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150 Fall 2018

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Artificial Intelligence Real leadership


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Contents #150

REPORT

Artificial Intelligence Real leadership

8

Will AI force us to rethink business?

THE KEY WORDS

A primer of artificial intelligence concepts from IESE’s Javier Zamora

20

How companies are adopting AI Facts and figures on the industry 30

How to separate hype from reality Interview with IBM’s Darío Gil

People, computers and the future of jobs Interview with MIT’s Thomas W. Malone

22

Why management matters IESE’s Jordi Canals reflects

32

26

Jordi Canals

Professor of Strategic Management at IESE, and dean from 2001 to 2016.

Darío Gil

Chief operating officer of IBM Research and vice president for AI and quantum computing at IBM. PhD in Electrical Engineering and Computer Science from MIT.

Thomas W. Malone

Professor of Management at MIT Sloan School of Management and founding director of the MIT Center for Collective Intelligence.


THE BIG PICTURE Where do women lead?

HACK

36

Of course you want to innovate. But how?

38

Are you an effective executive?

40

6 strategies to get the most out of feedback

40

+IESE Generations at work

Thoughts on today’s workplace 

Auditing the World Bank

In first person with Yuko Keicho 

When your VC is a helping hand

Funding and much more for alumni 

Bankers in the fintech era

Understand the transformation 

42 46 50 56

KNOW A road map for successful strategy execution

62

By Fabrizio Ferraro, José Miguel Argüelles and Massimo Maoret

It’s time for chief digital officers

72

By Sanja Tumbas, Nicholas Berente and Jan vom Brocke

How design can boost social impact and business results

76

5 ways managers can enhance their mediating skills

84

By Manuel E. Sosa

By Kandarp Mehta and Ignacio Ripol

How to handle crises The experience of Axel Lambert de Rouvroit 

52

SMART PICKS Voices that matter What to listen to

58

FULL STOP The art of work

Yuko Keicho

Director of strategy and operations, Internal Audit Vice Presidency of the World Bank Group.

92


EDITOR’S NOTE

Antonio Argandoña Director of IESE Business School Insight argandona@iese.edu

A

New, and true to ourselves new magazine? Or just a facelift? Well, neither. When we embarked on a redesign of our magazine, we started by asking ourselves two questions: What is our mission? and, What are our strengths? You have the answers to those questions in your hands. This magazine’s mission is to communicate IESE’s mis-

sion: to form leaders who aspire to have positive and long-lasting impact, and who work with integrity, a commitment to service, and high standards of professionalism and responsibility. We would like this magazine to be useful to executives the world over. How? By inspiring them and by featuring research that provides answers to many of their most pressing business questions. And, of course, this continues to be our magazine for alumni, now in issue number 150. Our alumni developed at IESE their potential to transform people, companies and society. They didn’t come just to learn, but, above all, to learn how to learn. We hope this magazine serves as a tool for continuous education, exploring new topics, because the world changes; recounting new experiences, because we all can learn from one another; and providing opportunities for reflection – all told with originality, lots of graphics and a casual feel, in keeping with the times. In these pages, you’ll find the Report, a thought-provoking look at a current business issue; a section of articles about some of the individuals who have passed through the halls of IESE and are now making their mark; infograhics and management tips; and a closing section with in-depth articles by our professors. What are our strengths? Two come to mind immediately. First: IESE’s human resources, especially our professors. Multidisciplinary and international, provocative and challenging, these educators and innovators are always thinking about what managers need… And second: our alumni. We want the magazine to be a continuation of the program of study that they undertook at IESE: an encounter with our professors and colleagues, and a way to stay current and progress as professionals and people. We hope you like it. Keep sending us your thoughts and suggestions.


REPORT

Real leadership


Will artificial intelligence force us to rethink business in the decades to come, or will it fall short of all the hype? Here, a look at what executives need to know.


REPORT

Artificial Intelligence, real leadership

A

s artificial intelligence (AI) expands the boundaries of what computers are capable of, it also puts new demands on executives to understand these evolv-

ing technologies, to find practical applications for them in their companies, and to resolve the unique ethical dilemmas arising from machines with ever more human qualities.

Competitive advantage in an AI world

For many, it’s a whole new world. While artificial

Strategy is not immune to the wave of

intelligence may come to define business trans-

change brought on by AI.

formation in the 21st century, most people are unable to describe what AI actually is, or to gauge its

In the short term, companies might find

potential impact on their companies and society.

competitive advantage in being early

AI is the new IT. It means lots of different things to different people

adopters of AI. In the medium and long term, however, today’s cutting-edge technologies will become ubiquitous. The advantages of having access to data and algorithms will diminish. So if the heart of competitive advantage is strategic differentiation, how then will companies achieve it? The answer may lie in taking a step back from the technology and considering another resource: people.

“AI is the new IT. It means lots of different things

Algorithms excel at being hyper-

to different people,” says Dario Gil, vice pres-

rational: extrapolating and drawing

ident for AI and quantum computing at IBM. AI

logical conclusions to maximize

in its most straightforward definition means the

efficiency. People who are rational

demonstration of intelligence by machines. The

thinkers are easy to manage and fit

AI field includes machine learning, neural net-

well into organizations. But hyper-

works and deep learning. But AI has also become

rationality carries within it a profound

an umbrella term for many other related subjects,

problem when it comes to defining

including big data.

strategy. Firms that rely on the same or similar reasonable big-data

“AI now is what Marvin Minsky, co-founder of the

analyses and algorithms as everyone

Massachusetts Institute of Technology’s AI labora-

else will struggle to differentiate

tory, used to call a ‘suitcase word,’ in the sense that

themselves strategically.

it contains many different meanings. We need to move from this to the specifics,” says IESE profes-

Human beings, with highly developed

sor Javier Zamora.

soft skills, can consider the emotional context and connections of strategic

10 | IESE Business School Insight | Fall 2018


decisions. They can be contrary and ask difficult, unexpected questions that result in actionable insights. They have imagination and can make intuitive leaps that AI is, at best, many decades away from replicating.

AI and its impact on management have been the focus of a number of forums at IESE in

One of the key roles for human man-

recent months, gathering industry executives

agers in helping companies differen-

and academics to consider what it all means for

tiate themselves will be to go to the

the future.

core of exploring what a company is – to consider its purpose and

Six decades of stops and starts

identity, to set its goals for the future.

While companies are investing more in AI than

The human capacity for moral and

ever before, it is not a new concept. Artificial in-

spiritual discretion will be paramount

telligence was founded as an academic discipline

to the sustainability of companies.

in 1956, and business felt the first tremors of this seismic shift in technology in the 1950s, when

Good managers also have the ability

early computers gave retailers the power to col-

to make tradeoffs. They reconcile

late sales data on an unprecedented scale.

different points of view within a company and manage complex and

But AI has historically struggled to find practical ap-

unaligned stakeholder demands. They

plications that live up to its promise. It did not work

balance the need to make short-term

well enough to be useful for most companies until

profits with the need to take risks

the last 10 years or so, when lower-cost computa-

for longer-term growth, despite the

tional power and more sophisticated algorithms

uncertain payoffs.

intersected with the vast data sets that could be harvested from the internet and other sources.

AI brings us to an inflection point in strategic decision-making for competitive advantage. Managing it successfully will depend on keeping a clear view of differentiation. We must harness the power of technological change without allowing ourselves to get swept away by its trends,

precisely because everyone else is.

Virtual assistants like Siri, Google Assistant and Alexa are some of the user-friendly forms of AI

Strategy differentiation will depend on how firms combine technology with their internal organizational capabilities and their ability to be more human – and sometimes unreasonable, emotional, insightful and creative – and not more machine-like.

Bruno Cassiman

Professor of Strategic Management and holder of the Nissan Chair of Corporate Strategy and International Competitiveness at IESE

Fall 2018 | IESE Business School Insight | 11


REPORT

Artificial Intelligence, real leadership

on top management teams’ and

of those decisions. In recruitment, for

boards’ agendas.

example, if the focus is exclusively on reducing costs instead of identifying

AI can help us move past broad initia-

better hires, the long-term outcome

tives, so we can focus on individuals.

could be worse for everyone.

The ability to analyze data and identify patterns will allow us to pinpoint

It is also imperative that companies

with greater accuracy what each

guard against the lure of what Wharton’s

person is likely to be good at, based

Peter Cappelli calls “cool tools.” Today’s

Managing talent with data and humanity

on current strengths.

recruitment and people-management software tools tend to be strong on engi-

AI can also help managers make

neering and weak on psychology. They

informed decisions on training. As data

have been developed by people who,

sets grow, algorithms will be able to

in the main, lack significant real-world

detect what’s working across organi-

management experience. The claims

Companies are increasingly using artifi-

zations and suggest how to implement

developers make for them may not lead

cial intelligence to assist decision-mak-

best practices in ways tailored to

to better real-world results.

ing on HR strategies. AI tools open up

individual needs. For employees, this

new possibilities in understanding the

should result in greater job satisfac-

Fairness is another concern. Algorithms

strengths of a company’s workforce as

tion, learning and productivity.

can be systematically biased, reflecting

well as tailoring its talent development

hiring managers’ biases regarding anyAt the level of corporate governance, AI

thing from gender to race to education.

can help boards understand and offer

Biases risk being replicated at scale

This is not a peripheral issue. Better

better guidance on talent issues. For

across a whole company.

performing companies are those

this to happen, board members must

that foster the adaptation abilities

get informed about data and AI. And

Human oversight of AI decisions will

of their workforce, developing and

HR managers must get their data house

increase in importance as the power

compensating professionals who

in order. Most HR departments don’t

and ubiquity of the technology grows,

contribute to innovation. Firms’ long-

gather nearly enough suitable infor-

requiring a people-first approach from

term sustainability greatly depends

mation, and they frequently compound

managers with emotional intelligence

on their competence in managing

the problem with suboptimal database

and integrity.

their high potentials and encouraging

management. When companies do

creativity through diversity. This

have databases that are large and well

means making sure that human

organized enough to deploy AI tools,

practices to strategic goals.

capital strategies are prioritized

they must then consider the objectives

Marta Elvira

Professor of Managing People in Organizations and Strategic Management, and holder of the Puig Chair of Global Leadership Development

The most relevant competency for managers is to know what’s possible 12 | IESE Business School Insight | Fall 2018


“What made possible the recent successes of artificial intelligence and deep learning are basically two ingredients that were missing some years ago: access at relatively low cost to very high performance computing and of course the availability of lots of data,” says Ramón López de Mántaras, director of the Artificial Intelligence Research Institute at the Spanish National Research Council. “The concepts have been around for a long time. But actually AI right now is still in its infancy.” Nonetheless, some are beginning to view AI as a so-called general purpose technology, capable of transforming broad sectors of the economy, on par with developments such as the steam engine, electricity and the internet. Beyond the large high-tech companies that have been early adopters, today

Can we do what we do better with AI? What new

AI is penetrating the automotive, telecommunica-

opportunities can we explore? How can we create a

tions and finance sectors. It is being used in retail

desirable society together with AI?

and the media, and is seen as having enormous potential in areas such as healthcare and education.

From narrow to general and back

Current AI technology is “narrow,” capable of workJulian Birkinshaw, a professor at London Business

ing at superhuman speed on specific tasks in specif-

School, describes the growing ubiquity of AI by

ic domains – such as language translation, speech

using the analogy of living in a mountainous world

transcription, object detection and face recognition

and watching the waters gradually rising. At pres-

– given good enough data. But we are already on the

ent, he says, AI is about making existing process-

path to “broad” AI, which will be highly disruptive.

es more efficient. We believe that we are on safe ground – that there are tasks only humans can

To “teach” the algorithms that AI uses, humans

do, requiring cognitive insights that AI will never

still often need to label the first data sets them-

reach. But he cautions against complacency. “The

selves (for example, by identifying objects in pho-

future,” he says, “will be very different.”

tos). This is an expensive process and, as a consequence, most organizations don’t have enough

Our own cultural attitudes may determine the

labeled data. That is one of the reasons that many

success of this adaptation. Tomo Noda, founder

of the companies which have incorporated AI into

of Shizenkan University in Japan, points out that

their core businesses have been large, digital na-

Japanese media frequently depicts AI as friendly

tives such as Google and Amazon.

and here to help us, citing Doraemon and Astroboy as examples. He contrasts that with the dystopian

Broad AI will be able to transfer some learning

visions presented by Hollywood in movies such

across networks, or use reason to create its own

as AI, 2001: A Space Odyssey and The Terminator.

labels, thus learning more from less data. Narrow

Noda urges us to reframe our engagement with the

AI needs a new neural network for each task but

new technology by asking more positive questions:

broad AI will multitask across multiple domains.

Fall 2018 | IESE Business School Insight | 13


REPORT

Artificial Intelligence, real leadership

Beyond broad AI, “general” AI, with full cross-do-

scientists from big tech companies to implement

main learning and autonomous reasoning, will be

advanced AI solutions. But they had little success.

truly revolutionary. But machines capable of rea-

Switching tack, Bertelsmann began focusing on

soning and understanding the way humans do are

building an organizational ecosystem that supports

decades away, and fears of “singularity” – the mo-

data readiness. Hiring is part of that, but so is con-

ment when AI surpasses human intelligence and

tinuous education and learning for all employees.

evolves beyond our control – are premature. Still, those concerns will one day have to be addressed.

New management competencies

Today’s university students face the prospect of forging their entire careers amid the changes AI will bring – and they need to be prepared.

And even narrow AI requires new knowledge and

Over 1,000 Stanford students enrolled in an

abilities of management. Studies have shown that

introduction to machine learning class this past

AI is most successfully deployed in companies

academic year. Professor Jeffrey Pfeffer explains:

where it is prioritized by the highest-level execu-

“They don’t want to be computer scientists; they

tives. Executives must have a basic understanding

just know it’s an important tool for everything.”

of data and its potential uses, to have a sense of which tasks are best handled by AI and which are best left to humans, and of how to enable their teams with these new technologies.

The humans in the mix

There are also limits. Wharton’s Peter Cappelli calls the corporate world’s new obsession with data “the revenge of the engineers.” He says that

That is not to say that executives must be data sci-

management is in part to blame for this in areas

entists or computer programmers. But they do need

such as human resources because it has devel-

to be able to ask the right questions. “The most rel-

oped so many theories that have failed. But rather

evant competency for managers is to know what’s

than turn people divisions over to data scientists,

possible,” says INSEAD Dean Ilian Mihov. “Algo-

executives should reconsider how they manage,

rithms will find patterns in the data but they can’t

evaluate and motivate people.

interpret them. Managers have to think about what might be happening. Then ask themselves how they

For the World Economic Forum’s Anne Marie En-

can create an experiment to test if it’s true.”

gtoft Larsen, those skills are not all about technology. “I think there is a huge need for us to go back

For IESE’s Zamora, putting AI into practice be-

to some of these more social, human sciences,

gins with a series of basic questions that exec-

such as complex problem solving, critical think-

utives must ask themselves: Is AI relevant to

ing, creativity, people management, coordination

the problem that I’m dealing with? Do I have

with others, and emotional intelligence.”

enough high-quality data to train the system to produce solutions? Are there tools such as soft-

And executives should reflect on what they do

ware and algorithms available that can be ap-

best and focus on how their strengths differ from

plied to this problem? Can I trust the results of

those of AI. There are some areas of strategic de-

the algorithms?

cision-making where humans will always have an advantage. These includes injecting creativity, orig-

Data readiness must go beyond the management

inality and emotion into issues, and making con-

level. Creating a data-fluent corporate culture is

cessions. The most insightful strategies, LBS’s Bir-

essential. Nico Rose, vice president of employer

kinshaw asserts, are often taken from metaphors

branding and talent acquisition at Bertelsmann,

from very different spheres. “That’s a very human

recounts how his company hired brilliant data

quality,” he says, “to see a pattern in something

14 | IESE Business School Insight | Fall 2018


THOUGHTS FROM AROUND THE GLOBE “Without defining values we cannot deal effectively with problem solving” Tomo Noda / Shizenkan University

“We need to have a discussion around what values are going to guide how we develop these technologies” Anne Marie Engtoft Larsen

World Economic Forum

“If you look at the evidence of what creates long-term value for the firm, it is customer asset building and brand asset building, which require that holistic view. And so far, I have never seen a computer build a brand” Dominique Hanssens University of California, Los Angeles

Fall 2018 | IESE Business School Insight | 15


REPORT

Artificial Intelligence, real leadership

unrelated and link it back to the world in which we’re working. I can’t see how computers can do that.” He believes it is worthwhile to go back to basics and ask: What is a strategy? Citing American professor and author Michael Porter, he defines strategy in two dimensions: as choices that lead to actions, and – in the case of successful strategies

Thinking outside the black box

– as being differentiated. A good strategy, in other

The next major phase in the evolution

words, is different to that of one’s competitors.

of artificial intelligence has already begun. Managers need to be aware

If companies rely on similar data sources and

of what’s possible, not only now but

algorithms

also around the corner, and the impli-

for AI-supported

strategic

deci-

sion-making, differentiation could be lost. Purely

cations it will have for how we work.

quantitative decisions can be too sterile; emotional conviction still adds value.

There is a huge need to go back to some of the more social, human sciences “Planning, budgeting and organizing can be done

Today’s AI falls mainly into the category of so-called “narrow” AI, with enough computing power to deliver superhuman accuracy and speed when performing single tasks in single domains. Hence, despite its raw power, its applicability remains relatively limited. However, “broad” AI has the potential to be much more disruptive, once it is able to operate in a multitask, multi-domain, multi-modal manner. In the near future, broad AI will impact risk modeling, prediction making and even strategic planning.

by AI,” says Shizenkan’s Noda. “But establishing vision, aligning people and motivating them re-

In this world where AI can make

quires people.”

faster, better-informed decisions than humans, what will the role of

Executives also must reflect on why firms exist,

managers be? The answer to that

in order to clarify their own roles within them

can be found in some of AI’s inherent

in a changing AI world. A key reason is to craft

limitations, which even broad AI is

a sense of identity or purpose. Successful com-

unlikely to overcome.

panies understand this and know who they are. A second reason firms exist is because they are

For all their power, algorithms don’t

good at managing complex tradeoffs, even over

solve everything and will only ever

time and in the face of shareholder pressure. AI

be as good as the data fed into them.

is not good at this and is unlikely to become so.

Self-reinforcing biases are a real risk, as was demonstrated by an MIT research project in 2018, which discovered that leading AI-powered

16 | IESE Business School Insight | Fall 2018


face-recognition systems were “racist” – incorrectly determining the gender of dark-skinned females because the algorithms had been trained primarily with images of white males. Another system used by U.S. courts was found

AI over time

to be prone to misjudge the likely recidivism of black defendants because of biased data. Human managers will need to be trained to be on the alert for such potential biases in order to provide a safeguard against blind acceptance of AI-generated decisions. This “decision curation” is especially important in the face of another AI characteristic – “black-box” decision-making. This is the idea that we can understand what goes into AI systems (data) and

FIRST WAVE

mid 1950s to early 1970s Term “artificial intelligence” used for first time in 1956, amid a surge in interest in this new field

what comes out (useful information), but not what goes on inside. As AI becomes more sophisticated, the math it uses is becoming so complex that it is sometimes beyond human comprehension – even for the people who wrote the algorithms. As a result, we can’t “show the working” and explain how AI reaches its conclusions.

output is used to make important – perhaps even life or death – decisions. Managers, therefore, must understand the context in which black-box AI decisions are to be implemented, and consider their consequences. To do this requires a (thus far) uniquely human quality: imagination. Companies often pay lip service to the idea of

ing diverse points of view.

Bringing ethics to the table

AI raises the spectre of machines that we create but that may one day surpass us, of computers that we program but that may take decisions we do not fully understand, of robots that assist us but that may make mistakes. All of this generates a host of new ethical quandaries, particularly around issues of fairness, accountability and transparency. The fairness debate, in part, centers around the danger of perpetuating biases. While data sets are ostensibly objective, they actually reflect ingrained biases and prejudices. If data is then fed

SECOND WAVE

into algorithms, how can we ensure that those bi-

mid 1980s

ases are not embedded into the future?

Government funding and AI programs with practical applications spark renewed interest in AI

This has implications for transparency and accountability when the system’s

Nor is it good at building processes for reconcil-

Accountability has to do with deciding who is ultimately responsible for systems, particularly when something goes wrong. As machines become more autonomous, there are increasing questions about where responsibility lies among those who design and deploy the systems, and the systems themselves. Who is responsible if a cognitive ma-

THIRD WAVE

mid 1990s to present More powerful computers, better algorithms and more data cause AI to flourish

chine takes the wrong decision? Transparency and explainability become issues as AI-assisted decisions become less easy to understand. How can decisions be interpreted and understood if we don’t understand how they are arrived at? As AI algorithms become so complex that even their authors don’t fully understand them, how can we explain and justify the decisions they make?

thinking outside the box; in the future,

These are unique dilemmas, although ethicists

this will be a literal necessity. The abil-

also warn against exceptionalism in the AI debate.

ity to ask “what if?” – to look before

Previous ethical debates, such as those surround-

leaping – is paramount to effectively

ing medicine or nuclear energy, have much to

and ethically harness the power of AI.

contribute to the conversation.

Sandra Sieber

Professor and head of the Information Systems Department at IESE Fall 2018 | IESE Business School Insight | 17


REPORT

Artificial Intelligence, real leadership

For most companies, the ethical questions will re-

The implications of AI go well beyond the business

late more to AI’s application than its technological

sphere, involving policymakers and governments.

development. Even narrow AI is affecting society

Stanford’s Pfeffer believes that governments lack

at large, rapidly making some jobs and industries

the skills they need to manage the employment

obsolete while creating new ones, which require

changes AI will bring. “Advanced, industrialized

completely new skill sets.

countries have done a bad job of managing the move from manufacturing to services,” he says.

While businesses adapt to the AI-fueled Fourth

“They will struggle here too, especially with age-

Industrial Revolution, millions of people around

ing and sometimes shrinking populations, budget

the world have failed to benefit from the advanc-

deficits and rising social costs for healthcare. How

es of the First, the Second, or the Third.

are they going to find the resources to reskill or upskill large numbers of people?” Reflecting on the possible political and social implications, he adds: “We have to do better this time.” Business leaders in the AI era will need to consider how their use of technology affects society. They will need to think of the human consequences and ethical dimensions of their AI-derived decision-making. And ultimately they will have to manage businesses by relying on what sets them apart from machines.

18 | IESE Business School Insight | Fall 2018


of incoming information. Cognitive

AI will increasingly automate business

flexibility increases the creativity with

processes, which implies fewer people

which information is interpreted and

will be involved in operations. At the

alternatives are generated.

same time, AI will increasingly free talent from the constraints of location.

Data readiness starts at the top

Top management teams may not

Management structures will become

need coding skills or deep technical

much more fluid. Managers from any-

knowledge of AI, but they do need a

where in the world can use AI to make

robust understanding of its possibili-

better-informed decisions.

and consider all the angles, without

Advances in automatic translation

Artificial intelligence promises to be a

prejudice or fear. Shaping an organi-

and virtual assistants will allow the

powerful driver of change in ways we

zational culture that encourages this

brightest talent to manage more easily

cannot yet forecast. Even so, it’s worth

open, agile, multidisciplinary culture

and effectively in international and

considering how management should

is crucial.

multicultural settings, even if working

ties in order to ask the right questions

prepare their companies for some of

remotely. AI will help geographically Usually, any cultural change should

dispersed managers get the best from

start by educating those at the top.

individual team members, wherev-

Data will be the most important com-

Again, my research has shown that

er they are. Multidisciplinary teams

modity of the future. As such, a top-to-

what goes on in the C-suite has an

in diverse locations will be linked by

bottom company culture of readiness

influential effect on the rest of the

AI-derived best practices, tailored to

– in terms of data governance, archi-

organization. So, the more the top

their own needs. The more participa-

tecture, traceability, accessibility and

management team is able to model

tive, integrative and cooperative the

visualization – will be a prerequisite to

the behavior it seeks, the more mid-

leadership is, the more motivational it

survive and thrive in an AI world.

dle managers and other employees

is for employees. For all AI’s disrup-

will start to align their own behavior

tive effects, it’s worth sticking to the

In my research on top management

and get excited about the possibilities

foundations upon which successful

teams, I have found that the ones

of AI. In an attempt to be the change

organizational cultures are built.

that operate at peak performance

they seek, many leading companies

are those that exhibit high cognitive

are actively recruiting MBAs who are

flexibility – meaning they are open

further along the AI learning curve

to new ideas, take a lot of different

than senior management, so their

perspectives into account, and are

knowledge and enthusiasm can per-

able to change their opinions in light

meate the entire organization.

the changes that we can already see.

Anneloes Raes

Professor of Managing People in Organizations at IESE

Fall 2018 | IESE Business School Insight | 19


REPORT

Artificial Intelligence, real leadership

THE KEY WORDS 01

GENERAL ARTIFICIAL INTELLIGENCE

The theoretical potential of artificial intelligence to simulate human-level cognition, taking complex decisions in varying contexts

02

SINGULARITY

The possible moment when machines, powered by artificial intelligence, will be able to surpass all human intelligence

Artificial intelligence in recent years has found some of the practical business applications that had eluded it for decades. But while the successes are many and growing, most experts agree that AI is decades away from reaching human-level intelligence – if, indeed, that will ever be reached. Here, a primer of key AI concepts from Javier Zamora, senior lecturer in IESE’s Department of Information Systems.

20 | IESE Business School Insight | Fall 2018

03

NARROW ARTIFICIAL INTELLIGENCE Artificial intelligence that is applied to a single, well-defined task such as language translation or facial recognition

04

MACHINE LEARNING When computers are able to detect patterns and make predictions and recommendations (prescriptive) based on systems that learn from experience (data)


06

DEEP (and SHALLOW) LEARNING Deep learning involves neural networks with many layers, while shallow learning involves few layers

07

BLACK BOX The ability of computers to reach conclusions in ways that humans cannot necessarily explain or understand

05

NEURAL NETWORKS A set of nodes connected in layers, in which each layer provides input to the next through forward propagation and back propagation

08

REINFORCED LEARNING

10

SUPERVISED (and UNSUPERVISED) LEARNING The two main types of machine learning algorithms. With supervised learning, data scientists must label data and guide outputs. With unsupervised learning, the computer identifies patterns on its own

When the machine is told only the goal of a given task, and through trial and error tries to maximize that goal

09

TRANSFER LEARNING

11

A focus on storing knowledge gained while solving one problem, and applying it to a different but related problem

ROBOTICS A branch of technology dealing with devices – often robots – that can sense and react to their surroundings

12

NATURAL LANGUAGE PROCESSING The part of AI dedicated to making computers understand and process human language


REPORT

Artificial Intelligence, real leadership

DarĂ­o Gil

Chief operating officer of IBM Research and vice president of AI and quantum computing at the technology giant. PhD in Electrical Engineering and Computer Science from MIT.

It is imperative for leaders to separate AI reality from hype


There are usually two visions of AI: a utopia of machines improving our world and a dystopia where humans are superfluous. Which is the real one? I would say that neither of these is the reality of AI. We have seen its rise being accompanied by both these perspectives: boundless enthusiasm for its ability to transform our lives, and fear that it could potentially harm and displace us. At IBM, we are guided by the use of artificial intelligence to augment human work and decision-making. Our aim is to build practical AI applications that assist people with well-defined tasks. There’s no question that the arrival of artificial intelligence will impact certain jobs, but we believe people working collaboratively with AI systems is the future of expertise. Then how will AI change employment? History suggests that, even in the face of technological transformation, employment continues to grow. It is the tasks that are automated and reorganized where the transformation occurs, and workers will need new skills for these transcredit :

IBM

formed tasks. Some new jobs will emerge: “trainers” will be required to teach AI systems how to perform, and another

A

category of “explainers” will be needed to help convey how these intelligent devices have arrived at a decision. In some areas, a shortage of qualified professionals may exist and the rtificial intelligence (AI) is evolving faster by

emergence of AI systems further highlights the need for in-

the day and its application impacts almost

dividuals such as cybersecurity professionals.

every industry. But it also affects the way corporations work. IBM’s Darío Gil knows

Do we need to understand algorithms to be able to work

firsthand how this technology is creating

with them?

new challenges for leadership and management. Here, Gil

I don’t believe that it is mandatory for every AI system to

talks about the present and future of AI as well as his vision of

be understandable at a very precise level, but I expect us to

quantum computing.

reach a foundation of trust through our testing methodologies and experiences. In some cases, users of AI systems,

What do you mean when you say that AI is the new IT?

such as doctors and clinicians, will need to justify recom-

As happened with IT, many companies are viewing the cre-

mendations produced by one of these systems.

ation and adoption of AI as an essential part of their success. There are parallels in today’s efforts with the previ-

How can business leaders adapt to the new AI landscape?

ous IT experiences: corporations are creating internal AI

It is imperative for CEOs, senior leaders and managers to

departments and aggressively recruiting AI experts, trying

become knowledgeable about AI, to separate reality from

to determine how this technology might be used. Further-

hype and to start developing a strategy on how they might

more, the hype around AI is increasing every day. The term

use AI systems within their business. The nature of lead-

has become a buzzword which is replacing other tech terms

ership will likely change in many aspects of the “hard” el-

such as IT, automation and data analysis; many times, in

ements, such as data-driven decision-making, and leaders

ways that aren’t really about AI.

will need to embrace “softer” aspects of leadership, such as Fall 2018 | IESE Business School Insight | 23


REPORT

Artificial Intelligence, real leadership

helping their employees work together. They will also have to identify ways to enable the partnership between their workers and the AI systems. What organizational challenges will companies face? One major challenge is determining whether their company will drive the AI strategy and capabilities internally, or whether they will work with external organizations to get support. Many considerations impact this decision, including the ability of the company to attract, develop and retain key AI talent. I also believe that it is critical for companies to have a senior leader focused on AI strategy and execution for their business. It could be achieved through the creation of a new role such as the chief AI officer, but it could also become part of the responsibilities of existing leaders, like the chief technology officer or the chief data officer. How do you envision the impact of quantum technologies?

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IBM is focused on advancing quantum information science

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and looking for practical applications for quantum comput-

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ing. In September 2017, our team pioneered a new approach

Creating the quantum computers of tomorrow. An IBM cryostat wired for a 50 qubit system. credit : IBM

to simulate chemistry on our quantum computers. Now, we expect the first promising applications: the discovery of new algorithms that can run on quantum computers and untangle

CMY

complex optimization problems and address artificial intelli-

scientific achievements in areas such as material design, drug

gence challenges. These advances could open the door to new

discovery, portfolio optimization, scenario analysis, logistics and machine learning.

24 | IESE Business School Insight | Fall 2018

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the complexity of molecular and chemical interactions, tackle

“Business leaders and managers must take the first steps in being informed about AI and quantum computing”

CM

What other steps have to be taken in the coming years regarding AI and quantum technologies? Business leaders and managers must take the first steps in being informed about AI, quantum computing and the potential impacts and benefits to their companies. We have to move from a narrow to a broader form of artificial intelligence that enables the application of AI systems from one task to another. Leaders must begin to define a strategy for the development and use of it for their specific business, and then their style of leadership will evolve to embrace the value that this brings in decision-making. For quantum computing, we encourage organizational leaders to become “quantum ready”: to get educated on quantum computing, identify applicable use cases and explore the development of algorithms that may lead to demonstrations of quantum advantage.

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REPORT

Artificial Intelligence, real leadership

Thomas W. Malone

Professor of Management at MIT Sloan School of Management and founding director of the MIT Center for Collective Intelligence. Inventor on 11 patents, co-founder of four software companies.

26 | IESE Business School Insight | Fall 2018


A lot of people are more worried than they need to be about computers taking away jobs

I

f artificial intelligence awakens fears of a dystopian

ogy helps us do two kinds of things. The first is perhaps the

workplace where machines replace humans and hu-

newest, which is that computers can sometimes do intel-

mans exist in lonely isolation, MIT’s Thomas W. Malone

ligent thinking themselves. They can use their specialized kinds of artificial intelligence – because no computer today is anywhere close to having the general intelligence that any normal human has – to help do some of the actual thinking that needs to be done to solve whatever problems these human groups are trying to solve. These computers can also provide what I call hyper-connectivity: connecting people to other people and also to computers, at a scale and in rich new ways that were never possible before.

imagines just the opposite. He sees a future in which groups of people, aided by technology and connected

as never before, are able to take smarter decisions. His new book, Superminds: The Surprising Power of People and Com-

puters Thinking Together, looks at these human-computer collaborations. What is a supermind? I define superminds as groups of people, and often computers, working together in ways that at least sometimes seem intelligent. These superminds are around us all the time and come in many different shapes and sizes, all the way from hierarchical organizations to local town hall democracies, from global markets to scientific communities and local neighborhoods – and many, many other kinds of groups. These superminds run our world. It’s these groups of people, not individuals, that are responsible for almost everything that humans have ever accomplished. If humans have always worked in groups, what’s new? What’s new is that we have a new communication technology that’s far more powerful than any communication technology that we have had before. This new computer technol-

How do we know group decisions are better decisions? I don’t think there’s any guarantee that they’ll always be better, but I think in general the odds improve. It of course depends on the kind of decision. But there are a number of potential benefits you get from larger groups. One is just brute force. Many kinds of work, including many kinds of intellectual work, require just a lot of thinking, a lot of possibilities that need to be tried, and if you can try 10,000 rather than 10 of them you’re more likely to find one that works better. Another thing that larger groups do better than smaller ones is that they can more easily have more diverse points of view. They look at the problem from more perspectives and are more likely to see different opportunities for how to evaluate things or more things to try. With large groups you also have more possibilities of finding people with very unusual capabilities. Fall 2018 | IESE Business School Insight | 27


REPORT

Artificial Intelligence, real leadership

With AI, will computers do more of the thinking? We have to realize the difference between two kinds of intelligence. The first is specialized intelligence: the ability to achieve specific goals in specific environments. The second is general intelligence: the ability to achieve a wide range of different goals in different environments. Even the most advanced artificial intelligence systems in the world today are only capable of specialized intelligence. Any normal human five-year-old

“It’s easy to imagine machines that are as smart as people. It’s a lot harder to build such machines”

kid has far more general intelligence than the most advanced artificial intelligence program in the world today. Until we have computers that are as good as people at every-

very skeptical of anyone who confidently predicts that we’ll

thing people can do, humans have to be involved in every use

have human-level artificial intelligence any time in the next

of computers. They have to decide which programs to run

few decades. It’s easy to overestimate the potential of artifi-

with. They have to decide what to do when things go wrong.

cial intelligence because it’s easy to imagine machines that

And often they’ll be doing the parts of the problems that the

are as smart as people. It’s a lot harder to build such ma-

machine couldn’t even do at the beginning.

chines than imagine them. What does this mean for the future of work? I think that a lot of people are more worried than they need to be about the problem of computers taking away jobs. Automating jobs will probably take longer than people expect. People also forget about delays in implementation. Even if we had today a perfect human-level general AI computer in the lab at MIT, how soon do you think that would take over all the jobs in the world? Tomorrow? Next week? Next year? No, it would take decades, even if we had the complete technology today. One of the interesting things about credit :

María Dias

markets, as superminds, is that they’re very resourceful, very creative at fig-

Are computers with general intelligence close at hand?

uring out new ways of employing resources. It’s very easy

People have been asking questions like this ever since the be-

for us to imagine the jobs we know disappearing, and much

ginning of the field of artificial intelligence in the 1950s. And

harder for us to imagine the jobs that don’t even exist yet.

for the last 60 years, the answer has been about 20 years in

But just because it’s hard to imagine them, doesn’t mean

the future. Is it theoretically possible that this time they’ll be

they won’t exist.

right? Yes, it’s theoretically possible. But I think we should be 28 | IESE Business School Insight | Fall 2018


We manage our customers’ hard work and dreams by taking care of their finances.

bancomediolanum.es


REPORT

Artificial Intelligence, real leadership

How companies are adopting AI Digital players lead the way Automotive / assembly

AI ADOPTION

High tech / telecom

HIGH

MEDIUM Travel / tourism

Financial services

Retail

Media / entertainment

Consumer packaged goods

Education

Healthcare LOW

ASSETS

6

USAGE

LABOR

DIGITAL MATURITY

AREAS across the value chain where AI can create value

CHARACTERISTICS of early AI adopters

4

PRODUCE Optimized production and maintenance

Larger businesses

PROMOTE Targeted sales and marketing

Digitally mature C-level support for AI Focus on growth over savings Adopt AI in core activities Adopt multiple technologies

5

ELEMENTS of successful AI transformation

Use cases / sources of value Open culture and organization

30 | IESE Business School Insight | Fall 2018

PROVIDE Enhanced user experience

Data ecosystems

PROJECT Smarter R&D and forecasting

Techniques and tools Workflow integration


sources:

Artificial intelligence, the next digital frontier?, McKinsey Global Institute, 2017

Growing investment

$26b to $39b 3x External investment growth since 2013

Adopters

30%

STARTUPS

TECH GIANTS

$20b

20%

Total AI investment by companies in 2016

to $30b

Partial adopters

10%

$6b to $9b

Experimenters

Machine learning boom

40%

External investment in AI-focused companies by technology category, 2016

$5.0-5.7b

Machine learning Multiuse and non-specific applications

$2.5-3.5b

Contemplators

$0.6-0.9b

Computer vision

$0.3-0.5b

Natural language

Smart robotics

$0.3-0.5b Autonomous vehicles

Early adopters today will be the biggest investors tomorrow FUTURE AI DEMAND TRAJECTORY Average estimated % change in AI spending over the next 3 years, weighted by firm size 13

Leading sectors

12

Financial services

11 10

Transportation and logistics

9

High tech and telecommunications

8 7 6

Professional services

5

3 2 1

Retail

Media and entertainment

Construction

Falling behind 0

1

2

Automotive and assembly

Energy and resources

Consumer packaged goods Education

4

0

Healthcare

Travel and tourism

3

4

5

6

7

8

9

10

11

12

13

14

15

16

CURRENT AI ADOPTION % of firms adopting one or more AI technology at scale or in a core part of their business, weighted by firm size


REPORT

Jordi Canals

Artificial Intelligence, real leadership

Professor of Strategic Management at IESE, and dean from 2001 to 2016. He co-organized The Future of Management in an Artificial Intelligence-Based World conference in April 2018, with Dean Franz Heukamp.


T

he possibilities of artificial intelligence in managerial decision-making are not only growing, but are also encompassing a wider scope of activities and business functions in organizations.

CEOs and senior executives have a responsibility to become familiar with these tools and their application. Knowing AI’s weaknesses, as well as its strengths, is indispensable for senior managers. But the real challenge that AI poses is this: Will management remain relevant in an AI world? In answering this question, we need to consider that while there is little doubt that AI can aid in decision-making, management is not only about making decisions. Management is about defining and setting a sense of direction for the company and some coherent goals. It involves designing policies and executing actions in a consistent way. It aims at engaging and developing people. It needs to serve a wide variety of stakeholders. It should balance different requirements and constraints, in the short and the long term. Management is not only about some specialized knowledge. It is also about good judgments, initiative, creativity, humility to learn and positive impact – qualities that AI can complement, but cannot replace. The long-term success of most companies depends on developing good management teams that can harness technology innovation and apply it well. Management involves making prudent judgments. Machines that learn are not designed to make judgments about good and evil. Humans can train them by feeding data of what is good or bad in specific cases, but machines cannot go from specific data to making a general ethical judgment. The use of prudence and good judgment in AI is indispensable; both validate the quality of data and the processes by which algorithms

source :

Charlie Bibby (Financial Times/FT.com). Used under license from the Financial Times. All Rights Reserved.

make recommendations or decisions. The failures associated with AI tools due to fake data or incomplete algorithms are already numerous. AI can complement management when data are reliable and algorithms are well designed.

Why management matters


REPORT

Artificial Intelligence, real leadership

Good managers assume responsibility for their actions and omissions. In situations where complex human behavior and human interaction are critical, we need good human judgment and people who always assume responsibility when making decisions. The legal consequences of AI are enormous for individuals and companies, in particular those related to the legal responsibilities of machines that make decisions. No matter how transformational AI may be for companies,

It is impossible to create something new and relevant without the human passion for discovery and innovation

CEOs and senior executives still have some very fundamental roles, responsibilities and challenges that only competent leaders can address. Good managers do so with a combination of

Creating the future. Respected senior managers think about

rational judgment, emotional intelligence, ethical principles,

the future, undertake new business projects and help create

freedom and entrepreneurial initiative to make decisions with

the future with energy and passion. They are keen to develop

a holistic perspective.

new ideas with an entrepreneurial mindset. There is something truly human in the process of creating new products,

Purpose. The first challenge is to offer a good answer to the

services or companies that can make a positive difference. It

question: “Why does my company exist?” Any company needs

is impossible to create something new and relevant without

to be explicit about its purpose. Shareholder returns are indis-

the human passion for discovery and innovation and desire

pensable, but not a sufficient condition for a company to exist

to have a differential impact.

in the long term. Companies need to nurture and grow their reputation with small and big steps, customers need to feel a

Broader impact. Finally, companies need to think not only

connection with the company and professionals should also

in terms of how much value they create, and which purpose

be attracted to it. The firm’s purpose is indispensable.

they have, but also about the wider impact that they have on society. This approach involves much more than managing

Uniqueness. A second challenge is how the CEO and exec-

different stakeholders. Companies need to be responsible

utive committee consider that their company is unique for

citizens in the society in which they live and operate.

customers and professionals. They should take key decisions that will make the company different from competi-

Senior managers are dealing with fascinating changes in the

tors. This involves not only thinking about investments and

business world and society, with technology and data being

other commitments to create some competitive advantages,

used in much smarter ways. At the same time, we need to ask

but also exploring how to shape the soul of the firm: the val-

ourselves those fundamental leadership questions. AI does

ues that inspire their actions and the activities at which the

not know how to frame them, or to provide answers to them.

firm is really special in the eyes of customers and employees.

Good senior managers do. Our challenge is how we use AI

The firm’s value proposition should be clear to the customer,

tools to make our companies not only more competitive, but

easy to understand and consistent with the firm’s policies.

also more human. In this new AI world, management has a role that is more relevant than ever.

Sustainable economic value. A third challenge that management should tackle is to make sure that the company is not only unique and special to customers, but also that it creates economic value in a sustainable way for all stakeholders, including shareholders.

34 | IESE Business School Insight | Fall 2018


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Fall 2018 | IESE Business School Insight | 35


THE BIG PICTURE

A new perspective

Dimensions of leadership

Analysis by country Sweden

PERSONAL SOCIAL

PERSONAL

Concerned with women’s proactivity and is reflected in their ability to pursue post-obligatory education, develop and file patents, and set up companies.

POLITICAL

Concerned with the presence of women and equal opportunities at the highest levels of power, where major legislative and executive decisions are made.

Norway

Finland

40

POLITICAL

40

BUSINESS

Australia

Where do women lead? US

Germany

Poland

UK

Slovenia

Canada

Estonia

Israel

Austria

Iceland

New Zealand

Spain

Denmark

Hungary

France

Belgium

Portugal

BUSINESS

Considers female leadership in the business world, where women managers are agents of change and help enable a more flexible workplace culture.

The Netherlands

Ireland

Switzerland

Mexico

Slovakia

South Korea

Greece

Evolution SOCIAL

Analyzes the support women receive and the impact of barriers they face when it comes to integrating their work, family and personal lives.

Luxembourg

Japan

Chile

Turkey

2018 ranking

Italy

Czech Republic 2006 ranking

80 60 40 20 0

Sw

ed

en

No

rw

ay

Fin

lan

d

Ice

lan

d

Est

oni

a

el nd ala I s ra Ze w Ne

UK

Sp

k al ain nmar elgium r tug B Po De


source: IESE–Women in Leadership (I-WIL) Index 2018. Nuria Chinchilla, Esther Jiménez and Marc Grau.

1

4

Ensure women with children do not incur motherhood penalties in the workplace

Encourage vocational training and eliminate stereotypes in higher education

2

5

Promote corporate family responsibility

Promote women’s leadership in top public-sector positions

3

6

Promote female leadership and value its benefits

Au

str

alia

Ca

nad

á

Slo

ve n

ia

Hu

Harness women’s strong personal leadership

nga

ry

Au

str

ia

d U S m a ny lan r Po Ge Fall 2018 | IESE Business School Insight | 37


HACK Of course you want to innovate. But how? Companies can’t just buy innovation. But they can create the optimal internal environment for successful innovation at the company and individual levels if they follow these six principles:

expert tips

Constantly scan the external market and customer input. Start small in innovation units before trying to scale.

ADOPT A START-UP ETHOS

EXPERIMENT WITH PURPOSE

Reduce the layers between the CEO and the front line. Foster knowledgesharing processes and break information silos. Ensure that decisionmakers at all levels are able to make bold, quick decisions. Evolve, adapt and innovate at speed to challenge the status quo.

01

02 ADOPT A FLEXIBLE ORGANIZATIONAL STRUCTURE

ENCOURAGE EXPLORER MINDSETS AND BEHAVIORS

EMPOWER AND ENCOURAGE LEADERSHIP AGILITY

03

04

05 DEVELOP AN ENTREPRENEURIAL MINDSET

06

Based on the study Organizational Agility by IESE’s Julia Prats and Josemaria Siota and Oliver Wyman’s David Gillespie and Nicholas Singleton.

38 | IESE Business School Insight | Fall 2018


Green lies Claiming your company is green but acting otherwise is increasingly risky business.

Consulting crowds

So-called greenwashing takes many forms. One example: when a company emphasizes a relatively minor environmentally friendly practice but

Executives can often improve the accuracy of their judgments by con-

ignores larger issues. Think

sulting groups of others. It’s known as the wisdom of the crowd: the

hotels with invitations to reuse

average estimate of a multitude is more likely to be accurate than any

towels but with air conditioning

individual’s guess alone. While this has been proven true for predicting

blasting 24 hours a day. With

matters of fact, a study shows that decision-makers could similarly draw

more and more NGOs acting as

on crowds to improve the accuracy of their judgments about tastes and

public watchdogs, the conse-

hedonic experiences. So how can this help you in your business?

quences of getting caught can

1 23

Remember what you know

Find the right group

Think social

The best way to take advantage of crowd wisdom depends on your familiarity with the element you’re evaluating. If it’s something unknown, any outside opinion can help. If it’s really familiar, better to ask people with tastes similar to yours.

Crowd opinions can be valuable as long as the composition of the group is right. Their tastes should resemble the decisionmaker’s but also be maximally diverse. The optimum number of opinions may be 10 to 15.

The clicks, likes or pins received by social media influencers can help predict the tastes of their followers. In choosing who to follow, look out for influencers whose followers have diverse yet compatible tastes.

Based on the article “The Wisdom of Crowds in Matters of Taste” by professors Johannes Müller-Trede, Shoham Choshen-Hillel, Meir Barneron and Ilan Yaniv.

be, in terms of reputation but also economically, severe. Based on the video “Greenwashing Today, Suffer Tomorrow” with professor Pascual Berrone. www.iese.edu/greenwashing


HACK

Are you an effective executive? Test yourself to see what you’re doing well and what you need to work on, and reorganize your agenda accordingly. Score yourself on a scale of 1 (not very much accomplished) to 5 (fully accomplished), and then check the results below. Alternatively, you could ask someone to score your performance. ever-present tasks

• Lead teams of people, especially those closest to me. • Work to bolster strategic and management control systems. • Attend to stakeholder needs, working to align their interests.

6

Strategies to get the most out of feedback

1. Separate yourself from your performance. It doesn’t define your value as a person.

2. Assume that your evaluator

means well. Don’t take the crit-

icism as a personal attack. your result:

Your points should add up to a least 12, and no single task should receive fewer than 3 points. These ever-present tasks should be your top priority. You cannot neglect them without suffering negative consequences.

silent work

• Develop strategic thinking across the organization. • Help and develop the learning capacity of the organization.

3. Focus on the future. Think

about how to put the suggestions into practice.

4. Recognize your own biases.

Self-awareness means identifying your emotional tics.

5. Ask for the basis of the feedback. Some criticisms may be

• Understand my own value chain and that of my competitors.

unfair or out of line. You may ask

• Foster organizational unity and cohesion.

your supervisor to be specific and

• Promote innovation.

to refer to other’s opinions, too.

your result:

Your combined score should add up to a least 20, and no single task should receive fewer than 3 points. This silent work requires ongoing attention. Neglect these tasks at your peril, as you might wake up one day and find yourself behind the curve.

6. Ask for time to digest the

feedback. If you feel strong

emotions brewing, ask for time to reflect before responding.

and also…

• Define the business model and the operations needed to execute. • Identify key collaborators and delegate important tasks to them. • Launch new business ideas/lines/areas/units. • Dedicate time to succession planning. your result:

How low is too low a score for these tasks? It’s hard to say, as it depends on how important these tasks are for the specific context in which you operate. Your board will play a key role in determining how proactive you need to be in tackling these tasks in the short term.

This test is included in the article “The Keys to Being an Effective Executive” by professors Adrián Caldart, Alejandro Carrera and Magdalena Cornejo, published in IESE Insight Review, No. 32.

40 | IESE Business School Insight | Fall 2018

Based on the technical note “Receiving Feedback” by professors Alberto Ribera, Ruben lghanayan and Sheila Gallego.

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+IESE Generations at work Multiple generations work side by side in today’s global workplace. But even while working in the same place, employees of different generations may have widely divergent approaches to motivation, leadership, entrepreneurship, technology, cultural fit and training. We reached out to graduates of all ages for more insight. BABY BOOMER: Born between 1946 and 1964 GEN X: Born between 1965 and 1979 GEN Y (Millennials): Born between 1980 and 1993 GEN Z (Centennials): Born after 1994

GEN X

Oliver Christian Feicks CEO at Axtone

Sector: Industry and mining

amp ‘18

Motivation: Working together with in-

Technology: The right use of technol-

ternational teams, turning intercultural

ogy is an advantage and for many people,

differences into competitive advantage

its natural assimilation is only possible

and travelling.

because they are digital natives. The older

Leadership: The result of how you

the generation, the more difficult it is.

think and approach people. I try to be

Culture: Generations have different

open-minded, inspire my people, moti-

views and different limits. Reaching a

vate them and give them the freedom to

common agreement is really challeng-

decide and go the extra mile.

ing. Being open-minded, getting out of

Entrepreneurship: The youngest gen-

your comfort zone and having the right

eration is very innovative but they often

attitude are helpful when managing

work in an unstructured way, which lim-

people from different generations.

its their success. As an entrepreneur, you

Training: It’s the mixture of both ex-

need to have a strong personality. Millen-

perience and skills that brings success.

nials have lots of ideas but can overlook

One alone isn’t enough to win battles

the need to focus on core activities.

in business.

42 | IESE Business School Insight | Fall 2018


GEN Y Reynald Nijhove

Program manager at Aegon Sector: Financial services

pmd ‘18

BABY BOOMER

Motivation: Driving change across the organization

Michael H.G. Schara

and having a positive impact on the company and on

Sector: Food

Leadership: The capability to set a positive example, per-

CEO and founder of Schara

our customers. form toward a vision and motivate others toward that vision.

pade ‘02

And being flexible, no matter what generation you belong to.

Entrepreneurship: All generations can be equally entrepreneurial. Personality traits and drive are the most important aspects to me, regardless of age.

Motivation: Representing and pushing for-

Technology: Technology can be a blessing or a curse,

ward a family-owned business and handing it

depending on how you use it. Communications connect

over to the third generation.

people anytime, anywhere, but there is a potential tidal wave

Leadership: Setting an example not only by

of interruptions that can kill your productivity and creativity.

past experience but also by looking forward

Culture: The real challenge is combining different man-

with professionalism, responsibility and

agement styles. People who are used to a more hierarchical

common sense to take decisions, while hav-

management style may need to adapt to a flat style, which

ing the right to fail.

offers more freedom and responsibility. Empowering people

Entrepreneurship: It’s not a matter of

can really change an organization’s culture.

belonging to a specific generation. Starting

Training: You can be supersmart, but if you don’t have

new things is the right definition 0f entrepre-

business experience, it will be tough to add value. The same

neurial skills. You have to be able to start new

goes for experience, it’s only valuable if it translates into

businesses and take risks continuously. We

better business skills.

live in an age where a new economy led by new technology is opening the world to a new way of doing things.

Technology: The use of technology is definitely an advantage. Use and familiarity with technology have nothing to do with generational issues.

Culture: Generations clash and coexist in the workplace. You must know how to deal with it and manage the way for profitable understanding. Different generations can learn from one another if they do things right. Older generations contribute with knowledge. New generations should learn from the past to launch things into the future. The sum of both is what leads to success.

Training: Experience dies with the individual, but knowledge lasts forever. Experience is for one, knowledge is for all.


+IESE

Meeting point

GEN X Sandra Weber

Vice president of product marketing options, modules and complexity management at Audi AG Sector: Automotive

amp ‘18

GEN Z

Motivation: The overall success of my company in making

Chris Preuss

the best decisions, empowering employees and doing

Head of data science at MADANA

something meaningful that adds value to the company.

Sector: Finance

Leadership: The ability to set and share challenging goals, have a clear vision of what we want to achieve and show

ytp ‘18

passion for the work we’re doing.

Entrepreneurship: Millennials are the real entrepreneurs since they have access to resources unavailable to previous

Motivation: Having a positive impact

generations. It’s easier for them to start out as entrepre-

on society. Money only motivates me to a

neurs with ideas, plans and capital.

certain degree.

Technology: I’m a big fan of technology when it’s used to

Leadership: Demonstrating and living the

simplify our lives. Familiarity with technology can be seen

vision of a particular group on a daily basis.

as a generational matter, but it should not be taken as an

It’s more important to focus on “why” rather

assumption. Older generations can become just as adept as

than “what” we do.

younger ones.

Entrepreneurship: Entrepreneurial skills

Culture: With an open mindset, we can stay fit for the

are different from an entrepreneurial drive.

work environment of the future. Diversity and differenc-

Our generation spends many years at univer-

es in knowledge, experiences and capabilities enable us

sity and often lacks real-world experience,

to take a fresh approach. Nowadays, you need experience

with responsibilities and the risk of failure.

and a more traditional approach to work just as much as a

Technology: Technology is an advantage,

millennial mindset.

but careful planning and structuring are

Training: Education gives you the theoretical knowledge

necessary before deciding on how to use it.

and analytical skills necessary to build your experience.

Moreover, technology is at the core of my

Skills can be just as important as experience, so I would say

generation. This constitutes a barrier for pre-

that experience does not necessarily outweigh other skills.

vious generations.

Culture: Different generations coexist. Managing people of different generations can be challenging, but their different skillsets are key to the organization’s success. Creating the right culture is essential.

Training: A university degree isn’t a guarantee. Certain skills can’t be taught at university. Experience has a high impact, but this isn’t always the case. Technical skills play an important role in organizational performance.

44 | IESE Business School Insight | Fall 2018


+IESE

In first person

AUDITING THE WORLD BANK Yuko Keicho

Director of strategy and operations of the Internal Audit Vice Presidency at the World Bank Group. Besides her work, she volunteers at organizations such as the Institute of Internal Auditors.

mba ‘92 credit :

Renée Higdon

A

gile, forward-thinking and a catalyst for change: they might not be the first words you associate with auditing. But they are at the core of what the World Bank Group’s Internal Audit Vice Presidency (IAD) does. The IAD is an independent, objective assurance and consulting division that helps improve the World Bank Group’s operations. In a nutshell, the IAD helps

the World Bank Group to be better. As the IAD’s director of strategy and operations, Yuko Keicho (MBA ’92) is driving that ambition.

46 | IESE Business School Insight | Fall 2018


Close up How has the World Bank Group evolved since you joined in 1995? The World Bank Group is made up of three main institutions:

PROMOTING CHANGE

the World Bank, the International Finance Corporation (IFC)

Earlier in my career, when I was on

and the Multilateral Investment Guarantee Agency (MIGA).

the operational front line and fo-

When I joined, I worked for the IFC, where my job was mostly

cused on promoting private-sector

focused on the private sector.

investment in emerging economies, I was sometimes puzzled and often

Back then, everyone was doing their own thing. There was

frustrated by burdensome proce-

very little encouragement to work with other institutions

dures. But internal audit can highlight

and there was very little will to collaborate. The big shift in

those unimportant things or point out

recent years is the call from the leadership team that all three

where money is misspent or could be

institutions should work together to deliver the most suitable

better allocated, and where the big

and relevant solutions and outcomes for our client countries.

risks lie. It’s very empowering.

“Global issues can only be addressed when multiple countries brainstorm together”

THE POWER OF LISTENING

I divide my day between planning and strategy thinking, but the most important aspect of my job is stakeholder engagement. No one comes and knocks on the door of internal auditing. We have to go out and say: “We can help you.” My team and I do a lot of outreach, such as three- to four-day country visits where we listen to local staff concerns and constraints and explain how we can help.

The external environment has also changed. In 1995, the

I also manage work programs, devise

World Bank’s major donor countries – such as the Europeans,

strategy and gather thoughts from

Japan and the U.S. – were not under the same fiscal pressures

my staff on how best to deliver value

as they are today. With greater financial constraints on our

to the organization.

stakeholders, we have shifted strategy to partner more with the private sector. It makes more sense: we utilize the knowledge and expertise of the public and private sectors to provide the best solution for our clients.

IESE & ME

IESE was one of the few business Recently, we’ve seen a move away from multilateralism. After more than two decades at the World Bank Group, what’s your opinion of multilateralism?

schools at that time to put an emphasis on ethics. For me, it was the most interesting class. At the end of the

It’s a necessity. Our client countries could be victims of cli-

day, economic growth is to make peo-

mate change or conflicts that transcend national borders;

ple's lives better, so the foundation for

their problems cannot be resolved by bilateral arrange-

whatever we do needs to be ethical.

ments. If they were, it would create fragmentation. That’s why we need global standards, to rationalize the process.


+IESE

In first person

Global issues can only be addressed when multiple coun-

The World Bank Group has prioritized three objectives to

tries brainstorm together and decide where scarce resources

reach these goals: sustainable and inclusive growth; growth

should be allocated. I believe in the power of multilateralism.

of human capital; and resilience. Growth needs to be sustainable for both the environment and society. And it should

“The internal audit team is sometimes perceived as the policeman, so it’s important that counterparts feel comfortable”

come from the growth of human capital; that’s the motor for economic growth. For example, in many developing countries girls do not have access to education. In disaster management, we need to be sure that the infrastructure we build, whether it’s a school or a road, is resilient. Disaster management is embedded into everything the World Bank Group does. We can assess risks and help countries build capacity to prepare for and respond to disasters and this is reflected in the project’s design and its legal agreements. You’ve talked about the World Bank Group’s goals. How does the IAD help the World Bank Group to achieve those goals via its risk assurance and advisory roles?

The World Bank Group is probably one of the most

Internal audit results are very much future-focused: if you

multicultural organizations on the planet. What are the

want to achieve X, Y or Z, you need to identify the gaps and

challenges and rewards of working there?

work toward closing them.

I lead a team of 35 people from 24 different countries. It’s very interesting; in a monocultural organization – a U.S. company,

For example, we review access to information and information

for example – the American culture is dominant. But in the

sharing. The World Bank Group has a public disclosure policy

World Bank Group, there is no dominant culture, so we build

and shares information about its activities externally. We need

our own – which is very multilateral. It requires a lot of effort,

to have an assurance review of how we implement this policy.

as people’s assumptions and cultural norms differ greatly. We receive lots of training and learn not to pre-judge others and

Risk assurance also addresses how we resolve conflicts of

to be tolerant of small differences, for example.

business interest. As mentioned before, the World Bank Group has shifted strategy to partner more with the private

What are the top strategic priorities of the World Bank

sector. Such joint projects can give rise to perceived or ac-

Group in the short and long term?

tual conflicts of interest. The internal audit has assessed the

The World Bank Group aims to end extreme poverty by

institutional process to manage such potential conflicts. The

decreasing the percentage of people living on less than $1.90

leadership team appreciated these reviews as it supported

a day to no more than 3% by 2030. It also aims to promote

the World Bank Group’s strategy.

shared prosperity by fostering the income growth of the bottom 40% for every country – both middle-income and

In terms of advisory, the IAD acts in response to requests.

developing – by 2030. Essentially, to narrow the income gap

For example, when the leadership team wanted to improve

between the wealthiest and poorest members of societies.

efficiency across shared services such as IT systems, we identified and reviewed the industry best practices and provided advice to inform policies and guidelines. The conventional view of auditing is that it’s about transactions and compliance, but as an industry the focus is the future. It’s about identifying the risks rather than grading the past.

48 | IESE Business School Insight | Fall 2018


Another of the World Bank’s strategy shifts is the Agile Bank initiative, launched in 2017. What does this mean in terms of operations? Agile is a methodology for continuous improvement. There has been a cultural shift in the World Bank toward cutting unnecessary processes and bureaucracy and focusing on what’s the best, value-added outcome for our clients. A one-size-fitsall, inflexible approach will not work: we will not be able to deliver the most suitable solutions to clients when their needs are so different from one country to the next. Agile Bank is endorsed and driven by the leadership team and then cascades down to staff. For example, the World Bank has just completed a pilot program on Agile and the IAD has completed a review providing advice on how we can scale up. How does the IAD follow up on management action plans after raising issues? Does management actually take action to fix problems? Our audit reports are addressed to the senior management level to promote positive changes across the organization. Management takes IAD’s observations seriously. We agree on action plans and we hold the leadership accountable for its execution. If it becomes overdue, the board makes an en-

Data-driven analysis is key to the IAD but where there’s

quiry. Management doesn’t want to be in this position, so it

data there’s the risk of cyberattack.

creates a sense of urgency.

Cyber is an evolving risk. We carry out internal audits on data, mobile devices, wireless environments, access controls... But

But it’s important to stress that the IAD is also an internal

not all IT is internal; we use vendors, so we need to ensure

consultant; we don’t just follow up by putting pressure on,

they comply with World Bank Group security standards. And

we act as an internal consultant to help identify solutions.

now when we are partnering with the private sector, we need

The internal audit team is sometimes perceived as the po-

to look at how to manage confidential and proprietary data.

liceman, so it’s important that counterparts feel comfortable

In terms of using data in our own work, the IAD is rapidly

to approach us.

building the capability data analytics in its reviews to draw additional insights on business activities. What other risks does the World Bank Group and its institutions need to pay heed to?

The World Bank Group itself is not subject to regulation but our vendors and our private sector partners are. We need to be mindful of emerging regulation such as GDPR (the EU law on data privacy) because to some extent, unless we respect those regulations, our partners can’t do business with us. Fall 2018 | IESE Business School Insight | 49


+IESE

Entrepreneurs

WHEN YOUR VC IS A HELPING HAND A private equity firm that shows genuine interest, offers constructive support and has a sense of humanity? That’s what Finaves, IESE’s venture capital fund, offers when it invests in a project. Julien Palier, co-founder of Daysk. com, and Bruno Lea of Lea Succession, whose ventures have received Finaves funds, share their experiences.

Julien Palier

Palier (left), CEO and co-founder of Daysk.com with Benoit Gilloz (right), chief technology officer.

emba ‘12

I

solation and hypermobility: this

I was always in coffee shops because

daily reality faced by indepen-

I couldn’t find a proper place to work.”

dent workers and entrepreneurs inspired Julien Palier and partner

Launched in October 2016, Daysk.com

Benoit Gilloz to create Daysk.

allows you to find an office or other space

com, an internet-based service that

to work, book it and pay for it through

helps you find the best place to work,

your computer or any mobile device. It’s

whenever and wherever you need it.

a kind of Airbnb of the workplace.

“Ben is a programmer and he was work-

50 | IESE Business School Insight | Fall 2018

ing at home and wanted to socialize a

Finaves, a seed capital fund designed to

bit again. In my case, I was working as

support the entrepreneurial activities

a consultant and spending most of my

of IESE students and alumni, was one

days going from meeting to meeting.

of the first to bet on the project. “It is


a perfect combination because there is the relationship of trust thanks to the IESE community, but you also have the great professionalism of an investment

Bruno Lea

fund that has a lot of experience in fil-

Engineer, CEO and founder of Lea Succession. His company is, first and foremost, a family adventure.

tering, selecting, monitoring and advising projects. That’s something that is not always achieved in investment processes,” Palier says.

mba ‘14

Daysk.com is currently consolidating its leadership in the Spanish market and that means “taking advantage of

credit :

María Dias

the know-how and expertise” of its investment partners. Thanks to Finaves,

are a vehicle to fund entrepreneurs

Palier is also able to draw on a select

who are looking for investors to take an

network of successful alumni-invested

equity stake in their company and help

companies, such as Nexenta, Advance

the company to grow.

Medical, Cooltra and Kubi Wireless. To learn more about this emerging “Having powerful minds supporting

field, Bruno attended the Internation-

you helps you make good decisions

al Search Fund Conference organized

and not feel alone. As an entrepreneur

by IESE in collaboration with Stan-

in the very early phase of a project, this

ford Graduate School of Business, and

is something that really makes a differ-

spoke with Finaves.

ence in what the future of your company will be. It all adds up,” says Palier.

W

He launched Lea Succession with the backing of Finaves and major French in-

FINAVES FACTS AND FIGURES

vestors. At the same time, he and his wife ithout a break-

Carolina had a son. “The fund is a family

through idea to

project,” says Lea. “We will go wherever

create a start-up,

the new venture takes us, and this can

but

only be done with all my family on board.”

with

little

desire to settle

into a traditional job, Bruno Lea found

During the first year, Finaves has gone

himself at a professional crossroads.

beyond mere financial support: “It is

“Like many millennials, I had reached

truly amazing to see how much they

a point where my eagerness to have

have done for me. They really care

more autonomy was so strong that, as a

about your project; not only about

U.S. headhunter told me, I was basically

making a good investment, but also

unemployable. So I came to the con-

about how they can concretely support

clusion that I needed to find something

and help you.”

exciting in between.” After reaching out to 700 targeted comThe solution came to him while he was

panies and with nearly 50 potential

doing his MBA at IESE in Barcelona,

deals in hand, he expects to make an

when a classmate introduced him to

acquisition in 2019. And most impor-

the search fund model. Search funds

tantly: “I am really enjoying myself.”

40

Launched in

2000

2500+

Jobs created

Companies

€ 12m Invested

>€ 200m Revenues

YOUR OPPORTUNITY

Are you an IESE alum with an entrepreneurial project in its early stages? Finaves’ latest fund has €3 million to invest. Send your pitch and get ready. More info at www.iese.edu/callforentrepreneurs


+IESE

My experience

HOW

At the French Ministry of Health, Axel Lambert was in charge of preparing and managing the state response to epidemics.

TO HANDLE

Now he advises organizations, companies and professionals on how to prepare for, react to and prevent health emergencies.

CRISES

After years of working with epidemics such as SARS, influenza and ebola, Lambert is conscious of one thing: “You’re never fully prepared.”

Axel Lambert de Rouvroit

Independent consultant on health security. Managing partner at Health Security Associates. Proud father.

mba ‘01 52 | IESE Business School Insight | Fall 2018


P

eople are often surprised that Axel

plan even when you can’t predict what will hap-

Lambert de Rouvroit went to work

pen, because writing helps your planning. It’s a lit-

in the public sector once he had an

tle bit like strategic planning for business. You try

MBA. “Water flows in the other di-

to build scenarios: if this happens, what do we do?

rection,” he jokes. And yet the skills

What tools do I have? This is something you learn

he learned at IESE would prove valuable in his

during the MBA. Nevertheless, managers should

role as senior advisor on bioterrorism and health

try to think in a more long-term way.

emergencies at the French Ministry of Health (2003-2006), where he was responsible for draw-

How do you plan for the unexpected, for some-

ing up, preparing for and managing the state re-

thing that might put lives in danger?

sponse to crises such as ebola, SARS and anthrax

I think it’s important not just to plan, but to train.

poisoning. “It was impossible to sleep on that job.

Rehearsing the scenario to train yourself to be

You never get bored. The task is never finished.”

able to work in an emergency situation. It is im-

Nowadays he is an independent consultant on

portant to experience the fear, the tension, the

health security for organizations such as the Eu-

stress. During an emergency, you are going to

ropean Commission and the World Health Orga-

make bad decisions. That’s how adrenaline works:

nization, as well as for private companies.

you forget things. The best preparation is to put yourself in that situation.

“You write a response plan even when you can’t predict what will happen”

And collaborate, with other countries, with other organizations. One of the big lessons is that when you deal with sensitive matters – such as human life – it is important to have established trust beforehand. You cannot transfer sensitive information to somebody if you don’t know what that person is going to do with it. You have to create those networks before the crisis. This is essential. But I’ve learned

We hear a lot about the idea of crisis, in busi-

that trust is never between institutions – trust is

ness, in politics and elsewhere. What exactly

between individuals, but you need the institution

does that mean in your field?

to build the system. This is something that I al-

A crisis is an emergency situation that is too big

ways keep in mind.

for you to handle. The rest is just emergency situations. During a crisis you have to deal with the un-

Despite all the collaboration, there is often a

predictable. If you have a globalized supply chain,

lack of preparation.

for example, then it’s essential to think about the

When you are discussing the need for investment

practical implications of closed borders, no trade,

in research, vaccines, teams, preparedness and

and cancelled flights and shipping, to name some

so on and they reply, “Sorry, it’s too expensive,

of the things that can happen in a country affect-

there’s nothing we can do about ebola,” it’s very

ed by an epidemic. You need to know how that is

frustrating. Because when there is a real emer-

going to affect your company. That is what I call

gency the money flows easily. The last big ebola

business continuity planning.

outbreak is an example. When the crisis was no longer in the news, the money dried up, but you

Analyze, prepare and respond…

need that funding to keep working on prevention.

Response is when it happens, preparation is ev-

Otherwise, the consequences and costs, especially

erything you do beforehand. You write a response

the indirect ones, will be much worse.


+IESE

My experience

The difference between an economic crisis and a health crisis is that in an economic crisis you have a central bank, an institution that can actually say “Calm down, we will do what is needed to protect the currency.” There are economic instruments to minimize the damage. A crisis of this type can still have a huge effect, but there are things you can do when it starts. In health, however, if you haven’t already done the preparation, it’s too late. The Minister of Health cannot say, “I’ll open the liquidity tap.” There’s no Mario Draghi to say, “We will do whatever it takes to preserve the euro.” In health, people don’t believe it. Words are not enough. What are you effectively doing? What do you have in place? The confidence and the trust needs to be established before the crisis. During an epidemic you can’t leave anything to chance, but at the same time you need to be flexible. How can you manage that? The balance is not easy to reach. Historically, what credit :

we did was plan disease by disease. There was a

María Dias

What kind of costs?

plan for anthrax, a plan for an influenza pandemic,

You can make comparisons between an economic

and so on. When you do this you realize that half

crisis and a health crisis. One point in common

the plan is the same for different diseases. So we

is that both of them spread very fast in a global-

changed a little bit and did some generic common

ized world. The second thing is the fear factor. An

ground planning for emergency operations. One

economic crisis almost always has a component

comparison you can make is with firefighters. Ev-

of lack of confidence: people no longer trust the

ery incident they deal with is different, but that

system. Health crises have a comparable effect,

does not mean that they cannot plan or train. You

but the lack of trust is more a consequence than

still need vehicles, equipment, trained people for

a cause. In both cases, they can lead to falling em-

different things and also, of course, coordination,

ployment, rising financing costs, and so on. Just

communication command and control.

think that if you close an airport or borders – which at any rate has been shown to be ineffective

Having said that, it’s very important to always

at stopping disease – you are effectively closing

keep in mind that the crisis will not be the one

trade routes.

you have been planning for. It always turns out to be different. As they say in the military: no plan survives contact with the enemy.

“It is important to experience the fear, the tension, the stress” 54 | IESE Business School Insight | Fall 2018


Even the bravest heroes need an ally to succeed Meet our Alumni Career Advisors and Coaches

More information: alumnicareers@iese.edu


+IESE

Views

Blockchain, artificial intelligence, the green economy and regulation. Banking is in transformation.

Bankers in the fintech era The business is being organized around customers and data. High standards of conduct, riskmanagement systems and the search for new profitability are more than ever a necessity. All of this without forgetting about stability. It’s vital to be ready for any opportunity. Bankers, fintechs and experts reflect on what’s changing... and what isn’t.

“We must redefine the role of central banks”

“If banking and fintech disappear, something will have failed” Sergi Herrero. Director of global payments and strategic partnerships, Facebook

Juan José Toribio. IESE professor and head of the Center for International Finance (CIF)

“We are and want to continue to be a

“Ten years ago, the biggest crisis in cen-

example, sending money to a friend

turies was unleashed and everything

in real time,” explains Herrero. “Our

On June 25, the Center for

got turned upside down,” Toribio says.

future is to serve the 2 billion people

International Finance (CIF)

“Central banks discovered they could

who still do not have access to banking

celebrated its 25th anni-

no longer respond in the same old way.

and need a safe environment to make

versary with professionals

They needed to ensure the system was

informal transactions with the money

from the digital, financial and

capitalized, but most importantly that

they earn every day.”

academic worlds.

customers would not be harmed.”

25 YEARS OF COMMITMENT

56 | IESE Business School Insight | Fall 2018

social network, but one that adapts to the demands of our customers: for


Javier Arias credit :

“Europe must go back to financing international projects” Alicia García Herrero. Chief economist for Asia Pacific, Natixis

“Massive and multifaceted.” This is

“The major challenge in banking is to regain profitability”

“Is it wise to trust in virtue? It’s possible to be ethical and profitable at the same time” Christopher Cowton. Professor of Financial Ethics, Huddersfield Business School

After the crisis came recovery, and af-

coming. Following the crisis, European

Jaime Caruana. Director at BBVA and former governor of the Bank of Spain

banks lost some clout in the financing

For Caruana, the future of banking

“Some people say we cannot afford to

of major international projects and

presents four challenges: new regula-

be ethical, but that is not true. We can

have given way to Chinese, Japanese

tions and supervision; a search for new

be ethical and successful. Perhaps not

and Korean banks: the big holders of

profitability; digital transformation; and

number one, but among the best and

global savings. For European banks,

competition with capital markets. “After

the profitable.” He says a “spirit of excel-

that is the great challenge beyond the

the crisis, banks had to retreat and cap-

lence” is the sector’s best ally, prompt-

fintechs: “This is where future profit-

ital markets appeared as an alternative.

ing professionals to work in the best

ability is.”

There is a need for new business strate-

interest of their customers and society.

Herrero’s vision of the change that is

gies, new forms of profitability.”

ter the excesses, ethics, says Cowton.


Food for thought

SMART PICKS Planet Money Hosted by Ailsa Chang, Cardiff Garcia…

Ever since seven U.S. public radio announcers decided to explain the 2008 economic crisis in terms that common mortals could understand, this podcast has been one of the best and most popular podcasts on economics and finance.

Slate Money Hosted by Emily Peck, Felix Salmon…

Voices that matter

Felix Salmon was one of the few economists who predicted the subprime crisis. He has joined forces with Slate magazine, where he presents a podcast in which he continues to dissect current

The spoken word has always been one of the best tools of communication and persuasion, but currently audio is living a new golden age. That’s thanks to intelligent speakers that are destined to become the multimedia center of the home, and to a boom in podcasts – a format that’s almost unbeatable for its flexibility in narrative, time and form. Podcasts are also great for their hyper-specialization – any subject can be covered with greater proximity and new narratives, allowing management, economics and finance to be explored in thoughtful new ways. The best business-oriented podcasts have been among the first in developing shorter formats with an eye toward the revolution that intelligent speakers represent. Here, a selection. 58 | IESE Business School Insight | Fall 2018

economic events.

Women at Work Hosted by Amy Bernstein, Sarah Green…

Among Harvard Business Review’s strong portfolio of podcasts, this one analyzes all things related to women and the workplace: from useful advice, to the salary gap, to work after the #MeToo phenomenon.


FROM MY DESK By Evgeny Káganer

WSJ Tech News Briefing

Professor of Information Systems

Hosted by WSJ

Platform Revolution

newsroom

Geoffrey G. Parker, Marshall W. Van Alystyne and Sangeet Paul Choudary

With this podcast, the Wall Street Journal tells you, every morning, about the latest news on technology companies, new gadgets and emerging trends.

Hidden Brain Hosted by Shankar

With all the recent hype about digital platforms, this book, from the authors of seminal academic research on platform competition, offers a powerful mix of theoretical rigor, actionable advice, and upto-date examples. Whether you’re launching a new platformbased business model or scrambling to respond to an emerging platform within your industry, this book will provide a solid foundation for your decisions. Best proof, in my opinion, of the old maxim: there is nothing so practical as a good theory.

Vedantam

exert more influence than

Benedict Evans

Black Mirror

you think on your personal

ben-evans.com

Netflix

I often get asked what sources to follow to stay up to date on tech news. All “breaking” stories will get plenty of coverage from any source you pick, from Tech Crunch to The New York Times. Benedict Evan’s weekly newsletter, on the other hand, assembles pieces that do not necessarily make the headlines but have some interesting nugget about them. Easy to miss, these are the type of stories that often provide the greatest insight.

This TV series nudges us to ponder the broader consequences of technology in our personal lives and society at large. Each episode skilfully blends ordinary scenes of what looks like the world today with extraordinary capabilities brought about by the technologies of tomorrow. As someone who spends a lot of time looking into the impact of technology on business, I have a lot of appreciation for the authors’ creative attempt to decipher the subtle manifestations of our tech-infused future in the present. More such reflection is badly needed.

The mechanisms of the brain

and professional life. Shankar Vedantam uses science and the best storytelling techniques to reveal the unconscious guidelines that direct our behavior, choices and relationships.

Freakonomics Radio Hosted by Stephen J. Dubner

The book Freakonomics was a true revolution in applying economic theory to unusual things. The phenomenon continues in a podcast alternating interviews with leaders such as Mark Zuckerberg with insightful and sarcastic explanations of why the economy is the study of incentives.

Fall 2018 | IESE Business School Insight | 59


SMART PICKS

Books that stand out Leading Companies through Storms and Crises Yago de la Cierva. Pearson Education.

Companies, even excellent companies, can find themselves embroiled in crises that threaten their reputation, their results, their relationships with priority stakeholders, and even their survival. During a crisis, it is more difficult to make the right decisions. Solving a serious crisis always involves actions that focus on the effects of the crisis on people and things as well as addressing the causes of the problem. But crisis management also requires effective communication to ensure that stakeholders understand what is being done. This book provides principles and best practices to help top management and corporate communicators face conflicts, controversies, crises and scandals.

The New Global Road Map Pankaj Ghemawat. Harvard Business Review Press.

Executives can no longer base their strategies

Art that shines

on the assumption that globalization will continue to advance steadily. But how should they respond to the growing pressures against globalization? Ghemawat

‘Joy Out of Fire’

separates fact from fiction to offer a better

Schomburg Center for Research in Black Culture

understanding of the key trends affecting

May 1 - November 24, 2018

global business. The author provides actionable frameworks and tools to help executives revise

“Since the Global Alumni Reunion 2018 will be held

their strategies, realign their organizations, and rethink how

in NY, I would like to recommend you visit the

they work with local governments and institutions. In our

exhibition ‘Joy Out of Fire’, at the Schomburg Center

era of rising nationalism and increased skepticism about

for Research in Black Culture, in conjunction with

globalization’s benefits, this book delivers a guide on how to

the Studio Museum in Harlem. The exhibition

compete profitably across borders.

features the work of an emerging artist, Firelei Baez, and explores the artist’s interest in representations of women, particularly Afro-Caribbean /Afro-Latina

The Home: Multidisciplinary Reflections

women in visual culture and history. I would

Edited by Antonio Argandoña. Edward Elgar Publishing.

recommend visiting this exhibition not only because

In the first major work to take the home as a

of the strength of Firelei’s work, but also because

center of analysis for global social problems,

of the importance of the Schomburg as a cultural

experts from several fields reveal the multidi-

destination in Harlem, NYC.”

mensional reality of the home and its role in societies worldwide. It studies the service that

James E. Bartlett

Executive director of the Museum of Contemporary African Diasporan Arts (MoCaDA) of New York

gemba ‘17 60 | IESE Business School Insight | Fall 2018

the home offers and its contribution to the wellbeing of communities in areas such as care for the elderly. It serves as a basis for action by proposing global legislative, political and institutional initiatives with the home in mind.


KNOW

By F. Ferraro, J.M. ArgĂźelles and M. Maoret

By S. Tumbas, N. Berente and J. vom Brocke

By M.E. Sosa

By K. Mehta and I. Ripol

A road map for successful strategy execution

It’s time for chief digital officers

How design can boost social impact and business results

5 ways managers can enhance their mediating skills

Page 62

Page 72

Page 76

Page 84


As a General Manager, you need to become a strategic leader. It’s not just about making sound economic decisions, or managing people. There are many other factors you have to take into consideration. How can you reconcile them and also successfully execute the corporate strategy? It can be overwhelming, but we offer you a practical guide.

A ROAD MAP FOR SUCCESSFUL STRATEGY EXECUTION

By Fabrizio Ferraro, José Miguel Argüelles and Massimo Maoret


Carmen Revuelta illustrations :

Fall 2018 | IESE Business School Insight | 63


KNOW

A road map for successful strategy execution

These questions highlight why strategy execution

A

is an increasingly sought-after skill in management. For instance, a 2017 Henley Business School survey of 446 managers and directors from 51 s a General Manager (GM), your

countries revealed that strategy execution was the

role is a constant challenge. Your

second most important development priority for

company may be performing

executives and senior managers.

below expectations; an external threat to your business model

What makes the GM job so tough is there’s no

may be looming on the horizon; or maybe you

all-purpose manual to study, apply and follow.

spot a market opportunity and are wondering

The technical knowledge that served you well as a

whether you should jump on it. Your company

functional manager is of little use in resolving the

needs to change, but where should you start? With

trade-offs that GMs face when making and acting

your strategy? Having the best strategy is of little

upon corporate-level decisions. Your abilities, and

use if it can’t be implemented. Should you start

the challenges you have to deal with, are part of

by tackling internal resistance? Should you con-

a personal journey that will be different from the

vene a board meeting to clarify your goals or ratify

journeys of other GMs, because it is an expression

them later on? Meanwhile, your inner voice is ask-

of who you are and the situations you face.

ing: do I have what it takes to succeed? Federico Minoli, a globally renowned turnaround manager (see bio), puts it bluntly: “Strategy execution is quite chaotic. Success will come from getting your hands dirty, talking to people on the shop floor, and being humble enough to admit what you don’t know.” Overwhelmed? Don’t worry, we’re here to help. Together with our colleagues in the Strategic Management Department at IESE, we’ve developed a road map for successful strategy execution. Use it to guide you through your next challenge, but treat it like a doctor’s protocol – a structured reference that still requires critical judgments and on-the-spot adaptations to be made in light of onthe-ground realities. Throughout the article, Minoli interjects doses of wisdom and realism: “You have to have a direction,” he says. “Then you can enjoy the journey, wherever it takes you.”

Strategic leaders: more than just managers

Most successful GMs don’t see themselves simply as managers, but rather as strategic leaders, which we define as a leadership style not limited to making rational economic decisions (valid as they are) but one that reconciles the hard and the soft aspects of strategy execution in a single, holistic process. 64 | IESE Business School Insight | Fall 2018


4 processes for successful strategy execution Process 1. Diagnosis

Process 2. Direction

• Governance

• Research and shared undestanding of the situation

• Strategy • Organization (people, culture, structures, systems)

Process 3. Action Drive execution through these levers: • Allocating tangible resources • Changing organizational structures and systems

• Set strategic goals • Develop a change strategy

Process 4. Personal development

• Monitor the journey

• Which tasks are non-delegable? • What skills do I need? • Do I have the time and will to develop them? • What is my responsibility to others?

• Recruiting and staffing • Networking • Communication planning • Engaging stakeholders

All too often, GMs behave as hard strategists, ana-

rive at a correct diagnosis after taking a particular

lyzing the competitive landscape and sending out

action. As you follow this road map, bear in mind

orders, like generals issuing instructions to their

how each element is intertwined through continu-

troops. The problem with single-minded, rational

ous learning and feedback loops.

management is that it can lead to business strategies that aren’t actionable, because they fail to account for human, organizational and political dy-

Process 1: diagnosis

Diagnosis focuses on making sense of your compa-

namics. At the other end of the spectrum lie those

ny’s situation. Of course, this is not something you

GMs who just focus on interpersonal relations.

do just once in a while. The following activities, in

These touchy-feely managers risk losing sight of

three core areas, must be priorities you repeatedly

the bottom line, leaving the firm vulnerable to

diagnose as situations evolve.

competitive threats or the next economic or technological shock. You need to be a fusion of both, if

governance.

you want to be able to execute strategy effectively.

tional configuration in which your company oper-

Start by understanding the institu-

ates. By governance, we do not refer solely to ownThe figure above presents our road map to help

ership structures and boards, but to the broader

GMs think and act as strategic leaders. It depicts

configuration of the firm’s internal and external

successful strategy execution as a constant unfold-

stakeholders. Success is measured not just in terms

ing of four processes: diagnosis, direction, action

of maximizing shareholder returns but by your

and personal development. Usually, these process-

ability to balance diverse stakeholder interests, and

es unfold sequentially, yet they can also be inter-

translate them into governance body activities. You

twined and recursive, i.e., you sometimes only ar-

need to nurture relationships with your board of Fall 2018 | IESE Business School Insight | 65


KNOW

A road map for successful strategy execution

Federico Minoli has 30 years’ experience as a turnaround manager on behalf of TPG, Deutsche Morgan Grenfell, Bain Capital, Investcorp and Emerisque. He is globally renowned for turning around Ducati Motor Holding, where he was CEO and chairman between 1996 and 2007. He is currently chairman of Dainese and POC Sweden. He lectures at IESE on strategy formulation and execution, and is featured in the IESE case study, “Ducati: In Pursuit of Magic,” by professor Bruno Cassiman.

DIAGNOSIS By F. Minoli There are two approaches to diagnosis: one way is to see the company as a spreadsheet, and the other is to dive into the company by talking to its people. The latter is what I do. Dedicate yourself to understanding the talent that each employee can offer. At Ducati, I once realized that one of our employees was bored and wanted out. His true passion was history, so I made him the company historian. He singlehandedly built the Ducati Museum, which became a core component of our marketing strategy.

directors and the key stakeholders represented there, such as shareholders, unions and employees, as well as with external groups such as your customers, governments and NGOs.

What makes the GM job so tough is there’s no all-purpose manual to study, apply and follow strategy.

You need to check the strategic health

of your firm to see whether it can generate competitive advantage, defined as creating customer value above and beyond competitors. Here is where the traditional tools of industry analysis, value creation frameworks and business models come into play. You should be able to answer these interrelated questions: • What should my strategic position be, in terms of geographic, customer and product scope? Where should we not be? • Does my company create and capture value in its current market position? • What are the critical activities, capabilities and resources that generate and sustain our competitive advantage? If you cannot answer these questions in 40 words or less, it may be time to go back to the drawing board. After all, if you can’t synthetize your strategy in a short statement, how do you expect your employees to grasp and share your strategic vision?

66 | IESE Business School Insight | Fall 2018


DIRECTION By F. Minoli organization.

A third diagnosis relates to the or-

ganizational components necessary to achieve the strategic goals effectively. This analysis should serve to highlight changes that need to be made to the following: • People & culture. Strategy execution depends on how well the organization can identify, recruit, retain and leverage human talent, and their fit with the corporate values. Analyze the stock of knowledge and skills in your workforce, looking not just at your top management team, but also the organization’s informal network of relationships. Consider how these relationships shape and sustain the organizational culture. Identify informal organizational leaders who could be champions – or potential resisters – of change. • Structures & systems. Not all organizational structures are the result of conscious design decisions. Sometimes, they are the result of “path dependence,” arising from inertia. Before deciding if structural changes are necessary, you need to clearly understand how your structures function. Is it a matter of making a few small changes to be more effective and efficient? Or is a complete reorganization called for? Don’t

When you join a company, you have 100 days to set the tone. Everyone’s defenses are down, and maybe the company is in financial difficulties. But if you spend your first 100 days overanalyzing the situation, you may lose precious time. I don’t recommend bringing in too many outside consultants, unless it’s for a limited period, on a limited issue. In my view, implementable strategies come from within the company itself. You need to come up with a vision up front about what to do. My preference is to offer broad, top-down, five-year targets, with some generic strategies. Then, you feed those to your people, asking them to match your top-down strategies with their bottom-up initiatives, which they can own and take responsibility for. As you start reorganizing, you have to celebrate early successes, to dramatize your points.

limit your systems analysis to the company chart but study: 1) transversal corporate systems for strategic planning, budgeting, reporting innovation, decision-making and control; 2) people systems for recruiting, promotion, training and compensation; and 3) operational systems for purchasing, planning, logistics and sales.

begin charting a future course for the company. As with the diagnosis, setting the direction should

Beyond checking that these elements are consistent

not be a solitary endeavor. Although the GM is

with each other, make sure they are aligned with

ultimately responsible for the direction the com-

your business strategy. For instance, a function-

pany takes, he or she should involve people at all

al structure will be ill-fated for a customer-centric

levels of the organization.

strategy, just as a well-defined strategy filtered through misaligned people, structures and systems

reach a shared understanding of the situation.

will generate much higher costs.

The earlier diagnoses should lead you to define

Process 2: setting direction

Once an overall diagnosis has been made, you can

your business situation, by which you articulate the core challenge your company is facing – whether startup, growth, realignment or turnaround. Each Fall 2018 | IESE Business School Insight | 67


KNOW

A road map for successful strategy execution

Strategy execution is ultimately about getting things done

ated? Is it sustainable? Does it fit internally within our organizational configuration? develop a change strategy. Opting for a reorienta-

tion of strategy will usually require organizational changes. But be careful: a recent McKinsey survey reported that 8 out of 10 company reorganizations didn’t deliver value as planned, while 10 percent damaged the company. For this reason, in any reorganization, you must

situation will have its unique set of challenges that

determine the degree of employee and leadership

will condition the strategic decisions you make.

involvement, and how the process should unfold.

The GM, together with the executive team, must

At this stage, you need to grasp several key ele-

reach a consensus about what your business situ-

ments of strategic change and the various ways

ation is before deciding the best way to address it.

that the following dimensions can be combined:

set strategic goals. With the challenge(s) framed,

• Target. Which organizational components

a strategy needs to be (re)defined to indicate how

among culture, people, structure and systems

the company will attain (or increase) profitability in

require change, and where should I begin?

this situation. This exercise must take account of

• Leadership. What style of leadership will I adopt

the previously identified constraints under which

to manage the change process: strict control from

the firm currently operates, along with the resourc-

the top or encourage bottom-up participation?

es the company has, and then translate those into

• Process. To what extent will changes be

concrete policies, resource commitments and ac-

transmitted through formal programs ver-

tions at corporate, business unit and functional

sus nurtured in an evolutionary way through

levels, each of which should be coherent and nested within the other.

experiments? • Speed. How fast or slow should the process unfold? Again, your prior definition of the situation

Strategizing starts with the definition of a corpo-

may determine the appropriate pace of change.

rate vision – a vivid description of the company’s future state, which could be expressed as a sales

monitor the journey.

goal (Walmart in 1990: “Become a $125 billion com-

tegic direction identified does not translate into

pany by the year 2000.”), a competitive goal (Nike

actionable initiatives and measurable key perfor-

in the 1960s: “Crush Adidas.”) or an imitational goal

mance indicators, and lacks a disciplined moni-

(Stanford University in the 1940s: “Become the Har-

toring strategy. Consequently, after an initial burst

vard of the West.”). No matter what your corporate

of energy and enthusiasm, operational priorities

vision is, it should have two traits: it must be long

take over, and change fizzles out.

All too often, the new stra-

term (a minimum of 10 years) and it must be aspirational, to motivate and inspire all employees.

That’s why monitoring the progress of the change plan is of paramount importance. Identifying in

Then you must define, usually with the board of di-

advance the key metrics to monitor the progress

rectors, the criteria for evaluating the strategy: Does

of scheduled milestones will force accountability

it fit with our mission? How much value will be cre-

within the organization, first and foremost on you.

68 | IESE Business School Insight | Fall 2018


Process 3: action

Strategy execution is ultimately about getting things done, which is why the next set of GM activities – translating the identified strategic priorities into action – is arguably the most important. Effective strategic leadership is demonstrated not by having one brilliant idea, but through numerous actions taken on a daily basis. action levers for execution. Here are the princi-

pal levers at your disposal to execute strategy. • Allocating resources: reallocating tangible resources (such as budgets and work hours) across different units or project teams, to ensure that the critical tasks of the new strategy aren’t deprived of vital resources. • Changing organizational structures and systems: changing the organizational chart to empower new units or changing accounting, reporting, IT, promotion and compensation systems to reorient the organization toward new strategic goals.

ACTION By F. Minoli I’m not a huge fan of structures. They can be burdensome and inflexible. The world and markets change so quickly that you need to be able to continuously morph into something new. Meg Whitman (former CEO of eBay and Hewlett Packard) once told me, “I don’t have time to create a structure because by the time I have one, things have changed and I need to come up with

another one, so why bother? Instead, I rally people around a mission.”

more money; they're motivated by being told, “We’re going to do these great things together.”

Resistance is a challenge you’ll have to overcome. If your mission is to change something, you have to generate a certain level of chaos at the beginning to start moving things around. That will destabilize people who do not want to change and excite those who do.

Recruiting is one of the keys to strategy execution. Personally, I like to bring in young people – 10, 20 or 30 of them, fresh off their MBAs. The impact they have on the company is usually amazing, because of their energy, their freshness, their desire to achieve, which infects everybody around them. They challenge our sacred truths.

Remember: People change not because you promise them

Fall 2018 | IESE Business School Insight | 69


KNOW

A road map for successful strategy execution

• Recruiting and staffing: finding the right talent and aligning it with the right formal and informal organizational components, from job design to culture, which is increasingly a source of competitive advantage. • Networking: actively managing informal political dynamics, which are not just about growing and maintaining personal networks, but

PERSONAL DEVELOPMENT By F. Minoli

involve regularly analyzing the political landscape inside and outside the company. • Communicating: deciding which meetings require your presence, which can be held remotely and which you can delegate; also, how will you communicate: in public or private? Individually, in a group or to the whole organization? By email or video? These questions matter, as people judge not just the content of your message but how you deliver it. • Engaging stakeholders: involving the right stakeholder in your decision process, e.g., inviting a key client to a company visit, reaching out to government leaders, or working with unions on a common challenge. In combining different actions, be sure to consider their strategic, operational and political implications. A thorough reflection on the implications of your actions may reveal unexpected consequences and trade-offs. Strategic and operational ones are perhaps easier to anticipate, but all actions will have a less obvious political element insofar as they seek to alter the organizational landscape, strengthening some people’s power and/or exercising greater control over (or redistributing) resources.

Process 4: personal development

Finally, any process of strategic transformation implies that the GM will need to undergo some personal transformation, too. Consider how your personal and professional profile may help (or hinder) company success. As you work through the previous steps, make a note of any “personal shortcomings” between the emerging needs you detect and the personal qualities you have – or will have to develop – to tackle those needs. 70 | IESE Business School Insight | Fall 2018

Education-wise, I’m a generalist. I don’t know much vertically, but I do know people. Of course, an industry cannot do without vertical experience. If you have to design an engine, you need someone who knows how. But there are plenty of people with that sort of vertical knowledge. What we lack are people with horizontal competencies, who think in broader terms and know what makes people tick. That’s what defines a good CEO: to have the conviction that everybody has a talent. Your role is to make the most of that talent, for the sake of your workers, the company, society at large. Spending the first hour of every morning going down to the plant and talking to your people always gives you something back. I like to recall the wisdom of Mr. Dainese, who, at a certain point in his life, stated that he did not want to become a caricature of himself, so he decided to leave. That’s the most difficult decision a CEO has to make: you have to nurture somebody else who will be able – and willing – to stab you in the back when the time comes. Otherwise, nobody ever leaves a position of power.


The authors

This self-analysis is perhaps the most difficult, because it means accepting you might not have all the skills required to get the job done. And it often implies a radical change in your behavior. On the plus side, this process helps clarify which roles you need to delegate to others and which professional adjustments you need to make to

Fabrizio Ferraro Professor of Strategic Management at IESE Business School.

align your profile with the tasks and behaviors this

José Miguel Argüelles Lecturer in the Strategic Management Department at IESE Business School.

Massimo Maoret Assistant professor in the Strategic Management Department at IESE Business School.

new phase calls for. However, some activities and areas simply cannot be delegated. Ask yourself how willing you are to acquire the requisite skills and whether you can do it.

Demanding that GMs weigh the consequences

Here, one factor makes the difference: your degree

of their decisions on all the people affected by

of freedom. How much time do you have to dedi-

their actions might seem too high a standard for

cate to these activities? How much decision-making

strategic leadership. However, we would con-

autonomy and ability to influence do you have?

tend that, for too long, the bar has been set too low, contributing to less sustainable corpora-

the responsibility of strategic leaders. The per-

tions and societies, which in turn has given rise

sonal transformation that each GM goes through

to many of today’s social, economic and political

will look very different, but one thing that holds

ills. Celebrating corporate leaders only for their

common across all situations is that the job requires:

financial results, without scrutinizing how their companies treat workers, customers and the nat-

• A high level of responsibility, as decisions are

ural environment, perpetuates this sorry state of

taken in a context of uncertainty and imply

affairs while reducing the long-term viability of

risk-taking, with impacts felt both inside and

corporations.

outside the firm. • Shaping people’s lives, as decisions ultimate-

Your challenges as a GM are exciting, complex and

ly have an impact on people, either directly

imply a high level of responsibility toward others.

or indirectly.

“Encourage people to dare,” insists Minoli. “The

• Taking actions conscious of the lasting impressions these actions will leave on people,

respect and openness that you instill between people are what will help you survive.”

organizations and society, which will define your personal reputation and legacy. • Continuous learning that draws on past experiences to rise to future challenges.

source:

Ferraro, F., Argüelles, J.M. and Maoret, M., “A Road Map for Sucessful Strategy Execution.” IESE Insight Review, no. 36 (2018); 44-51

The organizational and technological complexity of global corporations today makes it easy to miss the causal link between corporate decisions and their consequences. Yet make no mistake: your actions do have consequences on real human beings, which is why we believe that strategic leaders need to be ever mindful of it. Fall 2018 | IESE Business School Insight | 71


It’s time for

chief

By Sanja Tumbas, Nicholas Berente and Jan vom Brocke

digital

Is your company looking for someone to drive digital transformation? Are you considering hiring or promoting someone to join the ranks of these institutional entrepreneurs? Learn how Chief Digital Officers (CDOs) are carving a path for digital innovation.

D

omino’s Pizza has a Chief Digital Officer (CDO). A busy one. Domino’s says its emphasis on digital innovation has helped it reach an estimated $5.6 billion in global dig-

ital sales. That includes more than half of its total U.S. sales, which now come from one of 15 digital ways to order – via tweets, texts, smart TVs, wearable devices and more. The company is currently testing pizza delivery using self-driving vehicles. Leading digital transformation is an increasingly important job, even – or maybe, especially – in industries not traditionally associated with technology. CDOs generate new revenue streams, experiment and establish a direct digitally supported relationship with the customer. Little wonder, then, that this officers’ club is growing: 19 percent of the world’s 2,500 largest public companies have appointed a CDO, according to PricewaterhouseCoopers. PwC also found that most of those executives (60 percent) were hired in the past two years alone. So what do all these newly minted CDOs do? And how do they distinguish themselves from the IT professionals down the hall?

officers


The authors These executives are carving out space in their organizations using three main approaches: (1) grafting digital initiatives to existing business units (2) bridging or linking distinct functional units and (3) decoupling and insulating digital initiatives from traditional units to achieve something new. Chief Digital Officers’ success is rooted in their ability to navigate corporate bureaucracy. They strive to unite disparate business and technology functions. When successful, a CDO is a transformer-in-chief, articulating, developing and leading

Sanja Tumbas Assistant professor in the Information Systems Department at IESE Business School.

Nicholas Berente Associate professor at the Mendoza College of Business, University of Notre Dame.

Jan vom Brocke Professor of Information Systems at the University of Liechtenstein.

innovation via digital technologies.

Transformer-in-Chief

We should distinguish a CDO from a Chief Infor-

ence is not just semantics. While a CIO may focus on building transformational platforms within their organizations, a CDO must look beyond the boundaries of their industry to bring innovation back to the firm.

illustrations :

(CTO), or anyone in the IT department. The differ-

David C. Herreros

mation Officer (CIO), Chief Technology Officer

Fall 2018 | IESE Business School Insight | 73


KNOW

It’s time for chief digital officers

As an emerging role, the new CDOs find they must work to gain legitimacy Organizations in virtually every sector are inter-

their job in contrast to that of the CIO, often with

ested in digital innovations to apply to their pro-

initial power struggles.

cesses, products and marketing. But businesses that were not born digital are often held back by slow-moving organizational processes, as a grow-

Change-leaders

For an organization, CDOs are meant to be

ing body of research shows. A CDO tries to change

change-leaders. They see themselves playing a cen-

this by working across various departments, in-

tral role in building bridges and building consen-

cluding marketing, human resources and IT.

sus. Digital transformation requires close collaboration across an entire organization. As one CDO

Yet because new technologies have historically fall-

said to us: “You always need a translator... IT guys

en under the jurisdiction of the CIO, working on

speak a certain language and marketing guys speak

digital transformation often causes internal ten-

a certain language. When you put them in the same

sions. CDOs entering an organization may define

room, they really don’t understand each other.” However, as an emerging role, new CDOs find they must work to gain legitimacy. Decoupling or buffering their pet digital initiatives from other existing units can be an effective strategy to highlight their work, according to interviewees. Yet this approach can brand CDOs as “lone warriors,” an identity that is difficult to sustain over the longer term, as digital capabilities must be infused throughout the organization. CDOs are finding it useful to leverage the legitimacy of established organizational practices. But they must also create a new domain to free themselves from innovation-hindering departmental tensions. With three main approaches, and many variations, the pioneer CDOs are carving a new path for organizational innovation. source:

74 | IESE Business School Insight | Fall 2018

“The CDO: Driving Digital Transformation,” www.ieseinsight.com


IESE Business School ranked first in the world in Executive Education

#1 Fall 2018 | IESE Business School Insight | 75


HOW

DESIGN can boost social impact and business results By Manuel E. Sosa

Many managers approach problems with an engineering mindset: build it the right way and make sure it works. Designers, on the other hand, pose the question: Are we building the right thing in the first place? To build a design thinking culture in the company, we have to bring together insight, imagination and iteration. That way we can boost business results and even solve social challenges in surprising ways.


Javier Tascón illustrations :

C

onsider the everyday toilet, only

conceived for households or even land-based

imagine if it used 90 percent less

markets. It was commissioned by the maritime

water, took up less space and was

sector, which had a very specific need for a san-

a cinch to clean. What household

itary system that could be used on ships and

wouldn’t want one? Indeed, with

offshore platforms where space was tight, wa-

less sewage generated, what city wouldn’t want

ter needed to be used efficiently, and the de-

these toilets installed everywhere?

sign had to account for swaying movements to prevent splashes.

Such a toilet exists. It’s called Jets Vacuum, and it has won design awards for its combina-

If this brief landed on your desk, how would you ap-

tion of aesthetics, ergonomics and revolution-

proach the problem? Consult a technician? Bring in

ary vacuum-flush technology. But it was never

an engineer?


KNOW

How design can boost social impact and business results

Increasingly, companies are turning to design-

As the EGGS website proclaims: “Jets Vacuum is

ers. That’s what Jets Sanitary Systems did when

an example of how future design thinking can en-

it enlisted the Norwegian firm EGGS Design to

able a company to expand into unforeseen mar-

come up with a better toilet. In opting for a de-

kets and financially increase turnover.”

sign-led approach, something serendipitous happened. Yes, the toilet worked for all kinds of ships

It’s also an example of how design thinking is invalu-

– from freight vessels to cruise ships to yachts –

able not only for developing better products but for

but its universal user- and environmental-friend-

tackling complex social challenges in the process.

liness suddenly opened entirely new markets. Why just sea? Why not land? After all, a big question facing urban planners in developing countries is how to manage limited water resources.

Jumping into the unknown

When it comes to new product development, the standard approach might be to start with a blueprint and follow a structured path, always keep-

Designers can be key players in the innovation process, contributing much more than mere aesthetics

ing a contingency plan up your sleeve if things go astray. This may work when the problem before you is clear. But what about when there’s uncertainty or highly complex conditions? This is when designers can help. Designers are comfortable with open-ended problems. They’re used to jumping into the unknown in search of novelty and exploring new terrain to come up with creative solutions. Take Belkin: in the late 1990s, the cable manufacturer had an efficient process for producing standardized products. But when a client asked for a special type of cable and connector, Belkin had to seek help from an outside design team. After

Certainly, organizers of the FIFA World Cup in

several successful experiences outsourcing the

Brazil were asking themselves this very ques-

design of non-standardized products, Belkin end-

tion in 2014, a year after the new Jets Vacuum

ed up setting up its own design team in-house. To-

toilet came out. Tens of thousands of fans at the

day, Belkin offers a wide range of “people-inspired

70,000-seat Castelão stadium would be flushing

products and solutions” for iPhone, iWatch, iPad,

toilets during half-time. Organizers feared the

Kindle and Samsung. Belkin’s path reflects the

already overloaded infrastructure wouldn’t be

shift that many companies are making, from a

able to cope, in a country where water was scarce

mere appreciation of design to realizing that de-

and expensive. Jets stepped in and provided a re-

sign (and design thinking) can take your business

cord number of water- and space-saving toilets.

places you never thought possible before.

Jets estimates more than 500,000 liters of water were saved at every match. And less space for toi-

This happens because the design-thinking process

lets meant there was more space available for ex-

deliberately starts with the end-user. Whereas

tra seating, opening up new revenue streams from

engineers might be prone to define a quick solu-

additional ticket sales.

tion and jump straight to building a prototype,

78 | IESE Business School Insight | Fall 2018


designers first develop a deep emotional empathy for the user experience, and the rest flows organically from there in a series of circular development phases. The cross-pollination of ideas tends to yield more robust, productive results.

How to start?

How can you get the design ball rolling in your own organization? First, the value of good design has to be recognized at the top of the organization. It’s no coincidence that one of the most influential people at Apple is a designer (Chief Design Officer Jonathan Ive) and two of the three original founders of Airbnb are designers. Often, awareness of design is sparked by increas-

process, contributing much more than mere

ing competition and the need to differentiate

aesthetics. Their main contribution lies in their

from other similar products in the market. It’s

ability to bring insight, imagination and iteration

also being prompted by the Digital Revolution and

to a business vision. Let’s examine each of these

the need to rethink company activities across the

three areas, essential for human-centered inno-

board. By considering how a firm can create value

vation, in turn.

in novel ways for their end-users in a world where digital is increasingly important, design thinking can help firms frame digitalization as an opportunity, rather than a threat.

Insight: the value of empathy

All good design relies on deep insight into human beings. Identifying such insight typically requires developing empathy for the end-user (and other

Companies that don’t have design capabilities

important stakeholders). Doing so leads to new

in-house frequently outsource and work with

ways of viewing a problem or situation, and then

a design firm on a pilot project, as Belkin did. If

arriving at an unexpected conclusion. Profession-

the experience is positive, they may end up with

al designers seek to know what users are thinking

a successful product. After a few pilots, they may

and feeling, going beyond statistics and facts to

decide they need design capabilities in-house.

center on emotion-based information.

However, don’t make the mistake of underuti-

A good example of insight-gathering is reflected

lizing your in-house designers, relegating them

in a project carried out for Coaniquem, a center

to packaging and branding. This greatly under-

offering free treatment for young burn victims in

estimates their value. Designers have a strategic

Santiago, Chile. Across Latin America, over 7 mil-

role to play in defining the product itself and

lion children a year suffer from burn injuries. The

teasing out new opportunities for value creation.

healing process can take over 20 years as the child

Designers can be key players in the innovation

grows and requires various surgeries. Fall 2018 | IESE Business School Insight | 79


KNOW

How design can boost social impact and business results

Coaniquem approached Designmatters, the social

novation journey – wound dressers and physical,

innovation wing at ArtCenter College of Design in

occupational and musical therapists – whose col-

Pasadena, California, for help. Coaniquem want-

lective insights informed new design features.

ed to create a national burn-prevention campaign and enhance its six-acre campus, comprising

One need identified was a place for teen patients

medical facilities, a school and a residence hall.

to socialize. Taking advantage of unused shipping

The project was dubbed Safe Niños.

containers already on campus, and with sustainability concerns top of mind, the students upcycled

The project brought design students together

the containers to create a new hang-out space.

with local stakeholders, including patients, their families and medical staff. During two weeks

Another insightful observation was that most

of intense research, “method cards” were used

burns occur on children’s hands as a result of

to facilitate conversations, gleaning useful in-

touching open flames or live wires. Again, the stu-

sights into people’s hopes and fears, a typical

dents came up with an easily scalable solution,

day in their lives, as well as campus spaces and

this time a set of low-tech musical toys that chil-

traffic flows.

dren could play with, simultaneously improving dexterity and flexibility in their hands.

Fundamental to building empathy was that the researchers lived with the patients in the residence

Sometimes these insights uncover untapped com-

hall while carrying out co-creation workshops and

mercial potential. Think of what happened with

real-time prototyping. This allowed the team to

Jets Vacuum. EGGS designers began by focusing

involve a wider variety of stakeholders in the in-

on the actual users of toilets on ships, but they

80 | IESE Business School Insight | Fall 2018


also considered the needs and perspectives of cleaners and maintenance staff. So, yes, the toilet would be comfortable for ship-based users, but it also wouldn’t have sharp edges, awkward corners or hard-to-reach mechanical fasteners, to make the jobs of cleaners and maintenance staff easi-

The iteration process can help cut the costs of developing a product

er. Their search for human-centered insights took them in unexpected directions, to the point that

feel safe and optimistic about the future. This in-

a maritime product is now growing faster among

teractive initiative featured a storybook, a pass-

land-based customer segments. And Jets Sanitary

port for each patient and a dynamic therapeutic

Systems continues to make design improvements,

environment. The storybook encouraged patients

such as lowering noise levels, as it incorporates

to put themselves in the shoes of various charac-

fresh insights for new market needs.

ters who were bravely and enthusiastically going

Imagination: envisioning a better future

through a similar healing process. The passports consisted of 10 small activity books with characters representing different therapies. A peacock, for

Well-designed products emerge through an imag-

instance, represented wound dressing. Patients re-

inative process that starts with dreaming up many

ceived a stamp in their passports every time they

distinct possibilities to the challenge at hand.

completed a treatment.

Then, designers rigorously question the status quo in search of a solution for a complex problem

While design was used to spruce up the previous-

that is not just novel but also meaningful, in the

ly sterile medical environment and make it more

sense that it helps bring about a desired future.

graphically pleasing and colorful for children, the real design innovation here was that the treat-

Many managers approach problems with an engi-

ment process itself was transformed, through the

neering mindset: build it the right way and make

use of the storybook and passports, into a magical

sure it works. Designers, on the other hand, ap-

healing journey that inspired patients’ imagina-

proach problems with the question: Are we build-

tions. Once again, design is not just how it looks

ing the right thing in the first place? One approach

but also how it works.

is about function, the other is about form and use. To succeed today, you need both perspectives. As Steve Jobs said, “Most people make the mistake

Iteration: the art of repetition

Once designers have generated many distinct al-

of thinking design is what it (the product) looks like.

ternatives to meet a given set of needs, they create

People think it’s this veneer – that the designers are

quick-and-dirty prototypes of the most promising

handed this box and told, ‘Make it look good!’ That’s

ideas, which are then refined during the develop-

not what we think design is. It’s not just what it looks

ment life cycle. User feedback is systematically

like and feels like. Design is (also) how it works.”

employed to ensure that the product meets users’ needs. The intensive iteration process used by de-

We see these principles at work in The Healing

signers can help cut the costs of developing a prod-

Tree project, a continuation of the Designmat-

uct and improving it based on user feedback later.

ters/Coaniquem collaboration, which set out to

Iterating in an agile manner is critical to increase

address burn patients’ anxieties so they might

the chances of achieving an innovative outcome. Fall 2018 | IESE Business School Insight | 81


How design can boost social impact and business results

KNOW

A separate EGGS project underscores the value of

team to iterate interaction principles and try out

agile iteration. In 2015, the startup Blueye Robot-

interface elements, while also experimenting with

ics was interested in expanding the possibilities

different ways of working with the drone.

available for people to view underwater environments. Drones for subsea exploration existed, but

By enlisting all aspects of design iteration beyond

they were expensive, bulky and required exten-

the conventional methods, the developers came

sive training to operate. Was there potential for an

up with an unexpectedly successful product that

inexpensive product that was easy and enjoyable

genuinely lives up to its name of Blueye Pioneer.

to use? To find out, Blueye contacted EGGS. Their

And because “creating a consumer brand” was

goal: to develop not just a better physical product

part of the design concept, designers were able to

but an entire digital universe to control it, which

help the engineering team prioritize the user ex-

everyday consumers would love to own and use.

perience throughout the iteration process.

The design team tested a prototype drone on the

As a result, a device previously only accessible to

open sea, as well as in a harbor, in two ways: first,

filmmakers, oceanographers and the military is

they experimented with a web-based prototype

now available to a wide array of users. Scientists use

that Blueye had already created; then, they creat-

it for environmental and reef monitoring, and ship

ed a simulator using Unreal Engine, a virtual reali-

owners and the fishing industry use it for perform-

ty tool used by game developers. This allowed the

ing underwater hull inspections. But the drone also appeals to adventurous consumers, boat owners and families. Indeed, the drone can descend deeper than the average scuba diver, letting enthusiasts view an unseen world of lakes, rivers and oceans

The author

from the comfort and safety of dry land. The only question remaining is: Might it be time

Manuel E. Sosa is an associate professor of Technology and Operations Management at INSEAD where he directs the Heinrich and Esther Baumann-Steiner Fund for Creativity and Business, the Creativity-Business Learning Platform, the INSEAD/ArtCenter collaboration and the the Innovation by Design Executive Education Program. He is currently a visiting professor at IESE.

82 | IESE Business School Insight | Fall 2018

for you to call in a designer?

source: Sosa, M.E., “How Design Can Boost Social Impact and Business Results,” IESE Insight Review, no. 37 (2018): 24-31

The original article includes additional tips from Susannah Ramshaw, associate director of Designmatters at ArtCenter College of Design in California (www.artcenter.edu/designmatters).


Tips for implementing Design Thinking Ulla Sommerfelt shares what she has learned as CEO of EGGS Design (www.eggsdesign.com):

1.

Talk to users. They may not know what they want, but by talking to them you’ll gain a deeper understanding of their perspectives, which can be a source of inspiration.

2.

Map your stakeholders. Put all your stakeholders in a map to identify the primary and secondary users. Design thinking needs to include all the people who are serving the customer throughout the service-delivery process.

3.

See the whole picture. People often focus on optimizing one function in a company, but design thinking is about taking a step back to see things in a new light.

4.

Use visual aids. Top executives may get a lot of market analyses, but they rarely talk to their clients anymore. So we go out and video-record what users are saying. This can be as simple as using your phone.

5.

Get management buy-in. The previous steps help, as well as involving senior management in workshops. That co-creation is a key part of getting buy-in.

6.

Hire a designer. They can make sure that the design culture is affecting the business culture and that the design intention is followed all the way through the product development phase. You don’t change a culture by doing one workshop.

7.

Allow mistakes and failure. In our company, we celebrate when someone has made a mistake and dares to share it, because there’s always something to learn.

8.

Keep organizational structures flat. The fewer hierarchies and silos, the better you’re able to succeed.

Fall 2018 | IESE Business School Insight | 83


5 ways managers can enhance their

mediating By Kandarp Mehta and Ignacio Ripol

sk


RaĂşl Arias illustrations :

Negotiation is an ability that every manager needs to master, not only because it can help to solve problems and create value, but also because thwarted negotiations sap morale, waste resources and can even escalate into greater conflict. The use of mediation in corporate settings yields useful lessons for every manager in resolving disputes and negotiating positive outcomes.

kills


KNOW

5 ways managers can enhance their mediating skills

I

n Mumbai, a conflict arose between the management of a major textile firm and the workers regarding overtime pay. Rather than take the matter to court, the management and the unions agreed to engage in a form of

alternative dispute resolution known as mediation, bringing in an independent, third-party mediator to help both sides reach a negotiated settlement without resorting to costly, drawn-out litigation. However, as negotiations entered their eighth day,

at all. And then he asked, “What is the most you

the mediator was getting worried. The process had

would pay without compromising your dignity?”

stalled. The atmosphere in the room could be cut

“3.2 million,” he replied. “Period.”

with a knife. The managers remained adamant they would not pay more than 2.4 million rupees, while

For the mediator, this was something. But could

the union reps insisted on at least 3.6 million. The

he convince the union head, a tough negotiator in

gulf between them was significant – and widening.

his 60s, to accept the offer? Instead of proposing the figure off the bat, the mediator sat down with

Many leaders believe they are expert negotiators because they have had a lot of practice at it. But negotiating a lot is not the same as negotiating well

the union head and said, “I know you do not want to lose this battle. But we both know that, without an agreement, no one will win anything.” He took out a notebook and pen: “Write your lowest final offer here, and I’ll try to get the CEO to accept what you ask for. But bear in mind that if he rejects it, the only option left will be to pursue this matter through the courts.” The union official considered this for a moment, then wrote a number down. “I give you this number because I trust you, and I trust you will not try to convince me to go any lower.” The mediator looked at the figure with a mixture of dread and hope, and was instantly relieved. The number was 2.95 million. The next day, the three met in the mediator’s office and closed the deal at 3.1 million. Both sides

The mediator decided to change tack. In a private

were happy: the company paid less than its top

meeting with the head of the company, he asked,

offer, and the union got more than its lowest. But

“Aside from the numbers, what do you really care

more to the point, they left with their dignity, hon-

about?” “Dignity and honor,” the head replied.

or and pride intact. And that was what they both

“I fear that if I give in too easily, I will lose both.”

really valued above all.

The mediator stressed there was more dignity and

“No progress was made until the word ‘honor’ was

honor in finding an agreement than no agreement

mentioned,” the mediator explained afterward.

86 | IESE Business School Insight | Fall 2018


For every obstacle, a technique When difficulties arise, try some of these actions. OBSTACLE

TECHNIQUES

DIFFERENT PERCEPTIONS OF

• Basic facts

• Exchange information and seek help in interpreting it

• The merits of each party’s respective position

• See the strengths of each other’s arguments as well as the weaknesses

• The risks

• Evaluate the consequences of not reaching an agreement

COGNITIVE BIASES

• Selective interpretation

• Use objective criteria to analyze arguments/positions

• Overconfidence

• Focus on the weaknesses of your own arguments/positions and the strengths of the other’s

• Unrealistic expectations • Lack of interest in the perspective or interests of the other party

• Emphasize the benefits of reaching an agreement • Pursue mutually beneficial objectives

• Loss aversion

• Frame offers and concessions in positive, optimistic terms

• Distrust of the other party’s offers

• Be transparent

EMOTIONS

• Feeling the need to vindicate yourself • Negative emotions (anger, frustration, envy, guilt, embarrassment)

• Encourage parties to openly express their feelings • Take the other party’s feelings into account • Try to soften the impact of both parties’ emotional concerns

STRATEGIC BARRIERS

• Unwillingness to negotiate

• Keep the negotiation period short and sweet

• Entrenched positions

• Demand commitment to the process

• Unaligned interests

• Ensure the presence of people with decision-making capacity • Make and demand offers • Identify the other party’s intentions and try to clarify ambiguous moves • Warn the other party about the impact of their chosen action on the negotiation • Reformulate the other party’s positions • Generate ideas and creative solutions to conflict • Avoid confrontation

Fall 2018 | IESE Business School Insight | 87


KNOW

5 ways managers can enhance their mediating skills

Mediation is more about reconciling interests than it is about merely defending one’s own

“When I began to speak in the language of dignity, honor and pride, it became easier to draw both sides to common ground.” “Deadlock is often a result of more than just money,” he continued, highlighting one of the keys to resolving disputes of this nature: “You have to see beyond positions and numbers, to get at what really matters most.”

Beyond negotiation

Negotiating is a skill that every manager needs to master, not only because it can help to solve problems and create value, but because thwarted negoti-

ference in perception of the negotiating parties.

ations undermine value, sap morale, waste resourc-

Each party can have a wildly different perspective

es and even escalate into greater conflict. Many

on the matters under negotiation, from basic facts

leaders believe they are expert negotiators simply

to the financial costs, the balance of powers, the

because they have had a lot of practice at it. But ne-

needs and priorities of each party, and the proba-

gotiating a lot is not the same as negotiating well.

ble outcome. One element that is often perceived very differently by the parties is the question of

Some managers may view themselves as good nego-

fairness or equanimity. Negotiating an outcome

tiators for their fierce ability to defend their own in-

that seems fair to both sides can be more import-

terests and their strong track record of wearing the

ant than the financial advantages or disadvantages

other side down until a “win” is achieved, usually in

it creates.

the form of forcing their opponent to accept something of lesser value. But as our previous example

cognitive biases.

Parties can act or react irration-

shows, there is more to it than that. When negotia-

ally during a negotiation. This is due to cognitive

tions are combative – predicated on win-lose rather

biases, which can lead to illogical or inaccurate in-

than win-win – they frequently break down.

terpretations of the negotiation. Cognitive biases can take a variety of forms:

As such, managers would do better emulating the skills of the mediator. Mediation is more about reconciling interests than it is about merely defend-

• Selective interpretation of information in a way that benefits your own interests.

ing one’s own. By reconceptualizing the terms of

• Overconfidence in your own arguments.

negotiation, managers are more likely to achieve a

• Unrealistic expectations about what can

satisfactory outcome that pleases both sides.

Why do negotiations fail?

be achieved. • Lack of interest in the perspective or interests of the other party.

The reasons why some negotiations do not end in

• Loss aversion: people prefer avoiding losses to

agreement are many and diverse. For the purpose

acquiring equivalent gains, and, as such, refuse

of this article, we will focus on the broadest categories of obstacles (see the table). different perceptions.

The factor that tends to

fuel most conflict in negotiations is the stark dif88 | IESE Business School Insight | Fall 2018

to yield beyond the expectations generated. • Distrust in the offers made by the other party. emotions.

Many negotiators pride themselves on

objectivity and rationality, believing that emotions


such as anger, frustration, envy or guilt are embarrassing distractions. But emotions like these do play a role. Rather than ignoring them, an emotionally intelligent negotiator will acknowledge their own emotional states as well as those of the other party. This will minimize their disruptive effect, while providing insights for more emotionally satisfying outcomes. strategic barriers.

There are two ways of seeing

a negotiation: as a simple win-lose proposition, in which one side gains at the other’s expense; or as a win-win process whereby each party comes up with creative options in pursuit of mutual benefits. The first view sets up an automatic barrier: your only concern is to obtain the most for

The leader as mediator

To overcome these obstacles, managers need to

yourself and not be the one who loses out. In the

leverage some of the skills and methods that me-

end, somebody ends up feeling less than satisfied

diators use to salvage stalled negotiations. Man-

with the result – assuming the negotiation doesn’t

agers who learn how to apply a mediator’s mind-

completely break down before then. Another stra-

set to the conflicts and disputes that arise around

tegic barrier may be that the interests of the nego-

them will not only have better negotiation skills

tiator and those of the person or organization that

but will also be able to act with more neutrality.

the negotiator represents are not aligned. Again, if

Consequently, they will be more trusted to re-

the negotiator is pursuing personal interests that

solve disputes within their organizations. Here

are not in the best interest of the company, the

are five ways that managers can enhance their

result will be unsatisfactory.

mediating skills: Fall 2018 | IESE Business School Insight | 89


KNOW

5 ways managers can enhance their mediating skills

active listening. Active listening is vital. It requires

being attentive and showing an interest in what the other person is saying, paraphrasing key points to show you have understood the other point of view. It means not interrupting, not being overly critical, not questioning the other’s arguments, and not jumping in with unsolicited advice or rushing to judgment. Listening actively and empathetically makes it easier to generate trust, appreciate each

Mediation roles

other’s positions and identify shared interests.

Instead of playing the blame game, reformulation focuses on finding solutions reformulation.

Taking into account different

points of view makes it easier to get parties to change their stance on particular issues. Here the focus is on moving people away from fixed positions and ultimatums, and guiding them toward common areas of interest. This is no easy task. It involves: • Asking questions in order to open up new avenues worth exploring. • Redirecting negative statements, and shifting talk of problems to opportunities. • Putting vague statements into more precise terms. • Synthesizing points in common. • Simplifying complex arguments. • Avoiding categorical statements. Instead of playing the blame game, reformulation focuses on finding solutions. It looks to the future, not the past. 90 | IESE Business School Insight | Fall 2018

The Facilitator. The parties in dispute are the ones who know the causes of the conflict best. As such, they are best placed to find solutions to it. For this reason, the mediator’s role is to facilitate communication between both sides. The mediator is not there to tell them what they should do. He or she must remain impartial, getting the two sides to articulate their own solution. This approach is particularly appropriate for conflicts in which the parties have close ties (e.g., family disputes) and must continue to work together after the settlement. The Evaluator. Sometimes the mediator is expected to take a more active role. An evaluative mediator will consult extensively with the parties involved, then sum up the opportunities of a negotiated agreement versus the risks of not reaching one. A high level of trust is placed in the mediator, empowering him or her to be more proactive. This type of mediation works better in commercial conflicts. That said, every mediation has its facilitating and evaluative phases: it is sometimes said that a mediator should be a facilitator in the morning and an evaluator in the afternoon.


The authors

identifying interests.

Negotiating parties are

rarely willing to disclose their interests to the other side. Mediators, by virtue of their neutral position, can help tease out the interests of the parties, and then get each side to think about their interests from the other’s point of view. To do this, you have to know enough to ask, engage in the active listening mentioned earlier, and pursue alternative lines of inquiry. It helps if this is done in a pressure-free environment. evaluation.

When participants are too close to

Kandarp Mehta is a senior lecturer in the Entrepreneurship Department and the Negotiation Teaching Unit at IESE. He advises companies across continents on developing negotiation strategies and conflict resolution policies.

Ignacio Ripol leads the Litigation and Compliance Department at Grant Thornton’s office in Barcelona. He has wide expertise advising companies on commercial disputes, pre-litigation and judicial conflicts.

the process, they can lose sight of the big picture. For this reason, another vital skill in mediation is being able to step back and evaluate the pros and cons of reaching an agreement versus abandoning the process. By having a realistic assessment of the situation from a broader, outside perspective, participants gain a fuller appreciation of the stakes, which will help to concentrate minds on Viewing the manager’s role through the lens of me-

finding solutions.

diation enriches our conception of management optimism and persistence.

Optimism and per-

– as a role that encourages alternative points of

sistence are two more vital traits of all mediators.

view and identifies creative solutions. This can be

Likewise, a manager must maintain an optimis-

achieved by facilitating communication and infor-

tic outlook, highlighting the progress achieved,

mation flows, helping people to consider interests

rather than the differences still to be overcome.

other than just their own, and being that voice of

Managers must also keep communication chan-

reason that reminds everyone of the consequences

nels open, be determined to reach an agreement,

of not achieving desired goals. Even when agree-

and encourage everyone involved to adopt a simi-

ments cannot always be reached, managers as me-

larly positive mindset.

diators will still work hard to overcome impasses and prioritize relationships based on trust, mutual

In addition to having the skills, traits and mindset

understanding and common interests.

of a mediator, managers should also be familiar with how the mediation process works, so they understand the key steps along the path to resolution of a dispute.

source: Mehta, K. and Ripol, I. "The Mediator Mindset," IESE Insight Review, no. 34 (2017): 53-58

While many companies outsource this job to an external provider (which may make sense under certain circumstances), managers who are able to do some of this work themselves may help preempt some conflicts – or at the very least improve relationships with their business partners, suppliers, customers and employees.

Fall 2018 | IESE Business School Insight | 91


FULL STOP

The art of work


Work has served as a source of inspiration for many artists, who have viewed it not only as an activity that is essential to economic and social progress, but also as a vital factor in human identity. The works of artists such as Hopper, Millet, Calder and Lowry allow us to reflect on the world of work and the people who inhabit it

In pre-industrial agrarian societies, work was carried out within a familiar and close radius, with personal ties and community bonds at the center. With the Industrial Revolution, machinery became the protagonist, and work grew less personal; individual output ceded to production lines. The 20th century hailed the age of office-based work and, with it, a new sense of isolation for many; the corporation loomed over the person. In recent years, we have looked to other aspects of our lives – family, pastimes, friendships – to lend greater meaning to the work we do. We asked Guillermo Solana, artistic director of the Thyssen-Bornemisza Museum in Madrid, to take us on a journey through these changing attitudes toward work. Here, he presents us with four visions of work, beginning with the 19th century rural beauty of Jean-François Millet through to the late 20th consumerism of Pop artists. While varied in style and sensibility, all these works speak to the meaning of work in human experience.


FULL STOP

The art of work

Millet, humanism and rural work

1

Artists since Antiquity have sought to portray the world of work, some idealizing it, others us-

ing their art as an ideological tool and still others chronicling the economic and social transforma-

tions of their time. But in the mid-19th century, work took on an unprecedented role as a protag-

onist of artistic production. With the Industrial Revolution and urban transformation come another way of understanding painting. Almost as a

consequence, work associated with rural life was mythicized. Jean-François Millet (1815–1875), who painted seminal works such as The Angelus and The Gleaners, took this movement to new heights and was decisive in the work of artists such as

Van Gogh. “When you paint something, whether it is a house or a forest, a field or the sky or the sea, think about who lives there and who contemplates it. An interior voice will speak to you then of their family, their work and their labors, and this idea will bring you within the universal orbit of humanity,” Millet explained. In Millet’s portrayal of introspective peasants toiling the land, work is a form of self-realization and of contact with the essential through unchanging rituals. Work is not transformed, but rather remains an anchor to reality, to the land and to life.

2

L.S. Lowry and the new landscape of the Industrial Revolution

The Industrial Revolution, with the emergence of a middle class without bourgeoisie roots, brought a new way of portraying the world of work in painting, sculpture and archi-

tecture. The era of machines and the unchecked growth of cities had begun. New building materials transformed gov-

ernment and private buildings. Gustave Eiffel constructed the Paris tower that bears his name for the 1889 World Fair,

and the Chicago School redefined urban architecture. Many artists reflected this profound transformation but we have

chosen L.S. Lowry, who, although often absent from major museum collections, is one of Britain´s most popular artists. Lowry converts industrial labor into an artistic theme and finds what he himself called “the visionary beauty of post-in-

dustrial weeds. My goal is to put the industrial landscape on 94 | IESE Business School Insight | Fall 2018


Clockwise from top: Factory at Horta de Ebro by Pablo Picasso; frames from Employees Leaving the Lumière Factory; poster for the 1889 World Fair; Surprise of the Wheat by Maruja Mallo; and Returning from Work by L.S. Lowry

Hopper and the loneliness of the office

3

We have spoken of rural and urban landscapes,

and of how workers found (or sought without

finding) their place in them. The art of Edward Hopper (1882–1967) moves between these two landscapes, inhabited by isolated figures bathed in a cinematographic interplay of light and shadow. Hopper constructs his own vision of the hu-

man condition and of work in paintings such as

Office at Night from 1940. In this office, more is inferred than is actually depicted; looking at the scene, one cannot help but guess at what is going on and speculate about what will happen later.

The Industrial Revolution gave rise to the concept of workers as a collective subject to technological advance

This portrait of a solitary office worker at his desk speaks of absence and lack of communication in

a new narrative form that distills reality and leaves only its essence. Hopper perfectly captures the loneliness of the 20th century employee, the lights

of his office always on, toiling away at a mundane job in which there is no chance for professional development or fulfillment.

the map.” In contrast to the dreamy countrysides and pastoral ideals of many British artists, Lowry brings to the canvas the brick factories of the outskirts of Manchester. Again, machinery, with its noise and its smoke, marks a new form of labor in which the worker is not an individual but rather part of a collective that is invariably alienated. In Lowry’s work, we can see the first brushstrokes of work-related stress, of Monday blues, and of the monotonous life of a salaried employee without possibility of promotion. His are Dickensian characters described by a paintbrush. Thus is born the concept of workers as a collective lacking individuality, subject for the first time to the overwhelming advance of technology.

Fall 2018 | IESE Business School Insight | 95


FULL STOP

The art of work

Pop Art and the essence of capitalism Andy Warhol’s dollar sign is the perfect metaphor for Pop Art’s criticism of unbridled capitalism and consumerism, with work forming part of the system. Robert Rauschenberg, Jasper Johns, Cy Twombly and others revolutionized the art world, which until then, portrayed a more orderly world than the actual world we lived in. Pop artists threw out that narrative, depicting the kaleidoscope of modern life, in which

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work, leisure, politics, technology and popular culture form a collage of great expressive force. Richard Hamilton portrays the new domestic scene of the modern worker: new spaces, exotic furniture and computers and gadgets synthesize a reality in which people work essentially in order to consume. Industrialization and the production of consumer goods are extended in Pop Art to the production of a massive quantity of images, just as factories focus on mass production. It is at this time that a transformation occurs, giving way to the 21st century idea that work and its fruits are not merely objects of consumption and spending, but rather paths toward continuous learning and personal fulfillment.

From left to right: Untitled sculpture by Alexander Calder; Just What Is It That Makes Today’s Homes So Different, So Appealing? by Richard Hamilton; and Retroactive by Robert Rauschenberg.

96 | IESE Business School Insight | Fall 2018


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IESE Business School INSIGHT. Num 150  

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