U.S. Competitiveness Project—A Need for Systems Thinking

Andrew McKeon

Andrew McKeon is the founder of

The current state of U.S. competitiveness is not the problem, but rather, a symptom of a larger systemic one. In their January 2012 report "Prosperity at Risk," Michael Porter and Jan Rivkin describe how the threats to U.S. competitiveness are multi-faceted and interrelated, and how the strategies to address the competitiveness gap must be long-term, multidimensional, holistic and sustained. As they press business leaders to stop actions that simply benefit their own firms while collectively weakening America's business environment, Porter and Rivkin are describing the real problem. Fixing U.S. competitiveness will require a systems perspective much broader and more holistic than American management has practiced in the last 40 years.

Trouble is, for decades, U.S. management has had very little appreciation for seeing businesses from a systems perspective. Hugely popular management approaches like MBO (management by objective) created "the whole is equal to the sum of the parts" and "manage what you measure and measure what you manage" mind-sets. Consequently, little attention was paid to the interconnections and interdependencies within a business operation or between businesses—these weren't seen as important in building great enterprises or fostering strong economies. Harvard Business School's U.S. Competitiveness Project aims to change that thinking and hopefully will.

If we are to really address U.S. competitiveness, we must stop looking at issues, businesses and markets as isolated entities, and instead understand that the future of U.S. competitiveness lies in how well we address the systems issues facing the global economy and the planet over the next 20-40 years.

The risks are clear. Huge increases in global demand for raw materials, commodities, energy and water will put greater claims on resources, stress supply chains, apply enormous pressure to profit margins and deepen the planet's most serious environmental challenges. Before mid-century, an estimated three billion new additions to the world's middle-class will triple the size of the global economy, heightening demand for the world's scarcest resources. For companies to turn these risks into opportunities, they must take advantage of growth while mitigating resource disruptions and global environmental degradation. Clearly, business as usual will not get the job done. Sustainability must be the organizing principle of U.S. competitiveness if we are to lead in the 21st century.

Many ask about the meaning of the term sustainability. Here sustainability refers to a process and a way of thinking which begins with an appreciation for businesses as systems, embedded in larger systems such as markets, and all part of even larger systems of economies. Ultimately, the earth itself is a system made up of highly interconnected and interdependent groupings of natural and man-made systems, one of the most powerful being the global economy. In a well-organized system, every subsystem supports and aligns with the aim, operations and workings of the overall system. Lack of alignment leads to sub-optimization, decay and the potential destruction of the system. Simply put, sustainability is about getting the alignment right between how the global economy works and how the planet works. To the extent business operations support that alignment, business is sustainable and will prosper; to the extent business operations are out of alignment, business is unsustainable and will deteriorate. The key to U.S. competiveness lies in how well we plan and organize for that alignment.

Next month in New York City, there will be a major gathering of C-level business leaders, entrepreneurs, NGO activists, and at least two former Heads-of-State (Costa Rica's Jose Maria Figueres and U.S. President Bill Clinton) to discuss U.S. competitiveness in the context of the risks and opportunities of the 21st century. The event—The Sustainable Operations Summit—takes place the very same week as Fortune Brainstorm Green, a CEO-level event in San Diego focused on the newest ideas shaping the future of business. Both events and others like them signal an important trend in the business community: putting sustainability at the center of the discussion around risk, opportunity and U.S. competitiveness in the coming years.

At The Sustainable Operations Summit, I will be moderating a panel that was originally entitled "Environmental Strategy and Business Strategy." I spoke with the conference organizer about changing the name—replacing "and" with "as"—and he agreed. The "Environmental Strategy as Business Strategy" panel will discuss how new business strategies for American competitiveness in the 21st century must not make environmental strategy vestigial, or incorporate it only because it is noble or socially responsible. Instead environmental strategy must be seen as the key to global competiveness. Understanding natural systems will tell us much more than simply what we're doing wrong to the planet—it can provide unique insights into how to build resilient businesses systems. As detailed in the book Profit Beyond Measure by H. Thomas Johnson and Andres Bröms, natural system characteristics such as self-organization, interdependence and diversity have been used to build some of the most efficient and robust manufacturing systems of the 20th century. In the 21st century only by understanding these principles will companies be able to address the daunting challenges and unprecedented opportunities that are unfolding.

One of the panelists on "Environmental Strategy as Business Strategy" will be Col. Mark Mykleby (U.S.M.C. Ret.). After serving in combat in Iraq and developing strategy for U.S. Special Ops Command, Colonel Mykleby served as special assistant to the chairman of the Joint Chiefs of Staff, where he developed a new National Strategic Narrative for the United States in the 21st Century. The U.S. has been without a national strategy since the end of the Cold War when the strategy of "containment" of global communism became obsolete. Col. Mykleby's narrative replaces "containment" with "sustainment", making sustainability a core principle for America's next 50 years. The narrative is not just about green energy and resource efficiency, although these are important components. It is about something larger—a view of America's challenges and opportunities from a systems perspective. There are powerful and influential people both inside and outside Washington who are quietly working to see this strategy transformed into policy in the next administration, which would go far to mainstream the idea that U.S. competitiveness in this century as a matter of national policy must and will be driven by sustainability and systems thinking.

Tags: Challenge, Politics, Macroeconomic Policy

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  • 02 Apr 2012

    Jim Hartzfeld

    Andrew, I enjoyed the post as a set-up for what should prove to be a meaty conversation. This "competitiveness lens" at a national level reminds me of Ray Anderson's initial epiphany in 1994 from a corporate perspective. While we appreciated his exposure on the topic of sustainability, it was a shame that so much of his coverage focused on the "responsibility" side of his conversion rather than linking to his core identity and history as an entrepreneur and intense competitor. You should have seen our gas mileage competition on our 1st generation Priuses (Prii?).

    Our naive enthusiasm for how that view could effect policy around national competitiveness was squashed in the late 90's through our work on the President's Council on Sustainable Development in the Clinton administration and hosting meetings of Newt Gingrich's Environmental Advisory Committee. (Believe it or not he had one). We decided to focus all our attention at the enterprise level reaching out to as many as we could directly or through business organizations.

    I am enthusiastic about the resurgence of big systems thinking like this focusing on new ideas and not ideology. Just last week in Holland, I was describing Mr. Y's (Strategic Narrative) document to a group of European colleagues and how that could lead to a new era of western innovation and competitiveness. They could not believe that such thinking could exist at this level.

    I wish I could be there to witness the discussion. I hope to shake Col. Mykleby's hand some day and thank him for the brave thinking. Please do that for me and say that it's from many more of us that can't do it in person.

  • 03 Apr 2012

    Jim Hartzfeld

    I apologize for not appropriately referencing Ray Anderson as the late Founder and Chairman of the Board of Atlanta based Interface, Inc.

  • 05 Jun 2012

    H. Thomas Johnson

    Andrew, "Environmental Strategy as Business Strategy" is a perfect title for the panel you will moderate at The Sustainable Operations Summit next month in New York City. It reminds me of a remark often attributed to one of the fathers of modern systems thinking, the late Gregory Bateson, when he said, "The source of all our problems is the difference between the way humans think and the way nature works." Our goal must be to design business and economic systems that emulate how nature's life support system on this planet works. As you note, I spoke to that theme in Profit Beyond Measure, published in 2000. I returned to that theme more recently in "A Global System Growing Itself To Death - And What We Can Do About It," published in The Systems Thinker, Vol. 23, No. 4 (May 2012), pp. 2-6. Best wishes for an exciting and productive panel at the Summit.