The painful Asian crises of the late 1990s demonstrated the human and economic costs of tolerating risk laden "gaps in the global architecture". These same crises, however, can also point the way forward to a better model of global strategy in the widest sense of the term.

Properly understood and acted upon, common patterns in crises over the last few years in the Asian economy, the environment, disease and crime can lead to an improved approach to the management of societal risk and challenge. The learning from recent Asia crises, coupled with our best model of global strategy, can begin to fill gaps in the global architecture and support far better management of global affairs in the future.

These better strategies can be most fully realised if the business community engages more actively in the process of designing and executing global strategies -- dedicating more thought, resource and personal commitment to a programme of positive global change.

A Recurring Pattern

The insights for an improved model of global strategy begin with an understanding of a new and recurring pattern of crisis that has unfolded across Asia in recent years. A local problem surfaces -- collapse of the Thai baht, for example -- which rapidly becomes a greater crisis, spread by new global systems of information, distribution and delivery. These newly globalised problems are not limited to the economy and capital markets. A similar pattern can be seen in the spread of AIDS, the reoccurrence of the haze, widespread deforestation and other environmental disasters and the growth of organised transnational crime.

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, a second characteristic can be captured by extending the metaphor, for there were also no smoke sensors, no fire alarms and, ultimately, no firemen capable of putting out the fires, literal or figurative.

Gaps In the Global Architecture

The inability to respond effectively in this world of complex and escalating risk can be traced to the three weaknesses which lie at the heart of President Clinton's famous observation that there are 'gaps in the global architecture':

• 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

In four recent Asian crises, the resulting human and economic cost of tolerating these gaps was painfully clear. The economic crisis spread rapidly, with the IMF unable to design and implement a compelling vision of response across the region. In the environmental crises precipitated by the Haze in Singapore and more recent wave of pollution in Hong Kong, air quality indices reached all time lows and health warnings were sounded on a daily basis. However, there was no institution or initiative at all capable of addressing the transnational sources or the consequent health care costs of the recurring environmental disasters. AIDS and drug resistant TB spread rapidly across most Asian countries, unmonitored, undermanaged and unchecked. Illegal drugs continue to flow out of the Golden Triangle at an accelerating rate into the consuming markets of the world.

These unacceptable states of affairs have become, over time, adopted as an inevitable norm. Unfortunately, we can no longer afford to tolerate these low levels of societal "satisfactory underperformance" and need now to address manageable risks before they become unmanageable catastrophes.

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 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 all corners of the world.

A Very Modern Model

In each major area of societal challenge, the application of a more thoughtful, and more modern, model of strategy could yield far better results. We already have, in our collective intellectual capital, a better model to manage transnational systems -- reducing risk and capturing opportunities on a far more effective basis. The challenge is now one of application and leadership.

The sooner we apply that model the better. The costs of application would be lower and the benefits greater. If we wait until risk ripens into catastrophe it will be too late to avoid much of the resulting human suffering and economic harm.

The key elements of an improved model of global strategy -- called Next Generation Strategy in the business world -- provide a more effective approach to all applications of transnational strategy. It contains all of the elements of a better understanding of dynamic global systems, risk and opportunity; it employs a more thoughtful organisational approach using task forces, network models and fast response capabilities; it is driven by an effective use of advanced technologies; it establishes a clear set of priorities, resource allocations and performance measures and it is characterised by a whole new array of creative alliances. In all cases, this new model is driven by a coherent and aspirational vision tied to fully aligned implementation plans. Next Generation Strategies are also put in place through a more inspirational model of leadership which reaches individuals at a deeper level, giving them a more transcendent sense of purpose, value and meaning in the collective enterprise.

Realised Results

Achievement of improved results through the application of a better approach to strategy and leadership is not purely theoretical. Using a more effective approach which combined public and private resources in a fully aligned effort, 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.

A number of recent 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 full application of this new set of Next Generation business principles to areas outside the purely commercial.

These results prove that global strategies, more effectively directed and motivated, can link public and private sector actions, creating a more powerful approach to master risk and achieve acceptable levels of collective performance.

Why Business Leaders Should Care

Action to support an expanded notion of corporate responsibility and engagement in societal initiatives like GAVI is in the enlightened self-interest of all modern business leaders. The larger societal and economic risks, 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.

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. Enterprises that demonstrate this sensitivity to personal lifestyle, community influence and environmental impact will operate in a more positive environment and will have a greater ability to attract, retain and motivate the best of a small pool of talented leaders in the new economy space.

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 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 costly 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 achieving higher standards in areas of societal as well as economic performance. With clearer visions, greater aspirations and more effective leadership, we can indeed make this a better world for the next generation.