NEW YORK, August 2, 2010 — Companies celebrating the end of the recession should put their vuvuzelas down and head back to the boardroom: An onslaught of emerging economic challenges will forever change the global business landscape. Though these challenges will be significant, they'll also present an opportunity for businesses to develop new products and to reevaluate how they interact with customers.
That was the message here today at CRM magazine's annual CRM Evolution conference, convening this week at the Marriott Marquis in New York's Times Square, as Denis Pombriant, founder and managing principal at Beagle Research Group, delivered a keynote address that laid out a strategy for companies that want to survive the looming era he dubs "The Interboom" — the hairball at the intersection of three important economic bubbles and the paradigms that should take their place.
[Editors' Note: For more coverage from the CRM Evolution conference, please click here.]
According to Pombriant, the three most pressing issues to test our economy in the coming years are:
- the end of high technology as a driving force in the economy;
- the aging of the Baby Boomer generation; and
- the Peak Oil milestone.
Economic Driver #1: The End of High Technology
"Make no mistake about it: High tech is over," Pombriant said in his address. "It has been so successful that it is no longer a driver of the economy — it is the economy, and its growth rate is inexorably trending down."
Pombriant noted that the rate of creation in tech-based products has permanently slowed, and as a result the so-called smart money is leaving venture-capital investing — a trend, he said, that actually began when the dot-com bubble burst in 2000. That was the year venture-capital investment peaked, Pombriant said — topping out at more than $100 billion. Over the course of the last decade, that figure has settled back to between $20 billion and $30 billion. Last year, venture capitalists invested more money ($17.7 billion) than they took in ($13.2 billion), according to The National Venture Capital Association.
"You have to go all the way back to 1997," Pombriant said, "when they raised only $14 billion to find their worst year." The waning era of high-tech innovation, he warned, foretells not merely a drop in the number of new product categories, but further product-line extension and more value engineering. "The rate of new-category formation is declining," Pombriant said. "That's contributing to the slowdown of venture-capital investing."
Economic Driver #2: The Aging Baby Boomers
The ongoing retirement of 77 million Baby Boomers is another serious challenge, Pombriant told the audience, citing economist Harry Dent's Spending Wave Theory, which says that whenever people in their mid-fifties come to represent a large-enough share of the overall population, spending takes a dip, the stock market might drop, and a recession becomes likely. Wave economists expect us to reach this tipping point as soon as 2012.
The emerging world population, however, is expanding — and with it, the number of people entering the middle class. According to the Brookings Institution, the planet will add 1 billion people between 2008 and 2020, and more than 1.8 billion people will join the middle class (approximately 600 million of them in China).
"The aging of the Baby Boomer removes some customer-spending power from the equation," Pombriant acknowledged, "but global demand will be significant if we can use our heads to develop ways to capture it. Our ability to meet the demands of these people is a challenge under the current consumption patterns that we have. It will require all of the insight and resources we can muster."
Economic Driver #3: Energy and Transportation
"Experts estimate there are 910 billion gallons of oil left in the earth," Pombriant told the crowd. "Current consumption rates equal 85 million barrels a day." Excluding demand growth,our oil supply will last another 30 years. The recent run-up of liquid-fuel prices will continue, Pombriant predicted, forcing people to seek transportation alternatives and travel substitutes.
"Liquid fuels could rise to $20 a gallon," Pombriant warned. "We use eight barrels for every one we find in the United States. U.S. business travel topped $234 billion last year, according to the National Business Travel Association."
Expanding on a topic he recently wrote about for CRM magazine, Pombriant noted that "Peak Oil means transportation will become permanently and increasingly expensive." The scarcity of fuel resources, he suggested, will be a counterbalance to globalization as the advantage of low-cost labor is trumped by the high cost of transportable goods.
In other words, Pombriant concluded, businesses will need to focus on sustainability more than ever before.
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