in Fragile Times: A Vision for a Shared Future": World
Economic Forum Annual
Meeting Faculty were invited to contribute essays on the Annual Meeting theme
"Leadership in Fragile Times: A Vision for a Shared Future". The six
core themes of the Annual Meeting were:
- Advancing Security and Addressing
- Re-evaluating Leadership and Governance
- Reducing Poverty and Improving Equity
- Restoring Sustained Growth
Values and Respecting Differences
the perspective from
Stanford University, USA
[Sharing Values and Respecting Differences]
the terrorism of the fall plunged the global economy into almost unprecedented
levels of fragility,
such fragility was a key challenge for executives even
before those events. The instability (the combination of uncertainty and more
importantly, ambiguity) of the economy was already moving executives beyond
probabilistic thinking that can be captured by tools such as scenario planning
and risk analysis into an economic state that is "beyond probability".
For many executives, this state is unknown terrain. The resulting economic
fragility is likewise uncharted.
The current economic fragility has its roots, I believe, partially in the
information revolution that has taken most corporations from the high-inertia
world of economists such as Marshall, to the low-inertia world of Schumpeter and
others. The speed of information transfer and processing has shortened the time
frame of events, triggering the instability that drives fragility. While the
information revolution is significant, the current instability is also driven
even more broadly and deeply by the larger force of globalization. Massive in
scope and ironically orchestrated by no one, globalization refers to the
increasingly deep interrelationships among countries, corporations and
individuals. The connections may be cultural like global brands, environmental
like ocean over-fishing, technical like 3G and other wireless technologies, or
financial such as the linking of stock markets.
The density of connections throughout the world that characterizes globalization
affects corporations by amplifying instability. Even small events in one
location can affect events in another, in often non-linear ways. So, a few large
Australian wineries can affect rural life in France. AIDS activists in South
Africa can threaten the profits of the pharmaceutical industry. In addition, of
course, a loose network of terrorists can shock the economies of major
industrialized countries. The pace and scale of change are particularly
challenging to predict. The dotcom correction per se was anticipated, but its
magnitude and speed were clearly not.
The international power structure further amplifies instability. For decades,
the standoff between the two principal combatants in the Cold War shaped
geopolitics. Today, although the US remains a superpower and the European Union
is asserting a more unified point of view, globalization (especially free trade
and transparent markets) is shaping the economy. But no one – no person, no
company and no country – is in charge. Globalization just happens. Adding to
the instability is the backlash to globalization from trade unionists,
environmentalists, cultural nationalists and religious purists.
Coping with the fragility that an unstable economy creates suggests a number of
shifts in how executives guide their corporations. There are, I think, three
central imperatives. The first imperative is the need for enormously rapid
refreshing of the information on the corporate dashboard as managers shift from
managing the backlog of unmet demand (the fortunate State of the 1990s) to the
much more challenging task of managing the often-tenuous projections of
forecasted demand (the unfortunate state of the 2000s thus far); there is a
requirement for superb, real-time information – more frequent, more often,
more time-oriented, more external than needed in more traditional times. Such
information accelerates recognition of economic changes and deepens intuition
about those changes. Such early warning and intuition create a corporate edge in
coping with fragility.
The second imperative is the necessity of structuring each key strategic choice
around a much more numerous and broader set of alternatives. Single alternatives
and yes-no choices are too impoverished in their capture of economic reality.
Multiple alternatives not only drive breadth in thinking, but also enhance the
confidence to choose that often vanishes in the face of uncertainty. Not to be
discounted is the value of multiple alternatives as a hedge. If one alternative
fails, another is quickly available.
The third imperative is for decisive choice. More specifically, in what can be
termed "consensus with qualification", managers try for consensus. But
they have processes that enable making choices if consensus fails to emerge. By
contrast, consensus management leads to paralysis in conditions of fragility.
Talented and dedicated executives are likely to, and should, disagree. Conflict
is the norm, not the exception. Of course, it is worthwhile attempting to
achieve consensus. But endless pursuit of consensus is frustrating, paralyzing
and naive in unstable economies.
Coping with fragility – with the fog attendant with going beyond probability
– is the key economic challenge in business today. Is there an easy answer?
Obviously not. But, strategic choice that is informed by rapidly refreshed
information, framed by multiple alternatives and made through decisive choices
that do not depend on consensus is fundamental to beginning to cope with that
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