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The Magazine of the Rotman School of Management

Winter 2007

What’s
Next?

Designing the Thinker


of the Future
Also, Jeanne Liedtka,
Russell Ackoff, and The End
of Exponential Growth
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Contents
Winter 2007
Features
4 Designing the Thinker of the Future
Yesterday’s approaches to problem solving are incapable of solving tomorrow’s problems.The high-
value decision maker of the future will be characterized by a capacity for Integrative Thinking.
By Roger Martin and Mihnea Moldoveanu
10 Thought Leader Interview: Janice Gross Stein
The renowned conflict management expert discusses why the UN is not equipped to solve the
world’s problems, and why she is optimistic about our collective future. By Karen Christensen
14 Peripheral Vision: Detecting Weak Signals That Can Make or Break your Company
Wharton Professor George Day discusses the importance of developing periphery-scanning
capabilities to deal with an increasingly complex world. By Karen Christensen
18 The End of Exponential Growth:Why (Real) Growth May End Soon
Manydrivers of growth are showing signs of saturation; and that’s not necessarily bad news,
because a continuation of recent growth would exceed the earth’s ability to support human
civilization. By Robert Ayres

24 Time for Design


Cities, systems, structures, and strategies all face the same need to combine
expertise, insight, engagement, and adaptation. It’s high time to confront the
tensions of design. By Jeanne Liedtka and Henry Mintzberg
32 The Mega-Community Manifesto
Together, public, private and civil leaders must face the problems that none
can solve alone. By Mark Gerencser, Fernando Napolitano and ReginaldVan Lee
40 Neuroeconomics
‘Neuroeconomics’ uses knowledge about brain mechanisms to inform
economic theory, opening up the ‘black box’ of the brain, much as
organizational economics opened up the theory of the firm. By George Lowenstein,
Colin Camerer and Drazen Prelec

48 The Evolution of Harassment in the Workplace


A subtle form of harassment has emerged in some modern workplaces that creates a hostile
environment for women who don’t adhere to ‘gender ideals’. By Jennifer Berdahl
52 The China Rip Tide: Threat or Opportunity?
Focusing on reducing time and variability in the China-anchored supply chains serving North America
and Europe can help companies build competitive advantage. By George Stalk Jr. and Kevin Waddell
60 Enterprise 2.0: The Dawn of Emergent Collaboration
‘Enterprise 2.0’ technologies have the potential to usher in a new era by making both the practices
of knowledge work and its outputs more visible within an organization. By Andrew McAfee
64 Bank Reform in China:What it Means for the World
Bank reform presents a unique and crucial challenge within China’s ambitious economic transition
from central planning to a market economy. By Donald Brean

Rotman Magazine Winter 2007 • 1


Rotman Magazine Winter 2007
Departments
Editor:
Karen Christensen
christen@rotman.utoronto.ca 3 From the Dean
Contributors:
30 CEOs Corner: Colin Angle
Belmira Amaral, Keith Ambachtsheer, Pankaj
Aggarwal, Steve Arenburg, Jennifer Berdahl,
37 The Big Picture: Howard Gardner
Donald Brean, Eric Kirzner, Sharmista Law,
Roger Martin, Ken McGuffin, Mihnea
45 Questions For: Alvin Toffler
Moldoveanu, Catherine Riddell, George Stalk,
Jr., Jack Thompson, Stephen Watt
57 Point of View: Russell Ackoff
69 Faculty Focus: Keith Ambachtsheer
Design:
Ove Design & Communications Ltd. 72 Faculty Focus: Eric Kirzner
Cover:
74 Questions For: Chris Anderson
Corbis Images 76 Questions For: Alan Blinder
Copyright 2007. All rights reserved. 78 Questions For: Ronald Burt
Rotman magazine is published three times
per year for alumni and friends of the
80 Faculty Focus: Pankaj Aggarwal and
Sharmistha Law
Joseph L. Rotman School of Management, p.30
University of Toronto. 82 Point of View: Benjamin Friedman
Subscriptions are available for 84 Point of View: The Task Force to
$99 per year.To subscribe, go to Modernize Securities
www.rotman.utoronto.ca/subscribe Legislation in Canada

To submit a change of address, 87 News Briefs


please contact us at:
Rotman Magazine
94 Alumni Profiles
Joseph L. Rotman School of Management
105 St. George Street
96 Alumni Capsules p.74
Toronto, ON M5S 3E6
Tel: 416-978-0240 Fax: 416-978-1373
100 Class Notes
E-mail: alumni@rotman.utoronto.ca
Web: www.rotman.utoronto.ca
120 Upcoming Events

p.94

2 • Rotman Magazine Winter


Fall/Winter
2007 2006
From the Dean: Roger Martin
What’s Next?

It is difficult to make predictions, especially In this issue, we aim to help equip our read- – the integrative way of thinking and
about the future. But despite Yogi Berra’s ers to face the challenges and opportunities problem-solving – is increasingly taking
famed assertion, humankind maintains that we will all confront in the months and hold in business, and the Rotman School
an obsessive urge to look beyond the pres- years ahead. is proud to be at the forefront of this dia-
ent in the hope of controlling events What will the optimal problem solvers logue. On page 24, McGill Professor
in days to come. We devote much of our of the future look like? A few characteris- Henry Mintzberg and Rotman regular
economy to forecasting of all kinds, and tics stand out: they will have to turn their Jeanne Liedtka discuss why now is the
as the modern landscape has evolved, busi- backs on formulaic approaches, consider a Time for Design.
ness has increasingly used management greater number of variables than ever Also in this issue, Wharton Professor
science and information technology in an before, and examine non-linear relation- George Day describes the importance of
attempt to generate predictable outcomes ships between variables. On page 4, ‘scanning’ the periphery of our environment
– or ‘reliability’. Desautels Centre for Integrative Thinking on page 14; Harvard’s Howard Gardner
Despite these costly initiatives, there is Director Mihnea Moldoveanu and I describes ‘the five minds of the future’ on
little evidence that the ability of today’s discuss the resulting importance of ‘big page 37; renowned futurist Alvin Toffler
organizations to accurately understand the mindedness’, ‘nimble mindedness’ and discusses ‘third-wave wealth’ on page 45;
world and predict the future has increased ‘tough mindedness’, in Designing the Rotman’s Keith Ambachtsheer explains
one iota. With or without our efforts, the Thinker of the Future. Why We Need a Pension Revolution
future will emerge from the turbulent inter- One of the University’s – and the on page 69; and Rotman Professor Eric
play of a variety of forces: unprecedented world’s – great thinkers, renowned conflict Kirzner gives his views on the future of
growth in human knowledge, technology management expert Janice Gross Stein Finance on page 72.
that borders on the inconceivable, accel- explains why the United Nations cannot Try as they might, organizations will
erated social evolution, advances in solve today’s global problems, the role of never be able to foretell the future. Rather
biotechnology, and an increasingly connected government in uncertain times, and why she than wasting their efforts on chasing pre-
world, to name but a few. is hopeful about our collective future, in our dictable results, they should focus more
We need to stop thinking about ‘the Thought Leader Interview, on page 10. on employing the vision, judgment and
future’ as something that comes from the It appears ever-more likely that we insight of their human capital. As author
past, and to realize that the forces bringing will face a future of increasing scarcity, William Gibson once said, “The future is
about change right now are so great that it’s growing environmental degradation, and already here; it’s just unevenly distrib-
useless to make simple extrapolations. To widening disparities between the devel- uted”.The trick is knowing where to look,
quote Marshall McLuhan, “Our Age of oped and developing world. However, what to look for, and who to talk to.
Anxiety is, in great part, the result of try- according to INSEAD’s Robert Ayres, the At the Rotman School, we believe that
ing to do today’s jobs with yesterday’s continuation of growth would be much each of us has the power to shape the world
tools.” Our collective ability to thrive in the worse, because it would far exceed the for the better. The future doesn’t just hap-
future depends not only on how well we earth’s ability to support civilization based pen: people help create it through their
continue to learn, but also on how well we on our current lifestyles. The End of actions – or inaction – day in and day out.
are able to unlearn – to banish old mindsets Exponential Growth is on page 18. We invite you to join us on our continuing
and create new, more powerful models to A recognition of the value of the quest to develop a new way to think –
deal with our increasingly complex world. designer’s approach to solving problems about business, and about the world.

Rotman Magazine Winter 2007 • 3


Designing the

THINKER
of the
of the
by Roger Martin and Mihnea Moldoveanu
FUTURE
Yesterday’s approaches to problem solving won’t cut it
in tomorrow’s complex environment. The high-value
decision maker of the future will be characterized by a
capacity for Integrative Thinking . TM

Roger Martin Mihnea Moldoveanu

Current approaches to business education into certain outputs. Unlike many skills of argument about ‘market timing’, and will
are based on a model that has become the industrial age, they cannot be automated. rely on a different combination of analytical
increasingly incapable of bridging the gap There are two ways to interpret the and empirical reasoning.
between the problem solving means of the ‘tacit-ness’ of these skills. The first is to Moreover, different domains of
past and the complex problems of the resign ourselves to the notion that they can expertise are embedded in different modes
immediate future.A new model is needed – never be made explicit, and can therefore of inference and different logics. Through
one that turns its back on formulaic never be developed or selected for. An the medium of our manager, the logic used
approaches to solving problems and alternative approach – the one we are pur- by the system architect must be brought
acknowledges the vital role of integration suing at the Rotman School – is to attempt into dialogue with the languages of the pro-
in modern business, stressing the virtues of to make progress on identifying and devel- grammer and the network theorist; and the
‘nimble mindedness’, ‘big mindedness’ and oping the tacit skills that make a difference logics of the marketer and the product line
‘tough mindedness’ over the seductive trap to the solution of ‘wicked problems’ – manager must be brought into dialogue
of narrow perfectionism. multi-layered problems with no definitive with the logic of the hardware engineer.
The high-value decision maker of the formulation or solution. Successful integration is essential to
future will be a manager of complex inter- our manager, both for building credibility
actions who faces a multitude of inputs on The Role of Integration and legitimacy around her arguments and
a daily basis – different value systems, ways Let us consider a typical example of the actions, and also for successfully monitor-
of knowing, ways of acting and relating, high-value decision maker in action: a gen- ing and sanctioning the tasks and auditing
ways of managing, and ways of choosing eral manager at a telecommunications the arguments of the contributors. The
between them. In the midst of this cacoph- equipment firm attempting to bring to value of this decision maker to the organi-
ony, decision makers will be called upon to market a new cellular voice/database sta- zation increases exponentially with her
internalize the clash among multiple mod- tion.The manager must motivate, monitor, ability to successfully resolve the fundamental
els of the world and resolve it productively. coordinate and negotiate with experts with model clashes, tensions, and incongruencies
The skills required to accomplish this varied disciplinary backgrounds, who gen- that emerge among contributors.
are ‘tacit’, in that they are not explicit in erate arguments patterned on the Two features of the integrative function
the same way that the skills of a computer underlying logics of different basic sci- are apparent from this discussion. First,
programmer, a production line manager or ences, each based not only on a different integration is inevitable.Whether it actively
a chief development engineer are. They vocabulary, but also on different standards sets out to or not, every organization as
cannot be represented by adherence to a set of argumentation. An argument about ‘the a whole does achieve some level of integra-
of rules that can be put together into algo- optimality of a queuing process’, for exam- tion among different knowledge bases,
rithms that automatically turn certain inputs ple, will have different standards than an ways of acting, knowing, communicating,
TM Integrative Thinking is a trademark of the Rotman School of Management.
Rotman Magazine Winter 2007 • 5
representing, and so forth, in the sense that because of her error, but rather, exoge- for Loblaws as a way of resolving the
any global outcome brings together the nous factors beyond her control. conflict between the goals of providing
chain of activities of the firm. Bankruptcy, The integrative ‘way of being’ is char- both low prices for consumers and high
for instance, is an integrative outcome: inte- acterized by the successful resolution of profit margins for Loblaws.
gration of all of the causal chains making up tensions between the need, on the one • Moses Znaimer made Citytv into the
the organization takes place – even though hand, to learn and adapt and, on the other ‘quintessentially local’ television station –
nobody sets out to make it happen. The hand, to act decisively and purposefully. A a globally-licensed concept successfully
question that we are concerned with sur- working model for an integrative way of replicated in 22 other countries, as a way
rounds the quality of the integration: a given being is one predicated on the ability to of providing a strategy that is responsive
manager becomes a high-value decision consider more salient variables in a decision to both the globalization of the media
maker by making the reality of integration process; the ability to internalize and concep- business and the yearning of viewers for
happen more successfully. tualize non-linearly-structured relationships local feel and content.
Second, the integration function cannot between the salient variables; the ability to
be outsourced, because the result of out- maintain a view of the whole problem while The New Managerial Virtues
sourcing it would be a loss of the full benefit working on the individual parts; and the If it is the case that Integrative Thinking is
associated with it. Because much of the inte- ability to harmonize and synthesize alterna- an essential component of the mix of tacit
gration function occurs in the tacit-skill tive standpoints rather than choose between skills that will drive value creation in the
domain, it would have to be somehow dupli- them, all the while retaining the ability to act 21st century, then it makes sense to ask,
cated inside the organization after it has decisively and punctually. ‘what are the new managerial virtues that we
been carried out by an external agent – pre- Following are some real-life strategic res- should aim to cultivate and develop, and,
cisely what integration is not amenable to. olutions that exemplify the integrative skill: how are we currently equipped to do so?’
We believe that there are three such virtues.
A Sketch of Integrative Thinking • Isadore Sharp created the Four Seasons The productive resolution of seem-
Integrative Thinking can be defined as “the Hotels and Resorts experience in ingly intractable tensions must be rooted in
ability to think and act responsibly and response to the seemingly irreconcilable the recognition of different ways of think-
responsively in the face of multiple and tension between the need to provide the ing and acting. The ‘local television station’
possibly-conflicting models of oneself, oth- intimacy and comfort of a small motel that Znaimer envisioned is a ‘micro-world’
ers, and the world.” The successful with the range of amenities and services – a community of practice and discourse –
integrative thinker creates value through and attending economies of scale of a that is radically and fundamentally different
the creative resolution of tensions between large hotel by designing, rapidly from the cosmopolitan station – another
such models, interacting with self, others prototyping and perfecting the medium- such micro-world.They entail different pat-
and the world successfully in predicaments sized, service-oriented luxury hotel with terns of interaction, different capital
that are unstructured, ambiguous and com- intimacy and amenities funded by a budgeting constraints, different organiza-
plex, calling for the integration of disparate massive end-customer price premium. tional rule sets, and different inter-
knowledge structures and behavioural pat- • Herb Kelleher made Southwest organizational network structures. Znaimer
terns into a single action plan. Airlines into the short-haul, point-to- therefore had to possess the nimble-mind-
At the opposite end of the spectrum point frequent departure airline of choice edness to understand different micro-worlds
is the cognitive narrowing of managerial for leisure and business travelers in in their ‘radical other-ness’, and to mentally
predicaments along ‘disciplinary’ lines response to an articulated aim to ‘walk around’ in them in order to internal-
of thought via the use of pre-existing simultaneously become both the lowest- ize just how deep the tension between them
models, which epitomizes a patently cost and highest-profit airline in North really is.
non-integrative way of being. ‘Narrow America and the highest employee- Once the tension between micro
perfectionism’ entails narrowing the defi- satisfaction airline in North America, a worlds has been understood, the integrator
nition of the task at hand to the point that vision that incorporates multiple goals requires the big-mindedness to simultane-
‘perfection’ is guaranteed; cause-and- that one usually thinks of necessarily ously behold the competing models, while
effect relationships are simplified to the trading off against one another. retaining the ability to function. Her mind
point that actions produce a guaranteed • Jack Welch resolved the tension must contain the radical other-ness of sev-
result. For instance, rather than a clerk between embedding stretch goals in eral different possible worlds that are in
defining the desired outcome as ‘a satisfied General Electric and keeping budget- tension with one another, without falling
customer’, she defines the outcome as ‘a ing and planning meetings efficient and into paralysis.
customer interaction in which each step productive by de-linking discussions of Subsequently turning the new insight
of the prescribed procedure was dutifully executives’ hopes and dreams from con- into action – embodying the idea, produc-
followed’. If customers disappear because versations about budget. ing the revolutionary behaviour – requires
of indifferent service and the store goes • Richard Currie created the President’s tough-mindedness – the willingness of
out of business, in her mind, it isn’t Choice high-end private label products the high-value decision maker to ‘try out

6 • Rotman Magazine Winter 2007


behaviour’ and allow her ideas to die in her the core characteristics of ‘model clash’ – iour, the rich background of situational
stead if they are found to be wanting. the very clash that is so prevalent in the detail that is kept hidden by traditional
business world, where predicaments do not approaches is freed up, resulting in an
The Outdated Model: Business School 1.0 come packaged as specialized problem ‘augmentation’ of the mind that increases
While the skills we describe here are not statements, and it is up to the high-value the competence of the decision maker to
currently being widely trained or culti- decision maker to choose between radically deal with radical conflict.
vated, we believe that business academics different approaches. 2. We can harness the new emphasis on the
are equipped to develop such virtues in use of knowledge as a ‘design tool’ to cre-
MBA students. The tools are already in A New Way to Teach ate experiences that allow the ‘thinkers of
place; but business scholarship and teaching There are encouraging signs in the world of the future’ room to experiment with ideas
must be understood in a new light in order modern business education – ‘Business in action – to ‘live it’, imprinting on them
to bring about such change. School 2.0’ – that, together, amount to the the mental habits of the tireless designer of
A sketch of ‘Business School 1.0’ – seeds of a new way of teaching and experiments for answering questions about
which originated with the inception of for- researching. The traditional silos are now human behaviour: the tricks that get her to
mal business education in the early 20th buttressed by basic social sciences such as produce the right effects; the obsessiveness
century – reveals an organization of teach- economics, psychology and sociology, cre- over the ‘demand characteristic’ of the
ing and research that mimics the functional ating a foundation for carrying out experimental design; and the recklessness
structure of the business organization. dialogues that transcend the boundaries of of the questioning of the original insight.
There are ‘problems of production’, ‘prob- narrowly-defined disciplines. Rather than conveying ‘strategic frame-
works’, we can teach a basic repertoire of
Integrative Thinking calls for the skills that can be deployed to create new
models for new situations.
integration of disparate knowledge 3. We can develop tough-mindedness by
fostering the ‘falsificationist’ approach of
structures and behavioural patterns scientific inquiry – whereby individuals
design tests of the effectiveness of their
into a single action plan. strategies aimed at disconfirming or falsify-
ing, rather than confirming them. This will
lems of accounting’, and ‘problems of These dialogues, and the research that help to cultivate an awareness of the fallibil-
finance’ to be handled by methods specific they are generating, have brought into ity of human enterprise, a willingness to
to each individual problem area. sharp relief the depth and quality of the walk on the ‘uncomfortable side’, and occa-
Within this model, business academics tensions between alternative models of sionally, to let go of our cherished ideas in
research in narrow fields and create models humans and organizations, and as a result, a the pursuit of new, more powerful models.
for understanding their particular area. In ‘fabric’ for training integrative thinkers
general, this involves research in one field exists. New disciplines such as behavioural Teaching Tacit Skills
(often a narrowly-defined sub-field) and no finance, behavioural economics, and even An approach that holds promise for the
attempt to link their models with models ‘organizational neuro-psycho-socio-eco- development of the skills we describe is the
outside of the field. Faculty then teach their nomics’ are now taking root in business ‘practicum’. The format of a practicum is
models to students, who are predisposed to schools, a hopeful sign that the inner work- patterned on a combination of the musical
embrace the narrow perspective they are ings of the mind are now being considered ‘master class’ and the psychotherapeutic
taught. Each silo conjointly develops ‘rules in a business context.
of thumb’ for adequate contributions to We are faced, then, with a significant
classroom and scholarly discussions and ‘laws opportunity for momentous change in the
of business’ that are sometimes used to but- MBA that makes use of a lot of good work
tress the rules of thumb in question. and resources currently in the toolbox of
True tension has little opportunity to business schools:
flourish in this setting. In particular, there is 1. We can exploit the increased plural-
no room for the simultaneous understand- ism and widening dialogue that has
ing of multiple conflicting cognitive models emerged around the business school to
or images of the organization, the manager, design educational experiences that
or society at large; tensions among alterna- develop big and nimble minds, used to
tive ways of creating knowledge, validating seeing situations through multiple lenses.
belief or auditing theoretical claims; or the By exposing students to the fundamental
deployment of multiple logics and modes tensions that arise in attempts to explain,
of reasoning. These missing elements are predict, shape or justify human behav-
training session. In the former, the student counter-productive justificationist approach social, economic, technical, and moral
attempts to come to a better, deeper to hypothesis-testing that seeks confirming problems that we, collectively, have cre-
understanding of the score and of her own data and avoids seeing or considering dis- ated. We believe that the answer to the
performative capabilities with regards to confirming data. Instead, they are given the ingenuity gap may be that it is not a quan-
the score. The purpose of the instructor is opportunity to practice falsificationist titative, but a qualitative one: not a
to guide the process of forming and shaping approaches whereby they ‘stress-test’ their ‘know-what’ gap in numbers of ideas or
this understanding, offering suggestions for beliefs by seeking out disconfirming data other purely cognitive objects, but rather a
improvement and criticisms, but leaving that may provide insight into how to gap in ‘know how to’ – in the cognitive
ultimate decision rights firmly in the hands improve their models and beliefs. skills required to bridge between fact and
of the student. Similarly, the psychothera- The third module aims to stimulate and value, thinking and action, different modes
peutic training session allows the trainee develop the design capability of the ‘social of thinking; different logics; and different
the latitude to experiment with different engineer’ in the trainee, by getting students forms of life.
modes of being relative to a situation in
which she has a complex goal, and gives her
the benefit of feedback about the products,
The Integrative Thinking Practicum seeks
processes and procedures that she designs
and enacts.
to build sound ‘modeling engines’ in the
At the Rotman School, we have put
this thinking into action with the introduc-
minds of our students.
tion of the Integrative Thinking Practicum, to reverse-engineer and re-engineer their Integrative Thinking stands not as an
a program comprised of three modules own behaviour according to their aims. The enemy to the disciplines, on whose shoul-
and designed to expose students to new basis of this module is close self-observation ders it can be seen to squarely rest, but
knowledge and provide them the opportu- and analysis in controlled settings, followed rather as a constructive challenge to pro-
nity to choose how to practice with and by opportunities to take on new ways of duce more adaptive-reasoning patterns,
use it. Piloted as an elective course for interacting that are guided by a higher-level more valuable instruments of prediction,
first-year students in 2004-05 and 2005- goal. Defensive interpersonal communica- and a more inclusive approach to inter-dis-
06, it has become part of the required tion strategies, for instance, become subjects ciplinary dialogue. We believe that the
first-year curriculum for the 2006-07 aca- for behavioural re-engineering. ability to control cognitive processes can be
demic year. At its core, the Integrative Thinking developed through targeted interventions
The first module aims to teach stu- Practicum seeks to build sound ‘modeling and training programs, and that Integrative
dents to become creators and developers of engines’ in the minds of students, equipping Thinking is an essential component of the
models of human and organizational behav- them with the mental tools required to build mix of tacit skills that will drive value cre-
iour, to encourage model making and models that capture the complicated, mul- ation in the 21st century.
model shaping, rather than ‘model taking’. tifaceted and multidirectional causal Designing and educating the thinker of
Students are introduced to a basic reper- relationships between the many salient vari- the future requires business educators to
toire of cognitive tools that can be deployed ables inherent in modern business problems. become ‘intellectual entrepreneurs’,
to build detailed models of actual human In addition, it employs basic models from the experimenting with the educational expe-
and social processes. They are taught to social sciences as ‘engineering tools’ aimed at rience itself to develop a new way to think,
view model building as a way of (a) solving designing more successful behaviours and leaving behind the outdated model that has
problems that do not come pre-packaged in lenses for re-formatting and re-engineering stultified business education for some time.
a disciplinary language and (b) as a way of the participant’s own behaviour. And even though the work ahead for the
understanding others’ representations of prospecting of Integrative Thinking is stren-
the problem at hand.This module also chal- In Closing uous, there is little double that it is worth
lenges students to conceptualize the We currently face a disruptive opportunity undertaking. For who else will solve the
models that are already embedded in the in the market for managers: the growing problems of the future for us?
way they speak and think, and to ‘re-for- demand for high-value decision makers
mat’ them for greater efficacy. who can successfully manage interactions Roger Martin is dean and professor of Strategic Manage-
ment at the Rotman School. He is also director of the
The second module attempts to across multiple conceptual and behav- School’s AIC Institute for Corporate Citizenship and the
develop experimentalists and falsification- ioural domains. author of The ResponsibilityVirus: How Control Freaks, Shrinking
ists. Students are encouraged to see their The goal of attempting to decipher and Violets – And the Rest of Us – Can Harness the Power of True Part-
nership (Basic Books, 2002). His next book, on Integrative
world as an ‘experimental playground’ – as teach the new skills described here is to Thinking, will be published in fall 2007. Mihnea
a sequence of experiments designed to test bridge the ‘ingenuity gap’ identified by Moldoveanu is director of the Desautels Centre for Integra-
their hypotheses, designed explicitly to put some as the real limit to human develop- tive Thinking and an associate professor of Strategic
Management at the Rotman School. He is the author of Mas-
those hypotheses in danger. Secondly, this ment: the negative differential between the ter Passions: Emotion, Narrative and the Development of Culture,
module helps students understand the supply and demand of ideas that solve the with Nitin Nohria (MIT Press, 2002).

8 • Rotman Magazine Winter 2007


Are your people ready?

Where do new products come from? How about new services? Or new and better ways
of working? A people-ready business has the answer: It’s people, empowered by the
right software. Software that streamlines the creative process, organizes the production
process, and connects people who have ideas with people who can manufacture, distribute,
and sell them. That’s the foundation of a successful business. A people-ready business.
SM
Microsoft.® Software for the people-ready business. microsoft.ca/peopleready

In a business,
ROI stands for “return on imagination.”
© 2006 Microsoft Corporation. All rights reserved. Microsoft and Your potential. Our passion. are either registered trademarks or trademarks of Microsoft Corporation in the United States and/or other countries.
Thought
Leader
Interview:
Janice Gross Stein
by Karen Christensen
The University Professor and renowned
conflict management expert discusses
why the UN can’t solve today’s global
problems, the role of government in
uncertain times, and why she is hopeful
Photo: John Hryniuk

about our collective future.


Karen Christensen: In your recent paper, this is because ‘the UN is an phenomenon that when we can identify
“Late For a Very Important Date: The intergovernmental institution, so the something, it becomes less frightening. So
United Nations in Wonderland,” you say leadership doesn’t have the flexibility or it’s not entirely reasonable that the level of
the UN is lagging in addressing some the autonomy to manage up to current anxiety is as high as it is. It’s understand-
key issues. Please explain. standards.’ That may be true in part, but able, but not reasonable.
so what? If, when we leave nationally-
Janice Gross Stein: If you think of the regulated systems and scale up, we leave KC: Even given the recent foiled terrorist
United Nations as the steel framework of our best standards behind, the quality of plot in London?
the global architecture that will shape the global institutions is very fragile. This
21st century, it is currently not adequate to clearly cannot be the platform on which we JGS: Yes. We could have had 10 airplanes
the task. That’s not to say the UN isn’t doing build for the next century. Compare that to blown up over the Atlantic, and that is a
some very important things right as we shift leadership in the corporate sector, where particularly awful proposition for most
toward a more flexible global architecture: the best examples are also living and people, because almost everyone flies. We
the Secretary General has been instrumental working in an environment with multi- can all identify with those passengers who
in pushing to break down and reach across stakeholders, yet they are managing up to would have lost their lives. But the scale of
the silos. For instance, the UN has put and beyond the best standards in that that threat is much less serious than AIDS,
together the Global Compact, which is a environment. This is a challenge that and people in North America and Europe
group of corporate leaders that have come international civil servants must meet if we aren’t as frightened of AIDS (although they
together with the UN, NGOs and others to are to build the kind of flexible global certainly are in Africa and India and China,
look at how to build horizontal networks architecture we need. even Russia). We don’t identify with AIDS
across pre-existing silos to address some of
our biggest global problems.That’s an exam-
ple of the kind of flexible architecture that
Institutions cannot withstand today’s
we need to move forward in the future.
Another example: the Secretary
stress tests when they remain locked
General has convened a dialogue that brings
all the world’s great religions together to
into existing and entrenched patterns
work with UN staff.They will be looking at
how many of the issues that are roiling
of authority.
global politics are framed by religious
thinking, and at how religious thinking can KC: You note in your paper that the UN’s patients, we don’t say, ‘there but for the
contribute to reframing those issues so that failures on the security front are particu- grace of God go I’.Terrorism in the air is so
they become more tractable. It’s difficult to larly worrisome. visible, so dramatic, so random, and also so
think of another arena where these kinds of familiar that it makes all of us feel extraor-
conversations are taking place. What these JGS: A high degree of anxiety has become dinarily vulnerable, where we haven’t felt
examples tell us is how badly we need more a global phenomenon. Why is anxiety vulnerable before. It is this heightened
flexible architecture. What we need is higher now than it was even a decade ago? sense of personal vulnerability that creates
‘pods’ that can swing in and out as they are In large part, I suspect it’s because the the level of anxiety.
needed, bringing institutional leaders from issues that are most frightening to people A second issue is that the language of
around the world and from different today are relatively faceless. It’s not that the threat and security has become a dominant
sectors of society together. threats themselves are graver than they language worldwide. The menu of threats
Where is the scaffolding of the UN were before, but because they emanate has expanded, so then the menu of security
woefully inadequate? Institutions cannot from people that cannot be identified, who has also expanded, to include almost
withstand today’s stress tests when they are not institutionalized within familiar everything. We face the threat of global
remain locked into existing and entrenched structures. The Soviet Union had a far warming, as the consequences of how
patterns of authority, where people feel greater capacity to wreak havoc in a deep we’ve been living for the last 200 years
that they can only report up and manage way than most of the groups operating become apparent; and there are new
down. Unfortunately, that is the case in today. But we could put a face on Soviet threats to global public health.The menu of
many UN institutions; its capacities to lead leaders, and we knew where the Soviet threats has grown, and the search for
and to manage do not meet current global Union was on the map, and that made it security has consequently become much
standards. The common response is that less frightening. It’s a ubiquitous human wider.At times, the sense of threat feels all-

Rotman Magazine Winter 2007 • 11


encompassing to people. The world feels devolve downwards. Militias can now fire arts – particularly the visual arts and archi-
like a more frightening place than ever, and lethal missiles from a shoulder-held posi- tecture.We need to try to understand much
that’s because we’re all over the world now tion. You likely have a camera in your cell of what they’re telling us, because they really
in ways that we weren’t before. The phone, so surveillance moves way down, to are already ‘there’, and it’s where we all
language of fear is also a seductive one for allow widespread surveillance from below. need to go.There’s a great deal of alignment
political leaders seeking to mobilize energy Technology leads; it doesn’t determine, but between what Roger [Martin] talks about
and resources. it certainly enables the global phenomenon when he speaks of design thinking and what
of pushing decision-making down, and flat- I’m saying. The design literature tells us a
KC: What do you see as the biggest tening it out. And the result is that many of part of what we need to know, but not all.
challenge for global citizens over the the agglomerates become fragmented. It says that we need to move back and
next 20 years? Think about a large global corporation. expand the range of options that we think
The most successful, at the same time as they about, to move away from defined solu-
JGS: There’s a serious lag between most of retain central corporate decision making to tions, and to think about non-obvious
our institutions and the capacity to come steer the organization, have moved to adapt answers. If we can shift the problem, we’re
together to make policy to deal with chal- by flattening decision making out in large going to create a whole lot more space for
lenges and respond to changes in the portions of their structure. interesting and non-obvious answers. And
environment. We need to find that global We need to do the same with our that, I think, is a key part of what we need
‘material’ – and I mean material in a very institutional infrastructure. We need a to do. But beyond that, we need to design
practical way – that will be flexible central capacity to steer, but a flexible more fluid structures. If our structures are
enough so that it can expand and contract architecture that enables many to decide not fluid enough, we’re going to replace the
under different conditions. So much of when, how, and where to row. Corporate existing traps with new traps that we con-
what we have built is rigid and inflexible; managers who have achieved this balance struct for the next generation.
it isn’t responsive enough to the environ- can help us understand and model this
ment in which we find ourselves.We must problem.The big challenge is that authority KC: The rampant uncertainty in the
make our institutions more flexible, by is fragmenting, miniaturization is occurring global economy obviously presents key
figuring out which parts of the ‘steel scaf- in society as well as in technology, and challenges for today’s leaders. How does
folding’ we need to curve. We still need therefore, decision making is being driven one lead in this environment?
the steel – we need the institutions, and down and out, so that decisions are made in
we need them in all three sectors – the multiple centres. At the same time, we JGS: First, we must distinguish between
corporate, the public, and the voluntary need the capacity to make those big, uncertainty and risk. Education is very
sectors. We will always need an institu- authoritative decisions that set the course good at helping people think through risk,
tional infrastructure: nothing can be and steer.At the Rotman School, you might because it’s knowable to some degree.
accomplished without it. But institutions say it’s about getting the ‘design’ right, the Uncertainty is much more difficult to
have to be at least as enabling as they are right combination of disciplined creativity; think through. Dealing with uncertainty
constraining, and many of our global insti- I think about it as architecture, as building has become the defining question for all
tutions constrain much more than they
enable. How do we build a more flexible
architecture? This question becomes even Dealing with uncertainty has become
more difficult to answer as we begin to
appreciate that we can’t mass produce the defining question for all sectors
this ‘material’. There is no single formula
that is going to work everywhere. of society.
KC: What are some of the overall themes an architecture that’s flexible, that sways in sectors of society.There are several strate-
you see making a big impact globally? high winds, that withstands the shocks of gies one can use. First and most important
earthquakes, but that is anchored firmly in is to recognize that uncertainty is a funda-
JGS: What we’re seeing globally are two the society that it simultaneously reflects mental part of the environment in which
processes working together: miniaturiza- and seeks to change. we live. When we frame problems and
tion and fragmentation. Miniaturization is begin to lay out alternatives, we need to
very familiar to most of us. We know it KC: Is there any sector out there that is leave space at the table for what we cannot
largely through technology: things are get- coping well with the need for flexible – with any reasonable confidence –
ting smaller and smaller, and yet more and architecture? expect.And if we define our environments
more powerful. In a world in which tech- that way, we will leave resources free
nology miniaturizes size and magnifies JGS:I look to where the comprehension is enough and fluid enough in the certain
power, authority, leadership and initiative way ahead of the curve, and that’s in the expectation that we will confront the

12 • Rotman Magazine Winter 2007


unexpected within the lifespan of the proj- KC: What is government’s role in all
ect that we’re working on. And that itself of this?
changes everything – it changes what we
do, the way we build, the way we allocate, JGS: To be fair, government should lag
the way we construct relationships with somewhat behind the other two sectors,
people. A more positive way to put it is because it represents our insulation against
that we’re not leaving enough room for uncertainty.What if we, the average citizens,
innovation. We talk about innovation all get it wrong? Because we are at the edge,
the time, but when you actually look at the hopefully innovating, experimenting, and
structures we’re building, in the education building flexible architecture, we will make
sector, the corporate sector, or the volun- mistakes. In that sense, it’s fair to look at
tary sector, generally, we’re not making government as our collective ‘insurance pol-
enough space for innovation. icy’ when some of us get it wrong. But only
We also need to create the kind of up to a point: when government becomes
networks that pull in leaders from all the obstacle to creating the types of architec-
sectors. Some of the most interesting work ture I’m describing, that’s a serious
is being done today by these kinds of problem. Government speaks a great deal
networks. There is a recognition that no today about innovation, R&D, investment,
one sector of society has the complete and cutting-edge strategies to bring products
toolkit – whether it’s an intellectual, to the marketplace. Improved productivity
creative, analytic or a managerial toolkit – and commercialization are crucial, we’re

No one sector of society has the complete


toolkit – whether it’s an intellectual,
creative, or managerial toolkit – to drive the
process from beginning to end.
to drive the process from beginning to end, told, to Canada’s future prosperity. If gov- own personal futures. As this generation
especially when the challenges are large. ernments are serious – if they’re prepared to moves into the marketplace, into govern-
It’s by bringing together leaders from walk the walk rather than simply talk the talk ment and into the voluntary sector (and
different sectors that we get some of our – they need to open up spaces for Canadians they will be drawn to the voluntary sector,
most interesting results. to truly engage in the ways that we have been because it’s the most fluid), they simply are
Finally, we need to be more welcoming talking about. not going to put up with the rigid struc-
of friction. Personally and professionally, tures that characterize so many institutions.
people need a much higher tolerance for KC: What global development are you When they get frustrated, they’re going to
messiness and fractiousness. Our reflexive most excited about? move laterally to create a more fluid archi-
response, in an age of uncertainty, is to try tecture in a networked world.
to put things neatly into boxes, and to label JGS: The bright light that I continue to see The question is: can the rest of
them on flow charts, to preserve the is the young people that I meet here at the us adapt to the fluidity of architecture
illusion of control. Leaders, especially in University, who are wonderfully intolerant that sways in the wind, or are we going to
our open and democratic societies, of authority structures. They came of age be left behind in structures that break
justifiably worry that when we sidestep with the World Wide Web, and they’re used when the shocks come, at an ever-quick-
process, we often go wrong, and there is to navigating in a world where they go ening pace?
some truth to that. That truth underpins where they want to look for what they
the rule of law in our democratic system. need. They have a capacity to move at a Janice Gross Stein is the Belzberg Professor of Conflict
Management in the department of Political Science at the
But there is another truth, and that is that much quicker speed than previous genera- University of Toronto and director of the University’s Munk
when we step outside of process, we get tions, and a highly-sophisticated ability to Centre for International Studies. The University Professor
some of our most creative ideas, elegant detect ‘canned’ or prepackaged solutions. has authored over 80 books, chapters and articles on intel-
ligence, international security, negotiation processes,
designs, and flexible solutions. We need to They are much more willing to take risks, peace-making, and public policy. She currently serves as
balance the two, and I suspect that we are more open to the world, and much more vice chair of the Advisory Board to the Minister of Defence
currently over-weighted in one direction. flexible in the way they think about their and as a member of the board of CARE Canada.

Rotman Magazine Winter 2007 • 13


PERIPHERAL
VISION
Detecting Weak Signals That Can
Make or Break Your Company
An Interview with George Day
The Wharton professor and author discusses the
importance of developing our ‘peripheral vision’
to deal with an increasingly complex world.

Rotman Magazine Winter 2007 • 15


Karen Christensen: Describe the metaphor issue we’re trying to deal with – senior may conclude that, for the time being,
of ‘peripheral vision’ as it applies to management didn’t know that they knew you’ll just keep an eye on the situation.
business. about this particular surprise, and they didn’t
know that senior management needed to KC: Can you give an example of a costly
George Day: About 95 per cent of all the know about it. The crux is that organiza- lack of peripheral vision?
sensors in our eyes are devoted to periph- tions lack this capacity – the sensing ability
eral vision (the so-called ‘rod cells’), while – to bring signals out of the periphery and GD: One example I found intriguing was a
the remaining five per cent (‘cone cells’) attend to them.The problem is that there’s client of mine, who ran into huge problems
are used in focal vision.The rod cells allow a lot of noise that buries and confounds the with the European reduction of hazardous
us to detect motion, colour, and of course, interesting information from the weak sig- substances regulations.These require organ-
the periphery. The two things that struck nals. So, in technical terms, there’s a really izations to take dramatic steps to eliminate
[my co-author and I] about this were that, poor ‘signal-to-noise ratio’. things like mercury and lead, and to provide
abilities to recycle. His company was totally
blindsided by this; they had all sorts of prod-
The periphery in the organizational sense ucts in development, and they had to pull
them all back. It cost them millions. But it
is that ‘fuzzy zone’ way on the outside turned out that some of the technicians in
his company were well aware of these
of a firm’s collective vision. emerging issues; they just didn’t know who
to talk to about it, and they didn’t appreci-
on one hand, most organizations flip that KC: You believe that a capacity for periph- ate the significance of the information. We
ratio, so that most of their sensing eral vision is not only crucial to a firm’s find this time and time again: your sales
resources are devoted to focal vision: they success, but to its survival. Please explain. manager in Asia Pacific might hear a rumor
focus on current markets, products, and about a potential competitor; but does she
competitors, and very little is devoted to GD: It’s crucial because so many of today’s know who to talk to, or how important it is?
the periphery. The other thing that struck opportunities and threats emerge from the And when senior management finally hears
us about the metaphor was the notion that periphery, so if you can see these things about this weak signal, will they appreciate
you can develop your peripheral vision – sooner, you can act on them in a mindful its significance?
there are ways of improving it, not the least fashion. The issue is, can you act on it
of which is exercise. For example, people sooner than the competition? Many of these KC: What is ‘the vigilance gap’?
can increase their peripheral vision from things take long periods of time to develop;
180 degrees – 90 degrees on either side – acting on an important signal could entail a GD: This is the gap between the need for
to 190 degrees, just through exercise. And technology transfer, a shift in the market, peripheral vision and the capacity for it.And
of course, you can improve your overall or an emerging segment.The smart compa- sadly, this gap is actually growing, because
vision in lots of ways: you can wear glasses, nies with strong peripheral vision spot the the need for peripheral vision is driven by
replace lenses, have Lasik surgery; it’s really signal earlier, and they prepare themselves complexity and volatility in markets, which
quite amazing what you can do when you for it.They put capabilities into place – they raise uncertainty. If you think about the
put your mind to improving your capacity may not ‘jump right in’ and act on it, but environment of organizations, it’s frag-
for peripheral vision. So it’s a nice when it happens, they’ll be ready, because menting in many ways; there are all sorts of
metaphor, and people get it – they under- they’re monitoring the situation. new segments, many more competitors,
stand that the periphery in the One of the tools we find particularly lots of new technologies, so you have a vastly
organizational sense is that ‘fuzzy zone’ way helpful is ‘scenario analysis’ – creating more complex, fast-changing environment.
on the outside of a firm’s collective vision. alternative scenarios to cue yourself to crit- Just imagine that you’re a medical device
ical events that might happen, or trends that company: you’ve got regulators to consider,
KC: Are some people naturally better might be developing. We’re talking about a you have to worry about public opinion
equipped to notice important signals? zone of high uncertainty here, where (which has been quite negative of late), you
you’re not sure how something is going to have the physician community to keep track
GD: Yes and no. We found that in virtually play itself out. So the [seven-step] process of, dozens of technologies are changing
all cases, somewhere within the organiza- we came up in the book is not just about daily, and managers come from all over the
tion, there was someone who knew about a sensing the weak signals, or even acting on place – not only related industries, but from
past ‘surprise’, because they saw it in their them: we found the biggest problem was other geographies. That’s just one industry
periphery.They might have been associated getting the signal to the right person, and where the periphery is getting vastly more
with the firm as a distributor, a regional having them interpret it properly. Then, complex by the day, and this is driving the
sales manager, or a technologist, but the from there, taking appropriate action – increasing need for peripheral vision. But
problem was – and this is the heart of the which may be no action at all, because you the capacity is nowhere near keeping up.

16 • Rotman Magazine Winter 2007


KC: Give us an example of great new competitor who has a disruptive tech-
peripheral vision. nology, for instance. We’re not suggesting
that you don’t keep your antennae up – all
GD: One that most people can relate to is good managers need to do that – but that in
the situation that we found with the low- fact you’re very active about it, rather than
carb diet phenomenon. Back in early 2004, reactive, which means scanning everything
there was great interest in Atkins-type loosely out there. People need to be much
low-carb diets. Our data showed that nine more active in the way they go about scan-
per cent of adult Americans were on some ning, actively asking questions. If I’m in
version of this diet. It turns out that this nano-technology, for example, and I’m
was an opportunity that had been foreseen launching a new product, I had better be
as early as the 1980s; in fact, the Atkins diet very mindful of the disastrous experience
book was on the New York Times bestseller of genetically-modified organisms in
list from 1997-2002. Yet only one major Europe, because there are a lot of parallels
company that we found really saw that and between nano-based products and GMOs.
acted on it, and that was Anheuser- Some of the best companies in nano-tech-
Busch, which launched Michelob Ultra in nology understand this, and have focused
September 2002. This product was very their scanning on it. That’s just one way to
well received, and it fit the market trend look at the periphery.
beautifully. In speaking to them about this,
Anheuser-Busch had been aware of this KC: How can an organization get started
trend since the 1980s, and had been moni- on developing better scanning capabilities?
toring it carefully, developing products,
and just waiting for it to take off. And in GD: The departure point for an improve- iting their network of contacts and connec-
2001, they judged that it was time to ment program is leadership.We studied 170 tions to fairly familiar settings. Contrast
move. Most of the rest of the beer indus- companies in depth, and we found that if you that with the vigilant leader, who is very
try, notably Coors, was a full two years don’t have curious or vigilant leadership that externally oriented, seeks a lot of differ-
behind them, and this was critical: by the wants to learn about the periphery, nothing ent perspectives, and networks broadly in
time Coors came out with a product, it much else is going to happen. So the culture social and professional settings. This makes
was a miserable failure, because the trend is very important; if it’s closed and inward- a huge difference.Vigilant leaders also have
had collapsed. Most people were off the looking, you’ve got a problem. Another great strategic foresight – they actually
diet by then. Anheuser’s ability to see aspect is knowledge systems for detecting embrace uncertainty and have an ability to
things sooner is what made this success and sharing weak signals. How you’re organ- probe for second-order effects. They work
possible. It’s not about forecasting, or hav- ized is important, too – you could have task with much longer time horizons, and they
ing a better crystal ball, it’s about being forces, outlooks, scouting parties – all sorts are more willing to take time to explore
sensible about monitoring and picking up of things can be put into place. the periphery, so they create some ‘slack’
signals, understanding their implications
earlier, and taking the right actions at the
right time. Vigilant leaders actually embrace
KC: You have said that “to see every-
uncertainty and have an ability to
thing is to see nothing.” But isn’t a ‘big
picture’ perspective a good thing?
probe for second-order effects.
GD: Yes, but there are limits. As I men- As we looked at companies with supe- around that. Unfortunately, most heads of
tioned earlier, we have found that in rior vs. deficient capabilities on all these major corporations today tend to be more
virtually all cases, there was someone who dimensions, what overrode everything was like operating managers. That’s why work-
knew about that critical piece of informa- the vigilance of the leadership.There’s a big ing on this capability is so important.
tion, but they didn’t know that they needed difference between ‘vigilant leaders’ and
to know it. So an organization has to know ‘operating managers’. The operating man- George Day is the Geoffrey Boisi Professor and a professor
of Marketing at the Wharton School at the University of
where to be looking at things really closely. ager is very focused on the here and now, Pennsylvania, where he is co-director of the Mack Center
Of course, you pay a certain amount of on the current situation, and making the for Technological Innovation and director of the Emerging
attention to all aspects of the periphery, but numbers. They tend to be looking at the Technologies Management Research Program. He is the co-
author, with Paul Schoemaker, of Peripheral Vision: Detecting
there are some places you really have to world from the inside-out, and are fairly theWeak Signals ThatWill Make or BreakYour Company (Harvard
focus your attention. It could be a potential closed in terms of listening to outliers, lim- Business School Press, 2006).

Rotman Magazine Winter 2007 • 17


THE END
OF EXPONENTIAL GROWTH:

Why (Real) Growth May End Soon

by Robert Ayres
A continuation of growth, as experienced in the 20 th century,
would far exceed the earth’s ability to support human
civilization based on current lifestyles.

Robert Ayres

Exponential economic growth in the west- ‘Borrowing from the future’ means bor- repayment. We are running out of a num-
ern world began in the late 18th century and rowing on the basis of expectations of future ber of high-quality resources (topsoil, fresh
has continued, more or less unabated, until income.The sale of equity shares is an exam- water, fish, virgin forests, oil and gas, and
the present. However, anyone who believes ple; unsecured credit cards are another; and toxic waste assimilation capability) to
the future will be a straightforward continu- over lending by central banks (as in post-war exploit.The fact that global reserves of eas-
ation of the past needs to address the fact Japan) is still another.A more subtle form of ily-recoverable petroleum, natural gas, and
that a number of drivers of past growth in this involves borrowing from other coun- high quality metal ores are also finite
industrialized countries are showing signs of tries by running a trade deficit. merely adds to the problem. Competition
saturation or exhaustion, including: The U.S. now has a huge and growing for land, water, fisheries and energy
trade deficit, entirely financed by foreign resources is already creating violent con-
1. Division of labour (job specialization), as investment in U.S. government securities flicts in some parts of the world, much of it
emphasized long ago by Adam Smith; by exporting countries. The deficit cur- disguised as ethnic or religious in nature.
2. International trade, insofar as it allows rently approaches $800 billion, or seven This leaves item number seven as the
economies of scale and international per cent of the U.S. GDP, and absorbs close only viable driver of future economic
division of labour; to three quarters of the savings of the rest growth. The technological efficiency of
3. Saving and investing (the traditional of the world. This is unsustainable. Policy- converting raw materials (and fuels) into
driver of growth); makers hope for a ‘soft landing’, but that useful work and power increased enor-
4. Monetization of formerly unpaid would require a return to the sort of policies mously during the 19th century and the
domestic and agricultural labour; that resulted in a large budgetary surplus first half of the 20th century, resulting in
5. Borrowing from the future (by creating during the Clinton administration – cost and price reductions, not only for pri-
new forms of unsecured credit in including much higher taxes and sharply- mary energy, but also for all energy-related
massive amounts); reduced military spending. Given the products and services. In fact, virtually all
6. Extraction of high quality natural significant deterioration in U.S. economic products and services are dependent on
resources; and strength since the 1990s, it would probably energy – or energy as converted to ‘useful
7. Increasing the technological efficiency also require a gradual devaluation of the dol- work’ – to some degree. This long-term
of converting resource inputs into ‘use- lar, significant energy conservation policies trend has enabled the substitution of
ful work’ and power. and other policies to encourage domestic machines, powered by cheap fossil fuels,
investment rather than capital export. for human and animal labour. It has also
The first four trends have been largely The alternative – a ‘hard landing’ – facilitated large-scale industrial processes,
completed in the industrial world, would include a sudden devaluation of the together with their economies of scale and
though they are barely beginning in many dollar, a sharp increase in U.S. inflation, a experience, which further cut costs and
third-world countries. The benefits of sharp devaluation of U.S. bond prices, and prices. These cost-price reductions trig-
scale from international trade have prob- a deep recession. Foreign creditors would gered increased demand, thanks to price
ably peaked, and saving from current see their dollar reserves cut in value at the elasticity, and increased demand yields still
surplus and investing is quite out of fash- same time as their U.S. export markets further economies of scale and experience.
ion, notably in the U.S. Asian countries dried up, and a worldwide depression Sources of primary energy (crude oil,
still do it, but the U.S. essentially stopped would likely follow. gas, hydroelectricity, etc.) are no longer
saving in the 1990s and is currently ‘dis- Borrowing from nature by exploiting getting cheaper. Higher energy prices may
saving’ – living on capital, or on money non-renewable resources is actually more alleviate scarcity by reducing consumption,
borrowed from others. like theft, because there is no possibility of but they also inhibit economic growth.

Rotman Magazine Winter 2007 • 19


Moreover, the rate of increase in the effi- exponential, as assumed by contemporary significant U.S. slowdown or extended
ciency of energy conversion in industrial growth theory, it means little or nothing. depression, accompanied by inflation, are
societies has slowed down significantly. However, if one of the main drivers of eco- frightening.We saw a preview of the impact
The slowdown in technological nomic growth over the past century has of ‘stagflation’ in the late 1970s. In that case,
progress in the energy conversion domain been a growing supply of useful work, at the ‘cure’ was a sharp increase in interest
seems to be due to a combination of cheaper prices, then the continued slow- rates, deliberately engineered by then-Fed-
exhaustion of the easiest options, institu- down in efficiency gains means a gradual eral Reserve Chairman Paul Volcker,
tional sclerosis, and inappropriate future slowdown in economic growth. followed by a long decrease in oil prices
regulation favouring established monopo- Information technology has exemplified from the 1980 peak. Of course, one adverse
lies (especially in electric power the feedback cycle: costs have fallen, prices consequence of the period of low oil prices
distribution) and inhibiting innovation. have followed, and demand has risen in con- in the late 1980s and early 90s was that
investment in finding new oil and gas
The implications of a significant U.S. resources, as well as alternative technolo-
gies, slowed.
slowdown or extended depression, The current problem is at least partly
due to lack of investment in production and
accompanied by inflation, are frightening. refining capacity. On the other hand, the
high oil prices of today also reflect political
instability in the Middle East and, at
Another more illuminating way of look- sequence. But IT is not the panacea for the another level, the fact that new discoveries
ing at future prospects is by representing economy as a whole, unless it results in dra- have consistently failed to replace current
technological progress as ‘exergy’ [the matically lower costs and increased demand consumption in the quarter century since
energy available to do useful work] conver- for all of the other tangible goods and serv- 1980. And indeed, the gap is growing. The
sion efficiency, in the form of an experience ices that society needs. Up until now, the cost of finding new reserves is rising rap-
curve. It is evident that the period of rapid applications of IT (outside of its own sector) idly, even as demand from China and India
improvement is far behind us. Barring a seem to be eliminating more jobs than they is also rising rapidly.
miracle (i.e. a scientific breakthrough of create, but without significant correspon- Recent price declines suggest that imme-
huge proportions, or a radical change in ding impacts on consumer demand for diate worries were exaggerated, but the next
government policy), only further slow- really new and attractive products and serv- time, we may not be so lucky. Oil prices will
down can be expected in the future. ices that would create more jobs. not drop much more until demand drops,
Taken together, all of these phenomena and that would happen only in the event of a
Implications for Growth suggest that U.S. economic growth is major recession or depression. But the
What does this slowdown imply for eco- almost certainly decelerating, and could resulting drop in oil prices, even by a factor
nomic growth? If growth is automatic and soon cease altogether.The implications of a of two from present levels, is unlikely to be

What Will Life Look Like in 2100?


• Energy consumption in the U.S. and the surface of the moon, or from orbiting performance from the best that can be
Western Europe will have to be signifi- solar satellites. Nuclear power will have a envisioned today. Light metals (possibly
cantly decreased, which will require even significant role, but so will hydroelectric even magnesium), fiberglass and com-
more draconian cuts in the consumption power, wind power, tidal power, terres- posites will largely replace iron and steel
of liquid hydrocarbon fuels. This pre- trial PV on roofs, coal gasification (for in the body an chassis. Electric motors in
cludes any vision of a private jet or hydrogen) and alcohol fuels obtained by the wheels will provide the motive
several large SUV’s in every garage. And genetically-engineered enzymes from power, and fuel cells will (most proba-
air travel will be even more expensive waste biomass, especially lignin wastes. bly) provide the energy. Hydrogen
and less pleasant than it is today. production (by micro-organisms or elec-
• Private automobiles will be smaller and trolysis) and storage will replace the
• Electric power will be plentiful and more fuel efficient– partly because fami- present system of hydrocarbon-based
affordable. Most energy-consuming activi- lies will be smaller – but the average propulsion power for vehicles like taxis
ties will be in the form of electricity; some private vehicle of 2100 will not be radi- or buses, operating strictly within
will be transmitted by microwaves from cally different in appearance or densely populated urban areas.

20 • Rotman Magazine Winter 2007


enough to re-start rapid global economic itors. Incidentally, energy consumption will police power, which means an end to the
growth along the current trajectory. The also decline, along with declines in long- present system of 150 countries each with
existing sources of cheap oil will soon show distance tourism. If this happens too ‘absolute sovereignty’. The creation of the
clear signs of exhaustion, and the ‘unconven- quickly, it could trigger a wave of bank- European Union offers a possible model
tional’ sources touted by optimists require ruptcies among energy producers who bet for other groupings.
huge capital investment. Capital outflows on a continuation of high prices, as well as Sustainability by 2100 also implies an end
from the industrialized world for non- major economic problems for petroleum- to further environmental degradation. But
energy development such as urban exporting countries. that does not mean that today’s environmen-
infrastructure will inevitably slow down. The basic problem is that, just as growth tal resources – notably climate, forests, soils
Recent rapid Chinese growth has been in a feedback system drives more growth, and bio-diversity – can be preserved, any
financed largely by foreign investment and similarly, decline begets decline. If the growth more than population growth can be stopped
exports, mainly to the U.S. A collapse of engine goes into reverse, there may be no overnight. One positive factor is that global
the U.S. economy would have disastrous bottom to the depression, except through the population may peak and begin to fall as early
effects on China (not to mention other intervention of exogenous events, such as as the middle of the present century, pro-
exporting countries). Sudden or even rapid war. Unfortunately, a wider war for vided human life-spans do not dramatically
dollar devaluation would cut exports, and resources, pitting the Judeo-Christian West increase in the meantime. AIDS, declining
cut the financial assets of Chinese banks, against an increasingly fundamentalist Islam, male fertility and easy contraception are fac-
many of which are already overloaded with seems ever-more plausible. tors, but the basic reason is that, in an
non-performing assets. The impact on
China might not be limited to economic
distress. If, as usual, the worst pain is felt by
By 2100, huge numbers of people will
those at the bottom of the ladder (i.e. rural
peasants), there could be violent repercus-
have been displaced from low-lying areas
sions.There are already hints of trouble.
For industry, lower growth (or no
by rising sea levels and natural disasters.
growth) means reduced future profit
expectations and lower stock and share The Quest for Sustainability by 2100 urbanized society with rising living standards,
prices. Insurance companies will get into To be sustainable, the world must be having children will increasingly be viewed as
trouble.The so-called ‘wealth effect’, oper- peaceful and secure under the rule of law. an expensive luxury.
ating in reverse, will cut the consumption U.S. power is declining, and world peace Environmental problems in 2100 will
of other goods and services, especially will not be achieved by a ‘Pax Americana’; certainly be far more severe and obvious
housing and tourism, which in turn will nor can it be imposed and enforced by any than they are today. Deforestation will
reduce employment and income, especially other single country. It will require some have added more carbon dioxide to the
in places and countries that depend on vis- form of world government, global law and atmosphere, and exposed more of the soil

• Fresh potable water will no longer be less animal-based diet than the rich impact will be better controlled than it
free or unmetered in most places. New countries enjoy today. This shift will is today.
technology will enable cities to treat and occur spontaneously, thanks to both
recycle sewage water to a level of quality health concerns and environmental fac- • Education, entertainment, the arts,
higher than natural ground water offers tors. Most agriculture will be devoted health care, environmental protection,
today. It will take many decades before to food for humans and not for animals. and security services will be by far the
the public is willing to accept recycled Grain-fed beef, in particular, will largest employers. Manufacturing will be
water on tap, even though astronauts do become much more expensive, fol- largely robotic or automated, and almost
it routinely. However the current fad for lowed by pork. Non-farmed fish will totally controlled by computers. Con-
bottled ‘natural’ spring water is likely to also be an expensive luxury, as ocean- struction will also be largely robotic,
peak and decline before 2100. fishing rights are privatized, regulated using prefabricated components. Design,
and closely monitored by satellites. marketing, maintenance, repairs, renova-
• The declining global population will be ‘Fish farming’ will expand to fill the tion, recycling and waste disposal will
reasonably well fed, though on a much gap, however, and the environmental continue to employ human workers.

Rotman Magazine Winter 2007 • 21


surface to direct heating by the sun’s rays, fresh water is already scarce. It is also tional cooperation. Virtually all of the
especially in the tropics. Global warming energy (exergy) intensive. major investments needed will not gener-
will have raised average global tempera- One of the conditions for sustainabil- ate high returns, at least in the early
tures by several (three to six) degrees ity by 2100 is that a great deal of fresh years, and will require significant public-
Celsius, and more in the far north. Conse- water will have to be transported by canal sector financing.
quently, much of the frozen permafrost in or pipeline from areas with excess rainfall
Alaska, northern Canada and Siberia will – such as southern China, southern India, In closing
have melted, releasing methane into the Bangladesh or northern Australia – to Will a low-energy, low-growth future
atmosphere that will accelerate the global areas with too little rain, such as northern mean ‘freezing in the dark’, as nuclear
warming process. China, Rajasthan and the Indus valley or power advocates 30 years ago accused anti-
The Arctic Ocean will have lost its ice central Australia. Irrigating bigger areas, nuclear activists of proposing? The answer
cover, resulting in a further reduction in like the Sahara, will be a much more diffi- is ‘maybe’. In a worst-case scenario of con-
global albedo [the proportion of light or cult task, requiring either pipelines from flict and chaos, the future might be
radiation reflected by a surface] and a fur- the Niger River, or very large desalination something like that. But much better
ther acceleration of the warming process. plants located on Mediterranean or options surely exist. Technology is not the
Much of the Antarctic ice that is currently Atlantic coast. The interior of Australia obstacle, but neither is it the panacea. The
resting on the sea bottom will have floated could be irrigated by a combination of current political-economic malaise is
away and broken up. Depending on how fast canals (from the north) and desalination reversible, if the approaching crisis is rec-
this happens, the sea level will have risen by plants. A global water distribution system ognized for what it is, and if appropriate
at least half a meter, and possibly two or will have to be built, eventually. actions are taken.
three meters, rendering many low-lying What actions? In my view, the first and
islands and coastal regions uninhabitable. Energy Sources of the Future most important of the needed actions is
Hurricanes and typhoons will continue to be Well before the year 2100, the vexing to end the war in Iraq and to enforce (if
ever-more frequent and powerful as ocean problem of medium-to large scale energy necessary) a two-state solution for the
surface temperatures rise. storage, for which rechargeable batteries Palestinian conflict. Beyond that, we must
By 2100, huge numbers of people will are the only current (and unsatisfactory) address the linked problems of energy
have been displaced from low-lying areas answer, can probably be solved. There are availability and economic development in
by rising sea levels and natural disasters – at least two possible technical solutions. the poor countries. Last, but not least, we
particularly in South Asia and East Asia, The first is by means of magnetically levi- must acknowledge and reverse the degra-
but also in other fertile estuaries, such as tated high-speed flywheels, buried for dation of the environment and the
the Nile, the Amazon and the Mississippi safety in reinforced concrete under- changing climate.
Deltas. Northwest Europe will be hard- ground vaults. The other solution, better All of the above presupposes a funda-
pressed to protect itself from the rising suited to small scale and local users, mental change in the ‘received wisdom’ of
seas, and much of Florida, the Gulf Coast would be in superconducting magnetic those who walk in the corridors of power.
and the barrier islands off the East coast of fields, using newly-developed quaternary For instance, it is high time to recognize that
the U.S. (including Long Island) will be ceramic or even organic superconductors, the War on Terror cannot be won by military
flooded unless vast dike-building projects cooled by liquid nitrogen. Superconduct- means.Armies cannot make peace; they gen-
are initiated almost immediately. Only the ing magnet storage would be well-suited erally only make matters worse. Similarly,
Dutch seem to have grasped the enormity to store energy from wind turbines though all religions preach peace, religious
of the problem. Those who survive storm located (for instance) on remote mines, fanatics of all faiths tend to practice the
and flood disasters will have become farms or pipelines. opposite. Fanaticism itself is the enemy.
refugees. Resettlement will be a major An international electric power grid is Policing is necessary, but not sufficient. Edu-
challenge, especially in Asia. also part of the solution. Power will have cation is crucial, but also insufficient. Peace
Much arable land in low-lying regions to be transported from areas with surplus can be achieved only by promoting economic
will be flooded, or subject to flooding dur- generating capacity, such as the Andean development, with emphasis on eliminating
ing frequent storms, and most of the headwaters of the Amazon and the poverty, under international law, and accom-
remaining good farmland is already occu- Himalayas, to the big cities on the plain panied by a clear and constant message of
pied. Hence there are only two possible where most consumers (and industries) religious tolerance.
destinations for the refugees: most will end are located.
up in Asian cities, but the other possibility Robert Ayres is the Novartis Professor (Emeritus) of Eco-
Adaptation and mitigation (such as
nomics and Political Science and Technology Management at
is large-scale reclamation and resettlement dam and dike construction) will require INSEAD and an Institute Scholar at the International Insti-
of deserts. There are plenty of deserts in major investments, probably comparable tute for Applied Systems Analysis (IIASA) in Austria.Trained
the world that were once fertile and could in magnitude to those currently devoted as a theoretical physicist, he has dedicated his career to
studying technological change, energy, environment and
be again. However, reclamation will to military power.These projects will not resource economics and ‘industrial ecology’ – a field he pio-
require large quantities of fresh water, and only be costly, they will require interna- neered. He can be reached at robert.ayres@insead.edu

22 • Rotman Magazine Winter 2007


E X PA N D I N G P E R S P E C T I V E S I S E VE R Y T H I N G

Executive Programs at the Rotman School UPCOMING PROGRAMS:

embody innovation and drive, with programs Financial Literacy for Directors and Executives
March 2 – 4, 2007 in Toronto
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It’s a thinking environment. It’s a training ground Begins March 5, 2007 in Toronto
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for business leaders. It’s an energizing community Begins March 30, 2007 in Vancouver
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TIME
for
DESIGN
by Jeanne Liedtka and Henry Mintzberg
Cities, buildings, products, services, systems, and
strategies all face the same need to combine expertise,
insight, engagement, and adaptation. It’s time
to confront the tensions of design.
Jeanne Liedtka Henry Mintzberg

Nearly 40 years ago, Nobel Laureate in just work, they share a number of other resisting compromise, and imposing his or
Economic Sciences Herbert Simon characteristics: they seem simple but com- her will on users.
argued that, “everyone designs who devises plete to their users; they contain nothing At the other extreme are the lovely vil-
courses of action aimed at changing exist- extraneous, yet lack nothing important; lages perchés (perched villages) of Provence.
ing situations into preferred ones. Design, they engage at an emotional level; beyond Evolving over time and through the partici-
so construed, is the core of all professional their ability to serve function without fan- pation of many, the hand of any single
training: architecture, business, education, fare, they hook their users in an almost designer seems hardly visible. Yet these vil-
law, and medicine are all centrally con- sensual way; and finally, great designs man- lages retain a sense of symmetry and
cerned with the process of design.” age to be simultaneously enduring and coherence that suggests intention and con-
Given the widespread attention given innovative. They connect to the past with a scious forethought – no less so than Brasilia.
to design in the business press over the reassuring familiarity, while surprising Exploring the design continuum from
past two years, it appears the time has users with their inventiveness. the stark, fixed, and imposed, to the
finally come when the business world is The important lessons of ‘design as a adapted, fluid, and evolving allows us to
taking this message seriously.Yet design is noun’ turn out to be reassuringly straight- develop a deeper understanding of what con-
hardly the core of any current manage- forward: if you want great designs, seek stitutes ‘design as a verb’, and sets up an
ment training – or its practice. In fact, it’s simplicity, emotional engagement, and that examination of the challenges of designing
not clear that we even agree on what sweet spot between the familiar and the for business. To explore their range, we
design means. As two business academics new. And, of course, do the job well. And describe four disparate approaches to design.
long interested in this topic, our purpose yet, if it’s all that obvious, why are we sur-
here is to show the robustness of the rounded by so many mediocre designs? The Formulaic Approach: Brasilia
notion of design; to examine the various That brings us to the tricky part: First, we return to Brasilia, where the
forms ‘designing’ takes; and to explore its design as a verb. Like most things that are design tensions were resolved by coming
potential for helping people manage hard to do, this is where the competitive down heavily in favour of the designer’s
more effectively. advantage lies. Better designing – of prod- global knowledge and expertise, a con-
ucts, organizations, strategies – holds the trolled process, and a fixed design.
The Terminology of Design key to unlocking the real potential of Architect Oskar Niemeyer used estab-
Design is both a noun and a verb.As a noun, design for business. The basic attributes of lished techniques and official principles to
it refers to an outcome, and some are supe- successful designing are well-recognized: reach what he considered to be an optimal
rior to others. To appreciate the difference the process is synthetic, future-focused, answer. We use the term ‘formulaic’ to
between great and mediocre design, con- hypothesis-driven, and opportunistic. It describe this approach.
sider a comparison of the Golden Gate and involves observation, the use of frame- For modernist architects, the crises of
San Francisco Bay bridges. Both offer reli- works, and prototyping. But peel back from the highly-industrialized cities of the world
able transport across the water separating these high-altitude accounts, and you will were reflected in their traffic, congestion,
San Francisco and its neighbours – but the find that the particulars of designing and poor standards of living. Only ‘total
similarity ends there. The Golden Gate involve varying approaches. planning’, they believed, could resolve
enthralls, sweeps, and symbolizes, inspir- Consider the revolutionary architec- these problems. By creating a new kind of
ing art, music, and myth. The San tural and social experiment of Brasilia, city, Brasilia’s designers set out to create a
Francisco Bay Bridge, meanwhile, merely the most completely-planned city of the new kind of society, using architecture as an
gets the job done. Does this difference modernist movement. Rising from the instrument of change. The modernist prin-
matter? We believe that it does – and that largely uninhabited central plateau of Brazil ciples driving design included the
business has much to learn from this ‘tale of in the 1950s and designed in exacting detail organization of the city into separate zones
two bridges’. to be ‘the model city of the future’, it for work, living, and recreation; the
Functionality is an insufficient pre- anchors a position at one extreme of design replacement of traditional streets with
condition for a great design. The personal approaches, whereby the designer is evi- high-speed one-way avenues radiating out
objects that people cherish do more than dent, declaring his or her intentions, from the center; and the creation of

Rotman Magazine Winter 2007 • 25


superquandra – large apartment complexes The Visionary Approach: IKEA that as many people as possible will be
containing standardized family units Consider the pronounced similarities and able to afford them.”
intended to break down traditional socioe- differences between the above process In the IKEA story, we observe a more
conomic barriers. The resulting design is and the story of Ingvar Kamprad and organic design process at work. Kamprad
specified by a set of pre-existing principles, his creation, IKEA. Kamprad’s personal was more the visionary than the expert,
rather than emerging from a more open- ethic of thrift and simplicity provided more attuned to learning and adapting
ended process of experimentation. the underlying values behind IKEA’s than to knowing and controlling. In a
Brasilia’s design consciously resists defining intention: “To create a better sense, he had no choice – he started with-
attempts at adaptation, rather than encour- everyday life for the many by offering a out the power of bulldozers or a body of
aging them. It is meant to stay true to what wide range of well-designed, functional principles. He had, at best, the equivalent
it is – a ‘model’ city. home furnishing products at prices so low of a small number of people with shovels

Rotman’s Design Studio Opens


Its Doors to New Learning by Heather Fraser

The Rotman School’s own ‘business design unique internship program that would feed four OCAD students were assigned
studio’ is now officially open for learning curriculum development for Rotman pro- among the two projects.
and innovation. This past summer, we grams and provide a valuable experience • The Faculty Cast: Under my leadership,
opened designworks™, the activity hub for students interested in innovation the faculty included Rotman Associate
of the School’s design initiative. Part of the through design. Professor of Marketing Mengze Shi and
Desautels Centre for Integrative OCAD’s Industrial Design Chair Jules
Thinking™, the design initiative repre- • The Idea: An intense, 12-week program Goss. Other experts, drawn from acade-
sents an important component in the that provides students from leading aca- mia and industry, were engaged
teaching and practice of integrative think- demic institutions in the fields of design, throughout, offering guidance and inspira-
ing, as inspired by the world of design. Our engineering, and business with an oppor- tion throughout the process.
mission: to design original business thinkers. tunity to apply their learning and skills to • The Structure: The 12-week program
As a first step in a series of initiatives, important real-world innovation opportu- built off of designworks’ ‘Three gears
we piloted a Design Fellowship Program to nities in a multi-disciplinary collaboration of design’ [user understanding, ideation
serve as the first comprehensive prototype that leverages design principles and and prototyping, and business design],
for applying design principles and practices methodologies. expanded into a comprehensive project
to real-world projects.The Program proved • The Goal: To develop design solutions framework. A combination of lectures,
to be invaluable across a number of fronts. that provide human and/or social value, workshops, and coaching sessions served
It not only helped to formulate and ‘test showcase breakthrough design thinking, to provide guidance to the process.
drive’ the methods and tools for business and are commercially unique and viable. • The Program: Beginning with a client
design, but also validated the uniqueness of • The Projects: Two projects were ‘open brief’ that set a vision and an innova-
our approach to Business Design™ as a assigned: one for an established healthcare tion opportunity for the project, the groups
means of generating breakthrough, yet corporation, Medtronic, and the other a embarked on a series of steps revolving
viable solutions. It also gave us the experi- start-up charitable foundation, Firefly, around the ‘three gears of design’. A deep
ence we needed to expand the program dedicated to fighting neurodegenerative understanding of the consumer target was
into a year-long practicum.And, most impor- disease through research and education. the most critical point of departure. Using
tantly, it inspired a multitude of additional • The Student Cast: Program candidates ethnographic tools and methods taught by
opportunities to build more design-related were selected from a large pool of tal- an expert in the field (Natasha Schleich
content into the Rotman School’s MBA and ented applicants, based not only on their of Plunkett Communications), groups
Executive Education offerings. credentials and passion for ‘design think- engaged in a variety of exploratory
ing’, but also their special interests and research that uncovered core (and unartic-
Background & Overview unique backgrounds to ensure a diversity ulated) user needs. Using the identified
The program was driven out of the Rotman of skills and perspectives. A total of five needs as our criteria for innovation, the
designworks™ studio in collaboration Rotman students (three with engineer- group then developed a wide range of con-
with the Ontario College of Art and ing credentials, including one from the ceptual prototypes (products, services,
Design. Our ambition was to create a Jeffrey Skoll BASc/MBA program) and spaces, etc.) to openly address possibilities.

26 • Rotman Magazine Winter 2007


and only a general notion of what they faced. “Regard every problem as a possibil- resulting design is never really fixed; it is
were setting out to build. And so he ity,” was Kamprad’s mantra. meant to be flexible and adaptive. The falli-
adapted to the constraints he could not Interestingly, the IKEA story also shares ble person – the visionary – takes over from
eliminate. Nearly every element of IKEA’s some characteristics of Brasilia. Both are the ostensibly infallible technique, enhanc-
now legendary business model – show- intensely possibility-driven, with the ing the potential to experiment and learn.
rooms and catalogs in tandem, knockdown designer’s hand evident and dramatic. Yet
furniture in flat parcels, massive stores Kamprad’s visionary design process parts The Conversational Approach: Seaside
readily accessibly by automobile, and cus- company with formulaic design by relying This approach opens up the design process
tomer pick-up and assembly – emerged upon personal creativity, rather than formu- – making it a conversation among many
over time as responses to urgent problems laic technique, affording less control but people, all of whom should be recognized
that the struggling furniture company more responsiveness to opportunity. The as designers. Two of today’s leading

Employing a variety of prototyping tools –


ranging from storytelling to scenario plan-
ning – helped them express ideas in more
tangible forms, giving students the means
to more productive dialogue with clients
and user-solicited input. The final, refined
concepts were translated into a viable inte- Heather Fraser, top row centre, in white, with the first group of Rotman designworks students.
grated business model. At the end of the
program, students delivered a complete On the Medtronic project, the client New Product and Services Lab” is now
and actionable ‘design solution’ for each had this to say: “The Rotman/OCAD team available as a Marketing elective to second-
project, including a full ethnographic combined customer insights with penetrat- year MBA students. This full-year course
report on target insights and needs, a wide ing business-model analysis and design revolves around the three pillars of design
range of concepts and prototypes, and a processes, to provide us with several objec- thinking: deep consumer understanding,
comprehensive and breakthrough strategic tive, actionable recommendations which rapid prototyping of concepts that address a
plan and business model. we are determined to implement.” consumer need, and business design that
The initiative’s most important stake- makes the concept viable in a strategically-
The Results holders – the pilot ‘graduates’ themselves – sustainable way. Students, paired with
The students involved grew from an ‘inte- learned a lot. Said one, “Learning the design OCAD Industrial Design graduate stu-
grative learning experience’ that applied a methodology opened up my eyes to a new dents, are partnered with clients in order
combination of strong principles, practical form of analysis.The user-driven framework to develop solutions to large-scale, actual
tools and methods along with a style of we created began with a motivating ques- innovation challenges they are facing.
working that was highly collaborative, non- tion, created answers to those questions We have also begun a number of Exec-
linear (despite the prescribed process) and which were backed up by insights, then took utive Education and workshop initiatives,
continuously iterative – all of which pushed those insights to form strategies, and finally and are exploring research and develop-
them outside of their comfort zones, to lev- formed our tactics and plan of attack from all mental programs both within Rotman and
els of stellar performance and output. of this.” Said another, “I learned the value of in collaboration with other leading educa-
For the Firefly project, students a deep user understanding and cross-func- tional institutions. These initiatives have all
created a distinctive and scalable strategic tional teams, as well as the value of models been enthusiastically received by both stu-
blueprint for a foundation with high ambi- and creating visual aids that you need to con- dents and industry, indicating a need – and
tions for making a meaningful impact on stantly rethink and rework.” appetite – for a new way of thinking about
neurodegenerative disease on a long-term and the links between design and business.
global basis. Response from the scientific, Where from here?
business and social community has been very Heather Fraser is director of design initiatives at the Rot-
In September of 2006, the Rotman School
man School of Management and an adjunct professor in the
positive, and the foundation went ‘live’ on added its first design-based course to the School’s Desautels Centre for Integrative Thinking. She can
November 27th with fireflyresearch.org. MBA Program: “Design Practicum: The be reached at heather.fraser@rotman.utoronto.ca

Rotman Magazine Winter 2007 • 27


proponents of involvement in the design The Evolving Approach: Linux Like Duaney and Plater-Zyberg, Tor-
process are Andrea Duaney and Eliza- In this approach, designing in the tradi- vald leads the conversation rather than
beth Plater-Zyberk, founders of New tional sense – as practiced by identified writes the code. The ‘community’ does the
Urbanism. Their first and best-recog- designers at specific points in time and designing, and designers and users become
nized project, designed more than 20 resulting in fixed designs – disappears. We almost indistinguishable.
years ago, was Seaside, Florida, an 80- now enter the world of evolving, or never-
acre beachfront town on the Gulf of ending design, not by experts, but by Lessons for Business
Mexico. Architecture Week called it “one of communities in the course of living their The four approaches outlined above reveal
the most influential design paradigms of collective lives. some of the core tensions of design and the
its era”; and Newsweek, “the most influen- This evolutionary design is found in the various trade-offs that each approach
tial resort community since Versailles.” Linux operating system and the open makes. Following are four core tensions
What distinguishes New Urbanism source software process it pioneered. Linux that hold valuable lessons for organizations.
from other architectural approaches is is being designed with almost continuous
not only a different set of principles, but adaptation in mind. In recounting the story 1. Who drives the design?
also its insistence on wide participation in of its origins, software designer Eric Ray- Who should drive the design? The expert
designing, through the use of a process mond opens with a question: “Who would who knows better, who has the global,
called a charrette. In the words of Duaney have thought that a world-class operating explicit knowledge, or the user who under-
and Plater-Zyberk, “The charrette brings system could coalesce as if by magic out of stands better, who has the local, tacit
together all interested parties who are part-time hacking by several thousand understanding?
invited to offer direction and feedback developers scattered all over the planet, The paradox around deciding who
while the plan is being created. It pro- connected only by the tenuous strands of designs involves the apparent trade-off
vides a forum for ideas and offers the the Internet?” between a reliance on experts and visionar-
ies capable of radically innovative – but
potentially difficult to implement – solu-
Successful leaders in both management tions versus a reliance on users with a
tendency to produce ‘me-too’ designs that
and the physical fields of design seem to they enthusiastically execute.
Designer-dominated processes can
have an innate sense of when to allow have a clear advantage when it comes to
producing designs characterized by radical
flexibility into the conversation. change. The creation of Brasilia, for
instance, was an audacious feat – it is
unique advantage of giving immediate Linux’s success challenged many of the unlikely that engaging a community of
feedback to the designers while giving basic premises of traditional software potential users would have produced such a
mutual authorship to the plan by all those design – foremost among them, that large futuristic model city. As users, most of us
who participate.” By convening a conver- projects need to be built like Gothic cathe- crave familiarity, not novelty; radical
sation that puts the entire system in the drals, carefully controlled by a small band designs alienate us.
room, the architects control the bound- of experts who specify every detail and But at what cost do we exclude user
aries, but not the conversation itself. release their design to users only upon involvement? The extent to which Brasilia
Those involved are not merely consulted; completion. Linus Torvald, the originator actually achieved its designers’ ambitions is
they are engaged, and they become of Linux, created this revolution by starting mixed. The standardization intended to
members of the design team. Put differ- with a basic scaffolding offered by another produce equality produced, for many, a
ently, all kinds of ‘quiet designers’ enter programmer, sharing the source code, and feeling of anonymity instead. In place of
the process – bringing with them their inviting anyone interested to participate. gaining an enriched community, many resi-
local knowledge. He released revisions early and often, and dents felt a loss of privacy. Instead of
With the Seaside charrette, the archi- above all, treated users as co-developers, appreciating the orderliness of the space,
tects created a context in which experts and building a “self-correcting system of selfish they missed the messiness of street life.
users learned together, and out of which agents” whose pace of ongoing improve- Despite the homogeneity of the superquan-
the design appeared. This process can be ment was unprecedented. “The closed- dra, the old class distinctions remain. The
admittedly chaotic, which must be toler- source world cannot win an evolutionary risks of a design process that relies too
ated if creativity and consensus are to arms race with open-source communities heavily on experts are evident here.
emerge. Like Brasilia, however, the design that can put orders of magnitude more If this is reminiscent of strategic plan-
itself is eventually fixed. The charrette skill time into a problem,” Raymond ning in business, that is because formulaic
ends, and our quiet designers go home. observed, because “given enough eyeballs, design has been the corporate world’s pre-
Designing stops and construction starts. all bugs are shallow.” ferred approach. This approach, with its

28 • Rotman Magazine Winter 2007


emphasis on the designer’s worldview and its Business leaders seeking better design understand the problem until after the
disconnection from local knowledge, repre- thinking should pay careful attention to first time you implement a solution. If you
sents the yang of designing. It is ambitious, the challenges of preventing premature want to get it right, be ready to start over
aggressive, and intrusive. It relies on tech- consensus emerging in the face of fear of at least once.”
niques and information that, if inaccurate, chaos, and of maintaining the fluidity that
can be fatal. Its detachment from users – the is a prerequisite for breakthrough designs. In closing
people who must live with the design – is a Architect Frank Gehry notes that clients Design is not just a metaphor for management,
potentially fatal flaw.Yet it is capable of great are rarely comfortable with the indeter- but, as Simon said, the very essence of it.
change if the bulldozers are powerful enough minacy of an iterative process; they almost Cities, products, services, systems,
and the terrain is reasonably predictable. always push hard to fix the design and ‘end structures, and strategies all face the same
To succeed at significant change, either the uncertainty’. Conversational design need to combine expertise, insight, engage-
the formulaic or visionary designer must challenges leaders in ways that formulaic ment, and adaptation. To design, and to
persuade users to accept a radical design, or and visionary design do not. Business manage in general, is not to resolve the ten-
conversational and evolving designing must cultures that center on hierarchy, expedi- sions among different needs so much as to
engage users in ways that generate more-inno- ency, and authoritarian leadership get in function within them. To appreciate this
vative designs. Designers who persuade others the way of good conversations. We all will be to get more of those great designs
offer novelty and familiarity in tandem because know about opportunities that exist in the that so enhance our daily lives.
they understand how users see the world. white spaces between divisions, regions,
and functions of every company; what Jeanne Liedtka is executive director of The Batten Insti-
tute and the Johnson and Higgins Professor of Business
2. How does the designing happen? we do not know is how to tap these Administration at the University of Virginia’s Darden
This involves the tension between control- opportunities. Recognizing the role of School of Business. Henry Mintzberg is the Cleghorn Pro-
ling a design process to achieve coherence conversations in exploring new possibili- fessor of Management Studies at McGill University.This is
an excerpt of an article that appeared recently in the
and order versus opening up the conversa- ties can produce dramatic innovation. Design Management Review, a publication of the Design
Management Institute.

The key is to get the basics right so that


the specifics can be easily changed.
tion and risking some ‘messiness’ to achieve 3. When is the designing ‘finished’?
creativity and broader involvement. The The world does not stand still, but designs
inclusion of non-experts brings valuable must – at least for a time: buildings have to
ownership and local knowledge, but may be built, products brought to market,
also bring chaos and mediocre solutions. strategies implemented, and structures
Getting more innovative thinking from users established. The dilemma in each case is
themselves is how this tension is resolved. how designs can be built to adapt, yet pre-
Successful leaders in both manage- serve their integrity. In other words, how
ment and the physical fields of design seem can designing deal with change and conti-
to have an innate sense of when to allow nuity concurrently?
flexibility into the conversation, when to Former Intel chief Andy Grove has
tap the group’s potential for creating bet- said that his firm’s strategy process evolved
ter solutions, as well as when to abandon in alternating cycles of chaos and single-
the search for consensus to interject minded focus – sometimes adapting,
order from above. They have no formulas sometimes closing. Companies that do
– just an acute sense of the particular, nothing but change – constantly reorganiz-
the potential, and the possible.These lead- ing, always envisioning some new strategy
ers/designers seem able to give up enough or other, bringing in yet another team of
control to find creativity without losing change consultants – never reach closure,
coherence. Kamprad’s vision seems exem- and so are no better off than companies that
plary in its capacity to hold tight and let never change. Even the most evolving
loose at the same time, in order to engage designs have to be fixed for a time.
the collective creativity of the company’s The key, we believe, is to get the
employees and customers.There are enor- basics right so that the specifics can easily
mous opportunities to bring this kind of be changed. As Raymond observed about
conversational design into business. software design, “You often don’t really
CEOs Corner: Colin Angle
Keeping Up With
the Jetsons
Robotics pioneer Colin Angle has seen the future, and it is one in which
robots make life easier for humans – in some cases, even saving lives.

Karen Christensen: Early in the robotics Professional. On the latter project, we KC: You have been somewhat critical of
industry, there was a clear idea of what learned exactly what was necessary to the robotics industry for lagging in
robots would look like. You and your clean. The Roomba was never meant to be viable product creation. Where do you
team chose to think about things in an some kind of fad or gadget – it was always see the industry heading?
entirely different way. Describe your meant to be a serious cleaning appliance. So
approach. we knew where we couldn’t compromise. CA: One problem is that people some-
And from our experience with consumer times look at us and decide that we’ve
Colin Angle: The traditional way people toys, we learned that if you didn’t start already created all of the viable products,
thought robots would look was wildly thinking about cost immediately, right at and that’s not a particularly imaginative
impractical. Robots shouldn’t look like the beginning of the project, you would view of the world. But the industry is
people, because building people is incredi- make decisions that would ultimately drive absolutely heading to a better place.
bly complex. We chose to look at robots the price point into wildly unrealistic Because of iRobot’s success, more money
from a functional perspective. What we do places.This affected the types of sensors we is coming into the space, and the opportu-
is think about what we want the robot to have on Roomba: as a result, there are no nity to invest in practical robots is
do, and then create a design that is unmer- cameras on it, and there’s no sonar.We had becoming more of a real opportunity for
cifully optimized towards doing just that to solve the challenge of the robot not get- entrepreneurs than ever before. Better
job. Our Roomba Vacuuming Robot, for ting stuck and covering the entire room companies that are looking at more prac-
instance, is incredibly small and light. It can from a very different approach. Mechani- tical applications are beginning to emerge.
go under things, and you can easily pick it cally, we had to assume that the robot For example, robots are now being used in
up. If we’d built a large walking robot, it didn’t know where it was; so we did things hospitals, to allow doctors to see and
just wouldn’t have the ability to cover the like making it round, so that regardless of examine patients remotely and things like
area that Roomba can, and it would be where it went, it could always turn around that, so I do see headway and momentum
heavy and dangerous. So we’re all about and leave, so it couldn’t get trapped. We building. To some extent, the robots for
‘function first’. We believe that should be made the decision to make it only go for- entertainment and brand building are the
the driver. ward. We placed a bumper on the front of robots of the last decade. Robots that
deliver value are now the focus.
One key challenge for our industry is
It’s hard to imagine anything more that building a robot is a very complex,
time-consuming task. A certain degree of
rewarding than a robot that saves a life. time has to pass for it to happen. These
new companies, with their new ideas and
KC: The Roomba has been a major success it, so that regardless of where it went, the focus on the practical, need to be given
for iRobot, with two million units shipped bumper would be triggered. We resolved the resources and time for the fruits of
to date. During its development, you had some very hard robotic challenges through their labour to be realized. But I think it
to make some trade-offs in order to keep clever mechanical design, and then used will snowball – and as soon as there is
it affordable. Talk a bit about this process. sensors to detect edges of stairs or obsta- more than one example of a venture-
cles, where mechanics alone wouldn’t have backed robot company providing good
CA: We had previously designed some toys solved it.Throughout the process, we were returns for investors, we’ll see even
with Hasbro and some professional clean- very careful about where we allowed our- more entrepreneurs and resources going
ing equipment with Johnson Wax selves to add cost. into the space.

30 • Rotman Magazine Winter 2007


KC: Today there are more than 700 of vated me to keep at it.As for our company’s facilities are chronically under-staffed, and
iRobot’s PackBot Tactical Mobile Robots future, as I said, our vision and mission – there are fewer and fewer of them. That
at work in Iraq and Afghanistan, which and the reason people come to work here – sounds bad enough – but then you com-
have performed thousands of missions. is all about creating robots that make a dif- pound it with the reality that the number of
Your firm has been credited with saving ference in people’s lives. Our turnover rate people in the U.S. over the age of 65 is
soldiers’ lives. How has this initiative is extremely low – below four per cent. going to double over the next decade, and
affected your company’s future? We’re not a company that is all about Fris- you can really see that we are headed for
trouble. The challenge that we all have to
Our future is based on continuing to face is, what are we going to do about it?
To me, there’s an obvious answer, and
attract people who want to be part that is to give aging seniors what they want.
For the most part, that’s to live independ-
of this new industry – and part of ently in their homes for as long as possible.
And robots are going to be a huge part of
changing the world. enabling that future.The iRobot Roomba is
commonly purchased by people who don’t
CA: iRobot is not a typical company in bee games and stationary lap pools. It’s want to vacuum anymore, or who just can’t
search of profits; we’re really a company on about getting job satisfaction from taking do it anymore, so to some degree, we’re
a mission to change the world by bringing on very hard jobs and succeeding at devel- already in the elder care business by making
this new industry into existence. And that oping products that can get out there and homes better able to take care of them-
can be a very challenging and trying job make a difference. It’s a wonderful, exciting selves. Over time, we’ll see more capable
some days. But when you get a postcard environment, and our future is based on robots, not just focused on the home but
from a soldier on the front lines in Iraq, continuing to attract people who want to also on the occupants of the home, trying
who saw his buddy’s life saved, or had his be part of this new industry – and part of to decrease isolation, trying to allow doc-
own life saved, you realize that you really changing the world. tors and nurses to check up on patients in a
are making a difference. And personally, way that maintains the dignity and privacy
that gives me the motivation to make it KC: You have said that ‘elder care’ is the of the patient. And potentially, even further
through the tough days. Right now, with ultimate ‘killer application’ for robotics. out, robots that can help elders who start
our [November 2005] IPO and lots of How so? to lose the ability to get around – to take
enthusiasm about the industry, it’s easier to showers or go to the bathroom on their
get excited than ever before. But we’ve CA: The challenge is twofold.The first part own – giving them an opportunity to inter-
been at this for 16 years now, with more is that the infrastructure for decentralized act with a robot instead of a person, so they
challenges than success; all along the way, care for our elderly – nursing homes and have control over their ability to do these
seeing our products actually getting used the like – is in decline. The average age of things. I think that will be a great thing, and
and helping has been the driver that’s moti- nurses is well over 50 at this point; these that it’s very necessary.

KC: Which iRobot project are you most


excited about right now, and why?

CA: It’s a difficult choice, because you can


hear my enthusiasm about the need to solve
the eldercare problem, and that means tak-
ing the next steps with the homecare
robots; but at the same time, it’s hard to see
anything more rewarding than a robot that
saves a life. So I don’t have any problems
getting excited about our company’s future
and its product lines. I feel blessed and
lucky to be part of an organization that is
truly out there to do good.

Colin Angle is the co-founder and CEO of iRobot. He was


named one of Fortune Small Business Magazine’s Best Bosses,
and in 2003, was awarded the Ernst and Young New Eng-
land ‘Entrepreneurs of the Year Award’ along with iRobot
co-founder Helen Greiner.

Rotman Magazine Winter 2007 • 31


THE

ME
Community Manifesto
by Mark Gerencser, Fernando Napolitano and Reginald Van Lee

Together, public, private and civil


leaders must confront the problems
that none can solve alone.

Mark Gerencser Fernando Napolitano Reginald Van Lee

32 • Rotman Magazine Winter 2007


GA
Leaders no longer express as much confi-
dence about the future as they once did.
When they speak candidly, it often sounds
as if they feel trapped in quicksand, unable
to move forward easily. The methods and
tools that helped them succeed in the past
no longer work, and the challenges they
face – such as global competitiveness,
health and environmental risks, and inade-
quate infrastructure – can no longer be
solved by their organizations alone.
“Everybody is frozen,” says American
Express chairman and CEO Kenneth
the reputation of the company and its grasp
of changing trends.
Meanwhile, governments, which were
previously relied upon to manage society’s
problems, can no longer spend or regulate
their way into requisite solutions. “In the
past, corporations could depend on the fact
that government defined the answers,” says
Stephen Merrill, former governor of
New Hampshire and currently president
of Bingham Consulting Group LLC.
But now, he says, business leaders are
afraid that “government doesn’t even
role of the military; new economic uncer-
tainties as emerging and established
industries compete; and rising costs of
health care. These problems often occur at
an unprecedented and almost incompre-
hensibly vast scale.
Non-governmental organizations
(NGOs), for their part, are finding that
although expanding communications and
the Internet have given them more voice
than ever before, the demand for their
work has increased commensurately, com-
petition for funding has escalated, and they
Chenault. “What has not kept pace in the understand the questions.” no longer understand constituents’ needs as
business world is an understanding of how Moreover, there is a subtle but easily as they used to. “We’ve had blinders
the uncertainty of the geopolitical environ- detectable waning of confidence within the on,” says Paul Leonard, the former CEO
ment has impacted business.” The ability to public sector as governments around the of Habitat for Humanity Interna-
seize opportunities often depends on unfa- world find themselves accountable for tional. “We need to change course, to
miliar and unpredictable factors, such as issues without easy answers: the changing become more of a partner and a player; more

Rotman Magazine Winter 2007 • 33


knowledgeable about the large systems communitarian and democratic traditions, strengthens long-term quality of life, eco-
that exist and the role we can play in them.” and also the changing character of today’s nomic vitality, and community health. In
The root cause of the challenges con- business and political environments. Exam- other words, megacommunities provide
fronting these leaders is complexity: the ples of megacommunities range from leverage for retaining local identity while
growing density of linkages among people, planet-wide systems, such as the community creating a viable middle class and compet-
organizations, and issues all across the of corporations, governments, and NGOs ing on the global playing field.
world. Because people communicate so concerned with rain forest management and The second common feature of mega-
easily across national and organizational conservation, to local enterprise-related communities is a recognition of the changing
boundaries, the conventional managerial civic/business environments, such as the nature of effective leadership. In the past, a
decision-making style – in which a boss New York City neighborhood affected by the problem like managing regional land use
exercises decision rights or delegates them Harlem Small Business Initiative. would have fallen to a government body.
to subordinates – is no longer adequate. Whatever the scale and scope, all mega- Now, much of the work will be done by lead-
Solutions require multi-organizational communities have two things in common. ers of a group of separate but interdependent
systems that are larger and more oriented The first is a connection to globalization. As organizations. Fortunately, the skills and
to multilateral action than conventional technology has allowed the instantaneous techniques of megacommunity leadership
cross-sector approaches are. In such sys- transfer of money, images, ideas, and people appear to be transferable, whether the scope
tems, the most successful leaders are those around the world, ‘local’ communities are of action is a city neighborhood, a regional
who understand how to intervene and neither constrained nor protected by the watershed, a continent, or the globe.
influence others in a larger system that they age-old boundaries of geography and
do not control. We call this type of larger demography. A vendor in a remote village in Exhibit A: Enel SpA
system a ‘megacommunity’. Costa Rica or India is bound, through com- Organizations that avoid megacommunity
engagement do so increasingly at their
A megacommunity is a larger ongoing peril, and at the peril of the communities
they operate in. Consider the case of a proj-
sphere of interest, where governments, ect in Brindisi, Italy, initiated by Enel SpA.
Italy’s leading utility provider, Enel is a par-
corporations, NGOs, and others intersect tially-privatized company; the government
owns about 31 per cent of the stock. In the
over time. early 2000s, Enel attempted to diversify its
sources of energy by joining forces with the
Three-Sector Intersection munication, trade, and an increasing number UK company British Gas (BG) to build a
A megacommunity is a public sphere in of common interests, with an urban resident terminal for regasifying liquefied natural
which organizations and people deliber- of Paris or Hong Kong. gas in Brindisi, an economically-depressed
ately join together around a compelling The current wave of globalization area on the heel of Italy’s boot. The com-
issue of mutual importance, following a set involves a permanent structural change in pany expected the project to be greeted
of practices and principles that make it eas- many of the institutions of the world. with popular support: it would have pro-
ier for them to achieve results. Like a Nations and companies alike have undergone vided 1,000 jobs during its three years of
business environment, a megacommunity an irreversible shift toward what manage- planned construction and 250 permanent
contains organizations that sometimes com- ment theorist Charles Hampden-Turner new jobs in the region. Enel and BG were
pete and sometimes collaborate. But a calls ‘universalism’. They move away from careful to fulfill all the legal requirements
megacommunity is not a public–private part- reliance on connections and loyalty (typical necessary for starting the project.
nership, which is typically an alliance focused of societies with selective law enforcement) Soon after the project began, environ-
on a relatively narrow purpose; it is a larger and toward such principles as merit and uni- mental activists published a paper
ongoing sphere of interest, where govern- versal law. This kind of shift makes even highlighting its danger to the health and
ments, corporations, NGOs, and others formerly-closed societies more open to out- security of the local population. This trig-
intersect over time. The participants remain side influence, and thus more powerful. But gered a much larger protest, amplified by
interdependent because their common inter- it also makes them more vulnerable, particu- the local press into a broad and persistent
est compels them to work together, even larly to the problem of economic ‘winners national issue. In October 2003, a civil
though they might not see or describe their and losers’, in which the benefits of global- petition with more than 10,000 signatures
mutual problem in the same way. ization are not evenly spread. brought the first official halt to the project.
We chose the term megacommunity to The megacommunity concept repre- In July 2005, more than 8,000 protesters
reflect such a sphere’s character as a gather- sents a movement toward sustainable took to the streets, shouting, “We must save
ing place for organizations. We see these globalization, in which contact with the Brindisi!” A few weeks later, construction
communities emerging in many locations, outside world, instead of draining jobs and was entirely shut down. Although Italy’s
reflecting the evolution of long-standing making a local system vulnerable, Supreme Court stepped in and construc-

34 • Rotman Magazine Winter 2007


tion began again four months later, Enel felt dent Clinton suggested that they make the sectors: a redevelopment agency, a neigh-
the need to withdraw from the venture, sell- existing Harlem businesses more competi- borhood organization, or perhaps a
ing its 50 per cent investment back to BG. tive and capable. To foster this, he suggested business-funded partnership with a public-
Although this episode is not yet con- that the owners should create a new kind of or civil-sector organization. It would not
cluded and BG still hopes to build the partnership with not-for-profit status, call- have brought people together across all three
terminal, the outcome leaves Enel and BG ing on a wide range of organizations to help. sectors and, most likely, the results would
still dangerously dependent on Russian and The Harlem Small Business Initiative have been limited by the skills and experi-
North African natural gas pipelines, which pulled in a large number of groups, including ence of the few participating organizations.
rely on oil cartels for supply. In addition, the office of Harlem’s U.S. Congressman,
the two companies are less cost competi- Charles Rangel; the Greater Harlem Megacommunities in Practice
tive, the shareholders get lower returns, Chamber of Commerce; the Harlem The following four elements are universal
customers pay higher prices for natural gas, Business Alliance; the Harlem Friends to effective megacommunity leadership.
and those 250 new jobs are in jeopardy. (a group of small businesses and citizens); the
What could Enel and BG have done National Black MBA Association; New 1. Start with understanding. Minister of
differently? They could have explicitly York University’s Stern School of Busi- foreign affairs George Yong-Boon Yeo of
assessed the overall socioeconomic and cul- ness; and our management consulting firm, the government of Singapore advises CEOs
tural environment in which they were about Booz Allen Hamilton. These were not launching ventures in his region to “adopt
to operate. Rather than letting the govern- figurehead groups or silent sponsors; each the attitude of a student, and not be too
ment stand in for them in addressing the invested a great deal of time, effort, and cre- quick to preach. If you think you are there
misgivings of the public, they could have ativity in the project. But none was “in to teach before you have learned, you will
engaged the local government and civil soci- charge,” nor did the groups take orders from fail.”The same is true of all potential mega-
ety, and made a proactive case in both arenas the Harlem Small Business Initiative. Instead, community leaders. Most know how to
for the common goals and benefits of Brin- they worked out a way to participate sense the needs of their own organizations,
disi development. In short, they could have together, defining mutual goals and then but the environment of sustainable global-
taken the kinds of megacommunity meas- playing their parts individually. ization requires leaders to tune their
ures that Enel is beginning to put into A 22-month program was launched in antennae more broadly, picking up subtle
practice in the projects it initiates today. mid-2002, focusing on 10 local businesses, signals from the world outside.
including a plumber’s storefront, a florist, a Leaders engaged with a problem might
Exhibit B: Harlem Small Business Initiative dentist’s office, and a yoga center.The busi- begin by identifying the potential mega-
Potential megacommunities exist in areas ness owners loved their work and managed community with questions like these:
as varied as health care, transportation, their businesses reasonably well, but they What problems are we dealing with?
public safety, and the environment. When might typically keep their receipts in shoe- Why can’t we solve them within our walls,
enough leaders and organizations become boxes or let their phones go unanswered. and what other organizations are affected
conscious of their interdependence and As a result they were highly vulnerable to by the same issues?
reach out to one another accordingly, competition from more organized retailers What is the appropriate scale of this
something shifts in the capabilities of the with national brand names. megacommunity? Have we involved
community. Instead of continuing to fight Congressman Rangel’s office and the var- enough of the necessary players and stake-
each other or ceding authority to some ious local business alliances helped the other holders to create a critical mass for dealing
governmental or quasi-governmental body, Initiative participants understand the fabric of with the issues?
leaders come together as equals to develop the community and the value of these small How do the entities interact? How do
a plan of action. Like a stone rolling down a businesses as both employers and vendors. their interests and actions affect one
hill, the community converts its potential The MBA students and volunteer accountants another? How do their perceptions of my
energy into kinetic motion. and management consultants taught business organization affect the way they operate?
One such example is the Harlem Small methods and marketing approaches.
Business Initiative. In late 2001, a series of The result was wildly successful. 2. Exert strong leadership and presence.
large chain retailers announced plans to open Though some large chain retailers, includ- In business, government, and NGOs, it is
stores in New York neighborhoods. A num- ing Starbucks, Disney, and Old Navy, important for a chief executive or minister
ber of Harlem small-business owners, have entered Harlem, the Initiative is cred- to be outspoken and explicit. Each leader
fearing the impact of this kind of competi- ited with helping to keep the original has a case to make to others; and each will
tion on their long-standing customer base, neighborhood vibrant, and an impressive have to explain and support the megacom-
approached President Bill Clinton, who number of the small businesses served by the munity’s priorities to others within his or
had recently set up offices for his new Initiative doubled revenues and increased her organization. A corporate CEO, for
William J. Clinton Foundation in this profitability within less than two years. example, must be able to convince boards
uptown Manhattan locale, known globally as In an earlier era, this initiative might and employees to take more responsibility
a center of African-American culture. Presi- have ended up managed by one of the three for forms of accountability besides short-

Rotman Magazine Winter 2007 • 35


term profits. A government agency leader and allow them to be visible to all, as if sus- Businesses in sectors that have a great
must be able to endorse measures that meet pended on a platform in the middle of the effect on the community at large – such as
the needs of businesses and civil society. room. Conversations should be conducted energy, transportation, and media – may
And leaders of all three sectors must be among all levels of participating organiza- find themselves asked to join in conceiving
able to stay the course and make a long- tions, starting with the top leaders but and creating the infrastructure of the
term commitment. including middle-rank managers and future. This is a rare opportunity for them
Leaders in a megacommunity function employees, who should be given the time to not just comply with the public interest,
most effectively in a listening, learning, to work on collaborative projects with but lead it. However, such an undertaking
understanding mode. They must be pre- their counterparts from other groups. will also require a ‘listening and learning’
pared to view other sectors as potential orientation, and a kind of humility that is
resources and partners, instead of adver- 4. Launch experiments, learn from them, very different from the high-flying business
saries, and understand the growing and monitor progress. The initiators of a ethic we saw in the last decade.
permeability of boundaries between sec- megacommunity need to develop their own Politicians and public-sector leaders
tors. Says Minister Yeo of Singapore, “The model of effective action. In other con- must learn to acknowledge the fact that
most important first step is understanding texts, cross-sector collaboration is often even if they think they have all the answers
the nature of the participants. Each is com- plagued by a lowering of standards; partici- to a problem, they cannot fully control the
plex and has a deep nature which you pants bring less rigor to the process than solution. It has become fashionable in many
cannot completely change.” they would in an internal project. But in an circles to argue against government, but
effective megacommunity endeavor, there government still retains the role of mediat-
3. Design and customize cross-sector is explicit agreement up front on what par- ing between the mercantile fallout of
engagement. The design of conversations ticipants hope to accomplish, what they globalization (the fluctuations of prices and
depends on the culture and predisposition of expect to see, and how they will judge suc- currencies) and the population’s need for
each megacommunity. Specific events might cess. A leader should ask his or her fellow stability and security. It is thus in everyone’s
include full-scale forums where all the par- leaders: If we do the right thing, what kinds best interest to have an effective, capable,
ticipants come together for a day or two, or of indicators might we expect to see? Will and enlightened public sector.
cascading dialogues in which small groups we see improvements in water quality? In Many leaders of NGOs have spent
take on pieces of the puzzle.Agendas need to levels of community engagement? It is also years trying to be heard, and they now
be both specific in content and relatively very helpful, after an action, for partici- have unprecedented voice and influence: it
unstructured in scope, with plenty of infor- pants to reflect together on the results and is NGOs that often set the terms of public
mal time in which people can speak openly. how they might have done better. debate in both government and business
spheres. For example, concerns about land
Participation in megacommunities mine safety, child and sweatshop labor, and
government misappropriation of private
poses different challenges for each land went largely unheard until NGOs
took up those causes. But NGOs still have
of the three sectors. constrained financial resources, limited
staff, and little or no direct control over
Such conversations may seem unfamil- The Infrastructure of the Future regulation and markets. They can gain
iar at first, and many business and Participation in megacommunities poses influence only through engagement with
government leaders employ specialists to different challenges for each of the three sec- the other two sectors.
conduct and manage them. Cultural and tors. Business leaders will have to align the As part of a megacommunity, all three
language differences exist not just across imperatives of the outside world with their sectors are in an excellent position to have
geographic distance, but among the pub- immediate agendas (such as profitability and a real and lasting effect on large and com-
lic, private, and civil spheres. A word like shareholder returns). Corporate leaders will plex problems.Will leaders be able to take
profit can connote “resources for invest- learn to explain to shareholders and stock up the challenge and produce the results
ment” to business people and “exploitation” analysts the ways in which a commitment to that the world needs? Experience suggests
to a government minister or long-standing a megacommunity – for example, helping to that they can; and we believe they will.
NGO executive, and a word like bureau- build managerial capabilities among the
cracy can be a positive, negative, or schools and NGOs with which they work – Mark Gerencser is managing director of global govern-
ment markets with Booz Allen Hamilton (BAH) in
value-neutral term. is essential for realizing the company’s finan- McLean,Virginia. Fernando Napolitano is a vice president
Participants gradually bridge such cial priorities. Farsighted companies learned with BAH in Rome and managing director of the firm’s
boundaries by learning, as dialogue expert long ago to develop better capacity for man- Italian office. He is also a board member of Enel SpA.
Reginald Van Lee is a senior vice president with BAH in
William Isaacs has suggested, to ‘sus- agement along their supply chain; now they New York, where he co-leads the firm’s not-for-profit sec-
pend’ their assumptions – not to mask will be called to do the same with their tor initiatives.This is a condensed version of an article that
them, but to voice them dispassionately megacommunity partners. appeared in the fall 2006 edition of Strategy + Business.

36 • Rotman Magazine Winter 2007


The Big Picture: Howard Gardner
The Five Minds of

Photo: J. Gardner
the Future
Five minds will lead the way in the uncertain world that is our future.The melding
of these minds within an individual’s skin is the ultimate challenge for each of us.

At the start of the third millennium, we are an individual possesses discipline – in the sec- vast, seemingly indigestible amounts of infor-
well attuned to considerations of ‘the ond sense of the word.That is, one needs to mation now deluge us around the clock.
future’. In conceptualizing the future, I continually practice in a disciplined way to Shrewd triage becomes an imperative. Those
refer to trends whose existence is widely remain at the top of one’s game.The need to who can synthesize well for themselves will
acknowledged: the increasing power of sci- master a ‘way of thinking’ applies to the rise to the top of their pack; and those whose
ence and technology, the interconnectedness entire range of workers – whether it be syntheses make sense to others will be invalu-
of the world in economic, cultural, and lawyers, engineers, crafts persons, or busi- able teachers, communicators, and leaders.
social terms, and the incessant circulation ness professionals involved personnel, Let’s take an example from business.
and intermingling of human beings of marketing, sales, or management. Such edu- Suppose you are an executive and your
diverse backgrounds and aspirations. cation may include formal classes or may firm is considering the acquisition of a
As one who has participated in discus- occur on the job, explicitly or implicitly. new company in an area that seems
sions of the future all over the world, I can Nowadays, the mastery of more than important, but about which you and your
attest that belief in the power of education one discipline is at a premium. We value immediate associates know little. Your
– for good or for ill – is ubiquitous. We those who are interdisciplinary, multi-disci- goal is to acquire enough information so
have little difficulty in seeing education as plinary, or trans-disciplinary. But these that you and your Board can make a judi-
an enterprise – indeed, the enterprise – claims must be cashed in. We would not cious decision, and you need to do so in
for shaping the mind of the future. The value a bilingual person unless he or she can the next two months.The place to begin is
question then becomes, ‘What kind of speak more than one language, and by the with any existing synthesis: fetch it,
minds should we be cultivating?’ Five same token, the claim of ‘pluri-disciplinar- devour it, evaluate it. If none exists, you
types stand out as being particularly ity’ only makes sense if a person has turn to the most knowledgeable individu-
urgent at the present time. genuinely mastered more than one disci- als and ask them to provide the basic
pline and can integrate them. For most of information requisite to synthesis. Given
1. The Disciplined Mind us, the attainment of ‘multiple perspec- this initial input, you then decide what
The word ‘discipline’ has two distinct con- tives’ is a more reasonable goal. information seems adequate and where
notations. First, we speak of the mind as important additional data are required.
having mastered one or more disciplines – 2. The Synthesizing Mind At the same time, you need to decide
arts, professions, or scholarly pursuits. By Nobel Laureate in Physics Murray on the form and format of the ultimate
rough estimates, it takes approximately a Gell-Mann, an avowed multi-disciplinar- synthesis: a written narrative, an oral pres-
decade for an individual to learn a discipline ian, has made an intriguing claim about entation, a set of scenarios, a set of charts
well enough so that they can be considered our times. He asserts that in the 21st cen- and graphs, perhaps a discussion of pros and
an expert or master. Perhaps at one time, an tury, the most valued mind will be the cons leading to a final judgment.At last, the
individual could rest on her laurels once synthesizing mind: the mind that can sur- actual work of synthesis begins in earnest.
such disciplinary mastery had been vey a wide range of sources, decide what is New information must be acquired,
achieved. No longer! Disciplines themselves important and worth paying attention to, probed, evaluated, or sidelined. The new
now change, ambient conditions change, as and then put this information together in information needs to be fit, if possible, into
do the demands on individuals who have ways that make sense. the initial synthesis; and where fit is lack-
achieved the initial mastery. Gell-Mann is on to something impor- ing, mutual adjustments must be made.
As a result, ‘experts’ must continue to tant. Information has never been in short Constant reflection is the order of the day.
educate themselves over succeeding decades. supply. But with the advent of new technolo- At some point before the final synthe-
Such hewing of expertise can only be done if gies and media, most notably the Internet, sis is due, a proto-synthesis should be

Rotman Magazine Winter 2007 • 37


developed.This interim version needs to be mind forges new ground. In our society, determines much about the capacity of
tested with the most knowledgeable audi- we have come to value those individuals individuals to form relationships with oth-
ence of associates, preferably an audience who keep casting about for new ideas and ers throughout life.
that is critical and constructive. To the practices, monitoring their successes, and Of equal potency is the young
extent that time and resources are avail- so on. And we give special honour to human’s capacity to distinguish among
able, more than one trial run is desirable. those rare individuals whose innovations individuals, and among groups of individ-
But ultimately, there arrives a moment of actually change the practices of their uals. We are wired to make such
truth, at which point the best possible syn- peers – in my trade, we call these individ- distinctions readily; indeed our survival
thesis must suffice. uals ‘Big C’ creators. depends upon our ability to distinguish
What kind of mind is needed to guide As a student of creativity, I had long among those who would help and nourish
this synthesis? Clearly, though the individual assumed that creating was primarily a cog- us, and those who might do us harm. But
should have a home area of expertise, he or nitive feat – having the requisite knowledge the messages in our particular environ-
she cannot conceivably be an expert of every and the apposite cognitive processes. But I ment determine how we will label
relevant discipline. As compensation, the syn- have come to believe that personality and particular individuals or groups. Our own
thesizer must know enough about the temperament are equally, and perhaps even experiences, and the attitudes displayed by
requisite disciplines to be able to make judg- more important for the would-be creator. the peers and elders to whom we are clos-
ments about whom and what to trust – or to More than willing, the creator must be est, determine whether we like, admire,
or respect certain individuals and groups;
The ‘synthesizer’ must always keep her or whether, on the contrary, we come to
shun, fear, or even hate these individuals.
eyes on the big picture, while making We live in an era when nearly every
individual is likely to encounter thousands
sure that adequate details are secured of individuals personally, and when billions
of people have the option of traveling
and arranged in useful ways. abroad or of encountering individuals from
remote cultures through visual or digital
identify individuals who can help make that eager to take chances, to venture into the media. A person possessed of a respectful
determination.The synthesizer must also have unknown, to fall flat on her face, and then, mind welcomes this exposure to diverse
a sense of the relevant forms and formats for smiling, pick herself up and once more persons and groups. A truly cosmopolitan
the synthesis, being prepared to alter when throw herself into the fray. Even when suc- individual gives others the benefit of doubt;
possible, or advisable, but to make a final cessful, the creator does not rest on her displays initial trust; tries to form links;
commitment as the deadline approaches. laurels. She is motivated again to venture avoids prejudicial judgments.
The synthesizer must always keep her into the unknown and to risk failure, The threats to respect are intolerance
eyes on the big picture, while making sure buoyed by the hope that another break- and prejudice, what in the worst case forms
that adequate details are secured and through may be in the offing. into individual, state, or stateless terror-
arranged in useful ways.This is a tall order, It is important to ascertain the relation ism. A prejudiced person has preconceived
but it is quite possible that certain individ- among the three kinds of minds introduced ideas about individuals and groups, and
uals are blessed with a ‘searchlight thus far. Clearly, synthesizing is not possible resists bracketing those preconceptions. An
intelligence’ – the capacity to look widely without some mastery of constituent disci- intolerant person has a very low threshold
and to monitor constantly, thus making plines – and perhaps there is, or will be, a for unfamiliarity; the default assumption is
sure that nothing vital is missing; and that discipline of synthesizing, quite apart from that ‘strange is bad’. It is not easy to come
they also have the capacity to value the such established disciplines as mathemat- to respect others whom you have feared,
complementary ‘laser intelligence’ that has ics, mime, or management. I would distrusted, or disliked.Yet, in an intercon-
fully mastered a specific discipline. Such suggest that creation is unlikely to emerge nected world, such a potential for growth,
individuals should be identified and cher- in the absence of some disciplinary mas- for freshly-forged or freshly-renewed
ished. It is crucial that we determine how tery, and, perhaps, some capacity to respect, is crucial.
to nurture synthesizing capacities more synthesize as well.
widely, since they are likely to remain at a 5. The Ethical Mind
premium in the coming era. 4. The Respectful Mind An ethical stance is in no way antithetical to
Almost from the start, infants are alert to a respectful one, but it involves a much
3. The Creating Mind other human beings. The attachment link more sophisticated stance toward individu-
In our time, nearly every practice that is between parent (typically mother) and als and groups. A person possessed of an
well understood will be automated. Mas- child is predisposed to develop through- ethical mind is able to think of himself
tery of existing disciplines will be out the early months of life; and the abstractly: he is able to ask, “What kind of a
necessary, but not sufficient.The creating nature and strength of that bond in turn person do I want to be? What kind of a

38 • Rotman Magazine Winter 2007


worker do I want to be? What kind of a cit- – more happily if less frequently – when an vated. By the same token, any genuinely-
izen do I want to be?” individual or a group behaves in an ethically creative activity presupposes a certain
Going beyond the posing of such ques- exemplary fashion? Education in ethics may discipline mastery. And while prowess at
tions, the person is able to think about not begin as early as education for respect; synthesizing may be unnecessary, nearly all
herself in a universalistic manner: “What but neither ‘curriculum’ ever ends. creative breakthroughs – whether in the
would the world be like, if all persons Given the high standards necessary for arts, politics, scholarship or corporate life –
behaved the way that I do, if all workers in an ethical mind, examples of failures are to some extent dependent on provi-
my profession took the stance that I have, if abound. It is not difficult to recognize sional syntheses. Still, too much discipline
all citizens in my region or my world car- behaviours that are strictly illegal – like clashes with creativity; and those who excel
ried out their roles in the way that I do?” theft or fraud – or obviously unethical – the at syntheses are less likely to affect the most
Such conceptualization involves a recogni- journalist who publishes a story that he radical creative breakthroughs.
tion of rights and responsibilities attendant knows is not true, the geneticist who over- In the end it is desirable for each per-
to each role. And crucially, the ethical indi- looks data that run counter to her son to have achieved aspects of all five
vidual behaves in accordance with the hypothesis. In each case, the ethical mind minds for the future. Such a personal inte-
answers that she has forged, even when such must go through the exercise of identifying gration is most likely to occur if individuals
behaviors clash with her own self interest. the kind of individual one wants to be. And are raised in environments where all five
My own insights into the ethical mind when one’s own words and behaviours run kinds of minds are exhibited and valued. So
come from a dozen years of study of profes- counter to that idealization, one must take much the better, if there are role models –
sionals who are seeking to do good work – corrective action. I would add that as one parents, teachers, supervisors – who dis-
work that is excellent, engaging, and ethical gets older, it does not suffice simply to keep play aspects of discipline, synthesis,
(see www.goodworkproject.org). Deter- one’s own ethical house in order. One creation, respect, and ethics on a regular
mining what is ethical is not always easy, and acquires a responsibility over the broader basis. In addition to embodying these kinds
can prove especially challenging during realm of which one is a member. And so, of minds, the best educators at school or
times, like our own, when conditions are for example, an individual journalist or work can provide support, advice, coaching
changing very quickly, and when market geneticist may behave in an ethical manner; which will help to inculcate discipline,
forces are powerful and unmitigated. Even but if her peers are failing to do so, the encourage synthesis, prod creativity, foster
when one has determined the proper aging worker should assume responsibility respect, and encourage an ethical stance.
course, it is not always easy to behave in an for the health of the domain. I denote such No one can compel the cultivation and
ethical manner; and that is particularly so individuals as ‘trustees’: veterans who are integration of the five minds. Each individ-
ual, of their own volition, must come to
Individuals must reflect on the role of believe that the minds are important and
merit the investment of significant amounts
each of these minds in the workplace, of time and resources, and that they are
worthy of continuing nurturance, even
at home, in the community, and in the when external supports have faded. The
individual must reflect on the role of each of
wider world. these minds at work, in a favored avocation,
at home, in the community, and in the wider
when one is highly ambitious, when others widely respected, deemed to be disinter- world. The individual must be aware that
appear to be cutting corners, when different ested, and dedicated to the health of the sometimes these minds will find themselves
interest groups demand contradictory things domain. To quote the French playwright in tension with one another, and that any res-
from workers, when the ethical course is Jean-Baptiste Molière, “we are respon- olution will be purchased at some cost.
less clear than one might like, and when sible not only for what we do but for what As I have mentioned, in the future, the
such a course runs against one’s immediate we don’t do.” mind that is likely to be at greatest pre-
self interest. mium is the synthesizing mind. And so it is
It is so much easier, and much more In closing perhaps fitting that the melding of the
natural, to develop an ethical mind when There is no strict hierarchy among the five minds within each individual’s skin is the
one inhabits an ethical environment. But minds of the future, such that one should be ultimate challenge of personal synthesis.
such an environment is neither necessary cultivated before the others. Yet a certain
nor sufficient. Crucial contributions are rhythm does exist. One needs a certain Copyright Howard Gardner, 2007. All rights reserved.
Howard Gardner is the Hobbs Professor of Cognition and
made by the atmosphere at one’s first places amount of discipline – in both senses of the Education at the Harvard Graduate School of Education. He
of work: how do the adults in power behave, term – before one can undertake a reason- is the author of many books in psychology, education, and
what are the beliefs and behaviours of one’s able synthesis; and if the synthesis involves policy, including, Changing Minds: The Art and Science of
Changing our own and Other People’s Minds (Basic Books 2004).
peers, and, perhaps above all, what happens more than one discipline, then each of the In 2007, Five Minds for the Future will be published by Har-
when there are clear ethical deviations, and constituent disciplines needs to be culti- vard Business School Press.

Rotman Magazine Winter 2007 • 39


‘Neuroeconomics’ uses knowledge about brain
mechanisms to inform economic theory, opening
up the ‘black box’ of the brain.

by George Lowenstein, Colin Camerer and Drazen Prelec

NEURO
How Neuroscience
The foundations of economic theory were ideas from psychology to economics) has Automatic and Emotional Processing
constructed assuming that details about the become a prominent fixture on the intel- The standard economic theory of ‘con-
functioning of the brain – the ultimate lectual landscape, and has, in turn spawned strained utility maximization’ is often
‘black box’ – would never be known. This the new field of ‘neuroeconomics’. Impor- interpreted as a model of deliberation – a
pessimism was expressed by economist tant insights are now emerging that prove balancing of the costs and benefits of dif-
William Stanley Jevons in 1871: “I hes- Jevons’ pessimism wrong: the study of the ferent options, as might characterize
itate to say that men will ever have the brain and nervous system is beginning to complex decisions like planning for retire-
means of measuring directly the feelings of allow for direct measurement of thoughts ment or buying a house.While not denying
the human heart. It is from the quantitative and feelings; and this, in turn, is challeng- that deliberation is part of human decision
effects of these feelings that we must esti- ing our understanding of the relation making, neuroscience research points out
mate their comparative amounts.” between mind and action, leading to new two generic inadequacies of this approach:
In the last two decades, however, theoretical constructs and calling old ones the important roles of automatic and emo-
behavioural economics (the importation of into question. tional processing.

40 • Rotman Magazine Winter 2007


ECONOMICS
Can Inform Economics
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sectetuer adipiscing, parum ipsum.

First, much of the brain is constructed Second, our behaviour is often strongly systems on the one hand, and cognitive and
to support ‘automatic processes’, which are influenced by finely-tuned affective (i.e. affective systems on the other. Our goal here
faster than conscious deliberations and emotional) systems whose basic design is is to show that drawing these distinctions
occur with little or no awareness. Because common to humans and many animals. helps to make sense of a wide range of eco-
people have little or no introspective access These systems are essential for daily func- nomic phenomena that are difficult to
to these processes or volitional control over tioning, as revealed by the fact that when explain in conventional terms.
them, and these processes were evolved to affective systems are damaged or perturbed
solve problems of evolutionary importance – by brain damage, stress, imbalances in Controlled vs. Automatic Processes
rather than to respect logical dicta, the neurotransmitters, or alcohol – the delib- Controlled processes use step-by-step
behaviour they generate need not conform erative system generally caves in, and poor logic or computations, tend to be invoked
to normative axioms of inference and choice long-term decisions result. deliberately by the individual when he or
– and hence cannot be adequately repre- Human behaviour emerges from the she encounters a challenge or surprise,
sented by the usual maximization models. interplay between controlled and automatic and are often associated with a subjective

Rotman Magazine Winter 2007 • 41


feeling of effort. People can typically pro- ancient Greeks and earlier.The distinguish- Quadrant III:Your first task is to fig-
vide a good introspective account of ing features of affective processing are ure out what is on the plate. The occipital
controlled processes; if asked how they somewhat counterintuitive. Most people cortex in the back of the brain is the first on
solved a math problem or chose a new car, undoubtedly associate affect with ‘feeling the scene, drawing in signals from your eyes
they can often recall the considerations states’, and indeed, most affect states do via your optic nerves. It decodes the sushi
and the steps leading up to the choice. produce feeling states when they reach a into primitive patterns such as lines and
Standard tools of economics, such as deci- threshold level of intensity. However, most corners then uses a ‘cascading process’ to
sion trees and dynamic programming, can affect probably operates below the thresh- discern larger shapes. Further downstream,
be viewed as stylized representations of old of conscious awareness. in the inferior temporal visual cortex, this
controlled processes. For most researchers, the central fea- information becomes integrated with
Automatic processes are the opposite ture of affect is not the feeling states stored representations of objects, which
on each of these dimensions: they operate associated with it, but its role in human permits you to recognize the objects on
in parallel, are not accessible to conscious- motivation. All affects have ‘valence’ – the plate as sushi. This latter process is
ness, and are relatively effortless. Because they are either positive or negative extraordinarily complicated (and has
they are not accessible to consciousness, (though some complex emotions, such as proved difficult for artificial intelligence
people often have surprisingly little insight ‘bittersweet’, can be a combination.) researchers to recreate in computers)
into why automatic choices or judgments Many also carry ‘action tendencies’. For because objects can take so many forms,
orientations, and sizes.
Figure One: A Two-Dimesional Characterization of Neural Functioning Quadrant IV: This is where affect
enters the picture. Neurons in the inferior
Cognitive Affective temporal visual cortex are sensitive only to
Controlled Processes serial the identity of an object; they don’t tell you
effortful
evoked deliberately I II whether it will taste good. Outputs of the
good introspective access inferior temporal visual cortex as well as
outputs from other sensory systems feed
Automatic Processes parallel into the orbitofrontal cortex to determine
effortless
reflexive
III IV the ‘reward value’ of the recognized object.
no introspective access This is a highly-particular representation.
In economic terms, what is represented is
were made. A face is perceived as ‘attrac- instance, anger motivates us to aggress, neither pure information (i.e., that this is
tive’ or a verbal remark as ‘sarcastic’ pain to take steps to ease the pain, fear to sushi) nor pure utility (i.e., that it is some-
automatically and effortlessly. It is only escape, and so on. Affective processes thing I like) but rather a fusion of
later that the controlled system may reflect address ‘go/no-go’ questions that motivate information and utility. It is as if certain
on the judgment and attempt to substanti- approach or avoidance behaviour. Cogni- neurons in the orbitofrontal cortex are say-
ate it logically. tive processes, in contrast, are those that ing, “this is sushi and I want it.”
Automatic processes – whether cogni- answer true/false questions. The reward value of sushi depends in
tive or affective – are the default mode of turn on many factors. First, there is your
brain operation: they whir along all the A Fourfold Classification of personal history with sushi. If you got sick
time, even while we dream, constituting Neural Processes on sushi in the past, you will have an uncon-
most of the electrochemical activity in the In combination, the two dimensions scious and automatic aversion to it. Second,
brain. Controlled processes occur at special described above define four quadrants of the reward value of the sushi will depend
moments when automatic processes the brain, as shown in Figure One. Quad- on your current level of hunger; people can
become ‘interrupted’, which happens rant I is in charge when you deliberate eat almost anything – grass, bugs, human
when a person encounters unexpected about whether to refinance your house, flesh – if they are hungry enough. The
events, experiences strong visceral states, poring over present-value calculations; orbitofrontal cortex and a subcortical
or is presented with some kind of explicit Quadrant II is the rarest in pure form; it is region called the hypothalamus are sensi-
challenge in the form of a novel decision or used by ‘method actors’ who imagine pre- tive to your level of hunger. Neurons in
other type of problem. vious emotional experiences to fool these regions fire more rapidly at the sight
audiences into thinking they are experienc- or taste of food when you are hungry, and
Cognitive vs. Affective Processes ing those emotions; Quadrant III governs fire less rapidly when you are not hungry.
The second distinction to be made is the movement of your hand as you return Quadrants I and II: Processing
between affective and cognitive processes. serve; and Quadrant IV makes you jump often ends before Quadrants I and II go to
Such a distinction is pervasive in contem- when somebody says ‘Boo’! work. If you are hungry, and like sushi,
porary psychology and neuroscience, and Consider what happens when a party your motor cortex will guide your arm to
has a historical lineage going back to the host approaches you with a plate of sushi: reach for the sushi and you will eat it, draw-

42 • Rotman Magazine Winter 2007


ing on automatic Quadrant III (reaching) When it comes to spending money or toward sense-making leads us to strive to
and IV (taste and enjoyment) processes. delaying gratification, taking or avoiding interpret our own behaviour. Since Quad-
Under some circumstances, however, risks, and behaving kindly or nastily toward rant I often does not have conscious access
higher-level processing may enter the other people, people often find themselves to activity in the other quadrants, it is per-
picture. If you saw a recent documentary of two minds; our affective systems drive us haps not surprising that it tends to
on the risks of eating raw fish, you may in one direction, and cognitive delibera- over-attribute behaviour to itself. Even
recoil; or if you dislike sushi but anticipate tions in another. For instance, we find though much of the brain’s activity is ‘cog-
disappointment in the eyes of your host, ourselves almost compulsively eating our nitively inaccessible,’ we have the illusion
who made it herself, you’ll eat it anyway children’s left-over Halloween candy, while that we are able to make sense of it, and we
(or pick it up and hide it in a napkin when obsessing about how to lose the extra 10 tend to make sense of it in terms of Quad-
she turns around.) These explicit thoughts pounds; or gambling recklessly at the rant I processes.
involve anticipated feelings (your own and casino, even as a small voice in our head
the host’s) and draw on explicit memories tells us to stop. General Implications for Economics
from a part of the brain called the hip- The extent of collaboration and com- Neuroscience can point out commonalities
pocampus, inputs from the affective system petition between cognitive and affective between categories that had been viewed as
(sometimes referred to as the ‘limbic sys- systems, and the outcome of conflict distinct. One example of this with impor-
tem’), and anticipation (planning) from the when it occurs, depends critically on the tant implications is the utility for money.
prefrontal cortex. intensity of affect. At low levels of inten- The canonical economic model assumes
that the utility for money is indirect – i.e.,
that money is a mere counter, only valued
People are good at persuading them- for the goods and services it can procure.
Thus, standard economics would view, say,
selves that what they would like to the pleasure from food and the ‘pleasure’
from obtaining money as two totally differ-
happen is what will happen. ent phenomena. Neural evidence suggests,
however, that the same reward circuitry of
the brain in the midbrain is activated for a
Although it is useful to distinguish sity, affect appears to play a largely wide variety of different reinforcers,
between cognitive and affective processes, ‘advisory’ role.A number of theories posit including attractive faces, sports cars,
and between controlled and automatic that emotions carry information that peo- drugs, and money.
processes, most judgments and behaviours ple use as an input into the decisions they The idea that many rewards are
result from interactions between them. face. The best-developed of these processed similarly in the brain has impor-
Many decision-making disorders may orig- approaches is ‘affect-as-information the- tant implications for economics, which
inate in an improper division of labour ory’: at intermediate levels of intensity, assumes that the marginal utility of money
between the quadrants. For instance, the people begin to become conscious of con- depends on what money buys. For exam-
decisions of an impulsive individual are flicts between cognitive and affective ple, compensation of top business
excessively influenced by external stimuli, inputs. It is at such intermediate levels of executives skyrocketed in the 1990s.While
pressures, and demands. Such a person may intensity that one observes the types of improvements in linking performance to
not be able to give a more satisfying expla- efforts at self-control that have received so pay and social comparison undoubtedly
nation of an action except that he ‘felt like it’. much attention in the literature. explain part of the growth, one of the puz-
Affect can also distort cognitive judg- Finally, at even greater levels of inten- zles is why executives need so much
ments. For example, emotions affect our sity, affect can be so powerful as to virtually money. However, if abstract money
perceptions of risks – anger makes people preclude decision making. No one ‘decides’ rewards fire dopamine neurons, as addic-
less threatened by risks, and sadness makes to fall asleep at the wheel, but many people tive drugs do, then larger and larger money
them more threatened. Emotions also create do. Under the influence of intense affective rewards become desirable even if the
‘motivated cognition’– people are good at motivation, people often report themselves money won’t actually be used to purchase
persuading themselves that what they as being ‘out of control’ or ‘acting against pleasure-producing consumption.
would like to happen is what will happen. their own self-interest’. As Rita Carter If gaining money provides direct
Quack remedies for hopeful sick people, writes in Mapping the Mind, “where thought pleasure, then the experience of parting
and get-rich-quick scams are undoubtedly conflicts with emotion, the latter is with it is probably painful. While there is
aided by the human propensity for wishful designed by the neural circuitry in our no direct evidence of this, the assumption
thinking.Wishful thinking may also explain brains to win.” that paying hurts can explain many market
high rates of new business failure, trading in Sense-making is an important form of phenomena which are otherwise puzzling.
financial markets, under-saving, and low interaction between Quadrant I and the An example is the effects of payment-
rates of investment in education. other quadrants.The brain’s powerful drive neutral pricing schemes on choices.

Rotman Magazine Winter 2007 • 43


Companies often go to great lengths to dis- tems clash. People are often ‘of two minds’ treatment with a drug that blocks the
guise payments, or reduce their pain. when it comes to risks: we drive when we operation of opiate receptors in the brain
Consumers appear to oversubscribe to flat- know at a cognitive level that it is safer to reduces the urge to gamble. The same
rate payment plans, e.g., for utilities, fly; we fear terrorism, when red meat poses drug has been used to successfully treat
telephone services and health clubs. A flat- a much greater risk of mortality; and, when compulsive shopping.
rate plan eliminates marginal costs, and it comes to getting up to speak at the
allows consumers to enjoy the service podium, or taking an important exam, our Conclusions
without thinking about the marginal cost. deliberative self uses diverse tactics to get In many areas of economics there are basic
Similarly, travel plans are often sold as us to take risks, or to perform in the face of constructs at the heart of current debates
packages, making it impossible to compute risks, that our visceral self would much which can be usefully thought of as ‘neural
the cost of the individual components prefer to avoid. processes’, and studied using the tools of
neuroscience. Finance is a field awash in
literally millions of observations of daily
Emotional reactions to risk can help to price movements. Despite having wide-
spread access to extensive data, after
explain risk-seeking as well as risk-aversion. decades of careful research there is no
agreed-upon theory of why stock prices
(hotel, food, transportation). Often com- Fear unleashes preprogrammed fluctuate, why people trade, and why there
ponents of the package are presented as sequences of behaviour that aren’t always are so many actively-managed mutual
‘free’ (like Microsoft’s internet browser) beneficial. Thus, when fear becomes too funds, despite their poor performance.
even though the claim is meaningless from intense it can produce counter-productive Perhaps knowing more about the basic
an economic standpoint, given that the responses such as freezing, panicking, or neural mechanisms that underlie fear and
package is presented on a take-it-or-leave- ‘dry-mouth’ when speaking in public.The greed, conformity, wishful thinking,
it basis. One can interpret the appeal of fact that people pay for therapy to deal sense-making of random series, and per-
ad-hoc currencies, such as frequent-flyer with their fears, and take drugs (including ceptions of expertise can help explain
miles, or chips in casinos, as an attempt to alcohol) to overcome them, can be viewed these puzzles.
reduce the pain-of-payment. The ad-hoc as further ‘evidence’ that people, or more Although we have focused here on
currency feels like ‘play money,’ and spend- accurately, people’s deliberative selves, applications of neuroscience to econom-
ing it does not seem to exact the same are not at peace with their visceral reac- ics, intellectual trade could also flow in
psychic cost. tions to risks. the opposite direction. Even simple ideas
Emotional reactions to risk can help to in economics could be useful for inform-
Specific Applications explain risk-seeking as well as risk-aversion. ing neuroscience and shifting the nature
Both collaboration and competition Thus, when gambling is pleasurable, a model of the questions that are asked. For
between affect and cognition, and between that incorporates affect naturally predicts instance, neuroscientists do not under-
controlled and automatic processes, can that people will be risk-seeking and that self- stand how the brain allocates resources
also be seen in the domain of decision mak- control will be required to rein-in that are essentially fixed, such as blood
ing under risk and uncertainty. The risk-taking. Indeed, about one per cent of the flow and attention. An ‘economic model’
expected utility model views decision mak- people who gamble are diagnosed as ‘patho- of the brain could help neuroscientists
ing under uncertainty as a tradeoff of utility logical’: they report losing control and comprehend how various brain systems
under different states of nature – i.e., dif- harming their personal relationships by gam- interact and allocate scarce brain
ferent possible scenarios. But, much as they bling. Standard economic explanations for resources. Simple concepts in economics
do toward delayed outcomes, people react gambling, such as- convex utility for money, like mechanisms for rationing under
to risks at two different levels. On the one don’t help explain why some gamblers binge scarcity, and general versus partial equi-
hand, as posited by traditional economic and don’t usefully inform policies to regulate librium responses to shocks, could help
theories and consistent with Quadrant I of the availability of gambling. neuroscientists understand how the
Figure One, people do attempt to evalu- Neuroscience may help. Pathological diverse specialized systems that make up
ate the objective level of risk that different gamblers tend to be overwhelmingly the brain interact.
hazards could pose. On the other hand, and male, and tend to also drink, smoke, and
consistent with Quadrant IV, people also use drugs much more frequently than George Loewenstein is an economist teaching in the
Department of Social and Decision Sciences at Carnegie-
react to risks at an emotional level, and average. Genetic evidence shows that a Mellon University. Colin Camerer is the Rea and Lela
these emotional reactions can powerfully certain gene that causes gamblers to seek Axline Professor of Business Economics at the California
influence their behaviour. ever-larger thrills to get modest jolts of Institute of Technology. Drazen Prelec is a professor of Man-
agement Science at MIT’s Sloan School of Management.
The existence of separate affective and pleasure is more likely to be present in This is an excerpt of an article that recently appeared in the
cognitive systems that respond differently pathological gamblers than in ‘normal’ Journal of Economic Literature. For a copy of the complete
to risks is most salient when the two sys- people. One study shows tentatively that paper, e-mail christen@rotman.utoronto.ca

44 • Rotman Magazine Winter 2007


Questions for: Alvin Toffler

The renowned futurist and author, who Accenture has named the third most-
influential voice among business leaders (behind Bill Gates and the late Peter
Drucker) talks about the revolutionary form of wealth that will transform our
lives, our organizations, and the world.

Karen Christensen: You believe that we minute by comparison. But most of the dis- you can steal; or you can inherit some
are in the midst of the world’s third cussions of economics we hear today are money. These are the key entry points. In
major ‘wealth wave’ (following the still a discussion of the money economy in contrast, there are literally thousands of
agrarian and industrialization waves.) Industrial Age terms. ‘ways in’ to the non-money economy, and
Describe it for us. they are open to everyone. When, as indi-
KC: You believe this Third-Wave wealth viduals or groups, we both produce and
Alvin Toffler: From the 1960s onwards, a has the potential to increase not only consume our own output, we are ‘prosum-
new set of rules began to emerge in the monetary wealth, but human wealth as ing’. If we bake a pie and also eat it, we are
developed economies – new forms of eco- well. How so? prosumers; but the purpose of baking it
nomic activity and wealth creation, based might be to share it with family, friends or
not on physical labour and assembly lines, AT: We are accustomed to thinking about the community, without expecting money
but on knowledge. And this was truly revo- the economy in terms of monetary in return. Given the shrinkage of the world
lutionary – at least as revolutionary as the exchange: people buy and sell, they invest due to advances in transportation, commu-
Industrial Revolution had been three cen- and save, and it’s all a matter of the move- nications and IT, the notion of prosuming
turies earlier. Where the ‘second-wave’ or ment of money. But we now need to leap can even include unpaid work that creates
industrial wealth system brought massifica- ahead in our understanding of economic value to share with strangers half a world
tion, the emerging third-wave wealth activity and realize that a great deal of value away. All wealth systems have a prosumer
system de-massifies production, markets is created in a non-monetary economy that sector, because many of our highly-personal
and society and makes knowledge its central exists alongside the monetary economy. needs and wants aren’t supplied in the mar-
resource. As a resource, knowledge is [My wife and co-author] Heidi and I call it ketplace, or are too expensive, or because
totally different from the other resources the ‘prosumer economy’, and it involves a we actually enjoy prosuming.
economists have studied before. To begin big jump in our conception of economics,
with, it’s intangible, and it’s not depletable: because it’s not all based on money any- KC: Can you give a couple of examples
the more we use it, the more we can create. more: what we now have is a wealth system of prosumerism in action?
Such intangible functions as financing, in which a part of it is still the money econ-
designing, planning, researching, market- omy, but the other part is the non-monetary AT: One famous example is Linux: a
ing, distributing, managing, and servicing economy, in which many of the things peo- young fellow in Finland is sitting at his
are frequently more difficult and costly than ple do for themselves or others, without desk, and he isn’t happy with the software
‘muscle work’, but they add more value and being paid, have a major impact on the he’s using for his job. He decides he can
generate more profits. The fact that knowl- money economy – an impact that conven- create a better operating system; and on
edge is inherently inexhaustible knocks a tional economists largely ignore. his own, without quitting his job, and
gigantic hole in the economics that grew purely for his own satisfaction, he creates
out of the industrial era. And, by and large, KC: What do you mean by ‘prosumer’? Linux – the renowned open-source sys-
our economists haven’t caught up with this tem. He puts it out on the Web, and
yet (though many are working on it.) The AT: There are several ways that people enter hundreds, if not thousands of volunteer
still-emergent third-wave wealth system the money economy: you can acquire or programmers are invited to make it bet-
promises to make the amount of value pro- create something saleable, and sell it for ter, to add functions, etc. All of this is
duced by all its forerunner systems look money; you can get a job and a paycheque; done for free – outside of the money

Rotman Magazine Winter 2007 • 45


economy, yet it sends shivers through mentals’, you get lost in a maze of com- KC: What are the implications for spe-
Microsoft, because many governments peting definitions.What if, by focusing on cialists in any field?
decide to use this system instead of theirs. these things, we miss some things that are
Linux was created by prosumers, and even more important? What if all such fac- AT: The more refined and specialized tasks
even though it was created in prosumer tors actually depend on a deeper set of become, the harder and more expensive
part of the wealth system, it has had a forces? If you look at history, we’ve gone it becomes to integrate them – especially
multi-billion dollar effect on the money from hunting and gathering to agrarian, in an innovation-driven economy. At
economy. That’s just one example. peasant economies, to industrial some point, the costs of integration may
Another form of prosuming involves the economies, to the knowledge economy; the exceed the value of such super-specializa-
volunteer work that people do in their key question is, are there fundamentals that tion. Narrowly-focused specialists may be
communities and across oceans, such as are common to all of these? The answer is good at incremental innovation, but
the economic wealth that was created by yes, and it’s a much different list from the breakthrough innovation is most often
people who helped out after the Tsunami ones people are always talking about. For the product of temporary teams whose
in Asia. There are many forms of unpaid instance, clearly, every one of these members cross disciplinary boundaries –
activity that create value. The prosumer economies – from the birth of the human and breakthroughs in every field are
economy encompasses some of the most race onwards – has had to deal with the increasingly blurring those very bound-
important things we do today. And even biosphere. Whether you were going out to aries. The new wealth system demands a
though it receives little attention from hunt and gather or you were planning a complete shake-up in the way these
most economists, the worldwide money new mining operation, you had to worry increasingly-temporary skill sets are
economy they monitor couldn’t survive about the physical environment around organized for increasingly temporary
for 10 minutes without it. you. No matter which economy or wealth purposes throughout the economy. Noth-
system you’re talking about, you also had to ing is more deeply fundamental to the
KC: How so? deal with energy to create wealth, and you creation of wealth.

AT: At the most basic level, it’s because


every single day, some part of the work-
Unless it is completely transformed,
force retires or dies, and has to be replaced;
one generation moves in as another exits
education will become the greatest weight
the ranks. This explains why the money
economy depends so completely on the
on the back of the economy of the future.
most elemental form of prosuming: parent- needed to deal with time: when are the ani- KC: Talk a bit about the dangers of
ing. You don’t get paid for raising your mals you are hunting going to turn up to ‘obsoledge’.
children, but where would tomorrow’s get some water? These are just a few of a
money system be without them? Someday long list of deep fundamentals that we’ve AT: In the past, most industrialists,
– if the economy ever attains the science- always had to deal with – the ‘givens’ of investors and business people didn’t have to
fictional capacity to operate without wealth creation. In our book, we single out concern themselves with the kind of issues
people, or humans attain immortality – three that have particular impact on the that knowledge now presents. For exam-
parenting may become economically emergent economy of the future: the first ple, how much of the decision making in
unnecessary. But until then, at the deepest is how we deal with time; second is space your company (or your university, or your
level, production is life-and-death depend- or geography; and third is how we hospital) is actually based on obsolete infor-
ent on the unpaid exertions of billions of deal with knowledge itself. These are mation? In the previous ages, change was
parent prosumers. the most important deep fundamentals very slow, so people didn’t have to worry
going forward. about the obsolescence of their knowledge
KC: What is the difference between ‘fun- supply.Today, more and more of yesterday’s
damentals’ and ‘deep fundamentals’? KC: How will the Third Wave affect jobs? knowledge is obsolete, and tomorrow,
what we know will be different, so we have
AT: When you listen to the continual chat- AT: The ‘job’ is only one way of packaging to pay much more attention to the tempo-
ter on TV and in the press about the work. As the knowledge-based wealth sys- ral aspect of knowledge, and its continued
economy, everybody seems to be talking tem unfolds, we may well move into a relevance. We call obsolete knowledge
about ‘fundamentals’ – things like ‘low future in which more people ‘work’, but ‘obsoledge’, and it’s definitely something
inflation’ and ‘sound credit quality’. You fewer hold ‘jobs’, as such.And the nature of to watch out for.
hear people say, “The fundamentals of this our work will change, because skills now
company are good, and the fundamentals of become obsolete at a rapid pace, meaning KC: Tell us a bit about the ‘clash of
that company are bad.” But when you start we’ll have to continually learn new skills to speeds’ and how it affects economic
looking for a definition of these ‘funda- accomplish changing tasks. development.

46 • Rotman Magazine Winter 2007


AT: Nations all over the world are strug-
gling, at different rates of speed, to build
UN in its present form are corrupt and
unworkable. In Washington, the Federal
Integrative
advanced wealth systems. What most
business, political and civil leaders have
Emergency Management Agency
(FEMA) imploded during the aftermath
Thinking : ™

not yet clearly understood is a simple of Hurricane Katrina. And this is going to
fact: an advanced wealth system needs an continue to happen, because the institu- Learning How to
advanced society, for every system for the tions we’ve developed to work very well Think to Win
creation of wealth is a product of the soci- during the industrial era of mass produc-
ety in which it is embedded. If a country tion are increasingly incapable of a) 9 th Annual Rotman Life-Long
manages to speed up its economic keeping up with the speed of change, and Learning Conference
advance, but leaves its key institutions b) keeping up with the complexity of June 1, 2007
behind, it will eventually limit its poten- change.These institutions have become so
Toronto, Ontario
tial to create wealth.Today’s industrial-age complex and interconnected that they are
bureaucracies are slowing the move less and less functional. They can’t deal
toward a more advanced, knowledge- rapidly with the kinds of decisions that We are pleased to offer the
based system for creating wealth. This is need to be made. The worst example of following presentations:
true of China’s state-owned enterprises this is our schools. We have companies
“The Wealth of Knowledge:
and of France’s ingrown, elitist ministries that are driven by change, struggling to
Intellectual Capital and the 21st
and universities. It is also true of the keep up with it or die; on the other hand,
Century Organization”
U.S., in particular, in the inability of the they are dependent on tomorrow’s work-
Thomas Stewart, Editor,
U.S. Securities and Exchange Com- force, which today is learning in schools Harvard Business Review
mission to cope with the skyrocketing that change glacially, if at all. So they’re
speed and complexity of the private- not prepared for the high-velocity world, “Five Minds for the Future: the
sector financial institutions it is supposed and are actually being made incompetent Cognitive Abilities that will Command
to regulate. by the schools. Unless it is completely a Premium in the Years Ahead”
transformed, education will become the Howard Gardner, Hobbs
KC: What’s the biggest mistake being greatest weight on the back of the econ- Professor of Cognition and e
m
made by our institutions? omy of the future. a to co
Education, Harvard dGraduate
h
widt
School of Education
AT: Bureaucratic institutions in both the KC: Do you agree with Stephen Hawk-
umn
Col the Thinker of the Future”
“Designing
private and public sector break up knowl- ing’s assertion that we need to start Mihnea Moldoveanu, Associate
edge and its components, storing and making other planets habitable in Professor of Strategic Manage-
processing them in separate compart- order to preserve the future of the ment and Director, Desautels
ments, or ‘stovepipes’. Over time, these human race? Centre for Integrative Thinking™,
stovepipes multiply, as ever-more narrow Rotman School
specialization increases the number of AT: Yes, I do. If we go forward 1,000 years “Reinventing Yourself through Mindful
uncrossable boundaries. This makes it – assuming the human race is still here – Learning and Creativity”
extremely difficult to cope with fast- what will we be remembered for? No one Ellen Langer, Professor of
changing new problems requiring will remember Iraq, or George Bush (Jr. Psychology, Harvard University
knowledge that falls beyond artificial or Sr.), or most of the things we obsess
departmental borders.To complicate mat- about today. But there is only one thing that “Think Again: How Today’s Greatest
ters, guarding each stovepipe is an they will surely remember: that ours was Business Leaders Think to Win”
executive whose power is enhanced by the first generation in history in which Roger Martin, Dean and Premier’s
Research Chair in Productivity
control over data, information and knowl- human beings actually left the planet, went
and Competitiveness and Director,
edge, and who has little incentive to share into space, and began to create wealth
AIC Institute for Corporate
it. Yet as industrial-age boundaries break there. That is a historical event that is
Citizenship, Rotman School
down, it is only by sharing that important unmatched by most of what we pay atten-
problems can be solved. tion to. All of us – individuals, organizations Confirm your attendance
and governments alike – face the wildest,
TODAY by registering at:
KC: Will all the big institutions (the UN, fastest ride into the future of any genera-
www.rotman.utoronto.ca/events
World Bank, IMF, etc.) wither away under tion. When all is said, it’s a fantastic
the dynamic new system you describe? moment to be alive.
Alvin Toffler is the best-selling author of Future Shock, The
AT: They will either wither away or sim- Third Wave, and most recently, Revolutionary Wealth (Knopf,
ply implode. Major components of the 2006), all co-written with his wife, Heidi Toffler.

Rotman Magazine Winter 2007 • 47


The Evolution of
HARASSMENT
in the Workplace
Once thought to be based on sexual desire, a subtler form of
harassment has emerged in modern workplaces that creates a
hostile environment for women who don’t meet gender ideals.
by Jennifer Berdahl

The first type of sexual harassment to be The Role of Gender Ideals ‘Hostile-environment harassment’
widely recognized was quid-pro-quo ‘Gender ideals’ capture what is considered does not involve trying to establish sexual
harassment, in most cases originating most desirable in men and in women, and or romantic relations with a target, but
from a male boss toward a female subor- include both physical and personality rather makes a target feel unwelcome in the
dinate. The courts assumed that harassers characteristics. Personality characteristics workplace, based on their gender. Also
were motivated by sexual desire for their considered most desirable in men include called ‘gender harassment’ or ‘sexual hostil-
targets, and scientific theories of harass- assertiveness, independence, and domi- ity’, this form of harassment is now the
ment shared this assumption. For nance, while those considered most most common type in evidence in modern
example, the ‘natural/biological model’ desirable in women include modesty, def- workplaces. Gender harassment under-
proposed that sexual harassment results erence, and warmth. mines, humiliates, or rejects a target based
from natural and inevitable feelings of If mostly men harass mostly women on gender with sexual and sexist remarks,
sexual desire expressed primarily by men due to differences in biology, power, or jokes, materials, or pranks.
toward women due to inherent sex drives social roles, then women who meet femi- A recent experiment provides com-
and functions; and ‘power models’ nine ideals should be sexually harassed the pelling evidence of this phenomenon.
viewed harassment as resulting from the most. However, the most recent evidence Using a computer paradigm, researchers
fact that men’s economic power over suggests that gender harassment against had men receive an electronic communica-
women enables them to exploit and women is primarily targeted at those who tion from a purported interaction partner.
coerce women sexually. violate such gender ideals. Half of the men received a message from a
This original prototype of sexual One example includes an assertive woman who said she was studying econom-
harassment implies that the most frequent female police officer and bodybuilder who ics, intended to become a bank manager,
targets of such harassment would be indi- was subjected to sexually-explicit materials thought women were as capable as men,
viduals who meet gender ideals, which and found a soiled condom and sanitary and participated in a union that defended
involve both physical and personality char- napkin in her mailbox at work. Another women’s rights. The other half of the men
acteristics. I suggest that in the modern includes the famous case of Price Waterhouse received a message from a woman who said
workplace, just the opposite is true: the vs. Hopkins, in which an outspoken and she was studying education, intended to
most common form of sexual harassment extremely high-performing woman in a become an elementary school teacher to
today is ‘gender harassment’, a form of male-dominated professional accounting allow time for family and children, and
hostile-environment harassment that office was denied partnership and chose not to become a lawyer because the
appears to be motivated by hostility instructed to learn how to “walk, talk and job is more appropriate for men and she is
toward those who violate gender ideals, dress more femininely, wear make-up, have afraid to compete with men. Men had the
rather than by desire for those who meet her hair styled, and wear jewelry.”This case option of sending a variety of images to
them. I suggest that what appear to be sex- led some to propose that this kind of sex their interaction partner in reply, and were
ually motivated forms of harassment, like discrimination is motivated by a desire to more likely to send offensive pornography
unwanted sexual attention and pressure, punish women who do not conform to pre- to the woman who expressed nontradi-
share a desire to put those who ‘step out of scriptive sex stereotypes, or to beliefs tional beliefs and career ambitions than to
place’ back into it. about how women should behave. the woman who expressed traditional ones.

Rotman Magazine Winter 2007 • 49


My Research environments. The best known and most
In recent studies, I set out to test whether widely-used measure of gender ideals for
sexual harassment is most frequently tar- personality is the Bem Sex Role Inven-
geted at women who violate prescriptive tory.The ‘BSRI’ was created by identifying
gender roles in the 21st century workplace. personality characteristics considered more
That is, whether women who have charac- desirable for men than for women, and
The rationale provided by these teristics or engage in behaviour considered characteristics considered more desirable
researchers for why men gender-harass more desirable for men than for women for women than for men. The former cap-
non-traditional women is that men are experience more sexual harassment than ture ‘masculine’ ideals and include acting
motivated to derogate women when they other women and men. like a leader and being assertive, ambitious,
experience a threat to their male identity. Consistent with my hypothesis, dominant, and independent.The latter cap-
Women threaten male identity when they research shows that women in male-domi- ture ‘feminine’ ideals and include being
blur distinctions between men and women nated occupations, especially those in affectionate, compassionate, gentle, warm,
and thereby challenge the legitimacy of male-dominated work contexts, are sexu- and sensitive to the needs of others.
Despite being developed over 30 years
Women in male-dominated occupations ago, recent studies show the BSRI contin-
ues to capture masculine and feminine
are sexually harassed more than women ideals in modern society.
The three studies I conducted used the
in balanced or in female-dominated ones. BSRI to test my prediction that women
with relatively masculine personalities are
more likely to experience sexual harass-
these distinctions and the status they confer ally harassed more than women in balanced ment. I began with a study of upper-level
men.The fictitious women in the computer or in female-dominated ones. This would undergraduates, because sexual harassment
paradigm experiments represent archetyp- also be the case, however, if men are more occurs in a variety of domains, including
ical cases of gender role conformists and sexually aggressive than women, sexual schools. A second study tested whether
violators. Men who endorsed gender role harassment is driven by sexual desire, and women who have relatively masculine per-
distinctions and who were strongly male women who meet gender ideals are sexu- sonalities are more likely than others to
identified were more likely than other men ally harassed the most. negatively evaluate the same potentially-
to gender harass the nontraditional woman To test whether sexual harassment is harassing behaviours, to see if this might
and to report an enhanced sense of male targeted more at women who violate gen- explain the results of my first study. My
identity after doing so. der ideals, it is necessary to compare third study tested whether results for the
‘Sexual approach’ forms of harass- women who differ in their conformity to first study generalize to workplace settings
ment derogate women as well. Sexually these ideals in the same context. My studies by examining the sexual harassment expe-
objectifying a woman treats her as a tested whether sexual harassment generally riences of employees at work.
means-to-a-sexual-end and deprecates her is targeted at women who violate gender The women in my studies experienced
status at work, especially in the socio-his- ideals, and whether it is targeted at women more sexual harassment than the men, not
torical context of widespread sexual who violate gender ideals in more subtle because they experienced sexual behaviours
exploitation and violence against women. ways than their expressed career ambitions more often, but because they evaluated
Unwanted sexual attention, repeated and attitudes about women’s rights. I exam- these behaviours more negatively, consistent
requests for dates, and sexual coercion are ined sexual harassment as traditionally with prior research. This points to the
ways of derogating women in addition to construed to include sexual approach importance of measuring how a respondent
gender harassment.Viewed in this way, it is forms of harassment like unwanted sexual evaluated an experience before determining
not surprising that gender and sexual attention and sexual coercion, and studied if it was harassment. Women with relatively
approach forms of harassment are highly how actual women’s experiences of sexual masculine personalities, regardless of how
empirically related. Given this, it seems harassment in their real lives and places of feminine their personalities also were, expe-
reasonable to propose they share a common employment relate to women’s personality rienced significantly more sexual
motive. After all, men with relatively sexist gender violations. harassment than others. This did not appear
attitudes are not only more likely to gender- Gender ideals, or beliefs about how to be due to differences in evaluation of the
harass women but to sexually exploit them as men and women should think, feel, and behaviours: women with masculine person-
well. Sexual approach forms of harassment behave, are captured by ‘prescriptive sex alities evaluated the behaviours the same as
may appear to be sexually motivated, but may stereotypes’. These are likely to differ other women.
be more basically motivated by a desire to somewhat across contexts, but there is It is possible, however, that women with
derogate the target of harassment, especially much commonality in feminine and mascu- relatively masculine personalities actually
a woman who steps out of ‘place’. line ideals across a wide range of experience fewer sexually harassing behav-

50 • Rotman Magazine Winter 2007


iours than other women, but are more likely centers. Women in these male-dominated zation to discriminate against women. If
to recall them. This is similar to the ‘whiner contexts with relatively masculine per- some women are singled out for discrimi-
hypothesis’, which posits that surveys over- sonalities experienced the most sexual nation because they fail to conform to
estimate harassment because respondents harassment. In other words, the more gender norms – norms that reinforce sex
‘whine’ about minor events. While research women deviated from traditional gender differences and inequality – then enforc-
refutes this hypothesis, it is likely to be put roles – by occupying a ‘man’s’ job or hav- ing gender norms by punishing those who
forth as an explanation for why women with ing a ‘masculine’ personality – the more violate them enforces gender inequality.
relatively masculine personalities are more they were targeted for sexual harassment. If women who are outspoken at work are
likely than others to report sexual harass- Though having a masculine personality harassed, but their outspoken male col-
ment. It is possible that women who defy would seem to help employees fit into leagues and their other female colleagues
gender roles may be more likely to question, male-dominated work environments, hav- are not, then a double standard exists in
be bothered by, and therefore remember ing such a personality appears to have that organization that serves to reinforce
behaviour based on these roles, such as sex- hurt the women in this study. women’s subordinate status to men
ually objectifying women. within it.
In my second study, rather than recall- Implications for Managers My research highlights the double-
ing their past experiences (which may My research provides the first systematic bind faced by women in male-dominated
involve biases based on sensitivity to these evidence that in the modern workplace, workplaces, who are likely to be dismissed
experiences), respondents evaluated iden- women who violate feminine ideals are and disrespected if they are feminine, but
tical hypothetical experiences. If relatively most likely to be sexually harassed in their who are likely to be scorned and disliked
masculine women are more negatively social and working lives. If sexual harass- if they are masculine. Acting like ‘one of
sensitive to potentially-sexually-harassing ment is seen as a pervasive mechanism for the boys’ by being assertive and ‘leader-
behaviours, they should evaluate these punishing gender role violators and like’ may not be the best strategy for
experiences more negatively. thereby a way to enforce different stan- women who wish to succeed in male-
This study demonstrated that women dards of behaviour in women and men, dominated occupations, but it is not clear
who describe their personalities in relatively then it serves as a basic means for creating which strategy is best. Regardless of how
masculine terms are no more likely than different terms and conditions of employ- ‘warm’ or ‘feminine’ a woman was in
others to negatively evaluate potentially sex- ment based on sex. these studies, she was harassed more if she
was also dominant or otherwise mascu-
line. If being dominant and masculine is
Acting like ‘one of the boys’ may not be what it takes to succeed in male-domi-
nated occupations, it appears that women
the best strategy for women who want to face two undesirable choices: to not have
what it takes, or to have it but face an
succeed in male-dominated occupations. upward battle of harassment.
In the end, the onus should not be on
ually harassing events. This suggests that the Rather than ask if a perpetrator was victims to avoid sexual discrimination,
reason relatively masculine women experi- sexually motivated, or if the behaviour but on those in charge to create struc-
enced the most sexual harassment in Study 1 was sexual in content to determine tures and incentives that prevent it. Rather
is probably not due to an enhanced likeli- whether it constitutes sexual harassment, than attempting to ‘sculp’ potential vic-
hood on their part to view these this perspective suggests instead that we tims so they might avoid harassment, a
experiences negatively, but instead reflects ask whether an individual of one sex better solution is to focus on systemic
an actual likelihood for them to experience would have been harassed for having the means of discouraging such bias. Employ-
more sexual harassment. same characteristics and behaving in the ers should focus on eliminating different
My third study largely replicated the same way as an individual of the other sex. treatment, standards, and status between
results of the first in a workplace setting.As Furthermore, it suggests that policy and male and female employees. Organiza-
in Study 1, men experienced more sexual research on sexual harassment should tional policies should focus not on
behaviours than women, but men tended move beyond focusing on sexual motives banning sexual behaviour per se, but on
to enjoy these experiences and women and behaviours to include other forms of creating respectful work environments
did not. Women who worked in male- behaviour that derogate individuals based that do not subject men and women in the
dominated jobs at male-dominated manu- on sex. same positions or with the same charac-
facturing plants were more likely to Discrimination does not have to be teristics and personality styles to different
experience sexual harassment than their targeted at all members of a group to sub- forms of treatment.
male counterparts in those jobs and than ordinate the group as a whole: not all
men and women in female-dominated jobs women, or even most, need to be treated Jennifer Berdahl is an assistant professor of Organizational
Behaviour at the Rotman School.The paper on which this arti-
at female-dominated community service poorly in an organization for that organi- cle is based is forthcoming in the Journal of Applied Psychology.

Rotman Magazine Winter 2007 • 51


THE CHINA RIP TIDE:
THREAT OR OPPORTUNITY ?
Profiting from the Growing
Supply-Chain Bottleneck
By George Stalk Jr. and Kevin Waddell

A focus on reducing time and variability in the Surface freight from Asia to the west coast
of North America and to Europe is growing
China-anchored supply chains serving North at an explosive rate, while port and surface-
America and Europe can help companies build transport capacities are not. As a result,
North American ports and rail systems are
competitive advantage. beginning to choke, and delays and uncer-
tainties are increasing.
Freight demand on the North Ameri-
can west coast has been growing at a rate
equivalent to one Port of Vancouver per
year, and a rapid expansion of port and rail
capacity will be difficult, given formidable
environmental resistance and political pres-
sures. Although the problem is not as acute
in Europe, plans are ostensibly in place to
George Stalk Jr. Kevin Waddell add significant port capacity there over the

52 • Rotman Magazine Winter 2007


By George Stalk Jr. and Kevin Waddell

next six to eight years. Nevertheless, the In Western Europe, capacity utilization European ports to be unable to support the
conditions we describe here are going to in the major ports is running between 90 surge from Asia.A study by Drewry Ship-
get far worse before they start getting better. and 95 per cent, which allows little margin ping Consultants shows that actual
The port and rail systems of the North to absorb the variability inherent in over- capacity added is usually about a third of
American west coast are implementing seas shipping. During the summer of 2004, what is proposed, and it typically becomes
changes, but these are not likely to meet a spike in demand caught operators off- available at least four years later than origi-
the growing demand, for many reasons.The guard, resulting in long delays for nally planned.
most significant is that each of the North unloading container ship; some were even In North America, the supply chain
American participants in the China- turned away from ports such as Antwerp. bottleneck is beginning to affect the per-
anchored supply chains has a narrow view Operators dealt with the problem by formance of manufacturing and retailing
of its role and a limited notion of the end- adding equipment, hiring dockworkers, companies that rely on surface logistics to
to-end potential for improvement. The and improving scheduling, but such meas- get their goods from Asia to the heartland.
changes being made or contemplated ures only buy time in the near term. But few executives at retail or durable-
reflect this narrow focus: they are incre- Although the planned capacity additions are goods companies understand the
mental, and their effects will be swept aside significant, it would take only one or two magnitude of the challenge being forced on
by the bigger forces of the China ‘rip tide’. expansions to come on late or not at all for them, and even fewer are investing against

Rotman Magazine Winter 2007 • 53


the phenomenon to reduce costs and create Some executives may be tempted to the dynamics of their industry, and open a
competitive advantage. One exception is stop reading here and pass this article on to competitive gap that will complement and
Nike.The Financial Times recently reported their logistics people.That would be a huge enhance advantages founded on merchan-
that the company had joined other big mistake, because the actions required to dising and store management. The China
importers in the Waterfront Coalition, an turn the threat of the China rip tide into an rip tide presents a major strategic challenge
organization set up to lobby for more fund- opportunity are cross-functional, come that many companies are not dealing with
ing and political support for infrastructure together at the very top of the company, explicitly because they underestimate the
improvements. and require strategic choices, investments importance of fast, effective supply chains.
We believe that a firm focus on reduc- and initiatives. Most know that supply chain management
ing time and variability in the China- So what can companies do, aside from is important, but they underestimate the
anchored supply chains serving North nothing? They can retreat by bringing man- magnitude – and the impact on profitability
America and Europe can help companies ufacturing home. They can adapt by – of the hidden costs of longer supply
dramatically reduce their costs, improve building landside capability in ports not-yet chains, reduced flexibility, and lost gross
their margins, and build competitive congested in order to sidestep the problem. margin from missed sales and write-downs.
advantage. We also believe that North Or they can be still more creative and com- And rarely do executives think of supply
American and European companies should petitive by doing one of the following: chain investments as an outright source of
be looking closer to home (to Mexico, 1. They can aggressively manage their competitive advantage.
Central America, and South America for China-based supply chain, looking for ways In their rush to source from China,
U.S. companies and to Central and Eastern to squeeze time from it that competitors many companies are blindly walking into a
Europe for Western European companies), haven’t identified or exploited. strategic trap. The trap is thinking that
where the cost-of-labour penalty (relative 2. They can explore alternatives that will sourcing from China will result in lower
to labour rates in China) is more than com- minimize adverse supply-chain effects, product costs, when in reality the supply
pensated for by superior supply-chain including options – such as increased use of chain dynamics will, in many cases, drive
performance that is significantly less vari- air freight – that may appear costly but may up overall costs and reduce profitability,
able and virtually unaffected by port and actually lower overall expenditures by thereby creating an opening for a competi-
surface-capacity constraints. reducing hidden costs. tor. The first company to see and correct
the strategic error of sourcing from China
without an appropriate investment in sup-
In their rush to source from China, many ply chain dynamics to minimize costs will
seal the fate of its competitors.
companies are blindly walking into a
Effects on the China Cost Advantage
strategic trap. The growing imbalance in supply and
demand in Pacific container shipping can
A Cross-Functional Challenge 3. They can invest in premiums and capa- be captured in one statistic: over the next
Retailers live or die by a simple creed: bilities. Premiums are the extra payments several years, close to 100 new container-
stock products that sell, and don’t stock required to get substantially enhanced per- loading berths will be built in China, each
products that don’t sell. As North Ameri- formance by means of preferred treatment with a lift capacity of about half a million TEU
can and European companies source more from ground, sea and air shippers, port (twenty-foot equivalent units) per year. Most
of their goods from China, the risk of get- services, and other suppliers. Investments of the containers used in North America and
ting this wrong increases dramatically. The in capabilities enable companies to be bet- Europe are around 40 feet long, making them
effects show more in the economic profits ter than competitors at managing their equal to two TEU. Over the next several
than in the accounting profits. Accounting business in spite of the problems on the years, no more than five new berths are
profits capture Generally Accepted North American west coast. These initia- planned for the west coast of North America.
Accounting Principle (GAAP) costs, rev- tives can include cross-docking, facilitated Imports from China to North America
enues and losses. Economic profits capture portside handling, and “track and trace” are growing at 18 per cent per year in value
the hidden costs of lengthening supply capabilities to keep boxes moving. and at 12 per cent per year in number of
chains: increased inventories, overproduc- 4. They can diversify supply with multiple containers. It is hard to imagine anything
tion and underproduction, write-downs of suppliers and supply points or produce short of a global catastrophe altering this
excess inventories, and most important, domestically for critical components and trend. At some point this year or next, the
lost margins from stockouts. In reality, products, accepting higher production ports on the west coast of North America
accounting profits may be positive while costs as a tradeoff for lower stockouts and are expected to reach their combined con-
economic profits are not. Economic profits supply-chain costs. tainer-unloading capacity. Many have plans
can be the source of insight for creating Firms that make creative investments for expansion to levels approaching those
competitive advantage. like these will benefit enormously, change of Asian ports. The expansion would come

54 • Rotman Magazine Winter 2007


either from an increase in dockside foot- unlikely to get organized to pick up its are also the costs of rerouting shipments to
print at current levels of container PPR option, and because the Chinese are other ports – in the case of the North
lift capacity, as indicated in the ports’ mas- growing impatient. American west coast, to the east coast and
ter plans, or from significantly improved Unfortunately, neither port nor rail the Gulf of Mexico.
lift productivities. expansion is likely to happen soon. Compa- As all of these contribute to
The footprint expansion is doubtful. nies are going to have to fend for themselves. increased transit times and greater vari-
Local communities consider container bilty, the ‘cross over’ point where China is
ports to be polluters, noisy contributors to Direct and Indirect Supply-Chain Costs no longer the anchor for low-cost supply
road and rail congestion, and just plain of China Sourcing chains is near. We estimate that many
ugly. Less-threatening business expansions Companies that source manufactured companies booking positive accounting
have been stymied by complaints like these. goods in China do so because of the attrac- profits today are actually running negative
Productivity improvements would require tive production costs and their influence on economic profits.The higher the gross mar-
a breakthrough in labor-management rela- gross margins. But unit product cost (UPC) gin and the greater the variability of
tions – unlikely in an environment defined is only one part of a very complex picture demand, the more likely the cross-over point
by a long history of discord. to consider in outsourcing.As supply chains has been reached and passed. The opportu-
Either a footprint expansion or a dra- lengthen, they incur direct, indirect, and nity is near for companies to increase
matic increase in productivity would push hidden costs. competitiveness by sourcing closer to home
off the day of reckoning for three to five
years. If some miraculous combination of
modern management techniques, good The ‘cross over’ point where China is
labour relations and political astuteness
were to achieve both the footprint expan- no longer the anchor for low-cost supply
sion and the productivity improvements,
the day of reckoning would be postponed chains is near.
for eight to nine years at current container-
import growth rates and volumes – a Direct and indirect costs include ship- (Mexico or Eastern Europe), investing in
miracle that is very unlikely to occur. ping, nesting and de-nesting of containers vastly-improved time performance, and
at both ends of the ocean pipeline, inven- exploiting the ignorance of the phenomenon
Potential Solutions tory storage, handling, procurement, that their competitors may have.
Two potential solutions exist for North insurance, and overall financing. Hidden
America, one for the medium term and one costs are more difficult to identify and What Companies Should Be Doing
for the longer term. The medium-term quantify.These are the costs that arise from Everyone rushing to source from China
answer is the development of a port in British the dynamics of the supply chain. The can’t be wrong. However, some companies
Columbia. The Port of Prince Rupert longer it takes to move a product from are having second thoughts about their
(PPR), just south of the Alaska-Canada bor- point A to point B, the more difficult it is to China-sourcing strategies, and are either
der, is the northernmost deep-water port in manage the chain without fluctuations, reworking their North American logistics
North America that does not freeze, and it is which creates cost. Typically, a very small- networks or even retreating from China:
1,000 miles [over 1,600 kilometers] closer but-unanticipated change in demand at
to Shanghai than Los Angeles-Long Beach. point B can produce a change in demand at • Wal-Mart has built a 1.3-million-
Unfortunately, PPR will take a long time to point A that is three to five times greater. square-foot warehouse near the Port of
develop as environmental and political Another hidden cost is the expense of Savannah, Georgia, and will open an $80
issues are worked through, and is likely to flushing defective inventory from the sup- million distribution center near Hous-
remain a ‘backup’ port for Vancouver for the ply chain. Costs must be incurred not only ton, diversifying from Pacific ports;
foreseeable future. to remove the defective inventory but also • The Home Depot has built a 1.4-mil-
The longer-term solution may be in to produce additional goods to meet back lion-square-foot facility in Savannah;
Mexico. A number of sites exist that could orders and current demand – further • Toyota and Nissan are considering a
be developed into a large-scale deep- straining factories – and to physically plan to move more imports through
water port. Roads and rail lines into replace the marred goods with new prod- Mexican ports;
Arizona or Texas would need to be built, uct throughout the chain. • Red Bull has diverted all inbound
and the entire project, optimistically, As it takes longer for containers to shipments from southern to northern
would take about ten years and $10 bil- move through ports, further hidden costs California ports and is redistributing
lion. Although more expensive to develop are created, including the overtime costs products to local markets in southern
than PPR, a new Mexican port is a very that frequently arise from idled ships, unre- California as needed; and
realistic possibility, if only because some- liable portside loading and unloading, and • Kodiak is bringing its boot manufactur-
thing must be done, because Canada is overburdened rail-transport services.There ing back to North America.

Rotman Magazine Winter 2007 • 55


So what can companies do? They need to be supplier relationships at all levels of the enable final assembly to take place close to
very aggressive in managing their China- supply chain in order to identify areas the point of final demand, thereby mini-
based supply chains, looking for ways to where hidden costs could arise and to mizing the time and cost effects of long
squeeze time from them that competitors prevent their occurrence; supply chains; learning to source, manu-
haven’t identified. And how can they do that? • Segment the demand chain on the basis facture, launch and withdraw products
By assessing all their operations and processes of order predictability and demand more effectively; and exploiting new con-
anew and by adopting many of the recom- volatility so that components with the cepts for fast freight.
mendations we offer below for newcomers. highest gross margins and the most Identifying these investment opportu-
For companies that haven’t yet sourced from volatile demand get the fastest handling; nities requires exhaustive analysis of costs,
China, we recommend the following steps: and For European companies, carefully revenues, and lost margins in today’s end-
evaluate the unique opportunity to source to-end supply chains. Companies need to
• Reduce minimum-production-order from Central and Eastern Europe, where ask,What if? And they need to explore their
quantities and reduce cycle times as labor savings are almost as significant as answers thoroughly for each and every
quickly and as much as possible; in China and the supply chain penalty is white space before deciding that no addi-
• Refrain from sourcing or manufacturing relatively small. tional investment in premiums and
in China until management fully under- capabilities is likely to produce further
stands the dynamics of the supply chains; If a company does decide to source from or improvement.They must be especially alert
• Create an integrated or a semi-inte- manufacture in China, it should explore to the subtle-but-important system effects
grated information flow within the alternatives that will minimize adverse sup- of investing at one part of the chain to affect
company’s existing supply chain; ply-chain effects, including options that performance at another.
• Conduct in-depth examinations of buy- might appear costly at first, but may result
ing practices and management of in overall lower costs.These include: In closing
The current problems of sourcing in China
• Use air freight for products with the represent a giant non-tariff trade barrier,
highest margins and volatility; and the situation is likely to get worse
• Insist on point-to-point ocean shipping. before it gets better. Politicians throughout
To reduce costs, shipping companies the U.S. and Canada will dither and debate
build larger and larger container carri- until the options for alleviating the port
ers, which must then be scheduled to call bottlenecks have vanished.
on multiple ports. Shipping products on Companies will do what they can, but
a vessel that has your destination as its a single corporation can do little to solve
last port of call can add weeks – and the broader problem. An increasingly-frus-
great variability – to transit times; and trated China, which has the most to lose
• Develop better relationships with trans- from this de facto trade barrier, may under-
portation providers. This could mean take a major initiative, such as developing a
identifying and paying shippers for pref- new port on the west coast of Mexico. Any
erential treatment. In ‘hot hatching’, for such effort would take years to have an
example, you offer a premium to a ship- effect, but the possibility is real.
per that will load your goods onto its Whether your company is operating
vessel last and unload them first. and selling from Europe or North America,
it will not be easy to get your own situation
All these initiatives require investment in right. Winning will require creativity and
one of two forms: in premiums or in capa- insight into customer behaviour, as well as
bilities. As noted above, premiums are the segmented options, detailed cost analysis
extra payments required to get substan- and the kind of management that will strike
tially-enhanced performance and many executive teams as an out-of-body
preferred treatment from suppliers like experience. Yet the problem is severe
ground, sea and air shippers and port enough that someone out there is undoubt-
services. Companies can get results by edly trying to do something about it. That
forcing suppliers to compete on service in someone had better be you.
return for premiums. Investments in
capabilities, which tend to be a good deal George Stalk Jr. is a senior vice president and director in the
Toronto office of The Boston Consulting Group and an
harder to discern and carry out, include adjunct professor of Strategic Management at the Rotman
accelerating the flow and interpretation of School. Kevin Waddell is a vice president and director in
information; developing designs that BCG’s Warsaw office.
Point of View: Russell Ackoff
Preparing for the Future
Through Idealized Design

As the rate of change in the environment ent time. In so doing, interactive managers turers in a number of industries have cre-
continually increases, along with its com- prepare their organizations for success in ated such flexible production facilities that
plexity, accurate forecasting becomes more the unknowable future. they can customize each individual product
and more difficult and less and less likely. based on an order just received. Boeing
But the difficulties involved in predicting Anticipating the Future aircraft and Dell computers are examples.
the future do not remove the need to take Assumptions about the future differ qualita- It is obvious that an additional benefit of
it into account. How then, should the tively from forecasts. Forecasts are about such a system is that it allows for a rapid
future be taken into account? probable futures; assumptions are about possi- inventory turn and minimum idle capital.
One widespread approach to dealing ble futures. We carry spare tires in our cars
with the future involves strategic planning. despite the fact that we do not forecast hav- The Benefits of Idealized Design
In my research I have found that there are ing a flat tire on our next trip. In fact, if Interactive planners plan backward from
three common approaches to such plan- anything, we forecast that we will not have a where they want to be to where they are
ning. The first is reactivism. Reactive flat tire on our next trip. But we assume a flat now. They plan not for the future, but for
planners find the solution to their organiza- tire is possible, however unlikely it may be. what they want their organizations to be at
tional problems in solutions that have Assumed futures can be taken care of the present time. In so doing, however, they
worked in the past.They are often nostalgic in two different ways. First, there is contin- prepare their organizations for success in
about the past state of their organizations gency planning.When there are a relatively the unknowable future. Such ‘idealized
and speak about ‘the good old days’. few and explicitly-describable possible design’ has a number of beneficial effects
The second approach is inactivism. futures, planners can prepare plans for each on those who engage in it and on their
Inactive, or conservative, planners are satis- possibility. This is called contingency plan- organizations, as follows.
fied with the way things are and hope that ning.Then, when the truth about the future
their present problems will simply go away is known, the appropriate plan can be 1. It promotes understanding
if they do nothing. invoked. For example, an oil company can There is no better way to gain an under-
The third approach is preactivism. Pre- develop exploration plans based on the standing of something than by designing it.
active planners do not look to the past or price of oil increasing, staying the same, or Designing something as simple as a door
present for the solution to their problems declining. When it is apparent how the handle on a car requires the designer to
but believe that the future can be better price is moving, they can quickly move to understand how the human hand grasps a
than the present. For them, the future is an the appropriate plan already developed. handle and then turns (or pulls) so that the
opportunity for improvement to be The way of dealing with more contin- design produces a comfortable and func-
exploited. The weakness in this third gencies than can be planned for separately tional handle.
approach is in predicting what the future is to design into the organization or institu- Furthermore, in the design process,
will be.Any prediction of the future ensures tion enough flexibility and responsiveness one is forced to consider the assumptions
a poor outcome. These approaches some- so that it can change rapidly and effectively on which the design is based.This consider-
times work, but more often they do not. to meet whatever it encounters. Automo- ation frequently reveals the irrationality of
Visionary planners have developed a bile manufacturers cannot accurately some of the features of the existing object
fourth approach that results in what I call predict customer demand for all possible and allows for their replacement. For
idealized design. These interactive planners models, colours, and accessory packages. example, in nearly all men’s stores, cloth-
reject the approaches of the other three However, the best automakers have solved ing is arranged by type; a section for suits,
types.They plan backward from where they this problem by designing production lines another for overcoats, another for shirts,
want to be to where they are now; and they that allow them to build different models and so on. When a group of male planners
plan not for the future, but for what they and colours on the same production line as engaged in an idealized redesign of a men’s
want their organizations to be at the pres- customer demand requires. Some manufac- store, it became apparent to them that this

Rotman Magazine Winter 2007 • 57


arrangement was for the convenience of Banking is a good example.Years ago, 3. It simplifies the planning process
those who run the store, not its customers. banks employed many tellers who han- Planning backward from where one wants
They found that a far better arrangement dled transactions with customers. They to be reduces the number of alternatives
for customers was to arrange the garments received deposits and filled out deposit that must be considered when making a
by size, not type of clothing, putting all the slips, cashed checks, and entered interest choice of how to get there. It simplifies
suits, coats, shirts, and so on in the same in savings passbooks. Bankers had to hire the planning process considerably.
place so that each shopper – small, legions of tellers as their business grew. An organizational example of simplifi-
medium, or large – could find everything However, a few visionary bankers asked cation – requiring the details of planning
he might want in one place. Bookstores themselves what would be the ‘ideal backward and forward – is too long for our
have always known this and arrange books bank’. They concluded that it would have purposes here. So we offer instead an
by subject (because most browsers know few – perhaps no – tellers and would example drawn from a tennis tournament
what interests them, even if they do not process all the same transactions. This that nicely encapsulates how working back-
know which books are available). vision led them to create automatic teller ward greatly simplifies idealized design. If
machines that allowed customers to do the 64 players enter a tennis tournament, how
2. It transforms the concept of feasibility work rather than the tellers. In turn, this many matches must be played to determine
The principal obstruction to what we want led to online banking, where customers do the winner? This is not hard to determine.
most is ourselves. The great American not even have to go to the bank to manage There will be 32 matches in the first round,
philosopher Pogo recognized this in his clas- their accounts. The obstruction bankers then 16, 8, 4, 2, and 1, successively. Added
sic observation that “We have met the enemy, thought they faced – how to find and pay together, these equal 63 matches. However,
and he is us.” Our tendency, however, when all those tellers – disappeared when they if we start at the end and ask “How many
we stand where we are and look toward what realized that banks could operate just as losers would there have to be?” the answer
we want, is to see all kinds of obstructions well with a decreasing number of tellers. is obviously 63, and no arithmetic is
imposed from without.When we change our Although some customers complained required. The advantage of working back-
point of view and look backward at where about this change, many more were ward is even more apparent if we start with
we are from where we want to be, in many pleased at not having to stand in line wait- a number of players that is not a power of
cases the obstructions disappear. ing to be helped by a human being. 2, say 57. The arithmetic now becomes

R E U N I O N 2 O O 7 M AY 31
This year is a milestone for you — a reunion year for you and your classmates.
Milestone years include 1952, 1957, 1962, 1967, 1972, 1977, 1982, 1987, 1992, 1997, and 2002.
(Full-time MBA, Part-time MBA, EMBAs, GEMBAs or MMPAs, you’re all included!)

You’re invited to a special celebration on Thursday, May 31, 2007 at the Joseph L. Rotman School of Management.
Cocktails followed by a Class Dinner.
$135 per person.

Invitation will follow. Hope to see you in May!

For more information, including how to register or how to get involved with your class, please contact Michelle Zathureczky, manager volunteers and
reunion coordinator, at michelle.zathureczky@rotman.utoronto.ca or 416.946.3665. Or visit our website at www.rotman.utoronto.ca/alumni/reunion.

S AV E T H E D A T E ! S T AY C O N N E C T E D !

58 • Rotman Magazine Winter 2007


Figure One

complicated because some players must be and its solution. For example, consider Creativity flows from this process.
exempted from the first round to make the the following puzzle that most of us were
number of players left after that round a confronted with as youngsters (see 5. It facilitates implementation
power of 2. If we work backward, however, Figure One.) A major reason most plans are not fully
it is apparent that there must be 56 losers; Once presented with the above, you implemented is that those people responsible
hence this number of matches. are asked to place a pen or pencil on one for implementing it have no sense of owner-
of the dots and, without lifting the pen or ship of it. This leads to resentment and
4. It enhances creativity pencil from the paper, draw four straight subversion of its implementation. Idealized
Human creativity is as old as humankind, lines that cover all nine dots. This cannot design, however, requires the participation of
but it was not very long ago that we be done unless you deny an assumption of everyone who will be affected by it. There-
began to understand what it is. We which you may not be conscious: that you fore, ownership of the resulting plan is widely
believe that it is a three-step process. cannot draw the lines outside the bound- spread among those who must implement it.
First, it requires that we identify a self- aries of the square formed by the nine This avoids resistance and subversion. Imple-
imposed constraint, an assumption that dots. If you are not told that you can draw mentation of a design and plan based on it is
we make consciously or unconsciously outside the boundaries, however, you must usually carried out enthusiastically by those
that limits the number of alternatives we take it that you can. And when this who had a hand in preparing it.
consider. Second, we must deny or elim- assumption is put to rest, the solution is In the real world, some of the gaps
inate that assumption as too limiting. relatively easy. between idealized design and today’s reality
Third, we must then explore the conse- Furthermore, other possible solutions can be filled, and some cannot. Without
quences of this denial. exist when all assumptions are ignored. If idealized design, however, most projects
These steps are conspicuous in solv- you fold the paper a certain way, the nine that seem impossible today will not be real-
ing a puzzle (because a puzzle is a dots can be covered with one line using a ized tomorrow.
problem we cannot solve if we make an felt-tip pen. An eight-year-old watching
incorrect assumption). When the solu- adults trying to solve this puzzle asked why Russell Ackoff is the Anheuser-Busch Professor Emeritus of
Management Science at the Wharton School, University of
tion to a puzzle we have not been able to they did not get a “great big fat pen that Pennsylvania. This is a partial excerpt from his latest book,
solve is revealed to us, we want to kick covered all the dots and just go blop.” No Idealized Design: Creating an Organization’s Future (Wharton
ourselves because we realize that we constraints were imposed on the size of School Publishing, 2006), co-authored with Jason Magidson
and Herbert Addison.
were the obstruction between the puzzle the pen used.

Rotman Magazine Winter 2007 • 59


ENTERPRISE 2.0:
The Dawn of
Emergent Collaboration

60 • Rotman Magazine Winter 2007


‘Enterprise 2.0’ technologies have the potential to usher in a new
era by making both the practices of knowledge work and its
outputs more visible within an organization.
By Andrew McAfee
Andrew McAfee

Most of the information technologies that happy with the channels and platforms Indeed, it’s probably safe to say that
knowledge workers currently use for com- available to them. Davenport found that within most companies, most knowledge
munication fall into two categories. The while all knowledge workers surveyed used work practices and output are invisible to
first comprises channels – such as e-mail and e-mail, 26 per cent felt that it was overused most people. The good news is that new
person-to-person instant messaging – in their organizations, 21 per cent felt over- platforms have appeared that focus not on
where digital information can be created whelmed by it, and 15 per cent felt that it capturing knowledge itself, but rather on the
and distributed by anyone. With channels, actually diminished their productivity. And practices and output of knowledge workers.
the degree of commonality of the informa- in a survey by Forrester Research, only
tion is low. For instance, even if everyone’s 44 per cent of respondents agreed that it Enterprise 2.0’s Blank ‘SLATES’
e-mail sits on the same server, it’s only was easy to find what they were looking for New digital platforms for generating, shar-
viewable by the few people who are part of on their intranet. ing and refining information are already
the thread. A second, more fundamental problem popular on the Internet, where they’re col-
The second category includes platforms is that current technologies for knowledge lectively labeled ‘Web 2.0’ technologies. I
like intranets, corporate Web sites and workers aren’t doing a good job of captur- use the term ‘Enterprise 2.0’ to focus only
information portals.These are, in a way, the ing their knowledge. As Davenport puts it, on those platforms that companies can buy
opposite of channels in that their content is “The dream that knowledge itself – or build in order to make visible the practices
generated, or at least approved, by a small unstructured, textual knowledge – could and outputs of their knowledge workers.The
group, but then is widely visible – produc- be easily captured, shared, and applied to acronym ‘SLATES’ indicates the six compo-
tion is centralized and commonality is high. knowledge work has not been fully real- nents of Enterprise 2.0 technologies:
Knowledge management (‘KM’) sys- ized. Progress is being made, but it’s taken Search. For any information platform
tems have tried to have it both ways. They much longer than anyone expected.” to be valuable, its users must be able to find
have sought to elicit tacit knowledge, best In the practice of doing their jobs, what they are looking for. Intranet page lay-
practices, and relevant experience from knowledge workers use channels all the outs and navigation aids can help with this,
people throughout a company and to put time and frequently visit both internal and but users are increasingly bypassing these in
this information in a widely available data- external platforms (intranet and Internet). favor of keyword searches. It might seem
base. It seems appropriate now, however, to The channels, however, can’t be accessed or that orderly intranets maintained by a pro-
refer to KM systems in the past tense: they searched by anyone else, and visits to plat- fessional staff would be easier to search
didn’t even show up in a recently published forms leave no traces of the user. than the huge, dynamic, uncoordinated
survey of the media used by knowledge Furthermore, only a small percentage of Internet, but this is not the case. In the For-
workers.This survey, conducted by knowl- most people’s output winds up on a com- rester survey, less than half of respondents
edge researcher Thomas Davenport, mon platform. Thus, the channels and reported that it was easy for them to find
shows that channels are used more than platforms in use aren’t much good at pro- what they were looking for on their
platforms, and this is to be expected. viding answers to such questions as, ‘What intranets.A 2005 study by the Pew Internet
Knowledge workers are paid to produce, is the right way to approach this analysis? & American Life Project, on the other
not to browse their intranet, so it makes Does a template exist for it? Who’s working hand, found that 87 per cent of Internet
sense for them to heavily use the tools that on a similar problem right now? When our searchers report having successful search
let them generate information. Brazilian operation reorganized last year, experiences most of the time. The second
So what’s wrong with the status quo? who were the key people? What are the hot element in the SLATES infrastructure helps
One problem is that many users aren’t topics in our R&D department these days?’ explain this surprising difference.

Rotman Magazine Winter 2007 • 61


Links. Google made a huge leap forward Web aggregate large amounts of content, click the ‘stumble’ button.They’re taken to
in Internet search quality by taking advan- then outsource the work of categorization a Web site on that topic. If they like it, they
tage of the information contained in links to their users by letting them attach ‘tags’ – click a ‘thumbs-up’ button on the toolbar; if
between Web pages. Links are an excellent simple, one-word descriptions. These sites not, they click a ‘thumbsdown’ button.
guide to what’s important and provide – such as Flickr for photos, Technorati They then ‘stumble’ on to another site.
structure to online content. In this struc- for blogs and del.icio.us for Web site Over time, StumbleUpon matches prefer-
ture, the ‘best’ pages are the ones that are bookmarks – don’t try to impose an up- ences to send users only to sites they’ll like.
most-frequently linked to. Search technol-
ogy like Google’s works best when there’s a
dense link structure that changes over time
In addition to building folksonomies,
and reflects the opinions of many people.
This is the case on the Internet, but not on
tags provide a way to keep track of the
most of today’s intranets, where links are
made only by the relatively small internal
platforms visited by knowledge workers.
Web development group. In order for this front categorization scheme; they instead It’s surprising how quickly, and how well,
to change within companies, many people let one emerge over time as a result of this simple system works. It reasons by
have to be given the ability to build links. users’ actions. The categorization system extension, and hones in on user tastes with
The most straightforward way to accom- that emerges from tagging is called a ‘folk- great speed.
plish this is to let the intranet be built by a sonomy’ (a categorization system developed Signals. Even with powerful tools to
large group rather than a small one. over time by ‘folks’). search and categorize platform content, a
Authoring. Internet blogs and A folksonomy is in some ways the user can easily feel overwhelmed. New
Wikipedia have shown that many people opposite of a taxonomy, which is an up-front content is added so often that it can become
have a desire to author – to write for a categorization scheme developed by an a full-time job just to check for updates on
broad audience. As wiki inventor Ward expert. Folksonomies have some disadvan- all sites of interest.The final element of the
Cunningham recalls, “I wanted to stroke tages relative to taxonomies: they’re not SLATES infrastructure is technology to sig-
that story-telling nature in all of us. I usually multilevel, for one thing, and they nal users when new content of interest
wanted people who wouldn’t normally can be redundant. Their main advantage is appears. Signals can come as e-mail alerts,
author to find it comfortable authoring, so that they reflect the information structures but these contribute to overloaded inboxes
that there stood a chance of us discovering and relationships that people actually use, and may be treated like spam.A novel tech-
the structure of what they had to say.” Cun- instead of the ones that were planned for nology called RSS (which usually refers to
ningham’s point is not that there are a lot of them in advance. In addition to building ‘really simple syndication’) provides
undiscovered Shakespeares out there, folksonomies, tags provide a way to keep another solution. Authors such as bloggers
but that most people have something to track of the platforms visited by knowledge use RSS to generate a short notice each
contribute, whether it’s knowledge, workers. Imagine a tool like del.icio.us time they add new content – usually con-
insight, experience, a comment, a fact, an deployed within an enterprise: employees sisting of a headline that is also a link back
edit, a link, and so on, and authorship is a could use it to keep track of useful intranet to the full content. Software for users
way to elicit these contributions. Blogs let and Internet pages they’ve consulted, and called ‘aggregators’ periodically queries
people author individually, and wikis enable to assign tags to these pages as reminders of sites of interest for new notices, downloads
group authorship. Content on blogs is content. They also could see which other them, puts them in order and displays their
cumulative (individual posts and responses employees are using the same tags, and headlines. With RSS, users no longer have
to them accumulate over time), while on what sites they’ve visited. As a result, pat- to surf constantly to check for changes;
wikis it’s iterative (people undo and redo terns and processes in knowledge work they instead simply consult their aggrega-
each other’s work). When authoring tools would become more visible. tors, click on headlines of interest and are
are deployed and used within a company, Extensions. Moderately ‘smart’ com- taken to the new content.
the intranet platform shifts from being the puters take tagging one step further by
creation of a few to being the constantly automating some of the work of categoriza- Enterprise 2.0 Ground Rules
updated, interlinked work of many. Evi- tion and pattern matching. They use As technologists build Enterprise 2.0 tech-
dence from Wikipedia shows that group algorithms to say to users, “If you liked nologies that incorporate the SLATES
authorship can lead to convergent, high- that, then by extension you’ll like this.” components, they seem to be following
quality content. Amazon’s recommendations were an two intelligent ground rules. First, they’re
Tags. The Forrester survey revealed early example of the use of extensions on making sure their offerings are easy to use.
that after better searching mechanisms, the Web.To see another example, download With current tools, authoring, linking and
what experienced users wanted most from the browser toolbar available from stum- tagging can all be done with nothing more
their companies’ intranets was better cate- bleupon.com. With it, users simply than a Web browser, a few clicks, and some
gorization of content. Some sites on the select a topic they’re interested in, then typing. No HTML skills are required. It

62 • Rotman Magazine Winter 2007


seems reasonable to assume that anyone tags knit it together; and search, exten- give the people in my organization all the
who can compose e-mail and search the Web sions, tags and signals make emergent tools they need to interact.” Argyris found,
can use all of the technologies described in structures and patterns in the content visi- though, that most people’s theory-in-use is
this article with little or no training. ble, and help people stay on top of it all. driven by (among other things) the need to
Second, the technologists of Enter- Enterprise 2.0 technologies are sub- remain in unilateral control and the desire
prise 2.0 are trying hard not to impose on ject to network effects; as more people to suppress negative feelings.When the two
users any preconceived notions about how engage in authoring, linking and tagging, theories come into conflict, the theory-in-
work should proceed or how output should the emergent structure becomes increas- use usually wins, which helps explain why
be categorized or structured. Instead, ingly fine-grained. This suggests an so many corporate empowerment initia-
they’re building tools that let these aspects intriguing possibility: it has historically tives fail, or at least disappoint.
of knowledge work emerge. been the case that as organizations grow, it It’s easy to see how these insights apply
This is a profound shift. Most current becomes more and more difficult for peo- to Enterprise 2.0 technologies.These tools
platforms, such as knowledge management ple within them to find a particular reduce management’s ability to exert uni-
systems, information portals, intranets and information resource – a person, a fact, a lateral control and will be used to express
workflow applications, are highly struc- piece of knowledge or expertise. Enter- some level of negativity. Do a company’s
tured from the start, and users have little prise 2.0 technologies, however, can be a leaders really want this to happen? Will
opportunity to influence the structure. force in the opposite direction. They can they be able to resist the temptation to
Wiki inventor Cunningham highlights an make large organizations in some ways silence dissent? What will happen, for
important shortcoming of this approach: more searchable, analyzable and navigable example, the first time someone points out
“For questions like,‘What’s going on in the than smaller ones, and make it easier for in their blog that an important project is
project?’, we could design a database. But people to find precisely what they’re look- behind schedule or that corners are being
whatever fields we put in the database ing for. The new technologies certainly cut? What will happen if the content on the
would turn out to be what’s not important don’t overcome all the dysfunctions of new platform is uncomfortable for power-
about what’s going on in the project, corporate scale, but they might be able to ful people within a company?
because what’s important about the project address some of them. Because no one’s in charge of the Inter-
is the stuff you don’t anticipate.” net, no one can shut it down when it veers in
Wikis and blogs start as blank pages, Challenges for Managers directions they find uncomfortable. But a
and folksonomies begin when users start Even if managers and technologists do company’s Enterprise 2.0 technologies can be
entering tags. After using them for a while, everything correctly when initiating shut down. They also can be influenced by
the degree of structure and lack of flexibil- Enterprise 2.0 technologies within their people in authority – bosses can exert all
ity in other platforms can begin to seem companies, two potential threats remain. kinds of subtle and not-so-subtle leverage
strange. It also starts to seem odd that com- The first is that busy knowledge workers over online content. This means that leaders
panies and technologists ever proposed won’t use the new technologies, despite have to play a delicate role, and one that
highly structured KM systems to capture training and prodding. Most people who changes over time, if they want Enterprise 2.0
highly unstructured knowledge work. use the Internet today aren’t bloggers, technologies to succeed. They have to at first
Their different approaches to struc- wikipedians or taggers. They don’t help encourage and stimulate use of the new tools,
ture, however, do not mean that produce the platform – they just use it.Will and then refrain from intervening too often or
Enterprise 2.0 technologies are incompat- the situation be any different on company with too heavy a hand. If they fail at either of
ible with older ones.They can be added to intranets? It’s simply too soon to tell. these roles – if they’re too light at first or too
the channels and platforms already in The second threat is that knowledge heavy later on – their company is liable to
place. In addition, existing channels and workers might use Enterprise 2.0 tech- wind up with only a few online newsletters
platforms can be enhanced by adding dis- nologies exactly as intended, but this may and whiteboards, used for prosaic purposes.
crete SLATES components. Many e-mail lead to unintended outcomes. Intranets Enterprise 2.0 technologies have the
clients, for example, now have the ability today reflect one viewpoint – that of man- potential to usher in a new era by making
to receive RSS signals. In other words, agement – and are not platforms for dissent both the practices of knowledge work and its
technologies that let users build structure or debate. After blogs, wikis and other outputs more visible. Because of the chal-
over time can coexist peacefully with voice-giving technologies appear, this will lenges these technologies bring with them,
those that define it up front. change. However, the question remains: there will be significant differences in com-
The technologies discussed here have will the change be welcomed? panies’ abilities to exploit them. Because of
the potential to let an intranet become Management scholar Chris Argyris the opportunities the technologies bring,
what the Internet already is: an online plat- has noted a distinction between people’s these differences will matter a great deal.
form with a constantly changing structure espoused theories and their theories-in-use. An
built by distributed, autonomous and espoused theory, for example, might be, Andrew McAfee is an associate professor with the Technology
and Operations Management Unit at Harvard Business School.
largely self-interested peers. On this plat- “I’m sincerely interested in learning, This article originally appeared in the MIT Sloan Management
form, authoring creates content; links and improvement and empowerment. I want to Review. Read his blog at http://blog.hbs.edu/faculty/amcafee

Rotman Magazine Winter 2007 • 63


BANK REFORM
IN CHINA:
What it means
for the world by Donald Brean

“Let the dragon sleep,” Napoleon famously remarked


on China in 1803, “for when she awakes, she will shake
the world.” By all accounts, China is now wide awake,
and economic tremors are being felt around the globe.

A combination of sheer size and spectacular In this article, I look at what continued
growth has China on course to become the weakness and inefficiency in banking could
world’s largest economy by 2020, and it is mean for the sustainability of China’s eco-
already the world’s second-largest recipient nomic modernization.
of foreign direct investment, behind the
U.S. With foreign exchange reserves An Unbalanced Financial System
approaching one trillion dollars, China’s The most striking feature of China’s financial
ability and willingness to accumulate a system is the sheer dominance of banking.The
‘paper fortune’ has allowed industrial problem is not that China’s banking is precar-
nations, including Canada, to enjoy non- ious, but rather that it is inefficient and
inflationary consumption. U.S. interest incapable of doing all that could reasonably be
rates and interest rates related to U.S. expected of banking in this emerging indus-
rates, such as Canada’s, have been lower trial society. It will take some time to rid the
than they otherwise would have been over system of fundamental inefficiencies, but the
the past several years because China is a reform process is well underway. Meanwhile,
major provider of credit. It is a curiosity of however, China suffers capital misallocation,
international finance that a country with a poor risk management, and weak linkages in
per capita GDP of $1,500 lends a trillion macro-monetary mechanisms. Addressing the
dollars to the rest of the world. shortcomings could create enormous value
For most of the modern reform period for its economy: the McKinsey Global
that now approaches 30 years, China has Institute estimates that reforming China’s
moved steadily and successfully toward financial system could boost GDP by more
functioning markets – markets for agricul- than $320 billion annually.
ture, for goods for domestic consumption Figure One illustrates this point by
and for export, for labour, and for capital. means of comparison of the proportional
However, this deliberate move to markets shares of four major components in the
has not been accompanied by similarly financial system in China and in 12 other
serious reform of its banking system, countries. Based on 2005 statistics, 72 per
which has continued as a state-run plan- cent of finance in China – industrial plus
financing mechanism with a bias toward consumer finance – is bank lending. No
state-owned enterprise. other country is even close to this figure.

Rotman Magazine Winter 2007 • 65


Figure Two highlights the fact that the
Figure One: Bank Sector Dominates China’s Financial System banking sector in China is large relative to
(Financial stock components, percent 2005)
the size of its economy, disproportionately
so compared to other countries. Bank assets
15 19
22 25 are 160 per cent the size of China’s GDP. In
30 27
33 35 34
8 40 Canada, for example, the corresponding
12 43
5 7 55
4 9 60 figure is 75 per cent.
1
11 There are two primary reasons for the
21 29
21 34
35
overwhelming size of China’s banking sector.
11 30 13 19 35 First is the huge flow of savings from individ-
11 8 11 11
14 uals that end up as bank deposits; the other is
1
72 KEY the even-larger volume of corporate deposits.
11 12
46 45 43 Equity In the absence of a developed system of collat-
37 36 35 33 33 Corporate Debt
32 30 eral, Chinese corporations are often obliged
21 19 Government Debt
to keep cash on deposit as partial collateral for
Bank Lending
loans, which in turn raises the deposits-to-
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loans ratio and reduces the efficiency of bank


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on

lending for industrial investment.


Ph

Si
So

Source: McKinsey Global Institute, Global Financial Stock Database, 2006 Some corporations also have excess capi-
tal that they keep in bank deposits because they
Since banking is proportionally big in China, The United States represents the other cannot find attractive investment opportuni-
the other components are accordingly small. end of the spectrum, although not neces- ties, and because the alternative – paying out
In China's overall financial picture, gov- sarily a financial structure that China profits to shareholders – is not an established
ernment debt is proportionately much smaller aspires to. The U.S., of course, typifies a practice, especially as many corporations are
than in most other countries. Government financial system that has depth, liquidity, state-owned. In addition, some companies hold
debt in advanced financial systems is useful as effective regulation and technical sophisti- high levels of bank deposits because of lack of
a source of liquidity and as the generator of cation.Whereas the U.S. economy is about commercial paper and other debt securities to
“reference” interest rates used to price bonds. 50 per cent larger than China’s (12 trillion fund their liquidity needs, and because pay-
Non-bank corporate debt (bonds) in dollars versus eight trillion), total finance ment system inefficiencies prevent large
China is also relatively small. China’s bond in the U.S. is ten times total finance in companies with many branches from optimiz-
market, from investment bankers to bond China. Meanwhile bank lending in America ing cash management nationally.
rating agencies and trading institutions, is is only 19 per cent of finance. Equity The most significant implication of the
substantially undeveloped. Likewise, the 15 finance plays a substantially larger role in dominance of the banking sector in China’s
per cent share in the form of equity is small the US as it does in most English-speaking financial structure is that other modes of
by international standards. nations. finance are undeveloped, including its bond
market and stock or equities market.The eco-
Figure Two: Bank System Size, Select Countries
nomic attraction of securities markets is that
(Total bank assets in proportion to GDP, 2005) they are more flexible and more financially
160
innovative than bank lending.To the extent that
the function of finance is to facilitate the flow
145
of funds from savers to investors while allocat-
120 119 ing risk and putting a ‘price’ on risk across the
107 full spectrum, liquid securities markets have
97 distinct operational advantages over banks.
80 78 77 75 75
However, disintermediation – from
68 banking to securities markets – is a complex
55
51 48 47 process of institution-building along with the
35 32
development of laws and regulation. It
would seem that in financial-sector reform,
China, for now, is directing most effort to
bank reform, with the development of secu-
na

M an

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uth lic

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ilip a

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nd

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rities markets playing a lesser role.


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Unfortunately, such priorities have negative


uth

Ph
Si

ch

So
So

implications for incentives to develop the


C

Source: McKinsey Global Institute, Global Financial Stock Database, 2006


sorts of financial instruments and markets

66 • Rotman Magazine Winter 2007


that are central to risk management, includ- Goldsmith’s unsettling finding is that, in gram, China is engaged in a broad campaign
ing futures and forwards, options and most cases, economic transition from heavy- of financial institution-building.
derivatives as well securitization and other handed statism to a decentralized market A few uniquely-Chinese factors may
forms of financial engineering. This in turn economy and a burst of extraordinary explain economic gains achieved without
has implications for the cost of capital for growth sooner or later comes crashing down sophisticated finance. First is the ‘population
industry and hence for economic growth. in a financial crisis. Weak financial institu- dividend’ that China seems to be enjoying.
The fact that China’s financial structure tions, inexperienced central banking, People born in the 1950s and 1960s are the
is currently dominated by banking has impor- inefficient intermediation, volatility in mon- backbone of the Chinese economy: it has an
tant implications for whether its financial etary aggregates, lack of confidence, and the exceptionally high ratio of young working
system is likely to continue as such, and even- spectre of capital flight combine to under- people to retirees. The financial implication
tually emerge into a bank-centric model of mine and destroy hard-won economic gains. is an extraordinarily-high national rate of
industrial finance of the sort typically associ- Inflation, soaring interest rates, mounting ‘deposit’ or savings that flow directly into
ated with Germany or Japan. Bank-centric bad loans, internal runs on banks and exter- the banking system: China’s savings rate is
close to 45 per cent of income.
Bank-centric finance contrasts with the Second, the opening up of China to
international trade and foreign investment
so-called ‘Anglo-American model,’ with has attracted huge inflows of foreign direct
investment that augment internally gener-
its foundation in securities markets and a ated investment. On average over recent
years 60 per cent of foreign direct invest-
lesser role for banks. ment from OECD nations to non-OECD
nations flows to China. Multinational corpo-
finance is in contrast to the so-called ‘Anglo- nal runs on the currency that torpedo the rations generally have well-honed financial
American’ model, with its foundation in exchange rate – these make up a destructive relations with the global banking system and
securities markets and a lesser role for banks. turbulence that is the dark side of economic hence the production efficiency of foreign
China seems to be flirting with an approach growth built on a shaky financial structure. investment in China is unlikely to be com-
that is closer to the bank-centric system. China may yet defy Goldsmith’s Law. promised by financial weakness in China.
The boom-bust cycles have diminished Finally, China’s monetary policy seems
Goldsmith’s Law amplitude. Inflation is low. The currency is to shrewdly compensate for structural prob-
A disturbing recurrence in economic devel- strong. Exports are booming.Tax revenue is lems in finance. The high savings ratio
opment dubbed ‘Goldsmith’s Law’ relates rising. Meanwhile, as far as banking itself is mentioned above belies a disappointingly low
financial fragility and economic instability. concerned, albeit relatively late in the pro- rate of transference of savings to investment

A Backgrounder on Banking in China


Prior to opening up to the rest of the world, the early stage of reform the specialized products (grain, oil, cotton, meat, sugar,
China’s banking system consisted of only banks were allowed very little scope to tobacco and wool) and loans for enterprises
one financial institution: the People’s extend commercial or consumer credit. involved in processing. It takes deposits
Bank of China (PBC). What eventually The second stage in developing a mar- from publicly-owned entities and manages
came to be called the ‘first stage’ of bank ket-oriented banking system in China their international transactions.
reform took root in the early 1980s with the began in 1994, when the big-four banks 2. China Development Bank (CDB)
creation of a two-tier system. The PBC were relieved of their role in ‘policy lend- took over the policy lending role of the
became the central bank; the Industrial ing’ that characterized the banking regime CCB and, to a lesser extent, the ICBC
and Commercial Bank of China in the era of comprehensive central plan- (inasmuch as the latter was never a major
(ICBC) was carved out of the PBC and, ning. That function was assigned to three state-directed lender).The China Develop-
together with the China Construction ‘policy banks’ under the direct jurisdiction ment Bank is responsible for financing
Bank (CCB), Bank of China (BOC) and of the State Council: public-sector investment in support of
the Agricultural Bank of China (ABC), 1. Agricultural Development Bank national economic development and strate-
the four so-called specialized banks became of China (ADBC) took over the policy gic structural readjustment.
the second tier of the system.The ‘big four’ lending role of the ABC. ADBC provides 3. Export-Import Bank of China
banks were 100 per cent state-owned as, for loans for the purchase, transport, market- (EXIM) took over the policy-lending role
all practical purposes, they are to this day. In ing and reserves of selected agricultural from the BOC, especially the trade financing
Continued on page 68
Rotman Magazine Winter 2007 • 67
indicating that the banking system in China is financial sector reform will enable China to cient intermediation; and massive inflows of
woefully inept in its intermediation function. rely more on monetary policy, and with foreign direct investment.
At the same time, China’s money “velocity” – greater effect, for stabilization. Bank reform presents a unique and
a standard measure of the efficiency of 3. Increased capacity to manage the internal- crucial challenge within China’s ambitious
money circulation, for instance from savings external balance involving trade surpluses and economic transition from central planning
to investment – is exceptionally low. If veloc- capital flows. While these are appropriately a to a market economy. Banking is much
ity is low and pools of cash are stagnating, the later-stage concerns in comprehensive eco- more institutionally dependent than any
compensating monetary policy is to inject nomic reform, there is increasing urgency for comparable facet of reform. In this respect
more cash into the system. In fact in China China to relax its constraints on the Capital we have seen that China has been cautious
“M2” (circulating cash plus bank demand Account and the currency. Efficiently func- and flexible in the process of developing
deposits) is 150 percent of GDP which is tioning financial institutions are crucial. laws, regulations, interventions and in set-
high by international standards (in the US 4. Relief of pressure on financial institutions ting the speed of implementation.
M2 is 70 percent of GDP). to carry out economic functions that are more The international financial community is
Is a debilitating financial crisis in China appropriately done through the fiscal system. fond of citing the collapse of communism as
a serious risk? The answer is that China has Financial institutions in China – especially a significant turning point in the evolution of
both the policy insight and the wherewithal banks – face almost confiscatory taxation. today’s global economy. Perhaps, but that
to act early and forcefully to any threat of Especially in the intermediate stages of seriously confuses the China case, as China is
financial instability. In global finance, a tril- reform, banks were under substantial pres- still very much under one-party rule. A mar-
lion dollars of foreign exchange buys a lot sure to support inefficient state-owned ket system is not a political system.
of strength and credibility. enterprise, since dismantling them would Nevertheless, the implications of rising living
have caused social pain and dislocation. standards within an increasingly market-ori-
Implications of Bank Reform ented economy are overwhelmingly
Continued balanced growth for China will Finance experts want to believe that a prop- favourable to the world’s long-term interest
require an increasingly-sound financial sys- erly-functioning financial system is crucial to in the development of a more pluralistic
tem. The most important consequences of balanced, market-driven growth. However, political system in China. As was true in the
its forthcoming banking and financial sec- we know that for several years now, China case of Taiwan from the 1950s onward, a rap-
tor reform are: has been able to generate substantial eco- idly modernizing economy is likely to
1. Improved intermediation between sav- nomic growth despite its under-developed (if generate growing pressure for political
ings and investment – the asset allocation not downright dysfunctional) system. The change, away for one-part authoritarian rule.
issue. Indeed, the fundamental function of reasons for this are fascinating, but they are The world will watch with great
finance and financial institutions is to chan- neither permanent not recurring: for exam- attention.
nel savings to their most efficient use. ple, the ‘demographic dividend’, with its low
Donald Brean is a professor of Finance and Business Eco-
2. Enhanced effectiveness of monetary ratio of workers-to-retirees; China’s extraor-
nomics at the Rotman School.This is an excerpt of a paper
policy that operates through interest rates. dinarily high rate of savings; shrewd prepared for the Asia Pacific Foundation. For a copy of the
This crucial macroeconomic dimension of monetary policy that compensated for ineffi- complete paper, e-mail christen@rotman.utoronto.ca

Continued from page 67


function, inter-bank transactions. EXIM profitability, risk recognition, liquidity and to accelerate the reforms. First, the govern-
provides guarantees and concessional loans responsibility for own profit and loss. ment issued RMB 270 billion (US$33
for firms involved in international trade Despite the law, government intervention – billion) in special government bonds to
and investment. such as tight restrictions on banks’ deposit recapitalize the big-four state-owned com-
China’s policy banks fund themselves and lending rates of interest – continued to mercial banks. Second, new regulations
primarily through bond issues. They accept constrain the fledgling commercial banks’ abolished the credit quota policy (by which
few deposits, and those that they do accept discretion with regard to business decisions. the commercial banks had quotas imposed
are exclusively from state-owned institu- While ostensibly pushing China’s on them concerning to whom and how
tions.The combined assets of the three policy banking system to be market-driven and much they could lend) and, instead, allowed
banks have grown rapidly, and now comprise market-reliant, the second stage of the banks to adopt asset-liability management.
about 10 per cent of total banking lending, reform process continued to be bureaucrat- Finally, in a dramatic and significant step
which bears evidence of the continued pres- ically managed from the top. At this point, that marks the transition from the second to
ence of state-directed commercial finance. a proper banking regulatory agency had not the third stage of banking reform, the central
In 1995, the Commercial Bank Law was been established. In 1997, the Central government transferred RMB 1.4 trillion
promulgated, recognizing the status of state- Committee of the Communist Party (US$ 170 billion) in non-performing loans
owned specialized banks as commercial banks and the State Council held the first from the books of the state-owned commer-
operating according to market-based bank- National Financial Operations Conference cial banks to new entities dubbed ‘asset
ing principles of capital-adequacy, prudence, and introduced several important measures management companies’.

68 • Rotman Magazine Winter 2007


Faculty Focus: Keith Ambachtsheer
Why We Need a
Pension Revolution
There is now a broad consensus that the workplace pension systems in most of the
developed world are sick, and that they will require strong medicine if they are to
generate adequate pensions for workers in the years ahead.
Leading spokespersons of the business, So we should not be surprised that contexts, with current generations of tax-
labour, government, and professional com- when financial surpluses appear on DB payers and public servants quietly
munities in North America, Europe, and plan balance sheets, there are fights about skimming off surpluses at the expense of
the Pacific Rim have all been voicing simi- who ‘owns’ them. In corporate contexts, future generations. A good example was
lar concerns about workplace pension the surpluses of the 1990s led to contri- the easy decision by the teachers’ federa-
coverage, adequacy, and security in their bution holidays decided unilaterally by tion and the provincial government of
respective countries.The proportion of the employers, and to surplus ownership dis- Ontario to ‘spend’ the teachers’ pension
workforce covered by pension plans is too putes between plan members and plan surpluses of the 1990s on better pen-
low; many pension arrangements will not corporations, with regulators and even sions and lower contributions. At the end
produce adequate pensions; corporate the courts having to step in to arbitrate of 2005, despite relatively good invest-
employers are closing their traditional these tiffs. When surpluses turn to ment results, the plan reported a material
defined benefit (DB) plans; and many of the deficits in times of financial distress, plan $32B balance sheet deficit. So what to do
DB plans that remain now have insufficient members duke it out with corporate now? Again, game theory predicts the out-
assets to cover their liabilities. bond and shareholders about how the come: raise the contribution rate from 16
financial pain should be allocated. The per cent of pay to 22 per cent of pay,
The Trouble with DB Plans recent United Airlines saga offered a while leaving the final earnings-based,
Just as there is a consensus that workplace classic example of this kind of financial fully-indexed pension formula in tact. So,
pension systems around the world are sick, fist fight. Since operating under Chapter having benefited nicely from the earlier
so are there strong views on what the cure
is. Some commentators argue the answer
lies in reversing the decline in the use of DB
Having benefited nicely from the earlier
plans, where pensions are based on a specific
pension crediting formula and years of serv-
surpluses, today’s pensioners now smartly
ice. DB plan enthusiasts point out that
widespread adoption of this form of pension
load the current financial shortfall on the
arrangement would cure the workplace pen-
sion systems’ coverage, adequacy, and
backs of younger and future teachers
security ills in one fell swoop.While I agree
with the consensus that the globe’s work-
and taxpayers.
place pension systems are seriously ill, I
disagree that the cure lies in placing a DB 11 since late 2002, there have been a surpluses, today’s pensioners and older
chicken in every worker’s pension pot.Why? number of pensions-related law suits and workers now smartly load the current
Because workplace-based DB plans suffer legal actions involving the UAL unions, financial shortfall on the backs of younger
from a fatal flaw.These plans socialize risk- the corporation and its management, the and future teachers and taxpayers.
bearing without clarity about how and by Pension Benefits Guaranty Corpora- Beneath all these game theory-based
whom the very material risks embedded in tion (PBGC), and the U.S. Department actions lies the common thread that col-
DB arrangements are borne. Game-theo- of Labour. lective risk-bearing arrangements such as
rist John Nash taught us decades ago that The adversarial ‘win-lose’ element DB plans do not eliminate risk. They
such fuzzy ‘contracts’ will eventually dete- embedded in DB plan architecture gener- merely offer opportunities to shift it from
riorate into adversarial win-lose games. ally surfaces more subtly in public sector the strong to the weak.

Rotman Magazine Winter 2007 • 69


DC Plans Are Not the Answer Either TOPS addresses the human foibles Drucker’s vision of the ideal workplace
If not DB chickens, what should we stuff in problems through automatically enrolling pension system set out in his 1976 book
the pension pots of workers around the workers into pension plans, employing The Unseen Revolution: How Pension Fund
world? There are strongly-held views that ‘auto-pilot’ mechanisms to dynamically Socialism Came To America. Drucker astutely
defined contribution (DC) plans are the adjust individual contribution rates over recognized that if pension funds were mere
answer. Here employers and workers make time, tying the optimal investment policy captives of their plan sponsor or of for-
contributions into employee pension accu- for individual participants to their age, and profit financial intermediaries, they were
mulation accounts, with employees possibly even suggesting deferment of unlikely to play the critically important
typically allocating contributions among a retiring if necessary, all with the goal of role in launching and sustaining the work-
dozen or even more investment options, delivering a target pension within reason- place pension revolution he envisioned.
and withdrawing the accumulated lump able bounds. The point of the ‘auto-pilot’ Instead of being captives, pension delivery
sum upon retirement. It is certainly true mechanisms is that these adjustments to institutions needed to be set up with the
that DC arrangements eliminate most of contribution rates and investment policies sole mandate to create value for plan par-
the DB plan ambiguity about risk-bearing are made automatically over time, without ticipants, and so attain the necessary
and asset ownership. requiring any intervention by TOPS partic- ‘legitimacy’ to be successful.
However, research findings indicate
that the typical DC plan has three serious
flaws of its own. First, behavioural finance
Many workers pay too much for retire-
research confirms that most people are hes-
itant, inconsistent, even irrational planners
ment-related financial services in relation
and decision-makers regarding their own
financial future. Second, informational
to their true economic value.
asymmetry and misaligned interests vis à vis ipants unless they specifically choose to Achieving this mandate has profound
the global for-profit financial services intervene. Similarly, TOPS deals with organizational design implications. Scale is
industry drive a material wedge between longevity risk by including the purchase of one critical element. Without significant
workers and the retirement money they do deferred life-annuities over time as part of scale, pension organizations can neither
accumulate. The result is that many work- the ‘auto-pilot’ investment policy design. achieve the economies required to operate
ers pay too much for retirement-related As the annuity portfolio is priced and man- at low unit costs, nor afford to hire the
financial services in relation to their true aged in accordance with standard insurance expertise required to run the pension
economic value. These excessive fees paid principles, there will be no fist fights over ‘business’ based on sound governance
over a working lifetime are another impor- the ownership of any balance sheet sur- principles and practices. A key success fac-
tant factor why so many workers with DC pluses or deficits. Measured in life-time tor for pension funds is to manage from
plans are under-achieving their pension consumption utility/welfare terms, TOPS- the inside out, rather than being managed
goals. The third DC plan flaw is that these type pension arrangements not only by external agents from the outside in for
arrangements leave plan members bearing outscore traditional DC arrangements, but their own purposes.
the full burden of longevity risk. Surely we their traditional DB counterparts as well. An important implication of this ‘man-
should not expose the many millions of age from the inside out’ imperative is for
retirees around the world to the material Arms-Length, Expert Pension Co-ops expert pension co-ops to operate with
risk of outliving their money. Saying is one thing, doing another. To investment beliefs that are relevant,
improve workplace pension systems research-based and responsive to new
TOPS: The Optimal Pension System around the globe, optimal pension information and insights. Based on
So if broad workforce coverage with either arrangements must not only be designed, observed behaviour, the investment beliefs
traditional DB or DC plans is not the best but also effectively implemented. To of most of the globe’s pension funds still
cure for the world’s workplace pension sys- address the already-noted agency and cannot pass this important test. Instead, the
tem ills, what is? Well, we know that on the informational asymmetry issues embedded beliefs of many funds continue to be based
one hand, any lasting cure must avoid the in many current pension delivery arrange- on historical rules of thumb, anecdotes and
collective risk-bearing traps that eventually ments, TOPS systems must be run by conformity to the conventional wisdom of
turn traditional DB plans into ‘Musical arms-length, expert pension co-ops. Only the day. Not surprisingly, such second-hand
Chairs’ risk-shifting games, or in extreme this type of delivery arrangement has a rea- beliefs suit the financial services industry
cases, multi-stakeholder financial fist fights. sonable chance to overcome the inherent far better than it does pension fund benefi-
On the other hand, the cure must also effec- conflicts and too-high costs many pension ciaries. Expert pension co-ops are
tively deal with the human foibles, agency, plan sponsors and the for-profit financial revolutionaries in the sense that they have
and longevity risk baggage attached to tradi- services industry bring to the table. This thrown off the chains of conventional wis-
tional DC arrangements. Let’s call the lasting arms-length, expert pension co-op con- dom. They have adopted a culture that
cure TOPS:The Optimal Pension System. cept was a critical element of Peter permits them to develop their own invest-

70 • Rotman Magazine Winter 2007


ment and skill beliefs from first principles, another reason for current ‘too little sequent White Paper issued by HM Trea-
and modify these beliefs over time with the TOPS’ condition in most of the developed sury in May 2006 suggests that the key
best and newest available research results. world: a systemic failure to apply integra- Turner recommendations are on their way
tive design thinking to solving pension to becoming government policy.
TOPS Tipping Points problems. It has been sad experience to
If TOPS, with its auto-pilot and expert co- watch some of the finest minds in global A Final Note of Optimism
op features, is such a great idea, why don’t pensiondom earnestly attempt to ‘fix’ DB In conclusion, a final note of optimism.The
TOPS-type pension arrangements exist plans so that these arrangements will winning conditions for a successful global
already? But they do! A good example is become not only manageable and sustain- workplace pension revolution have never
TIAA-CREF, the $350B retirement sys- able, but wildly popular as well. It is hard been more favourable than today.There is a
tem for over three million current and to imagine a more futile exercise. Simi- growing consensus across the globe that
retired U.S. college education and research larly, it has been frustrating listening to, something must be done about pensions.
employees, and in which Peter Drucker and reading pension debates framed in an The Dutch and the Australians have already
himself was an enthusiastic participant for ‘either DB or DC’ context. The ‘neither demonstrated the societal value of broad-
many years. Through worklife-long DB nor DC’ answer to the globe’s pension based workplace pension plan participation.
employer-employee contributions as high ills seems to be a difficult concept for most The British are seriously considering it.
as 18 per cent of pay, millions of TIAA- pension people to grasp. TOPS, the optimal pension system, has
CREF participants have converted
sufficient pension capital into life annuities
to live comfortably the rest of their lives, The beliefs of many funds continue to
decade after decade. Founded through an
Andrew Carnegie grant in 1918, it may be based on historical rules of thumb,
well be the most successful workplace pen-
sion plan of all time. By mandating that all anecdotes and conformity to the conven-
workers participate in a workplace pension
plan, the Dutch and the Australians have tional wisdom of the day.
become highly motivated to build effective
TOPS-type pension arrangements based on Having said that, the British have already been invented and successfully
industry and regional affiliations, and they shown some recent signs of life. A commis- road-tested. Across the globe, it could be
are becoming increasingly successful at it. sion was formed two years ago by HM adopted at the national level, at regional
Having said this, TOPS-type pension Treasury to assess the status of workplace levels, at an industry-by-industry level, or
arrangements are still more the exception pensions in the UK, and to recommend at the individual employer level. What we
than the rule around the world.Why? measures to improve the system. The need now is leadership that will make Peter
Public policy neglect is one reason. Turner Pensions Commission tabled its Drucker’s 30-year old vision of a workplace
Dutch and the Australian politicians have final report and recommendations in pension revolution a reality at last. We
been astute to exploit the benefits of manda- November 2005. Its most important rec- could leave him no finer legacy.
tory participation in fully-funded workplace ommendation by far was to auto-enroll
pension plans. Because of 100 per cent (with an ‘opt-out’ clause) the entire UK Keith Ambachtsheer is director of the Rotman International
Centre for Pension Management and an adjunct professor of
workplace coverage and reasonable pension workforce not already covered by a work- Finance at the Rotman School. This article is adapted from
adequacy, there is no longer a need to place pension plan, in a National Pension the lead-chapter of his new book Pension Revolution: A Solu-
finance and maintain large national Savings Scheme (NPSS) with a minimum tion to the Pensions Crisis (John Wiley & Sons, 2007).
unfunded Pillar #1 pay-go social safety nets. eight per cent contribution rate.The Com-
Also, because everyone has to play, mission estimates that lifetime NPSS
much greater national attention is focused participation, plus the basic Pillar #1 state
on such issues as optimal pension plan pension, would provide the median British
design and implementation. So TOPS-type worker with a 50 per cent income replace-
solutions naturally emerge, stabilizing life- ment rate upon retirement. The NPSS
time consumption patterns across the would adopt many of the TOPS principles
economy, while at the same time creating set out above. For example, the Commis-
a new class of independent, wealth-creat- sion recommends auto-pilot mechanisms
ing, long-horizon investors. North to implement a life-cycle investment policy
Americans have hardly begun to talk about and to convert retirement savings into life
the pros and cons of mandatory, or at least annuities. It also recommends that the
broadly-based ‘auto-enrolment’ workplace NPSS be implemented by one or more
pension strategies. Which brings me to arms-length, expert pension co-ops. A sub-

Rotman Magazine Winter 2007 • 71


Faculty Focus: Eric Kirzner
The Future for Investors

Professor Eric Kirzner talks about the balanced fund of the future,
and why growth doesn’t guarantee returns.

Karen Christensen: “The balanced fund impact on the overall economy in forth- years ago, the opportunities were much
of the future will have more high-yield coming months? scarcer than they are today. Nowadays, you
products and more hedge funds.” Agree can invest in just about anything you want.
or disagree? EK: This is a very interesting investment Emerging markets represent a suitable allo-
issue. We’ve gone through this remarkable cation for investors, though typically for
Eric Kirzner: I agree. It may also have more bull market in commodities – in particular, most, it would be a pretty small percentage
private equity, and some real estate funds. in energy in Canada in the past few years – – I wouldn’t expect to see more than five
The basic paradigm of treasury bills, stocks and it’s made a lot of people a lot of money. per cent for a retail investor, and even that’s
and bonds comprising a portfolio is changing. Unfortunately, in the last few weeks [as at a bit high.There’s no reason why it shouldn’t
We learned something from the 2000-2002 September 2006], people have lost a great be there, though. The whole idea is to cap-
crash, and that is that a totally public equity- deal of money – in some cases, as much as ture the various cycles, not to try and guess
centric portfolio may not be the best thing, they’d made. The issue is that in the short when something is going to move or isn’t –
and having some assets in your portfolio that term, it’s impossible to predict which way to have exposure to all the cycles. I should
have little or no correlation with basic stocks energy prices will go; and in the long term, add that the definition of ‘emerging mar-
and bonds is a good thing. Hedge funds don’t
yet exist in a format for retail investors, and
the whole notion of ‘what a hedge fund is’ is
You would certainly want to have some
still evolving. There are lots of things out
there that call themselves hedge funds that
energy stock exposure in a well-diversi-
are not hedge funds. I would like to see hedge
funds become widely available to retail
fied portfolio: I highly recommend it.
investors, and I hope that develops.Typically, we’ve got some issues that are very impor- kets’ varies considerably: if you look at
demand does create its own supply, so we’ll tant in terms of developing countries and Morgan Stanley Capital International
see if that happens. As for high-yield prod- limited supplies that really make the case for Index of emerging markets, they’ve got
ucts, we already see it – there are a ton of energy quite bullish in the long run.You cer- countries like Mexico and Brazil on the list; I
income trusts out there. But investors have to tainly would want to have some energy stock wouldn’t put these in the ‘emerging’ cate-
understand the risks related to these prod- exposure in a well-diversified portfolio, and gory – I consider them developed markets.
ucts: there’s no free lunch. You don’t I highly recommend it. But over-concentra- But overall, it’s the same old story. There is
suddenly shift your portfolio from a safe tion in any one sector is very dangerous, as absolutely no reason to avoid emerging mar-
three-or-four per cent return in government the past few weeks have indicated. Investors kets, and there is every reason to include
bonds to a nine or 10 per cent-return income are seeing a level of volatility that some are them in a portfolio.
trust and call it a day. These products have not prepared for, underscoring the danger
much higher risk than bonds. But overall, of over-concentration. KC: In The Future for Investors, Wharton’s
we’re starting to see new, broader versions of Jeremy Seigel concludes that growth
diversification at the pension plan and institu- KC: To what degree should investors does not guarantee returns. Does this
tional-investment level, and that this is slowly embrace foreign stocks, including those surprise you?
seeping over – as it should – into the retail of emerging markets?
investor level. EK: It’s interesting.Although his frame of ref-
EK: I’m certainly not the first to say it, but erence is different, in some ways, there is a
KC: Oil prices are on many people’s I’ve always argued that portfolios should be parallel with value investing. Value investors
minds. What’s your take on this sector’s global. When I started writing about this 25 are very skeptical about growth prospects

72 • Rotman Magazine Winter 2007


within companies. They pay great attention Suppose a whole bunch of Baby Boomers EK: You certainly want to have a portfolio
to the quality of current earnings, and the reach a stage where they really can’t afford to that has some exposure to biotech. With all
quality of assets, and take a healthy skepti- keep their homes; their house likely represents the active research taking place, break-
cism towards growth prospects. If you’re a huge percentage of their asset mix. Just look throughs are being made in treating diseases
going to use a valuation model that includes at your own situation: your principal residence like diabetes and arthritis, and companies
a significant component for future and con- is probably worth much more than your that capture that are going to do very, very
tinuing growth, in the value investing world, investment portfolio. If Baby Boomers can’t well. So biotech is certainly a sector that I
you’re only able to do that if you are con- afford to keep their high priced homes in the would expect a sophisticated investor to
vinced that the company has a ‘protected future, we could very well see a major impact have some exposure to. As for ‘green tech-
franchise’.That is, that it can sustain growth on the housing market. And it could have nologies’, a few years back, I was doing
for a long period into the future via either a implications for the ability of seniors to sustain some analysis on ‘ethical investment funds’.
‘granted franchise’ – a copyright or patent – themselves (particularly in a low interest rate I found that these funds were actually doing
or an ‘inherent franchise’ – such as superior environment.) So I’m more concerned about better than people expected, which sur-
brand recognition or brand loyalty. A classic an environment with volatility in housing prised me, because if you’ve got a fund with
example is the Coke-Pepsi control of the prices, coupled with low interest rates. limitations on what it can invest in, you’d
soft drink market. We’ve seen all sorts of
competitors over the years, but nobody’s
been able to penetrate that duopoly.That’s an There is absolutely no reason to avoid
example of a ‘protected franchise’; so if you
look at growth prospects for a company like emerging markets, and there is every
Coke, you can easily believe in its longer-
term prospects. Some companies have reason to include them in a portfolio.
experienced super-normal growth over
short time periods; but unless it can be KC: Algorithmic trading has been a expect it to perform less well than one with-
shown that there are high barriers to entry to transformative development in the past out such constraints. I subsequently realized
other firms, that shouldn’t be considered as five years. Some say it will continue to that what I was picking up was that many of
part of the valuation equation. grow and change the nature of market these funds are actually sector-type invest-
activity. Do you agree? ments and technology funds; one class, in
KC: The upcoming mass retirement of fact, of so-called ethical funds invests in
Baby Boomers brings with it the shifting EK: There is no doubt that we are starting to environmental cleanup type companies, and
priorities of aging investors. What over- see some very sophisticated systems being those companies are tech companies, which
all market effects do you foresee? used, and some are quite useful for certain do well in a tech-type market. So this is an
types of institutional trading. But there’s a area that also belongs in a portfolio. But I
EK: This is a classic question, and a very negative side effect as well.Take momentum would add socially responsible investing is
important one. On the one hand, there is the trading, for instance. Some research indi- not easy to define; funds that automatically
knee-jerk reaction: ‘huge numbers of people cates that there can be great success with exclude tobacco and arms manufacturers
will suddenly start selling all their stocks at momentum trading, while some shows quite are pretty straightforward, but many firms
the same time’. First of all, investors have the opposite. I don’t have any problem with are in a more grey area. Christian Scientists,
learned that simply cashing out of stocks at a institutional traders getting involved with for instance, would say that medical research
certain time in life isn’t the right thing to do. highly-sophisticated trading strategies, but is unethical; others of course would say that
If you’ve amassed a certain amount of wealth, what you don’t want to see is these strate- it’s highly ethical and important, so it all
and you want to ensure that you’re going to gies starting to dictate market movements. depends on how you look at it. My job is to
live comfortably, and not outlive your Providing liquidity to the marketplace is inform investors that socially-responsible
money, or if you’re concerned about estate valuable, but patterns can start to develop if investing exists. If they want to get involved
planning, you won’t necessarily move out of there’s enough trading taking place, which in it and take possibly lower returns, it’s up
equities.You might lighten your equity hold- can have an influence on the marketplace; to them; but it doesn’t mean that I support
ings over time, but you shouldn’t wake up at and that isn’t necessarily a valuable thing. So it myself. I’m glad to see these funds out
age 65 and say, ‘it’s time to get out of stocks anything that expands a trader’s ability to do there, because anything that expands your
and into bonds’. Having said that, there will be what they do is valuable, but there can be investing opportunities is a good thing.
shifting patterns. And of course, you’ve got some significant side effects.
younger investors who are learning earlier
about the value of long-term portfolio build- KC: Many investors are looking to increase Eric Kirzner (MBA ‘70) is the John H.Watson Chair in Value
ing, so there are more and more investors their exposure to emerging industries such Investing at the Rotman School, where he has taught Finance
coming into the market. I’d be more con- as biotech, nanotech, and ‘green’ technol- since1989. He is the best-selling author, with Gordon Pape,
of The Buyer’s Guide to Mutual Funds series (2001-2004) and
cerned, actually, about the housing market. ogy. What’s your advice for them? ProtectYour Nest Egg, with R. Croft (CanWest, 2006).

Rotman Magazine Winter 2007 • 73


Questions for: Chris Anderson

The editor-in-chief of Wired magazine and author of The Long Tail:


Why the Future of Business is Selling Less of More talks about the end of
the era of the blockbuster monopoly, and how companies can prosper
in a niche-based culture.

Stephen Watt: What is the theory of the and buy niche products, thanks to the “infi- SW: A recent issue of Fortune Magazine
Long Tail? nite shelf-space effect”: the new distribution proposes a series of new rules by which
mechanisms, from digital downloading to corporate America should do business,
Chris Anderson: The theory of the Long Tail peer-to-peer markets, that break through including “find a niche, create something
is that our culture and economy is increas- the bottlenecks of broadcast, and traditional new” instead of the old emphasis on
ingly shifting away from a focus on a bricks and mortar retail. dominating your market. What are some
relatively small number of hits – mainstream other ways a firm can survive and flour-
products and markets – at the head of the SW: The tracking of top-seller lists is a ish in an era of Long Tail economics?
demand curve and toward a huge number of national obsession. Each year it seems a
niches in the tail.The term refers specifically new Hollywood movie breaks into the CA: In my book, I articulate a number of
to a sales chart which shows a standard top ten of the highest grossing films of rules, which fall into two main categories.
demand curve that could apply to any indus- all time; radio continues to be dominated One is to make everything available. In other
try, from entertainment to hard goods [see by pop music; recent titles like The Da words, don’t pre-judge or over-discriminate
chart].The vertical axis is sales; the horizon- Vinci Code and Harry Potter are some of as to what you put out there. Don’t do the
tal is products. The red part of the curve is the bestselling books in history. And yet usual huge amounts of research, planning and
the hits, which have dominated our markets you argue that the era of the blockbuster culling of products to only select the ones that
and culture for most of the last century.The is coming to an end. Please explain. will be popular, partly because you’ll never
orange part is the non-hits, or niches, which know, and also partly because there is demand
is where the new growth is coming from CA: What is coming to an end is not the era for things that aren’t one-size-fits-all. There’s
now and in the future. of the blockbuster so much as the era of the more and more niche demand, not only for
Traditional retail economics dictate that blockbuster monopoly. The economic con- different products but for variations of differ-
stores only stock the likely hits, because shelf straints and requirements of traditional ent products. You can get outside the
space is expensive. But online retailers from distribution, be it shelf space, channels or sta- one-size-fits-all and find success with a prod-
Amazon to iTunes can stock virtually tions, all work best with blockbusters. As a uct that has some resonance with the outside
everything, and the number of available result, the controllers of those channels need world, or is discovered by an influential opin-
niche products outnumber the hits by several to be very discriminating about what gets out ion-maker who kicks off the word-of-mouth
orders of magnitude. The same is true for there, and tend to cut things off pretty machine.We now see that increasingly in the
video not available on broadcast television on quickly after a certain level of popularity. It’s music and entertainment industry, as well as
any given day, and songs not played on radio. the new markets that I talk about, the ones in television. People are being creative not
When consumers are offered infinite that have nearly unlimited shelf space or just by releasing the main product but
choice, the true shape of demand is much cheaper distribution methods. These through all the ancillary products. For exam-
revealed. And it turns out to be less hit-cen- don’t have to be as discriminating and can ple, in television you have the outtakes, the
tric than we thought. The Long Tail book is offer vastly increased choice and variety. As a production diaries, the short form, the long
about the big-picture consequence of this: result, the blockbusters have to compete on form, the compiled form, the archives – these
how our economy and culture is shifting the stage with millions of non-blockbuster are all examples of putting it all out there and
from mass markets to millions of niches. It products, and you see the demand shifting to letting the marketplace sort it out.
chronicles the effect of the technologies that a more diffuse, shared, distributed market The second big lesson is the “help me
have made it easier for consumers to find between blockbusters and niche markets. find it” lesson, which is the huge impor-

74 • Rotman Magazine Winter 2007


tance of filters, search recommendations ute them nationally, to take microbrews and I suspect the same is going to happen
and other kinds of clever ways to package put them on supermarket shelves. Anheuser in music, and it’s easy to imagine it would
and sort products so that interested con- Bush was in somewhat of an unusual posi- happen in book sales as well. iTunes domi-
sumers can find them. tion of being able to control the supply nates music but it has a very ‘popular music’
chain well enough that it can get those approach. The way it presents music is at
SW: Discuss some recent success stories micro-brews out there. the lowest common denominator of meta-
of companies that understand the new data, which includes artist, album and
cultural and commercial landscape, and SW: Is there a danger of some companies track, and sometimes label and release
have made the most of it. developing a monopolistic or oligarchic date. That works okay for pop, though it’s
power over the Long Tail economy? really quite inappropriate for classical
CA: The obvious examples are Amazon, music, where you would want to know
iTunes, YouTube and MySpace, but CA: Right now we have a long tail of produc- the composer, conductor and lead soloist.
pretty much any successful web-based ers, and a long tail of consumers with much For jazz, individual performers are in
company out there is aggregating content more choice out there, but a short head of many cases more important than the
or benefiting from user-created content. aggregators in some of these spaces: iTunes band. You may also want to know the
Looking outside of Internet businesses and and Amazon being two good examples of par- name of the label, which in some
digital economies, there are interesting ticularly dominant web properties. My instances is important and in many others
examples such as Anheuser-Busch Long expectation, however, is that this is just an is not. All of this suggests there’s demand
Tail Libations. [Beer giant Anheuser-Busch early-days phenomenon. These are one-size- for a niche music service for classical and
recently created a new division called Long fits-all markets that benefit hugely from another for jazz. One day soon there may
Tail Libations to find more niche alcohol critical mass but suffer some inflexibility with develop a long tail of vertical aggregators
products to supplement the company’s bet- their presentation.You have an analogy in the that specialize in one form of music that
ter-known brands.] The long tail of beer is form of Google. Google is the dominant isn’t for everybody, but is presented per-
micro-brews: niche beer, craft beer, search space, or so it seems. But the reality is fectly for a particular market segment.
regional beer.What’s the economic enabler there are many kinds of search. Google dom- Obviously they all need to work together
of a longer tail of beer? It turns out that inates the canonical search, but there’s also in some way, to combine vertical with
innovations in the supply chain have video search, blog search, maps, books, aca- canonical searches, but that’s already
allowed companies to place more products demic papers and other types of search such underway with services that are starting
on the shelf, basically doubling the number as vertical search, and it turns out that Google to gain traction, and I suspect we will see
of goods on supermarket shelves over the doesn’t dominate most of them. For exam- more competition in the aggregator space
past 15 years. As a result, you can go fur- ple, YouTube dominates video search and just as we have seen in the search space.
ther down the tail even in traditional hard Technorati dominates blog search.What is When it comes to search, consumers
goods and packaged goods. developing is a long tail of search engines switch easily and there seems to be no nat-
What we’re now seeing is there is more where each one is focused on a niche subset of ural lock-in. There were search
demand for non-mainstream products, and the search audience, and we now find compe- monopolies before Google, and there will
that applies to beer. It’s now economically tition in that space. You don’t find that one be search monopolies after Google. In
efficient to take regional beers and distrib- company dominates the whole thing. music as well, we’re in early days. iTunes
has somewhat of a natural monopoly
because of its link with the iPod, but ten
years from now, there will be other music
The New Marketplace
players and other music systems. It’s not as
if customers are unable to leave.These are
ephemeral markets. Unless these music
libraries that people have invested in are
truly unconvertible, people might easily
switch to another system.

SW: Stepping a few years into the future,


what might a thoroughly fragmented,
niche-based culture look like?

CA: Wouldn’t that pretty much look like


the Net? Just talk to anyone under the age
of 25 and you’ll discover they already live
in that world.

Rotman Magazine Winter 2007 • 75


Questions for: Alan Blinder

The former member of President Clinton’s Council of Economic


Advisors talks about the differences between politics and academia,
the U.S. debt situation, and why offshoring has the potential to
be a highly disruptive force.

Stephen Watt: You are a regular com- academia than the Council of Economic pushing up interest rates. That’s one of the
mentator on CNN, CNBC, Bloomberg TV Advisers, which ironically has a false repu- reasons for lack of progress on the problem.
and PBS’s Nightly Business Report. Why tation as being an outpost of academia Things look like they’re going too well.
do you feel it’s important to share your within the government. If you look at those
insights with such a broad audience? who populate the Council, they are mostly SW: Canada’s economy, like that of
from academia; but they’re not performing many countries, is highly dependent on the
Alan Blinder: If you think of yourself as like academics when they’re on the job. U.S. economy. What are some possible
an educator, as many professors do, consequences for world markets if U.S.
there’s an educational role that goes SW: The Bush administration has a economic policy continues on its cur-
beyond the classroom. And that’s espe- record of both mammoth tax cuts and rent path?
cially true if you’re involved in a record spending. Vice-President Dick
discipline like economics, which is inte- Cheney has claimed, citing the Reagan AB: The incredible amounts of borrowing
gral to a lot of public policy decisions. tax cuts in the early 80s, that deficits from abroad that we’re being forced to do
The only way we’re going to get better don’t really matter. Do you agree? – in part because of the budget deficit, but
policy decisions is with a public that is
better educated on economic matters. It’s
part of the job description.
The incredible amounts of borrowing
SW: In 1993, you took a break from aca-
from abroad that we’re being forced
demia to serve in the U.S. government,
first as a member of the President’s Coun-
to do will eventually lead to a time of
cil of Economic Advisers, and then as vice
chairman of the Board of Governors of
reckoning, in which the U.S. dollar
the Federal Reserve. Not many academics
have had a chance to shape policy in such
falls quite substantially.
a direct way. Discuss that experience.
AB: No. There are reams of evidence and also because we don’t save enough at the
AB: The world of the White House is as dif- lots of theory suggesting that higher deficits household level – will eventually lead to a
ferent from academia as night from day.The – or rather, higher ratios of debt to GDP – time of reckoning, in which the U.S. dollar
pace is incredible, and there’s never enough push interests rates higher and crowd out falls quite substantially. If our exchange rate
time to actually think things through. In aca- investment. The problem right now is that falls, some other exchange rates must rise.
demia, we pride ourselves on the Robert this force has been overwhelmed by other There are several obvious candidates, and
Mondavi principle: don’t release any idea forces that are keeping long term interest Canada is one of them. If Canada is already
until its time, until you’ve thought it rates in the United States low, so low that it’s uncomfortable with the current dollar-to-
through and got it right.You don’t have that difficult to make that case for people who dollar exchange rate, you will be even more
luxury while working in the political mael- don’t have deep training in economics.With a uncomfortable when the two currencies
strom. The Federal Reserve operates at a long term bond rate of 4.5 per cent, it’s hard are at parity.There will be significant impli-
much more deliberate pace. It’s more like to demonstrate that these horrible deficits are cations for Canada’s ability to export.

76 • Rotman Magazine Winter 2007


SW: You’ve spoken about the United financial markets as long as we’ve had finan- they think that’s just the way it is. But the
States’ dependence on China, which has cial markets, and they’re not going away. costs of trade liberalization tend to be
a pattern of financing the U.S. debt by concentrated. You could put your textile
buying up American-dollar assets. Is the SW: House prices in major markets industry out of business by trade liberal-
U.S. making a mistake by trusting its eco- around the world are coming off an all- ization, and people in that industry, both
nomic vitality to such an uncertain ally? time high. Some economists (like Yale’s the owners and the workers, will tend to
Robert Schiller) believe that we’re wit- exercise their political voice. That’s cer-
AB: The U.S. is making a big mistake, both nessing another era of ‘irrational tainly part of the reason for the
for our own welfare and the welfare of the exuberance’, and that stock markets protectionist attitudes that we see in so
world, by sucking up so much of the around the world will soon pay the many countries, but I don’t think it
world’s capital through our budget deficits price. What do you think? explains the whole thing.
and our lack of personal saving. However,
given that we’re doing that, I don’t think
it’s a mistake to be borrowing it from It is not in China’s interest to see the
abroad in general. After all, what’s the
alternative? Vastly higher interest rates for value of the U.S. dollar plummet,
the U.S. People do fret a lot about China’s
attitudes toward the United States and its nor to see U.S. interest rates skyrocket.
political stability, but I think the Chinese
are too smart to bite off their noses to spite AB: I don’t see a gigantic hazard to the SW: There’s a lot of talk about the
their faces. It is not in China’s interest to stock market from the housing market, exporting of North American jobs, and
see the value of the U.S. dollar plummet, although certain stocks, such as those of the potentially disruptive effects of off-
nor to see U.S. interest rates skyrocket. home builders and lumber companies, shoring on wealthy countries. Is
Because it’s in their self-interest, they will could suffer in the future. The big unan- offshoring the impending catastrophe it
probably be a relatively reliable lender. swered question is how far housing prices is sometimes said to be, or should gov-
are going to fall, if indeed they’re going to ernments take a more laissez-faire
SW: Under Alan Greenspan, the Federal fall at all. The history of the U.S. suggests approach and let the forces of interna-
Reserve managed to both fight inflation that, in terms of the national average, we tional trade run their course?
and spare the U.S. from a serious reces- never see falling house prices for a pro-
sion for 18 years. His successor, Ben tracted period of time. It remains to be AB: I’d like to take a position somewhere in
Bernanke, appears committed to a similar seen if we’ll have a worse experience in the the middle. I don’t think offshoring is an
strategy for the central bank. Is it possible next year or two than we’ve had in the past. impending catastrophe: as has been
that American financial markets have remarked upon by many economists, it’s a
seen the end of the boom-and-bust cycle? SW: Why is protectionism currently so form of trade, and trade is beneficial to
popular across the political spectrum? both countries involved. But that doesn’t
AB: We have definitely not seen the end of mean it’s beneficial to each individual.
boom and bust cycles. It wasn’t so long ago, AB: I wish I could answer that question. When it comes to service jobs, which are
under the chairmanship of Alan It’s one of the great failures of econo- the majority of jobs in rich countries like
Greenspan, that we had an incredible boom mists, who for 200 years have been trying Canada and the U.S., offshoring has the
and bust cycle in the stock market. We may to teach the virtues of free trade, and yet potential to be a highly disruptive force,
have a boom and bust cycle in the bond mar- the lesson doesn’t sink in. We have some putting a lot of people out of work. It’s fine
ket in store for the U.S., and we may also be idea about the answer.Trade liberalization for economists to say, “They’ll find employ-
heading into trouble in terms of real estate provides small benefits to millions and ment elsewhere.” And it’s true, eventually
finance or even in a market such as deriva- millions of people, who don’t attribute they will. But there could be a lot of disrup-
tives. We’ve had boom and bust cycles in the lower prices they are paying to trade; tion, dislocation, and personal heartache if
we don’t prepare ourselves for this future
better than we’re doing right now.

Alan Blinder is the Gordon Rentschler Memorial Profes-


sor of Economics at Princeton University and co-director
of Princeton’s Center for Economic Policy Studies, which
he founded in 1990. He served on the White House
Council of Economic Advisers from 1993 to 1994, and as
vice chairman of the Board of Governors of the Federal
Reserve from 1994 to 1996. He is the author or co-
author of 17 books, including Economics: Principles and
Policy (with William J. Baumol), now in its 10th edition.

Rotman Magazine Winter 2007 • 77


Questions for: Ronald Burt

The University of Chicago professor and social capital expert


discusses structural holes, how creativity is an ‘import-export
game’, and why bridge-builders profit the most from crossing
organizational borders.

Stephen Watt: Social capital is a widely- powerful people. But when it comes to cre- That is the theoretical foundation for
applied term in business, sociology and ating value, the advantage lies with people why [Rotman Dean] Roger Martin’s con-
political science. Why is it such a produc- who are connected to those who aren’t cept of Integrative Thinking is so important.
tive and important concept? themselves connected.These disconnects – Integrative thinking, by definition, pushes
between people not already talking to one people into the unknown so they bridge the
Ronald Burt: As the world globalized over another or coordinating with one another – gaps that other people see as barriers to
the last 20 to 30 years, the era of the ‘local are called holes in the social structure of knowledge. The curriculum that is being
monopoly’ came to an end.As strong players information flow. More simply, they’re developed at the Rotman School will create
in local markets confronted competitors in called structural holes. And your value in a a competitive advantage for MBA students
other local markets, margins started to thin, network depends on your access to struc- because they will be better able to recognize
and companies were forced to remove layers tural holes. If everyone you know knows opportunities in the market as they develop.
of bureaucracy to cut costs. One result is one other, you have no social capital,
that people have become the authors of their because you’re not in a position to create SW: You have said that creativity is an
own jobs. This has always been true of the new connections. Holes are in fact essential import-export game, not a creation
top layers of organizations, but over the last to the division of labour. According to the game. If the most original and effective
decade or so, the trend has penetrated deep division of labour, we each specialize in our ideas are more often borrowed than
into the middle ranks. Large swaths of an particular field, and thereby ignore a lot of created, how can companies foster
organization now consist of people trying to activity, which greatly simplifies life in the innovation?
figure out how to do their jobs.
In such circumstances, employees
often lack the resources they need, and are
The people who connect across knowl-
instead required to negotiate with others to
get work done. Suddenly, informal rela-
edge gaps have a competitive advantage,
tions among employees – not who they
answer to, but rather, who they trust, who
because they see fresh combinations and
they rely on, who they discuss things with
casually – are key to the operation of a
alternative ways of doing business.
firm. Social capital is about competitive
advantage in informal relationships, and it network. Yet at the same time that these RB: We all specialize, for reasons of effi-
became a vital success factor in the latter disconnects are useful for efficiency, they ciency and productivity, and are often
half of the 20th century. blind us to new opportunities, which is blind to good ideas that occur in other
where brokerage becomes valuable. The places. When someone brings us a good
SW: What are ‘structural holes’, and people who connect across knowledge gaps idea, it’s typically something that person
how can employees use them to gain have a competitive advantage, because they has seen elsewhere. But we don’t think
competitive advantage? see fresh combinations and alternative ways about where that person has gone to find
of doing business. That’s why we pay them the idea; instead we think, ‘My goodness,
RB: People often think of advantage in net- more, we promote them more quickly, and what a brilliant person!’ Value is created
works in terms of being connected to we give them higher valuations. by translating an idea discovered else-

78 • Rotman Magazine Winter 2007


where into the local jargon, so that it’s another. The members of your team will tally misses the point. When a person
easy to digest. And in that translation is then start to measure themselves against bridges across silos, yes, the organization
the act of creativity. each other: ‘Who’s putting in hours? Who benefits. However, the people who gain
Because of patent law, which exists to best gets the idea?’ People don’t want to the most are the ones who build those
protect intellectual capital, we often think lose the reputation they’ve developed, so bridges, because they do their job better.
the value of an idea lies in its creation.Yet they try to conform to the group norm. To do state-of-the-art work in your
the value of an idea lies in the audience, not The lubricant that makes the system work assigned area, you need to build ties to
its source, and one idea can be ‘created’ is gossip. By gossiping to one another, peo- monitor what’s happening in other organi-
many, many times. Creativity exists in a ple are drawn into alignment by zations and in other parts of your
chain: an idea comes from this group and identifying and celebrating heroes, and organization. And this is the best way for a
goes to that group, and that group then car- denouncing villains. This is classic village company to frame the discussion.
ries it over to another group. An idea is a
multiple sequence of creative acts. This is
important because it means that creativity When a person bridges across silos,
isn’t just the domain of brilliant people, it’s
also the domain of average people who the organization benefits; but the people
travel to other groups.The simplest way to
feel creative is to find people more ignorant who gain the most are those who
than you. Nobody knows that better than
academics, who are constantly in the busi- build the bridges, because they do their
ness of reading widely, coming up with
ideas, then shipping them to groups jobs better.
unaware of the ideas.
An organization can promote creativ- politics.Think of grandma’s village, where SW: What’s next on your research
ity by facilitating different ways of seeing everyone knew what everyone else was agenda?
things. Jean-Rene Fourtou, while he doing, and people were relatively careful
was CEO of the chemical firm Rhone- about what they did. Gossip is the founda- RB: I recently completed a project in
Poulenc, was once asked, “Why is it that tion for the dramatic productivity which I found that brokerage benefits are
your chemists come up with so many lead- improvements we’ve seen in team-based not transferable; you have to be personally
ing ideas?” His reply was brilliant: “I manufacturing and product work. The involved in integrative thinking to obtain
manage le vide” – the emptiness.That is, he downside is, as people gossip, they drive the career benefits associated with it. Fol-
manages groups, keeps them apart, then the grey out of things. You see this in the lowing that, I looked at the psychology of
brings them back together after they’ve search for the ‘CEO hero’ who will some- brokerage, and discovered that brokers are
developed different ideas. Jack Welch how save us from all our problems. At the more emotional in their pitches than are
referred to this notion as ‘integrative diver- other extreme, people who make a mis- the people working strictly inside the net-
sity’: maintaining our diversity, our take can quickly turn into villains, and be work. The brokers aren’t just more
segregated silos, but then creating value driven out of the organization. So while positive or more negative: they are both.
from judicious integration. New ideas are the positive side of gossip is enhanced pro- Brokers cast a wide emotional aperture
borne when we confront contradiction. ductivity, the downside is group-think, through which they can reach a general
This is a concept that is easily grasped but stereotyping, and once again, reinforcing audience. I’m now working on a book
harder to implement. Usually we manage our blindness to new opportunities. called Bent Preferences, which examines how
for the efficiency of tight coordination. our position in the social structure distorts
SW: What kind of encouragement can an how we see things, so that two people
SW: What’s the function of gossip and organization provide to get an employee looking at the same object will see very
the sharing of secrets in the workplace? to interact with people outside their very different opportunities. It’s fascinating
Is gossiping on the job good or bad for a narrow functional group? research, involving integrative thinking at
company? the intersection of economics, psychology,
RB: Organizations often talk about the and sociology.
RB: Gossip has obvious negative connota- value of cooperation across silos for the
tions, but people often overlook the company. They say that as a citizen of the Ronald Burt is the Hobart Williams Professor of Sociology
and Strategy at the University of Chicago Graduate School
incredibly positive ones, which include organization, employees should collabo- of Business. He is the author of Brokerage and Closure: An
gains in productivity. The way you govern rate across silos and help people in other Introduction to Social Capital (Oxford University Press,
a group in an informal organization is groups. This argument usually creates 2005) and Structural Holes:The Social Structure of Competition
(Harvard University Press, 1992). A fellow of the American
through network closure: you encourage resistance: ‘I’m not paid to collaborate, Academy of Arts and Sciences, he has taught at University
the people that you talk to also talk to one I’m paid to do my job’ – which fundamen- of California, Berkeley, Columbia and INSEAD.

Rotman Magazine Winter 2007 • 79


Faculty Focus: Pankaj Aggarwal and
Sharmistha Law
Our Complicated
Relationships with Brands Pankaj Aggarwal Sharmistha Law

Social psychology research has shown that and family members. In such relationships, On the other hand, when ascertaining
the nature of the relationship between indi- people take a perspective that transcends an the value of a Toyota Corolla, the same
viduals influences the information that each emphasis on self-interest alone, keeping consumer may perceive the purchase more
pays attention to, and the resulting evalua- track of their partner’s needs. like an investment, and hence be more
tion each makes of the other. For example, We believe that consumers use rela- likely to take into account each specific
the existence of a ‘positive bias’ in a roman- tionship norms as a lens to evaluate brands, attribute like the gas mileage or turning
tic relationship can lead people to turn and that their attitudes and response to a radius. In other words, while an exchange
their partner’s faults into virtues. Such rela- brand are mediated by these relationship relationship is expected to promote a close
tionship biases are of interest to marketers norms. Therefore, individuals in a commu- scrutiny of brand attributes, a communal
because consumers have been known to nal relationship focus on different aspects relationship should engender a more
cross the threshold of commercial transac- of brand information than individuals in an abstract level of brand cognitions.
tions, ‘bringing a brand alive’ by giving it exchange relationship.
quasi-human qualities. The norms of a communal relationship Our research
A broad spectrum of social relation- make individuals more likely to process We conducted three studies to test the
ships has been shown to describe brand information at a higher level of effect of ‘relationship type’ on the pro-
consumers’ interactions with brands, abstraction. People in an exchange relation- cessing of brand information. Prior work
including ‘best friends’, ‘flings’, ‘arranged ship, on the other hand, are more likely to on the cognitive representation of con-
marriages’, and ‘committed partnerships’. keep track of their partner’s inputs or con- cepts suggests that a hierarchy of
Given that consumers sometimes relate to tributions to the interaction, rather than representation exists for most concepts.
brands in ways that mirror their relation- their partner’s needs. In a consumer-brand The ‘basic level’ is the one that is easiest to
ships with people, we hypothesize that context, we would expect this focus on access and use, and has the greatest
relationship norms active (or salient) at the inputs and outcomes in an exchange relation- amount of feature-related information
time of consumer-brand interactions will ship to translate into attention to (e.g., a chair). Going from a specific to a
be a key determinant of the information- ‘nitty-gritty’ details about the brand, more general representation involves
processing strategy adopted by a consumer. prompting greater attention to detailed, moving up the hierarchy to the next level
item-specific information, since that is the (e.g., furniture). Conversely, one can also
The Role of Relationship Norms only way consumers can track the ‘balance’ move down the level of hierarchy and
The two types of relationships of interest of what they get for what they pay. make the information even more specific
here are exchange relationships and commu- In contrast, since consumers in a com- (e.g., a garden chair).
nal relationships. Exchange relationships munal relationship with a brand do not Depending on the context, consumers
are those in which people give benefits to look for an immediate quid pro quo, they have been found to recognize product fea-
others in order to get back a comparable will attend more to information about the tures at different levels of abstraction. For
benefit, such as a relationship between overall brand benefits, and evaluate brand example, one study found that the degree
business partners. In these relationships, attributes more holistically. For example, of comparability between alternatives
people are concerned with how much they some Volkswagen Beetle owners have influences the level of abstraction used:
receive in exchange for how much they been known not only to name their cars, things that look relatively dissimilar at a
give; and they like to share rewards in pro- but also to pat them as a sign of affection. specific feature level start to appear more
portion to their inputs. For these car owners, evaluating the value similar at a broader, overall level of com-
Conversely, communal relationships are of their Volkswagon on attributes like fuel parison. For example, alternatives like ‘a
those in which people take care of others’ efficiency or horse power might seem less television’ and ‘a stereo’, which cannot be
needs and have a genuine concern for their appropriate than merely assessing if it is compared in terms of specific features
well-being, such as relationships with friends ‘fun’ or not. (since they have few specific features, such

80 • Rotman Magazine Winter 2007


as screen size, in common) can be com- We expect that communal participants’ cessing strategy. Our research makes two
pared in terms of more abstract attributes, focus on encoding abstract brand informa- important contributions to the field. First,
since they have more such features in com- tion facilitates their accurate recognition of our understanding of how consumers
mon (e.g., enjoyment or status). Attributes this information, as well as endorsement of interact with brands is amplified with the
can be thought of as lying on a continuum plausible inferences, and that exchange demonstration that different relationship
going from the concrete to the abstract, participants’ access to concrete brand types are associated with alternative pro-
and people can move up or down this con- information allows them to generate both cessing strategies. This provides deeper
tinuum depending on the context. appropriate abstract brand information and insight into why different consumers
In our first study, the context of a plausible inferences, thereby obscuring any respond in distinct ways to the same brand
product extension was used to examine recognition advantages the communal par- information, depending on their specific
whether the type of relationship norm ticipants may have had. relationship with that brand.
(communal vs. exchange) influences the Consistent with previous research on
level of abstraction at which consumers memory, which suggests that it takes longer to Implications for Managers
process the proposed product extension, retrieve general information about objects Our findings can be extended to help man-
and their consequent evaluation of the than to retrieve specific facts, participants in agers make more effective marketing-mix
extension. Our logic is that when the both communal and exchange conditions took decisions. For example, managers might be
norms of a communal relationship are longer to respond to questions concerning well advised to highlight different brand
salient, people will process information at abstract brand information relative to those features, or gainfully extend a brand name
a higher level of abstraction, perceiving pertaining to concrete brand information. to different products, depending on the
even the farthest extensions as being simi- Our results demonstrate that con- type of consumer-brand relationship.
lar to the original product category, and sumers in a communal situation have faster Furthermore, the type of relationship
hence will evaluate these extensions rela- access to both correct abstract brand infor- might also influence consumers’ response
tively positively. mation and plausible inferences, suggesting to a brand’s pricing structure: consumers
Conversely, when the norms of an that they particularly attend to and elabo- with an exchange brand relationship may
exchange relationship are salient, people rate on brand information presented at a prefer an itemized pay-as-you-go pricing
will process brand information at a much higher level of abstraction. On the other policy to keep track of specific input-out-
lower level of abstraction, likely perceiving hand, consumers in an exchange situation put trade-offs, while those with a
greater dissimilarities between the proposed apparently need to construct the abstract communal relationship may be more will-
far product extension and the original cate- or general brand information by relying on ing to accept a lump-sum price.
gory, and hence will be less likely to evaluate
such product extensions positively.
Our results indicate that relationship We would advise managers to highlight
norms do indeed moderate the degree to
which far product extensions are seen as different brand features depending on
similar to the original product.We propose
that when presented with both abstract as the type of consumer-brand relationship
well as more specific (or concrete) infor-
mation about a brand, individuals in a fostered by their product.
communal relationship condition will
overwhelmingly encode the abstract infor- their knowledge of concrete information. This research has critical implications
mation, whereas those in an exchange Our third study replicated the main not just for academics and managers, but
relationship condition would attend rela- findings of these two studies. In this last also for people in their everyday interac-
tively more to the concrete brand study, we compared the degree of abstract- tions. Relationship type is a key factor in
information. We tested this specifically in ness of features across the two relationships influencing which information is high-
our second study by presenting concrete spontaneously reported by consumers who lighted when we interact with both brands
and abstract information to participants were considering buying a product. and individuals. In fact, if people under-
and comparing their recall and recognition Together, these findings support the overall stand how others evaluate them and what
for each type of information, depending premise that brand-related information is type of features are considered relevant,
upon the relationship type. processed at a broad overall level in a com- they might be able to ensure not only con-
Interestingly, relative to participants in munal relationship, compared to an tinuous, smooth and more efficient
the communal condition, we found that those exchange relationship, in which it is interactions, but also longer and more
in the exchange condition showed higher processed at a much more detailed level. meaningful relationships.
recognition rates for correct concrete brand Our results lead us to propose ‘rela-
information, and lower rates of acceptance of tionship type’ as a moderating variable in a Pankaj Aggarwal is an assistant professor of Marketing and
Sharmistha Law is an associate professor of Marketing at the
incorrect concrete brand information. consumer’s choice of information-pro- Rotman School of Management.

Rotman Magazine Winter 2007 • 81


Point of View: Benjamin Friedman
The Moral Consequences

Photo: J.D. Sloan


of Economic Growth
The following is an excerpt from Benjamin Friedman’s
October presentation in the Rotman Corporate Citizenship
Speaker Series, sponsored by the AIC Institute for
Corporate Citizenship.

The subject I’d like to address is best our level of affluence, what difference different from the majority, because of
framed as a question: why does economic does it make? race, background or religion, for example.
performance matter? If Canada or the U.S. The answer is not just about human A third dimension is that of fairness in
had a business recession next year, the aver- basics. It’s about the political, the social and society. In any society, there will be those
age person’s income would go down only ultimately – to use a term, quite deliber- who will not find themselves taking advan-
about two per cent, and the whole activity ately, from the Enlightenment – the moral tage of the available opportunities, either
would last maybe 15 months at most. Why character of a society. My hypothesis is because the opportunities aren’t perfect,
do we care about that? that when the broad bulk of a society’s cit- or because such people simply lack ability,
For about three fourths of the world’s izens is moving forward in its material or suffer from what economists call labour
population, the answer is both immediate standard of living, and when it has some market luck.
and obvious. Across a very broad swath of
the world’s income distribution, improve- Any time a society’s citizens lose
ments in people’s living standards, as
measured by per capita incomes, translate the sense that they’re gaining in
immediately and directly into improve-
ments in the very basics of human their material living standard, that
existence: measures such as how long peo-
ple live, the diseases they suffer from, the society will undergo periods of
number of their children to die as infants,
and so on. rigidification, often with disastrous
However, the relationships between
material living standards in the aggregate economic consequences.
and the human basics have pretty well
played out by the time a country gets to an ground for confidence that it will continue My theory is that when the bulk of
average living standard of, say, half of to enjoy material progress in the future, the society’s citizens is enjoying a continu-
Canada’s. For example, Portugal has a that society will likely make progress in ally improved standard of living, the
standard of living, as measured by per dimensions of life that are positive in society is not only more able to afford to
capita income, that’s somewhat better moral terms. be generous in providing for the disadvan-
than half of Canada’s. Yet the Portuguese One such moral dimension is open- taged, but is more likely to do so.The final
live just as long as Canadians, they suffer ness of opportunity. A key test for any dimension is democracy, and the creation
from the same diseases, their infant mor- society by Enlightenment standards is or strengthening of democratic institu-
tality rate is about the same as Canada’s whether those young people who get tions. Here again, the sense of forward
(and better than that of the U.S., which is ahead are merely the sons and daughters of progress in the material realm is one of
an embarrassment for us Americans). So for those who already occupy the highest posi- the key pre-conditions for a society to
those of us who are fortunate in countries tions in the society, or whether achieve progress in the democratic politi-
that have achieved a certain basic standard opportunities are made more broadly cal realm. The converse is also true. Any
of living, the question remains: why do we available. Another moral dimension is tol- time a society’s citizens lose the sense that
care about economic performance? At erance – tolerance toward those who are they’re gaining in their material living

82 • Rotman Magazine Winter 2007


standard, history suggests that society will If the U.S. continues along that tra- economic growth, most obviously envi-
then undergo periods of rigidification and jectory, it’s likely to see the reemergence ronmental problems, to which we have
retrenchment, often with quite disastrous of the kind of pathologies that occur come to attach a moral overtone.The stan-
economic consequences. whenever the bulk of a society’s citizens dard conversation about economic growth
There are a number of important loses the sense that it is getting ahead. It’s is now one in which wholly material posi-
implications of this hypothesis. The good no coincidence that immigration is such a tives are weighed against wholly moral
news is that all sorts of countries in the hot topic in American newspapers today. negatives. People ask themselves: am I
developing world do not have to wait until Historically, why did anti-immigrant sen- someone who mostly cares about material
they achieve Western standards of living timent fade after the Civil War, only to things, in which case I’m supposed to be
before they can democratize and liberalize. return in the 1880s and 1890s, and again for growth, or am I someone who is also
Consider the example of South Korea. in the 1920s? It would be foolish to pre- sensitive to the moral dimensions of soci-
Beginning around 1960, and over a period tend that every twist and turn in ety, in which case I’m supposed to be
against growth.
This view of the growth question –
For five of the last six years, median trading off wholly material advantages
versus wholly moral advantages – is a
income in the U.S. has gone down. wrong characterization of the issue. If it’s
true that economic growth brings
of about 25 years, South Korea went from American attitudes toward immigrants improvements in fairness, tolerance and
being a poor, agricultural country, ruled by was narrowly or deterministically driven democracy, then bringing that awareness
a one party military dictatorship, to a well- by the ebb and flow of prosperity versus into our public conversation will not only
functioning electoral democracy, with stagnation. However, whether the subject achieve better factual and intellectual
a standard of living of about one third is immigration, racism, religious preju- accuracy, but will make it possible for us
of America’s. dice, generosity toward the poor, or even to move forward in a direction that is
Another example is China. During the most basic aspects of our democratic more likely to deliver pro-growth poli-
the most recent quarter century, China institutions – such as when women and cies, for the benefit of all.
has mounted the most rapid, sustained blacks achieved the right to vote – you
economic growth in the world, enjoying cannot look at the historical record with- Benjamin Friedman is the Maier Professor of Political
Economy and former chairman of the Department of
a growth rate of around seven per cent out coming away with a strong sense that Economics at Harvard University and the author of The
after inflation in per capita terms. During the underlying economics played an Moral Consequences of Economic Growth (Knopf, 2005). He
that time, China has seen a rapid expan- important role. was the 2005 recipient of the John R. Commons Award,
presented in recognition of achievements and service to
sion of economic rights, and the The third implication regards public the economics profession.
development of local democracy. The policy. One frequently hears among
Chinese have genuinely contested elec- economists that in matters of economic
tions at the village level, and in a country growth, the best stance for public policy
with more than 700,000 villages, this is is simply to stand back and let the market
not a small matter. Nationally, China run its course. Let all the families decide
remains what South Korea was half a on an individual basis how much they
century ago: a one party military dicta- would like to save, and let all the busi-
torship. However, if the Chinese can nesses decide how much they would like
sustain the same level of economic to invest. However, economic growth
growth, I am optimistic that they too will provides benefits such as tolerance,
be able to liberalize and democratize. democracy and fairness that we don’t
The second implication is a more price on the market. As a result, there is
sobering one, especially for Americans. a positive role for public policy to stimu-
For five of the last six years, median late the rate of economic growth to be
income in the U.S. – the income of the faster than what it would be if left to the
person right at the middle of the income market’s own devices. We certainly have
distribution – has gone down.While GDP no lack of policy devices at our disposal
has increased by a modest two-and-three- that would simultaneously enhance the
quarters per cent per annum, largely due growth and help deliver up a fair society.
to technological innovations, the growth is The last implication regards the char-
benefiting a small portion of the popula- acter of our public conversation. In recent
tion: the large bulk of people are not years, we have become increasingly aware
benefiting at all. of the various drawbacks associated with

Rotman Magazine Winter 2007 • 83


Point of View:

The Democratization of Information


While the models used in the economics and 2. communicating the information in a itively, IRCs are in all probability e-literate
finance literature generally paint the typical way that facilitates the third compo- users of the Internet and, in all likelihood,
retail investor as someone with unlimited nent; which is, the majority conduct their trading through
cerebral capacity who is able to consider all 3. understanding what is disclosed. internet brokerage accounts. Of course,
relevant information, filter out all that is some may not be e-literate, but it is hard to
irrelevant, and measure the motives of all The Task Force believes that the second assume that this group is significant in size.
parties prior to making an investment deci- component, the method by which informa- With regard to DRCs, the percentage who
sion, the typical investor, understandably, tion is communicated, is the key starting are e-literate will logically be smaller, but
falls well short of this ideal. Instead, he or point in ensuring effective disclosure. nonetheless high – Statistics Canada
she is limited by the standard foibles that are reported in 2004 that 64 per cent of house-
present in all of us to varying degrees: short A Way Forward – Access Equals Delivery holds in Canada have at least one member
attention span, inattention to detail, Bearing in mind the strength of SEDAR as who uses the internet, with 65 per cent of
dependence on potentially suboptimal pre- a free, publicly-accessible full record of all regular users having a high-speed connection.
dispositions, overconfidence, biases and of the disclosure documents required to be Research commissioned by the Task
emotion, to name a few. filed by a reporting issuer under Canadian Force indicates that retail investors are gen-
Much of the information that is securities laws, as well as the very tenta- erally receptive to receiving disclosure
required to be disclosed under securities tive move towards permitting full information only in electronic form, with
laws is difficult to digest and, arguably, has electronic delivery of disclosure docu- between 54 and 67 per cent (depending on
the tendency to reinforce an investor’s ments, the Task Force set about the type of information being disclosed)
shortcomings rather than helping to over- determining the most effective and mod- expressing comfort with receiving infor-
come them.While research indicates that a ern method of delivery. mation only in electronic format.
With these factors in mind, the Task
The Task Force questioned whether the Force questioned whether it continues to
make sense to burden the disclosure system
delivery of disclosure documents to with the requirement of delivery by paper
and, taking it one step further, whether the
investors, even by electronic means, delivery of disclosure documents to investors,
even by electronic means, makes sense.
makes sense. Within the realm of securities regulation,
‘access equals delivery’ means, quite simply,
surprisingly high percentage of investors The starting point was, of course, the that the regulatory requirement to deliver a
consult an issuer’s prospectus prior to mak- investor. Focusing on retail investors for the disclosure document to an investor will be sat-
ing a decision to invest in the primary moment, it would seem that investors can isfied by the investor being able to access that
market, the dense legal and technical lan- largely be divided into a) those who are (or document using the Internet. For example,
guage, small print, prevalence of jargon, believe they are) sufficiently financially lit- under such a model, the posting of a disclosure
and volume of information presented easily erate (for the sake of convenience we call document on SEDAR would satisfy both the
results in information overload. them ‘Independent Retail Clients’ or IRCs) filing and delivery requirements imposed by
So, how does one make disclosure and do not need, or choose not to make use securities laws. As noted above, SEDAR’s free
more effective? Obviously, there is no per- of, a registered financial adviser, and b) accessibility and its function as a central repos-
fect answer, but three components of those who use a registered financial adviser itory of disclosure documents makes it the
effective disclosure are: (‘Dependent Retail Clients’ or DRCs). obvious foundation for this model.
1. identification of appropriate disclo- Then there is the question of e-literacy – The access-equals-delivery model gains
sure items; the basic ability to use the Internet. Intu- additional credence when one considers the

84 • Rotman Magazine Winter 2007


differences in information delivery between How can this be done? One idea that has company online, from either the corporate
investors in the primary and secondary mar- met with a great deal of enthusiasm has been Web site or from a service such as SEDAR.
kets. While it is necessary to deliver a the United States Securities Exchange The information was then downloaded and
preliminary prospectus and (final) prospec- Commission’s voluntary program for presented within the browser with the
tus to an investor in the primary market reporting financial information using Exten- MERIT navigation, and the underlying data
before an investor makes an investment in sible Business Reporting Language (XBRL), was tagged in XBRL.
securities, an investor who is considering which allows for the ‘tagging’ of data items MERIT is based on, and extended
making or disposing of an investment in a in a disclosure document, i.e., information is from, XBRL, which provides a standard
security in the secondary market receives his embedded in the text of a document which framework for business information
information through his own intervention – allows it to be identified by the computer. through the use of meta-data, so that busi-
accessing it himself.There is no requirement For example, the general and administrative ness information can be broken down into
for an issuer to deliver to secondary-market expense line in a balance sheet would have its agreed-upon concepts. The MERIT system
participants a copy of its annual information own unique ‘tag’. The tagging is done would render an XBRL document instance
form, or copies of material change reports. according to agreed taxonomies to allow of tagged information, making it viewable –
Since secondary-market trading represents items in the disclosure to be identified in the creating the actual business documents of
something like 95 per cent of aggregate same way. When this is done computers can regulatory disclosure. XBRL provides a way
trading in Canadian markets, it is time for a recognize particular items of data, such as to define the atomized business concepts of
similar ‘access is adequate disclosure’ regime the general and administrative expense line disclosure; MERIT combines those facts
to apply to documents designed for primary in a balance sheet, analyze it, store it, and structures them into readable docu-
market transactions. exchange it with other computers, compare ments that make them consumable.
The research which we have commis- it, all in a manner that is chosen by the par- Documents based on a system like
sioned suggests that a significant issue in ticular user. In other words, the data ‘comes MERIT can look just like their paper-based
shifting to the access-equals-delivery model is alive’ for the user. counter-parts, but they are so much more.
to get the consent of investors to information A move to fully-electronic disclosure The first hurdle faced by a disclosure docu-
being made available to them in electronic will also facilitate the ‘layering’ of informa- ment is to present the disclosure in a way
form. Our view is that this hurdle should be tion within a disclosure document. As we which invites the potential reader to ‘dive
removed, not jumped. Consent should be have noted, the common problems with in’. MERIT does this by creating a naviga-
implied in the decision to invest in a system existing forms of disclosure are volume and tion interface that will facilitate quick
where ‘access equals delivery’ is the accepted density. ‘Layered’ electronic disclosure discovery of key business facts. The infor-
medium of information dissemination. would, in layer one, present a basic summary mation is presented in a way which not only
There are potential ramifications for of the information to be communicated to serves the interests of the casual reader but
such a recommendation in the area of share- the investor.The reader would then have the of the more sophisticated analyst – both the
holder meetings, for example. Issuers must, option to click on a piece of information that complex and the basic business facts of an
of course, notify shareholders that a meeting is of particular interest and enter additional enterprise will be much easier to find with
has been called. This can be accomplished layers, each with an increased level of detail. such a navigation interface.
either by way of a postcard-sized notice of An additional advantage of electronic layer- Because MERIT produced documents
availability of electronic proxy materials (as ing will be the ability to ‘pull’ information would have the XBRL tagging embedded
is contemplated in the U.S.) or by notice in from existing data sources. For example, an in them, consumers of this information
the public media. The details of the manner Annual Information Form filed pursuant to a could easily compare business facts within
by which effective notice may be given will reporting issuer’s continuous disclosure obli- and across companies, throughout history,
require resolution. However, we do not gations could ‘pull’ the issuer’s financial and quickly find the information they
believe that it is necessary for shareholders results from its annual and quarterly finan- need. For a demo of MERIT, visit
to have a right to paper meeting materials if cial statements. www.ida.ca/Meritdemo/demoindex.html.
they are available electronically. MERIT is not a complete taxonomy of
A New Paradigm for Electronic all disclosure, nor does it describe the stor-
The Democratization of Information Disclosure: MERIT age, transfer and rendering of all aspects of
The constraints of paper disclosure – its ‘MERIT’ (Model for Effective Regulatory corporate information – it is merely pro-
static presentation of data and its two- Information Transfer) was conceived by the duced to show how something like this
dimensional nature – can be overcome Task Force with the vision of making public could be created with full stakeholder input.
with fully-electronic disclosure that takes company disclosure more inviting, more Advantages for investors under a sys-
full advantage of the latest advances in accessible and thereby more effective. It tem like MERIT include:
technology.The goal, of course, is to make entails a potential presentation of disclo- • Fuller, and More Efficient Disclo-
disclosure more effective, by making sure information in a web-browser. The sure: A more complete, accurate, timely
it more appealing, less intimidating and assumption is that a consumer has asked for and primarily accessible disclosure – pre-
more understandable. the disclosure information for a particular sented in a way that facilitates investor

Rotman Magazine Winter 2007 • 85


review at their chosen depth. Removing through information and only raise alarms In Closing
the printing and delivery cycle should help for human intervention when there are Most Canadians are aware that they must
to ensure that it is available sooner, as well. exceptions rather than the routine. Time take more responsibility for their future
• Investor Due Diligence:The vast major- and costs associated with the creation of and retirement – this is a global phenome-
ity of companies do not have institutional or disclosure can also be saved. non in Western countries.The main goal of
analytical coverage, which increases the • Reduced Cost: Removing the cost bur- the regulatory system must be to foster and
burden on investors to do more of their den associated with printing and delivery mandate a disclosure system that leads to
own due diligence. A system like MERIT provides concrete, tangible and measura- better-informed consumers, and better-
helps them do this more effectively. ble savings to all companies. Companies informed advisers of those consumers.
• Investor Education: All of the above will need to reinvest some of those savings One of the easiest ways to help nurture
will improve the potential for market into designing and creating better and this is to bring business disclosure into the 21st
participants to become better educated more illuminating ways to present disclo- century, using the tools and technologies avail-
on their investment decisions and the sure information to all stakeholders, but able to us. If the regulatory community acts
companies they choose. The corollary is overall costs should still be reduced. decisively in these areas, Canada can be a world
that better educated investors will make • More Time: For analysis and decision leader in full and transparent business disclo-
the market more efficient, and poten- making by enabling companies to auto- sure for all of its stakeholders.This will result in
tially improve the valuations of mate inefficient manual information far more efficient and fair markets, improve val-
companies who participate in such trans- gathering and consolidation tasks. The uations,moreforeign investment, and a robust
parent disclosure. primary challenge with producing capital framework that benefits all Canadians.
reports and analysis is that the data This is a real opportunity for Canada
Advantages for corporate executives under needed to produce these items is locked to step up.
a system like MERIT include: in documents, and the data relies on
This is an excerpt from Canada Steps Up, the final report of
• Efficiency: When systems are integrated those documents to give it context. To
the Task Force to Modernize Securities Legislation in Canada.
with a structured framework like XBRL, use data locked in a document or The University of Toronto’s Capital Markets Institute (CMI)
human resources within the enterprise spreadsheet, it must be manually served as the Research Director for the Task Force. Paul
are freed to perform greater value-added entered, copied, and may need to be Halpern,TSX Chair in Capital Markets at the Rotman School
and Director of the CMI, and Poonan Puri, Associate Profes-
tasks. The routine task can be automated, recalculated. XBRL helps to mitigate sor of Law at Osgoode Hall Law School, were research
and software can be created to crunch this burden. directors. For the full report, visit www.tfmsl.ca.

There’s one thing we would


like to make perfectly clear:
Your desk. Telephone: (416) 978-1912
Fax: (416) 978-1920
Whether you need company profiles, media scans, infosolutions@rotman.utoronto.ca
industry statistics, financial data or articles on www.rotman.utoronto.ca/bic/infosolutions

the latest management trends — if it exists, our


professional research staff will find it. Call or email
us for your free estimate, confidentiality guaranteed.

Rotman alumni are entitled to a 20% discount on research fees.

86 • Rotman Magazine Winter 2007


News Briefs
Cultivating Africa’s Passion
“The problems in sub-Saharan Africa seem photocopies of a computer keyboard.
so entrenched and impossible – but they’re “When I met Michael Dell, I joked with
not; they are entirely solvable,” said Taddy him that he would never make a computer
Blecher in his second appearance in the as thin and light-weight as ours.” From
Rotman Corporate Citizenship Speaker Series on these humble beginnings, the school has
September 14th. Blecher speaks from made great strides. Last year, CDI’s 2,500

Photo: Stephen Watt


experience: he is the co-founder and CEO graduates – who paid only about US$70
of CIDA (Community and Individual tuition a year for their studies – earned
Development Association) City Cam- about US$14 million, an extraordinary
pus, the first tuition-free higher education return on investment. The school keeps
institution in South Africa. Rotman faculty, costs down by requiring students to lend a Taddy Blecher
staff and students gathered to hear his pow- hand with student recruitment, construc-
erful insights on non-profit management, tion and administrative work. “This has replicate the success of CIDA by organizing
leadership and international development. created an enormous sense of ownership in free universities throughout South Africa,
Formerly a senior project leader with the students, a sense of self-belief,” says and eventually, in nearby countries such as
the international strategic management con- Blecher. “One of the biggest challenges we Angola, Lesotho, Malawi, Mozambique,
sulting firm Monitor Company, Blecher have in South Africa since apartheid is get- Namibia and Zimbabwe. He’s most excited
helped found CIDA in 2000 to help tackle ting people to believe in themselves again.” about a new model of education that he calls
some of the problems that plague South Success breeds success, and CIDA has ‘university in a box’. The model involves
Africa, such as AIDS, crime, poverty and the attracted investment from philanthropists acquiring a parcel of land on the outskirts of
overarching tragedy of wasted human like Sir Richard Branson and Oprah a city, and establishing a campus that
potential. “Africa has been treated as the Winfrey, and companies such as Daimler- becomes a knowledge hub and micro-econ-
‘basket case’ of the world,” says Blecher. Chrysler, Dell and Microsoft. Their omy for the surrounding area. Businesses
“But the best way to change Africa is not donations have helped endow the school with run from campus provide training opportu-
through handouts, but through investing in resources and facilities to match its outsized nities for students and allow the school to
Africans.Teach people how to create wealth, ambitions. “When it began, CIDA was the pay for itself. “We don’t solve problems by
and you help them to help themselves.” laughing stock of the educational commu- throwing money at them,” Blecher states. “It
CIDA started back in 2000 with no nity,” said Blecher. “We just really wanted to is by cultivating passion, intelligence and
government support, teachers, buildings or prove it was possible to do things differently.” creativity that we create lasting change.”
equipment: students were taught to type on The next challenge for Blecher is to by Stephen Watt

Rotman Professor Honoured by Papua New Guinea


In September, Rotman Professor David Papua New Guinea during the transition of
Beatty was awarded a 30th Indepen- the country from colonial status to self-gov-
dence Anniversary Medal in recognition ernment and Independence. He currently
of his continuing services to the nation of serves as the Honourary Consul to Canada
Papua New Guinea. He was presented with for the Government of Papua New Guinea.
the Award by Grand Chief Sir Michael This was Prof. Beatty’s third honour from
Thomas Somare, Prime Minister of Papua Papua New Guinea, as he is also the recipi-
New Guinea, during a ceremony held at the ent of an Independence Medal in 1974 and
United Nations in New York City, mark- was made an Officer of the Most Excellent
Photo: John Hryniuk

ing the independence of Papua New Guinea. Order of the British Empire by her Majesty
From 1973 to 1977, Prof. Beatty served as Queen Elizabeth II in a ceremony at
Director of the Central Planning Office and Buckingham Palace in London, UK in 1993.
Economic Advisor to the Prime Minister in by Ken McGuffin

Rotman Magazine Winter 2007 • 87


News Briefs

Rotman Prof.Wins HP Technology for


Teaching Higher Education Grant

Photo: Ken McGuffin


A Rotman professor known for his use of David Dunne, co-directors of the Rot-
technology in the classroom has won a man Teaching Effectiveness Centre
2006 HP Technology for Teaching and Larry Harrison, director, Informa-
Higher Education Grant valued at tion Technology at Rotman, contributed
Christianne Banfield of HP Canada with
more than CAD $80,000. The grant, part to the project proposal. Prof. Mahrt-Smith
of the HP Technology for Teaching “The HP Technology for Teaching ini-
Initiative, is designed to improve student tiative focuses on transforming teaching gram and grant recipients is available at
success and engage faculty through the and learning through technology,” said www.hp.com/go/hpteach.
innovative deployment of mobile technol- Lynn Anderson,Vice President, Market- Prof. Mahrt-Smith joined the Rotman
ogy in the classroom. ing and Alliances, HP Canada. “By School as an assistant professor of Finance in
Jan Mahrt-Smith, an assistant pro- integrating mobile technology in meaning- 2002. He has taught in the School’s MBA
fessor of Finance, plans to redesign the ful ways into their classrooms, instructors and PhD programs, including the first-year
Finance course in the first year of the can increase student achievement and Finance course in the two-year MBA pro-
Rotman MBA program using HP mobile interest and prepare them for greater suc- gram, winning several teaching awards for
technology. The grant includes HP wire- cess in the competitive global workforce.” his work, including the 2005 Roger Mar-
less equipment for use by students and Since 2004, HP has committed US tin and Nancy Lang Award for
faculty. The equipment includes wireless $36 million in Technology for Teaching Excellence in Teaching. He is also at the
HP tablet PCs, a portable digital projec- grants to more than 650 schools world- forefront of bringing innovate technological
tor, and associated equipment. The tablet wide to support its broader education goal teaching tools to the classroom, and is well
PCs are lightweight laptop computers of transforming teaching and learning known for his regular participation in stu-
that allow pen-based input. Prof. Mahrt- through the integration of technology. In dent activities such as MBA Orientation and
Smith will also receive a stipend for his Canada, this is the first year of the Technol- fundraising events. Prof. Mahrt-Smith has
work on the project and will also attend ogy for Teaching Higher Education grant written in academic journals on the areas of
the annual Worldwide HP Technology for program, and HP received many high-cal- corporate finance, agency theory and appli-
Teaching Higher Education conference in ibre applications. More information about cations of asset-pricing and option-pricing.
early 2007. Profs. Uli Menzefricke and the 2006 HP Technology for Teaching pro- by Ken McGuffin

Rotman School Introduces Interactive Trader Simulation Platform


A breakthrough tool in trading education, room using applications and information that
the Rotman Interactive Trader (RIT) they will find in the workplace. The RIT
platform, has been launched by the Rotman trading cases are a prime example of our
School’s state of the art Financial Research learning-by-doing approach,” says Prof. Tom
and Trading Lab (FRTL). McCurdy, the FRTL's founding academic
Developed at the School, the software director and co-author of the trading cases.
creates a real-time trading environment A prototype of RIT was introduced
where participants are presented with chal- last February at the Rotman Interna-
lenging situations that are designed to teach tional Trading Competition (RITC)
different types of investment, trading, and where over 150 students from 36 schools
hedging strategies in a hands-on manner. competed for over $15,000 in prizes. “The
The software supports equity, fixed software performed flawlessly,” says Kevin schools. The Rotman Interactive Trader is a
income, and derivatives products and has Mak, competition manager and chief response to the overwhelming demand for
been designed to function on either a local architect of RIT. “At the open and close of more educational tools for these unique set-
university network or via the Internet. trading, we had upwards to 50 trades per tings. Rotman Interactive Trader is available
“The RIT is a cornerstone of our second being processed by the system.” to academic and private institutions on an
dynamic learning facility, which enables stu- Trading labs such as the FRTL at Rot- annual software lease basis. For more infor-
dents to apply, critically examine, and man have been one of the focal points for mation. visit http://rit.rotman.utoronto.ca
develop what they have learned in the class- development at North American business by Ken McGuffin

88 • Rotman Magazine Winter 2007


Tata Veteran Focuses on
Building Knowledge in India

Photo: Stephen Watt


Integrative thinking, characterized by the population. In 1974, when TCS won a con-
ability to create novel solutions in the face tract to design software for Burroughs, the
of seemingly intractable challenges, finds an American-based computer manufacturer, Dr. Faqir Chand Kahli
impressive champion in Dr. Faqir Chand the actual computer model that the software all, demands the capability to think clearly,
Kohli, commonly known as the father of was intended for had yet to be cleared for which we have in abundance.”
India’s IT industry. Former vice-chairman import into India.Without the ability to test Since officially stepping down as chair-
of Tata Consultancy Services (TCS), their software, Dr. Kohli’s team had to rely man of TCS in 2000, Dr. Kohli has focused
Dr. Kohli shared his thoughts on the chal- on a significant degree of guesswork, and yet on advancing engineering education in
lenges of creating an creating, nurturing the software, once delivered, worked almost India. With the Indian Institute of Technol-
and growing India's software industry in a flawlessly, and the contract led to dozens ogy, Bombay, and India’s Ministry of
session of the Rotman Integrative Thinking™ more with Burroughs and other firms. Information Technology, he initiated a proj-
Speaker Series on October 5. Dr. Kohli credits his own personal ect to graduate 3,000 microelectronic
Born in Peshawar, Pakistan, Kohli joined resourcefulness on an ability to “learn how engineers annually at the master’s level. He
TCS in 1969, after receiving engineering to learn,” developed during his days as a has also promoted efforts to produce
degrees at Queen’s University and MIT. In university student. In his efforts to build affordable computers and open source soft-
his three decades at TCS, he transformed it TCS into an IT giant, he has been aided by ware in Indian languages, to help spread the
from a 10-person operation to Asia's largest the natural strengths of the Indian popula- benefits of the technological revolution as
IT consulting, services and business-process tion: “We Indians not only speak English, widely as possible. His current brainchild is
outsourcing organization, with 80,000 we can think in English,” he says.The agrar- to use computer aided sounds and images
employees working in India and around the ian bias of the Indian economy has also to impart basic literacy, particularly to illit-
world. The company’s phenomenal growth proved to be a surprising blessing. “We erate adults, in a matter of months. “Your
was achieved despite early resistance from missed out on the industrial revolution, so education never ceases,” says Dr. Kohli. “If
the Indian government, which viewed com- we lacked the constraints of that revolu- one has learned how to build knowledge,
puter technology as irrelevant to the needs tion, namely the mechanical mindset,” says one will never become obsolete.”
of the nation’s largely rural, impoverished Dr. Kohli. “Information technology, above by Stephen Watt

As Canadian as Hockey and Beer


restaurant’s famous co-founder and name- chise owner of a local Dairy Queen. He
sake.To help set the record straight, Joyce came to know Tim Horton, the NHL
recently published a book with author player, as an occasional patron of his Hamil-
Robert Thompson, titled Always Fresh: ton donut shop, and became an investor in
The Untold Story of Tim Hortons by the Man the business in 1965. Following Horton’s
Who Created a Canadian Empire (Harper- death in a tragic automobile accident in
Collins, 2006). On October 11, Joyce sat 1974, Joyce purchased Horton’s share of
down with Prof. David Beatty in Rot- the partnership from his widow, and suc-
man’s Fleck Atrium before an audience of cessfully franchised the company over the
Rotman students, faculty, alumni and next two decades. In 1995, with more than
friends to discuss the book and the trans- 1,000 Tim Hortons restaurants in opera-
formation of Tim Hortons from a small tion, Joyce sold the chain to Wendy’s
Ron Joyce (pictured above) helped build town restaurant into the billion dollar Restaurants, led by his golfing buddy
Tim Hortons into one of Canada’s most enterprise it is today. Dave Thomas, in a deal that made Joyce a
successful home-grown companies, earn- Joyce left his home in Tatamagouche, billionaire and the largest shareholder of
ing over a billion dollars a year, and Nova Scotia, at the age of 15 and served as the burger chain.
boasting a brand as integral to our national a sailor with the Royal Canadian Navy in Explaining the phenomenal success of
culture as hockey and beer – and yet his Korea, and as a police officer in Hamilton, Tim Hortons, Joyce spoke of the company’s
name is often overshadowed by that of the Ontario, before trying his hand as a fran- business philosophy, which puts the needs
Continued on page 90
Rotman Magazine Winter 2007 • 89
News Briefs

The Costco Story


In the world of retail, making your cus- South Korea, five in Japan, and four in Taiwan.
tomers feel insecure can be a good thing, “We do $60 billion per year in sales in the
according to Louise Wendling. “Our cus- U.S. and $9 billion in Canada,” says Wendling,
tomers learn pretty quickly that if they see “and we now have six million Canadian card-
something they like in one of our ware- holders, and 47 million worldwide.”
houses, they have to buy it right away, While Wal-Mart is renowned for its

Photo: Ken McGuffin


because it won’t be there when they come low ‘SG&A’ [selling, general and adminis-
back.” That’s just one of the tips Costco’s trative expenses], Costco’s is actually
senior vice president and general manager, significantly lower, she says. “Our SG&A
eastern Canada region, shared with the is 9.74 per cent, while theirs is 17.97.
crowd in the inaugural Rotman Merchandising And that’s not a result of us paying low
Rotman Professor George Fleishman with
Experts Speakers Series on September 28th. wages to our employees. After four years Louise Weldman.
To hear Wendling tell it, the Costco on the job, our cashiers make $50,000,
story is one of a simple concept with excel- plus bonuses; and all Costco employees product below cost, but jacks up the price
lent execution. “In a nutshell, we offer get benefits and pension, which we pay of other items significantly to make up for
goods and services at the lowest possible for entirely.” it.] And in addition, we never go above a 14
price in order to give small and medium- Costco’s business is driven by knowl- per cent margin. For us, the ‘right price’
sized business owners volume-buying edge of its customer, she says. “Our must meet these two rules.” A shopper may
power from which individual consumers customers have high disposable incomes, and find peanut butter for 10 to 20 cents
can also benefit.” they demand high quality. A vendor might cheaper somewhere else, she says, but if
Founded by James Sinegal and Jeffrey offer us imitation-crystal vases for a great they look closely, “they will see that the
Brotman, Costco opened its first warehouse price – but we wouldn’t be interested, vanilla (or another product) costs double
in Seattle in 1983. Sinegal had started out because we know that our customer wouldn’t what it costs here.”
working for Sol Price at Price Club be interested.” “Instead of asking, ‘how much can we
(which Price founded in 1976), and the Look around a Costco warehouse, and sell this item for?’, we ask, ‘how little can
Costco business model was similar to Price you’ll find all categories of goods, but very we sell this for?’ Maximizing volume is our
Clubs’: both charged a membership fee and little choice within each, she notes. “We focus goal. For instance, we recently dropped the
catered primarily to small-business owners, on having very low SKUs [the total number of price of our cheesecake by $2, and sales
carrying quality, brand name merchandise at separate products in a store]. We only have increased by 60 per cent.”
substantially lower prices than are found at 3,900, while The Bay, for instance, has one Future plans for Costco include gas sta-
conventional sources. Price Club and Costco million. Our buyers’ choices are tougher, so tions, travel, cars and liquor. “One key
merged in 1993, and the company’s name that our customers’ choices are easier. If a challenge we face is keeping the government
was changed to Costco Wholesale in 1997. particular buyer goes over their SKU limit, I out of our business,” says Wendling. “Maybe
Today, Costco employs about 118,000 immediately ask them why.” the government should try modeling its
full- and part-time employees at its 483 loca- The right price is another key to organization on ours. If they did, I’m pretty
tions: 354 in the U.S. and Puerto Rico, 68 in Costco’s philosophy, she adds. “We don’t sure we wouldn’t be paying such high taxes!”
Canada, 29 in Mexico, 18 in the UK, five in have ‘loss leaders’ [whereby a retailer sells a by Karen Christensen

Continued from page 89

of franchise owners front and centre. “Con- Still, it’s one thing to establish a thriv- Joyce’s own passion for the business has
trary to a lot of the major franchise ing chain, and quite another to turn that rubbed off onto the nation as a whole. “I’m
systems, I always considered my customers chain into a national icon. Joyce believes very fortunate. I fell in love with the
to be the store owners themselves.” Under that Tim Hortons has benefited from a industry. I lived and breathed it,” he says. “I
Joyce’s leadership, the company developed longstanding strategy to focus on smaller don’t know anyone who’s passionate about
a central distribution system that provided markets: “We decided, early on, to domi- what they do who isn’t successful. There
store owners with product at significant nate the industry in each small town,” he are so many opportunities for entrepre-
savings. The distribution system “worked states. “When young people migrate to the neurship in this country. If you’re creative,
out for everyone,” says Joyce, “and it major centres, they bring their loyalty innovative and stay ahead of everybody
became an integral part of what made this with them, and think of Tim Hortons as a else, you’ll never go wrong.”
company great.” place like home.” It’s also possible that by Stephen Watt

90 • Rotman Magazine Winter 2007


Volunteers Recognized for Commitment to Rotman
In September, eight of the Rotman School’s top volunteers were honoured for their outstanding personal service to the University of
Toronto at the 17th annual Arbor Awards.The 2006 recipients are:

Geoffrey Beattie, President, The Woodbridge Company Ltd.


Geoffrey Beattie is a long-time member of the Dean’s Advisory Board, generously contributing his time, boundless energy
and expertise to the School. Geoff has also helped guide and mentor students through the MBA Candidates Mentorship pro-
gram run by the School’s Corporate Connections Centre.

Purdy Crawford, Counsel, Osler, Hoskin & Harcourt LLP


Over the past two years, Purdy Crawford has devoted much of his time to the Director’s Education Program (DEP), a joint ini-
tiative between the Rotman School of Management and the Institute of Corporate Directors (ICD). In addition to his role as
a Fellow at the Institute, Purdy has served as the program’s Executive-in-Residence and been a keynote speaker at a number
of School events.

Dr. Tony Fell, Chair, RBC Capital Markets


As a donor to the L.R.Wilson/R.J. Currie Chair in Canadian Business History and a member of the Canadian Business
History Advisory Board, Tony has had a significant impact in the development of the nation’s first course in Canadian
Business History. As a guest speaker,Tony has provided the students with valuable advice and guidance.

Anne-Mette de Place Filippini, Vice President and Portfolio Manager, AIC Ltd.
For more than five years, Anne-Mette has helped lead the School’s fundraising campaign as a member of the Campaign
Committee and the Rotman Advancement Board. In addition to being an active volunteer, Anne-Mette has been very
involved in helping develop the curriculum for the Canadian Business History Course. She has participated in the
course as a guest lecturer and has co-authored a case study with Professor Joe Martin.

Mary Hallward, Executive Vice President, Director and Chief Risk Officer, McLean Budden
Mary is a proven leader in fundraising for the Rotman School.As a loyal and generous donor to the School and the Uni-
versity, she is also an active member of the Rotman Vision Fund Committee. Mary has been a driving force in helping
the school to become a leader in annual alumni giving.

Delaine Hampton, Director, Consumer & Market Knowledge, Procter & Gamble
As a long-time member of the Marketing Advisory Board, Delaine has generously volunteered her time and energy in
helping design a truly integrative Marketing curriculum at the Rotman School. She has also participated in a num-
ber of School events as a guest speaker and presenter and has always been willing to offer her expertise to faculty,
staff and students.

Andrea Rudnick, Vice President, Dundee Securities Corp.


Andrea is a long-standing member of the Rotman Alumni Board and has provided sage advice and direction in helping Rot-
man grow its alumni programming. Andrea helped spearhead Rotman’s successful new monthly networking events and is
a loyal supporter of the annual Rotman Vision Fund.

Bill Young, President, Bealight Foundation


Bill continues to show his commitment to the University through his exceptional work at the Rotman School.Through
the Bealight Foundation he established the MBA Fellowship for Social Entrepreneurs, and serves on its selection committee.
Bill has also committed a generous amount of time to mentoring the fellowship recipients during their time at Rotman
and beyond.
by Catherine Riddell

Rotman Magazine Winter 2007 • 91


News Briefs

Dean Named to Inaugural Premier’s Research Chair


Last September, the Ontario Government McGuinty said. “Our collective devotion
announced that it was investing $3 million to research and innovation will lead to
to establish the University of Toronto’s first exciting new products and services, which

Photo: John Hryniuk


Premier’s Research Chair at the Rotman will in turn, create wealth, raise our stan-
School, to be held by Dean Roger Martin. dard of living and enhance our shared
“The selection of Roger Martin to this quality of life. Roger Martin, as Chair, will
important position supports the McGuinty bring ideas to the table that will help
government’s commitment to innovation and improve Ontario’s productivity and com-
increasing Ontario’s global competitiveness,” petitiveness.”
said Ontario Minister of Economic Develop- In addition to his role as Dean of the is now $6,100, or 12.4 per cent, behind the
ment and Trade Sandra Pupatello. “With Rotman School, Martin is also Chair of the median of its 16 peer jurisdictions.
this investment, we are taking steps to Ontario Task Force on Competitive- “We are calling for a shifting of our
develop Ontario into a leading jurisdiction, ness, Productivity and Economic overall attitude from collective complacency
which will mean greater opportunities for Progress. The Premier’s Research Chair to a shared determination to close the pros-
Ontario families in the future.” will reside within the Rotman School and perity gap,” says Martin. “If party platforms
In total, the government is spending will be separate but complementary to the over the past few elections are any guide to
$31 million to establish Research Chairs at Task Force. public attitudes, it’s clear that issues related
selected universities. “Our government is In November, the Task Force released its to our competiveness, productivity, and
committed to research and innovation, so Fifth Annual Report which calls for an invig- prosperity are not seen as centrally impor-
that everyone in Ontario has a fair shot orated debate on the importance of the tant to the public. We need to raise the
at success and more opportunities to prosperity agenda. Ontario’s economy is one volume on these issues.”
build a better life for themselves and of the world’s most successful; and most signs The complete report is available at
their families,” Ontario Premier and Minis- reinforce this. But it is not meeting its full www.competeprosper.ca
ter of Research and Innovation Dalton potential, and the province’s GDP per capita by Ken McGuffin

Building Diverse
Workplaces
On November 6, “Building Diverse
Workplaces: Models for Successful
Inclusion of LGBT Employees” drew a
full audience to the Fleck Atrium for a dis-
cussion of sexual diversity in the workplace.
Four panellists, including Susan Black, a From left, David Rayside, Susan Ursel, Susan Black and Brad Salavich.
consultant and former head of Catalyst
Consultants, gathered to discuss the “Your approach to LGBT issues is a bench- uality, or face the legal consequences,”
opportunities available to companies that mark, an indicator that you are a progressive stated David Rayside, head of U of T’s
create a welcoming work environment for employer,” said Brad Salavich, LGBT pro- Sexual Diversity Studies. While grassroots
employees identifying as lesbian, gay, bisex- gram manager for global workforce diversity activism is important, cultural change must
ual or transgendered. “Companies are more at IBM. Susan Ursel, an employment also be promoted at senior levels if it is to
effective in generating revenue if their equity lawyer, agreed, calling ‘queer succeed. “Managers will get on board if
employee base reflects their customer base,” employees’ the “canaries in the coal mine”, they see a business benefit,” argued Black.
said Black. “They also enjoy better business whose experiences on the job, positive or “You need to sell [sexual diversity] as not
outcomes – with more innovation and cre- negative, are indicative of a company’s atti- just an equity or a legal issue, but as a busi-
ativity, and less group think – when the tude toward workers of all stripes. ness issue. If you can bring all your
workplace is diverse.” In Canada, employee groups and identities to work, you’re going to be more
In the war for talent, companies seeking labour unions have been active in promot- engaged and more productive, and the
to attract and retain top employees must vie ing a social agenda. “Employers have had to company will reap the rewards.”
to prove their socially conscious credentials. address harassment based on gender or sex- by Stephen Watt

92 • Rotman Magazine Winter 2007


Investment Fund Creates New Opportunities for MBA Students
Rotman students interested in a career in money. They will learn so much more
funds management will gain not only the working with a real money portfolio – and
theoretical background in value investing, that experience will set them apart when
but also practical experience investing ‘real they graduate.”
money’, thanks to a generous $1 million Prof. Kirzner teaches Rotman’s sec-
gift from John Watson, (BCom ‘66, MBA ond-year course in Value Investing, a course
‘67), founding partner of Sprucegrove made possible by Watson’s 2003 gift. The
Investment Management Ltd. course, which has a hands-on approach,
The gift will provide students with the divides students into teams that provide
first opportunity in the School’s history to investment advice to a client. In the past,
work with a live portfolio. This is Watson’s the class has provided year-end recommen-
second first-of-its kind gift to the Rotman dations for its paper portfolio, but in 2006 Prof. Eric Kirzner with John Watson
School: in 2003, he provided funds to the first portion of Watson’s $1 million gift
establish the John H. Watson Chair in was invested based on recommendations of in the field,” said Watson. “Today, more and
Value Investing, the first Chair in Canada the class of 2005/2006. more students are realizing the importance of
established to focus specifically on Value The 2006/2007 Value Investing class value investing and the challenge of finding
Investing, which involves the search for will inherit the portfolio and, under the bargains that, from time-to-time, are out
companies whose share prices are under- oversight of a committee, will make invest- there to be discovered. With this investment
valued. This ‘bargain-hunter’s’ approach to ment recommendations based on fund, Rotman students will gain practical
selecting stocks assesses a company’s intrin- fundamental research and a rigorous experience that will be helpful to a career in
sic value using a series of defined approach to valuation. The $1 million investment management.”
quantitative and qualitative assessments. investment fund, held in trust for the Rot- “Thanks to John’s generous support,
“This is a fantastic opportunity for the man School, will be reinvested in the Rotman School will nurture a genera-
students and really changes things,” says perpetuity to provide generations of Rot- tion of extremely well-trained security
Finance Professor Eric Kirzner, holder man students with invaluable ‘real money’ analysts who have the tools, ethics and
of the John H. Watson Chair in Value investing experience. experience to enhance Canada’s prosperity
Investing. “It will be interesting to see how “When I established the Chair, there in investment management,” says Dean
their investment strategies change when were few students who even knew what value Roger Martin.
they know they are working with real investing was – never mind having expertise by Catherine Riddell

Live@Rotman: Mavericks at Work


ideas profiled in Taylor’s book, Mavericks at
Work:Why the Most Original Minds in Business
Win (William Morrow, 2006). “There is an
ironclad relation between what a business
stands for, and its success.The best strategies
today involve a point of view about creating
a better future for your industry,” says Taylor.
McEwan, who Taylor lauds for his “open-
source leadership,” agreed. “By stepping out
of ‘line’, you can get a clear view of the tar-
get. It’s a question of problem definition. By
approaching a problem in a unique way, you
can generate alternatives that others can’t.”
Others profiled as great “architects of partic-
Bill Taylor, co-founding editor of Fast Com- former chair and CEO of GoldCorp ipation” in the book include Whole Foods
pany magazine and New York Times columnist Inc. (above, right) as part of the ongoing Market, Craigslist, and Pixar Anima-
(above, left), visited the Rotman School on Live@Rotman series. McEwan’s is one of 30 tion Studio.
October 18th along with Rob McEwan, highly innovative businesses with disruptive by Karen Christensen

93 • Rotman Magazine Winter 2007 Rotman Magazine Winter 2007 • 93


Alumni Profile: Sandra Hanington (MBA ’92)
by Catherine Riddell
Catherine Riddell: Describe your role learned rule number one was that you
at BMO. never go far wrong if you invest in market
research. That became a rule of thumb for
Sandra Hanington: As executive vice- pres- me later on – make sure you understand
ident, customer strategies and marketing, I what your customers want. If you wait for
head up the marketing, product and direct them to tell you, it’s often too late.
bank areas for our personal and commercial
business. For me it’s about understanding CR: Fast forward now to the date you
our customers, putting together the right are set to retire. Looking back on your
offers that meet their needs, communicating career, how would you like to have
those offers to our customers and to our made your mark?
employees, and delivering great service
through our direct channels. SH: I would like to see the extent to which
I’ve helped make financial services much
CR: How did you get where you are today? more customer-centric – a business where
we meet customers’ needs and deliver
SH: I worked for a bit as an engineer and exceptional service and are wildly success-
ended up doing industrial marketing when I ful for our shareholders, as a result. As a CR: How do you know, early on, that the
was with Sunoco. From there, I made the leader, I would like to have a legacy of hav- culture will be right for you?
shift into financial services marketing. Most ing helped the people that work for me
recently, I spent three years in Chicago in a develop really engaging, challenging, SH: Find out what their measures of success
very similar role with our U.S. personal and rewarding careers that make a significant are. Their measures of success should be a
commercial banking group, Harris Bank. contribution to the organization . very clear pointer to the values of the
It was a huge endeavour to move my whole organization, and a way for you to test if
family down there, including my three chil- CR: Do you have a mentor? those align well with you. So if you’re all
dren, but it was a wonderful adventure for all about sales and that’s where your scorecard
of us and I'm definitely the better for it. SH: I do! She’s a Rotman grad, a woman I starts and stops, an organization that meas-
once worked for. She is very smart, is a ures success on some other scorecard, or
CR: How do you marry your skills as a very strong marketer and has a great work- doesn’t measure that at all, isn’t going to be
licensed professional engineer and an life balance. I continue to admire and a very good fit. You also have to know
MBA grad in your current position? respect her for all of those reasons. where you want to feel your impact. In
their heart of hearts, most people know if
SH: Surprisingly well! My engineering back- CR: Do you have any advice for current they want to drive things from the centre
ground was really demanding, so I’m not MBA students who aspire to a career in or be out in the field making it happen. I
easily frightened by complex things. In fact, financial services? think having that kind of self-knowledge is
complexity was one of the things that really important too.
attracted me to financial services because I SH: This is garden variety advice, not just
knew it would be intellectually challenging, for the financial services: make sure you CR: What’s next for you?
and I liked that. I think the whole strategy and love the place where you’re considering
problem solving orientation has also stood me working. Make sure the culture feels right SH: I just returned to Canada in this role, so
in very good stead. The practical engineering to you, that it brings out the best in you. trying to be successful in this job is really
bent means that I’m very results-focused and Don’t make short-term decisions that go important. Right now it’s about really try-
that works well for our business too. against your nature. Secondly, make sure ing to figure out how to take our retail
there’s a way for you to contribute to the banking offerings to the next level and how
CR: What is the most important thing you organization’s success – that whatever your to win and keep our customers’ trust and
learned at Rotman? role is, that it’s helping to move the organ- business. In this market, there are all kinds
ization forward. From that you can build a of opportunities for a smart, customer-
SH:The first thing was learning how to put very progressive career and feel good at the focused organization. After this interview?
together a persuasive business argument. end of the day.You’ll go home feeling that More meetings and a dinner. It’s a really
Secondly, in the business case simulations I you really made a difference. busy schedule, but I love what I do.

94 • Rotman Magazine Winter 2007


Alumni Profile:Trung Nyugen (MBA ’87)
by Belmira Amaral
Belmira Amaral: Describe your role as cultural aspects of the market, which are
senior vice president of finance and fundamental to being successful in any
strategic alliances at La Caisse Centrale given market. It also helped me look at
Desjardins du Quebec. things south of the border when we set up
a branch in Florida, providing me with a
Trung Nyugen: My major responsibility at global view.
Caisse Desjardins – similar to that of a chief
financial officer – is to take care of all the BA: As a company with strong roots in
financial reporting, as well as human Quebec, what challenges and opportuni-
resource and administration strategic plan- ties do you expect to encounter as
ning, and communication within the Desjardins expands its operations into
international banking division. The strate- the Ontario market?
gic alliances portion of my title was added
a few years ago.When we were thinking of TN: Our main strategy for building the
expanding outside of Quebec, instead of Desjardins Credit Union in Ontario is
going the acquisition route we decided to based on the existing human resources that
form strategic alliances with the co-op sec- are there.We transferred just one executive
tor and the credit unions outside of from Quebec to maintain the structure. So outside of Quebec into under-served
Quebec. I am also responsible for dealing we’ve given them a lot of leeway and sup- regions of Canada.
with rating agencies such as Standard and port, without imposing our way of doing
Poors, Moody’s and DBRS. things. The unit is doing extremely well: it BA: What are the most valuable tools the
is two years ahead of its business plan and MBA provided, with respect to advanc-
BA: In what capacity did you start out in very profitable. Normally, when you set up ing in your career?
this industry, and what were the keys to a new unit, you give it five or six years
advancing to your current position? before it even reaches the break-even TN: The interaction between my peers
point. We recently engaged the Rotman and the teaching staff is something I val-
TN: I started at the Bank of Montreal Impact [student consulting] group to look ued very highly. The EMBA gave us a
in 1975, in an administrative and credit at a small market in the Guelph and Cam- structure for our thinking process. There
function at the domestic level, and bridge area. There is no point for was never a wrong or right answer; it was
worked for about two years at the inter- Desjardins to try to compete against the big about ‘how do you perceive things?’ and
national level before joining the five in Toronto. Our strength lies in provid- ‘how would you deploy that?’The faculty
Desjardins Group in 1984. Desjardins ing excellent service to areas that are not as were down-to-earth and very well con-
sent me to the Rotman School to do my well serviced. nected to the market, so they were able
Executive MBA in 1987. I was the first to interact with us on real issues, instead
person at Desjardins to do an MBA. This BA: How do you see Desjardins pro- of only referring to concepts. At most
was a great opportunity, since it coin- gressing at the international level in the schools the faculty are highly academic,
cided with the opening of our Toronto years ahead? so there is a big gap between the reality
office. The EMBA was a strong indicator and the concept.
of me advancing in my career. I was a sen- TN: At this point we are focusing on
ior manager at the time, and the day after Canada and U.S., what we call our ‘natu- BA: What’s next for you?
I completed my degree, my boss made me ral market’. But we are conducting a
vice president. study to find an international strategy that TN: Ensuring that our strategy on moving
Although I worked at BMO in inter- takes into consideration the needs of our out of Quebec is successful.We have a long
national banking based out of Toronto for members. We are much more involved in way to go. The case we are making in
almost two years, when I was transferred the U.S., where we have just been granted Ontario and other Canadian locations is
out of Quebec I was still a little discon- a license to open a Caisse Centrale that we are very customer-oriented. If we
nected from the Canadian scene. Desjardins branch as part of the Des- can bring our strengths together to the
Mingling with the other students at Rot- jardins Bank that we have in Florida. So table, I believe that the co-op sector can be
man gave me a better perspective on the bulk of our efforts right now are con- much stronger, and the Canadian customer
Canadian culture. We underestimate the centrated in the U.S. and expanding will be better served.

Rotman Magazine Winter 2007 • 95


Alumni Capsules

Adam Yi Shen (MBA ’00)


Engagement Manager,
McKinsey & Company
Lives and works in: Shanghai, China

Best thing about my job: Able to work


with interesting and exciting people and
travel to various new places.

Biggest challenge of my job: Lifestyle is


tough as I have to fly away from home dur-
ing weekdays. Especially when I am on a
project in foreign countries, I need to fly
over 15 hours per week.

Most important skill(s) for my job: Com-


munication skills. Each day, I have to deal
with and deliver the message to clients.
Internally, there is constant flow and
exchange of ideas. The word that best describes me: Easy-going. Words of Wisdom: Balance is always
important. Life vs. work, family vs. busi-
Proudest moment: The moment my head How I relax: Traveling. ness, self interest vs. group interest,
office listened to my recommendation and pursuit of career and money vs. happiness
decided to reverse a billion dollar invest- Most important thing my MBA taught and health. There are many important
ment decision of a regional office. me: Team work. things in life.

John Shepherd, CFA (MBA ’98) The most innovative thing I’ve ever done
is: Structuring a principle protected note
Portfolio Manager, tied to the price of CO2 emissions, coal
RBC Investment Management UK Ltd. and uranium.
Lives and works in: London, England
How I relax: Saturday afternoon: the FT in
Best thing about my job: Every day is like one hand and a Guinness in another.
no other. Markets are dynamic with infor-
mation and news coming out 24/7. Most important thing my MBA taught
me: Empathetic skills such as listening and
Biggest challenge of my job: Being on noting the behaviour of colleagues. Learn-
the ‘right’ side of the trade – or having the ing to address issues directly will help you
conviction to see it to its conclusion. build consensus in any organisation.

Most important skill(s) for my job: Rational- Words of Wisdom: Judge a man by his ques-
ity, ability to act quickly, humility, consistency tions rather than this answers – Voltaire. To
and passion: you have to love the markets. live a creative life, we must lose our fear of
being wrong – Joseph Chilton Pearce.
The word that best describes me: Patient Who loves not women, wine and song remains
– with people and with investments. a fool his whole life long – Martin Luther.

96 • Rotman Magazine Winter 2007


Ali Yu (MBA ’97) Proudest moment: By far, my proudest
moment was the birth of my dear son,
Senior Director, Business Management, Nicholas, now five years old.
World Markets Technology,
Canadian Imperial Bank of Commerce The word that best describes me: Always
Lives in: Markham, Ontario prepared
Works in:Toronto
The most innovative thing I’ve ever
Best thing about my job: My role is to done is: My love for the arts and speech
drive efficiency and effectiveness in regards has never diminished, and I enjoy a side
to project delivery. As a member of the career as a DJ at a radio station.
leadership team, I have the opportunity to
stay in tune with work dynamics at an How I relax: Going to a spa.
enterprise-wide level while also perform-
ing within specific functional areas. Most important thing my MBA taught
me: The ability to deal with ambiguity,
Biggest challenge of my job: Realizing diversity and multiple priorities.
benefits associated with implementing pro-
grams and processes when the associated Words of Wisdom: To be optimistic:
benefits cannot be immediately perceived always see the glass as half full as What the future holds for me: To be able
by the impacted parties. opposed to half empty. Also, while it is to strike a delicate balance between the
good to work hard, it is definitely better demands of my professional life and my
Most important skill(s) for my job: Rela- to work smart. personal life.
tionship management

The word that best describes me:


Azam N. Foda (MBA ’00) ‘Enthusi(azam)’ for growth and learning.
Appetite for growth is the driver, and con-
Chief Financial Officer, Par-Pak Ltd stant learning provides the fuel for the engine.
Lives in: Oakville, ON
Works in: Brampton, ON The most innovative thing I’ve ever done is:
My innovation is focused on process rather
Best thing about my job: Belonging to a 29- than on product. There are numerous
year-old, financially healthy and incremental improvements in my tool kit to
still-expanding business. My finance team support growing businesses.
functions as true business partners, guided by
the principals of the corporation and free of How I relax: I enjoy music and watch rock
any targets or expectations set by the street. shows in my home theatre. Strumming on
my guitar, spending time with my family and
Biggest challenge of my job: Balancing going for long drives in the country side.
the diverse viewpoints of multiple stake-
holders to achieve positive results for the Most important thing my MBA taught me:
organization as a whole. Integrative thinking and the ability to quickly
understand cross-functional perspectives.True
Most important skill(s) for my job: The learning came from interactive classroom and
ability to present numbers that speak for group activities.The EMBA program provided
themselves. Clear, concise communica- me years of broad-based experience com-
tion is key. pressed together in a small time frame.
What the future holds for me: A future
Proudest moment: Every evening when I Words of Wisdom: If one desires a change, filled with continuous professional and per-
reach home and am greeted by my three one must ‘be’ that change before that change sonal growth coupled with an inner
young daughters aged three, six and ten years, can take place. But do not change your core satisfaction of having always put my best
and every time I see my wedding pictures. values or your integrity. foot forward.

Rotman Magazine Winter 2007 • 97


John Lee (MBA ’77) around the back office operation of the
company in 3 months.
Senior Vice President and Chief Operating Offi-
cer,AEGON Life Insurance (Taiwan) Inc. The word that best describes me: Motivator
Lives and works in:Taipei,Taiwan
The most innovative thing I’ve ever done
Best thing about my job:Motivating peo- is: Shape people and programs to deliver
ple through formal people programs and highly visible business results.
ongoing operational improvements with
visible deliverables. How I relax: Play tennis, basketball and golf.

Biggest challenge of my job: Providing Most important thing my MBA taught


necessary infrastructure to support fast me: Organizational Behavior Management
business growth.
Words of Wisdom: Work hard, play hard
Most important skill(s) for my job: People and have fun!
resource management.
What the future holds for me: Further my
As an “import” from
Proudest moment: career growth to become the CEO of a
Hong Kong/North America, I turned world class life insurance company in Asia.

Amy Charette (MBA ’00) The words that best describe me: Effec-
tive and enabling. Able to get things done.
P.Eng., MBA, CMC, CPIM
Director of Replenishment for Consumables and The most innovative thing I've ever
Pharmacy / Hudson's Bay Company done is: I attempt to incorporate innova-
Lives in:Toronto tive ideas and solutions in all of the
Works in:Toronto/Brampton projects and teams that I participate in. I
encourage others to think about solutions
Best thing about my job: Knowing my in a new light and to work with each other
actions and those of my great team can in a new way.
improve a customer’s day and directly
impact the company’s bottom line. How I relax: Playtime with the kids.
Lego and Fisher-Price Little People are
Biggest challenge of my job: Making sure still as much fun as when I was a kid. Each
everyone's skills and abilities are fully used to weekend we are out exploring Toronto
solve a problem or embrace an opportunity. through the eyes of a toddler – the Zoo,
Pioneer Village, Science Centre, ROM and
Most important skills for my job: Ability the local park.
to prioritize inventory investment, team
member focus, store resources, and Most important thing my MBA taught me:
vendor resources. Communication and How to best use available resources to achieve
problem solving. great results. Integration in true form.

Proudest moments: The major moments of Words of Wisdom: Find a way to leave
motherhood make me most proud: seeing something better than you found it
my two beautiful girls, hearing them say while having a positive impact on those
“Mommy” for the first time, and helping around you.
them learn and grow. Professionally, each
time I have helped enable a team to achieve What the future holds for me: Continu- can about supply chain management, par-
something previously impossible. ing to grow, learn and apply as much as I enting, and other passions.

98 • Rotman Magazine Winter 2007


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© Robert Half International Inc.


CLASS NOTES Editor: Jack Thompson

What’s Next? – How about another issue of Rotman filled to the brim with your class notes. Thanks to everyone who contributed to make this
section bigger and better than ever.
Our next issue is titled The Risk Issue, which provides a good excuse to make the Class Notes a bit more creative and ‘risky’ as well. So don’t
hold back, tell us about anything newsworthy: bonus marks for artistic impression!
If you’re thinking of submitting a class note, we’ve made it easy for you by setting up this web page, which includes a place to upload
photos: www.rotman.utoronto.ca/alumni/forms_classnotes.asp. Deadline for the next issue (Spring/Summer 2007) is Friday, March 16, 2007.
As a reminder, the Class Notes are also viewable on the Alumni Portal. Contact us if you need access by e-mailing alumni@rotman.utoronto.ca.
Thank you, and keep them coming! – Jack

MBA/MCom/DBA Republic, and one each in Romania and 1965


Colombia. Douglas writes: “Each of these MBA Class Champion:
Full & Part-Time has elements for future interesting unbeliev- Cam Fellman
able stories!” Following this, he took two Cam.Fellman65@rotman.utoronto.ca
groups to Cuba on a learning program, and
Reunion Alert! for the past 10 years, has been involved in a
program in Toronto where he has offered In Memoriam
All MCom and MBA classes in hon- free management assistance to the not-for-
oured years – i.e. those that end in profit sector. “I have come to the conclusion It is with great sadness that we inform
either a ‘2’ or a ‘7’ – are invited to that management is an art, not a science,” he you that our classmate and dear friend
return to the Rotman School on May 31, writes. “You just can’t learn it by reading a Norm Harris passed away In Octo-
2007, to celebrate Reunion 2007. For book. There is an unlimited market for ber of heart failure. I am sure we will
details, contact your class champion(s) opportunities working with the not for prof- all miss Norm’s wry humour and the
or Michelle Zathureczky, manager, its so my days will never be dull.” protracted stories only he could tell
volunteers and reunion coordinator at like the one at our golf dinner in July.
416-946-3665. You can also visit 1964 (Cam Fellman)
www.rotman.utoronto.ca/alumni/ John Bulloch was the recipient of the
reunion.htm. Rotman Distinguished Business Alumni of
the Year Award in 1987. He had plans to Bowes Dempsey is happy to say that his
take a doctorate at the University of Indiana son Frank, just having finished a 10 year stint
1956 but two babies disrupted that idea. “It was in the French Army and leaving with the
Russell Smith’s varied career has in our accounting class that the professor rank of captain, is now enrolled at the Uni-
included stops in Toronto, Ottawa and var- asked if anyone could help pick up a class at versity of Warwick (England) to get his
ious European cities, stints at Dexter Ryerson where the lecturer had died the MBA. The Dempsey Corporation, pictured
Corporation, Nortel and other technology previous evening of a heart attack – the rest below at a company golf outing, was
companies, and more recently, work in the is history,” he writes. “I wrote that history recently voted the seventh best employer
field of transportation. He writes, “My for the 35th Annual Meeting of the Cana- (small business under 300 employees) across
MBA has proven an essential vehicle in my dian Federation of Independent Business in Canada by the Report on Business Survey.
international progress. As I concentrate on June of this year. I started an e-learning
making a business out of a technology, the company (www.vubiz.com) when I was
MBA is mandatory! I am still healthy, and turning the CFIB over to my successor
working hard to improve my tennis game!” Catherine Swift. It is now roaring along
after ten years ,and just recently announced
1958 a joint small business development project
Despite having retired, Douglas Crowe with a group of powerful corporations and
has kept extremely busy with a host of vol- not-for-profits.”
unteer activities, participating in seven
projects in Bolivia, three in the Czech

100 • Rotman Magazine Winter 2007


MBA/MCom Full- and Part-Time

1966 www.rotman.utoronto.ca/alumni/ 1978


MBA Class Champion: reunion.htm, contact your class champion Jacquie Houston is involved in payroll, ben-
Gary Halpenny or the Alumni Office. efits and accounting for Baird MacGregor
Gary.Halpenny66@rotman.utoronto.ca Insurance Brokers Inc. Jacquie writes, “I
Gordon Nichols is a semi-retired char- currently reside in Toronto in an old mag-
1967 tered accountant offering business advisory, nificent renovated house with my three cats
MBA Class Champion: accounting and tax services to small busi- and my daughter. Best wishes to all the
Len Brooks nesses and individuals on a confidential and Class of ‘78 and I would love to hear from
Len.Brooks@rotman.utoronto.ca personal basis. Enquiries are welcome. anyone who remembers me.”

Reunion Alert! This class is celebrating a Adrian Sark is a consultant in marketing 1979
banner anniversary on May 31, 2007. For and sales at his own firm, Sark Agencies MBA Class Champion
more information and to RSVP, please visit Ltd., and a partner in two other firms, Sark Lorn Kutner
www.rotman.utoronto.ca/alumni/reunio & Reynolds and AdROI Inc., all of Toronto. Lorn.Kutner79@rotman.utoronto.ca
n.htm, contact your class champion or the He writes, “We now have two grandchil-
Alumni Office. dren! Best wishes to the Class of ‘72 – Janet Martin was recently appointed as
assuming there are still some breathing.” managing director of PMI Mortgage Insur-
1968 ance Company Canada. She spent much of
MBA Class Champion: 1973 her career with CIBC. As executive VP of
George Hayhurst MBA Class Champion: retail banking from 1999 to 2001, she led a
George.Hayhurst68@rotman.utoronto.ca George Parker very successful division encompassing more
George.Parker73@rotman.utoronto.ca than 1,100 branches and 17,000 staff. Says
1969 Janet, “I am looking forward to developing a
Joan Johnston is director of her own 1974 team in Canada that will help mortgage
company, J.M. Johnston & Associates Inc. in MBA Class Champion: lenders grow their businesses and enable
Toronto. Hank Bulmash more Canadians to buy homes.”
Hank.Bulmash74@rotman.utoronto.ca
1970 1980
MBA Class Champion: 1975 MBA Full-Time Class Champion:
Charles Johnston MBA Co-Class Champions: Frank Hall
Charles.Johnston70@rotman.utoronto.ca Susan Frank Frank.Hall80@rotman.utoronto.ca
Susan.Frank75@rotman.utoronto.ca
1971 Robert Johnston Lou Carcasole helps people improve the
MBA Class Champion: Robert.Johnston75@rotman.utoronto.ca quality of their lives through stress reduc-
Chris Ward tion programs that result in improvements
Chris.Ward71@rotman.utoronto.ca 1976 in health and personal performance. Lou is
MBA Class Champion: separated and has two adult children. He is
Brian Clark recently retired after more Jane Gertner enjoying life and work more than ever. His
than 33 years at Euro Brokers in New York Jane.Gertner76@rotman.utoronto.ca advice: “Work like you don’t need money,
City. Brian’s company lost 61 employees at love like you’ve never been hurt, and dance
the World Trade Center on September 11, 1977 like no one’s watching.” He sends his love
2001. Since that time, he has acted as pres- MBA Class Champion and best wishes to all.
ident of the Euro Brokers Relief Fund, Judy McCreery
offering financial assistance to the affected Judy.McCreery77@rotman.utoronto.ca Class Champion Frank Hall is working on
families. Retirement will allow Brian and behalf of two new sports marketing pro-
his wife Dianne to spend more time with Reunion Alert! This class is celebrating a grams for 2007. AIM Autosport, in support
their five (soon to be six) grandchildren. banner anniversary on May 31, 2007. For of the Peter Munk Cardiac Centre, will be
more information and to RSVP, please visit the first Canadian team to enter the Rolex
1972 www.rotman.utoronto.ca/alumni/reunion.htm, Grand Am Sports Car Series in the top level
Reunion Alert! This class is celebrating a contact your class champion or the DP category. The second program involves
banner anniversary on May 31, 2007. For Alumni Office. the selection of Canada’s next motorsport
more information and to RSVP, please visit star. A fully funded ride with AIM

Rotman Magazine Winter 2007 • 101


MBA/MCom/DBA Full & Part-Time

Autosport’s Formula Mazda program in Tom McAllister has been appointed as the and grow with the industry, serving our
2007 will be the prize for the winner of the president and CEO of Kids Help Phone, customers and delivering on the Tenet
Discovery Channel’s Star Racer series, to Canada’s only toll-free, 24-hour, bilingual promise: ‘Every Project – A Success!’”
be aired in the Fall of 2006. and anonymous phone and web counseling,
information and referral service for chil-
dren and youth. Tom has spent more than
twenty years in the consumer products
business working for Warner-Lambert,
Pfizer and Cadbury Adams. He has actively
volunteered in a number of community
outreach programs including United Way
and the Out of the Cold program for the
homeless. He was also enthusiastically
Joe Polito is an educator with the Toronto engaged in the volunteer Boards of Direc-
District School Board. tors of the Integrative Management Adrian Wijeyewickrema is marketing
Challenge program at the Rotman School. manager at Honeywell Aerospace in Missis-
1981 sauga, ON.
MBA Full-Time Class Champion: 1983
William Molson Romeo D’Angela is president of Novadan 1985
William.Molson81@rotman.utoronto.ca Capital which funds emerging companies MBA Full-Time Class Champion:
with a focus on resources and energy. Gerald Legrove
Class Champ Will Molson is a chartered Romeo is happily married to Bea and has Gerald.Legrove85@rotman.utoronto.ca
accountant specialising in indirect taxation. two children who (hopefully) will follow MBA Part-Time Class Champion:
Will and Christine live in the Toronto their parents’ footsteps and attend U of T Daniel Eng
Beaches area and are raising six children in someday. Daniel.Eng85@rotman.utoronto.ca
their spare time.
Peter Sen reports: “Apart from financial Vytas Barsauskas is vice president, sales
services, I am allocating a lot of my time in for IBF Corporation in Garfield, NJ.
helping people with intellectual disabilities.
It is non profit but I have gained a lot of sat- Class Champion Dan Eng is very excited
isfaction out of it. I am now a director on about his new life after having spent 20 years
the BOD at Community Living York South at a major financial institution. His goal is to
and I am also building a new agency for the help one First Nations person find work in
Chinese community in Toronto.” IT, since by helping one person in the family,
1982 he helps the entire family. Dan writes, “Life
MBA Full-Time Class Champion: 1984 is a journey that really never ends. The fun
Danny Chau Yvette Holt is regional operating officer and excitement is in the doing.”
Danny.Chau82@rotman.utoronto.ca at RBC Royal Bank in Toronto.
MBA Part-Time Class Champion:
Michael Hale Carlos Paz-Soldan is now president of
Michael.Hale82@rotman.utoronto.ca Tenet Computer Group, a 22-year-old
Toronto firm that specializes in the design,
Reunion Alert! This class is celebrating a implementation, and support of IT solu-
banner anniversary on May 31, 2007. For tions. One of Tenet’s founding partners and
more information and to RSVP, please visit now its sole shareholder, Carlos has also
www.rotman.utoronto.ca/alumni/reunio served as VP of technology, and was the
n.htm, contact your class champion or the main architect of Tenet’s eFusion Customer
Alumni Office. Integration Portal. His other initiatives at 1986
Tenet include local area networking and MBA Class Champion:
Class Champ Danny Chau is a director messaging in the 1980’s, Internet and col- Roy Turunen
with Ambrose Financial Services (HK) Ltd laboration in the 1990’s, and, more Roy.Turunen86@rotman.utoronto.ca
in Hong Kong. recently, mobility applications and integra-
tion. Carlos writes, “We continue to evolve

102 • Rotman Magazine Winter 2007


MBA/MCom/DBA Full & Part-Time

Martin Ayow is a derivative analyst at came from Australia, Canada, the United David Bowden is responsible for the
Manulife Financial in Toronto. States and Hong Kong.The reality check of P&L within business markets for Direct
her Mandarin-speaking ability was whether Energy Canada. Prior to this, David led the
Roland Ho is senior project manager the students showed immediate responses residential and small commercial energy
with CANNEX Financial Exchanges Ltd. to her explanations (given in Chinese) for and services businesses in Canada East.
in Toronto. English terms! David began his engineering career at Gen-
eral Motors of Canada, and then spent 12
Joe Leon is the co-president of A.G.S. Suzanne Giblon is an independent IT years in various roles at Warner Lambert
Automotive Systems in Scarborough, ON. consultant and managing director of International, in Canada, the US, Europe
Final AnalySys Inc. since 1998. The firm and South America (and speaks several lan-
Lesley Poole is a senior consultant with specializes in project management and guages as a result). David moved to Bata as
BMO Bank of Montreal in Toronto. business analysis services for brokerages, VP of international branded programs,
asset managers and wealth management worked at Canada Post on a two-year initia-
1987 organizations. Suzanne and Clyde Robinson tive, and then served as general manager
Reunion Alert! This class is celebrating a were recently married and celebrated with for Interbrew/Labatt, the largest brewery
banner anniversary on May 31, 2007. For a fabulous three-week honeymoon in the in Cuba. David founded Empori.com,
more information and to RSVP, please visit Galapagos Islands and Peru. growing the company to 125 employees
www.rotman.utoronto.ca/alumni/reunio and 40,000 customers in less than two
n.htm, contact your class champion or the years, and immediately prior to joining
Alumni Office. Direct Energy spent three years with Sprint
Canada as president of Consumer Services.
Lauren Bradley is the vice president, David is an executive director on the Board
product management and marketing for of Habitat for Humanity in Toronto, a
Foresters in Toronto. director of the Bata Shoe Museum, holds an
Richard Harvey is director, financial analy- industrial engineering degree and an MBA
Barry McInerney will join Russell Invest- sis at Rogers Communications Inc. in Toronto. from U of T.
ment Group as director of client service,
after 19 years at Mercer Inc., where he most David Higa has recently joined Windcroft
recently served as president of Mercer Financial Counsel Limited as vice-president
Global Investments in the U.S. He also and portfolio manager. David is teaming up
chaired the U.S. board of the Mercer Trust with fellow Rotman alumnus Gordon
Company, and was a member of Mercer HR Bruce (MBA ‘90).Windcroft is a boutique
Consulting’s global leadership team. Based investment counsel providing discretionary
in the New York City office, McInerney will investment management to private clients.
lead a 37-person team responsible for serv- Prior to joining Windcroft, David spent 15 Jonathan Erling is managing director at
icing Russell’s U.S. institutional clients years in the capital markets as a VP at TD KPMG LLP in Toronto.
throughout the country. McInerney will join Securities in Toronto, and as a VP at Citi-
Russell’s operating committee and will also group in New York. David and his wife Suzanne Etherington is in residential
serve as a member of the institutional exec- Carol live in Oakville, ON, and have three sales with Royal LePage Real Estate Ser-
utive committee. children, Jamison (ten), Holly (nine), vices in Toronto.
Jeremy (six).
1988
MBA Class Champion: 1989
Grace Cheung MBA Full-Time Co-Class Champions:
Grace.Cheung88@rotman.utoronto.ca David Pyper
David.Pyper89@rotman.utoronto.ca
Class Champ Grace Cheung went on a Maria Milanetti
trip to southern China this summer, where Maria.Milanetti89@rotman.utoronto.ca
she taught at a summer English camp at a MBA Part-Time Class Champion: Michael Garratt returned from a four
local high school. It was a memorable expe- John Harris year overseas assignment in Geneva,
rience to work with local students and an John.Harris89@rotman.utoronto.ca Switzerland in 2005 and accepted the posi-
international group of volunteers, who tion as VP and general manager for the

Rotman Magazine Winter 2007 • 103


MBA/MCom/DBA Full & Part-Time

consumer and industrial business with Excel throughout North America improve the MBA Part-Time Class Champion:
Polymers LLC near Cleveland, OH. Excel is way they recruit and retain new graduates. Cheryl Young
a US$400 million provider of custom poly- If you’re visiting Vancouver Island, be sure Cheryl.Young94@rotman.utoronto.ca
mer alloys and material solutions, with to give him a call.
operations in the US, Mexico, the UK and Edward Cheung is CEO and president of
China. Michael writes, “the mountains and 1993 Innings Telecom Inc, in Richmond Hill, ON.
skiing are certainly missed, but it is good to MBA Full-Time Class Champion:
be back closer to friends and family.” Daniel Lin 1995
Daniel.Lin93@rotman.utoronto.ca MBA Full-Time Class Champion:
Ruvan Waltman is the owner of Genesis Nick Strube
Building Corporation, a fully integrated David Budman is president of Service- Nick.Strube95@rotman.utoronto.ca
real estate development, construction and Lab Canada in Montreal. MBA Part-Time Class Champion:
management company with operations Darlene Varaleau
throughout southern Ontario. Ruvan’s Maureen O’Brien recently joined TELUS Darlene.Varaleau95@rotman.utoronto.ca
wife Danielle and three children, Jamie, as director, talent management. In this role,
Marley and Jacob are his core assets. he supports the recruitment, development Michael Cross is senior VP at Jovian Cap-
Ruvan wishes “a hearty hello to everyone and retention of employees for the business ital Management in Toronto.
in the class of ‘89.” solutions team, which serves the oil and gas,
financial communications, and health and Kate Holloway is doing business and
1990 public sectors. Maureen joined TELUS after market development for Mann Engineer-
Glenn Laxdal is VP of product manage- four years in a strategic HR position with a ing, focusing on energy management
ment at Nortel in Richardson,TX. leading pharmaceutical organization. Previ- solution and renewables for condominiums
ously, she spent over 20 years with Nortel and municipalities. Kate is also active in
1991 Networks in a variety of director-level posi- local and federal politics as a fundraiser and
MBA Full-Time Class Champion: tions in corporate communications, public energy policy activist, and was recently
David Littlejohn relations and human resources. elected for the second time to the Green
David.Littlejohn91@rotman.utoronto.ca Party of Canada Federal Council, along
MBA Part-Time Class Champion: Kim Shannon, an award-winning fund with fellow Rotman Alumni Andrea
Pamela Kanter manager with CI Funds, left to join industry Caulfield (‘00). Her son Sam celebrates
Pamela.Kanter91@rotman.utoronto.ca upstart Brandes Investment Partners & Co. his 16th birthday this month.
Kim’s company, Sionna Investment Manger
Barbara Trott is an artist as well as a sea- Inc., has entered into a “retail alliance” with Warren Jacobs is marketing manager for
sonal lecturer at the Ontario College of Art Brandes.That partnership severed a ten year Mister Chemical Ltd., in Concord, ON.
and Design (OCAD) in Toronto. relationship between Sionna and CI that saw
both companies flourish and win critical Kevin Lobo has been appointed president
1992 acclaim. “I have tremendous respect for the of Ethicon Endo-Surgery Inc., the surgical
MBA Class Champion: people at CI. It’s hard to part with friends”, device division of Johnson & Johnson. He
Blair Kingsland said Kim. “There was no specific issue that has spent most of the last ten years living in
Blair.Kingsland92@rotman.utoronto.ca led to this. It’s just an interesting challenge Europe and the U.S.
and opportunity that led to the strategic
Reunion Alert! This class is celebrating a alliance with Brandes.” Julie Kristof After a summer of cycling
banner anniversary on May 31, 2007. For and spending time on the gorgeous Nova
more information and to RSVP, please visit Trent Tucker is currently finishing up a Scotia beaches with her family, Julie has
www.rotman.utoronto.ca/alumni/reunio PhD in supply chain management at the accepted the position of VP at ThinkWell
n.htm, contact your class champion or the University of Waterloo, and teaching down Research, a market research consultancy.
Alumni Office. the street in the School of Business and She is balancing her career with the chal-
Economics at Wilfrid Laurier. Trent, his lenge of raising (chasing) a two year old and
Graham Donald recently moved with his wife Shannon and their two kids have made supporting her husband in his third year of
wife Jill and two daughters, Emily and Waterloo home for just over five years now. medical school. She writes, “Our ‘what’s
Georgia, to Victoria, BC, where he has also next’ is to have another child and decide
moved his business. Graham consults to 1994 where we will be living for my husband’s
universities across Canada in the area of MBA Full-Time Class Champion: residency. Who knows: maybe back in
career services and helps major employers Glenn Asano Toronto!? It was fantastic to visit class-
Glenn.Asano94@rotman.utoronto.ca mates on the west coast this summer and I

104 • Rotman Magazine Winter 2007


MBA/MCom/DBA Full & Part-Time

hope to be back visiting in Toronto very tions label and raising their twin girls. Lucas Chang is manager, strategic planning
soon! Keep in touch! Definitely be in touch and execution for TELUS in Scarborough.
if you’re passing through Halifax!!” Andrea Rudnick is now VP in the Invest-
ment Banking Group of Dundee Securities Viraj Desai is vice president, business devel-
Corporation in Toronto. opment at Alegro Health Corp in Toronto.

1997 Amy Freedman is vice president at West-


MBA Full-Time Class Champion: wind Partners in Toronto.
Burke Malin
Burke.Malin97@rotman.utoronto.ca Kendrick Lo has been admitted to the
MBA Part-Time Class Champion: partnership of Bereskin & Parr, a leading
Michael Saniga is manager, financial Nancy Crump intellectual property (IP) firm with offices
planning and analysis at Dell Canada Inc. Nancy.Crump97@rotman.utoronto.ca in Toronto, Mississauga,Waterloo and Mon-
in Toronto. treal. Kendrick is a lawyer and registered
Reunion Alert! This class is celebrating a US and Canadian patent agent, and assists
1996 banner anniversary on May 31, 2007. For clients in the high-tech sector in obtaining
MBA Full-Time Co-Class Champions: more information and to RSVP, please visit patent protection for their inventions.
Christine Wong www.rotman.utoronto.ca/alumni/reunio Kendrick has served as an Adjunct Profes-
Christine.Wong96@rotman.utoronto.ca n.htm, contact your class champion or the sor at Osgoode Hall Law School, and has
Suzanne Wilcox Alumni Office. recently been appointed to the national
Suzanne.Wilcox96@rotman.utoronto.ca Patent Agent Examination Board.
MBA Part-Time Class Champion: Robert Baseggio is sales executive,
Daisy Azer international sales for Bombardier Aero- Martin Saipe is senior legal counsel for
Daisy.Azer96@rotman.utoronto.ca space Regional Aircraft in Toronto. Scotiabank in Toronto.

Christie Bowes is human resources man- Patti Moran is director of innovation at Greg Van Sickle is a senior technical advi-
ager for ExxonMobil Canada in Halifax. Molson Canada in Toronto. sor in the PwC scientific research and
experimental development tax credit prac-
Jane Flintoft is the CFO and VP finance Trevor Rodriguez is a director of com- tice, one of the world’s top R&D incentive
and administration for S-Vox (formerly mercial market service sales for Cisco programs. Greg joined PwC after moving
Vision TV Group) in Toronto. Systems in London, covering emerging mar- over from the Deloitte SR&ED practice in
kets, Latin America, Central and East January 2006. Greg and his wife Shelley, an
Peter Intraligi is global head, client oper- Europe, Russia/CIS, and the Middle East engineer with Consumer’s Gas, live in
ations at AMVESCAP plc in Toronto. and Africa. Previously, Trevor ran service Pickering with their two children, Sydney
logistics and warehousing for Cisco, cover- Claire (born in 1998) and Finlay Bennett
After graduating from the LLB/MBA pro- ing Asia Pacific, China, India, ANZ, Korea, (born in 2000). Greg was also recently
gram, Motria Onyschuk-Morozov Hong Kong and the rest of Asia. Before that, hired as an assistant coach of the Toronto
spent six years with the international law he ran Marketing in Cisco Services Japan. Rock professional lacrosse team.
firm of Baker and McKenzie as a corpo- The Rodriguez family has enjoyed moving
rate/commercial lawyer in the Toronto around the world from Tokyo to Singapore 1999
office. In early 2001, she was hired by the to London. His wife, Tomoko and his two MBA Full-Time Co-Class Champions:
International Finance Corporation (part of kids, daughter Aneae (seven) and son, Issey Lenore Macadam
the World Bank Group) as project manager (three) are world citizens, having already Lenore.Macadam99@rotman.utoronto.ca
for the Ukraine Corporate Governance seen Mount Fuji, Sydney Harbour, Angkor Aran Hamilton
Project, and relocated to Kyiv, Ukraine. In Wat, Taj Mahal, Stonehenge and so much Aran.Hamilton99@rotman.utoronto.ca
mid-2002, Motria was promoted to senior more.Trevor sends his best to all.
operations manager and is currently Since 2006, Karl Al-Issa has been work-
responsible for IFC’s corporate governance Mike Ruthard is chief financial officer at ing in Montreal on a project – lanched in
technical assistance programs across the Newshore Capital Group in Toronto. September of this year – to implement
former Soviet Union, covering Russia, direct to store delivery for Imperial
Ukraine, Georgia, Azerbaijan and Kaza- 1998 Tobacco. He will continue to live in Mon-
khstan. In her spare time Motria keeps busy MBA Class Champion: treal, where he will implement category
helping her husband produce Ukrainian Mari Iromoto management at Imperial.
music recordings under their MO Produc- Mari.Iromoto98@rotman.utoronto.ca

Rotman Magazine Winter 2007 • 105


MBA/MCom/DBA Full & Part-Time

Caroline Bachand is the manager, Uri Ron is a portfolio manager with Royal Andrea Rees is an independent commu-
global treasury risk management for Nor- Bank in Toronto. nications consultant in Brussels, Belgium.
tel in Toronto.
Benjamin Skuy has been promoted to Hashim Rizvi is a director with Pricewa-
Dennis Chow is portfolio manager, pri- managing director and CAO of the Canadian terhouseCoopers in Chicago, IL.
vate placements for BC Investment auction operations of ADESA, Inc., North
Management Corp. in Victoria, BC. America’s largest publicly traded provider of Chris Spafford is a principal in the aviation,
wholesale vehicle auctions and used vehicle aerospace and defense practice of Mercer
Jessica Goldberg is a senior manager dealer floor plan financing. Originally from Management Consulting. Based in Dallas,TX,
with Deloitte in Toronto. South Africa, Benjamin is a Canadian char- Chris and Annelise Pedersen are the proud
tered accountant with more than 20 years of parents of Erik, their energetic two year old.
In July 2006, Tracy Hoskins joined business experience. Prior to joining The family has moved into a new house and
Research in Motion as a senior advisor, ADESA Canada, he worked for a major appears to making Dallas more of a long-term
global organizational design programs. Canadian bank focusing on the acquisition of home. Chris and Annelise send best wishes to
Tracy lives in Etobicoke, with her husband foreign financial institutions. He joined all friends in Toronto and look forward to
John Nestor and their daughter Gillian. ADESA Canada in 1999 as CFO, and since catching up with all over the fall while visiting.
January 2002, he served as CAO, responsi-
Robin Johnston has been busy traveling ble for operations, sales and e-Business. Shermaine Tilley has recently accepted
through the US speaking on sales and mar- the position of principal in the new CTI
keting, and private and nonprofit Tina Soin Sharma has taken on the position Life Sciences Fund in Montreal. This is a
fundraising. He recently published his first of director of investor relations at Vanguard new type of fund for Canada, and Sher-
book Lead Generation Handbook: 63 ways you Car Rental Group Inc, in Tulsa, OK. maine is excited about being part of this
might not have thought of to get more prospects, venture from the outset.
more quickly, at less cost. It’s available from Gehan Thiruchittampalam is a medical
Amazon.com and Barnes & Noble. sales representative for AstraZeneca Jodi Wilson is a manager with Accenture
Canada in Vancouver, BC. in Mississauga, ON.

Erick Wong is senior director of mobile 2001


innovation at Visa International in San Fran- MBA Full-Time Class Champion:
cisco, CA. Daniel Zinman
Daniel.Zinman01@rotman.utoronto.ca
2000 MBA Part-Time Co-Class Champions:
MBA Class Champion: Lisa Sansom
Mitchell Radowitz Lisa.Sansom01@rotman.utoronto.ca
Phillip Lund has returned to Paris, Mitchell.Radowitz00@rotman.utoronto.ca Walter Sophia
France, with his wife Danielle Constantin Walter.Sophia01@rotman.utoronto.ca
(PhD 2001), after spending 16 months in Tony Gray is general manager of Home
Beijing as manager of services business Depot in Barrie, ON. He writes, “every day Ian Adler is director of finance for Pepsi-
development for Schneider Electric’s Asia is an adventure.” QTG in Richmond Hill, ON.
Pacific Operating Division. He is now man-
ager of services training programs for Cary Chan and Olivia Tse were married
Schneider Electric’s Commercial Institute, in Hong Kong this October and honey-
part of Schneider Electric University. mooned in Tahiti. Cary is most recently
working in the investment area of Sun Life
In August 2006, Class Champ Lenore Financial’s Asia division, while Olivia is the
Macadam accepted a new position as fixed income product manager for
director of finance at Mongrel Media Inc. Sherri Neldner (Effa) recently moved to Bloomberg’s Asia Pacific region.The couple
the Toronto-based film distribution com- Calgary with 16 month old twins Kody looks forward to a wonderful future spend-
pany. Mongrel Media’s films are played and Taylor. ing the rest of their lives together.
across Canada at festivals, selected com-
mercial and art-house cinemas, video
stores, television and airlines.

Gustav Rodricks is a senior project man-


ager at Telus in Toronto.

106 • Rotman Magazine Winter 2007


MBA/MCom/DBA Full & Part-Time

Jeff Chong has founded his own consul- n.htm, contact your class champion or the Guillermo Obregon is still in New York,
tancy, SFC International Inc., in Toronto. Alumni Office. working as a manager for emerging markets
with Tradition North America, covering
Barclay Hancock is director, Aeroplan Jean-Christophe Depraetere, aka ‘JC’, Latin America, Mexico, Brazil and Chile.
portfolio at American Express Canada Inc. and Aurelie are happy to announce the Guillermo and his wife plan to stay in New
in Markham, ON. recent arrival of their second son Louis. York for at least three more years, and hope
Sylvain is already looking forward to play- to start a family at the beginning of next year.
Eva Koci is in institutional equity sales ing with his little brother.After a few weeks
with Jennings Capital in Toronto. on parental leave, JC is now back to work
in the finance division of CIBC, where he
Michelle Lalonde is a manager with A T enjoys the breadth of scope of his role as a
Kearney in Toronto. director, business management.

Timothy Meadowcroft is counsel at


CIBC World Markets in Toronto.

Lisa Sansom has made the transition into Sally Whitehead is an associate in the
the world of independent consulting by Toronto office of the New York-based law
starting LVS Consulting. Lisa specializes in firm Skadden, Arps. She is principally
leadership and change management coach- involved in cross-border corporate finance
ing, and is on her way to becoming an Julija Ezergailis is marketing manager at and M&A transactions.When not working,
accredited coach. Her clients include RBC Financial Group in Toronto. she can be found out west on the next ski
Queen’s School of Business, Export Devel- and snowboard trip, in search of fresh pow-
opment Canada and CMC Microsystems. Peter Grey-Wolf is vice president of der. Sally recently spent some time working
On the side, Lisa is also editor for Your Blue Capital Canadian Management Inc. out of Skadden’s Hong Kong offices and
Workplace magazine, Canada’s authority in Toronto. had the opportunity to travel to China.
on work/life issues. Lisa can be reached at
lisa.sansom@gmail.com, or else join her Marice Hart has returned to school as a
network on LinkedIn. graduate student in the School of Social
Work at Carleton University.
Adam Schatzker is a base metals analyst
working in the Global Mining Research Sanjeev Joshipura is a sales operations
group at RBC Capital Markets in Toronto. manager at Hewitt Associates, a 25,000-
Adam joined RBC in May 2006. Adam and employee-strong HR outsourcing and 2003
his wife, Elora have two children, Joseph consulting company based in suburban MBA Full-Time Class Champion:
(three) and Alison (born March 2006). Chicago. In addition to corporate manage- Pamela Beigel
ment and leadership, Sanjeev is passionate Pamela.Beigel03@rotman.utoronto.ca
Kevin Shnier has returned to Toronto as about U.S. politics and public policy, and MBA Part-Time Co-Class Champions:
associate, equity funds at Edgestone Capi- meaningful relationship building and network- Jennifer Chan
tal Partners. ing. He is a member of the Chicago Council on Jennifer.Chan03@rotman.utoronto.ca
Foreign Relations, the Executives Club of Rajesh Dixit
2002 Chicago and the Heritage Foundation. Rajesh.Dixit03@rotman.utoronto.ca
MBA Full-Time Class Champion:
Rizwan Suleiman Francesca Birks is currently physically
Rizwan.Suleiman02@rotman.utoronto.ca living in London but actively and virtually
MBA Part-Time Class Champion: living everywhere. She is working as an ana-
Jay Nicholson lyst in the Foresight + Innovation +
Jay.Nicholson02@rotman.utoronto.ca Incubation department of Arup, a global
design consultancy. The FII group explores,
Reunion Alert! This class is celebrating a researches, and facilitates workshops around
banner anniversary on May 31, 2007. For Brian Martin is vice president of strategy emerging global trends. Her current proj-
more information and to RSVP, please visit and business initiatives at RBC in Toronto. ects involve hotels of the future, and
www.rotman.utoronto.ca/alumni/reunio producing a set of cards on drivers of change
and demography. Should anyone find

Rotman Magazine Winter 2007 • 107


MBA/MCom/DBA Full & Part-Time

themselves in London or online, Francesca Zohair Harianawala is an executive accepted a new position as controller of
can be Skyped at francescabirks and e- with Amir Industries in Karachi, Pakistan. Breyer Casting Technologies Inc. Breyer
mailed at Francesca.Birks@gmail.com. Castings, formerly Brampton Foundries, a
David Jarvis and wife Dawn welcomed the division of Indalex, is a privately held firm
arrival of baby girl on August 17, 2006. Scar- focused on the design, manufacture and
lett Grace Jarvis weighed in at 9 pounds, delivery of quality aluminum parts.
11.7 ounces. All are doing well and David’s
getting lots of practice changing diapers! Jane van Alphen recently joined the
Ontario Institute for Cancer Research
(OICR) within the Medical and Related
Olivia Chen is a manager with the Royal Sciences discovery district (MaRS) as VP
Canadian Mint. operations. Funded by the Ministry of
Research and Innovation, the OICR aims to
Happy to be back in Toronto, Silver Chen become a centre of excellence in cancer
has been with Pfizer Canada in its Canadian research, moving Ontario to the forefront
head office in Montreal since graduation, of the international effort to control cancer
and is currently manager, patient access and Richard Meloff is a principal with Effi- and commercialize discoveries.
health policy (Ontario). She writes, “My cient Capital Corporation in Toronto.
role is to help Ontario patients gain access Michael J. Wu recently has moved from
to new medications. I have recently settled Amit Mujumdar is an associate with Sav- Beijing to the city of Guangzhou, China. He
down in Mississauga and would love to re- vian, LLC in San Francisco. had a chance to say farewell to Michael Schu-
connect with Class ‘03 and Rotman alumni macher in October, during the 2006 Grand
who work in the health care field.” Asif Nakhuda is the business develop- Prix in Shanghai, China. Michael wishes best
ment manager for Rapid Flyer in Toronto. for all the Class of FT’03 and PT ‘01.
Laurin Mayer writes, “Hi everyone. Life
is great and super busy. I spend almost Howard Nishi is a senior financial analyst
every second with my eight-month-old with CIBC in Toronto.
daughter, Riley. In my ‘free’ time, I run
www.momsinthecity.ca and www.bab- Anita Shankaran is a consultant with
blingbananas.com. We’re loving it, and Sapient Canada in Toronto. Anita and hus-
seeing tons of Rotman grad new moms! band Noel Yoganathan were married in
We’re having a blast and hope to see you Toronto in August, 2005. 2004
all soon.” MBA Full-Time Class Champion:
Maya Lange
Kenneth Chernin is a research analyst Maya.Lange04@rotman.utoronto.ca
with Beacon Securities in Halifax. MBA Part-Time Class Champion:
Steven Lane
Jody Fisher writes, “Matt and I were mar- Steven.Lane01@rotman.utoronto.ca
ried last year in Bayfield and just celebrated
our first anniversary. I have recently taken a Lesley Beneteau has returned to Canada
new role with Maple Leaf Foods in their Six Anita Shuper is now a movie star! She is after a work contract in Taipei,Taiwan, and
Sigma department (thanks again to Sherry featured in the documentary Las Peregrinas – is now the manager, investor relations at
Pedersen-Ajmani for her referral!). We TheWomenWhoWalk, filmed last autumn dur- MDS Inc. in Toronto. She and husband
made it to Alaska for some adventures over ing her 250km journey along the Camino Joshua Su, who flies 747’s around the world
the summer and are looking forward to de Santiago de Compostela in northern for China Airlines, are expecting their first
planning our next getaway. All the best to Spain. The movie was released in Novem- child in early 2007.
my fellow Rotmaners – hope to catch up ber, with various grassroots screenings in
you at Rotman functions or elsewhere!” locations around the world. All monies Daniel Chau is the general manager for
raised will be donated to assorted causes East China operations at BusinessObjects
selected by the screening organizers. China in Shanghai, China.

James Skinner recently earned his CMA Cristian Gheorghe is a global leader-
designation from the Society of Management ship fellow at the World Economic Forum
Accountants of Ontario and subsequently in Geneva.

108 • Rotman Magazine Winter 2007


MBA/MCom/DBA Full & Part-Time

Jonathan Greer reports, “On July 28, Ali Karbassi recently changed jobs and is Marcela is busy taming the garden in her
2006, we welcomed all 7 pounds, 6 ounces now working at Proximity Interactive (a new home in Toronto.
of William Brian Greer to the world. division of BBDO) as an account director.
Known as ‘Wills’ to his family and friends, He also launched his own small business, Sheldon Pinto is an associate, investment
he has had an eventful and happy first cou- City Surf (www.city-surf.ca) a few months banking with TD Securities (USA) LLC in
ple of months of life attending two ago, offering audio walking tours of New York.
weddings, and surviving a September Toronto neighborhoods. City Surf gives
weekend in Algonquin Park! And yes, his tourists and locals a taste of the city’s real Marc Reppin and Heather Camlot wel-
parents are getting some sleep.” local culture, and will be expanding to comed daughter Juliana to the family on
Montreal soon. September 21, 2006. Marc is enjoying
spending lots of time with Juliana and help-
Karim Keshavjee is a family physician ing her older brother Alexandre get used to
with a part-time practice in Mississauga, the new family dynamic. Marc currently
ON. He also provides IT-related change works for Rogers Publishing Ltd., where
management consulting in the health sector, he is developing CanadianBusiness.com
with such clients as Canada Health Infoway into a leading portal for business leaders,
Michael Hong entered the world of and McMaster University. He recently entrepreneurs and investors.
fatherhood in early February, 2006. landed a contract with the Heart and Stroke
Michael was sorry to learn that the weeks Foundation of Ontario to help them imple-
of no sleep and constant work in first year ment their high blood pressure strategy in
MBA did little to prepare him for the community physician practices throughout
whirlwind of raising an infant. Thankfully, Ontario. Karim’s wife Zahra is currently
Joshua Myungi Hong is a wonderful baby doing field work in South Africa and Jordan
(and occasionally sleeps through night)! for her PhD in education administration.
Michael lives in New York with his wife Karim will be joining Zahra in Jordon for a
Sandra, and practices law at Paul, Weiss, few weeks in December, 2006.
Rifkind, Wharton & Garrison LLP. Sandra Steve Richards works in the audit and risk
is on maternity leave from her post as the management group at Bell Canada, and lives
director of professional development for in Montreal with his wife and two young
Weil, Gotshal & Manges LLP. children. He would welcome any news from
former classmates and encourages everyone
to look him up if they are in Montreal.

Rob Oppenheim is currently working Chandreyee Saha is a senior business


with GE Energy Financial Services in Cal- consultant with CIBC in Toronto.
gary, AB. Rob, who married to Maria in
2005, invites everyone to give him a call Rakesh Shah is the IT purchasing man-
Taeil Kang has been working, since Sep- next time they visit Calgary. ager in the New York head office of
tember, 2005, as the managing director of MortgageIT. Rakesh moved to New York in
solar power business division at Korea Cot- January, 2006. He and his wife Dina Shah,
trell Co. Ltd. In Seoul, Korea. His married in July, 2006, live in the New York
responsibility is the development and financ- City area. Rakesh sends his best wishes to
ing of solar power projects. He has just all in the part-time MBA class of 2004.
completed one of the largest solar power
projects ever built in Asia, a 1MW power
generation plant using solar energy at a proj-
ect site about 50km south-west of Seoul.

Marcela Oreopoulos has back from


Boston, and is working as a consultant at
Monitor Group’s Toronto office. Most
recently, she has worked on Canadian cases Ayal Twik has relocated to Montreal,
in healthcare and financial services, and a where he is the VP, business development
US case in energy. When not working, for Corwik Inc.

Rotman Magazine Winter 2007 • 109


MBA/MCom/DBA Full & Part-Time

Nancy Yang had a baby girl, Elina Yang, in Upon graduating from Rotman, Sarah Jie Li is a category analyst at Acosta Canada
September, 2006. She enjoys watching Grant analyzed her personal passions and in Vaughan. Acosta is the biggest broker in
Elina growing. began to develop a business concept “that I consumer packaged goods in North Amer-
could believe in for the long-term.” Prior to ica. Jie previously worked as a vendor
Rotman, she had worked as a consultant, advisor for Loblaw’s Food Focus project,
often putting in 100+ hours a week. “I was where he learned much about category
unhealthy and stressed out, and with a poor management. He recently brought his wife
family-health history, my personal health to Canada. They got married in China in
weighed heavily on me. In January of my May 2005, and now live happily in a condo
second year, I started working out with a in North York. Jie sends best wishes to his
personal trainer and received nutrition class and many thanks to the alumni who
2005 counseling. My transformation to a fit, offered help during his job hunt.
MBA Full-Time Co-Class Champions: healthy, and balanced individual was incred-
Fiona Cunningham ible.” She decided to focus on helping other
Fiona. Cunningham05@rotman.utoronto.ca professionals improve their health and, in
Tanbir Grover doing so, their productivity and energy at
Tanbir.Grover05@rotman.utoronto.ca work. “I’m pleased to say that I am sched-
MBA Part-Time Class Champion: uled to open my fitness and wellness
Bob Kapur centre, Revolution Fitness (www.revolu-
Bob.Kapur05@rotman.utoronto.ca tionfitness.ca), in January 2007 in Toronto’s
financial district. We took a holistic Ramesh Sangameswar just announced
David Breau is a human resource consult- approach to services for our members and the launch of an internet marketing com-
ant at Dell Computer in Toronto. built our business around the three key pil- pany, www.customreach.org , focused on
lars: fitness, nutrition and wellness. I’ve designing, delivering and measuring search
Susan Cheng is an equity research associate been working with another ‘05 Rotman campaigns for companies targeting the U.S.
at Research Capital Corporation in Toronto. grad on our Information Systems: market. Within a few days of launch, he
Michael Raphael started his own com- signed up a couple of deals. “Looks like
Ellis Chow is general manager at North pany,Antaris, and he has been working with more sleepless nights ahead,” he says.
York General Hospital. me on the development of all of my IT Ramesh looks forward to catching up with
needs. I don’t want to put words in Mike’s Rotmanites in or visiting Toronto: “give me
Kevin Chun is an associate with TD Bank mouth, but I think we agree that our Rot- a shout and we can have a pint or two
Financial Group in Toronto. man MBA has been an incredible asset in together for old times sake.”
our entrepreneurial endeavors. Thanks to
Michelle Cui is a strategy consultant with the Rotman community for giving me the
IBM Business Consulting in Markham. tools that I believe will set me up for suc-
cess – in business, and in life.”
Catalin Alexander Culiniac is IT and
business consultant at BMO Financial Pippa Haberhauer is manager, new prod-
Group in Toronto. uct launch at Rogers Wireless in Toronto.

Avidan de Lara is the online operations Michael Holland is an associate with Bruce Sargeant is managing director at
and business intelligence manager for PC Macquarie North America in Toronto. BMO Capital Markets in Toronto.
World Canada in Scarborough.
Vik Karambelkar is project manager at Stacey Sequeira is an analyst with Ernst
Alexandra Fraser is an associate with Colt Engineering Corporation in Calgary. & Young Orenda Corporate Finance Inc.
Borden Ladner Gervais in Toronto. in Toronto.
Jee Soo Kim is senior business system
Roberto Garcia Rochin is a planning analyst at TELUS Communications Inc. Kathryn Shaw is manager of transaction
analyst for Frito Lay Canada in Mississauga. in Scarborough. services at PricewaterhouseCoopers in
Toronto.
Heather Graham McCourt is strategic Kevin Lam is associate director with UBS
market development manager for in Hong Kong. David Shum is national manager at Roche
Medtronic of Canada in Mississauga. Canada in Mississauga.

110 • Rotman Magazine Winter 2007


MBA/MCom/DBA Full & Part-Time

Ginette Skeete is senior communications Ilya Bogorad has recently started Bizvortex Michael Hazan is an account manager
advisor at Public Works and Government Consulting Group Inc. (www.bizvortex.com) with HINext Inc., in Toronto.
Services Canada. specializing in IT Management and Project
Management Consulting. Ilya says that this is Yale Holder is a project manager in the
Robert Spafford is an investment analyst one of the best decisions he has ever made, strategic planning and execution unit of
at Toron Capital Markets in Toronto. and that it would not have come to fruition Telus Communications, the second largest
without the support of his wife Kim and ‘telco’ in Canada. One of the projects he
Sarah Sturgeon is an analyst with Ernst & daughter Kelly. has recently been involved in includes
Young in Toronto. Telus’ Future Friendly promises
Brian Carey is a partner with Millard, (www.telusmobility.com/promises.) The
Josef Turnbull is in institutional equity DesLauriers & Shoemaker LLP in Toronto. Holder family recently celebrated the first
sales at Credit Suisse,Toronto. birthday of their first child, Kara. Wishes
It’s been “an exciting and wonderful year” for future luck and success are sent by the
Gustavo Villota is a brand manager with for Melissa Chee. In April of 2006, she entire family to the class of 2006.
Johnson & Johnson in Bogota, Colombia. joined Fresco Microchip, a venture-backed
semiconductor company, as director of
Amar Vyas is manager of credit deriva- business development and marketing. Then
tives at Scotiabank in Toronto. in September, she and Marcel were married
at an intimate wedding in Stoney Lake,
Chris West is the line-of-business director Ontario and enjoyed a relaxing honeymoon
for automotive at Canadian Tire in Toronto. hiking in Yosemite National Park and sip-
ping fine wine in Sonoma Valley, California. Tahir Janmohamed is a strategy consult-
2006 The couple is enjoying their new home in ant with IBM Canada’s Strategy & Change
MBA Full-Time Co-Class Champions: Markham with their golden retriever, and Practice, with a focus on technology strat-
Bill Fox Mel is looking forward to exploring her egy within the financial services sector. His
Bill.Fox06@rotman.utoronto.ca love for photography and getting involved short time with IBM has already seen him
Paul Nagpal in the community. “Best wishes to the class spend a couple of months in Trinidad, and
Paul.Nagpal06@rotman.utoronto.ca of 2006, and keep in touch!” he looks forward to future engagements
Paul Forma around the world. “Best wishes to all!”
Paul.Forma06@rotman.utoronto.ca
Shrutie Owerie Sameet Kanade is an associate in soft-
Shrutie.Owerie06@rotman.utoronto.ca ware and wireless equity research at
MBA Part-Time Class Champion: Canaccord Adams in Toronto – the capital
Ushnish Sengupta markets group of Canaccord Capital, which
U.Sengupta06@rotman.utoronto.ca is listed on the TSX: CCI

Mauricio Abaroa is the financial man- Sonia Khan reports, “I had a great sum-
ager of ECOMEX, the Mexican leader in mer of 2006. It was a pleasure to spend
erosion control, soil engineering and geot- Patrick Djandji is a marketing manager three months mostly on a hammock while
extiles. Mauricio is the co-founder of the with Microsoft Canada, in Mississauga. enjoying wine and books. My rotation pro-
company, which is growing rapidly to gram at CIBC Technology Solutions is very
become the reference in erosion control for Neal Dutta is a consultant with TDX exciting. I am working with the roll-out and
Mexican construction companies, and state Group in Nottingham, England. management of an enterprise platform for
and federal governments as well. He is hap- information management.”
pily married to Monica Serna, and they Andrei Edwards is articling with Deeth
enjoy independent movies and traveling. Williams Wall LLP, a law firm in Toronto.

Saju Bhaskaran is a senior functional con- Farzad Hakimzadeh is a senior consult-


sultant with Oracle Corporation USA, where ant with Trianz, in Santa Clara, CA.
he advises clients on best practices relating to
corporate finance and improving enterprise Susan Harnarine is a sales and clinical
intelligence. Saju lives in the San Francisco training specialist with Baxter Corporation
Bay Area and is also currently running a busi- in Mississauga.
ness in the apparel design industry.

Rotman Magazine Winter 2007 • 111


MBA/MCom/DBA Full & Part-Time

Justin Klein is a brand manager at Procter wishes to his class, and is looking forward Rajiv Nayan is manager of strategy for
& Gamble, currently working on Bounce. to the next reunion. IBM Canada’s Global Technology Services
business, responsible for prospect strategy
Young Kwon, product marketing assis- Romit Malhotra is a financial analyst analysis and new business development. He
tant manager at Samsung Canada in with CIBC in Toronto, where he has started sends best wishes to his class and looks for-
Mississauga, claims he doesn’t have a pic- a two-year rotation program and is excited ward to seeing you in the near future.
ture of himself on his PC, so he sent along to explore different areas of the bank.
a photo of his dog, Cookie, instead. Romit took three months off between
school and starting work and had a great
time travelling, hosting his parents and in-
laws, and spending the last pennies of his
credit limit before getting back to work.
He sends best wishes to his classmates and
wishes them great success in all their Philippe Ou is a senior analyst at Wash-
endeavors. “There is no place like Rotman ington Mutual, the sixth-largest financial
Gordon Lai is an associate in structured – everything outside is slower.” institution in the United States. Philippe
product sales at HSBC Asia Pacific in currently lives in Seattle, Washington, and
Hong Kong. as the first-known Rotman alumnus at this
major American bank, he looks forward to
Ryan Lavallee is a London, UK-based building a solid reputation for the Univer-
partner in a boutique, small-cap private sity of Toronto’s MBA brand in the Pacific
equity group. He currently splits his time Northwest. All Rotman alumni and con-
between London and Tuscany (Italy), with nections are welcome to contact Philippe
occasional wine-oriented side trips to the at: philippe.ou06@rotman.utoronto.ca
Veneto (Italy) and the German Rhineland. Laura Manes is a consultant with Bain &
Ryan has not yet developed a British accent, Company. She lives in Toronto with her Natasha Parekh is a senior analyst with
but sends his best wishes to all of his “friends husband, Ethan. Goldman Sachs in London.
and enemies back in North America.”
Sarb Parhar is an engineering supervisor
at Delphax Technologies in Mississauga.

Rodrigo Rodrigues is a consultant with


COOPBRASIL in Nova Friburgo, Brazil.

Raju Ruparelia is an associate with


Javier Matany is a senior financial analyst Credit Suisse in New York City.
Sukyou Lee is a research analyst at RBC in the international division of ConAgra
in Toronto. Foods, a leading company in the packaged- Aliza Schneid is a business analyst at
food business. Javier is pursuing the third Chartwell Group in Toronto. She reports
level of the CFA as part of his professional that she “got engaged (finally!) in August.”
goals. He and his wife (Rosana) recently
moved to a new place in Markham. Divya Shah is an associate with CIBC
in Toronto.

Wilson Leung is senior manager, finance


for RBC Capital Markets in Toronto.

Haresh Mahtani is a financial analyst


with Direct Energy (the North American
arm of Centrica Plc – a leading supplier of Eric May is associate marketing manager
energy and related services in the UK) in for Kimberly-Clark Corporation in Michael Shinewald is a consultant
their Toronto Office. He sends his best Neenah,Wisconsin. with Mezzanine Business Consulting

112 • Rotman Magazine Winter 2007


Executive MBA

(www.mezzanineconsulting.com), “Canada’s Charles Yu is currently conducting inter- an online business of a publicly-traded


leading tactical consulting firm. We deliver nal audits at CIBC. “I just moved to my new financial services company; and director of
world-class business analysis and practical home in Scarborough during the summer. sales and marketing for Bell Emergis. His is
guidance on market challenges and growth Back from vacation in Cuba, I am really also the former president and COO of Fly-
opportunities.” tanned. For anyone interested in Cuban ing Disc Inc., a publicly-traded new media
cigars i.e. Cohiba, I have a lot at home to company providing solutions for publish-
Nekzad Shroff is an associate at RPO share with you.” ing, media, and entertainment companies.
Management Consultants in “beautiful
Vancouver.”
Executive MBA

Reunion Alert!
All EMBA classes in honoured years –
i.e. those that end in either a ‘2’ or a 1987
Avi Sohal is an associate product manager ‘7’ – are invited to return to the Rotman Class Champion:
with the medical products division of John- School on May 31, 2007, to celebrate Vitor Fonseca
son &Johnson Canada. After his MBA, he Reunion 2007. For details, contact Vitor.Fonseca87@rotman.utoronto.ca
changed careers, moving from the IT indus- your Class Champion(s) or Michelle
try to marketing in medical devices. Avi, Zathureczky, manager of volunteers Reunion Alert! This class is celebrating a
who lives with his wife Deepali in and reunion coordinator, at (416) 946- banner anniversary on May 31, 2007. For
Markham, wishes all Rotmanites “a pros- 3665. You can also visit www.rotman. more information and to RSVP, please visit:
perous life,” and would love to be of utoronto.ca/alumni/reunion.htm www.rotman.utoronto.ca/alumni/reunio
assistance in any way he can. n.htm, contact your Class Champion or the
Alumni Office.
1985
Class Champion: 1989
Bob White Co-Class Champions:
Bob.White85@rotman.utoronto.ca Peter Murphy
Peter.Murphy89@rotman.utoronto.ca
A few years after surviving “out-of-body Bill Brown
experiences” in EMBA 1, Frank Abrams Bill.Brown89@rotman.utoronto.ca
Elena Uborceva is an electricity trader began his career in the financial services
with Aquilon Power in Toronto. industry in 1988 specializing in trading, Ed Vanhaverbeke operates a family-
investments and corporate risk manage- owned real estate development company
Andrew Wallace is an associate in invest- ment. Now at Man Financial, he works with properties in Durham Region. He and
ment banking at National Bank Financial with investors and trades in high-quality his wife Sylvia have four children and eight
in Toronto. U.S. growth stocks based on fundamental grand children. An avid traveler, recent
analysis, in addition to continuing to trade treks include Kilimanjaro and Everest Base
Benny Yeung is a research associate in the futures and options for speculators, and Camp. Ed is currently the chair of The
Calgary offices of BMO Capital Markets.As managing risk for hedgers. Man Financial Oshawa Durham Symphony Orchestra and
a member of the award winning research Canada Co. is one of the world’s largest member of the President’s Council of The
team, he is primarily responsible for the oil futures brokers and is listed on the London Canadian Opera Company.
and gas royalty trust sector. Benny sends Stock Exchange (EMG.L), ranked #1 for
best wishes to his class and looks forward to volume of trading and execution on the 1990
many big Class Reunions in the future. Chicago Board of Trade and the NY Mer- Class Champion:
cantile Exchange. Frank is also actively Jeffrey.Wayne
involved in local community and political Jeffrey.Wayne90@rotman.utoronto.ca
efforts that support Prime Minister
Stephen Harper. Frank was previously VP Heather Briant is senior VP of human
of corporate development at Rampart Mer- resources at Cineplex Entertainment
cantile, Inc. where he created exactTrade, in Toronto.

Rotman Magazine Winter 2007 • 113


Executive MBA

Dr. Donald Livingstone is a partner (2005-2007) of the Oakville Awards for Scott Dudgeon is the national executive
with Promeus Inc., an executive search Business Excellence, the sponsored pro- director for the Alzheimer Society of
partnership in Toronto. ceeds from which fund youth programs and Canada in Toronto.
bursaries in town.
1991 Brian Kim founded GWP Consulting in
Peter Bistolarides writes, “A lot has hap- Mark Foote was recently promoted by 1998, and it has been growing steadily
pened since graduation. I left Canada in Loblaw Companies Ltd to the positions of worldwide. “We now have three active
1994 to take a position as surgeon and president and chief merchandising officer. overseas branches, in Philadelphia, Seoul
medical director of a private health care and Shanghai, and are trying to open new
company based in Ann Arbor, Michigan.” Loreen Gilmour is studying for her can- San Francisco office as well as one in Ger-
He and his wife Peggy have five boys (Deno didacy exam as part of the requirements for many. All are mainly involved in the
is graduating from U of Michigan in eco- her PhD in health policy at the Faculty of export/import of steel and metals. As I am
nomics this year; John is attending Medicine, University of Calgary and hopes originally from a small country (S. Korea),
Michigan State’s Broad School of Business, to complete the program in about two I have been trained to think globally since
majoring in finance; James is a senior in years. Revisiting stats is proving to be a my youth, and I have good experience hav-
high school; and Paul and George are 12 challenge! I’m a member of the board of ing worked for one of the biggest steel mills
and 10.) “In May 2003, I embarked on a directors of the Calgary Health Region, a in the world. My dream is to establish a
sabbatical that took me and my family to $2.5 billion organization with 25,000 global networking company from the raw-
Boston, where I pursued studies for a Mas- employees. Rob’s software business is con- materials to the finished products of
ter of Divinity degree, which I received in tinuing to thrive and the kids are in Grades steels/metals to fill everybody’s needs in
May 2005. We returned to Michigan in 10 and 4. the world. Currently, my head-office is
June 2005, and I resumed clinical practice located in Mississauga.”
with my group, but recently left to join 1992
Synergy Medical in Saginaw, Michigan, a Reunion Alert! This class is celebrating a
multi-specialty academic group affiliated banner anniversary on May 31, 2007. For
with Michigan State University, as assistant more information and to RSVP, please visit:
director of surgery. I am enjoying the role http://www.rotman.utoronto.ca/alumni/
of teacher/mentor and continue to put reunion.htm, contact your Class Champion
both my clinical and EMBA skills to good or the Alumni Office.
use. In addition to my lay profession, I am
an ordained priest in the Greek Orthodox EMBA 8 – Class of 1992
Archdiocese of America, and serve a small The weekend of June 24th,2006, EMBA 8
parish in Kalamazoo, Michigan. Regards to held a reunion in Prince Edward County, 1993
all, and I look forward to hearing from graciously hosted by Glen and Susanne Class Champion:
EMBA 91 classmates.” Ladouceur at their beautiful waterfront Andy Hofmann
farm and vineyard outside of Picton. The Andy.Hofmann93@rotman.utoronto.ca
Greg Duffy has been operating Woodfield weekend featured BBQs, a wine drinking
Consulting since May 2003. “Was EMBA marathon, golf, competitive women’s 1994
really 15 years ago? Ouch!” He is concen- bocce ball, boat rides, and dancing. In Class Champion:
trating on IT and Geographic Information attendance were EMBA 8 alumni Bill Andrew Stewart
Systems (GIS) governance and strategy Fields, Pat Harmon, Chris Hill, Wilma Andrew.Stewart94@rotman.utoronto.ca
issues surrounding business cases and proj- Jacobs, Chris Jyu, Glen and Susanne
ect justification. Greg has written articles Ladouceur, Gerry Root, Lillian Veri, Don 1995
and white papers as well as conducting Wilson, Peter Young, and various partners. Class Champion:
Business Case seminars across Canada with A fabulous time was had by all and we look John Ramdeen
a business partner throughout 2006 and forward to the next get-together. Our John.Ramdeen95@rotman.utoronto.ca
looks forward to “continuing to de-mystify” thanks to Glen and Susanne – here’s a
the ROI/NPV aura in order to determine glimpse of their rustic, rural retreat. Colleen Albiston recently left E&Y after
real value and impact from IT programs. over eight years to take on the role of pres-
With all three children now grown and out ident at ZSA Recruitment in Toronto.
in the real world, he and Judy now have Colleen is a recipient of Canada’s Top 40
two grandchildren to spoil who now live in Under 40™ award, and currently sits on
Los Angeles. Greg volunteers with the the board of the YMCA of Greater Toronto,
Rotary Club in Oakville and is the chair serving on their governance and nominat-
ing committee.

114 • Rotman Magazine Winter 2007


Executive MBA

Wayne Leacock is currently practicing Reunion Alert! This class is celebrating a Ron Dahms is managing partner with
corporate/commercial law in Toronto, hav- banner anniversary on May 31, 2007. For KWA Partners in Montreal.
ing graduated from Queen’s Law School on more information and to RSVP, please visit:
2000. In addition to practicing law, Wayne www.rotman.utoronto.ca/alumni/reunio Jeff Lowe is the vice president of corpo-
is currently completing a LLM – Business n.htm, contact your Class Champion or the rate finance and treasurer at Inmet Mining
Law at Osgoode Hall – York University. Alumni Office. Corporation in Toronto.

1996 Joe Kassantini is the founder and CEO of 2000


Co-Class Champions: Bursah Experts, a leading stock market Co-Class Champions:
Jon Waisberg educational and consultancy company in Jennifer McGill-Canu
Jon.Waisberg96@rotman.utoronto.ca Saudi Arabia. He is also the leading stock Jennifer.McGill00@rotman.utoronto.ca
Carmine Domanico market analyst on CNBC Arabia TV, appear- Bruce Lawson
Carmine.Domanico96@rotman.utoronto.ca ing twice a week every Sunday at 3:30 PM Bruce.Lawson00@rotman.utoronto.ca
and Tuesday at 11:00 AM (Saudi Arabia
Jim Bradley has accepted a new position time). He also appears monthly unsched- Robertson Rodil is a senior engineer with
as director of global logistics for uled on Ekhbariah TV, Iktisadiah TV, Arabia Daimler Chrysler in Auburn Hills, Michigan.
Affymetrix, Inc., the leader in microarray TV and New TV and writes monthly in sev-
technology within the biotech industry. eral newspapers including AlMajalah, 2001
Jim, Kathy and Michael will be relocating AlHawameer and Souk AlAshum. Joe managed Co-Class Champions:
to Northern California in the next months. to attract partners worth in excess of US$ Ken Hagerman
Daughter Candice will remain in Michigan 2 billion and has succeeded in raising the Ken.Hagerman01@rotman.utoronto.ca
as a freshman at Michigan State University. value of the company from under Gary Ryan
“Best wishes to all of EMBA 96!” US$200,000 to over US$ 25,000,000 in Gary.Ryan01@rotman.utoronto.ca
just under three years. The business of the
Gerald Hippesroither is managing company has expanded from one analyst, to 2002
director at MCE Finanzmanagement over 17 leading analysts covering nine Class Champion:
GmbH in Linz, Austria. offices in the Middle East. Joe credits his Cheryl Paradowski
outstanding success to the Rotman School’s Cheryl.Paradowski02@rotman.utoronto.ca
Richard Paulson is CEO of Pfizer South “outstanding EMBA program” which he
Africa and Southern Africa. He and his wife believes gave him a sustainable competitive Reunion Alert! This class is celebrating a
Petra moved to Johannesburg about one edge. “Thank you EMBA/U of T/Joe.” banner anniversary on May 31, 2007. For
year ago, after his stint as CEO for Pfizer in more information and to RSVP, please visit:
Czech Republic. Recently, they welcomed http://www.rotman.utoronto.ca/alumni/
their first baby, Kitso, into the world. The reunion.htm, contact your Class Champion
Paulson family recently had a once-in-a- or the Alumni Office.
lifetime experience: a private dinner with
Nelson Mandela. Richard and Petra were Mark Anshan is the general counsel and
both very inspired and moved by his intelli- director of public affairs for the UJA Feder-
gence, charm, and sincere caring, and rate Carol Lloyd recently was promoted to ation of Greater Toronto, the central
this as one of the most moving experiences the position of president and CEO of The fundraising and planning organization of
of their lives. Easter Seal Society in Toronto. the Jewish community in the Greater
Toronto area. In his role, Mark oversees the
1998 legal work of the Federation, corporate
Class Champion: affairs, and coordinates the public policy
Ashok Sharma and advocacy issues with related agencies in
Ashok.Sharma98@rotman.utoronto.ca the GTA.

1999 Tammy Cook is assistant vice president,


1997 Co-Class Champions: projects and technology, administration and
Class Champion: Mo Mauri claims, group benefits at Sun Life Financial
Jennifer Hill Mo.Mauri99@rotman.utoronto.ca in Toronto.
Jennifer.Hill97@rotman.utoronto.ca Desmond Preudhomme
Desmond.Preudhomme99@rotman.
utoronto.ca

Rotman Magazine Winter 2007 • 115


Executive MBA

James Gilmore and his wife, Christine, ing dishes and his day job as Managing Part- Cecily Bradshaw is manager of phar-
are very proud to announce that on Sep- ner at Procase Consulting Inc. macy services at Southlake Regional Health
tember 15th 2006, Christian James Centre in Newmarket.
Gilmore entered the world weighing 8lbs
13oz. “Who knows… maybe a 3rd genera- Brad Einarsen has 16 years of experience
tion EMBA grad on his way?” in the IT field in which he has specialized in
how people interact with computers to get
their jobs done. He started at IBM Canada
in the Toronto Development Lab and built
up the International Centre of Competence
2004 for Multimedia and Web while he was
Co-Class Champions: there. He has also worked in industries as
Fariba Anderson diverse as Multimedia Production and
Fariba.Anderson04@rotman.utoronto.ca Industrial Process Instrumentation. He
Sajid Husain is a web sales specialist at Paul McKernan now runs his own business, Haven Knowl-
Lenovo Canada Inc. Paul.McKernan04@rotman.utoronto.ca edge Systems, which he started in 2000
with the mandate to bring the discipline of
2003 (EMBA19) Javier Zuniga is a managing consultant Knowledge Management to the otherwise
Class Champion: for IBM Canada in Markham. chaotic world of Internet Development.
Jennifer Figueira HKS is now in its seventh year of operation
Jennifer.Figueira03@rotman.utoronto.ca 2005 (EMBA22) and operates in the areas of Internet con-
Class Champion: sulting and development, hosting, and
Dan Snow says “a hello to all my class- Michele Henry Internet product development. Brad is
mates. After close to two years in Toulouse Michele.Henry04@rotman.utoronto.ca married to Amy and has two daughters,
France, change is upon us. I have accepted Zoe (8) and Eva (3).
the position of VP of strategic supply chain Gary Ataman has worked for Messier
management at my company’s headquar- Dowty for 23 years in various engineering Patrick Ferrier is the president of the
ters in Cleveland, Ohio. Colleen and I, and program positions. In his previous posi- higher education division at McGraw-Hill
along with our golden retriever, are in the tion as project engineer, he was responsible Ryerson, the innovative industry leader in
midst of a double relocation from France to for the overall engineering activities on spe- business and economics education. Prior to
Canada, and finally the USA. All this means cific aircraft landing gear programs such as his current appointment, he served as the
about three months of chaos and one last the Bombardier Global Express and the vice president and publisher, during which
Christmas in our Canadian home of 20 Challenger 300. In his currently position as time Canadian sales revenue grew by 80 per
years. Best wishes to all.” director, he is responsible for the qualifica- cent. He has worked with McGraw Hill com-
tion of the F7X LGSCU (landing gear and panies worldwide to help develop business
2003 (EMBA 20) steering control unit.) He obtained a Bache- strategies and local publishing programs. He
Co-Class Champions: lor of Mechanical Engineering from McGill currently sits on the board of directors for
Andrew Jenkins University in 1983 and a Masters of Mechan- the Institute for the Advancement of Teaching
Andrew.Jenkins03@rotman.utoronto.ca ical Engineering from the University of in Higher Education and is a member of the
Maria Lundin Toronto in 1990. Gary is married to Heather Canadian Publisher’s Council.
Maria.Lundin03@rotman.utoronto.ca and they have three children; Rebecca,
Steven and Jane, and a golden retriever
Rebecca Pang and Garry Chan were mar- named Misty Morning. He is a member of
ried on August 26 at Eaton Hall, a small inn the Whitby Tigers Running Club.
north of Toronto. Several Rotman class-
mates were present to join the festivities.
Rebecca and Garry are discovering the joys
of cooking and other simple pleasures of
life. Meanwhile Garry is trying to juggle
between the added responsibility of wash-

116 • Rotman Magazine Winter 2007


OMNIUM/GEMBA (Global Executive MBA)

2005 (EMBA23) OMNIUM/GEMBA 2001


Co-Class Champions: Co-Class Champions:
Karen Sparks (Global Executive MBA) Margaret Evered
Karen.Sparks05@rotman.utoronto.ca Margaret.Evered01@rotman.utoronto.ca
Joyce Rankin Renald Hennig
Joyce.Rankin05@rotman.utoronto.ca Reunion Alert! Renald.Hennig01@rotman.utoronto.ca

2006 (EMBA24) All OMNIUM/GEMBA classes in hon- 2002


Co-Class Champions: oured years – i.e. those that end in Co-Class Champions:
Elizabeth Duffy-MacLean either a ‘2’ or a ‘7’ – are invited to Manfred Koo
E.DuffyMaclean05@rotman.utoronto.ca return to the Rotman School on May Manfred.Koo02@rotman.utoronto.ca
Linda Jussaume 31, 2007, to celebrate Reunion 2007. Petra Cerhan
Linda.Jussaume05@rotman.utoronto.ca For details, contact your Class Cham- Petra.Cerhan02@rotman.utoronto.ca
pion(s) or Michelle Zathureczky,
Ian Janwaar is director of client services Manager, Volunteers and Reunion Reunion Alert! This class is celebrating a
at the Victorian Order of Nurses (VON) in Coordinator at (416) 946-3665. You banner anniversary on May 31, 2007. For
London, ON. can also visit www.rotman.utoronto. more information and to RSVP, please visit:
ca/alumni/reunion.htm http://www.rotman.utoronto.ca/alumni/
Flip Oberth is president of her own con- reunion.htm, contact your Class Champion
sulting business, Flipside Solutions Inc., or the Alumni Office.
in Toronto. 1998
Class Champion: Nikolaus Kretz is the CEO of ProRegio
2006 (EMBA25) Lan Nguyen Mittelstandsfinanzierungs AG of Linz,Austria.
Class Champion: Lan.Nguyen98@rotman.utoronto.ca
Rob Ljubisic 2003
Rob.Ljubisic06@rotman.utoronto.ca 1999 Co-Class Champions:
Class Champion: Michal Berman
Rahul Kuckreja is an IT project man- Jim Coutts Michal.Berman03@rotman.utoronto.ca
ager, specializing in wireless applications. Jim.Coutts99@rotman.utoronto.ca Susanne Justen
Four years back, he decided to venture into Susanne.Justen03@rotman.utoronto.ca
other industries to gain experience in areas 2000
outside of his domain. Starting with $100k, Class Champion: 2004
Rahul accumulated assets worth $5 million Nancy Dudgeon Co-Class Champions:
and is presently the owner/CEO of a Nancy.Dudgeon00@rotman.utoronto.ca Ralf Martinelli
retirement home for senior citizens. Rahul Ralf.Martinelli04@rotman.utoronto.ca
and wife Vineeta recently welcomed their Chris Gallenkamp is managing director Brent Furneaux
second son, Aryan, into the world. Rahul is at Technocell Dekor, a paper producer that Brent.Furneaux04@rotman.utoronto.ca
very proud to be associated with both, manufactures decorative paper for the
EMBA-23 and EMBA-25, and sends every- woodworking industry, where he is respon- Enrico Enghardt writes, “A couple of
one his best regards. sible for sales and marketing worldwide. years after graduating, I joined ALSTOM
Chris and his wife Freya have three kids and Power Service GmbH where I took over
Arwa Shahin recently moved to Amman, live in Osnabrück, Germany. Free time is operations responsibilities for the service of
Jordan to work on the quality compliance spent along with the family and, when pos- turbine generator sets installed at fossil
systems for a leading pharmaceuticals man- sible, playing golf. fired steam power plants within the Middle
ufacturer.Arwa has experienced working in East and North Africa regions. To me, the
the health care and pharmaceutical industry changes in China are nothing compared to
in several countries in Africa, the Middle the cultural and macro-environmental
East, and in Canada.The move to Jordan is aspects affecting business in the Arabic
an exciting one for Arwa, who was born world. The volatility is very dramatic –
and raised in Jordan, giving him the oppor- forecasted multi-million Euro projects and
tunity to work and live close to family and related cash-in are often delayed due to
friends as well as the wealth of experienc-
ing the changes and growth in the pharma
and health care sectors in Jordan.

Rotman Magazine Winter 2007 • 117


MBA (Accounting)/Master of Management & Professional Accounting

unpredictable wars, and other projects MBA (Accounting)/ his wife Robin have two girls aged four and
require governmental support to cover the nine, named Sierra and Skylar. “Best wishes
risk of sunk costs in the case of interna- Master of Management & to the class of 94.”
tional embargos. As you can imagine,
working in this environment requires one’s
Professional Accounting
‘battery’ to be recharged from time to
time; I do a lot of fresh or seawater fishing,
but I recently did something totally differ- Reunion Alert!
ent: climbing up Mount Kilimanjaro to
welcome the new year at sunrise (that’s me, All MBA and MMPA classes in hon-
in the middle, below). My main focus now oured years – i.e. those that end in
is developing my team and the market I’m either a ‘2’ or a ‘7’ – are invited to
responsible for. That’s what makes life return to the Rotman School on May 1996
interesting: predicting and handling the 31, 2007, to celebrate Reunion 2007. Co-Class Champions
future. Personally, I’m really looking for- For details, contact your Class Cham- Vanessa Blumer
ward to ‘What’s next?’ pion(s) or Michelle Zathureczky, Vanessa.Blumer96@rotman.utoronto.ca
Manager, Volunteers and Reunion Blake Langill
Coordinator at (416) 946-3665. You Blake.Langill96@rotman.utoronto.ca
can also visit www.rotman.utoronto. Janet Scarpelli
ca/alumni/reunion.htm Janet.Scarpelli96@rotman.utoronto.ca

Daniel Shimmerman is the president


1990 and CEO of Varicent Software Incorpo-
Antonio Lopes is vice president finance rated, an international solutions provider of
Guenter Knogler is head of IT at OO and administration for Federal White commission and incentive management sys-
Versicherung AG in Linz, Austria. Cement in Woodstock, ON. tems. He lives in Toronto with his wife and
three children, Ben, Abby and Jacob.
2006 1991
Class Champion: Faruq Rashid is the manager, financial 1997
Cecilia Mueller Chen reporting for Dundee Realty in Toronto. Reunion Alert! This class is celebrating a
C.MuellerChen06@rotman.utoronto.ca banner anniversary on May 31, 2007. For
1992 more information and to RSVP, please visit:
James Tucker traveled extensively post- Reunion Alert! This class is celebrating a www.rotman.utoronto.ca/alumni/reunio
program to Venezuela (visiting Caracas, banner anniversary on May 31, 2007. For n.htm, contact your Class Champion or the
Margarita Island and Angel Falls) among more information and to RSVP, please visit: Alumni Office.
other countries and highlights. He recently www.rotman.utoronto.ca/alumni/reunio
accepted an engagement with the Boston n.htm, contact your Class Champion or the 1998
Consulting Group and is enjoying work and Alumni Office. Class Champion
life immensely. James wishes health and Melody Tien Grewal
happiness to all his colleagues and looks 1994 Melody.Grewal98@rotman.utoronto.ca
forward to reconnecting over at least a few Class Champion
pints of beer in Greece this summer (‘07). Chris Hind 1999
Chris.Hind94@rotman.utoronto.ca Class Champion:
Jamie Ferguson
Allen Tai Ning Ho is a partner with Jamie.Ferguson99@rotman.utoronto.ca
PricewaterhouseCoopers in Toronto.
Mark Mandel is vice president, advi-
Eli Palachi is a partner in assurance and sory services at PricewaterhouseCoopers
advisory services at Soberman LLP. He and in Toronto.

118 • Rotman Magazine Winter 2007


PhD

2000 2004 PhD


Taek Sung Jung is an accountant with Jose Jimenez is audit senior at Ernst &
the Hangil Accounting Corporation in Young in Bermuda.
Seoul, Korea. 2002
In 2004, Rikhi Rampersad (DIFA 2004) Wulin Suo is an assistant professor at
2001 was made a partner of R.D. Rampersad & Queen’s University in Kingston.
Class Champion: Co, Chartered Accountants (RDR) in the
Elaine Ilavsky sunny isle of Trinidad. RDR has been the 2003
Elaine.Ilavsky01@rotman.utoronto.ca local representative for Deloitte in Trinidad Lynnette Purda and Mark Heeler wel-
for the past five years. Rikhi now manages a comed their son Evan Alexander on May
2002 number of the firms’ larger manufacturing 16, 2006. Evan was born in Kingston,
Class Champion: and oil and gas audit clients and tries to dab- Ontario, where Lynnette is a professor of
Ali Spinner (Charyk) ble in forensic engagements when they finance at Queen’s University.
Ali.Charyk02@rotman.utoronto.ca arise. Rikhi is married and has three chil-
dren, two boys and a girl. He confirms that
Reunion Alert! This class is celebrating a he has no plans to have any more, and from
banner anniversary on May 31, 2007. For the picture, you can see that they are quite a
more information and to RSVP, please visit: handful. Rikhi recently traveled to Germany
www.rotman.utoronto.ca/alumni/reunio for the World Cup to support the Soca War-
n.htm, contact your Class Champion or the riors with their efforts, which was an
Alumni Office. unforgettable experience.The German pub-
lic embraced the native Trinidadians with
Michael Gottlieb is enjoying the best of open arms and made them feel right at
Be a Class Act:
both worlds. He and his wife, Tamara (nee home. In fact, Rikhi, his brother and another Volunteer as a Class
Winn), celebrated the birth of their first child friend were interviewed by a local German
last year, Lauren. On the professional side, newspaper. He sends his best regards and
Champion
Michael recently left BMO Financial Group wishes to the DIFA 2003 and 2004 classes
Class Champions ensure their class
to join Barrick Gold Corporation as senior and reminds all that his open invitation to
remains active and vibrant long after
manager, financial reporting risk assessment visit Trinidad is still in effect. Three kids
graduation and bring the Rotman
and mitigation. He enjoying the dynamic now, “accommodation may be a bit challeng-
School and its graduates closer
opportunities at Barrick, having recently ing, but nevertheless, all are welcome.”
together. They help organize reunions,
returned from an assignment in Tanzania.
promote events, and keep track of their
classmates’ activities for inclusion in the
Class Champ Ali Spinner is a tax manager
Class Notes section of Rotman maga-
at RSM Richter LLP in Toronto. She and
zine. To represent your graduating
her husband, Jamie, were married in 2004,
class, contact the Rotman Alumni
and have recently moved into their new
Office at (416) 978-0240, or via e-
home in Toronto. Ali taught tax week at the
mail at alumni@rotman.utoronto.ca.
ICAO’s School of Accountancy last June
and is look forward to teaching corporate
income tax to UofT Commerce students Jason Zhang is an associate at H&Q Asia
this winter! Pacific, a leading private equity firm manag-
ing US$2.3 billion (see www.hqap.com for
more details.) Jason is currently based in
Shanghai, and was married in October 2006.

Rotman Magazine Winter 2007 • 119


Upcoming Events
Complete details are available at www.rotman.utoronto.ca/events

January 2007 February 2007 April 2007


January 9, 5:00 – 6:20 pm February 1, 5:00 – 7:00 pm April 10, 5:00 – 6:30 pm
Rotman Merchandising Experts Rotman Pension Management Rotman Public Policy Speaker Series
Speaker Series Speaker Series Speaker: David Mulroney, Foreign and
Speaker: Mark Foote (Rotman MBA ‘91), Speaker: Keith Ambachtsheer, Director, Defence Policy Advisor to the Prime
President and Chief Merchandising International Centre for Pension Minister of Canada
Officer, Loblaw Companies Limited Management, Rotman Topic:“Canada’s Foreign and Defence Policy”
Topic: “Pension Revolution: A Solution
January 11, 5:30 – 7:30pm to the Pensions Crisis” (Wiley, 2007)
Booklaunch for “Wikinomics: How Mass
Collaboration Changes Everything” February 20, 8:00 – 9:15am May 2007
(Penguin 2007) Rotman Integrative Thinking™
Author: Don Tapscott, President, Speaker Series May 3 and 4
New Paradigm Learning Corporation Speaker: Antoni Cimolino, General Psychologically Healthy Workplace
and Adjunct Professor of Strategic Director, Stratford Festival of Canada Conference @ Rotman
Management, Rotman School Topic: “Turnaround at the Stratford Keynote Speaker: Julian Barling, Professor
Festival: It’s a Lot Like Directing a Play” and Associate Dean, School of Business,
January 18, 5:00 – 7:00pm Queen’s University
Rotman Design Thinking Speaker Series February 26, 5:00 – 6:20 pm
Speaker: Alex Manu, Director, Beal Rotman Corporate Citizenship May 31, 6:00 – 10:00 pm
Institute for Strategic Creativity and Speaker Series Annual Rotman Reunion
Professor and Chair of Industrial Design, Speaker: Mike Feinberg, Co-Founder, This is a milestone year for the Classes of
Ontario College of Art and Design Knowledge is Power Program Schools 1952, 1957, 1962, 1967, 1972, 1977,
Topic: “The Imagination Challenge: Topic: “What It Takes to Make a Student” 1982, 1987, 1992, 1997 and 2002.
Strategic Foresight and Innovation in the For details, see Class Notes in this issue.
Global Economy” (Peachpit Press, 2006)”

January 23, 6:00 – 8:00pm


Rotman Master of Finance March 2007 June 2007
Speaker Series
Speaker: John Hull, Professor of Finance, March 21, 1:00 – 6:00 pm June 1, 8:00 am – 4:00 pm
Director – Centre for Finance and Maple 6th Annual Rotman MBA Conference “Integrative Thinking™: Learning
Financial Group Chair in Derivatives and on Social Change and Leadership How to Think to Win” 9 th annual Rotman
Risk Management and Co-Director, Master Keynote Speaker: Johann Koss (Rotman Life-Long Learning Conference
of Finance Program, Rotman MBA ‘04), President and CEO, Speakers: Thomas Stewart, Harvard
Topic: “Latest Developments in Credit Right to Play Business Review; Howard Gardner and
Risk and Derivatives” Ellen Langer, Harvard University; Mihnea
Moldoveanu and Roger Martin, Rotman

120 • Rotman Magazine Winter 2007


At Grant Thornton LLP – one of Canada’s
leading accounting and consulting firms
focused on mid-market clients – we believe
the best learning comes from hands-on
experience. That’s why we give you the
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Integrative
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Learning How to Think to Win


9 th Annual Rotman Participate in our 9th Annual Rotman Life-Long Learning Conference on June 1.
Life-Long Learning This year’s theme is “Integrative Thinking™: Learning How to Think to Win”.The
day’s co-chairs are Tom Stewart, Editor-in-Chief, Harvard Business Review and
Conference Roger Martin, Dean, Rotman School.
Friday, June 1, 2007 We are pleased to offer the following presentations:
Toronto, Ontario “The Wealth of Knowledge: Intellectual Capital and the 21st Century Organization”
Thomas Stewart, Editor, Harvard Business Review
Confirm your attendance
TODAY by registering at: “Five Minds for the Future: the Cognitive Abilities that will Command a Premium in the Years Ahead”
www.rotman.utoronto.ca/events Howard Gardner, Hobbs Professor of Cognition and Education, Harvard Graduate
School of Education
We look forward to seeing
you on June 1st! “Designing the Thinker of the Future”
Mihnea Moldoveanu, Associate Professor of Strategic Management and Director,
Desautels Centre for Integrative Thinking™, Rotman School

“Reinventing Yourself through Mindful Learning and Creativity”


Ellen Langer, Professor of Psychology, Harvard University

“Think Again: How Today’s Greatest Business Leaders Think to Win”


Roger Martin, Dean and Premier’s Research Chair in Productivity and Competitiveness
and Director, AIC Institute for Corporate Citizenship, Rotman School

105 St. George Street Publication Mailing


Toronto, Ontario, Canada M5S 3E6 Agreement Number 40062461