Janice Gross Stein, "Seismic Shifts: A New World for Market Leaders", Rotman Lifelong Learning 2005, June 3, 2005

Lifelong Learning 2005, Rotman School of Management, (University of Toronto), held at the Fairmont Royal York Hotel, June 3, 2005, 9:20 a.m.

Janice Gross Stein, Belzberg Professor of Conflict Management and Negotiation and Director, Munk Centre for International Studies, University of Toronto

These participant's notes were created in real-time during the meeting, based on the speaker's presentation(s) and comments from the audience. These should not be viewed as official transcripts of the meeting, but only as an interpretation by a single individual. Lapses, grammatical errors, and typing mistakes may not have been corrected. Questions about content should be directed to the originator. These notes have been contributed by David Ing (daviding@systemicbusiness.org) of the Systemic Business Community ( http://systemicbusiness.org ).

Introduction by Roger Martin

• Janice Gross Stein, a university professor, the highest level at U. of Toronto
• Middle-East specialist, conflict resolution

[Janice Gross Stein]

Talk about chaos, catastrophe, uncertainty, and how that's going to improve your business lives over the next 15 years

We're at an interesting time globally

• The rules of the system are changing, not just the world changing -- step-change, or qualitative change
• We're only partway through it
• We are not in a Windows upgrade, but where the basic operating code is changed, and we'll need to learn a new order.

First gloom and doom, then opportunities

• Fundamental difference in the way the U.S. behaves -- not trivial -- because the U.S. is a rule-maker
• U.S. will continue to be a rule-maker
• This is not a Bush administration phenomenon -- don't think will get back after 4 years
• The U.S. has become a revolutionary power
• It was status quo for most of last century
• U.S. always did things to preserve the status quo
• In the 1990s, the U.S. did an invasion of Iraq to preserve the status quo.

9/11: the status quo didn't work

• Thus, they wanted to change the status quo, because it wasn't working for it.
• It's impossible to understand what the U.S. is doing in the Middle East or Asia.
• The U.S. is busy overthrowing the system that it built around 1945
• It matters because the U.S. is the operating software in the system
• When the U.S. is determinely rewriting the code, we all have to learn to rewrite that code

There's a contagion effect

• Story: 186 plumbers came from Poland to France, charging 49 Euros than 79 Euros.
• This so inflamed the plumbers that they stopped the EU unification

Challenges to international institutions

• See this in the EU, where institutional development is on hold
• We see it in the UN, as a rules-based organization, is at is lowest ebb
• We see it in challenges to the WTO, the dispute resolution, and mechanisms

Take this picture and put it together: U.S. which is looking at what doesn't work; the UN weak; EU on hold

• There is a decline in the rules of the gain, and an opening to new rules

Points for corporate leaders:

• In social science, there's a difference between risk and uncertainty.
• With risk, we know quite a bit
  • Poker, you know the risk that you're going to get the card, if you do it enough
  • In business, when you know the probabilities, you can be more strategic
• In a world of uncertainty, you don't know the probabilities
  • e.g. what the likelihood of another attack to the U.S.? I don't know.
  • Know quite a bit about Al Qaeda, but can't make an informed statement based on probabilities
  • Can only live in a world of uncertainty
• How do you lead?

Leading in 3 or 4 things

• #1: Need to change the language often, and take the certainty outside of our conversation
  • Internal auditors came to see her last week
  • Moved from procedural discussion to: we're going to do a risk analysis of your business at the Munk Centre
  • The risk analysis of you doing this project
  • (Then lost it, which was bad, because you don't take on auditors)
  • Said your model is flawed, and told auditors to come back in 6 months
  • Auditor asked what's wrong in the model?
  • Haven't said that how to run the number of taking the project, and doing nothing for four years.
  • We function in a world of uncertainty, so thinking that we can behave in a world or risk is misleading
• #2: Business talks about business continuity: an attempt to hedge against uncertainty
  • Says we can't operate in an attack.
  • So, we insure, which is costly, but we do this all of the time
  • No other social system does this
  • e.g. SARS incident, no redundant systems
  • Compare banks and hospitals
  • First news on SARS from public health, official channels in February, but then, first from UBS in China in November, who set up an alternative trading floor in December
  • The kind of information that moves through global networks is faster, and real-time information in a way that none of the international institutions have, e.g. WHO or WTO, becaues it doesn't have to flow up and down
  • Cost was worth the insurance cost
  • The ability to create business continuity
• ?

At a seminar of emergency, had vp of strategic planning for Shell

• Challenges that Shell deals with, is the same that public institutions do
• Shell says: Our team spends 20% of time planning for the next 5 years, 80% of the time dealing with what we can't imagine right now.

#3: Business will operate across silos and sectors, in ways that are much deeper than in the past

• Much in sharing of information between corporate and voluntary sectors
• Public / private / voluntary will change, with the value of having real-time information on the ground
• No one sector has a monopoloy on real time information

#4: Will be important to work laterally, instead of in a traditional hierarchy

• Implications for the structure of business
• A piece of information that is crucial has to get to the place it needs to go, in the shortest amount of time
• Can't go up the hierarchy, across and then down.

Tough closing argument in this country, this time:

• This audience gets the struggle better
• Hear about how important it is to be accountable, transparent, and in process.
• Richard says it's creativity
• Janice says that it's the capacity to work in uncertainty
• In our world, process is a big pain in the neck
• Janice is the walking nightmare of every senior university official

Questions

Question: Iraq?

• It's a seismic shift
• Had a status quo in that part of the world, for 30 years, with no opportunity for evolutionary change.
• One of the wealthiest parts of the world.
• Yet, Internet use is lowest in the world, with the only other lower sub-Sahara.
• Health indicators lowest in the world
• This part of the world has regressed socially
• Unwrapping of a bargain in place for 25 years, that didn't not only work for the U.S., but also the people in the region.
• Bush cracked the eggs, but can he produce an omelette? He didn't do this to produce a souffle.
• If had to bet -- and don't have any good experiments -- we will see significant political change in the Middle East, and Iraq will be the last.

Canadian context: disenfranchised. Address that group?

• Yes, and much of western Europe
• No accident that French farmers have led the campaign against globalization
• Canada, 50 or 60 years ago, was fundamentally rural, now 80% urban -- and will be 90% urban in 10 years.
• Probably a losing battle, given global economic directions
• Canadians need to rethink what the rural needs: an urban necklace
• Need a rethink, rather than shoring up what has fundamentally change

Seismic shifts: Fall of Berlin Wall. Vietnam. Domino effect. We don't really see it. It feels as though Bush is trying to preserve the white picket fence, rather than trying to bring in democracy into a country that wasn't religious Muslim country.

• Let me change the question
• The choice isn't between the oil companies, or bringing democracy to the Middle East
• Neither
• There is a systemi change, that we in Canada underestimate
• Go to New York, LA., Chicago, there is a certainty that there will be another major incident
• A divide between Canadians and Americans
• Major American institutions are supporting that change, which means that there will be ripples throughout the world
• Not one will come near the U.S. in military power in the next 15 year
• Instead of Pax Britannia, or Pax Americana, there will be chaos at the border
• We live in a world where small differences make a difference: using power strategically
• Works better than in a rules-based system.

United Nations: rules are being changed. UN refused to act on human rights in Middle East. Failed to restore order in Bosnia? Why keep this non-functioning organization going forward?

• This argument confirms what I'm saying.
• The security council failed badly. In Rwanda in 1984. In Bosnia. In Darfur.
• Secretary General's son has sapped his authority to reform the institutions
• Oil for food was to use UN civil service, could have targeted sanctions
• But when had a corruption of this scale, it couldn't manage
• Despair in New York, and amongst those states that understand the imporantance of rule-based organizations
• It's tough for Canadians who reflexively response to say that the UN says it okay, it's okay, and when it's not okay, it's not okay.