A new global marketplace on the horizon
The study identified six seismic shifts that will transform the global playing field over the next five years:
1. The global digital economy comes of age. Latest advances in technology are boosting the digital economy and powering a third wave of capitalism that will lead to extraordinary wealth creation. About 57% of executives expect mobility to have the greatest positive impact on their businesses, followed by business intelligence, (37%), cloud computing (36%), and social media (31%). Oxford Economics forecasts that the global digital economy—including all forms of e-commerce and the total market for digital products and services—will reach $20.4 trillion by 2013, roughly 13.8% of worldwide sales.
2. Industries undergo digital transformation. Global market shifts and technology advances will upend most aspects of business. The industries that will see the greatest transformation include technology (cited by 72% of executives); telecommunications (66%); entertainment, media and publishing (65%); retail (48%); banking (47%); and life sciences (38%). Executives say this transformation will help them provide more responsive customer care (60%), reduce time to complete tasks (60%) and improve productivity (58%).
3. The digital divide reverses. About twice as many companies in the developing world than advanced markets will increase investments by 20% or more in mobile devices, social media, business intelligence, collaborative technologies and telepresence. Emerging markets already account for about 73% of the world's mobile use—and with E7 population growing twice as fast as the G7, that percentage will increase.
4. The emerging-market customer takes center stage. Rising income levels in emerging markets are creating huge opportunities for firms. In markets like China and India, disposable income is increasing at 8% annually, versus 2% in the US and 1% in Japan. At the same time, private and public spending will increase twice as fast in the BRIC (Brazil, Russia, India and China) economies than the top four advanced economies (US, Japan, Germany and France). As a result, Western firms are turning to reverse innovation, creating products first for developing markets and then rolling them out to the industrial world.
5. Business shifts into hyperdrive. Business intelligence (BI) will be vital for reacting to events in real time in today's fast-moving marketplace. Indeed, 70% of executives in the TICE (technology, information, communication and entertainment) arena cite business intelligence as very or extremely important to operating in real time, along with 64% in the retail and consumer sector. While 83% of firms in emerging markets have proper BI strategies in place, 43% of companies in advanced economies are still operating without them.
6. Firms reorganize to embrace the digital economy. Astute Western firms are moving to more flexible structures suited for a digital marketplace. Some are adopting globally integrated approaches that impose a consistent set of processes and create centers for decision-making. Others are developing organizations that push decisions to the edge, where executives interact with the market. But these changes are not easy to make: 37% of firms are not willing to cannibalize existing business models, and 35% lack the vision and innovation skills required of such changes.
"The global downturn accelerated two major trends: the transfer of economic clout to the emerging world and the adoption of new technologies to drive productivity and innovation," says Lou Celi, Executive Director of Thought Leadership at Oxford Economics. "Those trends are supercharging the digital economy and putting emerging markets at the epicenter of growth."
The paper offers a set of imperatives for CEOs to ensure their firms remain competitive. These include the development of a forward-thinking mobile strategy, reversing the approach to innovation, and protecting against greater risks from cyber attacks, reputational damage and economic volatility.
"The global marketplace will go through relentless change over the next five years," adds Debra D'Agostino, Editorial Director of Thought Leadership at Oxford Economics. "The firms that will succeed are those that prepare for the East but protect their positions in the West. As such, embedding new technologies into their global strategy will be key."