Innholdsfortegnelse for Winter 2020 i Rotman Management

In a 2017 essay (“AI: Scary For The Right Reasons”), you wrote that AI might improve metrics like GDP growth and productivity, but at the same time, it may worsen less visible metrics such as income disparity. Are you still concerned about that? Even more so. Without a doubt, AI is the most important technology we have seen in a very long time. Some people even refer to it as ‘the last technology’, because it will likely be responsible for all of the technologies that follow. As such, it presents massive potential for contributing to society. Having said that, where we get to will depend on the path we take. It’s great to talk about creative destruction if you’re the one doing the disrupting; but if you’re the one being…

You have said that in today’s environment, “every company is an algorithmic company, whether it knows it or not.” Please explain. Mike Walsh: We often assume that only purely digital companies like Google or Netflix can be called ‘algorithmic’ because their technology and infrastructure are all based on data and algorithms. But the reality is that every type of organization, at every scale, will soon live and breathe by its capacity to leverage data, automation and algorithms to be more effective and create better customer experiences. Whether you run a big factory making automotive parts or a small dry cleaner in Brooklyn, your future is likely to depend more on how well you leverage the data and information generated by your activities rather than how well you manage the traditional…

BOMBARDED WITH STIMULI from every direction, it is not surprising that we often resort to categorical thinking to simplify incoming information. The problem is, this common habit can manifest itself in a tendency to group individuals on the basis of social categories, including race, gender and age. Further, such categories are often imbued with associations and expectations — a.k.a. stereotypes — which perceivers use to form impressions and judgments of others. One little-discussed sub-category of stereotypes is ‘occupational stereotypes’ — collections of traits or attributes with which individuals associate members of different occupations. In this article we will describe our research into these stereotypes, showing, how they lead to segregation and some of their implications for society. How Stereotypes Lead to Segregation In 2013, the Ontario Bar Association launched a…

NO ONE WOULD ARGUE that online and mobile banking have transformed the financial services industry. Tech-savvy customers welcome online banking for its convenience, and banks view it as a way to increase efficiency. But despite the rapid growth of digital tools and solutions, personal relationships remain critical in the financial sector. My research indicates that there are hidden costs to abandoning personalized banking relationships — and that personal relationships between borrowers and lenders can benefit both parties. In this article I will summarize my research and show a few important ways that personal ties shape financial intermediation. Personal Relationships as Liabilities In finance, personal relationships can have upsides and downsides. One potential downside relates to ‘escalation of commitment,’ or the tendency for individuals to contribute more to failing investments when…

The rally cry for innovation is being heeded by organizations around the world, from start-ups to the Fortune 500 — amid a steady drumbeat of ‘disrupt or be disrupted’. An Accenture analysis of more than 3,600 companies with annual revenues of at least $100 million in 82 countries including Canada has found that nearly two-thirds face high levels of disruption — and nearly half show severe signs of susceptibility to future disruption. In Canada, many organizations are working to modernize and re-set their course to unleash ‘trapped value’. Key examples include financial services companies working within an ecosystem to break new ground on payments technology and supporting the rise of the robo-advisors to serve Canadians in new and useful ways. Amidst this disruption, the real challenge for organizations is to…

Since you became CEO of auto-parts manufacturer Linamar in 2002, it has been transformed into a $7.6 billion diversified global manufacturer of highly-engineered products powering vehicles, motion, work and lives. Can you talk a bit about the company’s transformation? We started down the road of globalizing and diversifying our company close to 20 years ago. We didn’t want to move forward with all of our eggs in the auto-parts basket, so the goal was to find new markets to put our capabilities around metallic processing and lean manufacturing to good use. I’m pleased to report that while we have expanded, we have continued to significantly grow our automotive business. The idea was not to de-emphasize that at all. It was to add additional avenues to grow the company. You are…

Not everyone is on board with AI and machine learning. None other than Elon Musk has suggested that it might lead to World War III. What is your take on the situation? You’re absolutely right that there is a huge amount of alarmism and ‘automation anxiety’ right now. Elon Musk, the late Stephen Hawking and Bill Gates have all made frightening predictions about super-intelligent machines as an existential threat to humans and jobs. These predictions are exaggerated and counterproductive. The fact is, we are very far from achieving artificial general intelligence (AGI). It’s important to be thoughtful about how we use AI, and in particular, to consider ethics, fairness and how any technology might be abused. But the idea of superintelligence coming to dominate humans is science fiction. Rest assured:…

What are the biggest wicked problems in healthcare right now? There are several, and from my perspective they are driven by two factors. The first is that there are so many stakeholders involved, which often means that there is no one ‘right’ solution. The second factor is that in today’s resource-constrained world, there is an imperative to do more with less. Both factors manifest themselves in the problems we see in healthcare — from attempts to efficiently deliver care to an aging population, to safely incorporating technology like AI and wearables without compromising quality, to creating coordinated access to medical information along care pathways. The backdrop to all of this is the overarching challenge of optimizing incentives across the entire system — for patients, providers and vendors. These are big,…

For those who aren’t familiar with the term, what is impact investing? Impact investing means investing in funds or organizations with the intention of generating a measurable social or environmental return alongside financial returns. Some of the areas where impact investing is most active include climate change, education, renewable energy and healthcare. The objective is to assemble capital to help lift ambitious projects off the ground that otherwise wouldn’t have attracted big investors. These are investors who embrace the theory of change identified by the 17 United Nations Sustainable Development Goals, the Paris Agreement and similar initiatives. The project selected for funding must have measurable and effective outcomes that reach a critical mass. In short, this is a rigorous scientific approach to investment. While some investors have been making impact…

Creative destruction—the idea that successful innovators sow the seeds of their own destruction—was defined by Joseph Schumpeter over 70 years ago. Is this still a phenomenon today? Gary Pisano: Absolutely. Schumpeter nailed it when he coined that term, and it’s amazing that he was writing 70 to 80 years ago. Today, many aspects of economic progress and competition are defined by the dynamics he described. We are seeing the constant, almost incessant creation of new enterprises that are thinking of new and innovative ways to do things, challenging existing players with new technologies and business models. As a result, competition today has two levels: existing incumbents challenging each other and new entrants entering the space to challenge incumbents. In the last few decades we’ve seen countless established companies fall by…

Alistair Erskine Chief Digital Officer, Partners HealthCare MY COLLEAGUE, BEST-SELLING AUTHOR Atil Guwande, recently wrote an article for the New Yorker titled, “Why Doctors Hate Their Computers.” In it, he points to a number of workflow-related issues that are problematic for physicians. Some come down to fragmented workflows due to partial digitization, and some are associated with the fact that the computer feels like it’s ‘in the way’ between the patient and the provider. The thing I hear from clinicians again and again is that between login screens and access to different systems, it takes way too many clicks. Clearly, there are opportunities for improvement. When it comes to AI in healthcare, some practical applications are already in use. A dermatologist is now equal to a computer in terms of…

THE 2020S HAVE ARRIVED, and there are no spoilers. It is likely that the years to come will be marked by geopolitical and economic uncertainty, with continued disruptions from digital challengers. How can business leaders ensure that their organization is primed for innovation and reinvention—and thus as prepared as possible for the relentless change the next decade will bring? The not so secret but often elusive answer: diversity. Our firm recently released a series titled “Winning the 20s: An Agenda for Leadership,” in which we present five imperatives for the next decade for organizations of all shapes and sizes. 1. Master the new logic of competition;2. Design the organization of the future;3. Apply the science of organizational change;4. Achieve innovation and resilience through diversity; and5. Optimize for both social and…

INNOVATION IS WIDELY ACCEPTED as the driving force for organizational growth and competitiveness. Yet academics and practitioners alike continue to lament the slow pace of innovation and seek remedies to accelerate it. One reason for the disappointing pace may be the fact that employees’ creative ideas often fail to receive a positive assessment from management. For example, although Kodak’s research lab invented the world’s first digital camera, its managers failed to appreciate this new product idea, enabling Sony to eventually overtake Kodak as the market leader in the digital photography space. Similarly, while Xerox developed a blueprint for the first personal computer, insufficient investment by its management allowed Steve Jobs and Apple to snatch the opportunity away and exploit it. Research suggests that, despite espousing creativity as a desired goal,…

MANAGEMENT ISN’T WHAT IT USED TO BE. And that just might be the understatement of the century. Every single executive, entrepreneur, manager and employee out there — without exception — must recognize that the century-old traditional management system has become obsolete. Going forward, every organization will be digital. Companies — even entire industries — will be disrupted and destroyed; but at the same time, new market space and enormous economic opportunity is being created. It takes a new kind of organization to thrive in this environment, and we believe Amazon personifies the new formula for winning in the digital age. Its management system breaks new ground in six key ways: BUILDING BLOCK 1: A Customer-Obsessed Business Model Despite their espoused commitment to putting the customer first, most traditional companies tend…

You are the Chief Science Officer at RBC and you also oversee its AI research institute. Describe the bank’s interest in this arena. There are many aspects to our interest in AI. First of all, financial services is a very data-driven business. From the retail side to capital markets, we are making decisions based on data every single day — whenever we estimate risk, work on cases of fraud, or use cyber security models. So for us, it was a natural investment to bring state-of-the-art machine learning to the traditional statistical systems that have been in place in the financial sector forever. But this is about more than upgrading our statistical models: We want to figure out what banking will look like in the future, and how we can use…

The innovation landscape in India covers every industry — from technology to manufacturing and services to government. Which area has seen the most progress? Some really exciting things are happening. India has some advantages in this area from being a ‘late mover’, which has enabled it to leapfrog the competition in many cases. Smartphone plans are a great example. It is a matter of frustration for many Canadians to have to haggle with Rogers and Bell for an extra gigabyte of data. People were thrilled recently when Rogers unveiled its new ‘unlimited’ plan. But it’s not really unlimited at all, because after 10 gigs, they slow down your speed. I visit India twice per year, and whenever I’m there I swap my SIM card for an Indian SIM card. This…

More than 20 years after the Internet went mainstream, you believe a new transformation is beginning. Please describe it. In the 20 years since companies started creating websites, virtually everything about the way we interact with businesses has changed — from movies to books to how we book hotels and rent cars. The only thing that hasn’t changed dramatically is customer service — until recently. Today, the smartest of chatbots — ‘virtual agents’ — are being powered by AI and connected to a customer’s complete past history. As a result, they can anticipate just what the customer is looking for and answer questions through chat, on the phone and through smart speakers like Amazon’s Alexa. This will change everything about how companies and their customers interact. Virtual agents will enable…

You have been involved in start-ups for many years as a founder, co-founder and Chief Technology Officer. In your experience, does entrepreneurship demand specific traits, or can anyone with a great idea do it? I don’t subscribe to the idea that it takes a special something to become a successful entrepreneur. There is no secret sauce. Having said that, in many ways, a major predictor of entrepreneurial success is privilege. Family support, personal background, and financial flexibility provide a definite advantage. As cynical as it may sound, most people who are seen as successful entrepreneurs today have benefited from some kind of privilege. Obviously, there are other requirements and characteristics as well. A mindset that includes passion, drive and ambition plays a key role in success. None of these elements…

Innovation requires creativity, and creativity thrives in a work environment that fits the dynamic needs of modern teams. As today’s organizations strive to become more innovative and resilient, they must adapt their spaces and modes of working to promote creative problem-solving across teams. Following are five conditions for innovation that we have observed in our work at IDEO. 1. Create a shared vision Illustrate the future of your team to show your colleagues what they’re working towards, and what new behaviours they’ll need to adopt to get there. A vision for the future should not only create a shared understanding about what needs to change, but more importantly, explain why. To get started, identify who it is you’re serving, what value your team can provide, and what you need to…

AT ITS CORE, machine learning is concerned with using large data sets to learn the relationships between variables, make predictions and interact with a changing environment. And it is becoming an increasingly important tool in business — so much so that almost all employees are likely to be impacted by it in one way or another over the next few years. Large data sets on variables describing consumer purchases, stock price movements and many other aspects of a business are not new. What is new is that advances in computer processing speeds and reductions in data storage costs allow us to reach conclusions from large data sets in ways that were simply not possible 20 or 30 years ago. Machine learning, also referred to as data science, can be viewed…

IN LATE 2017, a headline in the South China Morning Post declared that “China’s chance to lead global innovation may lie with 5G mobile technology development.” The accompanying story began as follows: “China is on the cusp of recasting itself as a leading technology innovator from a mere follower in the telecommunications industry” — a statement that conveys its growing ambitions to create new technologies rather than adopt existing ones. Since 2006, China has been in fast-forward mode as government ministries have rolled out successive ambitious plans to make the country an innovative society, with a growing emphasis on science and technology and the declared aim to become a world leader in advanced manufacturing and, more recently, artificial intelligence (AI). Can China meet its lofty goals? In this article, I…

We recently undertook a large, cross-country study into the relationship between multiple aspects of managerial diversity, the presence of enabling conditions such as leadership support for diversity, and innovation outcomes. We surveyed more than 1,700 companies across eight countries (the U.S., France, Germany, China, Brazil, India, Switzerland, and Austria) and a variety of industries and company sizes, examining diversity in management positions, measured with respect to gender, age, national origin, career path, industry background, and education. Partnering with the Technical University of Munich for the statistical analysis of the results, we examined the correlation of these variables both individually and collectively, with the percentage of revenues coming from products introduced in the last three years as a proxy for innovation impact. ‘Innovative companies’ were defined as those with fresher product…

WHAT HAPPENS when new and fast-improving technologies create opportunities to unleash untapped sources of revenue—some of them long trapped by market inefficiencies? As digital components become relentlessly better, cheaper and smaller, this is a question that every organization will need to answer. That’s because technology is increasingly creating the tools your competitors — incumbents and entrepreneurs alike — are using to build new digital products and services that target and release latent demand and serve unmet needs. We call that potential revenue ‘trapped value’ — and if you don’t get to it before others, you may find not just your future growth disrupted, but your current business as well. Trapped value to entrepreneurs is like honey to bears: It attracts new sources of capital investment and new entrants eager to…

1. Customer obsession. Leaders start with the customer and work backwards. They work vigorously to earn and keep customer trust. Although leaders pay attention to competitors, they obsess over customers. 2. Ownership. Leaders are owners. They think long term and don’t sacrifice long-term value for short-term results. They act on behalf of the entire company, beyond just their own team. They never say “that’s not my job.” 3. Invent and simplify. Leaders expect and require innovation and invention from their teams and always find ways to simplify. They are externally aware, look for new ideas from everywhere, and are not limited by “not invented here.” As we do new things, we accept that we may be misunderstood for long periods of time. 4. Leaders are right a lot. But not…

AS OF JUNE 18, 2019, Facebook’s closely guarded cryptocurrency project was no longer a secret. That’s the day the Creative Destruction Lab (CDL) announced that it would be joining Facebook and 26 other organizations as a founding partner of the Libra Association to create Libra — a simple global currency and financial infrastructure that will empower billions of people. Headquartered in Geneva, the Libra Association will govern the infrastructure and manage and evolve this new ecosystem, enabling developers and businesses to build inclusive new financial service products for people around the world. Set to launch in 2020, the currency will be backed by a reserve of real assets, providing low volatility and encouraging widespread global acceptance. The goal is for thoughtfully designed ‘smart contracts’ operating on a widely accessible and…

Your latest book is all about disruption from within an organization. What does it mean to ‘disrupt it yourself’? ‘Disrupt it Yourself’ is a play on the traditional DIY, or do it yourself. It underlines the importance of not waiting for others to solve your problems or disrupt your business. The fact is, a threat of disruption already exists within most established businesses — and added to that is the daily threat of disruption from new players and start-ups. In my work, I emphasize the opportunity traditional organizations have to disrupt themselves, as well as their entire industries. I encourage them to harness the power of the people and the ingenuity that is already inside of their organization to create better, more relevant solutions for their end users. In the…

Application program interface (API)—A set of protocols that allow computer systems to communicate and share data with each other. For example, an API could allow a virtual agent system to query a banking system about a specific customer’s bank balance. Bot—Short for chatbot. Chatbot—Any automated system that a human can converse with by voice or by text chat. Virtual agents are one class of chatbot. Containment—A term for calls or chats where the virtual agent can solve the problem on its own, without referring the question to a human agent. The percentage of calls or chats handled solely by the virtual agent is the containment rate. Corpus—A body of data, such as the complete transcripts of all the text chats that human support reps have had with customers, along with…

MANY WELL-ESTABLISHED COMPANIES KNOW that innovation is critical but have only just begun to test the waters. Others have set sail and are learning to navigate. The most advanced are mid-voyage, deep into their quest. Wherever they are on their journey, companies that are especially good at cultivating innovation don’t view it as a task or a project with a set goal. Instead, they envision a permanent state of evolution and exploration. Working with Dynata, a leading data provider, we recently surveyed more than 1,200 executives actively engaged in innovation. Our overall finding: Experienced innovators grew their market capitalization at a five-year compound annual rate of 9.5%, compared with just 0.5% for those with the least experience. One of the survey’s most striking findings was the clear value of pursuing…

In September of 2019, Rotman Assistant Professor Peter Wittek went missing during a mountaineering expedition in the Himalayas, after being caught in an avalanche. Peter was a valued member of the Rotman community and his loss is keenly felt. We are honoured to end this issue on Creative Destruction — a topic Peter was passionate about — with his final interview, which took place in July of 2019. You oversee the Creative Destruction Lab’s Quantum stream, which seeks entrepreneurs pursuing commercial opportunities at the intersection of quantum computing and machine learning. What do those opportunities look like? Peter Wittek: We’ve been running this stream for three years now, and we were definitely the first to do this in an organized way. However, the focus has shifted slightly. We are now…