2019: NOTHING IS CERTAIN, BUT EVERYTHING IS URGENT (click on slides for better resolution)

2019 will be a time to look at the world differently: The economy is slowing down, and the stock markets are increasingly nervous. Have we passed the top of an economic cycle which started in 2009? New tensions occur at all levels: energy and labor cost, inflation, currency volatility, rise in interest rates and protectionism. What will the consequences be? How can companies react?



A PERVASIVE TECHNOLOGICAL REVOLUTION

The new technological revolution affects every sector of the economy, without exception. The disruption extends to management practices and jobs. The “immaterial economy” increases its share of the world economy. However, it is hard to measure and to regulate. What is hype, what is real? At the end of the value chain, there is always a tangible product proposed to consumers. The objective is to align technology with customer’s needs.



NEW BUSINESS MODELS

New business models flourish and surf on new technological platforms. The “free” model offers services as a counterpart to accessing personal data (Facebook), the “subscription” model locks consumers into a long-term relationship (Spotify). The “licensing” model only proposes the use of a product, but not its ownership (Microsoft, Netflix). All these models change the relationship between companies and consumers considerably.



BRANCHING OUT

Global technology companies now can extend their business reach far beyond their initial industry sector. Amazon is a world leader in cloud technology, Google and Facebook in digital advertising, Tesla in batteries and solar panels, and Amazon now produces almost as many watches as the entire Swiss industry. Size matters. Ant financial, the electronic payment company of Alibaba, is 16 times larger than Paypal. The challenge for other companies: who will be my competitor tomorrow, where they will come from?



THE CONSEQUENCE OF GLOBALIZATION

The combination of the huge amount of liquidities, often parked outside the country of residence of global companies, with new technologies and tax optimization lead to an explosion in dividends, share buybacks and especially in a flurry of Mergers and Acquisitions. The consolidation of entire industry sectors and the ownership of companies is profoundly affected by this latter trend. Also, a proliferation of new companies and new brands from emerging economies has appeared on the global market. It is estimated that some 1,000 companies from emerging economies, with revenues of more than $1bn, can be qualified as global companies today. Many of them are family owned.



THE NEXT BIG SYSTEMIC RISK?

The world economy is now characterized by a formidable concentration of large technological companies which combine considerable know-how and financial resources. They also use about 25% of their financial resources to buy successful start ups all over the world. Today, many large companies have developed their own private equity fund. They are also a focus for much of the stock exchange investments through passive index vehicles, which concentrate and explode market capitalization. Such an economic and business power is not without risk. Where is the systemic risk today? With undervalued and overregulated banks or with overvalued and underregulated technological companies?



THE GLOBAL TAX REVOLUTION

Governments react to this new paradigm with more regulations (such as the EU General Data Protection Regulation) and taxes. Three basic principles guide the tax reform world-wide: a territorial system, transparency, and equality of treatment. However, divergence will continue regarding tax rates which will not be harmonized. Governments are also attacking the issue of taxing technological companies with the idea to tax revenues (2-3%) rather than profits which are hard to assess for a single territory.



THE MILLENNIALS' REVOLUTION

The arrival of the millennials as consumers and employees force companies to reassess their approach to products and markets. This new generation is driven by "Meism"; a self-centered approach to life, an eagerness for transparency, which means that nothing should be confidential anymore; a willingness to improve the state of the world, especially through sustainable development, and a conviction that "free is cool", which implies a reassessment of profitability models for companies. This new paradigm reinforces Peter Drucker's statement: " Changes in society now have more impact than changes in management." Companies that ignore this new fact will face strong headwinds from consumers, society, and governments.



A MINDSET FOR COMPETITIVENESS AND SUCCESS

This world competitiveness landscape implies new attitudes and new approaches to managing people. It is not only being good at "what you do" that counts, but also being good at "what you are." Winners will need to deal with more uncertainty and a higher degree of discomfort. They should nurture a healthy sense of ambition for their organization and themselves. Resilience and the ability to quickly re-invent oneself are key to success.

Companies need to stimulate a mind-set of imagination (why not?), of energy (why not now) and of commitment (why not me). Companies are increasingly questioned, especially by the millennials, about their contribution to society, beyond their financial results. The “legality” of the actions of companies - conforming to the law - is no longer enough in a world where public opinion also demands "legitimacy" - conforming to a higher standard. In such a world, companies will need to answer the broader question: why us?



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