May 26, 2014 Taking a ‘Long Range’ View to Adapt to Market Transformations

Volume 17 | Issue 3

The world has always been in constant change, yet it has accelerated at an unprecedented rate in recent decades. Andrew Burgess,

We live in an era when technology and society are evolving faster than the ability of many organizations to adapt. Whether it’s iPods replacing walkmans, e-readers edging out books or digital downloads making CDs obsolete, the pace of change is relentless. As one eminent sociologist said in paraphrasing Charles Darwin’s Origin of the Species, “It is not the strongest of the species that survives, nor the most intelligent. It is the one that is most adaptable to change.”

The world is changing at a rapid rate. It’s not confined to technology. Climate change, often thought of as a long-term challenge, is affecting ecosystems and economies around the world today. Resources are being depleted, an increasingly urbanized population is creating new demands, economic powers are emerging, and more advanced technologies are continually entering the marketplace. All of these are creating waves of economic and social change.

Global mega-trends such as these – and the unavoidable shift and need to do more with less – are driving major transformations in our society. Businesses need to think about how these trends are impacting their customers, not just today, but tomorrow. They need to think in a structured and constant way about the future, challenge their assumptions about the world, assess and navigate risk, and seize opportunity.

It is vitally important for industries and companies to be aware of signs of coming trouble and hints of opportunity. Recent history is littered with examples of companies that failed to keep up with shifts and adapt accordingly.

At AkzoNobel, we believe there are five keys for us to stay ahead of the competition:

• For one, we believe success depends on the organic growth of one’s business through customer focused research, development and innovation. If organizations are not able to identify and adopt major transforming technologies in a timely manner, they face the loss of a leadership position and adverse impacts to the business. For us, this means working multiple ways to mitigate the risk of missing relevant technology developments — among them, committing to a healthy R&D budget and managing our global open innovation capabilities to identify, assess and acquire the most recent and promising emerging sciences and technologies.
• Now more than ever, we have to be prepared for resource limitations, and to constantly reduce both the volume of raw materials we use to produce our products and the waste as part of the production process to limit our footprint and our losses. In our business, manufacturing, the loss of raw materials is inherent in the various processes involved – but the key is to ferociously look for ways to minimize the waste.
• When looking for glimpses into the future, it’s important to look beyond your own industry. One doesn’t need to look far to find an example of how one industry’s innovativeness revolutionized another industry’s market. In the U.S., the music industry was upended by Napster, then Apple and those that followed, while websites like Facebook and later Twitter established a vast “Social Network” that reshaped how we communicate.Though our company does not sell lights, LED lighting is a significant market for us because of the specialty chemicals needed to produce them. LED systems now have the capability to change color at the press of a button. This presents both a threat and an opportunity for us. It is a threat because it might negate the need for different colored paints. But, it is also an opportunity because the growing demand for this more sustainable alternative of conventional lighting is driving a very profitable niche market.For a very different area of business – the shipping industry – one challenge is the shared goal of many to identify more sustainable and cost-effective methods to meet evolving environmental standards. Our understanding of this challenge, combined with R&D investment and an open innovation- inspired collaboration with the U.K.’s Newcastle University led to the development of anti-fouling coating that enable ocean-going ships to move faster and use less fuel.
• Really focus on the custom- er of the future. Organizations are often open to adapting to trends — if there’s a business case to be made for it and a path that doesn’t involve much risk. In practice, however, decision makers do not focus enough on the way their customers’ expectations are changing or the manner in which their market is transforming. When they are finally ready to react, it’s typically a technology-first rather than a people-first initiative. Without understanding behavior, expectations and patterns, technology is often the right answer at the wrong time.
• Constantly assess the big trends facing your markets. At AkzoNobel, scenario planning is a key part of our analysis. We use them to investigate the impacts of global trends, to develop more resilient strategies, and to innovate sustainable products, services and processes.

One scenario we have spent a lot of time exploring is the development of mega-cities in high-growth countries. In these cities, we anticipate that people’s sense of individuality will become even more important than it is today – and more uniform globally and not as concentrated in Western countries as it is today.

As more of the population moves into mega-cities, they will be faced with the specter of becoming a faceless individual in a sea of 75 million others. In this world, the personalization of possessions will become much more important to people.

Already, we are seeing some brands get ahead of this trend. This winter, Coca-Cola launched a campaign that allowed fans to “Share a Coke” that could be personalized with the name of a friend. And last year, Jaguar Land Rover launched a dedicated bespoke engineering division giving customers the ability to individually tailor their cars.

This trend could provide substantial opportunities for a company like AkzoNobel that specializes in color. So too will be tackling disease in fast expanding mega-cities. For a coatings company such as ours, this is significant. As such, we are investigating techniques that can interrupt the spread of disease through the development of anti-bacterial and insect-repellent coatings.

We are working to be as ready to capitalize on such trends by preparing our product portfolio accordingly.

According to the World Business Council for Sustainable Development’s (WBCSD) Vision 2050 report, some of the changes that we should expect by 2050 include: a globe with a population of nine billion, with associated demands for food and natural resources; 95 percent of new buildings to be net-zero energy; universal access to low-carbon vehicles; and landfills obsolete in industrial processes.

The Vision 2050 report is among the sources we use to inform our long-term strategy and to help us identify changes in the market. In our buildings and infrastructure customer segment, the growing demand for buildings with lower energy costs incentivizes us to develop more sustainable products. For example, products might include powder coatings that can be cured at lower temperatures, paints that release fewer solvents and coatings that need little or no maintenance or can reflect heat.

The same applies to our transportation segment, where the need for more fuel-efficient vehicles has prompted our shift to new, lighter materials.

Resource scarcity is a key driver in our consumer goods and industrial segments. We have focused our innovation on eco-efficiency, using waste as a resource rather than simply as a disposal problem. We are also improving resource efficiency in the supply chain (with customers, consumers and in the end-of-life phase).

None of us has a crystal ball. The best we can do is to continually refine our analysis with more information to make the best decisions today to prepare for tomorrow.

It’s a constant cycle. We know the further you look into the future, the riskier forecasting becomes. If you look at futurologists’ predictions, it’s true they are almost always wrong. But this should not stop us ‘imagineering’ what the future might look like and taking measures to start adapting. There really is no other choice. Ultimately, the ability to adapt successfully to changing circumstances requires long-term thinking. Without such thinking, businesses will inevitably miss the danger signs and opportunities presented by technological, economic and societal changes.

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