2014 will be a year of continued excitement in the capital markets. 2013 was a boom year for Initial Public Offerings (IPO), the biggest year since 2007 in fact. But 2014 will mark a shift in emphasis in the IPO market. Twitter was the last big social media IPO for a while, following the launches of Facebook, Zynga and Groupon. Instead, attention will turn to companies with real business models and solid cashflows, following the successful IPOs of the Royal Mail and Merlin. There could also be a return to merger mania, with big deals now looking highly plausible in the worlds of banking, pharmaceuticals and telecoms.
The mobile industry will continue to capture more than its share of the headlines in 2014. History will repeat itself in the operating system standards war. Google’s Android will continue to increase its market share, as long as Samsung stays on board. Apple’s closed system will lose ground. Blackberry will die out. The big question market is Microsoft/Nokia’s Windows 8 system, and my hunch is it will make a comeback, with Microsoft continuing to throw money at it, until it secures second-place in the smartphone market.
I see two big issues in 2014:
The first is that as growth slows in major emerging markets like China and India, companies are going to have to segment these markets more finely. The easy market segments are already penetrated and to get further sales growth in these markets, companies will have to dig deeper – beyond the Tier One and Two cities in China and the rural markets in India. And, more in general, from BRIC focus to other emerging markets such as Africa. One sees hopes of a comeback in USA and Europe which means firms will have to refocus to some extent on these markets too. Getting growth will be a tough slog.
Secondly a greater reliance on “big data” where the focus moves from "wow isn’t it great we have all this data" to "how do we use it to help make better informed decisions". Analysis of this data requires the combination of hard statistical skills with softer managerial skill of knowing the right questions. Sooner or later, consumers are going to become aware of the huge amount of data that they are sharing without knowing. This is going to lead to a predictable fight for regulation on privacy concerns.
Traditional strategy is dead — welcome to the social era.
The technologies and innovations of the social era (such as the internet, social media, crowdfunding, crowdsourcing, etc) have introduced radical changes in how we do business. As we enter 2014, companies around the world will be confronting a number of new challenges, including the following:
From hierarchy to network: Companies will have to face the new reality that they do not (and cannot) do everything within their existing hierarchy. Increasingly, they will have to turn to “outsiders” (non-employees) to help them design or produce their products. Given the rate of technology evolution and the rapid convergence of multiple technologies, no company can assume all aspects of development, discovery or manufacturing within itself or even in one single location, while meeting the challenges of cost, time to market and functionality. In the current global scenario, various aspects of the company, including design, manufacturing and distribution are possible in different geographies. Companies will have to learn how to manage, control and motivate people in a distributed network (rather than a hierarchy).
From centralised to decentralised change: New technologies allow us to engage in totally different change processes within our organisations. Rather than the traditional top-down process driven by one heroic individual, we can now have bottom-up, decentralised processes, driven by hundreds of individuals. In such a process, rather than push change through, the change agent ought to put a system in place that pulls multiple change-agents into the fray.
From closed to open innovation: Gone are the days when a company had to discover everything internally. Now, ideas can literally come from anybody, anytime, anywhere. We have lots of companies that are putting this principle into practice and organisations need to totally re-think what kind of structures, cultures and people are needed to achieve open innovation.
From autocratic to democratic strategy: Increasingly, companies can and use everybody in the organisation to help them develop their strategy. In this sense, strategy is becoming “democratic”. But there are costs and problems with this and companies need to think how best to implement such a practice.
From rules to values and shared purpose: New technologies have changed the business landscape completely — business is now faster, more transparent, more competitive. At the same time, our employees’ (and customers’) norms and attitudes have changed so employees and customers are now fundamentally different from 30 years ago. Given the new type of employee and customer that we are facing, two key issues facing companies are: (a) how do I manage, control and motivate the Generation Y employee; and (b) how do I offer customised solutions to customers at a reasonable price.
2014 looks to be the year where we finally start to think about the end of the financial crisis and its aftermath as growth in the west improves. But it will be far from plain sailing. As money flows out of emerging markets back to the west we are likely to see some emerging market crises.
This will go hand in hand with more critical intellectual scrutiny of the growth economies, pointing out the deep institutional challenges that the next stage of growth will bring. In the west a return to growth will disappoint and lead rightly to a challenge for policy makers and business – where does the growth come from? How can we make the economy more inclusive? How do we tackle unemployment and career prospects for the young?
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