ULLTIMATE CHALLENGES FACING COMPANIES IN THE 21ST CENTURY

Uncertainty

Organizations today find great discomfort in uncertainty, and this is particularly pertinent for long-term success in business. Uncertainty in the global economy and the current recovery, uncertainty in the credit markets, uncertainty in how environmental regulations will affect business and ongoing changes in consumer behaviour all combine to show what appears to be a very uncertain future.

Essentially, uncertainty leads to a short-term focus and companies are shying away from long-term planning in favour of a more short-sighted outlook. While short-term goals are also essential, failure to strategically plan five or ten years into the future can end up destroying value. The problem to be solved, therefore, is to balance the need for a more reactive, short-term focus with the need for informed, long-term strategies. For more information on how to balance your short term plans with longer term strategies, visit our Strategic Planning pages.

Regulation

A changing regulatory environment is always of concern in certain industries, but fluctuating energy, environmental and financial policy is causing concern for nearly all companies today. Whether it is the demand from customers or shareholders to become more “green” or the threat of increased costs due to new carbon taxes, environmental considerations are among the biggest challenges businesses are facing, and the sheer process of keeping up to date with regulations can be overwhelming. Globalisation and the growth of foreign trade has also added to the regulatory burden.

Understanding international markets and the role they can play in your business growth may be the key to survival for many firms but this comes at the cost of regulations and legislation affecting how you do business in other markets. The problems to be solved are to understand the meaning of regulation in your industry, its implications for your business, and to develop the skills necessary to deal with it..

Cashflow

Having a good credit score is important not only when you want to borrow money but also as it affects your ability to secure good terms on trade credit. If you are a fast growth company you can rapidly outgrow your available sources. If you are an underperforming company you may not be able to secure credit.  The public sector and many large firms are shedding jobs by the thousands, and, as a result, the economy is relying on smaller businesses to create new ones, particularly in innovative sectors such as green technology.

Waste control

Waste control remains at the forefront of business strategy with many businesses now looking for more sustainable ways to manage costs long-term having already managed down their cost base through the recession.  There is a distinct interest in streamlining non value-added processes, in particular use of cloud-based technologies and other shared services to ease increasing administrative demand.

Also on the rise is the potential to outsource those activities not considered core to business services to provide a more flexible and predictable cost base. This would be particularly appropriate during a time of uncontrollable rising costs such as fuel prices, raw materials and the higher VAT rate.

Technology & Innovation

The pace at which technological advances are affecting businesses today makes capital investment in technology as much an asset as a handicap because a competitor may decide to wait for the next-generation technology.  Similarly, the ability for even the best of technologists to stay informed about emerging technology is in conflict with the need to master a company’s current technological investment.

For smaller businesses, the matter of distinguishing which technology will garner the highest return in terms of time and investment capital can be equally problematic. The solution is to develop a long-term technology strategy while remaining flexible enough to take advantage of unforeseen technological developments.

Globalization

The challenges of globalization is a top concern for organizations and companies in the 21st century. Understanding foreign cultures is essential to everything from the ability to penetrate new markets with existing products and services, to designing new products and services for new customers, to recognizing emergent, disruptive competitors that only months earlier weren’t even known. The problem to be solved is to better understand international markets and cultures through better information gathering and better analysis of what it all means.

Innovation

At least not the big companies (Global 1000) anyway, though that changes some as companies get smaller. This finding was a big surprise. It seems big companies are struggling with innovation, and a better innovation process is at the top of the agenda for most CEOs. But the idea of a more innovative culture appears too frightening to many. The problem to be solved is how to become more innovative while still maintaining a sense of control over the organization.

Regulation

A changing regulatory environment is always of concern in certain industries, but uncertain energy, environmental and financial policy is wreaking havoc for nearly all companies today. Whether a demand from customers or shareholders to become more “green,” or the threat of increased costs due to new carbon taxes, environmental considerations are among the biggest challenges businesses face today. And we don’t need to give too much press to the current issue of financial reform and regulation, although we do have some opinions about how to prepare for that if you’re a bank or a brokerage house. The problems to be solved are to understand the meaning of regulation in your industry, its implications for your business, and to develop the skills necessary to deal with it.

Technology

The pace of technological improvement is running at an exponentially increasing rate. While this has been true for several decades, the pace today makes capital investment in technology as much an asset as a handicap because a competitor can wait for the next-generation technology, which may only be a year away, then use it to achieve an advantage. Similarly, the ability for even the best of technologists to stay informed about emerging technology is in conflict with the need to master a company's current technology. The problem to be solved is to develop a long-term technology strategy while remaining flexible enough to take advantage of unforeseen technology developments.

Diversity

Diversity brings many challenges, as it makes it far more likely that people do not agree, and the lack of agreement makes execution very difficult. At the same time, the lack of diversity among many large company leadership teams leads to a narrow view of an ever-changing and diverse world—contributing to groupthink, stale culture and a tendency to live with the status quo for too long. The problem to be solved is to first define what diversity really means in your company, then foster the expansion of differing ideas and viewpoints while ensuring cohesion and teamwork.

Complexity

There’s no doubt that life and business have gotten more complex, even as certain tasks and activities have become easier due to information technology. The pace of change is quickening. The global economy is becoming still more connected, creating a much larger and more diverse population of customers and suppliers. Manufacturing and services are increasingly targeted at smaller, specialized markets due to the flexibility that IT provides in these areas. We know from our knowledge of the patterns of evolution that, in reality, systems tend to become more complex as they evolve, then become simplified again. The problem is how to develop better systems-thinking capability so you can design your business models, processes, products and services in a way that minimizes complexity.

Information Overload

The ability of companies, much less individuals, to consume and make sense of the information that is available (and necessary) to make good decisions is becoming a nearly insurmountable challenge. The problem to be solved is to deal with this mountain of information with both technology and human know-how, then to convert this information into valuable knowledge.

Supply Chains

Because of uncertainty in demand and the need to stay lean, companies are carrying smaller inventories than ever. At the same time, uncertainty in supply, driven by wildly changing commodity prices, an apparent increase in weather-related disruptions, and increasing competition for raw materials from the BRIC countries, makes materials planning more challenging than ever. Smaller suppliers that can no longer get the credit they need to keep up with their larger customers’ demand exacerbates an already unwieldy situation. The problem to be solved is to develop a supply-chain strategy that not only ensures the lowest costs, but also minimizes the risk of crippling supply-chain disruptions.

Problem Solving

The lack of a sophisticated problem-solving competency among today’s business leaders is limiting their ability to adequately deal with the first nine problems. This is why corporate managers tend to jump from one fire to another, depending on which one their executives are trying to put out, and in many cases the fast-changing business environment is what ignites these fires. So what is the problem to be solved? We believe, to do well into the future, companies must resolve that problem solving is the key to business, then develop a robust problem-solving capability at all levels.