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Prabhu Guptara: A European Perspective on Globalization

Professor Prabhu Guptara is executive director, Organization Development, Wolfsberg Executive Development Centre of UBS, Switzerland; chairman of ADVANCE: Management Training Ltd. (U.K.), and visiting professor at various universities and business schools — including some in the U.S. He has organized, chaired, and lectured by invitation for numerous international conferences, contributed widely to radio and television in the U.K. and other countries (The Money Program, Any Questions), and written for popular newspapers such as Financial Times (London, U.K.) as well as for scholarly publications. He was born and educated in India, was based for nearly 20 years in the U.K., and has now been based in Switzerland for eight years.

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Ethix: Prabhu, you have a rather unusual job. Could you describe it?

Prabhu Guptara: Well, there are standard ways of adding value to UBS, through selling funds, bonds and shares, investing peoples’ money, and encouraging people to put money with us, but my responsibilities are different from these. I do a range of activities, all under the rubric of looking for ideas to add value to UBS in nonstandard ways.

We have a series of client events here at Wolfsberg, for example. I am involved with the English language ones, as well as with our series of “Wolfsberg Think Tanks” on all kinds of subjects, from strategy, to IT and biotech, to law, to marketing. Of course we have divisions of the bank that deal with each of these topics, but Wolfsberg gets involved if there is some angle which these departments do not tackle. Some ideas from think tanks are purely blue sky, but that’s not what we’re trying to do. Our goal is to come up with at least one or two ideas that the bank can significantly benefit from each year.

In addition to the think tanks, we have a Distinguished Speaker series. We also have executives-in-residence, scholars-in-residence, entrepreneurs-in-residence, and artists-in-residence. Then, we are involved with providing practical help where needed, within UBS, for client companies, and for other organizations. For example, the World Bank asked Wolfsberg to help the first non-state-owned bank in China to come up to international standards.

So you’re given pretty much a free hand to experiment with things, try ideas, and add value to the bank.

That’s right; of course, within the overall strategy of the bank.

So, how do you come up with these ideas?

Most peoples’ job is to be in touch with a very specific group of clients, or hopefully, an endless list of clients. In my job, I try to engage people with ideas. Wolfsberg is a place where all kinds of people come, from across hierarchy, across business units, and across geographies. So I get to chat with an enormous variety of people.

Then I have a network in the consultancy world, having been a consultant for sixteen years, and with the academic world, because I’m still a professor supervising Ph.D.s and giving lectures at business schools. My role is to identify fruitful areas of conversation in what I call the grey zone between the blue sky and the brown earth. Of course many of the ideas get shot down because the time isn’t right, or we can’t get the critical group of people together to make it happen. But at least a few of the ideas get developed into projects of value to UBS.

So how widely does your network spread? Is it throughout Europe or does it go much broader than that?

It’s worldwide. I’m Indian, so I have an extensive network in India, and through Southeast Asia to Japan. I was invited by the International Management Association of Japan to lecture there, as well as by the Keizai Koho Centre, the top business body representing all the companies in Japan. I have been involved in North America as well, which I visit several times a year.

Business in Europe vs. America

Based on that perspective, tell me how you see the business world in Europe compared with the United States.

The United States is marked by boundless optimism, enormous energy, and lots of opportunities. Europe, on the other hand, is an old continent, with a weight of tradition. New ideas are, by definition, suspect here. We’d rather wait a little and let other people make mistakes, and when they’ve recovered and found out what really works, then we’ll pick it up and use it.

And there is one other very important difference. In the U.S., it seems to me that companies want as little legislation as possible, and will work hard to prevent legislation coming into being. Once legislation is in place, then of course American companies will comply. But there is an attitude of fighting legislation.

In Europe, on the other hand, there is an attitude of anticipating possible changes in legislation, and incorporating activities that we’ll probably have to come to terms with sometime anyway, as early as possible. The European perception is that the world will have to move towards more ecologically friendly, sustainable ways of doing business. Europe has gradually been moving in that direction over the last thirty years. So there is a much greater acceptance of environmental issues.

Well, what about the area of ethics? I’ve been told that Europe tends to be more principles-based and the U.S. is more laws- and rules-based.

The legal systems are, of course, entirely different. In England, there’s a precedent-based system of law, which was largely taken over by the United States. On the Continent, the whole of the legal system is based on the Napoleonic code, which is a huge, rather detailed tome. From that tome has grown the German civil code and various other civil codes in Europe. But they are very much more principles-based and the whole thinking tends to be principles-based.

In practical life, you start with what they call a “concept” in German, which means an overall framework based on first principles. On this basis a company will organize its entire human resources system, or the way it structures its business units. The way in which we operate in Britain and the U.S. is that we try things and see what works. This approach applies to ethics as well.

Business in Asia

We’ve talked about the U.S. and Europe. What about Asia?

Asia is much more fragmented than the United States and Europe, with very much older traditions. So if you look at Japan, it has quite different traditions and values as compared to Korea, which is its closest linguistic neighbor, or China, which is another very close cultural neighbor. Just in these three countries you find enormous differences going back thousands of years. And then if you look at India or Vietnam you’ll find radically different cultures.

Using a very broad brush, you could say that Asian countries have a father figure, or mother figure, who will be enormously powerful, will take all decisions almost unilaterally (though there may be one or two advisors) and the whole of the organization will revolve around this central figure. Or, in another part of Asia, the patron figure might have a whole cadre of trained engineers and managerial people around him or her. And then you have individual companies, for example, Sony in Japan, which are as Western as anything you find in the United States. So it’s a highly variegated picture.

And is UBS present in Asia, America, and Europe?

Oh yes. We have operations in every significant country. Every single central bank in the world which has more than a billion dollars is a client of ours in some way. UBS is the world’s largest bank by assets under management, so that’s not very surprising.

Forces for Business Change

What do you see as key forces for change in business today?

There’s technology, and there is the daughter of technology, which is globalization. We could argue that globalization goes back to the time of Genghis Khan. But in his case, as well, it was technology that did the trick. But what we might call modern forms of globalization started at the end of the nineteenth century, collapsed with the first and second World Wars, and then restarted in the 1950s.

The modern forms of globalization are all the direct consequence of modern technology, which has enabled us to physically move ourselves around the globe much faster, and to move products and information (including capital) around in digitized form. Thus the barriers that usually insulated countries from each other have gradually become porous, or even have opened completely. This has changed the notion of sovereignty, which is what marked nations in the past, to something much more diffuse in our time. So, on the one hand, power is devolving to smaller and smaller entities, and on the other hand, regional and global entities such as the European Union and the World Trade Organization are gaining power. So sovereignty has become much less clear-cut than was the case earlier.

And what does this mean for business?

Well, it expands the boundaries of business. Back in biblical times King Solomon’s empire was a kind of globalized business. They imported peacocks and apes and spices from as far away as India, and exported very far into the West. So it was never very difficult to be internationalized in terms of where you buy from and where you sell to.

But, in today’s world it’s necessary to be not merely operationally international, but also to be global in your way of thinking. I would argue that today it’s very necessary to create the kind of environment, the policies, the structures whereby people who are not from your country can rise to positions of leadership and indeed to the position of leadership.

How is this affecting UBS?

Only fifteen years ago, UBS was a very Swiss bank. And through a series of mergers and acquisitions it gradually became more and more European, and then finally more and more international. For example, our incoming Chief Financial Officer for the whole group is Australian. We have had a Chief Executive who is British. Though it’s still necessary in a Swiss bank to have sufficient number of people on the board who can speak Swiss German, which is the local dialect, it is not necessary for somebody who is Chief Financial Officer to speak even a word of German, at least when he or she arrives on the scene.

But I would argue that this alone does not create a global mindset. Because it could be the case that people coming from around the globe have to somehow fit into your national culture to be able to get into the top. The ability to be able to adapt to different cultures, go seamlessly to different parts of the world and absorb ideas is really the heart of being global. I wouldn’t claim that we have reached our goal, but that’s our journey.

The Downside of Globalization

You’ve described some of the lofty things about globalization. Are there some downsides to globalization as well?

Undoubtedly. Like any set of technological or political developments, globalization produces a series of challenges. For example, the tendency of present structures will always be to deal with global problems only to the extent that they are in the national interest. But global problems cannot be addressed on that kind of basis.

It is in the national interest of India and China, for example, to resist raising standards in the area of environmental sustainability, because the costs of doing so are huge. Of course, the benefits of doing so are huge as well, but they might be twenty years down the road. The politicians who are in command of the processes may only be in place for three to five years. This also applies to leaders of more highly developed countries such as the U.S. or the nations of Europe. So we have global issues, and we have national entities engaged with the process of trying to sort them out.

To my mind, this conflict could be resolved in one of several possible ways. One possibility is that we will end up having global disasters, because individual countries continue to negotiate these purely in their national interest. Secondly, we could have the development of a sovereign world government, but not sovereign national institutions. This has enormous dangers. Or we could have a benign development, which is national entities negotiating as far as necessary in their national interests, but also keeping in mind the genuine need for global solutions. And it seems to me that the way is open for us to go down the third path.

Another challenge comes from technology itself. There will likely be more and more skilled joblessness as technology provides efficiencies in work. Some jobs are capable of being expanded, involving services and new ideas. But even as these grow, technology eats up a middle range of jobs that require a modicum of intelligence and a certain amount of training. So today, you have to be faster and more intelligent than a computer, or intelligent in different ways than a computer, in order to retain your job. Fewer jobs will be needed because more jobs will get automated away.

As we move into a globalized world, it is theoretically possible to have a single factory located in Brazil or China or Africa or wherever producing, for example, all the razor blades we need in the world. And completely automated! Needing not a single human being in the factory! Now you can apply this to the whole range of products … and if we can produce all the products we need in a single, robotized-factory basis (this is pushing the argument quite far, I know), then all that we need are: logistics, creativity to be able to come up with new products, and people who’ll devise computer-based methods of selling these products to everybody who can buy. But of course the problem is, if we don’t need to employ people, where do potential customers get their income?

A certain class of people that have investments will continue to find themselves buffered, at least to a certain extent, from these kinds of developments. But most people in the world do not have investments, and most people in the world cannot do downscale jobs, and acquire a living wage from that. So we are faced with the prospect of very widespread unemployment in the world as technology proceeds. This is a huge second issue, which only a few thinkers are getting around to addressing.

A third issue is that we have a global pool of absolutely poor people that is increasing every day. And we have a middle pool of people whose sympathies are with these poor people. So we have a situation that is globally becoming much more politically unstable than was the case only fifteen years ago.

We need to find solutions to huge issues, such as hunger, which we could earlier push away from our consciousness in the absence of a connected world. Today we can produce all the food that we need to feed these people. What was yesterday “only” a tragedy, becomes today not only a tragedy but also an obscenity. And unless we have people who are willing to engage with these kinds of issues, we will not actually be able to get anywhere as a global society. Structures need to be created to deal with problems such as absolute poverty, and the challenges of increasing skilled unemployment in a world in which technology can take over more and more advanced functions.

Implications of Production Overcapacity

In one of your writings you commented on the overcapacity in much of our production environments today, because of technology. What are the implications of that?

The primary consequence is that today we have a marketing war. Fifty years ago, immediately after World War II, the challenge was simply to produce, because people needed to consume, and production had been flattened by the war. It was this way in Europe, in Japan, and in many other parts of the world, for different reasons. So companies grew up, from the ’50s onwards, focusing on simply producing. And in a way, the quality of what they produced didn’t matter too much at that time. Just the fact that you could produce anything meant that whatever you produced got sold.

Then, as the world got a bit beyond the absolute lack of production, whether in terms of relatively simple things like bread, or relatively sophisticated machines, quality became the differentiating factor. Today, quality is not a differentiating factor; quality is simply a condition of being in business. And so what enables your company to succeed today is not quantity, reliability, or quality of production, it’s actually the extent and reach and depth and power of its marketing. This is why brands have arisen. But brands have become like emperors without clothes, because in order to have a brand, you need to invest an enormous amount in marketing—without any guarantee that your brand marketing will produce results.

Just think: why do people buy a brand product? For prestige reasons, status reasons …. And there comes a point in many peoples’ lives where they’re not that bothered about prestige or status. And these people then stop buying branded products, preferring nonbranded products, which are more-or-less equally good today. And so we are in an era of marketing wars, where it’s not clear what will actually provide the competitive advantage to any company. We’re in an era where even brands will slowly stop having the kind of drawing power that they do at present.

Technology at UBS

Let’s move back inside your company. You said technology was the driver for globalization. Tell me how you see technology actually transforming UBS, now and in the future.

When I joined UBS eight years ago, we were like most large financial institutions, structured on the basis of national kingdoms. We had a matrix, which meant that the people who represented the products were more-or-less equally important as the people who represented the customers.

We’ve now moved to a system of being organized around global businesses. For example, our global business in investment banking is headquartered in London and our global asset management business is headquartered in Chicago.

Apart from the way that structures have changed (and these will probably continue changing as we go forward), the process of product development has changed. In the best financial services companies, the customer has become very much more a part of defining a product. This seems to be true in nonfinancial services companies, including manufacturing companies. This is one way in which you gain competitive advantage in a world that is dominated by too much commoditized product. If you can individualize products to a particular customer, then that’s greatly to your advantage.

But I think the big issues for the future are not these kinds of issues.

I think technology is now raising huge questions about what is a financial services company? Or an information company? A hundred years ago, it was clear that Reuters was an information company. They simply found information and sold it. Today Reuters is not only in that business, it’s also in the business of developing software products and financial products. So it’s not at all clear what Reuters is today.

So what is the role of technology in making this happen?

Technology essentially abolishes the boundaries between industries. For the first time it raises a question: do we want to stick to the financial services industry? Or do we want to go into the information industry, do we want to go into the entertainment industry, do we want to go into the IT industry? And I foresee that there will come into being what I call “megacorporations” that span industries. These will develop maybe five or ten years down the road. All industries that depend on digitization (telecommunications, IT, entertainment, news gathering and distribution, financial services, biotech, nanotech, and so on and so forth), are essentially capable of being restructured now in a way that was not possible before digitalization. I think the big issues are going to be: what kinds of megacorporations, how many megacorporations, existing for what purpose?

These are questions for the future, obviously. But we as a world community need to recognize that that’s the direction in which technology is pushing us, and then put in place the kinds of regulatory mechanisms that will enable these megacorporations to be forces of good, rather than forces of evil.

Business and Society

Do you see the role of business impacting society, being a force for good in the world today?

Business has always been a mixed blessing. On the one hand, if had it not been for business we would not have had the possibility of bringing goods and products from one part of the world to the other, of serving needs.

On the other hand, business has had a very long record of deliberately flouting regulations, of twisting these regulations in a way that increases the wealth of a certain individual or class of individuals, to a point which is not healthy for society as a whole. And I think in a world in which many corporations have become very powerful today, perhaps more powerful than many countries, it’s extremely important to ask the question: how can we enable corporations to do more good?

When you talk about good, you raise the issue of values. What about ethics and spirituality and religion and their role in corporations? Do these have a role in corporations? Or are these a wholly separate matter?

Until about twenty years ago, I think most people would have argued that values and spirituality are either a private matter, or certainly not officially recognizable matters when it comes to a corporation, and should be kept some distance away from it. I acknowledge that there were always a few companies, such as Barclays, Roundtree, and Colgate-Palmolive, that were founded by people with deep religious motivations. The people running such companies have tried hard to use their business enterprises for good, both in the way they have run their business and in the way they distributed their wealth. But these were exceptions to the general separation of values and business.

However, in the last twenty years there’s grown up a movement arguing that ethics and spirituality have a very important role, in terms of ensuring that individuals find meaning in their work, as well as in encouraging corporations to contribute more good than evil in the world. And this is a healthy development because we need all the forces that we can to ensure that the very powerful structures that we create are structured for good. It’s very healthy for people in their companies to be whole human beings, and not merely a pair of hands, with no head and no heart; or a head, with no hands and no heart.

In companies, religion and spirituality can really bring people together, depending on the way these are handled. That is why companies are increasingly making it possible for their employees to express their spirituality and encouraging them to look at the relationship between their faith, or their values, and the business that they’re involved with. Not only does it enable whole human beings to be involved, but it also allows for the possibility of new kinds of products, new kinds of customers, in a way that is not possible if you don’t allow this kind of expression.

So have you organized any discussions around this point at Wolfsberg?

Not in a specific program that I can recollect. But I hope that in all of our activities here, we have and will continue to integrate the ethical, spiritual, values-based, human dimension, rather than only a commercial, mechanical or technological focus.

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