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11 Apr 2023, 01:00
| FROM Insead Admissions Blog: How Firms Can Effectively Engage Stakeholders |
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Despite their best efforts and desire to “do good”, firms are often primarily focused on financial returns and rarely give stakeholders a seat at the table. This is because firms often lack a genuine understanding of the values that diverse stakeholders can bring and the unique needs and interests they seek. In this INSEAD Knowledge podcast, Lite Nartey, a Visiting Professor of Strategy at INSEAD, discusses how firms can identify key stakeholders based on their power and the legitimacy and urgency of their claims. She reveals the most effective ways to manage vast stakeholder networks and how to effectively engage with important players to create joint value. As with any relationship, the way a firm communicates with a stakeholder is a crucial factor in determining whether the relationship will be positive or negative. Essentially, firms can enhance cooperation and reduce conflict by understanding the different elements of successful stakeholder communication. Equally critical is the notion of joint value creation. The business environment today is characterised by different types of values – those sought by the firm as well as by different stakeholders – that need to come together for businesses to operate. |
12 Apr 2023, 23:00
| FROM Insead Admissions Blog: How Corporate Thought Leadership Drives Business Success |
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In a world driven and dominated by digital communication, online thought leaders have never been more critical. Much like individual social media influencers, organisations are now leveraging their profiles on professional networking platforms such as LinkedIn to establish themselves as thought leaders. This grants them the power to mobilise and influence followers and enhance business outcomes. While the influence of individual thought leaders is well documented, little attention has been given to the role of organisations as opinion leaders. A company can be considered a corporate opinion leader when it is a trusted authority in its field, shaping thinking about the company and the wider industry. In a recent study, my co-authors* and I found that corporate opinion leadership on professional social media platforms like LinkedIn is positively associated with company revenue. Essentially, companies that position themselves as thought leaders have a larger following, and as that following grows, so does their revenue. This finding is important considering some companies prioritise popular social media platforms like Twitter or Instagram and neglect the potential benefits of online professional networks. However, given that LinkedIn followers provide data on their employment history, skills and interests, they are arguably more reliable than followers (including fake accounts and bots) on platforms like Twitter and Instagram. LinkedIn followers are therefore more likely to serve as potential customers, job candidates or business partners. Being a thought leader is good for business Our study investigated the impact of thought leadership on a company’s financial performance, as well as the factors that facilitate an organisation becoming an opinion leader. We examined 310 companies, chosen from the S&P 500 list, with active profiles on LinkedIn. The sample comprised 99 sectors, which we grouped into eight broad categories: services, basic materials, consumer goods, finance, healthcare, industrial goods, technology and utilities. First, we collected data on the number of followers and company revenue to examine the relationship between opinion leadership and business performance. Our results showed that firms with 1 percent more followers on LinkedIn have 0.5 percent higher revenue on average. Prior research suggests that organisations can leverage their social media accounts to inform their followers about products and services, which can lead to increased engagement and sales. Our study confirmed that industry thought leaders can influence followers with suggestions and advice, resulting in product purchases and use of services. Next, we focused on the factors that determine whether a company is a thought leader by analysing the content generated by companies, users and employees. Our findings indicated that job posts, user reactions to posts and employee profiles are positively related to opinion leadership. Put differently, content created by organisations, users and employees facilitates the perception that a company is a thought leader in its respective industry. Corporate opinion leaders have an impact not only on followers and prospective clients but also future job candidates. This is because professional networking platforms allow companies to communicate with candidates and improve their business performance through talent acquisition. How to make your business a thought leader Our research provides valuable insights into the strategies that companies can adopt to establish themselves as corporate opinion leaders on professional social media platforms. Companies need to stimulate user reactions by producing unique and innovative content, such as short videos, infographics, product launches, feature enhancements and company achievements. For instance, HubSpot has successfully established itself as a thought leader on LinkedIn by creating eye-catching graphics and photos that highlight the organisation’s values and culture, as well as industry trends. While companies often use paid job advertisements to reach candidates on LinkedIn, we found that they can reach a wider audience by posting job advertisements as visual posts directly to their LinkedIn feed. Visual content tends to be more engaging and memorable, allowing companies to showcase their strengths, differentiate their firm from competitors and establish themselves as opinion leaders in their respective industries. It further highlights the company's focus on talent acquisition and development, which is an essential component of being a thought leader in any industry. Additionally, companies should motivate employees to set up LinkedIn profiles to broadcast their skills and employee experience to other users. Although LinkedIn serves as a head-hunting tool for many recruiters and there is a risk that employees will receive job offers from other firms, our study shows that employees make great online advocates and can further facilitate their employer’s image. Companies can also use humour and pop culture references to grab attention on professional social media platforms and establish strong connections with their audience. HubSpot, for example, playfully used the “Barbie” movie filter to showcase its key leaders on LinkedIn. Featuring employee profiles and highlighting their knowledge on specific topics not only helps establish the company's thought leadership, but also provides employees with an opportunity to showcase their expertise, which can lead to increased engagement and job satisfaction. Another example is Airbnb, which has established itself as a thought leader in the hospitality industry by promoting its hosts and showcasing real-life examples of how the platform has positively impacted people's lives. For instance, Airbnb shared a heart-warming story on LinkedIn of a former host who met his wife via the platform. This approach underscores the company’s commitment to providing unique and memorable experiences for its customers and helps build a community of loyal users and brand advocates who can contribute to the company's continued success. Becoming a thought leader in the digital age requires a multifaceted approach. It involves creating and distributing high-quality content on professional social media accounts, fostering employee engagement and participation in online conversations and leveraging user-generated content to build brand credibility and relevance. By focusing on these key strategies, companies can establish themselves as trusted authorities, enhance their online visibility and reputation and cultivate a loyal following of customers and advocates. To achieve this, companies need to adopt a strategic approach to social media marketing, using data and analytics to track engagement and measure the effectiveness of their content, as well as investing in employee training and development to empower workers to share their expertise and insights with their online networks. In addition, companies should actively seek out and engage with followers and users, respond to comments and feedback and showcase user-generated content that highlights the unique value and impact of their products and services. *Jordi Paniagua, University of Valencia and University of Notre Dame, and Grzegorz Mazurek, Kozminski University. |
14 Apr 2023, 05:00
| FROM Insead Admissions Blog: Maximising Entrepreneurial Potential: Governance as Insurance |
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Tech entrepreneurs today move at much greater speed and scale, making it increasingly necessary to anticipate rapid change and potential chaos. In this video, tech executive and serial entrepreneur Yann Lechelle sits down with INSEAD professors Theos Evgeniou and Ludo Van der Heyden to discuss the hard lessons he has learned. “I've founded or co-founded five or six companies, all of which have been sold,” says Lechelle. “But each of them in some way has been a failure.” Lechelle emphasises that it took him two decades of trial and error to identify governance as a crucial driving force in his various endeavours. Looking back, he realises that good governance could have prevented value destruction along the way. The aim of this discussion is to help today’s entrepreneurs maximise their impact from the outset so that they don’t spend 20 years making the same mistakes. Good governance is crucial for entrepreneurs to create long-term value and ensure start-ups don’t hit major roadblocks on their journey. Unfortunately, many tech entrepreneurs misunderstand, neglect or even avoid governance altogether. In complex, fast-paced environments, tech entrepreneurs should seek the external help governance provides from day one. One problem is that entrepreneurs often do not want to relinquish power, explains Lechelle. A question an entrepreneur should ask him or herself is: Am I willing to forego absolute power for the benefit of the mission and the business? In the early stages, governance can be flexible and informal, allowing founders to learn from and lean on experienced executives. As a start-up progresses, alignment at all three levels – owners, board members and business leadership – becomes critical for value creation. Shifts in shareholding inevitably trigger changes in power, and hence of mission, board membership and governance practices. Appropriate governance at each stage can help manage these transitions. “Entrepreneurs typically want to change the world,” says Lechelle. “To change the world, they need to ensure longer-term value creation, capture and distribution.” Implementing better governance practices from the outset can increase the chances of successfully bringing a venture to its desired destination. “Proper governance is insurance to protect value creation when things become complex. And I guarantee you, things become complex.” |
16 Apr 2023, 20:00
| FROM Insead Admissions Blog: How Will ChatGPT Shape Business, Society and Employment? |
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In the last 200 years, we’ve seen productivity growth of 1.5 to 2 percent per year on average, with the emergence of general-purpose technology such as the steam engine, electricity and computer driving rapid growth in the years following their introduction. However, productivity growth has slowed in advanced economies in the last 10 to 15 years. “Could artificial intelligence (AI) be the next general-purpose technology to drive productivity?” asked Morten Olsen, Associate Professor of Economics at the University of Copenhagen. Together with Theodoros Evgeniou, a Professor of Decision Sciences and Technology Management at INSEAD, and Phanish Puranam, the Roland Berger Chaired Professor of Strategy and Organisation Design at INSEAD, Olsen was speaking at INSEAD Tech Talk X webinar about how the next generation of AI systems will shape business, society and employment. Chess grandmaster Garry Kasparov wrote in Deep Thinking that a (weak) human working with a machine, with a strong process to work together, can produce better outcomes than when AI and humans work alone, said Evgeniou. According to Kasparov, building a better process at the human-machine interface requires humans to be informed. In other words, we need to know the technology to understand its potential, limits and challenges. Unpacking ChatGPT ChatGPT is a specific product in a class of technologies known as large language models (LLMs) – an application area of machine learning (ML), itself at the heart of modern AI. Like all ML algorithms, ChatGPT looks at a large amount of data, finds “patterns” – namely regularities with high enough probability – in the data and uses these patterns to make predictions such as about what word to generate next given the previous ones, explained Puranam. In school, we may have sat for tests where we were shown a sequence of shapes such as a triangle, a circle, a star and a triangle, and asked to predict what comes next. In simple terms, that's what machine learning does, he said. The term “GPT” is derived from the phrase generative pre-trained transformer. It is “generative” as it generates text as a prediction of what users are likely to find useful based on their questions or instructions. It's pre-trained by an algorithm called a transformer using a large corpus of text. In a nutshell, said Puranam, LLMs such as ChatGPT are complex ML algorithms that find patterns in very large volumes of text generated by people in the past and use them to predict what specific users might find useful based on their inputs. The complexity is evident, with an estimated 175 billion parameters in ChatGPT and an estimated 170 trillion parameters in GPT-4, an advanced version of ChatGPT. To appreciate the potential of LLMs such as ChatGPT, said Evgeniou, it is important to understand that they are not necessarily products, but foundation models. Since foundation models are used in different downstream applications, what we are seeing is just the tip of the iceberg. Foundation to a myriad of applications ChatGPT is most commonly used to synthesise or summarise text, translate text to programming language (such as R and Python) and search. In the business context, Puranam provided examples of applications such as copywriting for marketing materials, customer interaction, synthesising large legal documents, writing operational checklists and developing financial summaries. Due to ChatGPT’s ability to generate text from different viewpoints, it can widen perspectives and improve creativity potentially beyond human imagination, said Evgeniou. For example, you can generate short summaries of text such as your company’s mission statement from various perspectives, say a European, American, Chinese, 10-year-old or 80-year-old person. It’s already being used in business to enhance creativity and business success: Coca-Cola, for instance, used AI effectively to engage its customers in its recent marketing campaign. But creativity is not limited only to creative fields, stressed Puranam. The technology can leverage human creativity by generating alternatives for business plans, business models and so on. However, humans ultimately need to evaluate the quality of the content generated. In more advanced applications, Olsen stated that innovation is typically driven by fundamental and corporate research. The more AI can help in these processes, the faster we can see real innovation, just as how using AI in biomedical research has reduced the time taken for drug discovery and protein-folding predictions to a mere fraction of the time taken by a human. The fact that it is a foundation model means that ChatGPT is the foundation to a plethora of applications. Evgeniou believes that AI can augment human intelligence, leading to the creation of new needs that we didn’t even know of and creating new companies, products, markets and jobs at a much faster pace. What does ChatGPT mean for business? While ChatGPT brings new possibilities, we need sound processes to enable humans and AI to work together effectively. One of the most important lessons in technology adoption, said Evgeniou, is that organisational change is needed to implement and get value out of it successfully. In addition, trust is a necessary ingredient in technology adoption. But trust is a double-edged sword – when users place too much trust in technology, it can lead to overconfidence in decision-making or narrative fallacy, where people make up stories based on the narratives generated by LLMs. In high-risk applications, it can even jeopardise their safety. Trust is also associated with the question of liability, as Evgeniou noted: If professionals such as doctors, lawyers and architects make mistakes as a result of prioritising AI’s decisions over their own judgement, are they culpable? Would they be covered under malpractice or professional liability insurance? From the perspective of consumer trust and safety, the exponential growth of content made possible with technologies such as ChatGPT has made content moderation – a critical issue for our online trust and safety – more challenging for online platforms. Moreover, the role of AI in creating information filters and bubbles has been put in the spotlight. Families of the Paris terrorism attack victims are suing Google for the role of its AI recommendation algorithm in allegedly promoting terrorism. The Communications Decency Act (Section 230) is being challenged in the United States Supreme Court for the first time, which raises the alarm on the potential dangers of recommendation algorithms and opens other online platforms that employ AI to litigation risks, said Evgeniou. Talent development is another consideration. Puranam cautioned that over-reliance on LLMs can atrophy our skills, particularly in creative and critical thinking. Companies should avoid the myopic view of automating lower-end work just because technology allows for it. “In some professions, you can't be a partner without having been an associate, and you can't be a full professor without having been a research assistant,” he said. Therefore, automation without due consideration for talent development can disrupt the organisation’s talent pipeline. Evgeniou proposed that companies put in place guidelines to ensure that AI is harnessed safely, specifying who, when and how it should be used. “In AI adoption, we need to put humans in the driver’s seat to monitor the behaviour of AI,” he said. Is society ready? While some people are understandably concerned about being replaced by ChatGPT, technological unemployment hasn’t happened in the last 150 years, said Olsen. AI is not expected to lead to massive unemployment in the next five to ten years, he assured, so the more relevant concern is how it would affect income distribution. New technologies can bring about two effects: productivity and substitution. Productivity effects will only be apparent in productivity statistics over time, as economist Robert Solow observed. As for substitution effect, it affects individuals to different extents depending on their skill level. In the 1850s, low-skill-biased technological change saw the displacement of skilled shoemakers by unskilled workers who mass produced shoes in factories. On the other hand, the skill-biased technology that enabled factory automation in the 1980s to 2010s favoured those with university degrees over low-skilled factory workers. Currently, it is unclear which group will benefit from LLMs. At a more fundamental level, there is the question of whether LLMs can be truly unbiased and inclusive. Understanding how it learns reveals why it can be inherently biased. ML algorithms such as ChatGPT build knowledge by unsupervised learning (i.e. observing conversations), supervised learning and reinforced learning where experts “train” the models based on users’ feedback, explained Puranam and Evgeniou. This means that ChatGPT “learns” from individuals who train and use it, and the machine adopts their values, views and biases on politics, society and the world at large. Therefore, while ChatGPT can be democratising, it can also be centralised depending on the experts who train it, said Puranam. Moreover, the risk of misinformation is heightened due to the speed of content being proliferated and how content can be weaponised to threaten democracies and institutions. It is even now expected to influence election campaigns, said Evgeniou. Puranam also cautioned that people whose social lives exist only in online channels are at high risk, as they may fail to judge truth from falsehood. Olsen agreed that ChatGPT can perpetuate the views of individuals who are already siloed in their own informational bubbles online. The panellists were cautiously optimistic and agreed on the need for appropriate management and regulation to ensure ethical and responsible use of technologies such as ChatGPT. Learning to work together In practice, regulation will always fall behind tech innovation. The European Union Digital Services Act to safeguard online safety fell behind as soon as it was enforced in late 2022, since it only covers online platforms such as Facebook and Google but not ChatGPT, even though the latter aggregates online content. Similarly, although foundation models can be used in high-risk products downstream, they fall through the cracks in AI regulations. As big tech companies continue to develop new foundation models, this could unleash the proliferation of downstream products. If the foundation models remain unregulated, they may be the single point of massive, cascading failures. But regulating an emerging, evolving technology across different geographical regions comes with challenges. AI algorithms adopt values from the data used to train them, which can result in different AI culture across regions. This increases the complexity of regulation, said Evgeniou. Even if regulations are the same in different parts of the world, the implementations and results will differ not only because of different legal systems, but also different value systems. In spite of the challenges, a combination of actions by data scientists, businesses and regulatory bodies can improve tech trust and safety. Transparency and trust often go hand in hand, and it pays when businesses are transparent in their engagement with customers. For instance, they can inform customers when content is generated by ChatGPT and when customers are interacting with a machine instead of a human. An ongoing development to ensure that AI is more aligned with human values is the field of reinforcement learning with human feedback (RLHF), said Evgeniou. By incorporating human feedback, we can try to improve the quality of the AI’s output based on human values. However, according to Evgeniou, we are only at the beginning of solving the AI value alignment problem. In the meantime, while it is proven that AI can beat a human at chess, this is not the case in all fields. There is potential to leverage AI to complement humans, which requires a better understanding of the opportunities and limits of combining the two. As LLMs continue to evolve, all the panellists saw human-machine ensembling as a promising area to use AI to improve the quality of human thinking and identify the necessary conditions to achieve it. |
19 Apr 2023, 00:00
| FROM Insead Admissions Blog: Beyond Salary and Benefits: Why Career Conversations Matter |
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A simultaneous surge of mass layoffs and unprecedented job growth in the United States has created a confusing, complex climate for companies. In such a paradoxical environment, organisations should seize the opportunity to retain talent instead of falling into a cycle of continuous turnover. By holding onto valuable employees and building on their skills and abilities, companies can create an environment of mutual success, leading to enhanced value for the organisation. Having career conversations with managers, in addition to formal performance reviews, is an effective way to ensure that employees feel valued, motivated and committed. A study from Right Management found that almost 90 percent of employees believe that they are, or should be, responsible for their career development, and two-thirds of individual performance drivers are tied to career conversations. Regular, meaningful discussions between employees and their managers or mentors can help foster a fulfilling work experience for both parties. Through these conversations, leaders can gain a better understanding of their employees’ core aspirations and help them plan their career and life trajectories more effectively. Managers can also derive a strong sense of fulfilment from understanding and developing others Career conversations are seldom incorporated into the mandatory talent management cycle. Non-HR executives may find the constant demand for formal evaluations and salary reviews to be burdensome enough. But a well-handled conversation is a powerful tool that benefits not only the company in terms of engagement and retention, but also the individual’s overall development and transformation. A single conversation can change an entire career path. Choosing the right boss Ensuring a good fit with one’s manager is crucial, particularly when transitioning into new roles. Jaya learnt this the hard way when she joined a tech giant after getting an MBA at Oxford University. Her first manager was incredibly supportive and had a genuine interest in helping her grow and succeed beyond her immediate remit. Monthly career conversations turned into strategising sessions on how Jaya could get the most “stretching” projects to best showcase her abilities. Jaya was thriving and building deep relationships with others across the organisation. However, in her second role at the firm, Jaya had the opposite experience. She felt her new manager lacked the capacity to support her team and “career conversations” were tactical – like going through a shopping list of things she needed to do – and did little to encourage her growth. She said she was never offered any bridge-building opportunities or challenges to expand her scope, despite asking to take on more responsibility. In the face of pushback from her manager when she tried to take on more projects, she became pushier, and the situation descended into a passive-aggressive struggle. Jaya eventually decided to leave, and more than half of the team followed her lead soon after. Since then, Jaya has resolved to select her bosses more carefully and has joined another tech giant where she believes her manager is invested in her success. She is confident that she will build an increasingly exciting and fulfilling career in this open, committed environment. In contrast, Roxana had a positive experience from the outset when she started out in commercial and revenue management at a multinational beverage company. Her boss pushed her into a constant stream of projects and meetings that were outside the scope of her job description. Despite being out of her comfort zone, Roxana found these challenges enjoyable and relished the opportunities to experiment. In addition, her manager frequently inquired about her objectives and ambitions, encouraging her to think critically about her goals. When an interesting opportunity came up, her boss encouraged her to take the plunge and pointed out the transferable skills she possessed, despite her claiming to have no relevant experience. Essentially, her manager supported her in finding a new career path by promoting exploration without restriction and cheering her on from the sidelines. Roxana’s boss remains a role model for her as she continues to develop a successful career. Being the right boss Managers can provide daily opportunities for employees to grow and stretch beyond their current roles by having conversations about every aspect of their careers. Claude, who worked at a multinational pharmaceutical company, established a clear moral contract with his employees, explicitly telling them that he would only keep them for a short time and then push them towards their next opportunity. Claude fostered a comfortable and secure environment where employees were encouraged to seek help, advice or a nudge in a new direction. He helped an employee, Sven, realise that he had all the skills needed for a successful career in HR, despite initially wanting to pursue general management. With the support of Claude and other leaders, Sven was able to thrive in his new career path and catapulted from one HR leadership role to the next. The willingness of managers to engage in open and honest conversations with their employees about career possibilities can clearly have a transformative effect on their careers and lives. Encouraging individuals to explore all possible options and supporting them to arrive at the best conclusion is a hallmark of great management. Evidently, many leaders need to enhance their skills in this area. Part of the challenge is that many managers perceive career conversations as a complex task. These discussions can be emotionally charged, and leaders must handle them delicately to ensure that expectations and motivations are appropriately managed. Nevertheless, the barriers to these conversations are not insurmountable. How to have deep, meaningful conversations with others Sven, through his experience giving and receiving career conversations, shared a few pointers on how to have an effective discussion. Ideally, employees asking for feedback should initiate the conversation instead of waiting for managers to bring the topic up. These individuals should have a career plan so that the topics discussed can focus on aspects of that plan such as on-the-job learning, strengths to leverage, enlargement of experience base and next career opportunities. Managers should actively observe and offer feedback. A climate of openness, trust, courage and empathy is required from both parties. The conversation shouldn’t be structured as this makes it difficult to explore new or unexpected topics. Career conversations should be held in parallel with a couple of trusted individuals, so that the focus is not all on one manager. A career advisory board can be very helpful. Career conversations are not a check-the-box exercise, but rather a vital component of effective management. Mindful managers actively create an environment of possibility where employees feel empowered to discuss their career aspirations. By investing time and effort into these discussions, managers can help their team members become more self-aware, identify their strengths and areas for improvement and create a plan for their future growth. Ultimately, this benefits both the employees and the organisation as a whole, leading to higher job satisfaction, increased retention and improved performance. |
21 Apr 2023, 03:00
| FROM Insead Admissions Blog: ChatGPT versus Hybrids: The Future Depends on Our Choices |
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On 29 March, some 1,000 AI funders, engineers and academics issued an open letter calling for an immediate pause on further development of certain forms of generative AI applications, especially those similar in scope to ChatGPT. With irony, some of the letter’s signatories are engineers employed by the largest firms investing in artificial intelligence, include Amazon, DeepMind, Google, Meta and Microsoft. This call for reflection came in the wake of overwhelming media coverage of ChatGPT since the chatbot’s launch in November. Unfortunately, the media often fails to distinguish between generative methodologies and artificial intelligence in general. While various forms of AI can be dated back to before the Industrial Revolution, the decreasing cost of computing and the use of public domain software have given rise to more complex methods, especially neural network approaches. There are many challenges facing these generative AI methodologies, but also many possibilities in terms of the way we (humans) work, learn or access information. INSEAD’s TotoGEO AI lab has been applying various generative methodologies to business research, scientific research, educational materials and online searches. Formats have included books, reports, poetry, videos, images, 3D games and fully scaled websites. In this article and others to follow, I will explain various generative AI approaches, how they are useful, and where they can go wrong, using examples from diverse sectors such as education and business forecasting. Many of the examples are drawn from our lab’s experience. Decoding the AI jargon AI jargon can be overwhelming, so bear with me. Wikipedia defines generative AI as “a type of AI system capable of generating text, images, or other media in response to prompts. Generative AI systems use generative models such as large language models to statistically sample new data based on the training data set that was used to create them.” Note the phrase “such as”. This is where things get messy. AI methodologies can be divided into four broad categories: robotics, cognitive and symbolic, computational, and control. The first two are often referred to as “good old-fashioned AI”, or GOFAI for short. Cognitive – think decision-support systems used in dashboards, expert systems and other applications across many industries – and symbolic AI – such as WolframAlpha which can interpret mathematical symbols – is programmed to follow rules and mimic human experts. Computational AI includes various machine learning methods including neural networks and a plethora of multivariate data analytic tools often used to “discover” the rules that expert systems fail to achieve. GPT and similar approaches leverage this relatively new form of AI, which gained momentum starting in the 1980s. The fourth AI category, machine learning control, optimises objective functions (e.g. maximise fuel efficiency) within constraints (e.g. “never fly through a mountain”), often leveraging insights from the cognitive/symbolic and computational branches of AI. The graphic below, taken from a video summary of AI, highlights a few buzz words across the four branches. From the chart, it is interesting to note that all AI methodologies can and/or have already been used for generative purposes (e.g., a robot splashing paint on a canvass; an expert system analysing scanner data and automatically writing a memo to a marketing manager, etc.). Chat was largely the domain of the rule-based cognitive and symbolic methods. Translating one language to another also was dominated by GOFAI. Then, researchers starting using computational machine learning (e.g., neural networks like OpenNMT) and achieved largely superior results. My hypothesis about the future of chat is that it will be based on fast-evolving hybrid approaches; the mechanical robot will eventually use machine learning control, having been programmed to leverage both computational machine learning and a mix of cognitive/symbolic algorithms. Chatbots will also be built to purpose – a bot for poetry will likely not do well for welding. Generative AI: A brief history If AI is defined as any non-human method that mimics human intelligence, then the 1967 Cal-Tech handheld calculator must be seen as the ultimate generative AI. You prompt it with, say 2*2, and it gives you a human readable answer “= 4”. This is called rule-based AI. It is not rule-based machine learning because the calculator is not learning but following a rule from expert intelligence. In fact, you do not want to programme a pocket calculator with a learning algorithm or user feedback as this may lead to incorrect results. Each generative algorithm has a unique purpose and should be held up to the standards of the end user, not the programmer. Rule-based machine learning, as the phrase implies, ingests a large quantity of data that allows the algorithm to better learn or infer the plethora of rules that are not easily documented. For example, we can replace each word in the sentence “George Washington was the first President of the United States,” with position-of-speech tags (e.g., proper noun = NP0, VVB = Verb, ADJ = Adjective, etc.) = “NP0 NPO VBD ATO AJ0 NN1 PRF ATO AJ0 NN2.” This so-called natural language processing (NLP) lets us infer grammatical patterns likely to be understood by humans – the more frequent the pattern, the more likely it will be understood by an end user. NLP also allows us to divide sentences at the verb (VBD = “was”) – as humans do – to extract the “right-hand” and “left-hand” knowledge, mirroring English grammatical rules that distinguish between subject and object. IBM Watson, introduced in 2011, is an example of an AI system that uses NLP. Scraping billions of sentences from digitised sources, this method gives a simple, non-reasoning, knowledge-oriented chatbot, with one sentence yielding two chunks of knowledge: Q: Who was the first president of the United States? (searches right side) A: George Washington (returns the left side) and Q: Who was George Washington? (searches left side) A: The first president of the United States (returns right side) Note, in both cases, the text exists in nature and is plagiarised from some source, though only fragments are returned. No need for a neural network for simple knowledge bots – old-school NLP can do the trick. Now imagine we replace the text with “synonyms” that can be used for speculation or scientific inference: Aspirin inhibits headaches in chimpanzees. becomes inhibits in . One sentence alone can represent the crystallisation of years of research and millions of dollars (e.g., “the cure for malaria is XYZ”). Since the knowledge is in the public domain, the computer can free ride on billions of dollars of sunk investments reflected in petabytes of text. It can now apply reasoning and forecast what a scientist might speculate. Cool stuff. The problem with modern chatbots Neural networks, of which generative pre-trained transformers or the now-famous GPT is one class, are useful when the exact rules are not documented enough for programmers to get the desired results. They are also useful when the rules or strategies to implement the rules are simply not well understood or too costly to programme compared to cognitive approaches. Deep generative models and the underlying algorithms confidently make what appear to be educated guesses. But they may not follow known rules even in cases where the rules are fully understood. That is a problem. If users know the rules, and the AI fails to follow them, the output can be construed as “disinformation”, “deception”, “lying”, “propaganda” or worse, “social manipulation”. If programmers add rule-based logic on top of the “black box” then concerns over manipulation are amplified. Bad advice or instructions rendered without attribution or caveats might kill someone or cause a riot. Let’s compare two didactic or instructional limericks generated from different methodologies, but with the same prompt: “love” (e.g., write a didactic limerick about love). One uses black-box deep learning, the other uses rules. The imposition of “didactic” is to emphasise that the poems should teach the reader the meaning or the definition of love. A limerick is a five-line poem, usually humorous and frequently rude or vulgar, in predominantly anapestic trimeter. It has a strict rhyme scheme of AABBA, in which the first, second and fifth line rhyme, while the third and fourth lines are shorter and share a different rhyme. Poem #1: ChatGPT There once was a love so fine It shone like a bright sunbeam It brought joy to every day And made everything gleam It was a love that was meant to be, not a scheme Poem #2: TotoGEO There was a young girl from the Dove, And she wanted a word for love. Like flesh injection? No, it’s affection! That literate gal from The Dove. Which poem is better? This may depend on your taste. Which poem is a better limerick? The answer is clear: Poem #2. Why? Because it is a limerick and defines love as affection. The problem of the first generative result, from ChatGPT, is that it does not inform the reader that it does not know how to write limericks. A young reader might infer that Poem #1 is a limerick, and forever be misinformed. The second poem, which follows the known rules, can never be “wrong” as long as the rules themselves are known and programmed, as cognitive AI approaches typically do. The GPT approach is broad in its abilities but expensive to implement and open to guesswork. A recent media report, for example, concluded that “ChatGPT Is Pretty Bad At Poetry, According To Poets”. In contrast, the rule-oriented approach is built on a large and general linguistic graph applied to a narrow formulaic writing style. The algorithms for limericks are not the same ones that write sonnets even though they share the same back-end data graph and other code. The method for Poem #2 in the above example is far less expensive to implement than GPT and, like a calculator, is never wrong in what might be expected as an outcome. Visit totopoetry.com and type in a word to get a few examples. The rules and back-end methodology for the algorithms collectively called “TotoPoetry” (referenced above) have achieved a few milestones: the world’s longest poem; the first unabridged dictionary consisting of definitions written in verse across some 20 genres of poetry; and the largest collection of poetry written by the same source. Since the data input into TotoPoetry are themselves partially generated from neural networks, the graph-generated text can be seen as a hybrid generative methodology. TotoPoetry creates millions of poems so a second algorithm acts as an editor to choose the best ones to post. The real battle What is really going on here is the expectation that output generated by AI should be, well, correct, reliable, unbiased or at least not completely wrong. An autopilot should not try to fly an airplane through a mountain. Likewise, a generative AI platform should not mislead. At the minimum, it should indicate that it might be clueless on a topic it was not trained on. When I asked ChatGPT to write a Wikipedia article about Tinwarrole, here is what I got (note the bot’s assertive tone – likely from rules imposed on the language model): ChatGPT: Tinwarrole is a fictional substance with no real-world basis. It does not exist in reality and therefore does not have any known properties or uses. It is not a recognised term in any scientific or medical fields, and there is no information available about it. As a result, it is not possible to write a Wikipedia-style article about Tinwarrole, as there is no reliable, verifiable information to include in such an article. Our lab, leveraging exacting rules, gives a factual (non-fictional) answer, derived from an ASCII file indexed by Google some 10 years ago: TotoGEO: Tinwarrole was the name of an African slave aboard the NS de Montserrat. Tinwarrole was registered as a male of 44 years and enslaved in 1818; the NS de Montserrat was a Spanish schooner captained by Idriso de Pasqual. This vessel had a recorded mortality rate of 1 percent. Descendants of Tinwarrole, if any, were freed from slavery in the United States in 1863 following the Emancipation Proclamation. Generative AI is in its infancy. Things will improve over time. Asking to pause research in this area appears naïve in its lack of specificity. What needs to happen is that firms selling this technology must be cautious in releasing it too early or too widely. Minimal quality standards should be encouraged. Many of the platforms developed at the INSEAD TotoGEO AI Lab are in the hands of selected curators verifying veracity and provenance. Our work has already included the use of generative AI to exacting standards in agriculture and research. Soon we can expect to see more hybrid AI methodologies that blend deep learning with cognitive, symbolic, control and/or various rule-based approaches. In all cases, engineers can and have introduced strategic biases into the systems produced, leading to calls for transparency, provenance and accountability. If a plane crashes because of a bad autopilot system, the company creating and/or knowingly using such a faulty system may face liabilities. In the articles to follow in this series, I will explain how these methodologies can take business consulting, education, journalism and search engines to a whole new level. |
23 Apr 2023, 20:00
| FROM Insead Admissions Blog: Operating in Permanent Beta: How Can Organisations Cope? |
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Every day, companies in industries such as telecommunications, banking and insurance serve millions of consumers through digital services, mostly in the form of automated processes. Behind these services is a network of digital service companies – from the modem provider to the broadcast service, middleware and content provider – which interact with one another. Over the past decade, the IT-enabled digital service supply chain has transformed into a digital service network of independent companies continuously delivering new innovations. In this complex network structure, each company may contain software bugs that can disrupt the primary service, either independently or through interactions with other services or programs in the network. The fact that failures can arise anywhere in the network, independently or in combination with other services, means that it can be difficult to detect the causes of failure before a new service is deployed. As a result, while new products previously underwent a phase of beta testing by end-users to uncover issues prior to release, today’s digital services are delivered in “permanent beta”, with continuous fine-tuning and updating, such as app updates. For companies operating in this permanent beta reality, the concept is perhaps nothing new. However, the implications for the company’s strategy, performance measures and resource allocation are less understood. In a study, my co-authors* and I examined the repercussions for the company's quality assurance (QA), operations and training teams. From complicated to complex products The digital services environment has evolved from a complicated to complex one. The conventional product development process, although complicated, is structured and typically sequential, where the relationship between action, design and outcome is clear. In this context, QA experts would ensure the software’s performance by identifying and eliminating most bugs before the service is put in the hands of the consumer. On the other hand, digital product development today involves an increasing number of stakeholders and subsystems in a digital service network. The complexity makes it either impossible or cost-prohibitive to identify all potential faults and the origin of those faults before launching a service. When it is near impossible to eliminate all bugs before the service reaches the consumer, performance measurement through QA is rendered ineffective. In addition, the digital service landscape is not only complex, but also highly competitive: Consumers expect both high levels of innovation and reliability. Businesses are therefore not only under pressure to release services quickly, but also to adapt and renew their services in line with rapid technological development. However, innovativeness and reliability are sometimes in conflict with each other. Continuous updates to introduce new features can introduce new software bugs that reduce reliability at the same time. When service incidents do occur, companies are expected to recover services swiftly, or risk losing consumer confidence and loyalty. This adds more urgency and complexity for service providers. Overall, complexity is determined by the number of digital service providers in the network, the complexity of the product and the speed of change (which is particularly crucial for sectors such as electronics, software and vaccine production during a health crisis). Business not as usual Despite the digital services environment becoming increasingly complex, not all organisations recognise the need to realign their strategy and performance measures. My co-authors and I seek to uncover the implications for resource allocation – specifically, the difference between performance measurement before and after the release of digital services – and the role of employees. In the longitudinal study of a European telecom company TeleSP, we collected empirical data on its digital TV service over nine years. To provide a more holistic view, we built a model with stock and flow diagrams to identify general conditions or situations when things could go wrong , in particular when environments evolve from complex to chaotic. We included parameters such as the flexibility of assigning human resources between QA, operations and the training teams. Findings reveal that due to the increased complexity, traditional performance measurement methods focused on detection of software bugs before release becomes less effective. Since companies can no longer assume that they can predict what will go wrong and that they can solve issues before the service is launched, it might be more effective to release the service, monitor its performance and solve problems promptly in the field as they arise. A common example is updating mobile apps whenever software patches are introduced to fix issues. This strategy goes against recent and current industry practice. As traditional methods like QA become less important, organisational change is needed. Our research shows a shifting dominance of organisational processes in response to increasing levels of complexity. Organising for permanent beta also implies the need to rethink decisions about resources. Reorganise and reskill Ensuring that an organisation is ready for permanent beta involves organisational as well as people-related aspects. First, leaders need to recognise that the business landscape is evolving from complicated to increasingly complex or even chaotic. More concretely, steps need to be taken on two fronts: the organisation and the people. Organisational agility is needed to allow employees to be deployed across front-end roles (post-sales support) and back-end roles (QA and innovation) to better meet manpower needs in a timely manner. With increasing complexity, more service issues are expected to arise in the field, which requires more performance monitoring after releasing the service. Digital service providers must have the flexibility to reduce pre-release QA activities and reallocate QA employees to post-release performance monitoring and service recovery in the field as needed. This means that employees need to be trained to be effective in monitoring and anticipating problems, as well as remedying the issues promptly in the field, in addition to QA tasks. It is important to note that while innovation is widely celebrated, companies need to consider the impact on the wider organisation and employees. Innovation cannot happen at a rate where inadequate resources are allocated to manage issues that arise in the field or employees suffer from burnout. Companies need to anticipate potential issues that may arise, increase manpower assigned to post-sales technical support accordingly, as well as reskill employees in line with innovation. The above aspects need to be managed effectively, otherwise, inadequate capacity to address issues arising in the field can lead to bottlenecks in post-sales support and employee burnout due to insufficient manpower to meet the demand for support. Taking the pulse of performance To ensure post-sales service reliability, digital service providers are moving towards condition monitoring by deploying data-driven automated systems to continuously monitor the performance of the service. This ensures that crucial indicators of performance are kept within a healthy range. Should one of the critical parameters be out of acceptable range, it signals the need to address a potential issue. This is akin to wearing a fitness tracker on your wrist to continuously monitor certain health indicators and provide early warning signs before an ailment arises. Compared to routine maintenance such as annual vehicular inspection (which may not always be needed) or undertaking corrective maintenance only after service failure occurs, this approach is not only more cost-effective, but also potentially less disruptive to the user. Other industries where performance and uptime are crucial – such as chemical and energy industries, infrastructure, aerospace and shipbuilding – have been moving toward maintenance based on continuous monitoring of the equipment’s condition, enabled by the greater availability of data through IoT. Each company’s management will need to decide what parameters to measure, how to measure them and what the acceptable range is. Performance monitoring is most effective in predicting the probability of failure when automated data collection and analysis are combined with human expertise for data interpretation. Investing in human expertise is equally important as investing in automated processes. Overall, there are many moving parts in the increasingly complex digital services environment. Ultimately, businesses need to align performance measurement with elements such as business strategy, organisational culture and the external environment. * Kim E. van Oorschot, Norwegian Business School; Henk A. Akkermans, Tilburg University; and Yan Wang, Delft University of Technology. |
24 Apr 2023, 20:00
| FROM Insead Admissions Blog: Without Shared Values and Goals, Tech Regulations Won't Work |
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Regulatory harmonisation — the practice through which regulators align policies and procedures across markets — has been a trend since the end of World War II. It is heralded as a tool that enhances trade, ensures product safety, fosters innovation, and even increases mutual dependence and, thus, promotes world peace. The European Union is an evolving example of what can be achieved through harmonisation. It also lays bare its limits. For it is no longer clear that harmonisation is always desirable, or indeed realistic, in the realm of technology even as tech regulations grow worldwide. In fact, some of the biggest names in tech argue that technological progress should be paused, and countries are now imposing restrictions on one another’s innovations. The United States, for example, prohibits semiconductor chipmakers from selling advanced chips to China; Italy, among other countries, has blocked access to ChatGPT; and in China, which has long shut out Western tech platforms, access to the chatbot is reportedly banned. We live in a world shaped by rising nationalism and widening inequalities. China and the West are on a potential collision course of decoupling and conflict while Russia is waging a brutal war against Ukraine, to name but two fault lines dividing us. This dynamic and increasingly volatile context presses us to address a critical question: How can we build a digital world that is safe and beneficial for all? Is it enough to call for, say, China and the US to adopt the EU’s rules on digital services and artificial intelligence, while China and the EU adopt American financial regulations? We don’t think so. In fact, we argue that calls for regulatory harmonisation to “tackle collectively” the risks posed by technology are misguided if the goals of the intended regulation and the values that are key to successful implementation are not examined. The reason is simple: Given the diversity of political and economic goals, values, and agendas among global powers today, regulatory harmonisation is not only illusory, it may in fact be dangerous. Instead of striving for regulatory harmonisation at the global level, we need to enrich the conversation to first include alignment of goals and values, and whether and how technology helps to manage – or exacerbate – differences. Any continued push for harmonisation without agreement on goals and values will prove counterproductive and risky. This is the debate that needs to take place regarding global technology – and it needs to take place now. Let us elaborate why. The growing dangers of technology Despite its promises, technology is a double-edged sword. We face dire consequences if we don’t get global technology regulations right. It’s no surprise that the World Economic Forum’s global risk report for 2023 warns that technology will “exacerbate inequalities” and cybersecurity threats will “remain a constant concern” for the future. Meanwhile, the United Nations Human Rights Office reports that new technologies – specifically spyware, surveillance technology, biometrics, and AI – “are being misused worldwide to restrict and violate human rights”. In fact, leading tech figures such as Elon Musk and former Google CEO Eric Schmidt are convinced that humanity’s very survival is at stake, with the latter warning that AI poses a threat as dangerous as nuclear war. Instead of striving for regulatory harmonisation at the global level, we need to enrich the conversation to first include alignment of goals and values, and whether and how technology helps to manage – or exacerbate – differences. The second risk of harmonising regulations pertains to implementation. International regulators often work together to craft similar guidelines and technical requirements, but not all jurisdictions achieve the same desired outcomes. All too often, companies and organisations lobby for terms that serve their own interests. There is a lack of shared goals and values required for collective commitment to the regulation. Enforcement and implementation also tend to be uneven across regions, countries, and even among regions in the same country. In this aspect one could look to Switzerland as one example of effective regulation. The Swiss government delegates most regulatory authority to the cantons. At the local level, goals and values are more easily shared and understood, hence people are less likely to violate or circumvent laws. Conversely, lawbreakers rationalise their actions by accusing regulators of lacking understanding of their goals or their ways of working. Take the financial sector for example. Prudential regulation aims to ensure the stability of both financial institutions and the economy at large by mandating control mechanisms for risk management at a macro level. Yet, bankers repeatedly come up with creative ways to increase their financial gains — personal or corporate — while concealing risks partially or completely outside their balance sheet. The global financial crisis and, more recently, the Silicon Valley Bank collapse and the demise of Credit Suisse are stark examples of how well-intended regulations can fail. They also reflect the perennial gap between the intention and spirit of laws and their impact on different actors, each of whom is driven by their own goals and values. A narrow focus on rules defeats the purpose There is another, perhaps bigger, problem with aligning regulations: Laws can be copied, but the copy leaves the spirit behind. Worse, harmonised regulation may become a lawyers’ game of meeting the letter of the law while pursuing goals that violate its spirit. Here’s how this problem could play out on the global stage: Nations adopt the regulations of the others to spur trade and investments, only to drop those rules once they have sufficient size and clout. In other words, it is plausible that nations turn their backs on international cooperation after becoming major economic and geopolitical powers, and use the mutual dependency engendered by that cooperation against their former partners. If that happens, regulatory harmonisation will have created a new and fragile global power balance. This could lead to unpredictable and frightening potential consequences, including the weaponisation of AI systems as Trojan horses. Align regulatory goals and values before rules To mitigate these problems and ensure that regulations are effective across diverse markets, we need to foster trust and commitment by agreeing on the values and goals that will drive the laws and regulations as well as the implementation of those laws and regulations. To start the process with rules is going about it backwards. We should never forget that regulations are only mechanisms or instruments – a means to an end, so it is only logical to start by discussing and agreeing on the end. If people believe in what the regulations are trying to achieve and the values that underpin them, they will be much more likely to comply with and trust the regulations. And regulators can trust the people in return. This principle holds true across the board, for governments, multilateral organisations and companies. Goals set clear perimeters for what regulations are meant to achieve — they are fundamental to effective governance. For example, the EU’s Digital Services Act aims to protect online users from disinformation, harmful or illegal content, and to increase oversight of online platforms while fostering innovation. These goals are not country or region specific; hence it shouldn’t surprise us that all EU countries adopted the Act, which is never an easy feat for the bloc. Values capture the main underlying drivers of behaviours, both of the regulators and the regulated. They must align with goals if the goals are to be achieved. For technology, values may range from privacy and freedom of expression to innovation and safety. The OECD AI Principles serve as a good example. Unmanaged diversity is dangerous A century ago, British mathematician and philosopher Bertrand Russell, in the midst of China’s civil war, extolled in The Problem of China what he saw as Chinese virtues: respect for both individual dignity and public opinion, a love for science and education, and an aptitude for patience and compromise. Russell cautioned the West against expecting China to bend to their will – advice that is eerily relevant today in the context of global cooperation in regulating tech. “If intercourse between Western nations and China is to be fruitful, we must cease to regard ourselves as missionaries of a superior civilisation.” He also posed a question: “If China does copy the model set by all foreign nations with which she has dealings, what will become of all of us?” The question is remarkably prescient. As Schmidt argues in a recent commentary on technology and geopolitics in Foreign Affairs, we are locked in a global competition not only among nations, but also systems. “At stake is nothing less than the future of free societies, open markets, democratic government, and the broader world order,” he writes. Schmidt’s comments reflect the emergence of unilateralism across the globe which in our view is ill-suited to deal with the threat that is posed by AI. Instead, the world led by the US and China - and perhaps the EU - ought to engage each other on defining shared goals and values in order to counteract a threat that is second only to climate change to the survival of humankind on this planet. Schmidt is right that diversity, despite being celebrated in recent years, can be dangerous if not managed well. By diversity we mean wide differences of values and goals in tech regulation. The answer to averting a tech-driven armageddon is neither a pause in technological innovation nor regulatory harmonisation in isolation. Instead, alignment of and commitment to global goals and values will be the paramount drivers of cooperation and effective regulatory implementation. The United Nations was formed after World War II towards this end. Growing divergence of goals and values among UN members today poses a grave risk to the organisation’s mission, as it has become a forum for states to fuel nationalism and further their own goals. We should not wait for a tech-driven crisis to acknowledge the need to align our goals and values. We should do so proactively, by establishing new tech-specific global organisations where such alignment can be built for a start. It will make the world a safer place. |
26 Apr 2023, 20:00
| FROM Insead Admissions Blog: Intellectual Honesty Is Critical for Innovation |
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When top Amazon executives were debating in the mid-2000s whether to greenlight Kindle, the now ubiquitous e-reader, sparks flew in the boardroom. Jeff Wilke, the CEO of Amazon’s retail business at the time, openly challenged Jeff Bezos in front of the board. Wilke argued that the venture would fail because Amazon lacked experience creating hardware. Bezos conceded Wilke had a point but argued that the value of the experiment creating software-embedded devices outweighed the risk to Amazon. Later, Wilke said: “Turns out I was right on everything that I called out, and Jeff was still right to say we should do it.” He added, “[We] created a valuable skill set that we can use to invent new things on behalf of customers.” That debate – part of Amazon’s "disagree and commit process” – is part of why Amazon has so successfully created so many new lines of business. It also reveals a paradox: Leaders today are increasingly striving to create a sense of social cohesion, sometimes described as psychological safety, where people feel included and that their views matter. But if intellectual honesty, where you proactively voice disagreement in a rational way, is handled improperly, it can chip away at the social cohesion often at the heart of psychological safety. In the most extreme cases, intellectual honesty can even destroy psychological safety, leading to highly vocal debates and environments charged with anxiety. Striking the right balance between psychological safety and intellectual honesty is crucial but challenging. In a study of more than 60 start-ups and established firms in a variety of industries, my collaborators* and I found that many teams prioritise psychological safety without realising that it can sometimes undermine intellectual honesty – and vice-versa. Distressed, anxious, comfortable, innovative – what’s your team culture? Our study identified several principles that are critical for fostering an innovative, high-performance team culture that balances intellectual honesty and psychological safety. But first, let’s examine four typical team cultures that have varying degrees and combinations of psychological safety and intellectual honesty, and how these cultures facilitate or hinder innovation and learning. Greater awareness of a team’s culture could help leaders improve team performance. Distressed Distressed teams lack both psychological safety and intellectual honesty. As a result, they struggle with learning and innovating. Such teams are common in organisations where individuals lack emotional intelligence. In such environments, leaders often can’t admit that they are wrong and no one is willing to acknowledge that the company itself is under threat. A salutary example is Nokia. Executives and managers who worked there in the late 2000s described a culture of fear and intimidation in which senior leaders pressured managers to perform without revealing the extent of threats from competitors. Anyone who dissented was punished and employees were afraid to deliver bad news, including that the company’s cellphone strategy was failing. Anxious Anxious teams score high on intellectual honesty and moderate to low on psychological safety. Team members are encouraged to be brutally honest even if it harms their relationships. In interviews, people on teams with an anxious culture told us that they often don’t feel safe or respected. They worry that they are in constant competition with their colleagues and what the team thinks of their ideas. Anxious cultures have high turnover rates. Ray Dalio, who pushed for radical truth and transparency at the hedge fund Bridgewater Associates he founded, once reported that 25 percent of new employees left within 18 months. And according to one analysis, blunt-speaking Tesla CEO Elon Musk loses 27 percent of his executive team every year. Comfortable The opposite of an anxious culture, a comfortable culture is characterised by high psychological safety and moderate to low intellectual honesty. Team members are typically agreeable, need to be liked and are less assertive or proactive. They feel safe speaking up but choose not to, believing that avoiding potential negative conflict is better for morale and the productivity of the team in the long run. They may not care enough about the mission of the team or organisation to rock the boat. Comfortable teams tend to perform consistently, but they rarely produce pioneering innovations because members don’t push one another to improve. One manager at a professional services firm told us that he was not assertive when challenging colleagues’ ideas unless his work was directly affected. Further, according to one study, people in psychologically safe environments tend to be less motivated and don’t work as hard as people who expect their performance to be critiqued. Innovative The most innovative teams are those that balance psychological safety with intellectual honesty. Members feel safe to voice their opinions and openly debate ideas. They take decisive action, but they do so in ways that maintains respect among team members. In contrast to people in distressed cultures, they are able to swallow their pride and accept another viewpoint. “People who can’t handle the truth can’t admit a mistake, and so they go blindfolded off the cliff,” explained Martin van den Brink, chief technology officer at ASML. Van den Brink led a decade-long effort to create extreme ultraviolet lithography machines, a technology used to make advanced microchips. “I never pretend I will be right. I just say, ‘This is what I think; tell me the flaw in my thinking.’” Principles for building innovative cultures We have identified four principles that are most important to achieving an innovative, high-performance team culture. Principle 1: Foster emotional intelligence Emotional intelligence is the mortar that binds psychological safety with intellectual honesty. It includes self-awareness (awareness of your emotions), self-management (regulation of your emotions), social awareness (empathy and the ability to see others’ viewpoints), and relationship management (the ability to find common ground and build rapport). Leaders should be particularly skilled at social awareness and relationship management. By listening with empathy, seeing others’ perspectives and defusing conflict, they are more likely to foster intellectual honesty while preserving safety. They are also able to engage in self-reflection, show humility, use humour to relieve tense situations and tell people they are valued. Principle 2: Hire and develop proactive employees Research shows that personal initiative is more than twice as important as psychological safety in predicting whether someone will offer their ideas or raise questions. When Charles Gorintin founded the French company Alan in 2016 with the aim to create innovative digital offerings for health insurance and healthcare, he hired executives who were proactive and willing to challenge one another’s ideas. They created a culture in which leaders are encouraged to make decisions swiftly with the best information available and to change course quickly when new information emerges. Gorintin explained: “It is often better to make the wrong decision, act and learn how to fix it than wait to make a decision in the first place.” Principle 3: Legitimise and encourage honesty Organisations can address employees’ fear of retribution for speaking up through management principles or processes that legitimise and encourage honesty, such as the one practised at Amazon. Research suggests that task conflict – or disagreement about work – within teams leads to more entrepreneurial strategies, more innovation and higher performance. Principle 4: Subordinate egos to unifying goals When employees feel engaged with and responsible for the team’s or organisation’s mission, they are more likely to speak up about problems and issues that could jeopardise the mission. This sense of working towards a common goal is stronger than psychological safety in driving intellectual honesty. “I find that candour emerges when people are committed to the mission and feel dependent on their teammates for getting the mission accomplished,” said Sterling Anderson, a former Tesla executive and founder of Aurora Innovation, a US$3 billion startup that sells self-driving vehicle technology. Psychological safety and intellectual honesty can sometimes work against each other. The challenge for leaders is to promote candid debate that is focused on the problems the team needs to solve and defuse interpersonal conflict. By doing so, they can nurture a culture that leads to higher performance. *Jeff Dyer, Brigham Young University; Curtis Lefrandt, Innovator’s DNA; and Taeya Howell, Brigham Young University. This article is adapted from Why Innovation Depends on Intellectual Honesty, published in MIT Sloan Management Review. |
01 May 2023, 21:00
| FROM Insead Admissions Blog: Nondisruptive Creation: An Alternative Path to Innovation and Growth? |
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We’ve all heard the refrain: Disrupt this, disrupt that. Disrupt – or die. Unsurprisingly, many business leaders have come to view “disruption” as a near synonym for “innovation”, with many companies having achieved their success by disrupting traditional sectors. For instance, Uber, Lyft and Grab were founded as challengers to the taxi industry, just as E-ZPass effectively disrupted the tollbooth industry and Netflix clobbered the video-rental market. From the tech hubs of Silicon Valley and Shenzhen to the financial centres of New York and Tokyo, disruption is all around us. But is upending traditional industries the only way for organisations to innovate and grow? And is it necessarily the best approach? As we lay out in our new book, Beyond Disruption, the answer is no. Our research reveals that the obsession with disruption can lead companies to overlook an alternative pathway to innovation and growth. We term this process “nondisruptive creation” – creation or innovation without disruption or destruction. Nondisruptive creation presents a new way of thinking about what is possible and opens a bold new path for all of us to innovate new industries, new jobs and profitable growth without the social costs of shuttered companies, hurt communities or lost jobs. From blue ocean to nondisruptive creation After the publication of our books Blue Ocean Strategy and Blue Ocean Shift, we noticed the same question kept popping up from practitioners, academics and consultants working in the field of innovation. The question they posed was this: If blue ocean strategy is about the creation of new markets, when looked at through the lens of innovation, isn’t that the same thing as innovating? How does blue ocean strategy differ from the innovation concepts of disruption, disruptive innovation and creative destruction? Given how disruption has become the battle cry of business over the last 20 years, as well as the historical importance of creative destruction, we set out to explore this question on a deeper level. We began by re-examining our blue ocean data and found that although a few cases – such as Novo Nordisk’s insulin pen and Apple’s iTunes – largely disrupted and displaced existing industries, most blue oceans in our data were born not within the boundaries of an existing industry, but across them. Cirque du Soleil, for instance, created a brand new market space at a high price point across the existing boundaries of circus and theatre. Although it pulled market share from both industries, generating a measure of disruption, it did not significantly displace either industry. Our examination also revealed something else that greatly intrigued us. Among the cases that had been added to our original database over time, a few had triggered no disruption or displacement at all. This piqued our curiosity. Were these cases a few unconnected anomalies, or were they the tip of an iceberg, examples of a new kind of innovation? If the latter, what were the implications for business and society, now and in the future? And was there a process or an approach by which we could conceive and realise this new kind of innovation in a systematic way? To answer these questions, we collected historical and current cases on what we would call nondisruptive creation across the for-profit, non-profit and public sectors. As we did, we built a growing new database on nondisruptive creation, and the managerial actions involved in this process. A distinct new concept Our research showed that nondisruptive creation is a concept that is unique from both disruption and blue ocean strategy, with a correspondingly distinct impact on growth. Nondisruptive creation is not the same as – nor should it be confused with – scientific invention or technological innovation, or new-to-the-world products or services. Nor is it concerned with a specific geographic market or demographic group, such as the bottom of the pyramid, or a certain socioeconomic level, such as the low end. Nondisruptive creation is distinct from existing innovation concepts and can be defined as “the creation of a brand new market outside or beyond the boundaries of existing industries”. It is precisely because the new industry is created outside the bounds of existing industries that there is no existing market or established players to be disrupted and fail, yielding nondisruptive growth. In this way, nondisruptive creation opens a positive-sum approach to innovation and growth that allows business and society to thrive together. It achieves this by solving brand new problems and creating brand new opportunities beyond industry boundaries, whether those problems and opportunities exist but remain unexplored or are newly emerging. Take “Sesame Street”. It unlocked the brand new market of preschool edutainment – that, for the most part, had not existed previously – without displacing preschools, libraries or even parents reading bedtime stories to their children. Or Viagra, which revolutionised men’s lives by solving the prevalent but long unaddressed problem of erectile dysfunction. By creating a brand new market of lifestyle drugs beyond the boundaries of the existing industry, Pfizer achieved nondisruptive growth without any displacement. In contrast, disruption generates new markets within existing industry boundaries, which results in a high level of disruptive growth; and blue ocean strategy creates new markets across existing industry boundaries, producing a mix of disruptive and nondisruptive growth. The future is ours to create In Beyond Disruption we first aim to show why broadening the existing view of innovation and growth by including nondisruptive creation is of paramount importance today and will be even more so in the future. In the face of the rising tide of stakeholder capitalism and the Fourth Industrial Revolution, the challenge for companies will be to create new markets that don’t disrupt existing markets, jobs, people or society. Towards this aim, we discuss the distinctive strengths of nondisruptive creation and how it allows organisations to be a force for good, while also acting as an important lever of their growth. Second, we aim to show how business leaders can generate nondisruptive creation within their own organisations by laying out the building blocks for identifying, acting on and capturing nondisruptive opportunities. We outline areas that are ripe for nondisruptive creation that business leaders can seize, providing examples that cut across all sectors of the economy and a practical framework for guiding innovation efforts. This research has key implications for business and society and can help companies more thoughtfully pursue their growth and innovation strategies. If we can achieve profitable growth without incurring disruptive social costs, business and society could progress more harmoniously. Our book Beyond Disruption redefines and expands the existing view of innovation, opening a path to a positive-sum approach to innovation through which both business and society can thrive together. |
03 May 2023, 20:00
| FROM Insead Admissions Blog: How Women Leaders Benefit From Using Humour |
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“A sense of humour is part of the art of leadership, of getting along with people, of getting things done,” said Dwight D. Eisenhower. The ability to make light of a situation and make people laugh, as the former US President and statesman noted, is undoubtably a handy skill for managers. But there is a specific group of leaders for whom humour could be even more potent: women. This is the main finding of a study Julia Bear, Emuna Eliav and I conducted on the benefits of using humour to influence others. In our analysis of 2,407 TED talks by prominent speakers presenting new ideas in their areas of expertise to live and online audiences, we found that humorous speakers were more influential, especially women. Female TED speakers who used more humour were more popular and perceived as more influential than less funny women and comparably funny men. Our study, published in Academy of Management Discoveries and recently featured in Harvard Business Review, tracked how often the audience laughed to quantify humour. Audience ratings, independent evaluations and online view counts were also used to measure its impact. Take the 2013 TED talk by Amy Webb, founder of the Future Today Institute and an adjunct assistant professor at Stern Business School. Webb said: “I like the idea of online dating, because it's predicated on an algorithm… I thought, well, will data and an algorithm lead me to my Prince Charming? So I decided to sign on… When I was asked about fun activities and my ideal date, I said monetisation and fluency in Japanese. I talked a lot about JavaScript [audience laughter].” Our evaluators rated Webb as highly competent, warm and leader-like, while audience members rated her as highly funny. Her talk has been viewed more than 8 million times. The professional benefits of humour for women are also apparent in other contexts. As part of an ongoing research project, my INSEAD colleagues Li Huang, Melanie Milovac and Eric Yuge Lou analysed the use of humour in more than 200 start-up pitches. They found that female founders’ pitches that were rated by an independent evaluator as less humorous were less likely to win and be perceived positively by investors and judges than those by their equally unfunny male counterparts. But use of humour bridged this gender gap: funnier pitches were equally likely to win, regardless of gender. The two studies described above explored authentic expression of humour in real-world contexts with genuine stakes. In both cases, female presenters who violated the “women aren’t funny” stereotype by using humour effectively benefited more from humour than men. The reason could be attributed to women being perceived favourably when they defy gender stereotypes, such as assumptions that women are less intelligent or competent. Humour is associated with intelligence and competence, so women presenters who used humour effectively are seen as competent, diligent and independent. Humour, warmth and competence The findings from our TED talks study also suggest that humour can help female presenters overcome the warmth-competence double bind that women often face. Research has shown that unless they go out of their way to appear warm and friendly, women who speak in an assertive manner are often perceived as less likeable, less influential and more threatening than their male counterparts. But when women do appear warm and friendly, their competence often comes into question. Prior research has also demonstrated that humour can convey both warmth and competence, regardless of gender. We found that the funnier speakers in our TED study were perceived as both warm and competent, suggesting that effective humour may be the key to helping female leaders wield greater social influence. Authentic humour expression The most effective jokes are those that are authentic, meaning they fit the teller’s own style and identity. The women who utilised humour in our studies didn’t tell the same jokes as their male counterparts; rather, their humour was unique, personal, specific to the situation, and based on their experiences. Our findings may seem surprising in light of previous research that advises women against using humour in work presentations if they want to be taken seriously. While prior research explored whether men and women telling the same jokes in the workplace were judged as equally competent, we examined the effect of authentic humour of various kinds on the individual’s popularity and success. In these settings, we found that humour helps women overcome resistance and gain influence by increasing their perceived warmth and competence, two qualities that are often seen as mutually exclusive in female leaders. Humour is an important tool in a leader’s communication toolbox. But all too often, the pervasive stereotype that “women aren’t funny” becomes a self-fulfilling prophecy: women are told that they’re not funny, and so they’re deterred from using humour in professional settings. Hopefully, our studies can encourage more women to cultivate this aspect of the art of communication. |
07 May 2023, 22:00
| FROM Insead Admissions Blog: Planning Matters: Coordination in Humanitarian Relief |
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More than 5.9 million people have been displaced due to the Turkey-Syria earthquakes – and while media attention of the disaster has dwindled, the humanitarian needs have not. Displaced people are waiting to return to their homes and need temporary housing or repairs to their damaged buildings and infrastructure. The mammoth recovery operation is in full swing, but will take years and require effective planning and execution. In Turkey, to shelter people displaced by the earthquakes, over 300,000 tents were installed in temporary “tent cities” in hard-hit provinces. But even as the number of people in need of shelter grew, empty tents could be found in these tent cities. What had gone wrong? With the increased frequency and intensity of both natural and man-made disasters, the need for humanitarian aid is increasing – and so are the challenges and resource limitations. Humanitarian relief operations are often criticised, especially for their response to large-scale disasters such as the ongoing relief to the Turkey-Syria earthquakes. The magnitude of such operations is beyond the capacity and capability of a single organisation or even a single country. In reality, response operations require the involvement of many actors including local governments, local and international humanitarian organisations, local communities and the private sector. Unless these actors work together and coordinate their operations, effective and efficient relief is impossible. Why coordination matters Coordination in the humanitarian operations context refers to working together despite different goals. This requires different approaches and considerations. Information sharing is at the core of all forms of coordination. Scarce resources can be used more efficiently if all actors know who is doing what, where and when to avoid duplication of efforts. For example, following the 2004 tsunami, the World Health Organization sent measles vaccines to a village near Banda Aceh in Indonesia, only to find that an unnamed organisation had already vaccinated some children without leaving proper records. Further, different actors have different levels of information about the needs, field conditions and available supplies. Consider an international organisation with no experience in a country providing relief where a severe disaster has covered many of the roads in debris. Without the information and knowledge of the local actors, it would be nearly impossible to distribute aid to people in need in a timely manner. But there is more to coordination than mere information sharing. Information needs to be translated into actions, which often requires joint decision-making. This involves multiple actors making decisions together or communicating to ensure their efforts are aligned. These decisions may include procurement, inventory allocation, transportation and aid delivery to the affected population. Finally, to make the best use of limited resources, actors can consider resource pooling or sharing. For example, organisations can share their inventory of relief supplies, aid vehicles and warehouses, or consolidate supplies and jointly operate the distribution of aid. It is also possible for an agency to act as a service provider to another humanitarian organisation. What makes coordination challenging? Coordination between multiple parties is challenging in any setting, and more so in humanitarian relief after a large-scale disaster. Post-disaster operations involve the local government, military forces, United Nations (UN) agencies, international humanitarian organisations, local NGOs and private sector companies – each entity with its own views and priorities. In the case of the Turkey-Syria earthquakes, having two governments involved and political tensions in the region do not make coordination any easier. In a complex landscape with many actors with different missions, capabilities, constraints, organisational structures and languages, it is difficult to share information, make joint decisions and work closely together. Due to the urgent nature and time constraints of humanitarian aid, the diverse actors cannot afford to waste time in bureaucratic coordination processes. Because of the difficulty in establishing close relationships and effective coordination in a short period of time as the death toll increases, a coordinated response requires a well-designed mechanism and long-term planning prior to the disaster. Sadly, this is rarely the reality, as we saw in Turkey. Moreover, stakeholders tend to have limited resources. Local actors and small NGOs play a key role in humanitarian response but often lack the resources needed for effective coordination. This may include technological resources, as well as human resources to collect and share information and attend coordination meetings. Further, where monetary resources and supplies are concerned, aid agencies rely mainly on donations. Close collaboration with other organisations becomes challenging when donors earmark their donations for specific purposes, which in effect restricts the use and sharing of these resources with other agencies. Centralised vs. decentralised structures In practice, coordination can take different structures and formats – generally categorised as centralised or decentralised. Usually, the government of the affected country takes the lead in bringing the actors together. Organisations such as the United Nations Office for the Coordination of Humanitarian Affairs also contribute to efforts for coordinated response. In large-scale disasters, the UN cluster mechanism, which facilitates coordination between actors in different sectors of humanitarian action (e.g. water, shelter and logistics), may be activated as well. In a centralised format, one actor exerts authority over the others, as Turkey’s central government did in the recent earthquakes through its Disaster and Emergency Management Authority (AFAD), a governmental agency under the Turkish Ministry of Interior. A centralised structure can have potential benefits including faster decision-making and resource pooling. For instance, a centralised information sharing platform allows all actors to access the necessary information for a better-coordinated response. However, in large-scale relief operations with diverse actors involved or when local knowledge of the situation is critical, centralisation can in itself be an operational challenge. The tent city example in Turkey shows how a lack of local insights led to the inefficient use of resources in the form of empty tents. Many among the affected population were reluctant to move to the temporary tent cities simply because they could not leave their livestock and agricultural land behind, leading to the underutilisation of temporary shelter. Ultimately, it is a question of what decisions to centralise and what to decentralise. Decentralised decision-making is helpful when quick reaction by actors familiar with the local situation is required. However, particularly in large disasters, centralised coordination is needed to allocate scarce resources more efficiently. The challenge is keeping centralised decision-making efficient – without the bureaucratic and political burdens – and how to connect centralised planning with local execution. Plan ahead Coordination is an important element for successful relief operations. However, the complex and urgent nature of disaster relief, along with resource constraints and bureaucracies in centralised systems, make it challenging. Efficient coordination mechanisms need to be designed well in advance in preparation for disaster response. Emergency response plans should include an information sharing platform that can be activated immediately as the need arises. This requires the identification of key actors, including government agencies and local NGOs, even before disaster strikes. These actors need to actively communicate to agree on their level of involvement and how to coordinate under different scenarios. Specifically, they must be clear about what they are willing to share and how, who makes the decisions, what criteria to use and what is expected from the other partners, among other arrangements. In an emergency response, under high levels of stress and time pressure, there is simply no time for bureaucracy and ambiguity. But even with advanced planning, uncertainty is inevitable, making it virtually impossible to execute a perfectly coordinated response. There are always lessons to be learnt and room for improvement. The Humanitarian Research Group at INSEAD contributes to enhancing coordination in humanitarian relief through research focused on dynamics and coordination models in the humanitarian operation context. When every minute counts, getting the formula right matters. |
09 May 2023, 19:00
| FROM Insead Admissions Blog: The Last Days of Executives: Retirement and Beyond |
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Negotiating the final years of active work is a difficult period of transition. It’s a time of unprecedented uncertainties that can elicit strong emotions associated with losing a long-held occupational identity. What’s more, the boundaries of these “last days”* are changing. Life expectancy has increased by two to three years every decade since 1840, while huge investments continue to pour into research on age-related treatments. As a result, living to a 100 or even longer will soon be a realistic expectation for those living in wealthy nations. Age is no longer a reliable indicator of executive competencies, attitudes and skills. This should all be great news as it promises additional years of rewarding and professional opportunities. Yet, legislation and corporate practices are failing to keep up with the reality of us all living longer. This means many professionals may have to work longer to make ends meet and may not have the financial resources to retire comfortably. Executives, however, have the economic privilege to plan for these last days of professional life, and it’s important that they do. This is a period of multiple transitions in quick succession: a final period as a full-time employee; post-retirement roles as an entrepreneur, investor, advisor or philanthropist; time spent pursuing hobbies; or, most likely, a mix of the above, all while fending off the realities of ageing. It is clear that this is an area of increasing concern, given the growing number of conversations I’ve had with INSEAD alumni and senior executives attending our programmes. The good news is that executives should already possess the competencies required for post-retirement planning, namely, crafting a strategy and implementing it with discipline. Here are some thoughts and strategies, as well as reading suggestions, that can help. 1. Begin with the end in mind Planning for the last days is not possible, and wouldn’t have the same sense of urgency without a tentative (but quite literal) deadline. Dealing with the finite number years you have left is not easy, but executives should develop robust hypotheses about when the end might happen. There is a high degree of randomness when it comes to physical decay, and dying is a messy business compared to the relatively predictable early years. However, there is data out there to help make some informed guesses, such as country life expectancy (congratulations if you are Singaporean, or Spanish), parental health, personal lifestyle choices and more. This forecasting is not simply morbid musing on your finite existence but a case of financial prudence. If you want to be comfortable and enjoy your retirement, it is vital that you know (roughly) how many years you will need to finance. 2. Plan early and plan for the worst The likelihood of being hired for a good senior role after the age of 55 is slim, so you need to start planning for the last transition in your mid-40s at the latest. That means thinking about when to retire, what regular income you would like to have in retirement, how much you need to have saved to achieve that income and how to actually save that amount. As an executive, you should have a good grasp of numbers and already be aware of the dangers of relying too much on public pensions – as underlined by current trends which indicate a reduction in public pensions either directly or via inflation. This probably means you’ve already considered and subscribed to a private pension scheme. Despite your foresight, you should be aware that as an executive with above-average wealth, higher taxes may affect you, even after retirement. Make sure to take a conservative view when doing your calculations. Don’t forget to factor in the possibility of an unwanted early retirement. The sad reality is that organisations often let go of senior employees in favour of younger staff who are perceived to have more stamina, ambition and updated skill sets, while costing less in terms of wages and pension liabilities. Remember the rule: no one (not even you) is indispensable. One way to take ownership of this sometimes painful reality is by taking the initiative: develop a successor who will honour your legacy and leave when it is most convenient for you, even if that’s before you’re pushed. Surprise others, do not be surprised! 3. Stick to what you’re good at Managers in the last days of their career often ask me for advice on a change in occupational direction. An increasing number are interested in becoming a coach. While this is an appealing role, the field is crowded and the job requires specific education, practice and skillsets, not just experience and a willingness to help others. A similar argument can also be made for board directorships. This role demands up-to-date specialisation, and seats on interesting boards are scarce. Additionally, the trend towards younger directors is growing. It is only through actual experience that you can really know whether these types of position are right for you. If you are considering such a transition, try and explore the pros and cons of such roles well before retirement. The last phase of your professional life is no time for amateurism. Plan your retirement by building on activities that you excel at. Aim to finish strong. An alternative to becoming a coach or sitting on a board is entrepreneurship, and this is something you can start before leaving full-time employment. Develop a business idea that matches your existing skills and interests and does not put a substantial part of your savings at risk. Take advantage of cheap loans and look to share resources (and risks) with a friend or former colleague. The aim is not asset building but to generate cash flow and mental stimulation. 4. Stay healthy, active and connected Despite the friction, stress and frustrations of managerial life, many, if not the majority, of the executive education participants I meet at INSEAD love what they do. However, this enjoyment only serves to heighten the sense of loss once their working lives are over. As one former executive told me, “When you retire the phone is quite silent, and that the email inbox is pretty empty – I miss them dearly.” Don’t succumb to loneliness in retirement. According to The Good Life and How to Live It, having friends, even just acquaintances, is better for your health than not smoking. While younger generations may benefit from having many acquaintances, close friends are more important to older people. As famed British anthropologist Robin Dunbar said in a recent interview, going to a bar with good friends is better for your longevity than going for a solo run. While you will need the close support of friends and colleagues who share your experience and age, you should also stay connected with people from different age groups. When thinking about joining associations, clubs and organisations, look for those those with members of all ages. It's important that you don’t silo yourself generationally so you can keep touch with where the world is going ideologically, culturally and technologically. Sure, age might slow you down, but it doesn’t need to stop you completely. Research shows those who exercise have about 50% lower mortality rate than those who lead a sedentary life. Furthermore, consuming less calories and protein can boost your life span by as much as 20 percent. 5. No regrets In his eight stages of psychosocial development, pioneering psychologist Erik Erikson concluded that individuals aged 65 and older often experience a struggle between ego integrity and despair. They feel both satisfaction with their achievements and despair about the opportunities not taken and dreams not pursued. While I suggest a “stick to what you are good at” entrepreneurial baseline strategy, make sure it is not at the expense of your dreams. If you really want to try a different type of activity or take your personal life in a different direction (divorces after 60 are increasing, especially those initiated by women) the final quarter of your life is really your last opportunity. As a recently retired former CEO explained to me, “I am doing things that are so different from what I had done for decades; it is like having a second life!” Embrace the adrenaline rush that comes from stepping out of your comfort zone, and don’t find yourself regretting the professional routes or personal explorations not taken. Just be aware that taking those divergent paths may have required that you began your financial planning even earlier in your career. 6. Learn from others Managing Retirement, Romance, Wrinkles, and Regrets – to use the subtitle of one of my favourite books on this topic – requires work. Read about the last days of executives, have conversations with those who are already there and find moments for reflection and planning. These transitions are like nothing you have experienced before. *This title is inspired by The Last Days of Roger Federer and Other Endings, by Geoff Dyer. Caveat: this is is not a book about career finishes in management, but about endings in literature, movies and sports. |
14 May 2023, 20:00
| FROM Insead Admissions Blog: Recognising Possibility in Uncertainty |
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How do world-renowned leaders, innovators, entrepreneurs, artists and creatives achieve success? For some 20 years, Nathan Furr, an Associate Professor of Strategy at INSEAD, has been interviewing such individuals, culminating in a book with 42 practical tools to overcome uncertainty. In this INSEAD Knowledge podcast, we speak to Nathan Furr and Susannah Furr, his co-author of the book The Upside of Uncertainty: A Guide to Finding Possibility in the Unknown. In this conversation, they share how they developed this framework and how they consistently use the tools to navigate uncertainty in their lives. Amid the current socio-political and economic uncertainty, their tool kit demonstrates how to practice robust emotional hygiene to preserve mental well-being in difficult times. At the organisational level, they discuss the important ways companies can create the right culture and conditions for employees to get better at navigating uncertainty. First, leaders have to recognise that they cannot create something new without encountering uncertainty. They need to build uncertainty ability for themselves by practicing it, as well as help their teams develop this ability. While the pair agrees that organisations should work towards developing this ability, this is very much a work-in-progress in most cases. As the academic director of the Leading Digital Transformation and Innovation and Innovation in the Age of Disruption programmes at INSEAD, Nathan Furr acknowledges that the long-term trend of increasing uncertainty is in large part due to technological change. Technology has lowered the barriers to create, transact and interact, such that more people can participate in creation than ever before. Therefore, uncertainty should not come as a surprise. But we can learn to see the possibility in uncertainty instead of fearing it. |
16 May 2023, 19:00
| FROM Insead Admissions Blog: A Flexi-Work World Needs New Performance Appraisals |
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Although the days of full remote work may be over, many employees have expressed a desire for flexible work arrangements. But with Covid-19 no longer a global health emergency, more organisations could demand that people return to the office – setting the scene for an inevitable tug-of-war. Some organisations including Google, Meta and EY have continued to allow teleworking in some capacity, but others have followed the lead of Twitter’s new boss Elon Musk and insisted on calling employees back to the office full-time. Some of the downsides of flexi-work that often come up are onboarding difficulties, the logistical challenges of asynchronous work, the erosion of team cohesion, culture and collaboration, and the risk that employees may become demotivated. There have always been inherent tensions and misalignments between employer and employee goals. Many of them are now amplified by flexi-work. Managers may prefer an in-person work environment for reasons of control and ease of coordination. Employees tend to prioritise convenience and efficiency, as well as meaningful collaboration. Organisations value performance, culture and talent development. An unlikely solution lies in tweaking the performance appraisal system. Doing so could help align priorities, build common ground and create an organisational culture in which flexible work arrangements help people and businesses thrive. Managing the tensions Performance appraisals have long been a critical aspect of business performance and talent management. Besides marrying individual and organisational goals, they help move the organisation forward collectively during periods of change. Traditional performance measurements tend to focus on concrete, easy-to-quantify metrics, such as closing deals, hitting sales targets and attracting new users. But in recent years, digital transformation, the sustainability push and growing social consciousness have called for firms to look beyond financial output. In this broader context, the shift to flexi-work is a prime opportunity for firms to balance their performance appraisals with additional measurements on collaboration, engagement and contributions to organisational culture. Without appropriate measures, misalignments are bound to occur. For instance, the Microsoft New Future of Work Report 2022 showed that employees and managers often define productivity differently. The Microsoft 2022 Work Trend Index revealed that while 80 percent of employees self-reported short-term productivity gains since going remote, 54 percent of business leaders expressed concerns about the negative impacts. A better performance appraisal system could be a useful tool to align these diverse views and complement flexi-work policies, while improving how organisations assess their employees. It can also serve the often-overlooked function of nudging appropriate behaviours and help companies be more successful. Moving to an outcome-driven system Managers concerned about asynchronous work often champion a return to the office. However, this could give the wrong impression to their teams that they value presenteeism and the performative aspects of work. But an employee’s presence in the office doesn’t necessarily equate to them being productive. People busy polishing their resumes or responding to LinkedIn posts are hardly productive even if they appear hard at work while sitting next to the manager’s office. Adopting an outcome-based appraisal system – rather than one that emphasises productivity KPIs such as the number of hours worked or the time spent on each customer call, which are less applicable to a flexi-work environment – can help prevent this. It can also move the conversation towards collective problem-solving and build trust between managers and their reports. The best organisations will embrace KPIs measuring outcomes the team must accomplish, such as customer satisfaction and retention, operational improvements and user acquisition costs. This could help employees understand organisational-level objectives, define their corresponding role, and allow them to decide how to make the best use of their time to achieve those goals. By guiding behaviours towards more long-term oriented solutions, outcome-driven appraisals can do a much better job than conventional models of ensuring continued success for the company. The Lego Group, for example, uses customer pulse, a key metric that measures the engagement of its end users across functions. This continuous measurement is directly and periodically collected from their consumers and focuses the entire company on the key value driver: customer engagement with their product. This shared measurement creates a common language for alignment among the company’s Billund global headquarters, digital office in Copenhagen, online channels and physical stores. It breaks down functional silos, product line barriers, geographic boundaries and time zone discrepancies, and unites everyone around a common objective. Meanwhile, financial metrics such as EBIT (earnings before interest and taxes) account for less than 30 percent in the company’s senior executive appraisal system. Investing in employees Companies that want to retain talented employees in an intensely competitive landscape should continuously invest in their people’s development and ensure that the performance appraisal can motivate workers to hone their skills and spur professional growth. But hybrid work challenges these aims by creating a sense of distance between employees and their managers. Firms must therefore become more sophisticated about their appraisal policies to better engage workers. One way to do this is to prioritise individual growth on top of existing performance and efficacy goals. Decades of research by organisational behaviourist Edward L. Deci and others has shown that extrinsic factors, such as bonuses and salary bumps, can improve productivity and quality for manual labourers. But for work that is more intellectually challenging and requires creative problem-solving skills, intrinsic motivations are generally more effective. This can be honed through an appraisal process that invests in the professional development of employees, harnesses their intrinsic motivations and ties these to rewards, recognition and attractive new opportunities. For instance, single-contributor specialists who enjoy their work might prefer being recognised through a company award from the CEO instead of a promotion to a people-management role. An experienced supervisor might glean more fulfilment from mentoring younger colleagues rather than being tasked with more projects to oversee. Additionally, companies could alter the timeline of their appraisal process. Instead of conducting one or two big annual reviews, managers can initiate smaller and more frequent check-ins with team members. For example, Google guides supervisors to have periodic conversations with employees on their career aspirations, development areas and opportunities. As face time between managers and employees has decreased due to flexi-work, frequent check-ins can facilitate regular engagement and connection despite the physical gap. Effective managers tend to focus on providing immediate and actionable feedback after major events to help employees improve. Such frequent and constructive feedback is in stark contrast to the usual “record-keeping” approach that simply logs the evidence of achievements and mistakes. Fostering team culture and camaraderie To nurture team culture amid asynchronous work, new appraisal systems can pay equal attention to an individual’s contributions to their team and organisational culture as to the firm’s financial performance. This can improve communication and coordination and prevent the development of silos, which can erode a sense of belonging. Workers are generally not opposed to going to the office. But given the costs of the commute and the time “lost” on many in-person meetings, the in-office experience needs to be reframed as important, quality time for building team culture and strengthening social ties with colleagues. To help achieve this, performance appraisals could measure a person’s contributions to others’ learning and development, team morale and psychological safety, which are often best achieved through meaningful in-person interactions. Top consulting firms such as BCG, Bain and McKinsey, as well as Microsoft, measure team satisfaction and client net promoter score as part of their performance appraisals, which can carry as much weight as project delivery and financial performance. They also solicit peer-to-peer and internal stakeholder feedback on individuals’ contributions to team, culture and co-workers’ development to gauge the impact of collaboration. These measures support community building and help people leverage one another’s unique strengths, while ensuring that time spent in the office is purposeful and meaningful. With reduced face time between managers and employees, performance reviews could supplement manager evaluations with feedback garnered from an employee’s team members. This can give a more holistic and accurate picture of how workers are faring and the impact of their performance on a wider range of team members, which may not be directly or immediately visible to managers. When French multinational Schneider Electric implemented 360-degree feedback for all senior managers, 85 per cent of employees said they found this approach gave them a more positive working experience and strengthened employee engagement overall. The results are analysed and shared annually to create a sense of leadership effectiveness and culture evolution across the company. This gives employees skin in the game and a stake in the company, even if they all work asynchronously. To sum up, the ideal performance appraisal system for a flexi-work world must account for a holistic range of factors beyond purely measuring performance and productivity. It should prioritise caring for the well-being and growth of individuals, cultivating trust and camaraderie within – and across – teams, building psychological safety and creating an organisational culture that encourages innovation. Simple policies to force workers back to the office may trigger negative emotions. Creating an outcome-driven performance review system could steer companies on an effective path forward for the future of flexi-work. This article is adapted from a commentary published in The Straits Times. |
18 May 2023, 20:00
| FROM Insead Admissions Blog: When Shareholders Share, the Business Benefits |
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Global inequality remains stark. The pandemic, disparaging state of gender and racial equity, and a widening wealth gap have created what the International Monetary Fund (IMF) calls a “lopsided world” in its World Inequalities Report 2022. According to the report the world’s richest 10 percent make 52 percent of global income and own 76 percent of global wealth, whereas the poorer half account for only 8.5 percent of income and 2 percent of wealth. And according to the Credit Suisse Global Wealth Report 2022, the number of individuals with a net worth of over US$50 million more than doubled at the height of the pandemic in 2021 — the biggest increase in more than a century. And the number is rising. Over the next five years, the report forecasts that global millionaires will increase 40 percent to more than 87 million by 2026, of whom 27.6 million will be in the US and 12.2 million in China. Such gross inequality begs a multitude of political and economic questions. To businesses, though, the question is more straightforward: What can companies do to help their employees, especially lower-waged ones? Here’s a powerful yet simple idea: Let all workers, not just senior executives, own stock in the companies where they work. A revolutionary model for responsible business The concept, known as "shared ownership” or “broad-based employee ownership”, was pioneered by Pete Stavros, co-head of global private equity at investment firm KKR and founder of the nonprofit Ownership Works. As Stavros sees it, all workers, not just C-suite executives and top management, deserve a share of the value they create. Ownership Works argues that shared ownership creates four benefits: wealth creation and increased financial resilience for low to moderate income households; meaningful progress towards racial equity in the workplace; enhanced financial inclusion; and invigorated employee engagement that drives retention and overall company performance. A good example of the concept put into practice is US-based garage-door maker C.H.I. Overhead Doors. After KKR bought the company in 2015, every one of the manufacturer’s mainly hourly-rated workers were awarded shares in the company. Seven years later, when KKR sold the company for US$3 billion, each employee received an average of US$175,000, with payouts to the longest-serving workers reaching almost US$800,000. To date, KKR has awarded billions in equity value to over 50,000 non-management employees and implemented broad-based ownership across 30 companies, spanning all of KKR’s industry verticals, ranging from industrial manufacturing, media and consumer goods to asset management, professional services and technology. Ownership Works aims to create at least US$20 billion of wealth for low-moderate income households by 2030. Why should CEOs and senior executives capture all the upside? Shared ownership is by no means a novel idea. Management compensation plans that set aside up to 20 percent of equity for C-suite executives and senior leaders are a standard feature in the private equity playbook, designed to align the goals of senior management and PE investors as well as ensure higher levels of commitment and performance. Under such plans, the senior executives invest their own money alongside those of the PE investors. Upon the PE firm’s exit, executives can earn several multiples of their investment if the firm is successful, or lose their investment altogether if they don’t perform. Research by McKinsey finds that “generous financial and specific incentives are one of the most effective tools for executives to motivate employees,” especially during transformations. If shared ownership drives performance with senior leaders, why would rank-and-file workers be any different? In other words, why should CEOs and senior executives capture all the upside? As Stavros says: It's just not right for a leadership team to drive a company super hard for five years and at the end of it, out of thousands of people, a handful of people generate real wealth. So we start from a place of, this is the right thing to do. And by the way, it also happens to be smart business." As I see it, broad-based employee ownership is a form of social justice that aligns with the “s” in ESG (environmental, social and governance), which has become mainstream in business. It is also a form of equity ownership that can bolster companies’ drive to integrate diversity, equity and inclusion (DEI) into strategies. “Social justice, from the perspective of an endowment investor, is the recognition that lack of access to capital is the primary source of social problems and stigmas,” shared Roy Swan, Director of Mission Investments at the Ford Foundation when I asked him for his perspective. “Broad-based employee ownership is a type of stakeholder capitalism that not only allows employees to share in the upside benefits of capital, it also incentivizes innovation breakthroughs.” Three keys to successful shared ownership Being owners changes how employees see themselves — and how management sees them. Workers are empowered with a voice; they feel more proud. In return, leaders are more accountable and transparent. Sceptics frequently ask if employees leave after receiving payouts. Although it is still early days, the data indicates the opposite — employees are more committed. For example, at Ingersoll Rand, where 16,000 employees own equity equivalent to roughly 20 percent of their annual salaries, the number of staff who reported being happy at work has surged from 20 percent to 90 percent, while attrition has dropped from 19 percent to 3 percent — far better than industry norms. In fact, CEO Vincente Reynal estimates that shared ownership has created US$2.5 billion in value, increased the company’s EBITDA margin by 700 basis points and almost tripled its stock price. David Bangert, CEO of C.H.I Overhead Doors, is so confident that employee ownership drives employee engagement and performance that he even recommends offering some of the payout upfront. I believe that the case for shared employee equity is so strong that it should become part of the standard playbook for ownership transitions, i.e., any time a company is acquired, changes owners, or, in the case of family businesses, is handed to the next generation. We expect managers to negotiate new equity stakes during these times of change. Imagine if workers could do so too. But first, employee ownership plans require three keys to be effective: Exceptional management: Leaders need to believe in employee ownership wholeheartedly. Sharing equity demands changes in mindset and behaviour on the part of managers. As Stavros said in an interview with the Financial Times: “To be clear, it’s not just about sharing ownership — changing the culture is much harder than that. You have to treat employees like owners. Set goals and talk about progress often. Share information transparently." Ongoing education: I believe that employee ownership plans are more about education than implementation. Companies need to invest in financial literacy coaching in order to teach workers what it means to be a shareholder and how to manage wealth. It's also an education process for management who must learn new ways of communicating and motivating workers over a longer time frame, until ownership changes again and returns are realised. Scalable process: Managing and rolling out an incentive plan to hundreds or thousands of workers is different than sharing equity with a few dozen managers. Administratively, employee ownership plans require simple, clear processes that can be scaled as the company grows. Ownership Works has the tools and resources to help. Amid worsening inequality, figuring out how to increase employee equity should be on every business owner’s agenda. It’s time for shareholders to share. |
23 May 2023, 21:00
| FROM Insead Admissions Blog: Scaling Innovation in Genetics and Precision Medicine |
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Genetics and precision medicine have grown by leaps and bounds in the past decade alone. Precision medicine in particular – the use of genetic or molecular profiling to optimise efficiency and deliver a targeted diagnosis tailored to the individual patient – is a burgeoning field, largely thanks to recent advances in technology. As more start-ups enter the scene, how can they establish a robust customer base, integrate their inventions with existing healthcare systems and ensure they have sufficient resources to scale and grow effectively to facilitate equitable access to these advancements without depleting resources? In a recent Tech Talk X, INSEAD Professor of Technology and Operations Management Stephen E. Chick spoke with a panel of experts in genetics and precision medicine. They were Julien Rey (MBA ’14J), co-founder of FBB Biomed, which measures RNA biomarkers to detect a range of neurological diseases; François Paillier, CEO and co-founder of CircaGene, which produces self-test DNA analysis kits; and Konstantinos Theofilatos, co-founder and CTO of InSyBio, which harnesses big-data computational tools to discover biomarkers for cancer, neurodegenerative diseases and nutrition. The evolution of precision medicine Chick opened the discussion with his observations on the growth of precision medicine. “The cost of sequencing genetic information has been dropping dramatically, even faster than the rate of improvement in the cost of computing resources,” he said. As the cost of obtaining genomic data has decreased, companies are developing and launching exciting new business models. Chick pointed to rare diseases and oncology as two areas in which precision medicine is currently being used to provide more personalised diagnoses for patients based on their biomarkers. Chick also referenced INSEAD’s collaboration with Amsterdam UMC and other partners to develop targeted diagnostic treatments for sepsis – the number one killer of patients in hospitals – for people with different types of genomic or RNA transcriptomic profiles. There is much untapped potential in the field, and start-ups can take advantage of this to design new, innovative and equitable solutions around personalised medicine. “A biomarker is no good unless you can make a better decision with it, so the core question becomes how can we make meaningful use of that information,” Chick said. “Let’s not be dazzled by the science. Let’s be dazzled by the great things we can do by making better decisions around that science.” Understanding the value proposition Chick’s first question for the speakers was how they approached customer development. Paillier highlighted the importance of speaking to patients, healthcare providers and other potential customers to clearly identify the problem and assess the market before getting to work. “From an entrepreneurial point of view, the worst thing ever is to fall in love with your technology,” he said. “Don’t focus on the technology or the solution, start by identifying a problem that needs to be solved.” Paillier added that comprehensive market research can help firms gain a better understanding of the competitive landscape and, crucially, determine whether the market is already saturated. “If there’s not much to provide, your value proposition will be weak. You need to have a big gap between what is existing and what you are proposing,” he said, while also emphasising the need to engage with early adopters to get a product or service off the ground. Rey explained that FBB Biomed focuses on diagnosing multiple sclerosis and Parkinson’s disease as therapeutic options for these conditions already exist. While the company has developed diagnostic solutions related to Alzheimer’s disease, it is unlikely to launch these at this time as there is currently no proven, highly effective drug to treat the condition. “We decided to [focus on] the neurology market because there are no reliable diagnostics that exist today that are blood- and RNA-based with high accuracy… and [this is] underserved and overlooked,” he said. Theofilatos stressed the crucial role that venture capitalists and early-stage investors play in getting biotech start-ups off the ground. “Companies like [ours] need to front-load investments [in order to] build the credibility and the technology,” he said. He added that even after developing a product that customers want to use, it’s important to establish credibility through the likes of case studies, scientific publications and white papers. Companies should also prioritise fostering a network within the industry that can help them access new markets. “It’s all about network in pharma. It’s very important to be open to collaborations and not try to do everything by yourself,” he said. Scaling inventions Another key challenge facing biotech companies is scaling up their product or service. Theofilatos and Paillier said their firms leverage existing technology to do so. For instance, modern commercial platforms have enabled InSyBio to validate large amounts of data, and secondary data repositories have helped CircaGene detect gaps in the market. Pailler also noted the importance of identifying bottlenecks – be it in funding, technicalities or regulations. “It’s challenging to access funding right now, so make sure you maximise the value according to the money you have,” he said. “[With] AI, you can really develop something quickly and cost-effectively. It’s complex and time-consuming to navigate the regulatory landscape, so think about how you are going to switch your go-to-market strategies [in these different places].” FBB Biomed and CircaGene conduct genetic testing through a partner – meaning that for these companies to scale, this needs to be done in tandem with other stakeholders within their network. “If your goal is to grow exponentially, you must find a way to decouple your operations from your growth. Otherwise, you will have to grow at the same rate at which your sales are exploding, [which] is not physically possible,” Rey said. He stressed that prior to entering the commercial stage, companies should have established a completely automated system. FBB Biomed, for instance, used subscription-based software services – as opposed to hardware – to minimise their spending and cash-burn rate and optimise their operations. Building trust for the future Chick then posed a question from the audience about how start-ups can build customer trust and confidence in their systems. Paillier revealed that CircaGene invented and patented an encryption technology to secure patients’ DNA, while Theofilatos stressed that AI tools do not operate in isolation. “Being based on AI predictions is no different than being based on biochemical examinations,” Theofilatos said. “These are not models that make decisions [on their own] – they are supportive tools for clinicians, to assist them in making decisions [as they have] more information available and more guidance about what the data and the measurements [reveal].” Wrapping up the discussion, Chick asked the panellists for their advice for start-ups. Paillier emphasised the need to secure funding, establish a proof of concept and minimise cash-burn rate before scaling up. Theofilatos talked about the importance of connecting with a diverse group of experts to create a strong network. “Always keep in mind that you know a lot less than you believe,” Rey said. “There is no way to know what you don’t know other than to be exposed to it… [so] speak to different stakeholders because you will get a much deeper understanding of the ecosystem in which you operate.” To learn more about INSEAD’s Healthcare Management Initiative and digitalinsead, please visit their individual websites. |
25 May 2023, 02:00
| FROM Insead Admissions Blog: Super Apps in Asia, “Everything App” in the US? |
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When Elon Musk announced the appointment of Twitter’s new chief executive, he also reminded the world of his ambition for the platform: “Looking forward to working with Linda [Yaccarino] to transform this platform into X, the everything app.” But for once, the entrepreneur who popularised electric cars and pioneered private space exploration is behind the curve. Apps that serve as one-stop shops for a multitude of services – from online messaging, grocery and food shopping, e-payments, ride-hailing and entertainment to travel bookings – are already widely used in China and Southeast Asia. WeChat, the king of the so-called super apps, has more than 1.3 billion monthly active users. No super app has emerged in the United States to date, although American Big Tech firms appear poised to change that. A few examples: Facebook’s main app now includes payments, e-commerce, gaming, dating and podcasts; Amazon’s platform offers medical consultations, pharmacy services, grocery delivery and content streaming; Uber now peddles not just ride-hailing but also travel bookings as well as food and package deliveries. They may well succeed – though perhaps not on the scale of their Asian rivals. As Dan Prud’homme, Tony W. Tong and I explain in an article for Harvard Business Review, deep-rooted legacy, regulatory and culture reasons mean super apps will likely remain a pipe dream in the US, but the convergence of a number of conditions including demographics could usher in an age of “super apps lite”. Legacy issues and the culture gap Any prediction of the future would benefit from an examination of history, so let’s first consider the factors that have impeded the emergence of super apps in the US. They include historically divergent growth trajectories, a tighter regulatory environment and cultural differences. Different growth paths In the US, tech companies including Google (search), Facebook (social media) and Amazon (e-commerce) offered narrow services on personal computers before smartphones became widespread. These companies later developed mobile apps for their services, but the apps likewise offered a single service or just a few services. This could be due to the fear of cannibalising their own ad revenue, since each app can serve as an advertising channel. In Asia, by contrast, many consumers’ first experience with the internet was through mobile platforms and multifunctional apps. Tech companies such as WeChat’s owner Tencent and Alibaba, which runs Alipay, were able to quickly grow their user bases as they added new services to their original offerings (a mobile messenger and an online marketplace respectively). On the technical side, US tech companies have reason to be wary of stuffing an app with numerous features, rendering it slow to load and ironically undermining user engagement. For example, Google engineers we spoke to indicated they were hesitant to add more functionality to Google Maps because it was already operating at infrastructural limits. Facebook spun off the Messenger function from its flagship app over similar concerns about capacity. Another legacy reason for super apps’ absence in the US pertains to payments. Western consumers are used to using credit and debit cards and are hence lukewarm to mobile fintech innovations, whereas in China and many other Asian markets, large populations without banking access spurred the development of mobile payment systems that underpin many super-app ecosystems. Regulatory differences For all their success, neither WeChat nor Alipay could have become the behemoths they are today if not for a conducive environment of loose regulation in data privacy, competitive practices and financial transactions. On the last point, for example, WeChat Pay and Alipay used customer funds stored in their digital wallets to invest in overnight funds and interest-bearing accounts. They also facilitated underregulated peer-to-peer lending. Chinese regulators have since cracked down on companies’ use of consumer funds as well as anti-competitive practices and tightened data privacy rules. Meanwhile, the Chinese authorities’ decision to block tech platforms from the US, South Korea (KakaoTalk) and Japan (LINE) for national security reasons effectively removed foreign competition and helped homegrown apps flourish. This also fostered a Chinese app market that is less fragmented than those of the West. Cultural differences Surveys by KPMG, Bain and the World Bank have shown that Asian consumers tend to be more willing to adopt new digital technologies than their American counterparts. In China, for example, the traditional practice of giving cash gifts in red envelopes spurred the growth of WeChat’s digital payment system, which enables users to send digital red envelopes to friends and family. Asian consumers are also generally more comfortable with large conglomerates, such as WeChat’s owner Tencent, Alibaba and Samsung, dominating many aspects of everyday life. Americans, on the other hand, tend to view large corporations with suspicion, not least due to concerns about privacy and trust. Is the time ripe for super apps lite? Cultural and legacy reasons might have held back the emergence of super apps in the US, but several recent trends, from demographic shifts and regulatory pressures to technological disruptions, suggest omnibus apps are imminent. On the demand side, American consumers appear ready for multifunctional apps. Look no further than a 2022 consumer survey in which 72 percent of US respondents indicated they would be interested in using a super app. There are obvious demographic and social reasons underlying this newfound taste for one-stop apps. Younger Americans are more interested in mobile gaming, new social media and other digital services that fit well within super apps. Many of these so-called digital natives are also less averse to sharing their data with online platforms. Meanwhile older consumers are becoming more digitally savvy. A 2022 study by the Pew Research Center found that Americans aged 65 and older were five times more likely to own a smartphone and four times more likely to use social media in 2021 than a decade ago. Potential for new super-app ecosystems These trends coincide with regulatory pressures that may further fuel the development of multifunctional apps. First, data privacy laws in the US and European Union are making it harder for tech companies to monetise user data. This has led to Apple and Google taking steps to make it more difficult for third-party apps to share data mined from iOS and Android operating systems with other companies. As a result, companies may consolidate apps to keep user data within their own digital ecosystems. Second, the US government’s crackdown on alleged anti-competitive practices by Big Tech companies including Alphabet, Facebook and Microsoft could, ironically, push platforms to invest in diversified app services to lock in customers, since expansion via mergers and acquisitions is increasingly risky. Parallel to these developments is the advent of new technologies such as generative AI and stablecoins that may create opportunities to develop complementary tools and ecosystems similar to those of super apps. In China, people "basically live on WeChat because it's so usable and helpful to daily life," Musk said last year when he first flagged his goal of building an “everything app”. "I think if we can achieve that, or even get close to that at Twitter, it would be an immense success." That day may come sooner than we think. |
29 May 2023, 02:00
| FROM Insead Admissions Blog: Reinventing Yourself After a Setback |
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Al Gore famously opened his speeches and the award-winning documentary film “An Inconvenient Truth” with the same quip: "I'm Al Gore, I used to be the next President of the United States." The former Vice President, often described as one of the most powerful in American history, failed to secure the US presidency in 2000. Although he won the popular vote, he lost to his opponent in the electoral college after a fateful and contested recount in Florida and a decision by the Supreme Court in December 2000. Despite this setback, Gore famously managed to reinvent himself and establish a thriving career as one of the world's most prominent environmentalists. An INSEAD case study outlines how instead of retiring from public life, Gore drew on his political, social and economic networks and the various sources of power he accumulated over the years to rebuild his reputation and start an entirely new career. But is the ability to reinvent oneself only available to those at the top, like Gore, who have enough clout to quickly move forward in life? While Gore successfully recovered from defeat by reframing his career, those facing significant setbacks sometimes encounter the additional challenge of overcoming stigma and must redefine themselves as well as their circumstances. In a recent research project, we explored how people in these situations managed to bounce back. Individuals with a criminal record, for instance, face limited resources and opportunities to reconstruct their professional life. This was the situation for Shelley Winner, who turned her life around in prison after a long history of drug abuse. We were drawn to her case because of her resilience and thriving career at Microsoft. She has also attracted significant media attention. While Winner’s story is extreme, it holds valuable lessons for those of us encountering any kind of setback in our lives or careers. Rebuilding from rock bottom In our discussions with Winner, she recounted her problematic childhood: Her father introduced her to alcohol at age 11 and she started using drugs during her teenage years. She spent over a decade drifting from one high to another, selling and later trafficking drugs to sustain her addiction. This eventually led to her incarceration. With a four-year prison sentence ahead of her, Winner made a conscious decision to reprogramme her heart and mind. While in prison, she took advantage of every class and programme available to her and surrounded herself with individuals who were committed to turning their lives around. Upon her release, she entered a halfway house in San Francisco with a renewed determination and her sights set on a job in tech. Winner became a straight-A student in computer science and joined a job-readiness programme for formerly incarcerated individuals. Here, she connected with two women at Microsoft who advocated for her employment, eventually leading to her being offered a position at a Microsoft store. She fought hard to land the job, seeking assistance from the Fair Chance Ordinance in San Francisco, and within a short period her dedication and skills earned her a promotion to a technical role. Winner continued her advocacy work, volunteering and speaking out about fair-chance hiring. The next significant step in her career was transitioning to a corporate role, although she claimed she encountered another hurdle during a background check. However, a senior executive, impressed by her TED talk on hiring formerly incarcerated individuals, championed her cause and ensured her successful transition. Currently thriving in a sales position, Winner consistently exceeds her targets, wins awards and earns a healthy six-figure salary. Her advocacy work has also sparked positive change within Microsoft: The company has joined the Second Chance Business Coalition, a group of large private-sector firms committed to expanding the hiring and advancement of people with criminal records. Winner's story serves as a powerful inspiration for navigating significant setbacks. It reminds us of the fragility of our circumstances and the importance of approaching life with mindfulness. How to reinvent yourself after a setback Research in macro-organisational behaviour provides a framework for understanding how individuals can rebuild their lives and careers. There are five key aspects: architecture (or structure), culture, power and influence (including networks), identity and guiding principles. Winner's journey exemplifies the application of these elements in the face of adversity. Anyone confronting a significant setback can turn their life around by tapping into these five elements. 1.Structure Familiarise yourself with the institutions, rules and routines you can leverage to fight back and overcome setbacks. Winner turned her weaknesses into strengths and embodied humility, diligence, intellect and grit. She used discipline and focus as the structural underpinnings in her endeavours, for example by using legal frameworks in her favour. 2. Culture Read the room and understand the rules and values of the place or context you are aiming to get to. If you want to reinvent yourself, it's crucial to learn how to navigate within these rules and values to be accepted by the relevant audience. By shifting her focus towards the tech sector, which values mavericks and outliers, Winner elevated her chances of acceptance. 3. Influence and meaningful relations Focus on convincing and creating coalitions with people who can support and protect you. Seek perspectives and engage in meaningful discussions with friends and allies. Winner's journey involved connecting with individuals who advocated for her. She created an alternative network and invested significant effort in engaging and convincing those she was able to meet and influence. 4. Resilience from identity Tap into your inner strength, motivation and determination that stem from your unique (and possibly evolving) identity. Surround yourself with people who are going to challenge you as well as encourage you, such as trusted mentors that will support a willingness to change. Winner embraced her past experiences, redefined her identity and used her newfound determination to reframe herself and her circumstances. 5. Guiding principles Those who recover from setbacks and reinvent themselves often have a strong sense of mission. Winner’s faith provided her with the guiding principles to persevere and thrive. Similarly, Gore was driven by a mission to save the planet. Identifying and aligning with this mission, and the values driving you, underpins your own authentic leadership. To better equip yourself for reinvention after a setback, it is crucial to manage anger and transform it into positive energy. Creating a disciplined and mindful lifestyle – one that’s centred on studying, reflecting and reinventing oneself from the beginning – is key to developing new skills. It is possible to forge new identities, regardless of past mistakes or situations. Ultimately, rebuilding requires a sense of mission, hope and optimism. By integrating these insights and lessons into our own lives, we can navigate setbacks with resilience, transform our circumstances and embark on a journey of personal and professional reinvention. This approach is not limited to individuals in privileged positions such as Gore, but holds true for anyone, regardless of their background or circumstances. |
01 Jun 2023, 00:00
| FROM Insead Admissions Blog: Thoughtful Consumption: The “Last Mile” in Well-Being and Sustainability |
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Fashion, one of the most unsustainable industries on Earth, has long grappled with its damaging environmental and social impact. Consumers, on the other hand, tend to act like passive bystanders at a crime scene, placing the blame solely on brands and producers. While companies and executives face mounting pressure to adopt sustainable practices, consumers need to recognise that they are actively complicit in the very same crime. The evolution of the modern economy from output to outcome-centric cannot solely be driven by supply-side actors. The demand side, including consumers, households and communities, also has a significant role to play in promoting sustainability. However, sustainability efforts are largely concentrated on the initial stages of the production process, under the assumption that everybody wants to make greener choices. The same was true for Covid-19 vaccinations, yet not everyone wanted to be vaccinated. To create a more sustainable future, we need to shift our focus beyond the initial stages of production and address the crucial "last mile" – where consumers also adopt sustainable practices. Understanding the motivations and decision-making processes behind consumer choices is paramount in driving significant change. What consumers can do: Understanding why we consume While the effects of consuming alcohol, for instance, are visibly and immediately noticeable, the direct impact of fast-fashion consumption on animals and the environment is not immediately apparent. Recognising the connection between such behaviour and the broader, often invisible consequences related to labour exploitation, environmental dumping, animal cruelty and climate change requires reasoning and logical thinking. Furthermore, consumers often lack insight into their consumption patterns, including when consumption shifts from being a necessity to a choice, and how behaviour is influenced by the desire for social status and the addictive environments fostered by the fast-fashion industry. Generation Z, for example, is widely recognised for its commitment to sustainability, however this consumer group plays a significant role in driving the growth of fast-fashion giants. Sustainable choices often involve forgoing a short-term benefit for a longer-term one. For instance, choosing to invest in higher-priced, durable clothing instead of fast-fashion items may cost more upfront – and not be accessible to all – but ultimately results in reduced waste and environmental impact in the long term. The science of intertemporal choice – deciding between smaller, sooner and larger, later rewards – can be applied here. Part of the reason we prefer the immediate reward is because the future is uncertain, more abstract and less concrete. It is easy for consumers to think about the here and now, and spending money on new, shiny things in the moment is rewarding and tangible. However, thinking about delaying gratification – such as reusing old clothes or buying vintage ones – for the sake of the planet and future generations can be abstract and difficult. This is where firms can play an important role. The power of self-control: Pre-commitment and good habits Then there is the concept of self-control. It is not an easy task to exercise willpower and always choose the better option – such as supporting sustainable brands – and resist the temptation to purchase the latest trendy item. The most efficient way to practice self-control is by avoiding temptation in the first place, by practicing pre-commitment and forming good habits. Pre-commitment refers to making a decision or taking action in advance to reinforce self-discipline and ensure adherence to a particular course of action. It entails avoiding tempting situations, similar to how one would steer clear of the junk food aisle at the supermarket. An illustration of this strategy can be seen in Ulysses' command for his crew to plug their ears with wax and bind him tightly to the ship's mast to resist the irresistible allure of the Sirens’ song. This pre-commitment technique allowed them to safely navigate past dangerous temptations. Forming good habits revolves around establishing routines that become second nature, akin to brushing your teeth every morning. In her book, Good Habits, Bad Habits: The Science of Making Positive Changes That Stick, psychologist Wendy Wood outlines how people can effectively form and maintain desired habits. According to Wood, the key is to restructure environments to support and sustain good behaviours and make bad habits more inconvenient. What marketers can do: Educate and assist decision-making by understanding psychological barriers Personal commitment and individual habits may not be sufficient to drive widespread change. To further encourage thoughtful consumption, firms need to incorporate ways to best support consumers in their marketing efforts. Returning to the concept of intertemporal choice, consumer research demonstrates how companies can help people see their future in a more concrete way – for example by referring to specific events such as their 50th birthday, or by using visuals to imagine their future selves, such as showing a photo of how they might look like in 25 years. These tools can help consumers see the future more clearly and choose the larger, later reward. The main reason why it’s challenging for people to control their temptations and form good habits to practice moderation is that there is no one-size-fits-all approach. What works for one individual may not work for another, as everyone has different motivators. Marketers usually target specific groups based on their shared characteristics, a practice known as market segmentation. While this approach is typically aimed at encouraging people to buy more, it could also be used to promote moderation through a deep understanding of individual goals and consumers needs and environments. For example, some consumers might simply lack adequate knowledge about what contributes to their carbon footprint. (If you think you have a good understanding, you can test your knowledge here.) For such a group, education is critical. Another approach is to harness the influence of sports stars, teen idols and influencers, as they have the power to significantly influence desired consumption patterns and behaviours. In this way, marketing can shift its focus from enticing and seducing consumers to educating and empowering them. What producers can do: The “Stella McCartney” effect Fashion designer Stella McCartney provides a noteworthy example of incorporating solutions into a company's offering from the outset, rather than resorting to post-hoc corporate social responsibility initiatives. Visionary leaders focus on being part of the solution right from the start, and McCartney’s whole business philosophy centres around ethical and sustainable practices. In a discussion with us at the INSEAD Alumni Forum Europe in London, McCartney said: “The biggest thing for me is don't sacrifice style for sustainability.” She added: “Making timeless, incredibly well-made designs is a business in itself, because there's value added for resale or rental.” She also stressed the need for greater equality and kindness. “Animals should not be slaughtered for the sake of fashion,” she said. “For a handbag, it’s not worth it.” The fashion designer added that she was afforded the privilege to be conscious and authentic from the beginning and followed through by consistently challenging and questioning every single touch point. Through this process, she has developed sustainable materials such as “mushroom leather” or synthetic spider silk with the aim to transform the industry from within. She is currently urging US President Joe Biden’s team to change tax structures that disadvantage importing vegan leather compared to animal leather. McCartney recognises the power she has and the responsibility to support and advocate for emerging designers who are fighting for the same cause. The pressing question is how other fashion companies, including those in the non-luxury sector, or even companies outside the fashion industry, can learn from her approach. The supply side has really started moving. If all of us on the demand side also begin taking action by becoming more caring and thoughtful in our consumption habits, we can bring ourselves and the planet significantly closer to well-being and sustainability. |
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