Battle for technological supremacy. The United States and China have emerged as the dominant players in the race for hegemony in the Fourth Industrial Revolution. Divergent technology standards will persist while the competition continues. The winner will have outsized influence—with economic, political, and military implications for years to come.
Over the next five years, the United States and China will remain locked in a battle for global leadership in science and technology. While China is executing a coordinated and comprehensive strategy to push for dominance, challenges for Beijing remain, including a lack of capacity to produce its own semiconductors and processors and lagging research standards. It is therefore unlikely that China will surpass the United States in the short term. But the innovation edge that the United States has enjoyed over the past century is nevertheless eroding. This loss will continue if the US government does not reinstate its historical winning strategy of coupling grand vision with coordinated investments and action. And as the FAANGs and BATs battle it out, the rest of the world will need to decide which set of competing investments to accept and which standards to adopt. The longer this battle for dominance lasts, the greater the risk that the 4IR digital economy will fragment, complicating the operations of global companies and acting as a drag on economic growth.
Prepare for rapid innovation. Businesses should anticipate new innovations and spin-off technologies as a result of this epic battle between the United States and China for the future of 4IR. Staying abreast of technological breakthroughs and thinking through ways to leverage them will give companies a competitive advantage.
Improve cybersecurity. Data proliferation will increase exponentially as 4IR technologies and 5G networks are implemented. This growth will create even more attractive targets for hackers and data thieves—potentially including corporate espionage. Companies must protect themselves and their customers against such intrusions.
Monitor technology battle to inform strategy. Identifying markets in which Chinese or US technology platforms are dominant can provide insights into which technological, regulatory, and privacy standards will be required moving forward. Executives should use this information to minimize the costs and inefficiencies associated with engaging with multiple technology platforms.
Rise of the Indo-Pacific. The Indo-Pacific is the new megaregion at the heart of the global economy and geopolitical competition. As China steps up, the United States bows out, and a variety of middle powers move into the mix, the Indo-Pacific will simultaneously become more important to the commercial success of multinational corporations and more difficult to navigate.
The Indo-Pacific megaregion will simultaneously become more important to the commercial success of multinational corporations and more difficult to navigate. As the locus of the global economy continues to shift to Asia, the importance of the Indo-Pacific will grow. But the emerging Indo-Pacific is characterized by an expanding set of overlapping free trade agreements and strategic alliances. The United States will continue to reduce its presence in the region, at least in the short term. In its place, the Indo-Pacific middle powers will play a more important role in shaping the economic and security environment, at times collaborating with China and at other times seeking to provide a counterweight to its growing influence. Competing infrastructure initiatives will continue to stimulate economic growth throughout Southeast Asia, Central Asia, and sub-Saharan Africa. At the same time, however, the growing militarization of the Indo-Pacific will raise the risk of an armed confrontation.
Establish a presence in the Indo-Pacific. As the Indo-Pacific becomes more central to the global economy, it will be even more important for international companies to establish a presence there. Localizing business decision-making power within the region—which we refer to as becoming a locally integrated enterprise—will help a company to better understand, navigate, and react to geostrategic cross-currents.
Increase shipping security and insurance. The increasing militarization of the South China Sea and the Indian Ocean raises the risk of a confrontation in the region. Companies should assess the degree to which their supply chain depends on the Indo-Pacific and consider increasing security on their ships and purchasing higher levels of insurance on their shipments along these trade routes.
Engage in trade negotiations. The various multilateral and bilateral trade negotiations going on throughout the Indo-Pacific provide an opportunity for companies to open new markets for their products. Executives should engage with both home and foreign governments to make the case for liberalization in their sectors.
Clean food revolution. The global food industry is experiencing a profound disruption. More consumers prefer eating “clean foods” that are healthier and more environmentally sustainable. And technological innovations in food production are enabling a new meat mix that will change how people around the world consume protein.
The food industry will have to operate in a changed environment, with both consumers and governments demanding that attention remain focused on clean, sustainable, and healthy products. Food companies will therefore face expectations to minimize the known health risks of mass market products, if not to actively promote good nutrition. While industrial farming, traditional agriculture, and research into GMO crops will continue—especially given the challenge of feeding a growing global population—the clean food movement will also continue gathering steam. Many of the big food companies are already adjusting to this new reality.
For example, the Sustainable Food Policy Alliance was launched in July by Danone North America, Mars, Nestlé USA, and Unilever United States. These companies commit to “sodium reduction, responsible marketing and transparency, and reducing their impact on the planet, including cutting greenhouse gas emissions.” Over the medium term, then, the clean food movement should help improve both environmental sustainability and public health.
Embrace the change. The growing pace of mergers and acquisitions among clean food start-ups and investments into new food technologies by the world’s largest industry players foreshadow the future of the global food sector. Executives should find ways to incorporate the growing values-based consumer ethos into their business practices, as Millennials and Generation Z occupy an increasingly large segment of the market.
Seek opportunities for differentiation. With so many companies rushing into the clean food space, businesses will need to differentiate their messages and approaches to clean labels and improved sustainability to gain and maintain consumer loyalty. In the coming years, simply following the herd will not be enough.
Monitor the shifting food policy environment. With rapid consumer and industry change comes inevitable policy questions and issues. Regulations to better define and label various clean foods and alternative meat products will surface with increasing frequency and will vary across markets. Shifting regulations could create challenges, but businesses will also have an opportunity to work with policymakers and communities to shape rules for new food products.
Next-generation fake news. Fake news has already proven costly to governments, businesses, and societies around the world. Get ready for more volatility. Falsified video and audio are becoming less expensive and more convincing—and have a wider global reach. This next generation of fake news could prove far more damaging as fabricated stories become much harder to disprove.
There is thus an urgent need to educate the public on the risks of next-generation fake news. In the United States, several states have introduced or passed bipartisan bills that require public primary and secondary schools to teach the “media literacy skills” necessary for a functioning democracy. Researchers are exploring various approaches to identify DeepFakes, but deploying effective tools will likely take years. As the flow of data continues to increase, so too will the volume and speed of fake news dissemination. The risk that individuals could become more enmeshed in their own ideological silos—with their own set of “facts” supported by audio and video—is likely to rise. If efforts by governments, the private sector, and others prove to be too little, too late, next-generation fake news could create a systemic societal crisis in countries around the world.
Build consumer trust. As fake news spreads distrust and confusion, businesses should prioritize demonstrating their reliability, honesty, and transparency with consumers. This effort should include an emphasis on clear communications and effective customer relationship management, as well as necessary investments to protect customer data and personal information.
Prepare contingency plans. As fake news attacks become more common, developing a swift response plan is becoming more important for businesses. Companies cannot simply wish away this phenomenon, and therefore, they need to work aggressively to detect and deflect attacks when they do happen. Strategic foresight tools will prove most effective in addressing the unpredictable nature of such attacks. Contingency planning exercises such as war-gaming and scenario planning, for instance, can assist in early identification of and effective response to a fake news attack.
Partner to fight fake news. Companies and governments can benefit by collaborating and sharing knowledge related to the fake news threat. By looking for opportunities to work together and share best practices, both sectors can prepare for the threats posed by next-generation fake news. Developing relationships with leading social media companies will also be important to identify and remove fake news stories quickly.
Transformation of higher education. Technological changes, policy shifts, and companies taking a more active role in addressing skills shortages are reshaping higher education for the 21st century. As education shifts toward more technical training, a more specialized global workforce will emerge, and education systems will become a more important determinant of national competitiveness.
Educational systems for the 21st-century global economy will take years to develop fully. Many employers will therefore continue to struggle to fill skilled positions in both the short and medium term. Accordingly, the rate at which educational systems are transformed will become a more important determinant of national competitiveness. And as educational opportunities continue to expand globally, the countries with policy environments and educational institutions that attract top international talent will also enjoy a competitiveness boost. These developments will gradually increase the specialization of skills among the global labor force. While this trend will relieve contemporary shortages in skilled labor, it could complicate future retraining efforts as technology and occupation requirements continue to evolve. Governments that act on the need to continuously retrain workers displaced by technological change will therefore be most successful at mitigating associated social and political unrest.
Reevaluate compensation and retention policies. The shortage of workers will continue to exert pressure on profitability over the next five years. To attract and retain a qualified workforce, companies may need to boost remuneration or implement new policies such as liberal family leave or a more flexible workplace. Other measures may include incentives for older workers to continue employment past their retirement age or programs to retrain workers displaced by technological change.
Assess educational systems as part of investment decisions. As companies strive to ensure long-term profitability, the availability of skilled workers will become a more important driver of investment and capital allocation decisions in the next five years. When evaluating market opportunities, executives should assess the ability of local and regional educational institutions to develop qualified workers to ensure that a shortage of such workers does not pose a risk to business operations.
Create partnerships with educational institutions to boost long-term productivity. As technology continues to reshape the global economy, ample opportunities will exist for collaboration between the private sector and educational institutions. Companies experiencing a shortage of qualified workers should explore such partnerships to improve the quality of their applicants and reduce training and turnover costs. Local governments would also benefit from such arrangements through a more stable population and tax base.
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