The subject that you are going to discuss during the next two days is not an easy one and the Organisers are to be complimented that they have succeeded in putting a program together that has attracted so many participants from different walks of life and of such diverse experience.

Such a varied group of participants should help to ensure that at the end of the conference we will know what we are really talking about and what managers and educators should be aware of when dealing with complexity issues in their organisations.

EFMD with its membership of 800 business schools and a group of large corporations is increasingly acting globally. Its role is as a catalyst, guide and source of inspiration to make business schools and management education and consultancy drivers of change, transformation, innovation and entrepreneurship. Business schools have a fundamental role to develop the human capacity for leadership in institutions and preparing their graduates for management within and across organizations.

Peter Drucker always pointed out that in a society of organizations and institutions we cannot rely on those few “born” managers and leaders. We need to educate and train many more for organizations that are striving to achieve their mission. The explosive development of business education and in particular the MBA program in the 20^th century demonstrates the reality of this endeavour. It has been one of the greatest success stories ever in academic education.

However, questions have been asked since the financial crisis. Were business schools partly to blame for having educated the wrong type of managers, had they focused too much on business hype, is the MBA still a useful preparation for a leadership role in our modern society?

We all know that business schools have made a massive contribution to modern management and that they cannot be blamed for some of their graduates misbehaving in business life. However, they must confront the question of whether they have nurtured sufficiently critical thinking and inspired a broader understanding of management as a key role in society.

In a time of accelerated change business schools are themselves confronted with the need to transform. We must rethink how we help leaders and managers to tackle the challenges of the 21^st century. But before we do we had better identify what these challenges are.

The theme of this conference, Managing Complexity, is a perfect example of the new requirement that business schools face. It is a theme at the intersection of social sciences and hard sciences (complexity science). It requires a deep understanding of technological capabilities and of the unrivalled capacity of the human mind in terms of pattern recognition and intuitive judgements based on our own capacity to process “big data”.

There is no doubt that in the present global world, fraught with new challenges, business schools will have to review their research agenda. They have moved too deeply towards the methodology of hard science. This is not necessarily the best approach to understand and diagnose issues within organizations. Increasing criticism has been voiced about the relevance of business school research to address real life issues.

Another example is the devastating effect that short-termism has had on the economic system and long-term prosperity, not only of companies but also society at large.

So we need to ask ourselves the critical questions – have business schools done enough in their research and education to show the catastrophic effects of the agency theory and its ensuing logic? The great Sumantra Goshal was one of the few who did ask. He wrote a fiery article in 2005 shortly before he sadly passed away. It is a shame that this flame was not taken up by many others with a similar combative attitude and high moral aspiration. It was before the crisis hit – and he in a way foresaw the disaster looming.

I believe that Business Schools have a major role to play in addressing the wider context in which businesses operate and to help economists to complement their real world perspective by understanding the economy beyond aggregates and mathematical formulas. It is real people with their knowledge, their values and their motivation who make the difference.

The young people joining organizations today have a strong desire for purpose and meaning. They want to understand what value companies provide to their customers, to society generally and to them personally. CSR and sustainability have all too often been used as fig leaves to hide deficiencies resulting from short-term profit maximization.

We all know that innovation is the key to further prosperity and welfare. But we should constantly be aware of the fact that – whatever the financial resources available – there will be very little innovation if we fail to build organizational structures in which there is ample space and freedom for the individual to use his or her imagination, to create, to experiment and to sometimes fail.

Business schools will have to help to recreate an innovation culture that works for businesses, for societies and the individual. For this we will need highly focused research and new education programs. EFMD has through its membership a wealth of experience, which can be put to work to create such new programmes and to stimulate relevant research. The strongest social responsibility of businesses is innovation – only with innovation can business be made sustainable and the issues of the future be addressed and the same goes for business schools.

This conference can help to get a concrete idea what should be done for educational business institutions to continue to stay relevant now and in the future. .

Complexity is not something that can be tackled in a happy-go-lucky way. We are dealing with the management of all aspects of societal life. This time we had better get it right.

AUTHOR:

Gerard van Schaik has been Honorary President of EFMD since June 2008. He was the President of EFMD from 1995 till 2008.He joined Heineken N.V. in 1959 after taking his Masters Degree in Economics at the Free University in Amsterdam. In 1968-1969, he followed the Annual Program in Business Administration at IMEDE in Lausanne. In 1974, he was appointed to the Executive Board of Heineken and was responsible for European interests as well as Corporate Marketing of the Group. In 1983, he became Deputy Chairman of the Executive Board and, in 1989, was appointed Chairman. In 1993, he retired from that position.He is also currently Chairman of the Board of Martinair Holland N.V. Previously, he was Chairman of the Board of AEGON N.V. and former member of the non-executive Boards of a.o. DSM N.V., Sara Lee/DE N.V., ABN-AMRO Bank N.V., Whitbread Plc and United Biscuits Holding Plc.

It is with quite some emotion that I am addressing you – almost by the day 5 years ago we began something which we hoped would become a journey – exactly in this place. Today I can confirm that the Global Peter Drucker Forum has become a centre of gravity and a recognized platform to bring together the greatest management thinkers and practitioners to exchange their thoughts and to provide their input for shaping the future. In today’s complex and unpredictable world the importance of how we take decisions, how we make the right strategic choices, how we shape organizations to achieve desired results, how we manage and mitigate risks has become more important than ever. Peter Drucker has shown the utmost importance of sound management of the institutions of our society be it economic or non- economic in his first important work The End of Economic Man and The Future of Industrial Man. Peter Drucker came to the conclusion that the very survival of society depends on the performance, the competence, the earnestness and the values of their mangers.

During the last years bad management and flawed or rather no values have almost precipitated us into a global catastrophe of unseen dimensions. Today we seem to have forgotten how fragile our situation has become. The party seems to go on – and greed and self-serving behaviours are still dominating big business and politics. Inequalities in our societies are growing. Youth unemployment in Europe has reached a peak.  Not a good basis for creating a functioning society as Peter Drucker called it.

Despite some gloomy thoughts that anybody might easily get when looking at today’s situation there are bright spots – that give reasons for hope. Most importantly they lie in the younger generations who take a different look at the world as they yearn for meaning and purpose. To spend ones life with the sole objective to make a lot of money may not considered enough by coming generations. We are happy to have a significant group of the new generations joining – more than 30 winners of the Drucker challenge contest. The new generation will have it in their hands to shape the future. However, as Einstein put it: “We can’t solve problems by using the same kind of thinking we used when we created them. This is the challenge for the new generations. We had a purpose when we positioned the thme for the Drucker Challenge contest at the intersection of business, science and the arts.

Ladies and Gentlemen, in the coming two days we would like to take you on a journey that should contribute to better equip you to cope with the new challenges and to help to find your answers. I emphasize YOUR answers – because there are no ready-made recipes. When Drucker asked after a day of intensive discussion in a consultation mode with senior executives: tell me what you will do differently next Monday, he did not mean that he had given them any recipe to change things on Monday, but he meant that he had given them insights and clues to think through from a new perspective the problems and issues they are facing. Don’t expect ready made answers; rather expect input to ask better questions.

The Drucker Forum has now reached the point where we seem to be increasingly heard and perceived as a force contributing to shape the future of management. But we would not have got there if we had not the support of great partners and sponsors. We are a non-profit organization but as Drucker already has pointed out – even as such we need a business model to fund our activities and to invest into the future. We are grateful and thank them. However, I may say that our sponsors receive value for their sponsorship from us as well as we gain global recognition.

Lastly, we would not be here today wouldn’t we have had the unconditional support from the the Drucker Institute in Claremont and the Drucker Family. The Drucker Institute – here represented by its executive director Rick Wartzman – provided us with the opportunity to organize this annual Forum as the Global Peter Drucker Forum – there is no other Forum who has authority to do this. However, most gratifying for us is to have received the endorsement and trust of the Drucker Family – first and formost from Doris Drucker who turned 102 years in June.

With this I wish us all a successful and beneficial Forum where I hope you can draw value for the future for your role as a manager, an entrepreneur. an executive and as a human being. Thank you.

1. An increase in the number of entities interacting in the system.
2. An increase in the diversity of entities in the system.
3. An increase in the interdependence of entities in the system, with each entity affecting and being affected by the actions of other entities in the system.
4. An increase in the unpredictability of actions and events in the system.
5. An increase in the variability of potential outcomes and consequences in the system.

Now, consider how we as individuals have typically operated in the system in which we participate. In a previously less globally connected world, we interacted mainly with a limited number of entities, typically like-minded with less cultural and cognitive diversity. The system had less unintended consequences and more predictability. Consequently, we embraced Six Sigma style thinking in enterprises where “variation” was seen as the “enemy” of value creation. Interactions existed in the system, but were typically designed to be controllable, or at best, interactions were unpredictable, but could be reasonably known, as in air traffic control systems (where planes for the most part are constrained in terms of flight paths for instance). In the economy of goods and services, the focus was largely on “averages” (with the dominant assumption that life follows a bell curve), and subsequently “standardization” was the norm on the supply side.

Today, complexity is a given. It cannot be controlled but must be leveraged in value creating ways. This requires us to embrace a whole new paradigm of co-creation that reframes value creation with interactions as the starting point and the very locus of value creation. Harnessing the power of co-creation requires the purposeful innovation and design of engagement platforms (assemblages of persons, artifacts, interfaces, and processes that facilitate productive, collaborative, creative, and meaningful interactions) everywhere in the system—from the resource space to the opportunity space of value creation, and from enterprise decision-making to offerings—to democratize and de-center value creation. Just as a Copernican paradigm shift occurred in seeing the earth as revolving around the sun, we need to see individuals and their personal and collective agency as the new center of gravity of value creation.

A fundamental implication is that enterprises are now a nexus of interactions and value must be created with, and for, individuals as co-creators:

1. Enterprises must stop thinking of individuals as passive and docile recipients that firms traditionally deliver to, but must instead engage individuals as active co-creators of value.

2. All entities that affect or are affected by the actions and outcomes of a value creation process can be a co-creator. In other words, the more inclusive the engagement of stakeholders in the act of creating value (through engagement platforms), the better.

3. “Value” is subjective and not only varies from individual to individual, but also within individuals in the context of their experiences in space and time. The meaning of “value” is thus a function of human experiences, and products and services are a means to this human experience-based embodiment of value.

4. Individuals are, by definition, an integral part of creating experience-based value. Their own creativity is relevant to the process of creating outcomes of experience-based value. This requires effectively designed engagement platforms as the means to enacting value creation together. Engagement platforms are both offerings and the means to create those offerings.

5. Individuals must be continuously engaged as stakeholders in value creation, as much on their terms as that of enterprises, expanding how enterprises think about both value creation resources and opportunities.

6. Convergence of value creation based on human experiences of individuals in economy and society, necessitates that all enterprises, whether private, public, or social sector enterprises, must engage people individually and collectively.

7. Private-public-social enterprises must build ecosystems of capabilities centered on the wealth, welfare, and wellbeing of all individuals.

We need to build the technical and social enterprise architectures to support ecosystems of capabilities that enable platform engagements to give rise to new sources of unique value that is contextual and centered on events in the system and in the daily lives of individuals.  And to be successful, we must connect deeply with the actual lived human experiences of individuals as stakeholders in managing the reality of complexity. All of this requires knowledge, learning and insights on top of fine-grained real-time analytics through active, explicit dialogue, appropriate levels of access and transparency, and reflexive sharing of experiences to make platforms come alive and be mutually valuable to participating individuals.

Platforms must facilitate inclusive engagement, while enhancing self-expression of the inherent creativity of individuals. The integrativity, generativity, linkability, and evolvability of platform capabilities directly affect its co-creative capacity to cope with the scale, nature, scope, and patterns of complexity in “opening up” interactions in the system as new sources of “win more—win more” stakeholder-enterprise value. Infrastructure, governance, sustainability, and development must evolve towards working together with stakeholders in transparent fashion to maximize mutual involvement and consensus building of joint solutions.

Enterprises can better manage the triple bottom line that balances economic success, environmental stewardship, and social progress, by going beyond an “enterprise-centric” view of doing well by doing good, with all stakeholders having a say in and benefitting from valuable outcomes. By creating more value with others, the “win more—win more” nature of co-creation simultaneously generates enhanced wealth, welfare, and wellbeing. Ultimately, leveraging complexity through co-creation is about connecting with the dynamic flow and enormous variety of human experiences of value in an increasingly complex world.

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Venkat Ramaswamy (www.venkatramaswamy.com) is a Professor at the Ross School of Business , University of Michigan, Ann Arbor. He is the author of the books, The Future of Competition (with the late C. K. Prahalad) and The Power of Co-Creation (with Francis Gouillart). His new forthcoming book is The Co-Creation Paradigm (with Kerimcan Ozcan).