The future’s blue – and yellow?

Tom Richardson writes:

In the London office we like to shake out the weekend with a ‘Monday Morning Meeting’. It’s a tradition that goes back some twenty years, and it’s a way of finding time to think out loud and be provocative, to explore ideas and have them contested.

These meetings are important because we spend a lot of our time on specific client problems, often dealing with one industry or even one type of product for long periods, but these clients rightly expect us to be well-versed in wider trends.

Finding a balance between these is crucial to being effective. The role of research is to help clients to be able to decide and to act, so we have to see trends in context.

This week we used a balloon debate as a way of thinking about the future. We created a list of 100 services, products, institutions or ideologies, pulled them out of a hat, and stood up to defend our selection’s importance to the world in 2050.

Everyone had ten minutes to prepare and a minute each to make their case.

Round one saw ‘dictatorship’ go up against ‘IKEA’, ‘the National Trust’, and ‘dietary supplements’.

Andy Stubbings, a Senior Consultant, made a persuasive case for IKEA with a sobering vision of a world in 2050 in which energy scarcity, resource conflicts and overcrowded cities made the servicing of needs – not wants – the prevalent retail model.

Lawrence Wykes’ defence of dictatorship focused on the inevitable inefficiency of democracy in a resource-scarce world, while Carol Storey’s case for dietary supplements focused on population growth and malnutrition.

My deeply personal defence of the National Trust as a bulwark against the insidious creep of disposable architecture was not persuasive enough to put me through to the final round alongside Pets, IKEA and Dictatorship. Alas!

In the final round, IKEA came out on top for 2050, despite concerns about deforestation and global warming, because of its consumer focus, logistical precision and sharp eye for the wider external factors influencing its business. (For example, it’s a leader in using rail for its freight distribution).

So – did the exercise serve its purpose? I think so.

It forced us to articulate our opinions. And more than that, it made us think about the future in terms of what will be necessary, rather than what will be possible. Too many predictions – and technology pundits are particularly guilty here – focus on what we are capable of doing because it makes good copy.

But change and innovation lives in a messy space between consumer need, external constraint, and evolving business models. In other words, it needs an understanding of human behaviour, drivers of wider social change, and business opportunity.

By justifying our choices in a competitive setting, we had to anchor our arguments in these unforgiving contexts.

The picture of IKEA’s headquarters is from Wikimedia Commons and is published under a GNU Free Documentation licence.

Selling stuff

Click on the image to expand it.

(c) Jake Goretzki 2010

Feeling the squeeze

Andrew Curry writes:

It’s hard to add to the volume of commentary that has followed Wednesday’s Comprehensive Spending Review, but there are relevant observations from some of The Futures Company’s recent research. It is somewhere between a gamble and a large-scale economic experiment, as pundits observed almost immediately, largely regressive (opens pdf), and despite the denials it will increase inequality (from the current  historically high levels). If I was the government I’d be most concerned about the likely rise in unemployment, currently nudging the 2.5m mark, and with the government’s own estimates suggesting that 500,000 public sector workers could lose their jobs as a result of the public spending cuts. If the rush of private investment anticipated by some business leaders does not materialise, unemployment could quickly climb through the 3 million mark, which seems to have been the threshold of popular discontent in recent British history (if we think back to the early eighties and again to the early 90s).

Our recent wave of Feeling the Pinch research, which we blogged about earlier this week, also gives us a useful picture of public perspectives on the economy. The research was done in September, and 75% thought the economy was going ‘badly’ or ‘very badly’ – down from 85% in November last year. 39% thought they’d be worse off in 12 months time, and 10% better off – both figures almost unchanged since last year.

The groups who were more anxious about the economic prospects (“Choppy Waters” and “All hands on deck”) were similar to each other (and fairly different from the “Plain Sailing” group). They were likely to have a mortgage, or be renting; they were more likely to have dependent children; and they were likely to be working rather than retired. They are also much more likely to have been affected by debt, and have already changed their spending habits as a result of the recession. These are groups whose attitudes could change quite sharply if people they know start losing their jobs. And there are some clues here as to why the child benefits caused such a sharp public response.

The other relevant analysis was by our public sector team, which produced a short paper, “The Effectiveness Agenda”  after the election on how to improve public outcomes in an environment of austerity. We believed that savings could be found in public expenditure, but not the fabled ‘efficiency savings’ which critics always talk about. Instead, there were savings to be found from ‘effectiveness’, which involves looking at the desired public outcomes in a holistic way, and probably across departments. The Total Place agenda is a good example of this at a local level. Nationally, Kenneth Clarke’s plan to reduce the number of short-term jail sentences improves social and public outcomes while reducing expenditure hugely (although cutting the budget of the National Offender Management Scheme at the same time is not particularly holistic). But such thinking needs some time for reflection – and some leadership.

There are still a few places available at our next Feeling The Pinch breakfast seminar on November 9th; if you’re interested in attending, please contact Karen Kidson. The Effectiveness Agenda paper can be downloaded as a pdf from the link below; for more on this, speak to Andrew Curry or Alex Oliver. The icons at the top of the post were designed by Gus Newsam, of the Futures Company’s design team. They are © The Futures Company, 2010.

The Futures Company Effectiveness Agenda 2010 [downloads as pdf]

The new normal

Jo Phillips writes:

We are officially ‘out of the recession’, but uncertainty, and even fear, remains. The fourth wave of research in our UK consumer tracking study Feeling the Pinch (which Fran Walton and Eleanor Cooksey launched at a breakfast briefing in London last week) shows that consumers are in the ‘doldrums’ – a place which is both quiet and uneasy, a place where you are stuck. Two-fifths of consumers say they are worse off than last year (the same proportion as in November 2009) and just under half know someone who has been made redundant in the past twelve months.

With Wednesday’s Spending Review ensuring that job cuts are never far from a front page, and rising prices meaning that people need a bit more money to feel like they are staying still, it’s no wonder that consumers remain anxious. But we believe that this new reality is starting to stick. We’re seeing a deeper shift in consumer outlook: welcome to the New Normal.

With the New Normal comes our new acronym, SCANT, to help organisations and brands understand current consumer attitudes and thereby navigate this sea change. Here’s a brief introduction:

• Scepticism: many brands have been so focussed on price through the recession that they have stopped talking to people, leaving a trust void. 77% of consumers agree that the banks serve their own interests, not the interests of their consumers, and 58% now have less faith in the government to tackle the big issues of the day. Brands urgently need to  rebuild trust.

• Control: 65% of consumers agree ‘it is important for me to get a greater sense of control in every aspect of my life’ (up a very sharp 13% since November 2009), and 60% feel a greater need to be as self-sufficient as possible since the recession (up 9% from November). We’re seeing people’s relationship with time change fundamentally. Pre-recession, people would do almost anything to save time, including spending money. Now they are willing to use their time to gain greater control. Brands need to help consumers feel in control of their lives again.

• Acceptance: 53% agree that this recession will change consumer culture for ever (up 11% on November), and 45% that ‘some of the dreams I had before the recession are now out of my reach’. Categories that may have been seen as essentials may now be considered to be luxuries. Brands which are affected by this change may need to reposition themselves. Waitrose is a great example of a brand that has found a way to tell a different story.

• New aspirations: 53% agree that ‘Since the recession I have learnt how many things I can do without’ (up 5%). Expectations have been re-calibrated. People are focusing on smaller, everyday treats. One example of a business that has responded: as flying becomes an increasingly unpleasant experience, with security and health concerns, Virgin has positioned its “Upper Class” offer as taking these frustrations out of flying.

• Treading carefully: 60% agree that they have ‘become more likely to consider the potential risks of a decision they make’. People think twice before buying. And so the warranty has become the new battleground for the car industry. Kia opened this up with a 7-year (or 100,000 mile) warranty earlier this year, and Toyota later introduced a 5-year warranty. Since then Vauxhall has announced a ‘lifetime’ warranty (which also turns out to be 100,000 miles). We expect this sort of security to become part of a new relationship between organisations and their customers.

There are limited places available for a repeat of this breakfast briefing on 9 November. To find out more please contact Karen Kidson.

Rising East

Joe Ballantyne writes:

We’re experiencing a fundamental shift in the global economy, as wealth moves from West to East. As Asia and the Middle East assert themselves as the brightest prospects on the global landscape, in some ways we’re witnessing a return to the 16^th–19^th centuries, when the Chinese and Indian economies dominated world trade.

The scale of the shift is huge. In 1950, America was responsible for 27 per cent of the world’s GDP. China accounted for just 4.5 per cent and India, 4.2 per cent. Fast-forward to 2050 and the picture will look very different: forecasters say China will then be about to become the biggest economy in the world.

This economic shift, and the large implications for European businesses, was the subject of a recent report, Looking East, produced by The Futures Company for HSBC. The report included extensive analysis of the main drivers of change affecting the global economy to 2020, as well as a number of in-depth interviews with experts and businesspeople in a number of European countries.

It can seem as though this story is now a familiar one. But the research uncovered some striking findings, some of which go against the grain of popular conceptions about the rise of Asia. I was most struck, as we wrote the report, by these three:

• The ‘global financial crisis’ isn’t really global at all – it’s a manifestation of a longer term economic realignment. While Western economies stagnated through 2009-10, Asian economies are increasingly “decoupled” from the US, and have increasingly influential trade partners in other parts of the world – notably Africa and south America. China and India have continued to expand rapidly while Japan and several European economies have slipped into near-depression.

• Asia is no longer just a source of low cost labour – it’s increasingly a source of high value innovation. The model whereby the West does the research, development and design and the East took care of production is anachronistic. Lines have been blurred – as a result of a huge investment in education, countries like India and China are world leaders in areas such as software design and green technologies, and their multinationals are reshaping industries such as energy, steel and car making.

• There’s more than one way of running a successful economy. It’s easy to assume that the Washington consensus – open borders, economic liberalization, and free movement of capital, privatization – is the only way to run a successful economy. But these are largely a legacy of the ’80s, and an alternative model of ‘state capitalism’ developing in emerging economies. Companies are encouraged to exploit global capital markets and seek new opportunities abroad but are directed by the state and help to manage the domestic economy. This is most obvious in strategically important national industries: for example, 75% of the globally available crude oil reserves are in government hands. But it is also manifest in other industries: China Mobile, the world’s biggest telecommunications company, is listed on the NYSE, but controlled by a holding company owned by the government. In India, the central government has hundreds of state-run enterprises in diverse industries. Sitting behind the state capitalist model – in Russia and the Middle East as well as Asia – is the sovereign wealth fund, which invests globally for the benefit of the people but is managed and controlled by the state. These funds are increasingly active investors in the West.

The report – Looking East – was widely covered by (among others) the Financial Times, Wall Street Journal and Business Week and can be downloaded online (opens pdf), free of charge.The picture at the top of this post is from the China Digital Times, and is used with thanks.

Looking beyond price

Walker Smith writes:

A ‘new normal’ is emerging among consumers in the wake of the financial crisis and the recession:  ‘considered consumption’. This trend, which we noted last year, has now been reaffirmed by our latest Global MONITOR survey, which has just been released. One of the consequences is that the focus on price which was so strong immediately following the financial crisis has started to weaken.

Two data points stand out. The first is that 53% of consumers – taking a global average across all 20 countries – agree that ‘price is more important to me than brand names’ (down from 59% in 2009). The second is that 39% agree that ‘it’s best to buy famous brand names because you can rely on their quality’ (up from 34% in 2009).

Although these changes are small, they are notable. It can be easy to lose sight of the fact that consumers who are still tightening their belts also want the reassurance of name-brand quality.

And while there’s been a lot of talk about consumer frugality, what’s actually happening is that they’re practising prioritization. Consumers will stand up for the things that matter to them. But brands need to play their part as well. One of the other trends tracked by Global MONITOR is about interest in brands that practice social responsibility or deliver innovative wellness benefits. That’s been climbing, albeit slowly, over the past three years.

Global MONITOR is The Futures Company’s syndicated insights service. It encompasses an annual quantitative global survey of more than 27,000 consumers in 20 countries; the Global Energies, our consumer trends framework; and Global Streetscapes, our interactive database, continually refreshed, of consumer and brand behaviour. For more information, please contact Jennifer Childs in London or Simon Kaplan in the United States.