Innholdsfortegnelse for Fall 2010 i Rotman Management

From the Dean: Roger Martin “When a butterfly flaps itswings in one part of theworld, it can eventually cause a hurricane in another.” -Edward Lorenz, Pioneer of Chaos Theory COMPLEX INTERACTIONS. Intricate causal patterns. An over-abundance of choice. Sound familiar? Throw the ‘Butterfly Effect’ into the mix – whereby a tiny occurrence in one place can start an irreversible process with major consequences halfway around the world – and it’s no wonder so many people are concerned about how complicated the world has become. While conventional managerial wisdom often pursues predictable and measurable clarity, leadership today is more about balancing paradoxes than solving problems. Today’s environment demands a stance that embraces an uncommonly high tolerance for – even an attraction to – change, flexibility and disequilibrium, all of which boils…

THE ECONOMIC SHOCK OF 2008 and the Great Recession that followed didn’t just create profound uncertainty over the direction of the global economy. They also shook the confidence of many business leaders in their ability to see the future well enough to take bold action. It’s not as if we don’t know how to make good decisions under uncertainty. The U.S. Army developed scenario planning and war gaming in the 1950s, and advanced quantitative techniques – complete with decision trees and probability-based net-present-value (NPV) calculations – have been taught to MBA students since the 1960s. These approaches are extraordinarily valuable amid today’s volatility, and many well-run companies have adopted them over the years for activities such as capital budgeting. The challenge is this: coping with uncertainty demands more than just…

Interest in unpredictable and uncontrollable natural phenomena has grown consistently in recent years. Almost every physical science discipline and most areas of mathematics – from Meteorology to Mechanical Engineering, Thermodynamics, Topology and Acoustics – has developed theories, models and tools to describe system behaviours that lie beyond the reach of traditional scientific theory and practice. What researchers are finding is that the superficial similarities between complex, non-linear systems and human behaviour are compelling. Non-linear, dynamical systems are open and depend on nonlinear causality. Certainly, human systems at all scales evince these fundamental characteristics. They are open to influence from the environment; their behaviours depend on many different (sometimes apparently unrelated) variables; and direct causation is difficult to observe outside of highly constrained laboratory environments. These similarities have drawn social scientists…

IN MOST WESTERN SOCIETIES, the concept of choice – and the ability to exercise it – is seen as fundamental to peoples’ sense of autonomy and well being. The disciplines of Economics and Public Policy have been shaped by the notions of freedom of choice. In Economics, the standard assumption is that the provision of more choice allows individuals to find alternatives that are more closely aligned to their true preferences; and in Public Policy and governance, the rights and the ability of individuals to choose what is best for them is the foundation of libertarianism. As a result of this ‘choice is good’ thinking, the number of offerings in a wide variety of product and service categories has skyrocketed over time. Compared to just 10 years ago, the range…

WICKED: THAT’S HOW some people describe today’s complex problems. University of Pittsburgh Professor John Camillus has noted five criteria for determining whether a problem is ‘wicked’: it involves many stakeholders with conflicting priorities; its roots are tangled; it changes with every attempt to address it; you’ve never faced it before; and there is no way to evaluate whether a particular remedy will work. In short, a wicked problem has innumerable causes and cannot be definitely resolved. Sound familiar? The more urgently we seek crystal balls, the cloudier our prospects become. At least that’s how it seems to many senior executives who peer through the mists of uncertainty and paradox to see what might happen next. The harder they stare, the more the mist shifts. Will oil prices go up or…

You have found that accidents and other rare events can benefit a workplace by providing it with a ‘brutal audit’ of its strengths and weaknesses. How does this work? I studied the Baltimore & Ohio Railroad Museum, which provides a remarkable case study for those of us interested in resilience how an organization can not only survive but thrive in the wake of a catastrophe. The B&O Railroad – familiar to anyone who plays the board game Monopoly – is the birthplace of American railroading. In February 2003, a record-setting snowstorm resulted in a roof collapse in the main building of the museum, a historic round house. It is difficult to describe the magnitude of the damage that occurred. The roof collapse resulted in the destruction of many of the…

Distrust and suspicion are common in any social organization, but you have uncovered a more advanced form of distrust that you call ‘paranoid cognition’. Please describe it. When people are in situations where they feel insecure or uncertain, they tend to be extra vigilant in surveying the landscape for signs of threat or danger. They have a sense of paranoia that ‘things are not quite what they seem’. In addition to this hyper-vigilance in scanning their environment is a tendency to ruminate about the meaning of what is going on around them. Even once they’ve scanned the environment, they find themselves thinking, ‘Is there something more going on here than I realize?’ That’s paranoid cognition. Paranoid cognition is quite prevalent, even among ‘normal’ individuals. Why is this? When people hear…

September 11, 2:00-4:00pm Memorial for Prof. Myron Gordon September 14, 5:00-6:20pm Design Thinking Experts Speaker Series Speakers: Don Green and Michael Budman, Co-Founders, Roots; Douglas Coupland, Artist and Author September 22, 5:00-6:15pm Leadership Experts Speaker Series Speaker: Charlene Li, Founder, Altimeter Group and Author, Open Leadership: How Social Technology Can Transform the Way You Lead September 22, 5:00-6:15pm Design Thinking Experts Speaker Series Speakers: Brett Channer, Chairman, Saatchi & Saatchi Canada; Inger Bartlett, Founder and President, Bartlett & Associates Ltd. September 23, 5:00-6:15pm Leadership Experts Speaker Series Speaker: Bill Downe (MBA 78), President and CEO, BMO Financial Group September 28, 5:00-6:15pm Design Thinking Experts Speaker Series Speaker: Bob Hambly, Creative Director, Hambly & Woolley September 30, 5:00-7:00pm Innovation in Business Experts Speaker Series Speakers: Don Tapscott, Chairman, nGenera Insight; Anthony…

AS INDIVIDUALS, WE RELATE TO our complex, uncertain and foggy world not only through our senses, but also through ways of making sense of what our senses sense. These ‘ways of seeing’ can be thought of as ‘mental models’, and our minds are filled with them, whether we are aware of it or not. In today’s complex environment, the most successful thinkers can quickly and effectively abstract the best qualities of radically different ways of seeing from others and apply them to the situation at hand. In doing so, these thinkers develop an ‘adaptive lens’ on the bewildering phenomenon we call the world. We call these individuals integrative thinkers. Integrative thinkers see their way clear to successful action in situations where others see only a choice between poor or mediocre…

1: BE FLEXIBLE Companies must take a more flexible approach to planning: each should develop several coherent, multi-pronged strategic-action plans, not just one. Every plan should embrace all of the functions, business units and geographies of the organization and show how it can make the most of a specific economic environment. These plans can’t be academic exercises: executives must be ready to pursue any of them – quickly – as the future unfolds. In fact, the broad range of plausible outcomes in today’s environment calls for a ‘just in time’ approach to strategy setting, risk taking and resource allocation. A company’s 10 to 20 top managers, for example, might have weekly or even daily ‘all hands on deck’ meetings to exchange information and make fast operational decisions. Greater flexibility also…

Karen Christensen: You believe it is time for ‘Risk Management, Version 2.0’. Why now? Erwann Michel-Kerjan: The hallmarks of the 21st century will likely be more and more unthinkable events, previously-unseen contexts, and pressure to react extremely quickly – even when we can’t predict the cascading impact of our actions. And as challenging as things are today on a planet of nearly seven billion people, they will get even more challenging as the population continues to grow. Already, we have reached a degree of interdependence that has never before been experienced: what happens on one continent today can affect people on another continent tomorrow. In economic terms, this means that we are now seeing the emergence of ‘security externalities’, whereby the failure of a weak link in a connected system…

ONE OF OUR COLLEAGUES recently went on a family camping trip to an isolated area along the Alabama-Florida border. The family had never been camping before, and the small children were extremely excited about the adventure that lay ahead. But when they arrived at the campsite, they realized that they had no instructions for building their brand new tent. As the kids began to pull the many bits and pieces out of the tent’s carrying case, the magnitude of the problem became clear: 50 puzzle pieces, two small children, no instructions, and half of the poles looked identical. One by one, our colleague and her husband started trying to fit pieces together to build the tent frame. As the sun began to set, trial and error paid off: the…

IT SEEMS LIKE A LONG TIME AGO IN A GALAXY FAR, FAR AWAY. But in reality it was 2006, on this very planet. The entire world was booming, partly on the back of triple-A investment innovations devised by a master race of financial Jedi. And then: crash, bang, global recession. Suddenly it was all over. Triple-A turned into a euphemism for ‘subprime’, which itself began to translate into ‘toxic’. The banking Jedi were cast out with no bonuses – many into bankruptcy, takeover or nationalization. Welcome to the empire of the credit crunch. By now, it’s a story as well known as Star Wars. But what fascinates us about it is one single, often-overlooked fact: that almost no one saw it coming – none of the experts, none of the…

You have coined a term for a new global reality that will affect us all. What is it, and what are its key characteristics? We call it ‘globality’. If you look at the definition of globalization, it has largely been about a movement of corporations from the developed world to developing markets, from West to East. But the new reality is that the movement is also from East to West, from North to South and from South to North. All kinds of companies are going global, from places like India, China, Turkey, Brazil, South Africa and the Eastern European countries, and they have lots of advantages, which they are leveraging. These include rapidly-growing markets in India and China, cost advantages and some specific talent advantages. Who are some of the…

You are a pioneer in the study of Complex Systems. Please describe this emerging field. Complex Systems studies how relationships between the parts give rise to the collective behaviours of a system, and how the system interacts and forms relationships with its environment. Examples of complex systems include social systems, the human brain and weather patterns. Social systems arise out of relationships between people; the brain’s behaviours result from relationships between neurons; and weather patterns are formed by relationships between air flows. One of the exciting aspects of this field is how relevant it is to understanding the world around us, and how it changes the way we think about the world. You have found that some methods of thinking about complexity are often, if not always, useful. What are…

Your work at the MIT Leadership Center has given you some fascinating insights into the nature of organizational change. What are the key challenges faced by today’s leaders? The number one question we are seeing at the Leadership Center is, ‘how should we approach going global?’ Leaders want to know how to set up operations around the world and get them up and running quickly, while keeping them coordinated with the rest of the organization. The challenge is to be innovative, to be entrepreneurial, to meet customer needs and to build on emerging technologies and trends, but maintain alignment across those efforts. The nature of work has also shifted. People have gone from working on very clear, designated tasks, where they may be connected to a number of people in…

‘Social dilemmas’ include everything from traffic jams to runs on scarce goods to maintaining trust in relationships. What do these things have in common? In each scenario, there is a temptation for some people not to cooperate with others. So in traffic jams, there is a temptation to try to pass everybody or to run a red light. One of the ways we deal with this is to have enforced traffic laws. Solving social dilemmas entails agreement on some set of norms or rules, monitoring of some sort, and people trusting one another in order to achieve optimal outcomes for all. Whenever actions taken by individuals or organizations benefit a larger group, there is always a risk that some of the participants will ‘free-ride’ on the efforts of others and…

Whether you are interested in Physics, human health or you just want to avoid traffic jams on your way home from work, understanding complexity is key. OPEN UP ANY DICTIONARY and you will find ‘complexity’ defined along the following lines: ‘The behaviour shown by a complex system’. Then look up ‘complex system’ and you will see something like, ‘A system whose behaviour exhibits complexity’. What is going on? Unfortunately, complexity is not easy to define. Even among scientists, there is no widely-accepted definition. Worse still, it can mean different things to different people. In this article I will uncover the ‘magic ingredients’ that make something complex as opposed to just being complicated, and show how complexity is deeply engrained in our everyday lives. We will also see why complexity is…

WHENEVER WE SPEAK to business people these days, they tell us that the current speed, breadth and depth of change is greater than anything they have previously experienced. Uncertainty, ambiguity and turbulence have become the hallmarks of our economic environment, leaving our leaders with the daunting challenge of making sense of the world. Questions being asked include, ‘How is the world changing and what might it look like in the future?’; ‘What implications does this have for our business?’; And, perhaps most difficult of all, ‘What, if anything, should we be doing to respond?’ The shift towards a business environment characterized by rapid change and discontinuities calls for some specific capabilities that are not readily apparent in many of today’s leaders. In turbulent environments, data and analyzed information are…

In your research you have uncovered an all-too-common dynamic: to succeed, managers must commit to specific mental maps and reinforce them with processes that support their worldview. What happens when the landscape shifts? It’s not that mental maps are bad – in fact, they are necessary in order to focus and coordinate activity and mobilize resources. But when the terrain shifts, there is always a risk that a gap will grow between your established maps and the reality of the terrain. When this happens, you might fail to notice information that is not consistent with your map and disregard or discredit things. This is dangerous because knowing where your map is wrong is, in many ways, as important as knowing where it’s right. You have noted that too often in…

Your research on how young children deal with challenges is amongst the most cited in contemporary Psychology. What have you learned about how adults face adversity? Much of what I know about Psychology can be traced back to research I conducted early in my career. In these studies, we presented children with a series of problems, including some that were intentionally designed to be too difficult to solve. Not surprisingly, some of them treated the difficult challenges as ‘the end of the world’, as a verdict on their competence and their worth. Others, however, welcomed the most complex of problems and even embraced their complexity, saying things like, “I love a challenge.” My jaw dropped. I had gone into the research assuming that some people cope with setbacks and failure…

NOT SURPRISINGLY, PEOPLE vary in their propensity to trust. Some assume that others are generally trustworthy and make themselves vulnerable until evidence challenges their assumptions. Others assume that people are generally untrustworthy and act accordingly until their counterparts demonstrate their trustworthiness gradually, over time. The latter, low-trust orientation reflects the dominant ‘rational’ model of trust development. However, newer models allow for the occurrence of greater risks early in relationships and argue that such risks often yield positive results for ‘high-trusters’. Most economic models of decision making suggest that, to avoid exploitation, people should generally be defensive, ‘low trusters’. Rational choice theories, for example, assume that all actors will seek to maximize their own personal utility in social interactions (i.e., behave self-interestedly): decision makers will seek their own advantage as…

‘INNOVATE OR DIE’ is a commonly-heard phrase these days, aptly describing the urgency of driving growth through innovation. And yet many of the managers I speak to say, ‘We have no time or resources left for innovation; we’re buried just supporting our day-to-day business and solving problems’. While everyone agrees that innovation is the path to success, only a few companies – the Apples and Procter & Gambles of the world – seem to actually get around to it. Why is this? The answer, in a word: complexity. Everywhere you look, companies are reeling from self-induced complexity. In their frustrating search for high growth in low-growth markets, they have substituted proliferation for innovation. They have proliferated everything – products, customers and markets – but innovated in virtually nothing, and the…

“HOUSING, ENERGY AND TRANSPORT now consume more than half our incomes. In order to reset the economy, we have to not only create new industries, but fundamentally change the way we live and work,” says Richard Florida, Director of the Martin Prosperity Institute and Professor of Business and Creativity at the Rotman School of Management. On May 4, in a session of the Prosperity Expert Speaker Series, Florida presented insights from his book The Great Reset: How New Ways of Living and Working Drive Post-Crash Prosperity (Harper, April 2010) in conversation with economist Felix Salmon of Thomson Reuters. The economic downturn of 2008 continues to make itself felt in recent events such as the European sovereign debt crisis, suggesting that a full global recovery may still be years away. “The…