The private sector can no longer afford to stand back from the issue of global strategy in the widest sense of the term. Traditional public sector led approaches have failed to generate acceptable results in environmental quality, trans-national crime reduction, economic oversight, control of an unpoliced cyberworld, bridging a growing poverty gap and other priority areas of global concern. A series of painful crises in the 1990s -- economic, disease -- related and environmental -- showed just how far we are from having an acceptable model of global strategy and management. These crises, and continuing problems in almost every area of social order demonstrated the human and economic costs of tolerating expensive "gaps in the global architecture". The costs of present failures and systemic future risk are mounting. A continuing related failure to address the real problems and risks today would only increase the cost when we face inevitable catastrophes of tomorrow.

Moving forward effectively to manage problems and reduce societal risk in the future will require a more engaged set of private sector enterprises. Only those enterprises, and their leadership, can bring a more informed approach to global strategy, can focus and increase the quantum of resource applied and can provide a better model of leadership to a concerted multinational effort. The public sector has not, and can not, master these challenges on its own. Only a combined approach, linking public and private resources together in new and creative alliances and responding to a new model of leadership, can drive acceptable progress in these seemingly intractable problems.

There are signs that the private sector is already moving in the direction of more positive engagement. This encouraging trend is likely to continue, since it is not only morally more engaging, it is in the rational self interest of each and every business and business leader to participate in an improved approach to the management of global affairs.

An Unacceptable State of Affairs

By any measure, the current state of affairs in the major areas of societal challenge is unacceptable. AIDS has now claimed over 15 million lives and the number of HIV infections has passed 50 million. In South Africa, HIV now infects over 8% of the population and a new generation of children has lost parents, teachers and traditional family structures forever. A resurgent drug resistant TB is now claiming lives in G7 and developing countries alike. 11 million children will die every year from preventable diseases, 3 million of them from preventable causes. Responsive agencies struggle with inadequate public funding and insufficient private support to limit the spread and cost of other manageable diseases which may not kill their victims, but create untold volumes of avoidable human suffering.

In the criminal world, organised global syndicates now sell over $35 billion of illegal drugs per year in the US alone. Lawrence Somers estimates that the USA is home to $1 trillion of laundered money. The Financial Times estimates that a further $350 billion per year is laundered in the City of London. Likelihood of apprehension or punishment continues to be low. As a result, large criminal organisations continue to grow in wealth, power and influence, unmatched by any effective international police or interdiction force.

As these problems and related risks spiral upward, the eventual cost and complexity of the task of rectification also rises. The US Administration is now proposing to spend over $1 billion to start to combat drug syndicate corruption and crime just in Columbia. This is admittedly an inadequate amount to respond fully to the problems and actual harm caused by the systemic growth of the international drug trade, in even that one country.

Terrorists are now acknowledged to have access to weapons of mass destruction. Little responsive training or preparation is now in place to respond to such an attack resulting in large-scale damage to human life and property in almost every country.

On the environmental front, one third of mammal species in the world are near extinction or threatened with extinction. Pollution is once again thinning and punching holes in the ozone layer. The use of CFCs, dramatically reduced in the 1990s, is on the rise again. Global warming accelerates, melting the ice cap and according to experts, exposing open water at the North Pole for the first time in 50 million years.

In the economy, the state of affairs is not much better. The famed digital divide is not the only widening gap between the haves and have-nots. Systematic poverty sends over 1.2 billion people to bed every night without adequate nutrition or health care, while another 1.2 billion suffer from obesity. 1 billion people live on $1 per day or less, while the world's 5 wealthiest men possess greater wealth between them than the combined GDP of 43 of the world's poorest countries. Perhaps more immediately threatening to the comfort levels of MNC businesses is not the poverty gap looming between continents or hemispheres, but lies in the visible rise of a global overclass and a global underclass within the same society, and even within the same city. The rich in Paris and New York equally travel across the world in international airlines, wear Swiss watches, drive German cars and chat to each other on the Internet. The poor in Paris and New York share a different life pattern reflected in: higher incidences of HIV and other health problems, malnutrition, drug problems, broken families and unemployment. As the gap between rich and poor widens between and within societies, the likelihood of a social short circuit increases, and the potential scale of social harm and violence rises.

Things promise to get worse before they get better on current trends. The world population is now approximately 6 billion. This is predicted to rise to 9 billion over the next 50 years, with the bulk of this increase to come from the poorer countries. The poorer developing countries aspiring to higher growth (and consumption) the pressures on resources and ecologies may soon pass the breaking point. The UN is already predicting a shortage of fresh water within the next 20 years, along with other related infrastructural problems.

Gaps In the Global Architecture

The insights for an improved model of global strategy to respond to this unsatisfactory state of affairs begin with an understanding of a common pattern that has unfolded across the world in recent years. A local problem surfaces -- collapse of the Thai baht, for example -- which rapidly becomes a greater regional or even world-wide crisis, spread by new global systems of information, distribution and delivery.

One common characteristic of this new pattern of dangerous globalisation was eloquently captured in the phrase "there are no more firewalls in the world economy". Unfortunately, extending the metaphor can capture a second characteristic, for there were also no smoke sensors, no fire alarms and, ultimately, no firemen capable of putting out the fires, literal or figurative.

These types of crises, and the pattern they represent, is not unique to the economy. For in virtually every priority area of societal risk and crisis we can see the same pattern of new global risk unmatched by an offsetting global capability to respond. This is true in the areas of the economy, disease, crime, terrorism, the environment, the poverty gap, the erosion in systems of cultural values and spiritual belief and even in the rambunctious new cyberworld.

• The nation state is too small and often too isolated to address these new global risks and crises
• Intranational forums such as ASEAN are too weak to create and implement bold response packages, and are often lowest common denominator organisations, catering to the narrow individual interests of each of its member states
• International institutions are often underfunded, hampered by restrictive charters and may too frequently apply yesterday's solutions to today's problems; and finally
• In some areas there is no relevant global institution of any standing or influence to drive needed change. This in true, for example, in the environment, crime and cultural preservation, to name but a few.

A Volatile Era

A new level of collective instability has emerged from the increasing scale of potential harm which can result within any one particular global system, for example within the global capital markets, the cyberworld or the international trading economy. An even greater source of volatility comes from the intersection and interaction of complex systems -- for example the global capital world, the Internet and a global criminal system. In these new points of interaction, risk and potential harm compound at a geometric rate, creating a situation where a small event can have large, unexpected and painful consequences across nations, can span regions or even now reach the entire world.

In order to stabilise the volatility, and to define the scale and nature of the required response, a clear and simple understanding of the relevant principles of dynamic systems need to be applied.

The relevant laws of science and nature related to the management of dynamic systems to define the corrective force required -- Newton's Second Law of Motion being the most topical. These laws mandate that the force required to arrest or redirect a system carried forward with a certain momentum must be superior to, or at least significant in proportion to, the system in question. The same idea is more simply captured in the Chinese proverb "you can't put out a house on fire with a cup of water..."

Why Business Leaders Should Care

A new approach and more effective response to societal risk and volatility will require the private sector in general, and business leaders in particular, to take on a greater role in leadership and support to the management of global affairs. Only through an effective combination of public and public sector resources -- operating as a single entity -- can sufficient progress be made in the most important areas . But why should business leaders care? In the end, because it is in their own self interest -- both short and long term.

Action to support an expanded notion of corporate responsibility and engagement in societal initiatives is in the enlightened and rational self-interest of all modern business leaders. The societal and economic risks listed here, left unmanaged, will have a significant negative impact on future business performance:

Costs will be higher through increased health care costs, more expensive scarce resources, rising security expenses, more frequent business interruption and a growing tax burden as the state is forced to spend more in each area of risk management and response to avoidable catastrophe.

Revenues will be lower and growth prospects dimmer in many developing nations. These countries, which have provided much of past MNC expectation of volume growth, all face diminished economic prospects due to expanding populations, poverty, recurring patterns of disease and spiralling environmental, crime and health care burdens.

The most talented individuals will select alternative employment. More and more, shareholder value is created by executing successful strategies in the new economic order. These strategies are driven by a whole new generation of individuals motivated by personal engagement rather than outdated notions of paternalistic employment. Personal lifestyle, the nature of the enterprise, personal relationships, new networks and technological challenges often outweigh old job selection factors of salary, title and security. There are too many attractive opportunities with extraordinary salaries to distinguish one high level package versus another. Titles are often meaningless. No rational member of the I-generation values a promise of lifetime job security. Participation in an enterprise with a greater sense of purpose, value and values will attract the best of the best in the new war for talent. Enterprises that demonstrate a sensitivity to personal lifestyle, community influence and environmental impact will have a greater ability to attract, retain and motivate the best of a small pool of talented leaders in the new economy space.

Uninvolved brands will suffer: These same caring companies also will enhance the attractive core values of their branded products as well as burnishing their corporate brands. This will enable farsighted enterprises to build more enduring, and therefore more valuable relations with their customers into the future. Many CEOs of leading branded companies have already adopted a more activist stance toward responsible global corporate citizenship. The Coca-Cola Corporation now lists its status as a leading global responsible corporate global citizen as one of their six global priorities. Nokia have sponsored an entire advertising campaign communicative insights into heightened social awareness. Benetton have made controversial issues advertising a hallmark of their business. These effects not only are aimed at corporate brand-building, but also will have positive impact on product brands as well.

Business risk will be reduced: In a world where environmental issues, sweat shop labour practices in emerging markets or animal testing on cosmetics products can reduce the attractiveness (and value) of a brand, an investment in social caring will provide a buffer should something go wrong in the marketplace. An investment in building the image of a caring company can be seen as a kind of insurance against the PR costs of inadvertent disasters.

Accounts will require it: With the clarifying potential of "triple bottom line accounting", which takes into account community and environmental impact as well as financial performance, companies can set out a broader and more engaging purpose for their enterprise which will be in the long term best interest of all of its stakeholders -- employees, customers, suppliers and shareholders alike. The Global Reporting Initiative, established in 1997, has begun to address many of the technical issues facing the task. Models of socially responsible accounting have already been tested at British Airways, the Body Shop, Shell and TYU Empire at a practical operating level.

Motivation: Perhaps the greatest challenge today in attracting, keeping, motivating and engaging employees is the need to create and communicate an overarching purpose of the organisation. By giving employees a broader sense of contribution and value, enlightened business leaders can inspire a higher level of performance -- both individual and collective.

Businesses are made up of good people with good values: Engagement with worthwhile causes can make the workplace more a part of individual's personal, even spiritual fulfilment. Reaching into the deep sources of this motivating set of values will increase pride, performance and value of almost any enterprise.

Businesses are often part of the problem and can therefore contribute significantly to the solutions. The sources or distribution systems for global warming, money laundering, species extinction, software piracy, smoking related health issues, cultural "assault", internet paedophilia or hate crime instigation lie squarely in the lap of the business world. Failure to become part of a solution will ensure that corporations are essentially seen to be the source of the problem -- ensuring future payment and penalty costs are borne by future generations of shareholders. Eventually these future costs will be built into today's (discounted) market valuations.

A general backlash against ever larger businesses is possible. Although prosperity has kept many critical elements away from the business world, a number of recurrent themes have already begun to burrow deep into the minds of ordinary voting citizens. This growing anti-business sentiment could be partially checked by visible actions which promote worthy causes which go beyond the next quarter's earnings. Failure to respond now will ensure future attention will soon be paid to the issue at a political level, perhaps even in advance of a less prosperous turn of the business cycle. The globalisation demonstrations from Seattle, Davos and Sydney have raised a few of the critical issues in a highly viable set of forums. With global consolidation continuing apace, these same demonstrators will have fewer, but larger, targets for their attack.

Failure to self-regulate, or to contribute more actively to a programme of social amelioration, risk vote-seeking politicians translating anti-business sentiments into costly, and uninformed costs and controls.

This anti-business perspectives has many antecedents, but is reaching more deeply into the hearts and minds of traditionally pro capitalist Americans than before. In a Business Week survey of September 11, 2000, 72% of Americans surveyed said business has too much power over too many aspects of American life. Al Gore's convention attack on, "big tobacco, big oil, the big polluters, the pharmaceutical companies, the HMOs "was supported by 74% of respondents in the same surveys.

The highest degree of concurrence came from the same Business Week survey in a surprising surprisingly altruistic statement: " US corporations should have more than one purpose. They also owe something to their workers and the communities in which they operate, and they should sometimes sacrifice some profit for the sake of making things better for their workers and their communities". 95% of survey respondents agreed with these words.

How Business Leaders can Contribute

The Private Sector can make an enormous difference: There are at least sixteen areas in which enlightened leadership in the private sector can make a major difference in public performance. Restricting potential contribution and compartmentalising our best capabilities in the area of transnational strategy will only perpetuate the status quo -- ensuring that the private sector remains part of the problem, while it could provide leadership and resources to implement a better solution. Although the underlying problems and patterns that led to recent crises are escalating in scale and complexity, we already have a fully developed and tested model of global strategy from the business world that can master the new challenges we face. If we can apply our own existing best knowledge to reduce global risk and capture opportunities in advance of avoidable catastrophe, we will reduce the costs and improve the return on our investment in response to global challenges. Application of that advanced model of strategy and a greater engagement by the business community in a broader agenda of positive social change can lead to far better results in critical societal areas which have an enormous impact on our future: personal as well as commercial. Some of the critical elements of potential private sector contributions are as follows:

1. Intellectual capital: Although the cutting edge of competition in telecommunications, financial services, and other turbulent areas of global commerce may seem light years away from the management of the environment or patterns of organized crime, the modern world has brought them closer together. The same issues of globalization, complexity, risk, opportunity and dynamic systems behaviour are common to both. As the fundamental characteristics of commercial and societal problems reflect surprisingly similar patterns, the best solutions in both areas also have much in common.

   In the business world, a best practice model of transnational strategy has emerged from a Darwinian process of evolution. Trillions of dollars of experience and millions of man hours have been distilled into a proven approach to the diagnosis, design and implementation of global strategy. Good ideas prove their value, are refined, replicated and rolled out. Other approaches falter in the robust marketplace, and are examined for relevant learning. Lessons learned are extracted and applied. The failed models are discarded and the process of refinement moves on. The intellectual capital developed from their process is the best model to face any issue of a transnational nature -- public or private.

2. Political skills: Global business, as is the management of global affairs outside the commercial sphere, is as much about process and politics as it is about substance. The resolution of major challenges in the business world also has to do with scarce resource allocation, governmental relations, the politics of large and numerous organisations, and the oversight of a complex process of change and transformation.
3. New and more aspirational visions: At the annual Davos meeting of the World Economic Forum this year, President Clinton cited a need for new and more aspirational visions as the highest priority for world leadership in the coming years. What has long been known in the business world -- the clarifying and motivating role of vision in strategy -- is now emerging as highly relevant outside the business world as well.
4. Resources: MNCs increasingly control the channels of global distribution, the flows of global information, most of the pools of human talent and technology, employ the majority of the world's working population and oversee the deployment of the world's capital resources. Within and across these pools of resource and capability, there is an enormous potential to contributed knowledge, people, access to distribution channels and capital to the implementation of global strategy. Global systems of the economy, the environment, crime and others are developing momentum in the wrong direction -- and as the laws of science and nature dictate, only an equal or superior form can change that momentum. Private sector resources can both increase the amount of force applied and, through focus and intellect, improve the effectiveness and efficiency of scarce resource investment.
5. Performance measures: Many efforts at social change flag because there is no meaningful scorecard of performance. It is a long established truth in the commercial world that "what gets measured gets done". Even complex performance such as car dealership service or investment performance can be broken into components, weighted, evaluated and a single summary service score reported and acted upon. Priorities can be set and the impact of investments measured appropriately. Such measures, like the 9 element weighted Pollution Standard Index (PSI) can help to target actions and measure results.

   And for all corporations triple bottom accounting -- measuring and reporting on a full set of financial environmental and community aspects of business would be a major step forward, better practices and renewed faith.

6. Investment disciplines and prioritisation: Winning businesses have an established process to set priorities, to allocate resources to the highest priority actions and investments and to follow up to ensure the highest return is extracted from these investments. The result is a culture and operating approach which is both effective and efficient, ensuring that existing resources are well used. In addition, efficient use of resource begets more resources, ensuring that future resource allocations are applied to a greater pool of available assets of all kinds
7. Implementation Skills: Perhaps the most critical skill in strategy is implementation. One recent survey of performance in the USA attributed 70% of the failure of individual CEOs to an overall failure to implement defined strategies. It is not surprising that the business community is sensitive to the value of implementation as a key element of strategy. That same key skill and sensitivity would be highly valued in the societal area as well.
8. Integrating Capability: The development and implementation of any effective strategy will need to be driven by a new approach to leadership which is founded upon a clear vision, and is now often realised through creative new combinations of historically separate resources, these new integrated approaches are led by individuals equipped with a broader skill set than before. Renaissance men have been described not as masters of any single craft, but as gifted individuals capable of integrating the disciplines of their time. That skill, and the co-operative approach it requires, are now more than ever critical to the successful design and execution of global strategies.
9. Creativity: Old solutions, often do not apply to modern problems. "Non-linear" or breakthrough strategy is the order of the day in global competition. Accessing the creativity, and creative cultures, of a 3M, Kodak, Microsoft or Cisco would contribute to the design and implementation of unexpected, and more effective strategies.
10. Creative alliance capability: As the world economy evolves and grows, consolidations, alliances and combinations have become increasingly important in strategy. The skills to link historically adversarial suppliers and customers, or competitors, in new win/win combinations could be well used in linking unnecessarily disparate public and private sector bodies in a task force or shared initiative of common purposes.

    The same skill would be valuable in linking public and private sector in a series of issue-specific task forces.

    A number of recent public and private sector initiatives, most notably, the GAVI global vaccination programme funded primarily by a $750 million gift from Bill and Melinda Gates, are examples of the application of this new set of Next Generation business principles to areas outside the purely commercial.

    This GAVI initiative is driven by a creative alliance of public and private sector enterprises to eradicate vaccinable disease. All aspects of Next Generation Strategy have been activated in a creative approach to realise an ambitious vision of disease prevention, protecting many of the 3 million children who die every year from vaccinable causes. The GAVI initiative will make major progress in this area over the next five years as vaccines are paid for, distributed and administered throughout the world by a co-ordinated network of public and private enterprises. It will focus these resources on a task force basis to achieve precise operating targets. The network characteristics of the effort, and the new alliances operating within it, set a new benchmark for effective global co-operation.

11. Effective communications: Capital markets, enterprise momentum and implementation of strategy are all well served by effective communication programmes -- internal and external. As a result, private sector expertise in crafting message architecture, mastering channel usage and testing for impact could help in the creation of a positive and motivating media campaign in societal challenge as well.
12. Mastery of technology: Perhaps the greatest gap between current public and private sector capabilities lies in the application of relevant technologies. This gap is visible whether one is looking at state of the art internet exchanges of carbon and pollution units, or application of pharmaceutical products to reduce diseases or new supplies of logistics to transport food, technological advantage lies at the heart of many winning business strategies. Statistics, segmentation, prioritisation, rapid deployment, time to market and other advanced management technologies are joined by hardware, software and research benefits in creating lasting advantage in the competitive workplace for ideas, actions and ultimately, results.
13. International distribution systems: Just as AIDS, capital crises and integral drops are distributed by new global systems, these same systems can support solutions as well. The GAVI initiative, linking private sector capital with public sector resources.
14. Results and compensation: The final area of valuable transferability is the private sector's culture which values, and is even driven by creating demonstrable results. In the private sector there is, generally, a lower level of tolerance for delay and a higher value placed on measurable progress. A linking of this culture to compensation only accelerates the value of a private-public sector alliance.
15. Entrepreneurial drive: Not all activities from the private sector with positive societal or environmental benefits need to be pursued on a pro bono basis. Deforestation, energy trading, pollution credit systems, water management and other socially beneficial activities may also be developed purely for profit reasons. Such activities are not only likely to perpetuate beneficial activities but are able to increase the amount of energy dedicated to improving the overall state of affairs, since they make no claim or available public and private sector "social" resources.
16. Leadership: No national political leader, will have a priority on global strategy. It is a long standing truism that "all politics is local". Today's corporate leaders, and certainly the heads of large and successful MNCs, are citizens of the world and global strategists day in and day out. Tapping into this knowledge base is one element of value. Accessing the personalities, drive and capabilities of the individuals themselves is another. A Jack Welch, Robert Rubin, John Reed, Li Kai Shing, Doug Daft or other powerful leaders could dramatically upgrade the efforts, and results, from our existing model of global strategy

Achievement of improved results through the application of a better approach to strategy is which links public and private sectors more closely not purely theoretical Using a more effective approach to strategy and leadership, CFC usage plummeted 85% in five years as the ozone layer thinned and holes in the protective atmosphere loomed over Antarctica, Australia and the USA. Vehicle emissions in the USA have been driven down significantly. Sulphur dioxide emissions from fossil fuel burning are down over 50% in the past 20 years in the USA and Europe. Paper and steel recycling are on a long-term secular increase. Many fatal diseases have been effectively contained and some could even be eradicated totally within five years.

These results prove that global strategies, effectively directed and motivated, can indeed master new risks and achieve acceptable levels of collective performance.

The Leadership Challenge

The application of Next Generation Strategy -- in business or in areas of social concern -- requires a new model of leadership and co-operation. Tomorrow's leaders will need to bring to bear a style and substance that provides effective action through the management of networks, alliances and even by changing established definitions of sovereignty and the role of the nation state.

This will be particularly challenging in a period of prolonged prosperity where there is no coalescing crisis or redefining moment of change.

By redefining the state as part of a collective solution to broader problems, the much vaunted death of the nation state will be avoided and a renaissance of its power established. Economic crisis can be managed. The haze can be abolished. Diseases can be stopped. Crime rates and the power of transnational criminal organisations can be reduced.

The challenge to the next generation of business leaders will be to assemble and direct a fuller and more diverse set of resources in a programme of change -- public and private sector alike. Each will need to contribute a sense of urgency, a sense of importance, applicable intellectual capital and sufficient resources to realise a more ambitious set of visions, goals and strategies in tomorrow's world.

That process will require our leaders to reach deeper into the people they have been chosen to lead. Tapping into deeper personal aspiration, to a level which reaches core values, a sense of transcendent purpose and belief in individual action for the collective good will be critical for success of the venture.

Gaps in the Business Architecture

Ironically, the private sector reflects the same costly gaps in the global architecture as do their public sector brethren. There is no representative body for the private sector -- no forum or institution which can speak, and engage, the private sector in areas of global strategy. Just as in the areas of the environment and crime there is no global body which can represent the private sector. This capability has been sorely missed in regional crises, where a united voice of the business community could have provided valuable input into solution to the Asia Crisis of 1997, the meltdown of the Russia Economy on the long decline of the Japanese economy, Great benefit could be obtained by creating a Private Sector Council to represent the interests, and capabilities, of global businesses in the design and execution of global strategy.

The Greatest Risk

Perhaps the greatest risk of all may be to compartmentalise our own best knowledge and fail to bring to bear the most relevant source of learning and action on a timely basis to address the greatest challenges we face.

Given that we already have a model of global strategy that can lead to better results in areas of greatest societal risk, the challenge is now one of leadership and application. But are our leaders capable of engaging us in an effort to prevent catastrophe through effective risk management or only to respond to disasters once potential risk has become real world catastrophe?

Through the application of our best strategic knowledge, through individual commitment and effective collective action, we can aspire to reduce risk before it rises into catastrophe, and to achieve higher standards in areas of societal as well as economic challenge. With clearer visions, greater aspirations and more effective leadership, we can indeed make this a better, safer world for the next generation.