Europe Today: From Great Crises and Great Visions

Europe is not in a condition to think about great visions. It is busy with solving its debt crisis. One great discussion is if Eurobonds could or should be part of the solution. The European Commissioner for Economic and Financial Affairs, Olli Rehn, spoke last week at the EU summit for a deeper integration as a precondition of a launch of such Eurobonds. With this he hit the nail on the head: Deeper integration. It is often said that Europe growths through crises. The idea is that during crises Europe is compelled to find steps leading towards a deeper integration which are necessary for its continued existence.

                                                          

But is this only possible through crises? No. It is also possible through visions. A vision can be seen as a positive connoted motivation-factor for activities leading to more integration. Visions in this sense are the contrary of crises which are negative connoted motivation-factors. In contrast, a deeper integration is not a vision as such. It is more an objective behind the scene, which only can be ‘sold’ with difficulty because of its missing emotionality and concrete associations.

Europe's missing of a vision is also often said to be a disadvantage in the competition with other powerful regions such as China, North America, South Asia, Brasil etc. Emerging markets like India or China all have generally the vision of an economic catch up. Although this is quite a down-to-earth vision its implementation is a big challenge confirming the character of a vision as an imagined ideal (end-)state far away from an actual state.

But what could be a vision for Europe? Why not an economy integrated in a comprehensive ecologically sustainable recycling-system? On the one hand we have today in many countries in Europe different recycling-systems. A simple example are PET- and glass-bottles recycling-systems. But on the other hand we still have many products and processes using too many resources. For example there are still products made after the strategy of planned obsolescence (products with intentionally integrated weaknesses with the aim to reduce their life-time and to bring people to buy earlier new ones. It is also looked that reparations are no options).

Planned obsolescence is a resource-intensive (the product-turnover is very high) one-way strategy (many ‘dead’ products are landing on uncontrolled disposal sites in Western Africa or elsewhere in the third world). The strategy is legitimized by the argument that it secures a lot of workplaces and a prosperous economy. In a time where we know that resources are scarce linear one-way strategies aren’t options. In the long run there is no other way than to fit all economical processes into a sustainable recycle-system that has the form of a circle where all resources – from address-notes on paper to zinc carbon batteries – can circulate several or even endless times. Thus, the aim of an economy completely (and not only partly) integrated in a comprehensive recycling-system could be a vision for Europe.

By searching for economic, technical and political ways to implement the necessary steps to achieve these aims Europe would have the necessary challenges buttressing its integration. The vision, if taken seriously, would need creative and innovative ideas and would create workplaces. It probably also could be an example for emerging markets which may soon have caught up to the West and then are looking for new meaningful, pragmatic and future-leading visions. There are many possible visions for economically developed regions and countries. The mere protection of what has been achieved or the solving of serious (homemade) crises aren’t visions. Arguments that Europe can’t find a new vision because it is sluggish and replete are cheap and helpless justifications: If Europe wants to prosper and to stay one of the important regions in the world there is only one way: Europe needs a vision.

Claude Meier

The Facebook-Party

A few days ago Facebook went public. What was announced to become by far the biggest IPO of a technology company, felt to me like the announcement of the regional party of the year - the one everyone talks about in advance and you just want to make sure, not to miss out on what might become a legendary event. Today, shortly after the party, as the big hype is over and the even bigger hangover kicks in, you are more often than not painfully forced to ask yourself, was it worth it? And why the disillusionment now? What went wrong? Or was it supposed to turn out like this? In the case of Facebook, I go for the latter.

First, what generally bothers me from an entrepreneurial perspective; Founder and CEO, Mark Zuckerberg stated in the course of the stock market launch that “Facebook wasn’t originally planned to become a public corporation”. The early aspiration was a social mission – “to make the world more open and better connected.” While he is clearly doing so with The Social Network, this statement leads me to the straightforward question; So, was a commercial approach then chosen in order to be able to more effectively fulfill this mission in the future? I rather doubt it and believe that, as it has often been the case, the original mission has to a certain extent given way to the credo “money rules the world”.

On the other side of the equation, new stakeholders have entered the network of Facebook. Shareholders like retail banks, investment firms and private and institutional investors jumped on the bandwagon in the hope of quick returns - at the forefront, a syndicate of major US banks, many of those who received government aid during the recent financial crisis. Side by side with Zuckerberg, they decided just before the IPO to push the hype further, issue 25 percent more shares than initially planned and raise the shares’ opening price considerably.

In the aftermath of the Facebook-Party, both Zuckerberg and the bank syndicate obviously made billions of dollars. Shareholders, on the other hand, are suffering a 20 percent-loss on day three after the party – big hangover. However, there were clear warning signals for investors. Thus, not only greed of initiators is to be blamed, but also the naivety and short-term thinking of their followers. Besides my delight that I missed out on that particular party, I’m puzzled about the incredible hype around an IPO, at the end, of an institution whose business model still remains in the dark and whose turnover and return figures have never been published as yet. Moreover, I regrettably feel that for both, the involved financial institutions as well as the unfortunate investors, after the party is, most likely, before the party.

Marc Moser

A different kind of customer

Switzerland is one of the many European countries with a growing percentage of elderly people, as the baby boomer generation will be retired in the period 2015 - 2035. This year 2012 is the European Year for Active Aging. To overcome the barriers for an active life for older people, we have to improve our understanding of their most frequent illnesses and raise awareness of their impact on society at large.

Between the ages of 70 to 80 the risk of becoming dement is 5 - 7 %; up to the age of 90, 12 - 15 %; after 90 every third person is dement. Dementia is an illness that first slows down the pace of activities of an older person. Later, in a more severe stage, it makes difficult challenges out of simple activities. Therefore, we need to understand how dement people can have dignified lives and still be an active part of our society. As an example, this implies empowering them as customers.   

Only in recent years have we started to realize that due to the growing number of people with dementia, employees in shops, restaurants, banks etc. are confronted on the job with dement customers. Until now due to a lack of information and training, the employees are often not prepared for this situation, and in particular fail to understand the behavior of dement customers.

To raise awareness for such situations, the Alzheimer Association of Switzerland has published guidelines to support employees, who are in contact with people suffering from dementia (www.alz.ch). Especially employees in the service industry often have contact with dement customers. Hairdressers for instance are quite often persons of trust for elderly people. Due to the guidelines of the Alzheimer Association they learn how to interact with these customers, and even how to help them realize that they might need additional help.

In these guidelines also employees of banks can learn to understand which symptoms might be a sign of dementia. For instance, dement people have troubles with appointments, they have problems to articulate themselves, they show up several times on the same day to get money, they have difficulties filling out documents etc. In each of these cases, it is important to approach these customers with respect and understanding. Sometimes such employees are the only contact they have and they place trust in them. As the illness of dementia progresses, it is important to recognize that these relationships of trust are an opportunity for elderly persons to receive support and understanding.

The guidelines of the Alzheimer Association are first steps to keep dement people better involved in an active life. Based on this, firms should systematically train and support those employees who interact with dement customers. Corporate proactive behavior will reduce costs as transactions will be more successful, but most importantly the quality of life for dement people will be better.

 Sybille Sachs

Walmart – Civilizing the Chinese?

Your first reaction to reading this title may well be one of bafflement (what does Walmart have to do with civilizing anything?!), or if you happen to be Chinese, of likely indignation (how can a fifty year old American retail megastore contribute anything to our august, thousand year old civilization?!). But – as preposterous as it may seem – there is indeed a kernel of truth in this proposition. Let me explain.

The word “civilize” has its etymological roots in the French word “civilité”, which initially denoted the refined manners and decorum at French aristocratic courts. With repeated initiatives to – yes, “civilize” – the Chinese (as in their “no spitting on the street” campaign), the Chinese leadership is keen at molding the behavior of its citizens for the better. Recent outrage involving food manufacturers deliberately fortifying food with poisonous substances in order to cut costs, with employee unrest and even suicides (such as at Foxconn) in response to poor working conditions, as well as the omnipresent environmental pollution scandals, has the Chinese regime become increasingly edgy and aware that things need to change.

Enter Walmart.

Much as the Chinese regime, Walmart has seen itself confronted by a customer base ever more bent on better quality food, disgruntled employees (as with a high publicity class-action suit by female employees) and a questionable environmental record driven by aggressive rock bottom pricing on many of its throw-away products. So starting in 2004, Walmart’s then CEO Lee Scott proactively contacted environmentalist NGOs such as the Rocky Mountain Institute and the Environmental Defense Fund for assistance as to how to better manage its environmental track record.

What resulted is no less than remarkable. Wall-Mart has, since its entry to the Chinese market in 1996, become the leader in China as pertains to food quality, implementing rigorous food quality standards for its suppliers and launching an ambitious – and well received – organic food initiative. Moreover, the company has significantly reduced its packaging material volume and pressured its suppliers to cut energy consumption and pollution. The Chinese suppliers, while at first skeptical, are now keen to advertise their environmental objectives and successes. The Chinese shoppers, for their part, are delighted to get better quality food and organic produce, trusting a big company like Walmart more than smaller shops which are – in their eyes – more prone to cheat them and offer inferior quality products. And the Chinese regime is pleased to have such a potent partner in addressing these pressing problems and “civilizing” its companies and citizens. In sum, we have an excellent example of numerous stakeholders working in sync to achieve a win-win situation for all.

So all is good that ends well? Well, it may be too soon to bring out all the trumpets. While Walmart in China serves de facto as an extension of the Chinese government’s regulatory efforts and as a “civilizing” factor for its citizens, it is legitimate to question the long-term sustainability of such an in the end effect still purely instrumental objective. Nonetheless, there is reasonable hope that at least parts of it may be sustainable due to an interesting insight that the sociologist Norbert Elias outlined as part of any civilizing process. Therein, he posits that to become “civilized” entails individuals to restrain their drives and affects. In a first phase, this is achieved through a permanent outside authority and on pain of punishment. With time, however, in a second stage, there arises a moral code that is upheld by individuals even in absence of the threat of punishment, driven by people suffering from a bad conscience in light of failure to adhere to these mores. In the last phase, then, even such self-constraints dissipate, and individuals are intrinsically motivated in a very natural manner to adhere to the involved normative standards.

This is, in essence, what is beginning to occur in China in part with the help of Walmart (and also other parts of the world in other contexts), where social and environmental responsibility by corporations and individuals is becoming ever more part of the discussion, part of the regulatory and legal fabric and as well as public awareness in form of a normative “should”. Normative change, while it may initially have to be forced upon individuals and corporations, may in due time become second nature to them. We as a global civilization, as is apparent also in China, seem to be “primed” for a major normative paradigm change towards greater social and environmental responsibility. And, as we have seen, even a major multinational corporation such as Walmart can play a significant role in this “civilizing” process, if the necessary extrinsic motivation is there and a society is ready to reward such a change.

Manuel Heer Dawson

 For a fascinating and detailed account of Walmart’s social and environmental impact in China, read the “How Walmart is Changing China”, by Orville Schell in The Atlantic: http://tinyurl.com/bopuxsa

China’s Silver-Spoon Generation: How does it Impact China and the West?

In China the 90s generation is entering the employment market. During my visit in the last weeks in Hong Kong, in Guangdong Province and in Shanghai I met with many managers from manufacturing companies all complaining about the troubles they have with the generation’s representatives: They leave working places too often for smoking or playing e-games. They try to dodge work as much as possible. If another company offers just a minimally higher wage these employees suddenly change the company. In short, they are said not to be very productive and to lack loyalty vis-à-vis their employers.

I was quite surprised that exactly this issue was picked out in an article of the English-written Chinese paper “Global Times” when I read it for the first time. The article basically says that the 90s generation is unconventional, innovative, rebellious as well as self-centred. It is flexible and quick in learning. And, it is the first generation in which a really diversified set of values exist: everyone sees herself as different. This stands in strong contrast to the 70s and 80s generation of which each knew a quite homogenous set of values. The 90s generation is the 2^nd generation of rich. Because this generation’s elders became rich in the reform era its children have grown up with a silver spoon in mouth.

The silver spoon generation is still quite young. It is most likely too simple to reduce this generation to the actual troubling behaviour in companies. The question is how will this generation behave in some years when it has developed itself further? What implications does such a self-consciousness and value-diversified generation has to China and the rest of the world?

In the West we know e.g. the 68s generation. Although a comparison of China’s 90s generation to the 68s must be treated with caution there are some clear similarities: Both have grown up in economically prosperous surroundings; both are individualistic and differ themselves from the older generations through more open and more diverse values; they are creative and innovative; the older generations are rather negative to the ideas of these new generations.

Ideas of the 68s we may recognise e.g. in the IT industry. The ideal of openness underlying the internet and other computer-technologies is often brought in context with the Hippie or 68s generation. Early IT-cracks indeed often stayed together with Hippies (Steve Jobs e.g. lived for a certain time with Hippies in the USA, travelled to India in search for illumination, and even sometimes took LSD).

Today we know that although the older generations often were negative towards the youth of the 68s this generation had a big societal impact and also created some very successful and innovative entrepreneurs.

It is quite likely that China has the potential to boost its innovative power with its 90s generation. But, it is decisive that this young generation understands to bring in and develop their creative skills constructively in the next years. With these young people it is probably possible for China to leave its learn-by-heart mentality in education. For the rest and the West of the world this means that it has to envisage more innovations from China. The positive thing for the West and the rest is that they can profit of these innovations as consumer or user. But overall it is highly likely that global competition will become harder again. Therefore the West has to hold on the curiosity (at the functioning of the world) which was born once during Enlightenment. In this tradition it has to have the important and necessary courage to ask not only big but also unconventional questions.

Culturally the West is still very innovative and attractive, with a charisma also to other regions, including China. It will be interesting to see what influence the 90s generation will have on the cultural understanding and on political institutions of future China. This is even more difficult to prognosticate than the economic implications.

Claude Meier

Slippery when oily

More than two years ago, BP lost control of a well it was drilling using the Deepwater Horizon oil rig in the Gulf of Mexico. 700 million liters of oil poured into the ocean and the consequences for business, society and environment have since been widely discussed. The oil spill in the Gulf of Mexico is still a rich case study for various subjects related to stakeholder management and I have been following the issue of high-tech oil extraction more or less closely during the past years.

However, I am still surprised and somewhat indignant about the behavior of some of the affected stakeholders, based on their assertions that they have learned their lessons. This is because a few days ago a report showed that the United States government and the oil and gas industry have both failed to effectively improve the regulation and safety of offshore oil drilling. The report issued by Oceana, the largest international organization for protecting the oceans, further states that during the past ten months, at least three more leaking oil wells have been detected.

We know from many other case studies that changes in regulation and the implementation of successful business models take time, in spite of initial wake-up calls or public outrage. We have also heard of time-taking learning processes, slow processes of institutionalization and the tedious development of organizational cultures. It is clear that strategic, organizational and technological change processes cannot be implemented overnight. Yet, I am asking myself, why I still get upset reading reports like the one from Oceana? Some self-reflection led me to three possible causes for my astonishment.

First, as I am not a part of the oil business itself, I do not know what kind of systemic pressures oil companies are exposed to. As most of the oil companies are listed on stock exchanges, financial results have to be provided on a quarterly basis. This clearly supports short-term thinking, which is at odds with long term oriented fundamental change processes. Moreover, my personal concept of value creation is broader than the focus on maximizing financial profits.

Second, I think that my perception of issues like the oil spill in the Gulf of Mexico is framed by the coverage in the media. Spectacular and more recent events have a bigger impact on the readership than long-lasting change processes in the business models of organizations. The same is true regarding the media coverage of negative news compared to positive news. It is in this context that I think there exists a huge potential with new social media to accompany such organizational change processes in a timely manner and thus make them more visible.

Last but not least, there is the matter of dealing with causes and effects. The debates in the aftermath of the oil spill mainly covered the issue of improved regulations regarding deepwater drilling. However, this focus on symptoms of deepwater drilling does not take a sustainable perspective. As deepwater drilling is the cause of oil spills, we have to question if we are really capable to perform it in a safe way. Otherwise, it remains slippery on the oily ground.

Tom Schneider

Lasting change

In 2008 Obama campaigned with the slogan "Change We Can Believe In!" Four years later this slogan evokes the question what kind of change has actually taken place in the US since 2008. President Obama’s opponents claim in the current campaign that they are going to bring about “real change,” since Obama has failed to make the "hope for” change happen. Clearly perceptions differ regarding kinds of change, and especially the expectations about how quickly and fundamentally such change should take place.

In an evolutionary perspective, continuous gradual change is often compared to discontinuous and fundamental change. One can assume that those who voted for Obama expected quick and fundamental change during his first term of office, especially in the economy, which was extremely weak at the time of his election because of the financial crisis. In the present campaign job creation is the dominant issue. But precisely in this area it hasn’t been possible for Obama to achieve fundamental change, at the most some gradual changes.

Observation of strategic changes in firms provide findings that explain why fundamental change is often impeded: One important explanation is that over time successful firms tend to reinforce their values and norms with strong myths and legends so that adapting to changing conditions becomes difficult. Sometimes organizational routines are created; management resorts to this especially in uncertain situations. Thus, uncertainty can be reduced and anxiety can be controlled by routine actions; however, this prevents fundamental change.

The successful development of firms, and growing economic prosperity over decades in a Western context, is an example of a successful development that has lead to inertia. The successful development in the past has become the main barrier for fundamental adaption in the future: despite increasing criticism of neoliberal economic systems, necessary changes have not taken place. When in recent years, new challenges arose in the form of social expectations, especially as a result of corporate scandals and the financial crisis, leaders of firms and of political organizations mostly tended to rely on the deep structures that had been successful in the past. Fundamental adaptation has so far not been able to take place.

Evolutionary research has also shown that sometimes systems destroy themselves by applying their behavioral principles in an exaggerated manner. Excessive short-term shareholder-value thinking, for example, can prevent necessary adaptations and lead capitalism to destroy itself. This primarily, quantitative understanding of welfare is now criticized even by such leading economists as Joseph Stiglitz and Amaryta Sen. Analogous developments can also manifest themselves in other areas of society.

Gradual change consists of continual change in small steps. In this sense Obama and his team have effected, for example, that now in the US access to health care for everybody is being discussed and first measures are being taken. We have been able to observe similar continuous changes in our longitudinal case studies in firms (see Sachs S., Rühli E., Stakeholders Matter, 2011). As an example, since the early seventies there has been a continuous increase in the consideration of an ever-broader cast of stakeholders by firms. New kinds of tools (e.g. stakeholder mapping), departments (e.g. public affairs) and processes (e.g. stakeholder engagement) have been developed. Corporations have started to publish sustainability reports and signed standards (e.g. Global Compact) and founded roundtables (e.g. corporation 20/20).

As in firms, societal developments have taken place in the US, even if not to the hoped for extent and with the anticipated speed. More importantly it seems to me, we should concentrate on the events and stories that show the continual transformation processes to improve the quality of human life, rather than to bemoan the lack of fundamental change that has taken place. By no means should the partial lack of change be used as an excuse to go back to business as usual. In German we have the saying: “Good things come to those who wait.” Therefore I suggest “lasting change” for Obama’s 2012 campaign slogan.

Titanic disasters - or stories of successful, sustainable life?

11^th April: A hundred years ago, the pride of the White Star Line, RMS Titanic, was steaming westward on its maiden voyage to the New World. What happened around midnight between the 14^th and the 15^th of April has become part of our collective archetypal memory: a titanic disaster, caused by a blend of arrogance and ignorance, and a false feeling of safety.

Why has this tragic accident achieved such an epic status? The 20^th century has seen so many human tragedies and disasters – why this one? It happened even before the First World War that showed how effective and efficient industrialized nations were in killing enemy soldiers, and how ineffective and inefficient they were in solving political problems.

It happened before the Second World War that not only brought an unprecedented amount, but also unprecedented qualities of distress and suffering to humans.

How could the sinking of RMS Titanic create or keep its fame as an archetypal disaster of the 20^th century?

Many people have speculated about this question. Let me try it anyway: First of all, it was not a 100% man-made disaster. Travelling by ship was almost as safe back then as it is today. What if the Iceberg had been drifting by the ship at safe distance? To a certain extent, it was just bad luck. It was a risk most of us would have taken. It was an accumulation of unfortunate circumstances that (hopefully doesn’t, but) could happen to any of us.

Second – and even more important – I think it was the moment when the 20^th century lost its innocence. The RMS Titanic was a symbol of the achievements of a new area: High tech, top luxury, giant size, top speed; it seemed that man-made technology could break the chains of the old ages, reach new horizons and open the doors to a new quality of life.

The big cities of the early century offered a modern, urban lifestyle that brought an end to old fashioned traditions and gave freedom to the individual. The Titanic was a symbol of a new lifestyle. It offered fast and comfortable travelling to business people, back and forth across the Atlantic Ocean. And it offered affordable transfer to people on the third class decks: emigrants of Old Europe on their way to the pursuit of happiness in the New World.

Literally “out of the blue”, within less than a few hours, all these visions, dreams, lifestyles and hopes that had shown a way into the new century, were destroyed. The unthinkable had happened, the unbreakable was broken, and the unsinkable had sunken to the ocean floor: a titanic disaster disenchanted the young century. The reasons – Ambition? Unthoughtfulness? We will never really now. What we do know: It was the absence of true leadership - the ability to responsibly use the possibilities of a new technology, to adapt to changing external conditions, to take responsibility for human lives.

Many ships have crossed the sea since then. And a new century is about to leave its childhood behind. Has it lost its innocence yet? The archetypal incident must have been 9-11 2001.

While the Titanic disaster was the moment of truth with respect to the limits of new industrial technologies, 9-11 was the moment of truth with respect to the limits of new communication technologies in a global village. Hate and fanaticism keeps mankind from becoming global sisters and brothers through internet, mail and social media.

New technologies, new opportunities, new ages and centuries don’t automatically lead us into a bright future. It takes leadership: responsibility, respect and regardfulness, to make this world a better place, and to create collective archetypal memories which tell us stories of successful, sustainable life.

Christoph Weber-Berg