Exploring the reasons for strategic change

Ladies and gentlemen,

In 1950 the world was populated by 2.5 billion people. Now it is 6.7 billion and according to the US Bureau of Census we are heading for 9.3 billion in 2050.

On average individual people now are four times more affluent then their ancestors in 1950 - and as a whole the world have increased her total Gross National Product, measured in purchasing power, by a factor ten.
That happened in just over half a century!

In 2050 far more people than today also like to have electricity, have their homes heated and cooled and want to have a car to satisfy their desire for individual mobility.

More people, more impact on the world, positively and negatively.
So we better figure out a sound strategy that can accommodate so many people and can avoid poverty.

What does this global demographic development mean for European higher education?
To answer this challenging question, I think it would be best to start by defining the international context in which this change is taking place.

The current international context can be summed up as globalisation, the intense interdependence of businesses, and the tsunami of information and intelligence that is inundating our lives.
All aspects of this element of change can be found in Thomas Friedman’s “The World is Flat”.

This development offers huge opportunities for increased prosperity.
But, as we see now with the international credit and banking crisis, it also creates risks that won’t stop at national borders.

We live in a time of major political transformations too. The bipolar world that existed after 1945 quite unexpectedly turned into a unipolar one in 1989/90, with intellectuals such as Francis Fukuyama already declaring that we had seen “The end of history”.
In his opinion Western style liberal democracies were the new global centripetal power.

However, soon the world changed again. We now face a new and far more complex situation. While we see a unipolar world in terms of military power in the US, at the same time the world is shifting to a centrifugal multipolar mode in economic, political and cultural terms.

Some highlights of this shift include: 

• The rise of new economic forces such as China, India and Brazil, plus a tremendous accumulation of wealth by energy exporting countries; 
• The remarkable return of Russia on the political world stage; 
• A search for a new identity in this changing global context by Islamic states and faith; 
• The economic, monetary and political models of the West, all based on open markets and democratic governments, are being challenged by aggressive competitors – and also by intrinsic weaknesses in the Western models themselves; 
• The need for a complete overhaul of the global energy system in the next fifty years, driven by growing demand, the end of “easy oil and gas” and the CO2 problem. Known as The Energy Challenge.

Then there is Europe in particular. In the emerging new world order Europe is struggling with aspects such as:

• A stagnant and ageing population; 
• Stagnation in the process of political unification; 
• Lacklustre economic development; 
• Still no political or military force on a global scale; 
• A complex relationship with the US.

At the same time Europe is full of ambitions. Think of the

• Lisbon Strategy (2000), that says that Europe should be the world’s most dynamic and competitive knowledge economy by 2010. 
• Plus the aims of this Continent to be world leader in combating climate change.

So, Europe is high on aspiration but rather low on delivery. Therefor, more aspiration does not help; more delivery does.

I would like to spend some more time talking about the energy challenge I mentioned earlier.
Here we have a challenge that must be met by aspiration as well as by delivery.

I will elaborate on this issue not just because I am an energy executive, but because in my opinion this will deeply affect political, economic and even social developments.

Some months ago the International Energy Agency published its Energy Technology Perspectives.
In this report the OECD energy think tank estimated that cumulative investments in an environmentally and climate friendly energy scenario would amount to some 300 trillion dollars between 2005 and 2050.
Who can imagine the immensity of this amount of money? It dwarfs the already mind boggling 700 billion dollars that is needed to shore up the American financial crisis.

The Energy Challenge is the equivalent of 428 US financial crises!

However, in World GDP that 300 trillion dollars is “only” about 7% of cumulative GDP over that period.
These substantial investments underscore the intensity of the challenge to supply the world with ample energy that is safe, affordable and reliable.

When we look to 2050, the following mega-trends can be highlighted.

• The world’s population will grow to over nine billion, which is 2.6 billion more than today. 
• Collectively these nine billion plus people will be four to five times richer than today’s 6.7 billion, with most extra standard of living generated in developing countries. 
• Energy use will be twice as efficient; that means using half today’s energy to produce the same level of output in dollars/euros/yens/renminbis – but, 
• The world will still consume twice as much energy as today – the effect of more people and increased prosperity. 
• About six to ten times more energy will come from renewable sources, which, by the way, means that even in 2050 fossil fuels will be the dominant source of energy.
• Current political thinking is that in 2050 man-made CO2 emissions must be half of today’s levels. Some say a reduction of 80% is an even safer target.

Some people discuss the energy challenge in quite light-hearted tones. They want it ‘delivered’ by 2020 at the latest.
So the job is to supply affordable, secure and clean energy during the ‘reconstruction phase’ of the energy system.

The aspiration is full of ambition. Then the question is: Can it be delivered?

In Shell’s experience most people overestimate the speed of technological development and the speed it can be brought to the markets.
At the same time people underestimate the size and complexity of existing and future energy systems.

I prefer to put things into perspective by reducing abstract matters into more understandable units.
For instance, you could say that the world is currently consuming the equivalent of 230 million barrels of oil a day.
How much is that?
We’re talking the equivalent of 610 Olympic-size swimming pools – every hour!

Of that volume more than 80% - or 500 Olympic-size swimming pools per hour - is supplied by fossil fuels.

Modern renewables, such as sun, wind and biofuels, supply the equivalent of two million barrels of oil a day, which is the equivalent of five Olympic-size swimming pools per hour.

The challenging question is, can we, by 2050, double our total energy production, halve the energy content of global GDP, create full-size commercial renewable energy sources, and halve CO2 emissions?
Not the smallest of the human challenges of the future, we have to admit.

I am very supportive of using less energy. It gives us more time and reduces risks, but energy saving itself does not create the new and sustainable energy resources we need for the future.

Here all stakeholders, be it governments, companies, knowledge centres or universities, have a role to play of real Olympic magnitude.

Let’s return for a moment to globalisation. Globalisation doesn’t just mean an increased cross-border flow of capital, services and products, but is also – or should I say first and foremost – the free transfer of people and ideas.

Globalisation also means that developed and undeveloped countries alike stand to gain from higher skill and knowledge levels across the world.

So, ‘global business performance’ will come from companies with a truly international, or preferably global culture.

This is no paper-based theory, it’s actually happening. Take Shell, for instance. Last year we hired over 5,000 new staff – half of them with a technical background – in 95 countries.

This effort to hire on a global scale and adopt a global business culture is part of our corporate policy of Diversity and Inclusion – a business tool that has been in operation since the late 1990s.

Initially Shell’s Diversity and Inclusion policy was meant to address underrepresented groups, especially women.
Nowadays it’s seen as a real business enabler rather than a moral rights issue.

Diversity and Inclusion is a key element of our recruitment and internal selection process. What we want to do is bring the best in people to the surface – just like we do with oil and gas.

We also want to eliminate all barriers, including intangible ones, that could prevent the development of people’s full potential.
Here Shell’s ambition is to deliver on a meritocracy.

In the selection process we give extra attention to those intangibles.

For example, in the Netherlands our recruiters consider it an advantage if candidates’ CVs show they played an active role in a student organisation.
For non-Western candidates, such experiences are less common. On the other hand many others may have taken care of a family business while still attending university or even high school.

Looking back at my years as board member of the students fraternity of Delft University, there I learned more of ‘leadership’ then from additional mathematics lessons.

Another example relates to female candidates who have higher technical qualifications. “Like so many others”, you might say.
But Middle Eastern born women, who work in Shell operated companies in the Middle East, are Shell’s role models for commitment and global success.

Diversity is not about cloning people, it means focussing the energy of diverse people on common goals and shared values.
I’ll come back to that later in my presentation.

For Shell, Diversity and Inclusion is part of our DNA. With it we are able to widen the talent pool.
To say it straight: ‘Diverse nationalities arrive at better solutions for complex problems than teams of people with a uniform nationality.’

Shell sees Diversity and Inclusion as a ‘gearbox’ for globalisation.

For almost all major activities, companies like Shell have to deal with governments, in competition with local companies.

Being really ‘global’ means having the capability to understand local sensitivities. This ability works as an accelerator for creating business solutions that work well for our customers, the countries we and our partner work in, and by that also for Shell’s bottom line.

Local sensitivities always start with the ability to listen, not by explaining how very efficient our global systems are.
Of course these systems are efficient and therefore help us to be competitive and win business, but efficiency can be seen as a ‘hygiene factor’ in addition to our capabilities as a true multicultural entity.

What does this all mean for tertiary education?

European universities whose educational staff and board consists exclusively of local people better wonder whether they can be a global player and can offer a truly integrated international culture.

It’s in this global and increasingly changing framework that industry, government and institutes of higher education have to seek new ways of strategic thinking.

European universities are not the inventors of internationalisation, but they are successfully catching up.
The EU wants to promote itself as a centre of academic excellence, seeking to attract, and now I quote, “the best qualified students and academics from third countries by offering high-quality master’s or doctoral programmes created by consortia of universities from at least three different countries.”

Is the EU successful in this policy?
The US still has the highest market share in terms of foreign students, but its position is declining. In 2007, it had a 23% global market share - four percentage points less than in 2000. Silver and bronze went to the UK with 12% and Germany with 10%.

Here in the Netherlands some 6% of all tertiary students - about 20,000 in total - are foreigners. Most come from Germany, then China, with the number of Chinese students totalling about 5,000.

In business and trade the Netherlands is an open and internationally oriented country. Nevertheless its universities can offer a more international environment – 6% is one percentage point below the EU average; not our ‘logical’ position, I think.
This despite the fact that Dutch tertiary education offers about a thousand English-taught programmes, the highest number in Europe after Finland.

Last August NUFFIC, the Dutch organisation for international co-operation in tertiary education, advocated “The Olympic Spirit in higher education” in a full-page newspaper advertisement.
One of the elements of this spirit is an open door policy for talented international students. The ad was endorsed by business executives, including the President of Shell Netherlands.

In a previous policy document, NUFFIC had stated that globalisation could arouse counterforces of traditionalism, closeness and fundamentalism.
A growing international student exchange could form an effective counterforce against such protectionist behaviour.

The top supplier of global overseas students is China, with over 350,000 students believed to be taking degrees at overseas universities.
UNESCO predicts this number will rise to 645,000 in 2025. Second is India, with some 130,000 eggheads studying abroad.
South Korea, Morocco, Turkey and Malaysia are rapidly catching up.

China is also rapidly expanding the number of tertiary education places on offer within the country. This figure reached nearly 18 million in 2004, compared to only six million at the end of 1999.
This represents a breathtaking compound annual growth rate of 25%.

India in that same period went from nine million to twelve million places, representing a compound annual growth rate of 6%.

At the same time, and now I’m quoting OECD figures, the number of children in China aged between 15 and 19 is expected to drop from the current figure of 117 to 85 million in 2020, while that of India will grow from 114 million to 127 million.

The fast growing tertiary education system in developing countries indicates that a continuously increasing flow of foreign students to European universities cannot be taken for granted in the years to come.

If European universities like to globalise then they therefore must:

• increase their marketing activities in developing countries; 
• find a business model that helps in lifting barriers that prevent underrepresented groups, such as women and people from low income families, to enter the system.

From a Shell point of perspective, we like to see that those who benefitted from studies on overseas universities return to their countries to help increase the prosperity of their home country.
A permanent geographical braindrain is indeed ‘globalisation’ but the wrong sort of it.

Looking at technology, despite all talent that right now is crossing borders, it’s not all rosy, I have to admit.
For years already we see a diminishing number of young people studying technical disciplines, especially in Western Europe and the US.
Although I’m glad to see that there are signs that technical studies are going through a comeback.

Just recently a Shell-sponsored global survey confirmed this ‘anti-technology’ feeling.
In this “Citizen 2050 survey”, people aged between 18 and 24 in 27 countries were asked to state their lifestyle preferences, economic expectations and beliefs about the state of the environment between now and 2050.

The survey revealed that young people are deeply concerned about climate and environmental issues and the availability of energy sources.

When asked about one big change that could make a difference in 2050, just 9% offered technological change as a solution.

When asked how they thought the world would actually try to avoid the dangers of environmental damage, 17% selected the response “technological developments will remove any risk”.

For this question they were asked to select one of five available responses, and the majority opted for “government action” or “a number of small things” making the difference.
This might be taken to suggest that global youth downplay the role of technology in addressing climate solutions.

At the same time young people aspire to increased prosperity.
When asked in that same survey what they saw as “very important” and “somewhat important” in their lives, over 80% said they wanted “to be wealthy”, “to have a big house” and “to see many countries of the world”.

These are hardly things that relate to modesty or caring for the environment.
One in five young people even think that “personal flying machines” will be common in 2050.
In China, as many as 38% of youngsters see themselves high up in the air in their own flying machines by then.

The survey shows that young people are a mixed - and often conflicting - bag of beliefs and feelings.
Maybe it’s time for ‘slow - but technical - learning’, as an antidote to the fast forward society we live in.
Ladies and gentlemen, in my presentation I have explored the reasons for strategic change.

The leading force is clearly still globalisation.
Since educator, philosopher and scholar Marshall McLuan coined the term “Global Village” in the early 1960s, globalisation has worked in overdrive.

First products, then services and capital, and finally people and ideas were able to cross borders freely, offering limitless opportunities for those who dared to join in.

Joining globalisation can benefit individuals and nations. Not joining is a sure recipe for poverty and social frustration.

My vision is that of an optimistic man. The challenges are enormous, as are the possible benefits for all.

As said before, the real challenge is to harness the combined effects of population growth and increased prosperity. Globalisation and technological innovation can help here.

Early this year Shell presented its new energy scenarios up to the year 2050. Two scenarios actually, labelled Scramble and Blueprints.
The Blueprints scenario is Shell’s own favourite of the two.

Blueprints start at grassroots level, with coalitions of cities, regions and different industries with a common energy interest.
A slow process in the beginning, it gathers momentum as successful ventures emerge and people see that global economic activity remains vigorous while shifting towards a significantly less energy-intensive path.

Multinational companies ask for clear, harmonised international policies as a way of avoiding the inefficiencies and uncertainties that result from a patchwork of local and national standards and regulations.

The new energy world will be one of steady economic development and global economic integration.
Increased technology investments can create the international frameworks that are necessary to bring energy in sufficient supplies to the market.

This huge challenge of technological and regulatory change will add additional stresses, and the more rigid societies and political regimes will struggle to adapt.

This is also the brave new world in which universities have to find their place and direction. Their role is:

• to shape people who can contribute to changes, feel themselves ‘global citizen’, and are ready to roll up their sleeves, not only for their own benefit but also for the benefit of ‘back home’; 
• to contribute to the changes in technology, regulation and social processes that are vital to the success of global challenges like the Energy Challenge; 
• to offer a culture of Diversity and Inclusion that creates young talent with the virtues sought after by modern industry and institutions. These include respect for differences, teamwork, openness and focus to achieve progress and results.

Universities can only deliver inspired talent with these qualifications if they mirror that in their own leadership thinking.

Thank you for your attention.