No More Business as Usual
Syria. Ukraine. The Tea Party. Companies should start preparing for the new global reality.(originally published by Booz & Company)
Did you get caught up in the Olympics? Initially, I did. I was entranced by almost everything—from the dramatic skating triumphs to Bode Miller’s tears—along with people around the world, particularly in those countries where the pursuit of the highest medal count was a point of national pride. For the second week, however, I was in Ecuador, where interest in the Olympics never reached a fever pitch. There, news reports were far more concerned with matters that should be riveting us all: the violent uprising in Ukraine and street protests in Venezuela and Thailand.
These are just the latest signs of public anger on the global stage: North Africa and the Middle East were rocked by the Arab Spring from 2010 to 2013. Violence continues to shatter Syria, and Egypt convulses with ongoing protests. Proposed changes to the retirement age from 60 to 62 in France brought workers to the streets in 2010 just as the Tea Party reshaped the political landscape of the United States. Austerity measures unleashed anger from Greece to the United Kingdom, and helped spawn the global Occupy movement in 2011 and 2012. Thousands demonstrated against the governments of Turkey and Brazil in 2013, and unrest in both places persists today.
While these expressions of rage may only be loosely linked, they are indeed connected. Growing numbers of elderly people are putting pressure on retirement systems. Joblessness remains high in many countries. Increases in healthcare costs threaten to bankrupt national governments. Irregular climate patterns are stressing food and water supplies as well as natural and man-made infrastructure. Severe weather events are becoming more frequent. There is a pervasive feeling of social, economic, and environmental fragility.
Aging populations, global urbanization, and climate change are three significant, evidence-backed trends that are useful for understanding emerging system-scale disruptions. Individually, they are powerful. But taken together, linked through their interconnections, they represent the most important forces that will shape our future societal, governmental, and economic systems.
The business community has just as much cause to be worried as the rest of society. What if your workers—or your customers—take to the streets? What if your goods are stuck in a distribution center because there’s no fuel? Is your organization ready for the next natural disaster like Sandy or the next violent protest? More important, do you have a plan for how to deal with increasing social tension? Inevitably, it will only grows as the world reaches its limits on the resources, goods, and services that citizens take for granted (or, in the developing world, have long coveted and do not want to be denied). Companies are part of the social context and can become targets of popular ire as easily as governments. Not long ago, Coca-Cola faced vociferous protests in India over water issues.
In short, CEOs and other nonpolitical players are going to have to lead in an increasingly unsettled and angry world. The fact that the world is also increasingly transparent and connected only makes leadership trickier. Here are a few of the most pressing challenges:
Understanding society as a system. Since corporations became legal entities, most corporate leaders have been trained to have a micro view of the world, and they’ve typically been rewarded for that narrow vision. A company’s financial performance was paramount while “externalities”—such as environmental damage and social injustice—were secondary at best. But CEOs like those at Nike, Coca-Cola, Unilever, and others have begun to realize that companies don’t operate in a void, and they must take responsibility for their total impact on people’s lives and the environment if they are to retain society’s permission to exist. Firms are part of an overall societal system and they must understand where and how they fit into that system—and how to fulfill that purpose profitably.
Managing the tension between urban haves and have-nots. According to the World Economic Forum, “Urbanization will stimulate innovation, creativity, and economic growth while at the same time intensifying social and economic inequalities and conflict-filled political polarization.” For CEOs of multinational firms, this brings both best-of-times and worst-of-times implications: More and more people will buy products thanks to their growing affluence, while others will react more violently against iconic global brands as symbols of oppression. In August 2013, the Academy of Management themed its annual meeting, “Capitalism in Question.” Business leaders are going to have to offer solutions to social issues, as well as goods for sale.
Leading in an era of short supply. Until recently, the question of resources had largely been where they’d come from and what they’d cost, not whether they’d be available at all. Price is certainly a constant issue and demands from the growing economies of China, India, and others are likely to push to cost of basic materials upward. More significant, however, are changes such as the retrenchment of the ice caps at the North and South Poles as well as glaciers at the “third pole” in the Himalayas and other mountainous regions around the world, which portend dramatic shifts in the availability of fresh water for drinking and irrigation in the world’s populated regions (see this recent article in Time magazine on the drought in California). Military experts in many nations regard water- and food-related conflicts as a major global risk: In fact, one study from the University of California at Berkeley suggested that a 1-degree Celsius rise in temperatures in Africa would increase the likelihood of conflict by 55 percent, which would result in more than 390,000 combat deaths. Leaders will have to be much more cognizant of the impact their firms and their products have on overall supply and the environment.
Business executives used to sourcing and selling in a relatively stable world must realize that now is the winter of the world’s discontent. And the spring, summer, and fall of its discontent, too. You can hope this will all blow over. Or you can look at the certainty of system-scale changes and opt to engage in solving these vexing problems, willing to rethink even your most fundamental assumptions. Which will you and your organization choose?