The Economist End of Year feature interview
Daniel Franklin talks to ogilvydo about business predictions for 2013 – global economic challenges impacting Asia, implications of new leadership in China, rapidly changing Asian demographics, an Asian Silicon Valley, the BICIs rather than the BRICs, the internet transformation to a mainly mobile medium, opportunities for SMEs, exotic new markets…… and Gangnam Style.
Business leaders comment on Daniel Franklin’s interview
“In terms of the ever increasing ‘mobile systems’, this is already having profound impact on our lives in both the personal and business aspects. The twin trends of increasing mobility and social media platforms, means that inadequacies, mis-steps or mis-truths are exposed and re-broadcast at extraordinary speeds relative to the past. We all must ask ourselves: are we properly prepared?”
In terms of the ever increasing ‘mobile systems’, this is already having profound impact on our lives in both the personal and business aspects. As we are now coming to this particular tipping point on internet access per Daniel’s prediction, it would indicate the inevitability to refresh much of the systems thinking of business and service of all types. Many systems in industries are designed with the thinking of ‘fixed access complimented by mobile’, but now the reality is to become the inverse. For any business or public body therefore the questions on security, availability, authentication, the readiness of their personnel to engage and such, take on even more importance. This is calling for a new paradigm of thinking and design, not only the following of incremental steps from ‘fixed’ to a ‘fixed-mobile’ world.
Of course this mobility is also driving a much increased speed and volume of content (and data also of course). Especially in terms of content, the necessity to be absolutely true to one’s beliefs and value propositions at all times has never been so important. The twin trends of increasing mobility and social media platforms, means that inadequacies, mis-steps or mis-truths are exposed and re-broadcast at extraordinary speeds relative to the past. We all must ask ourselves: are we properly prepared? Daniel’s thoughts here are right on target.
Vice President, Marketing and Communications
IBM Growth Markets
“Many organisations are putting the cost squeeze on their European operations, and simultaneously looking to emerging markets to drive growth. Good content rules regardless of media. The Internet world allows for micro-segmenting and sophistication of content as per segment insights. Creativity is language, culture and time agnostic. It is a state of being.”
I agree with Daniel that the investment climate is uncertain across the world, but in my view, Asia continues to be a safer bet as the economic growth in these countries is likely to be faster and based on fundamental socio-economic factors.
In many multinational businesses, the slowdown in Europe is a real reason to look east. Many organisations are putting the cost squeeze on their European operations, and simultaneously looking to emerging markets to drive growth. So I would not completely agree that there is increased inward focus, across the board.
Daniel is right that there is no question that the growth of the Internet especially in the emerging world is going to be led by the mobile medium. In India, mobile phones are by far the primary medium for communication and will enable internet access to hundreds of millions even over the next couple of years.
We are keen to drive this wave. There is already rapid organic growth of the mobile Internet. There are still barriers like availability of local language content, device access and prices. We are working on making sure that the price of access to the internet does not stay a barrier. We are also keen on driving the relevance of internet through education across consumer segments.
He’s absolutely right regarding content. Good content rules regardless of media. The Internet world allows for micro-segmenting and sophistication of content as per segment insights. Brands, organisations, content creators who are in touch with their consumer segments when they create content, will create high quality content.
Creativity is always relevant and will be so in 2013 also. Creativity is language, culture and time agnostic. It is a state of being. It needs to be applied even more in challenging situations as creative problem solving often leads to Innovation.
Chief Commercial Officer
2013 will call for increasing creativity. We have a set of forces at play ; discerning consumers, increased and radical competition and an sluggish uncertain economic environment with event risks. all content has to be redesigned to suit the mobile screen. Is a lavish production with high special effects of value in the future if it gets consumed in the small screen. Is a picture heavy website going to download fast and enable easy navigation? Content will have to be redesigned.
I also believe that the Internet world will be increasingly mobile. That has a set of implications:
- Firstly all content has to be redesigned to suit the mobile screen. Is a lavish production with high special effects of value in the future if it gets consumed in the small screen. Is a picture heavy website going to download fast and enable easy navigation? Content will have to be redesigned
- Location specific content will become important. Helping people to shop at the store, content that alleviates boredom when waiting etc.
2013 will call for increasing creativity. We have a set of forces at play; discerning consumers, increased and radical competition and a sluggish uncertain economic environment with event risks. To succeed in this context will call for creativity to create significant consumer value, to compete against known and unknown competitors and to ride out economic swings with high adaptability.
Director – Snacking, India & Strategy, South Asia & Indo-China
I agree with Daniel that the traditional model was one of adaptive innovation, where Asia followed ideas created in the west and adapted them with higher speed and lower cost. However, this model is turning upside down as Asia develops leading edge expertise in bottom up pyramid innovations (such as the Arvind Eye Care model in India etc.) and these learnings are being reverse transferred by companies such as ours to compete with more affordable prices in the West.
Picking up on Daniel Franklin’s comments on the economic uncertainty. We live in a VUCA world (volatile, uncertain, complex and ambiguous). In this context we need to be agile, dynamic and adaptive with our specific business plans in specific markets. However, the secular trend of sustained growth in emerging markets and economic stress in developed markets as guidance to the business strategy will apply to 2013 as well. This 2 speed world does offer immense opportunity as the people in emerging markets improve their living standards and enter new categories, while at the same time the nimble players will learn to leverage the economic crisis in the developed markets as an opportunity to strengthen competitive presence by offering relevant value to the consumers.
He talked about the economic imperatives being drivers of policy even in transitions. China is very likely to put even higher emphasis on the consumption theme. This can only be good for consumer businesses such as ours, especially as we have major head space for growth in all our categories.
I agree with Daniel that the traditional model was one of adaptive innovation, where Asia followed ideas created in the west and adapted them with higher speed and lower cost. However, this model is turning upside down as Asia develops leading edge expertise in bottom up pyramid innovations (such as the Arvind Eye Care model in India etc.) and these learning’s are being reverse transferred by companies such as ours to compete with more affordable prices in the West. Also, China is focused on creating a large scientific patents base; it’s a matter of few decades where the new hubs for innovation like Bangalore, Singapore and Shanghai will compete with global best from the west.
Could Asia replicate Silicon Valley? It’s very unlikely that the exact cocktail of Silicon Valley will be replicated as the ecosystem is unique as far as digital innovation is concerned. However, it’s possible that the Asia may see the evolution of other innovation ecosystems that serve new platforms such as Biosciences in Singapore or low cost medical services in India.
I agree with Daniel on the mobility issue. The world already has 6 billion mobile connections and Asia is half of that, it’s a matter of time that internet able devices become as mass penetrated as mobile connectivity.
At Unilever we recognize mega trend of digitization as having huge impact on media consumption and connectivity of our consumers. We are working hard to equip our people, systems and processes to be capable of exploiting this opportunity.
Ideas make the world go around. Creativity in the business is now even bigger multiplier given the speed with which ideas travel and get adapted around the world.
Senior Vice President – Global Marketing Operations,
Transcript Ogilvydo interview with Daniel Franklin, Executive Editor of the Economist
27 November 2012
Welcome to Ogilvydo.com. I have a very very special guest today.
He’s an oracle, a prophesier. I’m delighted to be joined by Daniel Franklin.
Daniel, welcome to DO.com.
You are the executive editor of the Economist, you also for the last 9 years have been responsible for ‘The World in….’, the predictive annual report feature that is produced by the Economist. And you are sharing some of those predictions in Singapore today.
Yes and in Hong Kong tomorrow and New York next week.
Daniel, you’ve got to help me here. Every conversation I have with CEOs here, it is ever more difficult to predict the next quarter how their business will be. Is that just because I am speaking to the wrong CEOs or are you finding over the last decade that it actually is getting more difficult to predict?
Yes I think it’s been harder since the economic crisis, it’s been a peculiarly difficult period. In fact this year, 2013, is a tricky one for a couple of very clear reasons. One is the famous fiscal cliff in America. So we know that’s coming up, we know that if nothing is done about it, the outlook will be fundamentally different. And depending on what is sorted out or not sorted out, the US economy which is so important to the world, and not least here in Singapore which is an open trading economy, what happens to America is vital. So that’s one huge uncertainly hanging over the economy. And I think there are many businesses in America just waiting to see what happens. It’s very hard in many cases to make investment plans when this degree of uncertainty is in front of you.
And the other huge uncertainty is the euro. And although it’s less acute than it was. The danger that the euro will collapse imminently has more or less lifted. But there is an on-going sickness there that is far from being cured and is very vulnerable to something going wrong at any point during the year. Whether it’s an explosion on the streets of Athens or another surge of nationalism in Catalonia. It could be any number of surprising events as a result of the tensions in the Eurozone and an economy in recession.
I think both of those things together cause an unusual degree of uncertainty. Then you layer that over with the transition in China and the elections in various parts of Asia. So I have some sympathy for those that say it’s hard to see very far ahead.
I heard Sir John Major, the former Prime Minister of the UK, who was in Singapore recently, and someone had asked him a question, what are your views on Europe. I’m taking some poetic license, but he said, in a word, good. But then he said if you’d given me two words, not good. But as far as the 2013 predictions are concerned, give me some of those big pillars that as businesses operating across Asia, we should be mindful of.
Ok, well I think the broad picture is one not that dissimilar to that we’ve seen over the last couple of years. A very diverse picture in the emerging world and the developed world. We were talking just now about recession in Europe for the year as a whole and it looks more or less flat. America I think there’s a bit of upside, once you get over the fiscal cliff, and I think by the way the likelihood is that they will find a way to navigate that. Then maybe things will start to look up and at the end of 2013 there’s a chance that America really will be surprising on the upside. But nevertheless if you take rich world as a whole it’s less than 2% growth, emerging world 6% or so. So that’s the starting point that is guiding many executive decisions. I think the action is in the emerging world. China is and continues to be particularly important in that picture. But not only China. There’s a lot of interest in Africa, perhaps the second fastest growing region in the year ahead after Asia. And then I think for those with a real discerning eye there are pockets of rapid growth that are sometimes in quite exotic places, such as Mongolia, but those could be interesting for the adventurous.
We are seeing that ASEAN is coming together and having a voice more than ever. Are you seeing a greater importance across ASEAN?
Well I think the various economies of the region are particularly interesting. I wouldn’t necessarily say that as a club ASEAN had more clout than it has had in the past, as least to the outside world. But I think it’s certainly the case that if you take the Asian giants there are some emerging Asian giants that have been less in the spotlight in recent years who are doing very well. And there’s almost a bit of a competition now, with India struggling a bit, with its growth rate dipping down to maybe 6% or so. There are other giant Asian economies that are becoming very interesting, with possibly a race to try and become second, if you like. And in that context, I think Indonesia is particularly interesting. Indonesia next year probably crosses the threshold of quarter of a million people. If the BRICs were invented today they probably wouldn’t be BRICs they’d be BICIs, you’d probably have Indonesia rather than Russia. And the Philippines too which has had remarkably steady growth over the years. And you mention ASEAN, Myanmar is still I think not for the faint hearted, we’ve only just had the new Foreign Investment law and there’s a lot of uncertainty still there but clearly there are exciting prospects ahead if things continue to go well on the political front.
If Groucho Marx were remaking the ‘Go west young man’ it would probably be ‘Go east young man’. I was surprised, I don’t know whether you were, about the fact that no sooner was President Obama restored to the White House than he said, ‘Michelle, pack your bags we’re going East’.
Well there was an ASEAN summit, but it was interesting that he went to Myanmar which was obviously an important political statement . But he has deliberately made a lot of the Asian Pivot, and I think in the second term it will be a Pivot Plus, and you’ll see more of that. And actually second term presidencies tend to get drawn into foreign policies more. So Asia one way or another will be occupying more and more of Barack Obama’s time. And of course above all, the relationship with China is going to define that and the two greatest economic powers in the world with a new leader in China is a critical relationship. And there will be a certain amount of testing and seeing what the new generation of leadership in China means and will there be a change of direction of any sort. There is a general expectation of continuity but new regimes are never quite the same as the previous one.
On China, because of course India will by 2020 be the most populous country?
Yes the demography of Asia is changing very rapidly. India has a relatively dynamic demographic outlook. And China in 2013 some people estimate may be the year the labour force starts to shrink. So that’s a mind concentrating first sign of demographic challenges that China has ahead.
It has a very rapidly aging population so by 2050 China will have an older age profile, not just than America, but Europe as well. And Europe is old enough! So it really is in this race to get rich before it gets old.
I sometimes in wanting moments go onto WorldoMeters and it’s amazing to see in real time the worlds population changing
But if you take that from a European perspective looking at Asia and the rest of the world, and go way back to the middle of the last century Europe was over a fifth of the worlds population. In the middle of this century Europe will be less than a tenth of the worlds population. Europe is shrinking very visibly. And interestingly Africa is the complete mirror picture of that. So you have a humbling sense of the way the weight of the world is changing.
So in terms of business Daniel, do you believe that businesses in Europe and the States fully comprehend the challenge or the opportunity associated with Asia?
Well I think some do, because some are very very active in Asia and put a lot of emphasis on it but I think clearly many still don’t and it’s somewhat worrying to me that Europe in particular is going to be preoccupied with its own issues of keeping the euro alive, constitutional change, sorting out yet again the institutional arrangements for Europe. In other words a very inwardly focused set of concerns whilst the real action is taking place elsewhere. That has to be a concern.
So we’ve got high growth across population over the next decade and also high economic growth certainly for 2013 in most of the markets we would hope across Asia. You had a conference earlier this year in Silicon Valley, The Ideas Economy, which was looking at innovation and stimulating business. Looking at Silicon Valley and what it has, it’s ability to continually innovate and renew itself through every adversity. There’s this head scratching moment that despite this growth, despite population and despite numbers that the Silicon Valley equivalent still doesn’t really seem to have formed in Asia. Do you see the next Silicon Valley, whatever it might be called, somewhere in Asia, and in order for that to happen what is the secret of Silicon Valley’s success?
Well it turns out that you have valleys everywhere trying to replicate and it is very hard to replicate that magical mix that Silicon Valley has. I think one of the peculiar things that is hard for Asia to replicate, in certain parts of the region anyway, is the effervescence of ideas and freedom of association and expression
These are ideas colliding with each other with great speed, with great abandon. In certain political cultures it’s difficult. It breaks up and disturbs the status quo in a way that Asia isn’t always comfortable with. So it may be unrealistic to expect that you get the same sort of innovation in Asian environments. You can get other sorts of innovation. And indeed you do. You get constant iterative improvement of existing ideas. And also the take up of other peoples ideas with extreme vigour and often great effectiveness. And that’s not to be scoffed at. Because good copying or borrowing of ideas and taking them to next stage, that can be very effective as a business model and way of serving customers.
The idea of testing and challenging. I just want to ask you how this world is changing. It plays in part to the fact that everything is searchable and recorded. My embarrassing moments as a teenager weren’t recorded but my children’s will be. And I wonder if ironically when there is so much opportunity for creativity anywhere, whether it be in Silicon Valley in America or across Asia that we are almost creating that restrictive and inhibiting environment because everybody is becoming so worried of doing something that will later on be held against them.
In a funny way, I am sometimes surprised by the exact opposite. Despite the fact that you think people would be quite wary of putting down certain things that would be embarrassing on emails. They seem to still do it. Scandal after corporate scandal actually reveals that this goes on all the time. People appear to have the illusion that an email correspondence let alone Twitter message is somehow not going out to the whole world potentially. So, I don’t think that really is an inhibition. Maybe it should be but I don’t think it really is.
Ok. Let me talk a bit more about social media because in your “The World in…”, I believe you had originally predicted the importance of social media. So as we look into 2013 and some of the things you see, what are the other big social related trends?
Well, I think the one that I would like to highlight in particular because it is particularly interesting and important one. 2013 is likely to be the year when the Internet becomes a mainly mobile medium. By that what I mean is that the number of internet connected devices that are mobile… so smartphones, ipads etc will outnumber the fixed connections like PCs to the internet. You know that’s happened in a relatively short space of time for the Internet as a medium. It took 126 years for the telephone to get from fixed to mobile. It’s happening in a few decades for the Internet. And actually it has very big repercussions. This is a trend that will only grow in importance over the coming years. It has big repercussions first of all for the tech companies that are active in providing Internet related services. Certain ones that are particularly good in mobile will do well. Certain ones that have thrived in the fixed world aren’t necessarily well adapted for mobile. Apple I think is very well placed for the mobile world. HP would be an example of a company which may struggle or Dell which has made desktop computers and isn’t necessarily going to be as pioneering in the Internet world. Then there is a great middle ground of companies that could go either way. I think Facebook is a good example of that which was designed for a fixed internet world but is having to adapt very quickly to a mobile world. And then it goes well beyond that to all sorts of business. Including by the way, my own, media businesses which have to think much harder about how they start to design their product for the mobile first world rather than the fixed world. So we already had a big transformation when the world woke up to the importance of Internet itself and now there is another one when you woke up to the importance of mobile Internet. You design things for the mobile screen. You imagine your consumers consuming on the move and in fact the Internet is not the place that you go to, it’s always with you. You carry it with you. So I think, next year is the year where that it starts to become the norm and people begin to realise it more and more.
I was in Myanmar a few weeks ago and I had come out of a dinner and there was a trishaw driver. It wasn’t a staged touristy thing. It was genuine mode of transportation. Sitting at the back was this Yuppie on his tablet. Probably reading the Economist.
Oh one hopes.
But in a country like Myanmar, that pace of development, it was just such a stark amazing spectacle.
You know the mobile phone revolution is particularly important in Africa. Increasingly that’s also going to be a smart phone revolution.
Let me draw two things together. One is what you talked about of taking the Economist onto various platforms and what you do so well and taking that into content. So as we sit here today, we can celebrate the fact that PSY and Gangnam Style is up to 830 million views and loading and there is the irony that if we were to blast out and say Daniel Franklin, Executive Editor of the Economist and Andrew Thomas now performing Gangnam style….the viewership of this would go up enormously.
Maybe for you but certainly not for me. I take your word for it.
Do you not care about that, does that sadden you or are you delighted about that? It seems that it’s very difficult to get people to value high quality content
Well I don’t think that the two are incompatible. I would describe Gangnam as high quality content in its own way. It’s fantastic. I like the fact that something like that’s coming out of South Korea and is hugely successful around the world. And it indeed unleashes a second wave of creativity with people doing some sort of imitation.
I think there is an appetite for high quality content. It has to fit in with people’s lifestyle in whatever form it’s delivered. So I would be optimistic about a growing appetite for quite sophisticated content. There are growing numbers of people around the world who actually pick and choose, consumers who will happily consume both popular culture and go to museums and go to cinemas and see live opera. And hopefully read the Economist
Given all of that, what have you learnt about packaging your content for the Economist? The reason I say this is the evolution of social media and working with a lot of clients. There is an obsessive need to build communities. More and more companies now are now asking, so what do I do with this community? How do I keep this community relevant, stimulated and of course that’s the content and so a lot brands find themselves as publishers or broadcasters. And as you will testify, that’s a big challenge. People get it very wrong. So what are some of the things that you would say to any client with a big community they need to be mindful of in terms of content?
Well it’s not for me to give them advice of that sort but for us for our own content, what has been important is to stay true to ourselves in any of the various formats that we do, whether its online or tablet platform or whether its live events. There’s an extreme consciousness of what we do, the values that we bring to the content. So I think, in most contexts, the audience or the community will sniff out if you are not being true to yourself. That seems to me pretty fundamental to what you are doing.
So it’s the authenticity part of it being absolutely crucial to how you run your business and how you are expressing yourself?
I guess if you have a community, the community is there for a reason, they expect to commune around a certain idea or a certain style and if you are not true to that style they will wonder what they are doing there.
Everything that you have been saying about technology and how empowering that is. It does seem that SMEs obviously being so important across Asia representing anywhere between 65 – 90% of all businesses in Asia. What do you think SMEs can be thinking about? In terms of them structuring their business, about taking advantage of the societal change, the technology change and the opportunity to be unencumbered by the size of all this?
I think it is an exciting time for starting a business or if you are an SME, possibilities exist to go global in ways that did not exist before. So you can have Gangnam style going round the world for example in no time at all. And you can be a small business and have a worldwide platform and nobody really knows you are actually a small business – you are presenting yourself on a global platform. Not just actually presenting yourselves but sourcing materials from anywhere in the world because that is now increasingly easy. That potential, ‘the world is your oyster’ is greater than it has ever been. And it’s simply very exciting.
The final thing I have for you ……. but before that. My congratulations on celebrating nearly 30 years with the Economist. Let’s say that you have decided you have done everything that you needed to do with the Economist. What would you choose to do in 2013 or in the next decade if you were to look at something other than the Economist and other than journalism?
First of all, I have been extremely lucky with these past 30 years. I think I would love to do something, if I were to start over again, to do something creative. And that Creativity could be in any number of areas. But I would like to think that I would have the courage to be an entrepreneur next time around and to create a business, moreover to create a global business. That would be a very exciting thing to do.
It’s wonderful that you recognize creativity as we talk about the importance of creativity in business. And should you decide to do that, Daniel, please let Ogilvy know, as we would love to work with you and help you on that. Thank you very much.
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