Reinhold M. Karner

Success advisor and mentor

Reinhold Karner is an international success advisor and mentor to entrepreneurs, chief executives, start-ups and business leaders. He is a chair/fellow of think tanks and the RSA in London, keynote speaker and lecturer, as well as chairman/member/trustee on a number of advisory bodies, committees, juries and trusts. In 2007, Mr Karner went from being a 21-year-strong self-made entrepreneur and recognised start-up founder to losing everything ‘overnight’, yet overcame this setback and managed this failure successfully. It taught him an indispensable lesson and has enabled him to become a steadfast success advisor. Restarting from scratch, he is now at the top of all his fields once again. Mr Karner has accumulated profound experience ranging across the ICT and digital economy, trade, manufacturing, services and logistics, business and management consulting among others. He has a unique track record of 35+ years as a multinational entrepreneur, expert and leader, and his companies and products have received countless awards and accolades, as well as top rankings in several disciplines, categories and business performances. Mr Karner also pioneered the development of Europe’s very first ground-breaking Internet-, cloud- and Java-compliant ERP business suite, inventing several ICT key architectures which have become today’s ICT standards.

Economy 4.0: the global revolution and its five disruptive forces (Part 5 of 7)

Tuesday 05th July 2016


The fertility rate is falling, and the world’s population is greying dramatically both in developed and emerging countries. A third of the global labour workforce will retire in the next 10 years, which will change the scenery as never before, as well as challenging public budgets. A generation of older people is about to change the global economy in many aspects, and will reshape the business landscape in rich countries as they become increasingly well-funded consumers.

In the last century, the planet’s population doubled twice. But in the 21st century, it will not even double once – birth rates in much of the world have declined sharply. But the number of 65+ people, which was a steady eight per cent of the total population during the last few decades, is set to nearly double within just 25 years, to more than 1.1 billion people by 2035 – that’s 13 per cent of the population.

According to the Economist, the “old-age dependency ratio” (the ratio of old people to those of working age) will grow even faster. In 2010, the world had 16 people aged 65 and over for every 100 adults between the ages of 25 and 64 – almost the same ratio it had in 1980. By 2035, the UN expects that number to have risen to 26.

The interesting thing about this, in my opinion, is that people used to be ‘quite old’ at 65 years of age some decades ago, but today – thanks to so many positive developments – this perception and description is probably true only rarely.

But, on the other side of the coin, global experience shows that as nations grow wealthier, their inhabitants become less fertile. 30 years ago, just a small share of the global population in a few countries had fertility rates that were significantly below the replacement rate (2.1 birth per woman in developed, 2.5 in emerging countries).

Based on broadly rising prosperity by 2014, however, already 60 per cent of the world’s population lived in countries with fertility rates far below the replacement rates. This includes the majority of the developed world like Germany (1.4), UK (1.96) plus some large emerging countries such as China (1.5), Russia (1.6), Brazil (1.8) and Vietnam (1.8), while it is still over an outstanding six in countries like Mali, Niger and Somalia.

While aging has been obvious in developed economies for quite some time, (Japan and Russia have seen their populations declining over the past few years), the demographic shortfall is now spreading to China and will soon be seen in Latin America too.

Thanks to improvements in medical science, health care and vaccinations, a declining infant mortality rate as well as the predominant peaceful times and fortunate absence of massively devastating world wars, an upright circle has been created. According to MGI, for the first time in human history, aging could mean that the planet’s population could plateau in most of the world in a few decades.

If we take a look at the EU, in nearly every of its member countries, the fertility rate is below the replacement rate – at the moment, the population is expected to increase by five per cent until 2040 for various reasons, but will then begin to shrink. In Germany, which is known for its weak population growth, the European Commission believes the population could shrink by 19 per cent by 2060. The country’s working-age population is expected to fall from 54 million in 2010 to 36 million in 2060. This may also partly explain the recent welcome message from Chancellor Merkel to refugees.

The exemption to this trend is the UK, which may – according to MGI and without considering the impact of the recent Brexit vote – overtake Germany as Europe’s most populous country by 2060 – thanks to the high birth rate among families whose ancestors were immigrants, especially from their colonies, to a relatively high immigration today.

But all in all, this is not just a European phenomenon. The peak days of global population growth are very likely behind every continent except Africa.

At the same time, life expectancy is rising. Around the world, life expectancy at birth rose from 47 years in in the mid-fifties to 69 today. A few decades from now, in 2045/2050, the average person may expect to live to an impressive 76 years.

The demographic tables have just turned upside down. In the beginning of the fifties, developed countries had twice as many children (aged 15 years and under) as older persons (aged 60+ years). But since 2013, older persons outstripped children by a margin of 21 per cent to 16 per cent of the populations in these countries. Based on current trends, by 2050, developed economies could have twice as many older persons as children.

Credit-rating agency Moody’s projected in 2014 that the number of “super-aged” countries, defined countries in which more than 20 per cent of the population is 65+, which are today just Germany, Italy and Japan, would rise from to 13 in 2020 to 34 in 2030 (including China)! By 2040, as just one of many consequences, China could have more dementia patients than the rest of the whole developed world.

Beyond pure demographics, technology is massively contributing to the trend of aging. It’s commonly expected to see significant increases in life expectancy over the next decades as new technologies – such as next-generation genomics (see part 4) and others that are able to modify organisms – help evermore people across the globe to live healthier and longer lives.

Falling fertility rates, slowing population growth and aging populations will all likely have a massive impact on the labour force of the future. New workers will enter at a slower rate, and older citizens may work for much longer than they do today. Indeed, the definition of the labour force itself may change from 20 to 64 year olds today, extending by 5, 7 or even 10 years to include older age groups.

As the Economist states, Warren Buffett, the icon of American capitalism, at over 80 epitomises a striking demographic trend: for highly skilled people to go on working well into what was once thought to be old age. Across the rich world, well-educated people increasingly work longer than the less-skilled. This gap is part of a deepening divide between the well-educated well-off and the unskilled poor that is slicing through all age groups. Rapid innovation has raised the incomes of the highly-skilled while squeezing those of the unskilled. Those at the top are working longer hours each year than those at the bottom. The consequences, for both individuals and society, are expected to be profound.

There is also the unpleasant aspect that longer life expectancy and lower investment returns will mean that many elderly people will be less able to afford to retire. And because of these adverse demographics with fewer people working and more people receiving benefits, we will see quite a challenge as this could put an immense burden on state budgets, forcing governments to boost retirement ages. This shows once more, in my opinion, that the idea of a basic income for everyone due to the rise of robots will just not be financially feasible, making little sense at all to create a ‘useless class’ of people.

Rich countries with lots of well-educated older people may find the burden of ageing easier to bear than places like China, where half of all 50-to-64-year-olds did not complete primary-school education.

Worldwide, the share of older workers (55+ years) in the workforce is expected (as per MGI) to increase from 14 per cent in 2010 to 22 per cent by 2030. The greying of the workforce will be felt most severely in advanced economies as well as in China – where the share of older workers will increase to 27 and 31 per cent of the workforce respectively, as well as being the biggest market for robots in the world.

The aging and shrinking of the workforce is a major disruption that will affect us all!

The number of likely retirees will grow more than twice as fast as the labour pool, leaving fewer workers to pay for the elderly. In addition to creating pressure on global pension funds and state budgets, these trends will force a lot of pressure against the world’s pool of savings and create an array of new fiscal stresses.

As an entrepreneur, leader or chief executive, you can’t afford to wait and watch as employees and customers age. Embracing this new reality will offer a lot of new business opportunities but will also require quite a few essential changes in the way most enterprises operate and manage customers, employees, and stakeholders over their life spans.

While older and experienced employees are often more expensive, they are frequently the first to be laid off, bought out or let go during restructurings. But in an evermore greying world, employers should think twice and far ahead and adapt their strategies. MGI is spot-on on this point and I quote: rather than seeing older employees as legacy costs, you must view them as assets and resources.

Companies have to become more comfortable dealing with shades of grey. There are already many positive examples like Toyota, who changed their employment policy completely, rehiring about half of its retiring employees and allowing the company to maintain their skills and experience in flexible part-time scenarios. But there are many more best-practice examples around in this regard, such as Axa in France, British Gas, the US drugstore giant CVS and many more.

This is also the point where reverse mentoring should play its role, as Gartner Inc. is recommending. First pioneered by GE and since adopted at scale by companies such as P&G, Johnson & Johnson and GM, it focuses on pairing mature senior employees with individuals entering the workplace for mutual benefit.

Millennials possessing the dexterity and knowledge required for digital business become great resources for educating more tenured staff members on new technologies. In return, younger staff benefit from knowledge and capabilities imparted by senior staff, such as business acumen, protocol and decision-making skills that often come with time and experience.

And we will see another welcoming trend growing in the future: many vital elderly people are not happy in the long run to not be ‘needed’ anymore. After enjoying the fifth world cruise and 10th wellness holiday and spending a lot of money, they will realise that working wasn’t and isn’t that bad. So a growing part of them will be looking for a flexible part-time job, mentorship or some form of charitable work.

Volunteer work will become a growing bearing financial factor that saves the state and the economy a lot of money. This will also be a concept that young people and families will happily embrace – to invite such vital grey people for support in and around their households. This will even lead to voluntary grandparent ships and elective affinities – without any cumbersome state involvement. This is, all in all, a very bright outlook and a win-win situation for every generation!

However, from a business opportunity point of view, the vast majority of companies have been relatively slow and have even failed, so far, to focus on this expanding, substantial and fast growing grey market. The majority of consumer-facing companies are still too obsessed with the 25 to 54 demographic.

But in a changing world, older consumers will make up a bigger share of the market and will also likely be active consumers for a longer time. If more grey people intend to be working longer, they are more likely to be able and willing to spend more of their income.

Older consumers are also the richest thanks to house-price inflation and generous pensions. The 60+ spend currently some $4 trillion p. a. and that number will only grow. At the other end of the social scale, however, manual work gets harder as people get older, and public pensions look rather attractive to those with low wages and the unemployed.

The Boston Consulting Group (BCG) calculated that less than 15 per cent of firms have developed a business strategy focused on the elderly. The Economist Intelligence Unit, a sister organisation to The Economist, found that only 31 per cent of firms it polled did take into account increased longevity when making plans for sales and marketing.

A key reason for this tentativeness could very likely be that more and more young people dominate the marketing departments, also because of a growing digital focus, and still think that the best place for the ‘old’ is out of sight and mind. Youth must be served, the saying goes. But so, increasingly, must the elderly.

On the other hand, the innovation driven by start-ups as well as global consumer players such as Nestlé, P&G and electronics makers has given birth to an explosive range of new products and business models for the grey market. In the private sector, retail, health-care, tech, financial, and leisure companies are among the forerunners and first movers in developing tailored services and products for the greying market.

According to MGI, elderly consumers face trade-offs that force a change in purchasing tactics. While non-retirees are more inclined to “shop smarter,” looking for bargains on brand-name products online, retirees prefer to seek value, by, for example, buying supermarkets’ private-label goods.

There is a second important trend in consuming patterns. Seniors typically reduce their spending on housing, food away from home, and apparel as they move to retirement, while they increase spending on food at home, medical services, and, surprisingly, electronics. Of particular importance is also their focus on health and wellness, addressing the need to remain mobile and independent, which is usually not on the radar of young marketers and business developers. Products and services that address these needs will have a fast-growing market to capture.

Companies gradually seem to be mastering the art of discretion – addressing older people subtly, given the fact that certain projects have failed because everyone wants to become old but not to be categorised as old. For example, some retailers are surreptitiously lowering shelves and putting in carpets to make it harder to slip, package-goods firms are printing larger typefaces, and Kimberley-Clark, for example, has overhauled its brand of adult nappies to make them more like regular underwear.

So it’s key that even advertising tactics to build product awareness will be adapted to new requirements!

Japan – with the highest share of grey people – is leading the way and one should learn from them. Just one impressive example: malls are mostly designed as attractions for the younger generations, but in Japan, Aeon, a retail-focused conglomerate, opened a mainly senior-focused chain of malls. There you’ll find escalators that move at a slower-than-usual speed and price tags in large type as well as medical check-up units. And for those who just want to meet new people, the mall even offers a highly adopted senior dating service.

In Singapore, projects such as City for All Ages and their future-oriented mass transit and housing policies are increasingly transforming communities to become more accommodating to the elderly. And even in India, real estate developers such as the Max India Group or Tata are working to build residential communities specifically for seniors.

In the next two parts of this series, Reinhold Karner will tackle the remaining last disruptive force, and conclusions and recommendations will follow.