Back | Home> Process> Research

Macro Trends

I learned early on that strategists extrapolate their knowledge to predict future events, even though folks always disclaim "no one can predict the future." So planning teams conduct environmental analyses, external analyses, trend analyses, etc.

Here I call it macro (outside your firm and it's immediate market) trend (likely behaviors) analysis.

As a Strategic Planning Consultant with over 20 years of experience, I have developed a sense of what are reasonable assumptions to make about future events and since 2008, I have commented on economic trends in my blog using Twitter to help me hone my analyses.

A macro trend has a long life, a result of many forces in your community that you cannot manipulate. Like a river, you go with the current or exhaust yourself fighting it. Usually, as a strategic planning team formulates a strategy, we start with and lump trends into areas of analysis in our external environment - our market and our community. We are assessing opportunities and threats for a SWOT.

• Demographics - population groups, life spans, family composition, disposable incomes
• Economics - capital, business processes, productivity, work patterns, management
• Environment - raw resources, ecosystems, transportation channels, habitat
• Government - world events, politics, laws, public and economic policy, regulation
• Society - lifestyles, values, religion, leisure, culture, education, public-health
• Technology - innovations, scientific discoveries, economies of scale

A trend may fall under several of areas, but as a strategic planning facilitator, I resist the temptation to put it under two or more, since you can overstate importance.

Most strategists feel that four areas need to be studied in detail: politics, economics, society (demographics) and technology, which is often called a PEST assessment, particularly in Europe. Add environmental and legal trends to get a PESTEL (or PESTLE) assessment.

A "driver" is a trend in the community, as it builds momentum, that will trigger an opportunity for your business. For example, in the 1970s Royal Dutch Shell saw the need for more refineries as an opportunity with the driver being the 1973 Oil Shock. A current driver for web meetings is increasing travel costs, which will increase demand for Webex or Citrix GotoMeeting.

We can accurately estimate demographic trends well into the future.

Economics - the business cycle our focus - is data rich but prone to short term misinterpretation.

This chart shows that peak capacity of US Industries has been in decline, a long term view. Since the late 1980s, just in time delivery has "driven" consolidation in the supply chain, a driver in plant construction and hiring decisions. Demographics also explain the decline with the Baby Boom generation entering tretirement, there will be a lower participation rate (Participation Rate = Labor force / Civilian noninstitutional population).

Click to see larger image - updated monthly

Politics evolve along the election cycle as "new" majorities change the rules. Add Presidential elections to the chart above shows that the business cycle is independent of the election cycle over the long term. The gray shaded vertical bars are the US recessions, the start of a recession marks the end of the upturn in the business cycle. Peak US Capacity Utilization marks the high point of a business cycle.

Click to see larger image

USA peak capacity (the blue line - a proxy for competitiveness) is trending down. Job creation, the percent of the US population employed (the red line at the bottom of the chart) has peaked and is also trending down. The slope of the black lines represents the pace of job creation/month from the end of a recession to the beginning of the next. The green vertical lines mark inaugurations of new Presidents (Nixon, Ford, Carter, Reagan, Bush1, Clinton, Bush2, Obama). The business cycle is independent of the election cycle: for example, Ford's quiet craftsmanship led to Carter's burst of job growth; Volker as Chairman of the Federal Reserve Board killed inflation and Reagan took off; Bush1 built the foundation for a recovery (and so doing, cost him the election) and then Clinton bragged; Bush2's tax cuts did not accelerate job creation over eight years. Presidents react. Individual business choices, structural changes in competitiveness - the business cycle - create or shed jobs.

Technology trends are identified from industry associations as the best firms innovate and create the standards so their products will have an advantage in the market.

The question is do you move early or wait? If you wait, do you hedge your bets? Is the trend an opportunity to take advantage of, or a threat that will make doing business very difficult?

Next, how do you assess and track these trends.