Straub correctly, in our view, suggested that the ecosystems are not new quoting numerous theorists whose ideas were shaped primarily during the last century. However, we suggest that organizational ecosystems have always existed and just given a name in the last 50 or so years.

What has changed since the end of the last century is the speed at which conditions change primarily due to advancements in technology; the internet, AI, social media, and more. Traditional measures like profits, market share, ROI, stock price, etc. are outcomes from innovative ideas generated by people within the ecosystem.

Drucker Forum 2019

This article is one in the “shape the debate” series relating to the 11th Global Peter Drucker Forum, under the theme “The Power of Ecosystems” taking place on November 21 & 22, 2019 in Vienna, Austria.
#GPDF19 #ecosystems

Rapid response to change requires executives to first identify and understand the underlying conditions within the ecosystem that enable people, who power the ecosystem, to generate innovative ideas with desirable outcomes. Senior executives frequently say that “people are our most valuable asset” but how does the CEO know what is going on in the minds of people operating within the ecosystem? In order to avoid an expensive and aimless wandering from consultant to consultant CEOs should take a diagnostic approach to evaluating the ecosystem. Think of it as a doctor. We suspect, you would not have much confidence in the doctor’s diagnosis if the doctor started prescribing pills before taking your blood pressure or listening to your heart, yet, this is exactly what business executives do when diagnosing the culture and people within the ecosystem.

Over the past two decades we have observed that top tier companies have strong foundations in responsiveness, alignment, capabilities, motivation, and cleverness which we believe are the underlying people-centric conditions for success. The trick for executives in diagnosing interferences or viruses within the ecosystem is to ask the “right” questions…. like a doctor. Here are some starter questions;

• Responsiveness – Is the organization flexible and able to react to changes in the environment?
• Alignment – Is the direction of the organization clear? Does the structure fit the strategy? Is it shared broadly and are employees aligned to support the strategies?
• Capabilities – Does the organization have the competencies and skills needed to deliver on promises?
• Motivation – Are employees throughout the organization inspired to perform above and beyond expectations?
• Cleverness – Are employees empowered to be creative and use their creativity to meet expectations or demands from clients or customers within boundaries that do not stifle creativity?

If you don’t ask the right questions, you won’t get the right answer. Begin by asking these questions throughout your ecosystem then use the “5-why’s” approach to find out what ails your organization. Then you can take targeted action to eliminate the virus. Executives will not know where the answers will take them but the people within the ecosystem instinctively know what management must do so ask … and ask … and ask … then LISTEN!

About the Authors:

Herb Nold is professor of business administration at Polk State College in Winter Haven/Lakeland, Florida and has authored numerous research papers and a book chapter on the subject of organizational culture, change, and agility.

Lukas Michel is CEO of Agility Insights AG, Switzerland, founder of the AGILITYINSIGHTS.NET, and author of 2 books “The Performance Triangle” and “Management Design”.

This article is one in the Drucker Forum “shape the debate” series relating to the 11th Global Peter Drucker Forum, under the theme “The Power of Ecosystems”, taking place on November 21-22, 2019 in Vienna, Austria #GPDF19 #ecosystems

I heard these words against a backdrop of red curtains in a theater, a few hours before the 9^th Global Peter Drucker Forum officially opened. I had confidence that the bright, determined challenge winners around me were powerful actors prepared to do something with their words. But on this very literal stage, I wondered if we would be seen as actors in a different sense; playing the part of idealistic dreamers to an audience of established business people who had already decided how the future would be.

So I entered the forum wondering if the ideas from the diverse ages, experiences, backgrounds, opportunities, and perspectives of the challenge winners would be compatible with those of a more traditional business or academic career. But just as I was shocked by Nayyara’s words, I was shocked at how willing the business and scholarly elite in attendance were to match our wild ideas with revolutions of a radically different relationship with AI (Rahaf Harfoush, Erica Dhawan) or a new social contract for the digital age (Don Tapscott). I was in a room full of people itching for action.

Nayyara reminded me that the definition of business is not set in stone, and the Forum’s speakers and participants showed me a willingness to be disrupted. This leads me to believe that the evolutionary elimination of competition is already well underway. We are not outliers to think that the world can be run on different fuel than profit, we are simply fashionably late by 75 years to the conversation that Peter Drucker was already having. And he was probably late too.

The forum was months ago. Where are we now? The possibility of business separated from competition has continued to evolve for me: could carefully crafted supply chains be a key to growing prosperity? A recent change in my hometown’s ability to recycle plastics led me to research possibilities for opening community-managed centers, and linking 3-D printers with locally recycled plastic “ink”. Nayyara herself is in Pakistan, working tirelessly on issues of transparency. Another of the challenge winners, Shagun Tripathi, posed a poignant question that leads us to the future of the discussion: “What will robots do when humans take over?” The 10^th Global Peter Drucker Forum centers on exactly this question, the human dimension of the automation-human relationship. There is urgency in this question, from resentful laid-off workers and those fearful of putting too much trust in automated solutions. What we decide now as humans, managers, and businesses will create the future of the human workforce.

As this conversation continues to evolve, I particularly hope to find a way to allow the community at large to participate in determining how these radical technological changes will shape our future. The conclusion of every conversation I have about AI is, “I can’t change what will happen, so…”. Each individual has their own feelings of acceptance, excitement, fear, or revulsion at the inclusion of ever more intelligent technologies. But there is a unified sense of helplessness, which is not a healthy way to settle into a new era. Practically, this comes down to democratizing decision-making in organizations and across power divides. This problem of leaving people stranded in helplessness is at the center of what human centered management should address; each technological step forward is framing the lives that humans will live. Why do it without their consent?

About the author:

Anne Twombly is the winner of the 9^th Global Drucker Forum, student division. Previously from the NGO sector, she continues to seek different perspectives by which to understand the world. She is working towards her masters in International Business Management at Lauder Business School, Vienna AT.

I address this especially to business executives, but as citizens of their societies and neighbors in their communities.

Why do we focus on the conditions of our problems instead of addressing their root causes? Medicine, for example, gives far greater attention to treating diseases than to preventing what caused them in the first place. Jonas Salk provided a telling exception: instead of treating polio, he created a vaccine to eradicate it.

0.0, 1.0, 2.0    Much the same can be said about corporate social responsibility, or CSR. A corporation is considered responsible when it attends to the evident conditions of some social or environmental problem. But imagine how much more responsible it would be to address the underlying cause of that problem? Finding a new way to recycle waste may be good, but helping to reducing the generation of that waste is better. Not good, however, is Coca-Cola’s promotion of exercise programs for obese children, because its own products are a significant cause of that obesity. This, like greenwashing—pretending to be environmentally friendly—borders on what we can call Corporate Social Irresponsibility, or CSI.

We are inundated with CSI these days, some of it verging on the criminal—for example, banks that register customers for accounts they never requested or automobile companies that cheat on emission controls. And how about the massive private funding of American election campaigns This is a form of legal corruption tantamount to bribery.

Let’s label the irresponsible activities, CSI 0.0; the responsible attention to conditions, CSR 1.0; and the substantial addressing of cause, CSR 2.0. While we should be appreciating CSR 1.0 for its damage control, we should be welcoming CSR 2.0 for helping to reverse the damage. We need as much serious corporate social responsibility as we can get.

Imbalance as the root cause   I see imbalance in society as the root cause of many of our major problems, including global warming and income disparities. In my book Rebalancing Society, I trace the tipping point toward the current imbalance back to 1989, when the Berlin Wall fell, signaling the end of the communist regimes of Eastern Europe.

Western pundits at the time declared that capitalism had triumphed, over communism. They were mistaken. Balance had triumphed, over imbalance. A healthy country balances the market forces of the private sector with the democratic needs of the public sector and the community concerns of the plural sector (“civil society”).  Those regimes of Eastern Europe were severely out of balance, on the side of their public sectors, while the successful countries of the West were better balanced across their three sectors.

Since 1989, however, there has been a marked decline in the health of many countries, most notably the United States. The country now faces alarmingly high rates of incarceration, obesity, income disparities, and drug taking, accompanied by, of all things, a sharp decline in social mobility (particularly the chances of poor children moving up the social ladder). All of this reflects the escalating imbalance in American society.

The mistaken belief that capitalism triumphed in 1989 has enabled capitalism to triumph since then, tilting the country toward the private sector. Think about the lop-sided lobbying that now overwhelms Congress, as a result of that legal bribery—most of it in favor of business interests. How ironic that the very problem of imbalance that brought down communism is now bringing down democracy.

In much of this, corporate America has hardly been an innocent bystander. This is most evident in the congressional lobbying, but also in the intensification of global warming by the promotion of fossil fuels as well as by the stock markets’ relentless demand for MORE. Likewise have income disparities been widened by the shift to contract work that has diminished workers’ wages while weakening their protections. And at the root of this has been the investor obsession with Shareholder Value, as if no other stakeholders, let alone basic human values, matter.

The business fix?   Most of our major problems reduce to a single foreboding one: how to reverse the imbalance before it’s too late? There is widespread belief In America that if the country has a problem, business will have to fix it. Proponents of this fix point to private, so called win-win ventures, for example, that bring down the cost of windmills and solar panels. No doubt ”doing well by doing good” is beneficial. Not beneficial, however, are the many companies that do well by doing bad, or else do well by doing nothing. There is no win-win wonderland out there.

Now we see a whole spate of proposals for what can be called adjectival capitalism: Sustainable Capitalism, Caring Capitalism, Regenerative Capitalism, Inclusive Capitalism, Conscious Capitalism, Democratic Capitalism (this one with democracy as the adjective and capitalism as the noun!). All of this indicates the problem more than the solution.

Capitalism certainly needs fixing, especially the frenetic stock markets and the deplorable pursuit of Shareholder Value. But that will happen, not by capitalism getting itself right so much as by society getting capitalism into its rightful place, namely the marketplace. How did a word coined to describe the funding of private enterprises become the be all and end all of human existence? It is the balance in society that we need to get right, and that will not be done by business alone, or, for that matter, by government or community action alone.

Responsible Responses   What, then, can responsible businesses do? They can start by recognizing the role they may have played in creating these problems—if not deliberately, then as a byproduct of their economic activity—so that they can address their causes. Moreover, decent businesses will have to challenge the indecencies of other businesses, not least by supporting legislation intended to correct these indecencies.  Above all is the need for responsible businesses to engage in more collaboration with government organizations and community associations. Consequential solutions, especially for the problem of imbalance itself, will have to come from consolidating the capabilities of the major institutions of all three sectors: communities engage, governments legitimize, businesses invest.

Is the private sector prepared to recognize that it has too much power? Are many of us ready to temper our self-serving individualism for the sake of our collective and communal needs in society? Will international businesses and the international agencies so beholden to economic dogma acknowledge the social, political, and environmental downsides of globalization? History offers scant evidence of centers of power voluntarily relinquishing power. But these are no ordinary times, with the looming threat of global warming and the prevalence of nuclear weapons in a world of so many thugs in high office.

So, please, enough of business as usual, especially in the form of CSI 0.0. Beyond CSR 1.0, it is time for CSR 2.0—time for the citizens and neighbors who work in business to get serious about corporate social responsibility.

About the author:

Henry Mintzberg, Cleghorn Professor of Management Studies at McGill University, is the author of Rebalancing Society, and a weekly TWOG.

© Henry Mintzberg 2017; also posted on mintzberg.org/blog

Consequences for businesses

Why does this matter for entrepreneurship development or business strategy? Can inclusive government policy influence entrepreneurial thinking in the design of strategy?  It matters because inequality, in the words of Tony Judt, “is corrosive; it rots societies from within”  (‘Ill Fares the Land’ Penguin Books). While corporates lobby governments on a range of fiscal, monetary, industrial and environmental issues to try and map their own strategies around government policies, very rarely do they reflect or act on socially inclusive agendas. This is despite overtures to ideas such as the sharing economy and shared values.

Innovation and policies promoting innovation cannot necessarily address the big inequality question which has been entrenched by rates of return on capital exceeding the rate of growth of output and income.  This trend reversed what they did in the 19th century as Piketty and Saez,2014, write in  ‘Inequality in the Long Run’ ;https://eml.berkeley.edu/~saez/piketty- However, policies  focus on market failures that exclude certain groups of people from participation in the economy, then it simply replaces social failure with market failure. If market adjustments incorporate social change, to address the needs of the poor, then the poor and others can both engage as consumers and producers. This approach necessitates a key role for both the state as an innovator working with existing businesses as entrepreneurial organisations to foster the creation of new producers.

Barriers to innovation

The OCED Innovation Strategy 2015 An Agenda for Policy Action , refers to two types of inclusive innovation, pro-inclusive and grassroots innovation. The two variations attempt to address a range of market and systemic failures. These include typically a lack of or barriers to information about markets, difficulties in accessing basic infrastructure utilities, and the unavailability of credit, generally by the poor and the excluded, part of what Robert Mendoza, (Why do the poor pay more? Exploring the poverty penalty concept (2011)  refers to as the “poverty penalty”.

Government as actors

Governments are not just market gatekeepers, they are also effective as market creators This means dedicating imagination, resources, commitment and ecosystem development in that region. It also means mobilising resources for creating new firms with citizen governance structures.

At the business organizational level this takes the form of developing multiple channels of products and services or platforms, but not all governed by the same commercial goals. Applying ambiguous dexterity in strategy, using AI and machine learning technologies coupled with design thinking, firms could work with big public data  to seek joint solutions for the future, marrying civic good with economic surplus generation. This necessitates an understanding and application of appropriate ecosystems instead of rigid or standardized models extrapolated from the past and developed in very different socio-economic environments.

Policy rationales

We can identify 4 5 distinctive rationales for adopting these policies and using their purpose to sharpen entrepreneurial thinking in boardrooms:

1. Analysing  historic market, system and capacity failures but identifying predictive factors using both economic and social data;;
2. Augmenting innovation in the design and delivery of public and private services and the public and the private goods creation activities, matching public policy initiatives with specific corporate innovation strategies; ;
3. Empowering low-income groups to be active producers and consumers of innovative products and services that are consumed by varied communities of interest; and
4. The extension of the idea of long-term growth to address both economic growth and social development at the level of the wider economy/society and also at the level of the firm;
5. Incorporation of ex-ante and ex post evaluation metrics using , for example, natural language processing, that capture social innovation outcomes alongside those for economic ones for general innovation policies.

While individual firms may be able to achieve such outcomes with specific products (the Amul Dairy cooperative in India and the rural women suppliers of milk, just one example of integrated strategy) it is not easy To coordinate design, production and delivery with the involvement of excluded communities, firms have to wade through bureaucratic currents at governmental, institutional and spatial divides. The creation of an active ecosystem becomes a major requirement often involving government departments, NGOs, universities, research institutions, private sector partners, and the financial sector working in tandem with grassroots innovators, low income groups and consumers.

Policy frameworks

The complexity of the inclusive innovation policy agenda suggests that it is far removed from standard innovation strategy development, especially those found in advanced economies with their focus on science and technology and short-term outcomes. Yet, we can see that in any scenario organisational innovations involving people as producers and consumers, are necessary concomitants of technological innovations. A longer-term strategy process supports both larger and smaller firms. The mix enables strategies to leverage both complexity and uncertainty of economic environments.

Ecosystem of key players            

Grassroots innovation and inclusive innovation policy development only has purchase when an ecosystem of key players and institutions is established and supported. This leads to a democratisation of the innovation process, now apparent in networked based, open innovation architectures for modern product development projects (von Hippel and Krogh, Free revealing and the private-collective model for innovation incentives’. A distinctive factor in the inclusive innovation process is this producer-user-institutional nexus coupled with the conjoined technological-economic-social imperatives. Crucially, it is about non-proprietary and collective models of innovation. We need inclusive government policies on innovation dovetailing with micro-level organization strategies for inclusive wealth creation.

About the author:

Jay Mitra is Professor of Business Enterprise and Innovation, Director of The Venture Academy and at Essex Business School, University of Essex, UK. He also leads the International Entrepreneurship Forum (IEF) a unique network and forum for researchers, policy makers and business practitioners.

When Ronald Reagan said in the 1980s that “government is the problem”, he was right in only one sense: that the specific policies that were designed to enable the full deployment of the mass production revolution were inadequate for dealing with its exhaustion and decline. In fact, government did not yet know – and indeed could not know – how to deal with the emerging information revolution.

It was true, as Schumpeter would have said, that unfettered free markets were better suited for the period of experimentation with new Silicon Valley technologies; and open competition was more likely to persuade the old industry giants to modernize with computers and take-up the new organizational paradigm pioneered by the Japanese. However, it was unrealistic to expect markets to protect society from the ravages of creative destruction.

That should have been the role of government. But the Thatcher “TINA” dictum of “there is no alternative” turned off government imagination and condoned the suffering that spread across the working population.

Initiatives and consequences

Ironically, it was not a hands-off government but a proactive one that developed the internet, before handing it over to the private sector. Without the internet the real boom of the mid-1990s, could not have occurred. The information revolution became truly global and the process of creative destruction changed the face of the world economy.

This boom ended in a bubble that was followed by a crash, but this is typical of the creative destruction period of any technological revolution: it happened with canals, with railways, and with the construction boom of the 1920s. Less typical was the second bubble that followed in the 2000s.

After the NASDAQ crash, rather than reining in finance, governments and central banks provided easy liquidity, which was poured into massive off-shoring and housing speculation in a feast of synthetic financial instruments, using the new technology.

Whence now?

Today, after the subsequent crash, we are at a crossroads. As in the 1930s, the depression has revealed the underlying destruction of jobs and, in this case, the additional impact of industrial migration to Asia and elsewhere. Once more, there is an enormous technological potential capable of transforming the whole economy and of increasing productivity in many activities, but finance is not ready to take the risks. It remains entrenched in a casino economy, with trillions of dollars sitting inactive, sometimes in bonds with negative interest rates. Governments are mainly providing the QE that maintains the casino, apparently waiting for finance and ‘the market’ to solve the problems of growth, unemployment and inequality for them.

Worse still, instead of taking advantage of extremely low interest rates to invest and increase wealth production, jobs and, consequently, taxes with which to repay, they have adopted austerity on the budget side and largesse regarding the banks. Yet no amount of QE will move finance to fund the real economy of goods and services, if risk is not diminished.

In the 1930s, Franklyn D. Roosevelt tried out many of the policies that would later bring the post-war boom – but they were received with ferocious resistance from business and politicians, who were equally convinced of the magic of free markets. The prosperity of the “Roaring Twenties” was the source of their conviction, even though it ended in a precipitous crash – just as today. And markets can indeed, bring golden ages –rather than gilded ages– but only when the playing field is tilted by policy to provide a synergistic direction for innovation and investment.

Multiple directions

What happens in these post bubble-crash times, which I have called the ‘turning points’ of each technological revolution, is that there is a multiplicity of directions in which the revolutionary technologies can be taken – but none are sure to be profitable. At this point in the innovation path, after all the initial experimentation, the technological risk is minimal, but the market risk can remain huge. While the early decades of a technological revolution are supply-led, once the main new infrastructures are installed and the innovation paradigm of the new technologies has been learned, it is mainly demand that pulls the economy.

Welfare State as win-win game

That is why the Welfare State established after WWII brought the greatest boom in history. During the war, business discovered that with guaranteed demand, mass production would deliver high productivity and lower costs. They also found out that working with government was good business.

So, when high taxes were established to fund the highway system, suburbanization, the Welfare State and the Cold War, there was relatively little resistance. Mass production technologies were developed before the war, but it was only the application of these post-war directions for development that led to the creation of millions of jobs that turned semi-skilled personnel into middle income consumers.

With pressure from the labor unions and the support of the government, wages rose with productivity and the mass consumption society was shaped to fit the mass production economy. High taxes were accepted because they immediately turned into demand, either as military procurement or as unemployment insurance (guaranteeing continuity of monthly payments), subsidies for farmers (reducing food costs and increasing demand for machinery and chemicals) and pensions (to enable salaries to be spent without worry for the future). It was indeed a perfect institutional framework, suited to mass production within relatively closed national economies.

Diversity breaks the old model

We are now living through a very different technological revolution. It does not homogenize but rather diversifies production and consumption; it crosses borders invisibly and naturally leads to a global economy; it favors skills and creativity rather than semi-skilled repetition.

Globalization has moved production to where labor costs are lower and where new demand is growing; finance operates across the planet unhindered and global corporations establish interconnected value networks across several countries. In practice, the interests of global corporations no longer coincide with the interests of the societies where they originated. This results in stagnating wages, growing income inequality and low job creation in the erstwhile high-wage societies.

A role for government now?

Firstly, look at history, and discover that at this half-way stage of diffusion of each technological revolution, government has stepped in to create demand.

In the UK during the Victorian boom, the government used gunboat diplomacy to open the markets of Japan and China to British goods. In the Belle Époque, they supported or funded the creation of transcontinental railways, transoceanic telegraph, ports for steamships and railways in the countries of the Southern hemisphere, for truly global markets, whether part of the empire or not. In the post-war boom, all the Western democracies built up national consumption and procurement markets.

The next thing is to identify the trends that, if accelerated and supported, could bring forth massive innovation and investment.

I have suggested elsewhere that environmental problems can be turned into solutions, with the help of the current potential of the ICT revolution. Favoring ‘smart green growth’, understood as strongly reducing the tangible content in both GDP and lifestyles would provide a direction for innovation today.  As mass consumption did in the 1930s, it could spread across the whole economy, significantly increasing the productivity of energy and resources.

Catering to lifestyles geared to health, caring, creativity, learning, maintenance, recycling, reusing, and so on, would generate increasing numbers of jobs, countering those jobs replaced by new technology.

In the 1950s-60s, contrary to popular belief, it was not the manufacturing jobs in the new industries that provided all the jobs, but rather the services (including government ones) that arose because of the new lifestyles that these technologies allowed. The same is true today – as it has been in every previous technological shift. Silicon Valley is not the source of future employment, but the technology it provides has the potential to create a vast range of new activities.

Finally, governments need to engage in massive institutional innovation and self- modernization, with the boldness and imagination of Roosevelt and Keynes, and as adapted to our times as their ideas were to theirs. Living in the past has never boded well for business or government; what is necessary now is to proactively embrace the future.

About the author:
Carlota Perez is author of Technological Revolutions and Financial Capital: The Dynamics of Bubbles and Golden Ages. International consultant and lecturer, she is affiliated as Visiting or Honorary Professor at three UK universities –LSE, UCL and Sussex–, Academic in Residence of Anthemis, UK, and Professor at TUT, Estonia.

We must not let the demands of economic man/woman dominate our fuller humanity.  AI must be our servant rather than our master, economics the basis of a good life for all but not its purpose.

In the past century the organisation, the company (literally a gathering of companions) at its best, recognised this.  It offered security and personal development in return for commitment.  My own company, Shell, was paternalistic almost to a fault.  In those days the social contract was clear – companies looked for customers, employed workers to satisfy those customers and thus became customers themselves.  My job, a la Drucker, was to create more customers, subject always to a requirement to earn a given return on capital in order to invest in the company’s future and pay a reasonable rent to the shareholders for the use of their money.

That was then, profit was the result not the purpose.

Agency theory, shareholder value, stock options and bonuses heralded a new world in which workers became costs not assets, whatever was said by their chairmen.  Since then Coase’s idea that firms are needed to keep transaction costs down has been disrupted by technology, leading to the fragmentation of the company, turning it into a network of economic contracts in which individuals are valued only for the added value they contribute. It is, as Rick Wartzman says in his new book, The End of Loyalty, but it is also the end of the company as an alternative home where you could, to a degree, be your full self.

The new and growing world of self-employment, gig work, small enterprises, subcontracting and part-time work suits many.  Some small businesses are like families while many independent professionals and craftspeople  have relished the freedom and survived any economic hazards at the beginning.  Lucky are we whose work is both what we do and who we are. Yet for many others the freedom is illusory, the humanity is absent, the unmet need to belong to something, anything, is painful.  Half of our populations feel they are missing out – hence the populism and the anger.  Those wanting to leave the future in the hands of GAFA (Google, Amazon, Facebook, Apple) and NATU (Netflix, Airbnb, Tesla, Uber) should think again.  These new data-led organizations have many devoted followers but produce little tangible wealth and themselves employ few people.  They cannot be the answer.

So the problems are clear and becoming ever more urgent.  So are some of the questions that need to be answered which include:

Can the new technologies enliven and enrich our humanity, in health, education and better living?

Could organizations deploy the new technologies to structure themselves around more human-scale clusters in which individuals had the space to flourish?

Can we redefine progress, both individually and nationally, to be more than economic?  Will experiences and relationships come to be more valued than riches?  May we finally see the End of Economic Man that Peter Drucker first envisaged in 1939?

Will the social role of business expand to include some responsibility for the education and support for the ‘precariat’ workforce that surrounds them?  If not will governments take it on?

How will we define good work, a good organization and a good life?

Who will lead the way to a new understanding of what it means to be a manager in this new world?  Can the Drucker Forum be one source of the creative imagination that we will need?

About the author:

Charles Handy is a social philosopher and writer. He’s been an oil executive, an economist, and professor at London Business School in his long and distinguished career. His new book is The Second Curve: Thoughts on Reinventing Society. He will make the closing address at this year’s Forum.

AI: More than a new technology

AI, in its core definition, is not just a buzzword. As was the internet in its time, AI is much more than a new technology and will reshape both our daily habits and the world as we know it. The reason for this is that AI is the science of self-learning software algorithms that execute tasks otherwise typically performed by humans. AI does not generate insight or predictions but can be used to make critical decisions. It thus touches upon the essence of human life and capabilities for the first time in the history of mankind.

In public debate, there is currently widespread anxiety about AI and significant fears of what is to come. These include various nightmare scenarios, in which intelligent machines take control of humans or we all become useless and live in an automatized and sanitized world. However, on the contrary, AI could certainly be a catalyst for increasing human prosperity and even contribute to a more equal world if we are able to foster its development according to our fundamental societal values.

The development of personal, portable AI or AI as a commodity

AI will soon become commoditized and democratized, just as electricity was in its time. Today we use computers, smartphones, other connected devices, and, mostly, apps. Whilst access to internet technologies has constantly improved over the past decades, very few people are able to program these and generate income by intelligently exploiting consumer data, which, in theory, is not theirs. GAFA (Google, Amazon, Facebook and Apple) and the Chinese BAT (Baidu, Alibaba and Tencent,) are among the most prominent players in these fields.

Tomorrow’s world would be different with the emergence of relatively simple, portable AI devices, which might not necessarily be connected to each other by the internet, but would feature completely new protocols and peer-to-peer technologies. This will significantly re-empower consumers.

Because it is decentralized, portable AI will be available for the masses within a decade or so. Its use will be intuitive; just as driving a car is today. Portable AI will also be less expensive than motorized vehicles, given its relatively low material costs. Most of all, it will be personal and neutral –not sponsored by Amazon or Google but invented by a completely different enterprise, whose business model will not be based on the collection and exploitation of user data.

Someone told me that the smartphone was the remote control of our lives. With portable AI devices, we will almost certainly move back to take control over our lives again, since these will feature a personalized and impenetrable environment with comprehensive yet completely private information about us; their unique users.

AI as a game changer

Like all disruptive innovations, AI has the power to potentially open up the game for greater equality and inclusive prosperity. There are three examples in which AI is particularly promising: consumer power, the fight against monopolies and empowerment through work.

Firstly, traditional companies will regain direct access to consumers. Money will be spent on actual goods and services again, rather than on third-party commissions to data owners. Where taxis are ordered today via platforms like Uber, tomorrow my personal AI assistant will connect to those of the nearest taxi drivers around me. The assistant will reliably check the accident rates and ratings of the taxi drivers, make an informed decision, order the taxi and pay the full fare to the chosen driver. This also means that web-based interfaces designed for humans will progressively disappear, leaving the space for information in binary form for machine use. This is something that companies and traditional industries are already able to prepare for now.

Secondly, current monopolies will be shaken up. At the moment, the GAFAs and BATs of this world seem to be on a never-ending winning streak. Yet, with world data doubling every day and the development of devices less and less dependent on data input, GAFA and BAT will most likely lose their current status. Machine learning is one of the first forms of AI, and something that the GAFAs make use of. But it is not the only form. Just as a child does not need to be shown hundreds of cats in order to learn what a cat actually is, machines will be able to reason quickly. It will thus be sufficient to show them an image once or twice in order for them to know what to make of it. Hence, there is a big chance that today’s digital giants will be disrupted by completely new players, just as they themselves disrupted Cisco, Microsoft and Nokia only 10 years ago.

Lastly, the emergence of powerful AI will probably mean the end of work as we know it. We will see a difficult transformation period, in which the eradication of jobs caused by digital technologies will become a major issue for politics and the economy. However, if we prepare and adapt in a clever way, we might then enter a new golden age of work. When all repetitive tasks are performed by intelligent machines or devices, autonomy, creativity and empathy will become the core competencies required for any job, regardless of the level of qualification. Hairdressers, nannies and actors will be just as in demand as psychologists, engineers, neuro-scientists and CEOs. In their essence, jobs are a service rendered, for which others are willing to pay, and, ideally, something that brings some intrinsic satisfaction and recognition to those that execute them. The possibility of having robots take over parts of our daily tasks means that the nature of work will certainly change. Its role in a well-functioning society will probably not.

How to best prepare for the AI era

If we want to preserve our values, our current work and life ethics and quality of life, we will have to prepare for the new AI era, because, as stated by Tancredi Falconeri in “The Leopard” by Giuseppe Tomasi di Lampedus in1958, “If we want things to stay as they are, things will have to change”.

It is vital that we, instead of leaving the field open to others, positively encourage the development of AI in our societies with intelligent investments in education, infrastructure and funding. The good news is that the majority of today’s most advanced AI experts do not want to work for Google and the like, but rather wish to conduct their research independently and create new businesses on their own. They are not all located in Silicon Valley or Shenzhen but can be found in hubs all over the world. Yet, we must be very careful not to drive these experts into the arms of today’s internet giants by neglecting their specific needs in terms of financial support, resource availability and freedom to operate.

We must start to envision the future and the world we want to live in to actively shape it. Regulatory frameworks will be necessary if we do not want to risk leaving the world to machines one day, or, to the happy few manipulating them.

Clearly limiting the use of machines and, at the same time, granting access to new technologies to all citizens will be vital for the future and wellbeing of our modern societies. This is what we must tackle today, and should discuss at #GPDF17.

About the author:

Charles-Edouard Bouée is the global CEO of Roland Berger and specializes in disruptive innovation, new technologies and digital transformation. His latest work, “La Chute de l’Empire humain”, a fiction story about artificial intelligence, was published in March 2017. He also sits on the HBS Alumni Board and other business and community organizations.

The challenge to corporations comprises not merely a moral imperative for successful corporations to give back, or to manage reputational risk prudently. The very growth which demonstrably generates the majority of corporations’ returns in the long run is under threat. If this claim sounds dramatic, consider the following facts: growth rates are trending downward globally, corporate investment levels are falling, start-up activity is declining and there is a political tide rising against one of the major drivers of growth, global economic integration. Furthermore, this could even be compounded by an emerging backlash against technology, another major potential growth driver, motivated by fear of its impact on employment and inequality dynamics.

Addressing these threats will require not just setting different goals, but also adopting a different mindset. Business thinking has been dominated in recent years by the idea of maximizing Total Shareholder Returns (TSR). Such a philosophy is arguably appropriate to a situation where two conditions hold: 1) there are minimal externalities from business impacting the broader system beyond the company; and 2) the game is well established enough that emphasis on exploiting it fully makes sense, but not so mature that the exploration of new possibilities becomes critical. Clearly, these conditions do not hold today. Maximizing a rate of return which also incorporates expectations, creates an unsustainable ratchet effect. As the graph shows, after a period of high TSR performance, there is rapid regression to the mean. And the strength of the effect is increasing over time.

This should not come as a surprise. Aristotle already distinguished between two species of economics. First, there is Chrematistike, or wealth maximization as an end itself, without constraints. Aristotle posited that Chrematistike is flawed as a model and likely to undermine society. He presumed that a better of model is Oikonomia, the art of managing a household, where financial considerations are subordinate to the higher purpose of family welfare. For Oikonomia the acquisition of wealth is merely an instrument to ensure well-being. We would argue that the latter approach is more appropriate to the current circumstances. In a straw poll at a recent World Economic Forum meeting of business and public sector leaders, all participants agreed that that a polarized society was the most likely, if least desirable, default outcome of expected developments in technology and work. This can be avoided only changing the current approach.

So how should companies change their thinking and rewrite their strategy agenda to reflect the new circumstances?

We suggest eight imperatives for such an agenda.

1. Define clearly the purpose of each corporation, the higher social goal which it serves. This should be at the intersection between a need in the world, and a distinctive aspiration and ability to deliver it. This will address the self-limitations of pursuing TSR maximization as an end in itself.
2. Diversify beyond the narrow metrics of TSR and GDP and adopt metrics which more broadly define wellbeing. We have suggested SEDA (Sustainable Economic Development Assessment) for societies and have recently released a report proposing TSI (Total Societal Impact) for companies.
3. More emphasis on the future. The present value of growth options (PVGO) and investment levels for corporations have both fallen in recent years. This implies an insufficient exploration of future opportunities, particularly by large companies,  which makes them vulnerable to the success trap
4. Invest in technology “front to back”. That is, stress growth and the fulfillment of unmet human needs, rather than the easier prize of cutting costs (and often jobs) in the back office. Some basic needs like education, healthcare and housing have increased in cost and the burden has fallen disproportionately on the less fortunate. Addressing such needs would make a good target for technological and business model innovation, leading to more broad based prosperity gains.
5. Reeducate employees and citizens to make them better equipped to deal with changes wrought by technology. This would both reduce unemployment and alleviate talent shortages in emerging areas such as data engineering and artificial intelligence.
6. Rethink and reshape the future of work. In particular, understand and redefine the role of employees in organizations powered by artificial intelligence.
7. Support entrepreneurial business ecosystems. Corporations should rethink their global supply chains and business models in ways which create demand for services of the new and small companies which might not only be collectively major sources of employment but can also be a potent source of new ideas. It would also address the rising scale, concentration and complexity of incumbent enterprises.
8. Communicate a new compelling narrative for globalization, technology and for business overall, which inspires confidence in a shared future. As narratives shape perceptions and political reality, which in turn shape economic reality, business leaders have the opportunity to take an active stance and influence the direction of our societies.

Creating the conditions for sustainable growth is a challenging task.  Some leaders especially in younger companies appear to be already active in trying to build this new narrative and reality. Now, the challenge and opportunity for established companies is to extend their own longevity and growth prospects by doing the same.

About the author:

Martin Reeves is a BCG senior partner in New York and director of the BCG Henderson Institute. Bob Eccles is a visiting professor at Said Business School at Oxford University and Claudio Chittaro is a consultant in the BCG Henderson Institute.