Both present and future leaders expect the business environment to grow significantly more complex over time. This is one of the main conclusions of two recent studies conducted by IBM, the 2010 Global CEO Study, and the companion student study, Inheriting a Complex World. CEOs and senior government leaders - who I presume are mostly in their 50s and members of the Baby Boom Generation, - said that their primary challenge is figuring out how to operate in a world that is substantially more volatile, uncertain and complex. The students, on the other hand - mostly Millennials in their 20s, - understand implicitly and intuitively that economies, societies and organizations are interconnected and interdependent. They don’t even need a definition of complexity, since that is the only world they have ever known.
These two generations of leaders, - one at the top of their careers and the other about to start out on theirs, - are reacting to the changes all around them in distinctly different ways. The Boomers keep replaying the ideological and cultural battles with which they grew up. “What degree of government regulation is needed to help curtail the kinds of abuses that led to the ongoing global financial crisis? Are self-regulated free markets always the best answer? What does it mean to live in an increasingly multicultural society? Should society accommodate to the different kinds of nuclear families all around us?
The Millennials are in a very different space. They don’t need to keep defending market economies against communism, as this issue was settled with the fall of the Berlin Wall and the subsequent collapse of the Soviet Union, which happened when they were little or even before they were born. They have generally grown up and are comfortable living in a much more diverse environment. They have had openly gay and lesbian friends since high school. Get a life is what I imagine they are thinking when they hear the tired ideological and cultural debates of the older generations.
These two generations of leaders, - one at the top of their careers and the other about to start out on theirs, - are reacting to the changes all around them in distinctly different ways. The Boomers keep replaying the ideological and cultural battles with which they grew up. “What degree of government regulation is needed to help curtail the kinds of abuses that led to the ongoing global financial crisis? Are self-regulated free markets always the best answer? What does it mean to live in an increasingly multicultural society? Should society accommodate to the different kinds of nuclear families all around us?
The Millennials are in a very different space. They don’t need to keep defending market economies against communism, as this issue was settled with the fall of the Berlin Wall and the subsequent collapse of the Soviet Union, which happened when they were little or even before they were born. They have generally grown up and are comfortable living in a much more diverse environment. They have had openly gay and lesbian friends since high school. Get a life is what I imagine they are thinking when they hear the tired ideological and cultural debates of the older generations.
As different studies keep finding, we might be in a values-based generational transition as potentially profound as the sixties. Some might dismiss this transition as just the typical clash of youthful idealism with the practical realities of their elders. But let’s not forget the powerful changes that this same kind of youthful energy unleashed in the US and other countries in the sixties. Post-sixties America was quite different from the America of the 1950s. Similarly, the US of the next few decades - when today’s Millenials assume leadership positions in business, government and academia - may be quite different in several key areas from the past twenty years.
What are some of these areas of potential inter-generational differences? Globalization and sustainability are two. As I wrote last week, comparing the CEO and student studies: “Students and CEOs differed the most in their attitudes toward globalization and environmental and societal sustainability. Based on their comments, it was clear that students view globalization and sustainability as intertwined themes. They believe that a global citizen has responsibilities to others in the world, and that an emphasis on sustainability makes one better appreciate the impact of globalization.”
Our relationships with the individuals and institutions we deal with in our daily lives is another key area undergoing rapid change. The rise of social networks, enabled by the Internet and related Web 2.0 tools and platforms, is making it possible for people and institutions to connect with each other in unprecedented ways. We have not physically met many of the people we are now dealing with online or through other electronic channels – including many we consider our “friends.” But we are increasingly conducting business with them, as we buy things they offer through their websites or through e-marketplaces like eBay. And we are increasingly sharing their personal experiences, thoughts and feelings - and they are sharing ours.
The very nature of work is different, as companies undergo dramatic changes driven by technological advances and the heightened competitive pressures brought about by globalization. Companies are increasingly disaggregating and relying on business partners and consultants for many of the functions once done in-house. In the future, the organizing principle for work may no longer be the enterprise but the endeavor. It may soon be time to redefine what we mean by enterprise, employer and employee, as looser aggregations of collaborators form and disband, opportunity by opportunity.
In such a networked, distributed environment, trust and reputation are critical to the proper working of business, communities and society in general. But how do you establish relationships based on trust with people and companies you have never physically met? Increasingly, we rely on the aggregate advice of social networks and communities. We read the many reviews of products and services now available online to then form our own opinions. We rely on the ratings previous buyers have given to sellers with whom we may be contemplating doing business.
A new term has now entered the lexicon for both individuals and institutions: reputation capital. It is an attempt to quantify reputation value within a community or marketplace, based on all available information. While we may not have a specific definition of what reputation capital is, we know that it is very good when the number is high, and very bad when it is low. We much prefer to interact and do business with people and brands that have earned positive reputations based on their past actions.
While researching reputation capital on the Web, I came across this recently published book, Reputation Capital: Building and Maintaining Trust in the 21st Century, a compendium of the latest research on the subject from universities around the world.
I found the first paper very useful as a way of framing the topic: “Trust and Reputation in the Age of Globalization” by Mark Eisenegger, co-head of the Institute for the Public Sphere and Society at the University of Zurich.
According to Eisenegger trust and reputation are fundamental and indispensable:
“It is trust - not power, wealth, or even love - that is the most important operational resource in our society. Why? Without trust, we would simply be unable to act. If we were not able to trust third parties to act as we expect them to act, we would do anything to avoid getting ourselves involved with them. . . The more we have learned to trust an agent (for example, a company), the more comfortable we are likely to be relying on that agent in the long term. For trust is based on the experience that an agent has fulfilled our expectations in the past. And trust creates confidence that that agent will also fulfill our expectations in the future. For this reason, trust cements existing relations and at the same time acts as a magnet for future relations. Obviously, this applies not only in business. The same law holds in politics and other areas, even in our everyday lives and personal relationships.”
“However, it is only in rare cases that we can base our trust in those with whom we interact on our own experience. And this is where reputation comes in. For, whenever we are unable to rely on our own experience, we must fall back on the recommendations and judgments of others. Such recommendations, however, are nothing else but reputation judgments, which we then use to guide us - among other reasons, because it saves time and money. Whether we are deciding on a lawyer, a banking partner, a school for our children or which politician we should vote for, reputation judgments play a role that is central - and, in most cases, even decisive. Much more often than is commonly suspected, trust in those with whom we interact is based on the judgments of others, which influence us through direct or indirect communication (such as the media).”
He then frames the concept of reputation along three dimensions. First is functional reputation. Agents, be they companies, politicians or individuals, must demonstrate their own competence and associated successes. “This reputation dimension follows a strictly fact-based logic: functional success or failure is measured by figures that can be objectively verified.”
Second is social reputation. Agents must adhere to social norms and values in a responsible way. “The central question here is to what extent actors are ‘good citizens’: that is, whether they simply trample on others in pursuit of success, or whether they act responsibly, in line with social norms and values. Having an intact social reputation requires following codified and non-codified social norms.”
Third is expressive reputation. Agents rely on an emotionally attractive profile, based mostly on judgements of taste, to separate themselves sharply from competitors. “Reputation bearers are judged according to the emotional attractiveness of their individual character and according to how unique they appear. Agents with a positive expressive reputation appear fascinating, sympathetic and unique.”
Eisenegger believes that in the age of globalization, the greatest reputation risks lurk in the sector of social reputation. In today’s highly interconnected society, “significantly more attention is generated by denouncing moral misconduct than by honoring socially responsible behavior . . . credible social commitment builds on actions and not on words. This rule applies all the more strongly at times like the current crisis of the financial markets.”
“How will [the financial crisis] impact the dynamics of reputation in the economy and in society?” asks Eisenegger. “First, we should observe that we are underrating the current financial crisis if we choose to describe it only in terms of hard economic figures. This crisis is not only about nose-diving share prices, the collapse of once-reputable banks and automobile companies, the bankruptcy of entire national economies or the danger of a global recession. This crisis is much more than that. It is a gigantic crisis of trust and reputation for the entire economic system.”
“Shareholder value, short-term return targets, irrationally high equity returns, excessive management remuneration and bonuses are today seen as central causes for the irresponsible assumption of risks that have driven the economic system to the brink . . . companies that can credibly combine economic success with social responsibility and that have always been oriented towards guaranteeing sustainable yields are experiencing a boost in confidence through the crisis.”
This financial crisis is likely to be one of the major defining events for the Millennial generation. As we have seen in the past, such as with the Great Depression and the Vietnam War, crises of this magnitude have the power to fundamentally reshape society. In particular, they significantly influence the values of young people in their teens and twenties. Over the next few decades, as these young people assume leadership positions in business, government and academia, it will be very interesting to see how it all plays out.
Excellent Article! I am currently working on a Technology Forecast project for an Innovation Class and stumbled upon this article. I read in another website that there are over 250 providers of cloud computing or XXaas. Who in your opinion will be the key players in the future? I am assuming that as the technology starts everyone wants to jump on the bandwagon, but who in your opinion will be the ones dominating the offering?
Posted by: Laura | July 03, 2010 at 11:09 AM