Schwab scales Alpine heights in search of fresh thinking

 

The founder of the World Economic Forum says innovation is critical, writes Marc Coleman.

Professor Klaus Schwab is Alpine in every sense. Although German by birth, both of his parents were Swiss. His hobby is mountaineering, a pursuit that takes him regularly to the Alps.

His career could also be described in mountaineering terms. His present position as founder and executive chairman of the World Economic Forum (WEF), which meets annually in the Alpine resort of Davos, is not the only peak he has reached.

There are two doctorates in mechanical engineering and economics, respectively (one from Harvard) and six honorary doctorates (the latest from the London School of Economics). Then there is a professorship at the University of Geneva and an honorary knighthood bestowed by the Queen of England.

Such heights must command glorious views but when I ask Schwab why, instead of concentrating on making money, he set up the WEF, he recalls much more depressing ones.

"I grew up in Germany - I was born in 1938 just before the war - and my parents were of Swiss origin. What influenced my life substantially was that several times a year, we crossed the border and, in Constance, there was a virtual line on one side of which was war and on the other peace and stability."

When war turned Europe from the world's leading economy into a divided laggard, the young Schwab found inspiration to do his bit to make things better. "After the war, I chaired the Franco-German regional youth association. My heroes were Adenauer, De Gasperi and De Gaulle.

"Years later, when I came back from the US after my studies at Harvard, there were two events that had a decisive triggering event on me. The first was a book by Jean-Jacques Servan-Schreiber, The American Challenge - which said Europe would lose out against the US because of Europe's inferior management methods. The other event was - and this is relevant to Ireland - the Europe of the six became the Europe of the nine.

"So I asked why not create a European platform where European business leaders could discuss European business challenges?"

In 1970, he decided to spread the inspiration. He wrote to the European Commission and asked for help in setting up a non-commercial think tank for European business leaders. The commission not only sponsored the event, but sent one of its members - French politician Raymond Barre - to act as its intellectual mentor.

Even at its birth, the WEF was on its way to becoming a high-powered global policy festival.

These days, Asia has replaced the US as a focal point of discussion and the unabashed pro-globalisation stance of the WEF has come under increasing criticism.

For critics of the globalisation agenda, the Alpine views from Davos include too much blue sky and exclude what's going on down the valley at the bottom.

Schwab responds by saying that, rather than the peoples of the developing world fearing exploitation, it is Europe that needs to fear its future. "It's no longer a race to the bottom, but a race to the top of the value chain. China and India produce four million graduates a year. China alone produces 270,000 per year in science and engineering and, in 2004, both countries combined produced 13 times as many engineers as the US.

"If you add to that that 140,000 IT professionals work in Bangalore, compared to 120,000 in Silicon valley, these figures show that China and India will become formidable competitors"

Just what can Europe do in the face of such awesome numbers? Schwab runs through the three mantras of the Lisbon agenda - skills, labour market flexibility and research and development - before getting to what he thinks is really important for Europe's success. "What we need now is the entrepreneurial imperative. Innovation has to be the end in itself if we want to survive. It's not sufficient any more to see innovation as a means to an end. It has to be built into everything we do."

Has Europe any strengths on which to build? "Europe has always been, in principle, a very innovative society. Innovation is not only a technological function. It also has to do with the capability to integrate knowledge, not just use it. It's a question of brand building and soft issues that are interconnected with a broader innovation," he says.

Well, at least that's something. But, asked for examples of this kind of innovation, he selects Apple and Dell, both US companies.

Why has the Lisbon agenda - the commission's initiative to create the Apples and Dells of Europe - not succeeded? "One of my hobbies is mountaineering. I like to climb mountains in Switzerland. If you want to succeed at that, you need skills, you need the mindset, the will to win and to take certain risks and you need a facilitating environment. If I look at the Lisbon agenda, I think we are looking too much at the facilitating environment, the skills and the mindset are also important."

Where policy reform is concerned, he suggests that Europe's ageing population is preventing its politicians from serving the needs of future generations.

"At the moment, what we are missing is the integration of the trustees of the future generation integrated into the political decision process. We take many decisions that make decisions for future generations. But our politicians are mainly accountable to a population that is ageing and that has an interest in preserving rather than changing the present situation."

As with Europe's post-war economic troubles, Schwab's response is to spread inspiration to a new generation. In 1998, he and his wife Hilde collaborated to create the Forum for Young Global Leaders, which brings over 1,000 talented thirtysomethings to discuss the state of the world.

Finally, we turn to Ireland and the challenges its economy is facing.

"I recall that, 40 years ago, I spent some time in Killarney when Ireland attracted the Liebherr tractor factory, one of the first examples of foreign investment in the world. In terms of attracting foreign direct investment, Ireland has been fantastic - one of the best performing countries in the world.

"But if I take the word coined by Andy Grove of Intel, Ireland is reaching 'inflection' point. The conditions which have allowed Ireland to prosper are changing.

"I feel that Ireland's challenge is now to change that knowledge economy into an innovation economy. Knowledge will soon be available everywhere - I call it the 'googlisation' of globalisation. It's not what you know any more, it's how you use it. You have to be a pace setter."


Factfile

Name: Klaus Schwab

Nationality: German, of Swiss parents

Age: 68

Family: Married to Hilde with two children

Title: Founder and executive chairman of the World Economic Forum

Qualifications: Doctorates in mechanical engineering and economics from the Swiss Federal Institute of Technology and the Universities of Fribourg and Harvard.

Why he is in the news: He is in Ireland to address the UCD Michael Smurfit Graduate School of Business on 'The global economy in 2006 and its implications for Ireland', as well as to receive the UCD Ulysses award for global leadership. He is also meeting Minister for Enterprise, Trade and Employment, Micheál Martin.