There is nothing more practical than good theory
By Wolfgang Lehmacher and Victor Padilla-Taylor, World Economic Forum, first posted in ft.com
In October 2012, Wang Jisi – professor at Beijing University – urged China to re-open its ancient commercial trade routes with the West. In 2013, China’s President, Xi Jinping proposed to its neighbors the “One Road, One Belt” initiative. China’s aim? To achieve $2.5tn in additional annual trade with the nations along the proposed routes over the next 10 years. What is the current state of the project and how likely is it to succeed? The private sector, for one, has started reinforcing the connectivity between the East and the West. In 2011, supply chain operator DB Schenker started weekly trains between China and Germany. It carried 40,000 TEU containers (20 foot equivalent unit) from 2012 to 2014. In 2015, the Port of Rotterdam welcomed its first containers by rail from China. This route shortens the delivery time of goods from around 60 days by sea to about 14 days by land. In the future, trains from Chongqing in China to Duisburg in Germany transiting 10,800 km (6,700 miles) are expected to reduce delivery time to 10 days. Companies such as Hewlett Packard are connecting European customers with the factories in China through the new route. Returning containers are filled, for example, with western luxury cars. The result is that the modern caravan has started rolling. Thus, the “New Silk Road” development project – which embraces an area that is home to about 70 per cent of the world’s population, produces about 55 per cent of global GDP and has about 75 per cent of known energy reserves – has been taken its first steps. Of course, challenges remain. The ambition requires efficient and effective collaboration between the 40 countries located alongside the historic silk routes, both those that went overland from China to Europe and those that went by sea. China has taken the initiative to start aligning the participants, signing partnership agreements related to the initiative from 2013 onward with Russia, Kazakhstan and Belarus. The project requires significant funding – an estimated $8tn between 2010 and 2020 alone. The China government announced several commitments including a $40bn Silk Road Fund to be focused on projects in the Central Asia region, a $50bn Asian Infrastructure Investment Bank (AIIB) and a $10bn BRICS-led New Development Bank. Some sources suggest that Beijing is prepared to support the projects to the tune of between $160bn to $300bn. The China Development Bank and the Maritime Silk Road Bank are set to reinforce such support. The New Silk Road project needs to overcome technical and regulatory challenges. The trains require at least two changes of gauge – as China and Europe use the standard of 1435 mm gauge while Belarus, Russia, Mongolia and Kazakhstan use the broad gauge of 1520 mm. Many borders need to be crossed. Customs clearance processes need to be standardised – advanced information technology and digitisation might help. Ideally, the New Silk Road will become a free-trade corridor. Each country needs to understand what to contribute, such as what infrastructure and policies to launch, how to finance the initiative and what benefits to be expected from the investments. A well-designed business model which features a plan outlining how the Silk Road will work is critical to ensure that additional value – new businesses, new industries and new jobs – is created along the entire value chain and not merely at both ends (China and Europe). Imbalances in economic strength and the flows of goods – China exports are traditionally stronger than those of most of its trading partners – and seasonality like slow months and peaks need to be factored in the model. The success of the New Silk Road depends as well on clear governance rules and mechanisms. This includes the answer to the question of whether this project requires an independent organisation or can handle strategic decision-making and dispute resolution in a bilateral or multilateral way. The incentive to get this right is huge. The participating countries will be able to tap in a new source of growth and need to balance spending with progress. Currently, China is carrying the lion share of the investment. In return, Asia’s leading economy expects significant stimulus for its market and favourable ties with countries along the belt. The private sector will leverage the potential and increase investments proportional with the improvements in infrastructure and processes. If successful, the reboot of the ancient Silk Road will without doubt bring additional growth opportunities to business and nations, and provide also better access to no less than 66 per cent of the world’s middle class, which is expected to live in China by 2030. Wolfgang Lehmacher is head of supply chain and transport industry at the World Economic Forum and Victor Padilla-Taylor is community lead, supply chain and transport at the World Economic Forum Other sources: ECFR. (2015). One Belt, One Road: China’s Great Leap Outward. European Council on Foreign Affairs
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The road to innovation can be found both in our corporate and personal lives. And in spite of the many sacrifices, risks and discomforts that often accompany this process, especially at its start, for those who remain humble and open to the vision of bettering themselves this can bear much fruit. The “fuzzy front end” is a concept in new product development that explains how many ideas for innovative products and services go through an “intrinsically non-routine, dynamic, and uncertain”[i] phase. But with discipline and courage to navigate the stormy waters, high achievers manage to find direction through ambiguity towards the goals to which they have committed themselves to pursue. Often times, these leaders pave a new way for many more to follow. And whether the goal is constructing the new image for the Camaro or engaging your family in a new challenge outside of your home country, the stakes are high and you must stay focused. An example to the above, Mr. Douglas Houlihan, a 30-year old veteran for General Motors Company (GM), and its current Executive Chief Engineer and South America Product Leader, recently took time from his busy corporate agenda to share with the Master of Advanced Management (MAM) cohort some of the anecdotes and lessons that illustrate what it means to live a life of continuous innovation. As part of the Colloquium Series for our program, he candidly shared with us the details of his long career with this iconic American company that has recently recommitted itself to ride a new wave of innovation into the future while displaying “a renewed passion”[ii]. This future certainly looks promising, but it is also uncertain. General Motors faces tough competition from its industry peers. But the confidence that emanates from Mr. Houlihan and the members of his team (one of them, our classmate, Rodolpho Campos from Brazil), is unfaltering. The promise, of course without disclosing any spoilers, is that exciting things are coming our way out of GM's engineering teams, which seem to be the distinctive function in a company where the new culture excels in “knowing its numbers”, a feat that Mr. Houlihan clearly demonstrated while naming for us many of the detailed specifications of each car that he has helped to design: speed, power, torque, transmission. His excitement was obvious to all as he first ran his prepared presentation to later he give way to a more relaxed conversation that allowed us to go deeper and more intimate over cases of success and areas of improvement within his company. The topics that Mr. Houlihan addressed were very broad, as it is usual in this kind of meetings, with tough questions from an engaged global audience of classmates from Italy, Israel, Egypt, China, El Salvador and Nigeria, to name a few; questions about GM’s financial results in emerging markets, recalls, sustainable operations and leadership integrity and styles. But there was also space for exchanges with some of our American peers that had grown knowing and loving the old brand, but who recognized that there is true customer appreciation for the evolution of the new GM brands: "I used to have the Chevy Impala model for years; but after you changed it, what a sweet ride", said Sterling Grey from New York. For the man behind the re-launch of the Camaro brand, “the Legend Reborn”, the explanation for this success was to stay away from being fixed in the past, for there is always an opportunity to bring new hotness to the market, or the meanest-street-fighting dog”[iii]. A more recent example is the Chevrolet Bolt, the new EV (electric vehicle) with a 200 miles-plus range, that was just revealed this January and promises to be the new thing from GM to compete in an increasingly difficult market segment. However, these successes are not produced by accident. Product design must have an orientation that is needed especially at the fuzzy front-end. For that, Mr. Houlihan shared with us many insights, among them, the following: You need to start with the customer, not with what matters in the industry, and this takes vision and inspiration. Each segment needs the right product, the right performance (as in ‘let the car speak for itself’), and a little show time (as in the robotic movie series The Transformers where the car actually speaks for itself!). And it takes team work, the modern kind that requires you to think globally, and leaders who are willing to make the necessary sacrifices to be on-site for the management of the nuances of these teams instead of sitting in a comfortable chair in the headquarters of a developing country. For those challenges, where coordination is difficult, you cannot fake enthusiasm. Real leaders will listen, work together and build trust. At GM, as with a quest to prove that his company has really changed its old ways[iv], Mr. Houlihan has walked the talk. He moved overseas to Brazil with his family and continues traveling the world to understand the complexities of the new emerging markets that have become very important to the Detroit company.
But all this took courage from Mr. Houlihan, professional and personal. On the latter, it was clear by mentioning his family several times that his decision to relocate in another country was not an easy one to take, for as a global executive, even having very special moments away from your duties to enjoy for example a college Basketball game with his dear ones, he also recognizes the importance of being close and “here-and-now” when it matters. I personally relate to this situation, as I am sure that many of my MAM classmates also do, because we took similar decisions around our families in order to come to Yale to earn an additional master's degree. It does feel sometimes like being in the midst of this fuzzy front end with its dynamic uncertainties. And the toils and rigor that we and our families face while studying in one of the most successful business schools in the world may consume at times all your energy and power, and make you feel unresourceful, especially when results are different than the estimates you prepared beforehand. But we know that we can come out of these challenges with stronger relationships, not weaker, as Mr. Houlihan expressed so passionately. In conclusion, finding new roads may be a challenge that not many people are willing to take. And the fuzzy and messy road of innovation may be too much to bear for some professionals. But as Mr. Houlihan has proven throughout his whole career, in a manner that sounds very much alike to that of my Class of 2015 of the Master of Advanced Management, those who take chances and do not make excuses for the opportunities in front of them can become this new generation of professionals that will have a greater impact in this highly interconnected world. Thank you, Mr. Houlihan, for visiting our cohort at Yale and for being an example of a successful leader transiting this path. We wish you the best of luck in the bright future that will surely come for you and General Motors. [i] Kim, J. and Wilemon, D. 2000. Focusing the fuzzy front–end in new product development. R&D Management, 32: 269–279 [ii] Mary Barra, CEO General Motors Company. 2014. At https://www.youtube.com/watch?v=0sVQoi3ab00 Seen Feb 8, 2015 [iii] Tom Peters. 2009. Camaro Legend Reborn. [iv] General Motors Corporation filed for bankruptcy in 2009 to give way to the new General Motors Company. This past December the 2nd was indeed a very enriching day.
Early that day, had the privilege to attend an open event where no other that President Jimmy Carter spoke to the Yale community at large about stories and themes of interest to both the global citizen that populates New Haven and to every member of our university: Inequality, violence and the deep roots of injustice that women and girls suffer in many places around the world… places like Africa. But the learning did not stop there as I had the opportunity to continue the same dialogue later that day with two great women from "the continent", as these professionals refer to Africa, a region to which they have devoted their lives and work. Biola Alabi, 2014 Yale World Fellow, and Rachel Nyaradzo Adams, Associate Director for Africa at Yale, were our speakers for the Colloquium Series that candidates for the Master of Advanced Management at SOM have the opportunity to meet in very private, intimate settings. So, it is by connecting these sequence of events that I invite you in this blog post to reflect on the sentence that serves as its title, thanks also to the advice from Rachel Adams to read a book from Adam Kahane called “Power and Love: A theory and practice of social change” that speaks about the importance of the desire to achieve one's solitary purpose. When during our conversation that night our speakers were asked about how the world is telling Africa's story, they (and some of my classmates from those countries) firmly stated that they did not like the narrative that is being presented about this region. Even knowing that there is always a gap between our western news and what really happens on the ground in that part of the world, I was surprised to see that I did not listen from Biola or Rachel any soft or politically correct complaint about the matter but rather I heard strong and powerful directions for all of us over the need to change the lenses by which we watch the realities of Africa. What I heard were firm, even corageous declarations from these professionals about how we need to stop our traditional approach if we really want to understand their continent. Adam Kahane speaks in his book that for real change to happen in our societies, you need to combine or alternate the exercise of love and power to develop our pathways to better interactions in our families, our work and communities. And he clarifies that this power is needed in its generative change, not as a force of destruction . Therefore, it is under that framework and understanding that I come to appreciate the comments from our speakers, and the value of other experiences shared by them during our encounter, as the anecdote that one of them told us about being hired by a prestigious firm because she was angry enough to speak up about racism in South Africa. I believe that we also fall prey to the biases and the propaganda elaborated by others for the masses. And sadly, entire generations go about without noticing the lost opportunity of "presencing" where we truly stand as a society, a state of awareness that Adam Kahane identifies as the pre-condition for real and lasting change and innovation. So I wonder now: Who tells your personal story? As business graduate students look attentively into the recruitment process and a job offer for after our academic programs, this “personal story” question is in fact the inquiry that we are presented a lot with. May it not be that, while preparing ourselves to work in X or Y company around the world, we fall prey to accepting the story about us that is told by that someone else whom we want to please. If this is so, it will be a tragedy for us and for the social groups that await for us as potential leaders for the future. But if you dare to be a bit angry, brave, courageous, resilient and powerful enough to tell our own story and not letting others decide it for us, the results will be extraordinary. The name of the course was “Natural Capital: Risks and opportunities in global resource systems”, and it truly represented to me the unexpected door to an incredible array of new opportunities for my professional and personal development. Just a few months back, during December of 2013, I was an MBA student from Pontificia Universidad Catolica de Chile that had just received an invitation to join a group of international students in a pilot effort, an online course, that promised to raise our awareness on matters of sustainability and the environment. But, the call from Brad Gentry, Professor and Co-Director of the Yale Center for Business and the Environment, led us beyond this initial expectation into a rich and collaborative environment where we were challenged to explore new approaches to global issues and to connect with peers from other top business schools and executives from companies around the world that were in search for real solutions to these huge problems. Therefore, through this course, I was also introduced to the Global Network for Advanced Management (GNAM), which is a nascent community that links 27 of the world’s best business schools and shares the goal of educating the future leaders for a truly globalized planet, and the World Business Council for Sustainable Development (WBCSD), a CEO-led organization that lines up more than 200 forward-thinking companies, all of them committed to create a sustainable future for business, society and the environment. The format of the course was impressive and very different in many ways from the massive, online academic offerings that have been around for many years for popular consumption: 1) This was a SNOC (Small Network Online Course), a carefully tailored program that allowed multiple interactions between the 41 student-participants and the more than 20 different speakers, professors and teaching assistants that were fully engaged with our training. In addition to the two weekly video conferences, and many other private video meetings arranged in smaller teams, we had chats, discussion boards, multiple sharing tools (academic and social) and even online office hours, with the objective of making this investment of time well worth it for all. 2) As working in global teams was one of the main goals of the course, we were assigned to different student groups in each half of the semester, with the purpose of reviewing two “raw cases”, or business dilemmas, that important companies around the world were facing in their management of natural resources: Coca Cola with water, General Electric with energy, Alcoa with materials, Dow Chemical with natural areas, GAR with food and Swiss Re and finally Oxfam America with climate change. But performing an academic exercise was thought to be not enough engagement for the group: We were also given the task to combine our newly acquired knowledge and the tools that we had learned during our time in business school to design and present real solutions to executives of these firms, in a truly unforgettable opportunity for all of us. 3) We concluded the course writing, from the point of view of our different geographical locations, a personal assessment on the applicability of the Action 2020 platform that was developed by the WBCSD, the Stockholm Resilience Center and the World Resources Institute, as a vehicle for business action in nine priority areas of sustainability around the planet.
Therefore, I can confidently say that this course was not an ordinary course, for ordinary business professionals, or for ordinary times. This was much more personal, close, intensive, collaborative and transformational, a huge impact to our lives. Accordingly, after my completion of the Natural Capital course in May of this year, I decided to continue this journey of training, exploration and work in the midst of this thriving and highly-connected community by joining the Master of Advanced Management program at Yale and the Center for Business and the Environment (CBEY), where as a Research Student I work in developing specialized training for business leaders and in promoting entrepreneurial activities among students and faculty members of the Global Network for Advanced Management. Let me finish this review by asking you: What are you waiting to start your own journey? Be the most connected, join GNAM and enroll in the course Natural Capital: Risks and opportunities in global resource systems. It will be truly transformational! New Haven, Connecticut. I am ready to go home after a full week of studies at Yale University where 76 MBA students from around the world shared lectures and group work around the themes of Marketing and Behavioral Economics. Here is one take away for me after this notable week at one of the best universities in the world :
MULTI-FRAMING: The volume of information we handle every day increases too rapidly. And in our desire to maintain ourselves current and decisive, whether we are conscious of this or not, we do some personal FRAMING to gain a sense of control and consistency when we take decisions on a daily basis. Professor Nathan Novemsky, from the Yale School of Management, defined FRAMING as the process that we follow to establish LIMITS to our problems and points of references for our solutions to them. But moving away from a single-framing model to what is called MULTI-FRAMING is a much better process that includes the views of other people and reduces the odds of myopic choices. But, as with all remedies to diseases, this practice must be carried out with care in order to know where to stop between the continuum between our own views and those of others. The following example on how new customers could be approached for a new business illustrates us why: FRAME#1 People in Norway do and complete much of their work only in the office. FRAME#2 If a business is attractive and the parties become sufficiently familiar with each other, the way to get things finally could be over a Chinese-style dinner. FRAME#3 If you are Turkish, a thermal bath could be a better approach before negotiations. FRAME#4 And for people from Spain or Latin America, a much lighter pathway could be better (as in: "Let's party first, then we talk business!"). Then multi-framing saves us from traps such as: a) Misunderstanding: Very frequent in team members from multinational cultures. b) Poor analysis: More ideas on the table produce better solutions. c) Temporary solutions: Seeing all the angles of a matter pushes the decision-making to be sustainable among multinational teams. And, multi-framing also carries some nuances that we are to be aware of in order for it to work: #1) Listen, but do it smart. Politicians, before they are elected, promise that they will listen to everybody. However, when they do get elected, they learn the hard way that they cannot listen to everybody. Solve this problem with a clear agenda, a plan. And be clear in where you want to go. #2) Not all framing based on past success is bad. During our visit to New York this week, Credit Suisse executives told us that, in spite of the setbacks produced by unruled executives during the recent financial meltdown, they STILL need people with a bit of greed in their guts and the desire to make money. Alternative frames would damage this culture of effectiveness and the keen eye for business. #3) Too much information can be damaging the for decision-making process. Be selective, use the Pareto rule and consider a low-information diet (Tim Ferriss, The 4-Hour Workweek) for your work from time to time. My conclusion is that multi-framing is a good tool to be aware of, specially in our globalized environments. But in order for it to make its magic, it should be used with care.
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AuthorVictor Padilla-Taylor is Director of Networks at the Tsai Center for Innovative Thinking at Yale. He was the 2021 recipient of the Linda Lorimer Award for Distinguished Service, conferred by Yale’s president on staff who have demonstrated their commitment to innovative thinking and the educational and research missions of the university. He also serves as board leader at Global Consortium for Entrepreneurship Centers, Long Wharf Theatre, Yale SOM Alumni Advisory Board, and Saint Thomas More Chapel and Center at Yale University. For his accomplishments as alumni volunteer, he received the 2023 Yale Alumni Leadership Award for his service and innovative leadership as nominated and selected by alumni relations staff members. AlpsBoundA global soul with MBA experience from GNAM schools around the world Archives
October 2023
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