The great paradigm shift challenging businesses and investment strategies to evolve

The great paradigm shift challenging businesses and investment strategies to evolve

The fourth industrial revolution and the post-truth era are fuelling a palpable transformation within society and thus redirecting economic forces. Together these phenomena are contributing to a paradigm shift that is changing the way we regard fundamentals; like the nature of work and how the value of a business is interpreted. 

At times, society reaches a turning point, where a paradigm shift fundamentally affects how people live. Right now, we are experiencing extraordinary circumstances where different phenomena are simultaneously shaping whole ecosystems and economies. As a business owner or investor, finding ways to navigate within is increasingly challenging as perceptions of the world and ideas of the future are continuously changing.

Perhaps the most influential phenomenon fuelling the paradigm shift is the fourth industrial revolution (4IR). It’s marked by the development of artificial intelligence and the rise of IoT and virtual reality, and it has, in part, already caused a seismic shift to our day-to-day lives. Most notably, the innovations fueling the 4IR have challenged the nature of work, as people and businesses have become less dependent from its physical attributes. Instead, in some industries, intellectual capital and other intangible factors have become the drivers for success.

The second phenomenon affecting the reality of businesses is described by many as the post-truth era. It is characterised by the democratisation of information where everyone is a content creator and a distributor. We are influenced by people we trust and like, rather than any expert or evidence, which easily leads to entire communities that echo opinions that have been subject to false data. Information is available now more than ever before, but somehow people have become less knowledgeable because that which is factual and real, has been mixed with fabricated stories and outright lies. The communications firm “Edelman” recorded in their Trust Barometer 2017 the largest-ever drop of trust in business, government, the media, and NGOs.    

the paradigm shift-infograph

Brexit was perhaps the most painful example of how falsehoods influenced opinions nationwide, which has had a ripple effect throughout the entire world. It marked the beginning of a very distinct era of “information fabrication”, which will have great effects and repercussions that we are only beginning to witness. For example, just recently, The Barclays Entrepreneurs Index found that 505 businesses were sold by entrepreneurs in the UK in 2016, which represented a 28 per cent increase compared to 2015; the highest level since the bank started tracking such activity in 2010.  Essentially, in the UK, in this moment of political and economic uncertainty, entrepreneurs chose to create wealth rather than invest in it. 

As a result of these transformative forces, businesses are under pressure. The 4IR is changing the nature work and its value and, simultaneously, the elements governing the post-truth era are constantly undermining what we believe to be sound and true. The paradigm shift is accentuated by the intangible, meaning it has moved our attention from the material to the abstract. We now appreciate talent, knowledge and know-how as the most important assets of companies and ideas and networks as the catalysts for success, and they are all susceptible to influence.

Bare it all – the true company value

Each industrial revolution has placed more and more emphasis on human capabilities and innovation by bringing to the fore revolutionary ideas. In the 4IR human capital will determine economic success. Businesses have come to rely on intangible factors as essential to their existence. Company assets have taken on a whole new form, yet the way we analyse and manage these assets hasn’t really changed in decades. A good question to ask from business owners would therefore be; How well do you know what you own?

In fact, 2014 IBIS World report on Business Valuation Firms reported that in the US, 98 percent of business owners didn’t know the value of their company. As Ocean Tomo estimates that intangible factors represent 80 percent of the entire assets of companies, it has become imperative to invest in new ways of analysis that can measure the success of companies and sustain their longevity.

Simultaneously, the post-truth era is continuously shaping our understanding of the world and the brands that dominate it. If Brexit supporters were able to affect the minds of the voters to their advantage, the post-truth era might only amplify our ruthlessness when we strive to affect the minds of the consumers, and this is when brands are in the line of fire.

A recent study by Weber Shandwick reveals that 70 percent of investors monitor social media channels for what is being said about their investment target. As social media is becoming more and more vulnerable to external influence, a business owner might not be able to control their own message but be affected by competitors’ campaigns. This gives even more weight to why business owners themselves need to understand and control the value of their company holistically and be able to defend it with data. Not to mention protect it from competitors.

Attract the investor

The choices companies make internally have an effect on how they are perceived externally. Companies rarely succeed without external help from various investors who are keener than ever to understand how and where their money is invested.

We can take a lead from social media. We care about clicks, shares, likes and comments, in short, the data that can tell us what people care about. Each social action is transparent and yields information that can be tracked, traced and deciphered.

Similarly, investors want to turn the intangible knowledge of companies into tangible data. Data that can be managed and leveraged. As value is no longer tied to physical assets but intangible ones, it is important to adapt new ways to document and communicate the true value of companies. The Weber Shandwick study estimates that 80 percent of US buy-side investors assign weight to intangible factors when making investment decisions.

Being able to document the value of strategic alliances or the human capital of a company and knowing how to manage all networks, can determine the success of a company. In short, it is priceless information. Business owners that can collect this data will be much more prepared to reach their future goals, whether they regard investor relations or productivity.

Society and the way we do business will change radically. One easy way to stay in the game is to know exactly what you own and how to manage it. We will have to expect that every sector will be completely transformed within the next 10 years and this will require adaptability from companies wishing to ride along. Adaptability comes from knowing your company inside and out, and without making any preparations, the future might catch-up with you quickly.


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