Roland Berger - Think-Act - Growth - # 16 2011

Rethinking growth
Find out what really counts!

Plus multimedia CD, including the film:
Growth dimension intellectual capital
Seite 1
Issue 16
11:49 Uhr
ROLAND BERGER STRATEGY CONSULTANTS
Natalia Allen
on the fashion
world of tomorrow
DOSSIER: Rethinking growth
18.11.2010
think:act The global magazine for decision-makers by Roland Berger Strategy Consultants
07gb_16_01_Umschlag_aussen
Dieter Zetsche
on the managers
of tomorrow
The global magazine for decision-makers
Ratan Tata
sets his sights on
the world market
Was Alfred Chandler wrong?

Will China be a mecca for electric cars?
Plus dossier: Rethinking growth
Issue 16
07gb_16_02_03_U2_Editorial
18.11.2010
12:33 Uhr
Seite 2
If you are not prepared

for an opportunity, you
will just end up looking
ridiculous.
(Pablo Picasso)
Green Growth,
Green Profit
shows how to
put the global
links of the green
value-creation
chain together
in order to
transform
megatrends into
green gold.
Chinas
Management
Revolution
explains how a
radically new
leadership model
made in China
can strengthen
your business
with China and
re-energize your
management
style.
Order these books online: www.think-act.info
first views f
Dear readers, Growth is one of the main concerns of

managers around the world. But, although many economists
think we might have overcome the financial crisis by now, the
new normal does not provide a sound basis for business plans:
Will we be facing inflation or will we have to fight deflation? Is
the real economy on the rebound or will we see the knowledge economy rising again, soon? Are we threatened by an era
of trade wars or will coordinated crisis management lead to
stronger global cooperation?
We have made Rethinking growth the main topic of this issue
to reflect on how these questions define the solution options for
sustainable and profitable development. We present new concepts, reveal a map of intellectual capital as a driving force
behind growth and provide practical answers by successful
entrepreneurs such as Ratan Tata, who lays out his plans for
global expansion. We would also like to introduce you to our
Trend Compendium 2030, which shows the megatrends that
will drive the economic development of the coming decades. The Trend Compendium 2030
is a new version of the edition produced in 2007 with the Young Global Leaders of the World
Economic Forum. These outstanding individuals combine extraordinary talent, impressive
careers and the will to contribute to the common good. You will find the first of a series of
portraits of these distinguished people in this issue.
Of course, a podcast of some articles is included on our DVD. This time, we have also added a
glimpse of our Trend Compendium and a video.
We hope you enjoy the new think:act!
Yours,
Martin Wittig
CEO Roland Berger Strategy Consultants
p contents
think:act is published in five languages (English, German, Chinese, Russian and Polish)
Pro and con. Alessandro Profumo made the UniCredit Group big. In
Exclusive data. The future of growth begins with knowledge. But
an exclusive interview with think:act, the banker talks about what sort
of regulation financial markets need today. Page 26
which countries are ahead in the knowledge society? The intellectualcapital map, here in think:act, shows where. Page 24
Whats new whats not? Business is permanent innovation?

Not always. Duplication and imitation occur on all levels.
Economically speaking, this is not necessarily a bad thing. Page 46
How green can it get? Natalia Allen wants to make the world of
fashion more ethical. The first article in a new series of portraits: the
World Economic Forums Young Global Leaders. Page 54
contents f
food for thought

6 Always restructuring
Rebuilding as a constant state
8 The Trojan Horses of decline
How companies can avoid crises
by ensuring they dont happen
10 Strategy, structureand the DNA
Not every change in strategy is a
good fit for every company.
dossier
14 The end of linearity
The economy is looking for a new
understanding of growth.
18 Medicine for blindness
Trend Compendium 2030: seven
megatrends change the world.
20 Philosophy and service
How Tata is preparing for victory in
the world market
23 A new dimension in growth

Leif Edvinsson and his map of
intellectual capital
41 Standouts wanted
A different type of elite research:
What will tomorrows CEO be like?
26 Regulating ourselves to death?

How many rules does the economy
need? Comparing pros and cons.
42 Future markets
Glowing carpets, refrigerators
without coolant
industry report
business culture
30 Does China change the e-game?

The big names in carmaking are
counting on a mobility revolution.
The wild card? The customer.
44 In Africa, financial inclusion

Innovative companies provide
banking services to the masses.
34 The reputation premium

Reputation has always been
hard to controluntil now.
A new management approach.
36 Convenience to the people
An exclusive interview with
Jacek Roszyk, CEO of the Polish
supermarket chain abka
46 Economy of the con

When it comes to the economy, the
unreal has many faces.
52 Work in progress
series: the futurists

54 Fashion without victims
Designer Natalia Allen wants to
make the fashion industry green.
First article in a new series.
regulars
3 First views
58 Service | Credits
Dossier
Rethinking growth
Starting on page 13
Articles marked with this symbol

can be listened to on our CD (page 59)
or seen: In a think:act exclusive,
two researchers comment on the
world map of intellectual capital.
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18.11.2010
12:41 Uhr
Seite 6
p food for thought
WORLD OF NUMBERS
Always restructuring
25%
It is not the exception; it is the rule. The business world is

constantly rebuilding itselfworldwide. The financial crisis has even pushed corporate restructuring activities.
At Lockheed Martin, restructuring started with changes in management. More

than 600 executives, about 25 percent, have taken the US defense contractor up
on its early-exit program. Today, LMs global workforce is 136,000; LM has
announced it will trim that number by 10,000.
Source: corporate information, news reports
71%
Restructuring starts with an eye for the

necessity to do so. But companies rarely
notice their own decline in time (see
also article on page 10). In a Roland
Berger study looking at companies in
crisis, 71 percent failed to recognize
decline early.
Saving GM
More than $60 billionthats
how much US and Canadian
taxpayers poured into
General Motors in return for
a 61 percent and 11 percent
equity stake respectively in
the company.
Source: Financial Times
Europe: From 2002 to 2007 there

were over 7,000 cases of large-scale
restructuring in EU member states,
as recorded by the European
Restructuring Monitor. Until now,
these large cases alone had affected
just over 2.9 million jobs.
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Chinas old steel
Inefficient post
The US Government Accountability

Office put the US postal service on its
list of government agencies that need
restructuring. The reason lies in these
numbers (in billions of US dollars):
Net income (loss)

Year-end debt
2010
(7.0)
13.2
Source: Government
Accountability Office
2009
(7.0)
10.2
Chinas transition toward a market economy still

has a long way to go. Take the the chronically inefficient steel industry, which has suffered rising input
costs and capacity overhang of around 25 percent as
the number of smaller mills has grown. The industry, the worlds largest, is now made up of as many
as 800 mills, the biggest of which has a market
share of less than 5 percent. The government wants
to radically change this. But achieving that change
has proven difficult and sometimes comes with tragic
consequences. Last summer in Chinas northeastern
rust belt, workers fearing unemployment rioted at
Tonghua Iron & Steel.
38
2008
38% of the global steel

production came from the
Chinese steel industry
25% of the Chinese production
capacity is unused
(2.8)
7.2
2007
800: number of
Chinese steel producers
(5.1)
4.2
10: number of globally competitive

steel producers to which China wants
to whittle down its industry
2006
0.9
2.1
Mergers and their effects

Mergers and the rationalization they bring with them cause significant
job losses. This is confirmed by an analysis in the European Restructuring
Monitor over the period 20022007. Of the approximately 3.7 million job
losses announced as a result of restructuring (small and large cases), some
6.5%, or about 240,000 jobs, arose from cases where mergers or acquisitions were involved. The relative importance of mergers as a cause of job
losses was more significant in the last two years of the period referred to
than the first four years, amounting to 11% in 2006 and about 10% in 2007.
60,837
US business bankruptcies increased to 60,837 filings during calendar

year 2009, representing a 40 percent increase from the 43,533 filings
made during the 12-month period ending December 31, 2008. The 12month business filing total for 2009 was the highest since the 1993
calendar year, when 62,304 cases were recorded.
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The Trojan Horses

of decline
Sometimes, corporate crises start with apparently small
misjudgments. In this essay, think:act author Ren Seyger
demonstrates this with reference to Greek mythology.
Immortalized by Homer, the great city of

Troy successfully repelled besiegers at its
gates for decades. Then the city let down its
guard and accepted the gift of the Trojan
Horse. We all know what happened after the
giant wooden horse was moved
into the city walls: Greek warriors,
hiding inside the belly of the hollowed-out statue, emerged and
struck, conquering the city of Troy in
the course of one night. Leaders
who had succumbed to the belief that
their city could not be stormedwere
unprepared and watched helplessly as
Troy was destroyed.
The common business lesson drawn from
the tale warns against inviting competitors into a guarded space, lest the company
face a surprise attack from within its own
perimeters. Yet a closer reading of The Iliad
reveals another important lesson: When a
company thinks itself invincible, it can fail
to see the reality staring it in the face. The
company denies blatant signs of decline
until the fatal blow is delivered without
warning. In my recent book, Trojan Horses
of Decline, I dont speak as a Cassandra, predicting that companies will face their end
if they become too complacent. But I do offer
a cautionary tale about the creeping nature
of decline and how to prevent the rapid,
massive and irretrievable value destruction
that comes with it.
THE NATURE OF DECLINE
Corporate downfall is a complex and dynamic force that cannot be reduced to lone incidents or areas of decline. Decline is usually
in three phases: first a strategic, then an
earnings and finally a liquidity crisis. Early
identification of decline is rare. Early
response is even rarer. Studies show that less
than half of all companies responded to a crisis within 12 months of its actual start. If we
ask ourselves if the fall of Troy can be
blamed on one thing and one thing alone,
8
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food for thought f
THE MORAL OF TROY, PERHAPS

ITS GREATEST MESSAGE TO US NOW,
IS ONE OF EX AMINATION:
well conclude that the war began because of

many choices made by many actors in the
drama. Well also see that for companies,
decline begins at some point in the development and implementation of a strategy.
It starts when a company misjudges the relationship between what it can do and what
its environment demands. The gap in thinking can emerge when a company is tempted
by new growth opportunities, reliant on
business models of the past or susceptible to
the dominant business or market logic
when instead it should be focusing on capability and market dynamics.
PREVENTION
Whereas most management literature

addresses the consequences of decline, I
prefer to focus on prevention. Prevention is
critical: Once profits start to fall, there is little time or resource left for strategic turnaround. And if Trojan Horses are not identified and dismantled, the company wont be
able to withstand the inevitable low points
of conducting business, such as the loss of a
major customer or an economic crisis. The
key to preventing decline is understanding
the root causes of decline and how those
causes impact each other.
To do just that, my colleagues and I examined 35 companies that were publicly listed
and experienced sharp declines in financial
results. We began to recognize entrenched
patterns across industriesarchetypes of
decline, if you will. We call the archetypes
Trojan Horsesentangled, out-of-focus, unadapted and over-stretched Trojan Horses.
Heres an example to illustrate the point: A
European bank suffered serial shifts in strategy. In 1997, the company aimed to be a top
investment bank.
In 1999, the focus was on becoming a leading universal bank. In 2000, the bank added
wholesale banking activities to its core
strategy, and in 2001, the CEO announced
that retail banking was the most important
Four times it lurched to a halt

at the very brink of the gates
four times the armor clashed out
from its womb.
But we, we forged ahead,
oblivious, blind, insane,
we stationed the monster
fraught with doom
on the hallowed heights of Troy.
activity for the company. Finally, in 2009 the

bank had to be re-established after being
acquired, broken up and rescued by
the countrys taxpayers.
Its demise remains complex. But one root
cause is clear: At no point from its original
formation did the company have a clear
strategic profile that would allow it to stabilize long enough to make real changes in the
business and drive down costs. The company harbored an out-of-focus Trojan Horse; it
experienced decline as it became entangled
in multiple business models without realizing that the models were at odds and
required different expertise.
THE TROJAN HORSE FRAMEWORK
As part of our analysis, we applied Trojan

Horse stress tests to each case we examined and found that the tests form the basis
of a practical framework. Used in practice,
the two-part test first involves sorting out
the business model and identifying the
value that is created for customers and
stakeholders. If no Trojan Horses are
encountered in the first part, the business
model is tested for robustness and its ability
to balance risk and reward in the face of
external changes and challenges. The test
should be conducted every two years and at
every major change, such as an acquisition
or new market entry.
Once this exercise has been completed and
all Trojan Horses have been dismantled,
companies must create an environment that

makes it difficult for Trojan Horses to take
root once again. They must foster and facilitate self-examination on a variety of fronts.
Here are five approaches that can help management teams, supervisory boards and regulatory institutions in their continuous
watch over the health and prosperity of
their companies.
Define your business model by trying to
prove the obvious and trying to prove the
contrary. There is no stronger foundation for
a company than its own understanding of
what it wants to achieve and how it wants to
achieve it.
Avoid linear, incremental and annual strategy review processes that can fail to reveal
underlying strategic missteps. Many annual
strategic planning processes have become
semi-automated administrative processes,
often aimed at producing the underpinnings
for next years budgets. Companies must
strive to synthesize what really drives an
industry and challenge dominant thinking
with a mental library of business models
and the logic that supports them.
Set clear KPIs and milestones and create
data analysis systems to measure these.
Strategic ambitions must be incorporated
into the many layers of the infrastructure
that will support the business model.
Companies must adjust data analysis systems to make sure that the right information
is measured.
Balance compliance with entrepreneurship
and creativity. Find ways to balance compliance supervision with a fresh perspective on
the market and new approaches to the competition.
Organize your own opposition. Let the personalities of stakeholders come directly into
play in duels designed to test, validate and
falsify business models. Elect an astute
supervisory board that will challenge and
improve decision-making by questioning
current thinking.
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p food for thought
Strategy, structureand the DNA

His claim structure follows strategy made Alfred Chandler one of the first business gurus ever, and
the idea is still taught in business schools worldwide. However, as Roland Berger CEO Martin Wittig
argues in this essay, a strategy that works depends on the specifics of a company. Even the smartest
approach will fail if it is not suited to what a company essentially is and can realistically achieve.
In the early 20th century, business

historian Alfred Chandler coined the now
famous phrase that structure follows
strategy. His idea: Choosing a strategy
always comes first, and the corporate setting
has to adapt to this choice.
Much of Chandlers insight was based on his
observations of General Motors. But that
was in the 1920s. Since then, times have
changed. Today, companies have to adapt
their strategies quickly to changing environments and implement them faster than ever
before. GM itself has just experienced this;
in 2009, the firm had to file for bankruptcy
and, relying on government support, just
re-entered the markets in record time.
The question is, To what extent does the
Chandler model still work today? Is it
enough to simply claim that the structure of
a company has to orient itself according to
the strategy it has chosen to pursue?
My point is that it is not. Rather, it makes
sense for a company to look in the mirror
first, before developing its strategy or plans
of strategic change. The reason for that is
simple: time. The alignment of a corporate
strategy does not happen overnight, but
needs a certain amount of timeand time is
a critical success factor in todays fastchanging markets. A strategy that respects
and takes into account what a company is,
its corporate DNA, can be implemented
more quicklyand more successfully.
So, while we can still argue that structure
should follow strategy, each strategy also
has to take into account a companys DNA.
10
In the short run, the corporate DNA has to

be taken for granted. Any change of strategy
has to be oriented around what is possible
given the existing DNA; otherwise, the
transformation risk would be just too big. In
the longer runsay, three to five yearsit is
possible to develop and change a companys
DNA. But even then, it has to be executed
with care. Businesses have to be clear
about where to start and what part of the
organization to change at what stage.
If companies act according to these principles they will be able to develop a clear
strategy and implement it successfully
even if this implementation means a
thorough corporate self-reinvention.
However, that self-reinvention, that
transformation, can only be successful by
taking into account the two core traits of a
corporate DNAcharacter and culture.
Character describes common attributes of
what a company essentially does. Culture,
on the other hand, depends mainly on a
companys values. It shows how a company
actseven on an individual level. And
because it is so deeply embedded, it is probably the hardest element to change in the
process of strategy implementation.
If success depends on acknowledging the
character and culture of a company, then
one good example is Amazon. The companys success in the book market stems from
its ability to master logistics and supply
chain management. This expertise was
copied and adapted for other goods. As a
result, Amazon moved from books to CDs,
DVDs, electronic goods, clothing and lately

even groceries. The company understands
its character and culture and has shaped its
strategy accordingly.
HOW TO MANAGE CULTURE: WALMART
A companys culture is very much formed by

its employees. It is made up of basic principles valued and lived up to by the people
working there. Changing those principles
takes time, means a constant push by management and bears risks.
Often, these principles are established by
the companys founders. Sam Walton, the
founder of Walmart, showed respect and
care for his staff right from when he started
the company. That in turn created an atmosphere of trust that has continued to this day.
Even now, Walmart employees ask themselves: How would Sam have done it? That
influences the companys performance and,
by extension, its strategy.
Another, less-known example of culturesensitive strategy is the DVD rental service
provider Netflix. Like some other recently
founded companies, Netflix has created a
workplace culture of efficiency. The
California-based firm strives to stay nimble
as a start-up. Instead of red tape, it sets just
a few basic guidelines, which are embedded
in the day-to-day operations.
HOW TO MANAGE CHARACTER: NOKIA
In terms of character, one strength that

helps certain companies prevail over others
is their ability to adapt and seize opportuni-
18.11.2010
12:44 Uhr
ties. One of the best examples is Nokia, a

company that started out nearly 150 years
ago as a wood-pulp mill in southern Finland.
The hydro-electricity used by the pulp mill
attracted a rubber factory, which meant that
Nokia was soon selling footwear, tires, and,
later, rubber bands, industrial parts and
raincoats. From there, the rubber company
began manufacturing cables for telegraph
and telephone networks. Nokia then began
dabbling in telecommunications. That particular journey started in the 1970s, and in
1992 the company decided to divest its noncore operations and focus on telecommunications. All this would not have been possible if Nokia did not have a character that
embraced constant change and opportunity.
Nokias strategy flowed from that.
Internet companies are other great examples where the character traits determine
strategy. Many of these companies are will-
Seite 11
ing to take massive risks. Start-ups like

German online shoe store Zalando seized
opportunities that its competitors ignored
and saw as too risky. It entered the online
sporting-goods segment that classical, more
risk-averse sports outfitters had left
untapped for years. It is a strategy that has
proved successful, as this particular online
channel is now rapidly growing.
Understanding a companys DNA is essential, especially in times of strategic change.
Take Apple: Steve Jobs is a master of reading corporate DNA. When he took over
Apple again, after it had been struggling for
a number of years, Jobs understood that the
companys big strength was its close contacts with its customers and the media
industry. This is what he used to drive
Apples approach to innovation. Its Digital
Hub strategy, established in 2001, has been
the foundation of constant new business
opportunities. Just as Nokias character of

constant change took the company from
rubber boots to telecommunications, Apples
media-driven DNA created a character and
culture of constant innovation.
If understanding ones DNA is the core to
success, then this holds true not only in the
world of business. In the arts, for example,
arguably the greatest advances were made
once an artist really understood what he or
she was, and therefore could do better than
others. An artist like French-American
Louise Bourgeois developed her relevance
in the art world from working for decades
on essentially the same topicher relationship with her father and her mother. Here,
the personal DNA, the family roots of the
artist, form part of her artistic DNA, which
she understood so well.
Similarly, in football we regularly see teams
trying hard to implement a strategy that is
11
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Seite 12
have adjusted their game accordingly. However, what if a team has two world-class forwards? Would it not be foolish to use only
one of them? What is strategic about letting
trends dictate strategy? Indeed, in all major
European leagues, not least the German
Bundesliga, there are instances where teams
have invested heavily in adjusting their
strategies, but failed because their players
did not have the necessary abilities to execute them. These teams would be better off
following the model of the Greeks.
Like these football teams, many businesses
struggle to implement strategies because
they have not focused on their capabilities
and structure. Once a corporate DNA is
properly understood, strategy development
and implementation can kick in. Here, the
questions of classical strategy development
still make perfect sense:
en vogue at a particular time. Coaches try,

often unsuccessfully, to have their players
work to that strategyregardless of their
abilities.
Successful teams, by contrast, focus first on
their capabilities, on the character and the
values of the team, and develop their strategy from this base. These teams play to their
particular strengths.
An example of this is the Greek national
team, which won the European Championship in 2004. Despite being much criticized for not playing attacking football, the
Greeks remained focused on their main
strength: an almost impregnable defense. As
a result, the unfancied team, which had
been given odds of 150-1 to win before the
tournament started, beat highly rated teams
like France to win the championship,
driving Portugals football aesthetes crazy
in the final in Lisbon.
12
Inter Milans win in last seasons UEFA

Champions League represents a similar
example. Along the way to the final, Inter
beat teams with arguably higher individual
skill levels, in particular Barcelona FC. In
the matches with the Spanish team, Inter
did not try and match their opponents brilliant short-passing game, rather they concentrated on their own strong defensive
abilities. Barcelona were frustrated, and
Inter went through to the final, where they
beat Bayern Munich. After the match,
Bayern player Mark van Bommel acknowledged the victors smart approach: Inter
was more effective, he said simply.
LOOKING AT CAPABILITIES
The example of football is also interesting in

another respect: the dominance of certain
tactical trends. Currently, playing with just
one nominal forward is in, and most clubs
Are the targets clear and valued?

Has the strategic intelligence covered all
the market and competition issues?
Have the implications of this strategy been
calculated and quantified?
Has the strategy been broken down into
financial plans?
Are performance measures in place?
Are the compensation and remuneration
models aligned with the strategy?
Is the structure aligned with the strategy?
The latter is the critical question. The bigger
the difference between the strategy and
core DNA, the more painful and difficult it
will be to force change upon the organization. And the bigger the change, the bigger
the complications.
Companies developing their strategies need
to ask the right questions. They should be
asking: What abilities do we need? or
What sort of structure do we need to set
up? But on a more basic level, they should
also be asking Who are we? and What is
our starting point? Evaluating these strategic options means focusing on the core DNA
for the short term. In todays fast moving
environment, Mr. Chandlers message must
be amended to reflect this.
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Seite 13
DOSSIER #16
RETHINKING
GROWTH
After the global megacrisis, the world economy is

adjusting back toward a growth-oriented course.
However, the turbulence of the last several years
has resulted in a re-appraisal. Economists and
CEOs are looking for new ways to measure business and commercial success. One thing is
certain: success over the long term means that
companies and economies must develop a
growth concept that departs from linear thinking
and is open to absorbing complexity. In this
dossier, think:act offers up some ideas pertaining
to this new, qualitative growthin collaboration
with students from the EBS Business School, who
provided the editors with valuable article ideas
and background information.
There are no great limits to

growth because there are
no limits of human intelligence,
imagination and wonder.
RONALD REAGAN, POLITICIAN
Growth is a
painful process.
WILMA MANKILLER, FORMER CHIEF OF A MAJOR AMERICAN INDIAN TRIBE
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D O S S I E R #16
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Seite 14
Rethinking growth
The end of linearity

The economy is back on its feet and growing. Yet the crash has changed perspectives and
spawned some unexpected alliances. Growth forecasters are discussing the limits of an
artificially levered economy, while skeptics are discovering the market principle.
NOBEL PRIZE WINNER PAUL KRUGMAN claims to

have known it all along. Economists who have spent
their entire careers on equilibrium business cycle
theory are now discovering, in effect, that they
invested their savings with Bernie Madoff, he wrote
irreverently at the end of 2008 in his blog. Despite
tremendous growth rates, the financial industry had
succeeded in vaporizing value rather than creating it.
That Krugman, a Keynesian and contrarian
both, gloats over the failure of his colleagues to anticipate the crisis is not surprising, but he has struck a
sore spot. No mainstream economist had forecast the
14
implosion of the US mortgage market or could prepare

the world for what followed. Even former Chairman of
the Federal Reserve Alan Greenspan is on record
before a House committee saying that there was a
flaw in the model that I perceived is the critical functioning structure that defines how the world works, so
to speak. He believed that financial markets were
efficient. They are, but only at sending waves of panic
around the world in a matter of seconds; experts call
that phenomenon financial contagion. In particular,
these markets seemed to have an infinite amount of
leverage combined with unimaginably large amounts
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Seite 15
Rethinking growth
D O S S I E R #16
You can also listen to this

article on our CD (page 59).
GrowthA Future without Boundaries was the

motto used by students at the European Business School (EBS) in Oestrich-Winkel, Germany,
when they organized their universitys 21st symposium at the end of September. In a congress
the students organized on their own, international economists discussed the issue of where new
growth was to come from if capital markets and
civil society set limits and raw materials become
scarce. The answer: The business world is looking for a new quality in growth. Given that Roland
Berger has been supporting the event for several
years now, a team consisting of think:act editors
and EBS students therefore jointly prepared this
report to outline a vision of what intelligent
growth in the 21st century could look like.
American Economic Association and Great Britains

Royal Economic Society, where suddenly even conservative top economists are discussing sustainability and alternative growth models.
October 2009 saw the founding in the US of the
Institute for New Economic Thinking, and since then a
half-dozen Nobel Prize winners and other top economists have used it as a forum to ponder re-booting
the prevailing ideas in their chosen scientific fields.
Large-scale investor George Soros is such a believer
in the Institute that he invested $50 million in it. And
in Europe, conservative heads of state like Angela
WHEN NEW GROWTH THEORETICIANS like John
Gowdy engage in debate, the word sustainability is

often heard. However, Gowdy is not referring to the
hollow concept of sustainability meant to simply
defend economic growth against the criticism leveled
by staunch pro-environment groups. On the contrary,
he is even in agreement with social entrepreneurs
and environment protectors, given that they have
learned a few things in the last several years, too.
Instead of getting caught up in ideological feuding
with companies and politicians, they are now eyeing
those market mechanisms that they used to vilify.
One prominent example is the Club of Rome.
Since the publication of its first report, titled The Limits
to Growth, in 1972, the Club has doggedly and sometimes naively struggled against how a free market
economy exploits the manner in which people try to
make a living. It is one of the principle witnesses of the
environmental movementand in the 1970s, its prognoses of the finiteness of resources reflected a seemingly severe miscalculation. Now, the Club has evolved
into a mastermind for a new type of growth. The Club
of Romes first report was not optimistic enough in
terms of technical progress, admits its current presi-
,The US photovoltaic company is the world

market leader for thin-film modules used
by the solar industry.
If we want to solve energy

problems, we need to think
on a much bigger scale.
Im talking about
multi-gigawatt facilities.
BRUC E S OH N, F IR S T S OL A R PR E SIDE N T
128
PV module cost per watt ($)
THINK: ACT COLLABORATES WITH

THE EUROPEAN BUSINESS SCHOOL
FIRST SOLAR
1.60
The company posted 128

percent growth in the last
three years.
Module cost/watt
1.40
1.20
1.00
0.80
1,200
2005
2006
2007
2008
Megawatts produced
2009
1,113
1,000
Megawatts
THE FIRST THING THEY NOTICE is that the standard models failed. John Gowdy, an economist at the
Rensselaer Polytechnic Institute in Troy, New York,
said, Economists completely fell under the spell of
the neo-classical model with its sheer rationality and
its continuous growth. And it did not allow for any
changes whatsoever. However, economic views are
shifting, as seen at the annual conferences of the
Merkel and Nicolas Sarkozy are putting economists

on a mission to come up with a new growth concept.
The trusty old gross domestic product (GDP) is
no longer sufficiently meaningful as a growth indicator for them. Germanys Expert Advisory Board to
Assess Macroeconomic Development and its French
counterpart, the Economic Analysis Council, are to
present ideas to governments in both countries. The
new growth is intended to include social and environmental consequences.
Such terms are mentioned in economic realms
under buzzwords like external effects and market
failure. Because the standard economic model does
not take into consideration environmental damage or
socially underprivileged individuals, these were, without much ado, declared exceptions and given their
own models. Now external factors are flowing in from
the outset to create new growth theories, resulting in
a new concept. It is one that perceives growth as a
cyclical process in which a finite supply of resources
is repeatedly recombined in a better way.
800
504
600
400
200
0
2,500
Millions of US dollars
of credit they could not cover in the real economy,

which resulted in growth expectations that almost
brought the system to a standstill. In the second year
after the crisis broke out, economists are looking for a
new, more stable growth concept.
206
60
2006
2007
2008
2009
Net sales
2,066
2,000
1,500
1,246
1,000
500
0
504
135
2006
2007
2008
Source: 2009 annual report
2009
Because it makes its modules with

inexpensive cadmium telluride,
First Solar is able to hold a solid market
share in the booming solar sector.
15
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Rethinking growth
MONSANTO
The US company produces genetically
modified seed that is resistant to climate
change and whose planting requires fewer
resources.
I see tremendous market

prospects, especially for
wheat varieties that require
less water.
We need to find ways to
expand agricultural production without jeopardizing
our natural habitat.
H U GH GR A N T, MONS A N TO C EO
Resource use reduction per crop unit in %,

US 20002007
30.6
dent, Ian Johnson, to think:act. Prior to his position at

the Club of Rome, he was director of sustainability at the
World Bank, which activists formerly liked to accuse of
carrying out neo-liberal activities.
Johnson no longer speaks of absolute growth
limits, but more of relative ones that shift with the
emergence of new technologies. He is convinced that
growth after the crisis needs to be qualitative
growth (see interview). In the future, increasing
absolute production quantities will no longer be a priority. Instead, it will be to do the same with less by
turning to more streamlined, refined processesin
other words, a brand new type of cyclical economy.
He can count on the ambitious plans and inventive abundance of entrepreneurs. Around the world,
they have been working on solutions geared toward the
cyclical economy, improving living conditions and a
higher-quality economy. Paul Polman, CEO of the consumer goods company Unilever, got to the heart of the
matter at a conference organized by The Economist
magazine and held in February. Referring to the failed
negotiations at the Copenhagen climate summit, he
said that at some point politicians would be able to
agree on standardized regulations for the world economy. Until that time, entrepreneurs would have to take
matters into their own hands. Even if a companys
moral compass is not sensitive enough on such issues
to take action, it should work in a more resource-sparing
manner out of self-interest alone, said Polman before
the assembled economists and company leaders.
ONE STUDY BY THE WORLD RESOURCES Institute
12.6
Soybeans
Corn
Cotton
11.4
% change in resources used and emission

per unit of output, US crops 20002007
Resources
Land
Water
Energy
Soil
CO2-eq.
Average
16
Corn
Cotton
Soybeans
26
21
50
32
21
27
10
30.6
12.6
11.4
shows that large-scale consumer-goods companies

like Unilever could experience decreasing sales on the
order of 13 to 31 percent by 2013 as a result of climate change and scarce resources. One survey conducted by the Credit Suisse bank revealed that twothirds of the companies worldwide expect that prices
of operating materials will increase in the future. In
another study, the EU Commission forecast that out
of 41 minerals examined, 14 are subject to a high
supply risk that could threaten industrial production.
Resource scarcity has made itself felt in the day-today business and cost accounting of companies. The
rules of the game are changing, concluded Polman in
his address at the economics conference.
Polman is not alone with his sobering analysis.

Like him, many companies have already identified
new rules to play the game by and are using them to
their own benefit. Company bosses are not just interested in increasing energy efficiency, improving
processes and replacing expensive raw materials with
cheaper ones. They are also keen on tapping brand
new markets. Climate-change-resistant crops, recycling technologies, solar power stations and wind
parks are just some of the future markets in which
international companies and successful mediumsized companies are getting more involved. There is
a reason why Siemens AG is investing in the wind
power sector, and why Monsanto and Dupont are
working on genetically modified seeds that thrive
even in drought conditions.
CHRISTIAN SEELOS, AN ECONOMIST with the IESE
Business School at the University of Navarra,
Barcelona, advises companies to keep a lookout
specifically for social and environmental problems
whose solutions someone would be willing to pay for.
Companies can thus not only demonstrate their
sense of responsibility, but also tap new markets.
Together with social entrepreneurs who volunteer
their efforts and expertise toward schooling, animal
protection and the provision of clean drinking water,
they are building up necessary production and sales
structures until a political topic has matured into a
business field.
First Solar is a company that embodies this
type of new growth. On the one hand, the US solar
company is one of the leaders in the sustainability
business, and it makes money by supporting clean
solar energy. Yet on the other, First Solar depends on
particular types of metal deposits.
Instead of using silicon that theoretically is
as plentiful as sand on the beach, they build their
solar modules out of cadmium telluride. As a result,
First Solars cells are up to 40 percent less expensive
than competitors, which is helping solar power to
catch on. However, the material is also the companys
Achilles heel because the worldwide availability of tellurium is limited, and the metal upon which the business model is based could soon run out. Growth in
2010 is anything but easy.
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Rethinking growth
D O S S I E R #16
The mechanism
behind progress
Is economic growth hamstrung by scarce resources and
over-reactive financial markets? The Club of Rome that
posed the question in 1972 about the limits to growth is
now developing a vision of a more refined economy that
can grow without destroying the planet.
THINK:ACT Dr. Johnson, many managers and economists are discussing
the limits of growth these days. What is your view?

IAN JOHNSON I think that we in the economic sciences are presently
witnesses to a bona fide re-orientation of former lines of thought. Economists are seriously asking themselves what economic growth and real
prosperity have to do with each other. They are also wondering whether
steady-state economies are possible and what role environmental capital
plays. The origins of this newfound interest certainly extend back to the
first Club of Rome report titled The Limits to Growth.
All right, so attitudes are changing. But isnt the the financial crisis the
reason for that ?
That is not the only reason. I think the worldwide recession was something
like a wake-up calland if that wasnt enough, we needed crises, too.
People are worried. Very few of them have benefited from the wealth that
ultimately was created by economic growth.
Is growth even possible anymore these days?
Of course it is. Poorer countries need growth to overcome poverty. Yet the
growth patterns of the past several years need to change. We grew quickly
without regard for net worth. We ignored the fact that our natural resources
are disappearing. We paid no attention to how the poorest of the poor are
faring. We let markets be created that resemble casinos when in fact the
market is a mechanism that generates prosperity and social progress. If we
continue to ignore these problems, the consequences could be very costly.
So what do we do now?
In my opinion, there will be a middle roadsomewhere between centralized planning and free markets. We will continue to rely on our financial
systems and the market economy, but pay more attention to the external
effects. We need to ensure that we value natural resources and whenever
possible put a price tag on them, too. We need to become less materialistic
and consumer-oriented, and therefore more tolerant and socially evolved.
Does that mean the good times are over? Do we, as citizens of industrialized countries, say goodbye to economic growth?
No. I think it makes sense to have two types of growth limits. One is for
absolute limits best exemplified by the fact that we only have one atmosphere that is filled with the air we need to live.
The other type is for relative limits, by which I mean that the implementation of innovative technologies requires a substantial amount of money
and a lot of effort. The major new energy sources for example are currently
shifting those kinds of limits.
All efforts geared toward renewable energies ultimately stem from the
concern of running out of coal and oil. Research and development need to
provide alternatives to coal and oil. And if companies cant provide alternatives, then they will have to be stipulated by laws. We need these types
of solutions. We are exploiting the biosphere, which knows no relative limits, without anyone even thinking about whether technical solutions are
even possible.
Are you calling for growth that is qualitative in nature rather than quantitative in nature?
I do believe that we do need a new type of growtha kind that generates
real and sustainable prosperity and improves the quality of life. More
and more people will be ready to earn less if they could live in a stable,
social community. We can measure these types of qualitative aspects.
According to estimates, Chinas economic growth would be three percentage points less if the associated environmental damage was included. That
is a significant drop.
How much time do we still have to correct our course?
Im no fortune-teller, and thats why I cant answer your question. The warning signals are clear and time is definitely not on our side. However, I am
confident that the business world, the political realm and civil society will
now make the right decisions to lead us to a more sustainable, growthoriented path.
17
D O S S I E R #16

Rethinking growth
Medicine for blindness

Roland Berger Strategy Consultants has augmented its widely respected Trend Compendium 2030, which was first compiled in cooperation with the Young Global Leaders of the
World Economic Forum in 2007. As before, the vision of the project extends far beyond the
developments of today to show how companies can remain in business in the future.
HARRY WARNER WAS A TITAN OF HIS AGE. In the

early years of the 20th century, the Warner Bros.
founder attracted audiences to cinemas in droves. So
when he heard about the idea for making talking pictures, he asked, Who the hell wants to hear actors
talk? This was an understandable reaction from the
man who could point to a long list of successes with
silent movies and Rin Tin Tin the Wonder Dog. But
Warner the entrepreneur was astute enough to recognize the implications of this emerging change. Consequently, in 1927 he brought The Jazz Singer, the first
feature-length film with synchronized dialogue, to
motion picture theaters. With that, cinema found its
voice, and the rest, as they say, is history.
This story appears in the introduction to Trend
Compendium 2030. The study describes life and
business in 2030, including valuable advice on possible strategies for responding to the changes to
come. The economic and financial crisis has shown
us that there is less and less that we can take for
granted, stresses Roland Berger CEO Martin Wittig.
Economists are talking about the new normal, a
term they are using to describe an environment in
which corporate management must be exercised
against a permanent background of extreme uncertainty and increasing complexity. Accordingly, the
editorial team directors, Christian Krys and Klaus
Fuest, have concentrated on trends that will have a
lasting change on business, and not be substantially

affected by new technologies or unforeseeable
events.
They describe in clear terms the megatrends
that will shape the economy. These include demographic changes: population growth, urbanization and
aging; future markets: globalization, the BRIC states
and new growth regions; scarce resources: energy,
water and raw materials; climate change: CO2 emissions, global warming, the environment and biodiversity; life sciences and the merging of technologies;
the knowledge society: training and competition for a
skilled workforce; the transformation into a socially
aware society in which global responsibility and nongovernmental organizations and organs for founding
and funding projects experience a new importance.
WE MAKE A DISTINCTION between the globallevel, industrialized countries, and threshold and
developing nations, says Fuest. In order to identify
and verify the megatrends, his team evaluated studies and statistics relating to society, economics and
research. The data was filtered and authenticated, and
its interactions analyzed and organized for clarity. Krys
points out that the team includes economists, engineers and psychologists: This way, we prevent bias
from entering the perspective and are able to understand the complex relationships among the trends.
Rethinking growth
For example, companies that concern themselves with the changes in demographics and the life
sciences can expect business to be good. Many people who are growing older and consequently becoming sick more often can also afford private services
for maintaining their health. In this field, a 16 billion
market is waiting to be tapped by companies that
offer convincing concepts relating to fitness, nutrition, medication and the like. This is in addition to the
800,000 jobs the health care business is expected to
create domestically in Germany by 2030. It should be
noted that this includes more than just nursing staff,
it also extends to employees in the pharmaceuticals
industry or prosthetics manufacturers; their products
are in demand all over the world. Today's developing
nations are themselves becoming interesting markets as they take steps to convert their wealth in raw
materials into greater affluence by increasing prices
to counter drastically dwindling resources. The Trend
Compendium 2030 helps readers discern these
megatrends and relationships.
The study also shows how companies will function in the future. By 2030, business organizations
will be completely globalized and will operate in networks that extend across all levels of the value creation process, blurring the boundaries between industries and countries. Long-term cooperation in several
markets simultaneously andif the project requires
iteven with competitors will be standard practice.
By the standards of the Transnationality Index (TNI),
few companies today are comprehensively active in
a large number of countries or regionsmost confine
themselves to their home country and a manageable
number of interesting foreign markets. In the future,
success will depend on maintaining a strong presence in all leading markets and establishing a truly
global footprint. According to Roland Berger CEO Martin Wittig, one megatrend augurs particularly rich
D O S S I E R #16
opportunities: The future will be characterized by the

trend towards green business. A critical success factor for companies and national economies alike will
be the cooperation between eco-experts from all
industries. Green technologies are emerging at the
interfaces among plant and mechanical engineering,
measurement and control technology, microelectronics, nanotechnology, energy technology, drive technology, and consulting. Those who wish to take
advantage of the opportunity that accompanies these
megatrends must find innovative solutions by adopting new modes of thinking, new structures and new
knowledge.
THIS HAS BEEN RECOGNIZED by the state government of Thuringia, in Germany, which has organized an
aid program called Thringen Greentech. The program is designed to link engineering sciences, the
trades and high-tech organizations to provide more
efficient, more sustainable ways to develop and manufacture products and bring them to market. The project is just one building block in a strategy for making
the state more attractive to businesses. Roland Berger
Strategy Consultants has examined how the program
will be affected by the megatrends. The Atlas of the
Future 2020 is intended to help steer the state into
the fast lane. It is a guide to innovation, growth and
employment, stresses Minister of Economic Affairs
Matthias Machnig. We are going to develop a comprehensive strategy, and armed with this catalog we will
define economic policy for years to come. For the first
time, a state government is behaving like a business
and pursuing a portfolio strategy for supporting its territory. RBSC partner Torsten Oltmanns hopes that more
future-oriented projects of this kind will follow: This is
the kind of courage it takes to combat blindness to the
future, which is inevitable when one is too comfortable
in the here and now.
To order the Trend Compendium, please contact:

trend_compendium@rolandberger.com or
http://think-act.com/trend2030compendium
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Philosophy and service

When you are successful at home, it seems logical to look abroad. But making yourselves known as a company worldwide
is far from trivialas is experienced right now by companies like Tata, which is currently trying to globalize its business.
But all difficulties aside, Tata and other new global players clearly have something to add to the global marketplace.
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D O S S I E R #16

ONE OF THE HARDEST CHALLENGES faced by companies is the extension of their business across borders, into other countries and other cultures. This is
true even when the two culturesthat of the companys home country and the market it is expanding
intohave many similarities. When the two cultures
are quite different, then the challenge becomes even
harder. In the past, some Western companies have
sometimes struggled to gain recognition or reputation
in the East. Today, as Asian companies become more
multinational and invest in Western markets, they too
are facing the same struggle. It took two decades for
Japanese companies to become accepted in the West
and by Western consumers.
How long will it take Chinese and Indian competitors to do the same? One key example of a company that is currently globalizing its operations is the
Indian conglomerate Tata. Here are some insights
from Tatas globalization.
Already Indias best-known and most highly
respected company, Tata is beginning to make an
impact elsewhere as well. In March 2010, brand valuation agency Brand Finance valued the Tata corporate
brand at $11.2 billion, making it the 65th most valuable corporate brand in the world.
THE TATA GROUP IS A DIVERSIFIED conglomerate
with more than a hundred businesses and global revenues of over $70 billion. Significantly, two-thirds of
those revenues come from outside of India. One of the
groups companies, Tata Consultancy Services, now
has operations in 42 companies, and others are
expanding fast. In Britain alone, Tata now owns
famous brands such as Jaguar, Land Rover and Tetley
Tea, along with steelmaker Corus, acquired in 2007.
With Corus, Tata has already started to venture into
using its own reputation globally, recently rebranding
the company as Tata Steel Europe.
Ratan Tata, Grandseigneur of Indian business
and head behind the spectacular transformation of the
company, is clearly reputation- and brand-minded. He
knows that 20 years ago, Tata was seen as something
of an old-fashioned Indian business group. Prior to the
1990s, he told think:act, we had a reputation, but we
did not have a brand. He made it a priority to build a
strong corporate brand, which helped give the group a
stronger sense of unity and cohesion, along with a

greater strategic focus. Tata was also convinced that
the group needed to expand internationally. I believed
that Tata could not remain a purely Indian company,
he says. Its future had to lie outside of India.
The basis for this going-abroad is an almost
philosophical strength the company enjoys in India,
a strength Western top managers have at their disposal. It is built on foundation stones such as trust
and reliability, but there is also a commitment to innovation and to going beyond the familiar. Long ago,
Mahatma Gandhi described the Tata group as characterized by the spirit of adventure. Today, says
R. Gopalakrishnan, executive director of Tata Sons,
We are here to solve problems that no other company
thinks of as a problem.
HOWEVER, ULTIMATELY, everything comes back
to trust and fulfilling promises. True business success can be established in the long term only on true
commitment to values, says Ratan Tata. If you fail to
do what you promise, then everything gets thrown
away. Your words then have no meaning to anyone.
All of Tatas leaders share a common philosophy
that the purpose of the business is to create value
and wealth for the wider community, not just generate profits for shareholders. Profit is a by-product of
what we do, says Gopalakrishnan. It is what we earn
if we provide a service to people. This philosophy is
clearly transportable to customers worldwide.
In practice it takes many forms, such as constructive engagement with employees on every level,
and massive programs of corporate social responsibility. At one location alone, Tata Steels plant at
Jamshedpur in Jharkhand, the company has an outreach program that provides health and education
services to nearly 700 villages.
We had a
reputation, but
we did not
have a brand.
R ATA N TATA
THE NANO, TATA MOTORS new micro-car, is an

example of how these values converge. For millions of
Indians, the sole source of transport is the scooter,
which can be uncomfortable during the monsoon
rains and dangerous on Indias crowded roads. According to Ravi Kant, vice-chairman of Tata Motors, the
moving force behind the design of the Nano was the
desire to provide a small, safe car that people of even
21
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Rethinking growth
modest means could afford, and which would improve

the quality of their lives. But just because the car was
inexpensive, there must not be any compromise on
quality. Ratan Tata insisted that this had to be a car
we could be proud of, says Prakash Telang, managing director of India operations for Tata Motors. Other
car manufacturers said it could not be done. But Tata
Motors engineers persisted, and in 2009 the first
Nanos went on the market in India.
HENCE, IT IS FAIR TO SAY THAT THERE ARE Indian
specifics strengthening the internationalization strategy. At the same time, however, Tatas strong associations with India may also be a barrier to acceptance
in the West. To international audiences, the brand is
associated with perceptions of India, says Peter Fisk,
consultant and author of Marketing Genius.
That can be both positive and negative. India
is one of the fastest-growing nations, with a mix
of exotic history and digital innovation, but still with
a perception of cheap and low quality in some peoples
eyes. This is especially true in heavy industry, a
traditional Tata strength and one in which it has made

major investments in Europe.
It remains true too that many people outside of
India know little about the country. Their perceptions
are shaped by films such as Slumdog Millionaire,
which portrays the poverty and the gap between rich
and poor. These things exist, but there are other sides
to India too: a tradition of excellence in service, for
example, and the spirit of innovation that made projects like the Nano possible. The challenge for Tata, and
others like them, is to get that story across to Western audiences without losing their own distinctive
features. Tata must stay true to the things that make
it special, says Peter Fisk.
So far, Tata has taken a pragmatic approach. In
consumer markets, where it has acquired iconic
brands such as Tetley and Jaguar, those brands have
been left to stand alone. Jaguar will never be called
the Tata Jaguar, says Ravi Kant. That simply would
not add value. Indeed, it is hoped that the luster of
the powerful Jaguar brand and its reputation for style
and quality will rub off on the Tata corporate image.
IN BUSINESS-TO-BUSINESS MARKETS, however,
the approach is different. In these markets, customers tend to have more prior knowledge and understanding of Tata, and the brand has more immediate
acceptance. The rebranding of Corus as Tata Steel
Europe is a sign of things to come. The real challenge
for the new Tata Steel Europe, however, as its leaders
acknowledge, is gaining acceptance by employees.
Tatas reputation is built on a platform of trust, but will
British and Dutch steelworkers trust Tata? Will they
accept that it is committed to building the steel industry in Europe and investing in them and their jobs?
That remains to be seen, and it will not be an easy job
to convince them.
Tata has many strengths, and the potential to
turn this into a global business is certainly there. But
Tata needs to convince international audiences that
its Indian heritage is a positive feature, and to demonstrate the power of its own values. It will need do this
with actions. Living the brand is something that
Tatas leaders do as well as anyone in the world today.
If they can continue to do so, then the prospects for
success are very good indeed.
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D O S S I E R #16
You can also find a film about this

A new dimension in growth

Knowledge is power, and that applies in todays competitive world more than ever. Its compelling to ask, how
powerful are todays knowledge economies? Intellectual capital experts Leif Edvinsson and Carol Yeh-Yun Lin
analyzed the issue. According to the findings of their long-term study, northern Europe comes out on top.
A COUNTRYS GROWTH IS BASED on the

development of its intellectual capital. Thats a
strong statement but also falls in line with Leif
Edvinssons point of view. And his primary
mission is to promote intellectual capital (IC) as
a growth resource. Edvinsson holds the first professorship in the field of intellectual capital at
Swedens Lund University. Also serving as the
director of intellectual capital for the Skandia
financial services company, he prepared the
worlds first intellectual capital report.
To better illustrate the issue, Edvinsson
developed exclusively for think:act a world map
of intellectual capital (see following pages). In
his opinion, the significance of the knowledge
factor is not universally understood. Politicians
and CEOs need to recognize and accept the
significance of intellectual capital, because
otherwise they will gamble away their future and
accumulate enormous debt for subsequent
generations, Edvinsson said. In 2006, he
created the New Club of Paris that is dedicated to
supporting countries, regions, cities, and organizations as they make the transition into the
knowledge economy.
EDVINSSON BELIEVES THAT NOT ENOUGH
countries paid sufficient attention to the relationship between knowledge and growth. These
days, he is touting his new book, titled National
Intellectual Capital. To date, growth was measured solely by the input-output relationship of
the GDP.
Ignored were major factors that influenced
social and economic development, such as:
knowledge expertise, quality of life, health,
resource consumption and environmental protection. This short-sighted perspective also
resulted in growth slumps as the economic crisis has demonstrated.

Around the world, more and more scientists and top politicians want to tailor the narrow
limits of the prevailing growth concept, whose
roots lie in the industrial era, to the global relationships between modern, knowledge-based
economies. Nicolas Sarkozy has tapped economists Joseph Stiglitz and Amartya Sen to identify
new indicators that measure economic development. At the same time, Edvinsson, along with
Carol Yeh-Yun Lin (Chengchi University, Taiwan),
presented his calculation method to portray and
compare countries intellectual capital.
With data collected from 1995 to 2008, the
calculation is based on the complex interaction
of five different types of capital, whose measurement involves a variety of relevant indicators,
which are referred to as: human capital, market
capital, process capital, financial capital and
renewal capital.
Edvinssons study divides the world into
four groups:
1. Winners:
Most of the top spots in the IC index rating are
held by northern Europes low-population countries. Their governments understood many years
ago that their future lies in developing the valueadding potential of every individual.
2. Losers:
In contrast, the rest of Europe is mired in stagnation. The large industrialized European nations
and countries in southern Europe are currently
seeing the development of the biggest debts,
which subsequent generations will have to bear.
3. Climbers:
The fastest climbers through the rankings are
located in Asia (specifically Malaysia, Singapore,
Korea, and Taiwan) and in eastern Europe (such

as Poland, Hungary, and the Czech Republic).
4. Giants:
These include the BRIC nations (Brazil, Russia,
India and China) that are wrestling to free up
the competitiveness of their human capital. If
they succeed, it will permanently change the
global growth ratio.
WHAT ALL COUNTRIES HAVE in common is
that human and market capital prevails. The former refers to the value-adding potential of
peoples ideas, and the latter pertains to the interpersonal networking that enables them to
exchange and co-produce knowledge. Forwardlooking investments into process capital, or the
hardware that enables and accelerates the
exchange of knowledge, and sufficient financial
capital are also deemed necessary to develop
maximum leverage based on the knowledge that
people have and share. Once that happens, the
capital is generated that, according to Edvinsson,
is critical for knowledge economies: renewal
capital. By this term he means the ability of a
country to continually re-invent itself and build
new springboards geared toward adding value
through knowledge.
To do that, Edvinsson says, we need a
new type of leadership that is able to understand
the complex system dynamics of the various
capital-based parameters and it is known as
societal leadership. Every country, with its history, culture, geography and economic development, will have to assemble the sharpest minds
in all areas and have the courage to invest in
their ideas. His studies show that countries that
truly understand this concept from the start are
todays winners and in terms of IC and GDP, too.
23
55,000
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THE WORLD MAP OF INTELLECTUAL CAPITAL (IC)

How high is the supply of intellectual capital? Leif Edvinsson created a map exclusively for think:act that shows IC distribution. It clearly reveals the positive effect
of intellectual capital on average income.
The position of each circle shows how a country rated in terms of intellectual
capital in 2008. Next to the respective countrys name, this IC value is specified
quantitatively; the higher the figure is, the better. In addition, we also provide the
position in the overall IC ranking for the years 1995 to 2008. The size of the circles represents the population size.*
Below, we also made an attempt at offering a prognosis for the future. Ultimately,
it shows that intellectual capital produces surprising winners (e.g., Malaysia) and
losers (e.g., Germany and the US).
50,000
45,000
Nordic countries
Denmark, Finland, Iceland, Norway and Sweden
Large western European countries
France, Germany, Ireland and Great Britain
Small western European countries
Austria, Belgium, the Netherlands and Switzerland
Southern European countries
Greece, Italy, Portugal and Spain
Eastern European countries and southern Africa
Czech Republic, Hungary, Poland, South Africa and Turkey
North American countries
Canada and the US
Latin American countries
Argentina, Chile and Mexico
Oceania
Australia and New Zealand
East Asian countries
Japan, South Korea and Taiwan
Southeastern Asian countries
Malaysia, the Philippines, Singapore and Thailand
BRIC countries
Brazil, Russia, India and China
40,000
SPAIN IC 28,019 22
35,000
GREECE IC 24,962 29
ITALY IC 27,844 24
30,000
CHINA IC 22,948 36
RUSSIA IC 24,302 32
25,000
POLAND IC 25,513 33
HUNGARY IC 27,240 23
Gross national product (PPP)
20,000
ARGENTINA IC 21,443 38
CHILE IC 27,584 28
MEXICO IC 23,445 35
TURKEY IC 24,610 34
15,000
10,000
S. AFRICA IC 24,981 31
PHILIPPINES IC 20,934 39
THAILAND IC 25,370 30
5,000
MALAYSIA IC 28,562 25
BRAZIL IC 23,503 37
18
19
20
21
22
23
24
25
26
27
28
IC
CHINA
INDIA IC 22,189 40
24
China is especially interested in

developing its intellectual capital.
Huge investments are flowing
into universities and research
centers, and work is ongoing to
develop an Intellectual Capital
Center. The up-and-coming economic power has seized the
development of its intellectual
capital as the only opportunity
to regain control of its environmental and resource problems
over the long term.
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NORWAY IC 35,951 9
SINGAPORE IC 38,133 6
US IC 35,488 5
SWITZERLAND IC 38,735 3
IRELAND IC 34,409 13
AUSTRIA IC 34,873 12
NETHERLANDS IC 36,205 8
GERMANY IC 34,187 15
DENMARK IC 39,445 4
GREAT BRITAIN IC 32,802 19

FRANCE IC 30,877 20
CANADA IC 35,255 10
SWEDEN IC 40,097 2
AUSTRALIA IC 35,064 11
BELGIUM IC 33,635 16
FINLAND IC 39,425 1
JAPAN IC 34,932 14
CZECH REPUBLIC 27
IC 29,367
TAIWAN IC 33,377 17
NEW ZEALAND IC 33,031 18
SOUTH KOREA IC 31,630 21
PORTUGAL IC 29,879 26
29
30
MALAYSIA
By setting up the Multimedia Super Corridor,
Malaysia has invested
massive amounts of
money in its process
capital, thereby attracting and developing a
tremendous amount of
human capital. Within a
few years, the former
palm oil kingdom
evolved into one of the
leading IT nations.
31
32
GERMANY
According to Edvinsson, no
one at a political decisionmaking level in Germany is
responsible for the development of intellectual capital/
social intelligence, even
though the country is a
leader in developing
intellectual capital reporting
for companies. Edvinsson
then asks, on what is
the countrys course for
the future based?
33
34
35
JAPAN
Japan was an early mover in
developing soft factors for its
intellectual capital. Back in the
80s, the country had opted for
softnomics, or the economyoriented development of
knowledge capital. The result
produced international leaders
in the car manufacturing industry who are currently excelling
where US and European car
makers are failing: the development of hybrid vehicles.
36
37
38
UNITED STATES
39
40
FINLAND
The United States actually does many

things right: For years, the investments in intangibles have been
increasing. However, according to
Edvinsson, the country has not been
able to derive value-creating concepts from these investments. The
value of knowledge is siphoned off by
other nations, he says. For example,
look at California: Many Asians educated in the US founded companies
however, the profits did not stay in
California, says Edvinsson.
Representing ICs success in northern European

countries, Finland holds the top spot worldwide.
For years, the country has invested massively and
wisely in the development of its social intelligence.
When the country stood at the brink of bankruptcy
in the early 1990s, all government spending was
drastically curtailed, while kindergartens and
schools continued to receive funding. Ten years ago,
a Committee for the Future was created where the
countrys top representatives meet with leading
scientists and experts to discuss future issues
associated with social development and generate
solutionstwice a week!
*Iceland is not shown in this graphic. In the course of the financial

crisis, the country delivered too little data for 2007 and 2008.
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Rethinking growth
Are we regulating ourselves to death?

The financial crisis has stimulated regulators imaginations. But how much regulation do markets really need to function
efficiently? think:act puts the issue up for debate. Alessandro Profumo, until recently the CEO of UniCredit Group, believes
that only strong, uniform regulation will create sustainable growth. Justus Haucap, director of Germanys Monopolies
Commission, disagrees, saying the crisis is being misused as an excuse for overregulation that actually threatens growth.
ALESSANDRO PROFUMO
was CEO of UniCredit Group until
last September. He made UniCredit
the second-largest bank in Europe
and was an important participant
in reorganizing Italys banking
sector. Observers have linked the
reformers resigning to increasing
political influence.
26
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Rethinking growth
Clear and stringent regulatory frameworks in no way hinder economic

growth. Quite the opposite: Strong, uniform regulations create a basis
of trust for all market participants. As such, they are part of the foundation that supports sustainable growth. And now is also the right time
to implement effective regulation of the financial markets. Missing this
opportunity would be a huge mistake. Why?
Because it is much easier to introduce changes
in a crisis situation than under normal circumstances. We currently have national budgets
deeply in debt across Europe as a result of the
financial and economic crisis. These debts can
only be repaid if we have more growth. That is
why we need reform now that will promote a
strong, integrated European market with a uniform economic policy. I have never believed in
total self-regulation for the markets. A good
new regulatory framework would be advantageous for banks, financial markets and the stability of the economy.
The current uncertainty in the banking sector
is dangerous: When banks rarely take on risk
anymore and avoid financial innovation, we
pay the price with substantially lower growth rates.
The financial sector is an important growth driver
for the entire economy, but the industry is suffering from massive image problems right now.
And right now we need to rebuild the trust in
banks that was lost during the financial crisis
by implementing a better and more credible
financial market oversight authority. Then the
banks can once again assume their role as
growth drivers. For that reason, I support the
idea of a common European banking supervisory
authority. Banks all need to have the same
framework conditions, ideally worldwide. I think its
important that the financial sector is involved in developing these new framework conditions. The challenge is to
preserve the financial sectors role as an economic growth driver
while at the same time curtailing the causes for the current market turbulence. A common banking authority for European nations would be an
important step in the right direction. The regulators job would be to
avoid national isolation and drive the integration of financial markets.
The current crisis has demonstrated how quickly panic can spread
D O S S I E R #16
through the markets. Government agencies need instruments to monitor markets better and keep them under control. European supervisory
authorities should mediate disputes between nations and be able to
intervene quickly and decisively in crisis situations. Such a strong
supervisory authority would bring greater stability to major European
banks like UniCredit Group, and thus would be
the basis for lasting growth.
The size of banks cannot continue to be considered a risk factor for the entire economy.
Therefore, in addition to stricter oversight regulations, I advocate establishing a rescue
fund financed by contributions from the
20 largest banks relevant to the system. It
could bring in about 20 billion or so. This
would be far more effective and fair than a
flat-rate contribution for all institutions.
However, banks could only access this fund
if the responsible supervisory authority
gives its OK. Furthermore, the oversight
authorities should replace the banks management in crisis situations in order to be able to place
the bank in receivership quickly.
This type of rescue fund would be important for a
number of reasons. First, every market participant
would know that individual failing banks would
be brought under control quickly. This would
prevent panic in the markets that could
endanger the entire system. Second, it also
ensures that major banks that are relevant to
the system do not have to be bailed out by
taxpayers. The problems in todays markets
did not come about because some banks got
too big. Size is always relative: When I get into
a Smart ForTwo, I seem tall at 6 feet, 3 inches. In
a Mercedes sedan, I dont. Big banks like UniCredit
need to be measured from a European perspective,
not an individual countrys. The biggest problems werent
caused by the biggest banks, as shown with Lehman Brothers or
IKB in Germany. Especially in view of the current and potential future
crises, the right and important thing for a European banking group is to
have the ability to diversify our risks through further growth and utilize
returns to scale. I am convinced that the idea of one large European bank
has a future, and that it can be a growth driver for the European economy.
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D O S S I E R #16
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Rethinking growth
Thanks to the crisis, we are running the risk of allowing too much government in the economy. We saw that governments exerted
too little influence on the financial markets before the
crisis. That is why trust in the markets ability to heal
itself has been damaged. Now the pendulum is
swinging in the other direction: The government
is being entrusted with too much. And in so doing
many people forget that the current economic
crisis also represents a failure of government.
It did not create the right framework conditions
in the financial markets, nor did the national
banks take action any better than private banks
did. Some institutions in the banking sector had
become either too large or too interconnected to be
allowed to fail. These system-relevant institutions
will have to take more precautions themselves to mitigate risk in the future. We need to understand clearly
that there always will be economic upswings and
downturns as well as crises in individual industries. Nothing can prevent that. And we cant fully
prevent bubbles in the stock or real estate markets either. However, we can certainly prevent
banks from needing to be rescued by taxpayersby requiring them to take precautions
themselves. Of course it is important for the
credit economy to get back on its feet again. But
state intervention can be counterproductive here
as well. Politically motivated and guided credit
business can put the brakes on the upswing in
the private banking system.
Too much government is a true dangerwhen
regulatory policy standards are thrown out the
window and people speak out in favor of overregulation, we bring our own economic growth to a
standstill. Thats just what were seeing in the US
right now. The governments massive spending
programs to stimulate the economy have had relatively little effect because they were unable to
deal with the fundamental problemthe loss of
trust in the economic system. To jump-start
growth again, all government intervention needs
28
to be scaled back systematically, and in Germany, for example, the rescue fund needs to be wrapped up by the end of this year. The
minister for economic affairs needs to hold ground
against the influence of interventionists. They should
not choke off the upturn with additional taxes or by
regulating temporary work more strictly.
One mistake made after the crisis was that the
needed stronger regulation of the financial markets also was applied to the real economy. Yes,
we had an economic crisis, but the systems in
the real economy did not fail. The market economy lives from the fact that every opportunity is
associated with risk. Thats the only way our
economy can grow. The responsibility must always
lie with the one who makes the decisions. But making taxpayers pay the consequences cancels out the
system. Companies that make major errors too often
need to be winnowed out of the market, otherwise
they slow down economic development. If a company runs into a crisis because of a collapse in
economic growth, the government should not
help it by forgiving loans or guarantee credits.
It cannot carry that risk permanently. Taxes
would also need to increase over the long term
because public debt would rise. This would limit
the scope of political action even further, and the
higher taxes have the effect of slowing growth.
However, this danger does not exist if companies go
bankrupt, because their production capacities do not
disappear from the market. If a company like Schaeffler went
bankrupt it wouldnt mean that an automaker would
have to build cars without brakes. The customer would either find a new supplier,
which would create new jobs, or a
new owner would take over production and restore the factory. The
key jobs would be saved either
way. Therefore, a corporate bankruptcy poses a much smaller risk
to economic growth than a government rescue action does.
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Rethinking growth
D O S S I E R #16
JUSTUS HAUCAP holds the

chair of economics, specializing
in competition theory and policy,
at Heinrich Heine University in
Dsseldorf and is the founding
director of the Dsseldorf Institute
for Competition Economics.
Haucap was named the director
of Germanys Monopolies Commission in July 2008.
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p industry report
Does China change the e-game?

Experts agree: China needs an alternative to petroleum-powered cars. The government knows that
and is currently subsidizing the electric-vehicles industry heavily. The big question though: Will the
Chinese customers buy the e-cars? A report by Automotive News Europe journalist Douglas Bolduc.
Ask any automotive executive to name the

industrys most talked-about topics right
now and the list certainly will include China
and electric vehicles (EVs).
Chinas rise last year to No. 1 in global auto
sales has provided more proof that it will be
an automotive superpower for years to
come. Therefore, when the Chinese government in June ended years of wavering
between various technologies for alternativeenergy vehicles and cast a vote in favor of
electric vehicles, executives from Detroit, to
Wolfsburg, to Paris, to Toyota City took
notice.
There is no doubt that Beijings decision to
provide a maximum subsidy of 50,000 yuan
(about $7,460 currently) for locally made
plug-in hybrids and 60,000 yuan (about
$8,950 currently) for full-electric vehicles
purchased in five key cities will have a big
effect on the global auto industry. The
future of electric vehicles in China is very
bright, Renault-Nissan CEO Carlos Ghosn
said during a press conference in China in
late September. Also in September, Ulrich
Hackenberg, Volkswagen brand product
development chief, told Automotive News
Europe: We believe the momentum for
e-mobility is currently strongest in China.
HOW BIG IS THE GAME CHANGE?
However, debate rages on whether Chinas

decision is a true game-changer. EVs and
plug-in hybrid vehicles are forecast to
account for 1.5 percent of a total Chinese
market of about 14.25 million units by 2015,
according to Roland Berger analysis. That
30
translates into 214,000 sales (115,000 EVs and

99,000 plug-in hybrids).
Regardless of the amount of the government
subsidy, cars with alternative powertrains,
especially full electric cars, force customers
to make compromises. Todays batterypowered vehicles are very expensive and
have a limited range. Making matters worse
is that the infrastructure to support electric
cars is just starting to be built. And to top it
all off, EVs are no betterand in some cases
worsefor the environment than a car with
a combustion engine if their electricity
comes for a dirty source such as an outdated
coal plant.
Industry experts say that China is not pushing so strongly toward EVs, for environmental reasons. An EV in China, with its vast
array of coal-fired power generating plants,
would indirectly emit 179 grams of CO2 per
kilometer, former VW CEO Carl Hahn told
Automotive News Europe this summer, citing VW data.
By comparison, the so-called well-to-wheel
balance offered by EVs operated in Europe
would be 89 grams per kilometer of CO2,
according to VWs data.
Renault Chief Operating Officer Patrick
Pelata told Automotive News Europe that:
This figure goes down to 12g/km in France
[where much of the electricity comes from
nuclear power stations], and grows to about
80 grams per kilometer when electricity is
generated using compressed natural gas.
As China grows, so does its energy consumption. The country had a crude-oil demand of
9.5 million barrels a day in 2009, accounting
for roughly 10 percent of global supply,

according to Roland Berger data from SMC.
If demand and supply increase at the same
pace as in the last decade, China will have a
demand of approximately 30 million barrels
a day in 2020. That would represent 25 percent of global supply, the data shows. Vehicles would account for more than two-thirds
of this figure. The bottom line is that the
Chinese need to reduce their dependency
on oil, Roland Berger analyst Wolfgang
Bernhart said. They have to find alternative
solutions, especially for the transportation
sector.
CHANCE TO GET AHEAD
Former VW CEO Hahn said that another

reason China is encouraging the adoption of
EVs is to leapfrog its competitors who are
much further ahead in their development of
internal combustion engines. Hahn predicted electric and hybrid-electric vehicles will
be limited to 10 percent of the global market
until 2030. After that, he said, technical
advances will allow electrification to spread.
Roland Bergers Bernhart agrees: The real
breakthrough for electric vehicles will come
after the next generation of battery technology is developed, which is 10 to 15 years
from now.
Hahn said that increasing urbanization
favors EVs. In 2008, for the first time, the
majority of the worlds population lived in
urban areas, he said, citing data from the
United Nations Population Division.
Hahns former employer anticipates the
global market share for full-electric vehicles
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industry report f
to be 2 percent by 2020. Renault-Nissan CEO

Carlos Ghosn is much more bullish: He says
EVs will account for at least 10 percent of
worldwide sales by 2020, roughly 6 million
units a year.
Nissan started its EV battery research in the
early 1990s. The automaker considers the
2007 formation of its battery joint-venture
company with NEC Corporation to be a
key to where it is today. The joint company,
Automotive Energy Supply Corporation,
focuses on the development and mass
production of lithium-ion batteries for

everything from hybrids to electric vehicles
to fuel-cell vehicles.
At about the same time that the joint venture was formed, high-level Nissan executives were given a presentation that those
who were in the room say proved the
inevitability of electric vehicles. Basically,
the executives were told that for automakers
to do their part to slow global warming,
vehicle emissions would have to decrease by
a minimum of 70 percent and ideally by
80 percent. Simon Thomas, Nissan Europe

senior vice president of sales and marketing,
told Automotive News Europe that after he
heard the presentation he knew that massmarket EVs would be a reality during his
career, something he didnt anticipate. But
he said the data he saw and heard was just
too powerful to ignore.
We already know, and I think every other
manufacture would concede, that it is technically impossible for combustion engines
in the car park to reduce [emissions] by that
V W C EO M A RTIN W IN T E R KOR N
R E N AU LT- NIS S A N C EO C A R LOS GHOSN
SIMON T HOM A S, R E N AU LT- NIS S A N
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p industry report
amount, Thomas said. So it leads to the

conclusion that you have to move to zeroemission vehicles. And there are only two
known solutions today, EV and fuel-cell
vehicles.
A crucial reason why Nissan chose EVs is
because it sees great potential for them as
the global car park grows from 600 million
currently to a forecast 2.5 billion in 2050.
There is no way India is going to populate
its country with 50,000 petrol sites; same
with China, Thomas said. There is a real
leapfrog opportunity for those emerging
countries so there is a massive growth
opportunity there. We dont have to wait for
Paris, London and Rome to adapt to a new
infrastructure.
China appears ready to spend a fortune to
take advantage of the opportunity. The
countrys government will invest more than
100 billion yuan ($14.9 billion currently) to
subsidize its efforts to quickly develop its
nascent new energy vehicle industry over
the next 10 years, the Shanghai Securities
News reported this summer.
According to a draft plan worked out by the
Ministry of Industry and Information Technology, 60 billion yuan will be invested in
the development of energy-saving technologies, the newspaper said, citing unnamed
sources. The remainder is set to fund the
construction of infrastructure to support
energy-saving vehicles in select cities,
among other projects, it said.
There is no
way India is
going to populate its country
with 50,000
petrol sites.
SIMON T HOM A S, S E NIOR V I C E PR E SIDE N T
S A LE S A N D M A R K E TING, NIS S A N EU ROPE
To be a
resounding success, the electric
car must be
affordable for a
wide range of
people and
must be uncompromisingly
practical in
everyday use.
M A RTIN W IN T E R KOR N, C EO, V W
GOVERNMENT SUPPORT IS STRONG
The government also wants to see three to

five major makers of energy-efficient cars
develop as well as two to three makers of
parts that can supply them, according to the
report. The 50,000-yuan incentive for plug-in
hybrids and the 60,000-yuan subsidy for EVs
will be available for domestically produced
cars in five Chinese cities: Shanghai,
Changchun, Shenzhen, Hangzhou and
Hefei.
32
The future of
electric vehicles
in China is
very bright.
C A R LOS GHOSN, C EO, R E N AU LT- NIS S A N
Beijing has not explained why it chose the

five cities to participate in the pilot subsidy
program. But it is widely believed that the
government did so to restrict the subsidy to
the six automakers based in those cities.
The favored automakers are Shanghai Automotive Industry Corp., China FAW Group
Corp., BYD Co., Zhejiang Geely Holding
Group Co., Zoyte Holding Group Co. and
Chery Automobile Co. All six companies are
developing plug-in hybrids and EVs.
BMW IS CHASING GM
SAIC plans to roll out its first hybrid car this

year, while carmaker and battery-maker
BYDwhich is backed by US billionaire
investor Warren Buffetts Berkshire Hathawaystarted retail sales of its plug-in
hybrid F3DM in March.
General Motors Co. subsidiary Chevrolets
Volt plug-in hybrid is scheduled for a 2011
debut. GMs joint venture with SAIC can sell
the Volt in Shanghai, thus qualifying for the
big price break.
Other automakers will follow GM into the
segment in China. BMW AG, which has a
joint venture with Brilliance China Automotive Holdings Ltd., has promised that by 2014
it will launch its Megacity Vehicle EV in
China. PSA/Peugeot-Citron SAs China
roadmap includes launching EVs as well as
a plug-in hybrid in China within the next
decade. PSA, which has joint ventures with
Dongfeng Motor Group Co. and China
Changan Auto Group Co. Ltd., says it aims to
help halve the countrys fleet vehicle CO2
emissions to 95 grams per kilometer by 2020,
from 180 grams per kilometer now.
In June, Volkswagen, which has joint ventures with SAIC and FAW Group Corp., said
the China-developed Lavida blue-e-motion
shows that the German giant will naturally
be producing electric vehicles tailored to the
needs of the worlds most significant automotive market. VW was vague on when it
will launch the Lavida EV, which is based on
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industry report f
Nissan plans to launch eight different

EVs in Europe, the US and Japan.
Regarding China, the company
currently sorts out the best ways to
introduce EVs in the country.
an extended version of the Golf platform.

VW will only say that the Lavida EV will follow soon after the Golf blue-e-motion EV
arrives in 2013.
By that time, Renault-Nissan will have spent
4 billion to launch as many as eight different EVs in at least five key segments in
Europe, the United States and Japan.
Without being more specific, the FrancoJapanese alliance partners have said they
aim to have EV production capacity of
500,000 units in the next few years to supply
battery-powered vehicles to the Renault,
Nissan and Infiniti brands. In late September, Renault-Nissan CEO Ghosn said Nissan
is in talks with Chinese partner Dongfeng
about the best way to introduce electric
cars in the country.
THE IDEA: CITY DWELLERS WILL BUY
The question is: Who will buy EVs in China?

The answer is wealthy city-dwellers. Half of
the consumers with a monthly income of
more than 16,000 yuan (about $2,400) said
they would probably consider a new-energy
vehicle, according to a survey done by market researcher J.D. Power. The data shows
that most of those respondents live in one of

Chinas megacities. Overall, 39 percent of
the nearly 36,500 survey participants were
considered potential buyers.
The problem is that only 10 percent of the
potential buyers would be willing to spend
10 percent more for an EV. VW CEO Martin
Winterkorn touched on the high price of
EVs in June. During a presentation in
Shanghai he said: To be a resounding success, the electric car must be affordable for a
wide range of people and must be uncompromisingly practical in everyday use. Only
thenat high production volumes and if
possible on all continentscan one truly
speak of the beginning of the era of the electric automobile and of measurable positive
effects on the environment.
Winterkorns sobering comments did nothing to cool Chinas enthusiasm for EVs.
On July 6, officials from three ministries and
the nations highest economic planning
agency flew to Shenzhen to declare the
launch of the five-city pilot subsidy program.
This showed auto executives that the government is united and there would be no
more debate.
Also on July 6, Shenzhens city government

announced plans to provide up to 30,000
yuan to buyers of plug-in hybrids and up to
60,000 yuan for EV buyers. Those funds are
in addition to Beijings subsidies, resulting
in a discount of nearly $18,000 on the starting price of an EV, a major boost for BYD,
which is headquartered in Shenzhen.
CHARGING STATIONS ARE BEING BUILT
In addition, Chinas government has

assigned two electric utilities, three large oil
companies and major electrical equipment
makers to build EV charging stations across
the country. The state-owned companies
also have been told they need to help complete a draft of technical standards for battery-charging stations by the end of this
year, according to official China media.
No doubt: Chinas EV and plug-in hybrid
subsidies are the most generous in the
world. Clearly, Beijing can do more than
most other governments to create a home
advantage for its domestic players. What
remains to be seen is whether that will be
enough to turn the worlds largest automaker
into the global epicenter for electric cars.
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p industry report
The reputation premium

In their search for competitive advantage, companies today strive for an outstanding reputation in
the eyes of the customers. However, how to manage this intangible asset? New research indicates that
reputation can be managed in an efficient mannerwhich then allows for premium prices.
Warren Buffett has long understood the

link between a sparkling reputation and a
booming business. Lose money for the firm,
and I will be understanding, the billionaire
told staff in 1991. Lose a shred of reputation
for the firm, and I will be ruthless. In the
two decades since the Oracle of Omaha
made that statement, reputation has only
grown in importance. Consumers and
clients today have access to a wider choice
of products, services and providers than
ever before, and damaging news of failings
can spread across the Internet in minutes
as BP and Toyota discovered this year
trashing sales and share prices.
While a positive reputation is now crucial
for any premium business seeking to stand
out from the competition, many firms find it
difficult to manage this somewhat intangible asset. However, recent research shows
that a successful reputation strategy can be
planned around hard data. Before plotting
that strategy out, though, companies first
34
need to understand the basic building

blocks that make up their own reputation.
According to Dietmar Fink, research fellow
at the University of Oxford and head of the
Cologne-based Wissenschaftliche
Gesellschaft fuer Management und
Beratung (Academy of Management and
Consulting), and Torsten Oltmanns, Roland
Berger partner and also Research Fellow at
Oxford Universityauthors of a new study
on reputations causes and effectsreputation comprises three main factors ascribed
to a company by its stakeholders, including
their customers, employees and investors.
CONFIDENCE, APPEAL, TRUST
The first element, explains Fink, relates

to the stakeholders confidence in the
expertise of a company, such as whether
a high-tech firm like Apple has the expertise
to build state-of-the-art gadgets. Reputation,
adds Fink, is also dependent on a companys emotional appeal to the individual
stakeholderPradas understanding of its

customers luxury aspirations, for instance,
or a consultancys ability to persuade a
potential client that their employees share
similar values. And finally, says Fink, a
strong reputation is dependent on the stakeholders trust in the companys moral
integritysuch as whether a professional
service firms employees are perceived as
loyal to clients, and whether that client in
turn feels able to entrust important information to the firms employees.
This three-part model can be applied to any
company regardless of their field of activity,
notes Fink, but the relative importance
of the three dimensions of reputationconfidence, appeal and trustwill change
from industry to industry. In order to establish the most important contributors
to a positive corporate reputation in the
management consultancy sector, Fink interviewed some 300 executives from leading
German firms about their perceptions of
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eight consultancies. The result: a clients

confidence in the skills and abilities of a consultancys employees is the greatest contributor to reputation, having an effect nearly 30
percent larger than that of appeal, and 60
percent larger than that of trust.
MORE TRAINING SCHEMES
This suggests that consultancies eager to

efficiently raise their reputation with clients
should direct money and effort toward initiatives that boost the perception of their
staff as experts in their fieldsuch as highprofile training schemesand easy to work
alongside, rather than promoting the message that their employees are trustworthy
and free from ulterior motives. More generally, this model makes it possible to enhance
reputation cost-effectively.
This thinking holds relevance for other
industries, too. It is likely that companies
that work in professional services and have
regular close interaction with clientssuch
as accountancies, banks and law firms
could also benefit from implementing a similar strategy.
The study shows that there are significant
business benefits for organizations that
develop their reputation with this model
in mind. Their research revealed that on
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average, clients were willing to pay a consultancy with a premium reputationone perceived by clients as having highly competent employees with values similar to those
of their own staffaround 50 percent more
than a firm with a mid-market reputation.
They were also 40 percent more likely to
place that consultancy on a short list of firms
to be contacted about an upcoming project.
Fink notes that the effect of this positive perception continues long after a contract has
been signed: a client is roughly twice as
likely to follow the advice of a firm with a
favorable reputation compared with a consultancy perceived as average.
For companies working in sectors where
there is less direct employee-to-customer
contact, however, the contributors to a positive reputation will be differently weighted.
So its essential that any corporation thinking of implementing a reputation initiative
first establish the relative significance of
each of these three factors to their stakeholders. Following BPs recent disaster in
the Gulf of Mexico, for instance, its likely far
more important that oil and gas firms focus
their reputation-building efforts on developing trust (persuading governments and
investors that they will keep promises of
applying the highest safety standards) and
confidence in their engineering and technical expertise, instead of appeal (such as trying to convince the public that they share
their desire for cleaner, greener energy).
But no matter what industry a company
works in, if they can establish the right reputational mix, theyll almost certainly experience a boost to the bottom line. US brand
and marketing consultancy Prophet last
year noted that 22 corporations that appear
on at least two of the three most credible
reputation rankingsFortunes Most
Admired, Forbes Worlds Most Reputable
Companies and Barrons Most Highly
Respectedscored annualized shareholder
returns almost 13 percent higher than their
competitors and around 11 percent ahead of
the Standard & Poors 500.
REPUTATION NEEDS CONSTANT NURTURING
Of course, developing such a successful reputation requires much more than just a oneoff initiative. Firms must constantly manage
and adapt their reputation strategy to
ensure they live up to their stakeholders'
ever-changing demands. But companies that
persevere can expect big rewards: from winning the long-term loyalty of customers and
clients, to consistently outperforming their
less reputable rivals.
35
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p industry report

Convenience to the people

Big is beautiful? Not always, thinks Polish retail manager Jacek Roszyk. With his company abka, he
is conquering the country with small convenience stores. In this exclusive think:act interview, the
abka CEO talks to Financial Times journalist Jan Cienski about how the firm has rapidly expanded in
the region, his companys innovative business model and its development of an up-market brand.
THINK: ACT Mr. Roszyk, when did the idea for

opening abka shops occur?
JACEK ROSZYK We started our pilot project in
1999 by opening four shops in Poznan and two
more in the vicinity. We tested various locations, sizes, the stock and opening hours. After
one year we felt that we had sufficient data on
the consumer behavior and their requirements.
Our team decided to prepare a proper business
plan, get the capital ready and proceed with the
launching of a completely new retail chain on
the Polish market. I think that with regard to
the economic reality, we did it at the last reasonable moment. Building a new chain presently, without an existing sales structure, would
just not be worth it; it is easier to make an
acquisition, or to add an existing format, as
were doing now with Freshmarket.
Seems as if you entered the market
at the right time then?
There was much less competition than today,
despite much greater fragmentation of the market, and fewer strong foreign and Polish retail
chains. This was only five years after the establishment of the first retail chains in Poland, as
the first foreign retailers arrived only in 1995.
Those five years1995 to 2000led to dynamic
development of the Polish market, but it was
still possible to introduce a new entityespecially as the convenience sector had not taken
its final shape. There were a lot of independent
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family shops, but there was no clear message to

the client as to the standard image and opening
hours. Back in 1999, most such shops closed at
6 p.m. with only a few open to 8 p.m. Today
that is unimaginable; we created new standards with opening hours from 6 a.m. to 11 p.m.
But why did you think the Polish market
was ready for a convenience-store format?
We looked at the retail market and saw the
hypermarket segment was already dominated
by foreign chains, that the discount sector was
already mature, but it turned out that the
small-shop market was wide open. Except for
petrol stations, there was no competition in the
convenience sector. As we were the first, we
were able to quickly become the leaders. At the
JACEK ROSZYK, 38 (in

the picture with FT journalist
Jan Cienski), is one of the more
experienced retailers in Poland.
He took part in the creation of
the Biedronka discount chain,
now owned by Portugals Jeronimo Martins. Together with
serial entrepreneur Mariusz
witalski he helped launch
abka convenience shops in
1999. Currently the CEO of
abka, Roszyk holds a doctorate in economics and serves on
the board of Lewiatan, the Polish employers confederation.
38
time people thought that the market would be

dominated by hypermarkets; now, a decade
later, we see that the market will belong to convenience shops. There is still a potential of
about 100 billion zlotys a year, 25 billion,
larger than the hypermarket segment, and
that the convenience market is growing by
over 8 percent annually.
How does the Polish retail market compare
with other countries in Europe?
The Polish market looks different from those in
France, Britain, Germany or Spain. Our market is still largely fragmented, which means
that competition is the strongest in Europe.
In Poland, large-format shops control about
50 percent of the market, while small shops,
including convenience stores, account for the

remaining 50 percent. In Poland, the 10 largest
retailers control about 33 percent of the market, while in Britain, Germany and Scandinavia their share exceeds 90 percent. Even in
the Czech Republic, 66 percent of the market is
controlled by its 10 biggest retailers. It shows
that the Polish market still awaits consolidation processes. Small, medium and large retailers have adapted very well, and it is hard to
take over their market share. One thing that
will happen is that the group of 70,000 independent retailers who do not belong to larger
networks will gradually decline as they have
difficulties with advertising and wholesalers.
However, they often have excellent locations,
which is why they continue to profit.
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industry report f
Lets talk about the Polish customerhow

has he changed in recent years?
Consumers became increasingly demanding.
There are price-sensitive customers, but there
are also the better-off, who value convenience
and time; and then there are affluent clients for
whom the ease of buying is the most important.
Those separate segments have crystallized over
the last decade, and the battle is now not over
attracting a client from a different group, but
over winning customers from within a given
group. In the market there are about 70,000
independent shops and 30,000 shops operating
in some sort of a loose franchise format, and we
want to win their consumers.
But have you really been able to create a
brand that is widely recognized in Poland?
According to the recent survey, abka brand is
recognized by 95 percent of our customers. It is
partly attributable to our presence in the marketwe have 2,300 shops, and their popularity
is also the effect of advertising campaigns.
Your business itself is based on franchising
Our business model is halfway between a traditionally owned and a franchised store. We have
combined advantages of both systems, which
we find the most dynamic. For example, you
can become a abka agent practically without
making any investments. abka Polska provides you with the shop, equipment, training
and the stock, which is only replenished when
it has been sold to the final client. This helps us
reduce potential risk. We also guarantee a minimum salary to the agent and we cover his initial costs. The agent works on his own account,
as he has his own sales margin, so the more he
sells the more he earns. He is also responsible
for staff costs, while abka covers rent, security
and insurance. What is important for us is to
retain control over the image and marketing.
Shops have to maintain a uniform look with
the same merchandising and standardized
prices. The agent has to know the local conditions and adjust his costs accordingly. We also
hold regular training sessions for the agents.

In this mixed model, we control the business
but the agent is strongly motivated.
Is there much demand to become an agent?
We will open about 250 abka and 50
Freshmarket shops and we have no trouble
finding people.
Penta Investments, the Czech and Slovak
investment firm, took over abka several
years ago; what has changed since then?
Penta took over in 2007. They are a credible
and financially sound investor, which allowed
us to obtain financing on advantageous terms,
accelerate development and open new shops.
We were also able to develop Freshmarket, our
new format. Furthermore, we were greatly
assisted in adjusting our model to the Czech
market. We have almost 100 abka shops there
now, and have also acquired 45 Koruna supermarkets. They helped us move beyond Poland.
Does Penta also get involved in the actual
management of abka?
Penta is a passive financial investor. abka
management is there to develop a strategy and
a business plan and to consult on it with the
investor. Implementation of our business plans
is entirely up to our management.
I understand Penta is considering an IPO
for abka
There is still no final decision. If there were
such a decision, it would not happen before the
second quarter of 2011.
You mentioned the new Freshmarket shops.
How do they differ from abka? And what
concrete role do they play in the development of the company?
We noticed that there were prospective store
locations that were too large for abka format.
A typical abka store needs about 70 to 80 m2
of retail space, which means less opportunity to
display some products. Freshmarket stores
have space from 100 to 250 m2. Now we can

accept locations ranging in size from 60 m2 all
the way to 250 m2. With Freshmarket we were
able to develop fresh fruit and vegetable stands,
chilled goods and ready-to-eat mealsthey can
all be found in what we call the Fresh Alley.
Freshmarket stores also feature Fresh Cafe corners, where we offer coffee, tea, juices and food
like sandwiches and cakes. We also added
cheeses and meat stands. The Freshmarket format is a good supplementation of abka as it
does not cannibalize our convenience-shop
format. We also increase the buying power of
our chain, and we can promote and market
ourselves more effectively.
I understand that the Freshmarket shops are
aimed at a slightly more affluent client
They are slightly more up-market. We have
developed this model over the last two years,
taking the best that was on the market as well
as what was best in our previous shops.
Could you talk a little more about your
international expansion? Are the Czech
and Polish markets really so similar?
The markets are quite similar, but in the Czech
Republic there are fewer small-format shops.
This means less competition, but also creates
the need to drive up demand for those types of
shops. There are other differences, such as more
dairy and less sweets in the Czech Republic,
but we have now learned those differences. If I
have to assess the level of competition, I would
say it was higher in Poland. In the Czech
Republic there is little competition in the
convenience sector, so it is easier attract a consumer, as they do not have many more options
to choose from. One other thing, I think Poles
are more entrepreneurial, less interested in
working for a salary and more interested in
having their own business. They want to get
rich, which is why it is so easy for us to find
agents willing to work with us in Poland.
They want more money in return for working
longer hours.
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ABKA: Founded in 1999, abka convenience shops

have created a revolution in Polish retailing, which until
then had been dominated by independent mom and pop
shops. Now with more than 2,300 outlets in Poland and
the Czech Republic, abka has changed the nature of Polish shopping, bringing longer opening hours that have
become standard across the industry, and even offering
financial services like bill paying and cash back. Last
years economic crisis did little to slow the companys
dynamic growth. This year Jacek Roszyk, the CEO, plans
to open 250 new shops, as well as 50 Freshmarket shops.
Does the possible disappearance of many

independent shops in Poland create potential political problems for large chains?
We already saw laws in Poland that were
aimed at restricting discounters and large
shops like hypermarkets, but which were eventually found to be unconstitutional. However,
we feel very comfortable operating on this market. Despite what some of our competitors say,
it is not the price that is our main advantage .
Our three major advantages are location, location and location. About 70 percent of the success of a convenience store is conditional upon
its location. The rest is the dedication of the
agent, the range of goods on the offer, and marketing efforts. But location is the key element.
What plans exist to expand services at abka
locations, such as bill paying and cash back?
The first such services became available in
2005that was when we introduced bill payment. Now, 7 percent of our EBITDA profits
come from such services, and we would like to
improve this result by reaching 20 percent. It is
a fairly profitable activity, and it makes our
chain different from the rest of the market as
no independent shop can offer that sort of service. Hopefully the range of services will increase
as we seek to acquire the status of a moneytransferring institution, which will allow
us to act as a quasi-bank, enabling us to do
40
everything except for accepting deposits. This

would make us competent to grant loans.
Again, this is the strength of our business
model, as we have total control over what is
offered, from Coca-Cola through Snickers bars
to bill-payment services. Each of our shops is
connected to our servers, which means we are
one of a few chains in Poland prepared to offer
those types of services; this sort of an infrastructure cannot be bought, it has to be built.
Were you hit hard by the economic crisis?
It was better than we expected. The whole economy declined, but retail was the least affected
sector. Key was, as we benchmark against the
whole retail segment, that we grew several
times faster than the overall retail sector. In
2009, we opened 175 shops, this year we hope to
open 250 abka and 50 Freshmarket shops,
and in 2011 we hope to keep that pace. 2010
will still be slower than normal, but by 2011
we should regain our strong growth rate.
What are the companys financial results?
Our revenues in 2009 rose by 16 percent, from
1.8 billion zlotys in 2008 to 2.1 billion zlotys last
year.
What other trends can you see?
We see overall growth in retail, with a continued weakening of the hypermarket format. We
will see what happens with discount shops. The

position of supermarkets and the convenience
sector is bound to strengthen.
Why do you think that the Polish consumer
continues to stand by smaller shops and not
move to hypermarkets like in the rest of
Europe?
At the time of the transformation after 1989,
the Polish customer obtained a product in the
form of a neighborhood shop and he got used to
it, got used to going shopping every day or two.
The expansion of international chains only
really began in 1995, and those first four years
allowed Polish business to occupy the market,
and clients quickly adjusted to that. The Polish
consumer has proven difficult to change.
Another factor is geographical dispersion. We
have a lot of small and medium-sized municipalities, where a small-format shop can survive
but it would be difficult for a supermarket or a
hypermarket to get by.
How much place is there for this format?
The potential in Poland is for about 7,000
abka shops in the current format. We would
like to open about 500 Freshmarket shops. It is
not much if you consider the current number of
100,000 shops operating on the market,
although we have more expertise. It is a very
attractive segment.
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industry report f
Standouts wanted
The high-potential performers of today are better educated and
trained than ever before; but they resemble each other more
and more, too. And that could become a problem in an
increasingly heterogeneous world. Daimler CEO Dieter Zetsche
is one of many executives who claim that tomorrows
CEOs need characteristics that make them stand out from
the crowdand thus really be of interest.
Theyve studied in three countries, earned

top grades, have an MBA in their pocket,
and are still young and flexible. Many of
todays junior decision-makers have already
embarked on impressive careers. However,
with all their brilliance, their rsums are
similar. And that is precisely what could
pose a problem for companiesas the
business world becomes more complex, so
do the demands placed on managers.
Formal excellence alone is no longer sufficient, and Daimler CEO Dieter Zetsche
believes that, too. He told think:act, A strong
brand must be as distinct as possible. The
same applies to junior managers.
Zetsche believes that tomorrows leaders
need to have a clear profile in the form of
characteristics and experiences that make
them stand out from the others and thus
really be of interest.
How does one go about finding these standouts? Certainly not by the search methods
that most companies use nowadays. One
Roland Berger study showed that they focus
primarily on formal aspects such as business- or science-oriented university study
programs or relevant practical internships.
Sarah Ertel, from the University of
Innsbruck, describes the consequences,
The formal selection criteria may be promoting a somewhat undesired homogeneity
among high potentials. This in turn lowers
the idea density in companies.
This is especially the case, as University of

Innsbruck Professor Ivo Hajnal adds, given
that the homogeneity of a university education in Europe has increased due to the
recognition of equivalent degrees from
other universities as stipulated by the
Bologna Process. To date, Europe in particular had a very heterogeneous, or one can
also say a very diversified, higher education
system. The question now is whether too
much uniformity results in giving up a
A strong brand must be as distinct

as possible and the same applies to
junior managers. They also need a
clear profile in the form of characteristics and experiences that make
them stand out from the others and
thus really be of interest.
Daimler CEO Dieter Zetsche
certain competitive advantage.

That could be particularly true as homogeneity is fairly high among todays top
managers. This is demonstrated in a study
that Hajnal, who is a member of the Austrian Academy of Sciences, and Ertel conducted among German DAX-company executives. Their findings showed that their
careers were not especially heterogeneous.
After high school and military or civil
service, most decision-makers went directly

to university and from there moved seamlessly into the business world.
After starting their careers in a given firm,
many top decision-makers have yet to transfer out of it. About one-third worked their
way up to the management board, entirely
within a company. Loyalty obviously pays
off, concludes Ertel. However, only seven
out of 181 bosses implemented their own
business ideas in an entrepreneurial way.
Another one of the studys interesting findings is that a Ph.D. in the sciences, which
according to official criteria is expected only
by 13 percent of all companies, is a high
priority for todays CEOs. About 46 percent
of all management board members have
doctorates. It appears that an understanding of the scientific method is certainly a
sought-after quality in the business world,
says Hajnal.
As a follow-up, Hajnal and his team examine
the question: What will the recruiting and
training of tomorrows top managers look
like? Together with Andr Schneider, Managing Director of the World Economic
Forum, and Roland Berger partner Torsten
Oltmanns, they ask managers how serious
the lack of variance issue really is, and
what companies can do to rectify that. The
aim is to make sure that not only are tomorrows brands unique, but that they are managed by leaders who are equally distinct.
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FUTURE MARKETS
New business opportunities from research labs: wallpapers that emit light, refrigerators that dont
need coolant, better mining from listening to rocks and electronic equipment that repairs itself.
lighting wonder
The demand for new lighting technologies is skyrocketing. People want environmentally friendly lights that
consume little energy and few resources. Organic LEDs,
also called OLEDs, promise great potential savings. OLEDs
are polymer films that emit light when connected to a
power source. As large-surface, diffused light sources, the
range of light they offer is almost completely customizable, representing the full spectrum of sunlight. Furthermore, OLEDs are ultra-thin, lightweight, flexible and even
transparent, which will make totally new types of illumination possible in the future: transparent films that radiate light and large-surface luminescent wallpapers. But
the previous lighting concepts all needed a low-voltage
DC current source, which is a drawback because of the
power supply they require. Scientists at Philips Technologie GmbH in Aachen and Braunschweig University of
Technology, both in Germany, have now developed the
worlds first OLED lights that operate on 220-volt AC current. This discovery makes OLED systems that can be
plugged into a regular power outlet a reality. But exactly
when this innovation will be available is still up in the air.
42
magnet refrigerators
Household refrigerators still run on coolants that hurt
the environment. But in the future, metamagnets will
power their vapor compression cyclesthis cuts out the
coolants and reduces electricity use. The metamagnetism
effect changes the crystalline structure of salts as soon as
they are exposed to a magnetic field. They return to their
original alignment when the chemical bond is removed
from the field. The ionic lattice absorbs or emits heat
from the energy exchange.
Until recently experts believed the metal gadolinium,
a rare and expensive mineral salt, was the only ideal
metamagnet. But now researchers have found that the
fine nanostructure in the materials interior is the crucial
factor for the effect, rather than the metal type. The
advantage here: Nanostructures are far less expensive.
Now British refrigeration specialist Camfridge is
planning to join forces with household appliance manufacturer Whirlpool to build products that use metamagnetism. For these appliances, the metamagnet is applied
piece-by-piece to a plate that is mounted on the back of
the refrigerator and rotated constantly by a permanent
magnet. The metamagnet heats up and magnetizes in the
field created by the permanent magnet, but outside the
field it demagnetizes and cools back down again. The
first refrigerators with this technology are due in 2012.
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The scanner finds the

stone its searching for
using the frictional
behavior of stone layers that
is caused by mining.
rock scanner
Mining for raw minerals is a major challenge for humans
and technology. It is almost impossible for the human eye to
distinguish between the important and unimportant layers of
rock. In open-pit mining for brown coal, the lignite is often
sandwiched between layers of undesirable clay. Since digger
operators have a hard time visually distinguishing between
the two materials, they excavate a broader transition area.
Why? Because too much clay content diminishes the quality
of the lignite. Similar problems come into play when removing gravel or fine quartz sand from a flooded quarry.
And that is where the acoustic geoscanner from Clausthal
University of Technology can help. The high-tech listening
device recognizes what types of stone are located where
based on sound. It measures the specific vibration behavior
of every type of stone, because every stratum displays a
unique frictional behavior that makes it clearly identifiable
like a human fingerprint. To search for the right type of
stone, for example, the scanner is mounted on the shovel of
the lignite excavator, which then drives toward the potential
digging area. The vibrations vary as it drives depending on
nanohealer
Self-repairing surfaces brighten paint and protect objects
from rust. The secret: tiny capsules filled with a type of twocomponent adhesive. Distributed evenly within the paint, the
capsules burst when
the surface is damaged, the paste flows
out and reseals the
scratch.
Now scientists at
the University of Illinois want to apply
this effect to conductive materials. This
would substantially
whether it is passing by coal

or clay. A computer evaluates the vibration data and
transforms it into sound
curves that are then
assigned to a specific stone
area. This information
enables the digger operator
to decide immediately where
to dig and where not to.
According to the developer,
the geoscanner has already
been successfully tested and
operated in trials. For the
next step, they need to refine
it for serial production. And
the stone detective has
already earned its first laurels. At
Munichs Bauma conventionthe worlds largest
trade fair for construction machinery, building material
machines and equipmentit was recognized with the 2010
Innovation Award in the research category.
increase the life expectancy of electrical devices, for example

in case of a damaged busbar. Nanotechnology is the key. The
microcapsules contain minuscule carbon nanotubes about
four times as thick as a human hair. When the capsules break
open under mechanical pressure, the nanotubes are released
and align themselves like beads on a chain along the electrical field. They form a conductive bridge between the electrodes, closing the interrupted circuit.
The mini-Band-Aids already work well in fluids, but
researchers are still working on applications with air exposure. One successful example introduces entirely new ways
of ensuring battery safety. Since the capsules also disintegrate at high temperatures, they can interrupt the flow of
electricity between two electrodes by releasing isolating nanotubes when rechargeable batteries overheat. However, this
technology wont be market-ready for at least five years.
43
p business culture
In Africa, financial inclusion

The potential of mass-market banking in Africa is huge. Now, the race is on. Traditional
banks are competing with mobile communications providers. Two Roland Berger projects
show how to succeed in the bigand growingmarket.
In saturated markets, commercial banks

can only dream of the chance to rapidly
increase their client base with millions of
new customerswhile raising the amount of
deposits by billions of dollars. In Africa, this
promise is becoming reality. An increasing
number of banks reach out to the mass market of individuals who earn less than $10 a
day, offering them financial services such as
savings accounts and loans.
At first glance, the customer segment may
seem to lack potential. But a closer look
shows that the bottom class and what one
could call the emerging middle class in
Africa represent substantial opportunity
for those banks that find a way to bring services to remote or underserved regions in a
cost-effective manner. Not many have managed so far; the potential of mass-market
banking in sub-Saharan Africa is largely
untapped. Some 325 million adults in
sub-Saharan Africa lack access to banking
services, providing a business potential of
$60 billion in deposits, annually. Across the
continent, these numbers look even more
attractive if demographic trends and emerging market benchmarks are factored in:
Because it is in its early stages, banking in
Africa could grow by more than 10 percent
annually over decades. In Nigeria, for example, reaching 60 million unbanked by 2015,
banks could generate additional revenue
well in excess of $1.6 billion.
Christian Wessels, the Roland Berger partner in charge of the financial services business in Africa, says, Africas poor are not to
be disregarded. For savings products alone,
those in the lowest income bracket offer
44
revenue potential that is larger than all

the revenue potential of the highest income
bracket in Africa.
AFRICAN BANKS: IDEALLY POSITIONED
Roland Bergers team members have

worked in mass-market expansion at all levels in 10 African countries. Recently, the consultants helped a commercial bank in Ghana
roll out agent-based rural banking services
and advised a bank in Tanzania on a strategy to implement a multichannel approach to
reach millions of unbanked. In another project, Roland Berger used data from 22,000
households in Africas biggest country, Nigeria, to undertake a full market sizing and
outline the business case for banks in reaching the poor.
Banks are clearly attracted to the African
mass market and the opportunity to increase
their lending reserves with a low-cost, lowrisk and stable source of funding. Theyre
also keen to establish relationships with the
unbanked poor, a long-neglected customer
segment. By extending their operations into
microfinance products, they can win on several fronts. On one hand, they gain the
opportunity to pursue growth strategies that
make sense, given their brand names, institutional capacity and existing IT infrastructures. On the other hand, the banks take a
defensive position: They push back telecommunications operators with mobile payment
systems and well-organized microcredit
institutions that are increasingly looking to
expand their businesses into the traditional
banking sector. Equity Bank of Kenya, for
example, has transformed itself from a
microcredit organization into a universal

bank with more than $1.4 billion in assets
in 2009, and close to 5 million customers
today.
Equity Bank has already shown what kind of
commercial momentum can be leveraged
out of the low-income mass market: growing
at 55 percent annually for the last decade, it
has overtaken all competitors to become
East Africas largestand highly profitable
bank. Wessels says, Theres a real risk that
strong competitors will emerge over time in
the African mass-market banking sector.
Thats one reason were advising our clients
to create a strategy now for the mass market.
It should be a lot easier for a commercial
bank to go into microfinance than for a
microcredit NGO to move up into fullfledged, for-profit financial services.
Besides the commercial potential, the business of mass-market banking offers obvious
social effects. As banks pursue a compelling
growth strategy, they promote financial
inclusion and provide critical macroeconomic infrastructure for emerging economies.
By using modern technology and tailoring
their business models, they close the geographical, organizational and cultural gaps
that often keep Africans from using banking
services. Gaps include long distances and
prohibitive transport costs for the poor to
reach banks, the cost and complexity of ID
requirements for account opening, and attitude barriers, such as fear of using banking
services. Whats more, banks play a key role
in helping individuals improve their financial situations by offering a safe place to
accrue assets.
325 million adults in sub-Saharan Africa lack

access to banking servicesa huge market.
In its recent advisory work in Tanzania,

Roland Berger devised a strategy for a commercial bank to enter the mass market. The
project started with a strategic assessment
of the market in both rural and urban areas.
The bank revenue potential with customers
who earn less than $10 a day is estimated at
more than $350 million, already today, with
the majority coming from those earning less
than $2 a day.
FROM STRATEGY TO ROLLOUT
Roland Berger considered three basic products for entering the marketsavings, loans
and payment services, such as money transfers and withdrawals. The company looked
at the potential for each product in three
income brackets and in the urban and rural
segments.
In a second step, the consultants examined
existing and theoretical distribution models
and how customers in urban, semi-urban
and rural areas interact with each model,
depending on professions, literacy, income
and mobile-usage levels.
One result: Those in the agriculture sector
need flexible hours and special products,
while people who are informally employed
value the lowest delivery costs. Their
mission was to identify the lowest cost models so that even remote clients could be
reached in a profitable way. Product and
service offer had to take into consideration
the special needs of farmers, informal
traders and day-laborers.
Their recommendation for the bank: to pursue the market opportunity in Tanzania by
leveraging its existing branch network as a
backbone for bank-trained and bank-operated agents who spread out into towns and villages. This should be complemented by
enlisting successful retailers as agents, and
cooperating with telecommunications companies and their networks for mobile
money.
Meanwhile, in Ghana, Roland Berger
worked with a bank to design and roll out its
branchless banking model based on pointof-sale (POS) mobile devices used by trained
agents who work on a commission basis.
The devices are better suited for poor clientele than banking services via mobile
phones, since POS devices include fingerprint readers that can positively identify a
customer who may be illiterate and unable
to write his or her name. In addition, the
devices allow the use of bank cards, can
instantly print deposit receipts and are cost
efficient, since data is transferred via wireless networks into the core banking system.
Behind each mobile banking agent and his
device is greenfield banking infrastructure
that Roland Berger also designed and rolled
out, such as agent recruiting and training
and transfer points for moving cash from
rural areas to the banks facilities in Ghanas
capital, Accra.
Roland Berger reported on what it learned
from the project and captured methodologies for standardizing products and processes. In addition, it determined that the most
effective marketing approach relied on
sponsoring and the use of multipliers, such
as village elders and tribal chiefs.
After a two-month soft launch, the project
continues to be rolled out, expanding the
perimeter to 80 kilometers and beyond from
existing branches. The bank is targeting to
reach millions of customers across Africa in
the long run using this model. Wessels
applauds the bank for rolling out services to
the unbanked poor and encourages other
banks to do the same. He says: The potential is huge. The way to tap it, we can show.
All it takes is the strategic determination
and entrepreneurial vision by the management to take this step.
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BUSINESS IN FOCUS
Economy of the con

Pirated copies and industrial espionage cause billions in damage every year. But not every act of
piracy can be prosecuted. Observation and imitation, illusion and mimicry are a proven survival
strategyout in the wild as well as in globalized business in the 21st century. Insights into a business
world where nothing is as it seems.
[Fictitious finances]
A TIME OF EASY PICKINGS FOR PONZI SCHEMES
As far as a lack of seriousness goes, the Ponzi scheme industry is hard to
beat. Slick-talking salespeople fill cheap conference hotels and make big
promises. The target groups are often people with little business expertise
and a lot of psychological stress: People who want to believe in release and
redemption. That makes the career of Kenneth Starr all the more interesting.
Starr was arrested in New York in May 2010 for running a Ponzi scheme with
an investment fund that caused at least $59 million in damages. But Starrs
clients werent your average Joes, they were members of the elite: Actor Al
46
Pacino lost money as did star photographer Annie Leibowitz and top diplomat
Richard Holbrooke, Donald Marron, the ex-CEO of Citibank, and left-wing populist Michael Moore. Starr produced glossy prospectuses and good numbers.
No one suspected a thing. The stars of Wall Street and Hollywood are not used
to losing, and are perhaps more gullible for that reason. At a time when real
estate market values were going through the roof with no end in sight, Starrs
promises of sky-high returns somehow seemed realistic. Con artists always
need people who are willing to swap reality for their version of fiction.
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business culture f
[Blooming bank balances]

COUNTERFEITING IS A DYING ART
Hans-Jrgen Kuhl is an artist. Back in the 80s, the Cologne native created
colorful pop art and even met Andy Warhol. But he didnt get rich from it. So in
2007 the man, now 69 years old, switched mediainstead of painting lilies
like Monet, he chose Benjamin Franklins ($100 bills). Kuhl fabricated $16.5
million in his studio before a special response unit from the German police
force ended his career. But the officers who arrested him sound more like
fans: Kuhl isnt a gangster in the traditional sense. Hes an artist, an intellectual, commented a high-ranking police officer, and the bills he counterfeited
were good, very good. The paper selection, design of the printing
plates and the imitation of watermarks, holograms and other security technologies all require an enormous amount of artistic skill.
The first counterfeit coins and casting molds date back to about 220 AD. But
after almost 2,000 years, this artistic criminal genre is threatened with
extinction. The number of registered counterfeiting instances has dropped in
Germany from 80,583 (2004) to 40,204 (2008). Credit card fraudplaying
purely with numbers, codes and PINspromises higher returns.
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p business culture
[Identical ideas]
THE INTERNET AND TRADING FLOOR PRODUCE A NEVER-ENDING SERIES OF CLONES
Facebook. To put it polemically: Benchmarking, the transfer of best practice
The copy-paste command is one of the most important key combinations in
models, is not always easy to distinguish from industrial espionage. Copythe computer age. So perhaps it shouldnt be a surprise that in the online
cats arent just found in the online business world, they thrive on the trading
business industry in particular, the imitation of successful business models
floors as well. Every move Warren Buffett makes inspires so many investoften seems far more promising than an original idea. These cloned concepts
ment copycats that he requires banks and companies to keep his purchase
are called copycats. Back in the 90s, the Samwer brothers showed how it
and sale transactions a secret. But the copycat strategy is risky. From experiwas done by founding an Internet auction house, Alando, that they later sold
ence with biotech labs, we know that clones often are not viable, and only
to the company it was modeled on, eBay. The social network StudiVZ even
seldom do they develop into a functioning organismlike Dolly the sheep.
had to defend itself in court against claims of plagiarism from market leader
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business culture f
[Fabulous faces worth their weight in gold]

COSMETIC SURGEONS SCULPT BEAUTIFUL FACES FOR GOOD CAREERS
Plastic surgery used to be a medical treatment for jug ears and other physical
deformities. Patients went under the knife to get closer to that ideal defined
by Brangelina. But now vanity is being overtaken by professional ambition as
the main driver for wheeling people into the Beauty OR. British economics
professor Barry Harper has proved that less attractive people also have to
make do with a lower salary than their more attractive colleagues. The beauty
bonus adds up to about 15 percent. Studies in the US have found that 22 percent of men and 15 percent of women have had surgical procedures solely
because of their job. Employees and managers are working hard to make
their faces their calling cards. The ID Beauty Clinic in Korea focuses on designing corporate bodies. Koreans will do anything to survive in tough competition, explains chief physician Sanghoon Park. The surgeon doesnt sculpt
Cupids-bow lips or wrinkle-free skin, he creates faces that radiate competence and assertiveness. Tom Wolfe delivered the blueprint in Bonfire of the
Vanities: He squared his shoulders and carried his long nose and wonderful
chin up high. A trip to the OR can make anyone Master of the Universe now.
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p business culture
[Artificial energy]
DOPING IS BECOMING A PROBLEM AT TOP MANAGEMENT LEVELS
In the opinion of cycling experts, athletes can only get through the Tour de
France with the help of EPO and growth hormones. But doping isnt limited to
the sports arena. A growing number of managers and scientists are taking
substances like Modafinil, which was developed to treat the sleep disorder
narcolepsy, or Ritalin, a psychopharmaceutical drug, to survive 16-hour
shifts and performance pressures. The substances are called neuroenhancers, and they reduce the need for sleep while improving cognitive performance. A survey of top scientists conducted by Nature magazine revealed
50
that more than 20 percent had taken drugs for nonmedical purposes to
improve their concentration and memory. The winner-take-all principle rules
in the world of cutting-edge research and high finance as surely as it does in
the Tour de France or the Olympic Gamesa small advantage can bring great
rewards. Sociologist Uwe Schimank explains: Doping is a reaction to extreme
performance pressures, a coping strategy for a person who cannot fail. Perhaps conducting doping tests before important presentations and in assessment centers will become common practice in the future.
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[Synthetic cities]
THE EUROPEAN CITY AS A HIT EXPORT
According to its mayor, Oscar Goodman, Las Vegas is the ultimate city of
Western culture. Not only because skyscrapers with LED faades continue to
be built in the desert of Nevada, but because icons from all over the world are
here: the Eiffel Tower, the Pyramids and Italian Renaissance frescoes in the
Venetian Hotel. After a visit to Sin City, says Goodman, you can save yourself
the trip around the world. But Las Vegas isnt the only place that utilizes
stimulation architecture. Fake cities are being erected in the suburbs of
Shanghai, drawing buyers with all the charm and look of the old world. Albert
Speer Jr. designed German Town there, which is modeled on Weimar. In neighboring Thames Town, nouveau-riche Chinese can live in authenticlooking Tudor palaces. The fake cities may be more than just a marketing
ploy. Architects such as Christoph Ingenhoven assume thatin a future in
which space and resources are limitedthe European city will experience an
enormous Renaissance: Not just because of the urban planning density, but
above all because of the density of experience, tradition, history and culture.
But for now city planners in China and Nevada are just copying the look.
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p business culture
WORK IN PROGRESS
This time, the consultants are developing ideas for the future of management beyond the dominance
of US models. Does China have the solution? Or France? Whatever language future business will
speakits color will be increasingly green, as new research shows. Plus: the strategic role of diversity.
about to become avant-garde in the renewal

of management philosophy. It is still early,
but the experience of working in China for
over a quarter of a century suggests that the
growing skepticism about the American
model has been leading to the emergence of
a new style of management that differs significantly from the usual Western style.
This search for a Chinese way of doing business successfully is also the basic idea of the
new book by Charles-Edouard Boue, President of Asia at Roland Berger and Managing
Partner of Greater China. The new book provides readers with the main pillars of the
new Chinese management model. It also
offers them an opportunity to think about
new solutions for concrete business
problems in their own companies.
AWARDS
Top of French and

German business
SEARCH FOR INSPIRATION
Is there a Chinese
management revolution?
The recent global economic crisis has called
into question the way business has been
done worldwide. Economic leaders have to
find answers to questions such as: How can
we organize the economy as a whole and our
individual companies to be more sustainable, to be more robust against shocks and to
be of real service to society?
52
Previously, people would have looked to the

great business schools in the US for a lead.
Now more local ways are discussedalso by
the economic think tanks of Roland Berger.
One observation of the consultants: Europe
is rediscovering the sources of its strength
the diversity and creativity of the Continent.
The discussion of new ways of doing business is not confined to the usual suspects,
though. In their global business, the Roland
Berger consultants realize that China is
On November 23, Roland Berger France will

award this years French companies that are
the Best of European Business. The topic:
Europe: limpratif industriel. The event will
be opened by Christine Lagarde, Ministre de
lconomie, de lIndustrie et de lEmploi. This
will be followed by a round table with top
managers from companies such as Renault,
Airbus, Dassault Systmes, SFR, General
Electric and Michelin.
Meanwhile. the location for the next
German BEB award is also set: The award
ceremony will take place on February 24
next year in the US Embassy, close to the
famous Brandenburg Gate.
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MANAGEMENT
Diversity: more than

political correctness?
RESEARCH
Making green profitand

making profit green
Green business is here. It is a multibillion
business with enormous growth potential.
Its driven by megatrends such as population
increase, climate change, urbanization and
individualization. And it drives the transformation of existing businesses.
A lot of Roland Berger research is currently
dedicated to tracing this transformation
process, to determining the degree to which
current markets are changed, and to forecasting which new markets will be made.
One thing is clear: Although renewable energies play an important role and the reduction of CO2 emissions is one of the key drivers of sustainability, green business cannot
be condensed to this single goal. It is not
merely a calculation model for a worldwide
green tax program. Rather, it is a business

an increasingly big onehappening in different sectors, spread over various industries, impacting almost every region in the
world, generating ecological and economical
sustainability.
The broad scope of the business of green is
also shown by a new book the thinkers at
Roland Berger have been working on for
some weeks. The book (title: Green Growth,
Green Profit: How Green Transformation
Boosts Business) gives an overview of the
business models in the most important green
business markets and the most important
regions. It highlights the upcoming challenges for managers and gives advice on how
to use green opportunities to transform their
business. It shows regional and global
aspects of green business, coming directly
from experts in the respective markets.
As CEO, surely you could be forgiven for

thinking diversity and inclusion (D&I) a bit
of a soft issue, more political correctness
than business impact and, if anything, a
topic for HR?
Well, not quite. A lot of research shows that
more diverse and inclusive companies generally outperform their rivals. D&I is a
strategic issue that belongs on the CEOs
agenda. A new think:act content publication
will show why this is so.
From studies and work with D&I leaders,
the authors formulate five takeaways for
CEOs: (1) D&I is a key indicator of management and leadership performance; (2) D&I is
about more than gender and ageit is competencies and values; (3) quotas dont work
realistic and smart targets for everyone do;
(4) bottom-up involvement of senior and
middle management ensures success; and
(5) understanding the why gives urgency
and direction to the how.
This new think:act content presents insights,
tips and tools, and five things most successful D&I initiatives have in common.
STUDY
Retail and commercial

banking in Europe
A lot has been written about banking recently. A new study by the banking experts at
Roland Berger will now look specifically at
the retail and commercial banking sector in
Europe. It will consider the current changes
in the European retail banking. In particular,
it will ask how banks can face, and succeed
in, a lower-growth environmentand in a
world that is offering them lower margins.
The study will also describe best practices
for the key winning initiatives for banks.
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THE FUTURISTS
#1 | Natalia Allen
Fashion
without victims
FASHION DESIGNER NATALIA ALLEN
has set out to make the textile industry green

and fair. Since that isnt something one can do
alone, she is recruiting powerful partners in
the industry. And just look at that: The young
New Yorker is charging through open doors
because of her desire to improve the world.
This is the first article in our new series, The
Futurists, in which we portray the Young
Global Leaders of the World Economic Forum.
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series: the futurists f
Natalia Allen actually wanted to become a

doctor. Helping sick people get better as
quickly as possible seemed like a career that
made sense to her. After high school, the
young woman from New York took her
excellent grades in the natural sciences with
her to California to study medicine. And
then while sitting in one of her introductory
courses she thought: Am I the only person
here questioning things?
VISION: A SUSTAINABLE TEXTILE INDUSTRY
That was nine years ago. Now the 27-yearold is sitting in the new conference center in
Tianjin, northeastern China, wearing a discreet blazer made of organic cotton and
recycled synthetics that she designed herself. The founder of designfuturists has
brought her vision of a sustainable textile
industry to life for members of the World
Economic Forum at several workshops. She
has explained to them that up to 8,000 different chemicals can be found in our clothing
these days. That people in the US throw
away about 220 pounds (100 kilograms) of
clothing every year rather than recycling it.
That we need to break away from a supplydriven industry that dictates 10 or more new
collections every year, so that consumers
relearn a responsible approach to clothing.
Her presentation in Tianjin raised many
questions. Many people in the audience
wore expensive brands, but it seemed they
had not heard of the terms ethical fashion
or clean clothes before. And those listeners
were all the more surprised when they
learned that this young woman helps many
designersincluding Donna Karan, Calvin
Klein and Quiksilverto make clothing into
a sustainable product.
I naturally work with both sides of my
brain, to combine creativity and reason,
Allen says. And that seemed like a difficult
thing to do back in those introductory medical courses. The motto there was: We dont
cure cancer, we just treat it. And we do it
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YOUNG GLOBAL LEADERS is a youth organization sponsored by the World Economic Forum.
The Forum gathers rising young talents at conferences or in workshops to expand their horizons
beyond entrepreneurial issues and collaborate
on solutions for urgent global problems.
p series: the futurists
56
exactly this way or that way or the other.

Allen knows that dealing with severely ill
patients leaves little room for experimentation. But at the same time she quickly realized: I will never be able to reach my full
potential in an environment with precisely
defined solutions. I have a far-too-critical
mind for that. As mentioned previously,
aside from her talent for logical thinking
and reason, Allens left brain was also more
active than average. In high school she
excelled whether in the chemistry lab or as
a painter and graphic artist. Classical technique, she says today.
Armed with her portfolio, she was immediately accepted into the renowned Parsons
The New School for Design in New York.
Along with technique came the theory:
Great design is in part a decision-making
process based on well-researched information, recapitulates Allen. At the end of this
process you should have something new.
Curiositythe hunger for something new
initially led the young African-American
into the high-tech clothing field. While still
in design school she worked with synthetic
fibers that conduct electricity, which allows
sportswear to be equipped with technical
features such as pulse monitors. High-tech
and textiles, that sounded like the future.
With her degree in hand she founded
designfuturists as a consulting firm for hightech clothing.
HER FIRST DESIGN: A T-SHIRT THAT GLOWS
One of her first designs was a shirt for joggers that glows the whole night long like the
luminescent dots on the face of a clock
safety without LEDs and batteries. And the
design didnt just provide a long-term solution for running safely at night: It looked
cool, too. Several labels bought licenses.
One major sporting-goods manufacturer
quickly took note of the innovative young
New Yorker with technical expertise. Allen
was asked to help develop an antimicrobial
fabric to reduce sweat odors in sportswear.

The consultant looked at the project more
closely and realized the client wanted to use
a toxic metal. Environmental poisons would
be released on a large scale during production. The product could also be dangerous
for users under certain circumstances.
Thats when it suddenly clicked. I went to
the client and said: Absolutely not. I then
published my findings and presented alternative solutions. But the manufacturer had
already invested too much in advance development and would not change course. Allen
withdrew from her consulting contract and
asked herself a simple question: Doesnt the
world need other things more urgently than
high-tech clothing?
LESS THAN 1 PERCENT FROM ORGANIC FARMING
Allen has the ability to combine complexity

and clarity. She reports with impressive precision on who comes in contact with which
toxic substances for each production step,
from growing the cotton to wearing the
clothing against bare skin, and what impact
this has on people and the environment. The
amount of relevant data in her head seems
endless, and she chooses what will make the
greatest impact on each specific audience.
For US audiences she likes to say: The United States is the worlds biggest exporter of
cotton, but less than 1 percent of the raw
material comes from organic farming.
In her speeches she paints drastic pictures
of the conditions in sweatshops, of young
workers who have lost all their teeth and
children robbed of their childhood. After
this chain of reasoning come simple truths:
When you pay $5 for a T-shirt, the true cost
is paid for by everybody else.
Empathy is a good foundation for a valuebased economy while complex problems
need well-structured answers. Allen illustrates it with a graphic. At the top are consumers who first need to become aware of
the problem. The organic food trend has
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reached the mainstream in Western consumer societies. But few shoppers think
about the pesticides and herbicides used in
cotton fields or working conditions in textile
factories when they browse through the
boutiques in New York or Paris.
Allen also wants to use her consulting firm
to spark ideas in the fashion industry, particularly in New York. She initiated a program
together with the Pratt Institute that educates fashion students about alternative production processes. Best practices play a crucial role in textile recycling. Technological
progress has opened up many new development opportunities for keeping shirts and
pants in a cycle where scarcely any
resources are lost. When the first generation
of students from these sustainability seminars enters the industry, they will take their
knowledge with them.
Dont just talk,

act!
Seite 57
And then theres that huge wheel that the

diminutive Allen would like to turn. In a
nutshell, the textile industry ticks along like
this, in her opinion: Global competition
enables an increasing number of manufacturers to produce an increasing number of
goods in shorter periods of time. They
unload it into the market at all costs, creating disposable markets that should not exist.
SUSTAINABLE CONSUMERS SITE
An idea was born at the Young Global Leaders event in Tianjin that breaks with this
growth without limits logic. Under Allens
leadership, the YGLs want to launch a Web
site where consumers decide together
upfront which clothing pieces should be
produced. Buyers put down a deposit,
and then the product goes into production
adhering to the highest standards of
sustainability. The advantages of this business model are obvious. It rules out overproduction. Customers will identify with the
product more closely and use it longer. Marketing and sales costsusually the lions
share of total costs in the fashion industry
are reduced to a minimum, which in turn
enables the company to offer a green, fair
product at a competitive price.
After a test run with designs from designfuturists, the platform will be open to all
fashion designers who share Allens vision of
a better textile world. Whats beautiful is that
the vision is solid and specific. The innovator
makes it tangible and clear. Designers
should set the goal for themselves that their
clothing pieces should be passed down to the
next generation rather than landing in the
garbage after two months. Thats when they
really achieve sustainability.
think: act Ms. Morath, why did Roland Berger Strategy Consultants decide to support the
Forums Young Global Leaders? This is actually our fourth year of working together with the
World Economic Forum. The YGLs are the spokespeople for the young generation of leaders.
The YGLs dont just talk, they act. This fits in very well with our philosophy: Characters create
impact is our motto. The YGLs are colorful and diverse, and not afraid to roll up their sleeves
and dig injust like us.
Roland Berger is the Lead Partner for the YGLs. Could you please describe the collaboration with these young leaders? We actively support the strategic development of the YGL community, conduct studies on pioneering topics for the future and support selected task forces with
our expertise.
Roland Berger Strategy

Consultants supports the
Young Global Leaders of
the World Economic Forum.
Berger partner Beatrix
Morath explains why.
Could you name a specific example of how Roland Berger helps the task forces make
progress? Yes, the Better Place case study. Shai Agassi, the former CEO of SAP, founded a company from the YGL task force. We developed success factors in the form of a case study, and are
making this knowledge available to the other YGLs so that even more task forces can become
successful, sustainable businesses.
Youve been able to observe the Young Global Leaders at many workshops. What stood out
to you? The YGLs are a group of extremely professional and energized businesspeople, artists
and scientists from all over the world. Each of them brings their own experience, their own
cultural background. Their interdisciplinary collaboration leads to astonishing creative results
and solutions. Its very inspiring, even for my traditional consulting projects.
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credits
FOLLOW-UP
READING TIPS
How much fun is the RIM PlayBook?

Exclusively in think:act, media manager Haim
Saban talked about how much he liked the BlackBerry. Just recently, we also looked at Steve Jobs
management principles. His iPad is currently electrifying the IT world. Seeing that kind of success,
BlackBerry manufacturer Research In Motion now
wants a piece of the tablet pie, too. Its PlayBook is
due out in the spring of 2011.
How big that pie could become can be seen by the
3 million iPads that Apple sold in the first three
months. Industry experts estimate that tablet PC
sales will reach $40 billion in a few years. Better
make room because Samsung, Hewlett-Packard
and Dell each want a slice, too.
Carrying the hopes of Research In Motion: the Playbook
Indias Contradictions
The discrepancy is huge. Indias companies are
soaring, while the countrys infrastructure in
many areas is at a development country level. The
cover story in our last issue discussed how Indias
top decision-makers are taking the countrys problems and turning them into strengths. Now The
Economist dedicated a cover story to Indias economic miracle. Indias capitalism is driven by millions of entrepreneurs all furiously doing their
own thing, writes the magazine.
That is not easy to do when jammed roads trap
drivers in cars for hours. According to The
Economist, expanding the infrastructure is the
biggest obstacle to further growth. But if it is
overcome, India will soon draw many investors
who now favor tightly managed China.
MASTHEAD
PUBLISHER
Dr. Martin C. Wittig, CEO
Roland Berger Strategy Consultants
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8008 Zurich
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(Warsaw), Leon Gettler (Sydney), Frank Gruenberg,
Carola Hoyos (London), Tobias Moorstedt, Thomas
Ramge, David Selbach, Rhea Wessel, Johannes
Wiek, Olaf Wittrock, Morgen Witzel (Exeter)
DIRECTOR
Torsten Oltmanns
CONTRIBUTING AUTHORS
Justus Haucap (Berlin), Alessandro Profumo (Milan),
Ren Seyger (Amsterdam)
EDITORIAL ADVISORY BOARD

Roland Berger Strategy Consultants
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Schneider
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ART DIRECTION
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EDITORIAL
Tobias Birzer
58
ENGLISH EDITION
Doug Bolduc, Asa C. Tomash
GRAPHIC DESIGN
Andrea Huels
PRODUCTION
Wolfram Goetz (resp.), Franz Kantner,
Silvana Mayrthaler, Cornelia Sauer
PHOTO EDITORS
Beate Blank (resp.), Michelle Otto, Benno Saenger
PHOTO CREDITS
Cover: Jerry Jack, gettyimages, laif/Michael Rubenstein; p. 3: obs/Roland Berger Strategy Consultants;
p. 4: laif/Joerg Fokul, Andrea Huels, Jerry Jack,
Benno Saenger; p. 67: illustrations Arndt Knieper;
p. 7: Interfoto/NG Collection; p. 1112: illustrations
Sylvia Neuner; p. 14: illustration Mathilde Aubier;
p. 15: gettyimages/Pierre Andrieu; p. 1617:
gettyimages/Bloomberg, private; p. 1820, 22: illustrations Mathilde Aubier; p. 21: laif/Redux/Michael
Rubinstein; p. 2425: graph Andrea Huels;
p. 26: laif/Joerg Fokul; p. 29: Ipon/Stefan Boness;

p. 3133: PR Renault-Nissan, laif/Marcus Vogel/
Stern, PR Renault-Nissan (2); p. 3435: illustration
Andrea Huels; p. 3640: Szymon Szczesniak/
www.szymonszczesniak.com; p. 41: Vincent van
Gurp/www.vanvincent.nl; p. 4243: PR, Polylooks,
Zoonar, gettyimages; p. 45: laif/RAE; p. 4647: istockphoto, Benno Saenger; p.4849: gallerystock/Jeroen
Hofman, blickwinkel (M); p. 5051: VII/Joachim
Ladefoged, gallerystock/Peter Funch; p. 5253:
illustrations Sylvia Neuner; p. 54, 56: Jerry Jack;
p. 57: private; p. 58: PR (7)
Knowledge expert Leif Edvinsson explains his intellectual

capital concept in his new book.
He also describes how relevant
this form of capital is to countries and companies. In his book
Freefall: America, Free Markets,
and the Sinking of the World Economy, Nobel Prize winner Joseph
Stiglitz takes a look at the postcrisis world and the need to
rethink what growth means. He
criticizes the failed US economic
policies of the last several years
that may have led to the financial crisis, and attacks the moral
deficit of many market processes. Ren Seyger traces the evolution of looming corporate crises
in his book Trojan Horses of
Decline. Lastly, a new think:act
content piece explains how supply chain management is becoming a strategic value driver.
LEIF
EDVINSSON:
National
Intellectual
Capital,
Springer Verlag
JOSEPH
STIGLITZ:
Freefall,
Siedler Verlag
PRINTER
Pinsker Druck und Medien GmbH, 84048 Mainburg
COPYRIGHT
The contents of this magazine are protected by
copyright law. All rights reserved.
NOTICE
Opinions expressed in the articles of this magazine
do not necessarily reflect the views of the publisher.
REN SEYGER:
Trojan Horses
of Decline,
Roland Berger
service@think-act.info
Do you have any questions for the
editor or the editorial team? Would
you be interested in learning more
about studies by Roland Berger
Strategy Consultants? Just send an
e-mail to service@think-act.info
THINK: ACT
CONTENT:
From cost killer
to profit driver
Highlights from this issue on CD
Listen to the following articles:

END OF LINEARITY (P. 14)
k THE
Business is rethinking growth.
AND SERVICE (P. 20)
k PHILOSOPHY
How Tata is getting ready to conquer the world markets
TO THE PEOPLE (P. 36)
k CONVENIENCE
An exclusive interview with Jacek Roszyk, CEO of Polish retailer abka
And an exclusive film for you:

THE NEW ROLAND BERGER TREND COMPENDIUM 2030 (P. 18)
k PREVIEW:
Seven megatrends that are changing the world
DIMENSION INTELLECTUAL CAPITAL (P. 23)
k GROWTH
Leif Edvinsson and Carol Yeh-Yun Lin explain their research results.
Seite 1
Issue 16
11:49 Uhr
ROLAND BERGER STRATEGY CONSULTANTS
Natalia Allen
on the fashion
world of tomorrow
DOSSIER: Rethinking growth
18.11.2010
think:act The global magazine for decision-makers by Roland Berger Strategy Consultants
07gb_16_01_Umschlag_aussen
Dieter Zetsche
on the managers
of tomorrow
The global magazine for decision-makers
Ratan Tata
sets his sights on
the world market
Was Alfred Chandler wrong?

Will China be a mecca for electric cars?
Plus dossier: Rethinking growth
Issue 16

Roland Berger - Think-Act - Growth - # 16 2011

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Rethinking growth

Find out what really counts!

ROLAND BERGER STRATEGY CONSULTANTS

DOSSIER: Rethinking growth

The global magazine for decision-makers

Was Alfred Chandler wrong?

If you are not prepared

Order these books online: www.think-act.info

Dear readers, Growth is one of the main concerns of

Exclusive data. The future of growth begins with knowledge. But

Whats new whats not? Business is permanent innovation?

food for thought

23 A new dimension in growth

26 Regulating ourselves to death?

30 Does China change the e-game?

44 In Africa, financial inclusion

34 The reputation premium

46 Economy of the con

series: the futurists

Articles marked with this symbol

p food for thought

It is not the exception; it is the rule. The business world is

At Lockheed Martin, restructuring started with changes in management. More

Restructuring starts with an eye for the

Europe: From 2002 to 2007 there

Chinas old steel

The US Government Accountability

Net income (loss)

Chinas transition toward a market economy still

38% of the global steel

10: number of globally competitive

Mergers and their effects

US business bankruptcies increased to 60,837 filings during calendar

The Trojan Horses

Immortalized by Homer, the great city of

food for thought f

THE MORAL OF TROY, PERHAPS

well conclude that the war began because of

Whereas most management literature

Four times it lurched to a halt

activity for the company. Finally, in 2009 the

As part of our analysis, we applied Trojan

companies must create an environment that

p food for thought

Strategy, structureand the DNA

In the early 20th century, business

In the short run, the corporate DNA has to

DVDs, electronic goods, clothing and lately

A companys culture is very much formed by

In terms of character, one strength that

ties. One of the best examples is Nokia, a

ing to take massive risks. Start-ups like

opportunities. Just as Nokias character of

en vogue at a particular time. Coaches try,

Inter Milans win in last seasons UEFA

The example of football is also interesting in

Are the targets clear and valued?

After the global megacrisis, the world economy is

There are no great limits to

The end of linearity

NOBEL PRIZE WINNER PAUL KRUGMAN claims to

implosion of the US mortgage market or could prepare

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