Innholdsfortegnelse for Winter 2010 i Rotman Management

AT ITS CORE, BUSINESS IS ABOUT ONE THING: decisions. Every day, in every organization, people make decisions ranging from the micro (which e-mails to answer, which meetings to hold) to the macro (which product to launch, and when.) Across industries, more people are making more decisions – and faster – than ever before, making high-value decision making a critical skill. Today’s ‘high-value decision maker’ is a manager of complex interactions who faces a multitude of inputs on a daily basis – different value systems, ways of knowing, ways of managing, and ways of choosing between them. In the midst of this turmoil, the decision maker is called upon to internalize the clash between multiple models and resolve it productively. Indeed, an individual’s value to an organization increases exponentially with her…

Your Marketing textbook is now in its 13th edition and is used in MBA programs worldwide. Are the ‘four Ps’ still a useful framework? Definitely, because all marketing plans must still address those four big questions: Product, Price, Place and Promotion. However, I’m currently working on the 14th edition, and my colleagues and I are developing a new framework that will involve a more holistic set of considerations. What we call ‘holistic marketing’ entails the development, design and implementation of marketing programs, processes and activities that recognize a wide range of interdependencies, including the work of integrated marketing (the four Ps); internal marketing (i.e., getting support from the other functional areas); performance marketing (i.e., developing metrics to indicate what you’ve accomplished); and relationship marketing. The concept of holistic marketing goes…

Recently, one of the authors struggled with the choice of what to order for dinner at her neighborhood Italian restaurant. With great difficulty, she debated whether to indulge her craving for the restaurant’s sinfully-delicious pizza or to stick to her diet and order a salad. The battle raged in her head until the waiter hovering over her cleared his throat to signal that it was time to place an order. In the end, she chose the pizza over the salad. The option she wanted more won out over the option she knew she should select. The metaphor that individuals possess ‘two selves’ — a want self fighting for whatever will bring more short-term pleasure and a should self representing one’s long-term interests — is so widespread that its visual representation…

ON PAPER, ROB MCEWEN WAS AN UNLIKELY CHAIRMAN and CEO for Canadian mining company Goldcorp, Inc.With a background in finance, the small, soft-spoken man with the neatly-trimmed moustache preferred meticulous tailoring to industrial machinery. But despite his appearance, McEwen was a prospector at heart: he had a fascination with gold and grew up hearing tales from his father about miners, prospectors and grubstakes at the dinner table. So smitten was he with the industry that he hammered out his own template for what he thought a 21st-century gold-mining company should look like, despite never having worked for one. In 1989, he made the leap, stepping into a takeover and becoming majority owner of under-performing Goldcorp. Some called him crazy for buying what was regarded as a rust bucket of…

WHETHER OUR AIM IS TO LOSE WEIGHT, save for retirement or quit smoking, most of us have a clear idea of some of the long-term goals that we want to achieve for ourselves. Unfortunately, most of us also fail to implement the requisite course of action to produce these desired outcomes. Why don’t we simply make the decisions necessary to make our goals a reality? Traditional Economics, with its ‘rational choice’ account of human behaviour, is ill-equipped to deal with this issue for two related reasons. First, by assuming that people make optimal decisions, it, in effect, assumes away problems of this type. For instance, prominent economists have argued that addiction is the outcome of a rational choice and that people are obese because they have judged that the…

In On Being Certain, you compare the mind to ‘a stream that flows along certain well-worn paths’. How can we break out of stale thought patterns ? One of the keys to dealing well with a complex problem is not to leap to an immediate decision. Emergencies require immediate decisions, but in most situations, you need some time to think things through. The unconscious creates our initial reflexive thoughts, such as when we blurt out something in conversation before we are even aware of what we really want to say. Proper thought, on the other hand, requires time and quiet rumination. When I pose a problem to people whose opinions I respect, they are often completely quiet at first. They react with ‘down time’, which doesn’t indicate that they are…

LET US BEGIN by assuming that Nobel Prizes point to brilliance. Throughout the 1990s the creators of so-called ‘modern portfolio theory’ and proponents of capital market efficiency seemed to run away with all the Nobel Prizes in Economic Sciences: Markowitz, Sharpe, Miller, Merton, Lucas, Mundell and Scholes. All have become household names (at least in investment houses), and all are strong devotees of market rationality. The members of this illustrious group each contributed to the idea that financial decision makers are a rational and unemotional lot. Savvy institutional investors typify this character study. As a result, modern portfolio theory and conventional explanations of financial market behaviour have little to say about speculative bubbles, panics or uniformed decisions, all of which is dismissed as ‘irrational’. Then along came the turbulent fin…

How is Neuroeconomics changing our view of human nature and the way we think? The field of neuroeconomics arose in part in reaction to the limitations to the classical model of cognition – still taught to many MBA students today – which assumes that decisions are made through careful deliberation. Research from my laboratory and many others has shown that this sort of hyperrational decision making is in fact rarely in evidence in the real world. Simply put, our brains are not designed for purely rational thought. For me, what is most exciting about the recent advances in Neuroscience is their application to business decision making, and especially to the interplay between moral and competitive instincts. High degrees of competition shut down the empathy system and lead to both immoral…

IN OCTOBER, BUSINESSWEEK NAMED THE ROTMAN SCHOOL as one of the world’s 30 best schools for “educating the design thinkers and innovators of the future.” In its Special Report: Design Thinking, the magazine noted that world-class design and innovation courses are offered to MBA students through DesignWorks, the Rotman School’s academic and commercial learning lab for design-based education. A panel of academics, designers and business leaders recommend master’s and MBA programs that successfully combine design thinking and business administration. Other institutions making the list included Stanford, University of California Berkeley, Illinois Institute of Technology and INSEAD. Rotman Dean Roger Martin, who BusinessWeek refered to as “one of the early supporters of the discipline,” is quoted as saying that “Every cor poration needs a design-thinking type. That includes industries that…

Andreas Kouremenos (MBA ’08) Research Associate, Metals and Mining Research RBC Capital Markets Lives and works in: Sydney, Australia BEST THING ABOUT MY JOB: The analyst I work for and the team I work with. MY BIGGEST CHALLENGE: Learning about the Australian market. MOST IMPORTANT SKILL FOR MY JOB: The ability to sift through mountains of information and produce quality research. PROUDEST MOMENT: The completion of an exhaustive report on steel raw materials, which was very well received by clients. THE WORD THAT BEST DESCRIBES ME: Driven. HOW I RELAX: A bike ride to Bondi Beach followed by a quick dip in the Pacific Ocean. MOST IMPORTANT THING MY MBA TAUGHT ME: Confidence. WORDS OF WISDOM: “Do or do not; there is no ‘try’” (Master Jedi Yoda). SMARTEST DECISION I…

Information as of October 7, 2009. Not listed or incorrect? Please let us know. Lihor Abraham Scotia Capital Siddhartha Akude Sun Life Financial Inc. Usman Altaf Rogers Communications Inc. Christon Anastasopoulos KPMG Peat Marwick Thorne Shalu Attri Method Samuel Ault Paul, Weiss, Rifkind, Wharton & Garrison Karamjot Bains Monitor Group Khati Bandali Blueballoon Health Services Kapil Bapat Portfolio Aid Pedro Barbe Hotel Chain Jamie Bennett Interbrand (Canada) Veeraj Bissoonauth Rogers Cable Inc. Azadeh Boloorchi Ministry of Health and Long Term Care Roland Braganza Procter & Gamble Incorporated Inbal Brauner Deloitte Steve Bristo RBC Capital Markets Adam Burk First Principles Capital Christine Canning Bank of Montreal Brant Carson McKinsey & Company Incorporated Kristen Casper Teach for America Jason Chan Scotia Capital Victor Chang IBM Canada Ltd Bhaskar Chatterjee Sun Life Financial…

RESEARCH IN COGNITIVE PSYCHOLOGY and the relatively new field of NeuroEconomics consistently demonstrates that people violate the strictures of rationality on a regular basis. Pioneered by the seminal work of Nobel Laureate Daniel Kahneman and Amos Tversky, this literature has generated a lengthy list of irrational behaviours to which many of us are subject on any given day, whether we like to admit it or not. These well-documented violations of rationality have, in turn, spawned a list of biases that can be used to define ‘rational thinking’. That is, we can assess degrees of rational thinking in terms of the number and severity of cognitive biases that an individual displays. In this article we will describe some of the most common biases that challenge rational thinking, with the hope that…

MBA STUDENTS IN MY CRITICAL THINKING CLASS are required to take a number of ‘diagnostic’ exams. These tests are designed, among other things, to demonstrate that they are personally vulnerable to most – if not all – of the thinking mistakes they will learn about in my class. In the absence of such a demonstration, their natural tendency would be to think that I’m talking about everyone but them. The process starts early: on the very first page of the readings packet, students are asked to answer the following questions: 1. How important is it for managers to make logical decisions? _ Unimportant _ Not very important _ Somewhat important _ Quite important _ Very important 2. How important is objectivity in managerial decision-making? _ Unimportant _ Not very…

MUCH HAS BEEN SAID about the fact that decision making is prone to a lengthy list of systematic fallacies of reasoning that lead to suboptimal simplification of the knowledge structures on which sound decisions are made. However, an equally important culprit for what has been termed ‘bounded rationality’ may be lurking within us: bounded emotionality. Yes, people regularly give answers that can be interpreted as meaning that they think it is more likely for them to spill ‘hot cof fee’ than it is for them to spill ‘coffee’. But, this, I will argue, is not where the most irreparable breaches of rationality take place; nor is it the best explanation for why so many organizations become inert and myopic structures. Something else is at play, and, it has less…

SOME OF THE TOUGHEST DECISIONS IN LIFE are so-called ‘should vs. want’ decisions. John should be saving money for the future, but the temptation of a hot cup of cappuccino creates a want that distracts him from his savings goal. Paula knows that she should be exercising at the gym, but she would rather spend the time with her friends at the movies. George knows that he should be eating the healthy granola for breakfast, but his desire for a meat-lovers omelet gets the best of him. And while Ringo knows that he should only consume a small amount of his favourite potato chips, he suddenly finds himself fish ing at the bottom of the bag and wonders where they have all gone. These are just a few examples…

Since the time of Plato, the decision-making process has been described as either rational or emotional: either we carefully deliberate, or we go with our gut. But recent findings suggest that this isn’t how the mind works. Please explain. There has long been an assumption that people are rational agents and that we make our best decisions when we suppress our emotions. But researchers have been looking at the inner workings of the brain, and it turns out that this is not the case. Antonio Damasio and others have found that people without the ability to experience emotion become pathologically indecisive. There is a new appreciation emerging that our emotions are actually deeply empirical – that they reflect relevant information in the real world, and we ignore them at our…

THE ABILITY TO ASSOCIATE remotely-connected elements underlies discoveries and creations in fields as diverse as Physics, Mathematics and Art. Philosopher and physicist Henri Poincare once noted that “to create consists of making new combinations of associative elements which are useful. The most fertile will often be those formed of elements drawn from domains that are far apart.” Others have since made an explicit connection between associative processes and creativity and consider the former the basis for creative output. One remarkable aspect of associative processes is that they do not seem to thrive under conscious direction. In fact, conscious thought can actually subvert the search for creative solutions. Novel connections or ideas often insinuate themselves into the conscious mind when attention is directed elsewhere. Poincare described this phenomenon as follows: “I…

Since Adam Smith, most economic theories have been premised on the assumption that people are motivated by rational self-interest. What are the limitations of this view? Quite simply, it’s wrong. Even when people try to be rational, they often fail. Consider, for example, the balance between short-term thinking and long-term thinking. Classical economics assumes that people will optimize their choices for their greatest personal utility. But in reality, people frequently favour their short-term interests at the expense of their longterm interests – for example, by eating fattening food that hardens their arteries or watching television that provides fleeting pleasure while stifling long-term development. As I suggest in my book, credit cards may actually be more dangerous than crack, because people notice the immediate gain of being able to buy whatever…

FOUR OF CANADA’S LEADING PENSION FUNDS have established a professorship in pension management at the Rotman School. Prof. Alexander Dyck, a noted expert in corporate governance and corporate finance, will be the inaugural holder of the ICPM Professorship in Pension Management at the Rotman International Centre for Pension Management (ICPM). This professorship was established with the generous support of the Canada Pension Plan Invest -ment Board, Hos pitals of Ontario Pension Plan, Onta rio Teachers’ Pen sion Plan, and Ontario Muni ci pal Employ ees’ Retirement System. “Improving pension management practices is at the heart of ICPM’s mission,” says Keith Ambachtsheer, director of Rotman ICPM and adjunct professor at the School. “Prof. Dyck will help us explore and hopefully help us resolve some of the challenges facing pension…

RETURNING HOME from a consulting assignment in the Bay area, I arrived to my gate at San Francisco International with some time to spare, thanks to a more expedient than expected securityclearance process. I never deny myself the pleasure of visiting a bookstore, so I made my way to one of those overgrown newsstands found in just about every airport around the globe that also carry an assortment of business literature, biographies and current bestsellers. Such marvelous harmony would mean that decisions made by middle management are congruent with those made at the very top. Much like a well-trained dog team blazes its sled past the less-unified competition, such concordance would propel the organization towards its strategic goals. There I was, browsing through the titles: “The HP Way…” “The Wal-Mart…

Taking a 3D approach leads some of our students into areas they might never have expected to find themselves. In one case, it led them to the chemotherapy clinic of Princess Margaret Hospital (PMH) in Toronto. PMH – which ranks among the top cancer research and treatment hospitals in the world – received a donation to overhaul the design of its chemotherapy clinic. When Brian Golden, the head of the Rotman Collaborative for Health Sector Strategy, heard about the project, he called Heather Fraser, director of Rotman DesignWorks, to encourage her to get involved. The team at DesignWorks had already tackled projects ranging from high-performance bicycles to enterprise software. Working with a broad array of corporate clients, they had aggregated or developed a wide array of tools centred around the…

OVER THE PAST 50 YEARS, research by esteemed academics including Nobel Laureate Daniel Kahneman has uncovered a wide variety of biases that plague decision makers on a regular basis. Thanks to this groundbreaking work, we know that predictable errors lead people to commit sub-optimal acts on a regular basis, ranging from undersaving for retirement to engaging in needless conflict, marrying the wrong partners and accepting the wrong jobs. Unfortunately, we have yet to uncover systematic strategies to help people overcome these biases and behave more optimally. As the global economy becomes increasingly interconnected, every biased decision will have implications for a broader swath of society. Given the massive costs that can result from sub-optimal behaviour, it is time to focus on improving our knowledge base around strategies that can…

AS A LEADER, YOU ARE LIKELY FACING a set of unprecedented challenges. You might find yourself in markets that are increasingly competitive, comprised of customers who are highly discerning or downright fickle. You’re also likely leading a fast-moving workplace, where the ground rules seem to shift beneath your feet. The world is changing so rapidly, you may be wondering how you’ll be able to find new ways to grow and sustain your business. Which new products and services should you offer? How to decide? We believe that when you find yourself in such a situation, you may be better served to approach your problems less as a manager and more as a designer. In other words, stop deciding and start designing. In recent years, designers have been applying their skills…

When Alan Greenspan admitted to being ‘shocked’ by the failure of the financial system, you called this “an important step forward” for Behavioural Economics. Please explain. My colleagues and I have been conducting experiments about human irrationality for years now. When we present our results, ‘rational’ economists say, ‘These are nice experiments that make for great dinner conversation; but when it comes to professionals making decisions that involve money, irrationality simply doesn’t occur’. I have never bought this argument. Why would the human brain develop two separate approaches to decisions that depend upon the importance of the decision? While I allowed that the market could possibly mitigate some irrational behaviour, I also felt that it could increase it. At the end of the day, we had all this evidence of…

ACROSS INDUSTRIES, business models are being closely examined as new players enter the game and change the rules. While some firms are making efforts to ‘tune up’ their practices, the stark reality is that those who fail to find new ways to create value will be left in the dust. In this context, the modern enterprise needs to be dynamic, adaptive and market driven, and it must concurrently perform two tasks: navigate the choppy waters of the present environment while simultaneously creating value for the future. A company’s decision-making dynamics are a critical dimension of both its adaptability to the present and its future success. In our work with organizations big and small, commercial and public, local and international, my Rotman DesignWorks colleagues and I have gained interesting insights into…

THE CURRENT ECONOMIC DOWNTURN has focused attention on and fostered a spate of articles about how to manage effectively in difficult economic circumstances. A particularly good example of advice about managing in a downturn is provided by David Rhodes and Daniel Stelter in a recent Harvard Business Review article. Their approach is positive, comprehensive and considers both the immediate exigencies and future potential. Their key recommendations include immediately focusing on: • Monitoring and maximizing cash • Optimizing financial structure • Reducing cost and increasing efficiency • Aggressively managing the top line • Rethinking product mix and pricing strategies • Shedding unproductive assets and divesting non-corebusinesses. Reviewing these recommendations reveals three fundamental truths: 1. Each of these recommendations applies equally well in good times and in bad. The only difference may…

EVERY SINGLE MINUTE of human history is marked by decisions that affect every aspect of life, often far from the site of the decision itself. Collectively, these decisions have brought us to where we are today: to an environment marked by economic unpredictability, social instability and environmental degradation. Clearly, it is time to challenge the way in which we make decisions. In general, decisions tend to be overly-focused on the achievement of a single aim or the discovery of a solution to an immediate problem. We generally do not include the broader goals that we have for our organization, and too often, we do not consider the wider social, economic and environmental considerations on which our actions will have an impact. In business, a decision made by a manager is…

AS FAR AS JONATHAN LISTER (MBA ‘00) is concerned, the digital media revolution still has a very long way to go. Lister, managing director and head of Google Canada, spelled out his company’s vision of that ongoing revolution in a Sept. 30 presentation at the Rotman School. In his talk, Lister, the former general manager of AOL Canada likened today’s sweeping changes in the new media landscape to “the incredible chaos” that followed the invention of movable type in 1440 and led to the spread of global literacy. Citing the work of Internet technologies writer and teacher Clay Shirky, he said Google executives believe today’s media changes are “as material as the post-1440 period’ and “certainly as material as the Industrial Revolution.” Lister projected that online commerce will soon take…

WHILE KRAFT FOODS’ PRODUCTS have been a mainstay on pantry shelves for decades, it may not be the first company that comes to mind when you think about ‘innovation’. Yet in the past three years, the snack and beverage juggernaut – the largest food company in North America and second largest in the world – has impressed investors and analysts alike with its corporate restructuring, cultural transformation and improved growth. On September 14, the company’s Chair and CEO Irene Rosenfeld visited the Rotman School to discuss her experience of “Leading Transformational Change”, part of the Women in Leadership Speaker Series. In 2006, when Rosenfeld was brought back to Kraft after three years of service at Frito-Lay, it was obvious the company wasn’t living up to its potential. Immediate challenges included…

Happy New Year!Many of you will be reading this magazine online, probably for the first time. Thanks for helping us ‘go greener’ and reduce costs. As a reminder, we are still offering the magazine in printed format for those who prefer it; just let us know. The new year holds great opportunities, with many exciting decisions to be made. The easiest decision is to add YOUR class note to this section for the next issue – why not make it a resolution? Also, mark your calendar for the 12th edition of Life-Long Learning, coming up on May 27. Details of this annual conference will be on our website’s events page in February. And the ‘honoured years’ (classes ending in 5 or 0) will be gearing up for reunions this year.…

January 12, 5:00-6:15pm Merchandising Experts Speaker Series Speakers:Mark Foote (MBA 91), President and CEO, Zellers January 18, 5:00-6:15pm Finance Experts Speaker Series Speakers: Robert Pozen, Chairman, MFS Investment Management and Author, Too Big To Save? How to Fix the U.S. Financial System (Wiley 2009) January 19, 5:00-7:00pm Business of Green Speaker Series Speaker:Mergen Reddy, Global Director and Worldwide Leader, Hatch Management Consulting Topic: “Unlocking Value from the Feed-in Tariff in the Ontario Green Economy and Green Energy Act” January 26, 5:00-6:15pm Operations Strategy Experts Speaker Series Speaker: Ross Grieve, former CEO, PCL Constructors Inc. and “Canada’s Outstanding CEO of the Year for 2009” January 27, 5:00-6:15pm Operations Strategy Experts Speaker Series Speaker: Joseph Mapa (MBA 00), President and CEO, Mt Sinai Hospital January 28, 5:00-6:15pm Design Thinking Experts Speaker Series…