4 Trends Shaping The New Decade

By: Verne Harnish “Growth Guy”

Oct 5, 2010 1:00:00 PM ET

Dr. Hermann Simon, my favorite growth company researcher, is at it again – racing around the globe (in Japan as I write this), sharing what he sees are the trends shaping the new decade. He was kind enough to let me preview his latest research and share the results. Here’s my interpretation of four of his trends most likely to impact growth firms:

ACCELERATING GLOBALIZATION

We’ve only seen the tip of the iceberg when it comes to exporting. In 1950, world exports per capita were just six dollars. By 1980, they had jumped to $437. Thus, the relative jump was enormous. However, the absolute numbers are starting to accelerate. By the year 2000, world exports per capita more than doubled to $985. They jumped to $1,600 by 2005. And they reached almost $2,400 in 2008.

For growth firms, this means it’s time to seriously ramp up your exporting engine and hook your star to large firms that focus on exports. It’s not an accident that the best performing U.S. stocks have been for firms with huge global activity. Also think about copying firms in Switzerland and Germany and internationalize your management team.

It’s not a bad idea to take a clue from the British, who established the global clock and located GMT 0 in their own backyard. If you set-up an office in Europe, you can communicate with the east in the morning and the west in the afternoon during normal business hours. And by locating a global office in Europe, you never have to cross the Pacific Ocean to go anywhere on the planet, saving valuable travel time.

INCREASING GOVERNMENT INTERVENTION

In the aftermath of the crisis, regulation has increased in all sectors of the economy: financial, environment, data protection, health, transportation, and corporate governance. In turn, with massive public debts, governments are going to squeeze businesses for every penny they can, resorting to more blackmail-like practices if necessary.

With this increased intervention comes increased scrutiny and paperwork. Starting in 2011 in the U.S., credit card companies must report all transactions to the Internal Revenue Service (IRS). And starting in 2012, companies will have to file 1099 forms for all combined transactions over $ 600. This means you’ll have to file paperwork if you’ve spent $ 600 collectively over a year with a restaurant or office supply firm.

All this government intervention means that lobbying will be a major growth industry! At the same time, more and more firms will move to places like Estonia, Hong Kong, and Panama that have enacted business friendly policies.

ULTRA-LOW PRICE OR SUPER LUXURY PRODUCTS

It seems that the middle of the price market is shrinking. With the growing economies of India, China, Nigeria and Indonesia, there’s a huge demand for ultra-low priced products while a new upper class is buying up luxury goods i.e. the $2,500 Tata Nano car or the $80,000 BWM.

There’s no reason the developed world should miss out on these opportunities. Why not compete with China on price! To do this, Simon suggests a four-prong approach:

• Conduct R&D in emerging countries. I have several entrepreneurial friends using Hungarian developers to build their software.
• Launch a second low-cost brand – or multiple ones– so you don’t devalue your main brand.
• Take over the low-cost suppliers in your industry.
• Bring high manufacturing standards to a low-price product.

Overall, these tectonic shifts in the product world call for new location strategies with regard to R&D, manufacturing and marketing. Winning growth firms will be able to piece these disparate pieces together.

MESH BUSINESSES

Except for the music industry, we’ve only just begun to see the impact of the internet on current business models. Only now are companies effectively digitizing products so they can be distributed more efficiently. Worldreader.org, for instance, is digitizing local books in Ghana and using Kindles to more effectively distribute books to this African nation’s students.

More importantly, the internet is changing the way physical products are being used. Lisa Gansky, co-founder of Ofoto, has given a name to these new business models – what she calls “mesh” businesses. Zipcar, which allows people to share a car, is one of a hundred businesses she highlights in her book, appropriately called The Mesh: Why the Future of Business is Sharing.

Again, the recent economic crisis has accelerated these business models. Consumers are finding it less appealing to own assets now that the internet makes it easier to share – whether it’s DVDs (NetFlix), tools (North Portland Tool Library), or wine making facilities (Crushpad).

Never before, in my 28 years of helping growth firms, have I seen business models under such pressure to adapt to the rapidly changing economic and technology landscape. I hope these four trends propel your thinking.