Managing for feast, not famineJanuary 29, 2014: 7:00 AM ET
The economy in 2014 may be the most robust we've seen in some time. Are company bosses ready?
By Geoff Colvin, senior editor-at-large
FORTUNE -- It's time for business leaders to get ready for better times.
Heaven knows that's something we haven't focused on for a while, and it may seem odd to bring it up now. So let's acknowledge up top that we face a zillion worries about the economy: China is slowing down, emerging markets in general are the panic du jour, the Fed's taper could yet do damage, and the U.S. is about to confront another debt ceiling showdown. Let's also be clear that while I believe the U.S. economy's prospects are brightening, I'm making no prediction about the stock market. In fact I think it's expensive at today's levels, but that's a separate issue.
The big picture for business people is that 2014 stands a decent chance of being the best year that we've seen in some time. The World Bank and the International Monetary Fund have just raised their forecasts for global and U.S. economic growth this year; both are forecasting 2.8% for the U.S.
We just need to remember that while an improving environment is great, it poses its own challenges for managers.
As the economy improves, the competitive order in any given industry tends to solidify. Big shake-ups in the competitive order usually happen during a recession or times of tumult, as we've had in recent years. When business conditions get stronger, moving ahead of the other guy becomes much tougher. We've all seen it happen, and good McKinsey research confirms that the phenomenon is real. That's why the wisest business leaders are doing three things now:
--They're making sure their business model is right. Models have already been changing much more often than they used to, in virtually every industry. Altering models is hard, so when conditions are changing, as they are now, you want to be sure you're adopting a model that's right for tomorrow as well as for today. For example, is your business model built for a world in which U.S. consumers may become much more confident after years of caution, while China may grow much more slowly?
--They're probing the changing wants and needs of their customers. When the economy improves, most customers don't just want more; they want different. Americans can hardly eat more calories, but will they substitute beef for beans? Will renters go back to buying? Business school enrollments actually increased during the recession because jobs were so hard to find; the trend may reverse as the economy improves.
--They're making sure they've got the best people. As the environment strengthens, companies have a harder time enticing great performers away from their current employers. If you want to build a dominant team, you'd better do it now.
A faster-growing economy will sure feel good, but it will still include winners and losers. Tomorrow's winners know that good times, like bad times, require smart adaptation.