Optimism and Trust: Guideposts for a Changing Global Economy
A new study by PwC on the mindset of CEO’s indicates a very high level of Optimism. And optimism requires a level of trust. Trust by clients and trust in one’s own abilities to deliver. We’ll look at both.
In the publication entitled Thriving in the Service Level Economy, there is a quote from Clayton Christensen, the Harvard Business School professor and visionary business author of books including The Innovator’s Dilemma. He points out that the consulting industry is on the cusp of disruption:
“We have come to the conclusion that the same forces that disrupted so many businesses, from steel to publishing, are starting to reshape the world of consulting…. The pattern of industry disruption is familiar: New competitors with new business models arrive; incumbents choose to ignore the new players or to flee to higher-margin activities; a disrupter whose product [or service] was once barely good enough achieves a level of quality acceptable to the broad middle of the market, undermining the position of longtime leaders and often causing the “flip” to a new basis of competition.”
The article goes on to point to the following core values (see graphic below) that must not only practiced, but also truly embraced. The ultimate core value that needs to be applied, observed and nurtured for both businesses and their clients is trust. In all of the research on the subject of what’s next for professional services firms, there is no doubt that trust is the key for success in today’s globally flexing networked economy.
The services business has traditionally been about relationships. Assuming all knowledge is attainable, or can be referenced using today’s technology, data centers and PSA (professional services automation) tools, means that a level playing field is attainable, enabling any services firms anywhere, to compete. Today however, most firms are not moving at the same speed. The Service Level Economy has spawned a new breed of high performers that are moving ahead of the curve and extending the distance between themselves and all others.
A more mature model, including a sophisticated Operational System of Record, allows high performers the luxury of focusing on margins and revenue versus solely on clients’ satisfaction. The good news is that all other services firms can just as easily retool and grow. The technology already exists to help firms better manage every aspect of their business. This creates a sense of optimism, which also helps motivate teams.
There’s Good News and There’s Good News
In PwC’s annual survey of chief executives around the world, respondents voiced confidence about economic growth and greater interest in corporate responsibility. The article appeared in Strategy & Business and is entitled Optimism and Trust on the CEO’s Mind by Art Kleiner.
Percentage of CEO’s that believe that global economic growth over the next six months will…
Kleiner says: “It’s worth noting that the 1,293 CEOs in 85 territories who responded to PwC’s survey were basing their optimism on their company’s own steadily improving prospects. In fact, this was the first time since we began asking the question in 2012 that the majority of respondents said they believed global economic growth levels would rise (see chart above) This record degree of optimism held fast across every region: North America, Latin America, Western Europe, Central and Eastern Europe, Africa, the Middle East, and Asia-Pacific.”
Customer Mistrust Continues
In keeping with our theme of trust and optimism. When asked if they perceived declining trust from their customers, only 18 percent of these same CEOs said yes. This is not what you hear from other experts on attitudes and trust. Referenced in the same article, for example, the Edelman Communications Consultancy produces an annual global survey, the Edelman Trust Barometer, which measures the level of public confidence in the world’s key social institutions: government, business, media, and NGOs. This year, the Edelman survey witnessed no significant global change, but found evidence of noticeable shifts in 12 nations. Among the U.S. population overall, trust in institutions declined dramatically, making it the steepest drop ever measured by Edelman in one year for any single country. From the report:
“Edelman’s 2018 Trust Barometer survey results found trust levels in the United States plunging 37 points across all institutions: government, business, media, and NGOs. Confidence in the government fell off a cliff — dropping a remarkable 30 points — among the group Edelman calls the “informed public”: college-educated people age 25–64, in the top 25 percent of household income, who said they followed news and current events in the media.”
Also as part of the PwC’s survey, CEO’s were asked to identify where they see growth for their companies on a global basis. In the chart below, CEOs have favored the U.S. over other countries as a growth market, but never by so wide a margin as they did this year. (The survey parameters do not permit a CEO to vote for the country in which his or her company is based, so U.S. CEOs did not participate in this vote of confidence).
In summary, we have an optimistic group of CEO’s that are bullish about the future. And recent research indicates that for professional services firms, “trust” remains a foundational core value that continues to have to be earned. And when these two broad concepts merge, they feed off of each other. Add this with recent trends reporting that overall growth of services is increasing as part of the GDP (see chart below). This may be why so many creative and other services firms continue to see growth as a necessity to compete as the world continues to shift its attention to services.
Unlike manufacturing that makes and then ships, services can be delivered immediately anywhere, especially in professional services. In this Deloitte article, “The services powerhouse: Increasingly vital to world economic growth” by Dr. Patricia Buckley and Rumki Majumdar, the authors review nearly every aspect of the growth in the Services sector and end with this note:
“Increasingly, services are being delivered—that is, traded, both within borders and across borders—digitally. This trend will likely continue to increase as more people connect to the Internet and trade digitally with the rest of the world. With their increasing tradability and rising importance as inputs to traded goods and services, services are poised to play an increasingly vital role in many countries’ economic growth. We do not minimize the importance of manufacturing to the overall health of the economy, but priorities should also recognize services’ essential role. A healthy services sector is no less necessary for a strong economy than a healthy manufacturing sector.”
All indicators point to an optimistic 2018. As long as trust becomes stronger between client and business and for CEO’s running those businesses, the global economy can become the level playing you’ve been waiting for.