The Speed of Change

"He who rejects change is the architect of decay. The only human institution which rejects progress is a cemetery." - Harold Wilson, Prime Minister of Great Britain

We must prepare for some volatility in the first half of this year. Businesses need to have strong responses to slow market demand. Business leaders need to be open to change and accept that the world is moving in a direction that is unknown territory for many. For a recovery and confidence to rise, interest rates need to drop.

Interestingly, though, with all the hype about how poorly Canada manages inflation. This Economist article "Which Economy Did Best In 2023" has a different analysis that says we are making our way through a global recovery better than most. Canada ranked number 6 out of the 35 OECD Nations.

Personal Log: Dear Leaders

(A letter to every leader who is angry about this changing world)

Dear____________

We both see a lot of hate and negativity on social media. It is likely rejection or fear of a changing world, future, and truth about the issues challenging us. There is nothing wrong with having opposing views, but when your rhetoric is closed and attacking, it has the overtones of what is referred to as "alethophobia." It is defined as a fear or dislike of the truth, an unwillingness to come to terms with truth or facts. Your employees, customers, and clients are watching and listening.

They see you on social media, from LinkedIn , TikTok , X Twitter to Meta . Your rhetoric on hate and dislike is fed by the use of misinformation and conspiracy theories in everything from politics, the environment, the economy, and technology to targeted hate of individuals. It is wrong, and it will impact your future.

But please allow me to point out that this happens on all sides of these arguments. It's not just those in denial. Those who want to see changes happen fear you will stop them. There can be no progress. Without healthy debate and openness for discussion, your brand will suffer.

In 2019 The Great Transition The Emergence of Unconventional Leadership was published. In that book, I wrote the following to highlight how volatile and unpredictable things were happening. Chapter Ten - Wolves In Sheep's Clothing. "We call them colleagues and consumers by day; they are now activists and populists by night and during their breaks." I wish you had read it. You would be more mindful of the risks.

Today, this really defines our political divisions, dismissal or support of the environment, technology, and everything else we need to solve. It is my opinion that all of this is fear-driven. Squashing facts in favor of your own opinions is damning for your leadership.

The question I ask is, can your business afford this divisive behavior any longer? Is it unwittingly influencing decision-making? Putting you out of the market. Is it preventing the hiring of diversity and talent?

You need to tone it down. I am not asking you to be silent about your concerns; I am asking you to start thinking about how you can keep up with change and begin to lead it instead of being caught up in the rhetoric.

It's natural for all of us to reject feedback. The best we can do is step back and reflect on the risks of falling behind in our business and career if we push back on change, especially when the majority are heading in that direction. In the end, I believe everyone needs to be rethinking strategies to keep up with change.

The Next Generation of Innovators

If AI is only as good as the data it is fed. The humans who use this data to make decisions without AI (presuming the data is of high quality and plenty of it) can't process information as quickly and accurately as a machine, plus they would take too much time to predict or identify an opportunity. Therefore, we should not be surprised that 90% of human-driven product innovations without AI fail, and of that 10% that survive perhaps beyond the introduction phase, only 1-3% are ever successful.

Will artificial intelligence be able to do better? That remains to be proven. However, businesses within industries that have deployed levels of AI differ in their journey. In 2023, various sources suggest that 35% of companies reported using AI, and another 42% plan to in the near future.

If there is one fear with AI, it is the fear of missing out.

So, where is everyone in this journey?

First, there is likely a big difference between the top 1% tier of AI corporate applications versus the majority that have already begun this journey and an even bigger gap between those just thinking about it.

If the starting level were interest and exploration, the second would be experimentation, and the third would be singular implementation, meaning with certain functions. If all goes well, the fourth would be scale, and the fifth, if there is maturation and ample quality data, could begin a transformation. In the sixth level, the company could be demonstrating innovation with AI. The last would be strategically reaching AI factory-level operations, meaning autonomous capabilities between Humans and AI identifying, developing, and delivering next-generation strategies and market innovations. The last is that 1.0% are likely already using AI to develop innovations.

While we will not see AI-driven innovations happen quickly, the adoption and maturation rates will be interesting to watch in 2024. They will join the ranks of AI-capable companies. When that happens, innovations will become ubiquitous.

Economy: Canada Needs A New Vision!

Canada's employment numbers are dismal in December, as you will note in this Reuters article, but they are to be expected. Wages must catch up to inflation. However, the issues related to labor go deeper.

Canada, as a nation, has a dependency problem. It is an old economic one. We depend on the US for growth. Did you know 62% of Canada's global trade is with the US? The Second highest is the EU at about 10%. As a resourced-based nation, we will struggle because oil and gas will not be all that meaningful in the future. Then, our biggest Corporations are service-based. They outsource a lot and will automate even more in the next few years. I was always worried that this ride would eventually end. Why? Technology is the catalyst for change. Anyone who believes politicians will stop this from happening forgets that big businesses need to grow their profits continuously, and they lobby the government and politicians. Technology will need new workers, but the existing ones may not fill the gap or be trainable fast enough.

I am worried that political rhetoric and division are blinding us from seeing the truth, likely because no politician wants to put the cards on the table.

What should we do?

1. Improve our education systems at the elementary and high school levels and elevate teaching math skills, essential to developing next-generation technology leaders. Data scientists are one of them. If we don't, we can subject the future of Canada as a competitive nation to falter because we are stuck with old industries.

2. Fund the development of next-generation energy technology companies. Lead in emissions reductions and new non-emitting sources. Lead in the development of a new generation of safer Nuclear Reactors. Canada needs new industries in the energy sector; make it a law so that it is irreversible and can help us lead globally.

3. If we want jobs, we need more foreign competition to develop new sectors in this nation. Jobs in manufacturing will be lost to automation. We need to reskill the workforce faster.

4. The US is becoming economically insular; that's our biggest risk; they don't need us. They need our oil. When that day shifts, our economy will flounder.

5. Don't count on China as a trade partner unless you are willing to give up control of your nation.

Canada has been heading into a different economic territory for over fifty years.

That is the Nation we now have.

We cannot afford to be led by political leaders and their parties who use over-sensationalized media rhetoric or leaders with childhood anger issues who use misinformation to rally the least informed. This will not address Canada's future.

Instead!

We need a Vision, not another party that wants to lead with social media content and no plan.

Retailing - This Week

Can Retailers Overcome Temu and SHEIN?

Now, if Temu and SHEIN are not enough to worry Western Retailers, then nothing will. However, they should worry equally so about TikTok Shop . These are technology-first corporations that are into selling products as retailers. And yes, they are powered by AI. So, where are the Canadian, EU, or US versions of these brands? Why are we so stuck on physical? The reality is that few retailers or startups can come close to matching their supply chains, logistics, and prices. The rise of these AI-driven retailers has just begun. Temu's parent, Pinduoduo, is on the rise. If Western retailers don't act faster, it's a hard sell to convince analysts that anyone is up for the competition. Read this WSJ article

In lieu of consumers who have tight budgets, these low prices and likely okay products will lure Western consumers very easily. What other risks does it pose? Fewer store visits. You can't sell this low with the overhead of stores. Add in sellers on TikTok, and the retail game reshapes itself in ways never thought possible or imaginable. Yet here we are. E-commerce will accelerate as even retailers in the US, Canada, and the UK realize that lower prices are the rule. Selling value will become a far more important aspect of selling in stores to entice customers. Personalization and Customization are key to the physical retail world. And if you collect a lot of data and have the means to develop AI capabilities, you may have a chance to stay in business. Winning will be a different challenge.

All retail startups need to focus on building their foundation as a technology company first. Think of it as your new four walls.

Consumer Confidence and Competing

US and UK consumer confidence jumped in December; alas, in Canada, consumer confidence declined. But don't get excited regardless of which side of the integer line you are in this. You see, it is only a barometer, and it can switch gears very quickly. The stock market puts more confidence in this than lenders and consumers do. On the other hand, if you read this from The Street, Chief Economist Dana Peterson of the Conference Board does not see consumer confidence rising in 2024, and if the first half of this new year isn't a recession, it is a slowdown.

What does this mean for retailers? Competition is about to get more challenging. In fact, when the final numbers for 2023 roll in for most publicly traded retailers, pay attention to which retail segments rose the most in revenue. How did they do it, and how may that have impacted their competitors and, ultimately, smaller retailers? I expect more of that to happen with greater intensity, especially for those with AI capabilities, because flat sales in a slower economy aren't enough to keep their stock price up.

The Retail Story of 2023

In Canada... Nordstorm's failure. It came in with the hope that it could make a difference in Canadian department stores. But the reality was that Canadians didn't shop.

In the USA... the end of Bed Bath and Beyond was a hard hit for investors and employees; of course, there were bizarre expectations for a revival. Its intellectual property rights were purchased by Overstock.com, converting its brand name to Bed Bath and Beyond. The CEO of Overstock was fired later.

In the UK, Wilko closed its doors, actually 400 of them, and reopened under new owners and a handful of stores. Different retailers picked up their stores.

The lesson in 2023 was that not every retail business and consumer model was built to last the tests of time and consumer shifts.

Thank you for reading this week's issue of "The Business Brief"

You can reach me here: [email protected]. I bring real-world executive experience to the conversation.

Board director, keynote speaker, advisor to senior leaders and author.

This newsletter is not sponsored by any organization