To anticipate the future, pay close attention to the present. Every trend in the current business environment represents a clue to what is going to happen next. And rarely have clues been more needed — or more open to contradictory interpretations: increasing globalization versus increasing international hostility; burgeoning economies versus depressed consumer markets; liquid capital versus uncertain investments; and technological promise that has yet to be delivered in such fields as energy, biotechnology, transportation, and even telecommunications. In such times, the best indicators of significant change are the counterintuitive trends — the trends that don’t quite fit conventional wisdom, but that are so intertwined with the critical dynamics of the time that they cannot be ignored.
At the end of each year, teams of industry specialists at Booz Allen Hamilton get together and consider the trends they have observed, and what those trends spell out for the year ahead. This year, we found seven counterintuitive trends. They don’t fit many people’s expectations, but now that we have examined them, we don’t think about the world in the same way.
1. Oil, gas, and electricity: talent shortages. No matter how the price of oil fluctuates on a month-by-month basis, energy will generally be less cheap and plentiful a commodity during the next five years. There are three well-known reasons for this: first, the political tensions rife in the Middle East (and in such oil-producing nations as Venezuela, Russia, and Nigeria); second, the growing demand in emerging economies such as China and India; and third, the dwindling supply of “cheap and easy” oil and natural gas. Likewise, electric power producers will feel pressure to move away from coal, which is plentiful and relatively inexpensive, because countries around the world — even the coal-prolific United States and China — are increasingly likely to regulate greenhouse gas emissions.
But even if those factors did not exist, the industry would still be facing shortages because of an often-overlooked factor: a knowledge gap in energy companies caused by the retirement of the baby boom generation. In the oil industry, for example, the average age of employees is 46 to 49; with 55 as a typical retirement age, more than half of the employee base is expected to leave the workforce within the next five years. The resulting talent shortage affects all positions, from rig workers to senior scientists and engineers. Similar demographic shortfalls are coming in the electric power generation industry.
At the same time, the skills demanded by these industries are growing more involved. Oil exploration and production is now the domain of “megaprojects,” including immense offshore sites managed by multiple organizations and requiring complex maintenance. The prospective shift in energy fuels to alternatives like biofuels, wind, nuclear, and solar also adds complexity. Because it’s still unclear which fuels will be most effective at replacing carbon-based fuels, both in electric power generation and in transportation, there are years of experimentation ahead of us. All of this puts an additional strain on already scarce human resources.
The dearth of talent is a strategic business challenge, and several companies, including Shell and ExxonMobil, are investing heavily in training new staff. Others may take on retired staff as consultants. Still others will turn to suppliers, which have a better bargaining position than they’ve had in years. And to leverage their talent, some companies will pursue information technology–based (“digital oil field”) solutions, such as “Fields of the Future” at BP and “Smart Fields” at Royal Dutch Shell.
2. A shift in supply chain practices. Less visible than the well-publicized pressures faced by the Detroit “big three” — General Motors, Ford, and DaimlerChrysler — is a more pervasive and widespread trend that could affect the structure of the automotive industry more dramatically. Suppliers, which produce the components of the cars sold by mainstream manufacturers, are also in trouble. Delphi, Dana, Dura, Tower Automotive, and Collins & Aikman have all filed for bankruptcy. Even suppliers with a long track record of success have been squeezed, with profit margins often below the cost of capital.