Inflection points: How to see when the economy is about to shift | Rita McGrath | Big Think

Inflection points: How to see when the economy is about to shift
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Predicting broad economic change requires knowing why people typically fail to.

Pay attention to where talent is going and you'll get a sense for where the market is headed.

It's why business graduates have ditched Wall Street to go and work at Amazon.
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RITA GUNTHER MCGRATH:

Rita Gunther McGrath, a professor at Columbia Business School, is one of the world’s top experts on innovation and growth. She is the author of the best-selling book The End of Competitive Advantage (Harvard Business Review Press, 2013) and the upcoming book Seeing Around Corners (Houghton Mifflin Harcourt, Sept. 2019).
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TRANSCRIPT:

RITA MCGRATH: So an inflection point in business is something that changes, usually in the environment, that causes the assumptions underlying the way business works to change in some meaningful way. So if you think about it, any business is born at a particular historical moment in time. And there are certain things that are possible at that moment which guide the way that that business develops. And what predicts its success. So if you've been with a business for a long, long time, that kind of becomes second nature. And it's almost like a fish in water. You don't even think about it.

So what happens with an inflection point is all those assumptions get shifted, and it feels like a very different world. Now the good thing about inflection points is it's a bit like the old line from the Hemingway novel, "gradually, then suddenly" when asked about how you went bankrupt-- well, gradually, and then suddenly. So if you're paying attention, you can see the oncoming inflection points way before they happen. So let me give an illustration if you're a traditional power company, let's say, your whole business model is premised on centralized generation of power of some kind and then distribution through a grid. Your only customer is essentially the regulator. Everybody else is a user. And so your job, literally, is to keep the lights on, and all the metrics that you use have to do with that central megawatt generating power model. Once you start to have renewables, distributed power, smart grids, that number, that metric, becomes less meaningful. And so now, you've got to really rethink your whole business in order to accommodate that post-inflection point world. So that's how I think about an inflection point. It changes the metrics that you use to predict success in a business.

How you spot them is you really have to go out to the edges of your organization to see the early warnings of where things are starting to brew. Andy Grove, who wrote a very famous book about inflection points back in the 90s called Only the Paranoid Survive, had a great phrase which I've transformed into snow melts from the edges. So as an executive, how do you get out to the edges of your organization, of your industry, of your context to make sure that you're picking up those early warnings that things may be about to shift? So I think there are a number of reasons why people miss inflection points when they're happening. I think the first is that you just get so used to the way things are that you're not really paying attention. So it's not so much heads in the sand as just heads, like, looking straight ahead, you know, and looking up, not looking down, not looking around at all. So I think that's the first thing.

The second thing is acknowledging that things could be really different can be very scary. And everything you do, every bit of success you've had, is premised on a certain model for how things work and if you start to pick up early warnings that that model may be changing, that could be very threatening. And so there's a very human response to not want to take that in. And I think the third reason is people spend so much time being busy that it's very hard for them to take a big step back and say, you know, what could be changing in our environment? What assumptions do we need to challenge?

I think the last thing is, you know, we tend to surround ourselves with people who are a lot like us. And so we're with people who have the same world view. We're with people who have the same opinions. We're with people who talk to the same people. We watch the same television, blah, blah, blah, blah. And so if something's emerging from somewhere unexpected, it's easy to miss because we're just not talking to people who are familiar with that. My most re...

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