Manufacturers: dealing with the unknown

The barriers to entry are falling. Lower costs, combined with deregulation, will open the way for new low cost companies and business models from Amazon to Google, from eBay to Skype. This will present challenges to incumbents, while opening new industries and opportunities.

Climate change

The climate crisis will have an impact on business in several ways. These include higher costs for energy, water, raw materials and waste, insurance, and monitoring, rules requiring businesses to use less resources, consumer preferences for environmentally friendly products and services that reduce the impact of product consumption, pressure from institutions and shareholders and the imposition of mandatory supply chain sustainability criteria. Perhaps the most significant impact will come from increased government regulation and laws, including the introduction of an emission trading scheme.

Digitisation

The digitisation of just about everything that can’t be nailed down will threaten businesses that make money out of their intellectual property. The music, newspapers, cinema, pharmaceuticals and fashion industries will need to adapt in order to survive where ideas will “demand to be free”. Manufacturers will need to place more focus on protecting IP.

Energy

The rise of China and India has resulted in increased demand for energy. In particular, China, which just over a decade ago was a net exporter of oil, now imports 5.4 million barrels a day. It surpassed Japan as the world's biggest importer of oil in 2005, and is projected to need Saudi Arabia's entire annual production by 2012. The world is projected to move from consuming 5.5 billion barrels a day to 7.5 billion barrels a day by 2020. The Organisation for Economic Co-operation and Development is projecting that energy consumption will quadruple by 2050. At the same time, however, output from the world's oil fields is declining at a faster rate than expected and will require massive investment. Oil prices will continue to climb. All this will put enormous pressure on manufacturers.

Understanding the limits of knowledge is vital to understanding something effectively. Writing in the Harvard Business Review in 2003, David Gray argued that ignorance management was a more important skill than knowledge management and called for the introduction of a “chief ignorance officer”. It means embracing “nescience”, a word which simply means a lack of knowledge or awareness. Managers, he said, he can do this by four methods: sheltering nescience as long as possible and not filling the vacuum with ready knowledge, abandoning the idea that you need to have complete knowledge before you can act, having the freedom to explore what seems irrelevant but which in the end could prove to be fruitful, and to accumulate lots of ideas, even if most of them will not work.

Paying attention to nescience can remind us that if we want knowledge that is worth managing, we have to create it first. In other words, true wisdom and insight come from acknowledging and embracing one’s limitations. As the noted British historian Lord Acton said, mastery is acquired through resolved limitation. Donald Rumsfeld was a bit more blunt in his assessment, but was saying the same thing.

Watching these trends, and accepting that one can work around them, is one of creating the future. As the leading management thinker Peter Drucker once said, the best way to predict the future is to create it.