The Techno-Decade’s Challenges & Opportunities When Old Strategies Don’t work

Mar26

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Part 2

While de-globalisation and tech-nationalism are affecting world trade, innovating is seen as a means to overcome regulations as manufacturers are shifting closer to customers to better address the exponential velocity of change

De-Globalisation Resets World Trade

The pandemic had also set off something extremely worrying – a reversal of globalisation. As supply chains broke during the lockdowns, the world became more protectionist. Geopolitics took a dangerous turn as tech-nationalism made countries resort to tougher regulatory measures, preventing the free flow of knowledge and knowhow that helped countries like China become the world’s second largest economy. Before the world could fully recover from the pandemic, Russia attacked Ukraine on February 24, 2022, setting off a European war that further fractured the world. Over 1000 western companies exited the Russian market. Energy prices soared, increasing cost of production. The German economy is facing its severest challenge today.

A survey-based study revealed that 46% of companies expect a drop in sales and 47% anticipate a decrease in earnings due to the war in Ukraine. Additionally, 80% of companies believe that the war will have a lasting negative impact on their operations for more than a year, with 40% fearing effects lasting longer than three years.

A Wave of Tech-Nationalism

The CHIPS Act of the United States in October 2022, aimed at maintaining US leadership in artificial intelligence and high-end electronics, forced Big Tech to pull back their businesses in China. Chipmaker, Nvidia, which enjoyed a huge market-share in China, found itself in the regulatory cross-hairs and was prevented from exporting certain high-end semiconductors to this market. In fact, the Nvidia case, has become iconic of how organisations are having to figure out new ways to strategize these fresh challenges, as the old ways of doing business are no longer working.

Innovating to Overcome Regulations

Nvidia is trying to navigate regulatory compliance challenges and potentially redesign chips to meet new standards imposed by US regulations. The company will have to carefully assess these regulatory changes and adjust its business strategies accordingly to effectively navigate this complex regulatory landscape.

Resilience, agility and sustainability have established themselves as long-term priorities for businesses. This is perhaps best demonstrated by the global shipping giant Maersk. It was seriously affected by supply chain disruptions during the pandemic and following geopolitical tensions.

Shipping Line Operates Railways

The company came up with a multi-modal transportation innovation that combined ocean transport with either intermodal truck, rail, or barge inland transportation. Positioning themselves as a logistics partner by supporting business through an intermodal option to their ocean transport, it helped streamline operations and improve efficiency. Their business logic was to keep cargo moving, to minimise detention and demurrage charges. In other words, handling time, labour costs, storage, and packing costs are all reduced, and cost-effectiveness was maximised.

Shifting Closer to Customers

The oft-quoted Apple strategy to de-risk their business operations of manufacturing iPhones is one of the more recent instances of how companies are discarding their age-old strategies of cost effectiveness in their offshoring gameplan, by moving iPhone production to countries like India and Indonesia, among others. iPhone sales in China had dropped 24% in the first six weeks of 2024, adding to significant problems for Apple and other Western tech companies in a crucial market.

The company is adopting a strategy of moving closer to some of their biggest customer bases when geopolitics is forcing them to consider alternatives. During Apple’s Financial Conference Call in February, Apple’s CEO Tim Cook stated that “iPhone revenue was $69.7 billion, up 6% year-over-year. We set all-time records in several countries and regions, including Latin America, Western Europe, the Middle East, and Korea, as well as December quarter records in India and Indonesia.” A new IDC report published shows that Apple had approximately 7.5% market share in Q4 whereas they stood at 4.6% market share for all of 2023.

Exponential Velocity of Change

Technological advancements have always disrupted business models throughout the industrial revolutions. Nevertheless, organisations have found ways to rejuvenate their business models by adopting to changes instead of trying to resist those. The challenge today, however, is that the velocity of change has taken enterprises by surprise. But not all have been caught unawares.

On November 30, 2022, OpenAI released a Generative AI chatbot ChatGPT on the world. It took ChatGPT only five days to reach over 1 million users. Industry giants like Netflix, Twitter, Facebook, Spotify, and Instagram, took varying lengths of time ranging from two months to several years to reach the same milestone.

It is set to unleash a wave of disruption to businesses in all sectors. McKinsey analysis suggests that the technology could be worth $2.6 to $4.4 trillion to the global economy every year, with the biggest impact seen in customer operations, marketing and sales, software engineering, and R&D.

[To be concluded]