Rotman Management Winter 2020

FROM BANKING TO RETAIL, healthcare to manufacturing and education to professional services, digital technologies and innovative business models are upending organizations around the globe. The humbling fact of life for the modern leader is that virtually everything you thought you understood about successfully running your business is open to new and better ways of doing things. The term creative destruction was coined by Economist Joseph Schumpeter 80 years ago to describe the process of ‘industrial mutation’ by which a new innovation brings about the demise of what existed before it. Schumpeter was very clear: when creative destruction occurs, there are winners and losers. And yet the net economic benefit of a radical innovation is always greater than if that innovation had never been introduced. Our first issue dedicated to this topic was…

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

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

ON A RAINY DAY IN NEW YORK CITY, Travis Kalanick and Garrett Camp couldn’t get a cab. They quickly realized that trying to get a taxi in the rain was a horrible experience. The duo went on to found Uber, which became one of the most successful unicorns in history. If you haven’t heard the term ‘unicorn’ before, it applies to private companies worth more than $1 billion. If you’ve got an idea for a business or a product, this could be you. Or you could be like the founders of Napster or Pets.com — famous failures that came close, but no cigar. The thing is, at the ‘idea stage’ there isn’t much of a difference between huge successes and ignominious failures. I like to think that each of you has an…

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

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