IESE Global Alumni Reunion
Delving into Diversity

More than 2,000 alumni and friends from five continents gathered in Barcelona May 28-30, 2004, to explore the opportunities of "Globalization and Diversity in the Corporate World." The 43rd IESE Global Alumni Reunion was timed to coincide with the Universal Forum of Cultures, an important festival for Barcelona that shared a similar ambition with IESE: to open up dialogue on cultural diversity in order to promote progress in society.

Barcelona Mayor Joan Clos and Deputy Mayor Xavier Casas welcomed IESE alumni at a special reception held in the Forum's seafront auditorium, and explained how the Forum was part of a bigger plan to regenerate a long-neglected area of the city. IESE Dean Jordi Canals said that both IESE and the Forum aimed to make their mark on the city, so that people would leave changed by the experience and go on to impact the world for future generations.

Those in attendance were then treated to "Move the World," a sound-and-light extravaganza that serves as the centerpiece to the Forum experience. The performance began as a mechanical construction rose out of the sea and formed a globe, which was then torn apart by conflict, and a resolution was hinted at when all the players pulled up chairs and started to engage in dialogue.

The Forum performance could have symbolized the discussions of the Global Alumni Reunion, as IESE alumni sat down to consider various perspectives from a dozen experts on how businesses need to operate in a changing world where war and terrorism have become as ubiquitous as McDonald's, Coca-Cola and Starbucks.

What is Your Ethical Core?

"Why Values Matter More in an Insecure and Chaotic World" was the theme of a talk by Janne Haaland-Matlary, a professor of international politics at the University of Oslo and Norway's former secretary of state for foreign affairs. She argued that people in top management positions urgently need to consider the ethical dimension of their business activities now more than ever. "At a time when a moral compass is needed most, it is also most absent," she said.

The old institutions that once gave society its moral frameworks - the church, the nation/state - have been eroded, she said, adding that it was becoming consumers, as an organized force, who were driving the "modern trinity" of human rights, democracy and rule of law. This revolution had not yet been fully appreciated by business leaders, and she urged CEOs to grasp the nettle.

"Business leaders who say they are not interested in the moral or ethical dimension of what they do are essentially leaving international human rights norms to being defined by other stakeholders. But business leaders need to be involved in these dialogues, realizing that they have a role to play in shaping these norms. Like it or not, the public is increasingly looking to big business to provide a moral lead on human rights, good governance and corporate citizenship. It's already big in the United States, and it is coming to Europe."

"What is your ethical basis or core? Should you, for example, be doing business in Burma?" she asked the audience. "You need to know the answer."

Knowing your core values was reiterated by IESE professor Antonio Argandona. He stressed that these ethical values must be the backbone of the company and the basis for all decision-making – not simply a pretext for marketing.

In the same way that the consumer has become king of international politics, forcing the agenda in that arena, the consumer has also taken charge of information technology, according to Jeffrey Sampler, a professor of information systems formerly at London Business School and now at IESE.

Sampler gave an entertaining presentation tracing the last 100 years of technology, from how it transformed production during the Industrial Revolution, to how it transformed retail and distribution (Wal-Mart being the supreme example), to how it has transformed consumers and put them in charge today – and mobile phones, as but one example, are just the start.

"I urge you in your businesses to look at how power has shifted from producer to customer due to technology. Realize that as decision-making moves outside your business channel, your profit is reduced to zero," he warned. "Also be aware of changing demographics. We have to get rid of business prejudices that would see the Western consumer as dominant. Go to India and China – they will be the dominant consumer of the future."

China Still Booming

The predominance of China as a force to be reckoned with over the next four years was picked up by Bernardo Villegas, dean of the School of Economics at the University of Asia and the Pacific in the Philippines, and who has been a presidential adviser to both Corazon Aquino and Fidel Ramos. He spoke in the session on "The Economic Outlook: Views from Three Continents," representing Asia, alongside Richard Clarida representing the United States and Eric Chaney representing Europe.

"Asia is the fastest growing economic region in the world," said Villegas, adding that most countries in the region averaged a GDP growth rate of between 5 and 8 percent.

While he shared some concern that China's booming economy – averaging a GDP growth rate of 8 percent for the past two decades – was in danger of overheating, he remained optimistic that Chinese efforts to cool down the economy would lead to a soft landing. He pointed out that the Chinese word for "crisis" was made up of two characters meaning "danger" and "opportunity" put together. All crises can be turned into opportunities, he said, provided that a spirit of entrepreneurship was allowed to flourish. And the Chinese, he added, are about as entrepreneurial as you can get.

The GDP growth rate for the United States will likely be half that of China's over the next year, according to Richard Clarida, professor of economics at Columbia University and, until recently, assistant secretary of the U.S. Treasury under the Bush Administration.

He said that the U.S. budget deficit, which stands at $450 billion, could not be blamed solely on tax cuts introduced under President George W. Bush. He pointed to other factors – such as a deficit of growth prospects in the rest of the world and an excess of global saving – but he agreed that government spending must be frozen.

He refused to call the November 2004 presidential election, but felt it would be a close race between Bush and his main rival John Kerry. "Whoever wins will have to take tough stands on government spending in order to produce fiscal balance," he said, reminding the audience that a Democratic president would have the tougher job of working with a Republican-controlled Congress to push any reforms through.

Eric Chaney, co-head of Morgan Stanley's European Economics team and formerly the chief economic forecaster for the French government, predicted the lowest average GDP growth rate of the panelists -– around 2 percent for Europe. "It's a tough world for Old Europe," he said, acknowledging that the center of gravity for global trade had shifted to Asia and the United States, and largely left Europe on the sidelines.

"Globalization is tough for rigid economies that can't react quickly enough. There's still a long way to go for continental Europe to make the painful yet necessary transition from a traditional manufacturing economy to the service economy required to compete in today's marketplace," he said.

However, Chaney pointed to some positive factors, such as the narrowing of the gap behind the U.S. in the use of information technology, the relatively lower levels of consumer debt, an untapped labor market of women who could be released into employment, as well as the additional markets created by the recent expansion of the European Union by 10 new countries.
"Reforms are slow but they are accelerating," he said. So, the outlook for Europe was a bumpy road ahead, but like Villegas and Clarida, Chaney felt that, overall, things were looking up.

Vive la Différence

Another Frenchman proved that the future can indeed be bright for European-based businesses. CEO Franck Riboud shared how his Groupe Danone has become a global leader in dairy products, biscuits and bottled water, not by imposing a uniform brand on the world, like Coca-Cola has done, but by positioning each product in proximity to local consumers.

"Creating a global brand is not an end in itself," said Riboud. "Our goal is not to become No. 1 worldwide. Rather, our goal is to be No. 1 locally. Consumers do not buy a product simply because it is a global brand but rather because it offers them something of superior quality that is of interest to them locally. So, Aqua bottled water may not mean anything to you in Europe, but in Indonesia it is a top brand accounting for 3.5 billion liters of water sold a year. You may never have heard of Wahaha, but it's a big brand in China, and along with Evian, Danone and Lu, accounts for 63 percent of our anual sales."

So successful is this tailored approach that yogurt reinvented as "Dannon" in the United States, for example, is considered by consumers there to be a top "all-American brand." While brands such as McDonald's and Coca-Cola suffer from the backlash against globalization because of their emblematic association with American junk food culture, Danone's flexible approach that adapts its products to local tastes may, in the end, be the smarter strategy.

What Danone set out to do intentionally, the Spanish banking group BBVA arrived at eventually after it expanded into Latin America 10 years ago.

"When we first set out, we used a homogeneous model and an egocentric approach: we were a Spanish group, with Spanish management and a Spanish culture that communicated on a one-way basis with Latin America," said Jose Ignacio Goirigolzarri, president and COO of BBVA. "We soon learned that each country has different values and we needed to adapt to different terrain."

"The last decade has been a process of moving from being a retail bank of Spain to becoming a truly international bank," he said. "There has been a shift in culture to focus on diversity, decentralization and empowerment of local managers, and an obsession with the needs of the client. We have come to realize that diversity is not a problem, but an opportunity."

Pankaj Ghemawat echoed this sentiment in his session "Getting Global Strategy Right." The youngest-ever professor of business administration at Harvard Business School urged business leaders to see "diversity as a source of value rather than a constraint on value creation."

Change of Mindset

Managing apparent paradoxes such as "be global and be local" will become increasingly important for business leaders, said Nicholas Shreiber, president and CEO of the Tetra Pak Group, the world leader in the packaging of liquid food products such as milk, juice and soup.

Shreiber explained how a change of mindset led the company in a new direction. "As the market leader, there was no where else to go within the packaging industry. But then we changed our focus and considered the five trillion liters of liquid food produced in the world every year as our market, and suddenly we went from representing 80 percent of the packaging market to only representing 1 percent of the entire liquid food market. Now we're converting people to the use of cartons in new segments such as olive oil, wine and sauces. In Brazil and Argentina, we converted people from using pouches to cartons. We're aiming at the metal can market next."

As a result, Tetra Pak cartons are now used in 170 countries, amounting to E7.5 billion in sales last year. The 105 billion Tetra Pak cartons produced every year could be wrapped around the Earth at the equator 200 times. All of the cartons are fully recyclable, he added.

Shreiber believes the biggest challenge for the future is good leadership. "The top quality of a good leader is the ability to listen – like a great conductor of an orchestra. The scarcest resource in the world is not water or land; the scarcest resource is good ideas, and leadership to stimulate them, nurture them and bring them to life."

There was certainly no scarcity of good ideas at the 43rd IESE Global Alumni Reunion. It’s likely that the 2,000 business leaders who took part left Barcelona with the vision and ability to bring them to life.