Governments play a role. For example, Google’s Print Library Project initiative hopes to scan the contents of public and university libraries. Five book publishers filed suit against Google over what they perceive as copyright infringement. Will the courts side with the print publishers or with innovative new media producers? Will Congress (and legislators in other countries) write new laws that affect copyright protections not just for books, but for news media as well?
Venture capitalists could direct money toward companies that are developing new technologies for media consumption, such as electronic books (e-books) and portable video players. Should those products catch on, they could place further stress on traditional media’s approach to making money.
All of these potential responses matter. Leaders with well-honed business acumen keep looking at trends through different lenses and from the perspectives of other key players.
What does it mean for us?
Now, with greater confidence in their view of the big picture, executives can focus on their own company strategies. It’s certainly plausible that a company need not change its positioning. However, it’s far more likely that a leader will now see new market opportunities, investment priorities, or unpalatable risks.
Shortly after Jeffrey Immelt became CEO of General Electric Company in 2001, he publicly stated his intent to raise GE’s organic growth rate from 5 percent to 8 percent per year, about twice the historical rate of U.S. GDP growth. That’s a reasonable target for many companies, but for GE it presented a unique challenge: With the company bringing in $130 billion in revenues, it would have to generate more than $10 billion in new revenues per year to keep up that pace. And that $10 billion would have to be earned without sacrificing GE’s margins, cash flow, or return on capital. Where could such growth come from?
Mr. Immelt and his team stepped back and thought through which markets might grow fast enough. One clue: Emerging-market economies, in general, were forecast to grow faster than developed nations. China and India, in particular, were large nations that were growing quickly and opening up their economies.
Of course, for any emerging economy to grow, its government and citizens would need to make enormous investments in basic services, including reliable energy, clean water, and multimodal transportation. GE had much to offer in each of these product and service areas.
Local energy investment is partly dependent on global energy markets. Although in 2001 few expected oil to double in price, many were certain that the price would rise if the Chinese economy opened up. Ditto for coal, which powers much of the Chinese and Indian power grids. In the long run, then, higher energy prices would go hand in hand with demand for energy equipment.
But another trend could affect energy investment. Environmental regulations were becoming more of a consideration as nations began to ratify the Kyoto Protocol. Even though emerging nations are excluded from Kyoto’s emissions limits, many have stated the desire to maintain clean air for their citizens, increase energy independence, and reduce their exposure to volatile oil and gas prices. This could represent an opportunity to showcase GE’s innovations in energy-efficient and low-emissions technologies. GE could even play a role if an alternative energy source, such as nuclear, wind, or hydrogen, leapfrogged coal, oil, and gas (much as mobile phones are poised to leapfrog wire-lines in some emerging countries).
In these trends, Mr. Immelt spotted a moneymaking opportunity that offered the size and growth rate he needed to become a “general store for developing countries,” as the New York Times put it. GE could supply many of the infrastructure-related products and services — coal and nuclear power plants, wind turbines, water purifiers, and locomotive and aircraft engines — that emerging nations needed to grow their economies.