Stefan has the guts to discuss concepts such as fear, courage, tenacity, and resiliency which have a lot more to do with business success than just about anything else, but are unfortunately absent from most business books.  Stefan does a beautiful job of connecting us to the wisdom of the Serengeti.  Life may be very different in our boardrooms, but the wisdom is universal.

• The Enduring Wildebeest teach us to confront our fears and always take the next step – no excuses!
• The Strategic Lion teaches us that the pride’s connection to the strategy is perhaps more important than the strategy itself.
• The Enterprising Crocodile shows us the importance of finding the opportunities is all circumstances, not just the easy ones.
• The Efficient Cheetah teaches us that limited resources can actually be a benefit if you can be innovative.
• The Graceful Giraffe reminds us that dignity, respect, and doing the right thing are keys to success despite what appears to be a cut-through world.
• The Risk-Taking Mongoose shows us that change and exploration of the unknown can bring exciting and even superior alternatives.

I had the opportunity to speak with Stefan recently about Surviving Your Serengeti and asked him how important he thought “differentiation” or exploiting your strengths was to success in this post-recession world.  His response was that in a world that is increasingly confused, digital, and real-time driven, differentiation allows you to stand-out (not in a Charlie Sheen kind of way, but in a good way).  He also rightfully points out that differentiation is not so much about creating something entirely new, but more about packaging concepts and skills that we already know in new and different ways.

If you are a frequent reader of this blog, you know that I am a huge proponent of a US perspective that promotes a new 21^st century American dream that involves moving up the global value chain as opposed to a perspective that tries to re-create the past.  I asked Stefan how he thought Surviving Your Serengeti can help people see a different perspective, one that doesn’t conflict with the global realities of our times.  Stefan is hopeful that his book will help people find the courage to evolve.  By focusing on the life and death situations faced every day in the Serengeti, we can more easily see how “cookie cutter” many of us have become in our thinking and how we often take our every day existence for granted.

Go ahead, read the book and let it re-connect you with your own talents and skills as well as see them in others.  And then find out what animal you are, and the rest of your team, at www.WhatAnimalAmI.com.  Personally, I most closely resemble the Enterprising Crocodile.  Not great for my feminine image, but it is spot on!

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Why care?

If you’re an American who wants your job back, or who wants to keep your job, we as a country have to move up the value chain, and be a leader in global issues. We have to get our own house in order first, and learn a new place in the global economy because, to be blunt, our old place is no longer relevant.

The reality is that the US and China are inexplicably dependent upon each other.  The idea that the US would interfere with China/US trade if they don’t let their currency appreciate is daft. Equally as silly is the notion that China would then dump a ton of US debt on the market in retaliation.  Either move would hurt both countries – it’s like going back to the cold war days of threatening nuclear war – nobody wins so what’s the point.

In the meantime, countries like Brazil, who let their currency float more freely, run the risk of overheating when capital floods their boarders.  They are then forced to resort to capital constraints in the form of higher taxes on foreign investors to slow the pace.  But foreign investment is good for Brazil and good for the rest of the world because Brazil has a growing middle class, which is the lifeblood of the global economy.

Confused?

Join the crowd. There is plenty of good information in The Economist and the Financial Times on the subject.  “How to Stop a Currency War!” was the lead article in The Economist Magazine a couple of weeks ago. But for the layperson it’s confusing, and, as a trained economist, even I have to read the articles twice.

It is incumbent on us to find ways to make these topics more accessible, and more visceral, to people outside of finance and economics.  If we don’t, we become subject to politicians reverting to protectionism because they think it’s an easy ticket to getting elected, when they don’t fully understand the dire results of such policies.  Protectionist policies will only bring results opposite to what we all want, which is a growing global economy.

A Little Currency Background

Global exchange rates need to fluctuate and interact properly with each other. To do so, they need an unbiased benchmark—something that can have a stabilizing effect across all currencies. Today, the US dollar is that benchmark in most cases, and that is proving to be problematic for the long-term.

Prior to the 1930s and the rapid emergence of US world dominance, the gold standard was the stabilizer.  In the 1940s, under Roosevelt, the US dollar became a key reserve currency as it became more desirable than gold.  Gold then went through a period of undervaluation, leading to Nixon’s decision to de-link the US dollar from gold in the 1970s.

The US dollar as the key reserve currency worked well until we arrived in the 21^st century, when our dominance in the world become less significant and we began to show unexpected and dramatic signs of economic weakness.

When a country’s currency drops in value, it typically signals some combination of a lack of productivity, a lack of innovation in general, and a lack of competitiveness as compared to other countries.  In the last 20 years US currency valuation has masked these very important warning signals because it was propped up as a reserve currency.  As a result, the US now finds itself behind the curve and has yet to fully acknowledge its predicament, let alone fully engaging in its comeback.

That’s why a protectionist driven US unilateral currency war with China is absolutely the wrong approach to what is being touted as borderline currency manipulation. It would be a kin to going backwards in time, and we desperately need a forward-looking, 21^st century plan that embraces globalization.  Politicians should be focused less on China’s currency appreciation, and more on boosting innovation, emerging industries, and exports in general.

It’s a Multi-lateral Issue

Stabilizing global currency markets requires three critical actions that involve many countries, not simply the US and China.

1.     Change: Make substantive changes to a system that only partially works by using a multi-lateral approach through the G-20.  It’s time our global systems were updated to reflect the realities and the benefits of the 21^st century global economy.

2.     Rebalance: It is in everyone’s best interest to move significant amounts of the world’s capital toward emerging economies and away from indebted rich countries.  That should also provide an incentive to the rich countries to pay off some debt, innovate, move up the value chain, and generally push the envelope to make room for progress in emerging economies.

3.     Focus: Countries should focus more on the value they bring to the world than substantiating their place in the world through market manipulations.  Creating value should bring sustainable demand, despite currency fluctuations.

It’s a small world

Globalization is no longer an option.  The entire world, and nearly every economy, are inexorably linked. Global monetary relations significantly affect even the smallest business on Main Street USA.  Understanding the intricacies of a global economy—particularly as it relates to global exchange rates—is critical to the growth of US companies, the US economy, and the global economy.

The global capital markets turn over $4 trillion daily in currency markets and the total global sovereign debt market is estimated to be somewhere around $34 trillion dollars.  A large chuck of that currency and bond trading occurs between countries and each is affected by the others. Interference in open market forces by one country trying to create a local effect creates a counter-effect in other countries.

Make markets, not war!

As US citizens living in this interconnected world economy, we have a vested interest in electing officials with a strong willingness to show understanding and global leadership in the area of international economics.  Yet many politicians seem to be promoting the reverse—protectionism—because that’s what they believe Americans want.

That’s a complete copout. Such politicians irresponsibly enact policy based on the lowest common denominator of understanding rather than what is right for the long-term interest of our country, economy, and citizens.  They might be surprised to know that we’re a lot smarter than they realize. We know that by properly positioning ourselves for success, when the rest of the world expands and prospers, we will as well.

If politicians think that forcing China to let the renminbi appreciate will somehow create more jobs in the US, they are simply misinformed.  Nor is it even possible for us to make such demands. In the opinion of many respected economists, export expansion is the best option for generating substantial growth in the US in the near term (see previous blog post for more on US growth). It’s impossible for the US to compete on cheap labor and an undervalued currency.  So, how can we compete?

Creating jobs through products and services the rest of the world wants can only come from within our borders and from evoking more creative competitive and innovation business strategies. An expanding world economy means expanding markets for US goods and services. That’s the elemental link the politicians miss.

We should recognize that countries like China, whom we perceive to be a threat, are in fact birthing the world’s largest middle class of consumers. We need strategic leaders who recognize the issue is not a US vs China currency war, the issue is: What can we sell China and other emerging markets that no one else is offering?

Bellyaching about US consumers buying Chinese products won’t get jobs back. Competitive business strategies will. There is an opportunity here for the US to re-focus on creating attractive exports based on things like innovation of new products that attract investment, filling usability demand gaps at the bottom of the pyramid, and offering unbeatable ingenuity in the delivery of on-going services.

Retooling our industries and work forces into higher levels of value added manufacturing allows us to trade short-term pain for long-term gain. In 10 years, if they act NOW, rust belt cities like Detroit can be thriving hubs of manufacturing again, focused not on aging consumables, but on nano technologies, green energy, applied materials, and other innovative industries just now emerging.

If the US can make products highly usable and full of irresistible purpose, the buyers will be there regardless of what is happening in the currency markets.  It doesn’t always have to boil down to price.  The key is focusing on what we want to support in the world and who we want to be — as opposed to what we are against and whom we can blame for our troubles.

Rebalancing the World’s Capital

When value creation comes first, money will ultimately follow.  It’s time for global capital to become far less speculative and far more connected to long-term objectives and strategies for global economic stability.  Hopefully the evolution of finance will begin to reward creating and following value and purpose as opposed to simply following short-term gains.  We’ll have to wait and see on that one.

Yet, as we have seen in Europe, the capital markets are finally realizing that traditionally “safe” developed economies (i.e. Greece, Ireland, Spain) can actually carry risks significantly greater than those in emerging economies. A shift in capital away from the traditional rich economies and toward the emerging economies underlies part of the pain the US is undergoing. This shift is necessary and contributes to a growing global middle class that will ultimately increase global consumption, and therefore benefit all.

The dance becomes how much should shift and when? When do the risks tilt back in the other direction as an emerging economy begins to overheat or doesn’t have the political stability or infrastructure to cope with the rate of growth?  And how quickly can the developed world reinvent its competitive edge and begin to attract some of that capital back?

Focused on the Wrong Things

The relationships between one country’s currency to another’s can have large and sweeping impacts on capital and export markets. This is precisely why we see China reluctant to let the yuan’s value appreciate.

Appreciation of the yuan would have an adverse affect on China’s exports, a large driver in their economy (or so they believe). The best answer for China is to allow for controled appreciation over time and focusing on gaining more growth from domestic demand.  Strategic multi-lateral pressure can be helpful.  Demands from one country simply won’t work.

The best answer for the US is to focus on pathways to becoming more competitive and innovative. There are more ways to gain a competitive advantage in the export markets besides cheap labor and a cheap currency.  We must ask ourselves: What can we do to use our gifts of freedom to continue to supply the world with some of its greatest insights and products and innovations?

To remain the leader of the developed world, it’s imperative that we use our ingenuity to continue to push the envelope on technology and progress. This is our largest advantage over China.  China’s repression of its citizens and control of almost everything, in turn suppresses creativity, connectivity, innovation, and ingenuity . . . all essential ingredients for 21^st century global success.  China’s biggest threat is itself, not the West. The US and other advanced democratic economies should take full advantage of China’s current self-fulfilling inability to fully compete.

What’s next?

We can only address these problems together, not through unilateral sparring.  Our best option for sorting out some of these disputes is to encourage the G20 finance ministers to set some basic codes of conduct around what can be perceived as currency manipulation.  This week I was happy to learn that the G20 is making some headway in discussions and is willing to address the imbalance in the voting allocation at the IMF as part of the negotiations.

We live in a complex world. China, currency, and the state of the US economy are complex issues, with complex questions: Today, are politicians on both sides of the aisle trying to pacify US labor groups and the general population in the run up to elections? Are they engaged in some all bark and no bite rhetoric against China? Or are they trying to solve the real problem at hand—the sluggish US economy?

We need to understand issues, and hold leaders accountable, and say: If you’re not doing the right thing I’m voting for someone else.  Global exchange rates are complex, but what the US needs to do is actually quite straightforward. If the only thing I convey in this blog post is the need for greater focus on the root issues facing America (not China’s currency exchange rates), then I will consider it a success.  America has been the most innovative, forward-thinking, and exciting country in the world for over 2 centuries. We have always accomplished the seemingly impossible.  Unless we quickly remember what makes us unique and use those talents to jump-start new products, services, and leadership the world needs, we risk loosing our greatness and trading it for ordinary.  I said it was straightforward, not easy and not without a lot of hard work!

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Braden forgoes all the hype and quickly hones in on those really useful nuggets of pertinent information.  If you haven’t already, you should also check out Braden’s website Blogging Innovation, which carries an absolute wealth of information from many of the world’s best innovation thinkers.

There are a lot of great points in Braden’s book, but my favorite is his focus on the importance of insight and execution in the realm of innovation.  It’s one thing to have a great idea, but quite another to know what to do with it and how best to exploit it for the benefit of your customers and shareholders.

Another of my favorite parts is his clear and very powerful explanation of the nine innovation roles.  The idea being that there are many aspects to innovation and your aperture should be fairly wide when discussing the topic inside your organization.  You’re much more likely to be successful if everyone feels they have a role that relates to your company’s innovation vision and strategy.

1. Revolutionary
2. Conscript
3. Connector
4. Artist
5. Customer Champion
6. Troubleshooter
7. Judge
8. Magic Maker
9. Evangelist

Other exceptional points that Braden addresses, which makes his book unique and extremely usable in my opinion, are the following:

• Your measurement criteria may actually be restricting the flow of the very best ideas
• Use cross-functional teams to evaluate ideas, so that good ideas don’t get killed just because someone lacks the ability to explain them well.
• There is a big difference between useful and valuable – know what it is
• Slow innovation isn’t bad innovation (iPod’s took 3 years to really catch on, and the digital audio player 25 years!)
• The underlying business model of your organization will play a big role in your company’s ability to experience innovation success – don’t underestimate it!

And my absolute favorite concept in Braden’s book, which he sprinkles among the pages, is the notion that having courage and a culture aligned to innovation are key ingredients in any venture into the world of new ideas and insights.  So, if you or your organization lacks adequate courage, or has a hard-line culture, disruptive or breakthrough innovation are probably not in your future.

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When the mayhem in the financial world let loose in the fall of 2008, I was the COO of an international corporate finance company. It didn’t matter how long you had done business with a counterparty, how much money they had made with you in the past, or if they had introduced you as their best client just last month.

This was war. I saw some of the saddest displays of human behavior that I have witnessed in my entire career.

Relationships became meaningless, literally overnight, and trust was suddenly a word that no longer held any value. Corporations insisted their employees go for the jugular as a bloody grab for what cash remained in the system ensued. I actually heard one CEO claim that they would, “Rape and pillage their way back to profitability.”

That was my catalyst . . . realizing that spending the second half of my career stuffed behind a desk dealing with auditors, accountants, and deal guys with ocean sized egos just wasn’t going to work for me any longer. I picked up my head and began to observe and learn what was happening outside the world of finance and investing.

As a 40-something with 20 years of career behind me—more than half of it working around the globe for conservative Goldman Sachs Companies—the wild west of social media, online networks, web 2.0, friends, fans, and tweets seemed to come out of nowhere.

While learning more about these phenomena, I soon realized they were symptoms of a far larger shift in capitalism that was beginning to shape the 21^st century.  I spent the better part of a year, reading, thinking, writing, and formulating my own conclusions about where things were heading and how the global recession could in fact be a catalyst for capitalism to take a new turn.

Below are some new perspectives on how we can harness the power of connectivity to create growth and prosperity, how we can blow the lid off the box in which we’ve kept capitalism bound, and how the Conceptual Age will bring more meaning, and more joy to our personal and professional lives if we are simply willing to let go of our old ideas and seek out new ones.

If you and your firm are not willing to embrace these changes, you’re likely to miss what are shaping up to be some very large and exciting steps for business and humanity.

The Power of Connection

Hindsight is obviously very far away, and others who are much smarter than I will likely come up with better concepts to explain this massive shift. However, for me it’s all about changing the way we connect to people, organizations, ideas, and personal passions. It’s about learning how to connect the un-connectable dots.

Enhancing existing connections inside and outside of companies is the one thing that most old-school business leaders overlook. Who can blame them?  We were taught in business school to focus on recurring revenues, leveraged buy-outs, IPO’s, and shareholder value. This accepted path to wealth and prosperity worked quite well in the 20^th century, but said nothing about creating meaning, developing connections, unleashing human potential in the workplace, and heading into retirement feeling as though you had created something decent in the world.

News flash…seismic shift…game changer! Social media, email, cell-phones, blogging, reality TV, and interactive marketing, are all signals that people are craving stronger and more meaningful connections in their lives.  And the younger generation is demanding it both at work as well as in their personal lives.

New companies and young leaders are gaining competitive traction, not just through adept financial practices or differentiated products, but simply because they posses a mindset pre-wired to embrace connections. Connections that allow them to more easily and effectively drive innovation, productivity, and success.

Connectivity is about a new perspective that can bring many great and wonderful changes, including dramatic increases in productivity, differentiated competitive advantages, continued long-term prosperity and happiness in the workplace. It’s about how business doesn’t really have to be boring and antagonistic. It’s about lightening up and bringing a bit of fun into the office.

Capitalism

It is also about taking a hard look at where capitalism and our economic system have come from and where they could be heading – if we have the courage to be more innovative with our underlying systems. It is about questioning some of the things we thought were true, but maybe weren’t, or aren’t any longer. It is about remembering how to push the envelope and seize the joy of creating something new and meaningful.

This is particularly true for America, which is at great risk of loosing its position as the great innovator. We’ve become complacent with mediocrity, and unless we are willing to make some serious changes, we will pay a high price (or at least our children will).  We now fight wars without regard to borders, which in the cold war days was unconscionable.  Likewise, economic systems are loosing borders as well and the very best entrepreneurs and innovators will move to the places where they can most easily create.

When we realize that not using known medical technology to vaccinate children in third world countries against life threatening diseases is actually a choice, and not a permanent side effect of capitalism, then we are free to make a different choice.  When governments realize that their highest and best use in most cases is simply to promote alignment for growth and not be the growth, solutions will come with greater ease.

What will drive the next big movement in the world of capitalism? What seems awkward today but will be a no-brainer 20 years from now? What will make going to work an adventure instead of a chore?  What will create the next wave of competitive advantage in the market place? What will the next Microsoft do better than everyone else?  What will expand capitalism such that its benefits are more than we can currently contemplate? My answer is simply connectivity.

The capitalistic continuum has always adapted to society, and continues to become more esoteric and less concrete over time. The primary resource of modern capitalism has morphed over the centuries from capital to labor to knowledge and now to connectivity.

The next wave of capitalism will focus on alignment and the inherent values and desires of human beings not only to be economically successful, but also compassionately responsible. It is through such alignment that we will actually become better capitalists as we learn to exploit its full potential.

The Conceptual Age

The Conceptual Age is about asking smarter questions? Broadening horizons, embracing new perspectives, and establishing new mindsets always begins with new questions; never new answers to the same old questions.

What do we want? What kind of legacy do we want to leave the generations to come? What do we want our lives to be about?  In what kind of world do we want to live?  How can we better connect to the bottom of the pyramid? It’s also about realizing that we have the power to not only answer these questions, but also to bring those answers to life.

Daniel Pink (A Whole New Mind) walks us through the ages from the 18^th century Agricultural Age (farmers), to the Industrial Age (factory workers), to the Information Age (knowledge workers), and finally to the 21^st century and the Conceptual Age (creators and empathizers) all transpiring as we increase affluence, technology, and globalization and the world becomes more connected.  Pink describes success in the Conceptual Age as requiring high concepts (ability to detect patterns and opportunities and combine seemingly unrelated ideas) and high touch (ability to empathize, and understand human subtleties in the search for purpose and meaning).

The very best ideas generally reside in those overlapping slivers between disciplines and the Conceptual Age will show us more of those opportunities and more importantly how to better recognize them.  It moves us from an era of scarcity, opposition, and secrets, to one of abundance, collaboration, and transparency.  It allows us to remember that we are all on the same team and generally want the same things out of life.

Check back for future posts where we will explore each of these three areas in more detail.

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If we want to be honest, and I think we should, there is plenty of blame to go around for the predicament the US finds itself in today. We severely damaged our financial system through greed, ineffective regulations (notice I’m not saying a lack of), and a over zealous homeownership policy; we somehow forgot that economies and businesses work in cycles; and we all (people, businesses, and gov’t) failed to heed the wise advise of paying down debts when times were good.

Such a significant amount of economic damage requires corrective adjustments that will simply take a bit of time to work through the system.  There’s nothing wrong with a slow and steady recovery.  It certainly beats a continual decline or a Japanese style decade of stagnation.  What’s is wrong are politicians trying to use the slow recovery to get ahead in the poles by scaring the public into thinking the sky is falling again.  That may get you elected, but it will only harm the recovery because it breeds fear and continues to divide us.  Fear affects confidence, and confidence can either have a positive multiplier effect or a negative one (Its our choice).

Let’s first look at what is NOT going to drive us out of this recession; and yes it’s the list of things that works in most recoveries, just not this one.  It’s not going to be the housing market, since it was part of the problem.  We are still in an adjustment period of getting people out of homes that really couldn’t afford them in the first place.  There simply isn’t going to be much unmet demand until after the economy gets going again.  Consumerism is another area where we got out over our skis and adjustments are necessary to find a sustainable level.  I never really understood why the government chose to incentivized people to buy houses and new cars as a way to stimulate the economy . . . it just seems a little counter intuitive to me.  The stimulus was definitely warranted, but we could have come up with some smarter programs.  But since the government owned big chunks of the banks and automakers, perhaps one can see their logic . . . conflict?

Now, where’s the potential, the upside, the areas we can focus on that can produce meaningful results.  Some economists are saying that we need investments in businesses (boosts productivity) and a focus on exports, which I agree with for the most part.  We can use the demand that is stronger in other parts of the world to help create enough economic activity in the US, which in theory should help jump-start our own demand.  That’s the beauty of globalization.

We can also look to trends, future needs, and how this new era of globalization is shaking out to find those niche areas that require capital.  Anything that is working toward solving global issues, utilizing technology in innovative ways, and meeting the needs of people in lower socio-economic stances is likely a good investment.  I can promise you, the companies working on the $1,500 car and mobile banking/markets for the developing world, will look like geniuses 25 years from now.  We may actually be creeping up on the inflection point where it is actually more risky to bet on an investment that focuses on traditional methods of growth in developed markets than it is to explore the frontier where there are bucket loads of unmet demand . . . the bottom of the pyramid.

Success for the US in the 21^st century requires a new way of thinking, a new mindset, and paying far less attention to what the politicians are saying.

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Sunday mornings with Fareed Zakaria on CNN are sacred in my house.  Which basically means that my kids and husband abandon me for that hour.  More often than not, I’m highly tempted to blog about one or two of the topics Fareed covers.  I typically resist, because I rarely disagree with Fareed and over time I’m afraid I might come across as a “Fareed Groupie”, which could tarnish my image of a self-thinking, intelligent, strategic, modern woman.  That said, this week, I am giving into temptation. I simply must blog about this new British government and the 39-year old George Osborne (Chancellor of the Exchequer – Secretary of the Treasury to Americans) whom I found to be slightly pompous (expected), highly intelligent (expected), but unexpectedly refreshing and on-point in his ideas around what people really want from their governments.  I personally, think the US Republican party could take a lot of cues from the new conservative sheriffs at Downing Street.  As an Independent, I actually prefer it when both the Democrats and Republicans are acting wisely as it makes for better candidate options and more solution oriented action.

If you missed the show, it’s easy to watch or listen on demand.  Just click here.

Just to add my own touch to the conversation, and keep up my image, here are the four primary reasons why I like what I heard from Osborne and feel strongly that this is the direction that successful politicians will have to take (regardless of party) to be successful in the future.

Not Afraid to Act

Osborne has pledged to the British people that he will not hide hard choices from them and he will make them.  He has clearly lived up to this campaign promise with his austere budget that is getting a lot of press. He feels strongly that the public wants a government who can admit when there is a real problem, and work quickly to get it fixed.

Proper Leadership

The kicker here is their assumption that the public can and should act as an intelligent deputy to a sheriff who is willing to make and stand behind decisions regardless of which direction the political winds are blowing. This new conservative party clearly recognizes that the British public clearly understands there is a debt problem, and that the country has been living beyond its means for some time, and so they are willing to take it on as their first priority.  They also realize that not only Great Britain, but Europe, requires proper leadership to bolster their image and regain the world’s confidence in their ability to pay their own way.

Collaboration is Not a Death Sentence

Osborne speaks of forming a proper coalition government where the other party holds seats in the cabinet and how the real benefits of diversity in Parliament are less about looking different and more about being different and thinking different.  One of the best statements Osborne makes in Fareed’s interview is, “We can’t abandon whole areas of policy to the Left in British politics.  There is no reason why the Conservative Party should not have a progressive policy on climate change or be interested in issues of poverty and equity in our society and have answers to those issues.”

Open, Open, Open

They are open to new ideas, new views and anyone who can come up with a better way to reach a common goal.  Osborne indicated that he constantly seeks out second opinions and alternative views.  He encourages large numbers of people to come into meetings and say what they want to say, and understands that listening is a large part of the job.  His office recently asked the broader group of public servants for their ideas on how to reduce budgets in a way that doesn’t damage the frontline services people receive.  They received over 65,000 responses in a couple of weeks, and had some of them around to Number 11 Downing Street for a chat recently.  Interactive governement . . . what a concept!

I’ve been saying for years (just ask my friends) that the politicians in the US are simply making things worse and what most people really want is an entirely new breed of politician that is much more suited for the 21^st century.  We need politicians who care less about party line and more about solving problems. We need politicians who can explain both sides of an issue, without bias, and why they believe their decision is the best option.  We need politicians who can work with other politicians to get the job done and stop wasting the public’s time and money on petty politics.

As much as I love they way in which this new and refreshing British government is behaving, I would certainly caution them that the best solution in today’s environment is likely a combination of austerity in some areas and stimulus in others.  Because western politicians failed to play the austerity card when times were good, we are all now stuck in a precarious position.  The equation is really quite simple and it works for government, companies, and at home.  When times are good you pay off your debts, make smart investments, and put a little under the mattress for a rainy day.  When times are hard you dig out your mattress money and stretch on credit a little if necessary.  If used responsibly, credit can be a very stabilizing element in an economy.  When abused, as we all now know, credit can backfire as surely as a 1970’s MG.

One of the things I love the most about this new government is the fact that they aren’t letting fear run the show.  They are taking a stance, creating a strategy, and they are willing to listen to other ideas.  The longer we let fear run our households, our businesses, and our politics, the longer this era of uncertainty will linger.  It really is that simple.

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The opportunity to redevelop the real estate industry such that it contributes to the solutions the world is seeking, instead of continuing to pile on to the multitude of challenges, is huge. Such challenges include the energy crisis, climate change, natural resource preservation, population growth, urban sprawl with ineffective infrastructure, and a lack of sustainable growth practices. Those with the courage to see these opportunities and act upon them quickly will realize tremendous competitive and economic advantages.

Indulge me for a moment as I try to integrate the big picture of how the real estate industry can play a significant role in addressing the challenges we face as global citizens. Then, I’ll offer some details and specifics that outline a new approach to real estate.

Tom Friedman says in his book Hot, Flat, and Crowded, “We Americans are in no position to lecture anyone. But we are in a position to know better. We are in a position to set a different example of growth. We are in a position to use our resources and know-how to invent the renewable, clean power sources and energy efficiency systems that can make growth greener. If we, as Americans, do not redefine what an American middle-class lifestyle is – and invent the tools and spread the know-how that enables another two or three billion people to enjoy it in a more sustainable fashion – we will need to colonize three more planets.”

Real estate investors and developers play a huge role in how communities and cities are constructed, how buildings utilize energy, and what infrastructure and transportation is necessary to connect where we live to where we work, shop, and play. Without drastic changes in how we construct and live in our communities, what’s left of America’s competitive advantage in real estate will continue to fade. Others will take the lead in creating the technology and investment and development models that allow populations and standards of living to grow in sustainable ways that are also grounded in the pursuit of happiness and wellbeing for oneself and the rest of the world.

The global economic crisis should represent the perfect opportunity and context in which to effect meaningful change, unfortunately little is different today than it was 5 years ago in an industry that has endured massive losses over the last 2 years. The only changes fund managers (who ultimately control where and how capital is deployed) appear to be making are to appease their investor base with executive musical chairs, token fee reductions, and maybe a claw-back clause. Their plan is to ultimately convince investors that the world will soon get back to normal. Some fund managers are even sitting out a round or two of fundraising in order to avoid setting a precedent of unfavorable terms with their investors. These kind of non-structural changes or avoidance strategies will, unfortunately, not bring a new mindset, new strategies, creative partnerships, and the innovative models that are needed in the dynamic and interdependent world in which we all now reside. The pace of global change is so great, that the concept of “normal” may eventually become obsolete.

Investors, on the other hand, realize they have been paying too much to fund managers who, quite frankly, have lost their edge, allowing their value proposition to shrink to an almost unrecognizable point because such a large portion of profits have been driven by extremely favorable financing terms. Because investors rely on the income from their investments to fund whatever it is that they do (pensions, universities, etc.), they need to make commitments and keep the economic wheel turning. And, with so few new choices, many institutional investors are forced to give in to what fund managers are offering.

Large institutional investors have more power today than they realize, and with the right leadership they could help re-shape the industry for the better. Relying heavily on a previous track record as an indicator of likely success, in a future that will undoubtedly look quite different than the past, may not be the best strategy. A better bet may be fund managers that are more adaptable to change, that are more willing to present structures which focus on creating long-term value, and have a desire to begin working toward sustainable and energy efficient strategies of investing and development. When assets are viewed in terms of creating economic, social, and ecological value, growth is more balanced and sustainable and less susceptible to large swings in the financial and capital markets.

Suburban sprawl with carbon copy retail centers, minimally constructed housing developments, and energy-gorging apartment complexes are all simply unsustainable and will not work for the future. They are also poor examples to set for emerging markets that have to figure out how to support a net increase of 3 billion people over the next 40 years and typically look to America for answers.

The real estate industry will have to evolve because we are rapidly approaching the tipping point where it is economically advantageous to create and embrace new types of value. The real question is who will be the first group to realize just how incredible this opportunity is for those with the courage to change. Detailed below are two areas in which I believe the real estate industry can make great strides and become the leader the world needs in building more efficient communities that promote healthier lifestyles and sustainable living.

First, we must start with an investment model that is focused on creating value instead of creating fees. The days of creating a majority of profits from financing arbitrage while collecting huge fees and adding very little value are over (or at least they should be over). Those who can design integrated investment models that eliminate the double promote and have a viable long-term strategy that includes some elements of sustainability will have a tremendous competitive advantage.

Second, we must build asset management strategies that not only address the needs of capital but also begin to address the energy and climate conundrum we are all facing, offer end-users options that help solve their daily problems, and are congruent with the direction local municipalities and communities are headed. Typical asset management models are based on a pyramid structure driven by a chain of command. An integrated asset management model, as depicted below, puts the asset at center stage and focuses on adding value by integrating end user needs, investor needs, social needs, and environmental needs into one cohesive strategy.

An integrated asset management model is all about adding value. For example a C class apartment complex that provides residents with free parenting classes, free money management classes, and partners with a local non-profit that provides a mobile medical clinic to families that cannot afford healthcare, will enjoy the highest occupancy rate in its market. Alternatively, a high end retail center whose tenants all relate to health and fitness, sponsors weekend community races and farmer’s markets, will be able to charge a premium, because tenants will insist on being where the action is. Or how about an office complex that caters to “green” businesses that are happy to pay a premium because the building is carbon neutral and net positive on energy. These are just a few examples of a multitude of creative strategies available in an integrated model that views value through a multiple lenses.

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I am often asked to review and blog about new business books coming to market, and only rarely do I oblige.  When Tony asked me to review his new book, I said yes immediately. His ideas around managing energy as opposed to time resonated with me years ago after reading, The Power of Full Engagement and plays a big role in my own consulting practice. The energy management concept, if explored to its full potential, can do more to transform an organization than any other single component.

The great thing about Tony’s new book is that it is full of sound research that reinforces what Tony is teaching and helps us to really understand why we do the things we do, even when they are counter productive to our goals.  More importantly, he provides practical advise on how to begin the process of change that will work for anyone in any stage of their career, or any organization at any level of health.

Not only will you find great information to help you become a better employee, leader, or manager, but you will also find that this book will help you become the person, spouse, parent, child, and sibling that your heart desires.

If any of the following statements resonate with you, then you should RUN, not walk, to the nearest bookstore and get a copy of The Way We’re Working Isn’t Working.

• I always feel like I am behind in my work and will never catch up
• I want my team to be more productive
• I desperately want to find balance between my work life and home life
• I want my team to be more accountable and responsible
• I struggle with the daily distractions of email, phone calls, and endless request for my time and can’t get any of my own work done
• My company does a poor job of retaining employees

What I personally love the most about The Way We’re Working Isn’t Working is how it very easily connects to my own work around helping organization find competitive advantages that work in the 21^st Century.  Tony reminds us that, “In a fiercely competitive and rapidly changing marketplace, creative and big picture thinking, curiosity, and openness to learning and empathy are a largely untapped source of potential competitive advantage.”  Going from more, bigger, faster to richer, deeper, slower seems counter intuitive to most, but is in fact the best way to distinguish your company from its competitors.

I have asked Tony to give us his thoughts on a few more in-depth questions on this angle around competitive advantage.

1)   Why do you think it is so hard for organizations to fully grasp that strengthening their connection with and investing in the well being of their employees can be a tremendous competitive advantage?

There’s an instinctive tendency in all of us to default to the easiest solutions. It’s easier to demand more of people than it is to consciously invest in them. It’s also part of the short-term preoccupation that characterizes so many organizations.  If you view people as expendable and interchangeable, you don’t worry about investing in them because you believe they’re all replaceable.  Leaders with a more  long-term view recognize that when you invest in people they become more valuable over time.

We make that investment in ourselves in the years we spend in school. But many organization are too concerned with the next quarter’s revenues to think about investing in the future. But the best organizations do just that. Companies such as Apple and Google offer more to their employees than most other companies – not just in perks like the free meals Google provides or the fitness facilities Apple has, but also mentally, in terms of the environments of learning and growth they actively nurture; and spiritually, by giving employees the sense that they’re doing something that truly adds value to the world. It shouldn’t be a surprise, in turn, that these sorts of companies attract better employees and have great results.

2)   In your work with a vast array of companies, do you see more of a correlation to the age of a company and the age of its executive team and their likelihood to fully embrace energy management in their culture, or is it more highly correlated to specific industries?

There’s no question that a certain kind of company is more readily drawn to our work.  They tend to be more progressive, forward thinking and innovative than average.  We’ve had our greatest successes with technology companies and with creative companies, but interestingly, we’ve also had significant success with more traditional financial institutions.  I think that may be because the folks drawn to the world of finance are often fiercely competitive, and we’re offering a science-based way for them to improve personal performance.

Ultimately, though, we’ve been able to work in almost every kind of organization, because in the end it’s usually one or two senior leaders who make the decision about whether to bring us in.  The trick, we’ve learned, is to introduce them to our work first at a personal level.  When they see its impact in their own lives, they become evangelists for the practices we’re teaching, and the new way of working we’re advocating.

3)   What is the one piece of information that you provide to clients that seems to resonate with them the most when it is difficult for them to see how proactively managing the 4 types of energy can have a profound impact on personal satisfaction and corporate success?

In an era of overwhelming demand, what resonates first is the science-based case we make for the fact that human beings aren’t meant to operate continuously for long hours. We all know, intuitively, that the way we’re working isn’t working, and that it’s actually depleting us.   It’s thrilling for people to understand that intermittent renewal actually drives higher and more sustainable performance.  Our work gives people permission to work in ways that serve them better – and make them feel better.  And that ultimately serves their organizations better.

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There have been a couple of news spots recently on healthcare providers starting to do things differently and experiencing huge success.  In one doctor’s office in Seattle, patient emails are answered daily by a physician, and appointments last twice a long as the average doctor’s visit.  The result is a much higher level of connection between patient and doctor and a much greater chance that “health-care” is being provided as opposed to “disease management” services.  The other story I saw involved a hospital here in Dallas that last year experienced the death of a patient while he waited in the ER for hours.  They completely revamped their ER process creating a number of different pods or mini ERs that take in multiple patients at one time so they can keep a closer eye on everyone.  Again, huge success in dropping their wait times and even more impressive, a dramatic drop in the percentage of patients that left before they were seen by a professional care giver.

In my opinion, the US healthcare industry needs a new business model far more than it needs new legislation.  We seem to be in this mode in America where we think that the best solution to all problems begins with massive new legislation.  Sometimes a tweak here and there can be very helpful, but solving all problems with more rules just runs counter to everything I’ve experienced on how to create change and lasting success.

At its most basic level, it is relatively easy to see that the healthcare system in our country is a bit backward.  We pay physicians when patients have something wrong with them as opposed to when they remain healthy.  To get paid for anything, the physician must start with a diagnosis and a diagnosis code.  Any time or energy a physician spends on prevention or educating patients on how to stay healthier longer is a bottom line deduction from their profits.  It is a simple case of rewarding the wrong behaviors.  There are no fingers to be pointed or people to blame, it’s simply a model that is ineffective at creating what is needed, which is healthier and happier people at a lower cost.  Perhaps 100 years ago, when there was far less knowledge about and focus on prevention, the currently model was relatively effective.  Healthcare is no different than so many other industries (like energy, automobile, finance, and telecommunications to name only a few) that need to change with the times in order to remain effective.  What is sneaking up on most of us is that the rate of change has skyrocketed and is now at a pace that is uncomfortable to most industries and businesses.  There is hope though; we just have to be willing to change the way with think about things and be willing to do it in dramatic ways.

During the thrust of the healthcare debate, I only saw one article that touched on the real issues.  The article discussed how organizations such as The Mayo Clinic and the Cleveland Clinic appear to run at a much lower cost structure and simultaneously have reputations for the best service available in the industry.  The article attributed this in large part to the fact that doctors from different disciplines collaborated very effectively on all kinds of cases on a daily basis, which tends to cut out tests and procedures that ultimately end up being unnecessary.  Unfortunately, most of the healthcare industry is built on an “every doc for himself” model that actually dissuades doctors from taking the time to collaborate as much as they would probably like to.  It is much easier to collaborate when people are co-located and when the concept is built into the care model.

Because the “every doc for himself” model is so pervasive, it has been difficult for the industry to take advantage of technology to the extent that it could, which would ultimately benefit the patients and reduce costs.  For example, if a doctor sees a new patient and diagnosis him/her with diabetes, there schedule probably only allows for them to spend 15 or 20 minutes explaining everything.  The patient is in such a state of shock they likely are only taking in a portion of the information that is radically changing their life.  What if you could also send the patient home with a computer login that accesses their own health web page customized to their personal care needs?  It could contain a longer video, of their very own doctor, explaining everything again that they could watch as many times as they wanted and could share with family members who might be participating in their long-term care.  A private chat board could be available that is manned by an RN or Physician’s Assistant answering questions in real time.  The possibilities are endless in this area.  How many relapses could be avoided if patients watched daily videos that indicate how things should be progressing after surgery discharge or an outpatient procedure.

The point is, we need to start thinking in terms of radical changes, and honestly considering if the business model is working toward our goals or working away from them.  Imagine a time when doctors get paid for keeping people healthy.  Imagine if your healthcare facility was a place where you could workout, ask a quick question, learn about nutrition, pick up some new recipes, and get motivated to live a healthier life?  The reality is the current business model is stifling progress, innovation, and advancement in how we think about and deliver healthcare.  Our healthcare system has been narrowed down to a transaction system.  It feels like progress is being made because there have been great advancements in understanding diseases and innovating new treatments, however, very little has been done around the delivery of healthcare.  We have State of the art medical knowledge delivered, in many cases, through an outdated and archaic system.  If you are looking for ways to cut costs and increase the quality of service, this is where the opportunities lie.  Unfortunately, until we correct the structure of the system, those efficiencies will likely continue to lie dormant.

In the business world we call this a classic case of structure taking over the strategy.  You always want your strategy to dictate the best structure, not the other way around.  Unlike a single business transaction or a single company, where you change the structure relatively easily, this is an entire industry in one of the world’s largest countries.  It is likely impossible for a single healthcare provider, a single hospital, or even a single hospital system to make a change to the structure on their own.  Maybe it will require a grass roots movement that strives for a total do-over in the way our healthcare system works.  Once the structure is changed to create the alignments and incentives necessary to meet the goals then, and only then, will we see meaningful change.

As much as I dislike the behaviors that the medical insurance industry sometimes displays, it is a complete waste of time to try and fight them.  Everyone has responsibility for things getting to the point that they have, and these bad behaviors are just another symptom of a system that is governed by an outdated and ineffective model.  The insurance companies will have to be a part of the solution.  Insurance is a numbers game.  When the youngest and healthiest people opt-out because the cost is too high it simply continues a vicious cycle where the insurance companies feel they have to remove the other end of the spectrum as well in order to balance out their risk.  I am actually a fan of having a minimum insurance requirement with the government picking up the tab if someone can’t afford it.  We have this requirement in the auto industry and I believe it is one of the reasons that auto insurance seems to work so well.

If you look at healthcare as an entire business system and start to dissect its “operating statement” you quickly realize that revenues are generated by one party (insurance companies) and expenses are created by another (providers), though for the providers those expenses are viewed as revenue.  The profits from the system are shared but not anywhere near equal to the value that each party contributes or in a way that promotes the desired outcomes.  The real value that an insurance company provides is an administrative function, yet in many cases, they take an outsized portion of the profits from a value perspective and often have the most control.  The insurance companies will say they also take on the risk, but I would argue that it is the purchasers of insurance that take the risk.  When profits start to go down the insurance companies simply start denying claims, dropping high-risk people, and jacking up rates for everyone else.  They have become experts at deriving ways of mitigating their risks by passing them on to their customers, and we have let them get away with it for so long that it is now seen as standard practice.  In fairness, nothing has been done to ensure that the young and healthy remain part of the pool, which I believe could solve a lot of the insurance issues.  This would be one of those areas where some legislative changes could be good.

The real question is not, could we come up with creative and inventive ideas to cut costs and increase quality, but do we have the courage to make the necessary changes to the underlying structure?  Do we have the courage to design a model that provides the incentives to promote the investments necessary to increase service quality and bring down costs?  I hope the answer is YES.  I believe the answer is YES.  We can have all the intelligence and innovation imaginable, but without the courage to make system wide structural changes we will likely only create an updated and over compromised version of what we already have, spend a lot of money getting there, and leave an even more complex mess for our children and grandchildren to clean-up.

We must find the courage to critically examine the current system and understand how the alignments and incentives are simply miss-directed to accomplish the goals of the medical community and our society.

We must find the courage to recognize that the failures are not born of malice from any party, but are born of a system that is simply out-dated and broken.

We must find the courage to work together and commit to create the world’s finest healthcare system and be a leader for the rest of the world.

WE MUST FIND THE COURAGE TO CHANGE THE GAME!

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