Download Ask not what Capitalism can do for you

Ask not what Capitalism can do for you
Ask what you and your company can do for (replacing the role of) your Country
Prof. Carlo Alberto Carnevale-Maffè
BAA – MBA Reunion 17.05.2014
Ask not what Capitalism can do for you,
Ask what you can do for Capitalism
(therefore, for your fellow citizens)
“The means of
production (of
information and services)
must belong to the
people” (BYOD, check in
your pocket…)
“Workers (Users and
Consumers) of the
world, unite!
(on the Cloud, with
FaceBook)”
The next big market opportunity for corporations?
The unbearable heaviness of the Welfare State
• 
• 
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With public expenditures ranging from
30% to more than 50% of GDP in
Western countries…
… and under the unsustainable promise
of a ever-growing list of entitlements for
permanent education, unemployment,
retirement and health care…
…it is time for corporations, managers
and entrepreneurs to undertake public
roles which are no longer bearable by
traditional Nation States.
• 
Forget the irrelevant minimalism of
"social responsibility".
• 
Welcome in the brave new world of
"Institutional Corporate Strategy”
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The largest market on Earth? It’s “Big G”
•  “Big G” = G + T = Government Expenditures + Government
Transfer Payments (Social Security, Unemployment Benefits, Subsidies)
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Usa Inc. (& European Union S.C.R.(i)L.)
Source: FiveThirtyEight, Nate Silver, NYT, 16 Jan 2013
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Source: FiveThirtyEight, Nate Silver, NYT, 16 Jan 2013
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Source: FiveThirtyEight, Nate Silver, NYT, 16 Jan 2013
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Source: FiveThirtyEight, Nate Silver, NYT, 16 Jan 2013
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Source: FiveThirtyEight, Nate Silver, NYT, 16 Jan 2013
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To everybody, by their means
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5% of the people are 50% of health care spending
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Education & Tax Surplus
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A Shrinking “Lump of Labour”?
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Why you should stay in school…
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Raising a child as a citizen: 1960 - 2011
Education & Care: 9x - Health: 2x
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The College Tuitions’ hyperinflation…
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You’re really lucky to be
in the wrong place…
Welcome in the wonderful
world of European
management:
Slow growth (if any…),
deflationary pressures,
ageing population,
unsustainable welfare
costs
Highly fragmented
national markets (both for
input factors and output)
Little progress on
liberalisation, especially
on services
Few corporations among
the global leaders
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The New “New York”: Europe…
If You Can Make It There, You Can Make It Anywhere
The perfect training
ground for:
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Managing cultural
complexity
Fostering early
internationalisation
Learning soft
power
Management & Entrepreneurship:
the “Lingua Franca” in the Tower of Babel
Marx & Mark (Zuckerberg)
The end of firms’ monopoly on value added.
A shift in “organisation asymmetries”?
1998-2013
• A Network of Pages - Impact on “Information asymmetries”
• New forms of disintermediation, re-intermediation
But:
• Unchanged market structure between supply and demand
?
2014-2020
• A Network of People - Impact on “Organisation asymmetries”
• New forms of collaborative production
And:
• Change of market structure, end of firms’ monopoly on supply and
value added
Social networks as economic organisations
• Conditions: are they able to
address the issues of:
§ Coordination?
§ Incentives?
• Coordination:
§ Non hierarchical, lower level of
hidden action and hidden information
because of distributed social control
§ You cannot permanently hide from
your social networks
• Incentives:
§ Non monetary
§ Based on “values”, rather than
“value”
Digital = Social
Digitalisation increases:
• Standardisation
• Interoperability
• Network Effects
• Positive Externalities
Digitalisation lowers:
• Access barriers to production,exchange and utilisation of content
• Trasnsaction costs and therefore “switching” among different players
What is “digital” becomes “social”
The Citizen’s Finger
§ The Thumb
§ The Index
§ The Middle
§ (The Ring…)
Is the Economy Circular?
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The Economy is not a Chain nor a Circle.
It’s a Spiral
Are you truly global?
A simple quiz
•  Which innovation has given the single most
relevant contribution to economic
globalisation?
1.  TV?
2.  Civil aviation?
3.  Internet?
Thinking inside “The Box”
•  Logistics is, overall, one of the
largest industries of the largest
countries in the world:
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The share(*) of the logistic sector in:
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China: 21% of GPD (25% in 1991)
India: 13% of GDP
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Europe: 11% of GDP
USA: 8% of GDP (14.5% in 1982)
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(*) Source: The Economist, June 2006
Internet is an Economic Institution,
not just a technologic infrastructure
•  The Cloud is a new form of
public institution, non just a
technological architecture.
•  It’s a laboratory of
organisational innovation, a
crossroad of information
exchanges, a platform of
business relationships.
•  The Cloud is the new
“E Pluribus Unum”, the
United Processes of
Economy
The Internet Is NOT a Gift of God…
• 
Unless Jeff Bezos, Mark Zuckerberg,
or Larry Page, are Gods…
•  The Internet is a gift
(i.e. a subsidy)
of corporations.
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It’s a “de minimis” complimentary service
associated to the main, paid-for, offering.
The open public internet will become a freeof-charge, externality-based service for the
networking/communication needs of
corporations, both B2B and B2C.
Indeed full subsidy , i.e. Price = 0, is already
the most common/modal price for (real)
Internet services.
•  Get a Kindle, and live happy!
Google Uber Alles
Navigation gets social.
Waze live reports on Google Maps
The “inclusive” servitization
Bye bye, car
insurances.
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Bye bye, Telcos.
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Optical illusions?
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Small Things & Big Data
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Extracting value from externalities of
information, collecting data on
everything related to the customers
and their processes.
•  Nothing must be let down, nothing
must be forgotten.
•  Things are (new)
citizens of the world.
• 
They have specific rights – and
duties, as they become more “context
sensitive” with technologies.
The Internet of Everything
Microeconomics of Digital Services
TODAY…
Price
… TOMORROW
S1: Analogic Silos
Price
D3
P1
S3: Cloud
Apps + Data
+Services
D1
P2
C1 = P1 x V1
S2: Cloud Applications
D2
C2 = P2 x V2
Volume
V1
+
V2
Growing supply of applications,
lower variable costs and lower
barriers to entry and access,
increase volumes but drastically
reduce average prices…
C3M2
Volume
The size of the market will
have to grow through
“complementarities”
(with data, services, and valueadded business processes)
The challenge: can you do better than Nation
States in these fields, with less resources?
a) 
b) 
c) 
d) 
e) 
Education
Health Care
Unemployment Benefits
Retirement Benefits
Environment, Territory &
Infrastructures
• 
Just 3 Rules:
–  You can lobby for legitimate national (or federal)
Laws, providing the economic case for regulatory
impact assessment (“RIA”, see OECD)
–  You cannot generate major negative externalities
–  You have to develop convincing arguments also for
private investors and to identify the most appropriate
corporate partners
• 
…and just 30 minutes! (better than “4 Minutes To Save
The World”)
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The “Big G” Platform…
is not a “value-added chain”, but a “multi-sided market”
Content & Device
Providers
Communication
Platform
Merchants &
Institutions
Content Platform
Google
Commerce Platform
PREMIUM
SUBSIDY
People &
Communities
Rephrasing the classics…
•  “Public welfare is no more than
the continuation of business by
other means” (Bill von
Gateswitz)
•  “Peace – like user interface - is
too important to be left to
politicians” (Anonimous Job,
Silicon Valley)
•  “Make money, not currency
war” (Deng Xiao Yahoo)
Mirror, mirror on the wall: who’s
the most powerful of them all?
What comes first:
Politics or Economics?
•  Different constituencies,
different stakeholders:
–  Politics is (still) National
–  Economics is (increasingly)
Global
(the French guys down there,
please don’t make all that noise)
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Legitimate Corporate Diplomacy
Core processes, not just residual profits
• 
Corporations must give to
Capitalism, and their Countries,
much more than tax revenues
• 
Profitable diplomacy, not charity:
corporate diplomacy is not a
new form of “St. Peter’s
obulum”
•  Convergence of peaceful
relations, sustainable welfare
and economic interests
• 
Higher level of transparency and
accountability of corporate
diplomatic choices:
shareholders vote every day
with their feet…
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The economic factors driving
corporate role in diplomacy
MACRO
MICRO
•  Highest-ever share of GDP
from corporate profits
•  Cross-border M&As and
fragmented ownership
structures
•  FDI & Int’l trade
•  Positive Externalities from
technology standards and
network effects
•  Inverted sequence of
internationalisation of ICT
firms
•  Global attraction for talented
resources, no prerequisites for
nationality
•  Building corporate identities as
new sources of social values
•  Cross cultural knowledge
management, no “clash of
civilisations”
•  Firms move around much
more bits, atoms and people
than any State on Earth
.com vs. .gov?
Once upon a time…
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Any more Henry VII and
Giovanni Caboto around?
Modern Nation States as:
•  “territorial monopolies of legal
violence” (Max Weber)
…but…
•  “ever weaker competitors in
the extra-territorial markets of
power” (YouTube)
Buscar el levante por el ponente?
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Is “Corporate Institutional
Strategy” just a new route
to reach the “West Indies”
of traditional markets...
…or is it discovering
different economic
territories?
A few questions for
universities, managers
and entrepreneurs...
A New Renaissance?
A Time of “Explorers” and “Navigators”
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The myth of Universalism and the complexity of Individualism
Venture Captains and Venture Capital
Power by birth and co-optation vs. Leadership in discovery
and creative destruction (entrepreneurship…)
Carve out the New Alliance
“La scultura è arte per via di levare”
1.  Public Institutions: “Carve out” e
redefine service processes handled by
local public entities.
2.  Markets: integration (with appropriate
lobbying towards regulators) of systemic
value chains in specific territories. (Es.
Italy: tourism, food, fashion).
3.  Organizational model: “Crowdsourcing”
of professional skills, new capital
structure, new engagement cycle.
Michelangelo, St. Matthew, Galleria dell’Accademia, Firenze
Thanks!
Prof. Carlo Alberto Carnevale Maffè
Strategic Management Department
Bocconi University School of Management
Via Bocconi 8 – 20136 Milano
E-mail: [email protected]
Twitter: @carloalberto
Facebook/carloalberto.carnevale