How to Navigate the Currents of Change: Trends, Shifts and Cycles
Issue 172, August 8, 2024
In our rapidly evolving marketplace, distinguishing between fleeting changes and significant trends is crucial for organizational success. At 2040 Digital, we’ve long emphasized the importance of contextual intelligence and systems thinking in navigating change and transformation. As we wrote in “The Truth About Transformation,” understanding often conflicting dynamics at play is essential for leaders to steer their organizations through disruptive times. We’re going to tackle a twist on those dynamics by diving into a less talked-about aspect of change and transformation: determinants.
Cycles and Determinants
To effectively manage change, we must understand the interplay between cycles and determinants. A cycle, as we define it, is an interval of time that is a sequence of a recurring succession of events or phenomena. Cycles are the natural rhythms of business and society that we can often predict and prepare for. They represent social, economic, political, religious, business, and more. Think of product launch cycles in the tech industry or economic boom-bust cycles.
Determinants, on the other hand, are the underlying elements that shape these cycles and ultimately determine outcomes (positive, negative or neutral). They’re the less obvious, often overlooked elements that can make or break a strategy. They exist as factors and variables across the macro (world), meso (organization) and micro (customers, stakeholders and employees) systems that influence our society, organizations and day-to-day lives. At times each of the three systems intersect, influencing each other in positive and negative ways. Factors and variables in any process, represented in these systems, also intersect with each other, vertically, horizontally, diagonally and in circular motion. They can be determinants individually, in pairs or collectively. Or they may be of lesser importance. The key is to identify if they are truly determinants or passing thoughts. In our continued trumpeting of understanding the consequences of our decision-making, including unintended consequences that often result, understanding the determinants that have real influence becomes table stakes in today’s marketplace.
A barrier to revealing determinants is how we isolate our focus to one of the three systems (macro, meso and micro), and miss the totality and interplay of all the systems. We may focus on the high level or within a silo to solve a problem and meet a challenge. In that limited focus, we may overlook (or ignore) elements that have influence.
To take it to the next level, a cycle is a series of self-reinforcing determinants that lead to events unfolding in a certain way. Cycles comprised (or influenced) by the determinants, come together into systems. And that’s where foresight, systems thinking and viewing any cycle holistically is critical, knowing what determinants are going to play into success or failure.
Perspective and History
Being a student of history can reveal whether an element or group of elements is predictive. History can teach valuable lessons when it is understood in context with a long-view perspective. How we leverage those elements within systems sets a course and influences the future. Cycles may be long (even millennia, when it comes to the human species) or short. With our newfound short attention spans, we often start in the middle of a cycle mistaking it for the starting point, which results in conclusions without complete context, and therefore we may make the wrong decisions.
In other words, those who fail to learn from history are doomed to repeat it but those who seek to understand it will gain the knowledge required to understand today’s current history in context. Let’s add to the mix, paraphrasing Harry Truman, the only new history is the history we haven’t read. We tend to repeat ourselves often stuck in comfortable historical cycles. We also often fail to see that a cycle is actually historically much longer than we think. When cycles are long, those particularly that reach way back in history, even pre-history, we may not see the complete picture. Our perspective may be blurred by current terms, and we are short-sighted. Seeing only one sliver of history, we miss determinants that are off our radar (or we even dismiss) that may be influential to our current situation.
Recognition
So, to bring us full circle, without understanding the key determinants in any cycle, we may repeat history that is irrelevant to our current situation. To put it bluntly, effective leaders have the talent to identify the relevant determinants that will propel an organization forward. Yet, one of the key challenges leaders face is recognizing if they’re on the cusp of a trend or just experiencing a one-off shift. Needless to say, this distinction is crucial because it informs everything from strategic decision-making to resource allocation. Consider this: A single data point or isolated event (a single determinant) may not reveal much. But when viewed in the context of broader societal, technological, and economic trends, it might be the bellwether of significant change. This is where foresight and systems thinking become invaluable tools.
Macro Thinking
We often help our clients bridge the theory of determinants and cycles into practice for planning. Determinants are tricky. The important ones may not be the most obvious. We help them consider the more subtle determinants as influential factors because factoring in micro and macro shifts can make a dramatic difference.
Here are three use cases to illustrate the point.
1. Let’s say you are working on a program to expand drug manufacturing to Africa for export. Beyond considering market demand and regulatory environments, what are macro-demographic trends that could have an impact? The median age in Africa is 18.8 years and 40% of its population is 15 and younger. Add to that, in 2022 the literacy rate in Africa ranges from 80% to 54%. Recruiting the necessary talent to develop a workforce and training them for sophisticated manufacturing processes could become a barrier, requiring the manufacturer to import employees.
2. Or what if you are an educational publisher working on textbooks and curriculum development for the near future? On a macro level, there are dramatic shifting demographics in the US. By 2030, whites will have dropped to 56% of the population, and Hispanics will have grown to 22%. And by 2050, Hispanic residents will account for a quarter of the US population, up from 19% today — and one in three people in the US will speak Spanish. Publishing and curriculum development aren’t just about translation needs. It will require cultural competency in content, language context, and potentially different learning approaches that resonate with a more diverse student body. These determinants will affect everything from curriculum design to marketing strategies.
3. The most obvious example of a macro shift affects the healthcare industry. The realities of an aging population are game changers. Consider that 20% of the population in the US will be aged 65 and older in 2050, increasing from 58 million in 2022 to 82 million by 2050, representing a 47% increase. It’s even more dramatic in Japan where people aged 65+ will represent 38% of the population and the number of senior citizens living alone in Japan will likely jump to 47%. An aging population requires rethinking entire healthcare delivery models, from telemedicine to home care services. Will AI and robotics address caregiver shortages? What about the mental health implications of more seniors living alone, especially in places like Japan?
The point of this exercise is to appreciate how different determinants are critical factors yet often overlooked: climate change, aging and young populations, declining birthrates, immigration, education levels, language shifts, digital literacy, and AI iterations. Broadening the playing field to embrace nontraditional macro trends and identifying how they are predictive will impact your organization by anticipating the future
The Power of Contextual Intelligence
Even more to the point, without context, information and data are just noise. The real power lies in contextual intelligence – the ability to understand and interpret determinants within a broader framework. For instance, climate change isn’t just an environmental issue. It’s a determinant that affects supply chains, consumer behavior, regulatory environments, and even geopolitical stability. AI isn’t just a tech trend; it’s a determinant that will reshape labor markets, educational needs, and ethical frameworks in business.
Contextual intelligence embraces complexity and is key to navigating modern marketplaces. This means moving beyond simplistic cause-and-effect thinking and recognizing the interconnected nature of trends, determinants and cycles with systems thinking. For example, think about remote work. It isn’t just about technology enabling distributed teams, it intersects with urbanization trends, real estate markets, retail, mental health considerations, and even climate change (through reduced commuting). Understanding these interconnections empowers leaders to make more informed, holistic decisions.
The Path Forward
As we navigate an increasingly complex and rapidly changing world, the ability to distinguish between trends and shifts, and understand the underlying determinants shaping our ecosystems, become ever more crucial. At 2040, we believe that this kind of nuanced, systems thinking is what separates truly transformative leaders and organizations from everyone else.
By embracing macro thinking, cultivating contextual intelligence, and viewing challenges through a holistic lens, leaders can position their organizations not just to survive disruption, but to thrive in it. In the words of computer scientist Alan Kay, “The best way to predict the future is to invent it.” And invention starts with understanding the complex network of trends, cycles, and determinants shaping our world.
Next week we will reveal how determinants affect the dynamics of our organizations and decision-making, assess how to identify key determinants, tips on mapping cycles, and the power of anticipatory leadership.
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The 2040 construct to change and transformation. What’s the biggest reason organizations fail? They don’t honor, respect, and acknowledge the human factor. We have compiled a playbook for organizations of all sizes to consider all the elements that comprise change and we have included some provocative case studies that illustrate how transformation can quickly derail.
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