On Wednesday, the 6,000-plus attendees at the 2010 Million Dollar Round Table Annual Meeting, being held here June 13-17, heard from several speakers during the morning main platform session. The following are a recap of two of the presentations.
Transitioning from the First Curve to the Second Curve
The combination of three forces–demographic shifts, changes to the global, and technological advances–are forcing a transformation of businesses. That forced makeover represents what Ian Morrison, a futurist and the kick-off speaker of Wednesday’s Main Platform session, described as a “second curve.”
While on the first curve, said Morrison, companies initially perform well, but then experience a decline in revenue or profitability because of the economic, technological and demographic changes impacting their industries. To maintain their competitive position, they must transition to a second curve: a new way doing business that is “radically different” from that of the first curve.
“The problem,” said Morrison, “is that we tend to panic. We walk away from the old, first curve prematurely, and jump onto the second curve. In so doing, we risk losing business and profit on the of the first-curve business.
“But if don’t start building that second curve, we won’t be around later on in the 21st century,” he added. “So you have to manage well this process of change.”
Morrison said many companies now must revamp their business models because of the Internet and the rapid spread of mobile computing and communications.
He noted there are 1.6 billion Internet users globally, 60% of which are outside the U.S. and the European Union. Two-thirds of the world’s people now have a mobile phone, up from 15% in 2000.
These technology innovations, said Morrison, have given rise to more demanding and skeptical consumers who want “anytime, anyplace” access to products and services, and who want everything to happen “faster, better, and cheaper.”
“There is a natural human tendency to overestimate the impact of technology in the short run and to underestimate it in the long run,” he added. “We’ll see profound changes driven and amplified by technology, which is the source of value creation.”
Fueling changes to business processes, he added, is the emergence of new geographic markets, most especially in Asia, but also in Latin America and Eastern Europe–regions that have developed significantly during the past two decades. China, he noted, is now home to an increasing proportion of the world’s manufacturing output, while India has developed a comparative in advantage in outsourcing services.
Approximately 1 billion people in the world are comparatively “rich,” which Morrison defined as earning more than $25,000 annually. (He noted that 48% of the world’s population lives on less than $2 per day.)
As the global economy develops, differences between rich and poor will remain “profound.” Morrison characterized this chasm as “the long division.”
Developing countries, observed Morrison, will increasingly account for much of the world’s economic output, in part because of population trends.
“The developed world is flat in absolute terms and in terms of population,” he said. There is a 68-86 transformation taking place: In 1950, 68% of the world’s population was in developing countries. By 2050, it will be 86%.”
Morrison forecasted the world’s population will grow to 9 billion by 2050 from 6.5 billion today. Approximately one-third of all people under age 15 and 7% are over age 65.
The under-15 demographic is most highly concentrated in developing countries, including Afghanistan, Pakistan and Iran. The over 65 age group accounts for a small percentage of their populations.
Taiwan, South Korea and the U.S., he said, are in the middle of the age continuum. The most rapidly aging populations are in Japan, Russia and Italy.
The reason: a combination of increasing longevity and declining fertility rates. Italy, for example, has a fertility rate of just 1.4, below the 2.1 rate needed to replace that nation’s population.
Technological, demographic and geographic trends are buffeting insurance and financial service professionals as well, said Morrison, who foresees a shift in product sales.