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Redefining Business Challenges

  "Leadership in Fragile Times: A Vision for a Shared Future": World Economic Forum Annual Meeting 2002

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 Vulnerability
  • Re-evaluating Leadership and Governance
  • Redefining Business Challenges
  • Reducing Poverty and Improving Equity
  • Restoring Sustained Growth
  • Sharing Values and Respecting Differences

Here the perspective from Kathy Eisenhardt Professor, Stanford University, USA

Read the essay: 
[Sharing Values and Respecting Differences]

While 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 fragility.

February 18, 2001

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