This article was published by The Economist (Insights) in November 2013, and can be found here. Some areas covered in this article are explored further in the Economist Intelligence Unit report ‘Supply on demand: Adapting to change in consumption and delivery models’, which Aleyn Smith-Gillespie was interviewed for. The report can be found here.
Volatile and rising resource costs, regulatory pressures and supply chain risks are the new normal – part of the complex global environment in which companies have to operate and plan. Although many have embedded processes to drive efficiencies and mitigate risks, very few companies have recognised the opportunity to profit from these trends.
The reality is that we cannot maintain current resource-intensive business models and consumption patterns. The world’s population is expected to grow by a further billion over the next two decades, reaching 8.3 billion by 2030. This in itself presents challenges for global food supplies and energy resources. Add to this the fact that sixty per cent will adopt middle class consumption habits over that period – roughly double today’s level – the resulting increased demand for resources will only exacerbate current pressures.
Bold innovation will be crucial to decouple business models from resource risks. This will also enable companies to capture opportunities if they apply the same logic to their customer propositions. Approaches include shifting from a ‘linear’ production and consumption model towards a ‘circular’ one based on sharing, re-using, and/or potentially re-manufacturing assets; cutting out waste (or recovering value from it); and utilising more sustainable materials and technologies.