series of interventions” says Grulke.

Generational shift

The generational shift that has occurred over the past 10 years has perhaps made it easier for Grulke to illustrate how businesses that react positively to change can prosper. Traditional businesses can’t attract the brightest young people using the methods of old. At a meeting with a Big 4 management team in the United States, Grulke asked about an advertisement they had taken in The New York Times as part of a recruitment drive to find 100 new employees.

He pointed to the ad and said ‘tell me about this’. The management responded how great the ad looked, or how well it was positioned. He then pointed out that reports showed that the age of the average newspaper reader in the US was now over 60. They were trying to recruit savvy young people from a readership that was twice that age.

It took some work, but Grulke convinced them to proceed with a Youtube campaign, where the company asked young staff members who had been with the organisation less than two years to create short video clips explaining how they felt about working within the organisation. Almost 1000 clips quickly appeared on YouTube. While there were some negative ones, the company quickly found that the positive ones attracted 100 new recruits – without the use of the recruitment advertising budget.

“Understanding how young people interact with information through technology is vital. It’s all about one-click access to products and services. Music today is a service, not a physical product. The platform increasingly is the phone and not the internet. This is critical for future planning for a business.

“Young people can’t understand why they need to fill out so many forms in a bank; they don’t understand why the bank doesn’t ‘trust’ its customers. Today, kids have a totally new understanding of what trust is. We grew up in a world where you had to prove that we could be trusted. They give their trust to almost anyone while social networking, safe in the knowledge that if you abuse it they can remove you from their lives with just one click of a mouse,” Grulke says.

“They don’t want to fill out forms to take leave, or to work defined hours. They don’t understand the thinking behind turning off your phone going into a meeting. They think, ‘What’s wrong with these people? Can they really only do one thing at a time?’ The next generation have gone beyond multitasking – this is hypertasking – and this is the next generation of business leaders. Business needs to get ready to attract these people, and keep them.”

Adapting business

That generational shift is having significant effects on economies. People have already started spending money based on reputation, and not just the brand. (Grulke points out that when he purchased a garden strimmer, he bought the one with the best user reviews on Amazon, not the one with the biggest marketing budget). The same thinking – being functional as well as good value – has seen retailer Tesco achieve remarkable success in South Korea.

“Young Koreans are super busy and don’t have much time available for grocery shopping. Some even find the trip to the supermarket a traumatising experience. When Tesco entered the market with its Homeplus brand, it quickly grew to be the number two supermarket, but it wanted to move beyond this to number one. It looked at the ‘busyness’ problem as something it could turn into a positive. It advertised on subway billboards, using actual pictures of the shelves of its stores. People could use their smartphone to scan the QR codes on the image, fill an online basket with produce, purchase it with one click, and Homeplus guaranteed that the groceries would be delivered within one hour of the customer getting home. Just think about how much that will change the nature of being a Korean consumer.”

As Grulke moves from one topic to another, his discussion crosses diverse subject matter, and as his hands skim across his notebook, up pops a 150-year overview of global commodity prices. While there have been spikes – most noticeably during WWII – the overall picture is undoubtedly one of declining prices. With a click he overlays another layer – an upward trend representing the uptake of technology that moves in the opposite direction of declining commodity prices.

“You have to have real courage to bet against a 150-year decline of commodity prices – and technology is commoditising more and more products and services, from cars to auditing – technology is driving down the prices of almost everything. Take gold for example – India traditionally bought the most retail gold in the world, but they no longer purchase it like they used to, for dowries and so on. Now young people use their disposable income on iPads and similar fashionable technology. Also, as technology advances, it will become possible to synthesise many things that are currently very scarce. Platinum can already be synthesised, albeit in tiny quantities, at one per cent of the current price of platinum. But in five or 10 years, when they can refine that process, what will happen to the commodity price? Its ‘natural’ may be less than $15 an ounce. What other commodities that are the core of Australia’s economy could come under nanotechnology’s fatal spell?”

A change is coming

“FutureWorld [the global think-tank Grulke founded] puts out a weekly publication called Mindbullets: News from the Future. It’s in the style of news reports from the future, as they happen. “In 2005, we ran one on the collapse of the US property and debt bubble. I showed that at a lunch with several thousand US real estate professionals on the west coast of the US that year. Together, their association represented 80 per cent of the American commercial property market.

“They laughed, taking another drink. ‘This time it’s different’, they said, ‘It can’t happen. How could it?’ I replied, “Yes, it may be seem unlikely, but what if it did happen?”

There are lessons too for Australia, if it takes the time to listen. Falling commodity prices, coupled with Grulke’s prediction of a Chinese property bubble collapse and its shift to more technological industries (China is now shipping manufacturing to Laos and Cambodia for even lower pay rates, he says), could see up to 100 million Chinese out of work in the next five to 10 years. How the Chinese government will handle this new unemployment will be crucial to their future.

“China is producing more than 300,000 engineering graduates every year. There are simply not enough jobs for them at the moment, but they are innovative and are creating a massive new pool of patents and products – more than 1000 new ideas for the use of 3D printing for example. China will move from being a low-wage economy to being a high-tech economy. It took the West 50 years to do this – it will take China less than a decade.”

His point is that the mining companies can’t use the data from the previous two years to effectively project what demands will be like for the next 10 years. If the Chinese market contracts, then there will be instant consequences for the Australian mining industry, and in particular its exports. FutureWorld is working with many global mining companies on these issues and the alternatives for their businesses.

As for the accounting profession? Grulke points out that, as more Chartered Accountants secure c-suite roles within organisations, a tantalising opportunity presents itself. By dedicating time to understand the future, Chartered Accountants can become the leading lights of the corporate world – steering business through volatile times.

He emphasises that this can’t happen unless Chartered Accountants take a flexible approach, discover new and better ways of working, and continue to apply their ethical integrity to tackle business realities. If they do that, then they will be able to evolve with the changing demands of clients and employers today – and tomorrow.

Article last updated 28 March 2012