Comment: 2018's reminders to navigate emerging currents

Tomas Carruthers plan for a Scottish social stock exchange is praised. Picture: Chris Watt.

‘History,” wrote playwright Alan Bennett, ‘is just one f****** thing after another.’ Doubtless, many business people would agree. But in reality, the contours of history – the great clashes of countries, people or ideas – shape the business environment. Many leading companies owe their success in part to having been in the right place at the right time. Jeff Bezos may be a brilliant retail strategist, but it’s unlikely his vision would have been fulfilled had he not started Amazon in the early days of the internet.

Well, hindsight is a wonderful thing. But so is foresight. And 2018 was the year in which the great historical clashes of our age sprang into clear view, offering Scottish business a glimpse of the future. Four, in particular, stand out to me as meaningfully changing the business landscape. None of them have anything to do with Brexit. The most successful companies of this century will be those that learn to navigate these currents effectively.

The most obvious of these was the start of Donald Trump’s “trade war”, a significant escalation in the much-hyped clash between the world’s two great powers: China and America. We will find out next year who will gets the better of this skirmish. To date, China’s growth has suffered, while the US has made little progress in correcting its trade imbalances. But that isn’t the point. The trade war is merely a spasmodic response by a western power that reminds us that this is the Asian century. By 2050, Asia is forecast to house half of the world’s GDP and 13 of the world’s largest 25 economies. The best Scottish businesses will rightly seek to create value in those markets. Standard Life Aberdeen’s Indian joint venture is already worth more than its illustrious Edinburgh parent. But the trade war reminds us to expect a bumpy journey as the west struggles to process the meaning of Asia’s rise. One business that has recently discovered this is Google, whose attempts to develop a business in China provoked the ire of the US authorities. This was merely one flashpoint in the second great clash of our age: between digital businesses and governments. Examples of this were everywhere in 2018, such as Facebook’s appearance in Congress.

In the face of this regulatory flexing of muscles, Bigtech stocks duly startled Silicon Valley residents by plummeting 25 per cent or more. Digital business was supposed to be about wowing customers with snazzy apps and cool user experiences… not tussling with po-faced officials.

This shows us that managing government relationships has become a top priority for any firm with a digital model. Stuart Lunn of Scottish fintech star Lending Crowd showed an astute grasp of this in September when he declared his support for the Financial Conduct Authority’s proposal to tighten rules around peer-to-peer lending.

Regulation is not the only reason why companies should think hard about the unbridled pursuit of the profit motive in 2019. Since the global financial crisis, more people have started to question whether companies should exist solely to make money. And this fundamental re-think is not the preserve of sandle-wearing lefties. Financial Times columnist Martin Wolf (hardly a revolutionary communist), for example, recently wrote that capitalism is “substantially broken…[because] profit is not itself a business purpose”. Far out? Not for young business leaders. They fully understand that a company with a strong sense of its social impact will enjoy better access to customers, talent and capital. Scotland is already at the heart of this re-purposing of capitalism, for example in the form of Baillie Gifford’s Positive Change Fund or entrepreneur Tomas Carruthers’ plan for a social stock exchange.

Finally, momentum in favour of gender equality continued throughout 2018. Last year, the #MeToo movement, rightly shone a spotlight on abusive actions in the workplace. But in 2018 a more optimistic narrative gained momentum: the business opportunity of greater gender parity. In fact, evidence is mounting to support the observation that women who seek only parity with men may be lacking in ambition. This year, McKinsey found that firms with the highest female representation on executive committees earned a return 47 per cent higher than those with none. The best companies will realise they can access outperformance by making fundamental changes to their cultures and overhauling areas like hiring and promotions to allow women to thrive.

These great clashes – geographic, technological, cultural – will define the global business landscape for years to come. They bring with them a cartload of opportunity… and risk. The leading businesses of the future will seize the opportunities of Asia and digital, thanks to a deep sense of purpose held by their diverse workforce.

That might seem like a big ask, but here’s the good news: for the businesses that master all of this, the 21st century belongs to you.