15 major threats and opportunities you can't ignore, according to Martin Sorrell

WPP’s CEO shares his insights into the future for businesses

Martin Sorrell is CEO of the largest marketing services group in the world. WPP has 165,000 employees (the equivalent of the entire population of Oxford) spread across 3,000 offices in 110 countries. Its 2012 revenues were £10.3bn, and its market cap exceeds that figure.

So when he says something, it’s generally quite a good idea to listen. And listen I did, as he gave a keynote address at the Global Corporate Venturing Symposium yesterday in Bloomsbury.

Luckily for you, dear reader, I’ve saved you the £2,400 ticket price by passing on his insights into the major trends, power shifts and threats that all businesses need to be aware of in the world according to Sorrell. So listen up:

Martin Sorrell’s 10 major trends that are affecting businesses

1. Globalisation and the shift to the East. “But don’t forget the south either. This is the big era for Latin America and South and East Africa, and the Middle East.”

2. Overcapacity in production and oversupply are still problems. “Shortages will come. Look at all the birth rate statistics. It’s just like Japan – the ageing of the population.”

3. Internet disintermediation. “It costs business models and steals your talent.” Sorrell noted that young people like to work in young, “networked”, fast-paced companies and start-ups, not “big bureaucracies”.

4. The power of retail. Although he acknowledged how hugely powerful Amazon is and how it will continue to grow and threaten traditional retail models, “Wal-Mart, Tesco and Carrefour will become more powerful than the challenges coming from Amazon, which disintermediates the power of retail”. He added that “the proximity of retail will make it very interesting for the market online”.

5. Internal communications. “The biggest issue for chairmen and CEOs is communication internally about strategic and structural change.” He said that if you manage to get your internal messaging right, that conveys the correct messages to external communities too.

6. Localisation. “Companies are becoming more global, but more local too.” If you operate internationally, it’s imperative to have people on the ground who are local experts, because “it’s hopeless to believe you can understand all those countries”. WPP’s country managers are, among other things, understanding which companies will lead the future there and grow and eyeing up acquisitions.

7. Government. “Government is going to be with us post-Labour for a significant amount of time.” The long-term presence of government as “investor, intervener, manager” has to be accounted for.

8. The rise of finance and procurement. “The balance of power is shifting from marketing to finance and procurement.” This is because retail has grown in power, meaning manufacturers have battled with retailers. Gross margins have been squeezed so there has been ongoing pressure on the supply chain. “Finance and procurement is very powerful in a basically non-inflationary age and for 20 years we haven’t had much inflation.”

9. Corporate Social Responsibility. “Everyone agrees now, without exception, I would claim, that doing good is good business.” Sorrell said that if you are thinking long-term, you have to be thinking about CSR and how your business will do good (although he conceded that “the short-term is different”.)

10. Consolidation. “As a result of much of this, there will be more consolidation” – across clients and various types of companies. He said to look out for particular activity in fast-moving consumer goods (FMCG), citing the Warren Buffett’s acquisition of Heinz and the fact Nelson Peltz had taken a stake in PepsiCo.

And the things to watch out for…

Sorrell described the following a “grey swans”, a term coined by Nassim Nicholas Taleb to describe the “known unknowns” – those events that could have a significant impact, and that you can predict, but whose likelihood is uncertain.

1. The EU. Sorrell said Draghi had done “a super job”, and that “on balance most corporates feel better about the EU”, so this was in fact a “whiter” grey swan (i.e. less of a potential threat or unknowable).

2. The Middle East. “I feel more concerned about that – it’s a blacker one. Iran, Syria, Egypt, Libya, Tunisia – they are not settled in terms of leadership.”

3. China. Sorrell said he in fact feels “super-confident on China and very bullish”. He praised the new leadership and noted that president Xi Jinping first speech immediately addressed corruption, and that it was not scripted.

4. The US. Sorrell said America “is the gorilla in the room still”, noting its economy is still $16 trillion and how significant a part of the $72 trillion global economy that is – particularly as China is still only $8.5 trillion. “I feel America is coming out of it – slowly, but America is doing well.” The US is therefore also more of a white swan for Sorrell.

5.  The EU referendum. “I don’t think it helps reduce levels of uncertainty, so for the UK that is a grey swan.”