Back in 1943 Abraham Maslow produced a paper called A Theory of Human Motivation in which he contended that once an individual’s basic biological needs (food, water, sleep etc) have been met he/she would seek to satisfy a number of progressively higher needs. These range from safety through love and belonging to status and self-esteem. At the very top of Maslow’s hierarchy of needs was actualisation. Now I’m no psychologist but it occurs to me that one of the things that might be going on right now is that more and more of us have reached the peak of this pyramid and we are now searching for something more meaningful. For example, most people of a certain age (in certain countries) have now got enough stuff and buying even more stuff (no matter how new or wonderful) just doesn’t have the same effect that it once did. Hence people are shifting away from buying products towards seeking experiences. This explains everything from the boom in ‘holidays that help’ to the interest in spirituality. As I say, I am no psychologist (clearly) and perhaps this is way off target but the more I speak to people the more I think it’s true. There’s even a theory that the reason we are all in so much of a hurry is that we are in a rush to find happiness — and when we don’t find it we just run faster.

As low cost services spread across the world, so too does the appeal of the opposite: high-cost, high touch exclusivity and personal pampering. To use the travel analogy once again, for some people low cost fares leave extra cash to splash out on expensive hotels. But as more travellers get used to luxury, the more of it they want, which leaves people with something of a dilemma: How to set themselves apart from everyone else when almost everyone else seems to have exactly the same idea?  The thirst for luxury travel and other premium services is also creating what I’d call a convergence of expectations. What I mean by this is that people are getting used to being treated well and expect it all the time — no matter what they’re paying. For example, travelers to developing countries are beginning to expect first world conditions — even in the middle of nowhere — and seem to be incapable of suffering any form of temporary hardship. On a more mundane level convergence of expectations means that customers flying business or visiting a Lexus showroom expect exactly the same speed of service and quality of coffee that they get in a top restaurant or hotel. After all, if Starbuck’s can keep me happy for $3.95 by giving me a decent cup of coffee in a china mug why can’t everyone else?

Markets used to consist of a broad range of offers ranging from the cheap and nasty at the one end through ‘everyday’ to luxury. Mass markets generally sat somewhere in the middle. Not any more. As people have become richer markets have started to polarize between the top and bottom segments. In other words the middle market has all but disappeared, with people either trading up to premium products or happily accepting low cost (value driven) products that have become increasingly well made. In other words, metaphorically speaking, everyone is either flying with a low-cost airline or upgrading to business class. Actually that is highly misleading because in many cases people buy into both segments depending on what mood they are in or who’s paying. Hence people will buy $20 T-shirts one minute and $500 jeans the next. However the strangest thing is perhaps the fact that next to nobody is complaining about the ultimate price we all pay for the availability of low cost goods.  Shoes at £5 a pair have to come from somewhere and one wonders what the factory conditions and the environmental damage behind such products really are. Or perhaps we don’t — it just looks like a bargain and ethical concerns take a back seat to convenience.

According to The Economist magazine there was a 60% growth in the use of the words private equity in the financial media between April 2003 and April 2005. Looking back over the past decade the phrase has seen a 1,000% increase in useage. So what’s going on? The answer, in a nutshell, is that short-term institutional thinking (pension companies and such like) is undervaluing assets. More specifically, certain public companies need to be re-structured but senior executives are afraid of making any substantial decisions that will pay back over the longer term because the share price of their company will suffer in the short-term. In many cases things have also become very comfortable which is the last thing you need for innovation and change and public companies are being strangled by legislation and compliance. In other words, there is a significant disconnect between what a company is theoretically worth and how much it is being valued at by public equity markets. A solution, and a very profitable one, is private equity that taps into what is effectively the almost unlimited amount of low-cost credit that is currently available. Of course, for people with long memories this is essentially the same as asset stripping, which was in vogue in the 1970s and early 1980s. The difference is that the asset-strippers came a cropper due to high interest rates which, of course, we don’t have — yet. So for the moment private equity has its place in the sun, along with financial engineers some of whom have built empires on foundations of sand.

A recent issue of Business 2.0 magazine printed a list called 50 People Who Matter Now.In number one place was you. This is cheeky and provocative in equal measure but it’s also 100% correct. Not so long ago, companies created departments to create innovation. But the result was often that innovation was turned into a state secret. The only people who knew what was going on – and therefore the only people who could really contribute – were the Chosen Ones inside the innovation department. Not surprisingly, this approach limited both the quantity and quality of ideas so companies started searching for new ways of developing new ideas. One new idea is distributed or open source innovation in which customers (or anyone else for that matter) are the co-creators of the products and services that they consume. The idea began in software when developers posted code on the Internet and asked other programmers to fix the bugs. This was networked innovation and the original motive was altruistic because the final product was often given away for free. Then some bright sparks started to apply the principle of asking you and me to invent or develop all manner of products. There are now open source encyclopedias, open source cola recipes, open source newspapers, open source computer games and open source beer. There’s even an open source Hollywood film script. The open idea is even making its presence felt in the pharmaceuticals industry with sufferers grouping together to fund everything from information databases to biotech start-ups.

It takes 11,000 litres of water to make a hamburger and 83,000 to make a medium-sized family car. The average person uses 135 litres every day, most of which is wasted.Water, or more precisely the lack of it, will be everywhere in the future. The scarcity of H2O is being caused by growing populations in countries like India and China, but it’s also being caused by consumerism and development in regions like North America and Europe. Urbanisation and climate change are also major factors and in many cases the problem won’t be a lack of water but water in the wrong places. In China some areas are already taking legal action against other regions whom they accuse of stealing ‘their’ rain through cloud seeding, while in other countries the problem is too much rain rather than not enough.The pollution of rivers and lakes will move center stage and local dams will become global issues and peoples’ attitudes and behavior towards water will change significantly. Every industry from agriculture to fashion will come into the spotlight with regard to water use and customers will select one product or brand over another based upon the company’s water policy.

Are you leading a carbon neutral life? The desire to be green (or, at least, to be seen as green) is trickling down from countries, through companies and organisations to individuals. First organisations like the National Football League in the US jumped on the bandwagon by saying that they would plant trees to counter emissions from Superbowl XL. In the UK HSBC bank is playing the tree planting game and even Bristol City Council says it will plant trees along its bus routes to counter emissions from buses. We’ve seen rock bands planting trees to offset concert emissions and Hollywood is getting in on the act too with celebrities like Brad and Leonardo queuing up to declare themselves carbon-neutral. There’s even a car finance company operating in Australia that links your loan rate to how green your new car is and plants trees to soak up any likely emissions. Also in the US, eight US States have begun a federal action against five of the largest power companies in the US for not cutting carbon dioxide (CO2) emissions and pollution trading is set to be one of the fastest growing markets of the future worth US $35 billion by 2008 according to the UN.That’s right, there is a market for trading pollution whereby one company can buy and sell the right to pollute the earth’s atmosphere. Goldman Sachs, Merrill Lynch and Morgan Stanley are all active in this new market. But is an exchange for polluters and non-polluters a good idea? You’d think not. According to one think tank the existence of this market stifles energy innovation and promotes the idea of pollution. Still, something needs to be done and fast. We currently release 300% more CO2 than our oceans can absorb. India’s CO2 emissions are likely to rise by 70% by 2025 and between now and 2030 emissions from China will probably equal that of the rest of the industrialised world.

Companies (and governments) are telling people to do it for themselves. The theory is that this will save you and me time and money, although the reality is that more often than not this DIY trend is actually saving the company (or the government) money.Thus we have self check-in at airports and hotels. You can book your own tickets online and even calculate your own tax assessment. Customer service costs money too and is notoriously difficult to do well. So why not ask people to do that for themselves too? Customers can then no longer complain about lousy service. Other examples of the burgeoning self-service industry include scanning your own products, cleaning your own shopping trolley and slicing your own bread in supermarkets and assembling your own furniture.However, this particular trend is about to turn around and bite companies and governments on the bottom. People are now getting so used to doing for themselves — and so used to how dreadful the experience can be when they don’t — that some of them are unplugging themselves and really doing everything for themselves. Examples of this include people that are bypassing doctors and hospitals to treat themselves (thanks to information openly available on the Internet), people that are moving to semi-remote locations to escape the rat race and people that have given up on the mainstream media preferring to create their own information and entertainment instead.

Ever since Henry Ford invented mass production, companies have pursued a strategy of standardisation. Given globalisation, you’d think that standardisation would be intensifying but you’d be wrong. First, consumer markets are fragmenting. In the 1970s, the US population was typically segmented into 40 lifestyle groups. Nowadays, the number has increased to 66. This diversity comes in many forms; lifestyle, beliefs, values, income, ethnicity, family structures and so on, but all of these groups have one thing in common — they dislike homogenisation. A second problem is that standardisation stifles innovation. Making things the same reduces points of difference and leads towards commoditisation. Mass customisation and localisation, on the other hand, encourages experimentation, which drives innovation. Local customisation is also very difficult for competitors to track, let alone copy. As a result, retailers are starting to customise store formats, products and even service offers according to local, even individual, tastes. Equally, manufacturers are formulating specific products for specific regions or groups. For example, Coca-Coca has created four different canned coffee drinks for the Japanese market, each one targeting a particular region, while Wal-Mart varies selections of canned chilli peppers according to store location. Too much localisation or customisation can obviously breed logistical chaos and dilute the brand so changes are usually clustered using local geographic or lifestyle data. So what, apart from customer fragmentation, is driving this trend? The answer is information. Customer data can pinpoint not only who is buying what, but also when and why. For instance, data can identify need-states based on the time of day, so an inner city store can change both the mood of the store (lighting and music for instance) and the products on sale according to specific time segments.This is hardly rocket science, but companies are finding that localising stores or changing what get sold when can result in significant sales increases.

A trend that’s sweeping through the technology industry is simplicity. The idea is starting to make its presence felt in other areas too. Business tends to make things complicated because it’s easier that way. Hence many products are over-engineered and feature a myriad of functions that most ordinary people will never need or use. A recent survey by the Consumer Electronics Association in the US found that 87% of people (customers) cite ease of use as the most important feature of any new product. Another survey claims that 50% of the products that are returned as ‘faulty’ are in fact in perfect working order — it’s just that people don’t have the time to figure them out. So what’s the solution? Making products simple is actually very complicated. First you need to make your company simple. This means simplifying not only structure and process, but also culture and mission. A good example of a company that’s been ‘simplified’ is Philips. The company now runs just seventy businesses instead of five hundred and there are five divisions instead of fifty. There’s even a Simplicity Advisory Board to ensure that things are made simple but not simpler.