Creating Leaders Great at Performing in Uncertainty without a Clue as to Why

There is an interesting phenomena going on in some of the major business schools in Europe. In some – you are not allowed to mention environmental factors as a major catalyst for new business models/thinking. It is “understood” that as a lecturer, you inspire the students with fresh thinking but only so far. Go further, and people just roll their eyes and pigeon-hole you as a treehugger.

Here are three quotes from top business leaders:

“The era of ‘abundance’ is over. The future will see our natural resources, from oil to food, having some level of restriction placed on them.”Andy Bond, CEO, Asda (May 2009)

“We must rapidly wean ourselves off our dependence on coal and fossil fuels.” – Richard Branson, announcing investment of all profits from Virgin transport business, estimated at $3 billion over 10 years, to be invested in fighting global warming. (21 September 2006)

“Sustainability is here to stay or we may not be.”Niall Fitzgerald, UK CEO, Unilever

Now, none of these guys are particularly treehuggy. And most MBAs would give their eyeteeth to fill the shoes of these guys – and yet – in many MBA programs – coverage of sustainability issues is absent, apologetic, sidelined, or sketchy.

Let’s stop tiptoeing around the obvious. Business leaders can handle the truth. Though there is uncertainty on what the impact will be, climate change is a global issue that will impact business. Period.

In 2008 the US Director of National Intelligence (DNI) presented to Congress the DNI report National Intelligence Assessment on the National Security Implications of Global Climate Change to 2030. Here are a few excerpts:

“The United States depends on a smooth-functioning international system ensuring the flow of trade and market access to critical raw materials such as oil and gas, and security for its allies and partners. Climate change and climate change policies could affect all of these—domestic stability in a number of key states, the opening of new sea lanes and access to raw materials, and the global economy more broadly—with significant geopolitical consequences.”

“In addition, anticipated impacts to the Homeland—including possible increases in the severity of storms in the Gulf, increased demand for energy resources, disruptions in US and Arctic infrastructure, and increases in immigration from resource-scarce regions of the world—are expected to be costly. Government, business, and public efforts to develop mitigation and adaptation strategies to deal with climate change — from policies to reduce greenhouse gasses to plans to reduce exposure to climate change or capitalize on potential impacts—may affect US national security interests even more than the physical impacts of climate change itself.”

“Climate change is a threat multiplier in 
the world’s most unstable regions.”

“From a national security perspective, climate change has the potential to affect lives (for example, through food and water shortages, increased health problems including the spread of disease, and increased potential for conflict), property (for example through ground subsidence, flooding, coastal erosion, and extreme weather events), and other security interests.”

These leaders are talking about fundamental shifts in ‘givens’ that require action, a joined up way of behaving, new ways of thinking, and new approaches. And our top business schools should be on the leading edge.

I first got interested in business schools ignoring the big elephant in the classroom two years ago when I was delivering a course on dominant business metaphors and implementing change. I wanted to say one line – one sentence inviting students to ponder how the nature of sustainability planning would be different if organisations, in addition to approaching business as a ‘competitive sport’, also approached it as a living organism. The professor who brought me in said ‘no’ – that the MBAs would feel they were being hijacked away from the course they had paid for. There was a specific elective for sustainability – and outside of that – best not to mention those issues.

Over the past few months, I’ve been speaking with several top MBA programs in Europe. Each is saying that leaders need, more than at any other time in history, to be able to lead in the presence of ambiguity, and to be able to perform collaboratively with high levels of uncertainty. Applied Improvisation skills are rather good for that, which is why I’m there in the first place.

What I find interesting in talking with these top MBA programs is that many are not contextualising the WHY of this new emphasis. Not addressing why managers/leaders would need to be so good at ambiguity.

“Growth for the sake of growth is the ideology of the cancer cell.” – Edward Abbey

I sat up when I saw this quote. It was refreshing to see in a lecture to potential MBAs at a leading business school in the Netherlands a few weeks ago. During my time at the school, two of the guest lecturers talked about sustainability – kind of…

The first lecturer used the Abbey quote (Abbey is a renown outspoken sustainability activist) and talked about the need to create ‘sustainable businesses’ quickly dismissed the notion of ‘sustainable’ as being linked to any ‘environmental’ issues… – it was about a business which can keep going, despite ‘adversity’. Given what scientists are saying about increasing disruptions over climate change, peak oil, peak minerals, peak water, how could adversity due to these factors not be mentioned?

The other lecturer had just hosted a biomimicry event two weeks before and deeply cared about the environment and sustainability. He works with top leaders in the best companies around the world on developing leadership skills. In his session, he talked about the profound need for leaders to be comfortable leading in the presence of ambiguity, but didn’t say why. In the break he confided that there are some groups with which you cannot talk about the environment directly. He had been gently testing the water with that day’s group and found he could mention it a bit…but only a bit. Several people were there for the express purpose of earning more money with an emphasis on value extraction, not particularly wealth creation/exchange.

Contextualising is a vital part of learning. The military does this routinely in their simulations – creating real world scenarios in the classroom. If we are facing a series of challenges (climate change, scarcity of water, oil, minerals, etc.) we must mention that as part of what leaders will face.

One initiative that gives me hope is the UN Principles for Responsible Management Education (PRME) initiative. The head of a leading MBA program in the UK turned me on to it. Finally – a global effort is being made to transform business schools and the Assocation of MBAs is part of it. In theory – that should mean that the taboo-ness of sustainability issues being explicitly mentioned, or mentioned only in specific electives – disappears.

As I continue to work with MBA programs, I will keep you posted on what I see going forward in this arena. And if you know of any best practice in this area – please post it here. Let me know!

“Unless we change direction, we are likely to end up where we are going.” – Chinese proverb

© July 2010 by Belina Raffy

China: The Next Superconsumer?

There’s a good article in the Guardian that builds on data I presented last week in the article The Real Population Problem. One of the my charts shows the growing per capita income and consumptions patterns in China. As the population has grown, per capita income and consumption have grown. Using GapMinder’s Trendalyzer with energy consumption data from BP’s Statistical Review of World Energy 2010 and income data from the IMF, we can see some powerful trends unfolding (N.B. data presented for 1965 through 2008, 1 year steps, circle area proportional to population size, energy use in tonnes of oil equivalent):

Regional Energy Consumption and Income Trends
As income rises so does consumption – of commodities like energy, as well as retail goods.

Income has flattened in the US and Europe, and people are spending less and saving more.  For global retailers, China’s growing per capita income is attracting businesses that cater to the “consumer.”

Highlights of the Guardian article:

  • The fastest-growing consumer class in China are single women. They have high levels of disposable income and a craving for designer labels.
  • State planners forecast that half the population will rise to the “middle class” by 2020.
  • As China’s consumer population rises, 4.5 more earths will be required to feed the need.
  • Shanghai, the second busiest port in the world, is the beachhead for retail giants like Kentucky Fried Chicken (2,000 outlets in china), McDonald’s, Starbucks, Louis Vuitton, Gucci and Chanel, Wal-Mart, Carrefour, Tesco and Ito Yokado.
  • Mattel, the world’s biggest toy company, marked the Barbie doll’s 50th birthday by opening the world’s largest Barbie emporium.
  • China is now seeing a surge in obesity, diabetes and heart disease. Obese children used to be rare in China; now nearly 15% of the population is overweight.
  • To feed its growing livestock, China imports huge quantities of soya, much of it from Brazil, which has resulted in accelerated clearance of Amazonian forest and Cerrado savanna
  • In Shanghai, the average carbon dioxide emissions of its residents have already overtaken those in Tokyo, New York and London.

The Guardian article is an edited extract from When A Billion Chinese Jump by Jonathan Watts.

The Real Population Problem

Google Trends tells me that starting in 2008 the monthly number of news stories on population doubled. Most of the stories like to talk about how global population will expand by 30%, peaking at about 9.1 billion people by around 2050.  Though 2050 is a nice round number, and a convenient mid-century marker, one can be lulled in to feeling like it’s a problem that is 40 years off. Not so. The population problem is here and now. And it’s not just about the number of people on the planet, but how those people consume resources.  Let’s take a look at the pertinent trends.

Energy and Population

The rate of population growth has a strong correlation with the effectiveness of the dominant fuel source at any given point in history.  As the chart below shows, wood was the dominant fuel until coal came on the scene in the 1600s. The population growth rate increased modestly with the proliferation of coal.  But the real exponential growth began with the discovery and exploitation of crude oil.  Crude oil production is peaking and the world is in the early stages of a transition from fossil fuels to renewable sources of energy.

Fueling Population Growth

 

 

China, Brazil and India – Chasing the American Dream

As the population has grown, per capita income and consumption have grown. The most dramatic growth has been in the developing countries of China, Brazil and India. Let’s take a look at the trends in energy use and per capita income relative to some of the leading developed nations. Using GapMinder’s Trendalyzer with energy consumption data from BP’s Statistical Review of World Energy 2010 and income data from the IMF, we can see some powerful trends unfolding (N.B. data presented for 1965 through 2008, 1 year steps, circle area proportional to population size, energy use in tonnes of oil equivalent):

  • China, Brazil, and India all show steadily increasing per capita income, with China having the biggest change – outperforming India and Brazil more than 2 to 1.
  • Though US per capita energy consumption is substantially larger than China, Brazil or India, growth has been flat. This comes from conservation initiatives (efficient lighting, insulation, etc.). We must do better.
  • China, Brazil, and India’s energy consumption is growing quickly as they move toward American patterns of consumption. The trend is strong and steady, with no signs of slowing.
Regional Energy Consumption and Income Trends
(click for larger image)

 

Less Is The New More

Though Americans represent only 5% of the world’s population, we are consuming about 24% of worlds energy. We are similarly voracious consumers of water, food, land, etc. Citizens in developing nations aspire to live the American lifestyle. Fareed Zakaria refers to this as the “rise of the rest” in his book A Post American World. But the world has only so much to give. Much of what we consume is not renewable. We are bumping up against the limits of earth’s ability to provide for us. As the population expands, for developing nations, their historically meager slice of the pie will expand. For developed nations, their slice of the pie must contract.

 

Our Ecological Footprint

Using ecological footprint data from Global Footprint Network we can see the current state of consumption for North America and the rest of the world (N.B. width of bar proportional to population in associated region).

Global Ecological Footprint

N.B. Ecological Footprint accounts estimate how many Earths were needed to meet the resource requirements of humanity for each year since 1961, when complete UN statistics became available. Resource demand (Ecological Footprint) for the world as a whole is the product of population times per capita consumption, and reflects both the level of consumption and the efficiency with which resources are turned into consumption products. Resource supply (biocapacity) varies each year with ecosystem management, agricultural practices (such as fertilizer use and irrigation), ecosystem degradation, and weather.
 
This global assessment shows how the size of the human enterprise compared to the biosphere, and to what extent humanity is in ecological overshoot. Overshoot is possible in the short-term because humanity can liquidate its ecological capital rather than living off annual yields.

Carrying Capacity

The last sentence of the note above is important. The developed nations are already consuming beyond the earths capacity to provide. Carrying Capacity has been exceeded and as it is exceeded, Carrying Capacity declines. While developed nations are making headway improving conservation, there has been little reduction of consumption – we have simply slowed the rate of per capita consumption. Meanwhile developing nations are moving up the consumption curve, aiming for an American-class lifestyle. Depletion of earth’s precious resources accelerates – oil, potable water, wild fish, species, clean air, etc. are all in decline. Earth’s Carrying Capacity is thought to be somewhere between 1 and 3 billion people. We have been operating the planet well beyond that for almost 50 years now.

Earth's Carrying Capacity

Even if the population stopped growing today, we are consuming beyond the earth’s capacity to provide. With 6.8 billion people already on the planet, the growth of consumption is the population problem, right now.

Zacharia suggests “As each country rises up, they become more self confident and nationalistic, and less inclined to cooperate in global unity toward a common goal of tackling the pressing problems of this century.”

And quoting Hamlet: “There’s the rub.”

  • Population has grown beyond the Carrying Capacity of the earth.
  • Increasing demand for critical resources (energy, water, food, land, …) reduces Carrying Capacity further, and accelerates decline exponentially.
  • Climate is changing, pollution growing, species extinction accelerating.
  • And our ability to work cooperatively to meet these challenges is failing.

This is not sustainable.

How do we break the vicious spiral? How can our global economy – grown soft and pudgy during the 20th century’s age of abundance – adapt and function in the lean and mean dog days of the 21st century?