Leading Transitions to the New Economy
By Andre Nogueira and Mo Sook Park
April 18, 2019
In 2017, the New York Times reported on the obesity epidemic in Brazil. The introduction of global companies’ industrialized products in local economies was having a clear impact.
“How Big Business Got Brazil Hooked on Junk Food” demonstrated that wider access to industrialized food had resulted in unintended consequences: health and quality of life issues for Brazilians. In addition, small businesses owners lost customers and the environment suffered from industrialized waste.
In sum, the presence of large companies in Brazil compromised well-established local socio-ecological interactions in exchange for the economic growth of a few actors.
The ensuing change in our global economy
The situation in Brazil offers a rich example of the unsustainable structure of the current global economy: linear pathways.
The structure of our economy shapes how individuals interact with each other, as well as with their surrounding environments. Per the linear economy, organizations extract or capture different types of value from one place (human knowledge, raw materials, technology, etc.), and devise new offerings to serve markets elsewhere. Then, humans and organizations consume these offerings based on their needs and aspirations. Once offerings are not useful or become obsolete, they are disposed of.
But this linear production-consumption model is fundamentally unsustainable. It promotes overconsumption of limited resources without adequate consideration of an underlying network of connections among social, ecological, and technical systems.
A movement from profitability to sustainability
New economic models attempt to respond to the tension between organizational profitability and long-term socio-ecological concerns. Examples of such efforts can be found at many levels of our society—from national policies, such as The Green New Deal in the United States, to regional frameworks in Latin America based on the Solidarity Economy, to global arrangements, such as the Memorandum of Understanding on Circular Economy Cooperation by the European Union and China. All of them intend to give shape to the New Economy.
Organizations across sectors are seeking novel methods for promoting sustainability-oriented practices and participating in the New Economy movement:
- Philanthropic organizations are trying to build capacity, rather than dependency, in their grantees.
- Public sector agencies are trying to change patterns of behavior in their organizations, transforming organizational culture to stay relevant in a shifting society.
- Private sector organizations are realizing that much of their operational infrastructures must be extensively retrofitted, redesigned, repurposed, and sometimes even reconstructed.
- NGOs are seeking creative ways to better serve their populations, given the proximity they have to constituencies who experience the unintended consequences of a linear economy firsthand (e.g. gentrification, environmental injustice, segregation, etc.)
These and other efforts suggest that we need innovative ways to incorporate alternative systems of value, including justice, sustainability, and democracy, in our everyday choices.
Alternative systems of value
The current economy is fundamentally based on value-extractive models, or models that reinforce the benefits of certain stakeholders and interests at the expenses of others, including ecological systems. Examples of such conditions can be found in the increasing discrepancy between the rich and the poor, the social isolation of the elderly, the high contamination of oceans and other water reservoirs.
A transition toward the New Economy will require not only the incorporation of alternative value systems, but also the discovery of ways to regenerate different types of value. Design will play a key role in discovering these alternative value systems.
Design expertise has historically been leveraged as a vehicle to embed alternative value systems into the economy. For example, in the early 1990s, when 80% of new products failed immediately after introduction to market, designers created human-centered approaches to incorporate user concerns into product design. As a result of the now cross-market adoption of human-centered practices, aspects of feasibility, usability, and desirability have started to shape new production and consumption systems.
Although there are attractive business opportunities, organizations across sectors have been slow to acknowledge the speed and scale of contemporary socio-ecological challenges (e.g. emerging pandemics, climate change, global crisis of representative democracy, etc.) in their practices and ideologies.
Without challenging the fundamental logic that once shaped individualistic, linear economies, it is unlikely that any organization will be able to engage in the New Economy movement.
Changing or adapting is extremely difficult for large, risk-averse organizations, especially those that have historically demonstrated success. Because they were designed to thrive in the current economic system, transitioning operations often poses complex and ambiguous challenges. It is in this context that design is increasingly invited to lead new ways of both creating and delivering value.
Emerging opportunities for design and innovation
Twentieth century designers were often seen as changemakers. They represented a creative force making offerings that shaped new lifestyles. But they were still operating under traditional innovation processes. These processes sought to minimize organizational costs and maximize (economic) value.
Contemporary technological advances and cultural changes are challenging both traditional innovation processes and our current unsustainable and individualistic linear economic model. Increased computational capacities, the growing application of sensors, new digital communication platforms, data collection systems, and other mechanisms provide instant feedback on aspects of human daily life, global market dynamics, and the natural environment. In this blurred and ubiquitous landscape, users have a new kind of power with which they can challenge organizations. In response, organizations and their leaders must embrace new methods for continuously adapting.
Organizations aiming at promoting transitions to the New Economy must focus on increasing and extending circulation of multiple resources, consequently regenerating multiple types of value. Efforts to increase circulation will demand more connectivity, more collaboration, and more partnerships among numerous stakeholders.
In an economy based on these network-structured value systems, the opportunities for collaborative practices and the creation of value relies on the connectivity between nodes—or, in other words, collaboration and partnerships among individuals and organizations.
Each node can expand the circulation of multiple types of resources exponentially as it accesses and provides access to other networks. Individuals and organizations can rely on the law of increasing returns to expand their presence and impact in multiple markets, increasing the circulation of resources by benefiting from and/or enabling new connections.
Thus the benefits of increased connectivity are not only related to the growth of the network and the system through which multiple resources circulate, but in the underlying opportunities to create alternative values.
Design and leadership intersect to create value
Design can add great value when leading change within large organizations. Design brings new frameworks, tools, and methods for human-centered innovation.
But there are greater opportunities, yet to be explored, that could go beyond applying existing human-centered approaches. As a field driven by the logic of the possible, design can contribute to unlocking current practices and enabling paradigm shifts. As a situated practice, design is comfortable with change and ambiguity. Design has always adapted and evolved methodologies to produce better interventions. For example, design could enable new mechanisms of value recognition, extraction, creation, delivery, and regeneration, consequently leading to alternative ways of innovating within network-based structures, rather than just contributing to more valuable and useful offerings within individualistic systems.
But to accomplish all this, leaders across fields, including design, need to reframe their understanding of what leadership is. For example, recognizing that new power structures will redefine what it means to lead change, tomorrow’s leaders will no longer think of themselves as ‘providers’ of standardized offerings, or ‘executors’ of traditional approaches. Instead, they will become ‘enablers’ of multiple, yet specific practices, and unique interventions across multiple networks. If successful, such an approach to leadership will allow large organizations to incorporate new value systems and support the transition to the New Economy.
Several fields have advanced new leadership frameworks for managing large-scale innovation. Adaptive leadership distinguishes leadership from authority and defines leadership as an activity—not a person or a title. Instead, leadership becomes the practice of mobilizing others to thrive while tackling tough challenges in the face of uncertainty. Authority, on the other hand, becomes formal or informal power granted in exchange for a service. This distinction is significant, as it frees leadership to become a practice that does not necessarily require a formal title.
When it comes to leading large-scale economic transitions, it is important to recognize that many individuals and organizations exercise leadership. They may not be in positions of authority, but they are fundamental to promoting sustainable transformation.
Leadership skills for a new era
As change-enablers, leaders, including designers exercising leadership, are encouraged to develop and incorporate new methodologies that can mobilize and empower multiple stakeholders to take ownership of their collective success, rather than provide short-term solutions that simply increase an organization’s profitability. If successful, leadership efforts will be centered on ‘infrastructuring’ alternative pathways within which multiple actors can overcome barriers in whatever capacity they have. These might come in the form of physical interventions, but also in convening dispersed actors, facilitating partnerships and collaborations, increasing awareness about the fundamental challenges at hand, and mediating and managing conflicts, among others.
In the New Economy, individuals or organizations seeking to align with sustainability-oriented practices will be encouraged to build capacity within the ecosystems their interventions affect. For example, what would the economy look like if the multinational organizations that entered the Brazilian market had incentivized their employees to work with local producers? What if they had built their capacity to improve the health of the Brazilian population?
In this scenario, the global companies would have leveraged local expertise about patterns of production and consumption to develop culturally fit offerings. They also would have sought to understand the ethical implications of their presence and make decisions accordingly. They could have ensured that traditional intergenerational family businesses were not disrupted, or that their presence would not compromise the integrity of local environments.
Consequently, the presence of these organizations could actually empower multiple local actors to take ownership of progress and adapt as new challenges emerge.
Thus, although the following is not a comprehensive list, leaders in the New Economy will want to practice key skills:
- Engage with multiple and diverse stakeholders,
- Recognize and connect with each stakeholder’s competency and value,
- Leverage resources and activate strategic interactions as needed,
- Mobilize diverse stakeholders toward sustainable co-created outcomes, and
- Connect with a common purpose, especially when conflicts in existing processes emerge and often pose major barriers to progress.