World, Inc.: When It Comes to Solutions - Both Local and Global - Businesses Are Now More Powerful Than Governmentby Bruce Piasecki, Patricia Aburdene (Foreword by), George Dallas (Afterword)
Dr. Bruce Piasecki, one of the top energy and environmental consultants to companies such as Toyota, BP,
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Fifty-one of the world’s top 100 economies are now corporations. More than 40 percent of world trade now takes place within multinational corporations. We now know that the world is flat, but what does that mean for the future of business and society?
Dr. Bruce Piasecki, one of the top energy and environmental consultants to companies such as Toyota, BP, Chevron, DuPont and Dow Chemical, provides a groundbreaking new work showing that social response by firms will be the new benchmark by which corporations will be judged and can drive profits.
As power moves into the hands of corporations, the world is looking to corporations instead of governments to solve its problems. The corporations that can best address social issues by creating superior products will thrive and profit in this new world.
In his optimistic account, Piasecki, an environmental consultant, identifies a new consumer expectation: that corporations have social obligations. He describes a 21st-century capitalism transformed by a "bloodless revolution" that has added the necessity of "social response" to the basic tenets of technical quality and price. Piasecki's idealistic but perhaps necessary premise is that multinationals "can address the social problems we struggle with, in conjunction with the government, in a way that's good for both society and business." His answer: social response product development, which he illustrates with case studies from such corporations as Toyota and HP. With Toyota's pursuit of a greener car, for example, Piasecki (Environmental Management and Business Strategy) provides some insight into a successful corporation's shift toward social response capitalism through innovation and leadership. While Piasecki's valuable ideas are timely—given the social pressures of climate change and fossil fuel depletion—this guide's flaw is its breadth. Each of its three sections—the initial outline of social response capitalism, the leadership needed for such a corporate strategy, and the question of profitability—is fodder enough for a book. (Apr.)Copyright 2007 Reed Business Information
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WORLD INCWHEN IT COMES TO SOLUTIONS-BOTH LOCAL AND GLOBAL-BUSINESSES ARE NOW MORE POWERFUL THAN GOVERNMENT. WELCOME TO WORLD INC.
By BRUCE PIASECKI
Sourcebooks, Inc.Copyright © 2007 Bruce Piasecki
All right reserved.
Chapter OneOn Competition and Social Needs
There is something incredibly rapid and shocking about global consolidation. When one company merges with another, they grow exponentially overnight. We see it happen all the time, but we do not know exactly what it means.
I once shared a five-minute elevator ride with a senator in Washington before a key session of Congress. As we discussed this global phenomenon, he said: "Certainly, the seven sisters-the world's largest oil players-must be doing something right to get that big. It could not just be their love of debt, their faith in complex technologies, and their thirst to span the globe. They must be doing something right, don't you think?"
I have been pondering this question for ten years now. There are only five oil giants left standing, so not all do it exactly right. Yet, overall, is this rapid expanse of companies a result of doing things right? And by "right," what exactly is meant: right for the environment, right for people of all means, right for the profitability of the owners at any cost to others? Is the growth of thesecompanies good or bad for our world and those of us who live in it?
Consider these facts: 1. Fifty-one of the one hundred largest economies in the world are now corporations, not nations. 2. They are massive mansions unto themselves who have great political leverage. 3. The one hundred largest multinational corporations (MNCs) now control about 20 percent of global foreign assets. These top one hundred are household names. 4. Three hundred MNCs-conglomerates such as Honeywell, IBM, DuPont, Dow, and Whirlpool-now account for 25 percent of the world's total assets, a sizeable impact. 5. As much as 40 percent of world trade now occurs within these top multinationals, which explains why they are studied and emulated by smaller companies. 6. Only twenty-one nations have gross domestic product markets larger than the annual sales revenue of each of the six largest multinational corporations.
This astonishing increase in the size and global scope of a few key companies defines our world. Three hundred billion dollar entities with businesses in at least 150 countries each are no longer rare. GE is in this realm, as are Wal-Mart and Microsoft, among others.
I now believe this new global world can help improve your car, your computer, your food and its safety, medical devices, the length, comfort, and satisfaction of your life, and even the appliances and construction of your home. By doing so, it can also address the social problems we struggle with, in conjunction with the government, in a way that's good for both society and business. And in fact, it must do this. What is at stake is our very sense of the future.
Why do I now believe this? We will take the time to explore the answers to that throughout the book. Yet, the important thing to understand up front is that corporate globalization is not something new or something in the future that we can plan for or decide upon. It is here. There is hardly a nation on earth not impacted and reshaped by these large multinationals. There are few citizens whose days are not directly shaped by the choices of these firms, from the food we choose to make for dinner to the tools we use to get our jobs done and keep our families safe. Even airports and hospitals are influenced by the behavior of large oil and automobile companies, as are our news outlets and daily commutes.
Four-fifths of the world's population now live in cities, rather than farms or rural areas, for the first time in human history. Oil, energy, the mobility of citizens, and the price of goods are the central variables that made this rapid urbanization possible, from the things you buy in Milan and Rome to those you can expect to enjoy in megacities like London and Singapore. This has been made possible by the corporate strategies explored throughout the book.
So if this is the world we live in, we must be aware of and understand it if we are to succeed and thrive in the future. Yet most of us, as demonstrated by Thomas Friedman in The World Is Flat (2006, second edition), take this rapid globalization for granted and celebrate it with something close to abandon. Isn't it wonderful, we say, that we can get all this entertainment from Sony, all these imported goods for so little at Wal-Mart, and all this information "for free" deposited so swiftly into our iPod, our HP portable, or our PDA handheld? But we have yet to stop and take assessment of the situation, and understand how to harness the power of this rapid set of changes.
I intend this book to start a conversation about the powers and responsibilities of the multinational corporations. This conversation will get more intense, louder, more nuanced, and more focused on specific companies' behaviors over the next fifteen to thirty years. The basis of the conversation is this: I now believe the best path to that common goal of a better world resides in the rising role of large firms to develop better products.
Archimedes peaked his effort to win support in defending his land against all common invaders with his famous sound bite, "Give me a lever large enough, and I will move the world." This great preindustrial thinker understood the power of finding the pivot point in a fulcrum. Today, people's need to help create a better world is becoming the pivot point for all of our investments, hopes, and aspirations.
In business terms, the information in this book is bankable. We each can find that fulcrum in our own lives, in our own firms, through our own chosen investments, for the betterment of all. In the more personal terms noted by Patricia Aburdene in her insightful introduction, the book is also transformative-if you let it be. Society has always been stimulated and changed by readers and thinkers, some of whom are spurred to action. By the end of this book, you will see that positive, transformative actions in your business and your life can be not only feasible, but profitable. Figure 1 shows how the weight of an individual's choice of fulcrum can leverage the world. We call that the fulcrum point.
IF I RAN THE ZOO
Our first tale is about an oil giant, Chevron, and its gifted chief economist Dr. Edgard Habib. Many in the business world consider Habib a "thinking man's quarterback" or-as another in my group states-"an astute weather reporter with a wide view." He develops and expands his firm with a smart mix and selection of corporate options. His keen political and economic risk assessments translate into simple and manageable financial risks. He scans the political conditions of the countries where Chevron needs to compete, and puts the facts together to create oft-imitated composites of a country's needs and how Chevron can best fill them.
The weatherman part of Dr. Habib's description comes in when he offers a forecast, such as when he suggests that Chevron should move into a certain merger. He relates his reasons with force and grace, indicating where he sees bumps ahead. Most importantly, he can predict pretty accurately when to expect these troubles. Most of the time he delivers his advice behind closed doors. When he delivers his findings, it always has the feel of validity and the touch of flair and passion that moves markets.
In the summer of 2005, I asked Dr. Habib to speak on emerging issues to one of our AHC Group workshops. By then, our AHC Group workshop organizers had a decade-long reputation of bringing in a range of industrial giants to debate theories and practices, compare notes, and share tips and secrets. A range of perspectives is offered, which allows a kind of jib-jab of good corporate debate on pressing issues. No single giant has a bulletproof screen in facing social issues. There is a long tradition at these meetings of tough questions for these giants so they can learn from each other.
The audience for this workshop included leading executives from our member companies HI), Dow, DuPont, BP, Honeywell, the U.S. Air Force, and the like. We also attracted several CEOs, chairmen, and other top-of-the-food-chain folks from firms we wanted to enlist into our ongoing membership-driven leadership workshops-the kind of executives you would expect to have informed questions for the chief economists we bring in. We had worked hard to build a kind of sanctuary, where leaders can share their experiences, general plans, and even insights on their mistakes with mutual respect and tolerance. Figure 2 is a sample "hive" of the kinds of companies that are part of the AHC Group's affiliates program and who are involved in the benchmarking discussions we help to facilitate. This will give you a sense of the magnitude and diversity of the people listening to Dr. Habib that June day.
There was tension in the room when Habib began to speak. Many of us noticed it; all the cell phones stopped, and all the usual chatter subsided. As Habib began to speak, we knew the topics he would discuss would hurt or help all assembled. The majority of Dr. Habib's audience understood the source of the tension: As companies come to own more in this world, there are fewer and fewer real strategic plays left for purchase. China is in a special growth spurt this last decade, and their thirst for oil will prove sustained and significant. At the time of this workshop, the California oil company Unocal had a unique set of Asian holdings that made it appealing to both Chevron and China. We looked upon Dr. Habib with a new inherited tension before us. We paused before him, knowing he had progressed in his career across many stepping stones to where he might be high enough in the corporate stairwell to tell us an answer to what we were wondering deep inside. We were asking, in effect: "If you ran the zoo, Dr. Habib, what would you do? Let China gain access to all this Unocal oil, or pay a price large enough to keep them out?"
The Rusty Hinge of Social Needs
But even deeper than questions about how Habib and Chevron were prepared to react to this threat to their expanded profits, many of us were pondering a set of questions related to the societal implications of the purchase or pass: "Now that Chevron must make a choice to keep Unocal within its domain, what does this tell us about the role of large multinationals in geopolitics? If you address China's growing need for energy, for example, and let them buy the company, are you also disregarding the many related social issues like the rise of greenhouse gases in our atmosphere, and the overall decline of oil supplies for the United States in the years ahead, that could be the result of China's purchase?"
Dr. Habib spoke with a stunning speed and grasp of political and economic facts, and he made the art of corporate strategy seem like swordsmanship performed by the best Japanese warrior. He cut through the usual obstacles with impressive speed: yes, of course, large companies have social obligations. And yes, of course, we make moves to better Chevron's position in the world. But no-what we are doing is no different than any large organization in this room.
It was the last assertion-that many of us would do the same-that caused the deepest unrest. I believe now, in retrospect, this tension among the giants in that room had much to do with the central themes of this book: as companies get bigger and go global, the leaders running these multinationals understand instinctively that their social obligations have also increased. Yet these informed instincts of leaders are often repressed by the norms of business discourse. In this brave new world, where a single hurricane can break a great city like New Orleans, or where a single need for oil can disrupt geopolitics, it pays to ask these questions about size and scale. For it is these World Inc framing questions that offer us a satisfying or disrupted tomorrow.
A Door to the Near Future
By having Habib present to global giants like HP, DuPont, and BP, we were in effect asking a much larger set of questions. As we advance towards larger and larger organizations, are we in fact now building towards a new social order, a world in which firms shape our social choices? Are societal expectations and obligations now influenced more by multinationals than by nation-states laws, regulations, and local governments? Has a new world order, in effect, crept up on us in this new century?
Perhaps Habib knew things about the near future many of us did not foresee due to his unique and very public dilemma. His talk (and his work) often referred to working within both the spirit and the letter of the laws by which companies now operate; as such large and influential international entities, companies are subjected not only to the laws of the lands in which they operate, but also the scrutiny of the press, the world court, and the United Nations. He spoke as if he ran the zoo, and as if all the animals were requesting ideas on how best to answer the rising social expectations on his firm. At this point, many of us were "rusty" around the edges on these topics. What Habib was saying, and how he was saying it, was truly revelatory.
I wrote this book, in part, as a way to explain this weight on the hinge of the heavy door of the modern multinational. In our shared global future, multinationals are expected to swing between what society needs and what the company needs to be profitable as a business. The hinge bears the weight of how benefiting society has become increasingly important to profitability. While I fully believe this as the new doorframe to think best about the near future, I also feel in my bones that the assumed role of global leadership from firms is still to be hotly contested and debated until an internationally accepted norm is established for how much social responsibility can be reasonably demanded from a multinational. You could feel the newness and catalytic properties in every question Habib's talk inspired.
When it came to new and unheard of requirements on how large firms should address social needs, many in the room were reluctant to even attach the expectation of helping to create a better world to their day-to-day work. Like children excited in a new candy shop, the questions we were asking Habib were mounting in urgency. As the chief facilitator between the sixty-plus firms, I was beginning to wonder how to honor Habib and still address the needs of the audience. We took a fifteen-minute break in the middle of Habib's presentation. We decided to loosen our normal drive for closure and give him extra time to speak and answer questions, which he graciously accepted and the audience welcomed.
Unlocking Corporate Potential and Debate
After the break, we focused on how best to unlock the social leadership potential in major firms (you could hear the multinational door hinges squeaking from the weight). After rapidly reviewing political uncertainties, simmering regional and national discontents, and the overall aggregated rise of nationalism in the 180 countries Chevron currently works in, Dr. Habib reviewed current policy challenges inherent in the new worldwide equity culture, including a review of all the bru-ha-ha about China and the current U.S. trade deficit. He explained how advanced capitalism is now capable of working at lightning speed, where imbalances are not as consequential as in the boom and bust cycles of twentieth century capitalism. Yet despite this speed, I could sense some discomfort about this new social context in which the giants now roam. The economic theory Habib cited suggested a "self-healing effect" in the new speed by which information is exchanged, and for how fast currencies and companies can adjust. "We are right now rewriting economics," Dr. Habib suggested at one point, "as the actions of large firms and the acceptance of these actions by publics is working faster than the theory, and vice versa."
Dr. Habib was brilliant in identifying when these concerns about the imbalances created by globalization are misplaced, noting: "There is nothing wrong with this imbalance of payments, from producing countries to consuming countries. The newness of the size and scale of this imbalance alarms many, but it works. This new global equity culture works."
These were the words so often repeated to me as I visited the other 40 core company members in our Corporate Affiliates program in the year after Habib's talk. His faith, like the Senator's, that the global equity culture works became a kind of mantra, a kind of reassuring mix of signals and supersonic pulses whereby all else was to be understood.
Excerpted from WORLD INC by BRUCE PIASECKI Copyright © 2007 by Bruce Piasecki. Excerpted by permission.
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What People are Saying About This
Bruce takes us to the next level in World Inc. Through thoughtful commentary and concrete examples he sets a new bar for achievement and a challenge for innovation in not only products, but in the very way organizations are managed and respond."--(Richard H. Walker, Sr. National Manager, Siemens Building Technologies)
Meet the Author
Dr. Bruce Piasecki is the president and founder of the American Hazard Control Group, a management consulting firm specializing in environmental corporate matters since 1981. He is the author of five business books, including the bestselling In Search of Environmental Excellence, and his articles have appeared in the Los Angeles Times and the Christian Science Monitor.
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