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March 17, 2008 12:23 pm

David Bach: Fresh mix of politics with big business

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David Bach cuts a conspicuous figure around the Madrid campuses of Spain’s Instituto de Empresa. For a start, the impossibly fresh-faced professor of strategy and economic environment looks young enough to be one of his International MBA students. He is, in fact, about to turn 33, so is too old to be the youngest member of the school’s youthful faculty.

Professor Bach, however, is the only one with a PhD in political sciences, and one of only a few from a mainly liberal arts academic background.

A German by birth, he landed at the Spanish school in 2004, after nine years in the US, first as an undergraduate at Yale University and later as a masters and PhD student, research associate and teacher’s assistant at Berkeley, California.

Having acquired a taste for academia, his return to Europe was contingent on finding a suitable teaching tenure. However, as a specialist in political economy, he found his choices limited.

“I could have pursued a non-academic career in policy analysis, lobbying or something like that,” he says. “However, I wanted a university post, so I decided it would have to be in a business school.”

An offer from the IE proved to be the most attractive, partly for personal reasons. Although he met her in San Francisco, Bach’s wife Almudena is Spanish.

The couple – and their baby son – have settled happily into life in central Madrid, a capital that Bach describes as “a lot more modern and dynamic than German cities”.

However, he adds: “Spaniards aren’t scared of change, but at the same time they are wedded to their culture and traditions. This clash is what makes Madrid so interesting.”

For the past four years, Bach has been imparting to IE students his own interpretation of what is broadly know as non-market strategy – that part of management involving government, regulators, civil society and the media.

In the US, academics such as David Baron and Daniel Diermeier have been bywords for the discipline since the 1980s.

Prof Bach, along with fellow IE professor David Allen, is widely accredited with having bundled the disparate elements of non-market management and market disciplines into a cohesive, applicable strategy.

“Your have a lot of people talking about corporate social responsibility, corporate citizenship, stakeholder management, political risk management, political strategy, lobbying and public relations,” says Prof Bach. “It’s all out there floating around and I think it gets fragmented.

“All we are trying to do is streamline it all, to put it in a single framework,” he says. “Our programme is more about integration and synthesis, rather than that Eureka moment.”

Oil group BP is the star of one of Prof Bach’s favourite case studies. The UK company’s reinvention in the 1990s as the world’s first “green” hydrocarbons producer in an example of how to trump competitors with a deft blend of market and non-marketing strategies, he says.

John Browne, BP’s former chief executive, dramatically broke with the industry line in 1997 by acknowledging that global warming was not only real, but posed a catastrophic threat to the world’s environment.

After noting BP’s efforts to reduce harmful greenhouse gases, he promised to do more, while stepping up research into alternative energy technology.

The follow-through – including grants to green energy researchers and heavy investment in solar power businesses – lent credibility to what initially appeared a publicity stunt.

A new advertising campaign and corporate logo enforced BP’s rebirth as an environmentally-friendly petroleum company.

However, a series of operational accidents – one of which claimed 15 lives at a Texas oil refinery in 2005 – undermined a lot of the good work.

Lord Browne – as he was then known – announced an early retirement, brought forward even further at the last moment by minor scandal involving a former lover.

The case, according to Bach, provides two salient lessons on the use of non-market strategy.

“BP took a non-market position, a position on an issue that was going to be critically important to their business, and used it to drive diversification of their market strategy beyond oil,” says Prof Bach. “[However], they also made themselves more vulnerable to a screw-up on the operational side. Because of their strategy, and because of their advertising, they had convinced the world that they were beyond petroleum, that they were a ‘green’ petroleum company.

“All of a sudden you see a burnt-out BP refinery and two leaking pipelines, none of which sits at all well with the new image.”

Prof Bach says he got “hooked on the business and politics stuff” in the late 1990s while working at the Berkeley Roundtable on the International Economy, whose focus at the time was the difficulties of regulating the internet.

His doctoral thesis also looked at this, and at how national governments deal with the increasing globalisation of financial markets.

“I realised how important it was for business to try and shape the market environment in which they compete, and that this shaping and education, if you like, of policymakers is often in the public interest.”

Prof Bach breaks this concept into 20 sessions at the IE, with categories including “the limits of profit maximisation”, “competition policy and corporate strategy”, “sustainable development and product innovation” and “activists, boycotts and private politics”.

Although many MBA programmes touch on these themes, Prof Bach has won peer recognition for showing the importance of melding non-market and market ideas into an effective corporate strategy.

The energetic professor was last year named among the “ones to watch” in the prestigious Thinkers 50 list of global business gurus.

“If you think about your standard MBA programme or your standard management programme,” says Prof Bach “there is a lot of talk about consumers and about the competition.

“There is also industry analysis, where one looks at the power of suppliers, the power of buyers, the power of competitors and so on. There is rarely talk about the role of government, or the role of NGOs.”

Companies, he says, ignore the decisionmaking processes of government and regulators at their peril. “Making legislation is a lot easier than unmaking legislation.”

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