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Abstract Futuristic Background

About trends

By “trends”, we refer to “a general direction in which something is developing or changing: They can be seen in politics, society, culture, economics, business, technology: our landscapes and our virtual worlds.

 

It's quite simple why businesses need to track and manage trends: 1) Survival, 2) Sustainable growth and prosperity.....

The nature of trends

By “trends”, we refer to “a general direction in which something is developing or changing.”  Trends can be seen in the macro forces shaping the world i.e. political, economic, social, technological, and environmental. They can refer to ideas or products, technologies, or social attitudes. However, for trends to sustain themselves for any length of time and have a meaningful impact, they are usually some combination of several of these factors, which act in a way to mutually reinforce each other.

As an example, take the trend of “increasing plant food consumption”. Contributing trends have come from “Policies” that have increasingly penalised unhealthy foods around the world (e.g. The UK Sugar Tax 2018). With increased volumes being demanded, the economics of plant food production is becoming more favouable, with economies of scale (e.g. Unilever now offers several hundred vegan products in Europe). There is increasing social awareness of diet and well-being, and recognition of plant foods as being a healthy option. As well as contributing to production-methods, technology is being used to increase consumer adoption, via health apps and more effective digital marketing. Concerning reports of extreme weather events are helping to maintain support across government and societies for steps that protect the environment, intensifying the perceived benefits of plant foods beyond their health properties.

As a trend develops, these different factors - of policies, social awareness, social acceptance, innovation and improvement and financial-investment mutually reinforce each other.

How trends perpetuate: a cycle of awareness, investment and appeal....

Why consider trends?

In extremis, there are two key factors why businesses of all sizes might consider trends. 

 

  1. They create opportunities to align with them, and then grow at a faster rate.

  2. They create risks that can seriously harm them or even entirely kill them if ignored.

 

Taking a couple of examples of organisations that have emerged and done well in recent times, the role of several trends was apparent:

 

  1. Birdie is a “care tech” company, that provides a digital platform for care workers looking after patients in their own homes. In 2021, their platform supported 16m visits. Some trends that might well have helped Birdie, by fuelling the need for their product, included the aging population, the growth of unpaid carers, the challenges to the NHS and resources, the shortage of skilled care workers, and the increasing availability of faster, more reliable mobile broadband.

  2. Autograph Homes are an independent housing developer based in Bristol, with a growing portfolio of developments in the South West. They particularly specialise in high-quality and sustainable design. Trends that might well have helped include the housing shortage driven by population growth, environmental attitudes (particularly of younger buyers), house price rises, sustainable innovation in construction, energy price rises, and the sorts of lifestyles that professional urban people have sought of late outside of cities.   

The potential benefits of these businesses existed well before they came into being. However, as a number of trends converged, it created the tipping point to make them (and businesses like them) viable.

Trends can help the launch, growth and prosperity of businesses.....

trends create opportunities for SMBs.png

By comparison, two orgaisations that have suffered lately include Paperchase and The Sofa Warehouse, and there were a number of trends that were acting on each that would have adversely impacted them:

 

  1. Paperchase - the high street stationary store - would have faced trends that included reduced physical shopping trips, increasingly cost-conscious consumers who cut back on discretionary spending, indirect competition for greeting cards from social media and internet companies, the rise of the "paperless office", energy price rises, rises in paper costs and direct competition to their entire category from the increasing-popular customer-channel of Amazon. (UK office paper consumption fell from 2.4m tonnes in 2007 to 1.7m in 2019 (Confederation of Paper Industries).

  2. The Sofa Warehouse is a boutique chain selling high-quality, not inexpensive sofas. Trends that they would have faced would have included the rise in online-only furniture retailers, online furniture marketplaces (e.g. Etsy, Wayfair), a slowdown in discretionary consumer spending, a slowdown in home moving, the increasing dominance of cheaper Chinese exports in the furniture market, and a booming UK second-hand market part-stimulated by consumers' sustainability concerns.

So, aside the obvious financial impact of COVID on small businesses, there were other trends at play that, to a different extent, would have served to compound the impact.

Trends can conspire to harm and kill businesses.....

trends create threats for SMBs2.png

Although not always apparent, all businesses are facing trends that will support both their growth and decline at any given moment. Arguably, the UK’s population growth acts to support the great majority of businesses. The growing national debt, by contrast, does not.

 

Businesses can’t respond to all of these trends as they appear, but foresight offers the opportunity to prepare or even move ahead of the curve. Additionally, amongst the attributes that successful and sustainable businesses possess, business academics and commentators have come to appreciate the critical importance of ideas like “agility” and “dynamic resources”: the characteristics of the company that allow it to respond quickly and cost-effectively to new information, which can be in the form a new trend. 

 

Before having foresight, “Insight” is a pre-requisite What does the present look like and how did it come to be?: Being focused on customer and market sentiment and behaviour helps organisations to gain an earlier and deeper understanding of changes that could affect them in the future, so understand which ones to act on. 

Spotting trends is not enough

There are plenty of businesses that appear to have followed trends but failed. Over any length of time, it is the ability to not only identify trends, but to interpret them and then invest appropriately in them that is of critical importance to survival and success.

Four ways that organisations might identify trends, but then fail to effectively counter them, include:

#1 A mismatch between the organisation’s response to the trend and the stage the trend has reached: Trends have similar properties to the sales profiles of a product, in that they go through a “diffusion of innovation” curve of the sort famously popularised by Everett Rogers.

 

At the outset, “Innovators” love the new product/concept/technology/idea on its own merits. They convince sociable and influential “early adopters” to “buy” it - which might mean endorsing it rather that paying money if it's an "idea" rather than a physical product. The publicity and endorsement of the Early Adopters spread to convince the Early Majority that the idea is a good one, and they “buy” it too, once the benefits are proven. The Late Majority is more conservative but comes to be moved, gradually, by the sway of growing public opinion. Laggards who fear change or find the idea disruptive or expensive will put up resistance and only succumb when there is no other choice. ​

The diffusion of innovation curve: and mindsets of adopters by stage

Diffusion of innovation curve.png

Where the trend has reached affects an organisation’s best response to it. It’s possible that a product launch in response is too early or too late, or is pitched at the wrong crowd. 

 

The trend of “video game use” was well underway by the early mid-1990s. Against this backdrop of ever-improving games, Nintendo started working on virtual reality games in 1995, leading to a product called “Virtual Boy” - not unlike the sort seen today, with the game player wearing a headset. However, the technology and stereoscopic experience was neither sufficiently compelling nor affordable to be sold to Early Adopters. Nintendo managed a modest 770k sales - likely to Innovators who’d love anything Nintendo would have produced by that point - but the Early Adopters didn't buy it, putting the idea on the back burner for a decade or two. 

#2. Businesses need to understand how others are acting to the trend: 

It follows from the point above that businesses need to understand how others are responding to a trend. One notable consequence of not considering this factor comes by way of the idea of “industry shakeout” where the number of companies expand quickly in a given market due to a new opportunity but the level of opportunity cannot sustain them all, so the industry consolidates again, “shaking out” the weaker players. 

 

Deregulation in both the UK retail telecoms and energy markets over the past two decades created a rapid expansion in the number of providers and then a contraction. There were 8 telecoms companies in 2003, but 126 in 2019, though many also fell away during this period. The UK presently has 37 retail energy suppliers but over 60 have stopped trading.

 

#3. Businesses need to spot the leftfield trends that can interrupt their principal trends:

Trends can clash and, as well as reinforcing each other, can neutralise or reverse one or the other.

 

With increasing airline competition and increasing efficiencies within the airline industry, air travel broadly became cheaper over several decades. However, with growing environmental taxes on fossil fuels, and the lack of a plane that can work on alternative fuel, it's far from clear that this trend of cheap foreign travel will continue in the short-to-mid term. Thomas Cook and Skybus (Spain) both cited rising fuel prices as reasons they ceased trading.

 

#4. The driver of the trend was not well understood:

There has been a broad trend over the course of the C20th to dress more casually for work. However, the trend was not understood by whoever it was that created the fashion statement of wearing suit jackets with shorts, or waistcoats without shirts! 

After all, the trend of wearing more casual and individualised clothes at work was part of a bigger one where we have demanded workplaces accommodate our more authentic selves. Few, it transpired, had suppressed, primordial urges for wearing leather shorts with tweed jackets!

 

Many other organisations have - in retrospect - misunderstood or underestimated emergent trends e.g. Kodak, Blockbusters and Sinclair.

'Three Horizons': A useful framework

As well as looking at trends by type of issue (economic, social, etc) or industry (mining, manufacturing), a useful categorisation for trends that helps with interpretation comes by way of the Three Horizons Framework. This offers another perspective on how trends emerge, develop, and eventually die.

 

At any given moment, in a given industry or field, there will be trends that have shaped the here and now and will continue to do so for a few years yet (Horizon 1), trends that are entering the mainstream and will disrupt the status quote business models (Horizon 2) and events that have not yet, or just started, to become the trends of tomorrow, creating very different ways of doing things or ways of thinking that will eventually displace the norms of today (Horizon 3)  In effect, these are like three diffusion of innovation curves that are growing, reaching maturity and declining in different timescales.

The 'Three Horizons of Innovation' model is useful for interpretation

Three horizons of innovation.png

The three horizons model is helpful for understanding different sources of growth, and being aware of factors and forces that are shaping markets. Organisations seeking to be first to market would need to be building solutions for the third horizon, whereas organisations in mature markets should be continuously incrementally innovating (Horizon 1) while considering how threats and opportunities to their main business model might be emerging from Horizon 2. 

 

For instance, if you are in the contact centre solution market, Horizon 1 innovations would be improving the quality of call experiences by, say, providing better information on the screens of agents before and during a call. Horizon 2 innovations that are affecting today’s contact centre model come from, say, chatbots that are reducing the need for customers to make phone calls. Horizon 3 innovations would remove the need for a contact centre altogether. If you want to change your billing address, simply tell Alexa and she will do the rest by contacting your service provider to update the database, using AI voice recognition combined with advanced cryptography to maintain security. Or perhaps, you change your address once its on your personal device - at which point your new location data is then automatically updated on every database of every organisation that provides you with a service.

Conclusion

In conclusion, organisations can’t predict the future, but they can better prepare for it. By considering a range of plausible scenarios that trends will create for them in the future, it offers a heightened awareness of cues that will signal both opportunity and danger. 

 

Organisations that identify, interpret, and invest in appropriate responses to trends - based on their scale, time-frames and the responses of other players and consumers - are considerably improving their chances and prospects of both survival and growth, as the evidence of fast-growing and dying companies continues to demonstrate.

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