Leadership Vanguard - Systems Thinking Collaboration and Resilience

01

Theme Report

SYSTEMS THINKING,

COLLABORATION AND RESILIENCE

Phase

01This report presents the findings of the first phase of the Leadership Vanguard for the theme Systems Thinking, Collaboration and Resilience presented

at the Vanguard Exhange in Singapore, February 2015. As the Leadership Vanguard moves forward it will also incubate project ideas designed to advance

future-fit growth.

Phase

About the LEADERSHIP VANGUARD

Our prevailing growth model has delivered

huge gains for humanity.

More than one billion people have been lifted

out of poverty over the past two decades, the

average life expectancy has more than doubled

over the past century, and we have created

more wealth the past 100 years than in the

previous 100,000.

However, the escalating effects of climate

change, an employment market still reeling

from the last financial crisis, and the inequality of

access to healthcare, education, food and water

are proving with increasing clarity that our old

growth model is out of date.

We need a new growth model that accounts for

externalities and works with nature, not against

it; one that benefits larger numbers of people

instead of concentrating wealth in the hands of

a few; and one that maintains the dynamism of

business while delivering value over the longer-

term.

The Leadership Vanguard aims to identify,

support and mobilise future-fit leaders – all in

the interest of reinventing growth. By bringing

together four different kinds of leaders the

intent is for the groups to stretch each other’s

thinking and help each other become stronger

leaders. At the same time, the Vanguard’s

orientation will heavily emphasise action by

incubating, designing and maturing projects

that test and advance a new kind of growth.

The programme will explore three key

themes: Redefining value; Systems

Thinking, Collaboration and Resilience, and;

Communication in an Age of Radical Visibility.

SYSTEMS THINKING, COLLABORATION AND RESILIENCE

Resource scarcity. Inequality. Climate

change. Violent extremism. Viral disease. We

live in a world of “wicked problems”—those

that seem inherently impossible to solve but

are so serious and pressing that we have no

choice but to confront them. These dilemmas

have proliferated within the increasingly

knotted, interdependent connections between

societies, economies, and value chains in

the modern world. As the world has grown

more interconnected, our awareness and

understanding of those connections has not

kept pace, as we continue to make decisions in

silos and take action alone.

To realign our thinking to tackle these

challenges, we need to change along three,

related fronts: First, we must see across the

system to see ‘new combinations’ between

parts instead of just the parts themselves.

Second, we must aim for resilience, building

strategies and systems ready for multiple

futures and not just one. Third, we must

collaborate. When individuals and companies

extend their perspective to consider the shared

networks in which they operate, their arena of

action grows exponentially.

But examples of successful collaborations

are rare in the business landscape, and the

reason is they are notoriously difficult. Just as

wicked problems are infinitely complex and fluid,

making sense of the international landscape of

stakeholders willing to engage around a problem

can seem an overwhelming task. It can be a

daunting task to manage clear communication,

motivate all partners, ensure trust, and simply

have the patience to get it right.

Collaborative leaders have to strike a balance

between cultivating an inclusive space and

compelling partners to adhere to agreed

targets. In many ways, collaborative leadership

turns the traditional concept of leadership—and

leader development—on its head.

THE theme TEAMMaurice Adriaensen Head of Department, Operational Excellence DNV GL

Kuangwei Huang Project Engineer Manager

Keppel FELS

Christian Liberatore Commercial Advisor, Corporate Development

Woodside

Sheila Redzepi Vice President Global Advocacy and Sustainability Policy

Unilever

Chris Slim Vice President of Brand Building, Nordic

Unilever

Prashant Soni Kumar Head of Safety

DNV GL

Gareth Wright Business Adviser to SVP Browse Business Unit

Woodside

The Leadership Vanguard Theme Report Systems thinking, collaboration and resilience

Together, we can leverage our strengths, multiply our means, and shift the global climate trajectory.UN Secretary General Ban-Ki Moon

We have always been faced with complex issues, but never so many and all at once. Visualise that we are using roughly one-and-a-half times the Earth’s available resources to sustain our economy and soon-to-be population of nine billion people. We’re depleting our capital. At the same time, global wealth is increasingly being grasped by the hands of a small and healthy elite, leaving billions behind and creating instability. This is a moment of great risk, but it is also a moment of great opportunity. This is a moment to reinvent growth – sustainable, inclusive growth.

But to reinvent growth, we must tackle a set of problems that seem inherently impossible to solve, but which we have no choice but to confront. A ‘wicked problem’ is different from a ‘normal problem’ in the sense that it evolves and continues to challenge us. This is why wicked problems are wicked – it is difficult to define, problems are interlinked with other problems with similar characteristics, time is limited and any solution can become problems themselves. Think about climate change, nuclear energy, terrorism and resource scarcity. Most issues fuel one another, exacerbate impacts and create ripples across society. Wicked issues have to be addressed as part of a broader system.

Wicked problems have one thing in common. They are all a part of the social, political and economic system that has served us well in the past, but this system is no longer fit for purpose. Wicked problems are now an economic issue. Look at climate change and economic growth as one example – addressing climate change is increasingly seen as a smart macroeconomic strategy for achieving growth and economic success.

We need to address systems not symptoms. Systems thinking, collaboration and resilience are fundamental facets of the future-fit leadership that is required if we as a species are to succeed in reinventing growth. Systems thinking means understanding the complexity of our world and the relationships, interdependencies and stakeholders that have a direct or indirect influence on each other. Put simply, it is a broad appreciation of the system we operate in and the key players involved – a tool as much as a mindset. It allows you to identify stakeholders within the system and join them together in collaborations to bring about positive change. Linked to this is resilience – another key leadership attribute. Collaboration requires a significant investment in time and effort in order to develop relationships and work towards a common and mutually beneficial solution for the ‘system’. So leaders will need to be resilient when it comes to implementation as new approaches will always receive push back.

Everything is made up of systems – forests, food, people, climate. We can no longer afford to solve one problem at a time – instead, we must tackle several related challenges across industries, borders and boundaries in order to bring about positive systems change. For example, it was mobile technology firms that catapulted the agricultural revolution and food security efforts in Africa by providing farmers with access to timely and relevant information about production, technology and agricultural finance. These are all seemingly different but incredibly interconnected sectors.


CHAPTER 1HOW IS YOUR THEME RELEVANT TO THE REINVENTION OF GROWTH? WHAT IS THE POTENTIAL?

Look at deforestation, which is seen as a key contributor to global greenhouse gas emissions. It is responsible for up to 15 per cent of global greenhouse gas emissions and has an adverse impact on ecosystems. The consumer goods sector is already working on cleaning up its supply chains on the commodities that drive most tropical deforestation – which alone contributes the equivalent of the entire global transport sector to net emissions. That’s 400 retailers, manufacturers and service providers across 70 countries. Imagine if other business sectors joined together – from infrastructure, basic materials, transportation, food systems – with the same ambition.

We need to accept there is no clear cut formula. But ultimately it always boils down to people and leadership. People’s personal passion, commitment and deep sense of purpose have always been the backbone of every real change that transformed humanity for the better. Mark Twain famously wrote: ‘The two most important days in your life are the day you are born and the day you find out why.’

Rallying around the moral cause served the world well when issues were fewer and far apart. Today, we need more than incremental change. We need to engage with markets in a different way, and think about business as a vehicle for change.


What would a transition from a high-carbon econo-my to a low-carbon econo-my look like? Beginning with the purple box in the middle, this map is an illustration of the factors, relationships and impacts of what such a transition may look like.

By having business as a vehicle for change in this new world order of ‘wicked problems’ and their far reaching systemic effects, we really need to address the incumbent thoughts in the systems we struggle to make sense of. These thoughts influence the behaviour of individuals, companies and government organisations, and need to be weeded out if we are going to have a chance to break from the status quo and start achieving positive changes. We have identified six of these thoughts:

• The winner takes all in a zero-sum game Businesses must compete for purportedly scarce capital, talent, favourable government policies and public support, to name a few examples, in a zero-sum game. Companies and industries are often pitted against one another to compete for the same resources. In the energy space for example, coal competes with oil, which competes with solar, which competes with nuclear. Energy independence is often touted as having an abundance of one source, when it should really be about having a diverse portfolio of energy options. We need to have the mature objectivity to look at how we can create and develop a suite of solutions to truly track the problems we face. When we focus on competing in silos instead of collaborating, we deprive ourselves of potentially revolutionary interactions that may generate the breakthroughs we’re after in the first place. Ultimately, a zero-sum-game attitude is very limiting. Rather than aiming to take the ‘biggest piece of the pie’, our approach should focus on ways of expanding the pie.

• Vested commercial interests must be protected Industries and governments with vested interests in current growth models will (or will be tempted to) obstruct the progress of change. For example, a successful push towards a zero-carbon economy will negatively impact oil and gas-producing nations and their supporting industries. Powerful lobbyists will argue for industry-protecting mechanisms to safeguard fossil fuel interests. Failing to work towards solving wicked problems now will exacerbate their long-term consequences. How long can these comparatively short-term interests remain insulated from the macro-economic systemic effects of these wicked problems? Aiming to protect outdated business models will cause us to miss out on great opportunities for growth. Ultimately, only the adaptable survive and thrive.

• Maximising shareholder value is the sole purpose of business For decades there has been the long-held notion that the responsibility of business is to maximise value for its shareholders. Our focus on quarterly returns, coupled with financial metrics that favour quick gains, have exacerbated our need to perpetuate a recurring pattern of immediate returns. This is the crux of the Capitalist Dilemma pointed out by Clayton Christensen. Tackling wicked problems requires long-term investments that tie up capital for years. More specifically, as Christiansen writes, ‘companies use capital to create more capital


CHAPTER 2WHAT IS THE INCUMBENT THOUGHT THAT IS OBSTRUCTING THIS POTENTIAL?

and consequently the world is awash in capital but the innovations we need to advance us aren’t there.’ Although short-termism isn’t all bad (the ability for business to act rapidly, for example, is a source of strength), we must aim to adopt a longer-term approach to value creation.

• Sustainability belongs to marketing and public relations Being ‘sustainable’ has long been the domain of well-intentioned marketing and public relations strategies. CSR units, for example, are often not housed within a company’s strategic department. Systems thinking, however, easily pinpoints the immediate and gradual economic burdens the impacts of climate change create for businesses: rising sea levels affect coastal settlements and infrastructure; natural disasters disrupt global food systems, damage properties and displace whole communities; increased commodity prices impact consumer spending power; etc. Additionally, in an age of radical visibility, it has become easy to discern superficial from authentic action. Sustainability shouldn’t be about marketing ploys; it should instead be about identifying new opportunities, and allowing companies to attract and retain the best talent in the world.

• Tackling climate change will compromise our quality of life It is widely perceived that tackling wicked problems will come at the expense of jobs, economic progress and our overall quality of life – for example, the switch away from cheap fuel will drive up our utility bills and the cost of goods we purchase. In actuality, tackling climate change is about improving our quality of life by mitigating great systemic problems. Undoubtedly, we will reduce the quality of life if we choose to keep the status quo.

• Wicked problems will be solved by ‘silver-bullet’ solutions An often short-sighted thought is that wicked problems can be solved with ‘silver-bullet’ solutions. There are two assumed scenarios in this respect: someone will come up with a solution while we wait; or, all we need is for society to compromise. Both will yield disappointing results. Rather than hope for isolated breakthroughs to occur, we should look for opportunities locally that can encourage change, and support intermediate solutions that can generate a groundswell of ideas and actions across sectors and regions. A collective of actions that can enact changes to the system will accelerate progress. Wicked problems are real and present dangers. They are systemic and cannot be solved by a single person, company or government.


I KNOW A LOT ABOUT FINANCIAL RISKS—IN FACT, I SPENT NEARLY MY WHOLE CAREER MANAGING RISKS AND DEALING WITH FINANCIAL CRISIS. TODAY I SEE AN-OTHER TYPE OF CRISIS LOOMING: A CLIMATE CRISIS. AND WHILE NOT FINANCIAL IN NATURE, IT THREATENS OUR ECONOMY JUST THE SAME

Former US Secretary of Treasury Henry Paulson

What if we perceive wicked problems as integral, economic issues? Traditionally, tackling the likes of wealth inequality, resource scarcity or poverty has been the remit of governments and NGOs. But these very same wicked problems are essentially integrated economic problems. Sao Paulo’s worst water drought in 80 years, for example, appears to be a resource scarcity issue on the surface, but is, in fact, a game-changing issue for Brazil’s economy. Sao Paulo is Brazil’s richest state: an industrial heartland that is the engine for the country’s economic growth – producing one-third of Brazil’s GDP. But if water and electricity (80 per cent of which is generated by hydropower) start running out, the consequences for the economy and its industries could be dire.

Business can create change with pace and scale. Creating governmental and political momentum to enact substantive change is often an arduous and drawn out process. Business and industry, however, have the resources, capacity and legitimacy to carry out big systemic changes. Imagine how much faster systemic solutions can be developed when businesses compete to capitalise on new growth opportunities? Evidence continues to emerge that business has an opportunity to convert wicked problems into long-term added value.

We don’t need to make trade-offs in order to succeed. We’ve made natural assumptions that trade-offs are necessary between: man and nature; our current interests and those of future generations; and the advantaged few over the many. But what if we rejected that thinking? Businesses too often try to eliminate complexity to succeed, when in reality we exist in a world of accelerating complexity and exponential change. Business opportunities often prove to be fickle, but wicked problems are stable and long-standing. So it stands to reason that rejecting the need for trade-offs and accepting the existence of - and trying to tackle - wicked problems may very well be a commercial opportunity to capture new types of values.

We need a common set of values if we’re to successfully collaborate. Breakthrough ideas will likely require a shift to new business models. This will require genuine collaboration across industries and regions. But before we can even consider the ‘what’ and ‘how’ of collaboration, we need to determine the critical, yet often overlooked, first step – the ‘why’. What is a common set of values that can unify and mobilise industries to work together? This was a recurring issue brought up in our conversations with Paul Gilding, Carol Sanford and Kevin Noone – with opinions coming from the NGO, business development and science communities respectively. Collaboration isn’t just about bringing together stakeholders with obvious interests (eg, parties along the supply chain), it’s about bringing together stakeholders with no obvious interests but who are impacted by the same wicked problems. To illustrate, looking back at the Sao Paulo example – what might genuinely bring together a farmer, automotive manufacturer, power utility and the scientific community?


CHAPTER 3WHICH NEW IDEAS ARE DEVIATING FROM THESE INCUMBENT THOUGHTS?

What if we just started doing something, anything? A final thought, which isn’t exactly novel but is one worth emphasising! For breakthroughs to wicked problems to take place, we need to innovate. However, getting started seems to be the biggest hurdle for big business. All too often, we see great ideas whittled down by rigid decision gates and strategies to mitigate risk. How can big business adopt a more entrepreneurial spirit of iterative testing and prototyping great ideas? “Failing fast” may be a business cliché but creativity is a consequence of sheer productivity. Not acting on big ideas in this context is worse than failure itself.


We see clearly that the business imperative to act is the key vehicle for transformational change. Below are four initial conclusions from our exploration so far.

Growth is top of mind for business. It is clear that the moral debate on being sustainable has reached a plateau. Carol Sanford rightfully pointed out that sustainability as we know it today is primarily about ‘doing good’ and ‘doing less harm’ – using fewer resources, polluting less, harming fewer people. This essentially is a reductive approach that does not incentivise action. Businesses are fundamentally motivated by opportunities for growth. Therefore, to enact the substantive, systemic changes we would like to see happen, a fundamental change will be for businesses to shift their sustainability focus away from ‘responsibility’ and towards growth – a new era of economic growth that expands the scope of choices and opportunities for business. This growth will drive the improvement of human welfare, and empower current and future generations to define and pursue their own conception of ‘the good life’.

Leading the way away from the status quo. Too often we ‘fail’ into collaboration because it is human nature to seek the path of least resistance. To break away from business as usual and old habits, we need to re-examine and reconnect with what is truly most important. As the business leaders of today and tomorrow, it is not what we do that is important. It is why we do it. Purpose-driven mindsets and actions will lead us away from the status quo.

We need to act, no matter how certain or uncertain we are. There is no one right way to lead and there probably will not be one perfect solution to the wicked problems we face. Yet businesses and governments all too often choose to wait until a strategy is near perfect before execution. This hinders action. As Kevin Noone pointed out, we need to embrace complexity rather than try to pretend it doesn’t exist. Coming up with new ideas on how to build resilient systems will require radical innovation. This requires an iterative process of testing, failing and testing once more. Transformative ideas will come from leaders able to embrace failure in all its forms so that we can figure out what it is we’re working towards, come up with new ideas, and try and try again until we make the leap into something substantive.

We need each other. Period. The solutions of tomorrow won’t come from one person or one entity. We need to build up our collective knowledge and experiences. However, genuine collaboration will only happen if and when we share a common purpose. Our interests and perspectives may be different, but we are all affected by the same wicked problems. Whether it is climate change, poverty or education, the systemic nature of these wicked problems means we cannot afford not to work together.


CHAPTER 4ON THE BASIS OF EXPLORATION, WHAT DO YOU THINK NOW? WHAT ARE YOUR KEY INTERIM CONCLUSIONS OR HYPOTHESES?

Based upon our exploration to date, we have identified five areas for further exploration:

1. What makes businesses collaborate - in order for them to do it does there need to be an upside beyond purpose that adds to the growth of the business? We need to meet and talk to a few selected companies that have linked their purpose to collaboration and sustainability, placing both centrally in their business model, delivering stellar consistent growth. How has this changed their business (consumer’s behaviour towards them/perception of them, their cost structure, ability to source capital, etc.)?

2. What are the true barriers hindering companies and organisations from collaborating with full transparency around shared values? There are a lot of companies who wants to work with other companies, but something is stopping them. We need to understand why.

3. Quite a lot of smaller entities that have already managed to find ways to sustainably lead their businesses, enabling them to grow at rapid pace – what we can learn from them? How can we help mobilise more of this sort of positive action?

4. Are there any networks or forums that collaborate around the topic of reigniting growth and sustainability? Can we tap into these to share and generate tangible ideas and progress?

5. How can we accelerate leadership as a catalyst for change? Why can’t more companies take up Unilever’s approach (a disruptive business model that values collaboration)? How can we measure the value of collaboration (particularly when it benefits the system)?


CHAPTER 5IN WHICH DIRECTIONS WOULD YOU LIKE TO CONTINUE EXPLORING?

01phase

Bringing together companies from a diverse

range of industries ( joining us in this first year

are Unilever, DNV GL, Woodside, Keppel,

MasterCard and the Singapore Economic

Development Board), as well as major thinkers

and disruptors from a diversity of fields, the

programme seeks to build a deeper bench of

leaders participating in the transition to a more

inclusive and sustainable growth model.

At the core of the initiative is a ‘chemistry’ of

interaction among four groups: future leaders

from the six partner organisations (catalysts),

CEOs from partner companies and other

leaders of global organisations (mentors),

recognised thought leaders (beacons), and

potential disruptors with transformative ideas

who have yet to attract the world’s attention

(pathfinders).

Each group will be challenged and stretched

through exposure to the others, with CEOs

being able to tap into new insights on growth,

catalysts engaging with CEOs from other

companies in challenging two-way mentorship

sessions, and pathfinders and beacons building

connections with people who can help them

scale their ideas. As the Leadership Vanguard

moves forward it will also incubate project ideas

designed to advance future-fit growth.

The Singapore meeting is one of three global

vanguard exchanges taking place over the

course of 2015. It marks the transition between

phase 1 (exploration) and phase 2 (identifying

and refining project ideas). The second and

third exchange will take place just before The

Performance Theatre in Lisbon in June and in

connection with the Global Projects Exchange in

New York City in November, respectively.

ABOUT THE LEADERSHIP VANGUARD

For further information visit:www.theleadershipvanguard.com

The Leadership Vanguard is a growth initiative. It aims to accelerate the transition to a future-fit growth model by strengthening the world’s leadership capacity. This leadership needs to come from many places – civil society, government and business. That is why the Vanguard brings together leaders from across sectors, disciplines and geographies.

Leadership Vanguard - Systems Thinking Collaboration and Resilience

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