Afew days ago, at EGADE Business School Graduation ceremony, I had a nice chat with Mario Vela –guest speaker and Managing Director of GNP, the insurance company– about innovation and macrotrends. Walking down memory lane, we got to Mexicana de Aviación during the 90s, when Sergio Allard was Commercial Director and used to say something like “travel agents don't add any value and just drive up the tickets' price; we are looking at ways to take their commission out of the equation”.

It's 20 years later, and we are at that point: In 2016, Aeroméxico reported that “tickets sales through our website represented 19.4% of our passengers and 14.7% of our overall sales”. In other words, one in every five passengers bought his/her ticket online, without any help from a travel agent.

Getting back to our time, I let him know my opinion about that tattoo the insurance industry needs so badly, and how are own insurance broker presented us with three quotations, recommending a specific one because of its lower price, since the three companies' offer was "the same". It seems our agent is selling commodities and competes solely on price. Naturally, it started a juicy discussion on the subject, concluding the insurance industry brokers are "the" channel, but forget about innovation while the vast majority of them is competing merely on price, limiting their job to producing a menu of options, all equal in the eye of their customer.

It is pure 20th century sales style: facing equal conditions, a customer will always choose the cheapest offer.

The 1x4 Innovation Method

This error can be corrected through innovative spirit and a good method, because innovation needs method, similar to my grandmother’s style of cooking: she questioned, she tried, she scraped the bad bits, she made it better and she eventually produced a sublime dish, like that wonderful pork tinga served on a corn tortilla… Sorry, i got carried away!

As I was saying, innovation requires method and I propose one in particular: 1x4. It is about making quarterly innovation efforts, so that at the end of the year there's innovation in up to four areas of the organization; a good way to keep a company alive and well, a the top of its game. 

To do it, ask yourself five questions:

1. What do our customers need? What pains do they have, what would they change in their lives?
2. What if…?
3. Which proposal wows our customers?
4. Does it make business sense?
5. How can we turn it into a reality?

Innovation should not be complicated; as Tim Brown says in “Change by Design” –a book I loved– there is no need for expensive resources, you just need to be enthusiastic. You can even learn as you go.

You have nothing to loose. It's only five questions and trying them out is free.

Start by asking “why not?” to yourself and your colleagues. By answering this basic question you will tear down a lot of mental barriers.

#FuerzaMéxico

An extra bit.

I am amazed, and not in a good way, of what is happening with Uber. Just as it has done, many entrepreneurs forget that they are not just creating an app, but a company which must repeatedly deliver quality products and services to benefit them and their market. 

An extra, extra bit.

It is always good to talk about innovation, bounce-off ideas and concepts and create analogies among different industries. How often do you do it? Find yourself a trusted person to do it with, and follow just one rule: ideas have no limits.

An extra, extra, extra bit.

Do you see Mexico as a country where our thing is to create?  Wait for news on January 31st. You'll love them.

Two years on from the COP21 meeting in Paris, the approach is to now analyse where Mexico stands regarding the climatic commitments adopted at the summit. The aim of the agreement is to restrict the increasing temperature to “well below 2°C” with respect to the preindustrial era. The experts estimate that a reduction of between 40% and 70% between 2010 and 2015 is needed in order to keep below 2°C. The deadline is COP24 at the end of 2018 in Poland.    

In the two-year report on climate change, we found that among the measures taken by Mexico, the implementation of the General Law on Climate Change (LGCC) in 2012 was the key figure. It set ambitious targets for the reduction of emissions and also included the development of planning tools that help ensure the communication and coordination between the different Governmental departments.

The LGCC set optimistic mitigating goals for Mexico; this includes a 30% reduction of emissions by 2020, and a 50% cut by 2050 in relation to 2000, it also wants an increase in the generation of green energy to 35% by 2024. While these targets are a real challenge for our country, they also put us at the forefront of the countries making a conscious effort to achieve results, which will benefit both society and the world.   

In terms of innovation among the business community in Mexico, thanks to the agreement there has been an increase in efficiency and better practices in the industrial sector, particularly within smaller industries, such as:

• Regulations and standards have been introduced as well as incentive programs to regulate future energy consumption, even in the energy service market.
• Better practices are being adopted both by the production chains and the end users.
• Products made as a result of green technology are now being certified.

The macroeconomic impact of the 2030 reduction forecasts a 23% increase in investment and a 5% growth in GDP, with a reduction of the unemployment rate by 4% (INE, 2011).

This means fugitive emissions are reduced with improved international, viable practices being introduced as a result of the new governing structure of the sector. New methods need to be found to reach geographically isolated gas fields, especially in terms of non-conventional gas deposits and deep water. Operational industry practices need to be assured with more competence and transparency so new international products can be introduced. In sectors such as in electricity generation and industrialization, there needs to be an increase in the use of natural gas to move away from the more heavily intense carbon fuels (coke, fuel oil and diesel).

Thanks to the reconversion of refineries there is an increase in the use of heavier and more intense carbon fractions, increasing the production of lighter hydrocarbons. A research, innovation, development and adaptability platform of climatic technologies has been put to use in the sector. An example of this is the development of carbon catching and storage systems. It is still too early to see concrete results from the industry as a whole, but there are signs, for example in the car industry, that the use of renewable energy in production is something we should get used to[1].    

[1] First Two-year Update Report from the United Nations Framework Convention on Climate Change (2015) Sermarnat.

In the past, Harold Sirkin said that, as the global business environment has become more complex, the competition does not take place between companies, but between supply chains. In order to thrive in the market, it is no longer enough to just sell the best product or have the best brand. Nowadays, the success of businesses depends on their ability to efficiently integrate themselves into global production chains that allow them to get their high-quality products on the market, at a lesser price and in a timely manner.

NAFTA has favored precisely this type of integration in our region: by reducing or eliminating custom tariffs, production chains have been reshaped in search of the best possible efficiency, pinpointing every stage of the production chain in the best location for that function to be carried out.  
 

How much would a NAFTA exit cost us?

A prime example is the automotive industry, which favors our country for the installation of their global assembly plants for export due to the low-cost skilled labor we offer. Even though the final assembly is carried out in Mexico, several automotive components cross the border more than once as production supplies. This results in an integrated global chain which benefits from the various levels of expertise in each economy in order to create the highest added value.

Actually, designing and manufacturing an engine can be done in factories in the USA, using electronic supplies from Canada or Mexico. The engine is then sent to a factory in Mexico to be finally assembled into a car, which will cross the border once again to be sold in the USA or Canada. Our country also provides car parts used for final assembly in the USA. These cars are sold to other markets such as Europe and Asia.  

Furthermore, regional integration offers huge logistical benefits due to the close geography of our markets: a car that leaves the production line in a factory in Mexico may arrive in the United States within a matter of days; whereas a vehicle imported from China can take several weeks to arrive. The overall picture of the industry is far more complex, as various supplies used in assembly plants in Mexico originate from other important economic regions such as Asia or Europe. Nevertheless, the highest added value occurs inside NAFTA, with final production in Mexico. 

This was shown in a recent study by the Center of Automotive Research (CAR), whose analysis reported that it was US$1200 cheaper to produce a car in Mexico to be then sold in the USA, rather than to produce it directly in the USA; and US$4300 cheaper to produce the same car in Mexico, rather than in the USA, to then sell it in Europe (this is for cars with an average sale price of US$25,000). These savings result from quantifying the differential costs from manufacture, parts import, transport to the destination market, and the tariff advantages at NAFTA terms.
 

The trend will continue, with or without NAFTA

The potential scenario is how companies take advantage of the differences between countries and manage to adapt efficiently to ensure success in the global markets. This partly explains why the manufacturing activity in the United States has declined in the last 30 years, certainly favored by NAFTA, but mainly due to the search for efficient production chains. This was initially achieved by moving an important part of the production from the USA to China, and due to recent economic changes, to Mexico.

The USA will unquestionably remain a manufacturing power, but mainly for highly-specialty parts and products, as well as continuing in their role as a hotbed for research, innovation and design. This trend will continue for our northern neighbor in the next few years, with or without NAFTA, but it would certainly be more beneficial for the region’s production chains if the current NAFTA remains in place.

Entrepreneurship has become a relatively new phenomenon among the majority of Latin American countries. Nowadays entrepreneurs are no longer just emerging from privileged economic situations. The Latin American and Caribbean region has become a breeding ground for new businesses led by young people. It is now the second most enterprising region in the world. According to the Global Entrepreneurship Monitor (GEM) nearly two in every three Latin American entrepreneurs are driven by opportunity rather than necessity.

While entrepreneurship is booming, innovation still proves to be an issue for new business owners in Latin America and the Caribbean. There is a broad consensus that new, innovative enterprises play a vital role in determining how dynamic a country’s innovation will be; however, in the case of Latin American and Caribbean countries trends show that the region’s lack of innovation has a direct effect on economic growth, according to the Organization for Economic Cooperation and Development.

OECD members spend an average of 2.4% of their gross domestic product (GDP) on research and development, while in Chile and Mexico – the only two Latin American members of the OECD – the rate is just 0.4%. In other countries in the region it is even less. As a result, the Latin American and Caribbean region is just not inventing enough. The region is home to 8% of the global population and yet, in 2010, just 2.6% of the world's applications for patent registration were filed from there.

The lack of innovation limits the role of the new ventures in the global market place. Just 7.8% of Latin American micro enterprises are participating in the global market, with  the USA being the most important market segment with 60% of the total exports[1].
 

Mexico’s Productivity Gap

In the particular case of Mexico, in 2014, 97.6% of companies were micro enterprises, according to Enaproce, (the National Survey on Productivity and Competitiveness of Micro, Small and Medium Enterprises in Mexico). Since they account for 75.4% of total staff employed, they are an important factor in the country’s economy, making fundamental contributions to economic and social development in Mexico, and playing a critical role in increasing productivity and employment as well as reducing poverty. Despite their economic and social importance, Mexican micro enterprises present problems of low productivity.

According to Enaproce’s results, some of the factors that explain the low productivity of micro enterprises are:

• Limitations on access to physical and financial capital (including venture capital),
• Shortages in human capital
• Limitations in implementing techniques and technologies for productive processes, services and commercialization
• Macroeconomic conditions and unfavorable “business environments”
• Lack of capacity for innovation and technological development
• Lack of infrastructure and services to facilitate production.

Improving productivity of micro, small, and medium-sized enterprises has been one of the major efforts made by the Mexican Government. In 2013, the National Institute of the Entrepreneur (Inadem) was created to “constitute the heart of the nation’s economic activity and become one of its greatest assets.” In 2016, the OECD recognized Mexico as the most progressive country in the promotion of start-ups between 2012 and 2016[2]. Apart from Inadem programs, Mexico has also improved the financial inclusion of start-ups; venture capital has  taken  off  in  the  country and is now the second most-active industry in Latin America, behind Brazil[3].

Additionally, Mexico has reformed regulations to make it easier to start a business, the Express Companies Act being a notable example. It has also modernized services for entrepreneurs by launching mentoring networks and collective workspaces. Finally, the country has invested in promoting an entrepreneurial culture in the country to create an image of Mexico as a place for entrepreneurship with a global impact.
 

The Rise of Mexican Women Entrepreneurs

According to Inadem, only 19% of the country's startups are founded by women. One success story is Epic Queen, a social company founded by Daniela González y Ana Karen Ramírez, which creates boot camps and workshops inside companies, schools and organizations to bring more girls into the STEM (Science, Technology, Engineering and Mathematics) field. Epic Queen seeks to strengthen women's leadership in Mexico and Latin America with the aim of creating a generation convinced of its technological capabilities and leadership. It wants to empower women to create initiatives and develop their ability to take risks outside of their comfort zone, and above all, find the support to move into the digital world.

Another success story is Kichink, the winner of the Google Game Changer Award at the 2015 Demo Day for Entrepreneurs, Women’s Edition in San Diego, California in recognition of its outstanding innovation. The firm created by Claudia de Heredia is an online store portal for all types of products. Kichink! has processed 7,000+ transactions and registered 5,000+end users. Its automated system allows for tremendous scalability as customers join from Mexico, Colombia, Panama and Costa Rica. The team of young, ambitious entrepreneurs is committed to democratizing the tools of e-commerce for entrepreneurs in Mexico and the rest of Latin America.

Finally, there is a company which is considered as the “Uber of cleaning services” and one of Mexico’s most successful start-up sites, Aliada, a platform through which Mexico City residents can find the ideal housekeeper for them, and vice versa. It was co-founded by Ana Isabel Orvañanos. Since starting in September 2014, Aliada has grown,  and now has 150 professional cleaners, helping formalize this largely unregulated and informal Mexican industry. Aliada enables  professional cleaners to receive the benefits of formal work, transforming informal domestic cleaners into trusted and valued aliadas (“allies”) of the home. Aliada currently dispatches over 150 professional cleaners and has provided more than 30,000 services in just thirteen months of operation.

Developing public policies that support and aid the creation of new ventures is a key factor for the development of entrepreneurship in Mexico and the Latin American and Caribbean region. The OECD has established, that public policies related to science, technology, and innovation, education, production development and physical and digital infrastructure are required to improve the innovative entrepreneurial eco system in the region. Such direct policies in support of start-ups reduce the main barriers that hinder the founding and growth of start-ups[4]. These policies also benefit intermediary institutions, universities and stakeholders in the financial system.

As the entrepreneurial spirit continues to grow, sustainability becomes a key factor in the creation of new companies and technology throughout Mexico and the Latin American and Caribbean region. Developing and promoting programs like HIEP can help direct the creation of new ventures on the path to sustainability. It is key to align public and private policies and strategies so that they can contribute to the building of an ecosystem for entrepreneurial innovation, as well as maximizing synergies between the contributions of the different public and private actors.

[1] CERALE (Centre d’Etudes et de Recherche Amérique Latine Europe) - ESCP Europe Business School

[2] Report “Start-up Latin America 2016: Building an innovative future”, OECD.

[3] Latin American Private Equity & Venture Capital Association LAVCA, 2016

[4] Report “Start-up Latin America 2016: Building an innovative future”, OECD.

Big challenges hide big business opportunities. There is no need to look elsewhere to find visionary entrepreneurs or innovative businesses which provide global solutions. Each and every one of us and our organizations needs to have an empowering attitude which uses technological and market evidence to show that our solutions have the momentum and capacity to overcome the big global challenges.   

Nowadays, these global challenges can represent enormous opportunities in sectors such as alternative energy, natural disasters, environmental issues, ineffective health systems, democratization of effective educational systems, inefficient governmental management, security, lack of food and poor water supply among others. 

Let’s embrace the fact that we are now living in the revolution 4.0 era and we confront these challenges with exponential technologies such as artificial intelligence, digital biology, neuroscience, nanotechnology, computer networks and robotics. This revolution is characterized by the speed, reach, and impact it has on consumer behavioral patterns as well as organizations. There are now billions of people connected by intelligent mobile devices with an unprecedented processing capacity and access to an unlimited amount of knowledge.    

In contrast to previous industrial revolutions, revolution 4.0 is advancing at an exponential rhythm rather than a linear one. It is also considered to be a disruptive force in almost every industry, which will eventually transform the way millions of people live. Its overall impact will be so large that this exponential technology will have to be complemented by transformational practices such as: data science, entrepreneurship, leadership, organizational management, innovation policies and ethics. The probability of overcoming large global challenges will increase as long as we are proactive, and we make the most of  exponential technologies with transformational practices in our organizations.   

A lack of vision and leadership as well as an inability to tackle the challenges posed by revolution 4.0 are some of the reasons why 40% of today’s leading companies may no longer exist in a decade’s time. This revolution carries a threat to traditional competitive advantages of companies and new competitors could potentially take on the opportunities of new business that crop up to eventually wipe out the business models of today’s leading firms.    
 

Incubators, accelerators, CVC funds and ‘unicorn’ startups

Some large businesses are already innovating, inside and outside of their organizations, with exponential technologies, by using open innovation. One of the most common models used by larger companies is based on interacting with innovative startups thanks to the establishment of business incubators, accelerators or the establishment of corporate venture capital (CVC) funds.  

CVC funds allow large corporations to get better strategic returns in order to adapt to the 4.0 revolution. Some startups also get financial returns on their investments and become unicorns, which are startups valued at over 1 billion dollars. Startups offer technology and disruptive business models to large companies that are looking to differentiate in the market and gain advantages over their competition through innovation.   

Large companies in Mexico are starting to establish incubators, accelerators and/or CVC funds. Cemex, Bimbo, Grupo Modelo, Telefónica, Cinépolis, Volaris, Axtel, CocaCola, Grupo Expansión, City Express Hotels, Grupo Lala, Proeza, ArcaContal, FEMSA, Grupo Salinas and Banregio are just some of the companies that have begun to take an impulsive initiative and interact with startups. In Mexico, the National Institute of the Entrepreneur (Inadem) has recently done a lot of work to increase venture capital funds from just two in 2006, to 55 in 2016. According to the Mexican Association of Private Equity (Amexcap) venture capital funds are now the ones with more fund administrators of the total 168 Private Equity industry.  

We now need to have large Mexican corporations to support entrepreneurship. According to figures from the National Venture Capital Association, in the United States, almost 15% of venture capital comes from CVC funds. In Mexico, the Center for Innovation and Entrepreneurship (CIE) at the EGADE Business School is looking to bring big business players together to kick start the use of exponential technologies and transformational practices so that the revolution 4.0 can be tackled head-on. This will create more clarity about the technology and practices that impact their organizations, creating a more investment driven atmosphere as well as increasing the amount of innovative business models used in their companies to reach  growth and profit goals. This will not only aid their survival, but also help the transcendence of businesses.

Maintaining a hegemonic position in the market is as much as an illusion now than ever. 88% of the 500 most valuable companies listed by the magazine Fortune in 1955 have now disappeared. This figure indicates that in order for a company to survive, it needs to constantly innovate and reinvent itself. Companies need to adapt to the new global markets where there is competition from all sides, and the limits between sectors have faded.      

A clear example of the importance of being an agile, responsible and creative organization is the Apollo XIII Space Mission. As we know, the mission failed as it was unable to land due to the potentially fatal explosion of an oxygen tank. Their plans radically changed because of this accident, and their mission was to then rescue themselves and get their battered space ship back to Earth safe and sound.  

The explosion changed the rules of the game, just as globalization has changed the rules of the market. Companies have had to become more agile, responsive, responsible and innovative within the different departments or structures of their organizations, this is now referred to as intrapreneurship. In the case mentioned, the mission was to get to the moon, the accident (markets, competition) changed that plan and it became a race for survival, which was achieved by team work, agility, responsibility and creativity: “Creating the required products and services by any means possible to meet the consumer’s needs.”    

Lessons learned

According to Rita McGrath, from Columbia University in New York, companies now need to change their way of thinking:

• Tradicionalmente las compañías se centraban en tener ventajas competitivas monolíticas, ahora las ventajas están sujetas a una gran presión.
• Traditionally, companies focused on having monolithic competitive advantages, now the advantages are subject to a lot of pressure.
• Companies used to maintain their existing perspectives, now companies constantly question the status quo.
• Companies that had similar profiles used to define their processes and strategies, they should now consider other players to participate in their strategies.
• Processes that were slow but precise (financial statements, forecasts). Companies should now be agile, quick and be looking for certainty, but not necessarily precision.
• Companies used to be focused on forecasting, now they are motivated by the discovery of new markets and new clients, focusing on a better understanding of the customer.  
• Companies just used to focus on the net present value (NVP), they now iterate before making money. Companies now have to practice, shape their product and spend on prototypes, even though money will not be made until they develop the best possible product. 
• Business of the past used to look for confirmation, today they look for “disconfirmation”: “Show me where I am going wrong, that this is not the right market”, they have the opportunity to constantly question themselves.
• They used to be focused on an internal authority, they now look to aggressively focus on the rest of the world.
• If a product failed in the market, companies used to settle for failure. They now need to get themselves back up, brush themselves off and keep on going.
• Instead of restructuring companies, today they morph talent into a corresponding functional area to change performance.
• Companies used to have to determine facts, they now respond to early warnings. A different way of observation and awareness is needed.
• Innovation used to be done in waves, it now needs to be constant and oblique, it needs to run through the veins of companies. 
• Failure did not used to be discussed, companies now have it as part of their culture, there has to be constant questioning and a pro-failure culture.
• Current companies need to have a meaning and their employees should reflect that meaning, helping to generate thought, constant creativity and acting quickly to respond to the needs of the market.
• Companies need to take accountability when identifying with something, they need to take hold of its value, and take charge of the problem or solution.  This is the case with disruptive companies, that are changing the outlook of the market.
   

The Sharing Economy, the new way of doing business

What does a sharing economy mean? According to Jeremiah Owyang, the market does not just belong to a few companies, the market is everybody’s and we participate as both consumers and suppliers of products and services.  Sharing is becoming more powerful than these companies. What will happen when people no longer need to buy from these companies?  Many businesses are giving a deaf ear to this, and they believe that they can maintain themselves, but the prominence of companies is radically changing. 

In order to remain profitable, companies need to partake in the sharing economy. In this internet age, we can share our likes and dislikes on social media, but we can also use them as platforms to do business. We can use social media to obtain products and services from our friends, we no longer have to buy exclusively from these companies.

Faced with this change, the first reaction of large companies was to run an aggressive marketing campaign to try and influence a change on public policies, regulations, security, unions and quality control etc. Other companies saw it as an opportunity to share what was theirs and their access with other corporations, new companies and the community. This was nothing new, but the use of technology changed the rules. You can now travel in Uber or Lyft, stay in Airbnb or GuestToGuest, ask for an online loan in online communities such as Kiva, share office space in Liquid Space, etc.
                                                                                         
The fundamentals of the sharing economy

Mark Zuckerberg understood the new sharing economy (new industries, new markets, new consumers); and thanks to this the growth of Facebook has been immense in the last couple of years.

The impact of sharing can be hard. What would happen if people just started sharing one car instead of each buying their own? The large car manufactures would begin to get scared … The generational changes are pointing towards a generation that prioritizes experiences over possessions, they have a preference to not get into debt and have access to products instead of owning them.

There are also economic factors: there are idle assets that are business opportunities.  While the population grows, the earth’s resources remain the same, and there is the potential to reuse or resell products that have been manufactured for others. In fact, venture capitalists have already been investing in the sharing economy (2 billion dollars were invested in startups in 2015).

How to get into this new market?

The secret is to change the way in which we think: products become services, services become new markets, and new markets create new products.

Nowadays, you need to generate a platform to not just sell your product, but to add an extra value to your consumer. That means that your product does not become a necessity, but the platform you create becomes a necessity, so that people consume your product along with other products. In other words, your product becomes a service thus generating a virtuous cycle. Companies such as Netflix or SalesForce create events or offer prizes and experiences along with their subscription. Toyota and Audi are allowing people to pay to rent their cars.

Michael Dubin is the creator of the Dollar Shave Club, which is a platform that offers a high-quality safety razor for a monthly subscription of one dollar. He changed the business model of razor blades. In 2012, the company generated 250 million dollars’ worth of sales, and last year it was acquired by Unilever. What he thought up was not anything particularly disruptive, but he was thinking about the sharing economy.    

The sharing economy contributes to the generation of new markets, it motivates company directors to see their business as a service, to accompany their consumers on their way, so that they, themselves, develop the market. For example, the consumer may tell them how they should change their product. However, what motivates the market?

Owyang gives us an interesting example: “Nacho”, a young man of 35, had a house and he discovered a new opportunity in the market by using his guestroom that he had published on AirBnB. What would happen if apart from just renting out the guestroom, there was a business opportunity for something else? That is when he thought to team up with an international hotel chain to offer a truly first-class experience. 
 

Companies as sharing platforms

We have to extend and innovate our boundaries of sharing: co-finance, co-think, co-create, co-design, co-build, co-sell, co-invest, co-market etc. Your platform is a business that gives on so many levels, but ensures that you do not do business on your own.

A good example is #Wikispeed Car, a community in which every car-part expert sends their products to an assembly center and they manage to produce a car for just 25,000 dollars. Carrot 3D, innovators in the 3D printing business, their sales have jumped in the last two years due to their quick productivity. That is co-creation.  

Steven Holtzan from Inifity Pharmaceuticals, used the sharing economy to give more power to his employees, in what is called “citizen ownership”. Every employee is responsible for the work, and when it is done well they then gain access to the company. They are each owners of a part of the company, and are consequently more motivated (this is also an example of the sharing economy).

The challenge is how to create a sharing platform, how to share with other people and companies. Flexible companies should have the knowledge and skills to detect new opportunities, they should have the speed to respond when faced with uncertainty and volatility, and they should also have the capability to trust in one another, now more than ever.

What can you do differently? In which areas? What new skills do you need to develop? What motivates you? The company is a platform for new markets, it is a platform to resolve and detect problems and opportunities, so that we can take charge of them. We need to innovate to stay relevant.

Companies are asking themselves what is next? How can they adapt to new markets, trends and challenges? Well, they are on the right track.

The first round of Free Trade Agreement (FTA) renegotiations have begun amidst heightened tensions. Instead of seeing it as an opportunity to strengthen integration in the region to make North America one of the most competitive blocks in the world, the initial rhetoric of the Americans has intensified the negotiations, principally in relation to rules of origin, dispute settlement mechanisms, labor issues and several other burning matters that could intensify the discussions. 

• Rules of Origin: These are the regional content requirements that products need to meet in order to be considered as duty free for the countries that make up the agreement. Consider the automotive industry, for example, which is one of the most important trade sectors in the region. A car needs to have at least 62.5% of inputs made in the region in order to benefit from it. The United States is looking to increase that percentage to have a higher number of products manufactured in this country.  
• Dispute Settlement Mechanisms: This refers to the processes that countries use to resolve commercial disputes in the region. Currently they are resolved impartially by a binational panel, however the United States wants to incorporate changes that allow them to make decisions unilaterally.   
• Labor Issues: This is another cause of conflict. While Canada favors immigration with a system based on clear rules that incentives candidates qualified in specific areas, Mexico is interested in temporary migration agreements and a larger opening that allows a more flexible flow of migration. On the other hand, the stance of the United States is a more closed one, especially in relation to Mexican immigrants.    

The agreement needs to be modernized or adapted to the current and future circumstances of the issues stated. Canada and Mexico both agree that the dispute settlement mechanisms should not be removed, and that no change that is introduced concerning rules of origin should favor to just one sole member. However, work needs to be done to simplify procedures and grant more flexibility so that the rules can be adapted to future needs.  

In the coming months, it is critical for both the Mexican and Canadian teams to work together to achieve a common goal. Both Mexico and Canada are looking for an inclusive and responsible agreement that includes environmental issues, gender perspective and the standardizing of working conditions.

The stances of Mexico and the United States are similar when it comes to the telecommunication and finance sectors, important issues that both could agree on. These sectors as well as digital trade and energy, can help to create a unique opportunity for growth and integration in the region.

The next few months of negotiations will be difficult. Mexico and Canada are strengthened by their similar objectives, but Mexico must also look for common points of interest with the United States, and focus on the issues analyzed at the negotiation table. They need to look beyond the information given by the media and the likely belligerent rhetoric of President Trump. 

This past March, 694 MBA students traveled to one of 18 campuses to study with peers and learn from international faculty in an initiative called Global Network Weeks. Students visiting Israel’s Technion in Haifa learned why the country is called the Start-Up Nation; those who arrived at the University of British Columbia’s Sauder School of Business in Vancouver took a deep dive into green energy; and students who traveled to Jakarta learned from faculty at the University of Indonesia how digital entrepreneurship empowers women. Not a single dollar, euro, peso, renminbi, or shekel changed hands among participating schools to make this extraordinary educational experience possible. This is the power of networked management education. 

Global Network Weeks were the fist program initiative of the Global Network for Advanced Management (GNAM) when it launched in 2012. The network had its beginnings when the Yale School of Management in New Haven, Connecticut, convened a meeting of deans and directors from 20 business schools to discuss a collaborative effort. The network was founded on three shared beliefs: that the stakeholders of management education are increasingly global; that no one school can have a truly global reach; and that schools can gain tremendously from trade and collaboration. 

We believed that a network offered many advantages over the typical globalization strategies of joint degree partnerships, student exchanges, and multiple campuses, which benefit a relatively narrow group of participants and often bear heavy administrative burdens. Networks are flexible and efficient, leverage existing resources, are easily reconfigurable, can be joined and exited, can support multiple overlapping initiatives, and require minimal bureaucratic oversight. They represent an institutional innovation in our extremely disaggregated management education industry. 

How GNAM works 

With GNAM, we do not aim to create a series of specific programs, but to remove obstacles and enable collaboration among member schools. One guiding principle is to minimize bureaucracy, so we have no secretariat, no membership fees, no elaborate procedures, no definition of “academic credit”—we don’t even require that all activities be for-credit. Schools make in-kind contributions; GNAM motivates their engagement by solving problems and smoothing the way.

Because schools differ in their ability to contribute to the network, the only requirement is that members must engage with and contribute to GNAM activities. There is no “forced march”—schools decide which of the activities facilitated by GNAM will yield benefits or them. 

We ask potential new members to write an essay about why they want to join and what they would be able to contribute. To be considered, candidates must be leading business schools in their regions, share a commitment to globalizing management education through collaboration, and have at least one graduate program taught in English. Current members discuss the application, assessing whether an applicant shares GNAM’s vision, what it can contribute, and how much additional value its membership would create for current members. Then they vote on whether to admit the new school.

Schools join for three-year terms; at the end of that time, if they want to stay in the network, the other schools vote on whether or not they have been sufficiently engaged to continue as members. Obviously, “sufficiently” is not a precise term, but we expect that a school’s contributions will increase over time. To date, we have not voted against a membership renewal, but there have been times the dean of a more active school has called a less active school to discuss ways to boost participation. So far, these friendly interventions have led to more engagement. 

The network currently stands at 29 members. While we are open to adding a few more schools, particularly in regions where GNAM is not yet represented, for the time being we don’t want to get far past 30 members. We are keenly aware that complexity increases as our numbers grow. If we must make a trade-off between widening and deepening the network, we favor the latter.  

Diffuse reciprocity       

Once they are part of the GNAM network, member schools are treated equally. Links between Lagos Business School and FGV-EAESP São Paulo are as valuable as those between Tokyo’s Hitotsubashi University Graduate School of International Corporate Strategy and HEC Paris. The network exploits Metcalfe’s Law—its value increases with the square of its notes. 

Take the Global Network Weeks (GNWs), which allow students to supplement their studies by taking a specialized intensive course at a another member school. Each time a new school joins the initiative, the value increases exponentially, because students at all participating schools have additional options for schools to visit and teams on each campus become more diverse.

Colleagues who are not part of GNAM often ask us how we found a time frame for GNWs that fits in the academic calendars of nearly 20 schools. We didn’t. We found one that worked for a core group of fie; over time others decided to join. GNWs thereby became more attractive, and as more schools joined, the demand-pull has led 23 member schools to participate to date. With broad buy-in, schools now identify dates two years in advance—usually over spring and fall breaks in mid-March and mid-October. Schools that want to participate adjust their academic calendars accordingly. Minimal coordination coupled with network effects helped overcome a problem that could never have been solved in top-down fashion. As a result, student options have grown exponentially, as shown in the illustration at right.

GNWs illustrate another of GNAM’s essential principles: diffuse reciprocity. In a given edition, more students might want to go from Fudan University in Shanghai to University College Dublin’s Smurfit School than vice versa. That’s OK. As schools in the network enjoy repeat interactions across many different issues, they stop looking for specific reciprocity, a term Robert O. Keohane uses in a 1986 article in International Organization titled “Reciprocity in International Relations.” Instead, they consider the wider picture. They no longer ask, “Is this exchange fair?” but rather, “Am I getting enough value out of participation?” They transcend the bean counting that dominates the world of traditional bilateral student exchange. 

A week away

While GNWs are simple in concept, they do require a certain amount of coordination. Each school that wants to participate picks its topic and states how many students it is willing to host for the week. That list is shared with participating schools, each of which has its own system for determining how its students will be distributed. Schools only can send their students to GNWs at other schools if they also host classes.

For certain schools, there is usually more demand than available spots, so we have created an algorithm to allocate spaces across schools. In short, the more popular a school’s option is, and the more generous it is about hosting, the more spots it will secure for its students at other schools. We think this mechanism provides the right incentives, and all members have agreed to it. 

Member schools decide whether or not their own students will earn credit for attending GNWs; often, those schools treat the week as a block elective. At most schools, participation in this opportunity is optional, but a few require their MBAs to take part. To date almost 4,000 MBAs have participated. 

Students don’t pay extra tuition for attending GNWs, but they do cover the full cost of travel unless their home schools support or subsidize them, as we do at Yale. Interestingly, almost from the beginning, students realized they could set up their own private Airbnb exchanges, swapping apartments for the week. 

In 2016, a subset of member schools launched a separate GNW for Executive MBAs. Students engage in pre-work across schools; faculty at the host schools assess deliverables, enabling home schools to translate scores into their respective grading schemes and award credit. Many professors find this a richer option than the faculty-led international study trips that are common features of many MBA programs.

Multiplying connections

As GNWs have grown increasingly popular, GNAM schools have continued to develop additional initiatives to take advantage of network connections: 

Small Network Online Courses (SNOCs). In 2013, members began to offer a set of online courses for students at GNAM schools. SNOCs, which generally enroll between 20 and 50 students, include synchronous components, such as lectures, discussion, and student presentations, and asynchronous work via message boards and assignments. SNOCs can be thought of as student exchange programs that last only for one course and don’t require students to travel abroad. Students have the opportunity to learn from faculty experts at other schools and forge links with peers, but they do not miss out on other electives or recruiting opportunities at their home schools.

Each home school decides if students will get credit for SNOCs, and if so, which ones. In a few cases, university rules at a member school dictate that no online courses offered by faculty from other schools can count toward  a degree. 

Each school also has its own rules about when and how faculty can set up SNOCs. Most schools that have offered SNOCs count the effort against the instructor’s course load, even though only a few local students might be enrolled. Again, the idea is to encourage diffuse reciprocity: Your students get access to a pool of electives at no additional cost to you or them; in return, we ask you to occasionally contribute to the pool. 

So far, more than 700 MBAs from 25 schools have taken SNOCs through the network, and faculty from eight schools have offered them. Since some schools have never delivered classes online and we want to drive uptake, we allow any student to sign up for a SNOC offered by GNAM faculty, as long as there is room in the course and their home schools will let them do so. 

SNOCs have ranged from a course on inclusive business models from IIM Bangalore to one on disruption from the London School of Economics. UBC Sauder’s “Urban Resilience” course was particularly innovative: It brought in additional faculty from Yale, IIM Bangalore, the University of Ghana Business School, and EGADE Business School in Mexico. It also leveraged the Rockefeller Foundation’s Resilient Cities Initiative, and it featured an optional weeklong in-person module in Quito that was supported by the local office ofosta Rica’s INCAE Business School.

Faculty increasingly realize that online teaching opens opportunities for different kinds of coursework. This spring, an experimental SNOC explored the future of globalization after Brexit and the election of Donald Trump; it en-gaged more than 40 MBA students from 20 different GNAM schools in team-based data gathering to assess whether similar factors drive rising economic populism in different parts of the world. 

Global Virtual Teams. When the network began offering SNOCs, our focus was on connecting faculty in one location with students in others. Over time, however, faculty realized the extent to which these courses facilitated the development of virtual team skills, which has led to this latest initiative. 

Starting in January 2016, MBAs enrolled in required operations management courses at Yale, HEC, and EGADE formed cross-school teams to compete in an online simulation where they jointly managed a virtual factory. This year, students at UCD Smurfit joined in, making Global Virtual Teams a four-way initiative. The fact that participating schools have made a GNAM-facilitated curricular element a core requirement underscores how quickly the network has lowered barriers to collaboration. 

Before embarking on the group project, students from all four schools fist must participate in a course on how to make virtual teams more successful. Through the SNOCs, we already knew the sorts of problems that can crop up when we create teams of fie or six students from schools around the world. First, coordination challenges are high, because students are working in so many time zones. Second, barriers to free-riding are low; because there is no risk of encountering peers in the hallway or at the gym, there is reduced social pressure to contribute. Third, virtual teams are subject to greater conflict, because it’s more difficult to avoid and clarify mistakes. 

For these reasons, we require virtual team members at Yale, HEC, EGADE, and UCD Smurfit o invest time in getting to know one another at the start. First, they swap videos introducing themselves. Then they join a virtual teambuilding activity where they decide on the rules governing their collaboration, including how to divide tasks and resolve conflict. In this year’s second edition, there are indications that the global virtual teams have achieved better results than traditional on-campus teams in the past.

Global Network Investment Competition. The success of Global Virtual Teams led member schools to look for other ways to connect activities that schools usually do independently—such as running stock market competitions for their students. Finance faculty at Yale launched a network competition, which requires student teams to create portfolios of value stocks from their respective regions. This not only has fostered links among like-minded MBAs, but also has generated insights about the viability  of crowdsourcing. Now in its second edition, the competition has attracted  22 teams from 14 network schools. 

Global Network Perspectives. This initiative, created by the communications directors for GNAM members, is designed to disseminate faculty research to the widest possible audience. Many schools distribute condensed faculty insights to stakeholders; through this initiative, participating schools aggregate and curate research insights from other members and distribute them through their own communications channels. In less than two years, more than 160 faculty insights have been shared.

Global Network Surveys. We use these surveys to discover what matters to our vast network of students. Working with the World Business Council for Sustainable Development, we surveyed almost 3,000 students in September 2015 about their views on climate change. We learned that these future leaders care deeply about climate change, want more preparation from business schools, and might not be willing to work for companies perceived as laggards in this area. Our findins were presented at the COP21 U.N. climate negotiations in Paris. 

In 2016, the second Global Network Survey collected the views of almost 5,000 students and alumni on the challenges facing women in the global workforce. Findings from the data have been disseminated through member school channels, and our hope is to contribute  to ongoing policy debates. 

Other initiatives. As GNAM schools continue to look for ways to collaborate, efforts are accelerating in the area of executive education. Through the network, members can expand their global delivery capability and supplement their own faculty with experts from other schools—two differentiators that appeal to corporate clients. In addition, 19 member schools have joined forces to create the Certificate of Excellence in Global Business, which recognizes participants who partake in at least 15 days of executive education over two years from at least three different schools in two or more countries. More than 200 open enrollment programs offered by participating schools are eligible and are marketed via a joint website. 

Additional GNAM initiatives focus on joint case development and case sharing, joint alumni events, faculty collaboration in areas such as sustainability and entrepreneurship, case competitions, staff xchanges to identify and diffuse best practices, and benchmark-ing on everything from online education strategies to doctoral programs.

Promoting awareness

Despite its successes, the value proposition of GNAM is not self-evident to all potential participants. Newly arrived MBAs are focused on getting to know their classmates and their immediate surroundings, not learning about what a school on another continent has to offer. Faculty are more interested in connecting with immediate colleagues and longstanding collaborators. Some alumni question if it makes sense to invest in a cross-school network rather than to address pressing issues at home. We welcome these responses, because they encourage us to scrutinize all initiatives and relentlessly focus on stakeholder value.

However, one of our ongoing goals is to make more students and faculty aware of GNAM and its rich possibilities. Many professors have joined a LinkedIn group where we share opportunities for faculty, and we hope to see more collaborations among those who share common interests. For instance, researchers who focus on sustainability have met in New Haven for a week to share best practices; they also have created an online working group where they can swap syllabi and teaching ideas. A similar effort s developing in the area of entrepreneurship. 

In addition, some schools, including Yale, have made funds available for short-term visitors from other schools. We have discussed other initiatives, such as dedicated research funds for cross-school projects, but we’re still in the very early stages.

We’re also trying to make sure more students know about GNAM. Member schools have jointly produced a welcome video that they can show during orientations, and a good number include GNAM in their information sessions. But too many students still only find out aboutGNAM when they get an email about an upcoming GNW, SNOC, or competition. 

We have been working on a cross-school social media platform that also functions as a learning management system to support GNAM’s curricular and co-curricular activities. If this gets off the gound, we hope that all new students at member schools will create their profiles as thy start and be ready to network with peers at member schools from day one. 

Finally, we have launched the GNAM Ambassadors initiative. About two-thirds of our member schools have named student ambassadors who offer us advice on new initiatives, brainstorm with their counterparts at other schools about how to increase student engagement, and serve as a source of information about GNAM for their fellow students. 

The longer the network is in place, the more interest we have. During Global Network Week in March, we informally polled visiting students to ask how many had known about GNAM before they enrolled in their business schools, how many had learned about it during orientation, and how many found out about it only when they discovered the GNW opportunity. The percentages were about 40/40/20, which was much better than in previous years. Student surveys at Yale and other schools suggest that roughly 50 percent of students were interested in attending a school in part because of its GNAM membership. 

What works, what doesn’t

As we focus on increasing awareness, we also reflect on what we have learned in the past fie years. We are convinced that the most important step is to build an open innovation platform, removing or at least reducing barriers to collaboration, and enabling stakeholders across our schools to connect with their peers to drive mutually beneficial innovation. We have learned additional valuable lessons that we share with other schools considering launching their own networks:

• First, there are no self-organizing systems. Yale School of Management convened the Global Network, provided critical public goods, and continues to champion its initiatives through out-right leadership or active participation. Over time, however, many other schools have assumed ownership of key initiatives. Leadership, we have found, inspires engagement.
• Second, nothing stimulates engagement as much as tangible value creation for students and faculty. When students and faculty report to their deans, directors, and colleagues that participation in a GNAM activity has enriched their educational experience or professional development, resources materialize and barriers to participation crumble.
• Third, rapid prototyping trumps careful planning. Rather than having deans and directors debate what an online GNAM course might look like, individual faculty took the plunge, put their courses online, and invited students from other member schools to join. It took several schools some time to figure out how to give their students credit for an online course taught by faculty from another school. Yet demand-pull from the student side greatly accelerated these efforts. And in the meantime, faculty learned, improved their courses, and never looked back.
• Fourth, we must sidestep every bureaucratic issue that could delay or de-rail collaboration. Should a SNOC be 12 sessions, 18, or 24? Should it be offered on Canvas, Blackboard, or Moodle? It really does not matter. We want members simply to go ahead, do what they would do for their own students, and let the other schools decide whether and how to connect, convert, and validate.
• Fifth, it’s essential to connect the doers, ideally face-to-face. Deans and directors discussed opportunities for executive education on three separate occasions, yet little happened. Then the European School of Management and Technology hosted a separate meeting just for executive education heads, and things started moving. Similarly, after the communications heads at member schools met for a two-day brainstorming session on marketing, branding, and communications, awareness about the network went way up as schools have joined forces to push key messages.
• Sixth, we must not position anything in juxtaposition to member schools and their brands. GNAM does not supersede member schools, and its brand is not an umbrella. Rather, it multiplies the reach, curricular offerings visibility, and impact of individual member schools. We think “Intel Inside,” not “Courtyard by Marriot.” 
• Finally, we can reap wholly unexpected results from our mutual trust and colleagueship. For instance, confronted with growing concerns about rising economic nationalism and anti-globalization populism, GNAM school deans issued a joint statement in February that underscores the importance of ongoing scholarly exchange and collaboration, especially when it requires students and faculty to cross borders. 

The next steps

While GNAM has touched the lives of thousands of students and many professors, we feel that the network has barely achieved 10 percent of its potential—and we have three reasons for feeling such optimism. First, to date most GNAM initiatives have been designed around programs that existed before schools joined the network. As members launch or revamp programs, they will do so knowing that GNAM puts additional resources within reach. Might it make sense for smaller schools to focus their efforts on required core courses and rely on the network to provide students with a comprehensive set of electives? If faculty teach one course at multiple schools, will they reduce their preparation time enough to free up more hours for research? What other “gains from trade” might we see?

Second, as we produce more alumni who have experienced networked education, they will begin leveraging its benefits or lifelong learning and other alumni services. Third, employers could start using the network to recruit globally while minimizing costs. 

We will realize these advantages only if we continue to enjoy stakeholder demand. But we believe that we have created an effective platform for innovative networked management education that positions all our members to thrive in the changing world of higher education.

Article originally appeared in BizEd.

Illustration by Aleksandar Savic.