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​In June 2016, the World Economic Forum issued a document called "Systems Leadership and Platform Engagement Opportunities". The document was written to promote our aspiration to use a systemic approach while working to close the many gaps that exist in global systems today from trade to long-term investment, from healthcare to food security, or from energy to natural resource security and the environment. After my training on systems practice by the Omidyar Network, I will be attempting to merge the Forum's aspiration with the mindsets, processes and tools that I learned. What follows is an initial reflection on trade supported by its corresponding systems map.

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Established in 2007 as the foremost global gathering on science, technology and innovation, the Annual Meeting of the New Champions convenes the next generation of fast-growing enterprises shaping the future of business and society, and leaders from major multinationals as well as government, media, academia and civil society. The hosting city, Tianjin, in the People’s Republic of China, became part of the global community of innovation by convening more than 1500 participants from 90 countries for a true global experience addressing today’s unprecedented set of intertwined global challenges – economic, political, societal and environmental.

CLICK HERE TO WATCH A VIDEO ABOUT THIS IMPACTFUL PARTNERSHIP

The Logistics Emergency Team (LET) unites the capacity and resources of the logistics industry with the expertise of the humanitarian community to improve emergency response to large scale natural disasters. First facilitated by the World Economic Forum in 2005, it is the first partnership of its kind, and formalizes cooperation between the private and public sector. Image source: GettyImagesNews

To be effective in dealing with a major, multifaceted problem such as a humanitarian disaster, you need an advanced set of skills and a trained mindset to think systemically and creatively. In my role at the World Economic Forum supporting the Logistics Emergency Teams (LET), I have found that my time as a student at the Yale School of Management provided me with the knowledge and skills that I need for such a complex undertaking.

According to the United Nations, last year there were 128.6 million people affected by conflict, violence, and disaster in the world. Among those numbers, 96.9 million required humanitarian assistance–three times more than 10 years ago. This means that global humanitarian financing has surged to unprecedented levels, or $22 billion a year, raising the need for more efficiency and accountability in how this assistance is provided.

One of my courses during my time at SOM was Supply Chain Management. Professor Sang Kim taught us how to better manage the flows of materials and information among all stakeholders involved in fulfilling the needs of end users like beneficiaries of humanitarian assistance. When you consider that between 60 and 80% of emergency response spending is related to logistics you can easily understand how important it is to master strategic- and operational-level supply chain problems and quantitative tools.

Another course that provided me with key insights for my current work was Managing Social Enterprises. Impact measurement is a central concern among stakeholders in the humanitarian community. I learned from Professor Kate Cooney how to establish assessment frameworks with indicators that validate our social efforts both for the short and long term (this is called “theory of change”). I also learned about how to prioritize competing stakeholder claims, going beyond just identifying each of them and understanding the dynamics inherent to each relationship (this is called “stakeholder theory”). While deploying assistance to populations in need, you often find yourself mapping key players in your work at the global, country, and individual levels. When disaster strikes, you can face millions of affected people–hundreds of thousands of whom are displaced–and hundreds of organizations coming from all around the world to assist in response. Understanding the disparate needs of all involved—and how to manage them—is crucial.

Take one example: Super Typhoon Haiyan (also called Yolanda), the strongest recorded storm, hit the Philippines in 2013. It caused $2.86 billion in damages to the region and left 1.9 million people homeless and more than 6 million displaced. In disasters like this, how can the humanitarian community respond effectively? How do you restore the broken supply chains and swiftly close the gaps while coordinating with so many different parties at the global and local level?

As l learned during my class Global Challenges with Professor David Bach, crises of this magnitude require the close collaboration of business and society and personal, sustained efforts to overcome unique cultural challenges and to combine the efforts of multi-stakeholder ecosystems crippled with vulnerability. I am glad to have been thoroughly informed of all these approaches during my time at Yale SOM.

I learned about profit, planet, and people during my training in school. Now I feel fully capable of catalyzing tangible action on the ground and serving as a bridge between public and private sector players during collaborative initiatives that surpass the laws of competition when disaster strikes. This has become my passion, and I realize how meaningful my choice of business school was in preparing me to help save lives around the world. I wish everyone else reading these notes the same fortune.

This blog entry was first posted at som.yale.edu

By Wolfgang Lehmacher and Victor Padilla-Taylor, World Economic Forum, first posted in businessinsider.com
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You may not be alone these days if you believe that Donald Trump will build a wall between the US and Mexico as President of the United States. But rather than paying for it, we could see Mexico in the future breaking down a separate wall that is already creating frictions with the US: the wall of invisible trade barriers.
Two former Presidents of the Latin American nation, Vicente Fox and Felipe Calderon, said in March that there is “ no way ” Mexico would ever pay for such a wall. “We are not going to pay any single cent for such a stupid wall!” Mr. Calderón said. Since Mr. Trump has also rallied against the North American Free Trade Agreement (Nafta) – calling it a “ disaster – it doesn’t take a rocket scientist to figure out how Mexico’s government would feel about any change to the 22-years old trade deal.  
Instead of only resorting to defensive rhetoric, today Mexico can play offense when it comes to its border with the US. The truth is that in terms of its manufacturing and exports to the US, Mexico is still far from achieving its full potential, despite Nafta. Interestingly, the reason for this deficit is much less the often zealous US customs and border agency, but Mexico’s own non-tariff barriers, bottlenecks and shortcomings in trade.  More than half of the labour cost advantage that Mexico has over the US is estimated to be lost because of supply chain barriers.
Therefore, Mexico could unilaterally take a number of ‘wall-tumbling’ steps which would all but guarantee higher exports of key products to the US.
Take for example the medical devices industry, a sector which exported $7.7 billion worldwide in 2014 and which sells mainly to the US.  Just in this niche sector, removing specific non-tariff barriers throughout the end-to-end value chain could generate up to $1.5 billion in economic growth per year for Mexico.
For this and other industries close to the ‘tipping point’ of competitiveness in the global market, Mexico could reinvigorate its economic engine by supporting actions in four specific areas:

• Market Access:   Increase the knowledge of foreign opportunities and requirements for small and mid-sized enterprises by creating a portal that integrates all the support programmes (financing, intellectual property protection, market data, etc.) from the different government institutions.  
• Border administration:   Standardize the interpretation of rules customs offices with a bold move towards more automated processes that eliminate inconsistency.
• Infrastructure:  Reduce damages and delays at highway checkpoints by increasing the use of non-intrusive inspection technologies and ensuring strong coordination among enforcement agencies to limit the number of stops and frequency of inspections.
• Operating environment:   Conduct analyses to understand the root causes of process inefficiency in complex regulatory processes and develop an action plan to optimize end-to-end process.  

In trade just like in warfare, generating and maintaining ‘an edge’ over rivals depends on our understanding of the complexities of engagement.  The problem with the wall, as with common trade-promoting measures promoted by governments, is that it leaves its proponents with doubts about its sufficiency to reach the proposed goals.  With highly focused measures such as those listed above, and with the committed participation by the private sector, Mexico can successfully face its trade challenges to unlock much needed economic growth, while reducing and not creating unnecessary costs.
Trump’s wall is said to cost between $8 to $300 billion depending on which side of the argument you listen to when searching for the expense of the measure.  Surely much more value can be extracted from tumbling down barriers in trade, instead of doubling-down on this temporal narrative for an electorate looking for leadership.

​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

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.
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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
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Other sources:
ECFR. (2015). One Belt, One Road: China’s Great Leap Outward. European Council on Foreign Affairs

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.