Yet markets are demonstrating surprising capacities for resilience. Engineers and entrepreneurs in places like Nairobi, São Paulo and Doha are beginning to build export-worthy technologies.

This is a momentous time for anyone engaged in cross-market projects. It’s only fitting that the year’s top books match the scale of the changes we’re witnessing.

Here’s a year-end roundup of books that define our times and guide practitioners with a global perspective:

Thinking Fast and Slow, by Daniel Kahneman – The most influential social scientist of our time describes the two “systems” that shape our thinking and decision-making: ‘System 1′ is fast, intuitive, and emotional, while ‘System 2′ is slower, more deliberative, and logical. This seminal work reveals insights that have overturned traditional assumptions about metacognition.

“The Next Convergence: The Future of Economic Growth in a Multi-Speed World, by Michael Spence – The Nobel Laureate presents an elegant thesis to account for the current surge among emerging economies and its global impact.

Inside Egypt: The Land of the Pharaohs on the Brink of a Revolution, by John R. Bradley – A rich, beautifully written account of the socio-political dynamics in Egypt by a perceptive and appreciative observer.

Egypt after Mubarak: Liberalism, Islam, and Democracy in the Arab World, by Bruce Rutherford – A timely and incisive look at the complex political, economic and cultural forces shaping Egypt today.

The Party: The Secret World of China’s Communist Rulers, by Richard McGregor – An illuminating, inside look at past, present and future leaders of China’s impenetrable Politburo.

The Origins of Political Order, by Francis Fukuyama – This much-anticipated book by one of our most insightful and, at times, controversial political theorists was worth the wait. In the first of three projected volumes, Fukuyama describes the ways by which ideas have shaped political order.

The Price of Civilization, by Jeffrey Sachs – The outspoken Columbia University economist believes that the decline of American civic virtue is at hand. His poses what seems like an obvious question: Why has taxation become demonized? According to Sachs, taxes are the price we pay for civilization.

The Future of Power, by Joseph S. Nye – What are the forces and mechanisms shaping global power and how is society being affected by it?  Nye explores these questions and asserts that the U.S. and China have much to gain by deepening their cooperation.

Adapt: Why Success Always Starts with Failure, by Tim Harford (reviewed here) – The clever British economist demonstrates how effective trial-and-error leads to better results. In our world of complexity and unpredictability, learning from failure is imperative.

Civilization: The West and the Rest, by Niall Ferguson – The economist-provocateur explores a central question: “Why, beginning around 1500, did a few small polities on the western end of the Eurasian landmass come to dominate the rest of the world?” He posits that the West had six “killer apps”.

Monsoon*, by Robert Kaplan – A mind-bending journey across regions of the Indian Ocean which are growing in geostrategic importance as American power shifts gears. Ahmed Rashid aptly describes Kaplan as “a landscape artist who covers the world with extraordinary perception and insight”.

Emerging Africa–How 17 Countries are Leading the Way*, by Steven Radelet. The author, an economist, identifies the reasons for superior economic performance in some African countries. He concludes that the chief driver of economic development is an “interplay between economic reform and political change”.

The Dragon’s Gift – The Real Story of China in Africa*, by Deborah Brautigam – Brautigam debunks the standard myths about China’s aspirations and roles in Africa. It’s an indispensable read for anyone doing business on the continent.

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Endnotes:

* Denotes books published in 2010. (All others were published in 2011.)

Addendum:

Daniel Kahneman fans will likely appreciate his conversation with David Brooks at CUNY: video clip.

Another Kahneman resource is Michael Lewis’ Vanity Fair piece, “The King of Human Error”. Lewis writes:  “[Thinking, Fast and Slow] is wonderful, of course. To anyone with the slightest interest in the workings of his own mind, [the book]  is so rich and fascinating that any summary would seem absurd.”

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Here are my Summer Reading picks for those who go for both engaging narrative and penetrating insight. I’m recommending two distinctly different books by writers who don’t want to merely inform their readers; they want to shape the conversation. Both authors accomplished what they set out to do.

Tim Harford | Adapt – Why Success Always Starts with Failure

“Today’s challenges simply cannot be tackled with ready-made solutions and expert opinions; the world has become far too unpredictable and profoundly complex. Instead, we must adapt—improvise rather than plan, work from the bottom up rather than the top down, and take baby steps rather than great leaps forward.” ~Tim Harford

In his new book, Adapt – Why Success Always Starts with Failure, British economist Tim Harford of the Financial Times (The “Undercover Economist”) tackles a subject that’s close to my heart, the necessity of experimenting, failing and responding constructively to failure.

It’s become fashionable in recent years for American business writers to trumpet the virtues of failure. This is a radical departure from our culture’s traditional mythology where heroes walked with a swagger of infallibility. Today, we’re acknowledging that both trial and error play a key role in problem solving. Our new mantra is the old Japanese proverb: fall down seven times, stand up eight.

In Adapt, Harford argues that failure has always been useful in various ways, but in this age of complex challenges and pervasive fragility it’s vitally important. In our interconnected world where failure occurs frequently and its impact is more threatening, it’s imperative to recognize and adapt to errors.

“We face a difficult challenge,” he says. “The more complex and elusive our problems are, the more effective trial and error becomes, relative to the alternatives. Yet it is an approach that runs counter to our instincts.”

Harford, a trenchant storyteller, recounts several illustrative cases about how failure led to success. He tells how the U.S. military learned from its early tactical mistakes in Iraq to mount a more adaptive, successful counterinsurgency campaign.

In this instance, the takeaway for practitioners, both in and outside the military, is to do a better job transferring the “local knowledge” acquired in the field (or shop floor) to the command levels at their organizations.

Harford contends that there are three critical steps to failing and adapting successfully: Try new things knowing that some will invariably fail, make failures “survivable,” and be sure you know when you’ve failed. These steps apply to solving a wide range of problems.

Like Steven Johnson (Where Good Ideas Come From) who advances an elegant argument for innovating through experimentation, Harford builds a compelling case for intelligent tinkering. The trick isn’t to avoid mistakes at all cost but to learn and apply their lessons.

That our society is becoming comfortable with failure is a sign of maturity. It’s hard to fathom that until recently, admitting failure was rare, and encouraging it was anathema.

Sherry Turkle | Alone Together

In Alone Together — Why We Expect More from Technology And Less From Each Other, Sherry Turkle takes a critical look at how we interact with technology. Turkle is an author, clinical psychologist and an MIT scholar who leads MIT’s Initiative on Technology and Self.

After interviewing hundreds of adults and children, Turkle concludes that technology encourages people’s tendency to form superficial, less demanding on-line relationships in lieu of complicated, real bonds that are riskier and which require a greater investment of time and emotional energy. The implications, she concludes, merit our attention.

“Once we remove ourselves  from the flow of physical, messy, untidy life — and both robotics and networked life do that — we become less willing to get out there and take a chance,” she observes.

Teenagers are texting obsessively and many of us are shifting attention toward social networking and away from more substantial relationships. The consequences are troublesome for Turkle. She laments, “Networked, we are together, but so lessened are our expectations of each other that we can feel utterly alone.”

Turkle’s concerns echo those of Nicholas Carr, author of The Shallows, who contends that the Internet fosters a culture of surfing the Net rather than deep reading, and superficial thinking rather than focus and reflection. Like Carr, she asks us to consider the effects of how we use technology so that we can make choices that better serve our interests.

Despite the trends that she notices, Turkle is unaffected by the prospects. She’s not afraid that we’ll disengage entirely from real world relationships in a dystopian future, but she does think we ought to pay attention to how technology is mediating social ties.

Turkle encourages looking at behavior with a longer lens and drawing our own conclusions. The images are sometimes disquieting but her analysis is measured: “We’ve gone through tremendously rapid change, and some of these things just need a little sorting out.”

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Want more info on this subject?

Sherry Turkle on The Colbert Report; and an audio clip of Tim Harford interviewed by economist Russ Roberts of George Mason University.

A recent post (5/4/11) on how the U.S. military learned from failure, excerpt: The planners [of the SEAL mission in Abbottabad, Pakistan] had, in fact, learned from the disastrous rescue attempt of U.S. hostages in Tehran in 1980 that was undermined by a helicopter accident. Learning from prior mistakes is essential in effective contingency planning.

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The Middle East (1997) – Author Bernard Lewis is the senior dean of Middle East scholars. He’s a gifted storyteller with unparalleled subject mastery – a rare combination. Lewis makes clear sense out of complexity. This engaging primer is the gold standard of books on the region.

A Peace to End All Peace – The Fall of the Ottoman Empire and Creation of the Modern Middle East (2001) – David Fromkin toiled for ten years to describe the birth of the region’s nation states. This is the story of how the Western powers carved up the Middle East with little regard for the consequences. It’s required reading for anyone interested in understanding the forces that shape the region today.

The Modern Middle East: A Political History since the First World War (2nd Edition) (2011) – This primer by Mehren Kamrava provides a sound historical context for the events of today’s Arab Spring. Kamrava updated the book in the 2nd edition, published earlier this year.  It’s recommended for anyone wanting to fill the gaps in their understanding of the region.

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Using a longer lens

It’s been twenty years since the publication of Peter Schwartz’s insightful primer about scenario planning, The Art of the Long View. In the book, Schwartz makes a convincing case for using scenario planning in approaching strategic challenges of various kinds.

Schwartz, who led scenario planning efforts at Shell, Motorola, and Pacific Gas and Electric, concluded that the technique could be applied to handling the emergent complex threats that companies were confronting in the 90′s.

Since then, the world has grown radically more complex, more uncertain. Globalization and the Internet have woven together our institutions so that a crisis in one corner of the world can spread virally with far-reaching consequences.

Cascading consequences

We now live in a world where an unknown street vendor in an obscure Tunisian village sets himself on fire and a few weeks later the dictatorial regime in Egypt collapses. Those events triggered spiraling oil prices which boosted worldwide food and commodity prices with a cascade of far-reaching consequences.

While leaders can’t predict the next cataclysmic event, they must now contend with a wider range of plausible, discontinuous threats. Failure to do so can imperil their institutions.

In a world where traditional, linear thinking is inadequate, scenario planning is a platform for enabling problem solvers to explore the question: “Given what we know, and what we don’t know, what should we do now?”

That’s a significant question, but it’s not enough to simply ponder significant questions. Problem-solvers must also overcome the internal barriers – psychological as well as physical – which can paralyze organizations when the stakes are high. Scenario planning provides a context for examining assumptions and biases, and for avoiding the denial that ensues when facing existential threats.

Schwartz observes, “When decision-makers begin to look at the future, denial acts as an automatic shut-off valve: ‘I can’t consider that…’ A good scenario asks people to suspend their disbelief long enough to appreciate its impact.”

The Singapore Miracle

One of the more celebrated scenario planning cases is the Singapore story. That nation’s government first used the technique to help build its nascent entrepreneurial society in the 70’s and 80’s, and later to cope with a string of discontinuous shocks that threatened its economy including the Asian financial crisis of the 90’s.

Since then, Singapore has embedded the technique in its strategic planning efforts. Scenario thinking helped its leaders to recognize that in a region increasingly dominated by its giant neighbor, China, their nation must become an innovative technology hub. (Singapore’s mantra says it best: Anticipate change, stay relevant.) As a result, the government is investing $12 billion USD in technology R & D over five years — a 20% spending increase — to attract gifted engineers and entrepreneurs.

Lessons from the field

My own experience with scenario planning in a variety of settings has been overwhelmingly positive. It remains one of the more advanced tools in the strategic arsenal. My appreciation of the practice has only grown over time.

I’ve learned this: Convene the right problem-solvers under the right circumstances and they’ll reach a shared understanding, despite differences in perspective. Scenario planning helps organizations to recognize threats, opportunities and weak signals, and it often leads to practical solutions that everyone in the room can support.

When The Art of the Long View was published in ’91, scenario planning was deemed a novel technique for organizations facing rare and unusually complex issues. Today, most of our pressing challenges are laced with complexity — that’s our new reality.

If we’re going to prepare for what’s next, let’s bring in our sharpest minds and give them the tools to move the enterprise forward. I’m pleased to report that scenario planning is still the right tool for the job.

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As always, I’d appreciate hearing your views…

Want more info on this subject?

1. One of the more interesting critiques of Schwartz’s book is found in a video dialogue between Niall Ferguson and Schwartz
2. Here’s an insightful talk (video clip), The Singapore Miracle & Gov 2.0, by Peter Ho, Singapore’s former head of civil service, who explains his country’s work with scenario planning. Peter Schwartz is also featured
3. More on scenario planning is at Global Business Network (GBN), co-founded by Schwartz
4. Have a look at the World Economic Forum’s on-going scenario planning initiatives
5. Mats Lindgren’s ’09 book, Scenario Planning–The link between future and strategy
6. Bonus: An hour with Lee Kuan Yew, former PM-Singapore and author of ‘From Third World to First : The Singapore Story: 1965-2000′  on Charlie Rose (3/28/11)
7. Here’s a look at the Decision Support practice at my company, Osprey.

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Several years ago, I discovered Laurence Gonzalez’s (’03) book, Deep Survival – Who Lives, Who Dies and Why about individuals  surviving “do or die” situations.  Recently, I glanced through it again thinking it might be helpful for business people grappling with the challenges of this economy.  I couldn’t put it down.  Now, I’m  convinced of its value for anyone going through any kind of crisis.

Gonzalez studied hundreds of survival stories and presents many of them in his book. He shares tales of people surviving harrowing crashes and others lost in the wilderness.  Fascinated by their travails, he ponders why some people make it, while others perish? What general lessons can we learn from how the survivors behaved?

Gonzalez finds that one of the key features “deep survivors” possess is the capacity to focus on “doing the next right thing”.  Instead of becoming overwrought, survivors accept what’s happening earlier in the process and focus on extricating themselves.  They reason, “Okay, I’m here. This is really happening. Now I’m going to do the next right thing…”

That principle seems straightforward, but grappling with reality during a crisis was harder for the non-survivors. Victims, overcome by fear, were less adept at accepting their situation.

Many victims are prone to hysteria, while others are immobilized. What differentiates “deep survivors” is their ability to convert their emotions to drive reasonable, helpful action.

Surprisingly, the unlikeliest people sometimes prevail while others who are better trained and equipped don’t. Gonzalez tells the story of a teenage girl, Juliane Koepcke, who was with 91 other passengers aboard a plane that went down in the Peruvian jungle.

Most of the others stayed by the plane thinking it was the right course of action. Isn’t that what we’re told to do in a situation like that? But many of the “rule followers” died waiting to be rescued.  Juliane made a plan to escape through the jungle and she stuck to her plan, eventually meeting up with three hunters who rescued her. Her salvation, according to Gonzalez, was an inner resource, her mindset.

Fear is universal among people in peril. But “deep survivors” like Juliane channel their apprehension into helpful steps.  Gonzalez cites this as one of his “12 rules of survival“.

Deep Survival is gripping despite its being peppered with lots of narrative “switchbacks”.  But, Gonzalez successfully conveys his thesis that it’s not what’s in our backpack that makes the difference, or even what’s in our minds.  It’s something even deeper that counts the most.

Managing a crisis successfully is mostly an inside game. This applies to enduring any kind of peril — being lost in the wilderness, facing a serious illness, or a managing a daunting business crisis. Sooner or later, many of us will likely face a catastrophe of some kind.  If we understand what it takes to produce a better outcome, we stand a better chance of improving our odds.

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Stillness, insight, and wisdom arise only when we can settle into being complete in this moment,  without having to seek or hold on to or reject anything.  ~Jon Kabat-Zinn

We often give others the advice that we ourselves need to take to heart.  That goes for recommending books. Keep that in mind while considering my summer reading suggestion, The Mindful Leader- Ten Principles for Bringing Out the Best in Ourselves and Others.

I recognize the value of mindfulness and have meditated intermittently since my college days. But often, I’ve placed my desire to succeed in the corporate world ahead of other interests.  This book, by Michael Carroll, is a reminder to integrate mindfulness into all aspects of one’s life, including work.

Carroll, a Buddhist-trained HR executive, informs us that cultivating mindfulness enables us to be present while attending to our work.  Western business types will likely find his book more accessible than some of the more esoteric books that provide instruction on meditation.

Most people understand that meditation techniques can help reduce stress and burnout.  But practicing mindfulness helps us to rediscover something about being human.  By being present – by noticing the world we inhabit – we tend to bring out the best in ourselves and in others.

“By opening to our experience—without any conditions, hopes or fears—we cultivate the talent of confidence, and expressing such confidence is the key to inspiring a fearless, dignified, and joyful workplace,” says Carroll.

Carroll believes that the simple act of being present requires courage.  I think he’s right. His book is a reminder that the time to hit the reset button is always now.

I’d love to hear your views on this subject. What are your experiences with mindfulness in the workplace?  Do you practice mindfulness meditation?

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Would you like more information?

Michael Carroll discusses this book and demonstrates mindfulness meditation to Google employees in this video.

Suggested reading:  Any of Jon Kabat-Zinn’s books on mindfulness, including my favorite, Coming to Our Senses–Healing Ourselves and the Wolrd through Mindfulness.

One of my favorite authors on this subject is Daniel J. Siegel whose book, The Mindful Brain: Reflection and Attunement in the the Cultivation of Well Being, delves into the neuroscience of mindfulness.  It’s a superb read for those who want more information on this subject.

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You never know with these things when you’re trying something new what can happen. This is all experimental. ~Richard Branson

Over the years, there have been surprisingly few breakthroughs in the airline customer experience - until recently. Sir Richard Branson’s venture into the U.S. market, Virgin America, (VX) is redefining air travel by providing passengers with a fresh, distinctive on-board experience. The carrier is less than two years old but it’s quickly becoming a template for what’s possible in the future.

The choices VX is making demonstrate a “customer experience mindset” that’s all too rare in the industry. It’s evident that the VX team devoted their attention to passenger comfort and convenience. Features “baked in” to the customer experience include seats with power-outlets and USB ports. Cabins in their new A320s have soft mood lighting.

Healthy, appetizing meals designed by star-chef Luke Mangan show that the company knows what their customers prefer.  Features like these aren’t found on any domestic airline, let alone a low-cost one.

Last week, VX announced that its fleet is 100% WiFi-equipped (Gogo). They only have 28 planes, but they can boast that they’re the world’s first airline to reach that coveted milestone.

What’s most impressive is VX’s touch-screen, interactive entertainment system. The platform, known as Red, enables passengers to watch movies and live TV, play games, chat on-line with other passengers, and sample or even download MP3s from a massive digital library. Passengers can also use Red to order and pay for food and beverages which they receive “on-demand”.  For the digitally-inclined traveler, this is the way to fly.

Given the prohibitive cost of installing systems like Red on their existing fleets, it’s doubtful that any of the major network carriers will soon match VX’s “at-seat” amenities. But, the toughest feature for VX’s rivals to co-opt is its “customer experience mindset”.  These advantages could give the carrier a strong lead in the service innovation race for years to come if it stays healthy during this slowdown.

The airline serves only a handful of markets (New York, Boston, DC and the West Coast).  But, they’re big league markets where VX is attracting a cadre of loyal, well-heeled fans.  As an industry guy, I’m tipping my hat to Sir Richard Branson and VX’s San Francisco-based team for rethinking the in-flight experience, and for executing it well.

What do you think?  Have you sampled Virgin America?  I appreciate your perspective.

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Want more on this subject?

Richard Branson (Reuters, 6-2-09): “It’s unlikely all the big U.S. airlines will survive.”

Read Red Orbit’s piece (10-16-08), “Virgin America Wins Best Domestic Airline in Conde Nast Traveler’s (’08) Readers’ Choice Awards”.

Check out SimpliFlying’s series on Richard Branson and Virgin America.

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It is with the heart that one sees rightly; what is essential  is invisible to the eye. ~Antoine De Saint-Exupery, The Little Prince

Business stories about “empathy” are springing up again. BusinessWeek ran one (Empathy = Growth) last week.  Fast Company covers the subject periodically. Authors are urging readers to consider the merits of empathy despite the need to cut operating costs as demand for services declines. It makes sense for businesses to re-evaluate their customer relationships in this environment. I think empathy remains widely misunderstood and its role is undervalued in the business community.

Simply put, empathy is rooted in the capacity to see the world through the eyes of another person.  Empathy enables a provider of service to recognize the buyer’s feelings, needs, and wants in order to fulfill these drivers through various means.

I’m interested in a broad spectrum of “relational competencies,” including empathy, and how they are used in business. Skillful practitioners use these competencies to show their understanding, respect and appreciation for others.  These skills include self-awareness and various social competencies that enable the practitioner to listen to and validate customers which forms the basis of relationships.

I admit to a strong bias on this subject that stems from my work and research in this area: I’m convinced that an organization’s relational skills — meaning its collective capacity to engage customers — can be improved, and that it pays to do so.

Success depends on the company’s cultural climate among other factors. Leadership is essential. Organizations need robust, efficient service systems and analytical tools for gauging their performance. Traditional service training programs have been disappointing.  But research shows that effective learning solutions are helpful if they are properly designed, delivered and supported.

Why do so many companies struggle with this? Many suffer from a form of relational deficit disorder. They’re not facile with the “people” part of the business. They describe relational competencies as “soft skills,” implying that they aren’t essential — a message that undermines their relationship-building efforts.

Smart companies know better.  They recognize the link between relational skillfulness and customer retention, net promoter index, spend rates and other relationship metrics. They’re explicit and concrete about relational skills as a criterion for hiring, rewards and advancement.

Since its early days, Southwest Airlines’ approach has been “Hire for Attitude, Train for Skill”. The motto is now old hat. But the first time I heard that, it hit me like a sledgehammer:  Here was a company — a rival at the time — that could distill its talent management strategy in six words.

It’s no surprise that Southwest has flourished through every business cycle. During lean times, they grow stronger  than their rivals. They’ve run a tight ship, no doubt about it, but they do know how to relate to people. What’s amazing is that they operate 3,400 flights a day, yet they don’t let the noise of running an operation get in the way of serving the customer.  Their culture is “casual” and even “whimsical,” but there’s no doubt that it’s about the people.

It sounds cliché but forging stronger relationships is a winning strategy, and it works across industries and markets. It’s as true for the Belgian bank as it is for the UAE mobile operator, or the Singaporean airport. It applies to the South African resort, the British retailer, and the U.S. airline.  Relating to people is at the heart of what we do whether we sell handcrafted rugs in an Uzbeki bazaar or design luxury cars in a German high rise.

Observing service encounters around the world convinces me that people everywhere crave understanding, respect, and appreciation.  How people demonstrate that varies from place to place, but the need for feeling valued is deep-seated and universal.  If your company’s culture and infrastructure don’t support delivering your offerings with relational competency on a consistent basis, there’s work to be done.

Engaging people is necessary but not sufficient to delivering an exceptional customer experience.  Companies must deliver their products and services efficiently. Firms like Southwest Airlines that can balance relational competency with process rigor and execution have a powerful advantage over their rivals.

As more companies bring customers into the product and service design process, relational skills will become more coveted.  Collaboration with customers requires that we relate to people more skillfully.  The challenge in working with people shoulder-to-shoulder or across the globe is to understand and relate to them as we pursue common goals.  Tapping the power of collaboration requires high-level relational skillfulness.

As the world grows smaller, our ability to capacity to relate to others becomes a strategic advantage. Psychologist Daniel Goleman wrote, “The ever-pressing need to serve customers and clients well and to work smoothly and creatively with an ever more diverse range of people makes empathic capabilities all the more essential.”

Some organizations have a lot to learn about relational competency. What are the business implications? How can these skills be developed to retain customers and influence their behavior? No two companies face the same challenges and opportunities.  Firms are well served to re-evaluate their approach to relationships as demand for services declines.

As businesses focus on surviving in lean cycles, they tend to cut spending in areas that impact the customer — that’s understandable. The smart ones manage to find a balance between restructuring costs and building relational mastery. I’m betting on them to win.

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Want more on this subject?

For my money, the “go-to” resource on this subject remains Daniel Goleman. His ’98 book, Working with Emotional Intelligence (which followed his ground breaking work, Emotional Intelligence) looks at the skills people need to relate to others in the work place.  Goleman explains that emotional competencies are crucial to building successful relationships.  He supports his recommendations with findings from cognitive and behavioral research.  Goleman was among the first social scientists to discuss the correlation between emotional intelligence and success in the workplace.

Goleman offers an Emotional Competence Framework upon which his recommendations are based. His model is divided into two sections, personal competence and social competence is found below.

PERSONAL COMPETENCE

How we manage ourselves

Self awareness

Knowing one’s internal states, preferences, resources, and intuitions

• Emotional awareness: Recognizing one’s emotions and their effects
• Accurate self-assessment: Knowing one’s strengths and limits
• Self-confidence: A strong sense of one’s self worth and capabilities.

Self-regulation

Managing one’s internal states, impulses and resources

• Self-Control: Keeping disruptive emotions and impulses in check
• Trustworthiness: maintaining standards of honesty and integrity
• Conscientiousness: Taking responsibility for personal performance
• Adaptability: Flexibility in handling change

Innovation:  being comfortable with novel ideas, approaches, and new information

Motivation

Emotional tendencies that guide or facilitate reaching goals

• Achievement drive: striving to improve or meet the standard of excellence
• Commitment: Aligning with the goals of the group or organization
• Initiative: Readiness to act on opportunities
• Optimism: Persistence in pursuing goals despite obstacles and setbacks

SOCIAL COMPETENCE

These competencies determine how we handle relationships.

Empathy

Awareness of others’ feelings, needs, and concerns

• Understanding others: Sensing others’ feelings and perspectives, and taking an active interest in their concerns
• Developing others: Sensing others’ development needs and bolstering their abilities
• Service orientation: Anticipating, recognizing, and meeting customers’ needs
• Leveraging diversity: Cultivating opportunities through different kinds of people
• Political awareness: Reading a group’s emotional currents and power relationships

Social skills

Adeptness in inducing desirable responses in others

• Influence: Wielding effective tactics for persuasion
• Communication: Listening openly and sending convincing messages
• Conflict management: Negotiating and resolving disagreements
• Leadership: Inspiring and guiding individuals and groups
• Change catalyst: Initiating or managing change
• Building bonds: Nurturing instrumental relationships
• Collaboration and cooperation: Working with others toward shared goals
• Team capabilities: creating group synergy in pursuing collective goals

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Taleb wrote in The Black Swan:

Globalization creates interlocking fragility, while reducing volatility and giving the appearance of stability. In other words it creates devastating Black Swans. We have never lived before under the threat of a global collapse. Financial Institutions have been merging into a smaller number of very large banks. Almost all banks are interrelated. So the financial ecology is swelling into gigantic, incestuous, bureaucratic banks – when one fails, they all fall.

The increased concentration among banks seems to have the effect of making financial crisis less likely, but when they happen they are more global in scale and hit us very hard. We have moved from a diversified ecology of small banks, with varied lending policies, to a more homogeneous framework of firms that all resemble one another. True, we now have fewer failures, but when they occur ….I shiver at the thought.

In 2006, Taleb noticed a pattern that others missed.  How did he do that?

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Martin defines integrative thinking as the ability to deal with the tensions of competing solutions to a problem. Instead of choosing one solution at the expense of the other, the practioner generates a solution integrates both solutions.

In his ’07 book, The Opposable Mind, Martin argues that integrative thinking is superior to conventional thinking which consists of “accpeting unattractive and unpleasant tradeoffs”.

This concept is relevant to how government and business leaders ought to approach the financial crisis.  Instead of deciding between implementing tax cuts or a stimulus package – seemingly contradictory models – why not try both?  Instead of businesses merely cutting operating costs, why not implement initatives that preserve high margin business increase customer retention and profit per customer.

Martin considers these issues in an October 8  interview. He applies integrative thinking to the vexing challenges associated with the economic crisis affecting today’s leaders.

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Despite the shaky underpinnings and dire economic climate, the U.S. still ranks ahead of the other nations in competitiveness, though economists see thorny challenges ahead.  On the plus side, the U.S. still brings a lot in the area of production potential, well-functioning labor markets, sophisticated businesses, academic leadership and technological innovation.  

While these are sustainable virtues, the U.S. has its work cut out to stay on top as other countries take steps to improve their competitiveness (see Fareed Zakaria’s seminal The Post American World).  Globalization is leading to the “Rise of the Rest”. This pattern has been evident to anyone involved in business dealings across markets over the last decade.   

The report had few surprises. A notable exception is that the UK slipped (from 9th last year to 12th) due to its heavy reliance on a flagging financial services sector. 

Singapore, the Scandinavian nations and Switzerland have been perennial leaders for several years. And it isn’t surprising that the Gulf nations are on the rise due to worldwide demand for hydrocarbons coupled with concerted economic reforms.

Fiinally, some sub-Saharan nations are making headway though, as a region, it still lags behind.  These economies have had 5-6% annual growth rates and relatively low inflation in recent years.  But their infrastrusctures are fragile and they may be hit hard by a global slowdown.    

The WEF report is a lagging indicator of the strengths and weaknesses of global economies.  For example, it doesn’t take into account the prospects of a global slowdown which reduces the demand for resources. 

The take away is that governments play a substantial role in shaping a nation’s long-term capacity to compete in an increasingly global and crowded world.  Good governance rules.

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Now I really like Taleb’s work, and this book is a fascinating look at the world of unpredictable events. Taleb is an  mathematician who explains why such events are impossible to predict. But Anderson tells it better than I could, and I’m sharing:

Four hundred years ago, Francis Bacon warned that our minds are wired to deceive us. “Beware the fallacies into which undisciplined thinkers most easily fall–they are the real distorting prisms of human nature.” Chief among them: “Assuming more order than exists in chaotic nature.” Now consider the typical stock market report: “Today investors bid shares down out of concern over Iranian oil production.” Sigh. We’re still doing it.

Our brains are wired for narrative, not statistical uncertainty. And so we tell ourselves simple stories to explain complex thing we don’t–and, most importantly, can’t–know. The truth is that we have no idea why stock markets go up or down on any given day, and whatever reason we give is sure to be grossly simplified, if not flat out wrong.

Nassim Nicholas Taleb first made this argument in Fooled by Randomness, an engaging look at the history and reasons for our predilection for self-deception when it comes to statistics. Now, in The Black Swan: the Impact of the Highly Improbable, he focuses on that most dismal of sciences, predicting the future. Forecasting is not just at the heart of Wall Street, but it’s something each of us does every time we make an insurance payment or strap on a seat belt.

The problem, Nassim explains, is that we place too much weight on the odds that past events will repeat (diligently trying to follow the path of the “millionaire next door,” when unrepeatable chance is a better explanation). Instead, the really important events are rare and unpredictable. He calls them Black Swans, which is a reference to a 17th century philosophical thought experiment. In Europe all anyone had ever seen were white swans; indeed, “all swans are white” had long been used as the standard example of a scientific truth. So what was the chance of seeing a black one? Impossible to calculate, or at least they were until 1697, when explorers found Cygnus atratus in Australia.

Nassim argues that most of the really big events in our world are rare and unpredictable, and thus trying to extract generalizable stories to explain them may be emotionally satisfying, but it’s practically useless. September 11th is one such example, and stock market crashes are another. Or, as he puts it, “History does not crawl, it jumps.” Our assumptions grow out of the bell-curve predictability of what he calls “Mediocristan,” while our world is really shaped by the wild powerlaw swings of “Extremistan.”

In full disclosure, I’m a long admirer of Taleb’s work and a few of my comments on drafts found their way into the book. I, too, look at the world through the powerlaw lens, and I too find that it reveals how many of our assumptions are wrong. But Taleb takes this to a new level with a delightful romp through history, economics, and the frailties of human nature.

Want more on Taleb?  Check out Charlie Rose’s interview…

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It seems axiomatic. The more a company knows about the people it wants to serve, the better able it is to create offerings they prefer, to develop targeted messages, and to extract more value across the customer experience.

This Spring, my company launched Value-based Analytics, a model for measuring what your most valuable  customers need and want (“value drivers”), and the ways that client’s services meet and don’t meet those drivers.

Many companies are adrift in a sea of numbers. But for those with a clear understanding of how quality business intelligence can be used to make sound decisions, these really are the halcyon days of analytics.

It is increasingly feasible for enterprises to tap information to handle more granular segmentation, low-cost experimentation, and customization. Data mining and speech analytics tools are increasingly affordable and are leveling the playing field, even for mid-range players.  The quality and availability of information are  both rising while the costs of managing information are falling.

Many service firms that collect information obsessively are paralyzed by the reams of data. Choosing the right information to extract and interpreting it accurately require focus and fine-tuning.  Like any other enterprise capability, analytics ought to be tied to business strategy.

Before jumping into the deep end of the pool, there’s a caveat. Building analytical capabilities across the enterprise often challenges the orthodoxy. Shifting to a more analytical approach upends legacy systems and undermines the status quo. Information is power and, naturally, some managers see a full-scale analytics initiative as threatening.

Transforming the company’s analytical capabilities is always an exercise in change management.   Firms that rely on expert analytics – tools and mindset — to make better decisions stand to gain a valuable competitive advantage at a time that such advantages are increasingly harder to come by.

Want more info on this subject?  Here are two exceptional resources:

Thomas H. Davenport and Jeanne G. Harris, Competing on Analytics: The New Science of Winning, Boston: Harvard Business School Press, 2007.

Stefan H. Thomke, Experimentation Matters: Unlocking the Potential of New Technologies for Innovation, Boston: Harvard Business School Press, 2003.

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“Right now,” Khanna notes, “from the Middle East to Southeast Asia, the hero of the second world — including its democracies — is Lee Kuan Yew of Singapore.” His point is that, contrary to poular belief, Second World countries are not ideologically-driven, as much as driven by their desires to advance their economic self-interests.  Seeing the world from their perspective is helpful to operating more effectively in a multi-polar 21st century.

The Europeans, whom he classifies as a Superpower (with no apologies to conservative Robert Kagan), assume a more expedient stance when it comes to dealing with the Second World.   As a result, they’re getting more traction in those markets.

Khanna’s take will stir controversy.  But, at the very least, it’s helpful to view the world from others’ perspectives in order to understand the forces that are redefining the world.

Khanna’s book is a companion to Fareed Zakaria’s The Post American World mentioned in an earlier post.  Both books describe the profound implications of operating in an increasingly muti-polar world consisting of new relationships and sources of power.   Individuals interested in doing business of any kind on a global stage can benefit from seeing the world through the prism of the other players.

Interested in finding more on these topics? Khanna’s prescriptive NYT Magazine essay and a recent Charlie Rose interview are both illuminating.

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While the U.S. still possesses unique, natural advantages, “the rise of the rest,” including China, India and Brazil, among others, are creating a world through their economic growth that is more multi-focal. Other nations are now catching up to America’s level of economic clout and self-assertion.  What’s next for the U.S. in this new world order remains to be seen.

Zakaria argues that America has assumed that its innate strengths – academic resources, free markets and diversity of talent – can compensate for its anemic savings rate or the absence of a health care system or a cogent, long-term economic strategy.

“That was fine in a world when a lot of other countries were not performing,” argues Zakaria, but now the best of the rest are working hard, saving well and are looking ahead. “They have adopted our lessons and are playing our game”.  He  worries that “the U.S. risks having its unique and advantageous position in the world erode as other countries rise.”

According to Zakaria, the U.S. still has significant natural advantages. But the new worry for America is neither the rise of other societies, nor its own diminsihing influence, but Washington’s politics of stagnation and partisanship in recent years.  Zakaria argues that anachronistic systems of government hijacked by vested interests are having a drag on the agility and innovativeness that led to America’s rise in the last century. As David Singh Grewal notes in his new book, Network Power, “Everything is being globalized except politics.”

Zakaria makes his case skillfully. His argument should inspire a broader conversation during this election cycle about how to shift attention to the new challenges and opportunities of a multi-focal world. Rather than engage in the same tired debate about restoring America’s lustre, it makes sense to weigh the options as seen through the prism of a post-American world.

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Competitiveness will be further reinforced by collaboration-enabling tools including social media. Meanwhile, a critical mass of worldwide governments is creating conditions for even greater competition and openness which will drive even more cross-border collaboration.

History has shown that some markets will lag while others quicken their pace. It’s critical to understand how factors “on the ground” affect globalization.

The Oxford Handbook of Business History provides a context for understanding how flattening may unfold. The authors offer comprehensive, cross-disciplinary look at business history which they organize into four parts: Approaches and Debates; Forms of Business Organization; Functions of Enterprise; and Enterprise and Society. For those who want a a context for what’s next, it’s a companion resource to Michael Porter’s The Competitive Advantage of Nations and Ted Levitt’s work on global marketing.

Want more on this subject?  Check out the World Economic Forum’s Global Competitiveness Report (’07-’08).

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