(Not Porter’s) Five Forces


"Imagine the power of four billion connected minds—are you prepared for the innovation about to be unleashed?"

It's a thought-provoking question from McKinsey Quarterly authors, posed in an article on the implications of an increasingly interconnected world. The article describes "The Global Grid," one of what the Quarterly is calling the "five forces," or global trends, that will define the coming era. These forces (not Michael Porter's five forces shaping industry dynamics), while framed in terms of their impact on the corporate world, will of course have implications well beyond profits and losses.

Here's a summary of each global trend, from the website. Read the full slate of related content here.

  • The great rebalancing. The coming decade will be the first in 200 years when emerging-market countries contribute more growth than the developed ones. This growth will not only create a wave of new middle-class consumers but also drive profound innovations in product design, market infrastructure, and value chains.

  • The productivity imperative. Developed-world economies will need to generate pronounced gains in productivity to power continued economic growth. The most dramatic innovations in the Western world are likely to be those that accelerate economic productivity.

  • The global grid. The global economy is growing ever more connected. Complex flows of capital, goods, information, and people are creating an interlinked network that spans geographies, social groups, and economies in ways that permit large-scale interactions at any moment. This expanding grid is seeding new business models and accelerating the pace of innovation. It also makes destabilizing cycles of volatility more likely.

  • Pricing the planet. A collision is shaping up among the rising demand for resources, constrained supplies, and changing social attitudes toward environmental protection. The next decade will see an increased focus on resource productivity, the emergence of substantial clean-tech industries, and regulatory initiatives.

  • The market state. The often contradictory demands of driving economic growth and providing the necessary safety nets to maintain social stability have put governments under extraordinary pressure. Globalization applies additional heat: how will distinctly national entities govern in an increasingly globalized world?


  • Photo: GustavoG

    Challenger, Three Mile Island and the Financial Crisis

    "When I quote others, I do so in order to express my own ideas more clearly," French Renaissance writer Michel de Montaigne has written. I could not help but recall this idea as I read Malcom Gladwell's "Blowup." In this essay, published fourteen years ago, Gladwell explains with astonishing clarity exactly my thoughts on the tiresome financial and economic crisis blame game that still(!) remains fashionable. The essay is a preemptive argument against the scapegoating we have seen, and is so relevant to today's situation it's amusing. Unsurprisingly, perhaps, it turns out the world proceeds unnoticing of the argument, which he sums up in his subtitle: "Who can be blamed for a disaster like the Challenger explosion? No one, and we'd better get used to it."

    "We'd better get used to it." But I suppose it goes against the coping needs of human nature to accept that the blame for some bad things just can't be assigned.

    In "Blowup," Gladwell examines the cases of the explosion of the Challenger space shuttle in 1986 and the near-disaster at the Three Mile Island nuclear power plant in 1979 to illustrate that big "accidents" don't always have clear causes—that they may in fact be inherent in high-complexity systems.


    The near-meltdown at Three Mile Island mirrors and provides good perspective on the meltdown we saw in the financial system:

    Here…was a major accident caused by five discrete events. There is no way the engineers in the control room could have known about any of them. No glaring errors or spectacularly bad decisions were made that exacerbated those events. And all the malfunctions—the blocked polisher, the shut valves, the obscured indicator, the faulty relief valve, and the broken gauge—were in themselves so trivial that individually they would have created no more than a nuisance. What caused the accident was the way minor events unexpectedly interacted to create a major problem.
    That is not to imply that bad decisions and glaring errors were not made during the financial crisis—surely they were—but these specific instances of fraud and other breaches of the rules did not cause our problems. Our "modern-day" Three Mile Island was the result of the same unexpected convergence of the effects of disparate situations—brought about by people acting rationally and without malice—in an extremely complex system. The government had kept interest rates too low for too long; rising property values encouraged mortgage terms that allowed traditionally risky borrowers to own a home; investment banks, ratings agencies, investors and regulators alike did not understand the risk in certain pools of assets; mark-to-market accounting rules facilitated a downward spiral in banks' capital positions; and the list goes on. Congress, the Obama Administration and the media continue to channel public anger to Wall Street (therein, by the way, one can see clearly the exploitation of a scapegoat—the amorphous idea of "Wall Street" is used just as, in other times, the amorphous concept of "The Jews" may have been), how in the world can we cast blame for a systemic problem?

    Paraphrasing sociologist Charles Perrow, Gladwell writes:

    Modern systems…are made up of thousands of parts, all of which interrelate in ways that are impossible to anticipate. Given that complexity…it is almost inevitable that some combinations of minor failures will eventually amount to something catastrophic.
    We unfortunately encountered such a catastrophe just about two years ago.

    Gladwell also quotes an analysis of the Challenger situation (in which a rubber O-ring on the casing of a rocket booster failed to seal in the hot gasses during launch), which concludes:
    It can truly be said that the Challenger launch decision was a rule-based decision…but the cultural understandings, rules, procedures, and norms that always had worked in the past did not work this time. It was not amorally calculating managers violating rules that were responsible for the tragedy. It was conformity.
    The responsibility for the decision to launch still lies with the organization; however, although there was surely a great deal of finger-pointing in the incident's aftermath, in the end it was the system (that is, the design of the organization) that needed to be changed. Like the NASA employees on the Challenger launch, who acted as would be expected leading up to the unfortunate end result, the "sub-prime" borrower seeking a home, the mortgage salesperson, the investment banking analyst, the Federal Open Market Committee member all acted as one would expect (again, barring the specific cases of misconduct). They did not fail. The system failed.

    Of this kind of disaster, Gladwell said, "We'd better get used to it."

    But perhaps we don't have to be so complacent. Let's stop the tantrum and the finger-pointing and try to make the system better. Let's prosecute those instances of misconduct, but let's not project blame where it does not belong. The challenge and the opportunity we face represent something profoundly important, and we owe it to ourselves to be thoughtful.

    To that end, Michael Watkins is furthering the conversation on "systems leadership" here and here at HBR. In what situations have you seen effective leadership of complex systems?


    Photo credit: Matthew Simantov

    Statistical Liberty and Data for All

    Just watch Hans Rosling's fascinating presentation to the State Department last June (below), and you don't have to be a development economist or a public health statistician to see that the World Bank's new open data initiative has great potential. Today, the Bank gave the world unrestricted access to much of its global economic and development data, allowing brighter minds than this one—the Hans Roslings of the world—to peer in with an outside perspective and to mine it for new insight. Rosling himself sent a tweet today hailing the "liberation" of the Bank's statistics and calling for the IMF, OECD and UN agencies to follow suit.

    Watch the video below and visit www.gapminder.org to check out the interactive tool you'll see in the presentation.


    TEDxVolcano


    For the past few days, the erupting Icelandic volcano with the best name ever has shut down all air travel to and from northern Europe, stranding, among millions of others, the community of change agents who were gathered in London for the 2010 Skoll World Forum. Eyjafjallajökull gave them a blank whiteboard—they gave us TEDxVolcano.

    I guess it's just what happens when hundreds of people from the leading edges of social change are plucked from their various paths and dropped into the same city for a few days of unplanned, tangential time. In thirty-six hours, an impromptu team of individuals and organizations assembled a TEDx event, which they hosted and live-streamed today, Sunday evening London time.

    The event was intimate but featured rockstars of the social change community. Cara Mertes, Head of Documentaries for Sundance, described the volcano-related situation we are now facing as a fortunate, indeed a miraculous, "sneak preview" into the future, when the natural world becomes out-of-sync with human society due to climate change. This preview is fortunate, she said, in that it can help us learn, and miraculous in that it is peaceful—which may not be the case when we must deal with the real thing. Matthew Bishop, author of Philanthrocapitalism and U.S. Business Editor / New York Bureau Chief at The Economist, talked about how some have failed to see that the paradigm has changed since the financial meltdown of 2008, and how that prevents them from seeing that doors that had been closed are now open. He also argued for a focus on the "enabling problem"—one that will help us solve many others—by ensuring that the media plays its proper role in improving the quality of public debate, rather than polarizing issues and turning important discussions into simplistic shouting, as it often does. Nathaniel Whittemore, the catalyst for TEDxVolcano, described the event as an illustration of the power of "Why not?", pointing out that when enough people come together saying "Why not?" it becomes a "Hell yes!" He will surely write about the event, so be sure to check out reflections on his blog as well. TED's June Cohen did a wonderful job as host.

    It is pretty awesome that this group of people planned, hosted and streamed this event in a weekend. Thank you!

    View a recording of TEDxVolcano below:



    And those who were seen dancing…

    I'm no Einstein. But it turns out we share something in common.

    I remember spending long nights, back at school, struggling through practice cases with my business case competition team. In addressing those complex, hopelessly unstructured problems, it felt like we were fighting through tangled conceptual jungle, often aimlessly, just searching for something by which to be oriented. With the vines and branches in our faces, it was a real effort just to take the next step, let alone to understand if we were following the right path. Those nights, when we were trying to make sense of those cases, I remember it helping to stand up and move from where I was sitting, perhaps in front of the whiteboard in the empty classrooms in which we often worked, to sit away from the group at the other end of the room. It didn't matter where I went, really, but it mattered that I moved. The challenge was still the same and I had no new information, but placing myself in a different physical context helped me to arrive at a different conceptual vantage point in relation to our problem.

    Now, I wasn't deriving the theory of relativity by any stretch of the imagination, but I recently heard an interesting argument using Albert Einstein as an example to explain the power of having a different perspective, and it helped me to understand why my quirky change of location helped in solving big problems. Author Jonas Lehrer, in a recent PopTech video, argues that, had Einstein not been kept outside of the core academic circles of his day (as a Jew, the argument goes, he was relegated to being a patent clerk instead of entering into a tenure track at a prestigious university), he may not have reached the revolutionary understandings of our universe that he did. Being an outsider, Lehrer says, let Einstein think outside of the box.

    Interesting thought? Yep. Revolutionary idea itself? Not really. But the more it settles in, the more I begin to really appreciate it. And the more I begin to see that our future progress will rely on it (just as, apparently, our progress thus far has relied on it).



    Indeed, some social profit organizations root their change efforts in this principle of new perspectives. I used to intern with a small outfit of amazing people who did this. This group shares with facilitators around the world a symposium that helps people examine the unexamined assumptions which underlie so much of what we do. The symposium helps people reflect on questions like when we say we throw something away, where is "away"? The experience is an awakening, they say, which helps people make more enlightened decisions through new perspectives on day-to-day assumptions.

    I have been reading the book What the Dog Saw, written by Malcolm Gladwell (and delivered by Santa), and I notice the same principle at work. The book is a selection of pieces that Gladwell wrote for The New Yorker, all of which (at least through page 198) show that the genius in his storytelling lies in helping the reader look at something mundane from a new angle—from outside the framework of the day-to-day. Though "Million-Dollar Murray" is not my favorite piece (I like most, so far, the one after which the book is titled), it's another good example of this idea at work in a situation with social value implications. In this piece, Gladwell helps us look at homelessness and its societal cost from a vantage point much different from our daily encounters. Through the novel perspectives in this piece and others, Gladwell nudges us to reach for and take the mental freedom to explore possibilities.

    It is this principle that also gives power to those inspiring quotes which we put below serene photos or on Facebook pages or on post-it notes stuck to computer monitors. These quotes give us the freedom to think big by elegantly showing us another way to look at the mundane. For example, to quote none other than Mr. Einstein: "The world is a dangerous place, not because of those who do evil, but because of those who look on and do nothing." This thought throws open a door to new horizons of possibilities if we were to, say, think beyond the idea of evil as pertaining to those who perpetrate it and instead to the idea of evil existing because of the failure of a collective response by the world to overwhelm it. Evil, from this perspective, pertains to all of us, rather than to certain individuals.

    In writing this post, I realized that what I like about my favorite quote (below) is precisely that it challenges me to contemplate what may be on the other side of the walls of my own box.
    "And those who were seen dancing were thought to be insane by those who could not hear the music." – Friedrich Nietzsche
    So this principle, I'm realizing, really is commonplace itself. But, like Einstein, I'm now viewing it from a different perspective—and I'm taking Gladwell's cue to look upward and embrace the mental freedom to explore.

    Photo credit: tom.hensel

    How Twitter Makes You Smarter

    Yes, it started out as a way to let the universe know, in 140 characters or less, bits of utterly inconsequential information like the fact that one has just eaten dinner and is now sitting on the couch. And apparently, this immateriality was precisely the idea around which the service was built. Four years later, though, Twitter is a truly valuable communication tool.

    In June of last year, for example, Twitter was instrumental in allowing protesters after the Iranian election to remain in communication with the world in the face of repressive retaliation from the Ahmadinejad government. This past January, it helped to share stories, images and messages in the aftermath of the earthquake in Haiti, and played an important role in rallying the world to send $10 million in text-message relief donations in three days.

    On a day-to-day basis, Twitter is a very effective way to discover great content (whether news articles, blog posts, videos or other resources). In fact, it's one of the most effective ways, I have found, when used in the right way. Twitter has far transcended its stigma, for me, by pointing me to horizon-expanding and thought-provoking ideas and resources.



    The question, then, is about how to use Twitter effectively. Out of the 50 million tweets now being sent each day, a good chunk are bound to be useless, just as they were anticipated to be in Twitter's early days. There are good tweets, too, but with so many, using Twitter sounds like certain information overload. It doesn't have to be, though; the key is in who you follow. (If you need a Twitter mechanics primer, read this.) Following a small set of key, active tweeters in the areas in which you are interested will give you access to most of the good, relevant information. These tweeters either originate links to this material or retweet the relevant tweets of others. Not every tweet will be particularly insightful, but a quick scan will help you choose which links to follow. I follow 40 or so tweeters and am connected with the right amount of a variety and a quality of content I simply cannot match with other media sources.

    If you're not already on Twitter, try it out. I list below a select few tweeters who consistently share high-quality content and who might be of interest to readers of this blog.

    Recommended Tweeters

    @socialentrprnr – Nathaniel Whittemore is a blogger on Change.org, among other things, and shares great content on social entrepreneurship.

    @harvardbiz – If you've read my November 9th post on the ProInspire blog or have heard me rant, you know that I think almost all business literature is useful for social profit organizations as well. @harvardbiz shares links to the great blog posts and management tips that appear on the Harvard Business Review's website at HBR.org.

    @NextBillion – Tweets from NextBillion, the community dedicated to exploring the connection between development and enterprise, link to NextBillion.net blog posts and much more from around the web.

    @acumenfund – Jacqueline Novogratz's Acumen Fund shares a number of interesting stories and insights from its investments and from Jacqueline's own experiences.

    @ntakamine – Yep, that's me. I feed links to these blog posts into Twitter but also share and retweet other good, thought-provoking content I encounter. Update: I launched a new Twitter account specifically for this blog.  Follow @ThinkSI for tweets about social innovation and nonprofit organization design and management. 

    Prefer Email?

    I know many who would not use a Twitter application on their phone or desktop, as I do, and would never get into the habit of visiting the Twitter website to review their tweets. Fortunately, there's a solution which allows you to have tweets sent to you on a regular basis in one email. If you'd prefer to review your tweets in an email, follow the steps below once you have set up your Twitter account:
    1. Use FreeMyFeed.com to "unlock" the stream of tweets you collect from those you follow. (On your Twitter home page, click "RSS feed" on the right sidebar and log in. The RSS feed URL to which you are directed is the feed you need to unlock using FreeMyFeed.)
    2. Then use feedmyinbox.com to have your tweets emailed to you on a daily basis. Simple as that.
    Enjoy!



    Ideas in CSR: Three Examples of Leveraged Competencies

    The idea that a business' obligations are broader than maximization of profits is growing quickly these days (I'm going to avoid here the worn-thin indictment of "Wall Street" for neglecting these obligations; seriously people, enough already). A business, the concept holds, is also a social citizen and bears the responsibility of contributing to a just and sustainable society. A core component of this responsibility centers on companies doing business in a socially responsible way. For instance, Starbucks buys only "ethically sourced" coffee beans and Coca-Cola works to reduce its packaging and water footprint. But some companies are also pursuing another, less-common, angle on being a good social citizen.

    Successful companies are successful because they have a more masterful command of certain key abilities than anyone else. In business-speak, these differentiating abilities are a company's "core competencies". Google's cloud computing and accessible satellite imagery capabilities are untouched. Coca-Cola's ability to rapidly move high-volume consumer products to retail locations around the world is astounding. Wal-Mart's ability to work with its many suppliers for greater efficiency is unprecedented. These companies have competencies that no other organization on the planet can match, period. Now, they are exploring ways to leverage their competencies to create social value in addition to private wealth.

    Google's Deforestation Monitoring Prototype

    Deforestation of tropical rainforests is one of the leading sources of carbon dioxide emissions. The UN's REDD framework (Reducing Emissions from Deforestation and Forest Degradation in Developing Countries) is designed to make it worthwhile for rainforest nations to prevent deforestation, but implementation will require the ability to accurately monitor deforestation activity.

    Google, through its "philanthropy" arm, Google.org, is partnering with forest science experts to combine their software with its Google Earth satellite imagery technology to analyze changes in forest cover. Google then donates computing power from the "Google cloud" to reduce analysis time from what would take days or weeks on even a top-of-the-line desktop computer to a matter of seconds. The result is a prototype tool that brings us one step closer to having the power to effectively implement deforestation prevention strategies like REDD.

    Coca-Cola's Pilot of ColaLife

    ColaLife is a campaign aimed at engaging Coca-Cola (and eventually other companies) to help address what can be a big problem in the delivery of aid supplies in recipient countries: distribution. The idea is that one can purchase a Coke almost anywhere (the company's rise to dominance was built on the vision of putting a Coke "within an arm's reach of desire"), but that, in contrast, aid supplies like rehydration salts, medicines or water purification tablets sometimes do not make the "last mile" in distribution.

    Last year, Coca-Cola and its local bottler in Tanzania began testing ColaLife's idea of leveraging the company's distribution channels to deliver aid supplies. They are exploring the viability of transporting "AidPods", which are packages designed to fit in the free spaces found in a crate of bottles, along with their product. In a good example of how NGOs and the private sector can work together, Coca-Cola is partnering with NGO AED for their expertise in social product distribution and social messaging.

    Now, piggybacking on Coke's distribution channels is by no means a full solution to aid distribution challenges. And, indeed, the results of Coca-Cola's initial viability tests are not yet available, so it is unclear if the program will be continued. Nevertheless, that the company is open to exploring these types of possibilities is encouraging.

    Wal-Mart's Sustainability Index

    Wal-Mart is turning heads lately with its new effort to develop a sustainability index, which aims to assess suppliers, create a lifecycle analysis database and develop a simple tool to help customers make purchasing choices based on sustainability information. In the same way it famously manages its suppliers to achieve lower costs, Wal-Mart is now leveraging the same system for increased transparency around sustainability.

    As Joel Makower explains in a thoughtful post:
    It's definitely a bold move, one that stands to raise the bar on sustainability and transparency, empowering both retailers and consumers to leverage their buying power to affect change. It stands to spur innovation in products and processes. And it appears to be around for the long haul. Walmart has gone well beyond talking the talk here. It's changing the game.

    The Concept of Leveraged Competencies

    The word "leverage" is thrown around a bit too loosely, much like the "blame Wall Street" buzz-phrase of recent popularity. In fact, it probably belongs on a generalized version of this list. But, just as "infrastructure", "impact" and "catalyst" are valuable concepts in the right situations, so "leverage" has its appropriate uses.

    Heather McLeod Grant and Leslie R. Crutchfield, authors of the nonprofit best practices book Forces for Good, explain the practical concept of leverage well:
    In physics, leverage is defined as the mechanical advantage gained from using a lever. In business, it means using a proportionately small initial investment to gain a high return.
    In the three cases I describe above, the massive investment these companies have made in business excellence presents us with a unique situation: great social value can be created with a relatively small incremental investment. These companies are, in this sense, leveraging their competencies for social good.