Rich Karlgaard / Publisher, Columnist, Author / Forbes
Culture Is The Killer App Disruptive change is accelerating. Companies must be “biologically� adaptive. Great teams demand cultural health.
Predicting The Future … Is Easy … Getting it right is the hard part
“There’s no chance the iPhone is going to get any significant market share.” Steve Ballmer, Microsoft CEO, 2007
“We will, of course, retain the White House and win back the Senate.� Nancy Pelosi, Monday
So What Can We Predict With Confidence? About economies and markets?
Why Listen to Me? Publisher of Forbes since 1998 10 million global magazine readers per issue 70 million monthly unique visitors
Interviewed Founders/CEOs
And Written Books “Rich Karlgaard Is a navigator for the rest of us.� Clayton Christensen Harvard Business School
“Advances our thinking on what makes highly effective teams.� Satya Nadella CEO, Microsoft
Great Recession: 2007 to 2009
2009
2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 1993
2010 – 2020 Economy Growing … But Slowly 2% vs. 4% Post-Recession GDP Growth
Global Growth is Soft, Too Growth is weak below previous business cycles And it’s “two-speed” healthy for some, lousy for others Productivity growth per hour worked is way down Why?
IMF President Christine Lagarde Predicts 2017-2020 Global Economic Growth
1933-40 Average Annual U.S. GDP Growth
7%
World’s Top 10 Market Caps $568b $516b $420b $342b $312b
Apple Alphabet (Google) Microsoft Exxon Mobil Facebook
$297b $295b $270b $253b $235b
Johnson & Johnson General Electric Amazon Wells Fargo AT&T
All are U.S. companies
63% of Americans Still Think U.S. is in Recession
45% of Americans Have less than $400 in cash for emergency.
Labor Force Participation % of American Adults Working
Uneven Economy Will Remain Regardless of 2016 Election
Peter Thiel PayPal Co-Founder Facebook Investor Venture Capitalist Trump Supporter
Peter Thiel The American economy is underperforming because it is out of balance. There are too many “bits” companies and not enough “atoms” companies.
Why Is That? Investment capital flows into “bits� companies thanks to lower cap investment, lighter regulation, faster ROI
“Bits” Companies
Market Cap to Revenue Ratio of “Bits” Companies Facebook Airbnb Uber Alphabet (Google)
20 18 15 7
“Atoms” Companies
Market Cap to Revenue Ratio of “Atoms” Companies Delphi Cummins Dana GM
1.0 .9 .3 .3
Senior Care REITs
Market Cap to Revenue Ratio of Senior Care REITs LTC Properties National Health Investors Welltower HCP
12.4 11.2 7.5 4.8
Senior Care Providers
Market Cap to Revenue Ratio of Senior Care Companies Brookdale Ensign Lifepoint Five Star
4.9 2.3 0.6 0.2
Donald Trump Favored by voters who live in the world of atoms
Hillary Clinton Favored by voters who live in the world of bits
John Chambers 40% of Top 500 Companies Will Fail Within 10 Years
Failure = Long-Term Decline In Revenue Profitability Market Value Brand Value Cultural Relevancy
2 Megatrends Huge Outside Forces That Are Driving Change in Just About Every Industry
Megatrend #1 Global population is getting bigger, richer, more urban and older
Global Population Growth 7.2 billion today 9.1 billion by 2050
Middle Class Population Growth 1.8 billion today 3.2 billion by 2050
Urban Population Growth 4.0 billion today 6.5 billion by 2050 (Urban increase exceeds total global increase!)
Over 65 Population Growth 0.6 billion today 1.5 billion by 2050 (+65s are half the total growth between 2015 and 2050!)
Similar Trends in U.S. 440 million people by 2050 Urban and Older Growth in South and West ‌ but water could change that.
Population Trends and the Senior Care Market Positive: Rapid growth in potential customers
Negative: Will unregulated disruptors take market share?
Megatrend #2 5 Laws That Disrupt Everything
Disruption 2000-2015 Newspapers (Web) Retail (Amazon) Software (Cloud) Blackberry (iPhone)
Disruption 2016-2030 Manufacturing Transportation Financial Services Health Care Education
Moore’s Law 2yr. 2x 30% annual drop in cost/capability
Annual Declining Cost Projections for Digital Technology (2015-2020) Computing - 33% Storage - 38% Bandwidth - 27%
Never Forget! Winners embrace, never fight, Moore’s Law
1990s - Embraced Intel, Microsoft, Dell
1990s - Fought DEC, Data General, Apollo, Wang
Another Moore’s Law Tailwind Mobile computing revolution is still in its early days. Sub $100 smartphones will greatly expand global market.
2016 Mobile Phone Users 4.5 billion 40% smart, 60% standard
2020 Mobile Phone Users 5.5 billion 60% smart, 40% standard
2020
3.6 Billion Smart Phone Users 1.6 billion more than today
Big Tailwind! India’s smart phone penetration. It’s where U.S. was in 2008, China in 2012. India, alone, will add 500 million smart phone users in next 10 years.
Moore’s Law = Explosion of Cheap Sensors Cheap Sensors = IoT Boom
Metcalfe’s Law
n (n-1) / 2
3.6 Billion Smart Phones Creates This Many Potential Human Connections
648,000,000,000,000,000,000 vs. 4,000,000,000 (Google daily searches) 2,000,000,000 (Facebook daily users)
Big Mobile Tailwind! 5G Wireless Bandwidth in 2018 Mobile is becoming a true video and video sharing platform.
Joy’s Law Global Resources > Your Company’s Resources
In a Hyperconnected World The talent and image shapers outside your company overwhelms the talent and image shapers inside your company.
Andreessen’s Law Software Eats Everything
“More and more major businesses and industries are being run on software and delivered as online services – from movies to agriculture to national defense.�
Outside Entrepreneurs with Software Chops and Lots of Money
These Entrepreneurs are Armed (with Talent and Capital). They are focused and remorseless. “Don’t just make something work better—instead, blow up the old way and replace it with something completely different and digital.”
Brian Chesky Airbnb
Asymmetric Warfare
McGrath’s Law
SusAdv –> 0
The Holy Grail of strategy for many years has been defined as sustainable competitive advantage. You find an opportunity, you throw up entry barriers like crazy and then you get to enjoy it for a long period of time.
Sustainable Competitive Edge is dying for most companies
Transient Advantage is the new world order.
Adaptability Is The Killer App
Hypothesis: Adaptability Requires Health So What is Health? In Human Beings? In Companies, Teams and Careers?
United Nations Triangle of Health for Human Beings
GOAL LASTING HEALTH
PHYSICAL
Observation #1 Successful companies are organized as strong triangles
Fred Smith, founder and CEO of $50 billion global powerhouse FedEx, explains.
Fred Smith’s Triangle of Health for Companies
GOAL LASTING SUCCESS
STRATEGY
STRATEGIC BASE DISRUPTERS
SUBSTITUTES
COMPETITORS
1
CUSTOMERS
MARKET
Triangle of Success 1
Strategic Base Your Purpose and Your Plan
Triangle of Success SPEED COST SUPPLY/LOGISTICS DATA/ANALYTICS CAPITAL EFFICIENCY
Hard Edge Creating Day-to-Day Results
Triangle of Success TRUST TEAMS TASTE SMARTS STORY
Soft Edge Transformational Gains Purpose Loyalty Passion Commitment
Hard vs. Soft Battle for Resources Inside All Companies Beware Winner Take All!
General Motors in 1953 — Strategy, Hard and Soft in Harmony
General Motors in 1970s/1980s — Out of Balance. Financially Driven. Analytical Values Overwhelmed Cultural Values. The Result?
1986 Cadillac Cimarron—Top 50 Worst Ever
Got So Bad … GM’s Belief Under 1980s Management: Customers Won’t Notice! Same bad car — except for grille and hubcaps.
Resilient Company Values Trust (external and internal) Teams (trust is needed to break silos and move fast) Story (values are propagated through deeds and stories)
Trust The Force Multiplier of All Things Good
The Key to “All-In” Commitment
Northwestern Mutual’s Roberto Espinosa Became 5x More Productive in 5 seconds
AND THEY WOULD HAVE WORKED!
If only you had trusted in the divine genius of your life.
Observation #2 Global scale is a huge advantage in many industries. But it is not everything. Even giants must be highly adaptable. Which means organized as networks of small teams
Hard Math of Impossible Connectivity: N (N-1) / 2
2 Team Members 4 Team Members 6 Team Members 12 Team Members
= = = =
1 Connection 6 Connections 15 Connections 66 Connections
‌ breakpoint? 16 Team Members = 120 Connections 32 Team Members = 496 Connections
What Breaks in the Breakpoint? Communications, Speed of Decision Making, Accountability and Trust
Free riders, slackers, and “politicians� arise in their absence.
Optimal Size of Creative Tech Teams 7 (George Miller) 5 - 7 (Susan Heathfield) 4 - 9 (J. Richard Hackman)
Steve Jobs — Favorite Team Model
“My team model — The Beatles.” “They were four guys that kept each other's negative tendencies in check. They balanced each other. And the total was greater than the sum of the parts. Great things in business are never done by one person. They are done by a team of people.”
Advice from Kleiner Perkins co-founder Tom Perkins Megatrends Technology Global Markets Leaders & Teams
Steve Ballmer on his iPhone quote. “People like to point to this quote where I said iPhones will never sell, because the price at $600 or $700 was too high. I wish I'd thought about the model of subsidizing phones through the operators! That was business model innovation by Apple – to get the iPhone built into the monthly cell phone bill."