Executive Interviews: Interview with David Ahlstrom on Global Economy and Global Managers
October 2008 - By Dr. Nagendra V Chowdary

Prof. David Ahlstrom
Professor in the Department of Management at The Chinese University of Hong Kong.

rises.Amidst all these, the central banks have been put in a quandary which has compounded the exchange rate risks and companies across the globe seem out of place and clueless. What do all these events signify? Should they be looked at in isolation or are there any powerful lessons for future managers and CEOs when they connect the dots? Do you think the world was integrated for an inimitable disintegration?
The financial shocks have been relatively minor compared with the panics of the past. The current system is better set up to manage these shocks. I agree that the banking industry needs a lot of reform, and I hope this will happen. Enron and Tyco are non-issues. They were just examples of poor corporate governance in the corner of North American industry. Crooks and thieves have always been with us in this world, and they always will be. The challenge is to control them properly and punish them publically so the good majority does not start to get ideas to imitate them, as the ultimate game in economic theory has shown they might.

• As you compare the Fortune 500 companies list, let's say in 1958 and 2008, what distinguishes these two lists? What can be surmised and learnt from those two lists? As you look at companies in USA, Europe and Asia, what stands out? Is there any particular development that seems to sum up the impact of global competition?
  I believe that there is more upheaval today. In addition, there are many new firms that are in businesses that could barely be conceived of in the 1950s. One social science researcher has forecast that many future university graduates in the coming decades will work in an industry that does not even exist. Expect, as CK Prahalad has said, leadership has to be challenged. That is happening more and more today.

• According a recent McKinsey Global Survey, almost 70% of executives around the world say that global social, environmental and business trends are increasingly important to corporate strategy. Yet relatively few companies act on the global trends they think will affect them most; among those that do act, only 17% report significant benefits. Why is there such a disparity between need and action?
  I can only speculate that firms scan primarily in the area of direct competition and other threats. They tend tomiss out on opportunities that do not extend the (recent) past for them. That is, they are very good at incremental, sustaining innovation, but not good at disruptive innovation. Why? This could relate to cognitive problems that all people have, from top managers to down. But I would agree, many opportunities are being missed by firms that have the resources to take advantage of them.

• Competition existed long before modern economies and businesses were born. It began with life itself. Gause's Principle of Competitive Exclusion illustrated that no two species can coexist that make their living in the identical way. What would be the new frontiers of competition?Who are likely to be the major winners in these frontiers? What would be the new differentiating (when the competitors are closing in on the gaps) factors for companies?
  I was asked a similar question in the mid1990s. At that time, very few people could forecast the effect, the Internet would have on business, from supply chain management, to the new finance, to media to even education and medicine. The point is, it is very difficult to forecast. I would rather talk about the new opportunities that seem to be emerging: opportunities in major established industries for example, such as healthcare and education. These are two of the biggest industries (in terms of aggregate spending) worldwide. Yet they are dominated by government ownership and regulation. These industries are ripe for innovation, particularly disruptive innovation. For example, in higher education, only a very small percentage of an age cohort worldwide can go to university or attend postgraduate education, though many more would like to do so. For instance, only a few thousands per year can get an MBA or other postgraduate business degree. This is a very small percentage of those thatmightwant to study an MBA, MSc, MPhil or DBA. There is great opportunity for entrepreneurs in these two industries (and not just these two) to change and grow them. And these are just the industries that we know about today, imaginewhat else that cannot even be conceived of that is coming in the next 10-15 years!

• Do you foresee an increasingly decreasing role of multilateral international bodies like, WTO (with the rise of regional and bilateral trade agreements and perennial showdown at recent meetings, including impasse at Doha round of talks), UNO (with private sector assuming a great role at humanitarian activities for instance, Bill and Melinda Gates Foundation, Clinton Global Initiative, and increasing role of Social Entrepreneurship Initiatives and Microfinance Initiatives), the IMF and the World Bank?
  Yes, there is so much more money in society today. Over the next 100 years, with just modest growth, the average income in society will grow by about 15 times in real terms, more in the emerging economies. This will generate a great deal of wealth and with necessities well taken care of, I expect more philanthropy in the decades to come.

1. The Soviet Economy Case Study
2. ICMR Case Collection
3. Case Study Volumes