 It's a great honor to be here with you this morning to moderate what promises to be a fascinating panel. Today's topic is framed through the pillar of leading through adversity. But the more precise question that we are here to talk about in the debate is, are leaders too risk-averse in their efforts to bring the economy back on track? We in their opening materials should have our distinguished guests, full bios and CVs. So in order to maximize our discussion time, which is very limited with six such distinguished guests, I'm just going to introduce them very quickly and we're going to jump straight to the questions and answers. We'll talk for about 30 or 40 minutes about the topic up for discussion today and then we'll open the floor for some questions. So joining me to my far left is Clayton Christensen, Professor of Business Administration at Harvard Business School, then one closer to my right, I guess you could say, is Martin Sen, Group CEO of Zurich Insurance, then John Chambers, who's Chairman and CEO of Cisco, Arit Gideesh, President of Bain & Company, Mike Duke, President and CEO of Walmart, and Anand Mahindra, Chairman and Managing Director of Mahindra and Mahindra. So I'd just like to jump right in and as I told the panelists, I'd like this to be as dynamic and as engaging a conversation as possible. But it occurred to me as I was preparing the materials for today's talk that there's an inherent bias in the question. Are leaders too risk averse in their efforts to bring the economy back on track? Is a leading question suggesting that the answer is inevitably yes? And so I'd like to throw open the panel to no person in particular. Does anybody disagree with the premise of what we're here to talk about? That leaders are too risk averse in their efforts to bring the economy back on track? Or is that something as a general consensus we would agree with? John. John. All right. I think your general comment applies maybe to leadership in total. I think the people you picked on this panel are probably the reverse. Many of us in our industries, if you're risk averse, you get left behind. And if you watch the history of what makes companies successful regardless of industries, they are able to catch market transitions, listen to their customers and move rapidly. In our industry, my competitors from 15 to 20 years ago are all gone. 10 to 15 years ago, one remains. Five to 10 years ago, a shadow of what they were. Same thing from two years ago when we were here. And by the way, Cisco can get left behind the exact same way. So if you're in an environment where you don't take risk and don't push innovation, you will get left behind very quickly. We actually see each time you have a combination of uncertainties, i.e. economic market transitions with clouds and new technologies is when you become much more aggressive. And that's when you have a chance to gain a lot more market share and pull away from your peers. So actually, I think you'll find leadership as a whole. Most leaders whose companies do well year in and year out over decades will be very much risk takers, especially during the tough times. So is there some quality that is changing in the business environment? I mean, it looks like you wanted to say something, but I know also we talked a little bit about uncertainty. Is there something, and it seems to be one of the catchphrases that you hear already, even though this is day one of Davos, are we somehow in more uncertain times than we were previously? Is it the technological cycle? Is that what's driving this? Well, let me start by defining what I think. Risk is really the probability that an outcome will turn out as advertised. And it can be relatively objective. You can measure it, you can research it, you can analyze it. It's not going to be perfect, but you can get a pretty good idea. How a person relates to it has to do with his or her's risk aversion or the opposite. And I think people tend to put a more negative lens on how they perceive this today because indeed they feel more uncertainty. But let me make one other distinction. And that is, I think, where actually some people here on stage actually are distinguishing themselves from others. You look at the amount of cash on balance sheets. You look at the amount of buybacks instead of investment. I mean, it all points to the fact that in general, in fact, what John said is right, in general, people are risk aversion. But there's a difference between being risk averse and what I would call unfamiliar averse. A lot of what feels risky is actually unfamiliar because we're operating in a completely different world on some levels. So, for example, and those things can be learned, they can be researched, and people can learn attitudes and skill, how to manage their time like that. For example, cash used to be hoarded because it was scarce. Skills, people used to say, well, if I have to go through recession, I can let go of some people. Not anymore. Cash is actually abundant right now and is likely to be so for a while. And skills, especially engineering science and so on, are scarce today to the tune of 10 million open positions that cannot be filled in the world. And some predictions will say 45 to 95 by the end of the decade if education doesn't change that. And people don't change what they want. So not moving because of something that is uncertain, which is truly the unknown, is never a good thing. And there you can do some analysis on what might the risks be. Not moving because of things that are unfamiliar and you haven't bothered to learn how to operate on them, I think is really a crime. And I think that is a pretty important distinction to take. Martin, did you want to respond to that? Well, I just wanted to add to your question that the drive of return is risk. And before anyone takes any risk, you have to have a reasonable expectation on the return you're going to generate. And as we have at the moment, not enough clarity as a function of the economic crisis on what return you could expect, it is very, very difficult in order to be very gutsy about it. If you look at corporations, probably their cash positions are as high as ever, yet they're not being invested because we are moving from an economic crisis right now into a crisis of confidence for business leaders, political leaders, which needs to be balanced. And I think we still have to do some work in terms of getting this confidence back in clarity, what the change is, what they really mean for business in order to be able to have a reasonable return expectation and with that as well support risk taking. So if I can stay with that for just a second. When you get the majority of the economy predictable, you're going to get faster job growth and you'll get the companies investing more. Actually, the best return for companies is when things are really going the wrong way and you're willing to go against the tide. Clay, you've probably seen that in companies out of Silicon Valley and around the world. So I'd actually argue as a business leader in this group, your chance to break away is now as opposed to 12 months from now when hopefully the governments get more predictable with their policy. So it's risk reward again. Okay, we're already off and running and we've got a lot of people who want to say a lot of stuff. I want to go to Clayton though because we've had some ideas here about innovation. We've already talked a couple times about cash balances for a lot of Fortune 500, Fortune 1000 that are really cash rich and what's changed, it appears is that capital used to be scarce and other things are scarce now and capital is not. And you have a couple of lenses through which you look at this notion of why companies are not investing in certain areas all tied up with notions of capital innovation I think you call it. Yeah, I've decided around this question that there are really three types of innovation which each propose different levels of risk. So the first type, I'm calling empowering innovations and empowering innovations and transform products that historically were so complicated and expensive that only the rich had access to it. Now are so affordable and accessible that lots of people have access. So the model T was one of those, the personal computer was one of those, the smartphone is this again. And these kinds of innovations create jobs because they enable many more people to own them and so you gotta hire people to make them and so on. Historically, literally 100% of our job creation in America came from those kinds of innovations. And then the second type, and I wanna come back to then why is that scary? And seems to be a verse. The second type, we call sustaining innovations that make good products better. And they don't create new jobs. So every time Toyota sells a Prius, they don't sell a Camry. A good product supplants the old product. And they're really very important to the economy but they don't create jobs. And those are most of the investments in innovation that we create. And then the third, I'm calling efficiency innovations that help us make the same products cheaper. And they in general reduce jobs in the economy. And so as long as we create more jobs with empowering innovations, then efficiency innovations take jobs out. It goes just like clockwork and these issues don't even come up. But what's happened is because the abundance of capital has changed the world. It used to be that we should measure profitability by internal rate of return and return on capital employed when capital was scarce. And under that rule then, over the last 20 years, executives and investors have stopped investing in empowering innovations because they pay off in the five to eight year time horizon. And instead they take their capital and invest it in efficiency innovations which pays off in one or two years. And they take that money and invest in more efficiency innovations. And then more efficiency innovations. And so as a consequence, we are awash in cash. And yet we continue to invest as if capital was scarce. And so we're not investing in the kind of innovations that would create growth. And does it demand courage on the part of executives? Absolutely, because the world is measuring the wrong things. Mike, I wonder if you wanted to take that because you are, Walmart is both renowned as a growth machine and also a supply chain efficiency expert and also in a very healthy capital position. I don't know if you could take any aspect of that from your standpoint. Yeah, I would first, I'd like to go back to Dr. Christensen, Chloe, your first kind of innovation. You've evolved the terminology and hope you don't mind me bringing this up. Because I liked your previous terminology where you called it disruptive innovation and now you call it empowering innovation. I think both words fit very well, but I've gotten so used to using disruptive that I still like that too. So I'm going to find a way because I really think even at Walmart, we've had, I've been really pleased with our organization in the area of sustainable innovation and efficient innovation. Efficient innovation is really a lot about our business model. We often call it the productivity loop and it's really operating with lower expenses, more efficiency, lowering prices for our customers. And as a result, having more customers which allows for more efficiency. But that disruptive or that empowering innovation, I think it's something that we're trying not just at senior leadership, but throughout the organization. I really think a critical part of this is creating the overall environment in a company that this empowering innovation is really, really thought about all through the organization. I've seen two areas of our company that I think we've had a lot of empowering or disruptive innovation. One has been in the area of sustainability. Where throughout our organization, people have looked at just the traditional ways and have thought of completely different ways of operating in a more sustainable way. But that's also good for the world, but in addition, good for our shareholders. I think naturally, anyone that's in the retail business, also another area of empowering or disruptive would be the area of e-commerce. Using technology today, I don't visit a store today anywhere in the world without seeing customers using technology on the floor, communicating online and shopping using what I see as more empowering technology. So I think those are examples of what Clay's talking about. Erie, you said, did you want to follow up on that? Yeah, I think to take it from Clay's focus on job creation and to move it to a company's perspective, which John was talking about. And Mike was talking about, I think that those three innovations, we have different names, but it's all the same. You have to actually, the whole goal is not just to survive, but to be set up for growth. The best time is while the bad times are still going, while there is overall low growth. But definitely, it's not just survival. So the trimming the sale is what we would call for efficiency. You have to do that at those times because you need the low cost. But it's not just cutting cuts across the board or cutting jobs across the board. It's really redefining and innovating your processes of how you make distributed sale to your customer. And so it's a very different approach and it requires a lot of innovation. There will be some redundancy, but a very different ones than just cutting across the board. The second one, which he calls staying the course, is what Clay was talking about innovating for better products and services. And you have to do that because otherwise your competitors will be doing that and being ahead of you. At the same time, if you're not actually go at what you call transforming, and we call change direction. If you're not actually looking constantly at the horizon, trying to identify skills and technologies that are out there, there might be in some garage. If you're not looking for them, they'll come at you. If you're really systematically looking for that and thinking about what could disrupt or in fact erase your business model and replace you, then you need to acquire the skills there and the innovation either through M&A or through what you're doing yourself. But you need to be ahead of the curve. If you're not, somebody else will be there, and as John said, in his own environment and will replace you. So all three are actually necessary for company. Anand, did you want to? Yes, I'd like to live up to a reputation as a terminal optimist and claim that we are on the cusp of what I think is a major uptrend in innovation. Has there been a lull? Has there been some kind of placid period for innovation? Yes, and the reason I think we've been in that situation is that for the last four, five years, and Clay, you can confirm this, even the world of academia has been very obsessed with this phenomenon of frugal innovation coming out of Asia. I cannot think of one Western CEO who hasn't obsessed over that and tried to figure out what is this thing. Even in India, there was something called Jugaad, which was a make-do kind of innovation, which has morphed into essentially a philosophy of morpholest. And I think the Western world was getting confused and saying that we are supposed to go into these new markets, India and China, where we have to make appropriate products. So perhaps our old model of innovation was not correct. And so there's been a lot of gazing at that. Now I think what's happened is that there are some companies that have simply gone about doing cutting edge innovation, Apple for one. But even Apple is facing the rise of people like Samsung who are doing more for less. Forget the IPR issues for a while. Let's just say there are people doing more for less. Now what I think is gonna happen is that you're going to see cutting edge innovation is required. So I'm in a sense paraphrasing what you're saying, Clay. That the people like us from India and China are not going to be able to get to our aspirations simply by doing Jugaad or morpholest. We have to be able to do pioneering cutting edge innovation. I think companies like yours, John and others, MNCs are coming into India using their networks to understand what this is. But I think we are now at the cusp of a boom where people like you will figure out where in your network in the world I can get the morpholest DNA but still do pioneering innovation and come out with a grand synthesis which might actually be more sustainable innovation. Sustainable in the environmental sense. You're just incorporating the morpholest philosophy in cutting edge philosophy. So yes, I think there's a boom in cutting edge philosophy. And the winners of the next decade are going to be companies either from the west or from Asia who look around their organizations, figure out where competence lies in both these areas, pioneering and in morpholest. Find a way to synthesize them and create a whole new cycle of innovation. Yeah, John. If you watch what's happening, I couldn't agree with the non-comments more, a lot of the innovation is now coming out of the emerging markets. They're no longer following what the western countries did. They're skipping a generation. But back going to the basic premise, the way you win as a company is thinking five, ten years out play. And those companies who think one to two years out will get into trouble. The challenge we have is what you alluded to in your opening comments. CEOs today are measured on what you do this quarter this year. And with shareholders that as a whole are risk-a-verse and actually rewards you for making short-term operational efficiency decisions at the expense of innovation. But it's up to leaders. And kindly leaders also apply to government to focus back on the long term. How do you make India such a prosperous nation over the next five to ten years, not the next 12 months? How does Mike continue to break away for both the best physical and the best virtual, Walmart.com, Walmart Labs type of capability? And that's, I think, what this new generation leadership has to do. It'd be tough being a new CEO one year into the job. Because all of us would say, if you could be successful, that three to five years out. If you're one year into the job, you've only got two years to prove yourself. So it's a different environment versus what most of us grew up in. Look, John, and it's not just how boards evaluate CEOs. It's also how we evaluate management within our companies, too. And we can be guilty ourselves at times of evaluation of management on short term cycles and not really looking closely enough at the longer term metrics of what we create in our own environment. Sometimes even how we reward or penalize failure. And it's something I have to really be conscious of. We had one interesting officer meeting at Walmart about six months ago. We took an hour and a half of time with our corporate officers. And we said, we're going to dedicate this whole time talking about mistakes we've made. But we're going to say, what did we learn from the mistake? And when we finished the hour and a half, we still had a number of hands raised of people that wanted to volunteer mistakes and tell what they had, the mistake they had made, the risks they had taken, but what they had learned from the mistake. Now, obviously we don't want to make the same mistake multiple times, but we've had that mistake sometimes. But the environment that we create as CEOs is really important, too. If I can add on that. I think, John, to your point about future leaders or leaders coming in, that one of the responsibilities of everybody sitting here, you as leaders, is to actually teach people why the old way of doing business is not the right way of business. We need some help for government, I agree. But it's really up to leaders to decide that. And this distinction I made between uncertain and unfamiliar is actually pretty important. If you can, there's an old Arab saying that anybody who's ever been bitten by a snake is gonna look at a rope and be afraid of it. That is actually what we are. There are many ropes out there that we treat as snakes. So their uncertainty, yes, there is a lot of it. But there are certain things that are just unfamiliar. And we need to start managing that way. It's a very important distinction. And then people will feel a little more confidence than they feel now. When you think that everything is uncertain, you go, whoa, I don't have any confidence. I'm not gonna do anything. I mean, you realize that certain things are uncertain. And you can treat them a certain way, including looking a little bit of scenarios in some contingency plan, but it is planning. The uncertain is the unknown. It's the future, and you cannot predict the future. But the unfamiliar, you can learn how to operate in that. In that is what needs people who are coming after you and people like yourselves need to learn that more. Martin, did you wanna? Yeah, just to add to that, what is this leading to is as well that there's gonna be much more need for a balance in leadership. Both political leadership and business leadership as leaders have to show that they truly understand the risks we are facing. That is something which has been totally underestimated as part of this crisis. And with that as well, leaders have to show that they are credible. And that they have a credibility because the crisis of confidence, which concerns me tremendously, is exactly a lack of confidence from the mass public in the leadership. Because it seems people have not, leaders have not always understand the risks they took. Maybe it's wrong incentives took wrong risks, leading obviously to part of the problems we have. Both political leaders and business leaders. And I think that is now what is a big transformation as well. New leaders are waking up to it and making sure that we have much more balanced approach in order to create sustainable value for all stakeholders. The customers, the employees, the shareholders, and for the communities at large in which we live and in which we work. Which frankly I think is a fantastic development. And gives me tremendous hope in terms of the solidity of the business and how it's being moving forward. And don't forget it is business which creates chops. Chops and that's why it's that important that we get this right and that we get the right balance in terms of setting this groundwork. Can I make a quick comment on uncertainty? Okay, you then Clayton, because he's been- Because I already talked about these two labels. I just want to bring in a different perspective from an emerging market in India which was unique. That when I went back after business school played to India, all I found was certainty. Because we were a regulated economy. And I think people tend to forget that when you are in a license raj, as we used to call it, when you're in a socialist driven economy, where certainty is the norm, you hunger for uncertainty. Because you are not, that's what you were taught to deal with. I thought that's what you taught us in business. How to deal with uncertainty. So, I think all this talk about uncertainty, I thought that was our profession. We have to deal with that. And please, don't look for certainty. It's regulated autocratic economies that look for certainty. I want no part of it. Okay, a clarion call for uncertainty, Clayton. It turns out that two of the institutions that are getting disrupted in the most powerful way are you guys and us, right? And just as I'm listening to the team here, I understand the problem facing the Harvard Business School a lot more strongly now. So if you look at it from a technological point of view, you would say what's disrupting higher education is online learning. I will tell you that from the point of view of the Harvard Business School, you see this coming. And for us to invest millions of dollars per course to make better courses that we could sell in our existing business model, that is easy to do. But what is really hard for us to do is to look down at the bottom of the market and see a business model coming at us, which is we don't need MBAs anymore. Come to work for us. And we've created GE Crotonville, General Goldman Sachs University. And we just come here, we'll give you a week of strategy and then go back to work and then come and we'll teach you two weeks of product development and then go back to work. And the amount of money for us to go after that market, the amount of money is trivial compared to what we're paying. But because it's a different business model, this I think would even is your point, it has nothing to do with do we have the courage to do this. It's somehow what is not known about a different business model just makes us scared to death. And so you guys pray for the Harvard Business School. Yeah. John, do you want to take that? I mean, Cisco is renowned for either partially or completely overhauling its business model several times by now. Well, I think what we're all saying in different ways is the speed of change is now going on steroids. And what used to take place in an industry over 10 or 20 years has taken place in three to five. I think it's over where innovation takes five days. I think it's going to be three to five years on the changes. And we're seeing that in government as well. And if I were to point out four or five government leaders who are here at the World Economic Forum, you see a different mentality in terms of the Canadian leadership as an example. Thinking not where was their economy in the past, but how did they get ready for the future? And what we're all saying is you no longer compete against your prior competitors. You compete against market transitions. And it's your ability to get those new business models right ahead of your peers that determines your future of your country or your company. And if you watch what Mehvedev will probably talk about in the next session, Russia gets it. It's an easy place to do business now compared to what it used to be. They understand technology and reinventing their economies and direction. Cameron in the UK clearly understands it. He took the Olympics and said, I'm going to change innovation. I'm going to change education. I'm going to change our country's direction. You look at Israel with Perez and watch what he's doing in terms of change in a country. And so I think you're beginning to see a generation of leaders in both public and private sector who have a chance to work together to get us focused back on innovation for the future and real job creation on it. Key takeaway, however, is companies are going to go where they're wanted by countries that want them to be there. And that's one of the topics we haven't talked about today. Harriet? I have to say to go back to something that you actually asked specifically, and none of us actually answered, but it was hidden in what we said, is when was there ever certainty, except in India, perhaps? In 1973, GM thought everything was going to go fine. They just didn't realize that something was going to get wrong in 1973. And that's what led Toyota, actually, who was doing the small cars more profitably, because that's what we're doing. And all of a sudden Toyota was eating GM's lunch. There is always a level of uncertainty whether you're aware of it or not. When Jobs and Woosniak were creating the computer in their garage, there might be somebody out there today doing the same thing, except it's accelerated, as you said. So people who are sitting there, as John mentioned, and waiting for certainty, it's suicidal. There is never going to be certainty. And now we know it. It's just going to become more and more uncertain. In terms of areas in the world, we didn't really think much about North Africa until a week ago. All of a sudden, especially if you're an oil company with somebody else, not only to what happened today, but into what will happen in Africa because all those oil companies are participating there. So people who are waiting for the certainty to lift its head up and for uncertainty to go away, it ain't going to happen. So that's why I go back to uncertainty and infilarity and really, really, really tracking about those two. But start moving. The worst strategic move that you can do is to stay still, is to stand still. That is the lack of certainty and lack of familiarity brings to mind something else that we've talked about some before we walked out here on the stage. And that is the importance of collaboration. And really, it'd be easy for us to stand up here on the stage and really make it look like we're vertical as individuals taking risk or individuals leading companies or governments. What I believe is really more critical is working together more than ever. So business leaders working with the government, working with NGOs, because one person or even one business is not going to have the familiarity and really not even understand the certainty. But the more leaders in business work with leaders in government and NGOs, even across our companies, the more collaboration we do, the better we have at taking risk and I think bringing innovation. Because it's not so much about an individual's invention. It's what's the innovation that serves customers and creates economies and growth around the world. Martin, would you? I think if you talk about this uncertainty, and here I have to talk a little bit about, for my business, that's where insurance comes in and helps to, at least to a certain extent, tries to make the unpredictable, predictable, and model it and give at least a basic support. Now, what is the challenge is that we have in the connectivity of risks all around the world, which are moving in different parts at different speeds and that makes it pretty challenging for business leaders in order to prioritize that in a very effective and correct way. Having said that, the amount of innovation is just tremendous, which is gonna change moving forward. We just have looked at a, give you an example at an opportunity on how do people drive around in five, 10, 20 years from now? You already can now drive around self-driven. Technologically, no problem. You go into the car, turn on your GPS. Now, the friendly voice tells you which direction to drive to. In practice, you already can push the button and the car drives you wherever you wanna go. No problem. Now, that will take a lot of risks away. It will take part of our business away. But it will create total new opportunities. It will create total new liabilities and with that new risks, but new opportunities altogether. And I think it's exactly that what you have said, Clay, as an example, innovation will then as well create total new opportunities for job seekers. And that is what's going on and potentially much faster than we all think about it and that means we need to adjust, as we have heard, relatively rapidly our business models to stay tuned to this change. Can I come in? I want to go back to the first question you raised, Jim, whether the theme of this session was rhetorical and axiomatic. Yes, there is a bias in the question, but I think it's a question well worth answering because we do have to, as business CEOs, we do have an obligation to take risks with confidence. And there has been, in my opinion, some risk aversion. And if you look around, you will look at the news of the past four years, there has been a tremendous amount of focus on CEOs on restricting what they can do. There have been scams, there have been corruption scandals, and there have been a thicket of regulations that have come in to constrain people's behavior. Now, we can look at that as negative, or we can look at it that fences that will set us free. If you look at it as a fence that describes not a prison, but a playpen, and then we, I think it's incumbent upon us to go in and with the equal rigor that we set up all these governance mechanisms, which will restrict our behavior and our executive's behavior, I think we have to spend an equal amount of time and rigor on setting up systems and protocols that encourage free thinking, that encourage innovation. Otherwise, it's not gonna happen just by itself. So just as lawmakers spend a lot of time creating those fences, we need to create internal pathways for innovation. There hasn't been enough of that, and certainly that's something I'm going to spend more time on. I wanna tie together a couple of themes and maybe even change gear a little bit. I think much of this panel and much of what we're here at this particular economic forum to discuss is, the economic crisis in various parts of the world, we're heading into month 60, 65, something like that. People are calling it the great stagnation. Robert Gordon, an economist at Northwestern, we've used on this panel, we used the word innovation probably 30 times. I think that there's a great pessimism setting in where he's pointed out that we can electrify huge grids of gross vast spaces for, and we've been able to do that for 100 years. We can climate control any indoor space. We can compress time and space through telophony and mass transportation. In a lot of regards, even we're going backwards because supersonic travel has been, a lot of it is taking on this sound like the 16th century Qing dynasty, the emperor, everything that's ever been invented has already been invented. And so my question to you is, do any of you believe this, that innovation is slowing down or that the true factor 10, the real, there's only a handful of things that truly changed the way that the human condition lives, things like indoor plumbing and actually the railway was more important than virtually any transportation innovation to come since. And to use your example of the driving car, I think even Peter Tile said, we wanted flying cars and we got 140 characters. So there's a lot of disparagement of current technological innovation when the modern kitchen hasn't changed in 60 years. Does anybody give any of this any credence that we might be hitting a kind of innovation law? Yes, John. I think it's exact opposite. I think we're in a temporary cycle, both economically and risk-taking wise that's affecting the number of IPOs and new thinking. But if you watch what's about to occur, the knowledge is going to double every week. Your capability to come out with new ideas are going to accelerate. The average Fortune 500 company is gonna only stay on the Fortune 500 list not for 75 years like it did when I was a young person, but for 15 years on its way to five or seven, change will actually accelerate. Just using an example of one thing that we're interested in, you think about connecting every device in the world of which 99% are not connected today. We think you can create an industry worth $14 trillion and you can completely change my supply chain. You can completely change operational efficiency. You can change how you interface to your customers and you begin to usher in a whole new generation of the next capability of the internet. So I actually think innovation's gonna accelerate, offers huge opportunities. I think you haven't seen anything yet, so I'm a tremendous optimist on this. We'll run countries, however, we'll create an environment that attracts business to their countries to do that. All right. I agree with John, but again, let me, I think innovation is tough at the best of times. It's hard to measure, it's hard to get through. And in times like that, many CEOs decide, well, why don't we, we need to cut into a lot of things, let's cut into innovation. Exactly the opposite of what they should be doing, which John again mentioned before. And I think you can look at a company like Samsung, for example, which is innovating constantly. But first, you can't, we don't know. I mean, when Jobs and Wozniak were in that garage, who knew they were in that garage, right? There'd be many more of those things that we can't imagine. I think the last century was just, it took us from, through equivalent to a thousand years before. And we're likely to see things like that as well. And so not everything that has, who knew you needed an Apple iPad? Right. But in fact, everybody's walking around with it and finding it extremely useful. So if you look at Samsung, first the chairman lay of Samsung has a saying that he's known to say, which is change everything except your wife and kids. It's true. It's true. Embrace change. And Samsung actually has shown us collectively what they have done since year 2001 when they decided to bet on the technology. And as a result, became what they became, both in terms of providing Apple and then really leading mobile device. In 2011, they announced 42 billion dollars in Samsung electronics that they're gonna vest over the next year. And the last trigger that I was able to find was by the end of the third quarter, they have invested over 60% of that. Samsung overall, the group, has put aside 20 billion dollars, which they're gonna do over the rest of the decade to invest in what they are, what you're calling transforming technologies and to accelerate that. Whatever is the old way or new way of saying it. That's a huge bet and they are willing. Now Samsung is not just going willy-nilly into those things. They're actually, if you watch the way they develop, they usually go in, try to figure it out and they usually be the fast follower. And that's what they've done with just about everything, television, then to computers and the chips. And so they have a formula and they're not afraid therefore to invest it. That is a tremendous example of what we're talking about and look at where they're now. Jim, I would tell you, I agree with all that has been discussed and I am more optimistic and agree. I'm an optimist by nature and agree with what has been described. I also think as leaders in some ways, recognition of self-fulfilling prophecy is important. And I think for leaders to be optimistic and positive to help to drive innovation is important too. Are there any pessimists on this panel? Any? None, okay. Just had a quick question too, not question, sorry. I just want to emphasize the points that have been made about why innovation is going to accelerate and just give one example of a particular focused theater for innovation. And that's in emerging markets in the area of what has been called by CK Pralad, bottom of the pyramid or what Mike Porter has called the shared value opportunity. Up to now there's been a whole perception that the way to serve people who are underprivileged and of low income is to scale things back, scale things down, take things and put them in a sachet because that's all they can afford or provide some kind of appropriate technology. The next frontier is going to be when people realize that if you want to solve poverty of the most intractable kind that you'll find in India and Africa, you need the most cutting edge technology and the most cutting edge innovation. You're gonna have to think most out of the box if you want to dramatically reduce poverty in the next 10 years. So I'm saying to you that the real area where innovation is going to come is not just going to be in smartphones, but it's going to be finding solutions to improving the quality of life at the bottom of the pyramid. That's where you're going to see a real cutting edge innovation. Okay. I have second thoughts, Jayman, on not being pessimistic, but maybe a bit realistic because we are business people here debating on innovation. And I think in order to make this happen, it needs a balance as well with the regulatory environment all businesses have to deal with. And that's probably a bit still of the challenge to get this balance right because we all regulate it. And there's a bit of a tendency as a response to the crisis to maybe push the animal up a bit too much to the other side. And that is my own concern. I'm pretty sure we're going to figure that out and we're going to rebalance that, but it will take some time. And you have different geographies, different sectors where that is running at different speeds, and that could delay things, that could sort of delay things to a certain extent. That's my only, say, realistic view in terms of what could take a bit longer. Frankly, that is what is happening. A lot of the innovation is not really coming through because you need to deal with it from a regulatory point of view around the world. And a lot of these regulatory pressures are not as aligned globally as they could be, particularly in the financial services industry, and they are, again, particularly for banks. And that's something we still have to work out. I think it's still, but it will take a while until we're there. Okay. I'm going to Clayton first, and then I think I'm going to read, and then John. And then we're going to move to audience questions. So I don't want to come across as believing that innovation can end, but maybe assert that while that is true at a global level, individual nations and individual companies can actually put themselves in a situation where they cannot innovate. And let me give you just one example, which I think is unthinkable at this point in time. My research asserts that there's actually a trajectory of, there's a trajectory of improvement that customers can use. So we can't utilize all the technology that is made available for us sometimes, and that creates this model of disruption. So let me just pick on Apple. I love these guys, and they've been very successful, but this is what this theory from my research projects is going to happen in the future. So they start new markets with their technology, and their technology at that stage is proprietary and interdependent, and it needs to be that way. And that's really the core of who they are and what makes them so good. And manufacturing these products is just a side light, and it's really easy to outsource the manufacturing of that to people in China who have better costs. But now what is happening is the proprietary architecture of Apple, which historically has been, this is innovation, is becoming disrupted by modular architectures enabled by the Android operating system and other people. And when a technology becomes open and modular, actually what used to be proprietary and valuable becomes commoditized, anybody can make it. And then what is proprietary is the ability to make this stuff. So we visited a plant in China that manufactures the logic circuit for an iPhone. This thing is 32 layers thick. The vias that take you up and down from one layer to the next is two microns in diameter. And this machine makes eight million holes per hour in making this product. There isn't anybody in America who could innovate in that anymore. And so it's not that innovation will end, it will always, but what we can do in America actually can be, we might not be able to do that anymore. And that is truly scary to me. John, did you? Yes, I was gonna make a comment. I was with Martin a year ago. I would have been complaining about regulations, how it's slowing down innovation, governments that don't get it, not letting us repatriate money back in the United States. And actually my position has changed dramatically. I think a lot of things great about a free flowing economy with education innovation, regardless of emerging nation or geographic location, is that governments that are gonna get it are gonna get the job creation. And it is amazing when you come to WEF, when you hear which locations really understand it. And this is kind of a wake up call, I think for governments around the world. It won't be about the business leaders complaining about your regulation, it will be the business leaders growing their headcount and growing their investments where the right environment exists. Last night I had that honor to just have a dinner with the governor of Colorado and it surprised me. You talked about innovation, he got it. He understood how he could change healthcare, didn't complain about regulation, how he could change dramatically education, get groups that traditionally have never worked together and say, if we do this, John, will you locate jobs in Colorado? And so you're beginning to see a group of leaders who are thinking out of box and saying, I'm gonna compete against other states. In Canada, I'm gonna compete against other provinces. In emerging markets, I'm gonna compete against other emerging nations, which will get the regulatory act together. And I think this is one that business can actually play a stimulating role rather than complaining. We've got to say, you have to change and here's the role models you gotta be thinking about. My role model, Canada. Ori, did you, and then Martin, and then we really are gonna go to audience questions. Just very briefly, we haven't really spent some time on education. And I think one of the first things that should be on any government's agenda is reform and education all the way from kindergarten to the top. Because what we have now is education that does not actually provide for the jobs that are the most needed. And that might be the thing that really stops United States, for example, or other places. China or Shanghai, for example, got it 10 years ago. They realized that, they were way down on the OVCD list of countries and regions. And today, Shanghai is number one in science, number one in mathematics, and number one in reading comprehension. And the number of engineers coming out of China, all of us know that, is tremendous. And some of the innovations that are going on in China, and they don't just have to be technology. They're in processes, they're in design, they are even the fashion industry. I mean, it's just mind-boggling to compare it. And it really came from this. In the West, I'm afraid we're behind, I believe in India, we're behind. I was there two months ago and I said that. But I mentioned before, interesting little story in the null finish. Cartier never made watches. Decided they wanted to make the best watches in the world. They designed, that went through everything they did. They had labs put aside, but they couldn't actually recruit engineers and people who are deep in science because they thought Cartier, I mean, we're a scarce resource so we should go somewhere else. So Cartier actually came up with a whole way to make them understand why the labs are actually the most important part of them. And today Cartier has two outstanding watches, which I don't own either one, unfortunately, but, and it is all because they understood and a business they would never have thought about it, that they need all those engineers and science-based employees, which they never did before. That is one of the biggest problems I believe that we stand in terms of job creation because if you're not actually have the skills, you're not gonna get the job. And I think it's a real place where business should interact with governments. I should add that many companies have actually gone ahead and just started training for this because they don't want to wait for the government and that's also something that's pretty important in rewarding. Partly by design for this panel and partly because we've run out of time, we really haven't been able to mine the business, government connection to the degree that we would like. I just know as an attendee of the rest of the week, I will take what we've talked about and try to project it and ask people about the government connection to just some of the stuff that we've just scratched the surface on. Martin, do you wanna finish this out before we go to questions? Just to add to what John has said and virtually what you have just mentioned as well that I also see that is a tremendous amount of willingness to collaborate between the public sector and the private sector in a way which I have not seen last year. This gives me a tremendous amount of hope. Having said that though, I think there's still some countries out there which still have to get the cold because there's competition not only between organizations but as well between nations. And that nation and that say nation competitive environment will increase. It's gonna be those countries which really set the tone in order to support innovation to create jobs in the respective environment. That's gonna happen and all together creates a new pressure in order to be able to make the investments and to support respective risk-taking. Great and I apologize, we really do only have time for about 10 minutes worth of questions. And so we have one right here. We do have microphones. So if you could stand up, just tell us who you are and if you have a question for a particular person please state that. My question is for Christensen. We've been talking about sustainability and resilience and these are terms which are quite interchangeable. Could you please throw some light on how these can be aids for catalyzing innovation in the current economic environment? Boy, I have never been able to think that through myself. In other words, sustainable meaning this won't have a negative impact in aggregate in the economy. I don't, I haven't seen a lot of that happen actually. We have seen a lot of input into that kind of innovation. I haven't seen a lot to come out. And I don't know, I can't say anything. Maybe you guys have seen the same thing. Walmart I think have probably done a better job than most. I'm sorry to quite understand the question but I think I get the gist here. Sustainability I think is truly looking long term and when we look at our business we even look at a retail store and we say one of our objectives is to in the long term create zero waste. We set an objective to say we want nothing to come that ends up being wasteful from that particular facility and that then requires work all the way upstream all the way through the supply chain, packaging, the products we sell, the energy we use. So very often in sustainability there's a tendency to just look at a very narrow area of sustainability but to fulfill a goal like we have this goal of creating zero waste requires looking at a complete cycle of the whole supply chain. That's exactly the challenge. You have to be integrated across a spectrum that not many companies are integrated around and they can invest at this level and think it's sustainable and holy cow elsewhere it isn't in a long way and so it's something that we need to be careful of going in that direction but realizing that this is a business model problem. It's not a technology problem. But what has changed is the business model is now practical where 10 years ago you'd really have to take care on your financials to do some of this sustainability. You can now do it whether you're a Walmart or a Cisco in a very effective way and also your customers appreciate it. So actually in the optimist here I think you're about to see a wave and focus on this and it will be an end to end architecture approach to it. Another question? Yes, the gentleman, yes, right there and then. I'm Rafael Mead from the Wharton School. What do you believe are the major barrier to business model innovation? All of you talked about the need to innovate your business model but what are the barriers that prevent you from doing so? Was it Tony? The CEO. I'm not kidding you. Well, there are actually a couple of barriers I think. First the whole innovation in R&D and how you go about M&A for innovation is something that people grapple with at the best of times. It's sometimes hard to measure especially if you're going to afford disruptive technology that you think is actually gonna replace you. I think one of the things that people don't talk enough about and that sometimes has to do with the CEO as John said is how much of a, we call it right brain and left brain you actually have. Right brain representing sort of the creative side and left brain representing the commercial side. You see it a lot in fashion houses, almost every fashion house is like that. You see it less in companies. That was actually jobs and Jim's sort of combination. And you need that. And you need somebody who is a quote unquote left brain to recognize that right brains are important or they stop them before they get a chance to move ahead. And we've seen that we've researched it in many, many companies. That's one thing. The second thing is that innovation really needs some structure. It's not just sitting somewhere in a lab and thinking interesting thoughts like 3M used to do which how we got the yellow stick it. But they also had a very structured way. You need to think about where you want to go in innovation based on the strategy of where you're going and when you think you're going to be going and you need a little bit of long-term in that otherwise you wouldn't be buying the companies you just bought. You need the right organization both in terms of right brain, left brain and you need to leave them alone for a while as opposed to bug them every day. You need to think about looking at any kind of innovation from different angles. It's not only the consumers but also your competitors and your own capabilities. You need a portfolio of innovations to really come through from which you can pick and there I would put all three types of innovation that I talked about and that Clay talked about into it. You need a portfolio. The key thing after all that or actually from the beginning is that just because you created an idea doesn't become an innovation. It has to be commercialized, which is a very tricky thing and it has to be scalable. Otherwise you can't afford it. So for example Thomas Edison did not invent the light bulb. It was invented about 70 years before him by a German. So he created it but he didn't actually invent it. Recreated again in 1854 and finally in 1979 I think, Edison comes back and has something that actually is commercially viable. And so it took almost 70 years for this to actually show up. We try to shorten the time between those two. But just because you're creative doesn't mean it will end up in innovation. It is responsibility of the CEO and management to make sure that they have both the right lens on it so they don't stop it too early but also when to say we're gonna stop that and we're actually gonna continue with that because we believe this is commercializable and scalable. So we're almost completely out of time and so we have three final comments and then Martin and then Clayton and then I'm afraid we're gonna have to bring it into the end of the session. I'm just going to pick up on her comment about right brain people and emphasize that my undergraduate degree was in filmmaking. And for a long time it was my deepest darkest secret. I didn't want anybody to know about it lest I get thrown out of the company. Today I'm looking for filmmakers, designers, people from humanities. That's how I think I'll create a culture of innovation. To the question that John you were saying the CEO with a big smile in your face but I think you were pretty serious about it. And that's exactly what I believe is it's very often coming from the top. The ability organizationally to turn the organization around in an environment where you're probably moving very stable and you do not really see the need to make this adjustment. So in order to lead the innovation and with that as well change not only your own company but change the sector or the industry as a whole. That's a big deal. I think moving forward because of the pressures we have discussed and the interconnectivity of risks this is gonna happen much more where if companies are not doing that they will potentially just disappear from the map. So keep your question for next year and the years to come. And Clayton? I'll just add your question about why is creating new business models so difficult. A big part of the answer is because of professors at business schools like you and me. And we teach our students that they should think marginally rather than in full costs. And so we're supposed to ignore sunk and fixed costs and just look at the marginal cost and marginal revenue. And when you use that thinking to this problem it never makes any sense to create a new business model because you face the full cost of creating a new business model whereas if you don't and you just try to invest in your existing business model on a marginal basis that always is more attractive than creating something new. And so the problem is actually you and me at the fundamental point. I lied, John Chambers is gonna have the last word. Thank you. As a partying thought I think from all of this whether you're a business leader or a government leader if there is something that could really make a difference in your company, your university, your country but you're not doing it because you have fear about innovation or fear of failure. Just go for it. And I really mean that. That's what leadership is all about. It's really go for it and I think you're gonna see tremendous innovation over the next decade not just from these companies but around the world. Great. On behalf of Time and World Economic Forum please thank our panelists for an excellent debate. And thanks to all of you. Thanks very much. Thank you.