I by IMD magazine - Preview Issue XIV

REFRAMING THE ART OF BUSINESS

IN THE FOOTSTEPS OF FRIDA KAHLO

Thriving new markets are opening as more women artists from diverse backgrounds fetch record prices at auction.

CREATING A ‘BUZZ’ NOT A BACKLASH

How to enhance your brand without alienating your customer base in our age of instant vilification.

ARE YOU A LEADER OR A LAGGARD?

Why putting energy and resources into digitization and sustainability will pay dividends.

Art and business: two worlds collide

My arrival in London in 1997 for my first academic job coincided with Arundhati Roy winning the Booker Prize. As a scholar of culture industries, I became curious about the prize's undeniable influence on post-colonial literary fiction. During my research, I was astonished to discover that the Booker Prize was created by British publishers to promote fiction written in English by Commonwealth authors to fend off American competition. The curious worlds of art and creativity that had appeared to orbit a different sun to planet “business” were, in fact, interconnected! It prompted me to think about what we might discover as leaders and organizations if we explored this fascinating intersection between art, creativity, and business.

In the June edition of I by IMD , we asked a cast of experts from academia, the creative industries, and the art world to help us chart and make sense of this frontier. The results are fascinating and thought-provoking. We hope they will encourage you to see how these two seemingly distant worlds can orbit the same star, and that the ideas that spring to life as a result can inspire new, effective ways to lead, innovate, and “do” business.

In our scene-setting piece, Cyril Bouquet and Alexis Georgacopoulos challenge us to reframe creativity as a transformative tool for leaders, teams, and organizations. Andrea Zapata Sosa dives into the changing global art sales landscape, offering lessons on the benefits of inclusion that resonate far beyond the hammer of the auction house.

More companies should embrace drawing as a tool for development and reflection, argue Heather Cairns-Lee and Jasmina Djordjevic. There’s a practical framework on how to leapfrog from one pathway of innovation to new business models from Luc de Brabandere, Lina Benmehrez, and Jonas Leyder. Phil Thomas warns brands and creative agencies against trying to please everyone in an age of culture wars. Peter Lorange believes works of art can support better decision-making in business, while David Bach talks to Jason Price about how a social impact hub for creatives is opening doors in an underserved neighborhood next door to Yale.

We are also delighted to feature a stunning image from artist Refik Anadol on the cover. The work, titled "Machine Hallucinations – Nature Dreams", shows us how AI, human creativity, data, and nature can fuse to imagine new realities and new ways of looking at the world. This kind of creative thinking – and the use of technology to enhance and augment the human experience and find new paths – serves as an inspiration to us all in the search for solutions to the complex problems we face today. Indeed, as we learn in this edition, art and creativity – when embraced in the right way – can help us reframe our approaches to leadership and business.

Elsewhere, in the general management section of the magazine, Margherita Della Valle shares how she has revitalized Vodafone, Shelley Zalis calls for greater female representation in the media, and new research by Michael Wade and his co-authors shows how companies that excel at both digital and sustainability transformation are rewarded by investors.

We hope you enjoy this edition of I by IMD . As ever, we welcome your feedback and thoughts. In September, we will delve into the concept of “potential”: how can people and organizations reach their best in these turbulent times?

[ CONTENTS ]

04 [In good company]

Jerry Davis explains how Nikefication and electrification are driving rapid change in the auto industry.

[ The art of business ] In this edition, we focus on the latest developments in the world of art and what they can teach your business about creativity.

REFRAMING THE ART OF BUSINESS Cover: ‘Machine Hallucinations – Nature Dreams’ AI Data Sculpture, 2021, Refik Anadol Studio.

07 Is creativity the next frontier in the transformation journey? Cyril Bouquet and Alexis Georgacopoulos suggest ways that business can embrace the creative methods of artists.

11 More women artists from diverse backgrounds are fetching record prices at auction. Equitable representation in the art world is opening new markets and driving economic growth, writes Andrea Zapata Sosa

17 Jason Price, co-founder of an artistic hub in a deprived US neighborhood, explains his vision to David Bach and reflects on the transformative power of art.

21 In a world of AI, Heather Cairns-Lee and Jasmina Djordjevic examine how the simple act of drawing can unlock the full creative potential of humans.

26 Philip Thomas discusses the pitfalls of creating a ‘buzz’ for your product or service in a divisive cultural and political landscape.

30 Magnus Resch offers advice on what every potential collector needs to consider before buying their first artwork.

33 A rise in climate change protests against leading arts institutions is casting doubt on the future of corporate sponsorship, writes Michael Skapinker

36 It’s not what to think but how to think that’s important, argue Luc de Brabandere, Lina Benmehrez, and Jonas Leyder

41 Peter Lorange explains how his varied art collection inspires him to make better business decisions.

44 The museum world is not noted for its radical thinking, but the Toledo Museum of Art is profiting from a different approach, says CEO Adam Levine.

46 [In the mind’s eye] Command and control kill creativity, argues George Kohlrieser, so give your team permission to take risks.

48 [Sustainability] When it comes to digital and sustainable transformation, research shows that it pays to be a leader not a laggard, write Michael Wade, Lazaros Goutas, and Evangelos Syrigos

54 [Governance] In our series, A Board’s Eye View, Axel P Lehmann stresses the importance of boards examining the differences between risk and uncertainty.

57 [Brain circuits] Arnaud Chevallier, Frédéric Dalsace, and Jean-Louis Barsoux suggest five types of questions that will improve executive decision-making.

58 [Talking point] TONOMUS is creating a ‘cognitive’ city in the desert of Saudi Arabia. Joseph Bradley, the company’s CEO, tells Michael Wade what he’s learned so far.

60 [CEO dialogue] Vodafone CEO Margherita Della Valle, in conversation with Jean-François Manzoni, discusses her mission to deliver radical change and greater leadership diversity.

63 [Coaching Corner] Sunita Sehmi examines how to bridge cultural divisions and create a sense of belonging in diverse teams.

64 [Inclusion] Casting women in a more positive light in the media will have a transformative impact on the next generation of female leaders, argues Shelley Zalis.

66 [In depth] In a detailed analysis, Julia Binder and Manuel Braun suggest closer cooperation is the key to a successful circular economy.

72 [Talent] Sarena Lin and Tania Lennon explain how leaders can sharpen their skills and expertise in the age of AI.

76 [The forecaster] Howard Yu and his team present ‘future-ready’ success stories from the world of finance.

80 [CEO questionnaire ] In the Final Word, we asked Derya Matras 15 rapid-fire questions to find out what makes her tick.

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PUBLISHER

International Institute for Management Development, Ch. de Bellerive 23, P.O. Box 915, CH-1001 Lausanne | Switzerland

EDITORIAL ADVISORY BOARD

Anand Narasimhan (Chair) Professor of Global Leadership and Dean of Research

Christine Batruch Sustainability Advisor, Lundin Group; President, Bohdan Hawrylyshyn Family Foundation

Vincent Bieri Co-Founder Nexthink; Member of the Board of Advisors Trust Valley

Jean-Philippe Bonardi Professor of Strategic Management and Dean at HEC Lausanne, University of Lausanne

Stuart Crainer Thinkers50 Founder and author

Michel Demaré Chairman of IMD; Chair of the Board at AstraZeneca Plc. and Nomoko AG; member of

the supervisory boards at Vodafone Group Plc and Louis-Dreyfus Company International Holdings B.V.

Cynthia Hansen Managing Director of the Innovation Foundation, empowered by the Adecco Group

Prince Michael of Liechtenstein Founder and Chairman of Geopolitical Intelligence Services AG; Chairman of the European Centre of Austrian Economics Foundation in Vaduz; Member of STEP

Ann-Marie Sevcsik Catalyst of social change through innovative partnerships

Michael Skapinker Financial Times contributing editor

Ian Charles Stewart Executive in Residence, IMD; Main Board Director Trustee International

Institute for Sustainable Development; Co-Founder of WiReD Magazine

Su-Mei Thompson CEO at Media Trust

EDITORIAL

Delia Fischer, Matt Falloon, Ken Toner

ART DIRECTOR

Catharina De Gregorio

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The asset-light Nike model is driving change in the auto industry

The rise of electric vehicles – and a flood of new, small market entrants – is transforming the nuts and bolts of car making, explains Jerry Davis. Does this shift finally spell the end for the golden age of mass production?

Apple announced in February that it was exiting the auto industry after a decade of development. You may be surprised to learn that Apple was ever in the auto industry – but you may be even more surprised at just how many US companies are, at least nominally, carmakers. The Wall Street Journal reported that 43 electric vehicle (EV) and battery companies went public in the US between 2020 and 2022, with names like Lucid, Fisker, and Faraday Future. It has been a rough ride for many of them, and most will not last, but some may thrive – like Tesla, the most valuable car company on Earth.

For an industry dominated for generations by the “Big 3” in Detroit –General Motors, Ford, and Chrysler – this is a surprising hairpin turn. Cars became affordable early in the 20th century through mass production and, for manufacturers, bigger was cheaper, leading the industry to become highly concentrated. By the 1960s, GM’s US market share hovered around 50%, and the Big 3 were among the 10 largest corporations in America. Domestic challengers were rare and inconsequential.

So, what has changed? Why are there so many new automakers in America, and what does this evolution mean for the industry and beyond? The advent of EVs is the most obvious suspect, fueled by the need to transition to cleaner forms of transportation, as EVs draw on technology different from internal combustion engines. But there is something else: “Nikefication” has finally come to heavy industry, completing a transformation that began decades ago in the garment industry. Just as Nike pioneered a model in which a small cadre designed and marketed a product manufactured and distributed by others, we are seeing the Nike model come for the rest of industry.

Mass production as an operating system for society

In 1949, management theorist Peter Drucker published a series of articles in Harper’s Magazine proclaiming the arrival of a new era in civilization. He had spent time around Ford’s River Rouge factory and dug deeply into the history of General Motors. He came away convinced that these companies had created an entirely new operating system for society.

He opened with a bold claim: “The world revolution of our time is not communism, fascism, the new nationalism of the non-Western peoples, or any of the other ‘isms’ that appear in the headlines; they are reactions to the basic disturbance, secondary rather than primary. The true world revolution is ‘made in the USA,’ and its principle is the mass-production principle.” The system launched in Henry Ford’s Model T factory in 1913 had spread around the world and to every industry, from farming and office work to education, science, and journalism – even to how wars were fought: the D-Day invasion was quite clearly a lethal form of mass production, and the success of America’s wartime production system solidified its dominance.

As Drucker saw it, the operating system of mass production spread so widely because it was “a general principle of human organization for joint work,” not just a way to make cars and other products. Mass pro-

duction could apply anywhere people collaborated to get things done, regardless of the technology in play.

The crowning achievement of the mass production system was Ford’s River Rouge auto plant, where 100,000 workers (including both my grandfathers) took raw materials in one end and pushed Model A cars out the other in the most vertically integrated factory the world had ever seen. The Rouge made its own steel and glass onsite, and Ford owned some of its supply chain all the way into the earth from which it sprung –such as a Brazilian rubber plantation named Fordlandia.

Mass production required human labor on a vast scale, and Detroit became a destination for migrants from around the world, including the American South. By 1980, Detroit and Flint (a nearby auto center) boasted the highest median wages for young workers in the United States. The Big 3’s size and growth meant plenty of room for advancement, creating legible pathways to upward mobility.

Mass production thus underwrote the creation of a thriving middle class in America. When Drucker wrote, the biggest employers kept getting bigger and their wage scales were consistently higher than those of smaller companies (termed the “large firm wage premium” by economists). The auto industry created mobility in more ways than one.

The coming Nikefication of the auto industry

Even as the Big 3 became the Enormous 3, alternative methods of organizing production were emerging. Nike began life as a distributor of

Japanese-made running shoes and evolved into a designer and marketer of performance running shoes, ultimately growing to be the world’s largest athletic apparel maker, with over $50bn in annual revenues. But from the start, its focus was on design and branding, not manufacturing. For better or worse, it relied on garment producers in Asia for most of its products.

The Nike model of outsourcing production began to spread widely beyond the apparel industry during the 1990s with the advent of the internet and the World Wide Web. New information and communication technologies enabled low-cost instantaneous communication across organizational boundaries. Brands found that it was often cheaper to hand manufacturing over to third parties in low-wage countries and to monitor them (or not) from afar. (Much the same also happened with other functions, from payroll and HR to design and marketing.) In electronics, “board stuffers” evolved into turnkey electronics manufacturing services (EMS) providers. By the late 1990s, EMS firm Ingram Micro assembled computers for Apple, IBM, Hewlett-Packard, Compaq, and Acer – all on the same assembly line. After China joined the WTO in 2001, large swathes of the electronics manufacturing industry decamped, with a half million jobs disappearing within two years.

At the same time, the auto industry was rethinking its longstanding vertical integration. GM spun off many of its internal parts suppliers into a separate company named Delphi in 1999, and Ford followed suit with its spinoff of Visteon in 2000. Yet the final assembly remained sacred. Outsourcing production for sneakers, laptops, or iPhones was one thing, but a car? With an internal combustion engine containing 300 essential »

Employment at General Motors (in thousands), 1923-2023

(Source: Compustat, EDGAR, Moody´s Industrial Manual)

Publicly listed US auto companies

(Number of employees in 2024)

components and the whole vehicle containing perhaps 30,000 parts? Assembling suppliers for such a venture would take an almost unthinkable effort.

With half as many car parts as Detroit’s traditional products, EVs offered an alternative and encouraged the auto industry to Nikefy much of its supply chain. Much of the heavy engineering that goes into a new EV is in its hardware and software design, not in finding new ways to attach a carburetor (whatever that is). EVs looked more like tech than they did like traditional manufacturing.

Ford chairman Bill Ford once told the Wall Street Journal, “It’s easy to build a car. It’s harder to build a brand.” He was perhaps being facetious about the former (it’s not actually that easy to build a car), but he was not wrong about the latter. And Apple has a brand – as well as expertise in hardware and software, which is why traditional automakers breathed a sigh of relief when Apple pulled out.

‘With half as many car parts as Detroit’s traditional products, EVs offered an alternative and encouraged the auto industry to Nikefy much of its supply chain'

As we might have expected, much of the recent tsunami of new car companies looks a lot more like Nike and a lot less like Ford. The table lists 13 US-based car companies traded on a stock market as of this writing. Several of them are genuinely tiny, with fewer than 1,000 employees globally.

How is it possible for an auto company to have just 850 employees? Fisker’s founder explained to Business Insider : “We don’t want to be a vertically integrated car company. We’re not going to do our own manufacturing. It would be stupid for any EV startup to make a brand-new factory.” Instead, production of the first model would be handed off to Magna International, a contract manufacturer operating in Austria, while subsequent models would be assembled by Foxconn, producer of the iPhone and other electronic products. Fisker’s intention, in short, was to be the Nike of the American auto industry.

Maybe not forever

Apple is not the only player to exit the auto industry in recent months. Lordstown Motors filed for bankruptcy in June 2023, and Fisker is highly troubled, along with several others. The share price perfor-

mance of the recent IPO companies has been, on average, disastrous, dropping 80% from their debut valuations. As of this writing, Fisker is on the verge of financial collapse and appears unlikely to survive the summer.

We might update Bill Ford’s aphorism based on Fisker’s experience: building a car is hard, and building an organization is even harder. The company sought to avoid being encumbered by a dealer network, inhouse manufacturing costs, or a fully staffed accounting department. The result suggests limits to the asset-lite snap-together enterprise model. (Boeing might provide another example of the dangers of outsourcing, but that is for another column.)

However, while specific companies might not thrive, the underlying operating system of software-enabled enterprises is here to stay. After all, Magna successfully produces vehicles under contract for BMW, Mercedes, and Jaguar, and the design of electric vehicles leans heavily on software. We will almost certainly see an EV industry organized along very different lines from the traditional auto industry.

For much of the 20th century, the American auto industry embodied Peter Drucker’s mass production principle. As software continues to eat the world and fundamentally reorganize industries from restaurants to higher education, it is certain that autos – the cradle of mass production – will not be immune. ■

JERRY DAVIS is the Gilbert and Ruth Whitaker Professor of Business Administration and Professor of Sociology at the University of Michigan’s Ross School of Business. He has published widely on management, sociology and finance. His latest book is Taming Corporate Power in the 21st Century (Cambridge University Pre ss, 2022), part of the Cambridge Elements Series on Reinventing Capitalism.