iPlot

India: Urgent Emergence

This was India’s year. Obama visited, as did Sarkozy, and many other statesmen of lesser political weight or star appeal. With an annual growth rate of close to 8.9% and foreign direct investments projected to exceed $100 billion, the booming Indian economy defied the global recession. For the first time ever, eight Indian companies made it onto the Fortune 500 global list. And even PR crises like the ill-organized Commonwealth Games and political corporate scandals that were an easy target for India’s cynical media did not eclipse the nation's staggering rise – in fact, these events just seemed to magnify the spotlight. Without a doubt, the sub-continent became ready for primetime in 2010, and to many outside observers a new confidence appeared to take hold of India’s economic and intellectual elite.

This year also marked my first visit to India. I had the privilege of assuming leadership for a team in Gurgaon (New Delhi), Bangalore, and Chennai, and to immerse myself in a country I had never been to before. I vividly remember the first five minutes after my arrival at Indira Gandhi International Airport in Delhi in September, the dusty air, the thick fog, the vanilla scented perfume tree in the car, and the calm driver whom I, for lack of any alternative, decided to wholeheartedly trust as he was racing me to my hotel amidst the polyphony of honks. Other countries are in your face or slowly creep into your soul with their mores, oddities, and sensations. India is around you, all the time. It is simple as the tourist cliché of itself (especially when you live in the airport-lounge-and-luxury-hotel bubble of the global business traveler) and yet complex as a vertical staggering of infinite parallel worlds which make sense each by themselves but fail to strike a consonant chord – like in the movie Inception.

When I attended the India Economic Summit in Delhi in November a few weeks after my first trip, jointly hosted (for the 26th time) by the World Economic Forum and the Confederation of Indian Industry (CII), President Obama had just passed through India, leaving an indelible mark on the Indian collective psyche with his now famous line that “India is not emerging, it has emerged.” The mood was bullish, if not exuberant, and many considered the visit a breakthrough moment for India. The economic reality had not changed but the awareness of the sheer scale of the opportunity ahead and the self-assurance that it might indeed be feasible to accomplish it, had moved to a whole new level, seemingly overnight. No wonder the optimism was palpable at the Summit.

The official theme was “Implementing India” but the actual theme that emerged during the three conference days was “Inclusive Growth” – how can India sustain its tremendous growth and at the same time narrow the social divide? While India’s growth numbers are impressive, many of the speakers acknowledged that its so-called “demographic dividend” (a term coined by Harvard demograph David Bloom) is a double-edged sword. By 2020 half of India’s population will be below 25, and it will account for 25% of the global workforce. But this demographic trend is unevenly distributed. India’s northern states, with their high fertility rates, are the main contributors to population growth (by 2025, the median age will be 26) whereas the south faces rapid aging (a median age of 34 by 2025). This means that “India’s demographic dividend is actually a double hump, one of which is already nearly exhausted,” Infosys co-founder Nandan Nilekan writes in his seminal book Imagining India.

This “double hump” makes capitalizing on the remaining, “unexpensed” demographic dividend rather urgent. Experts foresee a demographic disaster unless India’s young workforce is properly skilled and employable by global standards. Unfortunately this is far from being the case today: For starters, 300 million people live in extreme poverty, that is, they live on less than one dollar per day, and 90% work in the informal economy. 70% of India’s 509 million-strong working population has not received a primary education, and only 11% of those aged 17-23 receive a higher education. India has the lowest education indicators among the G20 economies and the world’s highest number of illiterate people. One of the main challenges for India will be to create jobs for the 270 million people expected to enter the working-age population over the next 20 years. Will these people become the world’s workforce, as some predict, or the world’s worry?

Sustainable growth, many argue, will come from frugal (or reverse) social innovation, through public-private partnerships that scale at the base of the pyramid. It is well known that IBM has more employees in India than in any other country, and many of India’s big IT outsourcing companies (e.g. Wipro, Infosys, Tata Consultancy Services etc.) have long been competing with multinationals. But no longer is India just the development center of excellence of the world or an emerging consumer market of massive scale; it is increasingly home to bottom-up innovations in areas such as energy, healthcare, and automotive, spurred by the urgency of structural change. Crisis has always proven to be a hotbed of innovation, and the need to improve the livelihood of a society is a powerful driver for entrepreneurship.

India is already the front of some radical product and service innovations such as the $3,000 car or the two cents per minute nationwide cell phone service. Moreover, with the deep penetration of low-cost telephony, the country’s emerging middle class could be a testing ground for the burgeoning mobile health (mHealth) technology market, in particular telemedicine and rapid diagnostic services. Globally, mHealth revenues are projected to grow by 25% annually, from $1.5 billion in 2010 to $4.6 billion by 2014. India is seeing many of its pioneering efforts, for example start-ups such as mDhil and eHealthpoints. The Indian healthcare industry, in general, is one of the fastest growing sectors of the economy, growing at 23% per annum.

A basic enabler of “inclusive growth” is to provide the rural population with access to information- and communication technologies and financial services. Although India is the second largest telecom market in the world and tele-density has increased to 56.6% in 2010, 44% of rural Indian households are still unwired, and of India’s 6,000,000 rural villages less than ten percent have a local bank branch. Microfinance, long heralded as an able solution to this shortcoming, has recently suffered a serious setback. The rapidly growing private microcredit industry faced imminent collapse when almost all borrowers in Andhra Pradesh, one of India’s largest states, stopped repaying their loans. Critics accused microfinance institutions of making “hyperprofits off the poor” by extending loans to poor villagers at exorbitant interest rates and without enough regard for their ability to repay. It will take some time for the industry to restore trust (and some more regulatory oversight from the state will help, too). But again, this crisis may spur much needed innovation in the Mobile Money space.

India’s villages are increasingly becoming a breeding ground for innovation, as its rural poor develop inventions out of necessity. Mansukhbhai Jagani, Mansukhbhai Patel, Mansukhbhai Prajapati, and Madanlal Kumawat, and three others are on a recent Forbes list of rural Indian entrepreneurs (compiled by IIM-Ahmedabad professor Anil K. Gupta) “whose inventions are changing lives” of the people across the country. Jagani developed a motorcycle-based tractor for India's poor farmers, which is both cost effective – costing roughly $318 – and fuel efficient. A farmer, Patel invented a cotton stripping machine that significantly cut the cost of cotton farming and revolutionized India’s cotton industry. Prajapati, a potter, invented a clay non-stick pan that costs Rs 100 and a clay refrigerator that runs without electricity for those who cannot afford a fridge or their electricity and maintenance costs. Madanlal Kumawat, a grassroots innovator with no more than a fourth-grade education, developed a fuel-efficient, multi-crop thresher that yields cleaner grains, which can be bagged directly and eliminates the cost of cleaning.

Design and design-driven innovation are quickly entering the business vocabulary here, too, and when I met with editors of business publications in Delhi a few weeks ago, their interest in design was as keen as their conviction that India will soon become a powerful innovation engine with global impact, propelled by a distinct national design style and a throng of young, ambitious, and fearless entrepreneurs. It will require a mix of national policy and education providing the economic framework, global design and innovation firms bringing quality standards and best practices to India, and – perhaps most importantly – Indian companies embracing design as a key differentiator and value-driver, with some quick and visible market successes.

Whether you’re strolling through Old Delhi or driving along the campuses of Bangalore’s IT firms, you can’t help but marvel at the tremendous pace with which the country and its people are happening. The whole country is on the move, which offers plenty of opportunities for upward social mobility but also disrupts traditional lifestyles and cultures. New high-rise developments for the burgeoning middle class (91 million urban households are projected to be part of it by 2030, up from 22 million today) stand in stark contrast to the poor villages right next to them, which are in the progress of upending their local identities and cultural roots. According to the United Nations Development program, it is expected that 41% of India’s population will live in cities by 2020, compared to less than 30% in 2010. That is 590 million people, nearly twice the population of the US today. A recent McKinsey report (“India’s Urban Awakening: Building Inclusive Cities, Sustaining Economic Growth”) estimates that 70% of net new employment will be generated in cities by 2030 and that 85% of total tax revenue will come from the urban economy.

Needless to say, that this migration will further contribute to stresses on the already insufficient infrastructure. McKinsey expects 68 Indian cities to have a population of more than one million by 2030 (up from 42 today vs. 35 in Europe). It warns that the current urban policy framework will lead to urban decay and gridlock. Today, India is investing eight percent of its GDP in infrastructure, which is a high number by international standards. And as much as $300 billion are forecast to be devoted to urban infrastructure over the next 20 years, a twofold increase in per capita spending of $17 today. But McKinsey believes that $1.2 trillion capital investments are necessary to meet the projected demand in Indian cities. The firm proposes fundamental city governance reforms to ensure these funds are not only raised but put to work efficiently. Unlike China, India cannot issue sharp policy shifts to appease a young population that may not be satisfied with the living standards of their parents. If urban policies fail, social upheaval, fuelled by underlying religious and ethnic divides, will likely be the result. Or as Nandan Nilekan puts it: “This is our biggest, but also our last chance.”

India is aware of its “moment” and understands that the window of opportunity for inclusive growth is limited. The government is seeking to balance the hustle, the frenzy, and the urgency with calm and confidence. It is the only possible attitude when you have to govern what seems to be genuinely ungovernable. I thought of a line from a song by Thom Yorke: “You have all the time in the world. Don’t squander it.”

[picture: painting by Vangobot. Vangobot is "a robot who paints with the soul of the human artists who taught him how to see."]

The Economist and the Human Potential

If TED is about “Ideas Worth Spreading,” then the Economist’s Ideas Economy conference series is – as the title would suggest – about ideas worth monetizing. It’s the Economist, stupid! The venerable publication, a notorious late adopter, has realized that despite solid market standing it must reinvent itself to survive, both through a suite of new digital products and by branching out into the conference business. The focus on Innovation (as in “a commercialized original idea,” as the excellent moderator Vijay Vaitheeswaran defined it in his opening remarks) is a natural fit: The Economist has always stood for liberal economic policies and liberal social values – which is typically the kind of fabric that innovation thrives in.

The most recent event of the series took place last week in New York: With the theme “Human Potential,” 250 business leaders, entrepreneurs, politicians, and academics discussed for two days how to foster and tap into the creativity and intellect of their employees, stakeholders, peers, and students. The cynic could object and ask “Do we indeed have potential?,” inferring that the term “potential” implies progress and betterment – but are we, humans, even good? And if so, can we get better?

According to Harvard psychologist Steven Pinker, the answer is a clear yes. He presented a “history of violence,” arguing that violence is on the decline, which, as he readily admitted, appears to be somewhat counter-intuitive, knowing that there has not been a single day without war in the history of mankind. Attribute this to a recording bias: The magnifying effect of mass media makes violence more visible than ever before. Yet, Pinker cited empirical studies showing that the amount of actions which cause physical harm has steadily decreased over the past centuries. Despite the many atrocities it saw, the 20th century was not the most violent century in terms of absolute numbers (compared to the total world population), and acts of terrorism, Pinker pointed out, can only be described as (statistically) “insignificant.” Clearly, Pinker commented, the US overreacted in response to the 9/11 attacks. Before you cheer about the rise of human enlightenment and moral reasoning, however, consider that the way violence is committed may have become more subliminal, and that, more pressingly, weapons of mass destruction in the hands of a few rogue individuals (or states) can arguably do more harm nowadays - that is, cause ‘ultimate violence' - than ever before. Additionally, it remains difficult to project future trends based on historical data so that an overly optimistic, non-violent concept of human potential might be flawed because of a bias of retrospective. In fact, the Rational Optimist's great blind spot is that it cannot look into the “heart of darkness,” that it has no means to explain or forecast truly irrational behavior.

On top of that, it is, of course, particularly hard to assess the human potential when you are human. Is human potential limited to humans? Can humans really fully unleash their own potential or will it take artificial intelligence to do so? Were the attendees in New York able to realize human potential or rather its impediment? The conference, for the most part, stayed away from such provocations. Notwithstanding the occasional excursion into macro-economic or philosophical debate, most of the program was devoted to more pragmatic topics such as employee motivation, knowledge management, institutional and non-institutional learning, and creative thinking.

Like Pinker, Richard Florida struck an optimistic tone in his opening keynote, in which he heralded creativity as the essential resource of our societies. According to Florida, one third of the US workforce is employed in the creative sector, generating 50% of the overall wages. The unemployment rate has only gone up by 5% during the economic downturn, much less so than in other market sectors. Creativity, says Florida, is the key to economic recovery and the main catalyst of the “Great Reset” that he proposes. Asked about what he would tell the citizens of Detroit, he said “harness the creativity there,” claiming that “if we could turn 60% of services jobs into creative job we would boost the economy.” While that stood uncontested, his insisting on the metropolitan region as the hub of the “creative class” provoked more audience dissent in the subsequent Q&A. In the connected age of virtual worlds and social networks, the physical density of “idea people” seems to have lost some of its relevance. This is not to argue the importance of geographical talent clusters, but increasingly, innovation overcomes boundaries of space and happens whenever, wherever people meet (online). Geography is no longer destiny, and no longer does human potential start in cities, as Florida claims.

My colleague Robert Fabricant, VP of creative at frog design, who spearheaded a “social experiment” at the conference (more about that in another post soon), offered a less class-centric view on creativity. For him, creativity does not exist so much exclusively within an individual as it does between two entities: “Because that which is created needs a response to bring it to life.” He used the analogy of the old Roadrunner and Coyote cartoons to illustrate this collaborative creative interaction that is at the center of innovation.

The relationship between creativity and well-being, values and value, social purpose and money, self-actualization and economic success was the main theme of the conference. Jim Clifton, the CEO of Gallup, shared some remarkable insights, based on his institute’s annual survey on “what does the whole world want?” This time, the majority of respondents said: “A job” – in stark contrast to previous years when the answers had ranged from “a happy life,”and “family,” to “health.” The responses this year shifted the focus to the bottom of Maslow’s pyramid. Why is that? First of all, the inequality between the rich and the poor is growing, and it is no surprise that many living in developing countries consider “finding a job” an existential need. Secondly, the growing middle class (in India and China, and other emerging markets) has become much more aware of its possibilities and views employment as the main enabler of a brighter future for themselves and their families, one that often includes better education and increased consumerism. And then, well, there was the recession in the developed world - and its lasting implications.

So are we seeing a renaissance of materialism? Does money beat meaning? The final debate of the conference, conducted in classic Oxford-style, looked at this conflict through the veneer of employee motivation. Yaron Brook of the Ayn Rand Institute and entrepreneur Lynn Tilton, CEO and principal of Patriarch Partners, contended that “money motivates more than social purpose.” The two were facing formidable opponents in Clay Shirky (author of Cognitive Surplus) and Dan Ariely (author of The Upside of Irrationality), who argued that social purpose was the more powerful motivator. The pro faction – albeit perhaps exhibiting more passion – ran out of arguments soon and could eventually only help itself by evoking the Nazis (Godwin’s Law posits that “as an online discussion grows longer, the probability of a comparison involving Nazis or Hitler approaches 1. In other words: all discussions - regardless of topic or scope - inevitably end up being about Hitler and the Nazis.") Brook and Tilton’s mechanistic concept of human behavior was easily rebutted by Shirky and Ariely, who insisted that money is always only a substitute of meaning,refering to Wikipedia, Lego, and other examples of meaning-driven engagements. “Money can motivate your employees to show up,” Ariely said, but if you want them to not just show up but commit with their full creative and intellectual potential, you need to motivate them with non-monetary incentives.”

This view was echoed by Cristóbal Conde, president and CEO of IT services company Sungard, who endorsed transparency and called “creating a platform for collaboration” the most important task of today’s business leader. It didn’t matter that he almost literally borrowed his own words from an interview with the New York Times earlier this year – they still rang true. “Collaboration is one of the most difficult challenges in management. I think top-down organizations got started because the bosses either knew more or they had access to more information. None of that applies now. Everybody has access to identical amounts of information.” Conde said further: “The answer is to allow employees to develop a name for themselves that is irrespective of their organizational ranking or where they sit in the org chart. And it actually is not a question about monetary incentives. They do it because recognition from their peers is, I think, an extremely strong motivating factor, and something that is broadly unused in modern management.” Conde: “Micromanagement doesn’t scale because it spirals down, and you end up with below-average employees in terms of motivation and ability.” Sungard uses enterprise micro-blogging service Yammer to enhance internal knowledge sharing: “It has given our employees a voice.”

With CEOs like him, the company is not a 20th century idea: “The more I teach, the more I learn," Conde said. Humility, openness, and collaboration are the hallmarks of a new kind of humanistic organization, led by humane leaders. That’s an idea worth spreading – and monetizing.

The Future of Capitalism in Five Minutes: Meaning-Driven Business in Fast Times

Never let a crisis go to waste! Inspired by the transformative impetus of the economic downturn, my employer, frog design, will soon be starting a series about “Meaning-Driven Business” that invites leading business thinkers as well as C-level executives to discuss alternative ways of doing business and creating value. The series is based on the assumption that the current crisis is also a moral crisis, a fundamental crisis of trust in business leadership. According to the Chicago Booth/Kellogg School Financial Trust Index from April 8, trust in business has reached unprecedented lows, with only 10% of Americans now saying they trust large corporations. The “future of capitalism,” it seems, is at stake.

All this serves as a clarion call for business as unusual, and new ideas and values are in high demand. We believe this is an important conversation, and with “Meaning-Driven Business” we would like to provide a forum in which our guest contributors (some of them our clients) can present their ideas – from different backgrounds, different industries, and different corporate functions. Obviously, we‘re not the only ones exploring new horizons for business, nor are we the first. Some distinguished scholars and thought leaders have staked the claim and produced some great thinking around this topic.

Let’s start with an unlikely expert: the Catholic Church. The New York Times reports that Pope Benedict XVI is worried about global capitalism going awry. In “Charity in Truth,” his first papal encyclical on economic and social matters, he posits that Roman Catholic teachings can help reign in Western economics by encouraging social justice (which always means solidarity with the poorer and weaker) and closely regulating the market. In the same article, the Times cites German archbishop Reinhard Marx, a close advisor to the pope, who has written a best seller titled “Das Kapital” (“The Capital”), in a not so subtle reference to his more famous namesake. Obviously inspired by the success of the German post-war model (and the European welfare state philosophy in general), the archbishop calls for a universal “global social market economy” but is prudent enough to acknowledge its limitations, quoting Jean-Claude Juncker, the prime minister of Luxembourg: “I approve of the notion that Europe sees itself, unpretentiously, as a model for the world, but the consequence of that is that we would have to constantly change that model because we are not the world.”

Like the pope and his archbishop, economist Umar Haique argues that we need to re-boot capitalism. And like Reinhard Marx, he focuses on a re-definition of “capital.” His concept of “constructive capitalism,” however, is more radical than the social market economy solution Marx proposes. Haique demands that 21st century economics fundamentally rethink “what capital isn’t – and what capital really is.” “The value equation of industrial-era capitalism was toxically imbalanced. Why is industrial era business so destructive – why does it slash and burn rainforests, endanger entire species, vaporize culture and community, marginalize the poor and disadvantaged, and erode our health and vitality? Because none of those have value in an industrial economy: none are capitalized. So the bean counters of the world are free to plunder and ruin them – because, economically, they actually don't exist. 20th century capitalism, in other words, marginally valued pure financial capital too highly, while marginally valuing human, natural, social, and cultural capital at zero – or, at the limit, negatively." One example of the “capital deepening” Haique envisions are carbon assets: “Once they're capitalized, they become next-gen assets: assets that can be traded, hedged, remixed, tweaked, open-sourced, or shared. The difference is that they're assets with intrinsic, durable, human value – not the lemons Wall St was in the business of hawking. It is only by capitalizing the things we really value that the spark of value creation can be lit again.” As another example of really valuable capital Haique refers to Rypple, an ad-hoc social network that provides simple, direct, anonymous, and ongoing customer and employee feedback: “Rypple’s economic engine is powered by human and social capital – Rypple taps the connections people have with friends, colleagues, bosses, and mentors, to help them get smarter and more productive.”

Former Harvard professor Shoshana Zuboff would agree with Haique. She is the author of The Support Economy: Why Corporations Are Failing Individuals and the Next Episode of Capitalism, and in her recent BusinessWeek article “The Old Solutions Have Become the New Problems,” she proposes companies charter what she calls the “i-Space”: “Business is no longer just about the product. Now it’s about solutions for the individual. Economic value is hidden in consumers’ unmet needs and is released by providing people with the means to fulfill those needs. But in order to release new value, you need to get out of organization space and into the subjective space where individuals live. I call it ‘I-Space.’ This means shedding the ‘us-them’ mentality. Now everyone is an insider.” To succeed in i-space, companies “must federate and collaborate to compete:” “You can't do it alone because the needs of individuals don't conform to existing organizational and industry boundaries. This means learning how to manage what you don't control or own. These economies of trust are becoming even more important than economies of scale. (…) Amazon’s marketplace and eBay's webs of buyers and sellers are early prototypes of these federated networks. Apple and Facebook are struggling to understand the rules of engagement that should govern relationships with their applications developers. You can see them climbing a new learning curve through trial and error as they figure out how to build and sustain economies of trust.” Zuboff is wary of the old paradigms still taught in business school and calls all previous “compasses” obsolete: “You're in a new place. The bad news: There are no maps. The good news? You are the mapmaker.”

Similarly, Jeff Jarvis' concept of the "Share Economy” and Chris Anderson’s notion of the “Free Economy" are both based on the assumption that there is no viable business in markets in which information and content are abundant (i.e. the news industry) unless you add the value of aggregation, create artificial scarcity, or give away those abundant assets (i.e. music recordings) that drive attention to assets that are truly scarce (the live concert experience). Or as Kevin Kelly puts it in "Better than Free": "When copies are free, you need to sell things which cannot be copied."

Richard Edelman from Edelman PR believes we are entering a new era of “Mutual Social Responsibility,” in which “people (formerly labeled as ‘consumers’ by marketers!) contribute to society’s sustainability and well-being in partnership with business, government and non-governmental organizations. But they demand a seat at the table and real voice in the discussion.”

Noah Robischon from Fast Company coined the new, chic term “Ethonomics:” “We live in a world that's resource-constrained but ingenuity-rich. So an upstart generation of entrepreneurs – and innovators within the world's biggest companies – are founding businesses that are good for the world as well as the bottom line. They are practicing social change through urban revitalization, sustainable agriculture, green IT, alternative energy and online community-powered investing. Any business that claims to be truly sustainable and innovative should be increasingly efficient with energy and natural resources, transparent and accountable, and good on balance for people and other living things.”

Speaking of social, there are many who would argue that the future of social is indeed the future of business. This trend even extends to the world of finance – arguably the one industry sector that has suffered most from excessive short-term innovation and is in greatest need of real transformation. Social innovation platform Volans calls for a "WeBank" and asks: "Are people replacing institutions?" As an example of alternative micro- and real-time financing models it refers to Zopa, the world’s first online social finance company:”With no middlemen, less overhead, improved rates for lenders and borrowers, and a sense of transactions between ‘real people,' it creates trust and shared interests between lenders and borrowers.”

Peter Kim, together with Jeff Dachis, David Armano, and other partners, has launched “the first social business firm,” Dachis Corporation, and developed a "social business design framework" for "understanding and applying social constructs to business.” Social business design is “a mutually exclusive, collectively exhaustive way of considering how a corporation, business unit, or project can create and capture value from today's emerging technologies and evolving operating environment. The social business design framework captures ecosystem (community), hivemind (culture), dynamic signal (collaboration), and metafilter (content). Putting these into play creates improved business outcomes as well as emergent outcomes. Measurement provides the backbone to the entire framework, as driving change requires proof.” The most interesting archetype of Social Business Design to me is the Dynamic Signal, “the concept that every activity and action is recorded and made available, that every piece of data goes from being a database entry and is instead an event. An event which can be managed, shared and collaborated on by all of those in the organization,” as Dachis partner Jevon MacDonald explains. This concept resembles the familiar vision of the “Real Time Enterprise.” Rypple – mentioned before – offers real-time, ongoing customer and peer feedback, acknowledging that “Real-time business is inherently social – there is no real-time without social."

Yet the accelerated transactions and interaction cycles on the Real-Time Web need to be balanced with sustainable thinking. Quick decisions are easier to make if they’re grounded in a long-term perspective' agility requires stability; and the prerequisite for openness is a strong (and tight) community. It is it ever-more important that companies have a stable foundation, rooted in a set of shared of values and beliefs. At least that’s Charles Handy thinks: “....what enables a corporation to succeed in the longer term is a wish for immortality, or at least a long life; a consistent set of values based on an awareness of the organization's own identity; a willingness to change; and a passionate concern for developing the capability and self-confidence of its core inhabitants, whom the company values more than its physical assets. I suggest that those conditions are best met when organizations live up to the literal meaning of the word company –‘the sharing of bread’ – and regard themselves as communities, not property.....in time, the laws governing corporations will change to reflect (this) new reality." ("Looking Ahead," HBR September 1997).

For former Procter & Gamble chairman and CEO A.G. Lafley “Balancing present and future” is one of the key responsibilities of CEOs: “Don't allow the short-term interests to take precedence over the company's long-term objectives," he warns in a recent article for the Harvard Business Review (“What Only the CEO Can Do”). He describes the CEO as the only person in an organization who can link the external with the internal perspective. “It’s a job that the CEO must do because without the outside there is no inside.” You could argue, of course, that the real-time, hyper-transparent social web has made that distinction obsolete anyway: Inside and outside are congruent; they are one and the same.

There are numerous other thinkers that envision a faster and yet more sustainable, social business as the future of capitalism, and you can browse through articles and blogs post without end. Some recurring themes emerge though the more you read: On the organizational, delivery side, these themes are "social,” “real-time,” and “micro.” And on the cultural, the leadership side, they are “authenticity,” “generosity,” and “empathy.” If you combine the two layers, you get an interesting matrix – let's call it the "Meaning-Driven Business Matrix.” This is the playing-field in which all product, service, and business model innovation will take place from now on – but that’s a topic for a whole series (coming soon).

“More Than a Club” or What Brands Can Learn from “Barca”

I’m nervous, seriously nervous. In a few hours, in the Olympic stadium in Rome, FC Barcelona (or “Barca,” as its supporters call it) will face Manchester United, the other soccer superpower, in the game of all games, the final of the UEFA Champions League, the most important club competition in Europe (and the world, for that matter). Both teams have already won two trophies this season (their national leagues and national cups respectively), and a victory in Rome would see either one clinch the “treble.” For Barca, it would be a historic accomplishment – no other Spanish soccer team has ever won all three possible titles in one season. That’s not the only superlative in the lead-up to the game: Messi, Eto'o, and Henry – Barca’s offensive trio – have scored more goals together this year than the entire squad of any other European club.

I’ll be watching the game at a resort near Santa Barbara, and it’ll be the end of journey for me, in many ways: I have been following Barca’s triumphant season leading to today’s final  in different cities all over the world on TV. I saw the team struggle against Lyon in an earlier round in a packed sports bar in Amsterdam; I bit my nails in a smelly pub in Austin when Barca remained goalless in the home tie against Chelsea; I took a day off from work in San Francisco to enjoy them trashing Bayern Munich 4-1; I was in Barcelona in a bar without any Euros but a kind bartender (the comfort of strangers) who even accepted a few lousy dollars for a beer that helped me make it through a dramatic away game; I followed games on the Internet live-ticker in Sonoma County in lack of TV; and I celebrated euphorically the decisive 1-1 goal in Chelsea in the semi-final with my best friend in Hamburg. After all these memorable moments, I realize that I am emotionally exhausted. There’s just enough sentiment left for today’s game. I will use it to cheer Barca to victory.

So I am a Barca fan, but you may wonder why in the world would an otherwise level-headed (I hope) German professional, living in San Francisco, be so crazy about a Catalan soccer team? Joan Laporta, FC Barcelona’s president, asked me exactly that question (more diplomatically phrased) when I met him briefly two years ago at an event at Stanford University, and I uttered something like “because Barca is more than a club.” I felt stupid and exposed as succumbing to the marketing formula the club had promoted for years: “Mes que un club.” But then I thought of that one remarkable moment in Bill Maher’s documentary “Religulous” in which he tries to make fun of the actor who plays Jesus in a Christian theme park in Florida. Not a difficult task, it seems, until that very actor asks him back, with great sincerity and earnestness: “So you think this is all made up and crazy talk. I get it. But what if you're wrong?” There’s a short pause, and Maher, the cynic, has just been disarmed. That’s exactly how I feel about my passion for Barca. Not that Barca is like a religion to me, but it is a matter of faith. It is something to believe in – the why doesn’t matter.

And yet, I could cite very good reasons for why Barca ought to be the favorite club of anyone who loves the “beautiful game.” In fact, Albert Schweitzer must have had Barca in mind when he coined his famous aphorism: “Do something wonderful, people may imitate it.” Much has been written about Barca’s aesthical  play and its underlying philosophy. Barca’s style is a showcase of sparkling creativity, but what one must not overlook is the enormous tactical discipline and the intelligent organization that serve as the platform for the magic moments of Messi, Eto’o, Henry et al. The Barca superstars wouldn’t be able to shine without the works of Xavi, Iniesta, and Toure in midfield, and what pundits have rightly dubbed an “efficient ballet” is a collective movement of great fluidity and elegance, and a unique series of human-ball, human-human interactions that are a true pleasure to watch. One must also credit the incredible discipline that coach and former Barca player Pep Guardiola has introduced to the club this year. When a few players showed up one(!) minute late to a training session last week after winning the Spanish cup the night before, Guardiola reprimanded them and fined them – a symbolic act, of course, but one that reinforced the high standards of professionalism.

One of the other key elements of Barca’s supremacy is anticipation – the ability to predict the opponents’ moves and be just one crucial tick faster than them. This ability is based on the philosophy of “Total Football” that the Dutchmen Johann Cruyff and Luis van Gaal brought to Barcelona, and that Barca still cherishes. Total Football requires every player on the pitch to master any position at any time and to “read” the whole game from any angle. In this fluid system no player is fixed in their intended outfield role; anyone can be successively an attacker, a midfielder, and a defender. Total Football depends largely on the adaptability of each footballer within the team to succeed.

Barcelona embodies Total Football and is yet so much more than just football. To learn more about the genuine element of drama that no other club embraces in the way Barca does, I recommend you read Javier Marias' “All Our Past Battles,” a wonderful collection of stories around the “el classicos” between Barca and arch rival Real Madrid. You’ll understand the melodramatic quality of Barca’s defeats (and wins!), and the great poetry that surrounds all of its appearances, on the pitch and off. More than just once, Barca squandered opportunities to close in on a victory that was thought secure because the team’s abundantly talented players gave in to a seemingly insatiable quest for inspiration, artistry, and class rather than scoring a simple goal. The simple way is never the easiest for Barca. Barca’s striving for excellence feels nostalgic but at the same time very relevant and timely.

Franklin Foer also dedicates a whole chapter to the “Blaugrana” (Catalan for blue/red) club and its political undercurrents in his excellent “How Soccer Explains the World.” FC Barcelona was one of the first soccer clubs to be founded in Spain, and it became a haven for Catalan sentiment when Catalan self-government and culture were proscribed during Franco’s dictatorship. The club emerged as the playful manifesto of Catalonia’s spiritual independence, and since then, nowhere has soccer been more fundamental to the sense of identity than in Barcelona. Former Barca full back Oleguer even published a book which was about politics as much as his own career. Barca supporters joke that he only played when he was not on a protest march.

It is ironic that a club rooted deeply in Catalan nationalism has such an international following. But Barca’s appeal is so global precisely because its roots are so local. Barca represents the Catalan people while at the same time creating a sense of \belonging to “beauty and quality.” The meaning of Barca transcends the boundaries of sports and nations, and embodies the universal values of sportsmanship and integrity.

Every brand can take a page from Barca’s “magic ingredients”:

Aspiration: Barca has always set itself and its members daunting challenges to strive for and rally around. The latest one is “The Great Challenge” campaign which aims at growing the membership, fostering Barca as the biggest and greatest club in world soccer. Before the beginning of this season Barca also declared that its goal was to win all three competitions it participated in. Some may call this arrogance, but for Barca it's a brand driver. The “Big Hairy Audacious Goals” set by excellent teams always need to exceed the past ones. Motivation originates in the belief and opportunity to achieve the extraordinary – no matter what it takes. Under-promise and over-deliver is just good execution. Over-promise and over-deliver are the signs of a class act.

Only the best: Barca’s management and members are never satisfied with average, and they despise mediocrity. They understand top quality, tactically advanced soccer as a moral obligation. Only the best players make it to Barca where the competition is brutal. Analogous to GE's famous 10% rule, the lowest performing players in the team usually have to leave the club.

Social responsibility: Barca is fully owned by its members, unlike most other big soccer clubs - which are either in the hands of  large corporations or American (Manchester United) and Russian (FC Chelsea) billionaires - and they possess significant voting power. This “power to the people” tradition reflects a distinct social conscience that is expressed in many ways. Sure, other clubs are using the power of their brands as well to do good, but no other club’s social responsibility is so deeply engrained in its DNA as Barca’s. Based on its spirit of independence, the club has always taken on broader social issues and played a pivotal role in promoting diversity, tolerance, and peace worldwide. Barca’s partnership with UNICEF is a statement of the club's continuing efforts to be at the forefront of solidarity projects with a global reach. Under the agreement, which bears the slogan “Barcelona, more than a club, a new global hope for vulnerable children,” Barca contributes to the financing of UNICEF humanitarian projects and endorses UNICEF on its shirts – as the only major European team not to wear an advertisement. Club president Joan Laporta rules out any type of commercial shirt sponsorship and  instead seeks to promote a humanitarian message: "FC Barcelona is not only a football club, but a club with a soul.”

The real thing: To a European soccer fan living in the US who has grown accustomed to hyper-commercialized sports events, it is reassuring to see how purist the soccer experience still is in Barca’s stadium, the Camp Nou – a few pre-game commercials, no half-time show whatsoever, and all attention on the players, even during their warm-up exercises before the game. In Camp Nou, it is all about the “beautiful game.”

Charismatic reference point: Messi, arguably the world's best soccer player, serves as a reference point for team mates and fans alike. There is no one else like him, and he outshines all other soccer superstars with his playfulness.

Disruption: Powerful brands need an element of surprise. They should always take the freedom to ignore the quest for consistency and do what they want - irrationally, passionately, and with no regrets. Every three years or so, when a cycle ends, Barca’s management disrupts the existing team structure and builds a new squad. The rule is: Always change a winning team! By all standards of modern business, Barca is a professionally managed club but yet there is a sense that anything could happen anytime – almost like in a soccer match.

The Champions League final today will be another milestone in the saga of the Barca brand, regardless of who wins (2-1 for Barca, my prediction). Humility and hard work have been the traits of Barca's season so far, and in the end, dignity will matter more than titles and trophies at a club that is “more than a club.” And that exactly is the hallmark of a great brand: “Keep yourself clean and bright. You are the windows through which you must view the world,” the ancient proverb goes.

Marketing with Meaning: How KLM Activates Dormant Social Networks

I wrote earlier that 'marketing with meaning' has the ability to 'activate' customers. An effective way to activate customers is by activating the dormant social networks they inhabit (often without even knowing it). While social networking has visualized the so-called 'six degrees of separation,' all business transactions have a social component and can be seen as expressions of the underlying social micro-universes, 'the worlds within worlds,' in which – shifting time and place – individuals travel and interact. As marketers face the daunting challenge of connecting with fragmented audiences that are increasingly split into billions of social atoms populating myriad micro-networks, activating dormant social networks is their foremost task.

KLM's Africa and China Clubs, launched in 2007 and 2006 respectively, provide an interesting case study. The Dutch airline offers business customers the opportunity to meet fellow travelers who do business with or in either of these two regions – before take-off or during the flight, online and in person. KLM plays the role of the matchmaker and adds value to the otherwise somewhat value-free hours frequent travelers spend at airport lounges. It is the principle of the social networking site Dopplr, applied to the exclusive crowd of business or first class travelers: Connecting travelers who share the same connections. KLM pre-filters the club members so that travelers who sign up for the exclusive network are warranted a certain quality of contacts.

The clubs are a win-win-win: Trade groups and business offices from the travel regions are provided with a highly targeted way to advertise their services; travelers benefit from a true value-add and a richer travel experience; and, lastly, the clubs bolster KLM's reputation as an airline that cares about its customers. Of course, these networks already exist – they're just dormant. KLM does not make immediate revenue but it generates "social wealth" as long-term equity.

The KLM clubs exhibit all the characteristics of 'meaningful marketing' (see chart below):

- Social: The clubs help people connect.
- Personal: The clubs are relevant for the people they serve, and the service is exclusive and highly personalized.
- Storytelling: The clubs make sense of disparate information, perspectives, and events. They facilitate crossing paths by creating – quite literally – a common goal and therefore a joint narrative.
- Disruptive: The clubs disrupt the usual travel routine; they make it comfortable for business travelers to leave their comfort zone and go 'off the beaten path' to meet new people.
- Responsible: The clubs generate social capital by bringing together business people in pursuit of related goals. The KLM Club Africa, in particular, has helped African entrepreneurs to get in front of influential business executives (investors) conducting business in Africa.

Marketing 2.0 Conversation with Beth Comstock, GE

The fabulous marketing 2.0 blog, one of the best sources on marketing trends and best practices, has published a podcast of a Conversation with Beth Comstock, CMO at GE. Comstock speaks about the role of a corporate marketing group in a large diversified company with strong operating companies, fostering innovation, and general changes in marketing.

Business, Ethics, Barcelona: Doing Good When You’re Not Doing So Well

I just returned from Barcelona (where every tourist now seems to be tracking the path of Woody Allen's Vicky and Christina…), attending a few sessions of the Doing Good and Doing Well Conference organized by IESE Business School and Net Impact, an organization that connects MBA students interested in social responsibility.

That a leading business school is dedicating an entire student-run conference to the topic of responsible business is remarkable (HEC Paris will do the same soon in May, also in collaboration with Net Impact) but not an isolated phenomenon. In the past few years, several top business schools, such as Yale, Duke, Harvard, and Stanford, as well as pioneers such as the Presidio School of Management in San Francisco and the Bainbridge Graduate Institute in Washington State have begun to offer tailored programs to MBAs who want to marry traditional business skills with innovative approaches to solving social problems. Different from nonprofit curricula, which typically provide the fundamentals of fundraising and grant writing, these specific business school programs combine the finance and management training of a traditional MBA with electives that cover everything from how to get venture capital and invest in emerging markets to building sustainable energy sources. But conferences like IESE's indicate that social entrepreneurship is not yet fully integrated into all business school curricula and that it still needs the extra limelight. As long as not all business is social business, business that is not social will still find a safe harbor.

Business and ethics have of course been intertwined since the days of the Greek polis. Adam Smith, the spiritual father of the homo oeconomicus, wrote a "Theory of Moral Sentiments" before he wrote "The Wealth of Nations." And yet, business that is good for society has always been in need of being extrapolated through catchy labels (business ethics, CSR, corporate citizenship, social innovation, social entrepreneurship, etc.), invariably heralded as the Next Big Thing and slowly moving up the food chain from a window-dressing PR tool to a truly integral strategy driver. Recently, Fast Company coined the new, chic term "Ethonomics" and even made it one of the key pillars of its relaunched web site:

"We live in a world that's resource-constrained but ingenuity-rich. So an upstart generation of entrepreneurs – and innovators within the world's biggest companies – are founding businesses that are good for the world as well as the bottom line. They are practicing social change through urban revitalization, sustainable agriculture, green IT, alternative energy and online community-powered investing. Any business that claims to be truly sustainable and innovative should be increasingly efficient with energy and natural resources, transparent and accountable, and good on balance for people and other living things. Ethonomics is a hybrid of technology, design, and social responsibility, and at Fast Company we believe it is the future of business."

In Barcelona, this young upstart generation of entrepreneurs and innovators shared its ideas, seeking advice from those who had been in the field for some years. For example from Kyle Zimmer, the president and co-founder of First Book:

"Whenever you hit a point at which you feel you have no idea what you're doing (and if you don't reach that point quickly, you’re not moving fast enough), make a list with the ten most acclaimed experts able to answer your questions. And then call them one by one even if you have never met them or your list includes Bill Gates. It doesn't matter. Tell them your story and ask them for help. Some won’t call you back. In fact, I can pride myself with not having been called back by some of the most accomplished people in the world. But you’d be surprised how many will."

Jessica Jackley Flannery, co-founder and chief marketing officer of micro-lending marketplace Kiva, was another one of the veterans present, and her talk made most of the MBA students in the audience beam. Social entrepreneurs are simpaticos, of course, and you'd be hard pressed to find a MBA student these days who would not want to be a social innovator. Wall Street fame is so yesterday. Flannery epitomized the case for a new 'meaning' and emphasized the power of storytelling: "If we all understood each other's stories, the world would be a better place." Stories create empathy, and empathy breeds the solidarity needed for taking action. In light of the dire economic situation in developed countries, Flannery half-jokingly said she wouldn't be surprised if a young entrepreneur in Uganda were soon to lend money to a job-less banker in Manhattan. Globalization in reverse. In any case, innovative banking such as Kiva's is no longer only focused on helping developing economies. New web-enabled finance 2.0 models and infrastructures attempt to overcome the financial crisis in the US.

Entrepreneurs and innovators may be much needed these days, but "how can you be doing good when we are not doing so well?" the conference asked. With almost 14% unemployment in Spain, it was brutally aware of the need to discuss the creation of "Sustainable Value in a Downturn." Aside from the assumption that recessions can hold tremendous opportunity for any entrepreneur (as Christopher Gergen and Gregg Vanourek point out), social entrepreneurs in particular seem to weather the current investment pullback rather well. The Skoll Foundation is currently conducting a survey, to be presented at the Skoll World Forum in March. Preliminary results indicate that most of the social entrepreneurs have been affected by the economic downturn in some way or other, but only 10% of the respondents say that they have been severely affected.

"A crisis is a terrible thing to waste," Paul Romer (now famously) said, and hopefully the current recession will not lead to a Great Depression but a "Great Disruption" (Paul Gilding) that requires us to build the foundation of our economy from the ground up. In his brilliant post on "How To Be a 21st Century Capitalist," Umar Haique writes that "Capital deepening is the foundation of next-generation value creation." By that he means "assets with intrinsic, durable, human value – not the lemons Wall Street was in the business of hawking. It is only by capitalizing the things we really value that the spark of value creation can be lit again." He predicts that "next-generation businesses will be built on next-generation assets:" "Yesterday's businesses were built on cash, factories, and IP - financial, physical, and intellectual capital. Next-generation businesses are built, instead, on human, social, natural, and cultural capital – to name just a few."

TEDGlobal Coming Back to Europe in 2009 -- and Staying

TED (Technology, Entertainment, Design), arguably the world’s most influential gathering of creative thinkers, is coming back to Europe – and staying. TEDGlobal 2009, the companion to the TED conference in California, is to be held in Oxford, UK, July 21-24, 2009, and every year after that.

TED curator Chris Anderson says that one of the main reasons to return to Oxford (after a tentative trial in 2005) is the more convenient time zone for simulcasts of the conference program to the growing TED communities in Africa, Europe, and the Middle East.

TEDGlobal 2009 was officially announced at London’s Tate Modern last Wednesday, at an exclusive preview event hosted by Chris Anderson, Bono, Sir Ken Robinson, and Liz Murdoch. The theme for TEDGlobal 2009 will be 'The Substance of Things Not Seen,' and according to the Guardian, speakers (at this point) will include Ian McEwan, Janine Benyus, Anish Kapoor, Paulo Coelho, Chimamanda Adichie, Ross Lovegrove, Bjarke Ingels, Misha Glenny, Loretta Napoleoni, Stefan Sagmeister, Daniel Birnbaum, Rory Sutherland, Cary Fowler, David Deutsch, Dan Pink, and David de Rothschild.

More info on TEDGlobal 2009: http://ted.org/pages/view/id/207

What Do Germans Think of Joe the Plumber?

If Joe Wurzelbacher had already become famous two weeks ago, I’m sure this would have been among the questions I faced when I was recently interviewed by two German-speaking media outlets (the German public radio station WDR and Austria’s daily Der Standard) for their respective stories capturing an ex-pat German’s perspective on the US presidential campaign.

It is widely known that Europeans find US politics half amusing, half alarming. Germans, in particular, not in the least because of their history, mock the need for spectacle and find the “framing” of the political discussion to the expense of a near-total absence of substance rather concerning: how an ordinary plumber from Ohio could receive so much prime airtime and become the last straw in a candidate’s failed campaign, will therefore leave most of them dazzled. Let alone “drill, baby, drill” and Sarah Palin.

At the same, Germans are completely in awe of Obama, and even the notoriously cynical SPIEGEL was inspired to suggest more “excitement in German politics” after the senator’s speech in front of 200,000 Berliners. Germans are also fascinated with grassroots politics and field campaigning to the extent that they are important in the US. No German political party would ever allow more or less unvetted volunteers to make phone calls under their name. There is no “phone banking” in Germany. There is also no real-time focus group barometer during TV debates that spikes when either of the candidates utters the word “tax cut.” And there are no “fact checkers” who check the accuracy of each campaign’s allegations (but remain unchecked themselves, as the Economist pointedly remarks).

While the political culture gap seems to be widening, citizens on both sides of the Atlantic share similar economic woes. The initial Schadenfreude about the implosion of US greed has given way to deep concern about the domestic reverberations of the financial crisis. As Newsweek countered, Germans are sitting in “Glashaeuser” and shouldn’t throw stones. The German government just slashed its growth forecast for 2009 to 0.2 per cent. Klaus, the plumber, might lose his job under these dire circumstances and is probably equally concerned about tax hikes as Joe (although he may have reason to, and Joe, as we know, does not actually under a President Obama). But style and tone are different. If Klaus had said on German TV that he was not willing to apologize anymore for his country and was also in favor of closing all borders, this would have caused a scandal of national proportions. In the US, it was just seen as yet another piece of main street lore, an unexpected narrative of a campaign rich with narratives.

For China, the Financial Crisis is an Opportunity

I asked my colleagues in frog design's Shanghai studio about their perspective on the current economic downturn, and here's what they wrote back:

"The US may be the initiator of this round of global economic recession but it may not be the final payer. China's economy is about to suffer as well - and in more ways than one. And yet, the people who have been around the longest know not to pay too much attention to one-direction comments. They know that the sufferers will always shout much louder than the beneficiaries. They also know that there are ways to take advantage of the economic downturn.

In China, the rule of the game is always "Stay One Step Ahead of Your Competitors." There are some companies in this country - mostly the ones that operate domestically only - that will remain silent. Culturally it's what they've always done and what they always will do when facing these situations. Other companies will be more pro-active.

For example, when Chinese businesses run out of initiatives in which to invest their capital or when their investments stop growing (which is happening in stocks and real estate, two markets that have yielded big returns in recent years), they make a concerted effort to get back to the basics and invest in research and development. In fact, senior executives in some companies have said publicly that in the near future they would either invest in their own health and personal happiness, or they would increase R&D budgets in their businesses to invest in better products to prepare for a new run when the downturn ends.

This may be a survival strategy - that is, a strategy shift from the short term to the long term - but surviving a crisis is better than suffering from it. While the current crisis is eliminating big and small market players still trying to eke out short term gains in the form of cost cutting measures, the survivors will ride out the crisis while positioning themselves to win in the long term. The economic recession in Hong Kong fifteen years ago is a great example. In 1993, business opportunity in Shanghai was largely non-existent, but that didn't stop one Hong Kong property developer from buying cheap land and developing it in the center of the city. He envisioned Shanghai as the hub of Asia and the future of China, and he turned out to be right. He now owns several of the buildings in the heart of the Central Business District. The real estate developer's strategic long-term vision not only saved his company from the economic recession in Hong Kong, it also made him one of the biggest market players in the mainland property market.

So, while big global marketers withdraw themselves from the game, Chinese brands have a good opportunity to step up by investing money in R&D and product innovation, which will bring to market world-class products. The entrepreneur spirit always involves a combination of risk taking and long-term strategic planning, and indeed, the Chinese people have proven themselves and excelled as entrepreneurs. The reformation opened China's door to the world, and the skyrocketing economy created a Chinese "Gold Rush" that lured the world to underpriced real estate, amenable trade laws, and a surge of capital into the stock market. Now the challenge for Chinese entrepreneurs is finding opportunity in more unconventional places.

It could be that in the coming months and years, businesses in China will reinforce the domestic market as a way to fend off the global reverberations from the economic downturn. Domestic companies could add Western assets at a good value. More importantly, though, China can leverage the economic gains it has made over the past ten years into more investments in domestic R&D and innovation. This puts a premium on vision and strategic planning instead of short-term financial risk taking, and ultimately, that's going to benefit everyone, even as some will suffer now."