Do you remember the year 2000? How exciting the world seemed back then and how we were all talking about the promise of a new millennium?
Starting around then, business corporations and governments alike entered an unprecedented period of uncertainty, frustrating ambiguity, and disruptive change. At the time we probably did not really understand what was going on. But what initially seemed like just another phase of globalization has become a race to reinvent civilization.
How do we know? Because a series of cascading failures in our economic, social, political and environmental systems are providing clear evidence that our current way of life is not sustainable; that the principles on which we built our economy are inadequate for an increasingly interconnected global population approaching 6.5 billion people.
In the past easy credit gave rise to easy consumption. Easy consumption prompted material excess and debt to the extent that we now require the resources of two and a half planets merely to meet our current ravenous demands for more of everything. This cannot go on. As the Club of Rome famously predicted in 1972, there are indeed limits to further growth.
During the coming decade many of our most venerable institutions and iconic companies will hit the wall. They will go out of business as we transit to a society based upon cooperation rather than competition, business models turned upside down by new technologies, and an economy founded upon renewable resources rather than on toxic petrochemicals.
This is the new revolution. It is a revolution will irrevocably alter the basic patterns of human production and consumption. It will also fundamentally change the nature of business and, as a consequence, the role of company boards, directors and managers.
Many people still do not comprehend the profound changes that are occurring as a result of living in a globalized world. Some do understand but prefer to ignore the long-term consequences while they focus on meeting short-term goals. For others, like Citigroup, Chrysler, Fortis, General Motors and even the Royal Bank of Scotland it is already a matter of survival. For companies like Lehman Brothers, as we know, it is already too late!
In terms of the current global economic crisis many pundits believe what we are experiencing is cyclical and that things will eventually return to normal. They are wrong. The global credit crisis is symptomatic of something much larger; something barely controllable. Indeed, if by some misfortune we were to return to normal we would only setting ourselves up to suffer greater and more prolonged
socio- economic disturbances in the future.
The truth is that things can never return to normal. Business as usual is becoming a distant memory and we had all better wake up to what is really going on before it is too late.
Let us start with the major cause of today’s angst. Globalization. Of course globalization is not a new phenomenon. It can be traced back at least to the early years of the 15th century when nation states sent out entire fleets of adventurers intent on finding, plundering and colonizing new lands. That early phase of globalization still continues today - as evident from the US invasion of Iraq.
The second great phase of globalization was triggered by the invention of the steam engine which heralded the industrial revolution. For the first time goods could be produced for the masses rather than just for the neighbors. Now the explorers were business corporations who sent out hordes of executives in search of new markets and cheap labor. Again this phase continues today in a continuous search for managing the costs of production and sourcing new talent.
The third phase of globalization began around the year 2000 as new information and communications technologies began destroying entire empires (witness the demise of communism in the Soviet Union) at the same time liberating individuals who could now connect and transact with anyone, anywhere, at any time.
These accumulated phases of globalization have created a world in which traditional business practices and assumptions are increasingly irrelevant.
Where geography is often a delusion.Where traditional industry boundaries mean absolutely nothing. And where power is exercised not by conventional means (such as ownership of property or political strength) but by ingenuity, timing, daring, creativity and innovation.
Ultimately the result of these successive phases of globalization is a world where we are experiencing extraordinary tensions between the best and the worst of human desires:
A world where, for the first time in history, we are all interconnected and can share each other’s stories. A world in which international trade and the expansion of commerce have given us luxuries and a quality of life we never dreamed possible. A world in which technological breakthroughs offer the promise of eradicating many diseases, prolonging life and enabling safer, more secure urban environments. A world where even poverty is being inexorably ground down….
Unfortunately it is also an uncertain world in which a burgeoning population is rapidly depleting the planet’s natural resources. A world where envy, greed, fear and superstition still generate extreme actions, conflict and terror and where decaying empires delight in bullying less powerful nations. It is also a world where spiraling food costs and global warming are displacing millions of people, tipping them back into the poverty trap.
Meanwhile the increasingly desperate actions of central bankers, politicians and neo-liberal economists are simply evidence of the intellectual impoverishment of a ruling elite that seem oblivious to a reality for which they are responsible. They live in the past, refusing to acknowledge even glimpses of a future they cannot comprehend. Which is terrifying.For the forces that caused this uneasy state of globalism have not finished with us yet. They continue to converge at warp speed, creating highly volatile, novel, complex conditions characterized by uncertainty, ambiguity and continuous disruptive change.
The only way out of this predicament is through reinvention and renewal. Our current ways are simply not viable. On our current trajectory we are, quite literally, intent on destroying our future and that of our children.
But to reinvent business and governance requires a morality that seems to have sucked into a black hole of excessive corporate salary packages. It also demands an awakening to new, creative and innovative thinking. Albert Einstein famously noted that it is impossible to solve today’s problems with the same thinking that caused the problems in the first place. If business is to survive and prosper in the current turmoil, let alone in the longer term, we need to think differently.
In effect we need to redesign every critical system in our civilization from an altogether higher level of consciousness, particularly regarding intentions, ownership, possibilities and opportunities.
We have been educated to think in analytical, mechanistic and linear terms; identifying discrete problems and splitting them up into smaller and smaller parts from which we hope to be able to explain the whole. We now know that is futile in the current environment.
The most brilliant entrepreneurial business minds do not work this way. Instead, they include apparently inconsequential features in their search for salient patterns and trends. They then synthesize information until they have a coherent picture of the whole system – their critical domain of attention, if you will.
From there they are able to transcend unacceptable trade-offs (like focusing on the short-term at the expense of the future) and avoid band-aid solutions (like creating massive redundancies), creating instead resilient strategies that are difficult to copy, are in harmony with society’s needs, are profitable, and add considerable value to the business in the long term.
That is the kind of thinking we must begin to apply in our businesses and our institutions. To be successful in tomorrow’s environment demands a new set of assumptions as well as different practices and different outcomes.
Company directors and executives need to reinvent what they do and how they do it in order to future-proof their business. Politicians and bureaucrats, too, must do the same, in essence establishing an ethos, purpose and direction that is both compelling, relevant and sufficient for our needs; investing resources in ways that realize that purpose while improving long-term capability; delivering clean, benign, yet innovative products and practices; and ensuring excellent management through appropriate governance activities based on the deepest humanitarian principles.
For any business to remain viable in the coming decade (and governments too for that matter) they must learn to re-focus their attention on the things that really matter. In particular directors and politicians need to exercise global (rather than parochial) leadership, not merely by punctuating external events but by imagining altogether new possibilities, while company executives and government bureaucrats need to re-frame the purpose for which management was originally conceived.
Part of that process is learning to think in ways that transcend current issues and dilemmas. Part is refusing to accept standards and practices that were designed for an age that has long past. Yet another part, equally critical, is the willingness to reinvent the roles of directors and managers for a future in which collaborative relationships, rather than competition, will dominate the global business landscape.
Ultimately, applying sound strategic leadership and ensuring relevant strategic management will bring success in an environment characterized by disruptive change. But continuing to bury our heads in the sands of change will bring nothing but misfortune and further chaos.
This is an abridged version of the opening plenary address delivered at a seminar organised by the Thai Institute of Directors in Bangkok on 26th November 2008.
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