Demographics - a productive and dependable innovation opportunity

John W Lewis's picture
Chat Date: 
Thu, Feb 11, 2016

This is the third in our series of seven chats about areas in which changes create opportunities for innovation. The series is based on the seven sources of opportunity identified by Peter Drucker in this 1985 book "Innovation and Entrepreneurship" and discusses the sources in the opposite sequence from Drucker's - in sequence of increasing reliability and predictabilty as sourcs of opportunity for innovation.

In his book, this chapter, on Demographics, is particularly "quotable", so this framing of our discussion contains a few quotes!

Nature of demographics

His opening observation established the importance of understanding demographics:

"Of all external changes, demographics - defined as changes in population, its size, age structure, composition, employment, educational status, and income - are the clearest. They are unambiguous. They have the most predictable consequences."

In particular, he pointed out:

"Demographics have major impact on what will be bought, by whom, and in what quantities."

He described a variety of effects due to changes in demographics. These include highly predicatble changes in buying behaviour as young people grow older. They include the changes as different proportions of the population are educated to different levels. And they include the effects on the demand of skills and automation as the relative size of the population of working age and the overall size of the buying population shift.

Importance of demographics

Then he observed:

"All this is so obvious that no one, one would think, needs to be reminded of the importance of demographics."

but pointed out that this is not the case:

"Great demographic catastrophes such as the Black Death in Europe in the fourteenth century were admitted to have immediate impacts on scoiety and economy. But otherwise, demographic changes were 'secular' changes, of interest to the historian and the statistician rather than to the businessman or the administrator.
This was always a dangerous error."

Later, he wrote (bearing in mind that this was 1985):

"In the twentieth century it is sheer folly to disregard demographics."

Let's now make that the twenty first century!

Understanding of demographics

He then described a variety of examples where supposed experts had completely misunderstood, or been unable to predict, the effect of demographic changes, before pointing out:

"Demographic shifts in this century may be inherently unpredictable, yet they do have long lead times before impact, and lead times, moreover, which are predictable."

However, other reseachers have described not only the predictability of their impact, but also of the demographic changes themselves. See for example, one of Hans Rosling's TED talks on population, such as "Global population growth, box by box"from TED@Cannes in 2010.

Drucker points out:

"What makes demographics such a rewarding opportunity for the entrepreneur is precisely its neglect by decision makers, whether businessmen, public-service staffs, or governmental policymakers. They still cling to the assumption that demographics do not change - or do not change fast. Indeed, they reject even the plainest evidence of demographic changes."

and later, after some more examples:

"This unwillingness, or inability, of the experts to accept demographic realities which do no conform to what they take for granted gives the entrepreneur his opportunity. The lead times are known. The events themselves have already happened. But no one accepts them as reality, let alone as opportunity."

He concluded with:

"Thus, for those genuinely willing to go out into the field, to look and to listen, changing demographics is both a highly productive and a highly dependable innovative opportunity."

Questions

Let's discuss demographics as a source of opportunity to innvation during #innocaht on February 11th at 12pm Eastern time, based on the following questions:

  1. Which aspects of demographics have had the largest implications for innovation?
  2. How much attention do most people and organizations pay to demographic changes?
  3. How can we increase our ability to predict the impact of demographic changes?
  4. How can we increase our ability to predict demographic changes themselves?
  5. Which areas of demographics are likely to have the largest impacts in the future?

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