Working Wider

Eight Implications of a Wider New Normal

Coming out of the Great Recession we’ve entered a period of deleveraging and belt-tightening that some call the “New Normal”.  Clearly there have been fundamental changes in the global economy but changing economic conditions alone understates what constitutes the New Normal.  There’s a wider New Normal to consider.

First, the projected GNP growth for developing economies prior to and after the recession far outpaces what’s expected from mostly Western developed economies.  Second, the Great Recession hurt these economies less and they have rebounded faster.  Third, significant innovation from developing economies is now starting to flow into developed economies.  For example, Korea leads the world in the pervasive adoption of the latest wave of high-speed broadband.

These changes signal a power shift that, in wrestling terms, fundamentally changes who starts from the top position. For the first time since the industrial revolution, the economic playing field tilts away from developed nations.  The wider New Normal represents a much greater change than just belt-tightening.

Of course, the critical question is “so what do I do differently?”  Here are eight implications to consider.

1. Leaders in established economies have to pro-actively demolish selected internal structures and processes to create space for change.

Leaders err if they expect that communicating the New Normal is all that’s needed for employees to change their behavior.  Clay Christensen’s Innovator’s Dilemma, illustrated that current business models and customer requirements compel employees to resist innovation.  Proactive purging of outdated practices and technologies stimulates innovation by opening space for change.  Layering new ideas on top of old creates confusion as old and new battle for supremacy mimicking the gridlock special interests bring to Washington.

2. Think regional and national; not global

Economies grow around clusters of skills and interests.  High technology lives in Silicon Valley biotech has a home in Cambridge, England and software development thrives in Bangalore, India.  Particularly in developing countries where the developmental differences between regions can be extreme, stick with regional clusters of resources and customers that match your company’s need.

3.  Extracting actionable insight from available data trumps adding new data

With the embedded processors and networking capabilities built into so many consumer and industrial products, we don’t lack data.  Personal business software such as spreadsheets and Power Point “death marches” exacerbate the problem by making it easy to analyze and chart data every which way from Sunday.  This sucks all the creative “oxygen” out of the room, replacing it with low value discussions of precision.  Focus instead on extracting better actionable insight from current data.

4.  As the global economic floor rises, customer experience, attractiveness and compelling design become more important criteria for customers and employees.

The world is stepping up Maslow’s Hierarchy of Needs.  Delivering base functionality is now the rough equivalent of Maslow’s lowest level survival needs.  Future winners will be those who touch people’s belonging and self-actualization aspirations.  Base features and benefits must be augmented by design thinking with its higher value on style, human interaction and experience requirements.

5.  Building trust swiftly is critical for converting global access into competitive advantage

Anyone can get anywhere but who do you trust in unfamiliar domains?  With the greatest growth coming from unfamiliar places and cultures, the real challenge is growing a circle of trust faster than your competitors.   Plus, with developing countries often holding the upper hand economically, Western leaders must rely more on humility and respectful learning to rapidly expand trust and reduce risk.  Leaders should leverage existing relationships, partner with established multi-nationals and tap local immigrant networks.

6.  Virtual leadership and citizen heroism will gradually displace traditional leader-follower models

Leaders already travel more than they did, yet it’s still almost impossible to gather all of one’s team in a single room at the same time.  Creating a persistent virtual presence now requires a strong values-based management supported by modern communication infrastructure.  In addition, fostering local citizen heroism is essential.  What is a citizen-hero?  Think of any squad in a WWII movie where the ranking officer is killed in battle.  Watch how the survivors pull together and keep going without external intervention.  That’s the essence of citizen heroism.

7.  Business will increasingly embrace societal issues to advance performance

Government dysfunction and backlash is not just a U.S. phenomenon.  Western style democracies are too frequently gridlocked.  With autocratic economies such as China making swift advances, the failure to address big issues has serious implications for business.  Industry leads government in addressing global warming, health care cost containment and education. For example, to insure a continued flow of capable employees, Intel and other tech companies in Silicon Valley are giving millions to buttress California high school math instruction.

8.  Rational decision models have shown their vulnerability to “black swan” events and will get better by incorporating softer behavioral data.

Rational economics and its business counterpart “spreadsheet thinking” will continue to struggle with uncertainties and the limits of managing complexity.  At the same time, increasingly finer slices of behavioral data, will help us improve analytic tools.  For example, Netflix has constantly improved their movie recommendation engine by combining individual customer behavior with current queues and overall customer rankings.   Leaders need to honor the limits of objective rational models while also driving improved accuracy through incorporation of softer evidence.

There’s no question that the economic fallout from the Great Recession continues to threaten economic and societal recovery.  At the same time, it would be a mistake to assume the New Normal is simply a change in economic conditions.  If there’s anything the Great recession has shown us it’s the links between societies, economies and life on earth are more entwined than ever.  Those leaders that confront the core challenges of the wider New Normal will gain advantage.

2 comments… add one
  • DALawson May 1, 2010 @ 18:34

    Interesting thoughts.
    Wasn’t aware that Korea is classified as a developing country.

    • Christopher Meyer May 1, 2010 @ 22:15

      That’s a very fair comment. It’s hard to find the right terms for economies that are as advanced or beyond Western economies in many segments but still have much development in some regions. I have more direct contact with China who can compete directly with companies like Cisco yet in the western and northern provinces haven’t changed nearly as much. I’m curious if you have better language or frameworks to characterize them?

Leave a Reply

Your email address will not be published. Required fields are marked *