Five Game-Changing Global Problems to Solve
Every September for over 20 years, I have had the extremely good fortune to attend a global business conference that takes an in-depth look at business, government policy and geopolitical issues. It’s an opportunity to go beyond the headlines and hear from global experts and thought leaders who have a deep understanding of the topics on the agenda.
This year we heard from Greg Abel (Warren Buffett’s appointed successor at Berkshire Hathaway), Daniel Yergin (Pulitzer Prize winning author of books about the energy sector; including his latest “The New Map” (well worth the read)), the co-founder of the McKinsey Global Institute; current and former ambassadors, policy experts and CEOs and business leaders from Canada and around the world.
The speakers and panelists were all fantastic and, as with all of the best events we attend, the conversations at the tables and during the breaks were even better.
Because this is an invite-only, low profile event, the conversations seemed to generate more open and honest discussions than I would have normally expected which created an opportunity for me to widen my perspective both internationally and intellectually. As I learn so much, it feels greedy to keep it to myself so I make a promise to annually report back to my co-workers and peers on what I have learned.
This year, as many of the speakers talked about significant problems and challenges facing the world today, I wanted to share these with the Alberta entrepreneurial community as I believe they represent problems that could be solved and if so, could literally change the world while generating a lot of wealth along the way. These problems are not new but the world now seems to be at a tipping point on wanting to address them seriously.
For entrepreneurs, focusing on problems is key. Through the Product Opportunity Mapping framework I have developed, I advise companies – both large scale and startups – to look for problems to solve and only then come up with potential product solutions.
At the forum this year, starting with the discussion of various business, ESG, geopolitical challenges, several problems were identified. Concurrently, many of the thought leaders in attendance expressed their confidence that new technologies and innovations could create game changing solutions. In other words, smart technology-focused entrepreneurs should be paying attention.
An overarching theme of the forum this year was that since COVID has created so much disruption, it has been accelerant for change and a “revealer” of weaknesses within a company’s day-to-day business operations. As a result, we as executives and entrepreneurs need to question the business operating fundamentals we have taken for granted.
Wise companies realize that business is not going back to the way it was and are now asking how they can not only build back better but also how disruptions can create new competitive advantages. As well, they are asking how they can be better prepared for the next disruption.
For many of the CEOs and business leaders in the room, these challenges are front and centre and are being actively discussed in the board room. This means they are looking for solutions and for entrepreneurs this is an important buying signal.
If I was a young entrepreneur looking to make a long-term investment (or bet) into sectors where global problems exist and where growth will take place, I would start by looking at the five areas noted below. I believe these will be the foundation of many new and successful startups.
While not a complete list and only based on what I heard at this particular forum, they represent some big meaty challenges that society needs to tackle and now seems ready to do so. I should also note that since I am based in Alberta, I have placed a special focus on the energy sector (not just carbon-based energy but all types of energy).
Five Game Changing Global Problems to Solve
1. Climate Change Adaptation
It is now widely accepted by corporations that climate is a “now” issue. For the first time in the 20 years I’ve been attending this conference, the audience – ranging from policy makers to energy and non-energy company CEOs – all agreed that climate change needs to be acted upon now (like it or not).
Fifteen years ago, many were ignoring the issue and over time this evolved from denial to grudging acceptance. Today, there is wide acceptance and realization that new regulations are inevitable (as is the need for compliance) and forward-thinking companies are looking at how they can translate compliance into a competitive advantage.
Further, government responses to COVID is accelerating this change. The willingness to open the public purse to deal with the impact of COVID and to “build back better” has been unprecedented and for many countries – especially in the EU – this has been translated into a “green recovery”. In fact, one speaker stated that the EU is “all in” regarding a green recovery and the EU will apply sanctions against countries who do not comply with tighter environmental standards.
It was also noted that business leaders should place close attention to the upcoming COP26 UN Climate Conference in Glasgow in November, 2021. While the Paris Agreement in 2015, outlined high level targets to deal with climate change, COP26 will likely result in more definitive targets that will have a direct impact on individual companies.
At the same time, it is indisputable that the need for carbon-based energy sources will need to remain in place for many decades to come. It is not realistic to think otherwise as the transition to cleaner energy sources will take years and years and require massive investments.
Instead of suggesting that we rid ourselves of carbon-based energy sources altogether, a helpful way of thinking about this is to focus on a “net zero transition” meaning that for every atom of carbon added for consumption, another atom (or atoms) is removed creating a net zero or net negative balance. This is the only realistic way for society to maintain the massive societal benefits carbon-based energy sources have created. Petrochemicals are needed for industries such as healthcare (medical supplies and devices) and electronics – in other words the things we really don’t want to live without. Ultimately, this means there will be many new and growing opportunities to create these trade-offs (product solutions that generate carbon offsets and sequestrate carbon) and it will be profitable to make these trades.
Another interesting impact of climate change risk is related to migration. One speaker identified four key issues that are taking up the majority of the current EU legislative agenda. Of these, three were migration related. Migrants literally walking and floating towards the EU from Syria, Africa and Central Asia are creating enormous problems for all EU member governments. While refugee migration may be related to wars, authoritarian regimes and other disruptions, the impact of climate change is central to much of it.
As well, another subtle point highlighted is the need to differentiate between refugees and immigrants. Canada and the United States still have massive needs for immigrants to fill jobs in the decades to come. Refugees, on the other hand, are a different story as many are driven to leave their home countries not by choice but due to limited local economic opportunities – many of which are climate related (extended droughts or unprecedented weather events for example). To solve the root cause of this challenge, investments need to be made into climate and economic adaptations in their home countries so migrants don’t have to leave in the first place.
Another topic highlighted was that the fact that the transition from carbon-based energy sources to renewable has not been perfect. In Europe at the moment, energy prices for home heating are at record levels as renewables – while making an impact – are not perfect (the wind has not been blowing and sun has not shining as expected). If home heating and power costs remain high, there will be a push back from consumers which may slow the transition to renewables. At the same time, entire electrical grids need to be re-thought in order to facilitate the change towards non-carbon energy sources (more on that below) and how to reduce consumption in the first place by retrofitting buildings to be more energy efficient.
Getting back to the impact on individual companies, many – including Canada’s largest energy firms – have made commitments to be carbon neutral within the next few decades. However, it is not entirely clear how they will get there. A big part of it will be how they “officially” track progress and in a way that will be acceptable to the C-suite, company directors, public markets (investors) and regulators.
Conversely, these new tracking systems and infrastructure will also be needed for the entrepreneurs creating offsets that will be sold to those who need them to stay carbon neutral. Several companies are looking at this and whoever comes up with the winning approach is the company I want to invest in.
Problems to Solve & Opportunities: Scalable carbon storage; creating carbon off-sets, tracking and selling carbon offsets; cleaner carbon-based energy sources; making building energy retrofits less costly; climate adaptation technologies; engineering services for adaptation projects.
2. Electrical Power Infrastructure
Electric vehicles (“EVs”) and renewables are close to a mass market tipping point. Governments and the car companies have made the call and billions upon billions arenow being invested into vehicle and battery production while automobile manufacturers have all laid out their roadmaps for an EV future. GM, for example, has committed to having 30 models of electric vehicles on the market by 2025 while Ford is investing US$11.4 billion into battery production facilities in the US.
This is seen as “good” news to many but there is a “careful what you wish for” element to this. Most countries lack a charging and transmission infrastructure to support widespread EV adoption including recharging networks, a rebalancing of the overall electrical power grid and construction of new power transmission and distribution lines will be needed. In fact, a CEO of a major pipeline company said that electrical power transmission lines are even more difficult to get approved and built than a pipeline!
Problems to Solve & Opportunities: Removing roadblocks for building infrastructure systems; electrical power infrastructure components; electric vehicle infrastructure support components; tools to manage and rebalance electrical grids; local and national systems to manage the influx of renewables.
3. Energy Storage
As all major automobile manufacturers are starting to offer mainstream EVs and with sales continuing to grow, the materials needed to build EVs – and especially batteries - will be in high demand.
As one recent article stated, “green energy goes to waste if it’s not used when generated. Batteries that can store renewable power for when the sun isn’t shining or wind isn’t blowing are the holy grail of the energy industry”.
The need for new battery technologies is massive as will the rare earth minerals that most of them are made from (the increasing need for lithium is an obvious example).
This means new supply chains are being put in place with many companies trying to fill the void. Understanding how this supply chain is being put together and implemented will create many startup opportunities.
However, this emerging EV-related supply chain (and for renewable energy components in general – i.e. wind turbines and solar panels) has yet to be fully scrutinized.
As these new markets grow, the world will come to realize that what is needed to build EVs has some troublesome elements that are not so environmentally or society friendly. The impact of extracting rare earth minerals for example is very high. For instance, the amount of carbon consumed to extract them is massive (I don’t have the source to back this up but one policy expert stated that “for every pound of an EV battery, 500,000 pounds of earth needs to be moved” and “over one million child labourers are used to extract lithium and other (battery related) minerals in Congo today.”). Sooner or later this will have to change if a transition to a low carbon future is to be a success (which in itself will create new entrepreneurial opportunities).
Problems to be Solved & Opportunities: Innovative energy storage solutions for EVs and the broader electrical power infrastructure (i.e. new batteries to store energy generated by solar and wind during off-peak hours so that it can be consumed during peak-energy consumption times); cleaner methods or alternatives to rare-earth mineral extraction; supply-chain monitoring.
4. More Resilient Supply Chains
Most supply chains are now global and include the links between a manufacturer and end-user whether they be containers or individual parcels and travelling on planes, trains or ships. COVID has turned out to be the “big revealer” for supply chain weak points as bottlenecks in ports, container shortages and other disruptions have impacted product inventories and driven up shipping costs (in some cases a 5X increase in cost to ship a container from Asia to North America).
Technology has been powerful force to reduce friction (with more to come with the blockchain) and creating “just in time” supply chains has generated powerful competitive advantages through cost reductions and time efficiencies. However, COVID has exposed just how fragile they can be when under pressure and, in response, smart companies are moving from “just in time” to “just in case” supply chains to build-in greater resilience.
As it did to optimize assets and capacity, technology can also play a role in building back resilience. Massive investments are being made in this space and will create room for innovative solutions from smart startups.
Problems to be Solved & Opportunities: Identifying and building technologies to address the weak links of global supply chains; faster response capabilities during disruptions.
5. Event Tracking & Maintaining A Global Perspective
Finally, several speakers highlighted the need for a better “hurricane watch” or early warning system for natural disasters, pandemics, geopolitical events and other disruptions.
McKinsey forecasts that the number of potentially “extreme” events taking place around the world is rising dramatically with the impacts increasingly material. For example, they believe that “1 billion people could experience a potentially lethal heat wave by 2050” and cyber-attacks against individuals, companies and infrastructure projects will be more and more common.
It is inevitable that cyber terrorists will attack infrastructure that society depends upon which will include energy production and healthcare facilities (for example the Colonial Pipelines attack and Solar Winds hack). With the growth of 5G (which requires the build out of multiple times more access points as compared to traditional cellular networks), these attacks could be even more common and impactful.
Cyber-attacks are becoming a fact of life and require ongoing advances in technology defences but also more sophisticated early warning systems. Of note, shortly after the forum, the Edmonton company Samdesk raised $13.5 million to build out its “global disruption monitoring platform” which is targeting this exact market.
Related to this, the release of Meng Wanzhou and the “Two Michaels” occurred right after the forum and this underlined the need for all companies to play much closer attention to global politics. There were several China experts who spoke on this issue but none predicted the release would happen so quickly.
The souring of the China-Canada and China-Australia relationships over the past decade has illustrated how quickly trade flows can change and how a single decision made by a single government can have multi-billion dollar impact on many industries.
As an example, a troubled Australia-China trade relationship very quickly devastated their mutual trade of grains such as barley and canola. Other countries and firms might benefit from these conflicts but they obviously could be disastrous for an individual company in a very short period of time.
I recently met a Canadian who formerly ran the Asia operations for a Canadian bank and he said that while he still sees massive economic growth opportunities in China, he would have second thoughts travelling there as a business person. While the term “hostage diplomacy” is a troubling one, recent events suggest it can be an effective strategy for a government to pursue. In turn, it leads to the question of how much business risk does a company want to take in exchange for growth?
There is no clear answer but the bottom-line is the need to pay close attention to global geopolitical events; improve internal intelligence gathering capabilities; and build a better early warning system to be more proactive as opposed being to reactive. Those who take advantage of this and become first movers will have the potential to create an outsized portion of wealth.
Problems to be Solved & Opportunities: Development of intelligence gathering; early warning and prediction systems for natural, business, resource and geopolitical disruptions; risk assessment and analysis tools.
Final Thoughts…
These five areas are generating headlines today and will continue to do so in the years to come. They are worthwhile digging into so they can be fully understood and to figure out what the opportunities might be. These may not be entirely obvious but all areas noted represent growth and the one thing I can say with certainty is that growth creates momentum, attracts capital and can cover up mistakes that are made along the way. These are all important success factors for a new entrepreneurial venture.