November 7, 2018

§3. Governance – what should the CEO or Directors be doing?

In this series of three brief articles, Ron Ainsbury, Visiting Fellow at the Cranfield School of Management and Senior Fellow at the Research Centre Business Innovation at the Rotterdam University of Applied Sciences, sets out why and how New Zealand directors should be directing efforts to ensure that their businesses have a clear purpose and have the governance systems in place to ensure that the purpose is followed.

Perhaps, by focusing on purpose and embedding the culture and values to support that purpose, much of the unethical behaviour of corporations could be reduced and so much of the focus on the plethora of compliance rules, regulations and procedures minimised.

Questions for Leaders

These are the fundamental questions that a board (or the CEO) should be able to answer.

Q What is the purpose of this business or organisation?

Follow Simon Sinek’s directive – “Start with Why?”[1]Why do we exist? A statement of purpose is not to be confused with a Mission Statement. The difference is neatly explained in an HBR article by Bruce Jones of the Disney Institute: “Purpose answers Why, Mission answers What”.

Is the purpose expressed in a simple, easy-to-understand way? There are now many examples of well-expressed purpose statements.

 

If the purpose is not clearly stated then the Board should work with the CEO to develop a meaningful purpose – one that is consistent with the operations of the business. There are several guides as to how to do this, for example, https://www.blueprintforbusiness.org.

Q Is the purpose supported by a set of values that define our organisation’s behaviour?

These should not be just words but should drive the way the business develops its strategy and manages its operations on a daily basis. Values can help drive the business. As Xerox CEO, Anne Mulcahy reported corporate values “helped save Xerox during the worst crisis in our history.”

New Zealand’s Z Energy has a clearly-explained set of values which provide a great example for others to follow.

Figure : Z Energy Values

 

 

Q. Does purpose underpin our current strategic plan and goals?

Does the CEO and the Senior Leadership team promote the purpose and values in the way they run the business or are these just mouthed? Does it drive strategy development? Underpin operations? The following slide was part of Unilever CFO Graeme Pitkethly’s presentation to investors in Singapore, December 2015 and is typical of many Unilever presentations to investors and shows how Unilever’s simple purpose statement underpins their business – resulting in returns to investors.

Figure: Unilever’s Strategy explained

Q Do we have a culture that is in synch with our purpose and values?

Sir Winfried Bischoff, Chairman, Financial Reporting Council states clearly that “establishing a company’s overall purpose is crucial in supporting the values and driving the correct behaviours. The strategy to achieve a company’s purpose should reflect the values and culture of the company and should not be developed in isolation.”

A key underpinning of art of the culture of the company will be the mindset that the Board and Leadership team adopts. Examples (not exhaustive) of mindset questions include:

  • What is our time horizon for decisions – short term profitability or medium-to-long-term sustainability of the business?
  • How open and honest are we about our business and the way we operate? Secretive and giving away as little information as possible or are we open to public scrutiny?
  • Are our relationships, with suppliers and customers, short-term and transactional or long-term with a share destiny?

Q. Am I satisfied that our board has sufficient oversight of these activities?

There are several different ways in which a board may exercise oversight, for example, appointing a sub-committee to be responsible, appointing a lead director, appointing a below board committee headed by a director. There are many guides available on line that will help the director, for example:

  • “Board Leadership in Corporate Culture: European Report” a Research Report by Board Agenda & Mazars in association with INSEAD 2017
  • FRC – “Corporate Culture and the Role of Boards” July 2016
  • BITC – “Towards a Sustainability Mindset: How Boards Organise Oversight and Governance of Corporate Responsibility” by David Grayson CBE and Andrew Kakabadse.

Q. Are we being open and transparent in what we do?

In our reporting are we making our customers, our people and our investors fully aware of our purpose, values and strategy to ensure that our activities are seen to be genuine and not just greenwashing or sustainability-washing?

The trend towards integrated reporting is developing with companies publishing just one report and not a ‘sustainability’ or ‘citizenship’ report separate from the financial report. See, for example Heineken’s 2017 Annual Report[2]: “Through “Brewing a Better World”, sustainability is embeddedin the business and delivers value for all stakeholders.”

 Conclusion

New Zealand leaders of businesses, large and small, need to put aside the “profitability first” philosophy that dominates businesses today.

By focusing their businesses on purpose and embedding the culture and values to support that purpose, much of the unethical behaviour of corporations could be reduced and so much of the focus on the plethora of compliance rules, regulations and procedures minimised.

[1]https://www.ted.com/talks/simon_sinek_how_great_leaders_inspire_action

[2]Available at www.theheinekencompany.com

Tagged , , , , ,

§2. The Business Case

In this series of three brief articles, Ron Ainsbury, Visiting Fellow at the Cranfield School of Management and Senior Fellow at the Research Centre Business Innovation at the Rotterdam University of Applied Sciences, sets out why and how New Zealand directors should be directing efforts to ensure that their businesses have a clear purpose and have the governance systems in place to ensure that the purpose is followed. In this second article we look at the evidence that businesses that do embrace responsibility and sustainability outperform competitors.

The Business Case

Business leaders, seduced by the lure of shareholder value maximisation, often proffer multiple excuses for not taking more positive action on ESG[1]issues, that they can’t afford it. Costs will go up. We are too small. Yes, we understand the triple bottom line – but for now it needs to be profit first, people and planet can come later, when we can afford it.

Yet, the evidence reveals these to be false arguments. Businesses that are embedding responsible and sustainable business practices show, lower costs, higher employee engagement and productivity and improved returns.

It may seem strange to have to set out a business case for being responsible and sustainable. Keith Weed, Unilever’s Chief Marketing Officer, has said “I’d love to see the business case for being unsustainable!”

The evidence is now conclusive. As the late Ray Anderson said – it is a better business model.[2]

In 2010 Britain’s Business in the Community recognized a divide between those that “embrace sustainability-driven strategy and management, and those that don’t. These ‘embracers’ are the businesses that will survive and thrive”. BITC commissioned the Cranfield School of Managementto compile the business benefits for being a responsible business, “to help those currently at an earlier stage of the journey”. The study[3]demonstrated seven ways in which business benefits:

  1. Brand value and reputation
  2. Employees and future workforce
  3. Operational effectiveness
  4. Risk reduction and management
  5. Direct financial impact
  6. Organisational growth
  7. Business opportunity.

Since that study, several further research papers have highlighted the benefits.  In 2011 a Harvard study[4]provided “evidence that High Sustainability companies significantly outperform their counterparts over the long-term, both in terms of stock market as well as accounting performance.”

In 2014 a study by the Smith School at Oxford Universityand Arabesque Asset Managementshowed that Companies with strong sustainability scores show better operational performance and are less riskyand that Investment strategies that incorporate ESG issues outperform comparable non-ESG strategies.[5]

In 2015 Project ROI[6]built on the 2010 BITC findings cited above and provided detailed economic analyses on business benefits:

  • Share price and market value
  • Sales and revenue
  • Reputation and brand
  • Human resources
  • Risk and license to operate.

The report concluded that a “more productive approach will be to develop business-aligned and integrated CR strategies.”

In January 2016 the Financial Times highlighted a report[7]by HBR Analytica and EY’s Beacon Institute that found “companies with a purpose beyond profit tend to make more money.”

In 2017 in a HBS Whiteboard session Andrew Winston[8]neatly summarises the arguments in “The Business Case for Sustainability.” No wonder then that so many leading global businesses are not just dabbling with ESG issues but going “All In”[9].

When Larry Fink, the CEO of the world’s largest investor, Blackrock, writes to the CEOs of companies he invests in and urges them to find their purpose and that the “board is essential to helping a company articulate and pursue its purpose” purpose – it is time for NZ Boards to sit up and take action.[10]

[1]Environmental, Social, and Governance issues.

[2]https://www.ted.com/talks/ray_anderson_on_the_business_logic_of_sustainability

[3]The Business Case for being a responsible business” 2011 available on www.bitc.org.uk

[4]The Impact of Corporate Sustainability on Organizational Processes and Performance by Robert G. Eccles, Ioannis Ioannou, and George Serafeim HBR Working Paper 2011

[5]From the stockholder to the stakeholder:How sustainability can drive financial outperformance”by Smith School, Oxford Universityand Arabesque Asset Management 2014

[6]Project ROI Defining the Competitive and Financial Advantages of Corporate Responsibility and Sustainability by IO Sustainability and Babson College 2015

[7]https://www.ft.com/content/b22933e0-b618-11e5-b147-e5e5bba42e51

[8]https://hbr.org/video/5415413929001/whiteboard-session-the-business-case-for-sustainability

[9]“All In: The Future of Business Leadership” by David Grayson,‎ Chris Coulter,‎ Mark Lee Greenfield Publishing 2018

[10]https://www.blackrock.com/corporate/investor-relations/larry-fink-ceo-letter

Tagged , , ,
November 6, 2018

§1. Profit Is not the purpose of business!

In this series of three brief articles, Ron Ainsbury, Visiting Fellow at the Cranfield School of Management and Senior Fellow at the Research Centre Business Innovation at the Rotterdam University of Applied Sciences, sets out why and how New Zealand directors should be directing efforts to ensure that their businesses have a clear purpose and have the governance systems in place to ensure that the purpose is followed.

Perhaps, by focusing on purpose and embedding the culture and values to support that purpose, much of the unethical behaviour of corporations could be reduced and so much of the focus on the plethora of compliance rules, regulations and procedures minimised.

The Purpose of Business

The IOD’s Four Pillars of Governance Best Practice, states that ‘Corporate governance exists to help organisations achieve their fundamental purpose … typically to maximise shareholder value.’ Why?

This focus on short-term profit and maximising quarterly shareholder value has grown since the US Economist Milton Friedman first stated “there is one and only one social responsibility of business – to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.”

As a result, since then, most business schools, business commentators and analysts have developed and used various profitability measures such as quarterly earnings per share, to gauge the success of businesses, and stock market investors narrow their focus even further, sometimes to daily profit expectations.

But shareholder value is not a legal requirement. The NZ Companies Act 1993, 131 (1) states that ‘A director of a company, when exercising powers or performing duties, must act in good faith and in what the director believes to be the best interests of the company.’ Australian, US, and UK laws reiterate this, using ‘best interests of the shareholders’ as the guideline for a director’s decision-making.

In recent years the wisdom of focusing a businesses’ purpose on shareholder value has come into question. Martin Wolf writing in the Financial Times wrote: “Almost nothing in economics is more important than thinking through how companies should be managed and for what ends. Unfortunately, we have made a mess of this. That mess has a name: it is “shareholder value maximisation”. Operating companies in line with this belief not only leads to misbehaviour but may also militate against their true social aim, which is to generate greater prosperity.”

This view has been repeated in several articles, for example, James Montier of the global investment firm GMO wrote a well-researched article in which he demonstrated that
shareholder value maximization is “The World’s Dumbest Idea”.

It is time business went back to basics. With a few exceptions, businesses start when an entrepreneur sees a situation where a group of people can have a problem solved. As Peter Drucker once put it, “The purpose of business is to create and keep a customer.”

Creating and keeping customers could mean offering a new product or service that is cheaper, or of higher quality, longer-lasting, is disposable, offers superior performance, offers faster performance, and so on. In each case there is a group of people who are willing to pay for this innovation. If we look at the successful companies of today and trace back to how they first started, we see this clearly:

  • Nike, founded by an athletics coach, who wanted his athletes to have better performing running shoes
  • Google founded by students who wanted to be able to find academic papers on the internet more easily
  • Facebook founder Mark Zuckerberg wanted to help individuals share experiences with friends
  • Henri Nestlé wanted to help mothers who couldn’t breastfeed
  • Steve Jobs wanted everyone to be able to have computer power in their hands
  • Quakers offered to provide safe custody of gold for 17th century London goldsmiths and founded Barclays!

Each of these companies ventured into unethical behaviour, I assert because as they grew their governance focus shifted from purpose, values, and culture to short-term profitability, most probably as a result of stock market pressures.

Of course, there are many people who start a business simply dreaming they will become rich, but unless they find a market and provide an innovative solution, they won’t. If the entrepreneur manages the new businesses efficiently, then she or he earns a profit on the investment.

Drucker sets out three purposes of profit:

  • validation of the soundness of an enterprise’s efforts (the right purpose)
  • compensation for the risks that the business is incurring (dividends for investors
  • the generation of resources needed to fund future growth (sustainability).

The way to ensure the sustainability of the enterprise is to reinvest in innovation and meeting consumer needs.

Some continually argued against this profit-centred approach. Charles Handy, in the Michael Shanks Memorial Lecture in 1990 argued “To say that profit is a means to other ends and is not an end in itself is not a semantic quibble, it is a serious moral point.” And went on to address the purpose of business.

In recent years there has been a move away from Friedman’s profit-centred focus as business leaders have rediscovered the power of purpose. While John Elkington’s “People Planet Profit” may have started a trend towards businesses taking a lead in being socially responsible (CSR ) this new focus on purpose is not CSR it is central to the business. As David Grayson and others argue in their recently-published book, it is about companies going All In” (“All In: The Future of Business Leadership” by David Grayson, Chris Coulter and Mark Lee. Routledge 2018).

In October 2014 Coca-Cola Enterprise sponsored a “Future for Sustainability” Summit and commissioned a Cranfield School of Management and the Financial Times study, entitled ‘Combining Profit and Purpose’.

In a recent article, the strategy guru, Michael Porter wrote: “A big part of the problem lies with companies themselves, which remain trapped in an outdated approach to value creation that has emerged over the past few decades. They continue to view value creation narrowly, optimizing short-term financial performance in a bubble while missing the most important customer needs and ignoring the broader influences that determine their longer-term success. How else could companies overlook the wellbeing of their customers, the depletion of natural resources vital to their businesses, the viability of key suppliers, or the economic distress of the communities in which they produce and sell? How else could companies think that simply shifting activities to locations with ever lower wages was a sustainable “solution” to competitive challenges?

The role of Purpose is thoroughly set out in a seminal book “The Power of Purpose” by John O’Brien and Andrew Cave, required reading for every CEO and Director, indeed, for anyone interested in starting or running a successful enterprise, whether for profit or not.

Even in the world of investment finance, where the purpose of investing is purely for profit, we see a realisation of the importance of Purpose. Earlier this year Blackrock’s Larry Fink encouraged CEOs to reconsider their purpose writing “Without a sense of purpose, no company, either public or private, can achieve its full potential.”

“The bottom line result is that purpose-driven, people-centric, values-driven companies outperform. Not just because they do better sustainably over time, but because they avoid the risk. They avoid the Volkswagen and the Tesco problems, and they avoid the thing that wipes 30% off their share prices.” Ann Francke, CEO, CMI

Instead of criticising those who have signed up to the New Zealand Climate Leaders’ Coalition we should all be encouraging all business leaders to go further and focus on the wide range of ESG risks and ensure that their individual businesses have a clear purpose. NZ directors may find that they will need to spend less time on compliance.

Next

In the second article in the series Ron will present the evidence that businesses that focus on purpose and manage responsibly and sustainably, taking into account their potential impact on a wide range of stakeholders, generate superior returns for their investors.

Tagged , , , , , ,
October 27, 2018

“Shrinking our Wrap” !!!

The New Zealand Listener has published a cover article on Trash this week – quite interesting in light of the comments I wrote earlier about focusing on waste.

“Shrinking our wrap
With China shutting its gates to our plastics and paper, what can New Zealand do to stem the tide of ocean waste?”
by Veronika Meduna

If you can’t access, the nine-page article highlights the trash issues with data and pictures, reports on several businesses (including B-Corps) in NZ trying to turn waste into reusable materials, and introduces the circular economy with references to the Ellen MacArthur Foundation paper (of 2016!): ‘The New Plastics Economy’.

New Zealand is slowly catching on to the need to tackle trash and waste – and to start thinking in terms of the Circular Economy.

Current Issue (Oct 27 – Nov 2, 2018)

Tagged , , , , , , , ,
October 22, 2018

Is the current focus on Climate Change misguided?

Is the current focus on Climate Change misguided?

I was listening to the BBC Friday night comedy when the subject turned to the recent IPCC Climate Change report. “I don’t see the politicians doing anything about it, so I’m not” said one comedienne. She went on to say she had explored the UK government website to find out what she could do – and there was nothing, she claimed.

Reducing CO2 emissions is something quite difficult for individuals to tackle – seemingly it needs disruptive changes to lifestyle: stop flying, stop driving a car, turn off the heating and wear warm clothes in winter and so on. All the luxuries of modern life for which generations have strived – to be denied.

In some parts of the world the response is ‘bring it on’. How many Scottish comedians have used that line since ‘Global Warming’ (what we used to call Climate Change) became the catch cry?

To my way of thinking, the fundamental causes of Climate Change is the result of waste; wasteful use of resources, such as oil, gas and coal. But it is also the non-use of abundant solar energy, which to me is another kind of waste.

Should we be focusing on eliminating waste?

A Dutch brewer once gave me a rather colourful explanation of fermentation. Yeast cells are floating in a sugary solution. They eat the sugar, make love producing babies (more yeast) and excrete alcohol and CO2. I hasten to add he used more colourful verbs!

After a while the alcohol level in the sugary soup becomes toxic, the yeast cells die in their own waste. Thus, there is an upper level to the alcohol strength that can be produced by natural fermentation.

The metaphor is clear. When people say we are killing the planet – is it the CO2 levels we should tackle – or waste?

A few years ago an environmental documentary, ‘Trashed’, featuring Jeremy Irons as presenter, was published. The message about how pollution is harming people and the planet is as stark as Al Gore’s ‘Inconvenient Truth’. But, whereas Al Gore (and the IPCC) paint a future disaster based on predictions – ‘Trashed’ shows video footage of real damage.

The effects of waste are evident. We don’t need predictions of what might be and how our lives might be affected by waste . The effects of waste are before our eyes: polluted rivers and beaches, polluted air, city streets pock-marked with chewing gum, cigarette butts on street corners, litter alongside country roads, skeletons of birds showing a gut full of plastic.

Could a focus on eliminating waste be more productive?

Tackling waste first, by being less wasteful of energy in our homes and vehicles, by focusing on the household savings that will result, becomes individual action that tackles excess CO2. Let’s not forget it is excess CO2 that is the problem – without any CO2 at all – no plants, no trees, no vegetables – no life!

With Asian countries like China and Thailand refusing waste from western nations – it is time we stopped producing waste.

The circular economy movement offers dozens of practical tips for individuals, small businesses and community groups to take action. We don’t need to wait for government.

And whereas proposed Climate Change solutions appear to add significant costs to the economy, reducing and eliminating waste via Circular Economy principles offers value – measured by some in billions.

The Circular Economy opens up opportunities, for social and for-profit entrepreneurs taking advantage of new technologies (‘green chemistry, biochemistry, Nanotechnology and whole system design) in what Australia’s Natural Edge project called the 6th wave of innovation.

Shall we focus on eliminating waste?

© Ron Ainsbury 2018
www.GoJacaranda.com

Tagged , , , , , ,
July 21, 2018

Something everyone should read

I think her idea is a great one – maybe the world should explore making this compulsory for all school-leavers …

“One idea would be a public service program that would encourage or require young Americans to spend a year after high school in another community, far from their own, not “helping” members of another group but interacting with people with whom they would normally never cross paths, ideally working together toward a common end.”

https://www.foreignaffairs.com/articles/world/2018-06-14/tribal-world

July 13, 2018

Ron at Rotterdam TEDx

Here is link to a video I have posted on YouTube. This was in 2016. I repeated the talk in March 2018 – the text of which I posted earlier.

Cleantech Delta and Rotterdam TEDx held “Clean Tech meets the Next Economy”. I was invited to share my thoughts on the way business education needs to change to support the Roadmap to the Next Economy which is a plan for the development of the 23 municipalities in The Netherlands from The Hague to Rotterdam. See https://tinyurl.com/y7hrsq82 for more details.

Rotterdam TEDx hadn’t arranged video but a start-up video company was filming – hoping to generate follow-up orders! I discover this video in my files when I moved cities!

Tagged , ,
March 12, 2018

Education For The Next Economy – a personal view

Text of Rotterdam TEDx Talk

The theme of this year’s Rotterdam TEDx series is Great Heights. At first you may wonder what the connection is between food and education and great heights. I hope it will become clear.

Food courts

Food courts are very popular across Asia.

In the modern metropolis of Singapore – people still flock to food courts like Newton Circus.

Most shopping malls will have a floor or a large part of a floor devoted to food. So even in luxurious shopping malls featuring shops selling all the latest Parisian fashion – there will be plenty of food choices.

They are a more recent innovation in The Netherlands. At Erasmus University there is a modest food court for students. In Utrecht – they have Speys as part of the Jaarbeurs convention centre – and of course, here in Rotterdam – we have the new Markthal offering a wide variety of foods – although strictly speaking this is not a true food court – as it is not possible to find a table where you can sit down and have a family eating food from multiple food stores.

In a typical food court, you’ll find there is a wide range of food options each served at a specialty outlet.

Individuals can mix and match their selections and then come together in the centre and converse over their separate meals.

Families love this because in one spot you can satisfy mum, dad, grandma, grandpa, and all the kids – each eating their favourite food.

Perhaps one will see that something another person is eating looks tastier and decides next time to try that. On the next occasion each is free to try a different food.

A food court serves food at all hours: breakfast, lunch, dinner and snacks from morning until late at night.

A TED presentation of a few years ago started with this picture – Hogarth’s depiction of a coffee house, often the source of many new ideas that drove the enlightenment – let’s see how modern day food courts fi tin.

The 21st Century is truly VUCA

We are living in what has been popularly described as the VUCA World. As with much of the modern language of business, VUCA comes from the military, in this case the US armed forces describing conditions in Afghanistan.

V for Volatile – just try to follow President Trump from one day to the next!

U for Uncertain – just what will Brexit mean?

C for Complex?

The Rotterdam University Research Centre, Sustainable Port City, Duurzame Havenstad, known as RDM to most, has set out 21 trends that could have an effect on the way the Port functions all of which illustrate the potential VUCA.

These trends include the increase in the use of robots and drones, the impact of the circular economy with reverse logistics becoming as important as forward logistics, the rise in renewable energy, and self-propelled vehicles.

Simple arithmetic says that the interaction of these 21 trends adds up to a staggering number of potential combinations.

51,090,942,171,709,440,000!

A for Ambiguous?

Will robots yield fewer jobs? Fewer but higher-paying jobs? More jobs – but paying less?

Technology Change

We are currently in the 3rd, 4th, or 6th wave – depending on which academic you prefer to read.

The Australians developed the concept of the 6th wave of innovation.

The Germans described the 4th Industrial Revolution – adopted by the World Economic Forum.

And the American academic, Jeremy Rivkin – talks about the 3rd.

Whatever it is – the future is being driven by rapid advances in technology.

Just looking digital alone – here is one projection of the growth in connected devices. 50 billion by 2020.

Roadmap – Next Economy

In an attempt to make sense of the future – 23 municipalities have combined together to set out how the Rotterdam Delta should respond to the future

“In 2025, the metropolitan region of Rotterdam and The Hague will be the international market leader in the design, development, manufacture and marketing of solutions in the area of sustainable living in a heavily urbanised delta region. In the region, coherent solutions will be devised, tested and produced for global logistic, energy, food and safety issues.”

The Roadmap sets out five strategic areas of focus – or future economies – for the Delta:

1. The Renewable Energy economy
2. The Digital economy
3. The Circular economy
4. The Start-up economy
5. The Inclusive economy.

Arising out of this, in Rotterdam we have the Innovation Quarter seeking to redevelop older parts of the harbour known as the RDM and M4H districts. In fact, all this week we have had 90 students, from the Rotterdam Business School and the NEOMA Business School in France, tackling a problem specific to attracting new businesses to the planned circular economy area of M4H.

The question arises, are we preparing our students to be a part of this Road-mapped economy? I fear not. As in many countries, I see that education is stuck in a 19th Century paradigm.

The Problem

‘The Times’ recently published its 2018 world rankings of universities. I was pleased to see my alma mater, Oxford, remaining on top of the global list.

But more troublesome are reports that student satisfaction is low.

A third of students don’t believe their course is offering value for money
Over a quarter believe feedback from tutors is poor and too many students end up regretting their choice of course.

In the recently published book, ‘Overschooled and Under Educated’ the author John Abbott asserts that education is about preparing children to become good citizens and adults who will thrive at unstructured tasks – not just successful pupils.

In 2014, The London School of Economics found a mismatch between what universities were providing and what businesses need. Their research among CEOs identified three core capabilities sadly lacking in recent graduates:

Problem solving
The ability to connect different parts of the business in a holistic way
Collaboration and teamwork.

These capabilities are echoed in a Twente University paper entitled “21st Century Education”.

As the eminent international advisor on education and creativity, Sir Kenneth Robinson, has pointed out, our model of education was developed during the industrial revolution – fit for purpose in the 19th century. If you were to ponder who succeeds in the current system, he asserts – the answer is university professors.

But if we are to achieve the goals of the Road Map then what we don’t want are more university professors.

Greatness?

Now, you might be wondering. This is all very interesting, but what does this have to do with greatness? The theme of this conference?

Here’s my concern. Are we providing our students, our future leaders, the kind of university education that will allow them to be great? Inspiring them to pursue their own greatness? To find, what Sir Ken Robinson calls their Element. Where they can be great.

Over the past three years I have been inspired by my students. They come from everywhere. All parts of Asia. The Middle East. Africa. The Netherlands and other parts of Europe. Central and Latin America. Even Australia.

They come to study business but they are also imbued with a desire to create a better world. They are aware of the problems of the modern world – climate issues, poverty, and they want the businesses they work for or create to be good citizens.

So, are we providing them with the education that will prepare them for this future?

I know that we are not.

Too often this is the view of the classroom. And old textbooks are the focus of learning.

We need schools that start to encourage new capabilities. Pupils to learn basic facts and theories but also we need to encourage an entrepreneurial spirit, nurture and develop their imagination and creativity and not snuff out these innate capabilities.

I was quite intrigued by this Infographic – produced by Funders and Founders. Everyone will become an entrepreneur.

I have asked several cohorts of graduate students – has your university career prepared you to be more entrepreneurial? To be creative, innovative? The overwhelming response has been NO.

As Prof Ken Robinson has pointed out the current education system, in many countries, stamps out creativity and instils uniformity.

We need to encourage young people to develop a flair for learning to learn.

This latter capability is going to be fundamental in the 21st Century. With knowledge changing rapidly, we are going to have to be continually re-learning.

What do we need?

Of course we are going to need specialist skills, built on a foundation of facts and proven theories – so engineers of all types, scientists, and doctors. I am not arguing against the need for pure science and academic rigour in disciples – what I am arguing is that we need a different approach to conveying that knowledge from the academic world to the community at large.

We also need creativity, entrepreneurial spirits to foster new technological, business, and social solutions:

Basic skills and knowledge
Collaborative and team-building skills
Creative problem-solving.

We see so many advances being made by differing specialists collaborating, e,g.:

” New health solutions combining basic medical knowledge with nano-robotics, engineering, and IT
” Engineers studying nature – zoology and botany to create new materials or new ways to harness energy from the sun.

Back to the food court

The need for business education is clear

Encourage inter-disciplinary work – active interaction between researchers, lecturers, students, and business people
Develop stakeholder-engagement and cross-sectoral partnership building skills
Nurture creativity and entrepreneurship.

Or is it?

What to teach? The importance of topics seems to vary.

I was perusing Friedman’s book ‘Thank you for being late’ where he discusses Teller’s view of the rate of growth of new, technological knowledge and contrasts that with human adaptability.

One of my colleagues is studying 21st century skills and has found a large discrepancy between what educators think their students need and what students believe are their priorities.

Here is the list of essential topics.

Here are the student survey responses.

But why should we try to force students into a specific box right now? Maybe numeracy Is not important – now – but perhaps will be in the future. So why not allow students to return to add to their knowledge – when they need it?

My view of the future business university is a kind of educational food court.

The university of the future should allow students to mix and match topics of their choice. Not just choosing from a range of pre-structured, fixed degrees – but choosing from a wide range of subjects. Including the creative arts.

Why not a degree in which you study management, mathematics and music?

Just as a food court serves food at all hours so students will be encouraged to return to the university at all times in their lives – to learn new stuff. The current stuff.

I see the university of the future offering short, specialised courses. And as new technologies and new capability requirements emerge in the 21st century, universities will develop new very-focused courses perhaps only a week in length.

Instead of degrees – business schools will offer shorter courses in specific skills and capabilities and award certificates attesting to achieved competencies. In the same way that boy cubs, scouts and girl cubs and guides collect proficiency badges. Right now I’d like to sign up for a cryptocurrency proficiency course and badge.

Businesses will send their managers armed with live problems to these courses – aiming to achieve solutions to their current business issues – collaborating with lecturers and full-time students.

Perhaps studying for a degree might become obsolete for business. It may well be that certain disciplines (such as medicine and law) will still need focused basic degrees – although rapid changes in medical technology will force constant retraining.

But right now too many of our universities are too silo-ed.

As David Grayson of Cranfield University writing in the ‘Financial Times’ asserted: “Part of the problem is the emphasis for academic career progression on publication in three- and four-starred academic journals which can encourage incremental development of academic theory.”

The Roadmap may need such incremental development in basic sciences and technologies – but it also requires breakthrough, creative solutions.

Steps we are taking at RBS

In my experience, the current accreditation system in the Netherlands does not encourage rapid innovation. We need members of our education boards and administrators to return to school and study entrepreneurship and creativity – then return to their roles and transform the system.

At RBS – central to the structure of our one-year Master degrees is building in the capabilities of:

Creativity – divergent thinking, and not just thinking but how to apply and operationalise
Critical and analytical thinking – problem-solving skills, making judgements
Collaboration – emotional intelligence, interpersonal communication, and teamwork (not just between known allies – but also between competitors and unexpected allies). We create cross-disciplinary teams of students to work with businesses to tackle real-life business issues.

We have experimented with new forms of collaborative and distance learning – first with Brazil and more recently with Barcelona. But instead of encouraging development – supporting experimentation – instead of helping overcome potential issues – the overwhelming response I have observed is – why do you want to change. Why can’t you just leave things as they are.

The dead weight of inertia and fear of change.

The Barrier

In a recent blog on LinkedIn, Sahed Ladapo these graphs, showing technology, businesses and public policy.

If you then take one of the observations of Sir Ken Robinson, that our educational systems were designed in the 19th century, we can posit that they were fit for purpose in an era when the rate of change of knowledge was sedentary when compared to that of the 21st Century.

Now we can understand the frustration of forward-thinking educators – I’d like to include emyself int hat category – who recognize that their role is really to help students grapple with a fast-changing world and would thus like to focus on building fundamental capabilities, like learning how to learn – but have to operate in a rigid structure that discourages change.

Our educational systems need to become more fleet-footed.

Look at what is happening in China. Often we think of China as being a cheap manufacturer of western products – but their students of today are being prepared for a different world.

If we are going to inspire this new generation to become great leaders – whether in business, politics and society, the sciences, or the arts – we need to introduce some radical changes.

In conclusion, I challenge our educational bureaucrats – unleash the greatness in our current generation – start to become versatile, creative, and fleet of foot yourselves and if you can’t – get out of their way.

Tagged
December 9, 2017

What do we mean by entrepreneurship?

This is a blog I wrote specifically for the HR Business School (Rotterdam) but some might find the thoughts of interest.

In business and university circles we often hear the phrase “students must become more entrepreneurial.” We read articles arguing that everyone will have to become an entrepreneur in the new economy[1] and one of the key focus areas of the ‘Roadmap to the Next Economy’[2] is startup economies. The EU has a 2020 Entrepreneurship strategy[3] and, in 2014, the World Economic Forum sponsored a workshop entitled ‘Fostering Innovation- driven Entrepreneurship in Europe’, in which they put forward the structure of “stand up, startup, scale up” as a means to supporting the creation of new businesses.[4]

Asked for a definition of an entrepreneur, my graduate students will come up with familiar names; Gates, Jobs, Zuckerberg and Musk. They will describe a vision of a lone wolf working in a small workshop or garage, coming up with a brilliant idea that creates a billion-dollar business.

I recently interviewed 90 final year bachelor business students about becoming an entrepreneur and most replied “I don’t have what it takes”. Only five planned to start a new business after they graduated and a further 75 said – “Maybe in a few years’ time, but not just yet.”

No-one responded “Yes” to the question: “Has university prepared you to be able to start your own business?” Most only replied “Somewhat”.

This after three and half years of study at our business school!

Are we doing a good job at HR Business School helping our students become entrepreneurs? Perhaps we are discouraging ambition by projecting the wrong image of an entrepreneur?

That would not be surprising when there are so many ideas of what an entrepreneur is. For example, ‘Business News Daily’s’ Paula Fernandes interviewed 15 company founders and received different 15 versions of what makes an entrepreneur.[5]

In a recent ‘HBR’ article[6], John Hagel III reminds us that high growth new businesses (often referred to as ‘gazelles’ or ‘unicorns’) are few and far between and argues that we shouldn’t unduly focus on them. With new technologies making production and distribution processes more reachable to smaller businesses, perhaps we should focus our students, not so much on the building of multi-million dollar enterprises but, in Hagel’s words; “making a comfortable living for themselves and perhaps a small team of people” by “designing and commercializing products that are targeted to the specific needs of small groups of customers rather than the mass market.”

One can start to see this in the rise in new small businesses challenging global players – such as specialty gin companies, artesian bakeries, boutique breweries, and bean-to-bar chocolatiers.

Most of our graduates join small businesses rather than large ones and therefore don’t see the need to be entrepreneurial, but even existing small businesses need entrepreneurs to remain competitive.

The EC writes that “Europe’s economic growth and jobs depend on its ability to support the growth of enterprises. Entrepreneurship creates new companies, opens up new markets, and nurtures new skills. The most important sources of employment in the EU are Small and Medium-sized Enterprises (SMEs). The Commission’s objective is to encourage people to become entrepreneurs and also make it easier for them to set up and grow their businesses.” [7]

So, as the HR Business School, what should we be focusing on? I suggest three capabilities:

Creativity and Innovation:
How can we involve other parts of the university more with our business school? How do we encourage closer collaboration between our students and those of, say, the Willem de Koning Academy, CMIT and the RDM Campus?

Problem-solving, teamwork and collaboration:
The recent Rotterdam International Case Competition, in which teams of students tackled complex business cases under time pressure, is an example of what the few participants would say was a wonderful learning experience. But why just for a select few students in the occasional competition? Could we not use this methodology as a regular feature in more of our courses?

Calculated risk taking and learning from failure:
It is often thought that entrepreneurs are risk takers, but a recent study revealed that they take carefully-considered risks and, importantly, they learn from their mistakes.[8] Perhaps we can encourage our own FU nights[9] within the HR Business School – where we invite current students and recent graduates to share their experiences of mistakes made and lessons learned?

[1] “Why everyone will have to become an entrepreneur” Paul B Brown Forbes May 13, 2012
[2] https://mrdh.nl/RNE
[3] https://ec.europa.eu/growth/smes/promoting-entrepreneurship/action-plan_en
[4] http://www3.weforum.org/docs/AM14/WEF_AM14_FosteringInnovationDrivenEntrepreneurshipEurope_SessionSummary.pdf
[5] “Entrepreneurship Defined” Paula Fernandes Business News Daily, March 2, 2016
[6] “We need to expand our definition of entrepreneurship” John Hagel III, HBR, September 2016
[7] https://ec.europa.eu/growth/smes/promoting-entrepreneurship_en
[8] “Effectuation: Elements of Entrepreneurial Expertise” by Saras D. Sarasvathy Edward Elgar 2008
[9] https://fuckupnights.com
This blog is written by Ron Ainsbury, associate applied research professor Business Responsibility & Sustainability, Research Centre Business Innovation, Rotterdam University of Applied Sciences.

October 5, 2017

Trust and Business Leadership

Can much of the current political unrest be explained by the decline in trust of our leading institutions by the majority of citizens? A brief read of Edelman’s Trust Barometer might cause one to agree.

https://www.edelman.com/trust2017/

In answer to the question: ‘How much do you trust?’ in a survey of 33,000 respondents aged 18 and over in 25 markets 53% said they trusted NGOs, 52% trusted business, 43% trusted the media, and 41% trusted government. The level of distrust varies across countries but in almost every country there has been a steady decline in trust over the past the past few years.

Table: Distrust figures for selected countries

Reading behind these global figures are some interesting details.

In a crisis government official are only rated as very or extremely credible by 29% of the population, CEOs fared a little better at 37%. Most people are skeptical about what they are told by leader in a crisis.

Edelman sets out the path of a downward spiral as concerns turn into fears. Edelman focuses on five major concerns: corruption, globalization, eroding social values, immigration, and the pace of innovation. As concerns among the population grow to fears their belief in the system is eroded. Trust declines. The risk of population action rises.

Figure: Edelman’s Downward Spiral

    Implications for Business

If CEOs, NGOs. And government are not credible – then who are credible?

A person like me 60%

Technical expert 60%

Academic expert 60%.

Even these figures are not encouraging, 2 out of 5 people do NOT find these people credible!

‘Business plays a role in stoking societal fears’ says Edelman as people worry about losing their jobs because of lack of training ,or to foreign competitors, or to immigrants willing to work for lower wages, or because jobs are moved to offshore. Little surprise then that protectionism is on the rise.

The advice for business is clearly set out. Citizens expect that businesses should stop:

a. Paying bribes
b. Paying senior executives hundreds of times more than workers
c. Moving profits offshore
d. Overcharge for products that are necessities of life
e. Reducing costs by lowering quality …

and instead:

a. Adopt ethical business practices
b. Treat employees well
c. Pay fair share of taxes
d. Listen to customers
e. Offer high quality products / services.

There is a wealth of detail behind these statistics and while details vary from country to country what seems to be clear from Edelman’s report (which has been conducted annually since 2001) is that across the world people are crying out for leadership. And business leaders have the opportunity to provide responsible leadership. But they need to put the interests of consumers and their employees above their own personal desires.

This message is amplified by Simon Sinek in his talk “Why leaders eat last”.

https://www.youtube.com/watch?v=ReRcHdeUG9Y