Using Future Intelligence to Plan for the Future

Using Future Intelligence to Plan for the Future of Realtors 2008 – 2028 Strategic Planning Summit January 29, 2008

Today’s Agenda – January 29, 2008 Explanation of Future Intelligence, the professional study of future trends and their implications Most important strategic trends, 2008 - 2028 Begin a dialogue about what this all means for the National Association of REALTORS

“The closer you are to a position of responsibility, the further away the future can seem” -Erik Peterson Center for Strategic International Studies

METHODOLOGY

Future Intelligence 101 What every executive should know about how to manage future trends – and profit What is Future Intelligence? Scanning long-term shifts in society and technology and picking up threats and opportunities while there is still time to transform our organizations Taking an organized rational approach to a universe of change Why do executives practice this? Acceleration of change, uncertainty Big, slow moving organizations NEED TIME to change What value does it bring? A systems view of our industries Challenge to our assumptions Early warning, innovative ideas A sense of our role in history

The Future Intelligence Cycle World of trends, forces and possibilities Making the case to change 1 – 5 year today’s practices plan 5 – 20 year view Problems perceived, decisions made New approaches undertaken Execution of strategy is measured

What Does Future Intelligence Look Like? I know I need to study the future to make good strategy… …but it’s got to be actionable.

The Tragic Case of the Record Industry Reckless teens, dangerous new technologies, and helpless record executives

Meet Brianna La. Hara New Yorker Honor student Music lover

Meet Brianna La. Hara Sued Sept. 3, 2003 by the Record Industry Association of America for around $150, 000 per illegally downloaded song New Yorker Honor student Music lover

The State of the Music Industry in 2003 Sales plummeting Terrible PR New business models Could we have anticipated this?

For a different perspective, let’s go back to 1991 Gulf War I “Motorist” Rodney King Warsaw Pact ends Apartheid ends Magic Johnson HIV+ Vermont almost secedes

Also happening in 1991: Tim Berners-Lee outlines vision for the “World Wide Web, ” based on an idea he came up with at CERN in 1980. Sen. Al Gore (D-TN) holds hearings for the “National High. Performance Computer Technology Act, ” adding $1 billion in federal support for “The Internet. ” Compact discs, a digital music medium, surpass tape cassettes for the first time.

What could you have told management in 1991? There a number of ways this digital thing could turn out. Not all good. Surely we haven’t got that much to worry about.

Steps to adding the future to strategic planning ¡ Systems thinking ¡ Trend analysis ¡ Forecast assessment ¡ Strategic implications ¡ Scenario generation ¡ Communications

You never make strategic plans alone. The future is an interconnected system of trends.

Systemic view of the music industry Artist development Competing Forms of Entertainment Consumer tastes Markets & Channels Distribution

TREND ANALYSIS: Some key trends in 1991 Computers becoming consumer driven, more interconnected Processing, memory and connectivity increasing every year Music itself has become digital – CDs are now the biggest selling medium

Strategic implications: (Or, asking “So what? ”) Within the next 5 -15 years, music will become a digital good At the same time, digital communication between computers will go from just laboratories big companies to our homes. Record companies must prepare for a digital model of music in which music transcends the physical medium and becomes a virtual, cyber-service.

Scenario #1: “Music is free” “Hey man, I made you a ‘mix disk’ on my PC. It’s my 3000 favorite songs!” Strategic implications: Rapid drop in sales Artists angry over our inability to protect their royalties Radio stations shut down

Scenario #2: “Digi-tunes” “I don’t feel like going to the mall. Let’s use the computer to have the record company just send the “tune file. ” Strategic implications: Moving away from retail outlet of distribution Could be high number of digital retailers – lower barrier to entry Record companies need vastly improved computer infrastructure

Scenario #3: “First All Digital Band” “Hey man, let’s go to the Cyber. Bombers show! No, I don’t have a record by them. Their music is only available on the computer system. ” Strategic implications: Our marketing methods may become obsolete Smaller record labels could compete with giants Word of mouth could become more important than mass media

Scenario #4: “On defense” “You there! Stop using those new computer technologies! We’re suing you for breaching intellectual property laws!!!” Strategic Implications: Falling sales Terrible public relations move Kids look to video games for entertainment

If they had looked ahead, maybe record companies wouldn’t have ended up suing their customers… It won’t change tomorrow, but we should think about these transitions now! Wow, you’re right - let’s embrace this change! Great strategic thinking!

A future intelligence system Today 1 – 5 yrs. 5 – 15 years Hire new people Plan for loss of talented workforce? Launch new business Aging populations Upcoming restrictive environmental legislation? Disruptive technologies Emergence of “world-class” Asian industries? Form partnership Global climate change Globalization

Best practices for Future Intelligence 1. Demand intelligence ¡ Establish a system to feed you trends and what they mean 2. Generate ideas ¡ Get your teams to create and collect ideas about threats and opportunities 3. Make the case for change ¡ When a shift is on the horizon, communicate what, how, when and why throughout the organization 4. Take a risk ¡ It’s showtime – invest, create, launch, merge, and do something ahead of the competition

STRATEGIC TREND BRIEFING 2008 – 2028

Think STEEP to look over the horizon to the business challenges of tomorrow.

Strategic update 2008 -2028 Just a few of the many themes • Aging populations • Talent crunch • Healthcare collapse • Infotech – Web 2. 0 and collaboration • Natural resources – water and energy • Green business versus cleantech • An urban future

Aging populations – around the world • New phase of life for the world’s largest generation • Need another word other than retirement • Dramatic need for new products, services, and social structures

Global aging leads to mass retirement Worldwide, the Boom Generation (born 1945 – 1961) is preparing to leave the workforce. Its effect will be unprecedented in the history of industry 50% of top execs at Fortune 500 ready to retire within five years Federal government losing people en masse: 60% of total federal workforce, 90% of senior executive staff in next ten years Most industrialized countries are unprepared for the shock! Italy: Rapidly aging population, birthrate of only 1. 2 Japan: Turning Daycare Centers right into Senior Care Centers Healthcare workforce: Short 200, 000 doctors, 800, 000 nurses by 2020 U. S. Defense contractor: “We expect 2/3 of our engineering staff to leave within 5 – 8 years. ” U. S. Fed Chief Ben Bernanke: “Avoiding dealing with the Boomer retirement may harm the U. S. economy. ”

So Boomers may not leave the workforce entirely, but will likely create THE NEW RETIREMENT It used to be a pretty straight line from the office chair to the rocking chair. Today, there are financial and industrial realities that may change what the next retirement looks like. ITEM: 55% of Boomers aged 45 – 54 have less than $50, 000 saved toward retirement. 66% have less than $100, 000. 90% have less than $250, 000 Not shockingly, 2/3 of Boomers want a phased-retirement – some work, some play The IRS has put forth a proposal to allow workers to collect ½ salary, ½ social security

Aging will lead to a global talent crunch People often think only the United States and Europe are going to be looking for talent. Match the talent crisis with the country: “The IT industry in the country could be running out of ‘employable talent, ’ especially where new recruitments are concerned. ” “The rapid growth of our nation’s industries is leaving our companies hurting for skilled labor. ” “ 93% of companies report having trouble finding skilled workers. ” India Malaysia Costa Rica

Healthcare costs doubling in the United States? Hi America, this is your healthcare system. We had a meeting and decided $1. 9 trillion wasn’t going to cut it. We decided that by 2015, $4 trillion was a much rounder number. All this for the world’s 16 th best health outcomes! By the way, we’re going to be out 200, 000 doctors, and 800, 000 nurses, so the wait might be a little long. We recommend bringing some Sudoku to the emergency room. Thanks!

Natural resource scarcity: 2008 – 2028 OIL: Scarce due to demand– increasingly volatile FRESH WATER: Dropping on all continents – No replacement! COAL: Supply could last for centuries (cough!) NATURAL GAS: increased demand, international supply MINERAL AND ORE: Supply only limited by mining companies ARABLE LAND: Despite loss due to pollution, plenty left BIODIVERSITY: Extinction on the rise, but little industrial consequence

Trends for the New Urban Future: 2007 -2027 Growing Urbanization Rise of the Global Urban Citizen The 21 st Century City-State Slum Cities

The future of cleantech and green business: It might be just as much fun as regular business! Old school of green/clean living: Hippies camping, “roughing it, ” minimizing all consumption. Fundamentally unattractive to those who like hot showers, refrigeration, home cinema

New school of green/clean living: Hardwood floors, DVD players, refrigerators This may be much closer to the future of cleantech and green business. This design by the students of Missouri Science & Tech University was the entry to 2007’s Solar Decathlon, sponsored by the U. S. Department of Energy. Roughing it to save the Earth? All nineteen entries had to show a working prototype of a house that could use ONLY SOLAR POWER to provide enough energy for ho showers, indoor heating, television, a DVD player, lighting, all while powering an electric car for 60 miles a day.

Moore’s Law will still be in effect for the next 20 years, meaning computers will get more powerful But what’s different this time is that information technology is becoming: Functional and pretty Focused on connections Used by technology natives

Now: How will these trends combine to change the role of realtors in the housing market of tomorrow?

Executive Education – Consulting – Research - Speaking Eric Garland http: //www. competitivefutures. com egarland@competitivefutures. com 1317 F St. NW Suite 920 Washington, DC 20004 (202) 508 -1496