German consultancy Roland Berger has published an interview with its new CEO Dr. Martin Wittig, elected to his current post midway through 2010. Speaking from the World Economic Forum at Davos, Dr. Wittig shared his thoughts on the ongoing economic recovery, the future of international business, and the impact of the sustainability "revolution".
The firm's asking the questions, I'm reviewing Wittig's answers. Let's do it.
What is your outlook for the global economy in 2011?
Dr. Wittig notes that the world's economy experienced robust growth in 2010, with GDP rising 4.8 percent. Even better, he notes that his firm nailed the recovery spot on, calling the rebound "in line with the V-shape development that we at Roland Berger predicted in 2008." Bravo, doc! But what can we expect in 2011?
Wittig predicts more growth, but at a slower pace. Developing economies will be the driving forces behind worldwide growth, he suggests. While China's ascendancy will maintain its skyward trajectory, India's prospects look even better; the firm expects that this year India's growth will outpace 2010's rate by a full percentage point.
Economies in the United States and Europe will also grow, albeit at much slower rates. Wittig blames the slowdown on "eroding recovery efforts"—governments in these regions are replacing stimulus efforts with austerity measures, and job growth remains anemic. The firm predicts that the US economy will grow by 1.2 percent in 2011, below its prediction for that of the EU states (anywhere from less than 1 percent to more than 2 percent). Compare that to the 6 percent growth the firm sees happening in some developing countries. Sigh.
The world in 2011 is exceedingly complex, interconnected and unpredictable. How can organizations develop resilience in this new world of risk?
Here, Wittig condemns the use of "complex, quantitative modeling", a popular consulting tool which he says "failed" the world by not predicting the recent economic crisis. "Traditional forecast models have failed," the CEO says, "since they are too volatile, too imprecise or sometimes just plain wrong." Instead of just crunching numbers, Wittig suggests, a better plan is to view the future in terms of potential "scenarios". Dubbing them "drafts of the future," the firm thinks it's imperative that companies identify and plan for multiple scenarios that could develop in the fast-changing world of international business (shades of McKinsey here). New government regulations and political trends, emerging markets (and the competitors they produce), and more economic volatility could all come into play in the near future.
As global growth shifts to the developing world, what should the role of business be in developing countries?
Nothing groundbreaking here. For businesses established in developed economies, Wittig cites the necessity to establish strong bases of operations in developing markets. Operations in developing markets shouldn't just be placeholders, he argues; companies need to develop tangible stakes in these regions through ownership and investment. Of course, the key to international growth is a robust home office, he says, so maintaining growth at headquarters is equally crucial.
What would you consider the most important norms that an increasingly interdependent yet diverse world needs to share?
"First and foremost: We must fight any form of protectionism and must not turn back the wheel of globalization," Dr. Wittig declares. Not surprising, considering the global nature of his business; Roland Berger and the rest of the world's established names all want a piece of emerging markets, and any protectionism on the part of these economies' governments will make it more difficult to do so (for better or for worse). "A new wave of protectionism would threaten all the positive progress we have made in globalization," he says. All the positive progress you have made in globalization, I say.
How can companies turn sustainability into a competitive advantage?
Wittig delves into the numbers here (in sharp contrast to his condemnation of quantitative modeling), predicting that the green technology industry will enjoy 6.5 percent growth every year through 2020. Already, the firm asserts, demand for greener products and services has created a €1.6 trillion industry. Wittig's point is that sustainability is "not just a buzzword" or a "business megatrend" any longer; it's a well-developed industry with "enormous growth potential". Corporations worldwide have already recognized that potential, which runs high in both the developed world (the US, for instance, lags far behind Europe in terms of environmental friendliness) and the developing world (where development is fueled by, well, fossil fuels), and have made billions off of it.
The key for companies looking to break into the feeding frenzy is innovation, Wittig says. Emerging technologies are undoubtedly the driving force behind the industry boom; those researchers that can come up with a truly viable solar cell, or can swap algae for fossil fuels as a principal energy source, stand to reap unprecedented profits.
But companies in developed economies don't have as much of a head start as they'd previously thought, Wittig notes; businesses in China and Eastern Europe have already emerged as leaders in photovoltaic (solar) and wind power, often with the aid of robust government sponsorship.
For more information:
Roland Berger News: Interview with Dr. Martin C. Wittig, CEO
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