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World After COVID-19: Franz Heukamp, IESE Business School

Franz Heukamp is Dean of IESE Business School at the University of Navarra. In conversation with Soumitra Dutta and Dan LeClair of GBSN, he discusses important global trends that the pandemic is accelerating, as well as the increased responsibility of business and business institutions to society. The interview took place 12 weeks after COVID-19 was declared a pandemic by the World Health Organization. This is an edited transcript of their exchange. 

More interviews from The World After COVID-19 Series

Highlights from this interview:

  • Democracies will become more polarized as a consequence of the pandemic.
  • The European Union may come out of the crisis stronger and more united.
  • Globalization continues to be a source of great economic benefit for society; therefore, countries will not completely abandon global supply chains.
  • An institutional shakeout is likely to occur, as fewer business schools will be able to offer successful programs to students.
  • The responsibility of business toward larger stakeholder communities will become more important.

Dan LeClair: Given what is happening right now, do you see this as a global turning point for the world and in what ways in general?

Franz Heukamp: I have been thinking and I am sure many people have been thinking about what this really means. This is clearly a worldwide crisis that we are going through, first healthcare related with the virus infecting people, and now there are millions of people that have applied for unemployment benefits in the US. The data is already out, so clearly this will also have a very deep economic impact. In that sense, because it is likely to be the most important economic crisis certainly of any of our lifetimes—it may not be as big as the Great Depression in the US in 1929, who knows?—all the active managers today who are running any kind of organization will face something bigger than they have ever done before. In that context, I think lots of things can happen and are likely to happen. 

My impression is they will probably accelerate some developments that were already on the horizon. That is going to be the main way in which change will manifest itself. I think that is true at the level of each society. We already had a discussion before, in many societies, about inequality. We had a discussion about the fundamental principles that hold a society together. I think that will get stronger, and we will be seeing some countries that will be pushed and destabilized quite a lot. Democracies that were already very polarized before are likely to become even more polarized. That will be one of the direct consequences. 

Also, if you look at the global economic situation, the twenty-first century so far has already been the century of Asia rising, and I think that will also be accelerated. It is quite clear that even though the entire world is going through this crisis in different stages over time, Asia has already emerged faster and has shown to be more resilient to these kinds of crises—maybe because there has been a history, of course at a much smaller scale, of some of those healthcare related diseases and how to manage them. I think that will also be accelerated, so you will see Asia rise faster than it was even before. 

At the level of the individual—habits, how we work, how we live—I think it is a little harder to tell. There, I am actually a little bit more skeptical about the predictions people are making that we will do everything online from now on. I am not that sure. I think once you have the choice between doing things like you did before and maybe using a little bit more telecommuting and online meetings, I think the effect will actually not be as strong as we would say today. I think they will be surprised.

Soumitra Dutta: I want to come back to the bigger picture that you raised and ask you to focus a little bit more on the European Union. What do you see about the state of global coordination and leadership in trying to address this global pandemic?

Heukamp: I think the COVID crisis hits the European Union in a very delicate moment. I think Brexit showed that the European Union is fragile and needs to find a good reason and good set of objectives to show that it is worth investing in for each country. So, I think here is actually an opportunity, and I see that the European leaders are working on it to make sure that there is such a thing as a coordinated response and that for any individual country, it really makes sense to be part of the European Union because it allows you to do things that you could not do on your own. Frankly speaking, the beginning of the management of the crisis at the European level has probably been slow and not as effective as desired. Remember that several European leaders apologized to the Italian head of government for the slow response, so the beginning certainly was not that great. But from what happened these past days—European heads of government getting together and trying to find a solution—I am actually optimistic that this can work out, that this will actually instill the European Union with energy, and that it will mean for all the European Union countries that it is a project worthwhile.

Dutta: So, you think Europe will come out of it stronger. You are optimistic on that side. In a world where the US and China dominate, you think Europe is going to be able to keep its position.

Heukamp: I think that the European Union as an entity and as a player will actually, yes, be strengthened in the end by this crisis because the individual countries will pull together and will invest in the European Union. That may not be enough overall to be a very relevant player compared to the US and China at the worldwide level, but as being a significant force in the lives of Europeans, I think the European Union will be strengthened.

LeClair: Sticking with Europe for the moment, I have always admired their leadership on data privacy. This current experience is creating some challenges in how that bowls out into the future, and I am wondering if you could comment about that.

Heukamp: I agree with you that there is, of course, a history, and there is a cultural context. That has meant that the European Union countries have always been quite cautious about what data under which circumstances can be shared with organizations and among organizations. Right now, of course, we are in a situation where there is a direct benefit that is quite visible from tracing how people have been infected and through that tracing making sure that the disease can be contained. There is an obvious benefit, but I can see from the different people who are taking part in this debate that they have not forgotten about general principles of privacy that are important. So, I think the solution that will be found to trace people who are infected and the corresponding data sharing will comply in the end with the understanding and philosophy of European data sharing. I actually believe that this will also be good, indeed, for the rest of the world inasmuch as it will set an example for the US.

Dutta: How do you see business evolving and changing its strategies, its view towards globalization, its focus on shareholder versus stakeholder, and its focus away from profits perhaps into more people issues?

Heukamp: That is a very broad set of questions. I think the general tendency that we have already observed in the past few years to put stakeholder capitalism in the center—the different stakeholders take a little bit of weight away from the shareholders towards people who work in organizations, their customers and clients, and society at large—will be reinforced and accelerated precisely because it will be a moment of economic crisis in many countries in the world and therefore there will be a sense that those who have more need to contribute more. There will be a sense that we are in this together as a society, we need to stand together, and everybody has to make sacrifices. Single mindedly insisting on an organization’s purpose being the maximization of the benefit of just a few, I think, will be even less acceptable going forward than it already was. In that sense, I think there will be an acceleration. 

In terms of supply change strategy and globalization, I do not believe that people will walk away from globalization because it is a great source of economic benefits for societies.”

Obviously, there will be more safeguards put into place in terms of planning at the level of the individual organization for what can happen. I think that every time you have a crisis, you reinforce the part of realization that was clearly too weak as it was in the crisis. So, people will be putting into play some extra safety measures in terms of making your supply chain less vulnerable to disruptions, but I do not think it will be abandoned completely because no one would benefit from that. Frankly speaking, other crises have also shown that people forget quite quickly, so I think we also have to assume that what will be seen as relevant today and a big problem in terms of supply chain, in fifteen or twenty years once the people who are managing today’s crisis are not in charge anymore, maybe will not have as much emphasis. But I think there will be some changes in terms of safety measures, how much you rely on global supply chains, and so forth.

LeClair: Let us shift to business education. There are obviously changes happening as we speak, and there is an interesting debate about to what extent those changes will be lasting in individual schools. There is also a debate about how it will change the industry. Could you talk with us about how you see both changing?

Heukamp: I think here, we will also see a little bit of acceleration of an existing tendency. Already, the world of business schools has been crowded. There are many players in the market. Also, if you think about executive education, there were non-academic players that were already in the market. I think what we will see through this crisis, first of all, is that because you cannot do presential programs right now, the main activities are severely disrupted for most academic institutions. Some of it is happening online, but certainly not all of it. So, I think what you can expect to see is that as a result of the crisis, some of the players in the short term will disappear simply because they will not be able to withstand the prolonged crisis and the lack of revenue that they will be going through. In that sense, there will certainly be some consolidation going on. 

Also, if you think about specific programs or formats, it will probably shake out a little bit of the industry. The MBA, for example, already was on a track of ending up with a set of maybe twenty or thirty schools who could successfully deliver a full-time MBA program, and that trend will probably also be accelerated.

I think the MBA will continue to exist, but only a relatively small number of twenty or thirty will really be able to offer successful experiences to students in that area.”

And if you look at other areas of business education changes, there has always been the question of how much should be taking place online versus presential. I think here, we will actually see quite a bit of advance in the sense that the online capabilities of schools will have improved a lot because many people who are relevant in business school environments like senior faculty members, for different reasons, never really got into this until these days now in the crisis. They have found out that it is actually interesting, and you can do lots of things. It is not about better or worse. You can do certain things very well online and others you can do better presential. So, their toolbox will be bigger afterwards. They will know how to do it, and I think that will therefore increase the supply and the offering of hybrid programs—partly online, partly presential. So, you will see an acceleration there too. I think different things in that sense—a little bit of a shakeout at the institutional level and some changes in programs accelerating to incorporate more online elements. 

Dutta: Can I ask you to talk a little bit about what might change in the content of what we teach? Will there be any change, in your view, about how we see our students graduating and what kind of values and beliefs they actually learn from the MBA program?

Heukamp: Contents and capabilities are sort of our two knots–two parts of what is happening in a business program. In terms of direct contents, like what the subject matters are or the broad subjects that will actually be represented, again my anticipation is the change will be smaller than we would think today because there is a perennial set of subjects. Of course, there is some change in it, but there are certain ones that you really need to be on top of as a manager. If you are an aspiring or already mature manager, you need to know it. So, I think there, the change actually may be smaller than we would anticipate today. 

I think what will be again accelerated is a tendency that we have seen before, namely that a manager, a person responsible for a part of an organization or entire organization, needs to realize his or her responsibility towards all the people that he or she is managing directly or somehow touching indirectly as stakeholders. I think there, more will be expected. So, in the sense of values that you mentioned, I think we will actually see more of an emphasis on this—that managing is not just a technical set of disciplines with an interest in a very full toolbox. You need to know all of that, of course. You need to be able to do a solid financial, economic, operational, and so forth analysis, but there is a leadership aspect.

“Leadership is always about understanding how you lead people and how you impact people, and that has a strong value base. Specifically, I think the notion of service, being useful, and wanting to serve communities of the people you work with and larger stakeholder communities will actually be more important, and you will see that reflected in good programs.”

LeClair: That is a good segue into our final question. Moving forward, what are the top two or three leadership lessons? As a leader of a top business school in the world, how do you anticipate changing as a leader yourself?

Heukamp: I am in my fourth year here as the dean, and we have had a couple of smaller crises that we went through at the level of the organization, some coming from the outside but nothing of the scale of what we are going through right now because it is a worldwide crisis that is affecting everybody. That puts the entire business education industry in a very delicate spot because, with the way we operate, we need people to be able to move freely and travel. I think what is going to happen for me personally out of this is a stronger emphasis on really spelling out  the big picture vision of the institution—as in, “Why does this institution really need to exist, and what is important about it?” If I look back a little bit, in my first few years for good or bad, I think I took somewhat for granted that the people would understand why this was taking place. Maybe it was also a leadership deficit. You could say that I should have emphasized it more, but what I see clearly going forward is that, precisely in a moment or in a tough spot when it is unclear how we will be operating half a year from now because we do not know whether people will be able to travel and so forth, it is fundamentally important to send the message that it is important for the world and for society that we operate, and that this institution exists because it represents a certain set of values. It is a voice, and if it were not heard anymore, it would really be a problem. In that sense, in my own work going forward I will be focusing much more on the broader question of instilling people with the sense of mission and an understanding of why this institution needs to exist.

This interview was conducted by Soumitra Dutta, Chair and Dan LeClair, CEO of GBSN. This edited summary was prepared by Mira Anderson, GBSN Programs Intern.