What do you think will be the key issues for businesses in 40 years?

Founded in September 1983, The Open University Business School officially celebrates 40 years this year.

As part of our 40th anniversary reflections, we asked our Business School students and alumni what they think the global business landscape might look like in another 40 years. This entry comes from James Boyce, British Airways pilot and MBA student.

The context within which an organisation operates can broadly be divided into the macro environment, conditions that affect all businesses within certain broad boundaries, and the industry environment, conditions that affect businesses within particular strategic groups, which together comprise an industry. The former may be analysed using tools such as a PESTEL analysis (Political, Economic, Sociological, Technological, Environmental and Legal) and the VUCA framework (Volatility, Uncertainty, Complexity and Ambiguity). Although numerous methods may be adopted to analyse the industry environment, perhaps the most widely recognised framework is Porter’s ‘Five Forces’, which consider the bargaining power of buyers and suppliers and the threat of substitutes and new entrants to determine an overall picture of the competitive rivalry within a strategic group.

This article will consider a key issue as an opportunity or threat that has the potential to significantly change the way in which a business operates by 2063. Two key issues will be briefly discussed: mass customisation, and employee retention.

Mass customisation

Businesses of the 20th century engaged in mass production, producing high volumes of identical products as efficiently as possible to reduce unit costs. In the next forty years, businesses will need to engage in mass customisation, maintaining low unit costs whilst producing products personalised to customers’ individual preferences. Indeed, this can already be seen in digital domains with the widespread adoption of artificial intelligence models that recommend videos on platforms such as YouTube and TikTok, products on Amazon, and even potential suitors on dating apps such as Hinge and Bumble. By recording past behaviours, these platforms use recommendation systems that provide users with an experience that is customised to their specific desires and, crucially, one that is different to that of other users.

In a world characterised not only by increasing technological change but also by an increasing rate of technological change, the ability of non-digital businesses to engage in mass customisation will develop in the next 40 years. Currently, it appears that artificial intelligence algorithms are to digital platforms what robotics and 3D printing are to manufacturers, and as these technologies improve, so will businesses’ ability to produce customised products at low prices.

However, mass customisation doesn’t come without challenges. Whilst giving customers precisely what they want may appear to increase customer satisfaction, enabling the co-creation of greater customer value, it may also increase customer expectations. Moreover, as these technologies become more widespread, barriers to entry will undoubtedly be reduced, opening space for new entrants to enter the market if incumbents do not act to build a network of activities that is difficult to imitate by competitors.

Employee retention

Although mass customisation of products and services will be required for customer retention, it is possible that similar principles will need to be applied to retain employees. Armed with multiple income streams through gig-economy work and online freelancing, workers may be less willing to remain in roles which do not fulfil their personal and professional goals. They may also be less tolerant of organisations that do not offer them the meaningful projects, flexibility and purpose they desire.

Traditionally, the thought of changing companies brought with it certain risks. What if I don’t fit in? What if my new boss doesn’t like me? Am I doing the right thing? These questions are unlikely to change anytime soon. However, the uncertainty of not being able to find another role may reduce in the next 40 years. As pandemic-related lockdowns have resulted in the increased adoption of video-conferencing software, and as companies become less willing to fund business travel due to increasing pressure to meet net-zero targets, workforces may become increasingly globalised: never before has it been possible to have multiple employees working for international businesses from the comfort of their own home. Moreover, such cognitive diversity may also be favourable to businesses, enabling them to enhance their creativity. This may be particularly beneficial in a world of mass customisation. However, with such low switching costs it is possible that changing companies could mean merely logging onto a different website or using Zoom instead of Microsoft Teams, increasing employee turnover and knowledge sharing with competitors.

At this point, a valid question may be raised. If 3D-printing and robotics are used to produce customised products, will there be any need for workers? Throughout history, technological advancements have displaced workers. However, this frees up human capital to work on alternative projects. Had the plough never been invented, a sizeable proportion of the population may still be working in fields to harvest crops. Instead, we are designing algorithms to recommend products that we can purchase on the internet and thinking about how best to adapt our businesses to serve the rising African middle class.

Despite Business in 2063 will undoubtedly be different from today, and in ways we cannot currently imagine. This uncertainty in itself poses a key issue for modern managers.