Organizational survival means embracing change

Business Horizons, Nov-Dec, 1993 by W. Harvey Hegarty

Although our world is becoming smaller as a result of the growing interdependency of its countries, we still grow in disproportionate ways. By 2000, 80 percent of the world's largest cities will be in lesser developed countries. Population explosions are taking place in areas that already suffer from high unemployment, health problems, political unrest, and low standards of living. Significant socioeconomic imbalances are the result.

During the next decade, these imbalances will be accentuated as per capita income continues to increase more in the developed countries than in the poorer areas of the world. By 2000 it is projected that the per capita income in the United States will be more than $14,000; in Africa, it will be somewhat less than $700. The gaps in the distribution of wealth are widening. As countries become more and more interdependent economically, these facts cease to become statistics and begin to have a real impact on us all. Worldwide telecommunication systems, a myriad of satellites, and inexpensive televisions bring this information into our living rooms and to isolated villages across Third World countries--where, well over 80 percent of the world's six billion people live.

China is a good example of such dramatic change. Fifteen years ago, this most populated country in the world had virtually no economic force outside its borders. But with extraordinary changes taking place in education, technology, economic development, and political reform, China will be a major player in the world by the year 2000. It could have more influence than any other country by the year 2020. Our success rate in the developed world in becoming a partner with China has so far been relatively unsuccessful.

Figure 1 indicates that we are in a technological-marketing financial revolution. In some respects this revolution is in its infancy, and it will continue to grow through the next decade. Sustained economic success in the future may be more closely linked to having patents and protection on information banks rather than the product patents we are accustomed to. These changes will be reinforced by the telecommunications revolution, which many believe is also still in its infancy. There will be widespread use of voice recognition computers; telephones with storage and transmitting capabilities will be readily available; many business transactions will be conducted through interactive television. How societies, organizations, and individuals gird themselves for all these extraordinary changes will be a key challenge.

At best this represents a cursory overview of some of the forces changing around us. Significant transformations within many industries also will likely have dramatic effects on how we live. In biotechnology, for example, nonaddictive tricyclic antidepressants to cope with stress, oncogenes that attack cancer cells, and enzymes that consume toxic waste are all distinct possibilities.

As the world continues to grow in population, and as arable land is reduced in many countries, the United States will become more responsible as the breadbasket for the world. All current trends indicate that in the lesser developed countries the picture for increased productivity gains over the next decade are grim. It is expected that Europe will be struggling to feed itself by the year 2000, and Japan will become more and more dependent on outside food sources. Yet in recent years as many as 100,000 U.S. farmers have declared bankruptcy. This gross irony becomes truly frightening when we read about a well-respected farmer shooting his local banker and then himself when the bank began foreclosure proceedings.

Agriculture, though, represents only 3 percent of our national employment. The big sector now is services; over the last three decades we have seen service industries grow from employing less than 40 percent to more than 80 percent of our work force. Manufacturing and assembly have moved offshore; for the foreseeable future they will stay there. Not only has this taken millions of jobs away from U.S. workers, it has tied us more tightly to the countries making the products we continue to purchase and consume.

There is also a change taking place in population age distribution in developed countries. During the 1990s there will be an 11 percent decrease in 18- to 34 year-olds (the new work force), and an 8 percent increase in people over the age of 60. By the turn of the century, there will be in excess of 30 million people in the United States over the age of 65 who will not be contributing to the economic base yet will continue to be consumers. A similar scenario is taking place in Western Europe. The demands of this increasing segment of the population will span economic, social, political, health, and demographic issues in the developed world.

In the developing world, economic dependencies of various countries are expanding at an escalating rate. Direct overseas investment worldwide has increased tenfold in the last ten years--a pattern that will continue over the next decade until more than 40 percent of financial transactions will be international by the year 2000.