Augury is not in the job description. But faculty and staff at top business schools do need to be aware of trends and realities in and outside the world of graduate business education, which puts them in the position of having better-than-average insights about events in education and beyond. That’s why at the dawn of each new year Poets&Quants has sought the forecasts of B-school faculty, staff, and administrators, with no limit or constraint on what they use their powers of prognostication for. (See last year’s story on B-school predictions, and go back to B-schools’ 2018 predictions as well, to see how well the predictions stood up.)
There is often overlap in the predictions. Looking ahead to 2020, many echoed a view expressed by Scott DeRue, dean of the University of Michigan’s Ross School of Business: Huge and daunting challenges lie ahead, whether in the realm of politics, trade, education, or elsewhere. DeRue, like others, see growing demand for accountability by businesses in the realm of public policy, and growing calls to hold responsible those who fail to embrace diverse leadership, sustainability, and greater economic opportunity for all.
“In 2020, I anticipate that society will continue to be challenged in many profound ways,” DeRue tells P&Q. “In business, CEOs will be expected to be more engaged than ever in policy-related issues and social causes. Employees, customers, and investors will increasingly demand that companies explain how they are diversifying leadership, addressing climate change and sustainability, and improving equitable access to jobs and economic opportunity. It will be a challenging time for leaders across all sectors, wherein missteps will be very public, and purposeful leadership celebrated.
“Technology will inevitably become more deeply embedded in our lives, continuing to re-shape how we work, play, and live. We will encounter further benefits of artificial intelligence, yet also be confronted by moral challenges that arise in its application. Businesses with a clear vision, positive leadership, and sound execution will thrive. Business schools will continue to launch new courses that explore the intersection of business and technology. At Ross, for example, our FinTech Initiative is expanding its curricular and co-curricular offerings in new and exciting ways, and we are on the verge of launching a new digital business initiative that builds on this success.”
2020 WILL SEE BIG DEVELOPMENTS IN FIGHTING CLIMATE CHANGE, ROSS PROF SAYS
One of DeRue’s professors, Andy Hoffman, echoes his dean on the subject of sustainability in a blog on the Michigan Ross website. Hoffman foresees a continuing shift in 2020 from the U.S. federal government to the states when it comes to addressing climate change, calling the Trump administration’s withdrawal from the Paris Agreement “unfortunate, but not a done deal yet. The earliest possible effective withdrawal date is Nov. 4, 2020, one day after the U.S. presidential election. So there could be some fireworks if climate change continues to be an election issue and a Democrat is elected to the White House.
“In the meantime, much of the policy attention on climate change has shifted from the federal government to states, cities, and other countries to address the issue. Sometimes this helps businesses push forward with their strategies to address the issue, as when companies operate in multiple parts of the world and develop one product or process standard to meet the most stringent requirements. Sometimes this places them in a bind, as the auto sector now finds itself stuck between the Trump Administration and California. But in many areas, the market is shifting regardless of federal policy. And that is where business is looking, both in terms of risk management, climate adaptation, and market opportunities.”
Regardless, the new year will see a greater move toward clean energy, says Hoffman, the Holcim (U.S.) professor of sustainable enterprise, professor of management and organizations, and professor of environment and sustainability at the Ross School and Michigan’s School for Environment and Sustainability.
“The future grid will certainly use more clean energy as prices continue to drop. Renewable energy developers worry about the phase-out of the production tax credit, and how that might stimulate installations this year, but decrease them next year.
Looking to the future of the electric grid in this country, we should also be watching for more consumer participation and choice (distributed generation, demand-side management) and holistically designed solutions (micro-grids, energy storage, and centralized-decentralized control).”
Hoffman says continued expansion in the electric vehicle market will be among the most exciting developments in 2020. “Since Tesla began to bring its electric car to market in 2003, its market capitalization has grown to about $53 billion, surpassing GM to become the most valuable U.S. car company. Where major automakers first scoffed, they are now playing catch-up. The GM Bolt, BMW i3 and i8, Volvo Polestar, Audi e-tron, Porsche Taycan, Ford Mustang Mach-E SUV, and many more are extending ranges and reducing costs while the charging station network continues to expand.
“Research in autonomous vehicles is still progressing — you can see them on the streets in Ann Arbor — but is a bit further out than earlier rosy projections. Dedicated bike lanes are becoming more popular as urban congestion reaches new heights. And, in an unusual twist in 2019, ‘flight shaming’ has become so prevalent that, according to a study by UBS, 24% of Americans were flying less because of climate change. They estimate this could lead to a drop in annual growth rate of flights from 2.1% to just 1.3%, with a possible cost to Airbus of about $3 billion.”
The U.S., and the world, will begin to see the shifts in beliefs that are necessary to truly tackle climate change, Hoffman says.
“Surveys show an increase in concern over climate change within the American public and, importantly, more are speaking up about it,” he says. “We are also seeing a narrowing of the partisan divide. In 2009, only 35% of Republicans believed climate change is real, and that number is now up to 54%. When asked why they are changing their position, people answer that it is the recent extreme weather events we are witnessing.
“One voter demographic in particular that has accepted the science is the current college-age generation (18- to 22-year-olds), where the partisan divide is nonexistent. And that has manifested in the Sunrise Movement and the Youth Climate Strikes, which have voiced a new constituency that is changing the landscape of the debate. We now have a specific and aggrieved party — young people — and a specific set of interests that are under threat — their future. And to capture the ripple effects, a recent study in Nature Climate Change showed what we already know: Parents love their children, and their beliefs are influenced by their kids’ concerns.”
CHINA WILL BE AUTHOR OF MANY OF 2020’S BIGGEST DEVELOPMENTS
Michael Kitson, director of the MBA program and university senior lecturer in international macroeconomics at Cambridge Judge Business School, sees a “shift from West to East” in the coming year, with China dominant and the U.S. and Europe playing catch-up on a number of fronts.
“The world economy has been ‘deglobalizing’ in 2019 and this will likely continue in 2020 as trade conflicts continue and barriers to the movement of people are erected,” Kitson tells P&Q. “But this is probably a short-term phenomenon: we have seen it before — in the 1930s and the 1970s — when economies suffer from shocks they become inward looking.
“But 2020 will see the continuation of another trend, which is long-term and persistent, as the world economy is being reorientated from West to East. The global economy in the 20th century was largely dominated by the U.S., but the dominant power in the 21st century will be China. The U.S. entered this century as the dominant country but just like the UK in the 20th century it is a ‘diminishing giant.’”
The dominance of China can already be felt in a number of major ways, Kitson says, adding that “we are in the early stages of transition to China as the dominant world economy.”
“China is already the largest economy in the world (measured in purchasing power parity) and PwC (using World Bank data) estimates that, by 2050, the Chinese economy will be 72% larger than the U.S.,” he says. “According to Forbes, China is home to 291 of the globe’s biggest 2,000 public companies while the U.S. is currently on top with 560. China has five of the 10 biggest companies in the world — four of which are banks — and the rise of corporate China is set to continue.
“China is moving away from low-cost labor and is unlikely to get stuck in the middle-income trap, as it is investing rapidly in research and innovation. The ‘Made in China 2025’ strategy is investing in high technology sectors such as pharmaceuticals, automotive, aerospace, semiconductors, IT, and robotics. China is investing rapidly in its universities and has now overtaken the U.S. in terms of the number of scientific and technical publications.”
China’s “power and reach,” more than the much-publicized trade war, should be the biggest concern to the U.S., Kitson says.
“China has a special form of capitalism with the active role of the state to direct the market economy,” he says. “This may have many limitations, but it allows China to make long-term investments and engage in global expansion, as shown by the Belt and Road Initiative.
“It is the power and reach of China’s state-controlled capitalism that is probably of greater concern to the White House than trade imbalances. And it is this form of capitalism that is likely to lead to China being the dominant global power the in the twentieth century.”
THE MBA DEGREE IN A CHAOTIC WORLD
What role will the MBA play in this momentous year? Drew Pascarella, associate dean at Cornell University’s Johnson Graduate School of Management, says the degree will be more important than ever.
“The next year will be a period of increasing uncertainty — the U.S. presidential election, economic and environmental impacts of climate change, the shifting landscape of global trade and alliances, uncertainty around a possible recession, etc.” Pascarella tells P&Q. “To navigate these complex issues and their uncertain outcomes, the corporate world will need more courageous, dynamic, empathetic, cross-functional, data-driven executives who are skilled at leading through volatility, uncertainty, complexity, and ambiguity. The world will need more MBAs.
“At Johnson, we prepare these leaders by delivering a powerful combination of world class-technical skills, modern, empathetic leadership skills, and cross-functional experiential learning opportunities, where students can practice solving complex problems in a number of volatile, uncertain, and ambiguous environments.
“As uncertainty continues to create unforeseen problems and opportunities, the need for problem-solving MBAs experienced in leading through change will be greater than ever before.”