C.K. Prahalad on managing volatility

C.K. Prahalad offered an interesting perspective on the economic crisis when he spoke today at HSM’s World Innovation Forum conference in New York City. Prahalad, who is the author of the well-known book The Fortune at the Bottom of the Pyramid, said he thinks that, as a result of the economic crisis, every global industry will be restructured –and it’s not clear that the dominant players will remain dominant.

In particular, Prahalad sees us entering a period where a key challenge is managing volatility and discontinuities. Managing volatility, according to Prahalad, requires two very different skills: strategic clarity as well as operational agility and resilience.

Prahalad suggested that companies need to learn to innovate within the constraints imposed by volatility — for example, with low capital-intensity businesses,  with continuous churning of business models and with the capacity for real-time reconfiguration of resources.

Prahalad identified four forces behind the new economic structure he sees emerging: sustainable development; global markets; connectivity and social networks; and inclusive development (i.e., economic development that includes the world’s poor.)