I’ve always thought that managing portfolios is one of the most important strategic responsibilities of business leaders.
I recently came across a great approach to mapping a business portfolio, to visualize current work in progress and how it aligns to the overall business strategy. Without exception, every time I run this exercise the gap between current state and desired state is far wider than every executive believed, hoped or even imagined.
Portfolio mapping requires taking an end-to-end view of the lifecycle of initiatives in your organization. Consider four main domains:
Explore early stage initiatives that are bets for the future with high degrees of uncertainty
Exploit initiatives that have achieved product-market fit and the organization wants to grow and scale
Sustain initiatives that have become repeatable and scalable business models, products or services that drive the majority of revenue for the organization
Retire initiatives that are long lived, no longer beneficial (even limiting) to the organization future success or strategy and should be sunset from the portfolio
Initiatives that do not achieve desired outcomes in any domain should be killed, and their investment transferred to other initiatives.
High performance organizations focus on building capability to continuously move initiatives through the model from Explore to Retire. They understand that using the same strategy, practices and processes across the entire portfolio will result in negative outcomes and results.
Poorly managed organizations tend of use the same standardized approach for all domains. They fail to recognize the need to adapt their analysis, evaluation and control mechanisms to design a system that will provide the correct amount of governance and measurement to enable business leaders make high quality decisions based on learning outcomes and data derived from executing the work in each domain.
Typically these companies portfolios are orientated solely toward high revenue generating initiatives. Valuable cash cows that become prized assets, protected and milked dry. Lean Enterprises’ however know that one day the milk will run dry.
Explore
New initiatives are inherently risky. When aiming to explore a new business model or product it is imperative investment is limited by setting boundaries around time, scope, financial investment and risk. We do this not because we are cheap. We do this to create ‘safe to fail’ experiments and build in quick feedback loops to understand if we are achieving the desired outcomes.
In the Explore domain our goal is to test the business or product hypothesis at speed using a cross-functional team to experiment with the customers the solution is targeted at. By designing fast and frequent feedback loops into the team’s exploration we can limit investment, maximize learning and avoid creating ‘bet the business’ scenarios that are too big to fail.
Also, by limiting investment into smaller bets allows us to make more bets, enabling us to test many ideas to discover what works and what doesn’t. This is the principle of optionality applied to business model innovation and product development.
Most of the ideas that we believe are great aren’t actually that great at all. By creating optionality in how we design our testing process we can create many opportunities to learn, not just one.
Yammer used a concept of 10×2 to design feedback loops and limit investment in early stage ideas. Their approach constrained teams to no more than 10 and no fewer than 2 people when exploring ideas. Also their iterations could be no longer than 10 no shorter than 2 weeks before teams had to demonstrate their achievements designing feedback loops directly into the development system.
Principles and capabilities of Explore
Cross-functional multidisciplinary teams
Make lots of small bets
Boundaries of time, scope, financial investment and risk
Design experiments are safe to fail (the only true failure is the failure to learn)
Create a sense of urgency
Demonstrable evidence of value to proceed
Exploit
For those few initiatives that achieve escape velocity and exit the Explore domain, teams can continue with a sufficient level of confidence that they are building the right thing, now they must embrace building it the right way.
Lean Enterprises understand the project paradigm is broken only further propagating organizational silos, conflicting priorities and measures of success. They understand the importance enabling cross-functional teams to experiment directly with their customers and users. Effort and measures of success are tied to business outcomes not output.
As the team collects data from experimenting with real customers and users it improves its understanding of how the business model, product or service is performing. The team can then develop more targeted and sophisticated hypotheses based on the knowledge created from genuine user feedback.
Amazon designed the concept of Two Pizza teams – independent, long lived customer facing teams that were small enough to be fed by two pizzas. This enables context to be held within the group as the business model, product or service grows, while also allowing the team to become autonomous and learn together at speed. Leadership can then continuously evaluate how the initiative is performing based on frequent feedback loops, and can help to make further investment decisions on how to scale it up, down or to kill it based on the outcomes achieved.
Principles and capabilities of Exploit
Create end-to-end customer facing teams, not project teams
Continuous evaluation funding model
Target condition is to achieve break-even point
Data-driven, fact-based decisions based on accumulated knowledge
Maintain a sense of urgency
Set a vision, trust the team to get there, clear blockers and support as they proceed
Make knowledge sharing and organisational learning easy
Sustain
The majority of large organizations have built their entire business on a single business model and/or supporting products that achieved product-market fit and continued to grow beyond early expectations. They have extended their market, region, and/or sector to achieve exceptional financial success and achieve wide customer adoption and reach.
The challenge they meet is how to avoid ‘feature fallacy’ – the fallacy that simply adding new features will add more value. This manifests itself as overloaded products with features, tools and customizations that customers often never use or are even aware of.
Think of a product you have used for a number of years. Are you aware of all the new useful additions to it? Adding new features does not equal adding more value to customers and users. The feature fallacy often represents wasted effort and investment that could be spent elsewhere.
Etsy design for continuous experimentation. Teams at Etsy work closely with product, marketing, and engineering to scout, build, instrument and improve Etsy’s product portfolio to make sure that they are improving business outcomes for all their stakeholders – customers and users included.
The goal is to use data-driven decisions based on usage and profitability to enhance what customers desire – not just copy what competitors release or what HIPPOs (HIghest Paid Person’s Opinion) want to have.
By continually adding more and more features to existing products, organizations end up with huge monolith applications that are difficult, slow and costly to change or build upon.
The trick is to break out new ideas, implement them as an Explore initiative and drive them through the end-to-end lifecycle flow again. This provides all the benefits and rigor of each stage while building the capability to continually create new business opportunities for future on-going success.
Principles and capabilities of Sustain
Beware of the feature fallacy
Focus on what is valuable – where can we win?
Don’t get lazy. Success hides suboptimal issues
Keep discipline with fact and evidence-based decisions
What is being used, improved or removed?
How could we disrupt or get disrupted?
Retire
All good things must come to an end. The difficulty for most organizations is that many systems in their portfolio are not well understood. Often the people that built the original system long ago on a ‘project’ have left the company. No one knows how to change, adapt or turn off the system or what impact it may have. Fear runs through the organization because the entire company’s business model is dependent on a COBAL program running on a 486. It may sound like a joke, but this is the reality for most organizations.
High performance organizations continuously seek to reduce the complexity of their systems to free up people and investment to Explore new opportunities. By simplifying their systems they are able to innovate faster, cheaper and more frequently.
Ask yourself the question “When was the last time we sunset a system, product or feature in our team?” If you can’t remember then it is a smell. Over time the weight to legacy systems and technical debt will grind your innovation capability to a halt. Keep it within control. Remember that effort not spent on keeping legacy systems alive frees up opportunity to focus on new initiatives.
Principles and capabilities of Retire
Has it served its purpose? Can we sunset it?
It is providing value? Kill it if it is not.
Are there better opportunities to invest in?
Continually look to reduce product and system complexity
Simplifying helps to support further innovation
Free up funds and capability
Conclusion
Business models are transient and prone to disruption. If your organization is reliant on a single business model, product or service to guarantee its on-going survival then safe to say it is in a precarious state. You’re only one technology innovation, customer loyalty switch or economic decision from irrelevance.
To be successful, a company should have a portfolio of products with different growth rates and different market shares. The portfolio composition is a function of the balance between cash flows. High growth products require cash inputs to grow. Low growth products should generate excess cash. Both kinds are needed simultaneously.
Lean Enterprises know that building the capability to continuously seek out new business models, products and services is the key to ensuring their future business relevance, growth and evolution.
If your executive team is unclear on how your portfolio is performing and what initiatives you are exploring, exploiting, sustaining and retiring, get a cross-functional group together and map out your portfolio to visualize your work in progress. Ask if it is achieving the desired outcomes and aligned to your business strategy and objectives.
Share the results of the exercises with your teams and business leaders. Then starting getting deliberate about investment of time, effort and people in becoming the business you want to be.
5 billion people, two-thirds of the world’s mega-cities, one-third of the global economy, two-thirds of global economic growth, thirty of the Fortune 100, six of the ten largest banks, eight of the ten largest armies, five nuclear powers, massive technological innovation, the newest crop of top-ranked universities. Asia is also the world’s most ethnically, linguistically and culturally diverse region of the planet, eluding any remotely meaningful generalization beyond the geographic label itself. Even for Asians, Asia is dizzying to navigate.
Whether you gauge by demography, geography, economy or any other metric, Asia is already the present – and it is certainly the future. It is for this reason that we cannot afford to continue to get Asia so wrong.
The Future Is Asian is the new book from Parag Kanna, the 41 year old Indian who grew up in the UAE, studied in USA and England, initially worked for the World Economic Forum, and now lives in Singapore where he runs his own business FutureMap. He explores Asia from the inside-out, telling the story of how this mega-region is coming together and reshaping the entire planet in the process.
“In the 19th century, the world was Europeanized. In the 20th century, it was Americanized. Now, in the 21st century, the world is being irreversibly Asianized.”
The “Asian Century” is even bigger than you think. Far greater than just China, the new Asian system taking shape is a multi-civilizational order spanning Saudi Arabia to Japan, and Russia to Australia—linking five billion people through trade, finance and infrastructure networks that together represent 40 percent of global GDP. China has taken a lead in building the new Silk Roads across Asia, but it will not lead it alone. Rather, Asia is returning to the stable multipolar order that existed long before European colonialism and American dominance, with India and Southeast Asia coming into their own as economic and strategic hubs. Large but dormant societies from Iran to Indonesia are finally emerging, teeming with young and urban, ambitious and entrepreneurial youth, while from Saudi Arabia to Vietnam, privatization is unlocking a new wave of growth. Asians are sharing economic and governance models as never before, and their confident outward push is reshaping business and culture life across North America and Europe, South America and Africa. From investment portfolios and trade wars to Hollywood movies and holiday travels, no aspect of life is immune from Asianization.
The world has become used to hearing “America First”—but is it ready for “Asia First”? What happens when Asia no longer just produces for the West but the West produces for Asia? And when Asians don’t aspire to live like the West but rather Western societies wish they had Asians’ stability and far-sighted leadership? Get ready to see the world, and the future, from the Asian point-of-view.
“For most of recorded history, Asia was the economic, technological and cultural centre of the world. From that perspective, the last 500 years of western dominance almost appear an aberration.” says Tony Fernandez, Group CEO of AirAsia.
Khanna’s book presents this global “Asianization” through detailed analysis, data and maps of Asia’s major markets and their combined impact on global economy, society and governance. With his trademark conceptual clarity and on-the-ground reportage, Khanna provides essential guidance for executives as they look to hedge their China exposure and capture the next big commercial opportunities across Asia from real estate and retail to finance and technology, and attract Asian capital and talent into their operations at home and abroad. With his intimate knowledge of Asian history and geopolitics, he also paints a compelling vision of a balanced global system of shared responsibilities across America, Europe and Asia.
In an interview with Forbes magazine, Khanna was asked about his key messages
1. On growing up and living in Asia
Living in Asia, I wanted to write about what I was witnessing. I felt that discussions tended to conflate Asia’s growing predominance with China. I wanted to help better articulate the rise of the “Asian system”— and this is really the central theme of the book. In the context of international relations theory, the term “system” has as a very specific definition. It refers to a set of countries or units that have more to do with each other than they do with countries and systems outside of their region. Much as the European Union is a system, we are seeing the rise of a broad Asian system that stretches from the Persian Gulf and the Mediterranean Sea to Japan, and from Russia down to Australia.
Since the end of the Cold War, Asia has spent the last 30 years stitching itself back together in ways that vaguely resemble the Asian systems of the past. For some 500 years, colonialism and the Cold War have divided and fragmented Asia. But now this continental system is being resurrected. I wanted to write one of the first books to capture the rebirth of this great Asian system in a way that isn’t premised only around China. China is certainly one of the most important features of this system, but it’s not the only feature.
2. On the rise of Asian influence
It depends on how you measure power and influence. I mean, in some respects I could have called the book “The Present is Asian” because we live in an Asian world, demographically speaking. More than half the world’s population lives in Asia and that’s always going to be true. If you measure power in terms of economics, then Asia’s economic system is already larger than the European or the North American systems in purchasing power parity (PPP) terms. So in many ways the present is Asian, not just the future.
But it’s not really about rise and decline. We live in an unprecedented multipolar era in which there are already multiple systems and geographies of power. It’s not zero-sum.
3. On what the west should do
Well, the punchline of my last book, Connectography, was that you can’t compete if you’re not connected. The US will need to be present in Asia—economically, diplomatically, if it wants to have any influence. I’ve urged that the US rejoin the Transpacific Partnership (TPP) trade negotiations and even consider partnering in some way with China’s Belt and Road Initiative (BRI)as the Europeans are doing. Unlike the Europeans who have developed partnership agreements with China and other countries to promote their own companies in the infrastructure space, the US is basically sitting things out. It’s essentially saying, I’m taking my ball and going home. But it’s important to remember that if you’re not there, nobody misses you. US absence just means more opportunities for everyone else.
4. On the power of technology
Well, sure. I wrote my book Technocracy in America about this phenomenon. You know, there’s democracy and then there’s data, and both are equally important in achieving good governance. Democracy matters because of input legitimacy. You want the voice of the people to be heard and to play a central role in determining the policies of government. But you also need data because lots of people don’t vote. And lots of information is not available to the public through discourse. So feedback loops of all kinds are important: whether it’s voter sentiment or it’s public data collected through various means. Data is necessary for governments to determine policies and to determine solutions based on all the contradictory viewpoints that decision-makers face.
Good governance requires learning through case studies, learning across countries, learning through small local experiments, and through rapid feedback loops; all of that involves harnessing data in new ways. So I’m a very, very, very big believer that good governance hinges— not just on our democratic decision-making— but on data-driven systems for steering policy in the right direction.
I should add that much of the concern about the use of AI and Big Data is rooted in new challenges democracies face with regard to human rights and democratic governance. This is a very real concern. But it extends beyond Western democracies. Of course, we should always remember that there’s more people living in democracies in Asia than there are in the rest of the world put together. Asia is not China and the Asian system is by no means monolithic. In the next 6 months, about 1.8 billion people in India, Indonesia, the Philippines and Thailand will be engaged in elections. Asia’s democracies are learning from us and they are learning from each other. Hopefully, as these democracies adapt to technologies like AI and machine learning, we in the West will learn from them as well.
Here is an excerpt from the book courtesy of publishers Simon and Schuster:
A typical history textbook in the Western world begins with the civilizations of ancient Mesopotamia and Egypt, followed by chapters on the Greeks and Romans, the Middle Ages and Renaissance, Columbus and Copernicus, Napoleon and Enlightenment, British colonialism and American independence, concluding with the two world wars. As students advance through the years, the curriculum revisits the ancient, medieval, and modern eras in more detail and with more dramatis personae: Caesar and Cleopatra, the Holy Roman Empire and Black Death, Martin Luther and Louis XIV, the slave trade and Industrial Revolution, the Congress of Vienna and Crimean War, Franklin D. Roosevelt and Josef Stalin . . . and then the baton is passed to social studies.
Generally speaking, non-Western societies are brought into the picture to the extent that they had contact with the West. After all, the Mongols did reach the gates of Vienna in 1241. But the life and times of the Buddha and Confucius, the legacies of the Mughal Empire, the oceanic ventures of China’s Ming Dynasty, and many other foundations of Asia’s heritage might draw blank stares even after a university-level history course. Europeans, because they colonized the world between the fifteenth and twentieth centuries, tend to know quite a bit more than Americans about foreign regions. But as much as colonialism enriched the West, it still doesn’t feature much in the Western teaching of the past. Asian textbooks, of course, also focus on their own national and civilizational histories, generally at the expense of the Egyptians and Greeks. Furthermore, Chinese, Japanese, and Koreans are just as willing as Europeans are to whitewash—or omit—their subjugation of, or crimes against, one another. Because of colonialism, however, Asian history cannot wash out the West the way Western teaching does to Asia.
The deep linkages between West and East underscore the need for a more balanced account of global history. However, as Sebastian Conrad persuasively argued in his What Is Global History?, the discipline still suffers from Eurocentrism and a nation-state centered lens, diminishing the role of non-European civilizations as well as global processes such as capitalism that sustained linkages across regions.1 The essence of global history, by contrast, is to recount the coevolution of diverse cultures and appreciate their mutual influence. Remember that both the history of today and the rules for tomorrow are written by the winners—and Asia is gaining ground. As Asia’s ascendancy continues, the biggest gap in Western historical knowledge will be filled by Asians in their own words. What does history look like from an Asian point of view?
Ancient Asia: The Dawn of Civilization
The birth of human civilization as we know it today began in West Asia. In Mesopotamia and Asia Minor (Anatolia), the advent of basic farming tools during the Neolithic Revolution enabled humans to evolve from hunter-gatherer tribes into more settled agricultural communities that domesticated animals such as horses and dogs. The Natufian people of the eastern Levantine region were hunter-gatherers who began to grind and bake wheat into bread nearly 15,000 years ago. Fortifications found in Byblos, Aleppo, and Jericho indicate settlements dating to 7000 BC, making these the world’s oldest continuously inhabited cities. Archaeological excavations at Göbekli Tepe and Çatalhöyük in modern-day Turkey have uncovered patterned pottery, uniform brick housing, and even religious icons. By 3800 BC, the great Sumerian city-states of Ur, Kish, and Babylon thrived near the confluence of the Tigris and Euphrates rivers.
Prehistoric civilizations also flourished in East Asia. Agriculture became widespread in peninsular Southeast Asia by 6000 BC, in Japan during its Jomon period around 5000 BC, and in China around 4000 BC. By 3500 BC, during the early Bronze Age, the largest centers of the ancient world were Harappa and Mohenjo-Daro in the Indus Valley (today’s Pakistan), which featured wide streets, bathing platforms, drainage, and reservoirs. The Indus peoples worshipped a range of deities, including terra-cotta statues of the female goddess Shakti. With the migration of Aryan (“noble”) peoples from Central Asia around 1800 BC, Indo-Aryan civilization expanded southward into the Ganges plain, where its pastoral traditions and social structures were captured in the Sanskrit-language hymns of the world’s oldest religious texts, the Vedas, which formed the basis of Hinduism.
During the middle Bronze Age, around 2300 BC, Sumerian city-states gave way to the powerful Akkadian Empire and its successor, the Assyrians, who ruled over ever larger expanses as they subdued their Anatolian neighbors the Hittites, who had developed iron smelting for tools and weapons. Assyrians and Babylonians (especially under King Hammurabi) developed complex legal codes governing social life and a sophisticated division of labor among the working classes. They also engaged in diplomacy and trade with Egypt, selling it olive oil, wine, cedar wood, and the resin used for mummification. By 667 BC, Assyria had vanquished Egypt, putting an end to its age of pyramids.
Asia’s civilizations spread their advances in all directions. By 1500 BC, the seafaring Phoenicians of the Levant devised an alphabet system that was documented on Egyptian papyrus and adopted by the Greeks, a major Mediterranean trading partner. Inland, in the Caspian region, the nomadic Scythians mastered mounted warfare, occupied the Central Asian steppe region, and raided settled civilizations such as the Median people (in present-day Iran) while presiding over a vast trading network linking Greeks, Persians, and Indians that flourished from the eighth century BC onward.
These overland routes of commerce and culture reached as far as China, which by the first millennium BC had consolidated its administrative power in the Yangtze River valley. The procession of the Xia, Shang, and Zhou dynasties expanded the area of Chinese civilization through alliances and conquest, assimilating the Rong barbarians on their western frontier. At the same time, the Zhou engaged in sporadic trade with the various nomadic peoples of southern Siberia and the more sedentary peoples of Bactria, who made wide use of single-axle chariots. This Western Zhou Dynasty first articulated the notion of a Zhongguo (“Middle Kingdom”) to differentiate their imperial state from those of their vassals and the powerful fiefdoms of the northern plains. The Zhou also produced the cosmological I Ching, a text that sought to align human behavior with the cyclical patterns of nature.2
Three thousand years ago, the forces of commerce, conflict, and culture ebbed and flowed across the vast expanse from the Mediterranean to China in increasingly intense patterns of exchange. Around 550 BC, the nomadic Achaemenid people pushed aside the Scythians as they settled in the Persian region and built an empire that stretched from the Balkans to the Indus valley, the largest empire of the ancient world. Cyrus the Great’s Royal Road stretched 1,700 miles from Susa to Saris in western Anatolia, with horse-mounted couriers covering the distance in only seven days, making them the fastest postal service of antiquity. Cyrus and Darius I established opulent cities such as Persepolis, their administrative authority becoming the envy of Mediterranean peoples. (For the Greek historian Herodotus, Persia represented most of what was known of Asia.) The Achaemenids shared a linguistic kinship with the Sanskrit speakers of South Asia as well as a social stratification of priests, rulers, warriors, and farmers. Their faith, known as Zoroastrianism, was a philosophical monotheism that influenced local religions such as that of the Judaic peoples located on the eastern Mediterranean shores between Mesopotamia and the Nile River.
During the mid–6th century BC, India was the epicenter of new religious awakenings. In the eastern Ganges region (today’s Bihar province, as well as southern Nepal and western Bangladesh), ancient kingdoms flourished that differed from the Indo-Aryan strongholds to the north. In the Magadha Kingdom, Prince Siddhartha Gautama broke away from the prevailing Vedic Hindu dharma (eternal order or law), becoming an ascetic sage who attained enlightenment at Bodh Gaya and gave his first sermon at Sarnath. The first Buddhist council, convened soon after the Buddha’s death, was held in Magadha’s capital, Rajgir.3
To the north, in China, the Zhou Dynasty’s transition from bronze to iron made it a pioneer of farming plows, while hydrological technologies such as dams, dikes, and canals enabled it to harness the upper Yangtze River for irrigation. Other Zhou inventions included the decimal system in mathematics and the efficient weaving of silk. Even as the Zhou Dynasty’s stability gave way to the Warring States period (481–206 BC), “a hundred schools of thought” flourished. The military theorist Sun Tzu compiled his treatise The Art of War, which revealed strategies in espionage and battlefield tactics. Great sages such as Mozi, Mengzi (Mencius), and Confucius produced deep philosophical reflections on social values. Naturalistic philosophies such as Daoism also emerged, proposing the duality of yin and yang as seemingly opposing forces that actually belong to the same Oneness.
By 221 BC, the Qin Dynasty had risen and restored stability. Its first emperor, Qin Shi Huang, unified China’s language, units of measurement, currency, tax system, and census. To ward off the nomadic Xiongnu in the west, the Qin began the construction of the Great Wall. Meanwhile, as the Qin crushed their rivals to the east and south, many Chinese migrated across the Yalu River, overrunning the Gojoseon Kingdom on the Korean Peninsula. Both Chinese and Koreans also migrated across the Tsushima Strait onto the Kyushu Islands of Japan, which during its Yayoi period had developed distinctive pottery, bronze bells, and Shinto and animist belief systems. The mainland migrants brought with them Chinese script and characters, which became foundational to Japanese and other East Asian languages. Han people from central China also shifted in large numbers to northern Vietnam, where the Chinese commander Zhao Tuo established the Nanyue Kingdom, which spanned the Chinese provinces of Yunnan, Guangxi, and Guangdong.
The Qin quickly collapsed with the death of Qin Shi Huang’s son in 207 BC and, after another period of unrest, were supplanted by the even more powerful Han Dynasty, which promoted Confucianism both as a national religion and as a curriculum for the imperial bureaucracy. Particularly under the half-century-long reign of Emperor Wu-di (140–87 BC), the Han united disparate kingdoms into a vast empire, including subduing the Nanyue to the south. Their strength also allowed them to incorporate the territory of the nettlesome Xiongnu into a tributary region and to push through the fertile Gansu corridor into the Tarim basin toward the Pamir Mountains of Central Asia. The Han also forged connections over land and sea with India, Ceylon, Egypt, and Rome, together forming the first trans-Asian trading networks.
The Han westward push forced Yuezhi nomads from Xinjiang to the other side of the Karakoram and Pamir mountains, where they established the Kushan Empire with its center at Peshawar. The Yuezhi assimilated Buddhist culture from the Ganges valley lying to their south and disseminated it northward into Central Asia, where the Sogdian people, who occupied lands between the Amu Darya and Syr Darya rivers, were laying the foundations of the great Silk Road cities Samarkand and Bukhara (in today’s Uzbekistan). Meanwhile, from the other direction, the Achaemenid continued their push eastward into this strategic terrain, absorbing Sogdiana as a surrogate province.
The Achaemenid, however, faced a greater challenge from their western frontier as the armies of Alexander III of Macedon (“Alexander the Great”) penetrated eastward as far as the Indus River. Alexander defeated Emperor Darius III but maintained the efficient Achaemenid administrative and tax structures. The eastern Achaemenid stronghold of Gandhara remained a rich mélange of Persian Zoroastrian, Indian Hindu, and Ganges Buddhist cultures with capitals shifting between great cities such as Charsadda and Taxila. The Mauryan Empire, which emerged from the eastern Ganges Magadha region, conquered northward toward Taxila, with King Chandragupta advised by the great strategist Chanakya (also known as Kautilya). As the Mauryans secured their base at Taxila, Chandragupta’s grandson Ashoka adorned Gandhara with Buddhist stupas. The Mauryan Empire weakened with Ashoka’s death in 232 BC, opening the door for King Demetrius of Bactria, a successor to Alexander of Macedon, to capture Gandhara by around 200 BC. Subsequently, King Menander, born at Bagram (north of Kabul), propagated the Grand Trunk Road, which stretched from Central Asia through the fertile Punjab all the way to the mouth of the Ganges.
By that time, the Parthians, heirs to the Achaemenid civilization, had arisen from their stronghold just east of the Caspian Sea to dominate as far west as Anatolia and across the Euphrates River valley and Persia to the fringes of China in the east. Even as they skirmished with the Romans (who had succeeded the Greeks in regional power) in the Mediterranean basin and Caucasus region, the Parthians and their Sogdian middlemen fostered the Silk Road of trade in Indian spices and Chinese tea and silk bought by Romans and Roman glass, silver, ivory, and gold bought by the Chinese, who sent diplomatic envoys such as Zhang Qian on extensive westward tours to build ties with the Parthians.
Despite the region’s vast geographic and cultural diversity, Buddhism was the glue that held numerous Asian civilizations together. Bamiyan became a major center of Buddhist learning where monks nurtured a distinctive artistic style developed fusing Iranian, Indian, and Gandharan forms. Dunhuang in the Tarim basin, the site of stunning Buddhist grottoes chiseled into mountainsides, was the crossroads of several trade routes linking Mongolia and Tibet to Parthia and the Levant. As Han monks and merchants traveled the Silk Road in search of inspiration, they brought back Buddhist texts translated by Sogdians. Buddhism thus extended its reach through the Han Empire in a pincerlike movement from the west and south from India and Southeast Asia. By AD 155, the Han emperor Huan introduced Buddhist ceremonies into the imperial curriculum to complement Confucian teachings. In East Asia, then, Confucianism came to provide the rules of social organization premised on righteousness and benevolence, while Buddhism, Chinese Daoism, and Japanese Shintoism enabled people’s spiritual aspirations.
The maritime routes linking components of the ancient Asian system were even more significant than those over land. By the first century BC, up to 120 Greek ships per year sailed through the Red Sea and captured the monsoon winds to arrive at Indian ports, returning with jade, beads, and spices brought from Southeast Asian island kingdoms such as Sumatra and Java. Robust trade with the Indian subcontinent accelerated Southeast Asia’s Indianization, especially in the Kingdom of Funan in the lower Mekong Delta and the Khmer people, with whom Indian merchants intermarried, bringing Hinduism and Indian scripts to the Burmese, Javanese, and Thai languages. Indian knowledge of medicine also flowed along this route, finding its way into Chinese pharmacological texts. Funan’s successor, the Srivijayan Kingdom, was a famous Buddhist crossroads. King Songtsen Gampo of the mighty Tibetan Kingdom also adopted Buddhism due to the influence of his Nepali and Chinese wives.
This Indian-Chinese, Buddhist-Confucian exchange spanning India and China via Central and Southeast Asia made ancient Asia a rich cultural zone, lasting well beyond the disintegration of the Han Empire in the second century. The decline of the Han and subsequent Six Dynasties period of chaos empowered the Goguryeo Kingdom of Korea to liberate itself from the Han yoke, creating the largest independent state of the Korean Peninsula; it spanned the Yalu River and the Liaodong Peninsula. Another Korean kingdom, the Baekje, also held its own in territory and trade with China. The Baekje welcomed monks from Gandhara who brought Buddhism to the kingdom in the fourth century, and subsequently many more Indian monks who initiated the construction of monasteries and temples. The princess of Ayodhya in India even married into Korean royalty.
As in Korea, disparate Japanese kingdoms awakened, with the Yamato coalescing into a formidable regime that governed from AD 250 to 710. Under the reign of Prince Shotoku (AD 593–622) in the Asuka period, Buddhism flourished in Japanese society while Confucianism took hold in the bureaucracy. The Yamato adopted the Chinese calendar and sent Japanese students to China to study both Buddhism and Confucianism. At the same time, Japan sought equality with the Chinese emperor and refused to accept a subordinate status. Even as China, Korea, and Japan contested territory, constant migration brought them together into a common East Asian system of commerce and cross-cultural learning.
South Asia, too, continued with its intellectual and cultural advances. The Kushan Empire, led by Emperor Kanishka, strengthened in the wake of the Mauryans’ demise but continued Ashoka and Menander’s nurturing of Buddhism. By the year AD 150, Kanishka came to rule over a vast realm spanning the Bactrian regions of the Tarim basin (today’s Xinjiang) all the way to the Ganges. The Gupta Empire, which subsequently dominated the Ganges region after 320, marked a golden age of cultural and scientific accomplishment with the completion of the epic tale Mahabharata and the invention of the mathematical zero and the game of chess. The great university of Nalanda attracted students from as far as Central Asia and Korea and hosted the reputable late-seventh-century Chinese monks Xuanzang and Yijing, who translated dozens of Buddhist texts from Sanskrit into Chinese. The Guptas also expanded eastward through Bengal and built strong trade ties with the Srivijaya Kingdom, which over a period of nearly a century constructed the world’s largest Buddhist temple at Borobudur on the island of Java. The Guptas exported textiles and perfumes to Rome—until both the Guptas and the Romans succumbed in the fifth century to Hun invaders from the Altai region east of the Caspian Sea (today’s Kazakhstan).
Still, Asia’s continental connectivity continued to thrive. Paper, silk, gunpowder, and luxury goods traversed the Silk Roads in all directions, as did philosophical ideas and religious doctrines. New faiths also emerged from West Asia. In Roman Palestine, followers of the preacher Jesus Christ began to spread his message across the Levant and Caucasus; early missionaries such as St. Thomas the Apostle baptized Christians as far away as Kerala in southern India. Meanwhile, the Nestorian Church of Byzantium, splitting from that of Rome, anchored itself at Constantinople in Anatolia and grew its following in the Sassanian Empire, through which it spread eastward across Central Asia and as far as China. Ancient Asia was a richly diverse milieu of civilizations engaging through the forces of commerce, conflict, and culture.
Asia’s Imperial Expansions
Byzantium was not the only religious empire that surged eastward in the centuries following the sacking of Rome. In Arabia, long home to a polytheistic mix of Zoroastrianism, Judaism, Nestorianism, and numerous indigenous faiths, the revelations of the prophet Muhammad in Mecca in AD 610 CE inspired Arabs across the land. After his death in 632, Muslim tribes unified under the Rashidun Caliphate, which launched conquests across Egypt and North Africa and overran the Sassanians and Persians to the east. This early Islamic unity, however, gave way to disputes over succession, causing a rift within the ruling Umayyad Caliphate between rival Sunni and Shi’a sects. Already by the early eighth century, Islam had advanced to reach both the Iberian Peninsula of Europe and the fringes of India.
The Umayyad’s successors, the Abbasids, converted the powerful Turkic tribes of the Ferghana valley (in today’s Uzbekistan) and allied with them—as well as the powerful Tibetan Empire, which ruled a vast expanse covering the Tarim basin, the Himalayas, Bengal, and Yunnan—together defeating the Tang Dynasty’s armies (led in part by the Goguryeo Korean commander Gao Xianzhi) at the momentous Battle of Talas near the Tian Shan Mountains in present-day Kyrgyzstan, in 751. Despite its victory over the Tang, the Abbasid Dynasty came in 755 to aid the Tang to put down a rebellion launched by its own half-Sogdian, half-Turk general An Lushan.
While the Arab-Turkic-Tibetan alliance expelled China’s garrisons from Central Asia, its armies and merchants (including those of the nomadic Uighur people) took westward China’s sophisticated knowledge of papermaking. The Abbasids’ second caliph, Al-Mansur, established a new capital city, Baghdad, on the banks of the Tigris River (just north of the former Sassanid capital city of Ctesiphon). Subsequently, Caliph Harun al-Rashid (r. 786–809) built a House of Wisdom that gathered scholars such as the Persian mathematician and astronomer Muhammad al-Khwarizmi, who pioneered algebra (al-jabr) and the study of Indian numerals, and Hunayn ibn Ishaq, a Nestorian Christian polymath who translated more than one hundred works of the Greek philosophers Plato and Aristotle into Syriac and Arabic. Leveraging this collection of translated knowledge, the esteemed mathematician and astronomer Al-Biruni stood at the Nandna Fort in the hills of Punjab and calculated the circumference of the earth in the year 997. The caliphate’s contributions to the region were thus religious, intellectual, and economic.
Despite its defeat at the Battle of Talas, China under the Tang experienced a great awakening of cosmopolitan culture. Just before the Tang, the short-lived Sui Dynasty managed to unite the northern and southern Han and construct the Grand Canal, which linked the capital Chang’an (Xi’an) with eastern cities such as Beijing and Hangzhou, accelerating the movement of troops and grain. The Sui also sinicized major ethnic minorities and elevated Buddhism into the national religion. The Tang then continued to welcome Malay, Arab, and Persian merchants, even inviting them to live in permanent communities in Chinese cities. Such immigrants made up two-thirds of the 200,000 inhabitants of Guangzhou (Canton), where the Huaisheng Mosque became the first of its kind in China. Tang Dynasty merchant ships reflected this diversity, with crews made up of Christians, Parsis, Muslims, and Jews. Tang vessels crossed the Java Sea and Malacca Strait carrying tens of thousands of fine porcelain bowls and other items to be exchanged for Indian fabrics and Abbasid glassware.
At the time, the Tang Empire’s estimated 60 million people accounted for a quarter of the world’s population, and its cities were larger than any in Europe or India. The Tang leveraged this strength to expand aggressively into Manchuria in the north, Tibet in the west, and Annam (Vietnam) in the south. By the eighth century, nearly one hundred Asiatic peoples were sending tributes to the Tang emperor. Tang influence also reached a peak in Korea and Japan, where Buddhist sects came to rival the Asuka for power in the late eighth century. Japan’s two main Buddhist centers, Nara and Kyoto, were modeled on Chang’an (Xi’an). The internal strife that plagued the later Tang had dramatic consequences, including the independence of Vietnam and Korea. It also left a power vacuum in Central Asia filled by the nomadic Turks. Turkic peoples such as the Seljuks came to dominate from the fringes of China across Persia, subduing the Abbasid Dynasty in 1051 and defeating the Byzantines at Manzikert in 1071, advancing their Persian-Turkic synthesis across Anatolia. Born to a Turkic father and Persian mother, the Abbasid sultan Mahmud of Ghazni embodied this fusion of Sunni Islam with the warrior spirit of the Seljuks, waging relentless campaigns of jihad into Hindustan. The rise of the Delhi Sultanate all but wiped out Buddhism in favor of a syncretic Indo-Islamic culture in literature, music, and architecture.
As Seljuk raiders sacked north India’s disparate Hindu kingdoms, southern India flourished under one of its longest-ruling dynasties, the Chola, who by the ninth century had reached the zenith of power as a seafaring empire. The Chola Dynasty invaded Sri Lanka, the Maldives, Bengal, and Southeast Asia, spreading both Hindu and Buddhist culture across Khmer territory (Cambodia) and Java. The Chola achieved a decisive conquest over the Srivijaya in 1025, making them the masters of the Indian Ocean maritime network, with merchant guilds and temple banks financing ambitious commercial voyages to Yemen and East Africa.
As the Song Dynasty of China reconstituted centralized control in the late tenth century, it rejoined the thriving Indo-Pacific trade and shared its invention of the navigational compass and its mastery of shipbuilding. The expansion of the Delhi Sultanate eastward and its conquest of Bengal in 1200 spread Islam through Malacca, Sumatra, and Java. Such were the Muslims’ seafaring capabilities that by the later Song Dynasty, many had become dominant traders in China’s import-export industry.
Though the Song never achieved the splendor of the Tang, their prosperity grew as they embraced a capitalist culture and the use of paper money. Indeed, the Song were the first Chinese dynasty to commercialize the “tribute system” that focused on gains from trade with secondary powers rather than heavy taxation of the populace. Meanwhile, the Kingdom of Pagan unified central and coastal Burma as well as the Malay Peninsula, strengthening overland trade routes that linked the Bay of Bengal via Yunnan to China. The Chola, Song, and Srivijaya all competed to control strategic maritime passageways such as the Strait of Malacca but also amplified the linkages between their external trade and internal economies.
Meanwhile, on the other side of Eurasia, Europe had been stagnant for centuries after the fall of the Roman Empire. In the eleventh century, the pope sought to reconcile with Byzantium to repulse the advancing Turks and reclaim the holy land of Palestine. But by 1204, western Christian crusaders had instead plundered Constantinople, further dividing the Christian world and enabling greater gains by the Seljuk Sultanate of Rum. The mystic scholar and poet Rumi came of age in this Turkic-Persian milieu, composing literary volumes that both preached a personal love of God and venerated music and dance as pathways to spiritual union. In Central Asia, the Seljuks faced tough resistance from the Karakhanid confederation of nomadic Turkic tribes, which held firm from Kashgar to Samarkand before splintering into several khanates that became Seljuk vassals. Turkic language and Islamic culture thrived in the madrassas of Bukhara.
The Seljuk khanates and smaller Turkic protostates, however, could not withstand the rapacious armies of the Mongols. After uniting disparate northeast Asian tribes in 1206, the young warrior Temujin took on the name of Genghis Khan, or “universal ruler,” and led savage campaigns across Eurasia. By the time of his death in 1227, Genghis Khan ruled the largest contiguous empire in history, stretching from the East Sea (also known as the Sea of Japan) to the Caspian Sea. The conquests continued under his sons and grandsons, who swept across Russia and sacked Kiev in 1240, laid siege to Hungary in 1241, and reached the gates of Vienna. In 1258, the Mongols sacked Baghdad. In 1276, the Song Dynasty succumbed to Genghis Khan’s grandson Kublai Khan. A decade later, all of China—as well as the Gobi Desert and Siberia to the north—had fallen under the reign of the Mongol Yuan Dynasty, which Kublai Khan ruled from Shangdu (Xanadu) and eventually from Khanbaliq (Beijing).
For all its brutality, the Mongol Empire was strikingly tolerant: three of the four major khanates were heavily Muslim populated, while the Yuan adopted Buddhism. The Mongols were also shrewd in coopting diverse cultures and intermarrying with leading families. They rounded up hundreds of thousands of Arabs, Persians, and Turks and brought them back to China as administrators, diluting the influence of Chinese Confucian bureaucrats. The Persian physician Rashid al-Din, who served in the court of Genghis Khan’s grandson Hulagu Khan, authored a three-volume compendium (Jami al-Tawarikh) chronicling this blending of Mongol, Persian, and other cultures.
The Mongols’ provision of reliable security across a vast swath of Eurasia also enabled flourishing trade between numerous civilizations along the Silk Road. Merchant caravans from as far as Europe—including that of the late-thirteenth-century Venetian traveler Marco Polo—brought goods and visitors to the court of Kublai Khan. The rapid connectivity the Mongols enabled, however, also facilitated the rapid spread of a great plague that emanated from Central Asia. By the mid–fourteenth century, about one-third of Persia’s population had died; farther west, half of Europe’s population perished. That pestilence curtailed Silk Road trade and accelerated the decline of Mongol influence.
The Turkic Ottomans were thus able to reclaim Mesopotamia in the 1300s, while also conquering the Balkans, Arabia, and most of North Africa. After defeating the Byzantine army, Sultan Osman I transformed the land from a Greek-speaking Christian region to a Turkish-speaking Muslim one, while preserving autonomy for Christian and Jewish communities. But a major rival quickly emerged. Claiming descent from Genghis Khan, Amir Timur (Tamerlane) led his armies to restore a vast Persianized Mongol Muslim dynasty covering Central Asia and northwest India. Upon Tamerlane’s death in 1405, the Ottomans wrested control of eastern Anatolia back from the Timurids. The spread of field artillery such as cannon and muskets spurred an arms race among Asian empires.
Timur’s legacy migrated southward into India. Beginning in the early fifteenth century, Babur, a descendant of Genghis Khan and Tamerlane, laid the foundations of a multigenerational succession of Mughal (the Persian translation of Mongol) rulers whose domain stretched from the Fergana valley across most of the Indian subcontinent. Given their partial Turkic heritage, the Mughals soon began exchanging diplomatic missions with the Ottoman sultans. Initially, the Mughals were less tolerant than their Ottoman brethren, destroying India’s Hindu shrines and persecuting non-Muslims. Yet as Babur’s son Humayan and grandson Akbar expanded the empire both north and south, they increased trade with Europeans, modernized the court’s bureaucracy, and instituted a radical degree of religious tolerance. Akbar’s son Jahangir put down numerous revolts to consolidate the empire in the early seventeenth century, and his grandson Emperor Shah Jahan elevated Mughal opulence with Islamic monuments such as the Taj Mahal.
During India’s Mughal era, the Shi’a Muslim Safavids of Isfahan, whose ancestry included Turkic, Kurdish, and Azeri heritage, rose above numerous competing dynasties to become the first indigenous power to unify the Persian realm since the Sassanids, taking control of eastern Anatolia, the Caucasus, and western Turkestan. The Safavids enabled the north–south trade routes connecting Europe to India. An estimated 20,000 Indian traders lived and worked across the Safavid Empire, with Mughal merchants establishing dozens of caravanserai in major trading hubs such as Shemakha and Baku, where they collected Russian furs, copper, and caviar and brought them back to India via Afghanistan or by ship from Bandar-e-Abbas to Surat.
During the Timurid and Mughal periods in Central and South Asia, internal rebellions in China loosened Mongol control, and by 1368, the Ming Dynasty controlled the Yangtze River valley and claimed its place as the successor to the great Tang. In contrast to Song Dynasty capitalism and Mongol openness, however, the Ming emperor Hongwu curtailed private foreign trade and instituted a highly statist trade regime to project power over neighbors such as Tibet and Korea, which became a Ming vassal state and underwent a cultural sinicization. By contrast, Japan kept its distance from China, with neither the imperial military Kamakura Shogunate, which had fended off numerous Mongol naval incursions, nor its successor, the Ashikaga, submitting to the emperor Hongwu. Only in the fifteenth century did they reestablish ties through a series of diplomatic and trade missions.
Hungwu’s fourth son, Yongle (Zhu Di), continued to expand the Ming Empire by protecting the Uighurs from the Timurids, annexing Annam (as the Tang had done) and cultivating relations with the Karmapa of Tibet. Upon Timur’s death, Yongle reestablished peaceful ties with Persia. Ming China was an export juggernaut, trading from its ports of Guangdong, Shanghai, and Nanjing, perhaps the largest city in the world at the time with half a million residents. To demonstrate China’s incredible wealth, Yongle ordered the Chinese Muslim admiral Zheng He to undertake grand expeditions that established relations with Luzon and Sulu (today’s Philippines), Brunei, and Sumatra, and across the Indian Ocean to East Africa. At home, Yongle reconstructed the Grand Canal, built the Forbidden City (modern-day Bejing), instituted a rigorous Confucian examination system, and commissioned a comprehensive encyclopedia of Chinese culture and history. Even though the Ming under Yongle set the global standard for weaponry and shipbuilding, by the 1420s the emperor became preoccupied with defending the northern frontier against the Mongols and Turkic Tatars, turning China inward to focus on agriculture and limiting foreigners’ access to southern ports.
One major consequence of the Ming shift inward was that large numbers of Chinese migrated to Southeast Asian kingdoms, intermarrying with local women and assimilating into the societies of the Banten Sultanate (Java), Manila, Ayutthaya in Siam, Hoi An (in Vietnam), and Phnom Penh (Khmer). In Siam, Chinese migrants often changed their last names to be considered more local, while King Rama I of Siam was of partial Chinese descent. As a result, from the Malay Peninsula through the Mekong valley and across the waters to Luzon, Southeast Asia in the fifteenth century became a tapestry of blended ethnicities. It was also a complex religious patchwork, with Islam continuing to spread from Sumatra east to Java and north to Malacca, where King Paramesvara converted to Islam in 1414 and changed his name to Iskander Shah. Although Christianity had already established a strong presence in the southern Indian kingdom of Kerala, the arrival of missionaries and explorers from Portugal and Spain greatly accelerated its advance.
Asia and the Western Empires
The Ottomans completed their triumph over Christian Byzantium with the sacking of Constantinople in 1453, at which time most European nations descended into civil war. Seeking more secure routes to the wealthy markets of Asia, Europe’s maritime centers plied multiple long-distance routes in the hope of reaching the Moluku Islands to buy nutmeg and cloves. Toward the end of the fifteenth century, the Italian explorer Christopher Columbus ventured across the Atlantic Ocean, reaching not the Asia he expected but the Caribbean islands. Several years later, the Portuguese explorer Vasco da Gama rounded the cape of Africa to establish trade ties and entrepôts in Calicut and Gujarat. And in 1521, the Portuguese explorer Ferdinand Magellan, aided by the skills of his Malaccan interpreter, Enrique, rounded the tip of South America and leveraged the Pacific Ocean trade winds to make landfall at uninhabited islands near the Kingdom of Cebu. Collectively, these maritime passageways weakened the Turkic-Arab-Persian Silk Roads across Eurasia. By the 1580s, the Portuguese confronted and defeated the Ottoman fleet in the Indian Ocean, entrenching Europe’s positions from Mombasa to Gwadar, with Portuguese bridgeheads in Goa and as far away as Macao.
With the Ming having withdrawn their Indian Ocean fleets, Europeans took advantage of the latest technologies in shipbuilding and weaponry to advance trade among Europe, Africa, the Americas, and Asia. As they collaborated with the robust trading network of the southern Japanese Ryukyu Kingdom, they also established durable beachheads of political and religious control. As the Iberians spread across the region (soon followed by the Dutch and British), their merchants drove Indo-Muslim traders from their stronghold of Malacca, began widespread conversions to Christianity, and leased Macau from China in 1557. In 1571, the Spanish colonized Manila, making it the hub of the transpacific trade in silver brought on galleon ships from Acapulco and used to purchase Ming goods sent onward to Europe.4The enormous Ming appetite for silver became a major vulnerability as both Spain and Japan reduced silver exports to China, causing huge monetary and trade imbalances. With China weakened, the Japanese general Toyotomi Hideyoshi, who reunified the country in 1590, invaded Korea and China, but Korean resistance and Ming resilience thwarted his efforts. Upon Toyotomi’s death, the Tokugawa Shogunate rose to power but, paranoid about the proselytizing Europeans, chose an isolationist foreign policy from 1640 onward.
By 1644, the Ming had declined and were replaced by the Manchu Qing Dynasty, who put an end to the nomad-warrior Seljuks and Mongols (to whom they were related culturally) and reorganized the disparate Buddhist nomads and steppe Muslims of Dzungaria into the province of Xinjiang. Under Emperor Hong Taiji, the Qing invaded Korea twice, with Chinese princes marrying Korean princesses. The Qing Dynasty’s successive Kangxi, Yongzheng, and Qianlong emperors ruled over continuous prosperity and security, making China the wealthiest empire of the eighteenth-century world.
Casting off the Mongol yoke also enabled the Grand Duchy of Muscovy to pursue a more expansionist course. Through the sixteenth century, the Russian tsardom grew by approximately 14,000 square miles per year as it swept eastward across the tundra and plains, brushing aside the Khanate of Sibir to cement its claims west of the Irtysh River, after which it crossed the Lena River and reached the Pacific Ocean. Pushing south, Russian merchants and armies reached the Amur River, where they first clashed with the Qing but then signed the Treaty of Nerchinsk, exchanging their claims to the Amur valley for all territory east of Lake Baikal and trade routes to Beijing. Stability on Russia’s eastern and southern flanks set the stage for the four-decade rule from 1682 to 1721 of Tsar Peter I, who expanded into Scandinavia and fought a series of wars with the Ottomans for control of the Black Sea. Over the following century, Russia also wrested control of the entire Caucasus region from Persia’s Qajar Dynasty.
The Qing, meanwhile, could not sustain their grandeur, with rapid population growth, fiscal pressures, and corruption bringing the dynasty to the brink of disintegration. As Asia’s large imperial and bureaucratic powers resisted change, smaller European nations outmaneuvered them to achieve global dominion. Through the late 1600s and 1700s, the Dutch displaced the Portuguese from Hormuz to Malacca, and in 1800 they nationalized their corporate colonies across Batavia, Java, Sumatra, and Moluku, including seizing the Qing Dynasty’s Lanfang tributary in Kalimantan. European expansion in Southeast Asian economies relied on long-standing Chinese and Indian diaspora networks of credit that connected European businesses to local Asian markets. As the 1800s progressed, the French colonized Vietnam, Laos, and Cambodia, fusing them into a French Indochina union. Only by shrewdly balancing the interests of Western powers did King Rama of Siam and his successors manage to maintain the kingdom’s independence. Still, over the nineteenth century European powers transitioned from colonial intruders to global empires.
The durability of European conquest was enabled by a new set of industrial technologies pioneered in Great Britain, including steam power for ships, locomotives, and factories. As England accumulated large stockpiles of finished goods such as cotton-based textiles, it looked to Africa and Asia as markets to exploit. After its initial forays and skirmishes with Mughal princes on India’s western coast, the British East India Company established a stronghold at the mouth of the Ganges River in Calcutta in Bengal, from which it built out its revenue collection and governance functions across ever greater swaths of India. In 1784, the British Crown took over control of the company, beginning a period of direct rule of the subcontinent from Punjab through Southeast Asia, including Burma, Malaya, and the port of Singapore. During this nineteenth-century “Raj” period of rule, India was the hub for governing all territories east of the Suez Canal, meaning all of British Colonial Asia. In India itself, the British built a national railway network and established institutions such as universities and a modern administrative bureaucracy. At the same time, they enslaved millions of Indians, with tens of millions more dying in famines, undercut domestic industries, and fomented divides between Hindus and Muslims.
Colonialism also stirred Asia’s ethnic pot. The British took Indians to Burma to work as schoolteachers and civil engineers, and Tamils populated Malaya to work on rubber plantations. Tens of thousands of Indians were moved to East Africa as well to build the Uganda railway. Meanwhile, an estimated 20 million Chinese living in or around British coastal concessions such as Canton, Fujian, and Hong Kong shifted to Southeast Asia, where many married locals and deepened Southeast Asia’s multiethnic patchwork.
The British Empire also had grand designs for Central Asia. With India and the kingdoms of Nepal and Bhutan firmly under control, England sought a direct trade route to the Emirate of Bukhara. It also hoped to use the Ottomans (with whom England had allied to push back tsarist Russia in the 1850s Crimean War) and the Persians as buffers to prevent Russia from accessing the Indian Ocean. As it pushed northward from Punjab into Afghanistan, it skirmished with the Sikhs and pushed the Qajars out of Herat. A “Great Game” of maneuvers pitting Anglo and Russian proxies unfolded from Turkestan to Tibet, resulting in an 1893 agreement between the two powers to keep Afghanistan as a buffer state. But to the north, Russia rapidly expanded its railway lines eastward, easily taking the khanates of Khiva, Khokand, and Bukhara and the city of Tashkent. After clashes with the Qing Dynasty over the Illi River region at the border of Xinjiang, it also cemented its control over Turkestan.
British expansionism compounded the Qing Dynasty’s difficulties. Seeking to grow its trade surpluses, the British forced the Qing to absorb ever greater volumes of opium from India, leading to widespread addiction. In 1838, the British responded to the destruction of 20,000 cases of opium with military force, sailing up the Pearl River delta with gunboats and bombarding Chinese defenses, repeating the intrusions in the 1850s. These humiliations were exacerbated by European imperialists seizing Chinese ports as their own dominions in Shanghai, Tianjin, Ningbo, Fuzhou, Xiamen, and Hong Kong. China was also plagued by civil wars such as the Taiping Rebellion. In the late nineteenth century, the reformist Guangxu emperor attempted to establish a constitutional monarchy, but a coup d’état led by the conservative dowager empress Cixi thwarted him. The Yihetuan militia also launched a violent uprising (the “Boxer Rebellion”) to expel foreign intruders, but an alliance of Western powers, including England, France, Germany, and the United States, along with their Qing sympathizers, put it down. The failed rebellion further burdened the Qing with indemnity payments and reparations.
The arrival of Western powers brought very different results in Japan. Americans sailed into Edo Bay in 1868, opening the Tokugawa Shogunate to modernizing reforms that restored the Meiji emperor to the throne. The Meiji renamed Edo to Tokyo, centralized governance, built a national railway, and undertook major economic initiatives around industries such as shipping. As Japan became the leading East Asian power, it sought to emulate the West while also competing with it to dominate regional trade. It asserted itself militarily, defeating China in 1895 to take control of Manchuria, Korea, Taiwan, and the Ryukyu Islands. The United States’ efforts to dislodge Europe from the Western Hemisphere also had reverberations in Asia: In the aftermath of the Spanish-American War over the liberation of Cuba, the United States took possession of the Philippines as well as Spanish islands in the Pacific including Palau, Guam, and the Marianas.
Russia also continued to assert itself in the Far East, forcing Japan to return Manchuria to China so that Russia’s Trans-Siberian Railway could be extended to reach the naval base at Port Arthur (Dalian). By 1905, Japan secured a major victory over Russia at the Battle of Tsushima, winning back Manchuria, gaining the southern half of Sakhalin Island, and forcing Russia to recognize Korea as part of the Japanese sphere of influence. The Japanese further annexed Korea in 1910, sending Korea’s government into exile in Shanghai and then Chongqing. In 1911, Chinese revolutionary nationalists overthrew the Qing, ending China’s last great imperial dynasty. Sun Yat-sen was elected the first president of the new republic, whose seat was in Guangzhou, but warlordism continued to increase across the country.
Japan’s victory over Russia galvanized Asians to shed their fears of foreign aggressors and colonialists. The Ottomans, for example, were inspired by Japan’s defeat of their northern nemesis Russia as well as its ability to modernize without Westernizing. With his mantra “Asia is One,” the Japanese philosopher Okakura Tenshin became a leading voice of Pan-Asianism through his writings on the historical linkages not only among East Asians but also between Chinese and Muslims. Okukura’s Indian counterpart, the Nobel laureate Rabindranath Tagore, traveled from Japan and Korea to Persia, advocating a return to Asian ideals and traditions. Tagore’s host in China was the renowned intellectual Liang Qichao, who lamented how European colonialism had severed Asia’s historical interconnectivity and turned Asians against one another. The civil rights lawyer Mohandas K. Gandhi stepped up his campaigns of nonviolent disobedience against British rule in India throughout the 1920s, as did Aung San in Burma.
By 1914, escalating tensions between European empires and their proxies exploded into war. With the promise of having Shandong returned to its possession, China sided with the Allies (Britain, France, Russia, Italy, and the United States). But after Germany’s defeat in 1917, the Allies handed China’s territories to Japan at the 1919 Paris Peace Conference. Bewildered at this betrayal—and inspired by the 1917 Bolshevik Revolution in Russia in which Vladimir Lenin dismantled the czarist regime in favor of the interests of workers and peasants—Chinese nationalism surged. Chinese blamed themselves for allowing their own victimization at foreign hands. Seeking to avoid a repetition of the prior century of humiliation, Chinese.officials studied Japan’s rapid late-nineteenth-century industrialization and invited many Western scholars to tour China in the early twentieth century. In 1921, intellectuals including Chen Duxiu and Li Dazhao founded the Chinese Communist Party. Still, it was the Nationalists under Sun Yat-sen’s ally General Chiang Kai-shek who united China in 1926, establishing a government at Nanjing in 1928. Meanwhile, with Russia’s postrevolutionary civil war finally ended, the newly created Soviet Union’s socialist empire undertook agricultural collectivization and industrial modernization. Agreements with China secured Russia’s vast eastern Siberian flank.
The end of the great European war of 1914–1917 also brought about the dismemberment of the Ottoman Empire, with the last Ottoman sultan, Mehmed VI, forced to abdicate in 1922. Within a year, the Ottoman military commander and secular modernizer Mustafa Kemal Atatürk established a new Turkish Republic with its capital at Ankara. The partitioning of the Eastern Ottoman Empire through the Sykes-Picot Agreement created a French mandate over Syria and Lebanon and a British mandate in Palestine and Iraq, which became independent in 1932 with the nationalist Rashid Ali al-Gaylani as prime minister. Saudi Arabia annexed Ottoman possessions in the Arabian Peninsula, with the exception of small British protectorates such as Kuwait, Bahrain, and Qatar.
Lethargic and strife-ridden Persia also reinvigorated itself in the wake of the Ottoman collapse. In 1925, Reza Khan was formally appointed Iran’s new monarch, crowning himself Reza Shah of the Pahlavi Dynasty. He oversaw a major modernization program of infrastructure and schools. He also declared Iran (the country’s name in Persian) neutral among Europe’s hardening alliances, though he elevated trade ties with Germany, which had no colonial history in the region, and canceled the Anglo-Iranian Oil Company’s exclusive concessions, for which Iran received only a minimal profit share. Germany’s dictator, Adolf Hitler, sought to expand the country’s territories for settlement by German populations (Lebensraum) and reneged on his secret pact with the Soviet Union to carve up Eastern Europe, instead invading the Soviet Union in 1941. British fears that Germany might conquer the Soviet Union and proceed to take control of Iran’s oil refineries prompted a joint Anglo-Soviet invasion that created a corridor for US supplies to the Soviets. The British conscripted hundreds of thousands of troops from India, while the Soviets utilized Central Asian cotton and tank production to overwhelm Iranian forces and hold off the Nazis.
In the early 1930s, Japan, which had an anti-Communist alliance with Germany, seized on the ongoing conflict between China’s Communists and Nationalists to invade Manchuria again. Appropriating the same language of regional unity it had used to rally pan-Asianism, Japan conjured up an imperialist vision of a “Greater East Asia Co-Prosperity Sphere.” While the Allies (Great Britain, France, and the United States) focused on confronting the Nazis in Europe and Iran, Japan unleashed devastating attacks on the Allies’ interests in Pacific Asia, beginning with air strikes against Pearl Harbor in Hawaii and Guam in 1941. Japan’s army then marched across French Indochina, Burma, Malaya, and Singapore, taking more than 80,000 British, Australian, and Indian soldiers as prisoners in Singapore alone. British prime minister Winston Churchill mourned the fall of Singapore in early 1942 as the “greatest capitulation” in British history. Japan’s conquest of Asia spelled the end of European empires in Asia.
Warfare in Europe and Asia was equally devastating. Japan’s pillaging of China caused more than 14 million deaths, displaced more than 100 million people, and enslaved hundreds of thousands of Chinese and Koreans. The United States’ economic embargo and naval onslaught between 1942 and 1945 then battered Japan across the Pacific islands. While liberating Burma, the Allies also supported the Chinese resistance and the Korean Liberation Army, which retook southern China and the Korean Peninsula. The Soviet Union entered the Pacific war as well, crushing the Japanese army in Manchuria. In August 1945, US forces dropped two atomic bombs on the Japanese cities of Hiroshima and Nagasaki, after which Japan surrendered.
Asia in the Cold War
The defeat of Japan, combined with the crippling of the European empires, created a power vacuum in East Asia that was rapidly filled by the United States. Under the guise of Allied occupation, the United States, under the leadership of General Douglas MacArthur, imposed a new democratic constitution and barred Japan from any offensive rearmament. The occupation ended only in 1950. Determined to counteract US influence in East Asia, Soviet forces poured into Manchuria and onto the Korean Peninsula, whose southern half the United States had occupied after liberating it from Japan. While the United States and USSR negotiated at the newly founded United Nations to manage Korea as a trusteeship for a period of five years, both the Soviet-influenced Democratic People’s Republic of Korea (DPRK) in the north and the Republic of Korea (ROK) in the south agitated for full independence. As Communist forces moved south across the 38th Parallel, MacArthur’s army pushed back, sparking a full-scale war involving China.
China’s civil war, which erupted after Japan’s surrender, had just ended in 1949 with victory for the disciplined Communist forces led by Mao Zedong over the Nationalist army of Chiang Kai-shek, whose Kuomintang retreated from the mainland onto Taiwan, which had been returned to China after the Japanese occupation. There the Kuomintang established the Republic of China. In 1950, Mao’s forces pressed across the Yalu River to aid their brethren in North Korea. In 1951, Chinese Communist forces absorbed Tibet. And in 1955, Mao’s forces attacked and seized the Yijangshan and Tachen islands from Taiwan, halting only due to the presence of the US Seventh Fleet and the threat of nuclear reprisal against further Chinese advances.
Mao’s victory in China prompted many US lawmakers to urge President Harry Truman to adopt an “Asia First” strategy aimed at containing the advance of communism in East Asia. The United States committed to stationing more troops in Japan and South Korea, continued to deploy its navy to deter mainland aggression against Taiwan, and established the ANZUS Treaty with Australia and New Zealand in 1951. The United States’ “hub-and-spoke” alliance system became the scaffolding of Asian order.
The US military also surged into Southeast Asia. In Vietnam, the United States had provided covert support for the nationalist Ho Chi Minh’s forces to oust the Japanese from the country’s north. Upon declaring independence from France in 1945, Ho Chi Minh had hoped for continued US support, but the United States instead assisted the colonial French army in the south, which sought to preserve the Indochinese Federation. By 1954, France had to evacuate South Vietnam and grant independence to the kingdoms of Laos and Cambodia. US forces deployed into the country to prop up the South Vietnamese government of Ngo Dinh Diem against the North Vietnamese Communists, whose Vietcong guerrillas the Soviet Union and China backed.
In other major Asian states, independence also came at a high price. The immediate postwar years brought full independence for India, which in 1947 was partitioned along religious (Hindu and Muslim) lines into India and Pakistan, led by Jawaharlal Nehru and Muhammad Ali Jinnah, respectively. Nearly 15 million people crossed in each direction between the newly created states, with an estimated 1 million perishing along the way. Independence for Burma and Ceylon followed in 1948. But borders remained unsettled: India and Pakistan entered into a conflict over the Muslim-majority state of Kashmir, which had been ceded to India. In Indonesia, the anticolonial leader Sukarno declared independence from the Dutch almost immediately upon Japan’s surrender, but nationalists had to fight several more years until Indonesia won full independence in 1949. The Malay Peninsula, North Borneo, and Singapore were granted independence as Malaysia in 1963, but racial and economic tensions flared between ethnic Malays and the majority-Chinese-populated port of Singapore, which the Malaysian parliament expelled from the federation in 1965. On the whole, whether by liberation or partition, independence brought triumphant moments for Asians even though it meant adopting a new form of rigidly bordered, and contested, statehood.
During the numerous Cold War proxy struggles across the region, US, Soviet, and Chinese factions competed for influence. The United States supported anti-Communist authoritarian regimes such as that of Indonesia’s Sukarno and helped suppress the Communist Hukbalahap insurgency in the Philippines. It also led the formation in 1954 of the region’s primary security pact, known as the Southeast Asia Treaty Organization (SEATO)—meant to be an Asian version of the NATO alliance—that included disparate regional states such as Australia, Pakistan, the Philippines, and Thailand. Great-power meddling also encouraged authoritarian dictatorships across Southeast Asia. In Burma, the failure of Prime Minister U Nu’s democratic government to quell Communist insurgencies led to a military caretaker government in 1958; by 1962, a coup led by General Ne Win had established a formal military government. Likewise in Thailand, a brief experiment with democracy was followed by a succession of military dictatorships that coexisted with the respected monarchy of King Bhumibol. In the Philippines, President Ferdinand Marcos took office in 1965 and soon declared martial law in the country, citing unrest caused by a Communist insurgency. The United States supported these anti-Communist, military-backed regimes in Indonesia, Thailand, and the Philippines, which together with Malaysia and Singapore in 1967 formed the anti-Communist Association of Southeast Asian Nations (ASEAN).
In Southwest Asia, British and French dominions—Jordan, Syria, and Lebanon—gained (or regained) independence by the late 1940s. The Arab League was founded in 1945 to give voice to pan-Arab nationalism. Arab interests clashed with the Zionist movement, led by the Jewish diaspora, that claimed Jerusalem and Palestine as its homeland. Despite the recommendation of a UN commission to create separate Jewish and Arab states in Palestine, the expiration of the British Mandate in 1948 brought both civil war and a regional Arab war against the newly declared state of Israel. Israel repulsed Arab armies and took much of the territory that had been intended for Arabs under the defunct partition plan. An influx of Jews from Europe and neighboring Arab states fortified Israel’s strength, while more than 1 million Palestinian Arabs became refugees.
The United States became a more intrusive power across Southwest Asia as well, especially as the region’s hydrocarbon wealth expanded. After the Anglo-Soviet invasion of Iran, Great Britain and the Soviet Union divided and occupied the country, deposing Reza Shah in favor of his son Mohammad Reza Pahlavi and not withdrawing until 1946. The Soviets then backed a separatist Azeri state in northern Iran with its capital at Tabriz and an independent Kurdish republic (both of which were short lived) and created Iran’s Communist Tudeh Party. The United States got involved as well. In 1953, US and British intelligence services sponsored a coup against Prime Minister Mohammad Mossadegh, who had nationalized Iran’s petroleum industry, and restored to power Shah Mohammad Reza Pahlavi. Competition for influence spread across the region. While the United States protected Israel and secured its energy interests in Iran and Saudi Arabia, the Soviet Union appealed to the Arab world, aligning itself with anti-Israel nations such as Egypt, Syria, and Iraq (whose monarchy was overthrown in 1958).
Many strong Asian states refused to be Cold War pawns. Rather than accept subordinate status to the Soviet Union in a Communist bloc, China under Mao insisted on an independent agrarian socialism. More than 40 million people perished during his late-1950s “Great Leap Forward.” Mao also claimed the mantle of leadership against imperialism and capitalism, competing with the Soviets for influence. Syngman Rhee in South Korea and Kim Il Sung in North Korea also played great-power politics to their advantage, enlisting the United States and China, respectively, to strengthen their national modernization goals. Under Nehru, India actively worked with Indonesia, Yugoslavia, Egypt, and other nations to forge a Non-Aligned Movement that sought to achieve collective security without choosing sides between the United States and the Soviet Union.
India’s nonaligned status helped keep the United States and the Soviet Union mostly out of South Asia, while India forged a close partnership with Iraq, its largest oil supplier. But tensions with China flared as Tibet’s spiritual leader, the Dalai Lama, fled to India, where he was granted asylum in 1959. Subsequent border disputes culminated in the two-front war of 1962 in which China cemented its de facto control over the strategic Aksai Chin territory linking Tibet with Xinjiang. India and Pakistan’s dispute over Kashmir continued with a 1965 war that resulted in a United Nations–supervised stalemate, after which India drifted closer to the Soviets while Pakistan received greater aid from China. In 1971, India’s aid to Bengali nationalist forces helped East Pakistan secure independence as independent Bangladesh.
With Northeast Asia stabilized, economic modernization became the pathway to geopolitical clout, especially for Japan. The country’s nexus of government regulators, especially the Ministry of International Trade and Industry (MITI), and business groups (keiretsu) together engineered a liftoff of the country’s electronics and automative sectors, propelling the country’s growth by an average rate of 10 percent per year between 1958 and 1965. By the mid-1970s, just three decades after its surrender, Japan had become the world’s second largest economy. The “Four Asian Tigers” of South Korea under Park Chung-hee, Taiwan under Chiang Kai-shek, Hong Kong under British administration, and Singapore under Lee Kuan Yew also experienced rapid economic growth as they followed Japan’s model of state-guided capitalism focused on export-led growth while also welcoming foreign investment.
But Asia’s two most populous societies either remained stuck or went backward. India was in a quasi-socialist stasis due to the government’s 1950s nationalization campaign, heavy regulation of private enterprise, and imposition of tariffs to discourage trade. China also continued to subject itself to radical Communist experiments, particularly Mao’s decade-long “Cultural Revolution” between the late 1960s and mid-1970s. Mao sought to rid China of old ideas, customs, habits, and culture by destroying historical artifacts and eradicating the intellectual class.
The 1970s witnessed significant regional geopolitical realignments. The rift between Mao’s China (which became a nuclear power in 1964) and the Soviet Union under Nikita Khrushchev escalated into clashes in 1969 at the border region of Xinjiang and the Soviet Tajik republic, but negotiations between Soviet prime minister Alexei Kosygin and Chinese premier Zhou Enlai prevented escalation. China began to reconsider its hostility toward the United States and through secret negotiations with President Richard Nixon’s administration cleared the way for the US president to visit China in 1972. Though the United States hoped to use its new direct relationship with China to restrain North Vietnam, instead it had to withdraw from Vietnam in defeat in 1973, followed by the unification of the country in 1975 after the fall of Saigon, which was renamed Ho Chi Minh City. That same year, Pol Pot’s revolutionary forces captured Phnom Penh and took over Cambodia, establishing the Communist Khmer Rouge regime in the newly declared Democratic Kampuchea. Pol Pot’s commitment to autarky and social uniformity led to widespread famine and genocide until Vietnamese forces toppled the Khmer regime in 1979. Vietnam and China fought a brief border war as well in 1979, but China withdrew its forces once satisfied that the Soviets would not assist Vietnam.
Starting in 1978, Mao’s successor, Deng Xiaoping, sought to blend socialism with the opportunities of the global economy. He decollectivized agriculture, allowed private enterprise, and opened the country to foreign trade and investment as the “tiger” economies had done in the preceding decade. In May 1980, Shenzhen in the Pearl River delta became the first Chinese Special Economic Zone, luring foreign capital with tax exemptions and light regulation. It rapidly achieved a 30 percent annual growth rate and mushroomed from a village with a population of 30,000 to a bustling city of 10 million. While making China the leading developing-country destination for foreign investment, Deng also signed a landmark Treaty of Peace and Friendship with Japan and improved ties with both the US and USSR.
While the Cold War froze relations between the West and the Soviet Union, Turkey joined the Council of Europe (1949) and NATO (1952). It later applied for associate and then full membership in the European Economic Community, a diplomatic process that kicked off in 1959. Elsewhere in West Asia, instability mounted. Several wars erupted in the late 1960s and early 1970s between Egypt and Israel over the Sinai Peninsula and between Syria-led Arab forces and Israel over the Golan Heights. In the midst of the 1973 Arab-Israeli War, the Saudi Arabian–led oil cartel known as the Organization of Arab Petroleum Exporting Countries (OAPEC, later OPEC) imposed an embargo against major Western states, shocking the global economy. The Gulf countries used this oil windfall to kick off massive infrastructural modernization powered by millions of South Asian laborers and white-collar workers. From the mid-1970s to the mid-1980s, 1 million Koreans also went to the Gulf states to complete megaengineering projects.
Other upheavals shook the Arab and Islamic domains. In early 1979, more than two thousand years of Persian monarchic tradition collapsed as the Ayatollah Khomeini ousted Iran’s Pahlavi monarchy and declared an Islamic Republic. Later that year, Sunni extremists held 100,000 worshippers hostage at the Grand Mosque in Mecca. Both Saudi Arabia and Iran began to push their respective strains of Islam outward, especially in Pakistan. In December 1979, amid political chaos in Afghanistan, the Soviet Union invaded the country to install a loyalist government, inspiring fierce resistance from Muslim nations backed by the United States. In 1980, motivated by fears that the Iranian Revolution would inspire Iraq’s own Shi’a majority, Saddam Hussein invaded Iran, igniting a decade-long war in which Sunni Arab nations rallied behind Iraq while Iran sought to empower Shi’a movements elsewhere in the region such as the Hezbollah political party in Lebanon. As Iraq expended its energy on warfare and Iran consolidated its revolution in theocratic isolation, Saudi Arabia raised its profile as the world’s largest oil producer and a pillar of regional security, bringing together Arab Gulf monarchies in 1981 to form the Gulf Cooperation Council (GCC), which aimed at achieving a single market, unified military force, and common currency with its petromonarchy neighbors. In 1985, Iran, Turkey, and Pakistan formed the Economic Cooperation Organization (ECO) to promote greater cross-border trade and investment.
By 1985, the drain of the Afghanistan war and economic hardship at home forced the Soviet leadership under Mikhail Gorbachev to undertake a concerted reform program toward greater political, economic, and social openness (perestroika and glasnost), establishing détente with the United States and abandoning its policy of overt interference in Communist Eastern European nations. Grassroots revolutions spread in Poland, Czechoslovakia, and other Soviet client states, each prevailing eventually. In 1991, the Soviet Union itself splintered into fifteen independent republics. The Cold War came to an end, sparking geopolitical and ideological realignments favorable to Asia’s return to center stage in the global order.
Asia Reawakens
As the Cold War ended, West Asia grabbed the spotlight away from Europe. In the aftermath of the 1988 cease-fire between Iran and Iraq, Iran was weakened by war, economic isolation, and the death of its supreme leader, Ayatollah Khomini, in 1989. Iraq sought to rebuild its strength by turning on its oil-rich southern ally Kuwait. Within months, the United States sent 200,000 troops to defend Saudi Arabia, which became the staging ground for the liberation of Kuwait and massive retaliation against Saddam Hussein’s forces. With US military preponderance established in the region, the United States pursued a policy of “dual containment” against both Iraq and Iran. Despite long-standing US efforts to find a diplomatic solution to the Palestinian question, Israel’s relations with its Arab minority continued to deteriorate. In 1987, a Palestinian intifada (uprising) against Israeli occupation began, led by the Palestine Liberation Organization (PLO), the pan-Arab Muslim Brotherhood, and a new Islamist faction called Hamas. The intifada calmed only five years later with the Oslo Accords, which set down principles for establishing Palestinian autonomy in the occupied West Bank (and the Gaza Strip).
Between 1990 and 1991, the Soviet Union’s collapse thrust new states into independence. Georgia, Armenia, and Azerbaijan in the Caucasus and Kazakhstan, Uzbekistan, Kyrgyzstan, Tajikistan, and Turkmenistan in Central Asia all came to be ruled by their Soviet-era party chiefs. But bereft of Soviet economic support, the reformulated Commonwealth of Independent States (CIS) soon succumbed to conflicts between Armenia and Azerbaijan along with a civil war in Tajikistan. The victory of the Islamist mujahadeen in Afghanistan over Soviet forces just three years earlier had made the nearby Muslim societies of former Soviet Central Asia fertile ground for the rise of new militant groups such as the Islamic Movement of Uzbekistan (IMU) and Hizb ut-Tahrir. The Soviet collapse also meant that China bordered more former Soviet republics in Central Asia than did Russia. China settled its outstanding boundary disputes with these Turkic neighbors and used its largest province, Xinjiang, as a portal to access the raw materials of Kazakhstan, investing in new pipelines stretching from the Caspian Sea to the Tarim basin. As a way of establishing regional coordination with the newly independent republics, it also founded the Shanghai Cooperation Organisation (SCO) in 1996. Turkey also pressed for stronger ties with its Turkic brethren in Central Asia, but a succession of pragmatic Turkish prime ministers continued to focus on Europe, bringing Turkey into the European customs union in 1995 (though tensions with Greece flared over numerous island disputes such as Cyprus).
East Asian economic fortunes continued to shift with the 1990s expansion of globalization. As the Cold War backdrop faded, South Korea reopened diplomatic ties with its former foes China and Vietnam. China continued its rapid economic liberalization but maintained its centralized political regime, as evidenced by the brutal suppression of protesters in Beijing’s Tiananmen Square in June 1989. Western leaders such as US president Bill Clinton, elected in 1992, sought to sanction China for its suppression of political freedom, but Western commercial interests focused on accessing China’s massive customer base. Japan’s economy, meanwhile, suffered a “lost decade” due to the bursting of a speculative-asset bubble, creating space for South Korea’s family-run industrial conglomerates (chaebol) to leverage their government’s tax incentives and cheap credit to challenge Japan’s dominance in heavy industries and electronics.
East Asia’s geopolitical tensions heightened as China’s confidence grew. In 1995, fearing Taiwanese president Lee Teng-hui’s independence aspirations, China mobilized forces in Fujian province and conducted missile tests and amphibious exercises in the Taiwan Strait, with the United States responding by sending two aircraft carrier battle groups to compel it to back down. China did, however, regain sovereignty over Hong Kong from Great Britain in 1997 and Macao from Portugal in 1999, marking the formal disappearance of colonialism in Asia. During the mid-1990s, China also became more assertive in the South China Sea, prompting ASEAN to establish the ASEAN Regional Forum to bring China, the United States, Russia, Australia, and other powers under one diplomatic umbrella. ASEAN also expanded to include Vietnam in 1995 and Laos and Myanmar in 1997. Despite the tense regional atmosphere, China and South Korea began a dialogue with isolated North Korea, which had lost its Soviet patron. However, despite pledges to maintain nuclear-free status on the Korean Peninsula, North Korea announced its withdrawal from the Treaty on the Non-Proliferation of Nuclear Weapons (NPT).
Outside China, democratization was a major phenomenon in East Asia. In South Korea, former army general Roh Tae-woo won the country’s first direct presidential election in nearly two decades in 1988, remaining in office until 1993. In Taiwan as well, the incremental Kuomintang political reforms of the 1980s gave way to full-fledged electoral democracy in the 1990s. Political change came unevenly to Southeast Asia. The kleptocratic Marcos regime in the Philippines was toppled, replaced through democratic elections in 1986 by Corazon Aquino, who was hailed as the “mother of Asian democracy,” followed by Fidel Ramos in 1992. Southeast Asia’s export-led growth surge suffered a significant setback with the financial contagion of 1997, in which insufficient foreign currency reserves forced major devaluations and skyrocketing debt in Thailand, Malaysia, the Philippines, and even mature economies such as South Korea. The collapse of local currencies laid bare the crony capitalism governing countries such as Indonesia. After three decades of rule, Suharto lost the backing of the army and resigned in 1998 amid waves of demonstrations.
The Soviet collapse was also a major precipitating factor in India’s 1990s shift toward an open economy. As the once significant trade volumes with the Soviet Union plummented and the Persian Gulf War caused a doubling of oil prices, India’s prime minister, P V. Narasimha Rao, and his finance minister, Manmohan Singh, set about reversing Nehru-era central planning, dismantling the notorious “license Raj” of regulations, and welcoming foreign investment, all of which contributed to lifting India above what had come to be known as the “Hindu rate of growth.” At the same time, an insurgency in Kashmir and intermittent conflict with Pakistan soured relations, with both countries covertly accelerating their nuclear weapons programs and conducting nuclear tests in 1998. Pakistan also faced instability on its western border as the chaos of Afghanistan’s civil war resulted in the radical Taliban movement’s rise from the refugee camps of Peshawar to the takeover of Afghanistan in 1994, after which it began to set its sights on spreading Islamist revolution by harboring terrorist groups such as Al Qaeda.
In the aftermath of the Asian financial crisis, the region’s economic conditions recovered in the late 1990s and 2000s thanks to increased outsourcing of manufacturing by Western companies and accelerated trade integration. By 2004, Asia’s intraregional trade surpassed its trade with developed countries, insulating the region’s economies from the demand shock of the 2007 Western financial crisis. India, too, continued to grow despite lackluster economic reforms and began a “Look East” policy to capitalize on the rising opportunities for trade and strategic collaboration with East Asia. Meanwhile, Indians, Pakistanis, and other South Asians streamed in ever larger numbers to work in construction or government bureaucracies in the thriving petromonarchies of the Gulf region, whose economies surged on the back of a rapid growth in oil and gas exports to the fast-growing markets of East Asia. In the reverse direction, China expanded its infrastructure projects across Central Asia toward Iran, Pakistan, and the Gulf states.
This growth wave linking West and East Asia deepened despite the sudden turbulence emanating from the US invasions of Afghanistan in 2001 and Iraq in 2003 in response to the 2001 Al Qaeda terrorist attacks on New York and Washington, DC. The United States toppled both the Taliban in Afghanistan and Saddam Hussein’s Baathist regime in Iraq, but insurgencies led by local militias and Al Qaeda against the US-led occupation forces in Iraq and NATO forces in Afghanistan took a heavy toll, with Iraqi refugees crowding into neighboring Jordan and Syria. Meanwhile, a second Palestinian intifada against Israel broke out in 2000 and carried on through the death of PLO leader Yassir Arafat in 2004. In Iran, the strident Mahmoud Ahmadinejad was elected president and pursued a confrontational path with the United States, including ramping up the country’s covert nuclear program. As tensions with Iran mounted, violence flared around the Arab region. In early 2011, food insecurity and public agitation against corruption fueled antigovernment riots across many Arab states. Civil war shattered Syria, with radical groups such as Islamic State in Iraq and Syria (ISIS) spreading westward from Iraq and millions of refugees fleeing the country for Jordan, Lebanon, Turkey, and Europe.
Most South and East Asian societies spent the 2010s focused on political stability and economic growth. China became the world’s largest economy (in PPP terms) in 2014, Japan’s prime minister, Shinzo Abe, launched a major stimulus and reform program, and South Korea became the first country to transition to national high-speed Internet. In 2014, India elected Narendra Modi prime minister for his agenda of infrastructure investment, streamlining of regulation, and national pride. In Southeast Asia, Myanmar’s military junta relaxed its grip on power and allowed Aung San Suu Kyi, the daughter of the nation’s independence-era hero, to come out of house arrest and become a national political figure; a coup in Thailand against the kleptocratic Shinawatra family led again to military government, albeit focused on infrastructure and economic reform; and Vietnam took off as an industrial production center. The ASEAN nations of Southeast Asia overtook India in GDP and China as a recipient of foreign investment.
East Asia’s economic stability and integration helped mitigate significant geopolitical tensions over historically disputed territories such as the Senkaku/Diaoyu Islands between China and Japan and the Spratly and Paracel islands between China and littoral Southeast Asian nations. Tensions escalated on the Korean Peninsula, however, as North Korea sank a South Korean warship in 2010 and conducted successive nuclear and ICBM missile tests in 2017. Pan-Asian integration nonetheless moved forward in large strides: almost all Asian countries joined the Asian Infrastructure Investment Bank (AIIB), founded by China in 2014, and the Belt and Road Initiative (BRI) summit in 2017, committing trillions of dollars of capital to greater commercial and cultural exchange across the full breadth of Asia—and beyond.
It’s one of the toughest challenges an executive faces: How do you get your people to think creatively—to challenge the status quo—while still keeping your everyday operations running smoothly? Innovation is not like most other business functions and activities.
There are no reliable templates, rules, processes, or even measures of success. In a sense, each act of innovation is a unique feat, a leap of the individual—or the collective—imagination that can be neither predicted nor replicated. Innovation, in short, is anything but business as usual.
And yet certain organizations are somehow able to come up with great ideas over and over again. Some of the ideas are for new products, some for new ways of working, others are for new strategies, still others for entirely new lines of business.
Is there a secret to these companies’ successes? Can other organizations learn from their examples?
Simon Sinek … “Innovation is about solving a problem” … the best innovators see beyond their own industries, they think like customers to solve bigger problems, real human problems. They have a sense of purpose, a why, that goes way beyond just creating new products or services.
Steven Johnson … “Where do ideas come from?” explores the sources of ideas, from the coffee houses of the enlightenment, to the collaborative approachers of today. And with today’s tools and environment, radical innovation is extraordinarily accessible to those who know how to cultivate it.
Chan Kim … says create don’t compete, focus on Blue Oceans rather than Red Oceans … create new needs rather than just focusing on the needs that everyone else is meeting … like Cirque du Soleil when reinventing the circus experience
Clay Christensen … “The innovator’s dilemma” describes why constantly improving a product is not necessarily the best way to innovate. Often a distruptive business offering a seemingly lesser performance can displace the superior offer, because it meets the customer needs better.
Alex Osterwalder … “Business Model Innovation” is about reinventing your whole business. So many industries have become redundant that they need to fundamentally reinvent their whole business. It starts by asking how are you creating, delivering and capturing value? And what’s a better way?
Navi Radjou … “Frugal innovation” is a different mindset, that typically succeeds in emerging markets. It is about solving basic problems in more simple ways. Like the Chotukool which created a very simple fridge, more like a cool box, enabling people to buy and store fresh foods.
Hal Gregersen ….the best starting point for innovation is to ask powerful provocative questions … what if, why not … innovative leaders question the world constantly, provoking others to think openly and differently … but it starts by asking the right question
Scott Anthony … “Dual Transformation” is about the leadership challenge of creating tomorrow whilst also delivering today, finding the balance between improving the existing business, and transforming to the future business. How to allocate time, resources, and people to the twin goals.
Rita McGrath … on creating a better culture for innovation, in a world of co-created customer experiences. She explores how businesses need to develop innovation and collaboration as fundamental, repeatable proficiencies
Tim Brown … “design thinking” is taking the tools of designers to explore the real world of customers through their ideas, and then rapidly experiment with new ideas and prototypes to solve their problems, working as a team
Steve Jobs … said sometimes you needed to make a big step forward before your other competitors or you will miss out on special opportunities. This requires courage, to think unlike others, to believe in yourself, to shoot for bigger ideas than make a bigger difference to the world.
Kahneman is a nobel laureate and psychologist who has dedicated most of his career to understanding the mechanisms for decision-making. This book is an exploration of the two “systems” we use to form judgements: System 1, which is more or less impulse and strongly swayed by emotion, and System 2, which is how we solve long division problems–our slower and more analytical thought processes. What’s fascinating is how often we fall into “cognitive illusions” or “cognitive bias” because of our dependencies on System 1. We are all trying to make better decisions more quickly, and this book gives really actionable advice on how to do this while explaining why we are the way we are.
I get recommendations for business books all the time that are incredibly interesting, but I sometimes find that the books that actually impact my business are ones that have nothing to do with commerce. I’m a big fan of Brené Brown and her work on vulnerability and empathy. Her book Daring Greatly is a fantastic work that has helped inform how Maiden Home interacts with the ecosystem we’re building between our craftsmen partners in North Carolina, the Maiden Home team in New York, and our customers all over the U.S.
If you are in a position where you establish product-market fit and are now pondering next steps and how to scale, this book makes you feel as though you are consulting and being mentored by past successful entrepreneurs who have established themselves in Silicon Valley. When thinking about scaling, you have to consider the culture you are building and in what way the people you bring in to your organization help and build upon that culture.
Magdalena is an entrepreneur-turned-investor who’s been working in Silicon Valley for over 25 years and is well known for being the first investor in Salesforce.
We all need to be reminded that there are many changes in the world to be hopeful about and to build upon. Hans Rosling’s lifetime of helping us see the world more clearly is masterfully distilled in his last book.
One of my all time favourite books, Good to Great really defines the reasons why some companies make the transition to greatness, and how to build an organisation that can stand the test of time.
‘Think Small’ is an accessible toolkit that helps people make small changes that stick. The Behavioural Insights Team [a social purpose company part-owned by Nesta] are recognised around the world for helping governments innovate by trialing different nudges to prompt citizens into new ways of acting or spending – like paying tax bills on time, or taking more exercise. This book offers a summary of their most famous trials and results, to help the reader get to grips with how to apply this innovation method to their own life goals – framed as a self help book.
Current innovation processes and investment are structured from the top down, not where those who are best placed to create sustainable innovation and to drive successful change are. Founder of Village Capital, Ross Baird, argues that we have several blind spots when it comes to innovation: how we pick which ideas to support, how and where we find innovation, and why we invest in ideas. He argues that current practice is worsening deep divides and missing out on the best ideas, entrepreneurs and innovations.
Many people feel uneasy about the direction technology is taking, from new digital business models that leave workers more vulnerable, to the many and varied proposed applications of AI. In ‘WTF?: What’s the Future and Why It’s Up to Us’, O’Reilly highlights the big (and sometimes unexpected) questions we really should be asking about the future of tech, how we shape it, regulate it, and ensure it has the values we want for business, government and society. Eddie Copeland, Director of Government Innovation
In ‘The Growth Delusion’, journalist David Pilling offers a compelling case for why our obsession with economic growth, and our commitment to GDP as an indicator of everything that we value, is bad for all of us. For example, GDP measures gambling but not volunteering, financial speculation but not the value of nature. In other words, it ignores most of what matters to societies. He argues that policymakers, researchers and statisticians need to start thinking seriously about developing broader measures of prosperity and wellbeing. But this won’t be easy as there is little agreement about what makes people happy and prosperous. That’s why one of the most important ideas in this book is that deciding how we measure wellbeing, progress and prosperity in our societies shouldn’t be left to the professionals. Instead, governments should attempt to start a public debate about what they should measure.
‘Capitalism Without Capital’ draws on years of research – some of it supported and undertaken at Nesta – aiming to understand and measure the intangible economy: everything from inventions to brands, software to designs. Mainstream economics grew up in an era when most economic activity was physical – growing food or manufacturing cars and ships. As the economy has become much more immaterial, economics has struggled to keep up. The authors show the key facts – including that intangible investment is now greater than tangible investment in the UK and US, and that the majority of the most valuable firms in the world today – like Apple or Google – are based much more on intangible than tangible assets.
One of last year’s most important books on (fixing) economics, Kate Raworth argues that mainstream economics’ obsession with endless growth has created a society bound to grow ever more unequal; far out-producing and consuming our planet’s limited resources. ‘Doughnut Economics’ makes a clear case for why where we are today is not where we should be, and also lays out a very compelling (and accessible) vision for an alternative economy which does “meet the needs of all within the means of the planet”.
We lease cars. We rent designer dresses. When the lease is up, we return it and get another.
Could a similar leasing model work for furniture? IKEA, the world’s largest furniture retailer, is launching a subscription model where people can lease everything from office chairs to kitchen cabinets. Imagine you’re ready to redecorate your office or update your kitchen. Instead of going through the rigmarole (and expense) of buying all new and getting rid of the old, you just return everything and pick out something else. It’s the same as leasing a car or a piece of designer clothing. Once returned, it gets cleaned up, refurbished, and goes back into rotation for someone else to rent.
IKEA will pilot the program in Switzerland starting as soon as this month. There’s no word yet how much subscriptions will cost or exactly which Ikea products will be eligible. If the subscription model goes well, Ikea may launch the program globally. The company will start by leasing office furniture like desks and chairs to businesses. Kitchen cabinets are also a possibility. Because of the way Ikea’s cabinets are designed, all you’d have to do is swap out the doors for a completely different look.
“Instead of throwing those away, we refurbish them a little and we could sell them, prolonging the lifecycle of the products,” Torbjorn Loof, chief executive of Inter IKEA, told The Financial Times.
Time to innovate your business model
“The failure of any business reflects at root the failure to innovate, failure to recognise change, and the inability to respond to change adequately or appropriately” says Langdon Morris in his great new book Business Model Warfare.
“Business model innovation is perhaps the most important form of innovation, because it’s available to any company of any size, anywhere in the world. All it takes is insight, and the willingness to listen well and try something new.”
Here’s a short extract:
Today, as we see that yet another massive wave of new technology is about to crash across the global marketplace — what with artificial intelligence, blockchains, machine learning, self-driving cars, robots, quantum computing, etc., etc., all arriving immanently, — we must therefore anticipate that every existing business model of every existing business is thoroughly and utterly subject to disruption. This is a stark warning about the need to innovate.
Wouldn’t it be so incredibly helpful if there were a formula to explain all this, to simplify it and make it useful in practice? And indeed there is, a simple, three element framework:
Outside: The company provides experiences to customers through the delivery of products and services. The current quality of those experiences is today’s reality; making them transformatively better is the vision.
Inside: The factors inside the organization make this delivery possible. These can be many and varied, including the product or service itself, the supply chain, the operations, and technology. These are the means.
The Bridge: And then the way that a company communicates this value proposition to customers through marketing and branding, which are the messages and means through which the company communicates. This is the story.
This formula for business model innovation immediately gives us three essential questions to ask about our own business model, and how to improve it:
What’s the best possible experience that our customer can have? (Vision)
How can we organize ourselves to deliver that? (Means)
What’s the best brand identity to represent it? (Story)
We also observe that the most successful business model innovators tend to focus obsessively on oneparticular aspect of their business means, and develop it innovatively and far beyond what’s been done before. That is, they push it to the edge, the absolute limit of possibility, and in so doing create an entirely new capability that they then leverage to define or enable an exceptionally better value proposition for their customers. (See the illustration at right.)
Let’s look again at some of the companies we’ve already been discussing to see how this applies: where did they push it?
Amazon: The company’s determination to leverage its core technology into every aspect of the customer relationship.
Apple: Obsession with the user interface design created an ease of use that is the basis for nearly everything else that Apple has accomplished.
Google: Obsession with creating user traffic on its platforms has driven two decades of growth.
Southwest Airlines: Obsession with reducing operating costs enabled an entirely new business model and created three decades of exceptional growth and success.
Walmart: Obsession with supply chain optimization is the foundation of its global retailing empire.
The word “obsession” shows up in each one for good reason, and in fact in each of these examples it’s a dual obsession. On the inside, it’s the obsession to optimize some aspect of operations; on the outside, it’s the obsession to optimize the customer’s experience.
Getting there may not be easy, though. Southwest Airlines had to endure a near-death experience during its startup stage before a core element of its eventually-successful business model became clear; it took Google years to figure out how to make money; Amazon and Uber are still losing money; and Apple was moribund as late as 1997, and it was only in about 2005 that its many decades of persistence began to pay off.
How does this work in practice? Business model innovators often begin with these questions simultaneously at the forefront of their thoughts:
The first is simply, What would make the customer’s experience better? Answering this question well requires a detailed understanding of the tacit dimensions of the user experience.
The second is, How can we achieve that? This is the means.
The third question then focuses the compelling story, the critical importance of branding.
Yes, the table is of course a simplification (and possibly an over-simplification), but isn’t it interesting anyway? Do you agree with all the labels I’ve chosen? Perhaps not. But it does convey some important ideas that you need to think about with respect to your own business model:
Can you articulate what your business model is about clearly and concisely?
Does it tell a story that matters to your customers?
Can you deliver on the promise?
Notice that nowhere on the chart is the story or the experience actually the technology itself. Thus, it becomes clear that the importance of new technologies is that they’re the means through which new and better experiences are delivered, but they should rarely be the focus.
Mediocre marketers sell technology. But people buy the hole, not the drill, so skilled marketers sell the hole.
That is, the best business model innovators figure out how to deploy new technologies in order to create better experiences for their customers, while the non-innovators push technology without considering what it means for their business model, or how their business model should be designed to create optimal experiences.
If you look at the up-and-down history of retailers like Best Buy, this is one of the key lessons. They originally designed their stores as temples for people to come and worship technology, which immediately got them commoditized, and soon squeezed by Amazon and Walmart. To turn the business around they had to make it experiential and thus interesting, which they did by turning the stores into brand bazaars, collections of interesting shops in one big box. To complete the turnaround they’re now developing the new brand identity, an essential element of all business models.
I first heard about marginal gains whilst watching cycling. Dave Brailsford was the new performance director of Team GB, who in recent years have come to dominate the event. Marginal gains was said to be his secret to superior performance.
From cycling to marathon running, education and healthcare, cyber security to car manufacturing, organisations have found that 1% improvement can make a big difference. Lots of small changes can add up to more than one big change. Concentrate on making many 1% improvements and you’ll find the compound effect is huge, without putting all your eggs in one basket of transformational change. Of course there is a way to combine both concepts, in transformation through continuous evolution, but more about that later.
Alcohol on bike tyres, and electrically heated shorts
British Cycling hired Dave Brailsford as its new performance director at a time when professional cyclists in Great Britain had endured nearly one hundred years of mediocrity. Since 1908, British riders had won just a single gold medal at the Olympic Games, and they had fared even worse in cycling’s biggest race, the Tour de France. In 110 years, no British cyclist had ever won the event.
In fact, the performance of British riders had been so underwhelming that one of the top bike manufacturers in Europe refused to sell bikes to the team because they were afraid that it would hurt sales if other professionals saw the Brits using their gear.
Brailsford had been hired to put British Cycling on a new trajectory. What made him different from previous coaches was his relentless commitment to a strategy that he referred to as “the aggregation of marginal gains,” which was the philosophy of searching for a tiny margin of improvement in everything you do. Brailsford said, “The whole principle came from the idea that if you broke down everything you could think of that goes into riding a bike, and then improve it by 1 percent, you will get a significant increase when you put them all together.”
Brailsford and his coaches began by making small adjustments you might expect from a professional cycling team. They redesigned the bike seats to make them more comfortable and rubbed alcohol on the tires for a better grip. They asked riders to wear electrically heated overshorts to maintain ideal muscle temperature while riding and used biofeedback sensors to monitor how each athlete responded to a particular workout. The team tested various fabrics in a wind tunnel and had their outdoor riders switch to indoor racing suits, which proved to be lighter and more aerodynamic.
But they didn’t stop there. Brailsford and his team continued to find 1 percent improvements in overlooked and unexpected areas. They tested different types of massage gels to see which one led to the fastest muscle recovery. They hired a surgeon to teach each rider the best way to wash their hands to reduce the chances of catching a cold. They determined the type of pillow and mattress that led to the best night’s sleep for each rider. They even painted the inside of the team truck white, which helped them spot little bits of dust that would normally slip by unnoticed but could degrade the performance of the finely tuned bikes
The “black box” of continuous improvement
1% became the team mantra; all day every day. He understood that if you’re going to win you must have everything under control and working at its very best. ‘Very best’ only comes with continuous improvement. All the time his concentration was on the small improvements every day; everywhere and anywhere: 1% at a time. And it worked – brilliantly.
In 2012 Sir Dave Brailsford explained the idea of marginal gains to the BBC. He said: “The whole principle came from the idea that if you broke down everything you could think of, that goes into riding a bike, and then improved it by 1%, you will get a significant increase when you put them all together. There’s fitness and conditioning, of course, but there are other things that might seem on the periphery, like sleeping in the right position,having the same pillow when you are away and training in different places. They’re tiny things but if you clump them together it makes a big difference.”
This phenomenal success caught the eye of Cranfield Business School who published a paper, called The 15 Steps to Peak Performance which detailed the principle.
Let’s also check some terminology, and how it has emerged
Marginal Gains: The marginal gains theory is concerned with small incremental improvements in any process, which, when added together, make a significant improvement. Matthew Syed, author of Black Box Thinking wrote a viewpoint for the BBC about marginal gains. It’s a great read filled with references to speed eating,aviation and healthcare as well as a few cyclists!
Continuous Improvement: The practice of Continuous Improvement (CI), sometimes called Continual Improvement, is the ongoing improvement of products,services or processes through incremental and breakthrough improvements. Because its continuous improvement its usually depicted as a circular flowchart sourced from High Jump.
Kaizen: Japanese for improvement and it means ‘change for the better’. It focuses on activities that continuously improve all functions,processes and employees. The theory is that by improving standardised activities and processes, Kaizen will eliminate waste. It was first used in Japanese businesses after WW2 influenced by American business and quality managers. Since then it’s gone global because employees at every level of the company combine their collective talents to create powerful improvements.
1% mantra
1% might seem too small a target for your business. You’ll be aiming much higher: 25% growth at least. But let me show you the magic that one cycling director uncovered to smash through their huge targets. 1+1+1= big improvements.
10% might seem like a big price rise. But instead think about a 1% price increase, say 4 times a year? A 1% price increase typically delivers an 11% impact on profit. So, in volatile and competitive markets, it is more important than ever to give pricing the attention and focus it deserves.”
James Duval, writing for Customer Think says: “In the world of business, the smallest changes and tweaks to existing models and approaches can be substantially more effective than large, disruptive ones in increasing revenue, changing direction, and even choosing an initial path for a start-up.”
So, why do we still believe that we must make big changes to get big results? If we want to lose a stone in weight, why do we focus on the ‘stone’ we have to lose rather than the 2lbs a week we need to shift over a 7-week period? 2lb is much easier compared to a stone; perhaps that’s why we fail so often; the goal is just too big, too daunting, too impossible… and so we give up.
The same applies in any business; big or small.
One of our clients bought products to resell to the public via their disruptive website. Every time they bought another batch of stock,they re-negotiated prices, asked for discounts or improved credit terms, free delivery and bonuses. They targeted a 1% positive benefit every time. More often than not they achieved the price they wanted to pay. But it’s not just about buying right….
All businessesare a collection of individual processes that fit together to deliver the product. It’s easier if you look at each process in turn; making small improvements to each process rather than changing the entire business in one go.
If you map each process, you’ll soon discover waste that can be eliminated; remove duplication, fill gaps and address automationthen you’ll find many 1% savings that will soon add up.
Big changes are so disruptive to daily operations –that’s why they usually fail. In a competitive market all business owners should be seeking out small measured improvements and changes to their product, service, delivery and processes rather than decide on massive disruptive change.
A much better strategy is to optimise a tweak rather than the game-changing ‘big idea’.
Finding that perfect tweak
Google is a great example of a company that used small tweaks to existing ways of thinking and providing a service to become a business colossus. They’re now famous, and feared, algorithm updates are proof of their total focus on continuous improvement.
Apple are widely regarded to be one of the most innovative companies operating in the world today, and many of the company’s biggest hits are spectacular displays of the ‘tweak’ in action. The company has applied this mantra to everything it has done since. To paraphrase company CEO Tim Cook, “Apple spend a lot of time making sure their great ideas are packaged inside other great ideas.”
Neither Apple nor Google reinvented the wheel. They just focused on improving it a little bit each time; tweaking existing systems to bring big benefits.
You don’t have to be first; you just need to be better. Remember, it’s always the second mouse who gets the cheese.
Implementing small changes in strategy can make a big difference according to Marry Warner for Tweak Your Biz. She says; “Big things come in small packages and lots of them! This is especially true for startups and small businesses that are very keen about increasing their profits and are ready to do anything for it. The only problem SMBs are unaware of is, most big things that really matter to business can be achieved just by changing a few small things in the work process and strategies”.
The article gives you some great ideas, although in my opinion each suggestion also adds complexity to the business; more things to keep track of and ultimately improve by 1%. She goes on to cover customer service improvements, payment and shipping options as well as discounts, deals and how to do it.
Business Improvement Goal
All good stuff but for me there should always be an improvement goal to reduce complexity by 1%. That could be reducing colour options, sizes,delivery charges, payment options etc. Marginal gains aren’t always achieved by adding more choice for customers. Removing waste and complexity; the KISS (keep it simple stupid) principle also brings huge rewards.
Marry is right, improving customer service by just 1% has a positive impact on your bottom line. Reducing the number of complaints, saves time and money so placing your focus firmly on reducing complaints is time well spent. Improving product quality, thereby reducing the number of quality control issues will assist. Double checking orders, especially multi product orders before they are dispatched reduces errors, so does checking the shipping label is on the right box!
Little and Often
Paul Lemburg’s web blog way back in 2010, suggests that, “making a series of small changes, consistently and over time, is the one, sure-fire, guaranteed way to insure your business makes you rich.” He says “Implement something new every week – a little tweak, as often as you can manage.”
We’ve all heard the phrase ‘change for changes sake’. It’s too easy to make change after change after change until everything has changed beyond recognition. Customers don’t recognise you, staff are confused,suppliers mystified, and you’re exhausted! STOP.
No knee jerk reactions should ever be allowed in your business. Think about it, work it out. Ask yourself ‘how can I make ‘x’ better, quicker, cheaper, easier, more reliable, less complicated
Make time to consider options and then implement the right change. But don’t stop there; track the change, measure it, review it and stop or adjust it, if it isn’t working. It might only take one or two small changes to get your big difference instead of a big mess trying to make too many changes all at once.
Positive not negative gains
In James Clear’s article on marginal gains he talks about the Aggregation of Marginal Gains; saying “…improving by just 1% isn’t notable (and sometimes it isn’t even noticeable). But it can be just as meaningful, especially in the long run”.
James makes 2 important points. First is that marginal losses occur in the same wayas marginal gains and secondly the compound effect of not getting back on track quickly.
As the entrepreneur, Jim Rohn says: “Success is a few simple disciplines, practised every day; while failures are simply a few errors in judgement, repeated every day.”
But beware, this pattern works just the same way in reverse. Instead of marginal gains you have marginal losses. If you find yourself stuck with marginal losses and poor results, it’s not because something happened overnight. It’s the sum of many small choices — a 1% decline here and there — that eventually leads to a big problem.
At the beginning, there isn’t a difference between making a choice that is 1% better or 1% worse; it won’t impact much today. But as time goes by, the small improvements or declines compound and soon there’s a big gap between company’s who make slightly better decisions daily and those who don’t. This is why small choices add up over the long-term even if there’s not much difference at the time.
Most people love to talk about success, but the truth is that most of the significant things in life aren’t stand-alone events,but rather the sum of all the moments when we chose to do things 1% better or 1%worse. Aggregating these marginal gains makes a difference.
James concludes his valuable link laden article with a reminder that, “There is power in small wins and slow gains.”
Set small goals, forget the big one.
You can’t eat an elephant in one go.
It’s just the same as writing my book, The Grown-Up Business or this paper – it just doesn’t happen in one go. I write the first draft, then I re-work it trying to make improvements each time. At some point I have to stop, or it won’t get published and then no one will read it. But if I were to keep reviewing it, I know that I would make improvements. When my book was published, I read it all and already have lots of sticky notes for improvements to go into the 2nd edition.
In Bill Marsh Jnr article, small wins, he relays a story about a writer who sets a target of 1000 words per day. The writer did this for 259 days and wrote enough content for 3 books. They were all published within a year and returned a tidy financial sum.
Bill’s point was that, had his friend set a target to write & publish 3 books in a year it probably wouldn’t have happened.
But as Bill said,
“… by focusing on small wins and slow gains, he accomplished far more than he ever thought possible in such a short time.”
You can only influence what happens in the future by what you do next. You can’t win a golf tournament on the first day but you can put yourself in a good position to win on the last day. The idea of mini targets, mini goals is one that is gaining traction with businesses. Achieve each mini goal and you’ll easily achieve the bigger target. And you get to celebrate a bit along the way too!
If you want to achieve big goals turn them into mini actions.
Want this = do that. Do that = achieve goal.
So, if I want to drop a dress size, that’s my goal. My actions might be; do 50 press-ups every day and don’t eat any cakes, sweets or chocolate! It might be run 3 miles 3 times a week and 15 minutes of Pilates every day. You get the idea, actions we can do, goals we can only achieve when we have done the actions.
When most businesses are looking for improvements, they usually focus too much on large, costly complex and transformational change programmes. They fail to seriously consider the positive impact that incremental change, over a sustained period, could have on a business.
“it is our experience that organisations frequently spend insufficient time working out what small changes can be made that, when built layer on layer, lead to significant improvements.” They also contend that even, “…if you are a top quartile performer already, it’s the marginal gains that ‘put you to the top of your game.”
Leadership
Before you start aggregating your marginal gains you, as the business owner, must be prepared to drive this new way of operating right through the business. Your management team must be on-board and all employees engaged with enthusiasm, if you are to succeed.
You shouldn’t exclude any part of the business when seeking out marginal gains – it must be access all areas.
Companies that adopt marginal gains; 1% improvements as their business model and successfully drive this through see significant, positive and sustainable growth.
Our world has been and will remain, in a constant state of evolution and change. Some hugely disruptive, whilst others small, hardly distinguishable movements. There is no doubt that major change is hard to deal with and hence the recruitment industry does a thriving trade in supplying change managers to large organisations looking for radical change.
Incremental change, the 1% method doesn’t require the business to engage expensive change managers. It’s’ just the way that business happens around here. The new normal is seeking small improvements every day that add up to a bigger impact.
Summarising
1% price increase,then repeat in 2 months and then again and again
Debtors days; one day at a time
Quality failures; one at a time
Employee sickness days
Less meetings, or at least shorter ones
Purchase components, materials or stock 1% cheaper
Reduce packaging by 1%
Upgrade IT systems, hardware and broadband to be 1% more efficient
Reduce systems breakdowns
Improve quality so that there are less complaints
People
People are a huge part of any business so a little improved performance by everyone will make a huge difference. In Richard Pearson’s post on Marginal Gains, Noticeable Results for HR Review details how “marginal gains work just as efficiently (effectively) in the HR department, concluding that a 24% increase in job satisfaction can be achieved.”
But, there’s no point dedicating time or effort to getting marginal gains if you don’t analyse and resolve inefficiencies within the team. Poor performance isn’t a consequence of one mistake but lots of small incorrect decisions over time. A bit like Chinese whispers….
It’s the constant stream of errors which increases the gap between you and better decision makers. Richard concludes,
“that the key to succeeding in business is no longer the grandiose and expensive changes, but rather it is the attention to and improvement of all the finite,day-to-day decisions that will create outstanding success.”
The team at fresh tilled soil share their own story about marginal gains and how they’ve applied it to their business; one step at a time.
“One of the constraints we’ve placed on ourselves is to remain at about 30 full-time people. That restriction means we must focus on other ways to grow value. The path we chose was to make as many small marginal gains as possible.Our belief was that the aggregate of these small gains would lead to a large overall gain for the business. We started this journey to making marginal gains with the knowledge that there are no silver bullets in business. There is hardly ever just one thing that improves your business. Success is an aggregate of many small things.”
A Focus on the Little Things
Even American Express gets in on the 1% project suggesting 6 tiny business tweaks that pay off big time. They assert that it really is “the little things that make a big difference.”
Our clients’ experiences with 1% isn’t restricted to buying better or implementing price rises, they extend to every nook and cranny of the business and its operations.
It’s all about making minor adjustments to how you operate your business; one small one then another and another. Be careful, if the adjustments you’re making are the wrong ones you’ll soon be going in the wrong direction.
And if you are worried about the last Amex suggestion, ‘raise your prices’ then why not go for just 1% now and then another 1% in 3 months’ time, over and over again.
A client who was retailing product online focused on their purchasing. They set themselves a goal to buy each new batch of stock at a better price or with better terms than the last purchase. For example, their first purchase £5000 of stock was at £4.12 per unit, the second purchase of £8000 of stock was at £4.06 per unit. The third for £12000 had a unit cost of £3.99. They didn’t achieve a cost reduction every time, on occasion their credit terms were improved, or they were offered discounted stock items. They were extremely successful exiting the business after 22 months with a very nice price tag! Don’t just focus on the selling price, the buying price and the associated terms are also crucial if you’re going to make marginal gains.
Little Victories Mean Big Results
Companies can grow exponentially by constantly implementing 1% improvement. Continuous improvement is a business model worth studying and replicating. Do something different and make money.
That’s how Lewis Howes started his 7-figure business. He simply began doing something to make some money to pay his rent. In Emma Johnson’s article for Forbes she tells Lewis’s story and demonstrates how the 1% principle can work, how Lewis went from living on his sisters couch to earning a $1M and how that ‘little something’ grew into a big business.
If you’ve a big goal, then start by breaking it down into much smaller pieces. Set smaller goals that can be easily achieved. Achieve each small goal and the big goal happens. You’ll have something to celebrate every week; momentum starts to build, and together with your enthusiasm, it builds into an unstoppable success machine.
In John Meyer’s article for Entrepreneur Blog he concludes that the most powerful innovation happens incrementally. In his own example he proves why marginal or incremental change – even just 1%, is worth pursuing. John said
“When my company cut our sluggish Monday morning meeting down from 30 minutes to 15 minutes and asked all employees to stand, we got everyone’s week off to a better start and saved $520 of billable time every single week.”
Odd isn’t it that 1% of your average working day is 14 minutes!
Making small changes is all well and good but you must make the right changes or risk spiraling out of control. John details exactly how to make sure you are implementing the right changes. Try these methods for identifying, testing and optimising.
Experiment.
Do a trial run.
Track the results.
Review the change.
Keep learning.
Don’t wait until something is wrong before trying to fix it – be proactive find the problem now and make the improvements and move onto the next one. Once the problems are solved then optimise your business by making processes that already work, work even better.
Change shouldn’t be huge to make a difference; it’s the little things that really count.
Likewise, Jeff Olson author of The Slight Edge, advocates scrapping big targets in favour of small goals and details just how to do it in his article The Power of 1% and How to Boost Business Three-Fold in a Year. Essentially,we can only impact what happens in the future by what we do now. So as Jeff Haden in his article for Inc., 5 Incredibly Effective Ways to Work Smarter not Harder, says “focus only on today.”
In Jermaine Haughton’s piece for www.managers.org.uk he discusses how marginal gains can boost SME profits and says,
“Data analysis company Quantum Black consulted a large engineering multinational to introduce a series of small adjustments to its team composition, that were mostly in the 0.5%-to-1% improvement range. The process resulted in a 22% rise in productivity improvement and performance.”
Be Creative, Challenge Convention
The airline industry has taken the 1% principle to the heart of everything it does in the air.A 1% saving on the amount of airline fuel used resulted in thousands of pounds of savings. The Telegraph details lots of examples but here are a few to whet your appetite.
American Airlines famously removed an olive from every salad it served in the air and saved £30,000.
Virgin carries thinner glassware and their meal trays were designed to remove the need for heavy plates.
United Airlines uses thinner paper to produce its in-flight magazine. They estimate the savings to be $300,000.
Thomas Cook airlines introduced lightweight trolleys and saw an immediate 1% fuel saving.They don’t print receipts for in-flight purchases and reduced the weight of their magazine too. The saving from receipts – some 420,000 till rolls – was the weight as well as the cost to purchase till rolls – a double saving!
A $500,000 saving was achieved by Northwest Airlines by slicing each lime into 16 slices instead of the original 10.
“What is guaranteed to make a difference on game day is the extra 1% of effort expended on making improvements to multiple aspects of training, planning and preparation regimes.”
And that “…. gains were made in every conceivable department, no matter how minor they may have seemed. From the base fabric of a cyclist’s skin suit to the recruitment of specialist podiatrists and ocular scientists as part of a sports science team, no stone was left unturned.”
Iris have a free(email required) sign up to 2 e-books; The Power of Marginal Gains and Evolving Marginal Gains from this article, albeit their sign up process is a little clunky to get through.
Kaizen
Wherever you search on the web for marginal gains you’ll find results for Kaizen too.
It’s a system that focusses on continuous improvement in quality, technology, processes, company culture, productivity, safety and leadership. It’s a methodology that makes changes and monitors results; similar to the Plan – Do – Check- Act (PDCA) Model
Joel Bradbury’s article for Graphic Products has a good overview of Kaizen; what it is, how it works and what are the benefits.
Cycling’s legacy
Whatever you may think, London 2012 did leave a legacy; marginal gains, continuous improvement and the 1% principle. The education community has embraced the Sir Dave Brailsford method. Even school kids know about marginal gains,and they’ll probably know more than you soon.In 2016 at the Rio Olympics the 1% principle proved successful once again.
We used to assume that we each have our established ways of thinking and behaving, and as we get older the capability of our brain to learn and adapt becomes more difficult. Yet our brain can grow new neurons at any age. Each neuron can transmit up to 1,000 nerve signals a second and make as many as 10,000 connections with other neurons. Our thoughts come from the chemical signals that pass across the synaptic gaps between neurons: the more connections we make, the more powerful and adaptive our brain can be.
Tara Swart is a neuroscientist, practising medical doctor, and executive coach, with a background in psychiatry. I first met her on stage in Bratislava, where we both were delivering our “Big Idea” for Europe. Whilst a super-smart neuroscientist she is immediately engaging too. Her first book, “Neuroscience for Leadership” was more of an academic text. Her new book is “The Source” is more populist, and claims most of the things we want from life – health, happiness, wealth, love – are governed by our ability to think, feel and act. In other words, by our brain. It has even resulted in her becoming “Neuroscientist in Residence” at London’s ultra-hip Corinthia Hotel.
Keeping the brain fit through exercise and yoga, continual learning and rich experiences, enhances your mental agility. In the past leaders relied more upon experience and procedure, in today’s world we need leaders who can make sense of new patterns, imagine new possibilities, thriving on diversity of thought and complexity of action. Leaders need to have a mind that is always ahead, seeing and anticipating what next.
“Think of the brain as the hardware of a computer” says Swart. “Your mind is the software. You’re the coder who upgrades the software to transform the data (thoughts). You also control the power supply that fuels the computer — the food and drink you consume, when and how to exercise and meditate, who to interact with… You have the power to maintain or destroy your neural connections.”
Mindful activities such as yoga or meditation reduce levels of cortisol and increase the fold of the outer cortex of the brain, allowing the pre-frontal cortex to better regulate our emotional responses. Swart says just 12 minutes a day, most days of the week, will make a noticeable difference. New experiences such as travel, learning a skill, such as a foreign language, and meeting new people can stimulate the growth of new neurons.
There are some obvious ways to improve your brain function, such as drink more water, get more exercise, and don’t use read from electronic screens in the last hour before bed. Sleeping less than seven to eight hours a night isn’t sustainable for most people, because that’s how long it takes to clear out toxins. Sleeping on your left side helps the brain to flush out toxins more efficiently, and downing a spoonful of coconut oil before a big meeting boosts brain power for about 20 minutes.
Alibaba’s “customer-to-business” model shows how to use the power of AI and machine learning to respond to customers’ rapidly changing needs and aspirations.
In Smart Business: What Alibaba’s Success Says About the Future of Strategy, Alibaba’s chief strategy officer, Ming Zeng, explains how Alibaba’s model was developed, its innovative use of technology, and how it keeps the company on a growth path.
Zeng argues that in a digital world, all successful companies use the latest tech, but the Chinese giant Alibaba is the company that has taken the underlying principles of e-commerce the furthest, with a model based on machine learning and the comprehensive “datafication” of the customer experience.
Alibaba, founded in 1999 by Jack Ma, recorded a net income of 61.41 billion yuan, approximately US$9.6 billion, in the year ending March 2018, and its market cap puts it firmly in the global top 10 companies.
Alibaba is not like Amazon
Zeng says that Alibaba is sometimes compared to Amazon but he believes that the comparisons are incorrect. Whereas Amazon is a retailer, Alibaba is a portal that links customers to sellers (although it is now highly diversified, involved in everything from banking to film finance). Its strategy has been to apply technology to every part of the purchase chain, from advertising to delivery.
“Alibaba today is what you get if you take all functions associated with retail and coordinate them online into a sprawling, data-driven network of sellers, marketers, service providers, logistics companies, and manufacturers,” says Zeng.
“Alibaba does what Amazon, eBay, PayPal, Google, FedEx, wholesalers, and many of the biggest manufacturers do in the USA, with a healthy helping of financial services for garnish.”
Academia to Alibaba
Zeng was not a part of the company at its inception. At that time he was working as an academic at INSEAD business school, after completing his PhD in the USA, teaching a course on Asian business when Alibaba caught his attention.
“It had no Western counterpart so it was a perfect case for MBAs,” he says. “I contacted the company and management agreed to let me study the firm and conduct some interviews. I met Jack Ma for the first time in 2000 and I later worked as a strategy adviser for Alibaba Group.
“In 2006 I was finishing my first book in English, Dragons at Your Door: How Chinese Cost Innovation Is Disrupting Global Competition**, about emerging multinationals from China. I got a phone call from Ma asking me to join the company, which I accepted.”
Alibaba’s ecosystem
Zeng and Ma realised that they had to think of the company as an ecosystem if they were to realise its potential.
The strategic imperative was to make sure that the platform provided all the resources, or access to the resources, that an online business would need. The emerging technology of algorithms and machine learning, together with the decreasing cost of computing power, made it possible.
Zeng says, “The formula for smart businesses can be summarised in a simple equation: Network Coordination + Data Intelligence = Smart Business.
“That equation represents what is behind Alibaba’s success and captures everything you need to know about business in the future.”
The C2B model
The technology allows the company to put customers at the centre of business, constantly collecting data on them and their purchase choices in real time.
Zeng calls this the customer-to-business (C2B) model, using feedback loops to drive machine learning. Now, when customers log on they see a customised webpage with a selection of products curated from the billions offered by millions of sellers.
The model requires several connected elements: a network that can dynamically adjust the supply and quality of service offerings, an interface where customers can easily articulate their needs and responses, a modular structure that can grow from an initial beachhead, and purchasing platforms than can provide agility and innovation.
Every customer exchange supplies more data, which goes into the feedback loops required for machine learning.
This system requires that a large number of actions and decisions are taken out of human hands. Algorithms automatically make incremental adjustments that increase system-wide efficiency.
Alibaba even uses AI-based chat-bots to handle a wide range of customer inquiries and complaints without any human interaction at all.
Facilitating the data loop
Zeng puts forward four steps as the basis for creating a smart business: creating datafication processes to enrich the pool of data the business uses to become smarter; using software to put workflows and essential actors online; developing standards and APIs to enable real-time data flow and coordination; and applying machine-learning algorithms to generate business decisions.
In this new environment, leaders no longer manage. Instead, they enable workers to facilitate the feedback loop of user responses to help the company along its evolutionary path.
Zeng is adamant that the C2B model represents the future for all business.
“We live in a time of exponential change,” he says. “Everything I have described in Smart Business will soon be conventional knowledge. Change will be disruptive. But it will also bring massive opportunity.”
This week I’m in Copenhagen working with the Danish Diversity Council, and leading a fabulous workshop of female business leaders exploring the rapidly changing world, and what it takes to create and win in the future.
Of course that’s not solely a female challenge, and as a guy, I was privileged to be invited to lead the workshop.
We talked about all the usual themes in this context. The obvious right for equality in all ways, not for equal numbers in some weird quota system, but for a fair approach.
We looked at some of the great female leaders around the world, shaking up business and shaping the future. From Anne Wojcicki leading the future of healthcare with 23andMe, to Mary Barra reinventing automative with GM, and Zhang Xin, the self-made richest women in China.
And we explored the attributes required to be a successful business leader in today’s world. The need for vision and intuition, empathy and engagement, creativity and collaboration, care and humanity, and much more. Of course men can have these attributes too, but they are certainly less “macho” characteristics, and more typically associated with female approaches.
All good. Until we came to the state of equality for female leaders in Denmark.
Microsoft Denmark CEO, Marianne Dahl, joined us for a panel discussion. She was passionate and angry. She felt things were going backwards not forwards, that the agenda had stalled, the glass ceiling returned, that attitudes had hardened and fairness slipped. I was shocked, particular in a country like Denmark with a reputation for social progress.
And here are some of the great Nordic female leaders:
https://www.youtube.com/watch?v=4HcX6jsUOYk
Filippa Knutsson, Founder, Filippa K.
Filippa Martina Knutsson is a Swedish fashion designer. She is the owner of the fashion brand Filippa K, founded in 1993, and runs it with her former husband Patrik Kihlborg. She has been called “a household name” and “a superstar” in Sweden and much of Europe.
She has been immersed in the clothing and fashion industry for many years. Having spent her formative years in London, she returned to her native Sweden to work in her family’s fashion business. She later came together with two business partners to establish the Filippa K line in 1993. Based in Sweden, in just over 20 years the brand has expanded to fashion outlets in 20 markets and 50 brand stores across the Nordics as well as in the Netherlands, Belgium, Germany and Switzerland.
The men’s and women’s lines can also be found at over 600 of other retailers worldwide. In 2014 turnover exceeded EUR 70 million. Ms Knutsson has been deeply involved in orchestrating the success of the Filippa K fashion lines and supervises all of the brand’s creative aspects, including conceptualization, design, retail concepts and brand communications.
Mette Lykke, CEO Too Good to Go
Lykke leads the Danish waste food business Too Good to Go. She was previously Vice President of Under Armour, International Digital and the co-founder & CEO of Endomondo. She and two business partners co-founded the fitness tracking app Endomondo in 2007 and by 2014 had grown the community-based venture to reach 20 million registered users. As chief executive, she successfully orchestrated the company’s acquisition for $85M by the US-based athletic apparel manufacturer Under Armour.
What happens when you take three business consultants and a gypsy? This isn’t the start of a joke. She revealed that an unexpected encounter with a gypsy showed her that following her dreams could take her to places she’d never believed possible and that passion for what she does is the real measure of her success.
She showed she could walk the talk when she traded in a comfortable position at the international consulting firm McKinsey for the risks of entrepreneurship. Ms Lykke and two business partners co-founded the fitness tracking app Endomondo in 2007 and by 2014 had grown the community-based venture to reach 25 million users. As chief executive she successfully orchestrated the company’s acquisition for USD 85 million by the US-based athletic apparel manufacturer Under Armour, where she is now vice president.
Before her steep rise to business success, Ms Lykke worked as a journalist and researcher for a major Danish daily newspaper while pursuing a master’s degree in political science at Aarhus University. She was later recruited by McKinsey & Co as a management consultant. The rest, as they say, is history. In 2013 she received the Female Business Owners’ Inspirational award and in 2012 was granted the Founder of the Year award by the Nordic Startup Awards series, which celebrates startup ecosystems based in the Nordics.
Pia Vemmelund, Managing Director, Momondo
With more than 25 years under her belt in the travel industry it’s no surprise that Pia Vemmelund has worked her way to the top of one of the fastest-rising online travel and destination service providers, Momondo. Before joining Momondo, Vemmelund spent 19 years with the Scandinavian airline SAS, where she held several positions, including Director, Commercial Intelligence and Sales Support. In 2007 she moved to Momondo and took on the hefty portfolio of commercial manager with responsibility for sales, online marketing, finance and administration. By 2012 she had become the company’s managing director and was made a member of the board in 2013. As Momondo chief executive Ms Vemmelund has played a central role in securing financing for the venture. In 2014 she helped negotiation a USD 130 million investment in Momondo by the venture capitalist Great Hill Partners. She is also a board member of Greenland Travel and the Danish online bargain aggregator Bownty.
Azita Shariati, CEO Sodexo Sweden & Denmark
Iranian-born catering industry dynamo Azita Shariati leads the Swedish and Danish operations of the French-based multinational company Sodexo. The company’s Nordic operations employ 11,000 people and have a turnover of SEK 7.5 billion. Ms Shariati has earned every ounce of the respect and accolades she now enjoys, having worked her way up to the chief executive position during a relatively brief nine-year career with the company. During her impressive rise to the top of the organization she held roles such as sales director and country manager, Sweden. A passionate advocate of gender balance and multiculturalism, when she was appointed vice president in 2010, she famously set a challenge for the company to employ women in 50 percent of senior management positions by 2015 – a target that was later achieved. As a result, she was named Sweden’s most powerful business woman in 2015 by the weekly business magazine Veckans Affärer. In granting the award, the publication cited Ms Shariati’s inclusive leadership based on her advocacy for gender balance and diversity and her recognition that she has the power to change society.
Hilde Midthjell, Owner, Dale of Norway
Hilde Midthjell is a serial Norwegian entrepreneur with a background in medicine and a distinct flair for business. Ms Midthjell is currently main owner and board chair of Dale of Norway, a clothing company that produces outdoor lifestyle gear. The company is perhaps best known for its trademark lusekofte sweater, which features traditional Norwegian design and weaving methods. It has also been the official supplier of sweaters for the Norwegian ski team and winter Olympics since 1956. Prior to taking the helm at Dale, Ms Midthjell set up and ran a successful cosmetics company, Dermanor, part of the Dermagruppen group for more than 20 years. She sold the company for NOK 500 million. The cosmetics company now operates across the Nordics. She is also owner and chief executive of a series of companies, one of which is an investment firm through which she owns a controlling share of Dale of Norway and a minority stake in the sustainable tourism company Basecamp Explorer
Lotte Tīsenkopfa-Iltnere, CEO of Madara Cosmetics
A keen interest in sustainable living and home-made cosmetics led entrepreneur Lotte Tīsenkopfa-Iltnere to establish Madara Cosmetics, a manufacturer of organic skin care products, in 2006. Currently the company’s chief executive, Tīsenkopfa-Iltnere has expanded the product line and grown the reach of the business across northern and central Europe. The company posted revenues of 1.9 and 2.3 million euros in 2012 and 2013, respectively. In 2012 she was named one of the country’s top 25 women in business by Forbes Latvia and in 2014 one of the company’s facial products was named the best new cosmetic by the Latvian lifestyle magazine Pastaiga. Tīsenkopfa-Iltnere has also worked as a journalist and has studied Japanese language, culture and business in Latvia and Japan.
Björk Guðmundsdóttir, Musician and Entrepreneur
Widely known by her first name only, Björk has become a fixture on the international music scene during the 30 years of her career as a singer-songwriter, musician and producer. She has also championed environmental causes and has actively campaigned for environmental preservation in Iceland. In 2009 she collaborated with a venture capital firm to set up an investment fund to invest in green technology in her home country. In 2012 her net worth was estimated at more than USD 50 million. She is a lynchpin of the experimental music scene, yet has turned out a number of highly successful singles on mainstream music charts – reflecting her eclectic musical tastes and styles. Björk has had 30 hit singles in the Top 40 of global pop charts and has scored 22 Top 40 hits on UK charts. The Icelandic artist has been recognized with a number of music industry awards throughout her career. In 2011 she became the first artist to release an album, Biophilia, as a series of interactive apps, which were later inducted into the permanent collection of the Museum of Modern Art.
“A crash on the Washington, D.C. metro system. An accidental overdose in a state-of-the-art hospital. An overcooked holiday meal …
At first glance, these disasters seem to have little in common. But surprising new research shows that all these events, and the myriad failures that dominate headlines every day, share similar causes.
… By understanding what lies behind these failures, we can design better systems, make our teams more productive, and transform how we make decisions at work and at home.”
The award-winning book Meltdown explores how complexity causes failure in all kinds of modern systems, from social media to air travel, and how we can prevent meltdowns in business and life.
https://www.youtube.com/watch?v=0Wi8KA4I34s
Weaving together social science with stories that take us from the frontlines of the Volkswagen scandal to backstage at the Oscars, from deep beneath the Gulf of Mexico to the top of Mount Everest, Chris Clearfield and András Tilcsik explain how the increasing complexity of our systems creates conditions ripe for failure and why our brains and teams can’t keep up. They highlight the paradox of progress: Though modern systems have given us new capabilities, they’ve become vulnerable to surprising meltdowns–and even to corruption and misconduct.
But Meltdown isn’t just about failure; it’s about solutions—whether you’re managing a team or the chaos of your family’s morning routine. It reveals why ugly designs make us safer, how a five-minute exercise can prevent billion-dollar catastrophes, why teams with fewer experts are better at managing risk, and why diversity is one of our best safeguards against failure. The result is an eye-opening, empowering, and entirely original book–one that will change the way you see our complex world and your own place in it.
“More and more of our systems are in the danger zone, but our ability to manage them hasn’t quite caught up. The result: things fall apart.”
As systems become more complex, we are more vulnerable to unexpected system failures. In Meltdown, the authors examine a fatal D.C. Metro train accident, the Three Mile Island disaster, the collapse of Enron, the 2012 meltdown of Knight Capital, the Flint water crisis, and the 2017 Oscars mix-up, among other meltdowns, and discover that while these failures stem from very different problems, their underlying causes are surprisingly similar. These stories told here are a compelling look behind the scenes of why failures occur in today’s many complex systems.
Using sociologist professor Charles Perrow’s theory that as a system’s complexity and “tight coupling” (a lack of slack between different parts—no margin) increase the chance of a meltdown. In other words, these failures are driven by “the connections between the different parts, rather than the parts themselves.”
Some systems are linear and in these systems, the source of the breakdown is obvious. But as systems become complex, as at a nuclear power plant, the parts of the system interact in hidden and unexpected ways. Because these systems are more like a web, when they breakdown, it is difficult to figure out exactly what is wrong. And worse still, it is almost impossible to predict where it will go wrong and all of the possible consequences of even a small failure somewhere in the system.
As more and more of our systems become more complex and tightly coupled, what do you do? How do we keep up with our increasingly complex systems?
Oddly enough, safety features are not the answer. They become part of the system and thereby add to the complexity. And when something goes wrong, we like to add even more safety features into the system. “It’s like the old fable: cry wolf every eight minutes, and soon people will tune you out. Worse, when something does happen, constant alerts make it hard to sort out the important from the trivial.”
There are ways to make complex systems more transparent. For example, using premortems. Imagine in the future your project has failed. Write down all of the reasons why you think it happened. A 1989 study showed that premortems or prospective hindsight boost our ability to identify reasons why an outcome might occur and therefore deal with the potential problems before they occur.
We also should encourage feedback and sharing of failures and near-misses. “By openly sharing stories of failures and near failures—without blame or revenge—we can create a culture in which people view errors as an opportunity to learn rather than as the impetus for a witch hunt.”
Encourage dissent with a more open-leadership style. People in power tend to dismiss other’s opinions. Leaders should speak last. You have to work on the culture. Ironically, the authors note, introducing anonymous feedback actually highlights the dangers of speaking up.
Bring in outsiders and add diversity of thought. Outsiders will see things we don’t and are more willing to ask uncomfortable questions. Also in a more diverse environment, we tend to be more vigilant and question more. When we are around people just like us, we tend to trust their judgment which can lead to too much conformity. “Diversity is like a speed bump. It’s a nuisance, but it snaps us out of our comfort zone and makes it hard to barrel ahead without thinking. It saves us from ourselves.”
Transparent design matters. We need to see what is going on under the hood. Being able to see the state of a system by simply looking at it can be an important safeguard.
These are just a sampling of the ways we can learn to manage complex systems. This doesn’t mean we should take fewer risks. On the contrary, these solutions—structured decision tools, diverse teams, and norms that encourage healthy skepticism and dissent—“tend to fuel, rather than squelch, innovation and productivity. Adopting these solutions is a win-win.”
We can make our systems more forgiving of our mistakes by thinking critically and clearly about our own systems. How many things have to go right at the same time for this to work? Can we simplify it? How can we add margin?
The average life of a company has been consistently shrinking, from 67 years in the 1920s to 15 years today, and dropping fast according to research by Richard Foster of Yale School of Management. At this churn rate, 75 per cent of the S&P 500 will be replaced by 2027.
Austrian-American economist Joseph Schumpeter called it an era of “creative destruction”, picking up pace at the dawn of the digital era – around 15 years ago. Industries like media and entertainment saw their traditional, analogue business models become obsolete as content became digital, easily shareable, and virtually free.
As the digital revolution extends rapidly into every aspect of the economy and our lives, no industry is immune to the transformative effect of digitalisation. Digital technologies are corroding the very institutions and industries that are using it. As it does, it ushers in a new industrial era, where concepts like ‘company’, ‘corporation’, and ‘employment’ no longer define what it means to create wealth and to work.
George Zarkadakis argues that new models of organising talent, capital and technology are being tested, pointing at an often disturbing and certainly very different world from the one that our parents and grandparents knew. But what would that world be like? And what would this profound transformation mean for business?
The deconstruction of the firm
What is a company? Business corporations – centralised, hierarchical and self-contained orchestrations of labour, capital and know-how – have been with us for so long that we imagine them as something ‘natural’ and given. But there are specific economic reasons for their existence.
In his theory of the firm, nobel laureate economist Roland Coase proposed that corporations exist because they’re good at reducing three costs. The first is the cost resourcing; it is less expensive to find and recruit people with the right skills and knowledge inside a company than to look for them outside every time you want to do something. The second is the cost transacting, or managing processes and resources. Having many outside contractors, for example, usually imposes a greater administrative burden that having teams in-house. And finally, the third is the cost of contracting; every time work takes place inside a company, the rules and conditions that govern the work are implied in the employment contract, as opposed to having to negotiate separate contracts with multiple external contractors. By reducing these three costs, Coase said, corporations are the optimal structures for increasing economic activity.
Yet thanks to software and the Internet, those three costs can now be minimised just as effectively outside the company as they can inside it. Finding workers via talent platforms, such as Upwork or Topcoder, is often less costly, easier and less risky than recruiting someone full time. Collaboration tools allow for agile forms of work, where managers are not just unnecessary, but are seen as obstacles, bottlenecks and inefficiencies. Finally, the advent of distributed ledger technologies enabling ‘smart contracts’ promises to slash contracting costs by removing the need for a trusted third party intermediate. Because of these innovations, we are already seeing a new way of business organisation emerging – one which is open, permeable, skills based, and highly networked.
Destroying hierarchies
One of the best examples of this new type of organisation is Bellingcat, a platform for citizen journalism established in 2014 by Eliot Higgins with initial funding from a Kickstarter project. Bellingcat uses material available on social networks to enable volunteer journalists to do in-depth investigations. When Malaysia airline MH17 crashed over Ukraine, Bellingcat showed how effective their business model was by exposing Russia as the instigator using social media data from the Facebook accounts of Russian military personnel. Although much can be debated about the merits of removing traditional, hierarchical editorial oversight in the media by providing tools and a channel for investigative journalism, Bellingcat has reinvented news media in the age of digital and given more opportunities to any citizen becoming an investigative journalist. Many other companies are emulating aspects of the same model by removing managerial oversight and allowing more freedom to the person who actually produces the work.
Zappos, the digital shoe and clothing shop currently owned by Amazon, employs around 1500 people and has a billion dollar annual turnover. In an email to his employees in 2015 Zappos CEO Tony Hsieh announced that there will be no more managers and no job titles, and employees will be taking decisions by themselves, implementing the so-called ‘Holocracy’, a self-organisation methodology introduced in 2007 by the HolocracyOne company. Instead of pyramidal hierarchies holocracies are organised around ‘circles’; each circle may encompass a traditional function (e.g., marketing) as well as other ‘subcircles’ that are focused on specific projects or tasks. No one prevents workers from freely moving across subcircles in order to achieve their goals, for there are no managers to report to. For such an organisation to function efficiently, workers need special software that enables cross-circle collaboration and measures individual and team performance.
As many other companies around the world begin to change their organisational models to become more agile, innovative and resilient to continuous change, the theme of removing traditional leadership and replacing it with worker autonomy is pushed centre stage. Haier, the Chinese manufacturing giant, is transforming into a platform for entrepreneurship by encouraging its employees to become self-governing entrepreneurs. Zhang Ruimin, the CEO of Haier, is effectively leading his organisation so he can become obsolete, for he sees this transformation as the only path that can secure a future for his company. By getting rid of traditional leadership models and becoming a platform, companies such as Haier and others massively accelerate their innovation processes and their chances of long term survival.
Enter AI and Big Data
With the advent of powerful machine learning systems, the journey of the digital transformation of companies is has entered new, turbulent, uncharted, but nevertheless very exciting waters. We are currently witnessing the first wave of AI-enabled automation impacting work, usually as a result of companies automating processes with RPA or by deploying chatbots to customer service centres, or – in specific industries such as logistics and warehousing – by reimagining work-intensive processes with the use of social robotics. The work dividends from this first wave of automation are mostly positive. Low level, tedious, hazardous and boring tasks are taken over by machines, freeing up time for the humans to do ‘higher level’ tasks.
This opportunity for redeploying humans and reconfiguring work is certainly a very good message for the future of human and machine collaboration. But it requires that companies think proactively and reskill their workforce accordingly. For example, by deploying a chatbot to take over more than half of customer enquiries a major international telephone operator has managed to increase customer satisfaction, but also reduced the number of contracted workers who were necessary before.
The second wave of automation is yet to come. When it arrives, big data and AI will profoundly disrupt the traditional business models of every industry, and indeed blur the boundaries between industries. The signs are already there for all to see. Take, for example, the car industry. In a driverless car world the experience of driving will be radically different. Driverless cars will democratise the experience that only the super rich enjoy today – using the car as a second office, or an extension of their living room, while their trusted chauffeur does the driving. So the question is: are car manufacturers ready for this profound transformation of their industry? Do they have the right skills to design, build and deliver these new experiences for their customers?
From platforms to ecosystems
In the Fourth Industrial Revolution the biggest challenge for every business will be ‘speed to capability’ In other words, how quickly can a company retool itself, both in terms of technology and skills, in order to perceive, analyse, understand, and respond to continuously changing customer behaviour and expectations? Cloud technologies can provide retooling agility, but that is not enough. Companies will need to reorganise work in order to obtain human agility as well. They need to be able to access and deploy a wide range of skills quickly and on demand. This means that we must forget the concept of a ‘job’. This concept is a relic of the First Industrial Revolution where stability was critical for business success, and people were deployed in stable organisational units. In the new world of constant change and shifting trends, stability is an obstacle. Human workers will be defined by their skills and not by job titles.
In such a world, leadership needs to radically change too. Instead of a supervisory role that ensures processes are dutifully followed by all, the new leaders should be more like orchestra conductors: bringing together diverse talent and technology into a coherent whole that can deliver an excellent performance whatever score you put in front of them. Such leadership needs a new mindset, and the support of a new generation of systems that enable an agile, diverse and highly collaborative workforce. In a world of AI automation the real competitive advantage will come from unlocking human potential. The ‘age of the machines’ is really the ‘age of the humans’ – a realisation that is already termed the AI Paradox. Unlocking human potential means empowering experimentation and collaboration, as well as capitalising on the power of team diversity. This can be affected by scaling agile practices, breaking down silos, opening up the company to innovation from non-company actors, and thus transforming an organisation into an ecosystem of agile and continuous innovation.
The traditional idea of the secluded, self-contained, self-governed corporation will be massively revised in a world where collaboration inside as well as outside the company is vital for success. For example, as companies transform into open collaborative ecosystems they need to consider how to incentivise a wide range of participants in adding value to the ecosystem. These participants may be customers or suppliers, or communities with an interest to participate in the ecosystem. Data self-sovereignty will catalyse the need for new revenue models, quite possibly by leveraging cryptoeconomics as well as new forms of governance whereby impacted communities are included in decision making. The future of companies would be to evolve into interconnected ecosystems with a purpose beyond the mere maximisation of economic performance. It will be up to future business leaders to determine, and articulate, what that greater purpose should be.
Outside: The company provides experiences to customers through the delivery of products and services. The current quality of those experiences is today’s reality; making them transformatively better is the vision.
Let’s look again at some of the companies we’ve already been discussing to see how this applies: where did they push it?
