Nobel Laureate in Economic Sciences Elinor Ostrom discusses the challenges posed by the world's common-pool resources (CPRs) and how to approach collective-action dilemmas. She presents seven 'design principles' for well-managed CPRs and talks about some of the key challenges to implementing them, explains what 'nested attributes' are and describing the benefits of collective management and 'polycentric' systems.
The term 'complexity' can be summed up by the phrase, 'Two's company, three's a crowd'. Complexity Science can be seen as the study of the phenomena which emerge from a collection of interacting objects -- and a crowd is a perfect example of such an 'emergent phenomenon'. Everyday examples of crowds include collections of commuters, financial-market traders, human cells or insurgents -- and the associated crowd-like phenomena that emerge are traffic jams, market crashes, cancerous tumors and extreme weather. In each example, the precise nature of the crowd-like phenomena that emerges will depend on how the individual objects interact and how interconnected they are. In the end, the author shows that Complexity's role in making connections between previously-unrelated phenomena taken from distinct disciplines is a very important one.
In this interview from Rotman Magazine, the Wharton risk expert states that the hallmarks of the 21st century will likely be more and more unthinkable events, previously-unseen contexts, and pressure to react extremely quickly - even when we cannot predict the cascading impact of our actions. He explains the important role of 'creeping risks' and describes the three top risks for 2010, as outlined in his report for the World Economic Forum: underinvestment in infrastructure; fiscal crises; and chronic disease. In the end, he explains one of the key ironies of living in an interconnected world: that being selfish today means taking care of others.
The periphery -- that 'fuzzy zone' at the edges of your organization's focus -- is where early signals of both threats and opportunities can first be sensed, the authors argue. Their study of more than 300 global executives found that 80 per cent felt that their organizations had less capacity for peripheral vision than they needed, and the majority of leaders in another study said that they had been surprised by as many as three high-impact events in the past five years alone. They describe how 'network reach', 'network capture', 'network speed' and 'network resilience' can be harnessed to contribute to strong peripheral vision.
In most western societies, the concept of choice -- and the ability to exercise it -- is seen as fundamental to people's sense of autonomy and well being. As a result of this 'choice is good' thinking, the number of offerings in a wide variety of product and service categories has increased significantly over time. For instance, compared to just 10 years ago, the range of products available in a typical North American supermarket has increased by 55 per cent. The author describes five strategies for dealing with 'overchoice', including 'organizing and eliminating options' and 'encouraging attribute-based decision making'.
Some organizations - including Google, Pixar and Cirque de Soleil -- appear to thrive in ambiguity. The authors, senior consultants at design strategy firm Jump Associates, have a name for them: exploratory organizations. They describe five basic characteristics of exploratory organizations, including empathy and 'hybridity', and argue that by infusing their groups with some of the best practices of these organizations, leaders in any industry can dramatically increase their success at solving their most pressing challenges.
Whether they like it or not, business leaders will continue to be confronted with greater turbulence and uncertainty. The authors argue that the shift towards an environment characterized by rapid change, discontinuities and ambiguity necessitates three specific capabilities that are not readily apparent in many of today's organizations: taking an ecological perspective on the role of the organization within an interconnected web of interdependencies; helping people make sense of the events and rapid changes they are experiencing; and understanding and working constructively with acute anxiety states. They describe each skill in detail and show that we are experiencing a paradigm shift for how many of us think about leadership.
Although precise numbers are difficult to obtain, the United Nations reports that 2.5 million people are trafficked each year. Approximately 80 per cent of victims are women and girls, with most engaged in the sex trade. The authors, members of the Massachusetts General Hospital Initiative to End Slavery, conducted research in eight metropolitan areas: New York City, Los Angeles, London, Manila, Mumbai, Kolkata (India), Rio de Janeiro and Salvador (Brazil), interviewing hundreds of health workers and anti-trafficking leaders. Based on their research, they make four recommendations for global businesses, who they encourage to exercise leadership in the effort to eradicate human trafficking.
As CEO of not-for-profit adoption agency The Cradle, Julie Tye had taken the organization from the brink of dissolution in 1992 to a position of financial stability and health by 2007. One of the innovative steps Tye took in 2002 was to introduce an online learning venture that provided education for families preparing to adopt. The Cradle launched Adoption Learning Partners (ALP), using donated funds and government grants when possible and subsidizing the rest. The income generated by ALP grew from zero in 2002 to approximately $50,000 per month in 2007. But ALP's major market (parents preparing to adopt internationally) was forecasted to decline 50% over the next three years; the Web site was outdated; and new competitors were entering the market. ALP had built a reputation as a pioneer in adoption e-learning by providing high-quality, effective online courses. But without the infusion of at least $400,000, ALP risked losing its leadership position and, possibly, its viability. ALP needed a significant investment of time, talent, and funding. Tye had an MBA, a keen business sense, and fourteen years of experience in healthcare administration and the social services field. Even with her leadership, did The Cradle have the appetite to take on such a demanding strategy? In the end, would it be worth the investment?
The Namaste case is a story of how Kellogg alumni couple Gary and Denise Gardner grow their Namaste-branded hair care line from production at the family's kitchen table into a formidable $80 million empire within a 14-year period. The Gardners come from a longtime hair care business lineage, the Soft Sheen dynasty, started by Gary's father decades earlier. Soft Sheen was ultimately sold to hair care giant L'Oreal for over $100 million. The Gardners claim Namaste's growth occurred through listening to the needs and desires of customers for healing hair care products that reminded them of nourishing household remedies. The hair care line became a leader in its industry but faced the dilemma of how to expand sales in new markets, especially international markets such as South Africa and Nigeria.
Swartz awoke on June 1, 2009, to find the first of what, over time, would amount to 65,000 angry e-mails accusing Timberland of destroying Amazon rain forests and exacerbating global warming. The senders were reacting to a Greenpeace report alleging that Brazilian cattle farmers were illegally clearcutting forests to create pastures, and leather from their cows might be winding up in Timberland's boots. Swartz and his team had to craft a response immediately: The brand's reputation was at stake. He realized that the underlying question-Where did Timberland's leather come from?-was legitimate, and that he didn't know the answer. The idea of tracing hides back from tannery to pasture was daunting, but he saw the issue as a battle for the hearts and minds of environmental activists. The company opened a dialogue with Greenpeace and worked with its Brazilian supplier to get the origin of its hides certified. Meanwhile, Swartz made sure that all those e-mails received replies. In the end, Timberland praised Greenpeace for bringing the issue to the industry's attention, and Greenpeace acknowledged that Timberland had taken a leadership position on it.
Individual judgment and initiative are essential to the success of the modern capitalist economy. At the same time, rules and centralized systems are needed to bring order and prevent waste. Balancing decentralization and command-and-control modes of decision making has always been a struggle, and organizations have experience managing the tension. In recent times, though, a new form of centralized control has taken root: mechanistic decision making based on top-down statistical models and algorithms. This has been especially true in finance, where risk models have replaced the judgments of thousands of individual bankers and investors, to disastrous effect. The problem with the statistical approach is that it cannot adequately account for the uncertainty inherent in economic decisions or the idiosyncratic nature of human activity. What finance in particular needs is a return to judgment. The author offers some broad guidelines for this: Computerized controls work best with inanimate products and processes that can be physically shielded so that the variations of conditions can be minimized. Computers also shine when, like the configuration of pieces on a chess set, the number of possible outcomes is vast-in fact, this vastness often gives the computer its edge-but they all conform to well-specified rules. Conversely, human judgment is favored when shielding is difficult, outcomes are ambiguous, and the possibilities are open-ended. Ultimately, however, the "right-sizing" of judgment is itself a matter of judgment.
The citizen sector, composed of millions of groups worldwide that are attempting to address critical social needs, has long been regarded as understaffed and inefficient. But it has grown and matured over the past three decades, say the authors, both of Ashoka: Innovators for the Public. Citizen sector organizations (CSOs) are attracting talented and creative leaders, and their work is changing the game in critical industries such as energy and health care. For-profit companies now have an opportunity to collaborate with CSOs to create new markets for reaching the four billion people who are not yet part of the world's formal economy. The power of such collaborations lies in the complementary strengths of the partners: Business offers scale, expertise in manufacturing and operations, and financing. Social entrepreneurs offer lower costs, strong social networks, and deep insights into potential customers and communities. The authors call this framework the hybrid value chain. In one example, Colceramica, a Colombian manufacturer of kitchen and bathroom tile, collaborated with the human-rights organization Kairos, which recruited and managed a sales force of previously unemployed women, to reach a low-income market. Within three years sales had grown to nearly $12 million; the living conditions of more than 28,000 families had been improved; and 179 saleswomen were each earning $230 a month.
Entrepreneurs can play a central role in finding solutions to the world's toughest social problems. The failure rate for start-ups, however, is high. And new ventures in emerging economies face such challenges as uncertain prices and costs, nonexistent or unreliable infrastructure, and unpredictable competitive responses. The authors offer guidelines for launching successful businesses in uncertain markets. One of those guidelines, discovery-driven planning (a well-known process developed by MacMillan and Rita Gunther McGrath), helps managers test their assumptions about preliminary business models and revise them on the basis of emerging data. The remainder were informed by the authors' efforts, with the Wharton Societal Wealth Program, to help launch socially beneficial ventures in Africa and the United States. Those guidelines include outlining the minimum number of people a venture should serve and the minimum level of profitability it should achieve; identifying important stakeholders; planning how to terminate the venture in an acceptable manner; and anticipating unintended consequences of the enterprise. The lessons aren't just for entrepreneurs. The management teams of multinationals, foundations, and NGOs can apply them to any challenging and highly uncertain business situation. In doing so, they can better control their costs, minimize the effects of surprises, and increase their impact on society.
The popular take on entrepreneurs in the developing world is that they are few in number and run only microbusinesses. But in a two-year study of entrepreneurship in emerging markets, Habiby and Coyle, of AllWorld Network, uncovered hundreds of high-potential ventures poised for significant growth. Many were in surprising markets like South Africa, Saudi Arabia, and Jordan-economies dominated by top-down government policy, large business groups, and social elites. The ventures AllWorld encountered were far from microenterprises. They included companies like Bayt.com, the leading job search site in the Middle East, which attracts 4.5 million job seekers; and Airblue, of Pakistan, the world's first totally paperless airline. They generate large numbers of jobs, create industries, and open new markets. When it comes to educational and employment backgrounds, the entrepreneurs running these companies look just like their Western counterparts. But notable differences do exist: The company builders that AllWorld identified in emerging markets launch 25% more businesses; they have higher success rates; and the vast majority are serial entrepreneurs. These ventures represent new channels for growth for multinationals and investors. For developing nations, they could be the path to progress and prosperity. To realize their potential, however, these firms need global customers, talent, and capital, and that means getting on the global radar screen.
Though companies now invest heavily in mentoring and developing their best female talent, all that attention doesn't translate into promotions. A Catalyst survey of over 4,000 high potentials shows that more women than men have mentors-yet women are paid $4,600 less in their first post-MBA jobs, hold lower-level positions, and feel less career satisfaction. To better understand why, the authors conducted in-depth interviews with 40 participants in a mentoring program at a large multinational. All mentoring is not created equal, they discovered. Only sponsorship involves advocacy for advancement. The interviews and survey alike indicate that, compared with their male peers, high potential women are overmentored, undersponsored, and not advancing in their organizations. Without sponsorship, women not only are less likely than men to be appointed to top roles but may also be more reluctant to go for them. Organizations such as Deutsche Bank, Unilever, Sodexo, and IBM Europe have established sponsorship programs to facilitate the promotion of high-potential women. Programs that get results clarify and communicate their goals, match sponsors and mentees on the basis of those goals, coordinate corporate and regional efforts, train sponsors, and hold those sponsors accountable.
Again and again, senior managers fall into four behavioral traps that thwart organizational change. The behaviors are difficult to recognize and reverse because they serve to protect egos and prevent anxiety-but executives can overcome them. First, managers fail to set proper expectations. When they announce major directional changes or new goals, they don't spell out credible plans or specify who's accountable. Second, they excuse subordinates from the pursuit of overall goals, allowing people to remain preoccupied with their own units. Third, executives essentially collude with staff experts and consultants by going along with a deeply flawed contract: The experts agree to deliver and implement a "product" (a new system, for instance) but don't include measurable gains as part of the deal. Fourth, managers wait while associates overprepare. After challenging their employees to make needed improvements, they accept the response "Yes, but first we have to..." Finish the sentence: Train our people. Set up focus groups. Bring in Six Sigma. And so on. The best way to confront the traps is to conduct small personal experiments that rapidly produce tangible results, incur little risk of failure, and are confined enough to demonstrate a clear link between trial and outcome. For example, one iron plant addressed quality problems by targeting five areas for improvement, setting clear and measurable goals for each, and holding team leaders accountable for outcomes. All five experiments succeeded and were extended to the rest of the plant. Quality problems eased up within 100 days and virtually disappeared a few months later.
The Innovation Consultancy, a small team within the health care provider Kaiser Permanente, practices an expansive, service-focused version of innovation that is both rapid and economical in comparison with the conventional version. The team's members observe how health care providers interact with one another, with technology, and with patients, and how the patients respond. They take photographs, draw pictures, write stories, and try to capture experiences from the point of view of everyone involved. During KP MedRite, a project to reduce the error rate in dispensing medication to hospital patients, the team asked nurses what they thought was wrong with the dispensing process. The nurses usually replied, "Nothing." But when given a chance to make self-portraits, they would draw themselves with sad faces and frazzled hair. Interruptions appeared to be the leading cause of errors-so one of the resulting innovations was a bright yellow sash signaling that its wearer was not to be disturbed. KP's Chris McCarthy founded the Innovation Learning Network to accelerate knowledge transfer among peers in the nonprofit health care industry. One promising process that has emerged, Inflection Navigator, helps patients who've received a frightening diagnosis handle the consequent urgent tasks-follow-up tests, visits to specialists, decision making about treatment and care-with the aid of care coordinators. This innovation and others like it arise from a brand of creativity that transcends the media version of the health care debate.
Competitors from the developing world are rising fast. Will they come to rule the global economy? Not necessarily, say Insead's Black and Morrison, who argue that today's emerging giants look an awful lot like Japanese corporations in the 1990s. Japan's star has since fallen, and the country no longer dominates the Global 500 as it once did. Drawing on 25 years of research, the authors found that four factors drove Japanese firms' early export growth: strong corporate models and cultures; a domestic market isolated from competition; an agreeable labor force; and cohesive, homogenous leadership. But when the firms moved into foreign markets, those strengths became downfalls. Entrenched in their corporate ways, they were too narrow-minded to look for local insights, and they lacked leaders who had international knowledge. They were also unprepared for contentious overseas labor relations and the sophistication and expertise of their global competitors. To avoid Japan's fate, emerging giants must change their business models, reduce their reliance on protected domestic markets, learn to cope with diverse labor, and shake up their leadership.