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Dec 09 2010

Global MegaTrends Part 4 – Rise of Sustainability, Venture Capital Flow, R&D Investment Stalls

Hello from Istanbul, Turkey for this fourth and final post on leading global business and economic trends effecting US associations prepared by MCI’s Global Association Management & Consulting Practice.   Part 1, 2, and 3 of this article can be found here, here, and here.  Using the latest research findings from leading global institutions, MCI assembled a more indepth megatrends analysis to help clients with 2011 strategy and planning from which these posts are excerpts.

Megatrend #10 – Think Sustainability, Forget CSR

CEOs from the vanguard of innovative companies around the world are shaping a new era of business where fully integrated sustainability strategies are beginning to change the way business think about their business models, corporate strategies, product or service designs, and even how they produce and distribute these products. What is fundamental to this new understanding is that being sustainable requires innovating what and how you deliver value from your business units in an integrated way, whereas corporate social responsibility (CSR) has been mostly program or project based initiatives that rarely impact how the company produces shareholder value.

In the face of rising global competition, technological change and the most serious economic downturn in nearly a century, corporate commitment to the principles of sustainability remains strong throughout the world. CEOs see sustainability as important to their company’s future success.  The ways in which CEOs are addressing sustainability issues are also changing in three key ways in which approaches and strategies are shifting as we move toward a new era of business.

  • End consumers as well as business and government customers are increasingly driving a company’s strategy for developing sustainable products and services.
  • CEOs are aware of the critical role that innovative, leading-edge technologies are playing in advancing the sustainability agenda—in areas such as climate change (e.g., using smart technologies such as grids and meters); and in terms of increased transparency through social media platforms.
  • Businesses realize that today’s global challenges are too broad and too complex to go it alone.  CEOs believe civil society organizations (like associations) are an essential partner in tackling these issues, they believe non-governmental organizations (NGOs) are declining in their influence on corporate sustainability agendas.

Megatrend #11 – Venture Capital: Flowing Away from the West to the East

In a 2010 study, venture capitalists in the United States widely expect their industry to contract while those in emerging markets, including China, India and Brazil, expect to see their ecosystem expand over the next five years.

According to the survey results, more than 90 percent of U.S. survey respondents expect the number of venture firms to decrease between now and 2015, while a majority of venture capitalists in China, India and Brazil anticipate adding more venture firms in their country during the same time frame. Venture capitalists in Europe and Canada also expect an industry contraction in their respective countries though to a lesser extent than in the U.S.

Traditionally strong markets like the U.S. and Europe will continue to be important hubs despite consolidation in the number of venture firms; however, the stage has now been set for emerging markets like China, India and Brazil to rise as drivers of innovation as they are increasingly becoming more competitive with the traditional markets.

Sixty-two percent of all respondents globally expect the number of venture firms in their country to decline in the next five years. This figure is driven largely by the United States where 92 percent of U.S. venture capitalists expect the number of venture capital firms to decline, followed by France (83 percent), Israel (80 percent) and the United Kingdom (70 percent). Conversely, 99 percent of respondents in China expect the number of venture capital firms to increase in their country, followed by Brazil (97 percent) and India (85 percent). The predicted amount of venture capital available for investment in the next five years followed similar trends by country.

Megatrend #12 – Research & Development Investment Has Stalled in West

A troubling sign in the US and Europe is the lack of public investment in R&D which historically has propelled new groundbreaking innovations upon which new industrial innovations and business value have grown.

According to the World IP Organization, falling revenues and reduced cash flows, diminished access to credit and increased economic uncertainty have led companies to adjust their innovation strategies.  Many Western countries saw a slowdown of growth in research & development (R&D) expenditure in 2008.

  • First time in history saw decline in IP applications
  • US residents filed 4.1% fewer applications in 2008 compared to 2007 while Chinese residents filed 26.7% more
  • China is poised to surpass Japan in domestic R&D in 2011 – to rank #2 behind the USA spurred by Chinese govt policy
  • Post-crisis world economy & IP is likely to see faster rates of growth among middle-income economies – especially in East Asia and India
  • For first time, the USPTO granted a higher share of patents to non- US resident applicants compared to US resident applicants

What to Make of These Trends?

We are often asked what is the value of a US-based association pursuing a global strategy and customers.  Our response can be summed up by that great business guru Wayne Gretsky who once said, “the reason I score so many goals is because I skate to where the puck is going to be.”

The future of many associations will include non-US members, customer and board or committee members.  It will include getting to know what is locally relevant in order to attract them to you.  It will take products that are adapted to their local needs both in terms of the design and how it is delivered or promoted.  It will take an openness and appreciation of new cultural thinking both in terms of management culture (appreciating risk) and social culture (being inviting to others who arent like us).

Here’s a toast to the border-less association.

At MCI, we feel it is an exciting time for US associations who can embrace such a vision.

Happy Holidays and make 2011 a great year.

1 comment

  1. Hi Peter,

    Great serie of posts! Thank you for sharing your knowledge and views!

    Enjoy Turkey with our great folks there.

    Greetings from Brazil,

    Leo

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