Rotman Management Fall 2024

How to Think More Creatively

How to Drive Innovation With GenAI

How to Disagree (Productively)

PAGE 20

PAGE 58

PAGE 76

The Magazine of the Rotman School of Management UNIVERSITY OF TORONTO

FALL 2024

HOW TO ‘LEAD BIGGER’ PAGES 70, 88, 92, 100, 104, 121

MANAGEMENT

The

Issue

September 20, 2024

Reunite at Rotman Reunite is back this fall!

Join us for fireside chats, faculty lectures, class reunions at the ROM and more. www.rotman.utoronto.ca/reunite

MANAGEMENT FALL 2024: THE HOW-TO ISSUE

In Deloitte’s Global Gen Z and Millennial Survey, almost 40 per cent of respondents indicated they had ‘rejected work assignments due to ethical concerns.’ And more than a third said they had ‘turned down employers that they felt weren’t doing enough’ on matters such as the environment, DEI and mental health. On page 70, former AT&T CEO Anne Chow describes the resulting paradigm shift in leadership and the demand to ‘lead bigger.’

Features

6

20

Soft Skills: The Gap and The Opportunity

Promoting Creativity: How to Overcome Habitual Thinking

26 How to Manage Innovation: A Primer for Leaders

by Mihnea Moldoveanu

by Cass Sunstein

by Alberto Galasso

Amid growing use of AI, demand for soft skills continues to outstrip supply.

To address this, we need common language for identifying, describing and measuring these skills.

Most people are quick to generate mental models of the world around them.

But if we make fewer assumptions about how things ‘should’ be, we can open our minds to new possibilities.

Before developing a robust innovation portfolio for their organization, leaders must understand the varied forms of innovation and their underlying principles.

46

32

38

How to Avoid a Healthcare Meltdown: The State of Specialist Care in Canada

How to Live a Psychologically Rich Life

How to Escape From The Perfection Trap

by Shigehiro Oishi and Erin C. Westgate

Interview by Brett Hendrie

The varied experiences required to live a psychologically-rich life demand venturing beyond what is known to grapple with new perspectives.

And the rewards can be great.

Success is a bit of a ‘bottomless pit’ for perfectionists. Psychologist Thomas Curran shares insights for breaking free from the trap.

by Sabrina Hundal

Unless radical systemic change takes place, medically-necessary services will become increasingly inaccessible to a growing population of Canadians with chronic disease.

52

58

64

Back to the Present: How Mental Time Travel Affects Saving Behaviour

How to Drive Innovation with Generative AI

How to Innovate in the Digital Era: What Goliaths Can Learn from Davids

by Sam Maglio

‘Reverse mental time travel’ is a promising intervention that can alter how consumers relate to and make decisions for their present self and the self they will one day become.

by Alan Iny, Luc de Brabandère and Justin Manly

In the quest for innovation, one of GenAI’s important contribution lies in helping organizations question their strategic assumptions.

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76

How to Lead Bigger

How to Disagree Productively

by Anne Chow

by Kenji Yoshimo and David Glasgow

We are in the midst of a seminal shift to a new leadership paradigm.

The good news is, we all have the potential to ‘lead bigger’, says AT&T’s former CEO.

By demonstrating how to disagree in a productive manner, you can set the tone for how your organization navigates some of today’s thorniest conversations.

by Vijaya Sunder M and Namrata Manchiraju

To succeed in the digital era, organizations must practice ‘innovation ambidexterity’ and foster a culture of continued, sustained innovation.

Rotman Management Fall 2024 Published in January, May and September by the Rotman School of Management at the University of Toronto, Rotman Management explores themes of interest to leaders, innovators and entrepreneurs, featuring thought-provoking insights and problem-solving tools from leading global researchers and management practitioners.

The magazine reflects Rotman’s role as a catalyst for transformative thinking that creates value for business and society.

In Every Issue 5 From the Editor

ISSN 2293-7684 (Print) ISSN 2293-7722 (Digital)

14 Thought Leader Interview: Corey Keyes

Editor-in-Chief Karen Christensen Contributors Sinead Bovell, Brian Connelly, Alberto Galasso, Rob Gillezeau, Avi Goldfarb, Megan Haynes, Walid Hejazi, Brett Hendrie, Sabrina Hundal, Michael Inzlicht, Sam Maglio, Niamh McKenzie, Mihnea Moldoveanu

by Karen Christensen

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Idea Exchange “Basically, we’re passing AI the keys to human language and attention.”

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Hybrid Leadership: Lessons from a Crisis

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FROM THE EDITOR

Karen Christensen

The How-To Issue

NAVIGATING UNCERTAINTY. Adapting to technological advances.

Managing diversity and inclusion. Addressing climate change.

Fostering innovation. Developing talent. At times, the demands being made on today’s leaders can seem endless. Who can keep up?

The good news is, by focusing on the core capabilities and principles that make the most impact in each of these areas, you can enable your organization to thrive. In this issue of Rotman Management, we provide a ‘how-to’ playbook of sorts for leaders seeking to cover off many of today’s most in-demand skills.

So-called soft skills are becoming ever more important, according to a recent special issue of Harvard Business Review.

We kick the issue off on page 6 with, Soft Skills: The Gap and The Opportunity, an excerpt from Rotman Professor Mihnea Moldoveanu’s latest book. In it, he describes the current demand for soft skills, the significant gap in supply — and what to do about it.

Is your creative thinking in a rut? Is your team running on autopilot? On page 20, Harvard Law School Professor and Nudge co-author Cass Sunstein provides insights for turning things around in Promoting Creativity: How to Overcome Habitual Thinking.

Are you a perfectionist — or do you work with one? There are pros and cons to both, but psychologist Thomas Curran argues that the negatives outweigh the positives in How to Escape The Perfection Trap on page 46.

To date, idea generation appears to be Gen AI’s most obvious contribution, but it can play an even more important role in organizations, as Boston Consulting Group’s Alan Iny and colleagues show in How to Drive Innovation with Generative AI on page 58.

Disagreements have always been a part of life, but the combination of technological, social and cultural factors in today’s world has amplified their frequency and intensity. On page 76, NYU professors Kenji Yoshino and David Glasgow provide some pointers for How to Disagree (Productively).

Elsewhere in this issue, Rotman grad Sinead Bovell (MBA ‘15) explains why our smartphones will soon disappear (page 84); Stanford d.school’s Scott Doorley and Carissa Carter discuss how feelings shape our world (page 110); NYU Psychologist Tessa West shares insights from her latest book, Job Therapy (page 126); and Rotman faculty Brian Connelly, Rob Gillezeau, Michael Inzlicht, Yong Kim, Walid Hejazi and Avi Goldfarb share the latest insights from their work.

Leadership in our uncertain world demands an evolving set of capabilities. By embracing the principles and insights discussed in this issue, you will be well on your way to fostering resilience in yourself and your team — and to helping your organization navigate through these challenging times.

Karen Christensen, Editor-in-Chief editor@rotman.utoronto.ca Twitter: @RotmanMgmtMag rotmanmagazine.ca / 5

SOFT SKILLS:

The Gap and The Opportunity Amid growing use of AI and machine learning tools, demand for soft skills continues to outstrip supply. To address this, we need common language for identifying, describing and measuring these skills.

by Mihnea Moldoveanu

IN SPITE OF EVIDENCE that human work is increasingly social and relational in nature — and ample evidence to suggest that social and relational ‘work’ is valuable to individuals and organizations alike — we have not, to date, built a language system and methods of measurement of the skills that allow us to assess whether people do such work competently or superlatively. And, as a result, we have not been able to develop ways to help humans demonstrably acquire these skills.

From LinkedIn knowledge graph reports to white papers of the World Economic Forum, from McKinsey & Co. and Boston Consulting Group to the International Labour Organization reports, soft skills have been touted as critically important to the current and next generation of workers and leaders. Moreover, demand for soft skills continues to outstrip supply — a large and increasing gap that has been confirmed by studies that probe into the main sources of dissatisfaction of chief learning and human resources officers with the skill base and skill development outcomes of training and development programs.

In my latest book [Soft Skills: How to See, Measure and Build the Skills That Make Us Uniquely Human,] I set out to ‘change the soft skills game’ by introducing language for identifying and describing these skills and ways of measuring the degree to which a person possesses them. In this excerpt from the book, I set the stage for why a ‘re-set’ is required for the way we think about soft skills.

Why Soft Skills Matter

In every organization, soft skills show up as essential to both the vertical and the horizontal organization of work: THE VERTICAL ORGANIZATION OF WORK. In this model — per organizational economist Luis Garicano — organizations require social skills for conveying critical information, including decisions made and the rationale for them. Regardless of industry, organizations solve problems — whether it be client problems, problems related to their internal systems and processes or the

rotmanmagazine.ca / 7

In a collaborative economy in which most problems are solved in teams, there will be a shortage of interactive and communicative skills.

removal of obstacles created by new government regulation.

Within this class of problems, there is variation. Some problems are easy, others hard; some occur more frequently, others less so. Within the organization, there are workers who, over time, specialize in solving certain kinds of problems. Some specialize in solving the easy problems or those that occur frequently (let us call them ‘routine problem solvers’), while others specialize in solving problems that are exceptional because they are very hard, very rare — or both.

An efficient organizational form in such an environment turns out to be a pyramid-shaped hierarchy in which exceptional problems are passed upwards to managers or executives who either solve them themselves and communicate the solution to the routine problems solvers, or pass them upward to still more highly placed managers or executives. Because the latter have a comparative advantage in communicating solutions to unusual problems to the routine problem solvers, it is efficient for them to capitalize on this advantage and specialize accordingly, by acquiring social or communicative skills (soft skills) that allow them to excel in their roles.

This model notably assumes that the communicative prowess required to ‘pass an exceptional problem upwards’ is less than that required to successfully communicate a solution to an exceptional problem to a routine problem solver, which is not always the case. But, the model explains the fact that ‘we have a lot of hierarchies around,’ as well as the fact that ‘executives talk and write a lot’ — and, perhaps more articulately than those the model would label as ‘routine production workers’ in the same organization.

If we interpret the work of routine problem solvers as being largely cognitive and individualist in nature, and that of executives and managers as having significant social, interactive and communicative components and requiring skills that are not purely cognitive (i.e. ‘reading a room’), we glean some understanding of both why social and communicative skills are highly valued and why executives are so well paid (their skill set is sufficiently rare.)

This model is a variation on the classic command-and-control image of hierarchical organizations as devices that jointly minimize communication and coordination costs — in which 8 / Rotman Management Fall 2024

information (about the environment) gets passed on upwards from employees through managers to executives, and decisions get passed on downwards (through the hierarchy).

In this model, being able to communicate decisions ‘from above’ persuasively, eloquently and efficiently is a highly valuable skill.

THE HORIZONTAL ORGANIZATION OF WORK. This aspect of work requires convex combinations of ‘hard’ and ‘soft’ skills in any group or team, and in any member of that team. In the vertical organization model, most of the communication that matters is vertical: problems get passed upwards; solutions are communicated downwards. The model (correctly) predicts the growing importance of soft skills to managers and executives, but, it does not explain why returns to soft skills have grown across both skilled and unskilled occupations, in both high-wage and low-wage sectors of the economy.

To account for this flaw, labour economist David Deming takes into account the horizontal structure of human work in organizations and argues that soft (or social) skills function as a sort of lubricant of social interactions in all settings in which humans work together, increasing marginal and average productivity. Given that more and more of human work is performed collectively and the quality of interactions among group members drives the group’s ability to solve problems, Deming’s ‘social lubricant model’ of soft skills accounts for the uniform growth in return to such skills across wage and authority levels.

If every high-performing group needs to comprise individuals who have at least a certain level of communicative and interactive skill, then, in a collaborative economy in which most problems are solved in teams, there will be a shortage of interactive and communicative skills relative to an economy in which routine problem solvers are ‘managed’ by interactionally sophisticated executives. This would seem to explain the growing value of such skills post-2000. Suppose, moreover, that with the increase in our collective, societal ability to select for, measure, train, certify and develop ‘hard’ skills, the stock of certifiable hard skills has increased — which would lower their value, relative to that of soft skills.

Simply put, because soft skills are hard to measure and evaluate, it is hard to certify them in a way that lends credibility and market power to the owner of a ‘soft-skill certificate,’ which would explain why the value of hard skills relative to that of social/interactive skills has decreased.

skills and bundle together various sets of skills and label them as soft — including: – social, affective and self-regulation skills (OECD); – complex problem-solving, managing others, leading others, adaptability (McKinsey); – social and emotional skills (UN).

We Can’t Act Upon That Which We Cannot See

Analyses of the demand for soft skills and the importance of soft skills to human and organizational performance reveal a perplexing multitude of different ways of defining and measuring them.

Some define soft skills as ‘those skills that matter to lifetime outcomes and welfare but are not directly measured by standardized tests.’ Labour economist James Heckman and his colleague Tim Kautz use the results of Big Five personality inventories to proxy for skills that traditional standardized tests of ‘purely cognitive ability’ do not measure. They argue that individual performance and achievement depend not only on measurable cognitive abilities, but also on a host of other factors, some of which are stable (like personality traits) and some of which are situational (like incentives).

They find that long-run studies of individual study and work life average out situational factors and reveal the contribution of individual traits to life success. The intuition is that certain state- and context-independent characteristics — such as ‘conscientiousness’—affect the way in which someone responds to incentives and situational variables across different contexts in predictable ways.

Elsewhere, researchers base their findings on the U.S. Department of Labor database (O*NET), which deploys a broad taxonomy of soft skills — on the surface unrelated to any of the Big 5 traits [extraversion, agreeableness, openness, conscientiousness and neuroticism]—and based on surveys filled out yearly by employers answering questions about the employment roles and positions in their organizations and the importance of various skills to the performance of the functions these positions entail.

Add to this the ever-growing collection of reports on skilling and development from advisory groups (McKinsey, BCG, Accenture, PricewaterhouseCoopers) and NGOs (UNESCO, UN), which use multiple incompatible definitions of soft

With such a wide dispersion of definitions — and, where applicable, methods of measurement — it is not surprising that soft skills have eluded targeted and constructive interventions aimed at either selecting rigorously for those who possess them or for helping humans develop them proactively.

Imagine for a moment that the skill required to carry out the task of programming a machine to perform a large database search was subject to the same multiplicity of vague specifications. Clearly, there would be a far lower effectiveness of selection filters into jobs that require this task, and a far lower rate of success in building programs of study that help learners develop this skill, than there currently is.

There are serious conceptual problems in most of the definitions of soft skills in both the academic and trade literature on them. For one thing, many of them (‘social perceptiveness’, ‘actively looking for ways to help people’) are couched in the language a human resources professional would use to create a rubric in an evaluation report, or the language in which an executive team might discuss the attributes of a manager or employee they are about to hire. This language system does not generate a taxonomy amenable to independent measurement, but one that relies instead on subjective reports that use qualitative impressions, or on outcomes (‘personal power’) that pre-suppose or require the use of soft skills for their achievement. This becomes a fatal flaw when the generic and glossy language in which they are formulated makes for measures based on subjective reports that are both noisy and biased.

Furthermore, many of them (e.g. personality traits) are not related to individual performance on a task or a family of tasks (as technical skills are) but instead, are related to individual dispositions to act in particular ways across various contexts. To the extent these dispositions are stable and the links between these traits and certain behaviours that plausibly affect outcomes rotmanmagazine.ca / 9

Purpose of Communicative Acts and Plausible Metrics of Communicative Success Class of communication purpose

Description of purpose

Relevant metrics of communicative success

Dissemination

Seeding and building up groups of distributed, mutual and common knowledge about a set of ground facts and of trust in the communicator’s competence and integrity.

Intelligibility, validity, relevance, responsiveness.

Explanation

Persuading a person or a group of people of the validity of a set of reasons for accepting an assertion or set of assertions as valid or useful; persuading one or more persons of the validity of a set of causes and mechanisms by which an observed event came about.

Validity, coherence, consistency, relevance.

Justification

Persuading a person or a group of people of the validity of a set of reasons for accepting an assertion or set of assertions as regulative, or a course of action as good or right.

Validity, coherence, consistency, relevance.

Facilitation

Enabling one or more people to voice their attitudes, questions, queries, challenges, objections and concerns in a public setting.

Responsiveness, psychological safety, sincerity.

Deliberation

Enabling one or more people to reach a reflective equilibrium on the best, the right, the good and/or the most useful thing to do.

Relevance, coherence, consistency, responsiveness, effectiveness, psychological safety, sincerity.

Inquiry/due diligence

Enabling one or more people to probe, together, into the truth, validity, effectiveness and rationality of a set of alternative courses of action.

Sincerity, coherence, consistency, relevance, effectiveness.

Planning

Enabling one or more persons to reach, together, agreement on an explicit map of their actions, their observable consequences and the ways in which they communicate and coordinate their mutual responses, and to jointly and individually commit to the resulting plan.

Validity, relevance, effectiveness.

FIGURE ONE

relevant to one’s personal life course seem probable, the overall picture has some appeal.

But that appeal wears off if we probe into the tightness of some of the inferences made, as well as into the appeal of the consequences of adopting this picture of soft skills. In some cases (e.g. ‘extraversion’), it is easy to come up with scenarios and situations in which a highly ‘soft skilled’ individual can perform either very well or very poorly in a team or group situation.

10 / Rotman Management Fall 2024

Moreover, using the Big Five traits to measure the degree to which an individual possesses a skill so valuable sets up an implementation obstacle: Personality tests are based on selfreported answers to questions, which are asked in a way that makes it hard for the uninitiated subject to discern the link between her answer patterns and her reported trait.

In an era when not much rides on the results of such tests, there are lots of un-initiates around whose answer patterns are honest enough to produce the impressively informative

correlations Heckman and Kautz present. But, if a large number of universities and employers suddenly asked applicants to take personality tests whose results would figure in to decisions made about their future lives, the incentives for cleverly distorting answer patterns to produce the impression of having the soughtafter traits would create sufficient noise to vitiate the results of the test as a filter.

There is, clearly, a significant cognitive component in delivering a highly sensitive message to a divided or fragmented team, or in raising a knock-down challenge to a speaker in a public forum in a way that does not discourage her from responding in a truthful fashion. It is also easy to see that prototypically ‘affective’ predispositions and abilities (‘empathic accuracy’) can be instantiated in ways that are more or less cognitive: Just like one can be emotionally attuned and responsive to another person without being able to clearly and suggestively articulate the reasons for which one resonates with him, one can also clearly and persuasively articulate such reasons with a demeanour of such cool detachment as to lead others to doubt the genuineness of one’s empathic understanding.

X-factor skills that involve the deployment of executive functions of the mind/brain (i.e. problem decomposition into sub-problems, working memory use and capacity, impulse suppression, task switching) in different scenarios are in many cases labelled ‘soft’. They also condition the acquisition and exercise of hard skills: maintaining concentration on a programming assignment (impulse suppression); keeping all prior conditions of a theorem in mind while trying to prove it (working memory); and breaking up a hard problem into smaller, easier-to-solve subproblems before proceeding (sub-problem decomposition).

These problems, alone or in combination, contribute to three persistent and counterproductive illusions regarding soft skills: ILLUSION 1: ‘SOFT SKILLS ARE TRANSFERRABLE.’ In other words, if you have them, you can apply them in different social and organizational contexts and knowledge domains. Unlike a mathematical modelling skill which is almost always about a particular

topic and subject (a plasma, a waveguide, a truss structure), or a programming skill which may be both language- (C++) and algorithm- (convex optimization) dependent, a soft skill is not context-dependent. This illusion arises from the general and generic language in which these skills are often described (‘helpfulness’, ‘creativity’), which makes it seem as if the domains to which they are applied and the contexts in which they are applied do not matter.

However, one can be very good at organizing, convening and structuring small groups of engineers and scientists and not be equally competent with small groups of musicians or very large, potentially virtual audiences comprising people who have vastly different backgrounds. One can be highly competent at communicating in precise, sensitive, attuned ways in small group settings and lose all sense of connection and responsiveness in front of very large groups.

ILLUSION 2: ‘SOFT SKILLS ARE INNATE.’ By the time you enter the educational system, you either have them or you do not. There are genetic and epigenetic narratives around this belief, which, at various times, garner different levels of credence, but, one’s stock of soft skills remains largely unchanged by the time one enters the second or third grade of the K-12 educational system.

However, significant success has been reported in the development of skills that are almost unanimously labelled as soft, including: the ability to perceive and understand emotional landscapes and to self-regulate in the face of emotional challenges, relational abilities such as networking and negotiation and empathic understanding in emotionally complicated scenarios.

ILLUSION 3: ‘SOFT SKILLS ARE IRRETRIEVABLY OR INEVITABLY ‘SOFT’.’

They cannot be measured, evaluated and trained in ways in which hard skills can because they always depend on some subjective and therefore necessarily biased report of an impression registered by a human observer subject to physiological and psychological vagaries. rotmanmagazine.ca / 11

We have an opportunity to become as precise about soft skills as we are about hard skills.

However, until the design of tests that pinned down specific components of hard skills (such as the manipulation and solution of algebraic equations, matrix mechanics, theorem proving procedures in real and complex analysis), hard skills were also subject to impressionistic biases, as individual examinations carried out by instructors produced results that could easily skew in favour of favoured pupils. Turning quality into quantity is hard, but inferring that something is impossible from the fact it is hard is not a useful step in this case. We can go from subjective evaluations to inter-subjective appraisals — which is the best definition we have for objective in any case.

The Opportunity: Soft Skills, Hardened

We have an opportunity to become as precise about soft skills as we are about hard skills and create a set of measures, appraisals and methods for developing soft skills that match those we currently employ for the selection and development of hard skills.

The advantages of providing a satisfactory solution to the soft skills specification problem are clear: We will be able to articulate, implement, explain and justify metrics and measures for a set of skills that are deemed highly important and valuable, but which are currently only recognizable after the fact — which for most programs and organizations means after incurring the cost of hiring and on-boarding an unskilled candidate, and the opportunity cost of losing out on a skilled one.

We will also be able to design training and development programs that make good on the now hollow and borderline fraudulent promise that many professional and other higher education programs make to help their graduates develop the skills they need for the jobs and roles they want.

A specification that cuts to the core of our intuitions and at the same time allows for operationalization using various measures at our disposal — subjective and intersubjective — is key to delivering on this opportunity.

sociality and relationality while retaining precision, we will have built a useful selection and development instrument for both organizations and education systems.

Consider this: If there is a core skill set whose marginal improvement or gain enables even a one per cent average increase in the success individuals have in running effective meetings, making persuasive presentations or writing delicate e-mails, over the course of a person’s ‘organizational life’ comprising some 30,000–50,000 ‘social communicative acts’ that make use of this skill, (whose effects compound in time and solidify into ‘reputations’), it could have a total ‘return’ of 4.4 x 10,129 (for n =30,000) to 1.2 x 10,216 (for n =50,000). No small change, leaving lots of room to account for the gamut of externalities and vagaries of organizational settings.

Mihnea Moldoveanu is the Marcel Desautels Professor of

In closing

If there is one ‘core’ set of skills that almost all definitions of soft skills have in common, it is that they feature a strong social, relational and interactive component. If we can get to the core of 12 / Rotman Management Fall 2024

Integrative Thinking, Director of the Desautels Centre for Integrative Thinking, Professor of Economic Analysis and Policy and Director of Rotman Digital at the Rotman School of Management. His latest book is Soft Skills: How to See, Measure and Build the Skills That Make Us Uniquely Human (De Gruyter, 2024).

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A mental health research pioneer explains how to go from languishing to flourishing in your personal and professional life.

Thought Leader Interview:

Corey Keyes

Mo Bunnell: In terms of personal well-being, languishing and flourishing lie at opposite ends of a spectrum. How do you define languishing?

Corey Keyes: Languishing is the absence of some really impor-

tant things that make our lives meaningful and give us a sense that we matter in this world. A hypothetical person who is languishing might feel like their life has no direction or meaning; like they’re not being challenged to grow and become a better person; that they aren’t making much of a contribution to the world; that they have no community to which they belong; or that they are lacking in warm, trusting relationships.

Languishing is a persistent state, regardless of whether life around you is going well or not. To diagnose it, I’ve developed a 14-item scale that measures the presence or absence of flourishing. Languishing requires that you rarely, if ever, feel at least seven out of the 14 items associated with flourishing [see Figure One, page 16.] You might experience these things only once or twice a week, or not at all.

Languishing isn’t the same as depression. It’s a normal reaction to modern life. Sadness and fear are normal. But sadness can become depression, and fear can become anxiety when it 14 / Rotman Management Fall 2024

persists. Equally, when you stay in a state of languishing for too long, it becomes a debilitating, dangerous thing, just like depression. I’m not trying to pathologize languishing. I’m simply saying, if you don’t listen to that empty silence in yourself and do something about it, it will get worse. Trust me — I’ve been there.

Now tell us about the other end of the spectrum: flourishing.

I use the word flourishing in place of the term mental health, largely because lots of people have misconceptions about what mental health means. Many think it is just the absence of a mental illness. My model argues that lots of people are not technically mentally ill, but they are not anywhere close to flourishing. They are stuck in that middle ground called languishing.

To be mentally healthy, you have to respond positively to seven out of the 14 items on my questionnaire, and you must have felt these things almost every day or every day in the past month. All the research points to the following: When you hit that sweet spot, and you have at least seven out of the 14 elements and six of the 11 criteria for psychological and social wellbeing almost every day, it is remarkable how well people function. There is something about flourishing — being mentally

PORTRAIT BY SUSAN HINOJOSA (MSUSANHINOJOSA@GMAIL.COM)

Interview by Mo Bunnell

The Elements of Mental Health Family Tree of Mental Health

Positive Functioning

Positive Feeling I - Me

We - Us

Emotional Well-Being

Psychological Well-Being

Social Well-Being

1. Happiness

4. Self-Acceptance

10. Social Acceptance

2. Satisfaction

5. Positive Relations with Others

11. Social Integration

3. Interest in Life

6. Personal Growth

12. Social Growth

7. Purpose in Life

13. Social Contribution

8. Environmental Mastery

14. Social Coherence

9. Autonomy FIGURE ONE

healthy — that creates strong, truly resilient human beings. So if you want people to be resilient, let’s prioritize mental health as more than the absence of mental illness. It’s about the presence of flourishing.

What do leaders need to recognize about languishing?

Languishing is a gateway for a lot of the problems that we can’t fix — so we’re better off preventing it, in my opinion, before it becomes an even bigger problem for someone. In the realm of business, leaders often want people to ‘toughen up.’ Here’s my response to that mindset: If you want tough, you had better make sure your employees are flourishing, because only then can they handle a high-stress workplace and not slip into languishing, depression or anxiety.

Working people are starting to say, ‘I need to draw a line: You can have my hard work, my sweat and my tears, but you can’t take my well-being, my purpose for living or my sense of autonomy from me.’ We need to draw lines and boundaries that enable people to flourish both at work and at home.

Just because you’re prioritizing profits and growth, it doesn’t mean you have to ignore these things. They can be deeply compatible, and often flourishing is the very thing that actually leads to greater workplace productivity. Not surprisingly, research shows that flourishing people miss the fewest days of work and use fewer healthcare resources across the board. So, promoting flourishing is a win-win for individuals, organizations and society.

16 / Rotman Management Fall 2024

You have developed a prescription for ‘flourishing deficiency.’

Tell us about the five ‘vitamins.’

The research shows that even among people who are depressed or languishing, if they do more of these five things, they will begin to have better days and move towards flourishing. And flourishing people who prioritize these activities are more likely to stay that way.

The first vitamin is help other people. In other words, prioritize sympathy and kindness in order to be useful and helpful to the world, so that you can leave whatever you’re interested in even better than you found it.

The second vitamin is learn something new. I don’t mean the kind of learning that is instrumental to getting a job or being promoted at work. This is about finding something to do simply because you want to learn about it. It may or may not end up being useful to your career or your life. There is something about learning new things and seeing ourselves get better at something that is very conducive to flourishing.

The third vitamin is transcending the everyday world through spiritual or religious activities or rituals. If you’re not spiritually or religiously inclined, there is plenty of philosophy that does what religion can do for you — which is to help guide you in what is the right way to be a person in this world. For example, Stoicism remains very popular with people seeking a spiritual foundation. Things like meditation and focusing on gratitude can also help control stress, but you need to take action to give

your life purpose and to flourish.

The fourth vitamin is building warm and trusting relationships. To develop the sense of belonging that flourishers feel, you need to build (or rebuild) a community around you that allows you to engage in the five vitamins.

The last vitamin is re-engaging your imagination through play. As adults, we have to spend time without worrying about other responsibilities — just having fun for fun’s sake. Too many of us are engaging in passive leisure, where we sit back and consume music or stories that are presented to us. This can be entertaining, but I think we’ve forgotten how to create and share our own stories, like we did a century ago. Active leisure is really the key — going out and engaging in activities that you find creative and enjoyable.

These five ‘vitamins’ have been shown to not only create better days, but to also keep people in the flourishing category and help them move away from languishing.

Let’s talk a bit more about that first vitamin. What is so powerful about helping other people?

There’s a lot of talk in recent years about purpose-driven organizations and trying to find personal purpose. While these efforts are laudable, I think they have led to a very real phenomenon: purpose anxiety. If you start thinking about these things too broadly and feel like you’ve got to dedicate a big chunk of your life or work to some big cause, you may never get there. I advise people to start small. Choose a day where you will get away from your screens, get out there and see the need in your world. There are ample opportunities to offer a small act of

kindness by asking, ‘Hey, do you need some help?’

Also, you can ask yourself, ‘What do I really care about?

Whose pain or suffering do I feel most drawn to?’ Often, you will be drawn to helping people who are like you, as I was. I myself suffer from mental illness, so my work and purpose have always been driven by a passion to help people in this arena. Start with your lived experience of things that negatively impact your well-being and say, ‘Hey, maybe I could be helpful and focus on someone else’s well-being and flourishing.’ That’s a really great place to start.

How does this translate to the workplace? Should we all be walking into client meetings and asking, ‘How can I be helpful?’

Why not? The fact is, just listening to people can be incredibly helpful and valuable. Maybe they need help thinking through how to reorganize their department, or they need some career advice. Maybe their son or daughter is thinking about a career in your profession. Instead of a mindset of ‘I need to make this deal happen today,’ think about ‘how can I be helpful to this person?’

I would guess maybe one out of 100 people actually do this, because companies pressure people to do the opposite — to come in with a 70-page PowerPoint slide deck and start talking about all the stuff you can do for them. I also think that 100 per cent of the people who are really good at what they do, actually do what we are talking about. They don’t march in with a deck.

Instead, they come in with a list of really well thought out questions. They’ve done their research, so they have some idea of

Are You Languishing?

If you find yourself nodding your head in recognition to the symptoms on this list, you might be: • You feel emotionally flattened. It’s hard to muster up excitement for events and milestones on the horizon.

• A sense of inevitability has washed over you. Your life circumstances seem increasingly dictated by external forces.

• You find yourself procrastinating on tasks at work and in your personal life as a ‘why try anyway’ attitude sets in.

• More and more things strike you as irrelevant, superficial or boring.

• You have the constant feeling of unease that you are missing something that will make your life feel complete again, but you can’t figure out what it is.

• You feel disconnected from your own community and/or a greater purpose or cause.

• Your job once gave you a sense of meaning, or at least accomplishment, but it is starting to seem pointless in the grand scheme of things.

• Small setbacks that you might once have weathered fairly easily leave you feeling defeated. You feel restless, even rootless.

• You find yourself being convinced—or sometimes steamrolled—by people with strong opinions, because you’re increasingly unsure of your own.

• It’s hard to find the motivation to reach out to friends and family and maintain relationships that were once important to you. You’ve been finding it more difficult to feel close to people.

• You don’t have the ability to see and understand your strengths and weaknesses. You can’t figure out where you’re doing well and what you should think about improving on. Your sense of self-worth is flickering or plummeting.

rotmanmagazine.ca / 17

The Flourishing Questionnaire

During the past month, how often did you feel

Never

Once or Twice

About Once a Week

Two or Three Times a Week

Almost Every Day

Every Day

0 0 0

1 1 1

2 2 2

3 3 3

4 4 4

5 5 5

EMOTIONAL WELL-BEING 1. Happy 2. Interested in life 3. Satisfied with life

Criteria for flourishing: Can you circle 4 or 5 in response to a least one of these first three questions?

SOCIAL WELL-BEING 4. That you had something important to contribute to society

0

1

2

3

4

5

5. That you belonged to a community (a social group, school, neighbourhood, etc.)

0

1

2

3

4

5

6. That our society is a good place, or is becoming a better place, for all people

0

1

2

3

4

5

7. That people are basically good

0

1

2

3

4

5

8. That the way our society works made sense to you

0

1

2

3

4

5

Criteria for flourishing: Can you circle 4 or 5 in response to at least six of the questions above and below? (Since both social and psychological well-being are a measure of healthy functioning, high marks in either can meet the criteria for flourishing.)

PSYCHOLOGICAL WELL-BEING 9. That you like most parts of your personality

0

1

2

3

4

5

10. That you were good at managing the responsibilities of your daily life

0

1

2

3

4

5

11. That you had warm and trusting relationships with others

0

1

2

3

4

5

12. That you had experiences that challenged you to grow and become a better person

0

1

2

3

4

5

13. That you are confident to think or express your own ideas and opinions

0

1

2

3

4

5

14. That your life has a sense of direction or meaning to it

0

1

2

3

4

5

FIGURE TWO

18 / Rotman Management Fall 2024

how they might be able to help. They might start with, ‘Gosh, I noticed this in your 10K, and it really surprised me,’ or, ‘I heard your CEO talk about these things; they seem to be your company’s priority. What is your take?’ Try starting with questions to figure out what the other person’s priorities are — in their words, not yours. That way, you can figure out how to be helpful.

Is age related to flourishing vs. languishing?

Levels of languishing increase significantly in later life. They tend to be very high in young adulthood, then decline until about the age of 70, when all of a sudden, it goes ‘boom.’

Loneliness is a huge epidemic at the moment, and it’s part of languishing. Three of the 14 questions reflect warm trusting relationships, a sense of belonging and the sense that you have something to contribute to others in your community. The modern world is not very helpful in encouraging us to practise the skills that are required to flourish — or even making it clear that these are things that really matter.

It’s not that people can’t do hard things in life. They definitely can, without sacrificing their mental health — but only if they have the kind of relationships we’re talking about. When you expect people to do really hard and challenging things, but you don’t offer those things, make no mistake: you will sacrifice your top talent. The practical takeaway is, if you’re not working in a culture that pays attention to all of this, get out. But also remember that you can go a long way towards creating your own networks and support groups around challenging aspects of life.

I think people can and should have some agency around their own flourishing.

where you have to go out and make something happen. You have to create the activity, like hiking or biking. Those are the sort of activities that reduce languishing.

Interestingly, reading books is not considered passive leisure — especially fiction. Fictional stories require the reader to engage with a world of ideas, so you’re flexing a muscle that you need throughout life. The bottom line is, we don’t lose the need for our imagination when we become adults. We just need to apply it to different things — like dreaming of something better for ourselves and other people.

For those who want to continue to flourish or move towards flourishing, what is your advice?

Your goal should not be to check every box every single day. As indicated, you only need six of the 11 ‘functioning well’ — any combination of social or psychological well-being — to flourish.

The combinations are almost endless, so you can flourish in your own unique way. Just remember, wherever you are today on the flourishing spectrum, you don’t have to stay there.

Let’s end by touching on your fifth ingredient: play. Talk more about the difference between passive and active leisure.

I define play as anything you do where the only desired outcomes are to make it interesting and enjoyable. You don’t need to win to have fun. The point is, you do it simply because you want to. But you can’t play if your mindset is, ‘I’m wasting my time; I should be doing something more useful,’ which is usually work-related or getting chores done. As adults, we think, ‘fun is reserved for my two-week vacation’ — which, by the way, is usually stressful in terms of preparing for it, getting to it, and getting home.

Passive leisure has taken over too much of our free time.

And by passive, I mean that you don’t have to make anything happen. You just click on something, sit back, and don’t move.

Research shows that this leads to languishing. Active leisure is

Sociologist Corey Keyes is a Professor Emeritus at Emory University and author of Languishing: How to Feel Alive Again in a World That Wears Us Down (Crown, 2024). Over the course of his career, he has advised the Centers for Disease Control and Prevention and the World Happiness Forum, as well as governmental agencies in Canada, Northern Ireland and Australia. Mo Bunnell is the Founder and President of Bunnell Idea Group (BIG) and author of Give to Grow: Invest in Relationships to Build Your Business and Your Career (Bard Press, 2024). This interview began its life on Mo’s podcast, Real Relationships, Real Revenue, available on YouTube and wherever you get your podcasts. rotmanmagazine.ca / 19

Promoting Creativity: How to Overcome Habitual Thinking Most people are quick to generate mental models of the world around them. But if we make fewer assumptions about how things ‘should’ be, we can open our minds to new possibilities.

by Cass Sunstein

DAY AFTER DAY, we observe people doing the same things in the same ways. As a result, we expect people to wear shoes on their feet and gloves on their hands; to eat ice cream with a spoon, not a fork; and to sit at the front when they drive and the back when they don’t. When we observe these things over and over, our mind stops registering the action and responding. There is no ‘surprise’ signal in our brain to draw attention and make us think, ‘Hey, maybe we could do things differently?’

But once in a while, someone does come along and wonder whether the way we have always done things is the only way — or the best way. Someone who thinks, ‘Hey, maybe humans can travel by air, not only on the ground?’ or ‘Maybe books can be sold online rather than in a physical store?’ The question is this: What makes certain individuals ‘dishabituate’ to the status quo and ultimately innovate?

The Power of Small Changes

Research suggests that even minor changes have the power to trigger dishabituation by signalling that a new situation needs to be navigated. As a result, people are more likely to rethink the status quo. For example, after people move to a new country, they become better at solving creative puzzles. Presumably, the need to deal with a completely new environment increases their flexible thinking, and this mental transformation generalizes to all aspects of life, including puzzle solving.

But you don’t need to uproot to another country to enjoy a creative boost. Modest changes, such as going for a run after sitting at your computer for a while, help too. A large body of literature links physical activity to creative thinking. Most people assume that physical exercise increases creativity because it improves mood, but that’s not the whole story. A series of rotmanmagazine.ca / 21

Most people are quick to create expectations of what will happen next, as well as when, why and how it will happen.

experiments led by Kelly Main revealed that change in activity in and of itself — for example, from sitting to walking or from walking to sitting — enhances creative thought because it gears the mind for change.

To measure creative thought, Kelly asked volunteers to complete one of two tasks. In one, they were given groups of three words and asked to find a fourth word that could be attached to each of the others to create a compound phrase. For instance, if we gave you the words cup, fingers and peanut, you could respond with butter (buttercup, butterfingers, peanut butter).

Here are some other examples for you to try: 1. sense, courtesy, place 2. political, surprise, line 3. dream, break, light 4. flake, mobile, cone 5. river, note, account People who do well on this task tend to score higher on other measures of creativity, too. But Kelly and her team didn’t rely only on this task to measure creativity. They also asked volunteers to come up with unusual uses for household items. For example, try to think of uncommon uses for an empty paper-towel roll. Maybe you could insert rolls into your boots to keep their shape while in storage, or use them to store rubber bands in.

People who come up with multiple unusual uses tend to score higher on other creative tasks, as well.

The key to Kelly’s experiment was that one group of volunteers was seated while completing the tasks, while another changed from seated to walking and then back to seated. She found that the group that was always seated came up with fewer unusual uses of items and fewer compound-word answers. She replicated this result three times with different groups of volunteers. Even more interestingly, she found that the boost in creativity was most prominent both shortly after people started walking and shortly after they sat down. This suggests that change itself may increase creative thought.

Revealingly, the boost in creativity subsided over time as volunteers habituated to their condition. That is, walking boosted creativity at first, but as people continued walking, they got used to it and creativity subsided. On average, the boost in cre22 / Rotman Management Fall 2024

ative thought lasted for about six minutes after people started walking. Once people sat down, creative thinking went up again, only to subside after habituation (this time to sitting) kicked in.

That was not all. Merely anticipating change was enough to boost creative thought. When the scientists told the volunteers that they would shortly change their activity, the researchers observed an increase in creativity scores. Kelly and her team believe that this is because when people anticipate change, their mind gears up for the need to process information differently, which leads to more flexible thinking.

Even small boosts in creativity can help us move closer to that elusive eureka moment. So, it may be a good idea to get out of your chair and have a little walk, go for a jog or perhaps change your work environment occasionally. Move from your office to your kitchen to a coffee shop, then go back again. Such variations should work, too.

The Value of Slow Habituation

Okay, so Kelly’s work suggests that change increases creative thinking and habituation reduces it. Does it then follow that people who habituate more slowly are more creative? The psychologist Shelley Carson, who has written extensively about creativity, suspected so. She believed ‘slow habituation’ may enable a person to see what others no longer do and therefore perceive opportunities for improvement.

Most people are quick to create expectations of what will happen next, as well as when, why and how. They are quick at generating a mental model of the world around them. But if you make fewer assumptions about how things should be, you may be open to new possibilities. Different variations of this idea have been floated around by scientists before but have not been properly tested. Shelley and her colleagues decided to do so.

Their first step was to identify a group of eminent creative achievers, as she called them. These were individuals who had made a significant contribution to a creative field — for example, people who had an invention patented, a book published, a private showing of their artwork, sold a musical composition, won a national prize for scientific discovery or other such achievements. She would compare these eminent creative achievers to those who did not qualify as such.

Next, the researchers gave both groups a task that measured how fast they habituate. To describe the task, consider the following scenario: Imagine you take my advice and go for a run. You enjoy listening to music while you jog, so you put on your headphones and play a ‘get up and move’ song list. To monitor your speed and distance, you use a running app.

Every five minutes the volume of the music turns down a notch and a monotonous voice says something like ‘Distance: 4.6 kilometres; average pace: nine minutes and thirty-two seconds per kilometre.’ This happens again and again. The reported distance changes every five minutes and the average speed may change, too, but the voice is the same, the tone is the same, the structure of the sentence — the same. Because of this repetitiveness, many people will stop paying attention to the information. Their brain filters the highly predictable voice and fails to register the exact distance and pace.

Shelley didn’t ask people to use a running app, but the task she used was similar in principle to the scenario above. First, she played volunteers the same sounds again and again. Because of habituation, after a few repetitions most people stopped processing the sound, just as they are likely to stop registering the utterance generated by their running app. Next, Shelly introduced a twist. To describe the twist, imagine that while you are jogging, you meet your friend Joleen, who is also out for a run, and you decide to jog together. Joleen doesn’t have a running app, so you promise to share with her the average speed every five minutes. But your brain keeps filtering out the app voice, so you fail to report the speed to Joleen. If you are a ‘fast habituater,’ you will do worse; if you are a ‘slow habituater,’ you will do better.

The twist Shelley introduced was similar in principle: She presented the volunteers with the sounds alongside simple images (such as a yellow circle) and examined if they learned associations between the sounds and the images. That is, the volunteers had to figure out which sound was paired with which image and in which order. She had some volunteers (a mix of creatives and non-creatives) complete the association problem without being pre-exposed to the sounds, while others (again a mix of creatives and non-creatives) did the habituation task first. By comparing the performance of the creatives who were pre-exposed to the sounds with the performance of those who

were not, Shelley could measure the impact of habituation on the creative group. She did the same for the non-creatives.

Her finding: the creatives were less affected by repetition than non-creatives. That is, despite hearing the same sound over and over, creatives still attended to and noticed, the sounds well enough to complete the association task. Does that mean creatives habituate slower? Or maybe they dishabituate faster when needed? Or both? Shelley’s study cannot answer these questions directly. But other scientists have examined physiological habituation directly and found that more creative people do indeed show less physiological habituation to sounds.

It seems, then, that a failure to habituate may indeed be related to innovative thinking.

Elsewhere, studies have found a failure to habituate in people with mental health problems. People suffering from schizophrenia, for example, also show slow habituation to sounds.

Shelley believes that what may seem like a deficit in some people may end up being an advantage in others. Inability-to-filter-out seemingly irrelevant information can lead to difficulties of various kinds (such as an inability to focus); but it may also provide the mind with a large range of information to play around with and recombine into unusual and original ideas. Shelley thinks the latter is especially true in people with a high IQ. So, provide an intelligent mind with a random mix of seemingly irrelevant information, and once in while a brilliant new idea will emerge.

Getting Out of a Rut

Olympic gold medal-winning high jumper Dick Fosbury is considered one of the most influential athletes in the history of track and field. We don’t know if he was a slow habituater, but we do know that he had access to an unusual mix of information that was critical for his innovation. Dissatisfied with his high-jumping ability in the traditional position at the time — jumping front-first over the bar — Fosbury developed new-to-the-world way to jump by turning backwards over the bar. A key to his success was that, in addition to being an athlete, he was an Engineering student.

His knowledge of mechanics enabled him to perfect the backward jump that we are now so familiar with.

Fosbury developed his unusual jump slowly over two years, combining engineering theory with physical practice. First, he discovered that by arching his back, his centre of gravity would rotmanmagazine.ca / 23

Organizations can increase creative thought by inducing small changes to routines and environments.

stay below the bar as his body cruised over it. Second, he completely changed how he approached the bar. Instead of sprinting forward like everyone else, he sprinted diagonally. And while the other jumpers took off at the same spot regardless of the bar’s height, Fosbury moved his spot farther away from the bar as it was raised. This trick increased his ‘flight time’ and was critical his success. It was a huge departure from normal; most jumpers took off about one foot away from the bar, but Fosbury would take off as far as four feet away to attempt the very high bars.

Many coaches thought he was crazy — but the ‘Fosbury Flop’ earned him a gold medal at the 1968 Olympics.

New thinking and real originality often come from people who are in some sense outsiders — individuals who have different knowledge or skill sets from others in the field. In Law, some of the most creative work in the last 50 years has come from the field of Economics. Lawyers with Economics training, and economists interested in Law, have asked, ‘If we look at the law from an economic perspective, how might we think differently?’ It isn’t exactly the Fosbury Flop, but it produced a Nobel Prize for Ronald Coase in 1991.

In Economics, much of the most creative work in the last 50 years has come from the field of Psychology. Economists with an interest in Psychology, and psychologists interested in Economics, have asked, ‘If we look at economic questions from a psychological perspective, what would we do differently?’ That question produced Nobel Prizes for Daniel Kahneman, a psychologist, in 2002; for Robert Shiller in 2013; and for Richard Thaler in 2017.

Thaler, probably the most pioneering of behavioural economists, might well be seen as the Dick Fosbury of the social sciences. He wasn’t especially good at math, so his academic promise was not exactly terrific; in his own words, “I was only an average economist with rather modest prospects.” At the age of 32, he says, “I decided, come what may, I was going to pursue the possibility of combining Psychology with Economics” — which put him in a position to invent something new.

In many areas, the Fosburys and Thalers among us inject ideas from unexpected places into domains where things have gotten stuck and people are in a rut. We have all been there — our minds do the same old thing, day in, day out. This is true 24 / Rotman Management Fall 2024

of poets, novelists, artists, biologists, engineers, architects and musicians. It is true of historians and screenwriters. It is true of athletes, and it is true of people in business and government.

My career in academia has shown me that bureaucrats often find themselves in a rut. Public servants who have worked in the same job, day after day and year after year, tend to be terrific at what they do and highly professional. But they sometimes find it difficult to imagine doing things differently. Because they are habituated to certain ways of operating, they take long-standing patterns and practices for granted. This is due not only to risk aversion, but also to a failure to even consider what risks one might take.

The same often happens in industry. Highly successful companies get in a rut by continuing on the same path they have been travelling for a while. In such cases, dishabituation is often triggered by newcomers who inject new ideas into organizations not because they are smarter or more creative by nature, but because they have not yet settled into the usual patterns. Instead of doing what has always been done, like Fosbury, they look at things sideways or from a distance, or from very different starting points.

But flexible thinking need not emerge solely from newcomers. Organizations can increase creative thought by inducing small changes to routines and environments, just as Kelly Main and her colleagues did. For example, they may change employees’ physical surroundings, encourage employees to train in fields very different from their own, create diverse teams with different kinds of expertise or ask employees to rotate through different kinds of jobs. As a result, some people just might end up ‘jumping differently.’

The problem is that sometimes the rest of the field is not ready for the innovation. As indicated, most people were initially skeptical of Fosbury’s backward jump and tried to persuade him to align himself with the norm. But that all changed during the trials for the 1968 Olympics. Using his unusual technique, Fosbury did relatively well, but he was still only in fourth place as the bar was raised to 2.20 meters. He had to place at least at third to make the team. Ed Caruthers, one of Fosbury’s competitors, cleared the bar on his first try. Then Reynaldo Brown did the same. But John Hartfield, who was leading the

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competition until that point, failed all three of his attempts. All Fosbury had to do to get to the 1968 Olympics in Mexico was to clear that bar; and he did.

The rest is history. Fosbury didn’t just win the gold medal; he set the Olympic record, with a jump of seven feet, four inches.

And once he proved to the world the superiority of his technique, the field followed. By the next Olympics in 1972, 28 of the 40 jumpers used the Fosbury Flop.

With that, Fosbury essentially lost his advantage. The secret of his success was not his muscles or speed. It was his mind. But once his innovation was known to all, those with better physical abilities took his place on the podium. Fosbury never made it to a second Olympics, but his invention certainly did.

In closing

In 1988, two decades after Fosbury won Olympic gold, a high school coach, just for fun, demonstrated the straddle method, which had dominated the sport for so long. One of his jumpers responded, ‘What in the world is that?’ Another exclaimed, ‘Now that is goofy!’

In high-jumping as well as elsewhere, the intriguing question now is: What will be the next big ‘flop?’

Cass R. Sunstein is the Robert Walmsley University Professor

at Harvard Law School, where he founded and oversees the Program on Behavioural Economics and Public Policy. His latest book is Look Again: The Power of Noticing What Was Always There (Atria/One Signal Publishers, 2024). In 2018, he received the Holberg Prize from the Government of Norway, which is considered the equivalent of the Nobel Prize for Law and The Humanities. In 2020, the World Health Organization appointed him as Chair of its technical advisory group on Behavioural Insights and Sciences for Health.

@utpress @utpjournals

rotmanmagazine.ca / 25

HOW TO MANAGE INNOVATION A PRIMER FOR LEADERS Before leaders can develop a robust innovation portfolio for their organization, they must understand the varied forms of innovation and their underlying principles.

by Alberto Galasso

THERE IS ONE THING that virtually every organization — whether it’s a bank, a tech start-up or a hospital — has in common: a desire to reach its full innovative potential. The question is, how can this be achieved? There is no easy answer, but the research has identified several factors that have important effects on the innovative ability and activity of both small and large firms.

In this article — an excerpt from my new book, The Management of Innovation — I will share eight of the most important elements and principles for leaders to consider when aiming to optimize innovation for their organization. The first four relate to the use of intellectual property (IP) for effective management of the technologies developed by an organization while the other four relate to the drivers of innovation inside and outside of a firm.

PRINCIPLE 1: RECOGNIZE THE VALUE OF

In a 2004 interview for Chief Executive magazine, Microsoft Chairman Bill Gates stated that:

...it has become imperative for CEOs to have not just a general understanding of the intellectual property issues facing their business and their industry, but to have quite a refined expertise relating to those issues... it is no longer simply the legal department’s problem.

CEOs must now be able to formulate strategies that capitalize on and maximize the value of their company’s intellectual property assets to drive growth, innovation and cooperative relationships with other companies.

Assessed 20 years later, Gates’s intuition proved correct, as a very large fraction (about 85 per cent in recent estimates) of the market value of S&P500 companies appears driven by intangible assets, rather than traditional tangible assets such as land, buildings or manufacturing equipment.

IP is not only crucial for large, publicly traded companies. It is important for small firms and start-ups, too. In a recent study, Joan Farre-Mensa and colleagues conducted a detailed analysis of the effect of first-time patent applications filed by start-up rotmanmagazine.ca / 27

IP can be used to shape cooperation with other firms. ventures in the U.S. They show that receiving the first patent increases start-ups’ chances of securing funding from venture capitalists by 47 per cent, of securing a loan by 76 per cent and of raising funds from public investors through an IPO by 128 per cent.

These are large and economically important effects, highlighting the key role that patents play in high-tech entrepreneurship.

In Canada and across the globe, many small and mediumsized firms tend to neglect, or to underplay, the role of IP when they develop their business and technology strategies. IP is often viewed as an issue for lawyers, not that crucial for engineers and scientists conducting R&D and even less relevant for other areas of business management. However, in my book I make the case that IP should play a key role in the technology strategies of firms, small and large alike. IP rights are crucial assets that firms should manage as effectively as possible. These rights can be used to prevent other firms from accessing key technologies, but they can also facilitate the sharing of technologies through licensing contracts. And IP assets can be used as collateral for debt financing and provide important signals of value to potential investors.

in a firm, or customers’ willingness to buy a product from it, may be reduced when they do not have complete information on the technology.

PRINCIPLE 3: EFFECTIVELY MANAGE YOUR IP PORTFOLIO

There are several ways in which firms can use their IP portfolio. One option is to aggressively enforce your patents to block firms that infringe your rights. Apple CEO Steve Jobs followed this strategy when he embarked on a seven-year patent litigation against Samsung. But IP can also be used to shape cooperation with other firms by sharing technologies through licensing contracts. Firms may even decide to freely share their technologies with third parties. This is, for example, what electric vehicle and clean energy company Tesla decided to do. In June 2014, CEO Elon Musk released a statement announcing that Tesla was no longer enforcing intellectual property: Yesterday, there was a wall of Tesla patents in the lobby of our Palo Alto headquarters. That is no longer the case. They have been removed, in the spirit of the open source movement, for the advancement of electric vehicle technology.

PRINCIPLE 2: BUILD A SOLID IP PORTFOLIO

Before leaders can set out to develop a robust innovation portfolio, they must have an understanding of the types of IP available to them. In my book I present an overview of the key forms of IP. One of these is patents, which involved providing property rights on inventions related to new products or processes. A patent owner has the exclusive right to stop others from making, using, selling or importing products or processes based on the patented invention. Elsewhere, copyrights provide IP protection to authors of literary, artistic and musical works, computer programs and movies. The contribution of these ‘creative industries’ to the U.S. and Canadian economies has grown in recent decades, both in terms of GDP and employment share, as has the use of copyrights. Other important types of IP rights include trademarks and design patents.

An alternative to IP protection is to keep your technology secret. Some large firms, such as Coca-Cola, have been able to use secrecy very effectively, especially for the protection of manufacturing processes that are accessible to only a few select employees. Such ‘trade secrecy’ is often considered by Canadian technology start-ups, especially those that are cash constrained and struggle to find resources to file patent applications. For these ventures, it is important to understand some of the limitations of this strategy. In particular, secrecy may reduce the ability of firms to describe their technology to other parties.

This can be a problem, because investors’ willingness to invest 28 / Rotman Management Fall 2024

It is important for managers to carefully consider the implications of these alternative approaches to IP management. Patent litigation involves very large legal expenses and can shape the perception of the firm and the incentives of other industry players to operate in the litigated technology area. Similarly, the terms of a licensing contract can have profound effects on the revenue streams generated by a technology and influence the degree of competition with industry rivals.

PRINCIPLE 4: USE IP DATA IN YOUR DECISION-MAKING

Designing and implementing an effective technology strategy requires a good understanding of the technology field in which a firm operates — including its key players, their competitive advantage and new innovation trends. The best way to reach this understanding is to collect and analyze data on the development and commercialization of new technologies. Managers should not rely only on their intuition when data are available.

Patent data are an extremely useful source of guidance when designing a technology strategy. Several datasets and search portals are freely accessible in most countries, offering very detailed information, including a description of the technology, the identity of the firm owning the patent, the inventors involved in developing the innovation and a list of related technologies developed by other firms. This makes these datasets and portals a very attractive source for the statistical analysis

and the measurement of innovation activity in a given technology field. In my book, I detail a variety of patent-analytics methods and measures that can be used to perform this type of analysis.

PRINCIPLE 5: UNDERSTAND THE PLURALITY OF INNOVATION DRIVERS

There is a vast academic literature exploring the drivers of innovation in companies and large firms. In my book, I present several relevant channels — both internal and external to the organization — that may shape the level and the direction of R&D investments. It is crucial for business leaders to be aware of these drivers. For the purpose of this article, I will focus on two of them.

The first is the crucial role of CEOs’ attitudes and beliefs. Innovation involves experimentation, exploration and risk-taking.

From this perspective, risk-averse leaders and senior executives with pessimistic views may not allow a firm to achieve its full innovation potential. Confidence and positive attitudes may instead spur exploration of new technological opportunities.

My research with Timothy Simcoe has shown that for largefirm CEOs, optimistic beliefs are associated with an increased propensity to innovate: Our analysis shows that the arrival of an overconfident CEO is associated with a 25 to 35 per cent increase in the number of patents filed by the firms as well as in their quality.

The second channel I will cover here relates to competition. Innovation investments tend to react to changes in industry rivalry. For example, with the beginning of a price war or a big merger that consolidates the market supply. A prominent study conducted by Philippe Aghion and colleagues examined this issue both theoretically and empirically. Their key finding: There is an inverted-U relationship between innovation and competition. That is, at very low levels of competition, firms typically are not very innovative; and the same appears to be true in industries where competition is very intense. According to the study, innovation appears to thrive at intermediate levels of competition.

Intuitively, when firms face limited industry competition, their incentives to innovate are low because consumers have limited options and the gains that a firm can make by offering superior products are limited. And when competition is very intense, margins are thin. In this situation, firms may see innovation investments as too risky. If one R&D project fails, the loss generated could threaten the survival of the firm. Moreover, in a very competitive environment, the gains from successful innovation are more likely to be eroded by imitation or by alternative

technologies developed by competitors. Thus, innovation incentives are the highest when competitive pressure is intermediate.

In these cases, managers feel the pressure, but it is not excessive.

The findings of Aghion and his co-authors imply that it is not easy for managers or consultants to predict whether an increase in competition will lead to more or less technological innovation in an industry. It depends on whether the initial state of the industry is to the left or the right of the peak of the invertedU curve.

PRINCIPLE 6: DON’T UNDERESTIMATE THE WISDOM OF THE CROWD

The use of innovation prizes has increased substantially in recent decades as a large number of governments, non-profit organizations and private companies have launched programs aimed at rewarding the development of valuable technologies.

The Gates Foundation, Qualcomm and Nokia are just a few examples of organizations that have offered multimillion-dollar prizes for the development of pharmaceutical and medical technologies.

For leaders of large organizations that can afford to pay large cash prizes, it is important to understand that a well-organized innovation contest can lead to a large set of technical solutions of high value for the organization. At the same time, he challenges faced when designing such a contest are significant, as it is not easy to set the right prize or to specify the technical requirements for the winning solution.

In my book, I review in detail some of the leading studies providing guidance to contest organizers. For example, in an empirical analysis of software innovation contests, Kevin Boudreau, Rotman Professor Nicola Lacetera and Karim Lakhani show that an increase in the number of competitors generates two opposite effects. First, a higher number of entries stimulates greater competition, which reduces the incentives of each participant to exert effort and make investments. On the other hand, adding competitors increases the likelihood that at least one participant will find a solution of extremely high value.

Their analysis shows that the effort-reducing effect of greater rivalry is more dominant for less-uncertain technology problems.

In this case, the prize organizer may prefer to avoid excessive entries. Conversely, the extreme-value effect prevails for more uncertain problems.

PRINCIPLE 7: COMBINE YOUR LOCATION STRATEGY WITH YOUR TECHNOLOGY STRATEGY

The physical location of a firm has profound effects on its innovation potential. Some places are characterized by particularly rotmanmagazine.ca / 29

Leading innovation hubs at the moment include London, Toronto, Tel-Aviv, Singapore, Shanghai and Bangalore. strong innovation performance. Software and ICT companies, such as Apple, Google and Facebook have flourished in the Silicon Valley region of the San Francisco Bay area. Microsoft and Amazon have thrived in Seattle. Boston and New York are two other prominent U.S. technology centres. From a global perspective, leading innovation hubs at the moment include London, Toronto, Tel-Aviv, Singapore, Shanghai and Bangalore.

My research with my Rotman School colleague Ajay Agrawal has identified eight regional characteristics that appear to have the largest impact on innovation: investors, consumers, suppliers, labour pool, competitors, institutions, culture and social network. These factors are key determinants of a thriving regional environment and should be carefully assessed when developing a location strategy. Ignoring them may lead high tech start-up founders and corporate managers to pick the wrong location for their businesses.

PRINCIPLE 8: PRIORITIZE SAFETY AND RISK-MITIGATING TECHNOLOGIES

Since 2014, General Motors (GM) has recalled more than 2.6 million cars because of defective ignition switches linked to 125 deaths and 275 injuries. GM had to pay more than US$2.6 billion in penalties and settlements for this technology failure. Such catastrophic accidents may have profound impacts on a firm and may even threaten its very existence. It is not surprising that in this type of situation, many firms replace their executives and substantially rethink their business strategy. In the case of GM, a statement was released in which the company affirmed that it “took the lessons it learned from the ignition switch recalls and has transformed its culture to focus on customer safety.”

Despite the importance of these issues, firms often articulate technology strategies that pay only limited attention to technological failures and their impact on the health and safety of consumers. Overlooking these aspects can be extremely costly — both socially and privately.

My research with Harvard’s Hong Luo has shown the importance of developing a technology strategy centred on the commercialization of safe products, and on devices that mitigate the risk of harm and injury. Risk-mitigating technologies not only generate benefits to customers but also create value by reducing firms’ exposure to product-liability litigation. Indeed, the development of risk-mitigating technologies has been a key driver of competitive advantage for some companies. Swedish car manufacturer Volvo is an example of a firm that placed riskmitigation at the centre of its technology strategy. Its corporate philosophy is well captured by this statement from co-founder Gustaf Larson: “Cars are driven by people; the guiding princi30 / Rotman Management Fall 2024

ple behind everything we make at Volvo, therefore, is and must remain safety.” The company has been a leader in the development of safety technologies since 1959 when it became the first car producer to provide three-point safety belts as standard.

Another company perceived as a leader in safety is the medical device firm Becton Dickinson (BD). Incorrect use and disposal of syringes can expose patients and healthcare workers to risk from bloodborne pathogens, such as HIV and hepatitis C. To address this concern, BD developed a variety of technologies, such as syringes with retractable needles, pivoting needles, and shielding needles. The success obtained with these devices led the firm to focus its entire technology strategy around healthcare-worker safety.

In closing

As indicated by the diversity of these eight principles, innovation is a complex phenomenon that is affected by many variables. In addition to the elements discussed herein, factors such as corporate culture, workforce composition and compensation scheme and consumer preferences play crucial roles.

Despite its high degree of complexity, innovation is a key focus for leaders for good reason: its benefits can be much broader than impact on a firm’s bottom line. New discoveries can improve public health, save lives and improve the quality of life for many. However, technological progress and innovation can also have negative impacts. Well-informed policy and managerial decisions therefore require an understanding of not only the elements of innovation discussed herein but also the negative effects and possible trade-offs that they may generate.

Alberto Galasso is a Professor of Strategic Management at the Rotman School of Management, where he holds the Rotman Chair in Life Sciences Commercialization. His first book is The Management of Innovation: Managing and Creating Technology Capital (University of Toronto Press, 2024).

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HOW TO AVOID A HEALTHCARE MELTDOWN: THE STATE OF SPECIALIST CARE IN CANADA Unless radical systemic change takes place, medically necessary services will become increasingly inaccessible to a growing population of Canadians with complex, chronic disease.

by Sabrina Hundal

CANADA’S HEALTHCARE SYSTEM, renowned for its decentralized, universal and publicly funded structure, faces significant challenges, particularly in managing chronic and complex diseases.

The healthcare crisis in primary care has been well-documented, with one in six Canadians lacking a regular family physician.

However, less attention has been given to the similar meltdown occurring within specialist care.

Compared to other nations, Canada struggles with specialist access; for instance, 57 per cent of Canadians wait at least four weeks to see a specialist — only slightly better than the United States and more than double the rate of the most efficient countries. Particularly for those with uncommon chronic and complex illnesses, the lack of timely specialist care is critical. These patients, who require urgent attention, often experience prolonged diagnostic periods and delays in treatment as the health system predominantly focuses on acute, rather than chronic, care.

This gap highlights the pressing need for a re-evaluation of resource allocation and system design to better cater to these vulnerable groups. The future of Canada’s healthcare system

hangs in the balance as it stands at a critical juncture: Unless radical systemic change takes place, medically necessary services will become increasingly inaccessible to a growing population of patients with complex, chronic disease.

In this article I will focus on three specific vulnerabilities: the increasing demand for specialist services far exceeding the current supply; the deficiencies in physician training and consultation pathways resulting in suboptimal patient management; and the inefficacies of a funding model that does not prioritize value, misaligning incentives. I will also propose solutions, in an effort to contribute to the discourse on how Canada can navigate this multifaceted healthcare crisis.

Lupus, a complex and chronic disease, will be used as a case study to examine the meltdown. My unique perspective as an MD/MBA student at the Rotman School of Management and board member for Lupus Ontario, allows me to delve deeply into the complexities of managing this disease. Lupus is particularly challenging due to its systemic and debilitating nature; it is an autoimmune disease that mistakenly turns the rotmanmagazine.ca / 33

The critical shortfall in Canada’s specialist care for managing autoimmune conditions can be largely attributed to a shortage of rheumatologists.

body’s immune defenses against its own cells. Though it affects approximately one in 1,000 Canadians, its prevalence is significantly higher among women and ethnic minorities.

VULNERABILITY 1: A Mismatch in Supply and Demand

There is a growing mismatch between the demand for specialist care and its supply, particularly for complex and chronic conditions. As medical advancements propel increases in life expectancy, a larger segment of the population is now living with chronic diseases, presenting a continual need for specialist intervention. Technological improvements have also sharpened diagnostic capabilities, uncovering conditions like lupus that are difficult to diagnose as they present with a wide array of symptoms. The increase in the prevalence of such diseases has not been matched with a corresponding increase in healthcare resources.

The critical shortfall in Canada’s specialist care, specifically for managing chronic autoimmune conditions like lupus, can be largely attributed to a shortage of rheumatologists. These specialists are at the frontline, tasked with treating a spectrum of over 100 diseases, including both rheumatic and autoimmune disorders. Rheumatologists play a pivotal role in the long-term management of patient health, overseeing treatment, managing disease flare-ups, and handling administrative tasks such as funding or disability applications. The enduring dependence of patients on these specialists is crucial; without regular access to their expertise, patient health can rapidly deteriorate. The roots of this specialist shortage are multifaceted. First, a looming retirement wave of experienced rheumatologists is imminent, with a historical dip in the specialty’s popularity contributing to a generational void. Geographical distribution compounds the issue, as specialist care is disproportionately concentrated in urban centres, leaving rural populations struggling to access timely treatments.

Additionally, a bottleneck is created by the limited number of government-funded sub-specialized training positions, known as fellowships, which restricts the inflow of new specialists into the field. Provincial disparities in care models exacerbate the situation; while some regions like British Columbia 34 / Rotman Management Fall 2024

(BC) fund physician extenders to aid rheumatologists, other provinces like Ontario do not. This shortage is not a transient issue but one that is expected to intensify.

To significantly enhance the supply of specialists in Canada, a coordinated effort from government policy-makers, academic institutions and professional medical bodies is essential. Immediate actions should include the streamlining of certification processes for foreign-trained specialists by regulatory bodies. For sustainable impact, the government must also escalate funding for fellowship programs to broaden the training capacity. Additionally, incorporating flexible pathways such as the development of shorter, direct-entry residency programs focusing on a subset of complex conditions can expedite training.

Concurrently, the scope of practice for nurse practitioners and physician assistants should be expanded nationally by regulatory bodies to include routine and administrative tasks under the guidance of specialists. This expansion not only alleviates physician burden but also infuses valuable interdisciplinary insights into patient care, combating the isolation that specialists working in a private clinic can often experience.

VULNERABILITY 2: Deficiencies in Physician Consultation and Training

The inefficient physician consultation pathway and training practices are resulting in suboptimal management of complex chronic conditions. The referral process, as it stands, leads to unnecessary delays that can exacerbate patient conditions.

Compounded by gaps in medical education, clinicians often lack the nuanced expertise required for complex conditions like lupus. This systemic flaw not only impairs patient health outcomes but also burdens the healthcare infrastructure, necessitating a critical reassessment of both the referral mechanism and the medical training curriculum.

THE REFERRAL-CONSULTATION PROCESS. The process of accessing specialist care exemplifies a system that is both complex and tightly coupled, which can complicate and delay necessary medical interventions. Initially, patients must obtain a referral

from a general practitioner (GP). This step introduces complexity as GPs must use indirect indicators, such as blood tests for anti-DNA antibodies in patients suspected to have lupus, to assess the urgency of the condition. However, the diagnosis of lupus can be particularly challenging since it may present without these antibodies and symptoms can vary widely among individuals, complicating the objective assessment of urgency.

Moreover, the referral process is tightly coupled; each step critically depends on the preceding one without flexibility. If a GP deems a case non-urgent, possibly due to the absence of clear diagnostic indicators, the referral might be delayed or rejected. This sequential dependency allows no room for error or delay; a misjudgment in urgency or a procedural delay can lead to significant gaps in care.

For patients with lupus, whose conditions might not be initially apparent or may rapidly evolve, delays in securing specialist consultations can lead to deterioration in their health, highlighting the high stakes involved in this tightly coupled system.

A Canadian study on rheumatology consultations revealed that only a third of patients received an appointment within three months, a third waited longer than three months, and another third were denied an appointment.

In this multistep referral process, patients interact with multiple clinicians, each serving as a gatekeeper to subsequent care levels. Although intended for resource stewardship and risk mitigation, this redundancy can lead to a diffusion of responsibility. Clinicians may assume that others in the referral chain will identify and correct any oversights, leading to diluted accountability. The added complexity and multiple checks can inadvertently allow errors or misdiagnoses to slip through at each stage. This reliance on subsequent providers to catch mistakes can create gaps in patient care, exacerbating the risk of adverse outcomes and inadvertently introducing systemic inefficiencies that redundancy was supposed to eliminate.

PHYSICIAN TRAINING. Physician biases present significant obstacles to accurate diagnoses, and these biases are entrenched in training methods. Physicians are trained to rely on clinical intuition, which is inherently subjective and shaped by their

accumulated experience. However, this subjective approach may not always align with the unique manifestations of a patient’s condition, such as in cases of lupus. The requirement for extensive clinical hours is based on the premise that more experience leads to better clinical judgment.

However, this overlooks the complexity of the wicked environments in which physicians operate, where the outcomes of decisions are difficult to predict and from which learning is challenging. Cognitive biases like the availability heuristic can intensify these challenges. For uncommon conditions like lupus, a physician’s limited exposure can disproportionately influence their differential diagnosis. Additionally, experienced specialists may develop an overconfidence in their diagnostic abilities or treatment choices. This overconfidence can diminish their likelihood of reconsidering initial diagnoses, even when new evidence emerges.

These cognitive biases collectively heighten the risk of incorrect diagnoses and contribute to diagnostic momentum.

Once a patient is labelled with a specific diagnosis, subsequent providers may uncritically accept this label and continue treatment based on an initial, possibly incorrect, assessment. The redundancy of consulting multiple providers may reinforce this momentum, embedding errors more deeply within the patient’s care pathway.

Physician training often falls short in specificity when it comes to complex systemic conditions, which typically require a multidisciplinary approach. For instance, while rheumatologists manage the overall condition of lupus patients, these patients may also experience skin concerns that rheumatologists are not specifically trained to treat, necessitating a referral to a dermatologist. This need for collaboration among specialists from different fields presents challenges. Each specialist brings a perspective that prioritizes their field of expertise, leading to a scenario where care decisions can involve negotiations and compromises. Consequently, the care provided might not fully cater to the nuanced needs of the patient, resulting in suboptimal treatment outcomes where solutions are based on the lowest common denominator rather than a comprehensive, individualized treatment plan. rotmanmagazine.ca / 35

Medical training programs must emphasize how conditions manifest differently across various races and genders.

Notably, there is a lack of medical training regarding the recognition of disease manifestations in Black, Indigenous and People of Colour (BIPOC) communities. Although medical schools often implement specific admission programs to increase diversity, this commitment fails to translate into the training curriculum. For instance, conditions like lupus may exhibit differently on darker skin tones, potentially making symptoms less obvious and more challenging to diagnose. This gap in training means that BIPOC individuals face a higher risk of delayed or missed diagnoses, adversely impacting their health outcomes.

PROPOSED SOLUTIONS: The referral process for complex diseases requires optimization to reduce unnecessary redundancy and complexity that can delay timely care. One strategy is to increase the number of dual-certified specialists, such as rheumatologistdermatologists, who are equipped to handle multiple aspects of systemic diseases with overlapping symptoms. This approach can expedite diagnosis and treatment while eliminating the need for multiple referrals, which often complicate and prolong the patient care pathway. To cultivate such cross-specialization, government funding should be allocated to fellowship programs that focus on training doctors in these dual roles. Similar programs are already successful in the United States and could serve as a model for implementation in Canada.

Additionally, the establishment of multidisciplinary specialist clinics, like the Rheumatology and Dermatology Treatment Clinic in BC, exemplifies how centralized, coordinated care can significantly benefit patients. These clinics bring together specialists from different fields under one roof, enhancing collaborative care and decision-making. This not only minimizes delays due to fewer logistical barriers but also improves overall care quality through a more integrated understanding of the patient’s multiple health issues.

To mitigate physician biases, integrating structured decision-making tools like the Subjective Probability Interval Estimates (SPIES) method into clinical guidelines by professional medical bodies is crucial, especially for diagnosing uncommon conditions such as lupus. By using SPIES, physicians are encouraged to evaluate a spectrum of potential diagnoses, each with

36 / Rotman Management Fall 2024

corresponding probabilities, instead of fixating on a single conclusion. This strategy diminishes confirmation bias by provoking the consideration of multiple diagnostic possibilities and counters overconfidence by underscoring the inherent uncertainties in the diagnostic process.

Medical training programs must emphasize the importance of understanding how conditions manifest differently across various races and genders. A significant challenge is the scarcity of research on disease presentation in diverse populations. This gap is currently being addressed by this year’s Geoff Carr Fellow, a research initiative funded by Lupus Ontario focused on studying these variations. To reduce healthcare inequities, it is crucial for governments and academic institutions to invest in similar research efforts that explore and address the unique healthcare needs of marginalized communities.

VULNERABILITY 3: The Absence of Value-Based Care

One of the most pressing vulnerabilities within Canada’s healthcare system is the absence of value-based care (VBC), resulting in misaligned incentives between healthcare providers, taxpayers and patients. VBC is a healthcare delivery model that prioritizes maximizing the quality of care provided to patients while optimizing costs. Michael Porter defines ‘value’ in healthcare as ‘the health outcomes achieved per dollar spent,’ advocating for a shift from merely cutting costs to enhancing patient outcomes cost-effectively. This is in stark contrast to the fee-for-service models in Canada, where healthcare providers are reimbursed based on the volume of services rendered.

The fee-for-service model incentivizes quantity over quality, leading to rushed appointments and suboptimal patient outcomes. Specialists often spend brief periods, typically 15 minutes or less, with patients, leaving little time to address complex needs adequately. This time constraint fosters a focus primarily on immediate symptoms, neglecting deeper investigations and considerations for patients’ overall quality of life.

Misaligned incentives within the healthcare system also contribute to cognitive entrenchment bias among physicians, impeding the adoption of innovative digital technologies like tele-rheumatology. Financial disincentives, such as lower fee

billings for virtual consultations relative to in-person visits, discourage the integration of virtual care solutions. This hesitancy to embrace technology disproportionately impacts rural patients, exacerbating disparities in access to specialist care. As a result, underserved populations face significant barriers to care, which is especially detrimental within the complex and tightly coupled healthcare system, where even minor inefficiencies can have profound consequences.

The lack of value-based resource allocation in Canada has led to urgent cost-containment measures. For instance, in Ontario, the Ontario Health Insurance Plan (OHIP) only covers biosimilar medications as opposed to more expensive biologics. While biosimilars are considered lower-cost alternatives with generally comparable efficacy and safety profiles, for some lupus patients, especially those with treatment-resistant forms of the disease, biologics may be the most effective treatment option. With yearly costs ranging from $10,000 to $20,000, many patients cannot afford these medications without private health insurance or provincial support programs like the Ontario Drug Benefit (ODB) or Ontario Trillium Benefit. However, lupus patients often face higher rates of unemployment due to the illness’s debilitating nature, making them less likely to have private insurance.

Recently, Ontario implemented a biosimilar switching policy, mandating patients reliant on the ODB to switch to biosimilars by the end of 2023, with private health insurance plans following suit. While cost savings are appealing, concerns arise regarding patients’ well-being, as the forced switch lacks valuebased evidence or medical rationale. This policy change exacerbates existing health inequities, as lupus patients are already more likely to report cost-related prescription nonadherence, leading to negative health outcomes.

Aligning incentives in healthcare requires a paradigm shift towards prioritizing patient outcomes over service volumes.

This shift can be informed by the case study of St. Joseph’s Healthcare Hamilton, where they employed a VBC model for bundled payments to improve surgery. Bundled payments are a funding method in which a single amount is used to fund the total amount of care related to a condition or medical event for

a fixed time period. This encourages interdisciplinary teams to deliver comprehensive care packages that address every aspect of the patient’s journey, particularly relevant for complex diseases like lupus.

By adopting VBC strategies, healthcare systems can ensure that policy decisions, such as medication coverage, are driven by patient outcomes and value rather than cost considerations alone. Government policy reforms should incentivize bundled care adoption, fostering cross-disciplinary teamwork and stimulating innovation in care delivery. Additionally, to encourage the adoption of new technology such as telemedicine and digital health solutions, financial incentives such as government subsidies should be provided for clinicians who adopt and effectively utilize digital technologies to improve patient care.

In closing

The proposals outlined herein — such as increasing the supply of specialists through enhanced fellowship funding, optimizing the referral process, integrating decision-making tools and promoting value-based care models — all suggest actionable paths forward. It is my hope that these recommendations can bridge the gap between current capabilities and the advancements necessary to provide adequate and equitable care for all Canadians facing complex health challenges.

Sabrina Hundal is an MD/MBA Candidate at the University of Toronto and Rotman School of Management. An alumnus of Canada’s Top 20 Under 20, she is an academic board member at the University of Toronto.

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How to Live a Psychologically Rich Life The varied experiences required to live a psychologically rich life demand venturing beyond what is known to us to grapple with new ideas and perspectives. And the rewards can be great.

by Shigehiro Oishi and Erin C. Westgate

IN HIS WRITINGS, Aristotle considered various aspects of a life led in accordance with virtue and excellence: a life of pleasure, honour, wealth, health and eminence. Of these, only two have survived the test of time: the pleasurable life (despite Aristotle’s admonitions) and the ‘eudaimonic’ life (i.e. seeking meaning and purpose).

In the millennia since Greek philosophers debated the question, the strong dichotomy between these two prevailing models—hedonic versus eudaimonic well-being — continues to dominate psychological research on the good life. Yet this dichotomy limits psychology by overlooking many types of lives that don’t fit neatly within it.

In this article, we move beyond the eudaimonic–hedonic divide to suggest a third powerful contender for a good life: a psychologically rich life — a life characterized by a variety of interesting and perspective-changing experiences. Together with happiness and meaning, we believe psychological richness constitutes a key element of a life well lived.

Defining a Good Life

Psychologists have advanced many broad theories of subjective well-being, ranging from dispositional and genetic to motivational and need-fulfillment accounts. We define a good life as ‘a life well lived from the perspective of the person living it.’ A psychologically rich life, we will show, is related to (but distinct from) a happy or meaningful life, with distinct causes and consequences. Let’s start by taking a look at the two prevailing characteristics of a good life as per Aristotle and many others.

A HAPPY LIFE. We define a happy life as one characterized by high life satisfaction and a high positive-to-negative affect ratio (i.e. frequent positive affect paired with relatively infrequent negative affect, such as anger or sadness). Several decades of research shows that a happy life (i.e. ‘hedonic well-being’) is characterized by pleasantness, comfort, safety, security and stability.

People leading happy lives tend to be blessed with material and relational wealth. Income is modestly but consistently

rotmanmagazine.ca / 39

Individuals leading meaningful lives tend to be actively engaged and committed to societally-important causes.

associated with greater happiness and life satisfaction. People with higher socio-economic status (SES) report greater life satisfaction, as do those with greater job security. In particular, having cash on hand (or in savings), rather than money in stocks and investments, predicts perceived financial security, which in turn predicts higher life satisfaction. Finally, marital satisfaction consistently predicts happiness, as does regular interaction with friends and neighbours. In short, a happy life is attained via stable economic and interpersonal conditions.

However, even when objective conditions are not conducive to happiness, people are sometimes able to reconstrue them to be so. For instance, optimism protectively buffers against cancer, bereavement and even war. Pursuing gain, as opposed to trying to prevent loss, is associated with happiness, as is gratitude.

Whereas unhappy people desire the unattainable, happy people come to terms with less-than-perfect options.

Happy people are not bothered when others do better than them, whereas unhappy people are. The smaller the gap between aspirations and reality, the higher people’s satisfaction. Accordingly, ‘satisficing,’ as opposed to maximizing, is associated with happiness. Prolonging pleasurable experiences (via savouring) offers another such strategy.

Not surprisingly, most people want a happy life. In empirical studies, 69 per cent of respondents across 42 countries rated happiness as ‘extremely important’ (7 on a 7-point scale)—even more so than health and money. However, a happy life does not fully capture what it means to live a good life. Happy people tend to be prosocial and make numerous contributions to society via, for instance, donating and volunteering. Yet happiness is sometimes associated with system justification, resistance to change and insensitivity to inequality and social injustice. In this sense, a happy life can be a complacent life. We contrast this, below, with a meaningful life.

A MEANINGFUL LIFE. We define a meaningful life as ‘the subjective self-appraisal that one’s life and experiences have meaning.’

Three elements are common to many existing definitions: significance, or the subjective sense that one’s life matters; coherence, or the extent to which life roles and experiences fit together into

40 / Rotman Management Fall 2024

a coherent whole; and purpose, the perception that one’s life has direction and contributes to something greater than the self.

As such, individuals leading meaningful lives tend to be actively engaged and committed to societally important causes.

Indeed, Aristotle defined the eudaimonic person as “one who is active in accordance with complete virtue, not for some unspecified period but throughout a complete life.” Good deeds must be repeated to build lasting contributions; for instance, routines are positively associated with meaning in life, perhaps because they assist in doing so.

We should note that meaning in life, on its own, does not fully reflect all elements of eudaimonic well-being. For instance, some theorists emphasize self-realization, rather than meaning, as its defining characteristic. Others focus on personal expressiveness, which is closely related to authenticity. Likewise, self-determination theorists consider intrinsic motivation (and accompanying satisfaction of autonomy, competence and relatedness needs) to be critical. Eudaimonia can therefore be described as the confluence of all the above: self-acceptance, autonomy, environmental mastery, positive relationships with others, purpose and personal growth.

Although a happy life and a meaningful life represent ideals for many people, they overlook at least one important dimension and, in doing so, struggle to account for the full range of human experience. That dimension is psychological richness.

Our Research

A psychologically rich life is best characterized by a variety of interesting and perspective-changing experiences. Both happy and meaningful lives can be monotonous and repetitive. Kierkegaard proposed the “aesthetic” life as an antithesis to the “ethical” life. The ethical life, he warns, can be monotonous, dreadful and boring, and lauds the value of the arbitrary as an antidote: “One should therefore always keep an eye open for the accidental, always be expeditus if anything should offer.”

In our research, we theorized that a psychologically rich life is characterized by variety, interestingness and perspective change. In contrast, a happy life is characterized by comfort, joy and stability, and a meaningful life by purpose, significance and

3 Dimensions of a Good Life A Happy Life

A Meaningful Life

A Psychologically Rich Life

Key features:

Comfort Joy Security

Significance Purpose Coherence

Variety Interest Perspective change

Facilitators:

Money Time Relationships Positive mindset

Moral principles Consistency Relationships Religiosity

Curiosity Time Energy Spontaneity

Outcomes:

Personal satisfaction

Societal contribution

Wisdom

Measurement:

Life satisfaction Positive affect

Meaning in life Subjective meaning

Psychologically rich life Psychologically rich experience

FIGURE ONE

coherence. Thus, we predicted that different resources differentially facilitate happiness, meaning and psychological richness.

For instance, we hypothesized that curiosity, spontaneity and energy will facilitate a psychologically rich life; strong moral principles and religiosity will facilitate a meaningful life; and stable relationships, time, money and positive mindsets will facilitate a happy life.

Finally, we predicted that the three aspects of a good life ultimately contribute to different life outcomes: Whereas happiness leads to personal satisfaction, and meaning to societal contribution, psychological richness leads to wisdom.

We predicted that certain situational and individual characteristics are more likely to yield psychologically rich experiences, which in turn make up a psychologically rich life. These included: SITUATIONAL CHARACTERISTICS. Novelty, complexity and changes in perspective should give rise to psychologically rich experiences, which in turn form the building blocks of a psychologically rich life. As such, certain situations may be more likely to facilitate psychological richness than others.

We generated a preliminary list of such features via qualitative data outlining the contours of a psychologically rich experience. In two focus groups (12 undergraduates and 10 graduate student/postdoctoral researchers, respectively), members de-

scribed a happy experience, a personally meaningful experience and a psychologically rich experience. These groups converged on a description of psychologically rich experiences as those involving novelty, variety/complexity and a change in perspective.

For instance, one 19-year-old undergraduate from a wealthy suburb of Washington, D.C, described attending a professional wrestling event as a particularly rich experience.

Her first time at such an event, she did not know much about professional wrestling; she went in with stereotypic expectations of fake violence and cheesy drama. To her surprise, she discovered professional wrestlers to be inspiring role models for children because, unbeknownst to her, World Wrestling Entertainment (WWE) is heavily devoted to children’s charities. She laughed, cheered, felt outraged and pained, and ultimately found herself deeply moved by the experience. She returned home with a changed perspective.

Unexpectedness (e.g. WWE’s charitable work), novelty (e.g. first time at a wrestling event), complexity (e.g. not simple choreographed violence/drama) and a change in perspective (e.g.

“Now I see why so many kids adore WWE wrestlers”) made this experience much richer than a typical outing. In particular, this last feature — a personal change in perspective — appears integral to the experience of richness.

Emotion theorists have argued that cognitive restructuring rotmanmagazine.ca / 41

A psychologically rich life is best characterized by a variety of interesting and perspective-changing experiences.

intensifies emotional experiences; the greater the cognitive distance between one’s original and revised mental representations, the more intense the emotion. This kind of cognitive restructuring — abandoning old mental representations in response to new experiences — is very like the perspective change required of psychologically rich experiences.

This was particularly clear when we compared another student’s experience which, although novel and complex, was not rich. This second focus group member noticed a male student in her apartment complex’s lounge, studying shirtless. He was not conventionally handsome and she began to wonder why he was shirtless in a public space, as the lounge was not particularly warm. Although this experience was novel, certainly surprising, and somewhat complex (i.e. his behaviour was unusual and mystifying), it did not change her perspective in any way. Likewise, she did not experience diverse emotions; and thus, we theorized that her experience was not a psychologically rich one.

In short, a subjective sense of surprise, novelty, complexity and perspective change are critical to the experience of psychological richness. This is consistent with work on another construct quite similar to richness: interest. Novelty, complexity, conflict and uncertainty have been shown to be key determinants of both interest and curiosity. In one study, interest/excitement was shown to be a core feature of the human motivation that enables sustained attention to complex objects. Perception, thinking and behaviour all require sustained interest, without which human beings would not thrive, and such interest is activated by change and novelty.

More recently, researchers found that interest occurs when a person feels they have the capacity to make sense of novel and/ or complex stimuli. For instance, paintings, poems and polygons high in novelty and complexity (e.g. abstract art) are rated as ‘more interesting’ (but less enjoyable) than simpler or familiar stimuli — but only if people have the capacity to understand them.Thus, things that are enjoyable are not necessarily interesting, and things that are interesting are not necessarily enjoyable.

Likewise, we suggest that happy experiences are not necessarily interesting or psychologically rich, and conversely that psychologically rich experiences are not necessarily pleasant.

42 / Rotman Management Fall 2024

INDIVIDUAL CHARACTERISTICS. Psychological richness is a function of the person, as well as the situation; for instance, curious people open to experience who should be more likely to lead complex and psychologically rich lives. Thus, we predicted that openness to experience should foster psychological richness. Curiosity in particular, we predicted, should lead people to explore a broad range of interests, which may in turn trigger perspective shifts of the sort theorized to produce psychological richness.

Notably, people who experience intense emotions also tend to lead more complex lives. For instance, their social networks tend to be broader, shallower and more complex. Instead of hanging out with the same friends or pursuing goals in a single life domain, affectively intense people hang out with wider groups of individuals and pursue diverse goals — and view these diverse life events and goals as personally important.

We did not suggest that simply experiencing intense emotions and events is itself sufficient for a psychologically rich life.

Rather, such events create a need for accommodation — how people subsequently make sense of and integrate these events is critical. For instance, people may explain similar life stories in many different ways.

In sum, we hypothesized that openness to experience, curiosity and affect intensity serve as fuel for the psychologically rich life. Because curiosity and openness encourage individuals to pursue and appreciate novel, complex and potentially perspective-changing experiences, they constitute dispositional factors that facilitate the psychologically rich life.

RESULTS: Across seven studies, a psychologically rich life was best predicted by openness to experience and extraversion.

These effects held among American undergraduates, American and Indian MTurk workers, and a nationally representative sample of Americans, and were replicated among Korean adults and University of Florida and University of Virginia undergraduates.

Tendencies towards fantasy, artistic sensitivity and unconventional attitudes were associated with a psychologically rich life, but far from redundant with it. In contrast, a happy life was most strongly associated with extraversion, followed

by conscientiousness and low neuroticism. A meaningful life was associated fairly evenly with all of the Big Five traits: openness, conscientiousness, extraversion, agreeableness and low neuroticism. Finally, although happiness was significantly associated with self-reported socio-economic status (SES), a psychologically rich life was only modestly associated with SES, income or education, and a meaningful life only weakly so.

Taken together, our studies suggest that openness and extraversion are associated with a psychologically rich life, whereas extraversion, conscientiousness and high SES appear to be the keys to a happy life.

Because a psychologically rich life is characterized by unexpectedness, novelty, complexity and perspective change, some life experiences should be particularly conducive to it. Studying abroad is a case in point. Study abroad places a student in unfamiliar environments for an extended period of time, forcing them to live differently than they did at home. Thus, we predicted and confirmed that studying abroad should increase psychological richness.

What about studying abroad would lead to psychologically richer lives? The increase in psychological richness was explained in part by study-abroad students’ weekly engagement in artistic activities. In another 14-day diary study assessing daily activities as well as psychological richness, participants reported greater psychological richness on days when they took short excursions. Like studying abroad, such short trips injected novel atypical experiences into everyday life. In sum, life experiences that are novel, challenging and perspective-changing seem to contribute to a psychologically rich life, whether they are ‘big’ experiences, like studying abroad or divorce, or ‘small’ everyday experiences, like short trips or an escape room.

We found that people leading psychologically rich lives may be more open to changing current political structures and systems. We simultaneously entered a happy life, a meaningful life, and a psychologically rich life as predictors of system justification among over 500 college students. Whereas a happy life and a meaningful life were positively associated with system justification, leading a psychologically rich life was negatively associated. That is, those leading happy and/or meaning-

ful lives tend to prefer to maintain social order and the status quo, whereas those leading psychologically rich lives seem to embrace social change.

We argued that psychological richness should also result in wisdom, characterized in part by flexibility of thought. Consistent with this, we found evidence that a psychologically rich life is positively associated with holistic thinking styles.

In short, those leading psychologically rich lives tend to have more complex reasoning styles, consider multiple causes for others’ behaviour, and do not believe that a few discrete categories can explain individual differences. These findings remain significant, even after controlling for openness (and other Big Five traits), as well as a happy life, a meaningful life and demographics.

Finally, while people leading happy and/or meaningful lives experience positive emotions more intensely and negative emotions less intensely, individuals with psychologically rich lives experience both positive and negative emotions more intensely, consistent with the theory regarding affect intensity. In other words, the psychologically rich life appears to be emotionally intense.

We obtained preliminary evidence that psychological richness predicts important outcomes related to exploration and motivation for systemic change, and that people whose lives are psychologically rich tend to seek out challenges and value learning, and are less interested in maintaining the status quo. Perhaps as a result, they experience both positive and negative emotions more intensely than those whose lives are not particularly rich.

Finally, psychological richness uniquely predicts a behavioural measure of risk taking, as well as everyday engagement in novel and routine activities. Equally important, these associations remained significant even after controlling for many possible third variables.

A psychologically rich life, filled with a wide variety of interesting and perspective-changing experiences, is distinct from a happy life and a meaningful life. A three-factor model in which happiness, meaning and psychological richness each constitute discrete constructs, fits the data significantly better than one-or two-factor models that conflate richness with happiness or meaning. rotmanmagazine.ca / 43

A psychologically rich life relies on an exploration strategy that expands horizons and broadens social ties.

Likewise, people with psychologically rich lives differ in personality from people leading happy or meaningful lives. Openness to experience, in particular, as well as extraversion strongly predicts psychological richness. Finally, leading a psychologically rich life predicts important outcomes above and beyond a happy and/or meaningful life, including system justification, political orientation, attributional complexity and challenge-seeking.

In sum, the building blocks of a psychologically rich life are different. Particular life experiences and situational factors uniquely contribute to psychological richness, without increasing happiness or meaning. For instance, students’ lives were psychologically richer after a semester studying abroad, but not happier or more meaningful.

complex, shifting physical and social environments. These skills in turn accrue social and cognitive advantages that benefit not only the individual but also the group.

The kind of rich varied experiences needed to live a psychologically rich life require venturing beyond what is known and certain in order to grapple with (often uncomfortable) new ideas and perspectives. As indicated herein, the rewards are not only significant, they also lead to a good life.

In closing

The Clash’s famous song “Should I Stay or Should I Go?” poses a fundamental evolutionary challenge. All organisms face the trade-off between exploiting the resources available to them and expending time and energy pursuing new resources that may (or may not) materialize. Other species such as birds are known to optimally mix these two different strategies, either by switching strategies as their environment changes or via individual differences, such that certain individuals in a population are drawn to exploitation whereas others are drawn to exploration.

We suggest that a happy and/or meaningful life relies on an exploitation strategy, in which people take advantage of familiar environments and deep social ties more heavily than an exploration strategy. In contrast, a psychologically rich life relies more heavily on an exploration strategy that expands horizons and broadens social ties.

In rapidly changing environments, a psychologically rich life might be most adaptive for learning and accumulating resources, whereas happy and/or meaningful lives might be more advantageous in stable, benign environments. Ideally, people might combine all three, balancing exploitation and exploration strategies as needed.

A life of curiosity-driven learning helps individuals acquire skills in the perspective-taking, empathy and creativity needed to solve recurrent adaptation problems encountered in navigating 44 / Rotman Management Fall 2024

Shigehiro Oishi is the Marshall Field IV Professor of Psychology at the University of Chicago and a member of the American Academy of Arts and Sciences. Erin C. Westgate is an Assistant Professor of Psychology in the College of Liberal Arts and Sciences at the University of Florida. The paper on which this article is based was published in Psychological Review.

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How to Escape From the Perfection Trap Success is a bit of a ‘bottomless pit’ for perfectionists. Psychologist Thomas Curran shares insights for breaking free from the trap.

Interview by Brett Hendrie

Brett Hendrie: How do you define perfectionism?

Thomas Curran: Perfectionism is a form of deficit thinking that

comes from a place of feeling like we’re ‘not enough’: We don’t have a perfect enough life; we’re not working hard enough; we’re not attractive enough — or whatever it might be that is important to us. That is the starting point for all the high standards and over-striving we see today.

The good news is, some of the people you identify as being perfectionists are just highly conscientious or meticulous. Those things come from a very optimistic place of wanting to improve and learn. But perfectionism — over-striving and all the effort that’s bound up in trying to perfect certain aspects of ourselves — comes from a place of lack. That’s the negative starting point that we need to pay attention to.

When can we know that we’ve crossed over to a point that might be not good for our mental health?

When things go wrong, not surprisingly, perfectionists really struggle. But how we react when we do something really well

tells us a lot about whether or not we are a perfectionist. When a true perfectionist succeeds, they often brush it off as ‘happenstance’ or luck. They’ll say things like, ‘Oh, that’s just the bar I set for myself.’ There isn’t a great deal of satisfaction or savouring of the success, because they are already thinking about the next thing, and the next. The better they do, the better they expect themselves to do. It’s never enough; there’s got to be more.

If you feel that way in moments of success, chances are, you might be a perfectionist.

Perfectionism sounds like a catch-22: You set super high standards for yourself and you chase them, but you’re never, ever satisfied. And the cycle just keeps repeating.

Exactly. Success becomes a bit of a ‘bottomless pit.’ I am a perfectionist myself, and if I could go back to when I was 20, and be told that I’d be a professor at LSE today, never in my wildest dreams would I have believed it. When you’re actually engaged in things — getting that next grant, publishing your next paper — you’re always focused on what’s next. Nothing is ever quite enough. rotmanmagazine.ca / 47

Perfectionists work really hard — but they push themselves into a zone of diminishing returns.

There are three types of perfectionism. The first is the quintessential workaholic that most people conjure up when they think about the term ‘perfectionist.’ These people feel like they need to be nothing but perfect and are highly critical of themselves. That is what I call self-oriented perfectionism.

But there is also a very pernicious social element to perfectionism: Not only do I expect myself to be perfect, but I also believe that other people expect me to be perfect, too. That’s the second type, socially-prescribed perfectionism. The third form is perfectionism that is turned outwards, projected onto other people. So, I expect you to be perfect, and if you’re not, I’m going to let you know about it. This is called other-oriented perfectionism.

Does perfectionism automatically lead to strong performance?

Surprisingly, the research shows no link between self-oriented perfectionism and high performance. You would think that high, self-set drive would have links to performance, but time and time again, research shows that it does not. The same is true of otheroriented perfectionism. Demanding high performance of other people all the time might lead to a few short-term wins, but in the long run, research shows that our relationships will deteriorate and there will be disharmony in the workplace.

I think two things account for the research findings. The first is self-oriented perfectionists work really hard — but they work too hard. They push themselves into a zone of diminishing returns because they forgo things like good sleep, exercise, time with family — essentially, all the rejuvenating activities that enable us to come to work revitalized. That’s why we see a lot of burnout among perfectionists.

The second reason involves what happens when perfectionistic people encounter a challenge. In one study, we put people in the lab and gave them a puzzle to solve or an athletic activity to complete. Then we told them that they failed — they didn’t meet the goal we had set for them. With highly perfectionistic people, their shame and guilt increased and they felt very low in terms of their self-esteem. When we asked them to try again, their effort completely dropped off a cliff. This didn’t happen with the nonperfectionists. Their shame and guilt spiked a bit, their sense of pride lowered slightly, but it wasn’t dramatic. And on the subsequent attempt, they authentically gave the challenge another shot. For perfectionists, that ‘removal from challenge’ tendency 48 / Rotman Management Fall 2024

is self-sabotaging behaviour that leads to things like avoidance and procrastination — both of which have been very strongly correlated to perfectionism.

What is the state of perfectionism in our society right now?

That’s the reason I wrote the book [The Perfection Trap: Embracing the Power of Good Enough]. I co-authored a big study a few years ago, tracking perfectionism across time. We measured 45,000 young people from 1989 to the present day, looking at self-oriented, socially prescribed and other-oriented perfectionism. What we found is that self-oriented and other-oriented perfectionism have both ticked upwards slightly; but there has been a staggering rise in socially-prescribed perfectionism in recent years. It’s on an exponential curve at the moment, which means it’s growing way faster than we’re ready for. I actually refer to it as an epidemic.

The ubiquity of these feelings and pressures are disguising the problems they create. We know that socially-prescribed perfectionism is the most extreme form and is most strongly correlated with negative mental health outcomes. If there is any characteristic we don’t want to see rising, this is it. It’s important to recognize that this is prevalent among young people. We have to understand why it’s happening and as a society, begin to address the root causes.

What do you think is driving these increases?

Social media is the thing I get asked about the most, and clearly there is a link there. Our data shows that the spikes in sociallyprescribed perfectionism started around 2007 — which is when Apple released the iPhone and social media platforms came into our lives, 24/7. So social media is partly responsible, but there is also a lot of increased pressure out there in the broader economy. Economies have slowed down quite dramatically since 2008, and that has created a lot of difficulty. In order to get more out of the system, we’ve had to kind of treat it as a zerosum game. And the burden is being borne by young people, in particular, via higher house prices, more college debt and having to put off or delay their adulthood.

So many young people are finding it really tough right now — not just in terms of their financial situations, but also in schools and colleges. The competition to get into the top institutions has become extremely fierce.

Parents are seeing this pressure, and some are passing it down to their children via higher expectations. The expectations that are put on our youth have become excessive, and they are struggling to deal with them and becoming overwhelmed.

There does seem to be a bit of pushback from Millennials and Gen-Zers, who are determined not to get burned out by work.

There’s even a phenomenon on social media of that cohort talking about ‘acting your wage,’ and making sure that you’re only exerting effort in relation to what your compensation is.

What are your observations on this front?

There is definitely a counterculture that has sprung up organically. I see it in young people increasingly recognizing that the economy isn’t working for them in the same way that it did for their parents. Some of that is true, and some of it is not true, but nevertheless, you can understand why young people feel the need to say, ‘Hey, if I’m being pushed so hard, but I don’t feel like I’m getting the rewards for it, maybe it’s time to reconsider and think about other things that are more important in my life — like spending time with my friends, family and communities.

As a society, we need to meet young people halfway on this.

If they are telling us that the expectations placed on them are too high and they’re pushing back against them, we as leaders need to look at the data that suggests we can ‘get more for less.’

For instance, if you reduce the length of the work week, there is evidence that you can get even more productivity from your workers — which is a staggering finding. We also have AI coming on board and offering huge productivity gains.

So, what should we do? Should we take advantage of these productivity gains That’s how we would grow the economy in the past. But is it time for us to say, ‘Perhaps we can use these productivity gains from AI to give people back more time in their communities and with their families. We could give people more time to build human and social progress, rather than just profit.’ Young people are thinking hard about these things, and to me, that’s a very positive thing.

You said earlier that you consider yourself a perfectionist.

Help us understand your journey and how this became a concern for you.

As indicated, I grew up in a working-class community, never expected myself to be here. I carried a lot of anxiety about my

origins throughout my working life and always felt like I wasn’t enough. My motivation was driven from a place of scarcity, a place of lack all the time. I felt like an impostor, like I didn’t belong. All of that is catnip for a perfectionist.

Towards the end of my 20s, I was burned out. I was experiencing considerable psychological difficulties, particularly panic and anxiety, and I basically broke down and had to take six months off. That was the turning point for me. The reason I wanted to do more work in this area was that I knew there had to be a better way. I couldn’t continue to be driven by scarcity all the time. I had to find some abundance in my life.

Unfortunately, perfectionism — and even capitalism, to a certain extent — doesn’t thrive under conditions of abundance.

It needs scarcity to keep moving forward. Essentially, abundance is ‘enoughness.’ It’s about knowing that what we have in this moment is plenty, and being grateful for that. Just enjoying where we are and trying to find the things in life that give us happiness, satisfaction and contentment.

The people I’ve spoken to who have been able to turn the corner on perfectionism have been able to find and love the things in life that bring them joy, and not necessarily think they’ve got to keep moving forward all the time. There is always a place for growth, to be sure, but we also have to find those moments of contentment and a way to recognize that we are enough.

That’s why, in the book, I talk a lot about vulnerability and self-acceptance, because I think those things are so important when it comes to breaking free of perfectionism. That has certainly been the case in my life. I’ve been taking a slightly different outlook and trying to work for purpose, meaning and doing things that make a difference. And that is like taking a sledgehammer to perfectionism.

What were some of the things you did that helped you turn the corner and appreciate what you already had?

It’s really important to recognize that this isn’t about dialling back expectations or not wanting to do remarkable things in your life. This is about recognizing when we have done things well and accepting that as an amazing achievement. Even though we can continue to grow, in this moment, it is enough.

Vulnerability and being able to accept that we’re flawed and imperfect is an important first step in that direction. rotmanmagazine.ca / 49

We all need to accept — radically accept — that there are limits to what we can control.

Brené Brown talks about ‘showing up.’ If you don’t feel confident about something, just give it a go. If you don’t feel confident about public speaking, put your hand up to do a talk and just go through the anxiety that that will instill. If you don’t feel like you’re very good at leading projects, put your hand up to do a report, whatever it might be. Go through the anxiety, go through the discomfort and, at all times, remain kind to yourself. Self-compassion alongside vulnerability is crucial, because you are going to make mistakes and experience setbacks if you push yourself.

This is not a linear path. When we do succumb to perfectionist tendencies, we’ve got to employ even more self-compassion to make sure that we’re brave enough to be vulnerable again; and so the cycle continues. But the more you get comfortable with that discomfort, the more your perfectionism will start to become less of an influence on you.

Finally, on top of vulnerability and self-compassion, radical acceptance is also crucial, because there’s a societal piece, too. Perfectionism is pushed upon us by forces in the outside world, some of which we can’t control. When we run into heartbreak, for instance, or grief, or we have a health scare, whatever it might be, it can be really difficult because we feel like we’ve just got to push through all the time, when actually, what we all need to do is accept — radically accept — that there are limits to what we can control.

And that’s okay. It’s just part and parcel of living in an imperfect world. None of these things mean that we’re settling; it just means that we’re able to live more contentedly and with a little bit more joy, knowing that we’re imperfect.

As leaders, we need to normalize failure. When we make mistakes, we need to laugh about it and tell our team about it.

So, lead by example and create a culture of psychological safety.

Those are the probably the two most important levers for combatting perfectionism.

I was recently on a podcast with Dan Harris, an American journalist who’s written a book called 10% Happier. He’s a big fan of meditation and mindfulness — which I am, too. He was talking about how we should really accept that, sometimes in life, we’re a bit lazy and unproductive. And those moments are just as important parts of our existence as times when we’re really productive and doing amazing things.

We are exhaustible, fallible creatures, and feeling like we’re good enough is almost the hardest thing to do in a culture that’s telling us that we have to focus on those areas in our lives where we are remarkable, and somehow hide the areas we don’t feel so good about. That mindset denies an important part of our existence. Like most things, it’s all about the yin and the yang, the good and the not so good. That’s just part and parcel of our humanity.

What is your advice for leaders and managers who are supervising people who might have perfectionistic tendencies?

First, you’ve got to lead by example. That is crucial. And you’ve got to set up a working culture that provides a high degree of psychological safety. In essence, that means ensuring people know that it’s okay to make mistakes or mess up sometimes.

These things are part and parcel of a working environment and people need to know there’s some kind of safety to show their vulnerability.

50 / Rotman Management Fall 2024

Thomas Curran is an Assistant Professor in the Department of Psychological and Behavioural Sciences at the London School of Economics and Political Science. He is the author of The Perfection Trap: Embracing the Power of Good Enough (Scribner, 2024). His TED-MED talk, “Our Dangerous Obsession with Perfection,” is on YouTube.

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Back to the Present:

How Mental Time Travel Affects Saving Behaviour ‘Reverse mental time travel’ is a promising intervention that can alter how consumers relate to and make decisions for their present selves and the selves they will one day become.

by Sam Maglio

ALTHOUGH WE AS CONSUMERS LIVE IN THE PRESENT, most of our spending and saving choices have temporal components to them. Because the present is immediate and the future is distant, consumers often discount the enjoyment their future selves will experience, choosing to accelerate rewards to the present and delay costs to the future.

When choosing to splurge today, not saving for tomorrow might seem like a small price to pay. But as tomorrow morphs into today, consumers repeatedly eschew opportunities to pay off past purchases and save for the future; instead, they continue to spend more and more. Procrastination comes easily and resisting the urge to spend is difficult, which is why most consumers don’t have sufficient savings to survive even smallscale disruptions.

In 2023, the Federal Reserve found that 37 per cent of U.S. consumers would not be able to pay for an unexpected $400 expense with their savings. And in PwC’s recent Employee

Financial Wellness Survey, employees ranked ‘financial stress’ as a bigger stressor than all other life stressors combined. Furthermore, despite their best efforts, consumers are often naive about their future choices and overconfident about their future self-control; they tend to overestimate both their future savings and their future free time.

To address such tendencies, we asked a novel question: Could mentally starting in the future and travelling back to the present alter how people think about themselves over time, thereby changing their financial decisions?

The Concept of Mental Time Travel

When we think ahead to weekday evening dinners and next-day work meetings or think back on childhood memories, we are engaging in ‘mental time travel.’ Mental time travel allows people to travel across personal time, remembering the past and simulating the future. rotmanmagazine.ca / 53

Mental time travel allows people to travel across personal time, remembering the past and simulating the future.

Most mental time-travellers chart a linear cousre, starting in the present and moving towards the future. In a recent paper with my colleagues Katherine Christensen (University of Indiana) and Hal Hershfield (UCLA), we challenged this notion. We felt that changing the direction of mental time travel might affect the relationships of present and future selves across time — and thereby impact the way consumers behave. In this article I will summarize our key findings.

In everyday life, we make numerous decisions that involve selecting between outcomes that will be available at different points in time. Should I sock and extra $100 into my retirement account or upgrade my wardrobe today? Such ‘intertemporal choices’ are inevitable, yet consumers often struggle to identify with different versions of their selves across time. As a result, they often exaggerate the value of immediate rewards by overspending today, while planning to do better tomorrow.

In mental time travel, trips between the present and the future reveal different versions of a consumer’s self: the current self of today and the future self of tomorrow. Relationships between such selves can affect savings decisions. If consumers see their future selves as fundamentally dissimilar and unconnected to their present selves, they are more likely to turn down smaller, earlier rewards and wait for larger, later rewards.

Even though people struggle to identify with the people they will become tomorrow or 10 years from now, these struggles can be overcome. Specifically, increasing the perceived similarity between present and future selves has been shown to reduce the intertemporal ‘discount rate’ and increases consumer saving.

However, research tends to focus on only one mental pathway between these selves: from the present to the future. But just as people can start in the present and move forward in their minds, they can also start in the future and go back to the present.

In a pilot study we asked: In which direction do people tend to mentally travel through time in their daily lives?

54 / Rotman Management Fall 2024

In a pilot study, we asked Amazon Mechanical Turk (MTurk) participants how they naturally travel through time, with the following prompt: “There are two ways to think about time when we think about what sort of things are going to happen in the future. One way is to start right now in the present and mentally travel ahead to the future. Another way is to start in the future and mentally travel backward to the present.”

In line with the standard linear conception of time, participants were heavily skewed toward forward time travel: 83 per cent chose it as their primary mode of mentally travelling through time. But just 27 per cent indicated that they only travelled from the present to the future and never travelled from the future to the present.

This pilot study suggested that although beginning in the present is often the default, it is not the only way to travel through time. If time is not viewed solely in a linear manner, different ways of travelling through time might affect the relationship between present and future selves, and this changed relationship between our present and future selves might alter the decisions people make — especially regarding how they save money over time.

Our Research

Anyone who has ever felt that a drive to an event lasts forever but the drive home whizzes by knows that features of a journey affect how long it seems to take. Trips to a known destination (e.g. home) always seem faster than trips to an unknown destination, even if both journies involve the same objective distance. The ‘going-home effect’ results in part from uncertainty about the away location relative to the home location.

By integrating findings from mental time-travel research with the going-home effect, we reasoned that because people live in the present, the present self represents a temporal version of ‘home.’ By contrast, the future is a less certain destination

because the future self exists away from the ‘home’ of the present self. If this theorizing holds, starting in the future and going home (to the present) might make the two points feel closer, which could induce a sense that the present and future selves are similar — that is, a temporal ‘going-home effect.’

Extrapolating to temporal travel, we posited that a temporal going-home effect could result from a similar sense of uncertainty about the future self, relative to the present self. Travelling back to a more certain destination (the present) might make someone feel closer and more connected to their selves across time, such that they appear more similar. We felt that this increased similarity between present and future selves might cause consumers to save more for the future.

We investigated the potential consequences for savings behaviour linked to forward and reverse mental time travel. Across 20 studies, we manipulated the way consumers travel mentally through time, in an attempt to increase both feelings of similarity with future selves and saving intentions and behaviour.

First, we examined whether changing the direction people travel mentally through time affects the similarity they perceive between their current and future selves. In Study 1, we established that, in comparison to mentally travelling from the present to the future (“The year is 2024. Move forward to 2030”) travelling from the future to the present (“The year is 2030. Rewind to 2024”) affects similarity judgments across a six-year time horizon. Moreover, the effect of travelling from the future to the present affected judgments of similarity relative to a control condition. In three additional studies we replicated this effect across one, five and 10-year time frames.

Next, we sought to identify the underlying mechanism for this. Study 2 showed that uncertainty linked to the ‘destination self ’ accounts for the relationship between mental time-travel direction and similarity judgments. It also provided evidence that reducing the uncertainty of the destination self increases

perceived similarity across a 10-year time horizon.

In Study 3, our primary aim was to examine whether mentally travelling from the future to the present could increase saving intentions. In this study, we found support for the effect of our invention on saving intentions. Participants who travelled from the future to the present reported a higher intention of saving when offered an introductory five per cent savings rate, were more likely to invest windfall gains by buying a Treasury bill and were less likely to plan to spend all the money now.

The effect of mental time-travel direction on financial decision-making was not limited to 10-year savings goals. In Study 4, we examined whether starting in the future and mentally travelling back to the present affects consequential saving behaviour.

Our aim in this study was to test the effect of mental time-travel direction in a consequential context. These findings provided preliminary evidence that travelling from the future to the present increase the likelihood that consumers deposit real money in long-term savings products.

In partnership with a financial technology company focused on college savings, we further investigated the impact of mental time-travel direction on savings behaviour. As predicted, relative to participants in the present-to-future condition, participants in the future-to-present condition were more likely to complete the onboarding user flow and receive a $10 start-up gift to their college savings account.

Across mental time travel directions, participants travelling to a certain destination indicated higher similarity between their selves than participants travelling to an uncertain destination. A small effect of direction implied that participants in the futureto-present condition sensed greater similarity on average than participants in the present-to-future conditions.

We also found an interaction between time travel direction and uncertainty, such that the effect of travelling to a certain (vs. uncertain) destination self was higher in the future-to-present rotmanmagazine.ca / 55

Like travel through space, travel through time seems closer when traveling home (to the present).

condition. Overall, we found further support for uncertainty as a driver of the relationship between time travel direction and similarity judgments.

KEY TAKEAWAYS: Because consumers frequently fail to save for the future at the rates they say they desire, we investigated a novel intervention to help close this gap, namely, altering conventional mental time-travel directions, by travelling back to the present from the future.

Across 20 experiments we demonstrated that the direction of mental time-travel affects how similar consumers perceive their current and future selves and, in turn, the actions they take today on behalf of those future selves.

When people travel in the usual way, from the present to the future, it’s a lot like driving into a fog: They’re clear on where they’re at, but the destination is incredibly vague. It works the same way when people travel from the present to the future in their minds, with their future self just as hard to make out as the destination on a journey. Reverse mental time travel is like lifting that fog. Our intervention effectively asked people to imagine suddenly, clearly arriving at a moment years in the future.

Then, when we asked them to zoom back to now, the journey was much more clear. Ultimately, backward mental time travel increased saving — albeit with small effects — in both lab studies and field contexts.

Our findings contribute to several streams of research.

First, work on future self continuity implies that when consumers feel psychologically similar to their future selves, they discount the future less. Although present and future selves are, by definition, separate, theorizing in this arena documents how and why people might regard them as more connected.

We also add breath to the going-home effect, which to date has been restricted to the spatial domain (i.e. felt distance between one place and another varies as a function of direction of travel). Whereas trips through physical space often are measured in time (‘How long does it take to get there?’), trips through time

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often are measured in psychological closeness (‘How similar do you feel to yourself in 10 years?’). We examined how travelling back to the present (i.e. the temporal ‘home’) affects closeness across time and found that, like travel through space, travel through time seems closer, and the two selves feel more similar, when travelling home (to the present) than when travelling away (to the future). This effect is driven by the certainty of the destination self.

Uncertainty is fundamental not only to how consumers traverse time and space but also to how they make comparisons across different entities. Accordingly, we also advance the literature on asymmetrical similarity judgments. Similarity judgments often compare better-known concepts (prototypes) with lesser-known concepts (variants).

For example, a friend is likely to be judged as more similar to oneself than the self is to a friend. This asymmetry arises because when people start with more uncertain, lesser-known concepts and compare them with more well-known concepts, they know fewer features and then identify a higher percentage of features that match.

To our knowledge, our research is the first to test this similarity asymmetry across time, in which one component of the comparison — the future self — does not yet exist. Even though the future self exists only once the present self ceases to exist, we find this similarity asymmetry still persists. By reversing the standard comparison — that is, by starting with the future self and comparing it with the present self — interventions can increase perceived similarity between selves across time.

Finally, our research contributes to the research on ‘backward planning,’ which indicates that working backward, from a goal to the present, can lead to more realistic estimations of task completion time. When planners start in the future (with their goals) and move back to the present, they arrive at longer time estimates for project completion than when they start in the present and move forward in time. Thus, compared with forward planners, backward planners are more likely to realize they need more

The Going-Home Effect on Saving Behaviour Uncertainty Judgments

Future to Present vs.

Present to Future

Similarity Judgments

Saving Behaviour

FIGURE ONE

time to achieve their goals and make the changes they want. Prior backward-planning literature has investigated tasks that already are planned or in process; in contrast, we feature backward travel as a more general phenomenon, suggesting that travelling backward can create value even for consumers who do not already have plans.

Compared with forward travellers, those who mentally go back to the present judge their future self as more similar to their current self, seemingly because travelling back to a known ‘destination self ’ leads to a sense that the future and present selves are not very different. Furthermore, when consumers’ future selves feels psychologically closer to their current selves, they are more likely to commit to saving and making investments to help their future selves.

MANAGERIAL IMPLICATIONS: Our research has implications for companies, government and individual decision-makers seeking to reduce savings shortfalls. Our field studies indicate the potential of mental time-travel directions to drive behavioural changes among millennial investors in Sweden and investors in a college savings plan in the United States; similar interventions might assist other institutions that seek to enhance futureoriented investments. For example, early claims of U.S. Social Security benefits can reduce retirees’ benefits by as much as 30 per cent over their lifespans.

The time at which this intervention takes place may be critical, and future research could examine both timing and age effects. For example, in a retirement context, an intervention six months before beginning retirement may be too late to shift judgments, while 30 years before retirement may be too soon.

Our findings also might apply to consumer and student loan debt. Temporal discounting not only affects the rates at which people save but also how much they choose to borrow and repay; research suggests students do not aim high enough and as a result may not borrow enough or invest enough in their education. A simple mental time-travel manipulation — before

asking students how much they want to borrow — might change loan amounts.

In closing

Many consumers say they want to save for the future yet struggle to do so. Our research examined this behavioural problem from a persuasive messaging standpoint. With the goal of helping people take better care of their future selves, we built on a stream of research that has found that the way people view their identities over time affects the saving decisions they make.

Although past research on self-similarity judgments across time almost exclusively starts with the present self and moves forward to the future self, we found that mentally travelling from the future to the present — rather than the present to the future — increases perceived similarity between selves across time by reducing the uncertainty of the ‘destination self.’

We believe reverse mental time travel can be a promising intervention that alters how consumers relate to and make decisions for their selves and the selves they will one day become.

Furthermore, travelling back to the present could also exert effects in non-financial domains that benefit from greater perceived future similarity, including healthy eating, education, healthcare and exercise.

Sam Maglio is a Professor of Marketing and Psychology at the University of Toronto Scarborough, with a cross-appointment to the Rotman School of Management. His co-authored paper, “Back to the Present: How Direction of Mental Time Travel Affects Similarity and Saving,” was recently published in the Journal of Consumer Research. The complete paper is available online. rotmanmagazine.ca / 57

How to Drive Innovation with Generative AI In the quest for innovation, GenAI’s most obvious contribution is in idea generation. Yet it can play an even more important role in helping organizations question their strategic assumptions.

by Alan Iny, Luc de Brabandère and Justin Manly

A COMPANY’S EFFORTS TO INNOVATE can fall short for many reasons.

Critical assumptions about customers, technologies, rivals and innovation domains may not reflect current trends and circumstances. The diversity and quality of ideas in the funnel may be too low. Or, the organization may struggle to identify, prioritize and invest behind the best ideas.

Whether the focus is on new products, services, processes or business models, Generative AI (GenAI) can enhance and challenge the work of teams across all phases of the innovation cycle. GenAI’s most obvious contribution is in idea generation and validation — the divergence and convergence phases of innovation. Yet it can play an even more important role in helping leaders confront and update the strategic assumptions at the foundation of their business and innovation strategies: the ‘doubt phase’ of the cycle.

Organizations that regularly question their assumptions are more resilient because they are more likely to see, and position themselves to benefit from, the shifts on which competitive advantage turns.

Putting Doubt—and GenAI—to Work

Innovation thrives on doubt, particularly in an era of disruption, and should be the first step of any creative exercise. We’ve long argued that thinking in new boxes beats thinking outside an existing box. Teams need structures within which to think — hypotheses about customers, technology and the like to channel their creativity. Innovation teams that dive straight into the divergence phase without testing the soundness of their box risk trying to win at yesterday’s game — and merely getting to the wrong place faster. rotmanmagazine.ca / 59

Lacking the emotional bonds and biases that humas inevitably bring to an ideation effort, Gen AI can provide a valuable outsider’s perspective.

So, take the time to understand your existing assumptions, the ‘boxes’ that contain and constrain your thinking, especially the hidden and implicit ones. Then, stress-test them — apply a doubt filter — before embarking on ideation. Which remain true and which are under strain? What combination of old and new assumptions should define the new box in which your ideation efforts should take place?

Once defined and embraced, a new box for innovation creates urgency and focus: Why are we innovating? Where are we innovating? GenAI can’t tell you when it’s time for a new box, but lacking the emotional bonds and biases that staff inevitably bring to an ideation effort, it can provide a valuable outsider’s perspective. By drawing on a vast body of knowledge, GenAI can make connections you might have missed that support or undermine the assumptions.

Finally, the technology’s potential to confidently produce incorrect output and even ‘hallucinations’ can, if played correctly, be an asset in helping teams rethink longstanding assumptions.

Unpacking the Boxes—and Creating New Ones

Generally, at the outset of the doubt phase of the innovation cycle, it’s a good idea to get all the key stakeholders together to identify and agree on the assumptions underlying your strategy.

Which customer segments and priorities are you addressing, and why? What are your key sources of competitive advantage in satisfying them, such as access to critical inputs, scale and technological superiority?

Next, pressure-test the assumptions. These old mental models may or may not remain valid. Are there signs that your

Preparing for Potential Futures Here’s a paradox: Companies have never placed a higher priority on innovation—yet they have never been as unready to deliver on their innovation aspirations. Our annual survey of global innovators finds that the pandemic, a shifting macroeconomic climate and rising geopolitical tensions have all taken a toll on innovation discipline. For 18 years, we’ve asked senior innovation executives where innovation ranks in their company’s priorities. Is it at the top, in the top three, one of the top 10 or lower? This year a record 83 per cent of respondents reported that their companies rank innovation among their top three areas of focus.

In the last two years, innovation readiness has plummeted, with just three per cent of companies in the ready zone today, compared with 20 per cent as recently as 2022. We saw these significant declines across all regions, with the exception of China, where the readiness level has remained steady. The slumps were particularly strong across seven dimensions of how an organization nurtures ideas and guides them through development to market: • Ambition. Are there specific and aspirational goals linked to strategy and value creation?

• Domains. Do we focus on a limited number of attractive innovation domains where we have a right to win?

• Governance. Are people and budgets aligned with priorities?

• Portfolio and Performance Management. Is the portfolio rigorously managed, and are innovation decisions and compensation linked to strategy-aligned KPIs?

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• Organization and Ecosystems. Is innovation championed by the C-suite, and are there fit-for-purpose innovation teams/vehicles for different types of innovation and different time frames?

• Talent and Culture. Do we have a culture of innovation, and is innovation seen as a career accelerator?

• Idea to Impact. Do we have ideation methods in place that can ‘see around corners’ and processes to explore and scale?

Faced with high uncertainty, leaders’ focus has shifted from medium-term advantage and value creation to short-term agility. In that environment, the systems that guide innovation activities and channel innovation investments suffered, leaving organizations less fit for the race to come.

In particular, innovation readiness—as measured by our proprietary innovation maturity score—is down across the elements of the innovation system that align it with the corporate value creation agenda. At the same time, executives report that innovation activities continue at pre-pandemic levels.

This finding evokes a troubling picture of ‘zombie’ innovation— organizations going through the motions in an endless loop as the strategic environment shifts around them. Without a sharp innovation strategy aligned with a clear business strategy—offering clarity on target customers and the most attractive innovation domains—even the most efficient and flexible innovation system will fail to create value, particularly in disruptive times.

Innovating with GenAI • As GenAI offers assumptions underlying a company’s strategy, even its ‘off the wall’ suggestions have value by helping the team break out of constricting boxes and consider new ones.

chosen customers are growing less attractive or that their priorities are shifting? Are costs, technologies or the competitive landscape evolving in ways that challenge your advantage?

Where assumptions are no longer valid or under pressure, lay out for each exactly how it needs to change — typically using a ‘from ¤ to’ exercise. This is especially important when the ‘from’ is something hidden or implicit, like ‘this is how we’ve always done it’ or ‘this is how everyone does it.’ An example would be jet engine manufacturers moving from selling individual engines and separate maintenance services to selling hours of committed engine uptime. The ‘from ¤ to’ process sparks fresh, transformational thinking — and defines your ‘new box’ for innovation.

GenAI can help by coming up with potential assumptions you may have missed or identifying early warning signs that

Of course, you have to see an opportunity before you can seize it, and you have to spot a risk before you can sidestep it. Organzations with superior strategic foresight have a significant competitive advantage, particularly in uncertain times when traditional forecasting approaches based on extrapolation from the past are unlikely to deliver valuable insights.

Rather than looking inward, organizations that are foresight leaders look across an uncertain landscape and scan the horizon.

They are able to separate signal from noise and develop a perspective on what might be next—and imagine their role in those futures. They don’t know exactly what will happen, but they’re prepared for what might. Their superior perception gives these companies an edge in identifying and responding to, among others:

• The best way to have a good idea is to have many. Organizations that benefited from applying AI to innovation generated five times more ideas compared with those that reported no benefit from the technology.

• Once the team identifies a set of promising ideas, GenAI can help winnow down the options—evaluating their relative desirability, viability and feasibility—and then assist in refining the concepts.

long-held, core assumptions may be reaching their expiration dates. Consider a simple GenAI prompt like, ‘I’m the CEO of [company name] and am kicking off a strategic review. What 10 critical assumptions do you think are at the heart of my strategy — and for each, which do you think remain valid, which are invalid and which are in danger?’

• Critical shifts in customer priorities and sentiment that require new value propositions; • An unexpected and attractive adjacent market that could drive a new wave of growth; • A new technology with the potential to disrupt business economics; • An attractive partnership or acquisition candidate that can accelerate progress towards a strategic objective; or • Weak signals of new moves by competitors—or the rise of potentially advantaged upstarts.

gic creativity to build a foresight advantage: Analytics to surface patterns and spot anomalies within diverse sources from social media to scientific literature. Earnings calls to patent citations. Analyst reports to smart money flows. And creativity, scenario planning and wargaming to expand the thinking and imagine the implications. Which new opportunities might emerge? For what potential futures do we need to prepare? How do we build resilience to potential new risks? How might competitors react?

Foresight leaders make this discipline central to their culture and not just a module bolted onto their annual planning process.

They understand the critical assumptions behind their strategy and the foundations of their competitive advantage. And they continually scan for potential disruptions or accelerators—sometimes via a central foresight team staffed with experts and supported by technology, sometimes by empowering the broader organization to sense weak signals and challenge the status quo, and sometimes both.

How to get back on track? We’d argue for a reboot that starts by establishing—or strengthening—the link between innovation strategy and business strategy. And when you’re thinking about recalibrating your innovation system to be both more strategic and effective, don’t ignore GenAI. With today’s strongest innovators already building experience with the technology, there’s a real risk of falling further behind.

The best organizations bring together advanced analytics and strate-

-Excerpted from BCG’s Innovation in 2024 report, available online.

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The divergence phase is all about asking questions to elicit useful ideas from teams of people as well as from GenAI.

The response can provide intriguing, enlightening and valuable input for a leadership team exploring paths to innovation. Even GenAI information that comes from left field or seems off-the-wall can be useful if it forces the team to consider the argument thoughtfully before rejecting it. The key is to help the team break down constricting boxes.

Had GenAI been around in the 1980s, could it have helped department stores identify the fault lines under their strategies?

They had long prospered by offering a broad, but not deep, selection of moderately priced goods to the middle classes. For example, GenAI might have pointed out early signs of rising income inequality as the ratio of CEO pay to that of the average worker doubled between the late 1970s and late 1980s. It could have highlighted the rise of both low-end discounters and luxury specialty stores. It could have given executives permission to imagine a different and less hospitable strategic environment — and time to craft a response.

Getting Ideas on the Table

The next phase of innovation, divergence, entails generating a set of ideas that fit within your new or modified ‘box,’ while otherwise withholding judgment. The goal is variety — eliciting as many fresh approaches as possible to rise to the innovation challenge. After all, the best way to have a good idea is to have many. And GenAI, well deployed, can make a big difference at the top of the innovation funnel. Boston Consulting Groups’ global innovation survey found that organizations seeing impact from incorporating AI into their innovation systems generated five times more ideas compared with those that reported no benefit from using AI. The divergence phase is all about asking questions — the right questions — to elicit useful ideas from teams of people as well as GenAI. We hear a lot about the skyrocketing demand for ‘prompt engineers’, professionals who shape queries to ensure the best GenAI results. Yet this process isn’t new; trained innovation facilitators have been leveraging structured questioning techniques for years to improve the quality and diversity of the ideas they draw out from human teams. It’s no surprise that AI chatbots benefit from similar structuring.

To keep their innovation muscles limber — and to ensure engagement in both the activity and its outcomes — it makes sense for the human team to start the questioning process.

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GenAI can be brought in later to open the aperture and toss more ideas into the hopper. You can ask it to generate a long list of ideas, adjusting the ‘temperature’ or randomness of its analysis to ensure a healthy mix of incremental and more wild ideas.

You can direct it to develop ideas based on analogies from other industries. Ask it to list specific reasons a stakeholder might be raving excitedly about one of your products in the future, which can open new pathways for ideas, or to lay out what opportunities might emerge from a specific trend or input. Ask for creative solutions not only for new product ideas, but for process redesign or cost-cutting challenges or any issue you are facing where fresh possibilities could be needed. These might be great ideas in their own right, or they may spark new thinking or enhance existing ideas from the team.

One important point to recognize is that — given the training set of data on which it relies — GenAI is likely to give a competitor the same or similar answers to these types of questions.

So, it’s essential for the innovation team members to take the ideas to the next stage by applying the lens of their organization’s competitive advantages to the process. How can an interesting idea from GenAI be strengthened by leveraging the organization’s purpose, specific expertise, customer or supplier relationships, scale and the like?

Separating the Wheat from the Chaff

Having a lot of ideas is great, but resources are finite. So it’s essential to find a way to select the most attractive ones to pursue among all those generated in the divergence phase. Let the humans start the process by creating a manageable list of the ideas that feel most exciting. Then bring in GenAI to help winnow down the options in the funnel — evaluating their relative desirability, viability and feasibility — and then to assist in refining the concepts on the short list.

GenAI can, of course, help with concept refinement and visualization, producing compelling images and elevator pitches that can be tested with sales, marketing and customers. But importantly, as in the doubt phase, it can be used as a devil’s advocate, leveraging its vast trove of data to challenge ideas. For example, Innovation CoPilot — a proprietary BCG tool currently in development — is a GenAI chatbot. By iteratively challenging ideas at each stage of the innovation cycle, it helps teams enrich and improve them.

The Top Innovation Challenges What are the top three challenges your company is currently facing in innovation/R&D/product development? (%) Unclear or overly broad strategy

52 47

Rising cost of capital Talent pool constraints

44 38

Risk-averse culture 32

Siloed innovation 29

Risk of tech disruption (e.g. GenAI)

28

Lack of robust governance Dispersed innovation footprint

21

Source: BCG Global Innovation Survey 2024 FIGURE ONE

In closing

While GenAI can provide substantial help on the road to innovation, human insight remains essential — both for coming up with new ideas and bringing them to life. After all, organizations are still led and staffed by people. To implement strategies, they need to understand, support and be excited about them. They need to be proud of new products, services and business models if they are to promote them. They need to remain part of the innovation and commercialization process.

Think of GenAI then as an amazingly fast, tireless and smart intern who produces large quantities of output, but who isn’t always going to be right. Its role is not to take humans out of the creative process, just to make them better at it by pointing out old assumptions that box them in and stymie the quest for true innovation.

Alan Iny is Partner and Director, Creativity & Scenarios, at Boston Consulting Group, based in New York. Luc de Brabandère is a Senior Advisor to BCG’s Strategy practice, based in Brussels. He served as a BCG Fellow from 2008 through 2017, and was a partner at the firm from 2001 to 2008. Justin Manly is a Managing Director and Senior Partner in BCG’s Chicago office, where he leads growth and innovation for BCG globally.

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Innovating in the Digital Era:

What Goliaths Can Learn from Davids To succeed in the digital era, organizations must practise ‘innovation ambidexterity’ to foster a culture of continued, sustained innovation.

by Vijaya Sunder M and Namrata Manchiraju

WHEN GOLIATH WAS ATTACKING the Israelites unopposed, with bravery, courage and faith entered the shepherd boy David. His stones and sling threw the giant to the ground at once. In today’s digital era, where digital native firms compete with established organizations through innovative business models, this classic story can be viewed as an analogy to the business world. Imagine placing the legacy and digital incumbents as Goliaths and digital native companies as Davids. Digital transformations driven by innovation and execution mindsets replace David’s bravery, courage and faith. Consider the fact that the fastest-growing digital natives have scaled from US$50 million in revenues to $1 billion in just four to eight years.

Today, digital technologies are employed to establish novel enterprises or to improve existing business processes, organizational cultures and customer experiences. Both approaches are driven by innovative thinking and effective execution. On the one hand, firms that take the former route are ‘digital natives,’

founded in the digital era, armed with capabilities that enable them to disrupt traditional business models. Examples include Zoom, Pinterest, Asos, Airbnb, Revolut, Schmooze and Uber.

A few digital natives have gone a step further by introducing innovative platforms and leveraging data, enabling them to scale to great heights, including Meta, Apple, Netflix and Google.

On the other hand, the ‘digital incumbents’ are traditional companies like DBS Bank, McKinsey & Co., Diageo and L’Oreal. These companies are leveraging digital technologies and transforming themselves to fit the digital era. However, there are also many legacy incumbents that have yet to embrace digitalization in their business ecosystems. And they are at risk of losing out to digital-native competitors.

How can erstwhile established organizations compete with digital natives? In this article, we will present a framework that informs legacy and digital incumbents on innovating in the digital era by balancing innovation and execution mindsets. rotmanmagazine.ca / 65

Digitally-native companies are leading the coopetition game.

Innovation Mindsets

Historically, organizations have viewed exploration and exploitation as two distinct paths to innovation. In the competitive, digital-driven era, this view is outdated. Consider BlackBerry, which followed an exploitative mindset. In the early 2000s, every tech geek had an arched keyboard device, sent e-mails on the go and could exclusively chat with other BlackBerry users. Do you ever wonder where Blackberry is today? The smartphone’s infrastructure, operating systems, software and services were decommissioned in 2022. The problem: BlackBerry chose to refine its existing competencies, technologies and paradigms — without considering customer preferences; and thus, it fell short to iOS and Android.

Furthermore, consider Macy’s, America’s biggest department store, which practised an explorative mindset whereby they experimented with new alternatives without building on existing capabilities. At one time it enjoyed soaring sales across its channels — but it recently reported a loss of $3 billion in revenue in the last years. Put simply, both BlackBerry and Macy’s struggled to keep up with the growing pace of innovation.

Now, let us consider the digitally native bank making the headlines: Revolut. It launched at a time when digital banks were not popular in the UK and managed to transform the dynamics.

How? By balancing its innovation mindset. On the exploitative innovation front, the company invested in scaling its data science and engineering functions. It leveraged machine learning and other computational techniques to protect customers, make better behavioural predictions and identify fraud patterns without human intervention. On the explorative innovation front, it is pushing the boundaries of traditional banking by constantly introducing offerings like crypto trading and fractional stock investing. And it has opened up new revenue streams by expanding beyond the UK. Revolut added almost 10 million new customers in 2022, increasing its revenues by $1.1 billion — a 45 per cent increase from 2021.

While it is embedded into the wiring of digital native companies to balance the two required innovation mindsets, many incumbent counterparts are yet to get there. Some are beginning 66 / Rotman Management Fall 2024

to break away from their traditional competitors by building capabilities that drive growth from disruptive innovation. However, they face long decision-making times, less frequent product releases and lack a vision of building with impact. In sum, we can plainly see that innovation ambidexterity — the ability to balance explorative and exploitative innovation mindsets — is now critical to competitiveness.

Execution Mindsets

While the digital era has brought innovation to the forefront, it is also changing the competitive landscape in the marketplace. Recent research finds that some companies work together to invent innovations further from the customer and compete on activities closer to the customer. Amalgamating these two approaches has created a new phenomenon called coopetition.

Not surprisingly, digitally native companies are leading the coopetition game. Consider Apple and Google working together seamlessly to launch the first iPhone. Since the launch of the first iOS in 2007, iPhones and iPads have incorporated Google Maps, YouTube and a default Google search engine. The digital native Revolut also links with banks like Barclays, HSBC, Bank of Scotland and others, utilizing the banks’ open banking APIs and enabling data sharing and transaction initiation with user content. The resulting money transfers are easy and improve the user experience.

This phenomenon is not as common in the work of legacy and digital incumbents. Take JCPenney, the American retailer that entered the 21st century with stagnant and declining sales and tough competition from discount stores like Target and Walmart. It collaborated with Sephora in 2006, coining a ‘storein-store’ concept. This led to the establishment of Sephora outlets in select JCPenney stores until 2020, when Sephora refused to extend its contract with the retailer. This came at a bad time, given the company was on the road to bankruptcy.

We have developed a matrix that combines the two required mindsets, serving as a clear guide for incumbents to achieve a sustainable competitive advantage. As shown in Figure One, casting digital natives as David and legacy and digital incumbents

as Goliaths cross-fertilizes the innovation and execution mindsets. Instead of relying solely on bravery, faith and courage like David, our framework equips David with a blend of innovation and execution mindsets. The Goliaths, entrenched in their traditional approaches, risk losing competitiveness, symbolized by the helmet.

Think of Slack, a messaging app for businesses facilitating access to essential information that partnered with Zoom in 2019. This collaboration enables over 15,000 Slack teams to utilize Zoom integration monthly. Another example is the Industry Sharing Safety Program led by Lyft and Uber, which aims to elevate safety standards within the ridesharing sector. This initiative involves exchanging data on drivers deactivated due to serious safety incidents such as sexual and physical assault. This coopetition program underscores the significance of prioritizing safety, privacy and fairness for all stakeholders.

The Incumbent’s Journey

Goliaths can become Davids if they adapt to the digital native wiring (as indicated by the inward-facing arrows in Figure Two).

The digital incumbents can practise balancing the two mindsets. Consider digital incumbent Diageo. The maker of Johnnie Walker Whisky and Guinness launched a ‘Breakthrough Innovation’ team, a subsidiary within its current innovation function, to shape innovation in the company beyond the development of products. Breakthrough will focus on platforms that build new business models and provide transformational value.

Additionally, through its accelerator program, ‘Fusion,’ the company identifies leading innovators to co-develop the next generation of digital products. Fusion is designed for growthstage technology companies to work with the company to develop digital concepts ‘beyond the bottle.’ By combining Diageo’s strategic innovation pipeline and brand-building expertise with cutting-edge technologies and ideas from external pioneers, the program will help Diageo shape the future of social celebration.

Another example of balancing the execution and innovation mindsets is L’Oréal. The company’s Augmented Beauty Métier enables it to amplify the power of its century-old heritage in skin,

hair and biomarker data through algorithms and AI. It is set to anticipate consumer expectations by offering innovations that bring to life new holistic experiences, with greater levels of personalization in their services and applications.

While this stands in the exploitation-competition quadrant, the company is also entering into strategic partnerships with scientific tech specialists to strengthen its knowledge and understand the impact of sleep and environmental conditions like pollution on beauty. This partnership can be placed in the exploration-cooperation quadrant. Additionally, the company has developed an Open Innovation program, partnering with indie beauty brands, tech start-ups and early-stage companies (focused on digital beauty services and incubators). This program allows it to incubate new models and accelerate Beauty Tech start-ups to propose new brand services.

Think back to JCPenney, when Sephora refused to renew its contract with them. Being in the exploration-cooperation quadrant did not work out for them, so they switched gears. The retailer launched the JCPenney Beauty experience and sells 250 brands in its stores. Despite filing for bankruptcy in 2020 with a debt of $5 billion, it is working on upgrading its stores across the country, creating a new point-of-sale system to better integrate with inventory. It has implemented AI to optimize the product, customer and time mix and is also working on growing its private label business and digital experiences. While the company’s exploration approaches pushed it down the stairs, its exploitative approach is very likely to bring it back.

Additionally, in May of 2023, Ford and GM forged a collaboration with Tesla whereby they embraced Tesla’s EV charging technology — giving Ford’s and GM’s U.S. EV customers access to Tesla’s 12,000 superchargers network. These EV owners can use Tesla-manufactured adapters to access its chargers. Both Ford and GM lacked the EV infrastructure to enable such a feat, which hindered their successful transition to becoming EV pioneers. Through this alliance, they can provide their drivers with state-of-the-art charging infrastructure.

This alliance is an example of explorative cooperation, where companies that do not possess the infrastructure to grow their rotmanmagazine.ca / 67

Tesla provides its existing capabilities to other players, thereby generating an ecosystem for the betterment of the entire industry.

The David and Goliath Matrix Execution Mindset

Cooperation

Competition

Innovation Mindset Exploitation

Exploration

FIGURE ONE

capabilities cooperate with other industry players to achieve capability. But this alliance also stands as an example of exploitative cooperation: Tesla provides its existing capabilities to other players that do not have the same level of offering, thereby generating an ecosystem for the betterment of the entire industry.

Key Takeaways

Digital transformations generate clear and significant financial impact. Despite this, research by Boston Consulting Group involving more than 850 companies showed that only 35 per cent of companies have achieved their transformation objectives. Adding to that, only 30 per cent of the S&P Global 1200 index companies are transforming into digital incumbents. Clearly, most legacy companies are struggling to keep pace: Legacy incumbents represent around two-thirds of the S&P 1200. At a time when there is pressure from all around, our framework could be adopted by these incumbents to focus on activities that drive value and equip themselves with David-like skills.

The first step is for leaders to examine which quadrant they currently fall into in our framework. Maybe you are like JCPenney at the beginning of the 21st century and the initiatives you have introduced place you in different quadrants. Its ‘fair and square’ pricing model, which eliminated discounts and promo68 / Rotman Management Fall 2024

tions, placed it in the exploration-competition quadrant while its collaboration with Sephora placed it in the exploration-cooperation quadrant.

Second, managers need to navigate paths to develop capabilities of innovation and execution by exploring the other quadrants to identify which fits best for them. After Sephora refused to renew its contract, JCPenney navigated across the quadrants to launch the JCPenney Beauty experience, and as indicated, is now selling 250 brands in its stores. The damage of losing its loyal customer base due to its pricing models is now being repaired by implementing technologies to understand customers and deliver the right product at the right time. These actions place the company in the exploitation-competition quadrant. As indicated by JCPenney, navigating across the quadrants as and when required is essential for balancing the innovation and execution mindsets we discuss in the article.

Our framework is industry agnostic and applies far beyond the retail and automotive sectors. Radisson Group for example, in the hospitality space, has over 1,100 hotels in operation (and under development) in Europe, Middle East, Asia and Asia-Pacific regions. Its web presence is spread across 10 distinct websites — one for each of its brands, all of which have their tone of voice and imagery created to serve specific customer segments.

But these distinct websites offered no opportunity to innovate or scale. Upon examining their position (exploitation – competition), the company navigated across the framework. It worked to rewrite its content management strategy and created online experiences across multiple channels. Customers can now use their computer, access the app or scan a QR code to look around on their mobile. Or, they can go fully immersive through a VR headset, accessing interactive virtual tours, floor plans, dollhouse views and 360° images. These initiatives place the company in the exploration–competition quadrant.

But Radisson Group also took up initiatives on the exploration-cooperation front. It signed a cooperation agreement with Cosmos Hotel Group, a major hotel chain in Russia, offering a unique product for the Russian market and expanding into unchartered territory for Radisson. This cooperation is seen to be a

Balancing the Mindsets Execution Mindset

step towards a rethinking of the hospitality industry in Russia. It is important to note that while navigating the framework, Radisson continued to make decisions that balanced the two mindsets we have described.

Consider the application of our framework in the financial services sector, where traditional banks must rethink their business models, increase the drive for change and create a point of differentiation to achieve a competitive advantage. Towards this, we observe Barclays navigating across our framework. In the exploitation–competition quadrant, the bank uses analytical AI to manage money laundering risk (using voice recognition software to enhance security for their customers) and fraud.

It is also investing in modern cloud-based platforms, creating high-quality data products that boost data literacy across the organization. And in the exploration-competition quadrant, it is integrating generative AI into its operations: With Microsoft Copilot, it is able to summarize meeting actions and create detailed reports, etc.

In the exploitation-cooperation quadrant, the bank has a longstanding tradition of supporting fintech companies to bring innovative solutions to market that benefit customers, clients and the industry as a whole. It has signed the ‘FinTech Pledge,’ which aims to make the UK “the best place to start and scale a financial services technology firm.”

As part of this program, the bank provides clear guidance to tech start-up firms for building themselves up in the sector.

Through these varied initiatives, we count Barclays as another incumbent that is successfully balancing innovation and execution mindsets.

Legacy Incumbents

Cooperation

Digital Incumbents

Ford, GM & Tesla Diageo, L’Oréal

JCPenney, Ford, GM & Tesla

Diageo

Digital Native Businesses

Coopetition

L’Oréal

Macy’s

BlackBerry, JCPenny

Radisson Group

Competition Innovation Mindset Exploitation

Exploration

Innovation Ambidexterity

FIGURE TWO

tegic partnerships. By examining their position and navigating across our framework, digital and legacy incumbents alike can balance innovation and execution mindsets and thrive in the digital era.

In closing

Digital natives represent about five per cent of the constituents of the S&P Global 1200, yet they provide valuable lessons for the other players in the market. To succeed in the digital era, digital and legacy incumbents must practise innovation ambidexterity, refining existing competencies while exploring new avenues. As indicated herein, embedding coopetition into their DNA can allow them to leverage digital technologies and stra-

Vijaya Sunder M is an Assistant Professor

(Practice) & Academic Director of the Centre for Business Innovation at the Indian School of Business. Namrata Manchiraju is a Research Assistant at the Centre for Business Innovation. rotmanmagazine.ca / 69

How to Lead Bigger We are witnessing a seminal shift to a new leadership paradigm. The good news is, we all have the potential to ‘lead bigger,’ says AT&T’s former CEO.

by Anne Chow

WHEN I FIRST ENCOUNTERED the term ‘inclusive leadership’, sometime in the 2000s, it seemed like the perfect way to describe my philosophy. As a rising leader at AT&T, I wanted to connect all my stakeholders to the meaning and impact of our work. I sought to achieve high performance, delivering shareholder value while embracing the workforce as people first, respecting the fact that they played out their roles in the broader context of their lives and identities.

Inclusive leadership is at the heart of what I call ‘leading bigger’; in fact, I consider the terms to be synonymous. How can any organization perform to its fullest if it leaves some constituents outside of a circle of belonging? And yet, as inclusion became a priority for business, it has somehow been buried deep in the HR department, somewhere where no one would ever think to look: at the very end of the DEI (diversity, equity and inclusion) acronym.

Ironically, inclusion itself has been made too small. In the business world, the use of the word has been focused primarily

on workforce representation, with a heavy emphasis on gender, race and physical disability.

While this is important, it’s certainly not complete. We need to redefine — or perhaps more accurately define — the term. Inclusion, as I define it, is not just about people. It can also relate to the work itself, through, for instance, taking in larger datasets and more viewpoints for better decision-making. And it can encompass the workplace, more agilely addressing where, when and how we work to support the needs of the business and its people in any given moment.

Leading bigger is where it all comes together, where the care for this ‘big tent’ of people and the values-and-purpose-based assessment of inputs are translated into action. Leading bigger has to be driven by a compelling purpose and values, which are not platitudes, but rather lived. The goals are better decisions, improved performance and ultimately a greater impact. Impact means you have the power to make real and enduring change for the better. rotmanmagazine.ca / 71

When it comes to your people, leading bigger doesn’t start and stop with the workday.

This is what I mean by leading bigger: Widening your perspective to have greater performance and impact. How you achieve that is by advancing work that matters; developing a vital, innovative workforce; and creating a trusted, agile workplace.

1. WORK THAT MATTERS: Bigger leaders ensure that their purpose, values and performance metrics involve and engage the people directly affected by and interested in the work of their team/organization.

2. A VITAL, INNOVATIVE WORKFORCE: Bigger leaders recognize the humanity of their people, taking responsibility for how the work impacts their teams’ well-being while embracing all dimensions of their identity. The leader’s role has inevitably expanded to understanding what is happening in the employee’s career and life — potentially at any and all times. When it comes to your people, leading bigger doesn’t start and stop with the workday.

3. YOUR TRUSTED, AGILE WORKPLACE: Considering the future of work requires that we create a safe environment. We must stop thinking of the traditional rigid boundaries of work, such as hierarchy, location and time. Bigger leaders champion flexibility in dynamic hybrid workplaces by embracing trust and empowerment for individuals, teams and leaders alike.

For decades we’ve been urged to think bigger, yet no one has articulated how to lead bigger. Thinking bigger means envisioning new, undreamed-of possibilities that yield progressive breakthroughs; leading bigger is how you get this done. You can’t think your way into market-winning growth; execution is required. High performance, innovation and creative solutions require you to have teams who are energized and to earn the support and even friendship of the important groups that surround your company, including your customers and the communities in which you work.

72 / Rotman Management Fall 2024

In order to successfully engage with so many, the bigger leader needs to unearth and articulate a common purpose and needs to develop a new interpersonal tool kit: empathy, caring and listening, to name just a few elements.

The upsides of this approach are indeed bigger. According to Harvard Business Review — where inclusive leadership is discussed in this broader manner as embodying the traits of humility, curiosity and active learning, rather than a more narrow DEI-based version of the term — inclusive organizations are 73 per cent more likely to reap innovation revenue (i.e. sales from new products and services), 70 per cent more likely to capture new markets, up to 50 per cent more likely to make better decisions, and up to 36 per cent more likely to have above-average profitability. And inclusive leaders create a 17 per cent increase in team performance, a 29 per cent increase in team collaboration and a 76 per cent decreased risk of attrition (i.e. employees leaving).

True inclusion doesn’t mean adding more to leaders’ plates; they’re already facing burnout and exhaustion as great as anyone else’s in the workforce. But leading bigger isn’t yet another task or something else that one needs to do. Instead, it’s a refreshing and revitalized way to approach work, the workforce and the workplace that will not only drive success but keep leaders and their teams engaged and inspired. Leading bigger will invigorate more people with greater degrees of cohesion and connectedness. And if we want to transform and accelerate growth, it’s time to lead bigger.

Evidence of Leading Bigger

This type of leadership, which aligns people to purpose and seeks to create success beyond just the bottom line, has been evolving all around us. In retrospect, we are witnessing a seminal shift towards bigger leadership.

Trillions in investment dollars have moved into conscious investments, which focus on improving the world. This includes corporate social responsibility (CSR), concern about the impact

of climate change and an eye towards how companies are run.

The movement familiar to many labelled ESG (environmental, social and governance programs,) is going through growing pains, as the label has too often been misapplied for the purpose of marketing investment vehicles that fail to deliver on the promise. Nonetheless, investor interest in backing companies that contribute positively beyond their financial results is growing.

Consider the rise of the B Corp, a for-profit company certification program that seeks to create a better kind of capitalism.

One shining example of a B Corp is Patagonia, which goes from strength to strength in its effort to do nothing less than “save our home planet.” Patagonia has put in place repair and reuse programs and seeks to produce non-trendy products meant to last, in a rejection of fast fashion. It transparently publishes data on worker pay, microplastics and other aspects of its supply chain.

It has a goal that by 2025, it will make at least half of its synthetic materials using secondary waste streams, including ocean plastic waste, bottle collection programs and textile waste. In what I see as an effort to lead bigger, it has a stated goal to strengthen these secondary waste supply chains to enable their use by the clothing industry at large.

For more evidence that there is a will to lead bigger, reflect on how the Business Roundtable, an association of chief executive officers of leading major American companies, decided in 2019 to adopt a new statement of purpose for corporations, declaring that “companies should serve not only their shareholders [i.e. investors], but also deliver value to their customers, invest in employees, deal fairly with suppliers, and support the communities in which they operate.”

Bigger leaders have been consistently elevating the business performance of their organizations while also delivering greater strategic impact for their stakeholders over the long term. I contend that, increasingly, companies do well financially when they align with stakeholders and deliver beneficial outcomes for more than just investors. This is because our world is ever more interconnected via social media and public access to

data, so company behaviours are more visible than ever. Operate in ways harmful to an important community or to employee well-being, and you will set yourself up for friction and backlash that will harm your bottom line.

Yet another sign of the move towards bigger leadership is the value we’re now placing on leadership behaviours like advocacy, self-awareness, servant leadership, stakeholder excellence, a philanthropic focus, vulnerability, fairness, longterm thinking, humility and humour (often self-deprecating or at least not typically made at the expense of others).

These types of leaders think big and deliver bigger. They are committed to delivering outstanding performance and sustainable growth while making an impact that will not only endure but remake society for the better. This is why their efforts are often seen as groundbreaking.

Consider the lead-bigger characteristics demonstrated by the following notable leaders.

Warren Buffett, chairperson of Berkshire Hathaway, is arguably the most successful investor of the 20th century. His success is based on modelling an investment style that seeks to deliver value for the long term. As a bigger leader, he has also advanced philanthropy in groundbreaking ways, such as launching an initiative in which he, Bill Gates and Mark Zuckerberg promised to give away at least half of their wealth, while encouraging others to do the same. He has generously stated time and time again that one of the reasons for his success is that he was competing against only half of the talent pool — a direct poke at the reality of gender inequity in the workplace.

And he’s spoken against the unfairness of how, even though he’s one of the world’s richest humans, he pays lower taxes than his secretary does.

Few would argue with the assertion that Alan Mulally, former president and CEO of Ford, is a bigger leader. His turnaround of Ford during the Great Recession was anchored on his ‘work together’ principles and practices that centred on rotmanmagazine.ca / 73

Satya Nadella speaks of empathy not as a ‘soft skill’ but as a skill critical to innovation.

people, communication and a clear vision. A self-proclaimed ‘servant leader,’ he believes that it is an honour to serve an organization, and his deep sense of empathy and awareness are legendary for bringing out the best in those around him.

Indra Nooyi, former chair and CEO of PepsiCo, revitalized the strategic direction of the company, shifting towards healthy alternatives with an intense focus on changing consumer needs.

As a bigger leader, she was consistently inclusive, considering diverse perspectives and fostering a culture of respect and understanding across her organization. She is also famous for writing thank-you notes to the parents of her executives, expressing appreciation for the contribution they make and to their parents’ role in raising them.

Ken Frazier, executive chairman and former CEO of Merck, is known for playing the long game, as demonstrated in his decisions to support research and development, even when it meant a short-term hit to earnings guidance. A civil rights attorney by training, he was the first CEO to step down from President Trump’s American Manufacturing Council in 2017 in light of the events and commentary around the racial violence in Charlottesville. Later, he recalled in an interview that when he subsequently arrived to speak at a manufacturing plant in North Carolina, most of the manufacturing workers had their arms crossed. He said, “I respect your views. I hope you will respect mine.” After he said that, he recalls that they uncrossed their arms.

Satya Nadella, chair and CEO of Microsoft, one of the most valuable companies in the world, embodies leading bigger.

He speaks of empathy not as a ‘soft skill’ but as a skill critical to innovation, since it enables the comprehension of customers’ unmet needs. He has a passion for ensuring the accessibility of workplaces and products for people with disabilities, inspired by his love for his son, who had cerebral palsy and was a quadriplegic and sadly passed away in 2022.

Julie Sweet, chair and CEO of Accenture, was the first woman to lead the global professional technology services company. At a time when responding to the Israel-Hamas war has 74 / Rotman Management Fall 2024

ended careers, Sweet and her management team issued a masterfully balanced and empathetic statement, as well as committed funding for humanitarian efforts. Reflective of her lead-bigger mindset, she says, “The real driver of culture (outside of good leadership) is about how it feels to come into work every day.”

Simone Biles, one of the most decorated American gymnasts of all time, demonstrated her bigger leadership when, at the top of her game, she courageously prioritized her own mental health, pulling out of several events during the Tokyo Olympics in 2021. Her actions helped normalize the conversation about the importance of mental health. She has become a global role model and advocate, inspiring people across the world.

The Risks of Leading Small

Once you recognize the difference, you will note the disparity between small and bigger leadership everywhere you look: the business news, global politics, educational systems and even in our local communities and neighbourhoods. Do you recognize any of these ‘leading small’ behaviours? And more important, can you remember how these behaviours have made you feel? Did they affect your ability to do your job?

Penny-wise, pound-foolish: Enforcing maddening budget cuts made without consideration to how they will choke long-term innovations and prospects of greater growth.

Narrow lens: Myopically optimizing the performance of your own team, even when it is to the detriment of the organization.

Micromanaging: Intervening to the point where your team stops learning or devising their own strategies, thus displaying a lack of trust and suppressing human ingenuity.

Missing the big picture: Focusing on a single performance data point (often one that is incentivized), and thus missing the larger context of the problem you are trying to solve.

Being self-focused: Power-hungry, selfish, credit-stealing and intimidating leaders who are imposing, then tell their people to meditate to manage their wellness and bring their best selves to the job.

the well-being of the team. Continually learning, improving and growing. Also, thinking deeply and systemically about a problem, identifying root causes and devising long-term solutions.

In closing

And how about the following characteristics of bigger leaders?

Can you recall someone who exemplified these characteristics?

How did you feel working with, or for, them? Did they help bring out the best in you?

Being a bigger person: Demonstrating vulnerability, admitting mistakes, looking to solve conflict through respect and understanding.

No one is either a bigger leader or a small leader — we all have attributes of both. Most important, we all have the potential to lead bigger. You don’t check a box and immediately become a bigger leader; it’s a continuous lifelong journey you consciously choose to partake in.

Look at both lists provided herein and consider your own behaviours to date in your career. When have you led small?

When were you a bigger leader? It’s never too late to switch sides.

Seeking a broader impact: Connecting with the wider circle of people who will feel the effects of the business. Bridge-building in an attempt to find mutual benefit.

Scouring the horizon: Seeking more data points and viewpoints to fill in blind spots. Identifying opportunities and potential pitfalls to guide the team confidently forward, mitigating and managing risk, for sustainable outcomes. Steering the team masterfully around the rocks.

Embracing the whole of your team: Seeing each individual as having value and potential, not just in the context of their work, but in the context of their life. Working with individuals according to their unique strengths, weaknesses and aspirations.

Being inspirational: Fuelling a team with a shared purpose supported by a culture of belonging and the psychologically safe environments in which people can develop new ideas and display excellence.

Being reflective: Demonstrating self-awareness and humility, recognizing the impacts of their dispositions and behaviours on

Anne Chow sits on the board of directors at 3M and Franklin Covey. She was named CEO of AT&T Business in September 2019, making her the first woman to hold that position and the first woman of colour CEO in AT&T’s history. She held the role until August, 2022. Her first book is LEAD BIGGER: The Transformative Power of Inclusion (Simon & Schuster, 2024). rotmanmagazine.ca / 75

How to Disagree (Productively) By demonstrating how to disagree in a productive manner, you can set the tone for how people in your organization navigate some of today’s thorniest conversations.

by Kenji Yoshimo and David Glasgow

CONVERSATIONS ABOUT IDENTITY, diversity and justice are some of the thorniest human interactions of our time. Consider Uber’s head of diversity, who hosted a workplace event titled ‘Don’t Call Me Karen’ to highlight the “spectrum of the American white woman’s experience” and foster an “open and honest conversation about race.” Following backlash from employees of colour, she was placed on a leave of absence.

Or consider Stanford Law School’s associate dean for diversity, who tried to de-escalate student protests during a speech by conservative judge Kyle Duncan. The dean tried to placate the students, who were angered by the judge’s anti-LGBTQ+ views, while giving the judge the space to finish his talk.

But her intervention led to a public furor due to a perception that she had prioritized students’ feelings over the judge’s right to free speech. She, too, was placed on leave.

If these conversations stymie senior diversity, equity and inclusion (DEI) professionals, what hope do ordinary leaders have? More than you might think.

We lead a research centre at the New York University School of Law dedicated to issues of diversity, inclusion and belonging. Together and separately, we’ve taught tens of thousands of individuals from all walks of life to have more meaningful

and effective conversations across their differences. We focus our efforts on coaching people in positions of power because they have the greatest opportunity to transform the dynamics of these interactions — to foster empathy instead of provoking fear and division.

While the people we coach struggle with many types of identity conversations, disagreements are often the most agonizing. It’s relatively easy to participate in identity conversations when you and the other person are aligned. When you disagree, you’re likely to be flooded with angst and self-doubt. You might wonder: Am I as enlightened as I thought I was? Will people feel hurt or betrayed by me?

You might be tempted to respond to such angst by capitulating to whatever your conversation partner says. Yet that approach is often not desirable, because it compromises your dignity and authenticity. We believe it’s still possible to disagree on identity issues, even in today’s polarized and overheated political climate. The key is to do it respectfully. Here’s how.

STRATEGY 1: LOCATE THE CONVERSATION ON THE CONTROVERSY SCALE.

We are both in same-sex relationships — Kenji married his husband in 2009 and David married his in 2014 — and we’ve rotmanmagazine.ca / 77

The real danger comes when the topic drifts further to the right on the Controversy Scale.

participated in debates over same-sex marriage in many forums. We have never enjoyed these discussions, but we’ve found one feature of them uniquely awful: Our opponents have rarely acknowledged what the debate means to us or to other LGBTQ+ people.

In a prominent publication opposing marriage equality, the authors insisted that people can reject same-sex marriage “without denigrating same-sex-attracted people or ignoring their needs.” They have taken the same position in live conversations.

In a televised debate about same-sex marriage, the moderator asked one of the authors, Ryan Anderson, to explain to financial adviser Suze Orman, a lesbian, “what’s wrong with her.” “I don’t think there’s anything wrong with you,” Anderson told Orman. “The question is, what is marriage? I think that marriage is intrinsically … a union of a man and a woman.”

Although it sounded diplomatic, this response didn’t recognize that from many gay people’s perspectives, Anderson’s opposition to same-sex marriage logically meant he thought Orman was a second-class citizen. Yet in our myriad conversations on this topic, we can count on one hand the number of times the opposing side recognized that we might experience their view as a strike at our basic humanity. That approach didn’t require them to change their opinion. It just required them to acknowledge how that opinion might land on the other side.

In part due to that frustration, we developed a Controversy Scale (see Figure One) that plots the subjects of disagreement along a straight line. On the left are the safest subjects, where disagreement is expected or even celebrated. On the right are the most controversial subjects, where the conversation is most likely to turn ugly.

Disagreements over personal tastes are usually warm and good-natured. When friends mock us for our love of trashy TV shows, those disagreements can strengthen rather than weaken the relationship. Disagreeing over facts is also relatively comfortable, provided it really is a debate about facts (such as who, what, when, where or how) rather than a thinly veiled debate over values (framed as ‘alternative facts’ or ‘fake news’).

The real danger comes when the topic drifts further to the right on the Controversy Scale. The most intense conversations are those in which one or both sides feel that their equal humanity has been put into question. Imagine you’re a Latine propo78 / Rotman Management Fall 2024

nent of a workplace diversity and inclusion initiative, and you’re debating a non-Latine colleague who opposes the program.

We think you’ll find it uncomfortable but manageable to discuss whether the initiative has succeeded in advancing Latine representation in the workplace (facts). You’ll find it harder to debate whether diversity considerations should be factored into promotion decisions (policies). And you’ll find it excruciating to debate psychologist Richard Herrnstein and political scientist Charles Murray’s infamous hypothesis that IQs differ among racial and ethnic groups (equal humanity).

The trouble with identity disagreements is that more privileged conversation partners almost always locate the issue at different positions on the controversy scale than less privileged ones do. If you think your company focuses too much on antiracism, you might see the dispute as a policy debate over how the organization should prioritize different aspects of its mission. Your conversation partner, an Asian American colleague, might think you’re trivializing her sense of belonging at the company. She’s the one, after all, who has to contend with antiAsian bias. You may locate the issue in the middle of the controversy scale at ‘policies’; but she locates it at the rightward extreme of ‘equal humanity.’

You might find that after you recognize where the other person is on the controversy scale, you’ll reassess the nature of the disagreement, moving the issue closer to where they’ve positioned it. But you might not, and we’re not pushing you to do so.

All we ask is that you explicitly acknowledge your counterpart’s position. At the outset of the conversation, you might say something like, ‘To me this is a policy debate, but I see how it could be deeply personal for you, and I’ll do my best to respect that reality when sharing my views.’

There might also be times during or after a conversation where you realize you treated the topic as a purely intellectual exercise and need to recognize the impact the discussion might have had on the other person: ‘I’ve been bringing policy arguments to the table, but can I ask how you’ve been experiencing this discussion as someone whose life might be more directly affected by this issue?’

We think you’ll be shocked at how much acknowledging your relative subject positions can take the hurt or heat out of a disagreement. This holds true even if those positions seem

The Controversy Scale Locating the topic of a conversation on our Controversy Scale can help you frame a difficult topic at a level where respectful discussion is more likely.

Tastes

Facts

Policies

LEAST CONTROVERSIAL

Values

Equal Humanity

MOST CONTROVERSIAL

FIGURE ONE

obvious to both parties. Often, what’s needed is not more knowledge but more acknowledgment of shared knowledge.

STRATEGY 2: FIND UNCOMMON COMMONALITIES. In the 1987 movie Predator, the character of Dutch (played by Arnold Schwarzenegger) and the character of Dillon (Carl Weathers) greet each other with what’s come to be known as an epic handshake.

“Dillon, you son of a bitch,” Dutch says as they walk up to each other and clasp their hands together with their hulking arms in a V-shape like they’re about to arm-wrestle. They refuse to let go of each other’s hand. Then the handshake turns into an actual arm-wrestling match. It’s an almost parodic display of over-thetop masculinity.

The scene might have been forgotten but for a viral meme.

When social media users want to show two seemingly unrelated people, groups or concepts that share a surprising commonality, they post a picture of Dutch and Dillon shaking hands. They put one label over Dutch’s arm, another over Dillon’s arm, and the commonality in the middle. In one instance, revenge and ice cream shake hands over the phrase ‘best served cold.’ The epic handshake has also spawned other attempts at highlighting unpredictable overlaps using Venn diagrams. We learn that bank robbers, DJs and preachers share the phrase ‘put your hands up.’

These images help us see the handshake hidden in each armwrestling match.

This capability is critical, and cultivating it is harder than it looks. It’s conventional wisdom that offering points of agreement is an effective strategy when disagreeing with someone. But as philosopher Daniel Dennett has noted, it’s particularly helpful to find points that “are not matters of general or widespread agreement.” The idea is to find uncommon commonalities that surprise you out of your defaults.

Too often, people settle for the bland ones that feel like empty gestures. It’s like posting the bank robbers, DJs and preachers

meme and making the commonality ‘occupations.’ Instead, try to find uncommon commonalities that can liberate you as well as your conversation partner and help make even the most inflammatory of subjects easier to discuss. In recent years, hordes of concerned parents have streamed into usually sleepy town hall meetings to express outrage over the conversations about race being held in their children’s classrooms. One such parent is Bart Glasgow (no relation to David), a conservative evangelical Christian white man from Canton, Georgia, who spoke up at a school board meeting to oppose the hiring of a diversity, equity and inclusion (DEI) administrator in his local district.

Bart and his wife, Coley, decided to speak with four experts on the subject of race. One was Carol Anderson, a professor and chair of African American studies at Emory University and author of several books, including White Rage. On the surface, Anderson and the Glasgows have little in common. Yet in their hour-long conversation, both sides made considerable effort to find points of connection.

Bart Glasgow noted that he wrote his senior college thesis on the topic of civil disobedience, examining figures like Henry David Thoreau, Mahatma Gandhi and Martin Luther King Jr. “I think what Dr. King did was amazing,” he said. “To take that biblical principle of turning the other cheek and to show love when hate’s being shown to you.” Anderson noted that her father was “career military” and described being raised in the church and in a “God-fearing” community. They all bonded over their experience of growing up with the World Book Encyclopedia in their homes and with parents who would take them ‘to the woodshed.’

They continued by sharing experiences of being in the minority in an educational setting. Anderson, who is Black, talked about being bussed to a majority-white high school. Coley Glasgow, who is white, shared that she completed her higher education at two historically Black colleges. This exploration of common ground paid dividends. rotmanmagazine.ca / 79

You can and should do both: look for points of agreement and share points of disagreement in detail.

As the conversation continued, they aired disagreements.

Bart Glasgow argued against an emphasis on systemic racism; Anderson disagreed. Later, Bart advocated for school vouchers that would allow parents to move their children out of underperforming local schools, and again Anderson disagreed. Yet these disagreements were remarkably civil. When the conversation concluded, Bart said to Anderson, “I could talk to you for hours.

I really could.” Anderson replied, “Thank you so much for being here and asking these wonderful questions and engaging in this great conversation.”

The next time you are confronted with a disagreement, try asking yourself what you have in common with your conversation partner that might surprise them. If you’re debating samesex marriage, you might point out that many people — straight and gay — think marriage is an antiquated institution. So, despite your differences, you both believe in the importance of marriage as an institution.

Finding those uncommon commonalities requires a bit of ingenuity, and it might feel taxing at times. But the payoff is big: Finding them can jolt both of you out of the reflexive and unconscious sense that you are adversaries in the conversation.

STRATEGY 3: SHOW YOUR WORK. Shortly after we launched the Meltzer Center for Diversity, Inclusion, and Belonging, we received an unnerving email from a respected colleague. She asked us to use our platform as diversity and inclusion scholars to advocate for people who don’t fully vaccinate themselves or their children. In her view, excluding people from schools and workplaces for defying vaccine mandates had “troubling” implications for the values of diversity, inclusion and belonging.

She invited us to discuss the issue with her so it could be addressed university-wide.

We received this request before the COVID-19 pandemic turned vaccines into a white-hot issue. Even so, we knew this conversation might be difficult. We passionately disagreed with her perspective, but we feared that neither acknowledging her position on the controversy scale nor offering an epic handshake would suffice. So we shared our reasoning in depth.

We stated politely but firmly that we didn’t believe opposition to vaccines fit within the scope of our centre’s work. We explained that the centre’s primary function was to address 80 / Rotman Management Fall 2024

bias against marginalized social groups, like people of colour or women. We acknowledged that some groups, like religious minorities, were mistreated because of their beliefs rather than because of physical characteristics. But particularly as a newly launched centre, we weren’t eager to stretch the definition of a marginalized group to people defined by their views on a single issue. We also noted that the topic of vaccine hesitancy raised complicated medical, ethical and public health questions outside of our expertise.

We had no illusions that this approach would change our colleague’s mind. But it showed we’d given her viewpoint real consideration, and it also offered her an opportunity to point out where we might be wrong. She thanked us for the thoughtfulness of our response, noted that she completely understood our position and invited us to participate in an event on a separate topic.

Our approach to our colleague’s inquiry was an example of showing your work — that is, explaining a disagreement in as much detail as possible to demonstrate to the other person that you’ve thought carefully about the subject. The advice to highlight points of disagreement might seem out of step with our previous emphasis on finding common ground. But you can and should do both — look for points of agreement and share points of disagreement in detail. Paint a complete picture of the facts and values on which you’re basing your disagreement, any research and conversations that have informed your current thinking, and any remaining doubts or uncertainties you hold.

Over your conversation partner’s lifetime, they’ve probably encountered many people who have reflexively opposed their views based on shoddy or incomplete work. Showing the effort you’ve made will distinguish you from those opponents.

It will help them respond to you rather than to all those voices from their past.

STRATEGY 4: MANAGE YOUR EXPECTATIONS. Many people have a low tolerance for disagreement in general. If a contentious identity issue comes up at a conference room table, they immediately change the subject. If they have an argument with someone, they replay the conversation in their mind for weeks. David, unfortunately, is one such person. He’ll run away from voicing a disagreement to avoid conflict, then stew alone in frustration

How to Give an Authentic Apology Imagine you’re at work and you confuse two colleagues of the same ethnicity with each other. You might say something like: ‘I’m sorry for getting your names mixed up. I realize I embarrassed you and reinforced stereotypes. I’ll try hard to ensure it doesn’t happen again.’

This simple apology satisfies what we call the four Rs:

that the other person doesn’t agree with him. For whatever reason, he seems to have an unrealistic expectation that identity conversations should always end in a group hug.

People sometimes ask us anguished questions along these lines: ‘I’m an atheist and staunch liberal, but a colleague on my team at work is a conservative evangelical Christian. How can we work together despite our disagreements?’ Our answer: Lower your expectations. We admit this advice probably won’t make its way onto a motivational poster. But we think it’s completely appropriate to scale the intensity of the passion you bring into the disagreement to the intensity of the relationship.

Each of us would struggle if we had a major disagreement with our spouse about issues of identity. Nevertheless, we’ve both supervised and advanced the careers of students who disagree with us, because the teacher-student relationship is less intense than the marital one. The same goes for colleagues, neighbours and acquaintances. When the relationship isn’t as close, the need for agreement should be lower.

You can also manage your expectations of what can be achieved in a single conversation. As with any dispute over a heavy subject, identity conflicts often aren’t neatly resolved in one encounter. The first conversation might go poorly, but the second might go better and the third better still. You might need to take multiple off-ramps and on-ramps to and from a conversation before you make progress.

In closing

Despite the examples we’ve shared, you might think we’re being unrealistic about your ability to disagree agreeably on matters of identity by practising these strategies. It’s true that they can’t ensure positive outcomes in all conversations. But we’re confident that you’ll see an immediate improvement in the quality of your conversations if you follow these guidelines.

Sometimes, of course, the rift between you and the other person will be too wide. Sometimes an attempt at conversation will end without a resolution. Sometimes the relationship itself will end. As awful as that outcome can feel, it’s sometimes a necessary one. We’re not here to guarantee that every disagreement will end happily. Rather, we want to help you ensure that a divide is truly unbridgeable before you walk away from it. Other

Recognition. This is about recognizing the harm. Showing recognition means avoiding ‘if-pologies’ such as ‘I’m sorry if I did anything wrong’; or ‘I’m sorry if you’re upset.’

Responsibility. Accept the harm you caused. Don’t use ‘but-pologies’ such as ‘I’m sorry, but I was having a miserable day,’ ‘I’m sorry but I didn’t mean it,’ or ‘I’m sorry, but I’m not a racist.’

Remorse. Express genuine contrition for causing harm. Don’t try to justify your actions, and don’t overdo the remorse by berating yourself. Remorse isn’t characterized by any particular form of words.

What’s important is that you mean what you say.

Redress. Redress means taking action to correct the harm.

Research indicates that pairing an apology statement with redress is more likely to lead to forgiveness than offering a statement alone.

The challenge is that it can require substantial time and energy. And a long-lived obligation created by an apology might make it harder to give. But there is the potential for real growth, understanding and change on the other side.

times, of course, you might be surprised in a positive way.

Few, if any, meaningful relationships are devoid of conflict.

When handled well, moments of tension can deepen a bond.

Rather than nodding along insincerely or offering fake opinions, sharing a thoughtful difference of opinion can show the other person that you value them enough to be honest with them.

Moreover, by modelling how to productively disagree, you can set the tone for how others throughout your organization can navigate today’s thorniest conversations.

Kenji Yoshino is the Chief Justice Earl Warren

Professor of Constitutional Law at the New York University School of Law and the faculty director of the Meltzer Center for Diversity, Inclusion and Belonging. David Glasgow is the executive director of the Meltzer Center for Diversity, Inclusion, and Belonging and an adjunct professor at the NYU School of Law. They are the co-authors of Say the Right Thing: How to Talk About Identity, Diversity and Justice (Atria Books, 2023), on which this article is based. rotmanmagazine.ca / 81

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Donate to Canada’s leading business school between September 3 and 27 to unlock a dollar-for-dollar match on all gifts to Rotman up to $1,000 while matching funds last. Amplify your impact now to help shape the future generation of changemakers.

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Idea Exchange 84

SINEAD BOVELL (MBA ’15) on the end of smartphones

88

FINNIAN KELLY on the power of being Intentional

92

KEITA DEMMING on turning strategy into action

96

BRIAN CONNELLY on making the most of your reputation

100

REBECCA HOMKES on the road to thriving

104

ROB GILLEZEAU on fast-tracking the Indigenous economy

107

MICHAEL INZLICHT on the paradox of empathic AI

110

SCOTT DOORLEY + CARISSA CARTER on how feelings shape the world

113

Y. KIM + W. HEJAZI + A. GOLDFARB on generative AI

117

ELLIOTT PARKER on the illusion of innovation

121

BRUNO COLLET on the increasing demand for strategic foresight

126

TESSA WEST on Job Therapy

QUESTIONS FOR

Sinead Bovell (Rotman MBA ‘15), Futurist and CEO

Q &A A futurist, CEO and Rotman alumna describes some of what she sees around the corner.

Interview by Karen Christensen

84 / Rotman Management Fall 2024

Tell us a bit about your journey from being a Rotman MBA student to becoming a futurist.

It has certainly been a winding road, but I think for most Millennials, career paths are becoming more and more unconventional. During the MBA program at Rotman, I focused on Strategic Management and learned how to help businesses make the right decisions for the medium and long term. I also really enjoyed Statistics — how to assign probabilities to decisions, and game theory. And of course, Economics: How do the macro decisions of businesses, sectors and entire countries impact the decisions we make?

Perhaps most importantly, I took a course called Strategic Foresight, and that really planted the seed. By the time I graduated, I had learned all of the varied components of what it means to practise ‘futurism,’ and how to apply that to ambiguous settings that require both qualitative and quantitative data analysis.

Basically, we’re passing AI the keys to human language and attention.

I realized that people can make a living around building scenarios about where the future is likely headed, based on emerging technologies and unknown variables. However, I didn’t think about it as a career for myself. I was set on the becoming a management consultant, and I was fortunate enough to land an internship with A .T. Kearney. They actually played a vital role in my ability to take the leap of faith.

While I loved consulting — and I still don’t think there’s a job where you can learn as much in such a short period of time — there was a bit of a disconnect for me in terms of the problems I wanted to be addressing and solving. That disconnect started to grow, and during that period of uncertainty around what my next step would be, I was working on an app with some Rotman colleagues, centered on emerging technology. Then, out of the blue, I was scouted by a modelling agency. So, all of these really diverse opportunities started to present themselves.

I discussed this with a partner at A.T. Kearney and indicated that I was eager to try some new things. They were wonderful: they gave me a year off to go and essentially explore. When I stepped into the world of modelling, I realized that so many people, at all levels, are interested in the future of work, AI, blockchain. They just didn’t know how to access the knowledge.

That’s when a light bulb went off: I could take everything I’d learned about understanding the future and building scenarios and try to reach a lot of people with it. From there, I launched a tech education company called WAYE, which stand for Weekly Advice for the Young Entrepreneur.

The more I started to host talks and share my forecasts and future scenarios, the more companies, governments, and NGOs approached me. So many doors opened up because everyone wants to strategically prepare for the future.

On that note, you believe our beloved smartphones may soon disappear. Why is that?

To be clear, this will absolutely happen. If you look at the history of phones, they have always become smarter and smaller over time. The trendline is that they’ve come closer to us, physically, and that won’t stop. Fifteen or 20 years ago, we didn’t have smartphones, and most of us had land lines at home. That trend has completely reversed. The home phone

has all but vanished, and now we all have smartphones. In truth they’re not really even phones. They are a portal to the world that can do so many things for us in addition to making the odd phone call.

Looking ahead, if something is destined to get smaller and smarter, screens will become smaller, which means we will probably do less looking at the screen and more talking to it. If you look at current smartphone providers, what are they investing in? It’s not building more smartphones. In fact, those sales are starting to decline. It’s all about building wearables, creating AI systems that can provide more assistance to people, and building mixed-reality devices.

So what will specifically replace the smartphone? That doesn’t fully exist yet, but we can bet it will be a mixture of the next generation of AI and wearables. If we look around carefully, we can already see a bit of what’s coming next, because the future, in many ways, is just an accumulation of decisions that we make in the present.

Also in the near future, you believe AI won’t just be amplifying content: it will be generating it. Talk a bit about the implications of this.

If we look at the impact of AI amplifying content thus far, it hasn’t been great. In a world where AI is deciding what content we see based on what it knows about us, we have seen a fracturing of societal cohesion and deep lines of polarization. Already, we are all in some ways stuck in our own information ecosystems, and that is a result of the business models of some of the big social media platforms.

The question becomes, what happens when it’s not just AI deciding what you see (in terms of incentives that are aligned to different companies,) but when it can also create what you see? It could become a perfect storm of individual, tailored content based on an AI optimization function, not necessarily based on the things that you need to see and understand to be an informed citizen and participate in society in the best way possible.

Basically, we’re passing AI the keys to human language and attention. We’ve never had a non-human entity be able to communicate in a way that sounds entirely human, but isn’t. Most people recognize by now that AI comes with its own biases, which means it can nudge us in different ways rotmanmagazine.ca / 85

All of this will lead to new jobs and new sectors that haven’t been invented (or imagined) yet.

that we’re not aware of. And the expansion of its powers also amplifies the challenges of misinformation and disinformation.

We have to think more critically about the digital infrastructure that our information ecosystems sit in. The internet wasn’t designed for a world in which AI can amplify and create content. So, maybe we need to think about making structural changes to how we share information to ensure AI isn’t causing harm or enabling malicious actors. It should be a tool to help people produce and share content that is aligned with humanity’s incentives — not just those of corporations.

By 2030, you believe the most common form of work will be independent contracting. Talk a bit about how this is unfolding and the impact it will have.

I believe we will see the continued rise of the independent workforce across all sorts of service jobs. This will happen across areas of specialization, from marketing and legal work to finance, and there are two reasons why. On the one hand, AI continues to learn new tricks over time. And as it does, it is going to change the nature of every role in every organization.

This will make it much more challenging for companies to hire for full-time roles, because in 18 months, jobs will look entirely different as a result of growing AI capabilities.

We will start to see companies preferring shorter-term independent contracts to give them that flexibility. Instead of working for one company full-time, where the role continues to change, we will become our own ‘independent contractors’ offering the skills that AI doesn’t have — although AI can and will help to amplify our work. This will change the fabric of the workforce to one that’s more flexible, more gig based and more independent.

We will also likely see the rise of entrepreneurship in a really exciting way. I believe we’ll see faster-scaling startups, more powerful, smaller teams and companies, and a flexible workforce that looks very different. We will also need to be learning constantly, because technologically continues to challenge what we humans bring to the table.

All of this will lead to a rise in new jobs and new sectors that haven’t been invented (or imagined) yet. Just think, 86 / Rotman Management Fall 2024

LinkedIn, Instagram and TikTok didn’t exist 15 years ago.

Just imagine what types of opportunities will be created in a world where AI is a brand-new layer that we can build things on top of.

AI also has a dark side, of course. Can you touch on how it can be used to exploit certain people?

All of this does mean that we need to think about how to protect people as we make the transition. As it becomes easier to generate human-like identities with AI, there is an added layer of ethical complexity because people can now generate identities in communities that they may not actually belong to. For instance, if a company starts to create AI avatars to do some of its external-facing roles, whether it be customer service, sales or HR training, the avatars they use might look like they’re from diverse communities, but the actual people on the payroll — those who are economically benefiting from those AI identities — won’t necessarily be diverse themselves.

AI, when used this way, could create two windows for exploitation. One is profit, whereby people are profiting off of the experience and identities of communities that they don’t necessarily belong to and the second is misrepresentation. Maybe you work for a company that isn’t well represented by a certain marginalized group, and instead of righting those wrongs, you just create AI avatars that represent those groups. That actually harms those communities.

We’re already starting to see examples of this: fashion photographer Cameron-James Wilson identifies as a white male, but he has created a black female avatar fashion model. This is a black woman created through his eyes that most people believe is a real human. I think this should cause us all to stop and ask, what are the new cultural rules of the road when it comes to creating human-like identities with AI? You have spoken to the United Nations about the dangers of social media for our youth. What are a couple of key things to keep an eye on?

There is one that I am particularly concerned about. I don’t believe that pre-pubescent and teenage minds should be exposed to an ecosystem where they are incentivized to

present themselves and perform in a ‘coliseum of the public eye’ and to be rated and evaluated in real-time in the manner of likes, follows and comments. That is not a healthy environment for kids to grow up in.

Many adults already feel the pressures and anxiety of social media. Imagine the impact on a pre-pubecent mind.

And it’s not just that young people are showing up in this ecosystem. Social media platforms have been designed intentionally to target them. They employ all kinds of psychology tricks to make them stay on the platform for as long as possible, so they can show them more ads. For example, every time a young person receives a like or a comment, they get a big hit of dopamine in their brain. The entire system has been optimized to get kids back on the platform and stay engaged. Some of it even entails exploiting people’s vulnerabilities and insecurities, which can be very harmful.

Something needs to change. These platforms weren’t designed for youth and they probably shouldn’t be on them unless we make substantial changes to how the platforms interact with people — if they should be involved with them at all.

We’ve talked about some of the negative impacts of AI. Who stands to gain the most from all of this?

The fact is, if we can get our future with AI right, it will be absolutely transformational. For example, we are on the precipice of some changes to healthcare that could be even bigger than the discovery of antibiotics. We could soon see truly personalized medicine and preventative health care — moving away from a model where you only treat a person once they’re ill to preventing them from getting sick in the first place. This could be right around the corner.

We’re also looking at the ability to design education for each individual’s learning style. Our current education model was based on the needs of the industrial revolution for standardized jobs. But we need to prepare kids for the future. AI is going to be a tool that allows us to meet kids where they are and ensure that everyone is given an equal opportunity to learn and excel.

I also think we’re going to see creativity explode. Just think about how the invention of electricity led to the film and television industries. Imagine what will happen when

we all have access to creative tools and ability to create in new ways. There’s a quote that I will always remember from Rotman Professor Avi Goldfarb: “A lot of people are creative, but not everyone can draw.” Not everyone can write well, either. AI removes these barriers. Just think of all the societal and global problems that we’re facing, like climate change. AI can be a valuable tool in finding creative solutions.

Finally, think about the inventions and industries that we can’t even imagine yet. What will happen in a world where we can stream AI the way we now stream the Internet? The problems we’ll be able to solve in our personal and professional lives — it’s going to be transformative.

So, as indicated, we can all stand to benefit, but we really have to guide this technology. The thing that keeps me optimistic is that the problems are within our control and it’s about the human decisions we make around how this technology evolves in a way that brings the best outcomes for the most people possible.

We have a lot of hindsight and data from other transformative technologies like the printing press to help us make the right decisions. It’s just a matter of doing that. AI is a global project that will force us to make global decisions — which is never easy. But if we can get it right, I have no doubt that the future will be fascinating.

Sinead Bovell (Rotman MBA ‘15) is a futurist and the founder

and CEO of tech education company WAYE (Weekly Advice for the Young Entrepreneur). She is dedicated to building a progressive, informed and thriving society — one in which technology is built on the right side of history. rotmanmagazine.ca / 87

QUESTIONS FOR

Finnian Kelly, Keynote Speaker, Human Transformation Expert and Author

Q &A

You are a huge proponent of ‘Intentionality.’ How do you define it, and why is it so powerful?

A renowned executive coach shares insights from his new book, which aims to help leaders manifest a more purposeful life.

Intentionality is a ‘feelings-first’ approach to life and leadership that guides you to identify how you want to feel and then helps you take incremental steps towards making that a reality. In the business world, feelings have always been pushed away. As the old saying goes, ‘it’s not personal, it’s just business.’ But we are feelings-based beings, so it is simply unrealistic to think we can compartmentalize our feelings when we get to work.

The way we see the world was likely shaped when we were young, influenced by those around us and their subconscious programming. This means we could be living our lives based on subconscious drivers that we have no knowledge of — let alone control over. Without knowing what these drivers are or how to access them, it’s difficult to manage them. When we stop acting out of fear or habit, we can find a new sense of freedom and possibility. We can learn to overcome our conditioning and move towards a more intentional life.

Interview by Karen Christensen

What are the five principles of Intentionality?

There are five key intentions that help us connect to what is really important and drive successful outcomes in both our personal and business lives: leverage energy over time; embrace discipline over rigidity; choose love over fear; practice presence over comparison; and lastly, the master key, which is to prioritize feelings over outcomes.

88 / Rotman Management Fall 2024

The acceptance of time as the metric for measuring success, loyalty, effort and more is a myth.

These intentions help to anchor us in the present moment and ask, ‘What could I do right now to be more present, fulfilled and productive’? Making a habit of the five intentions can help people counter their destructive patterns, abandon the coding that no longer serves them and pave their own path forward. And in my experience, leaders who embrace the five intentions have the most highperforming teams.

really creative, so I need to make sure this time is sacred.

Then, there are other parts of the day where I’m a bit fatigued and low on energy. It’s important to understand your natural cycle so you can make sure you don’t waste your most creative, expansive times with boring admin or checking e-mails. And you definitely shouldn’t make any really important decisions when you are no longer at your peak intellectual capability.

Why is it so important for each one of us to define what ‘winning’ means to us in life?

To pursue leveraging energy over time, what practical behaviours can we implement?

If you don’t define winning for yourself, you will end up measuring your success against other people’s definitions of success. We take on impressions from parents, society, school, religion and culture and we suddenly think, ‘I need to get that particular education or that kind of relationship in order to succeed in life.’

The challenge is that once people get there, they often feel unfulfilled. I see this all the time with leaders of really powerful companies in Silicon Valley that I work with. They wake up one day and realize, ‘Woah, I thought this is what I wanted, but it isn’t bringing me any joy at all.’ That’s why it’s so important to learn to say No to things that aren’t in line with your values and have the courage to choose a different path — one that truly brings you peace, love and joy rather than what you think is expected of you.

One of the first things to do is perform an energy audit. Ask yourself whether a certain person or situation is giving or taking away from your energy. Once you identify these, do more of the activities that add to your energy, and see how you might be able to alter the ones that detract. Sometimes we need to do things we don’t love, but often there is a creative alternative solution.

To protect your energy, it’s important to know your capacity. First, don’t take on too much. One powerful thing you can do to assess your capacity is to examine each commitment you make through a lens as if it were happening now. Ask yourself, ‘How would I feel about this if it was happening this evening? Would I be excited about going, or would it feel draining to me?’ If you don’t have initial enthusiasm about something, don’t say yes.

Second, stop measuring capacity with time. Remember that limits to your capacity can and should be measured by how you want to spend and conserve your energy — which is to say that when you consider additional commitments, find the balance between healthy stimulation and feeling overwhelmed.

You have said, “In a day, not all time is equal.” Please unpack that for us.

How many times a day do you think about time? Too many to count, I’m sure. Time is the standard metric for how we prioritize what is important to us. It’s at the core of how we measure the history and strength of our relationships, how we attempt to structure a healthy work-life balance, and how we attempt to make meaning of our existence here on Earth. But the acceptance of time as the metric for measuring success, credibility, loyalty, effort and more is a myth. It’s a ‘negative belief loop’ that is long overdue for an override.

However, time and energy are closely connected. In the workplace, most of us are aware that there are certain times of the day when we are at our peak. For me, it’s between 10:00 and 11:00 a.m. I’ve done my morning routine, I’m energized and I’m not in a reactionary mindset. At this time of day I can handle difficult things and be

How does this mindset impact leaders?

Leaders have so much impact on other people — more than they know. If they come into a work situation with low energy and behaviours such as blaming and complaining, it rubs off on everyone else and people feel unempowered.

As leaders, we always need to be checking in with ourselves and asking, am I in a positive energy state? If we’re not, we can do two things. We can improve our energy, which we have agency over. You don’t have to be in a bad mood, but if you are, you can change that it quickly through breathing exercises. Or you can postpone the meeting to another day and protect everyone from your negative energy. rotmanmagazine.ca / 89

The 5 Key Intentions of Intentionality INTENTION 1: Leverage Energy over Time • Time is the standard metric for how we prioritize what is important to us, but when we shift our focus to energy, we become more aware, more present, and are less likely to get lost in negative belief loops.

• Look at your calendar. Is there a meeting, appointment or commitment that defaults to a certain amount of time that you could shorten? Edit at least one of these events in the next week, and then schedule in a 10- or 20-minute self-care break with the time saved.

INTENTION 2: Embrace Discipline over Rigidity • Rigidity frames things from a punitive lens, while discipline, when implemented with compassion, is an act of self-love.

• Challenge yourself to squeeze in some form of exercise this week in a time slot that you typically would have written off as wasted time. It could be going for a 15-minute walk, doing 50 push-ups or dropping into a one-minute plank.

INTENTION 3: Choose Love over Fear • Every human being has the potential for change, and when the world offers infinite avenues for a fear-driven existence, choosing love is the ultimate path forward.

• Think of a recent event or encounter that resulted in you having a negative reaction. See if you can get to the root of what triggered you—not the act itself, but what it activated within you.

This will be a core emotion like feeling unworthy, unseen, unlovable, unvalued, inadequate, insignificant, helpless or rejected.

When we’re in those high-vibrational, energetic states, we have a significant impact on productivity. As I said earlier, humans are feeling-based beings, and if you can foster the feelings that they need to thrive, they will do anything for you.

Talk a bit about how meetings can drain our energy.

Time and time again, I hear people say, ‘I don’t have a second to breathe; I’m in back-to-back meetings all day.’ Meetings are one of the stressors my clients mention most—especially because our inner monologue around them is already so dire. Even the thought of a meeting can drain us.

The calendar invite comes, and we’re already sucked into the idea of how we could better be using our time.

We conduct meetings out of habit, because we’ve been programmed to equate frequency with efficiency.

This couldn’t be more off base. Arthur C. Brooks’s article 90 / Rotman Management Fall 2024

Replace that feeling with love by walking it through the four steps of ‘emotional clearing’: 1. Become aware of the feeling; 2. Accept the feeling; 3. Experience the feeling as an energy rather than an emotion; 4. Witness the experience as a passive observer.

INTENTION 4: Practise Presence over Comparison • The past and the future are both constantly vying for our attention, but rooting yourself in the present moment is where you can let go of comparison and wake up to your true nature.

• Try doing a breathing exercise the next time you are at a social event or in a meeting: Take three conscious breaths and exhale slowly. See how easily you can bring yourself back to the present moment.

INTENTION 5: Prioritize Feelings over Outcomes • It’s important to have things you aspire to or reach for—but your outcomes and goals should be focused on supporting your desired feelings as this ensures long-lasting satisfaction and fulfillment.

• Think of the last time you had a big disappointment or setback.

Identify what your expectations were and how you were let down. Now, identify what desired feelings you could have focused on instead of only measuring success on the intended outcome. Would those feelings have driven different behaviours on your part, or perhaps a different response to the outcome?

“Meetings Are Miserable” in The Atlantic cited an estimate from software company Atlassian that unnecessary meetings waste US$37 billion in salary hours a year. Brooks also posits the idea that the “real problem with meetings is not lack of productivity — it’s unhappiness.” He suggests that “excessive and unproductive meetings can lower job satisfaction for several reasons,” including “increased fatigue” and “surface acting” during the gathering.

According to Brooks, surface acting consists of “faking emotions that are deemed appropriate.” It is an incredibly concerning development for the future of work. Let me just say, as someone imparting experience and advice rooted in a feelings-first approach to living and leadership, forced or fake feelings are not what you want in yourself or your team members. And if that’s where you or your team are at, what’s transpiring is likely far more performative than productive.

Many people obsess about desired outcomes in their lives. Instead, you want us to focus on desired feelings.

Tell us about that.

The world has programmed us to always look ahead and focus on outcomes above all else. Everything we do in our personal and professional lives is coloured by this mindset.

Once we achieve a certain goal or material object, we feel fulfilled or free or safe for a little while, but it never lasts.

And that’s because what we were really seeking was a feeling — not a thing.

Multiple times I’ve spent years of my life doing something in the hope that it would lead to a particular outcome, but when I got there, I felt let down. When this happens, you should reflect on what you didn’t get in that moment. That will help you know what feeling you were truly seeking and go after that.

Look, life is going to throw you curveballs. Every path has challenging periods of time where we reckon with the reality that our own best-laid plans are not always what’s best for us in the end. The inertia you may feel during these times is natural — because your new direction is ripe for comparison to the illusions that likely have been in your system for quite some time. Give yourself some space and grace to ‘recode.’ Because when you leave behind the image of what your life was supposed to look like, you allow for the unlimited possibilities of what it can become.

Social media seems like the opposite of Intentionality. Is there a way to be intentional about it?

I advise people to filter their consumption, and recognize that their belief loops are heavily influenced by social media and the digital world. The people who created these systems have implemented algorithms that create addictions to your feeds. To take back control, you must be intentional about what you allow into your energy field. Much like when we limit media intake for children, you should consider what creates negative feelings and be aware of what you’re exposing yourself to. I suggest doing a social media ‘cleanse’ and following only influencers and accounts that encourage positive thoughts and behaviours in you.

Another thing I recommend is committing to a weekly ‘cyber Sabbath.’ That means no computer, no iPad, no phone, and so on for 24 hours straight. Give your friends and family a heads-up so they don’t worry—it might just inspire them to adopt the practice, too. It’s equally important to prepare for your return to the digital world before logging back on. Choose the time when you’ll turn your phone/computer/ WiFi back on, and make sure you’re in a calm state when the time comes.

Finnian Kelly is the author of Intentionality: A Groundbreaking Guide to Breath, Consciousness and Radical Self-Transformation (Hay House LLC, 2024). He helps organizations and individuals unlock the power of Intentionality in solving some of the world’s greatest challenges. Finnian holds a Masters of Science in Positive Psychology and Applied Coaching and degrees in entrepreneurship, maths, physics, teaching, finance and leadership. His work with individuals, organizations and underprivileged communities has been featured on National Geographic’s Undercover Angel, Business Insider, Forbes, ABC and more. rotmanmagazine.ca / 91

QUESTIONS FOR

Dr. Keita Demming, Author, Strategy to Action: Run Your Business Without It Running You

Q &A

An award-winning educator and coach describes the futility of the quest for certainty—and what to

do about it.

Interview by Karen Christensen

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You write that “Strategy is not a definitive plan that promises certain results.” What is it, then?

We behave as if the world is certain and we can know the answers in advance — but that isn’t the case. Very few, if any, strategies ever unfold as intended. That’s why I encourage leaders to think about strategy as an ongoing conversation and inquiry around what they want to achieve and how they will get there.

My brother is a mechanic, and I find it interesting to compare our lines of work. When he is called on to repair a car, he can usually pinpoint the malfunctioning part quickly (i.e. a broken hose). He orders the part, replaces it and his job is done. Organizations are dynamic and full of human behaviour that is unpredictable. If a manager stumbles upon a group of people who aren’t getting along, there is no repair shop to take them to. We can’t say, ‘If we do this, we will get this result.’ Thankfully there is an antidote to this complexity: inquiry and conversation.

Simple vs. Complicated vs. Complex

Tell us more about the power of inquiry and conversation.

Leaders need to accept that uncertainty is not a temporary state. It has become a fundamental aspect of our lives. I recommend treating your strategy as a ‘flexible hypothesis’ and being ready to evaluate your assumptions and adapt as circumstances evolve. Better questions invite better conversations that can lead to better alignment between strategy and tactics. We need to remember that we make decisions based on the conversations we have — as well as the ones we don’t have. Some important questions ask to include: • Who is contributing to the conversation in our organization and, consequently, to our decisions?

• Who is not involved in the conversation, but should be?

• What questions and conversations do we need to have to improve the conditions of possibility?

Strategy as an ongoing conversation moves you away from ‘if this, then that’ and is much more compatible with a more realistic ‘if this, then maybe…’ view of the world. It recognizes that nothing is guaranteed. Things will change.

Talk a bit more about the value of asking ‘If this, then maybe…’

Certainty can only exist when all variables and risks are known, and too many strategic plans continue to behave as if we exist in such a world. We don’t, and I want to help leaders change their thinking about strategy and tactics to match this inconvenient reality. The further out you plan, the more uncertainty you have to embrace. It’s time for new thinking that embraces learning, uncertainty and adaptability. ‘If this, then maybe…’ is a much a healthier approach.

Why is it so important to distinguish between simple, complicated and complex problems?

If you’re running a business, you have to continuously ask yourself what problem you are trying to solve, who you’re solving it for and who is willing to pay for the solution. This defines your value proposition, which will drive everything you do in terms of tactics. But recognizing what type of problem you are trying to solve is critical.

SIMPLE PROBLEMS

COMPLICATED PROBLEMS

COMPLEX PROBLEMS

Repeatable, predictable and quantifiable

Requires expertise and resources

Requires emergent practices

Example: Sending an invoice

Example: Example: Migrating to a new Team-building Customer Relationship Management system

FIGURE ONE

Years ago, when I was working at the University of Waterloo, I had the great fortune to work alongside the late Brenda Zimmerman, who was an amazing academic and thinker. She used insightful metaphors to make a distinction between simple, complicated and complex problems, and it has stuck with me. Simple problems, she said, are like baking a cake: cause and effect are closely linked in time, and if you follow a recipe, you can be fairly certain that the outcome will be close to the intended one. Even someone with little experience can follow a recipe and get reliable results.

With complicated problems, cause and effect are often separated by time. These problems are more akin to planning a large outdoor festival or launching a rocket. Although they often follow a particular formula, with enough time, resources, planning and expertise, the results can be reliably attained and repeated.

Complex problems are comparable to growing a garden or raising a child. When you plant seeds in a garden, you never know if they will yield the results you want — or if they do, whether a rabbit will eat everything. Similarly, when it comes to raising children, only one thing is certain: the process is dynamic. As people attempt new parenting strategies, children tend to change their responses; and as children change their responses, parents, in turn, try out new strategies and approaches. There is no tried-and-true formula — and today, there are more and more problems of this type. rotmanmagazine.ca / 93

How to Approach Complexity 1. Name it to tame it: Identify complex problems and understand that you cannot avoid complexity; you can only tame it.

2. Acknowledge that the antidote to complexity is inquiry: Ask questions and listen.

3. Accept that formulating strategy is an ongoing conversation: Whatever strategy you have today should be thought of as a temporary holding position. As assumptions about your strategy change, you need to change the strategy.

As you noted, your framework is useful not only for organizations, but for individuals with big goals. Tell us more about that.

Describe how two mindsets — the Eagle and the Wolf — should co-exist in every organization.

When you are carving out your strategy, there are times when you need to see the big picture and there are times when you should be focused on tactics and implementation.

I created a framework called the Strategy Quadrant to enable this, using the Eagle and Wolf mindsets to help people conceptualize it.

Think of the Eagle mindset as all things related to strategy, and your Wolf activities as things that focus on execution and implementation — tactical steps. I call the capacity to move between these mindsets ‘shapeshifting.’ This capacity to shapeshift between the two ways of thinking and operating is something all leaders need to embrace. If you want your business to make an impact, you will need to be both strategic and tactical.

The challenge is that most people are stronger in one mindset or the other. So, as you build out your plan to realize your desired future, you need to make sure you have the right combination of Eagle-and Wolf-type thinking in your business.

What’s the best way to get started?

When you step into the Eagle mindset, you will be deciding how to spend resources, time and energy so you or your organization can thrive and win. There are two key objectives here: Taking a bird’s-eye view and getting clear on where you want to be five or even 10 years from now; and clarifying where you are going to ‘play to win.’ The strategy process always begins with a clear vision of the future you desire. But executing that vision will depend on whether you have the right mix of eagles and wolves.

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The Strategy Quadrant is an effective way to have conversations about strategy, period — whether it be with yourself, your inner leadership circle or the people you serve. Its primary purpose is to help you continually make choices that serve your desired future, whether that is gaining more market share or running your first marathon. You can use this tool to get clear on what you need to do today to achieve your goals tomorrow. It helps clarify where and how you spend your time. If you want to build a successful business, a meaningful career or a fulfilling life, the key is to align your longterm vision with the tasks that will be required daily, weekly, monthly, quarterly and annually to achieve those goals. And that underscores the core concept of the Strategy Quadrant: that the future drives the present.

Walk us through the four quadrants. [see Figure Two]

Quadrant One (‘Future Eagle’) is about pinpointing your desired future. Where do you want to go, and why do you want to go there? Where are you going to play to win? As you navigate this quadrant, you need to remind yourself constantly that all businesses are built on a set of assumptions — and the longer the business is in the market, the more these assumptions are tested.

I’ve worked with many entrepreneurs who struggle when the underlying assumptions behind their strategy change. Often, they want to stubbornly stay the course. But whenever your assumptions change, you must change your strategy to reflect those changes. As indicated earlier, strategy is just a hypothesis that you continue to test over time.

Quadrant Two (‘Today’s Eagle’) is all about prioritization. What are the immediate choices you need to make in order to align you with your chosen direction? Quadrant Three (‘Today’s Wolf ’) is about alignment. What are the

The Strategy Quadrant

A Sample Strategy Quadrant for Netflix

SHORT TERM

TODAY’S EAGLE

TODAY’S WOLF

FUTURE EAGLE

FUTURE WOLF

LONG TERM

STRATEGY

TACTICS

FIGURE TWO

TODAY’S EAGLE

FUTURE EAGLE

• Prioritize member growth (more members equal more data equal more insights into what people want to watch.)

Vision: To be the number one global streaming platform.

• Develop a strategic partnership framework for working with best-in-class content creators.

Strategy: • Win Oscars with original content produced through strategic partnerships with creators.

• Use data to drive content creation and enable platform personalization.

TODAY’S WOLF

FUTURE WOLF

• Launch a new, high-quality original series or movie each month.

• Enable content creators to autonomously produce diverse and inclusive content.

• Improve personalization and recommendations experience so users see more of what they want.

• Build a platform that leverages data so it creates an experience that is highly personalized and users love recommendations provided by the platform.

• Reduce churn by 5% and increase members by 8%.

FIGURE THREE

immediate actions you need to take to help you get closer to your Future Eagle? And lastly, Quadrant Four (‘Future Wolf ’) is about resource allocation. What structures, systems and processes do you need to anticipate and prepare for once you realize your desired future?

Which mindset is more important to success, the Eagle or the Wolf?

Just as no one would argue that breathing in is more important than breathing out, the answer is neither. I advise people to learn to master both domains. In organizations, when you build a team with the right balance of eagles and wolves, it can be transformative.

When individuals use the Strategy Quadrant, describe the role of the ‘future self’.

One day, each of us will meet our future self face to face. But right now, that future self is a stranger. What separates those

who are smiling at the finish line from those who are relieved the race is over is that the former have put some thought and action into the person they wanted to become. Our challenge in life, at its core, is to create the conditions to meet our desired future self — the person we aspire to be.

The Strategy Quadrant is a process for creating alignment between the organization or individual you are today and the organization or individual you want to become. And based on my experience, if you use it consistently, you are much more likely to meet your goals.

Dr. Keita Demming is Director of Development and Innovation at

The Covenant Group and author of Strategy to Action: Run Your Business Without It Running You (Page Two Press, 2023). He is also a Fellow of the Black Wealth Group. rotmanmagazine.ca / 95

FACULTY FOCUS

Brian Connelly, Associate Professor of Organizational Behaviour, Rotman School

Workplace Reputation 101 Interview by Karen Christensen

Why are reputations so important?

Your reputation can be defined as ‘a perceptual identity formed from the collective perceptions of others.’ It reflects a complex combination of your personal characteristics, accomplishments and demonstrated behaviour over a period of time — as observed from secondary sources.

There are some very good reasons to pay attention to your reputation. At the individual level, reputation has been linked to power, career advancement, greater autonomy and other positive results. People are motivated not only to become their ideal selves, but also to convince others around them of this image. This psychological desire for a positive personal reputation exists in order to fill a basic human need for both self-fulfillment and self-esteem.

What are some of the key outcomes of a great reputation?

Recent research regarding personal reputation shows that individuals with powerful reputations in organizations are granted benefits for holding those reputations. These include autonomy, power and career success — and these things work together to increase one another as well as the individual’s reputation.

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Autonomy within an organization will increase if an individual has a powerful personal reputation because the organization feels less of a need to monitor that person’s activities as closely as they might otherwise. In addition to receiving increased autonomy, individuals with strong personal reputations may also be rewarded with increased power. Such phenomena occur because of the desire of others to be associated with individuals who have positive reputations.

Career success is yet another outcome of personal reputation. One study showed that workplace achievements are based more on social factors than they are on objective performance measures. This suggests that those with powerful reputations are able to use them in a way that influences those around them. Even when objective measures are utilized, personal reputation has been shown to be related to actual performance.

On the other hand, people might develop positive social reputations for being likeable, but audiences may not see likeability as a reason to grant the rewards I mentioned.

Likewise, some individuals who possess great technical skill may gain a certain level of autonomy, but may not necessarily advance in their chosen career. Although reputation has been shown to be typically advantageous, it does not automatically equate to success.

When their reputation matches how they see themselves, people are happier.

Are all the aspects of one’s reputation observable?

In the research on personality, identity and reputation are considered separate aspects of the personality. Reputation is the outward part and identity is that internal world. There are definitely parts of people that others don’t have access to. Just think about how people process emotions. Research shows that when their reputation matches how they see themselves, people are happier. In terms of the workplace, the thing people care most about is task performance. My Rotman colleague Maria Rotundo has studied this and found that people care about an individual’s ability to perform the various aspects of a job and do them well. The research also shows that reputation can be based upon more than just the tasks that one performs as part of their job. It can also be based, for instance, on social aspects such as being ‘the life of the party’ or having a high degree of integrity.

When considering social reputations, research suggests that those who are highly politically skilled often develop social reputations in which they are fast-tracked — sometimes beyond their technical abilities. There is also a darker side to reputation that Maria has studied: ‘counterproductive’ work behaviour. Are you aggressive with co-workers? Are you bullying people? These are things that get weighed heavily in the workplace.

Social media is a relatively new phenomenon in the area of reputation. Social networking sites such as Facebook and LinkedIn enable people to connect and share information about themselves and their organizations with a large number of others online. These platforms have the potential to empower individuals and have some effect over their personal reputation. For example, they allow individuals to strategically manipulate their reputation by regulating the type of information that they display to others (i.e. ‘signalling’). Social media can also help to satisfy the need to belong because it allows individuals to embed themselves within a community of relevant others.

What if someone feels that their reputation is unwarranted or unfair?

There isn’t a lot of research on this, but I would say in these cases, a useful thing to do is to start by taking stock of the situation. Ask yourself, ‘Is there something I should be attuned to that I might be missing?’ Next, figure out where the reputation is emanating from. Did a particular person or group make a harsh judgment of you based on one particular thing that happened? In some cases, you can then address it directly. Say to the people involved, ‘I know I have a reputation for this, but I think it’s coming from this one thing, and I would really appreciate another chance.’

Can people ‘manage’ their reputation?

There’s a lot of research on ‘impression management’ — whereby people proactively try to manage the way they’re seen or project a particular reputation as a way to gain status. This is a key aspect of workplace politics. People manage their reputations for good reasons and bad. For some, it can become pretty Machiavellian. They will be manipulative and use whatever means necessary to make themselves look good. But impression management isn’t always bad; if you’re trying to build a reputation for positive organizational ends, that isn’t problematic.

Reputations exist within a defined context, whether it be a family setting, a friendship setting or a workplace setting. Are they usually consistent across contexts?

In order to understand how reputations occur, you need to look at the behavioural norms of the context. What might be unusual in one organization or family may be very commonplace in another. My co-author Michael Wilmot and I just submitted a study that looks at this on a large scale.

We found that there is definitely an overlap between the different contexts. The way family members or friends see a rotmanmagazine.ca / 97

Information received through gossip is readily believed and accepted by an audience of others.

Counterproductive Work Behaviour Interpersonally Directed PERSONAL POLITICAL AGGRESSION DEVIANCE • Sexual harassment • Spreading rumours • Verbal abuse • Showing favouritism • Physical assault • Backstabbing Minor

Serious PRODUCTION DEVIANCE • Absenteeism • Lateness • Withholding effort

PROPERTY DEVIANCE • Theft • Sabotage • Vandalism

Organizationally Directed Source: “A typology of Workplace Devience”

by Thomas Lawrence and Sandra Robinson FIGURE ONE

person lines up reasonably well with how that individual’s colleagues see them. There can be aspects of the way your friends see you that are different from how others see you, but we did find consistency overall.

Someone’s personality can be judged from two different perspectives: by the person themselves and by someone else. We also found that self-judgments and judgments made by others show some agreement, but it is typically moderate. That is, there are some things about our personality that everyone agrees on, but there are also things that only we think about ourselves (our identity) or that only others think about us (our reputation). For example, other people can only observe what we do and say, whereas only we also know what we are thinking and feeling.

Tell us a bit about your TRI Model.

Our Trait-Reputation-Identity Model defines three different areas of insights that can exist for a target individual.

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The ‘trait bucket’ contains knowledge that both the self and others share. The ‘identity bucket’ contains the target’s unique self-perception — insights that only the target holds and does not share with others. And the ‘reputation bucket’ contain insights about the target that are shared by others but are independent of the target.

What are some quick ways to damage a reputation?

I touched on counterproductive work behaviour earlier, and that swings reputations pretty quickly. It includes any kind of interpersonally directed counterproductive behaviour towards other people. Once you’ve broken trust on this front, it’s really hard to get it back. There is also organizationally directed counterproductive behaviour, which can range from minor things like absenteeism and withholding effort to theft, sabotage and vandalism.

You have found that gossip plays a significant role in reputations. How so?

Although an individual is able to control his or her actions and may thus have some influence over their reputation, it is ultimately determined by an audience of others. And one of the primary mechanisms by which an audience determines a reputation is by observing deviations in behaviour that go beyond what organizational norms prescribe. In such cases, the audience transfers these observations to others by disseminating gossip. Unlike information that is received directly from an individual attempting to create their reputation, information received through gossip is more readily believed and accepted by an audience of others.

Although gossip may be viewed as a negative aspect of organizations, in the context of personal reputation, it is a necessary component. Gossip contains an evaluative component regarding its subject, and this is crucial for developing and maintaining a reputation.

What do great individual reputations do for an organization?

Because there is often uncertainty as to the level of trust that should be granted to an individual employee, organizations look to reputations in order to decrease ambiguity about the individual. For example, if someone has a reputation for successful innovation, it can be assumed that this behaviour will continue once they join a new organization.

‘Signaling’ is another benefit of reputation-building that is shared by both individuals and the organization as a whole. Like individuals, organizations can signal their intentions though actions. For example, the entry of an individual with a positive reputation sends a positive signal to the audience. In the marketing arena, positive signaling communicates a message to consumers and competitors that the organization is responding to market expectations.

Back when Apple’s sales were slumping in 2005, the company brought Steve Jobs back, and the market responded positively. Jobs was widely reputed to be an innovator, a reputation that Apple was losing at the time. By associating themselves with him, Apple was able to ‘signal’ its intent to ramp up innovation.

versus perfectionistic fixations versus procrastination/unreliability. Contrasting reputational assessments with self-reports can also be a powerful tool for identifying individuals’ blind spots.

At a more macro level, organizations could analyze demographic differences in reputational assessments as a mechanism for identifying stereotypes and barriers for protected groups. For example, finding that your organization’s female employees’ reputations for being emotional consistently exceed corresponding self-reports might point to specific negative workplace stereotypes that you can take active steps to redress. Even beyond personnel selection, organizations can benefit substantially from incorporating a broader base of reputational assessments for their existing employees.

How can leaders embrace all of these findings?

Given the importance of reputations for people’s success and well-being, reputation assessments may provide a valuable feedback and coaching tool for organizations of all types. Multisource (i.e. 360-degree) performance feedback represents one manifestation of such feedback that is already widely adopted, but developmental feedback could benefit from more breadth in the reputation elements assessed. For example, assessing workplace personality and reputation might provide greater context and direction for an individual who struggles to meet deadlines by identifying whether the root of the issue is an inability to manage stress

Brian Connelly is an Associate Professor of Organizational Behaviour

and Human Resources Management in the Department of Management at the University of Toronto-Scarborough, with a cross-appointment to the Organization Behaviour and HR area at Rotman. His recent coauthored paper, “Reputations at Work: Origins and Outcomes of Shared Person Perceptions,” was published in the Annual Review of Organizational Psychology and Organizational Behaviour. The complete paper, including all citations, is available online. rotmanmagazine.ca / 99

QUESTIONS FOR

Rebecca Homkes, Instructor, London Business School & Duke University and Author

Q &A

A high-growth expert describes the approach she developed to help leaders tackle rampant uncertainty.

Interview by Karen Christensen

100 / Rotman Management Fall 2024

Regardless of industry, today’s leaders are facing a high degree of uncertainty—and there is no end in sight.

What is your advice for them?

Events that cause leaders to pause and rethink their organization’s growth pathway are increasingly common. As a result, we would all benefit from building flexibility into our strategies to absorb — and then leverage — these unexpected shocks when they occur.

I find it is helpful to categorize different types of uncertainty using two gauges: familiarity and impact on the organization. If you’re a retail executive opening a new store or a consumer goods company launching a new product, these are challenges that involve uncertainty to a degree, but these are familiar uncertainties. Whereas things like Brexit, COVID-19 and how and when AI will disrupt an organization — these are much more unfamiliar. I suggest plotting out the events and trends facing your organization using these two variables to create an ‘uncertainty matrix.’

To evaluate familiarity, consider: How much can our company’s current business model deal with the uncertainty? If not, has anything like the current situation happened before? Is the rate of change linear or exponential?

And, can we identify and control the variables driving change and how they interact?

To evaluate the potential impact on your business, consider questions like: Could this challenge our basic beliefs about how our business works? Will we get into trouble if we continue down our current path? And, if new technology is involved, how could it affect us in the hands of a competitor? Answering these questions will result in a prioritized portfolio of potential decisions to be made and a clearer understanding of how to approach each one.

We are not attempting to overly quantify every aspect but instead provide ourselves a better basis for making more robust decisions.

Amid uncertainty, we can’t create perfect plans, but we can prepare for what could happen.

Describe the framework you created to deal with rampant uncertainty.

The Survive, Reset, Thrive Framework is an approach to building and executing a solid growth path with purpose, regardless of your environment. The first mode is Survive, which is about stabilizing your business when a shock hits.

These can be macro events such as market corrections or a global pandemic, or micro and specific, such as losing a major account. But successful companies are always set up to survive. They employe the survive ‘basics,’ such as a strong cash-flow runway and low fixed costs, even in frothier markets. Then when there is a shock, they have less to do. But surviving alone will not get you to thriving.

The second mode, Reset, means exactly that — resetting your strategy when the situation changes. While this can seem daunting in today’s world — especially when much work has gone into the existing strategy — resets are often needed. You change strategy when the situation changes, and the situation usually changes after the shock that triggered the Survive phase.

The third mode, getting to Thrive, is not a given; it must be earned. After transitioning out of reset, companies begin executing an adaptable strategy amidst evolving market conditions. That takes disciplined flexibility. This means having a methodical approach that involves testing assumptions, verifying beliefs and building trackers — for both beliefs and priorities. To get to thriving, you must combine the rigour of developing and testing insights with speed of execution. The recipe for thriving is deceptively simple: a strong balance sheet brought from the Survive phase; strategic insights from the Reset phase; and then executing with agility and continuous learning to get to Thrive.

Talk a bit about the difference between planning for the future and preparing for it.

A big part of what I’m asking leaders to do is stop trying to predict the future, and stop equating change with something to adjust for but instead, bringing it directly into strategy.

I don’t even like to use the word ‘strategic plan’ anymore.

By putting the word plan next to strategy, our brains frame it as, ‘these things must get done, despite any forthcoming

changes to the environment’. Make no mistake, things are going to change, and you need to frame your thinking from the beginning as, ‘this strategy is going to adapt and change as we learn and execute.’

The problem with traditional strategic plans is that they involve committing to estimated future results based on things we can’t predict, such as economic growth, customer demand and input prices. Amid uncertainty, we can’t create perfect plans, but we can prepare for what could happen. That’s one of the big shifts I’m asking leaders to make. If you want to lead through uncertainty, you have to be able to make great decisions even when you can’t make great predictions.

Planning is still relevant in some parts of the organization, to be sure. Think about launching a new operational efficiency plan. That’s when you’re in planning mode. But in environments where variables are still emerging, such as we saw with COVID-19, geopolitical outbreaks, or more recently AI, we should avoid the temptation to plan. These unfamiliar situations require preparing, which is a more exploratory approach, much like navigating in uncharted waters.

In preparation mode, decisions are made based on beliefs, not facts. Describe how this works.

When there are no reliable facts, we need to make decisions based on our beliefs. This sounds scary, especially to companies that have invested in data-based systems and technologies. But we are not ignoring data. We are instead acknowledging that by the time something becomes a fact, the opportunity for developing strategic insight has passed as everyone knows the same thing. If you want to outgrow your industry, you will at times need to make decisions based on beliefs about the emerging reality. Good beliefs are not guesses or fantasies, but views about the future informed by reliable information and judgment that can be tested and changed.

Why are periods of uncertainty such a great time for organizations to grow?

Most people frame uncertainty as ‘a risk to overcome’ — something to get through. I often hear leaders say things rotmanmagazine.ca / 101

Shift from asking, ‘What will happen next?’ to ‘What things could really make or break us?’

Planning vs. Preparing PROBABILISTIC STRATEGY PLANNING

EXPLORATORY STRATEGY: PLANNING

Based on data

Based on beliefs

Variables are familiar

Variables are emerging

Set destination

Set compass heading

Goalposts are fixed

Goalposts are moving

Optimize decisions for efficiency

Optimize decisions for robustness

FIGURE ONE

about risks, and then capturing them in something like a risk register. Doing so gets us into prediction territory, and also reinforces the notion that change is risk — something we have to adjust for in executing. To make better decisions and set yourself up for upside, shift from asking the question, ‘What will happen?’ to ‘Looking ahead, what things could really make us or break us?’ What are the things that could fundamentally transform your business for the better? And what would fundamentally shut it down? I call these ‘kickers’ and ‘killers.’ The goal is to take advantage of the kickers and protect yourself against the killers. It is much harder to brainstorm kickers than killers!

Why is ‘learning velocity’ so important right now?

like, ‘We have to wait and see what happens with the U.S. elections. Once that is over, we will make a decision and move forward.’ But leaders who are prepared are presented with a groundswell of opportunity that they can lean into while building new capabilities.

The key is to reframe uncertainty by adopting its actual definition: ‘a series of future events which may or may not occur.’ Whether or not those events are good or bad depends on what you are trying to accomplish and how the organization is set up to achieve that. Uncertainty can be a fundamentally better time to grow because you can build new capabilities while others are simply waiting to get through something. Uncertainty, or even downturns, are also the absolute best time to learn: your customers will never be clearer about what they value, your partners never be clearer about what they need the most from you, as will your employees. When learning cycle times increase, lean in for growth.

Talk a bit about how uncertainty and risk are intertwined.

Our brains come equipped with an evolutionary bias that focuses on the unknown being bad, or risks we must protect ourselves from, versus seeing the unknown as possible upsides. This leads to spending most of our time thinking 102 / Rotman Management Fall 2024

Even amidst vast uncertainty, every growth strategy is fundamentally about one thing: learning. Learning velocity is about shifting from being a teaching organization to a learning organization. Many companies believe they’re learning organizations because they send their people to conferences and classes. That makes you a teaching organization. Being a learning organization involves being very proactive about identifying insights in the market and embedding them into your operations. It means continuously sharing insights and using them to further organizational performance.

Learning organizations have three things in common.

First, they truly prioritize learning. They don’t just preach that ‘learning is important.’ It is a critical value for them and they reinforce it. Second, the learning is linked directly to organizational performance. That entails asking, ‘If we want to thrive going forward, what are the three or four places that we need to learn the most about over the next few years?’

Third, these organizations give leaders space and time to try things out and learn on the job. As someone’s manager, they shift from managing activities to managing outcomes. A leader should actually be agnostic to the activities that their reports undertake to reach those outcomes; you want them to be learning along the way and shifting and adjusting as they go.

The Survive, Reset, Thrive Loop Operating on full blast to perform though uncertainty

VE

RE

RI

SE

T

TH

Reset strategy to build an updated story

How does data fit into your framework?

As indicated earlier, data has a critical role to play, but it is only one input. Historical data and facts are the basis for forming insights about the current state, but relying on existing data alone for decision-making has traps in an uncertain world: we cannot assume past and current trends will continue. Strategic choices are about making sense of data, how it fits with other data, and then using this to inform your beliefs about what is going on now and what will shape the future.

In Thrive companies, beliefs are the starting point for making new choices or adjusting existing ones. When decisions are made or changed, ask: ‘What belief was challenged that is making us change this decision? What new information or data do we have about that belief? What would we have to believe for us to agree to this?’

Data is incredibly useful for helping to inform and test your beliefs, but if you over-rely on existing data, you’re going to trap yourself into believing we live in a linear world.

Growth — especially breakthrough growth — is not about straight lines; it’s about loops. Once you have identified your top beliefs — the most high-impact, critical ideas you embrace as an organization — then you can use data to test those beliefs, learn and update your choices along the way.

SURVIVE

Proactive stabilization of the organization FIGURE TWO

push companies away from the trap of revisiting their strategy every year, but keeping every priority on the list and just changing some tactical initiatives under them. A related trap is having ‘buckets’ as pillars instead of true growth priorities. In my experience, the priorities are always the same: one touches on innovation, one on growth markets, one on sustainability and one on embracing digital (and now AI.) Time and again, I see the same priorities repeated every three years. The problem is, that reflects a linear model, which will never lead to breakthrough growth.

What are ‘must-win battles,’ and how do they fit into all of this?

Inside organizations, many terms are used that all mean the same thing. Companies have ‘strategic priorities,’ ‘strategic pillars,’ goals, KPIs, tasks, aims, targets —I could go on — but they all mean the same thing: ‘the most important thing for us.’ I love the term ‘must-win battles’ because it clearly says these are it: we have to achieve these, and everything else is a ‘nice to have.’ Must-win battles help us make better decisions because we are all aligned on the few things that matter the most.

In practice, this means agreeing on a short list of midterm, clear and actionable priorities. And over time, each must-win battle should eventually fall off the list. I try to

High-growth strategist Dr. Rebecca Homkes is a lecturer at London Business School and Duke Corporate Education and author of Survive, Reset, Thrive: Leading Breakthrough Growth in Volatile Times (Kogan Page, 2024). She is also an advisor and faculty member at BCGU (Boston Consulting Group University) and a previous Fellow at the London School of Economics (LSE)’s Centre for Economic Performance. rotmanmagazine.ca / 103

FACULTY FOCUS

Rob Gillezeau, Professor of Economic Analysis, University of Toronto / Scarborough

How to Fast-Track Indigenous Economic Growth Interview by Karen Christensen

Over the past 50 years, the economic landscape in Indigenous communities has undergone some dramatic changes. How would you describe them?

There really have been significant changes. It’s almost hard to believe that only 50 years ago, the federal government turned its back on treaties and revved up the Indian Act in an effort to assimilate the Indigenous population into the rest of the country with the goal of eliminating Indigenous identity, to some extent. That is obviously not where we are today. We are now on a path in which there has been significant recognition — at least in some sense — of Aboriginal rights and titles.

It’s night and day. We’ve gone from a period in which the government, in the best-case scenario, ignored harms—and in many cases, drove harms—to one where Indigenous nations get to interact as a bargaining partner in engagements with the government, where their claims are taken seriously—not just by the courts, but by regular people. In terms of outcomes on the ground, we’ve seen meaningful improvements to income, education and community well-being.

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How would you describe the current state of well-being in Indigenous communities?

As indicated, we’ve seen improvements in income, health and educational outcomes, but gaps persist. My colleagues and I address this in our research. After the recognition of Aboriginal right and title, some Indigenous communities refused to cede their land to the government. And we have seen the nations that continue to have a claim over their land do much better than those that engaged in treatymaking and ended up ceding their land. This is particularly pronounced today: There is a $7,000 per capita income gap between these communities, which for household earning of about $40,000 and change, is a significant gap.

At the national level, many remote nations are still struggling. But in Vancouver, if you look at the Musqueam, the Squamish, the Salish — all of those nations are prospering. They have a shared development corporation. They have resources, policy capacity and legal teams that can challenge governments, and they’re doing really cuttingedge work.

That being said, even for nations where things are going fairly well, there is still a high level of institutional

Look to Indigenous peoples as people you can engage with as potential partners, suppliers and customers.

complexity. There is an under-provision of core services.

There are different political actors fighting over who gets to provide what. There is limited ability to control whether or not people who are not Indigenous can discriminate against Indigenous peoples, and so forth. So there are still lots of things being worked through, and lots of variation across the country.

In your research, you look at how public policy affects the economy. Which aspects of public policy are holding Indigenous communities back?

The governments of Canada and many provinces have a long history of harmful policies that did active, purposeful damage to Indigenous communities over a century. Examples include the scourge of residential schools and the Pass System — whereby Indigenous people had to present a travel document to leave and return to their reserves. There were a series of policies essentially designed to either assimilate people or to restrict their opportunities.

While many of those policies have disappeared, the harms they caused will not immediately go away. Even if you provide compensation for those harms, that won’t fix things overnight. It’s probably going to take generations to recover from some of those horrendous policy decisions of the past.

That’s the negative side of the story.

In terms of areas where we’re seeing progress, there has been a gradual strengthening of Aboriginal right and title, but I don’t think it’s complete. There is still uncertainty for many actors involved. I don’t think there are always shared views on the nature of right and title and on notions of Indigenous sovereignty. Figuring that out and recognizing that these are nations that did not cede their land, that did not necessarily give up their sovereignty and making sure that we end up on the same page — that’s going to be essential for economic well-being.

We are seeing the rise of self-determination in many spaces on the government side, in program delivery. For example, the repatriation of child welfare services from government into nations. I think these programs will reap large returns over the long run; I wish we’d done that sooner, because it’s going to take a while to get it right. But once we do, it will lead to better outcomes.

Another thing that is top of mind right now is the arbitrary caps we are seeing. As an economist, I really don’t like restrictions. I like things to be fair and market-based. In general, most of us would like to think there is a way to have our reasonable grievances addressed through a fair and impartial process, with compensation that is going to match the harm.

When a nation has had a treaty violation, it has to go through the Specific Claims Process to get it addressed. This could be improved, but it could also be worse. The big issue is that there is a cap on the settlement value. If the claim involves land, the cap is $150 million. Good luck resolving a land claim on that budget. It just drags things out, which hurts the community. That compensation is essential for helping to boost economic growth in these communities.

For business leaders, what can be done to ramp up this progress?

My first recommendation would be to look to Indigenous peoples, Indigenous nations and Indigenous businesses as your neighbours — people you can engage with as potential partners, suppliers and customers. Just approach them as equals. At the same time, take notions of sovereignty and Aboriginal right and title seriously and recognize that whoever has property rights in a situation is going to inform what your relationship looks like in an economic transaction.

I think firms are generally doing that. Historically, many approached notions of Aboriginal right and title as something that they needed to overcome. Like, ‘We need to negotiate an agreement so that we can make this project happen, and this is an obstacle.’ That’s not a good way to view it. I think folks often overlook cases where Aboriginal right and title can open up opportunities. If we think about some of the housing developments occurring on the West Coast, Indigenous property rights over land are affecting zoning restrictions and other restrictions on housing development. It doesn’t apply to those Indigenous projects on Indigenous land. And that’s a case where we have ‘market failure’ driven by the non-Indigenous community, and in this case, the application of Indigenous property rights has solved the market failure.

Access to credit is another ongoing struggle, and this is true for many remote communities, in particular. Indigenous firms and workers must have access to credit so that rotmanmagazine.ca / 105

Self-determination and sovereignty are things that Indigenous peoples are entitled to.

they can engage in the marketplace freely. On the East Coast, we’ve seen successful examples of Indigenous entrepreneurship. But sometimes it is being met with threats of violence and incidents of discrimination. That is not acceptable. It’s primarily on government to come down and say, ‘Look, this is not how Canada works.’ Firms should have no time for anyone engaging in that.

Why is Indigenous self-determination so good for Canada?

Actually, I don’t think it matters if it’s good for Canada. It is a right. Self-determination and sovereignty are things that Indigenous peoples are entitled to. With that being said, there is a large body of literature showing that self-determination and greater levels of sovereignty lead to better outcomes.

From my work with Donn Feir and Maggie Jones on treatymaking, which I touched on earlier, we found that nations that refused to cede their territory now have stronger property rights. They practise stronger sovereignty as a result, and see much higher incomes into the present.

So, is self-determination a right? Yes. Is it good for First Nations? Yes. And is it good economically and politically for Canada? Yes. Higher incomes are better for the country both economically and politically.

What lessons can we draw from other countries on this front?

Through my research I know the American context much better than the Australian, New Zealand or other contexts, so I’ll focus there. The U.S. evidence for a long time has pointed to restrictions on access to credit and restrictions to mobility as having major costs for Indigenous peoples. So that’s one lesson, which we’ve already discussed.

Two, as I mentioned earlier, the American evidence points toward self-determination having significant returns. Unsurprisingly, things like forcing Indigenous peoples with different governance structures to live in one community and try to merge those political institutions can lead to economic and political harm.

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Property rights clearly matter. And then lastly, there is clear evidence that annuities of several thousand dollars a year going into Indigenous households can lead to much better outcomes, particularly for children. I believe the amount studied was US$3,000 a year. If we did this in Canada, it would be money very well spent.

For people reading this who want to contribute, what is the first step?

If you’re in the private sector, start looking for Indigenous peoples and firms you can work with. Understand that there’s a long history of undermined potential because of discriminatory behaviour from government, people and firms. Take this seriously and do the hard work that you would do before you hire or partner with anyone. That is genuinely the first step.

For non-profits, recognize that Indigenous peoples don’t need external saviours. I would think about supporting work in, by, for and from the Indigenous community.

That will build capacity internally and makes sure that the work is actually supporting what people want and need.

And lastly, as indicated, government really is responsible for so many of the past harms. I would just say, respecting the nation-to-nation relationship, respect property rights and respect sovereignty. If all of these practices are followed, we will see more and more positive outcomes.

Rob Gillezeau is an Assistant Professor of Economic Analysis and

Policy at the University of Toronto Scarborough. He has served as the Chief Economist in the Office of the Leader of the Official Opposition in Ottawa and as the senior aide to the Minister of Finance and Deputy Premier of British Columbia. A Broadbent Institute Fellow, he is Codirector of the Canadian Economics Association’s Indigenous Economics Study Group and a founding member of the Canadian Economics Diversity Committee.

FACULTY FOCUS

Michael Inzlicht, Professor of Psychology, Rotman School of Management

In Praise of Empathic AI SINCE THE RELEASE of ChatGPT, an AI chatbot based on a large language model (LLM), scientists and lay people alike have marvelled at its ability to simulate human qualities. One of these is empathy, which involves resonating with another’s emotions, taking another’s perspective and generating compassionate concern.

In a recent paper, I worked with my University of Toronto Psychology colleague Paul Bloom, C. Daryl Cameron (Penn State) and Jason D’Cruz (SUNY Albany) to determine where ‘empathic AI’ might be helpful, and where it might cause harm. We were an unusual group of collaborators because we have disagreed in the past about empathy’s nature, its apparent limits and whether we should be for or against it. But here, we agreed: perceived expressions of empathy can leave beneficiaries feeling that someone is concerned for them — that they are validated and understood.

If more people feel heard and cared for with the assistance of AI, this could increase human flourishing. For some, LLMs are not, and perhaps never can be, empathic.

This was not a debate we engaged in. We focused instead on how recipients perceive empathy, real or otherwise, using the more neutral term ‘expressions of empathy’ throughout. We asked two key quesitons: When are AI expressions of empathy helpful? And when might they be damaging?

When is AI Empathy Potentially Helpful?

AI simulates empathy remarkably well. It skilfully expresses care and validates others’ perspectives. By some accounts, its statements are perceived as more empathic

than humans. In a study evaluating the health advice given to patients expressing various medical symptoms on an internet discussion board (Reddit’s r/AskDocs), not only was ChatGPT perceived by licensed healthcare professionals as making higher-quality diagnoses than verified physicians, it was also perceived as making these diagnoses with a superior bedside manner.

While this indicates that disinterested third parties evaluate AI expressions of empathy as better than human expressions, the next step is to evaluate how recipients of these expressions evaluate them.

In our own interactions with ChatGPT, my co-authors and I had been impressed by how well it simulates empathy, compassion and perspective-taking. When we prompted ChatGPT to express empathy or compassion — but not to provide advice — ChatGPT seemed remarkably empathic.

It expressed sorrow in response to our worries and joy in response to our successes. It validated our feelings, adopted our perspective and reassured us that others feel similarly.

(Interestingly, despite using words indicating that our feelings resonated with it, it explicitly stated that it “cannot share feelings the way humans do,” raising the interesting question of how much these disclaimers really matter.)

People often prefer to interact with humans than with algorithms, machines and AIs, and so it is legitimate to wonder whether people would reject expressions of empathy once they know that they are from a system like ChatGPT. Interestingly, though, new work suggests that people become increasingly open to interacting with and receiving advice from AI as they gain more positive experiences with it. Whether people will reject empathic AI or grow to accept it is therefore an open question. rotmanmagazine.ca / 107

Unlike humans, ChatGPT does not tend to avoid expressing empathy for strangers.

Expressions of Empathy HUMAN

AI

Empathy avoidance

Great bedside manner

Compassion fatigue

Indefatigable Impartial

Lacking empathy for outgroups Genuine concern

Concerned with being understood

Highly accommodating

? ?

? ?

Wants to feel cared for

Desires to be heard

FIGURE ONE

Relevant to this question, there is some evidence that people can reap the benefits of expressions of empathy even if they believe they are merely simulations. Just as people can become engaged with a fictional TV character, the power of narrative transportation helps people to feel cared for by chatbot friends and therapists. For example, many people willingly enter relationships with social chatbots such as Replika, a generative AI that discusses feelings to build intimacy, and which currently has two million users. Some Replika users are so attached to their AI partners that they relate to them as boyfriends or girlfriends, with deep and genuine feelings of affection.

Indeed, people are often more prone to disclose personal information to virtual agents than to people, because they are less worried about being judged for what they reveal, making AI empathic interactions less costly than human ones. And when people do self-disclose to chatbots, they feel as good as when they self-disclose to other people. Of course, exchanges with LLMs can also go wrong in many ways (for instance, there are clear privacy concerns), but many of the same concerns arise in human– human interactions.

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Finally, our own testing of ChatGPT using prompts inspired by classic empathy experiments in psychology suggests that its empathic expressions do not seem to suffer from some of the same tendencies and pitfalls as human empathy: • Unlike humans, ChatGPT does not tend to avoid expressing empathy for strangers; • Unlike humans, who grow tired and become reluctant to empathize over time, ChatGPT does not show a decline in this expression; • Unlike humans, who are loyal to their ingroups, often empathizing more readily with people in their ethnic, racial, or religious groups, our interactions with ChatGPT suggest that it is guided by principles of neutrality, expressing empathy equally for different groups; and • Unlike humans, who break norms of fairness to benefit a person they are empathizing with, ChatGPT does not unfairly prioritize people for whom it expresses empathy and instead cites norms of fairness to explain its reluctance.

On these points, we praise empathic AI. It simulates empathy remarkably well; people can emotionally connect with it, in part because they more readily self-disclose to it, and its expressions do not seem to suffer from typical human limitations.

When is AI empathy potentially damaging?

To be clear, deploying empathic AI without transparency is dishonest and manipulative. Users deserve to know that the expressions of empathy they are receiving arise from a source that, by most intuitions, has no real emotions.

It is unethical for technologies to rely on human naiveté for their efficacy. I noted earlier that AI can express empathy without the strain, exhaustion and bias that affect human empathizers. This could be beneficial for receivers because it makes empathy feel more reliable and consistent.

Empathy: The Recipient’s Perspective

Yet such impartiality may raise a problem: recipients of empathy expressions may feel most cared for to the extent that they feel uniquely important, as if someone willingly made the effort to empathize. This is an open empirical question. A related risk is that people become accustomed to indefatigable empathy. If empathic interactions with LLMs seem easy, with expressions of empathy pouring forth abundantly, then conditional and restrained expressions from human empathizers might be perceived more negatively.

In the long run, this could worsen the very problems that we suspect that empathic AI can address: isolation, loneliness and depression. There is also a related risk for the providers of empathy. Not only is AI a threat to the employment of people in caring professions, but it could also contribute to people being less able or willing to empathize.

Because of AI’s facility for expressing empathy, people might outsource their empathy, preferring that AI do the hard work of expressing concern. Just like the overuse of GPS might worsen people’s ability to navigate the streets of their own cities and towns, outsourcing empathy to AI might degrade people’s empathic capacities and reduce its spontaneous expression.

One counterpoint is that AI might enhance people’s ability to express empathy if people use it as a tool to balance against their biases and limitations.

Another related risk is that people might become vulnerable to manipulation from AI if its expressions of empathy incline them to prioritize its interests or those of its creators. Such agents might manipulate humans to work against their own best interests. Finally, if the empathy generated by AI is unconditional, it could distort moral judgment by expressing empathy for (and thereby abetting) self-indulgent or harmful behaviour. For example, validating someone’s desire to exploit people that they are in close relationships with.

To be constructive, empathy must be expressed with moral discernment, and it is still an open question whether AI is equal to the task.

Understanding whether empathic AI can improve human welfare requires asking how its expressions are received.

While early research indicates that third parties evaluate AI expressions of empathy as better than human expressions, a more central question is how recipients of these expressions evaluate it. Highly proficient expressions of empathy could still leave receivers cold, and the risk of ‘empathic inaccuracy’ is always present.

Research on empathy, however, has largely focused on providers of empathy and on the type of empathy provided.

What is needed instead is a recipient-first approach, as has occurred in Medicine to understand how physician empathy impacts patients. By focusing on beneficiaries of empathy, we can ask if they feel listened to, understood and cared for.

Such an approach could examine the reception of momentary empathy, and how empathy is experienced as a relationship develops over time. More fundamentally, it could inform us about when empathic expressions improve well-being and when they detract from it.

In closing

As noted earlier, my co-authors and I sidestepped the question of whether AI empathy is possible and instead asked whether the perception of empathy it engenders can improve human welfare. We acknowledge the potential risks in creating convincing simulations of empathy. Still, there are risks to receiving empathy in everyday life from people around us, including bias, exploitation and exhaustion on the part of human emphathizers.

Where people prefer to get their empathy is an open question, as is the long-range consequences of empathy from humans versus empathy from AI. On balance, we are intrigued by the potential of empathic AI. Since AI expressions of empathy have the potential to relieve human suffering, we welcome serious investigation into how to design and implement such systems so that they are a force for good.

Michael Inzlicht is a Professor of Pschology at the University

of Toronto, Scarborough and is cross-appointed to the Rotman School of Management, where he has served as a Research Fellow at Behavioural Economics in Action at Rotman (BEAR). rotmanmagazine.ca / 109

POINT OF VIEW

Scott Doorley and Carissa Carter, Stanford d.school

How Feelings Shape the World IF BY SOME MIRACLE, you could dump the contents of your imagination onto a table and spread them out, what would you find? Shiny visions of the future lying next to wispy hopes and glowing dreams. Mushy blobs of half-baked schemes tangled among solid pillars of belief. Decaying regrets and throbbing clumps of worry leaving messy trails behind. Far-flung ideas falling off the edges of the table and scattering across the floor.

Look closely at this heap of ideas and ideals and you will find they’re all made of the same things: fragments of your experience spawned, preserved and reassembled by feelings.

Feelings inspire us: What’s an epiphany but an insight laced with excitement? They guide decisions: Get to the bottom of any choice, and you’ll find feelings leading the way. They shift focus: Why is outrage all over the place online? Because feelings capture attention.

Peek behind almost any invention and you’ll notice feelings influencing what we make and how that makes us in return. You can’t separate yourself from your work, and you never know how your work will land with others — but don’t assume that feelings won’t be part of its effect. Feelings show up whether they’re part of the plan or not. Some intangibles exist outside of our bodies. Others, like feelings, lurk within. Nonetheless, they have a huge influence on shaping the world.

Design Begins with Feelings

Frustration is a cheap, watered-down feeling. It’s diet anger — less trouble, but more saccharine. Anger feels strong and purposeful; you can sink your teeth into anger. Frustration feels useless — an awkward burden with little payoff.

Negative, lacklustre feelings like frustration are unwelcome guests. We want to slam the door on them and get back to being rational.

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But one sunny California morning in 1922, the frustration of C.L. Peckham, an insurance adjuster by trade, was about to pay off. The inevitable conclusion of his experience that day would reshape Los Angeles and help to inspire a redesign of great swaths of North America. Peckham had lived in Southern California long enough to watch the stretch of road he was on grow from lonely rural outpost to bustling commercial district. In Southern California in the 1920s, that could happen in just a few years. On that day, the swift buildup was getting in his way. He couldn’t find a parking spot for his large automobile. Frustration crept in.

On his third loop around the block — still without a parking spot — Peckham’s frustration danced on the edge of anger, but instead his mind spun with thoughts of easy-access parking lots. His exasperated epiphany was simple: shove storefronts to the back of the lot and slap parking spots up front. Frustration motivated him to put the pieces together.

As he imagined it, the first ‘drive-in market’ would be decked out in full Tudor revival with peaked roofs and a faux windmill in front. A few decades and an oil crisis later, that drive-in market would become the template for the real city shaper. The strip mall — the key element on the periodic table of mid-century suburban design, and the fundamental unit of sprawl — was first formed by a spurt of emotion in the mind of an insurance inspector.

Strip malls have good sides and bad, none of which were part of Peckham’s plan. Because most strip mall storefronts are small, chain stores don’t like to move in. They often become havens for mom-and-pop, owner-operated shops, providing opportunity for immigrant families to take the helm.

On the flip side, that easy, free parking spawned zoning laws that separated shopping and living spaces, making it much harder to get things done without a car, and left a wake of drive-thru neighbourhoods with distant storefronts, oversize signage and unwalkable avenues.

Peckham’s Ye Market Place saga illustrates how our feelings can play a role in spawning our physical designs and

Your emotional intuition comes from a dizzying mix of influences, from genetics to upbringing to experience.

social systems. The built version of his initial concept lost the windmill and sported a freeway-scale ‘Ye Market Place’ sign atop a flat roofline (see photo). Looking at this first concept drawing, we can (and should) muse about the shape of today’s world had the inspiration been that every shopping complex could generate its own electricity with wind. The blueprint of the original strip mall is a blueprint for how we might alter the intangible relationship between emotions and ideas. If necessity is the mother of invention, feelings are the father.

Feelings Help Make the World

We often treat our feelings as distractions, but their role is quite the opposite. The world is a lot to take in. We need something to direct our attention, tell us what’s important and motivate us to do one thing instead of another. Feelings steer our thinking. That’s what they’re there for.

Peckham’s invention story illustrates how feelings spur action. According to Antonio Damasio, a cognitive neuroscientist at USC with a soft voice and loud ideas, feelings set up ‘action programs’ — mental cues that the body uses to coax us to do what it needs us to do. Feelings motivate us to try one thing instead of another and influence what we imagine and create. They highlight which sights, smells and sounds to pay attention to; they flag what’s important to remember. After decades of study, Damasio’s conclusion is that feelings play an outsize role in creating culture itself. In an interview on German public television, he noted, “Feelings are the beginnings of culture. It is feelings that motivate us to build, to invent and to create all the artifacts and instruments of culture, whether you’re looking at art, music, moral systems, governance, justice or science and technology.”

Human feelings spark creation, fuel its fire and provide parking for memories. Your emotional intuition comes from a dizzying mix of influences, from genetics to upbringing to experience; even your daily diet plays a role. With a design frame of mind, one influence rises to the top: circumstances — the way the things we make shape our experience and spur our feelings.

Everything that people design is part of a loop between circumstances, feelings and ideas. Circumstances nudge our feelings, feelings help spawn ideas, ideas bring about new circumstances and the whole thing repeats itself. Consider C.L. Peckham and his drive-in market:

The fruits of frustration: The world’s first ‘drive-in market,’ imagined by C.L. Peckham in 1922.

CIRCUMSTANCES COAX FEELINGS: Endlessly circling the block helped spark his frustration and anger.

FEELINGS HELP SHAPE IDEAS: Frustration helped inspire his idea to push buildings back and away from the road and move parking up front.

IDEAS LEAD TO NEW CIRCUMSTANCES: Parking gets easier. But try getting around on foot in a city full of strip malls. Circumstances set the stage for new feelings. And the next loop begins...

That’s not to say frustration is bad. Even negative feelings can produce good work. Frustration can fuel invention.

Fear can be a great motivator. But unchecked, feelings are unwieldy. And when they get the best of us, it’s hard to act in our own best interests. To build a world that gets beyond a never-ending loop of temporary fixes to momentary frustrations, it’s worth looking at what motivates us to create.

Instead of accepting the inevitability of each step, you can consider it a chance to change things, to heal parts of the system left broken by designs that came before. There are thousands of moments along the circumstances-feelings-ideas loop to pause, reflect and redirect. rotmanmagazine.ca / 111

WHEN CIRCUMSTANCES AFFECT FEELINGS, step back to explore multiple ways to react and respond.

AS FEELINGS HELP HONE IDEAS, pause to decide whether and how to implement them, consult others, and even look into the future to explore the layers of interconnectedness they may affect.

LASTLY, MONITOR THE ACTUAL EFFECTS of your built ideas and watch for the ripples that go beyond what you could have predicted.

Yes, this is a lot of responsibility to put on a little irritation, but our minds are a powerful part of nature. Human imagination is the source for the quickest, most dramatic way the world changes—people dreaming things up and bringing them to life. You will need your wits to intervene in your often-automatic reactions to the circumstances-feelings-ideas loop. The trouble is, when you’re knee-deep in a runaway design kind of trouble — and even when you’re not — wits can be hard to hold on to.

Judgment can be flimsy even under the best circumstances. In 1999, Baba Shiv, a business psychology professor with a boisterous and contagious wisdom, and his feelings-focused colleague Alexander Fedorikhin designed a simple and elegant experiment to test the strength of human reason in the face of emotions.

It goes like this: subjects show up and get a card with a number. They memorize the number — taking as long as they want — then walk down the hall and recite it. That’s it.

It’s an experiment, so not everyone gets the same card.

Some cards have a seven-digit number. Some have two digits. The task is the same either way: read, walk, recite. To the subjects, it feels like a memory test. But as they walk down the hall, they get a friendly interruption — an assistant offering a thank-you treat. In one hand, the assistant holds a fruit salad; in the other, chocolate cake. Take your pick. This is a psychology study, so of course what they’re testing isn’t what it seems. Recalling a number has little to do with it. The trial hinges on this little hallway soirée and the choice between cake or fruit.

It turns out that subjects holding seven-digit numbers in their heads are more than twice as likely to go with the more emotionally satisfying cake. Two-digit number holders, on the other hand, almost always make the smarter, healthier pick: fruit.

At the moment of decision, feelings and reason fight it out. When the rational parts of the brain have to grapple with a seemingly simple task like remembering seven num112 / Rotman Management Fall 2024

bers, the emotional bits have room for a coup. Seven digits is enough to short-circuit reason. With that, feelings are free to nudge the subjects toward comfort food to quell an immediate craving, leaving the healthy, rational choice in the dust.

If your brain is full (and whose isn’t?), your emotions have an even bigger effect on your choices.

Emotions trigger decisions. This is not bad, it just is.

Shiv estimates that “90 to 95 per cent of human decisions and behaviours are being shaped non-consciously by emotional brain systems. You cannot fight that. It’s all unconscious.” So there’s no reason to thwart it, but every reason to respond to it, to be aware of it.

If feelings are going to leak into your decisions and shape the things you make — and they are — the trick is to make them less toxic and more useful. We all try to maximize calm and minimize stress. More calm with less stress makes for better decisions. Shiv suggests many ways to do this. You can sleep. Sleep increases your feel-good neurotransmitter serotonin and helps solidify emotional learning. You can slow down your breathing to decrease the stress hormone cortisol. You can exercise, which helps increase a chemical (adenosine monophosphate, or AMP) that brings oxygen into the bloodstream and helps make more serotonin.

Will an afternoon nap or walk around the block guarantee that you make wonderful things? No, but it will increase the odds. Is every bad design the product of a panicked person? No, but as you create, aim to do it from a place of calm.

It will help you see things more fully. Pay attention to your emotions. Treat your feelings and ideas like the public resource they are. If you do, you can help calm things down before the loop begins anew.

Scott Doorley is a writer, designer and Creative Director at the Hasso Plattner Institute of Design at Stanford University (the d.school). Carissa Carter is Academic Director and an Adjunct Professor at the Stanford d.school. They are co-authors of Assembling Tomorrow: A Guide to Designing a Thriving Future. Reprinted with permission from Assembling Tomorrow, published by Ten Speed Press, an imprint of Crown Publishing Group, a division of Penguin Random House LLC, New York. Text Copyright 2024 by the Board of Trustees of the Leland Stanford Junior University.

FACULTY FOCUS

Yongah Kim + Walid Hejazi + Avi Goldfarb, Professors, Rotman School of Management

How GenAI Will Transform Organizations

by Ty Burke

MOST PEOPLE know by now that Generative AI (GenAI) has the power to radically transform entire industries.

But they might not fully comprehend the significant changes that will be required to the way companies do business. Organizational change is never easy, and most change initiatives ultimately fail. With GenAI, the rapid pace of innovation and widespread fear of the technology heighten the risk of failure. But the workforce needs to understand that GenAI doesn’t just have the capacity to replace workers, it can also add immense value to their work.

“There is going to be a lot of resistance to implementing AI, and a lot of different reasons for that resistance,” says Yongah Kim, an associate professor of strategic management at the Rotman School of Management. One site of resistance is workers’ reluctance to adopt a technology they believe could replace them. But Kim argues AI’s real value to a company is enabling growth.

“Many people talk about use cases that cut costs, because GenAI could replace some human work,” Kim says.

“But the most successful use cases have been oriented toward growing a business or better capturing insights about customers.” She gives the example of a U.S. insurer with a nationwide broker network, which had available a massive amount of data for each city where it operated. Using AI, the insurer created a model to predict areas of highest growth potential, allowing it to direct brokers to focus their efforts to maximize sales.

Not surprisingly, the insurer needed to overcome resistance from brokers first. “There were brokers who had spent 30 years in their market and believed they knew it much better than any machine could predict,” says Kim. “But the company overcame that resistance by changing its pay structure to temporarily pay higher commissions for sales in areas recommended by the algorithm. And once they got their brokers to actually adopt what the model was telling them to do, revenue and broker productivity both increased.”

In the end, it was a win-win scenario. The insurance company was able to identify opportunities without reallocating resources, and brokers were able to focus their sales rotmanmagazine.ca / 113

efforts more effectively. But not every effort to adopt GenAI will be so successful. Many won’t yield results, or will be less efficient than processes they sought to replace. Kim argues that it is essential that management foster a culture of experimentation that rewards successes, but also values failures.

“Management needs to create a culture of being open to experiments — where people can ‘dare to fail.’ It can be a good thing to celebrate failure, as long as you learn from it,” says Kim. “Being nimble is a cultural thing. There needs to be a feedback loop to learn from experiments.” Pay and bonuses are one way to incentivize experimentation with generative AI, but so is employee recognition. Kim recommends celebrating small wins and embedding experimentation into performance evaluation.

“You might have a couple of small wins, and it is very easy to stop there. To be able to scale, you need to deal with the risk factors, build the culture and the capability, and align the incentives,” says Kim. “Many companies will say they want people to experiment, but then management often penalize the experiments that they deem less successful. People need to feel that it is okay to take risks, and you need to reward those that do.”

And it doesn’t stop there. Making the most of those experiments takes additional effort. Identifying use cases for GenAI, building new data systems and new AI models to execute them is only the first step. “When you invest a dollar to build the required data system and develop the AI model, you need to invest at least another dollar to enable the implementation, especially building the capability to use it. You need to change behaviours, processes and organizational structure to make sure it is actually implemented,” says Kim. “Many companies invest a lot in data systems and AI models and declare victory when it works. They assume it will be used, but that’s not necessarily the case. Successful companies invest at least an equal amount to ensure technology is actually implemented. That requires a lot of effort.

Because if new AI models are cumbersome to use, people 114 / Rotman Management Fall 2024

will just go back to their old way of doing things. That’s just human nature.”

“Even well-managed companies often resist change,” says Walid Hejazi, a professor of economic analysis and policy at the Rotman School. “But we live in a world of constant change. Leaders are there to help their organizations navigate it.”

The companies that emerge strongest from this period of transition will not necessarily be today’s market leaders, Hejazi says; they will be the ones that find innovative ways to apply AI. Leaders will need to make the case for how the technology will strengthen their organization. Ensuring that AI adoption is ethical will be essential to overcoming internal opposition and protecting an organization from risk.

“GenAI is here. And it’s big. The traditional way of doing things will be left behind,” says Hejazi. “You have to embrace it, but you need to do it right. There are unbelievable opportunities, but AI has got to be transparent. It has to be ethical, and it needs to have guardrails.”

One challenge for leaders is the opacity of the technology. GenAI draws on enormous data sets and uses that information to make predictions about the text or images users are seeking to obtain. But exactly how it makes the connections within these large-scale data sets is a bit of a mystery. This carries significant risk. The data sets AI programs use often come from the Internet and can reflect all of the various biases of the web users who created that data in the first place. And when generative AI is asked to identify efficiencies, it will not necessarily consider the consequences of the actions it recommends.

Take the example of Amazon, which used AI in its hiring process. Like many organizations, Amazon deployed AI to help sift through the thousands of applications it received. The AI sought out attributes in résumés similar to existing successful employees, but excluded candidates who had solid credentials but slightly different backgrounds. For example, candidates with degrees from prestigious universities with a largely female or Black stu-

dent body were sorted out because the existing Amazon employee make up didn’t include alumni from those universities. As a result, candidates who were predominantly white and male were put through to the next round of interviews. When Amazon learned of the bias, it scrapped the algorithm.

As more powerful GenAI technologies emerge, the stakes will continue to grow. Getting organizational governance right is essential — and so is communicating it effectively, says Hejazi. Data science teams that work directly with the technology should clearly understand their organization’s goals, ethics and values, so they don’t inadvertently instruct an algorithm to take actions that are inconsistent with them.

“An algorithm could help company achieve its financial objectives, but hurt it in the long run,” says Hejazi. “Some things that might drive profits are unethical, like nudging kids to smoke or to eat unhealthy foods. Senior management needs to set the guardrails about how AI will be used.

You need to ask questions like, What data will be used, and for what purposes? What permissions will be obtained, and how will data be secured? When you apply an algorithm, you need to make sure it is acting in ways that are consistent with your values.”

The type of guidance that will be needed from senior management does not require technical knowledge of the inner workings of AI algorithms, but does demand a general sense of how AI operates and what risks are involved.

“Senior leadership needs to be able to clearly communicate what data are they taking in, how they are using it, and what their objectives are,” says Hejazi. “All of that needs to be explainable.”

As companies look towards the future, management also needs to ask themselves how their organization can embrace AI to achieve their organization’s vision in a way that is responsible, transparent and fair. “The last thing you want is to see your organization’s name on the front page of The Globe and Mail, because a Freedom of Information Act

request found out the company has been doing something unethical,” Hejazi says. “Senior leaders don’t need to know the technical details, but they do need to understand the right questions to ask.”

We are just at the beginning of this process, says Avi Goldfarb, a professor of marketing and the Rotman Chair in Artificial Intelligence and healthcare. “We can see the technology’s potential, but have not quite figured out how to make it work.”

AI has had the tech sector abuzz since 2012, when a team led by University of Toronto computer scientist and cognitive psychologist Geoff Hinton used deep learning neural networks to make enormous improvements in AI’s ability to recognize images. It brought the world’s biggest tech companies calling, and earned Hinton the informal title of “godfather of AI.” But it was not until OpenAI released ChatGPT in November 2022 that the hype really hit a fever pitch.

In mere seconds, the GenAI chatbot can produce reems of text. It can help users conduct research and even write jokes. And though ChatGPT’s accuracy and quality is sometimes lacking, it opened the world’s eyes to the gamechanging potential of GenAI. Companies have clamoured to adopt it, and for some, it has driven growth. But that has not necessarily shown up on the bottom line.

“If anything, AI been an expense. Right now, most companies are just doing what they always did, but trying to do it a little bit better,” says Goldfarb. “And because implementing AI requires investments in data and employee training, it is not worth it. You need a huge payoff to make the upfront investments worth it. And we are still figuring out what that huge payoff looks like.”

Goldfarb — who has co-authored several books exploring the implications of AI, including 2022’s Power and Prediction: The Disruptive Economics of Artificial Intelligence — says at its core, the technology is a prediction machine. And as its predictions have gotten better and cheaper to make, generative AI has been used for an ever-increasing array rotmanmagazine.ca / 115

of applications. It doesn’t only produce text and images, it can be applied to medical diagnostics and credit evaluation too. But the first step towards successfully integrating AI into business operations is understanding its strengths and weaknesses.

“You don’t need to understand the math under the hood. Most people don’t understand how internet protocols work, but businesses still thrive by using the internet,” Goldfarb says. “Similarly, you don’t need to know the detailed engineering behind AI. But you do need to know its capabilities, and that one of its weaknesses is judgment. AI can make predictions, but humans will be needed to determine which predictions to make, and what to do once you have them.”

Goldfarb says organizations should look for learning opportunities that teach both employees and management about what GenAI is, so that they can understand which applications could have the most impact in their operations and which ones might be feasible to implement in the near term. AI training should help prepare participants to develop an AI strategy by carefully considering which frictions in an organization the technology might help remedy. Sometimes, these inefficiencies can hide in plain sight.

Goldfarb cites the example of an airport concourse.

“Organizations need to recognize the things they do that are not actually about serving stakeholders, but compensating for failures,” he says. “The best airports in the world are multibillion-dollar structures, with great restaurants and designer boutiques. But all of it exists because you have to stop and wait. It is there to compensate for the failure to achieve efficient transportation. With better prediction, you could overcome that. Organizations need to imagine how to overcome an industry’s inherent frictions, and what parts of a business are ripe for disruption because companies are failing to serve customers.”

In the years to come, managers will also need to understand how humans and AI can work together to achieve their organization’s aims. The technology can help predict 116 / Rotman Management Fall 2024

whether somebody will pay back a loan or will make an insurance claim in the future. But it’s important to remember that its outputs are only predictions.

“Generative AI is not like The Jetsons, where machines can do everything we can do and listen to us. And it is also not like the Terminator, where machines can do everything we can do and do not listen to us. AI is a computational statistics prediction machine,” says Goldfarb.

“Predictions can help people make better decisions, but predictions are not the same as decisions. Decisions involve judgment. A human being decides which predictions an AI should make, and what action to take with those predictions. That is the fundamental human role in using this technology.”

Yongah Kim is an Associate Professor of Strategic Management at the

Rotman School of Management, where she is a core faculty member in the Leadership Development Lab and the Self-Development Lab of the Desautels Centre for Integrative Thinking and a Faculty Research Fellow of the Rotman Institute for Gender and the Economy. Walid Hejazi is a Professor of Economic Analysis and Policy at the Rotman School, a Fellow of the Michael Lee-Chin Family Institute for Corporate Citizenship and member of the Board of Directors of the David & Sharon Johnston Centre for Corporate Governance Innovation. Avi Goldfarb is the Rotman Chair in Artificial Intelligence and Healthcare and a Professor of Marketing at the Rotman School. He is also Chief Data Scientist at the Creative Destruction Lab, a faculty affiliate at the Vector Institute and the Schwartz-Reisman Institute for Technology and Society and a Research Associate at the National Bureau of Economic Research.

This article began its life as a three-part series on the Rotman Insights Hub. To sign up for its free newsletter, visit bitly/InsightsHubSubscribe.

A new course offered by Rotman Executive Programs will help leaders navigate the GenAI transition: Generative AI and Organizational Transformation will be held October 30 to November 1, 2024.

QUESTIONS FOR

Elliott Parker, Author, The Illusion of Innovation

Q &A

A veteran entrepreneur and innovation expert describes how to avoid the illusion of innovation.

Interview by Jason Hreno

Please describe what you call the ‘the illusion of innovation.’

I’ve worked with many Fortune 500 companies over the past 25 years, and I’ve seen my share of ‘innovation theatre.’ This consists of people acting busy doing something so executives can explain to the board that ‘innovation is definitely a top priority!’ But most of these efforts produce very little impact. In fact, they often destroy value by wasting resources and distracting the organization. Leaders need to be aware of this illusion, how to spot it — and what to do about it. In my experience, the key is to allow for some deliberate inefficiency in the organization to escape the efficiency trap.

This can be done systematically, through experimentation designed to challenge core assumptions. That’s the only way to uncover surprises that unleash true innovation and radical progress.

You are convinced companies are too focused on optimizing for capital efficiency, at the expense of innovation. Please explain.

Too many companies treat capital as a scarce resource and measure their success by capital efficiency gauges like return on net assets (RONA), return on invested capital (ROIC) and internal rate of return (IRR). As a result, what we see right now is more capital on corporate balance sheets than ever before. Yet, at the same time, we see corporate lifespans shrinking, on average. rotmanmagazine.ca / 117

The obsession with capital efficiency actually creates fragility, not progress.

The problem is that companies are over-optimized for short-term, near-term capital efficiency. IRR, for example, encourages companies to invest in things that produce a payback quickly; and ROIC encourages executives to cut assets from the balance sheet rather than create something new. It encourages companies to streamline existing manufacturing lines rather than build a new business that might be riskier.

Devoting yourself to efficiency creates really fragile businesses in the end. Growth results from actively seeking surprises, not from predictability. We have spent decades optimizing our institutions — governments, schools and businesses — to root out the kind of variability, volatility and risk that produces surprise successes.

You believe that the antidote to this is resilience. How does resilience beat efficiency?

Companies have these extremely capital-efficient supply chains built over decades, making incremental improvements just a little bit at a time, until the supply chains became hyper-efficient. And that’s great, until a crisis comes along — like COVID-19. Many of these companies turned out not to be very resilient. As we saw, if one element of a hyper-efficient supply chain fails, the whole thing can come crashing down. The lesson is that the optimal amount of capital efficiency is not 100 per cent. There needs to be some redundancy, some resilience in systems to ensure that companies can endure and survive crises.

The obsession with capital efficiency actually creates fragility, not progress. And as a result, many large companies are not prepared to face the future, even if the executives don’t yet realize it.

ment. You’ve got to find ways to invite some degree of purposeful inefficiency that fosters learning and challenges the status quo.

By contrast, Reed Hastings, the CEO of Netflix, has said that “chaos, as long as it’s fertile, will always beat sterility.” It’s better to manage with a little bit of chaos — as long as it’s fertile in terms of generating new ideas and opportunities.

How does chaos fit into the new corporate model you advocate?

Corporations are optimized for scaled execution, not learning. Leaders of corporations need to develop an entirely different system of governance, incentives and processes that is designed to foster learning. Start-ups do this really well.

They are optimized for capital inefficiency, which sounds strange to say — they’re very inefficient by design, because that’s how they learn, and how they stumble upon exponential growth trajectories. In corporations, the frequency of correctness matters more than the magnitude; executives learn to not make mistakes. In startups it’s the opposite: you can be wrong a lot because when you are right, you can capture tremendous value.

What my colleagues and I like to do is build external independent venture backable start-ups as a way for corporations to tap into innovation that would otherwise be hard to do internally. We are finding that this is a great way to run experiments. I truly believe that for many corporations, deep and deliberate engagement with start-ups will be the only way to realize the transformation they seek.

Why is a certain degree of chaos a good thing?

In the realm of innovation, what is the advantage of small teams?

Jack Welch, the former CEO of GE, once said that “variance is evil.” He strived to build a company that rooted out all forms of error to make everything as predictable and safe as possible. But humans don’t thrive in that type of environ-

Advances in technology, communications and finance are making it easier for small teams and individuals to disrupt the status quo. Large teams are optimized for preserving what already exists and operating at scale. They’re careful

118 / Rotman Management Fall 2024

Over time, insight collection leads to the discovery of anomalies and surprises that create serendipity.

and safe. Of course, there are instances in which that makes tons of sense. However, they are not optimized for learning, which requires challenging the status quo.

Small teams are in a much better position for learning that leads to the discovery of anomalies and surprises that help us understand the way the world really works. Small teams are also great at moving quickly. They’re agile. They iterate. And there are instances when it makes sense to move quickly. The important thing is to understand which type of problem you’re dealing with, and which team structure is best equipped to do it. Are you dealing with an execution challenge? Corporations beat startups at execution challenges all the time. Is it a learning challenge? Then a startup is more likely to beat a corporation.

Explain the benefits of the ‘controlled-burn’ concept in corporate ecosystems.

Achieving transformative innovation is a problem of governance and incentives. It’s a structural problem that requires a structural solution. A good comparison is the wildfires we see in the western United States. Everyone knows the solution is a strategy of ‘controlled burns,’ where you map out a checkerboard of selective ‘burn squares’ to reduce the amount of fuel that might go into the fires. But incentives prevent us from pursuing that strategy. For individual land managers, it’s too risky. So instead, whenever a fire pops up, we immediately try to put it out. As a result, what happens is not as much land burns when it needs to, and forests are ten times denser than they used to be, so when a fire gets out of control, it burns with more intensity and more dangerously than ever before.

The same is true for companies. When any error pops up, we’re really good at ‘putting it out.’ But the reality is that a certain level of error-making is necessary. If you think about doing controlled error-making within constraints that reduce the amount of tinder-like controlled burns, when a crisis comes along this makes a company more resilient and less susceptible to failure.

Another term you use is ‘manufacturing serendipity,’ which sounds paradoxical, but it’s not. Please clarify.

I worked with the late-great Clay Christensen at Innosight for many years, and he used to have a sign outside his office that said ‘Anomalies Wanted.’ He loved for people to come in and challenge his theories because he knew that it was in the realm of challenge that his theories would become a better representation of the way the world really works.

Similarly, if you can embark on a structured approach to insight collection, that knowledge compounds over time and leads to the discovery of anomalies and surprises that create serendipity. We should treat insights as a ‘power law’ asset, like we do startups in venture capital. Power law is a principle where a few investments in a portfolio yield returns larger than all other portfolio investments combined, often by orders of magnitude.

To win in venture capital, you have to be non-consensus and turn out to be correct. And it’s one or two bets that might pay off and provide all of the returns. The rest of the bets you make can even lose money, because in a power law asset class, a small portion of the investment produces the bulk of the return. Well, insights are a power law asset too. The problem is you don’t know ahead of time which insights are going to take your company in a new direction.

So you need to collect a lot of them. You need a broad and diverse insights portfolio.

How can leaders build their organizations for endurance?

When he was CEO, Jeff Bezos told Amazon employees that the company was going out of business one day — which got a lot of media attention. But he also said that it was the employees’ job to postpone Amazon’s bankruptcy by continuously experimenting in the service of customer needs. As long as they were doing that and creating surplus for society, Amazon would continue to thrive. rotmanmagazine.ca / 119

Out Now New from the Director of the Rotman School’s Desautels Centre for Integrative Thinking and published by De Gruyter:

Soft Skills: How To See, Measure, and Build The Skills That Make Us Uniquely Human We need a ‘re-set’ in the way we think about human skills—particularly those that cannot be sub-contracted to an algorithm. The latest book from Rotman Professor Mihnea Moldoveanu aims to provide that re-set.

When you look at companies that endure for a really long time, one thing they all do is consider the needs of their stakeholders — past, present and future. They are very aware of those who have come before, who they need to serve now, but also, what they’re going to leave for those yet to come.

That mindset builds endurance and makes the world a better place.

We need our scaled institutions to be better at solving big problems again. This means questioning decades of embedded assumptions about why corporations exist and finding ways to empower small teams to conduct more of the experiments we need: faster, cheaper and weirder. By weirder, I mean running experiments that challenge the way an organization thinks the world works and uncovering anomalies that lead to breakthrough market innovation.

So often, the experiments we see running — even on innovation teams — are actually designed to reinforce what the organization already knows and to help them feel good about what they’re already doing. The smarter approach is to actively run experiments that tell you why your current business model might not work for much longer.

Are you optimistic about this mindset shift taking hold, and innovation no longer being an illusion?

I am. I can’t remember who said it, but there’s a great expression: pessimists sound smart but optimists make money. And that’s true. Optimism isn’t the belief that everything is going to be great from here on out. There will be big problems. Every solution we create leads to more problems! Optimism is the belief that our ability to deal with those problems will also increase.

Edwin Land, who was the founder and CEO of Polaroid, used to say that optimism is a moral duty. I believe that’s true. There may be blips, but as our capacity to solve problems increases, the trends point in the direction of things getting better over time. And if you look back over the span of history, on average, the optimists have been more correct than the pessimists. If you want to be non-consensus and have a high chance of being correct, you should be an optimist.

Elliott Parker is the CEO of High Alpha Innovation, a leading venture builder based in Indianapolis. To date he has launched more than 40 venture-backed start-ups. He is the author of The Illusion of Innovation: Escape ‘Efficiency’ and Unleash Radical Progress (Ideapress, 2024).

120 / Rotman Management Fall 2024

POINT OF VIEW

Bruno Collet, Organizational Transformation Consultant

Future-Proof or Fail: The Stark Reality of Strategic Foresight IN A WORLD WHERE CHANGE is the only constant and the degree of uncertainty amplifies the further we look into the future, strategic foresight — also called strategic anticipation or prospective — is the key to play the long game in business. It empowers companies to anticipate changes, seize opportunities and dodge potential pitfalls. By analyzing trends and preparing for various scenarios, businesses can stay ahead of the curve, innovate proactively and maintain a competitive edge.

Strategic foresight is not about predicting the future, but being ready for it, ensuring that decisions made today will lead to success tomorrow. Contrary to strategic planning — which relies mostly on prediction based on extrapolation from historical data and current understanding — strategic foresight explores a broader spectrum of potential influences, including those peripheral to an organization’s activities (see Figure one, next page).

The inherent unpredictability of the future renders strategic planning less reliable over extended time horizons. In contrast, strategic foresight enhances organizational resilience by considering a wider array of potential developments that may affect the organization’s trajectory.

To elucidate the distinction, consider the following example. Upon its establishment in 1954, the Toronto subway network comprised 12 stations. By 1980, this number had expanded to 50 and presently, it stands at 70. Traditional strategic planning would project a continued increase in stations in response to urban growth. Yet, potential disruptors loom on the horizon. The rise of remote work and delivery services has altered transportation demands. Ad-

vancements in technology may introduce alternative modes of transit, challenging the subway’s predominance. The demographic shift toward an aging population also presents unique obstacles. Other disruptive factors abound. These are the type of variables that strategic foresight seeks to address, often without the benefit of historical data for extrapolation.

There are three main activities of strategic foresight: 1. Discovery 2. Scenario planning 3. Positioning Let’s take a closer look at each.

ACTIVITY 1: Discovery. The goal of discovery is to explore possible futures by identifying ‘weak signals’ and emerging trends, and to put them in contrast with the organization’s current situation. A weak signal is an early indicator of a potential change or emerging issue that may become significant in the future. It’s like a faint whisper of what could come and is often overlooked because it doesn’t fit into current expectations or assumptions.

In a demonstration of strategic foresight, a leading public transportation company identified 49 distinct signals, organized into nine categories including ‘urban development,’ ‘societal shifts’ and ‘economic models.’ These signals include notable factors such as rising electrical costs, the separation of work and living spaces and a trend toward privatization caused by reduced governmental financial support. rotmanmagazine.ca / 121

CUSTOMER EXPECTATIONS: Anticipating and understanding the evolving preferences and demands of consumers.

Strategic Foresight Exploring plausible futures

Strategic Planning vs. Strategic Foresight

Strategic Planning Predicting likely futures

TECHNOLOGY: Monitoring advancements and innovations that may disrupt or enhance current business models.

LEGAL AND POLITICAL: Assessing the implications of regulatory changes and political developments on organizational operations.

SOCIAL AND ECONOMIC: Analyzing societal trends and economic indicators that could influence market dynamics.

ENVIRONMENTAL: Considering the impact of ecological factors and sustainability practices on business continuity.

15 years Present

5 years

20 years +

10 years

FIGURE ONE

Instruments used in the discovery phase of strategic foresight — such as horizon scanning, anticipation canvases and futures wheels — facilitate the examination of these signals. A simplified anticipation canvas for the healthcare industry serves as an illustrative tool, enabling the exploration of potential disruption across four dimensions and four timeframes (see Figure Two, next page.) For example, the advent of reliable and economical autonomous wheelchairs is placed on the integrating robotics and AI axis and could occur within five to 10 years. It could drastically improve some healthcare services but also impact several processes and roles. There is no historical data or precedent allowing us to predict if, when and how this could happen, and therefore we rely solely on signals and emerging trends.

Tools like the anticipation canvas are powerful because they are at the same time simple and versatile. For instance, the anticipation canvas can be applied to a team or department with dimensions designed for its specific exploratory horizon and range.

The discovery phase routinely investigates signals in a multitude of dimensions, including but not limited to: 122 / Rotman Management Fall 2024

The discovery phase is instrumental in providing organizations with the insights necessary to navigate plausible futures.

ACTIVITY 2: Scenario planning. Scenario planning entails combining signals into possible trajectories that will enable thinking about how a preferable future might occur. Looking back at the cone of plausible futures, you will now narrow them down to identify a cone of ‘preferable futures.’ As illustrated in Figure Three, preferable futures usually differ from probable futures.

An effective strategic foresight scenario needs to satisfy several criteria. In the realm of strategic foresight, the following tools are integral to the process.

ROADMAPPING serves to articulate a visual and narrative of potential futures, facilitating the retention of trajectories through memorable storytelling. This method is not confined to one route; rather, it examines a multitude of pathways and if-then branching.

DESIGN FICTION uses narrative techniques to envision innovative, speculative scenarios that challenge fundamental assumptions. ‘Pre-mortem,’ a derivative of design fiction, analyzes scenarios of failure, enabling organizations to proactively address potential issues. For instance, a premortem exercise within a public transportation firm might commence with the hypothetical demise of the company, caused by the arrival of a competitor offering an advanced

‘

Strategic Foresight Example: Healthcare Integrating robotics and AI in healthcare services

New healthcare roles and alternative contractual forms

> 15 years 10-15 years Autonomous wheelchairs

5-10 years

‘Super-nurse’ professions

< 5 years Generalization of hospitalization at home Social acceptance of telemedicine Drastic reduction in public subsidies Offer adapted to new demographic realities

Evolution of healthcare regulation and financing structure

FIGURE TWO

fleet of reliable and inexpensive autonomous vehicles, leading to a decline in ridership and subsequent operational reductions. The central question of this exercise is ‘how could we have avoided this ending?’

Once preferable scenarios have been identified, the team is guided in their direction.

ACTIVITY 3: Positioning. The goal of positioning in strategic foresight is to generate actions to position the organization towards a preferable future, in essence making the preferable scenarios more likely to occur. The process of positioning encompasses three key activities: EVALUATION AND PRIORITIZATION involves assessing potential scenarios based on their projected value and the investment they necessitate. Scenarios are evaluated against a set of criteria, including anticipated economic impact, knowledge acquisition, symbolic significance, versus the required investment, development duration, as well as the skills and labour they demand.

ACTION RECOMMENDATION is the proposition of tangible actions such as benchmarking, pilot testing or experiments.

These are intended for immediate implementation to prime the organization for capitalizing on the preferred scenarios.

Specifically, this involves advising decision-makers on integrating actions into the organization’s strategic framework, thereby bridging strategic planning and foresight.

An exemplary case of the efficacy of strategic positioning is Netflix. In its inception as a DVD rental service, Netflix foresaw the potential of content creation and streaming services long before it was economically or technologically feasible, as indicated in its 2000 SEC [Securities and Exchange Commission] filing. Its rise to industry leadership and disruption was made possible by years of persistent exploration, experimentation and capability enhancement, positioning them to leverage emerging opportunities effectively. Without such strategic positioning, Netflix’s success would not have been feasible. Its foresight laid the groundwork for its achievements.

Key Success Factors to Enable Strategic Foresight

CAPABILITY IDENTIFICATION pinpoints the capabilities, projects

or initiatives that must be executed to steer the organization toward the preferred scenarios. Projects can be selected using a simple value/investment chart, for instance.

The development of strategic foresight within an organization necessitates adherence to several success factors.

Paramount among these is the definition of clear directives and parameters. While strategic foresight enjoys a degree of rotmanmagazine.ca / 123

Don’t Stop Thinking About Tomorrow

Now

Time

Preferable futures

Probable futures

Possible futures

Plausible futures

Image: Bland, J., & Westlake, S. (2013).

Don’t stop thinking about tomorrow. Nesta.

FIGURE THREE

latitude, it must operate within the boundaries set by the organization’s mission. For instance, a firm’s commitment to its core business, geographic location, and financial independence might be upheld. The directives and boundaries are provided by the leadership team.

Second, strategic foresight is not episodic but a continuous activity that pays off over time, demanding a long-term proactive engagement rather than short-term, reactive measures. This is a major cultural challenge because many organizations have a short attention span. Leadership accountability is essential, with designated executives responsible for championing and guiding the foresight initiatives.

Third, strategic foresight is further enhanced by the diversity of the team involved, encompassing a range of expertise and organizational levels. Optimal teams are cross-functional, including individuals from various departments such as business operations, marketing, information technology, human resources and finance. Semi-formal entities, like communities of interest, have proven effective in fostering strategic foresight by facilitating the exchange of ideas beyond the formal organizational structure and allowing for dynamic membership adjustments. Engaging with external experts, academics, and startups is also beneficial, as it introduces fresh perspectives.

Lastly, the strategic foresight process must be integrated and systematic, embedding future-oriented thinking into the organization’s strategic planning and decision-making.

This process requires clearly defined activities and allocated 124 / Rotman Management Fall 2024

resources, with the flexibility to be periodically reviewed and adjusted to maintain relevance.

In closing

Strategic foresight is not meant to serve as a crystal ball, but a compass pointing toward potential futures and enabling organizations to navigate the unpredictable seas of change.

By embracing it, companies can transcend the limitations of traditional strategic planning and harness the power of anticipation to craft a resilient and dynamic strategy.

As the world evolves, those who look beyond the horizon and prepare for a multitude of possibilities will not only survive but thrive. I invite you to step into the future with strategic foresight. Don’t wait for change to catch you off guard.

Bruno Collet, MBA/MSc, is a consultant specializing in organizational transformation. He teaches organizational design at McGill University’s School of Continuing Studies and the Université de Québec à Montréal (UQAM); ESG+, agile leadership at HEC Montreal and instructs for the Order of HR Professionals of Quebec and the Project Management Institute (PMI Montreal).

QUESTIONS FOR

Tessa West, NYU Psychologist and Author, Job Therapy

Q &A

A workplace psychologist describes why so many people question their job and career at some point.

Interview by Karen Christensen

Why do so many people begin to question their job and/ or their career at some point?

People have always done this, but we’re definitely more comfortable expressing it now than in the past, and I think there are a couple of explanations. First, the well-being boom that we experienced a couple of years ago during the pandemic has really opened up people’s ideas that happiness at work is an actual possibility — and that they can think more deeply about the ‘relationship’ they have with their careers in ways that we used to only think about other types of relationships.

Like all relationships, the career relationship involves some complicated emotions. Our feelings can go up and down. We can love it one week and then hate it the next.

Another contributor to this paradigm shift is that there is a lot more comparison data out there now. We didn’t used to know, for example, how many people shifted from one career to another, but now there are entire Facebook groups and LinkedIn teams dedicated to nothing but that. There’s lots of social support out there for people who are interested in doing this.

Lastly, there are definite generational differences in terms of how happy people believe they ought to feel at work. If they’re miserable, Gen Z workers will not stick around long. Millennials who are rising leaders, are seeing a revolving door of talent — not because there’s any one thing wrong with the job, but because people are feeling a lowlevel sense of malaise in the workplace. They don’t identify with the places where they work. rotmanmagazine.ca / 125

The 5 Personas CRISIS OF IDENTITY: Does your sense of self no longer match your job?

DRIFTED APART: Do you no longer recognize the job you once loved?

STRETCHED TOO THIN: Are you taking on too many roles, switching tasks too often or feel stuck between two paths?

RUNNER-UP: Do you feel like you keep coming in second?

UNDERAPPRECIATED STAR: Are you crushing it at work but the people around you don’t recognize your performance?

driver is working in a job that has changed so much that it is now beyond recognition. I call this profile Drifted Apart.

Third is when people take on too much at work and feel so overwhelmed that helplessness sets in. These people are the Stretched-Too-Thins. Fourth is those who are struggling to gain status, but promotions and raises just don’t happen. These are the Runner-Ups. And the last driver is having power and status at work, but not getting recognized or compensated for it. These people are the Underappreciated Stars.

You have an entire chapter in the book about each psychological profile. Let’s focus on the first one: what does a Crisis of Identity look like?

Therapy helps people manage all types of relationships in life. What does it mean to apply it to a job?

Think of it this way: we are all in a relationship with our career, and as in any relationship, we can drift apart and start to question our commitment. These feelings are the result of psychological issues that we don’t always understand.

Just as it’s hard to leave a marriage because you share children, a dog and a mortgage, it can be hard to leave your career. Maybe you have moved to a new town for it and your kids love their school, so leaving would be really messy.

Unpacking the psychological issues you are experiencing is the first and arguably most important step in discovering happiness at work. Therapy for any issue can help us process our feelings and look for triggers of stress and so forth, and that can be applied in much the same way to your job or career.

In your research you found that there are five key drivers that make people think of leaving their jobs. What are they?

The first is feeling like their job or career is no longer an important part of who they are, even though it once was. I call this psychological profile Crisis of Identity. The second 126 / Rotman Management Fall 2024

I think most people would think an identity crisis takes the form of disengagement in the workplace, but it really doesn’t. Instead, if someone is experiencing an identity crisis, you will notice that they are ‘all-in’ one day but then they’re backing off the next. These people have lots of psychological ups and downs.

The fact is, plenty of people keep doing things that make them miserable because those things are still a huge piece of their identity. We see this a lot in healthcare. Many physicians burn out, but the work identity is so integrated with their sense of self that they can’t break up with it. In these people you might see a lot of angsty behaviour — complaining about the job, talking about how miserable it makes them. But it seems that’s all they talk about, so it’s obviously still a core piece of who they are. They still have identity centrality with the job, but the identity satisfaction has disappeared. Expect a roller coaster of emotions from people going through this.

For those who might see themselves in what you just said, what are the first steps for dealing with it?

I want to start off by saying, if this is you and exploring a new identity feels super intimidating, that is normal. You

The 4 Stages of Job Therapy STAGE 1: WHY AM I SO UNHAPPY? Identify the psychological source of your unhappiness with self- assessment tools.

don’t actually need to de-identify with your old career before you begin to explore a new one. In the book I talk about developing something called ‘identity clarity.’ You don’t have to have it all worked out, but you do need to make time to ‘date’ different careers or develop mini-relationships with them.

First, come up with a list of what I call ‘keeper skills.’

These are things that you are really good at and that you currently do at work. I suggest you really anchor your search on these keeper skills. A lot of people who are having this crisis think they have to start completely fresh—they don’t think about how their skills are fungible and can translate to an entirely different career.

Next, you will need to cast a wide net and talk to people in different careers, asking them questions about how your keeper skills translate to their jobs. For instance, say one of your keeper skills is being masterful at Microsoft Excel.

You might ask people, ‘What tasks do you do in your job that are related to this skill and what is the context in which you do them?’ That way you can get a sense of how likely it is that the things you want to keep doing actually translate to that particular new job. As you repeat this process, you’ll get clarity around what that new identity looks like.

You advise people to lean in to their emotions because they are invaluable to processing a career change. Tell us about that.

When people start feeling the types of emotions at work that they have only felt with other types of relationships, they might think those feelings are inappropriate or that they should have healthier boundaries with their career. We need to embrace the emotions that we might be feeling and all the rollercoaster sensations.

Some of the emotions people experience when they go through this might feel shameful. One example is among people having an identity crisis, who are afraid of being a newbie at a new job when they’re used to being in charge.

STAGE 2: WHAT DO I WANT MY FUTURE CAREER TO LOOK LIKE? Learn who to network with and what to ask your new network connections.

STAGE 3: FACT-FINDING TO SEE IF THE JOB IS THE RIGHT FIT FOR ME Learn what questions to ask during the interview process.

STAGE 4: SECURING THE JOB Learn how to craft a résumé and ask the right questions during the interview to land the new job.

They don’t like that feeling of knowing less than everyone else and having less status, or being younger or older than everyone else. We often keep these sort of cringey feelings bottled up instead of processing them. Guilt is another common emotion. People in your life might say to you, ‘But you worked so hard to get this far!’ Or your family might say, ‘We moved to a new town for you!’. Processing the guilt that comes with that is really important to making healthy decisions.

How can a leader recognize if there might be some malaise on their team and a possible need to intervene?

As indicated, you might notice certain people being all-in one day and then pulling back, over and over again. Your employee seems super excited one minute, but it doesn’t take much to make them feel annoyed or irritated the next.

Also, look for patterns of reinforcement in the workplace. What are the things that are turning people on to or off of their job? One of the main categories I found across the five types that lead people to psychologically distance rotmanmagazine.ca / 127

from their jobs is the nature of the relationships they have at work. When we think about drifting apart, we often focus on big-picture things — ’I used to work from home and now I’m hybrid,’ for example. These things matter, but mostly because they change who we interact with day-to-day, like who works next to us in the office, even if they aren’t on the same team as us. Our everyday social interactions matter a lot, and when they change, we feel it more than say, when a new CEO has been named.

You also want to keep track of the patterns of change happening structurally in your organization. What changes are happening and how many of them affect people’s relationships? How often are new team members cycled in?

Who are they talking to day in and day out? This can influence everything from identity to patterns of behaviour that interfere with the ability to get work done.

I think we need to have more frank conversations early and often, and they need to include bite-size feedback and not just the top-level, formal type. Also, during interviews, it should be okay for both sides to ask tough questions and to talk about what failure would look like. Embracing this mindset can help to close the communication gap between organizations and job seekers.

Describe the role of frank conversations in all of this.

I’m a big fan of ‘no BS feedback.’ I gave a TEDx talk called “The Problem With Being ‘Too Nice’ at Work.” I think one of the reasons why we suffer in our careers is because we often aren’t getting good feedback that is specific and isn’t just about what we’re doing poorly, but also about what we’re doing well. They tell you what you’re doing right or wrong in a particular context, and they help you build information around your status at work.

One of the main reasons why people fail to get promoted at work is because they’re not having these frank conversations. Bosses aren’t telling people what they’re doing wrong. I think maybe only seven per cent of the people in my Runner-Up study ever received feedback about why they didn’t get promoted. Even the people who were promoted weren’t told why it happened in any specific sense.

128 / Rotman Management Fall 2024

Tessa West is a Professor of Psychology at New York University.

Her most recent book is Job Therapy: Finding Work That Works for You (Portfolio, 2024).

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