WPP CEO Sir Martin Sorrell reports
It is perhaps unusual that a Chinese entrepreneur should cite Abraham Lincoln as inspiration. The entrepreneur in question is Lei Jun, chief executive of smartphone maker Xiaomi and a man with a democratic way with product development.
Xiaomi consults its customers on design and software, issuing weekly updates based on their feedback. A million internet engineer fans and friends continually evaluate products to improve service. This crowd-sourced innovation, Lei says, is “by the people, for the people”.
Such inventive commerce is in contrast to the mood in many Western boardrooms. More than five years have passed since the collapse of Lehman Brothers, but the cataclysmic events of September 2008 still haunt us.
The result: stasis and an ultra-conservative attitude. So much so that corporates are sitting on an extraordinary $4.2 trillion in cash and relatively unleveraged balance sheets, unwilling to take risks. All too often they are making their numbers not by investing in top-line growth but by cutting costs.
Understandable perhaps, when the average American chief executive lasts four-and-a-half years and the average chief marketing officer just two-and-a-half.
So it remains a slow crawl out of the Lehman slump, even if global real GDP growth forecasts for 2014 are stronger than last year, at around 3.5% to 4%, with nominal GDP forecasts between 5.5% and 6.5%.
Corporates are sitting on an extraordinary $4.2 trillion in cash and relatively unleveraged balance sheets, unwilling to take risks
The forecasts reflect higher (but recently slowing) growth rates in Asia Pacific, Latin America, Africa and the Middle East, and Central and Eastern Europe, and lower (but improving) growth rates in the US and Western Europe, where Britain and Germany are undoubtedly the strong men of the region.
The markets between these two western European bookends, principally France, Italy and Spain, continue to be difficult. If the European downturn is U-shaped, France remains on the downstroke, Italy is bumping along the bottom and a recovering Spain is on the upstroke, although with socially-unacceptably high levels of unemployment, particularly amongst the youth.
The post-Lehman slump has also been a cold bath for Britain – but it is finally climbing out. The Coalition government had a choice when it came to power in 2010: pursue higher-spending Keynesian programs, like the US, or go for cuts. George Osborne, the Chancellor, chose the latter (although it’s worth remembering that government spending has not actually fallen in nominal terms).
Worldwide communications services expenditure 2013 $m
|Advertising||Market research||Public relations||Direct & specialist communications||Sponsorship||Total|
|Africa & Middle East||18,839||730||140||1,892||2,300||23,901|
The UK Prime Minister, David Cameron, has been castigated for the harshness of his economic policy. Undoubtedly, the medicine has been bitter, but it does seem, at last, to be working and the political climate appears to be moving in the government’s favour – as the positive reaction to this year’s Budget showed. We should be careful not to nip this fragile recovery in the bud.
The prospects for electoral success in 2015 seem considerably better for the Conservatives perhaps, not with an overall majority but, more likely, another coalition. There is perhaps one caveat: that David Cameron manages to ensure Britain remains at the heart of Europe, given his promise to initiate a referendum in 2017.
Chapter 7 of 13