Page 86 - Accelerating out of the Great Recession

THE NEW REALITIES

Increased Consolidation and Changes in Leadership

In the new era of low growth, many companies will be forced to
engage in merger and acquisitions (M&A) activity to survive.
Excess capacity, resulting from the fall in consumer demand,
will force many companies to either merge or exit some busi-
nesses. There will be other pressures too—including the emer-
gence of new technologies and industries and the efforts by
governments to protect mature domestic champions—that will
present formidable challenges to lead-footed companies in
mature industries.
This new M&A activity will lead to a transformation of some
industries. The pecking order of companies within industries has
often been disrupted and rearranged in previous recessions.
During the last downturn, 8 of 10 industries experienced shake-
ups. One-third of the companies in the top 10 dropped off the
list during the crisis, whereas less than half that number lost
their top-10 positioning over the period of the ensuing upturn.
This time the changes will be even deeper and more funda-
mental.

The Race for Innovation
In past recessions, the level of innovation, creativity, and new-
product development went up. Several economists see revolu-
tionary innovations—such as the railway, the automobile, and
the computer—as the driving force behind the long waves of
economic development first identified by Kondratiev.
As discussed in Chapter 1, the current crisis may signal the
end of one such wave, with many of the industries that drove
the development of the last decade now reaching maturity. New
industries will shape the next economic expansion: biotechnol-

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