How businesses can ‘win’ the 2020s

To be a winner in business is to be agile, adaptive, and flexible, if not outright fluid. Just ask the last decade.

“When the 2010s began, the world’s 10 most valuable private companies by market capitalization were based in five countries, only two of them were in the tech sector, and none were worth more than $400 billion,” stated a December study by BCG Henderson Institute, the Boston Consulting Group think tank dedicated to developing pioneering ideas and approaches to solving business challenges. “Today, all of the top 10 are in the US and China, the majority are tech companies, and some at least temporarily have surpassed $1 trillion in value.”

Thus, the study’s literally trillion-dollar question: “What will it take to win the 2020s?”

Sprouts today, flowers tomorrow

Already-apparent emerging trends, technological or otherwise, are most likely to shape business competition over the next decade. Businesses would do well to stay abreast, if not ahead, of them. These trends include artificial intelligence and the development of potentially extremely valuable business “ecosystems” that challenge industry boundaries and “blur the line between competitors and collaborators, and producers and consumers.”

China’s rise to power in the global economy, a consumer focus on businesses’ commitment and contribution to societal and environmental sustainability, increased investor activism, and a deceleration of working-class population growth in major economies also appear on the list. Together, they make “planning-based approaches” for the future confusing and more complex, if not occasionally downright impossible.

To stay in the game, the report makes clear that industry titans and newcomers alike must question and, if necessary, realign their businesses’ strategies and goals with the upcoming decade. A business’s age will determine the types of challenges it faces in the ‘20s, but young or old, each “would do well to learn from each other’s strengths.”

The success of many younger businesses is supported by their ability to construct “highly scalable digital platforms.” This success, and the digital opportunities that brought it, could be short-lived, “especially the opportunity to dominate broad, consumer-oriented digital ecosystems.” To succeed to in the coming decade, these businesses will need to pivot from purely digital platforms to those that combine digital technology with physical assets. “They will also need to ‘come of age’ by managing leadership transitions, avoiding the bureaucracy and inertia that generally come with greater size and a longer history, and developing new strategies to preserve trust among users and society at large – challenges that traditional companies have considerably more experience with.”

For established businesses, this often means digital transformation, the buzzword of the moment encompassing a journey leading to the all-important stage of “digital maturity.” Those businesses that find success – or, as the report states, “resurgence” – in the 2020s will have recognized, scaled, and deployed appropriate technology, and “reshaped their external relationships, organizations, and approaches accordingly.”

The study finds five aspects on which businesses should focus, regardless of industry or geographical location. If effectively approached, these aspects should place businesses in powerful positions to become leaders in the coming decade. 

Outsmart logic

“The emerging wave of technology – including sensors, the Internet of Things, and artificial intelligence – will turn every business into an information business.” More data will be available, as will more effective tools with which to obtain useful information from that data. Essentially, technological advances will provide companies with a wealth of resources they can use to give themselves a leg up on the competition. To do so, however, they will need to keep up with these advances, with both humans and machines.

The past’s “economies of scale” will be replaced by “economies of learning,” which will revolve around near-constant change and adaptation to identify and meet customer needs. This brings the concept of “ecosystems” into play. “Because ecosystems are fluid and dynamic, and not perfectly controllable even by the orchestrator, companies will need to be much more externally oriented, to deploy influence indirectly through platforms and marketplaces, and to coevolve with ecosystem partners.”

Resilience is another key – with technology’s constant change comes the need for businesses to weather the storm, should one arise. The business environment is increasingly dynamic. “Therefore, today’s leaders need to fundamentally reinvent the organizational model in order to become future winners.”

Create an organizational cyborg

Artificial intelligence, automation, and other forms of robotics are obviously primed to be key components of any successful business during the 2020s. But simply applying them to existing parts of a business isn’t enough. For success in the next decade, these technologies must be inextricable from daily operations. “To increase the ability of organizations to learn in aggregate, [businesses] must build integrated learning loops that gather information from data ecosystems, continuously derive insights using machine learning, and act on those insights autonomously, all at the speed of algorithms rather than the speed of human hierarchies.”

This doesn’t mean full reliance on technology. Leaders must instead design processes that “synergistically combine humans and machines,” with machines doing the grunt work and humans taking on tasks and duties that require human qualities, such as validating algorithms and developing innovational possibilities. “This division of labor also requires rethinking human-machine interfaces so that humans can trust and productively interact with machines,” the study states.

Change how change occurs

One of the few things that is a certainty in the coming decade – and in the decades to come after – is that change not only will, but must, occur. “It is therefore critical to create a sense of urgency within the organization to ensure that everyone truly understands the need for change,” the study finds.

Change, however, is risky; in fact, most large-scale studies fail. In the ‘20s, change must be evidence-based, understood empirically, rather than relying on gut feeling or past behaviors or actions. “Repeatable transformation capabilities” must be built, meaning that change will be an ongoing organism rather than making cameo appearances in what are often trying, if not chaotic, times.

Diversity isn’t just morality

A diverse company isn’t only one with a good public appearance. Diverse companies have been proven to have an increased resilience, capacity for innovation, and better financial performance – a 2018 McKinsey study, for example, found that firms in the top quartile for executive team gender diversity were 21% more likely to experience above-average profitability.

As defined in the study, diversity includes gender, sexual orientation, and ethnicity, as well as work experience and background. “Importantly, these factors are most additive; so companies that are diverse on multiple dimensions are even more innovative.” The more types of people in the room, the study finds, the better a company’s chances are at creating the next big thing, or taking a great leap forward.

“Structural diversity alone, however, is insufficient. Organizations also need an environment conducive to embracing new ideas, and they must install open communication practices, participative leadership, commitment to building diversity in top management, openness to testing multiple ideas, and other measures to unlock the full potential of diversity.”

People want purpose

More and more, consumers are demanding that the products they purchase or use are produced by a company with a purpose – delivering products and services while aligning with the betterment of the environment or society. The climate crisis, sustainability, trust in technology, human rights – all are hot-button issues that must be addressed. This is not to say that every company must tackle every societal issue, but “in an era characterized by polarization, everything in business will likely become ‘political.’”

To focus on societal impact is to take strides toward increasing long-run financial performance, as well as strengthening the bond between businesses and society – or consumers. “Leaders will need to master the art of corporate statesmanship, proactively shaping the critical societal issues that will increasingly change the game of business,” the study states.

The study makes a pointed conclusion: everything above is a starting point for a journey that will take organizations into the relatively unforeseeable. Businesses can prepare as best they can, but there is no telling what the future will bring. This is both an exciting and unsettling prospect. “Winning the present is challenging enough, but the more essential task of leadership is winning the future. The fast-changing world will test our status quo assumptions, and it is critical to look forward in developing an agenda for the next decade,” the study concludes.