September 2009
Green shoots or stormy skies ahead?
Things will never go back to normal. A new normal is emerging, and there will be new rules for success (and failure).
article by
Dean van Leeuwen
Article at a glance
In September 2008, the world changed almost overnight. A year on we can reflect on the craziness of the past twelve months; and as we emerge from the worst recession since the 1930’s many of us hope things will go back to normal. But this article argues that there is now a new normal and business leaders need to be careful that they don’t head up the mountain in their shorts and t-shirts only to get caught out in a blizzard.
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It’s been a crazy few months…
As we reach the first anniversary of what is now being called "the great meltdown" we are able to reflect on the past few crazy months. The state of our economy and at times the crazy behaviour of our politicians are going to have an impact on all of our lives for at least the next decade in the form of reduced public spending or direct taxes. We may be emerging from the recession but its memory and impact will linger.
The one thing that is true of past recessions is that each downturn is followed by an upturn and during every downturn there have been opportunities to build more corporate muscle, prepare for the upturn and get ahead of your competitors. A point in case, what do the following companies: GE, Hyatt Hotels, HP, Burger King, Microsoft, Revlon, CNN, FedEx, Sports Illustrative and Fortune Magazine all have in common? They are all successful companies that were started during recessions. Opportunities exist for companies and executives who are brave and prepared to pull their heads out of the ground. As Peter Drucker once said “wherever you find a successful company somebody once made a courageous decision.”
Regardless of where the economy currently is heading, our research consistently highlights one overriding conclusion - the world has changed, there is now a new normal.
As much as we would like to go back to the “normal” of the past two decades the reality is that this not going to happen. Think of the massive social and political changes over the past 12 months. If I’d said to you, before September 14, 2009, that governments would own big banks and that there would be a near global financial meltdown, would you have believed me? Probably not. If I’d said to you 18 months ago that America would have its first black president, you probably wouldn’t have believed me either. Reverend Jesse Jackson, didn’t believe it. He was interviewed crying on TV saying he never even expected this to happen in his lifetime!
The World has Changed
The reality is that the world changed at the end of 2008. And if the world has changed you need to be doing things differently! It would be great if we could see into the future and know what happens next. Now I think I’m safe in saying that no one can honestly claim to predict the future, and I’m certainly not going to say that I know what will happen over the next few years. But we can look back into the past to identify trends and indicators of what may happen. As Winston Churchill once said “The further backward you look, the farther forward you are likely to see.”
To see what tomorrow may look like, come with me on a journey that will reveal a startling trend that goes as far back as the War Of The Roses over five centuries ago. Our story starts in the mid 1990’s when two Harvard and Yale trained professors Neil Howe and William Strauss did an incredible study. As political economists they wanted to understand the impact that an era had on the lives of politicians. They mapped out 500 years of Anglo-American history and what they discovered was fascinating. They uncovered that society lives through periods of highs and lows or periods that they called awakenings and crises. Now this is not new, we all suspect that there is a cycle in life, an ebb and flow that society moves through, periods of adjustment and readjustments. But their study revealed something more alarming. Since the War of the Roses they identified seven moments in time when the course of history changed dramatically. These moments in history, have shaken the foundations of society to the core and out of the rubble emerged new powers and new world orders. The events identified were: The War of the Roses; The Spanish Armada; The Glorious Revolution; American Revolution; American Civil War and the Great Depression/WW2. When analysing these events a repeating cycle becomes very obvious. On average these events, equivalent to a societal earthquake, happen approximately every 80-90 years. Howe And Strauss’s made a bold prediction - the next shake up would happen during the latter part of the first decade in the 21st Century. With events unfolding over the past few months there are few who can argue against the accuracy of their prediction.
Periods of readjustment in history can been compared to the season of winter. A necessary time when the old decaying leaves of society fall away, leading to rebirth or a spring period. This is a time when the old ways of doing things pass on to be replaced by new institutional systems (political, financial, legal and religious) and new personal value systems emerge changing and reshaping society.
The notion now is that society is entering a period where it will undergo a major shake up. A shake up that will redefine our value systems, our institutions and the way in which things are done. Changes will be dramatic, to the extent that our society pre and post this winter period will look very different. Now the challenge we all face is that we are living during a period of great change and it is not always clear what is coming next. The theory helps us to understand that there is now a new season, a new normal.
Just because we are in the winter season does not mean we need to get all despondent. Winter can be a great time. We go skiing, we drink gluvine and we snuggle up in front of the fire. The most important thing is that leaders recognise the signs that signal winter’s arrival and don’t head up the mountain in their shorts and t-shirt only to get caught in a blizzard!
The good news is that business confidence is on the up with over 43% of senior managers believing we are emerging from the recession. But is this confidence premature? There are still many unanswered questions and a lot of uncertainty (see insert for “mixed signals” taken from The Observer 6 September 2009). Fearful G20 finance ministers pledge more support for fragile economies and the Organisation of Economic Co-operation and Development (OECD) warns that the UK is still in a "severe recession. Despite Alistair Darling's claim that the UK is better placed to weather the downturn, indications are that the UK will emerge from the recession behind other countries with the OECD predicting that the UK will contract by 4.7% in 2009.
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