Idea in Brief
The Challenge
In the decade ahead global profits will fall back from just under 10% of global GDP to about 7.9%—about the level they were in 1980. Hardest hit will be North American and Western European companies, which currently account for more than half of global profits.
The Reason
The economic environment is becoming less favorable, and new rivals from emerging economies and the tech sector are putting Western incumbents on notice. The newcomers play by different rules and bring an agility and an aggressiveness that many Western companies struggle to match.
The Response
To maintain their lead in the coming years, big North American and European companies must:
- Be paranoid
- Seek out patient capital
- Overcome inertia
- Build new intellectual assets
- Go to war for talent
We’d call it the opposite of a perfect storm: a set of external circumstances that together create an exceptionally favorable economic environment. The largest North American and European multinational corporations have been sailing through one for the past 30 years. In that time they have enjoyed their longest and strongest run of rising profitability in the postwar era, thanks to an environment that has supported robust revenue growth and cost efficiencies.