Davos in 2013 – the Future of Value Chain
Four years ago when I attended the World Economic Forum’s annual meeting in Davos, Switzerland, the theme of the program was “Shaping the Post-Crisis World” as the financial crisis continued to unfold in the developed world. Back then I wrote a blog titled “From Davos with Hope” to call for courage as key decision makers faced new challenges. Those were the final days of January 2009 when snow fell heavily in the tallest city in Europe, and when fear, anxiety and hope were all mixed among the meeting participants. Today, the world is still struggling to overcome the aftermath of the crisis. But this year in Davos, the forum focus is centered less on policy reaction and more on building risk resilience. The theme of the annual meeting program changed to “Resilient Dynamism” with a focus on catalyzing and facilitating global, regional, and industry transformation.
Transformation has always been considered a necessary part of strategic agility in management philosophy. I am particularly impressed by discussions about the future of value chain, including possibilities for new models of economic value creation. How can we shift to closed-loop models or circular economies, where the idea is to follow ecological ideals and make the best use of already available resources to create value, and to create an economic system (much like the ecological system) geared more toward sustainability?
The need for a great leap forward toward a circular economy focused on sustainability is evident as both the technological cycle and biological cycle—the two categories in the so called “Cradle to Cradle Design,” clearly have economic value in them and between them. For example, when it comes to the environment, we can design waste out of a particular cycle, yet still allow the “waste” product to go back to the system. It is just as important to realize the economic circle and make the most out of it. Over the years FedEx has been making tremendous efforts in this regard – in striving for energy and operational efficiency, in experimenting with renewable energy sources, in pioneering package tracking for total system transparency, in remanufacturing existing passenger planes into freighters to lessen the carbon footprint, and in embracing a basic philosophy of quality driven management to reduce wastes in daily operation and convert those wastes into usage as a part of the system.
Most of the existing value chains are based on optimization, not yet a renewable chain. How to create an environment that is conducive to transforming single dimension optimization into sustainable system-wide value creation remains a challenge to policy makers and business leaders. Opportunities are abundant; the challenge is recognizing them. The concept of a circular economy may just provide such a perspective toward identifying these opportunities as viable business proposals.
Walking on snow covered streets in Davos year after year, you cannot help but ponder the circle of season, things and life, as well as persistent obstacles in managing risks toward growth sustainability through these circles. I hope this message will resonate loud and clear, from the tallest mountain city in Europe to the whole world.