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Affordability the key driver for New Normal success

Consumer demand
By Paul Hodges on 20-Nov-2014

AffordabilityChange is always unwelcome and usually uncomfortable.  But it also provides us with Opportunity, as the Chinese character for Crisis highlights.

The second half of our Boom, Gloom and the New Normal eBook provides detailed discussion of the Opportunity for product development, research and development, and manufacturing in the New Normal.  We also summarised the key features of the New Normal in Chapter 11 as follows:

“Affordability. Consumers have less money to spend, and so the highly profitable middle ground of the past couple of decades is disappearing, as the chart shows.  Instead, the focus will be on the megatrends of food, water, shelter, mobility and health.  These products must be affordable, as they must meet basic ‘needs’ rather than supplying mere ‘wants’.

“Demand-driven.  Markets have essentially been supply-driven in recent decades, with growth being forecast on the basis of ratios to expected GDP growth.  Companies have focused on increasing their efficiency via a ‘one size fits all’ business model.  As we transition to the New Normal, they will need to refocus on being effective.  Innovative strategies, flexible implementation planning, plus a commitment to local techno-commercial support and long-term R&D will be required

“Market focus.  New worldscale plants will still be needed during the transition.  But companies operating in the West will also need to reposition their businesses to focus on the needs of the ageing 55+ New Old generation, if they wish to drive future growth.  Those operating in the emerging countries will need to develop mechanisms to sustain growth in the domestic economy, particularly in the rural areas.

“Shared Value.  Consumer values are changing quite dramatically, away from the materialism of the recent past.  Concerns about sustainability and carbon footprint are rising up the agenda.  Social stability is also becoming an important concern for governments.  Companies who continue to operate on purely financial metrics will find the environment ever-harder to understand.

“The VUCA environment.  The transition to the New Normal is a sea-change for the global economy.  Its full impact will take years, if not decades, to become clear.  Meanwhile, the world will face much greater uncertainty, as conflicting views of the world play out on a day-to-day basis.  Companies therefore need to plan for a VUCA environment:  Volatility, Uncertainty, Complexity and Ambiguity will be the order of the day.”

Clearly companies and investors will take some time to develop and finance the new products and services that will be essential for success, now we are entering the New Normal.  But the important first step is to recognise the Opportunity exists.

We are all on a voyage of discovery.