From the Editor
— whether it be the latWHATEVER YOUR ORGANIZATION PRODUCES est technology, a healthcare experience or some type of financial service — one hard truth applies: Your offering has zero value unless your customers perceive value in it. One of the core challenges for leaders today is to understand the nuances of creating value in the mind of the consumer.
What does your organization do that no one else can match? What problems do you enable people to solve? And what problems do customers have that you are not currently solving? In today’s innovation-focused environment, everyone in your organization should be thinking about the answers to these questions.
The challenges for today’s leaders don’t end there, because ‘the business of business’ is no longer just business. Individuals, economies, societies and political systems are increasingly interconnected, making it harder than ever — and ill-advised — to focus on business considerations alone.
In this issue of Rotman Management, we put value creation in the spotlight in an effort to define what it looks like and how to enable more of it. We kick the issue off on page 6 with The (Surprisingly) Simple Economics of Artificial Intelligence, where Rotman Professors Ajay Agrawal, Joshua Gans and Avi Goldfarb describe how this new factor of production is opening up myriad opportunities for value creation across industries.
Bain & Company’s Eric Almquist and Jamie Cleghorn and their colleagues have identified 70 distinct ‘elements of value’ in the realms of business-to-consumer (B2C) and businessto-business (B2B). On page 18, they describe how these elements co-exist within a hierarchical system. Their framework — loosely based on Abraham Maslow’s Hierarchy of Needs, can be applied to any industry.
In Creating Value for Business and Society on page 24, authors from BCG and MIT unpack the ‘how to’s’ of creating value for business and society at the same time, providing five guiding principles that have enabled companies like Kraft, Starbucks, Hilton and BASF to achieve this feat.
Figuring out how to digitize your offerings is an ongoing challenge for today’s leaders, but the opportunities it enables — which include finding customers in new ways and getting to know them better — make the effort worthwhile. On page 36, Rotman Professor Dilip Soman and his co-authors explain the way forward in Consumer Behaviour Online: A Playbook Emerges.
Elsewhere in this issue, we feature the founding father of modern strategy, Harvard’s Michael Porter, in our Thought Leader Interview on page 12; and in our Idea Exchange, BCG’S Gerry Hansell discusses ‘value patterns’ on page 99; Medtronic’s Gabriela Prada describes the rise of value-based healthcare on page 108; Kellogg Professor Don Schultz says it’s time to flip the value model on page 130; and Rotman Professors Anita Mcgahan, Eric Kirzner and Geoffrey Leonardelli discuss their latest research.
As indicated in this issue, today’s most successful organizations are moving beyond the traditional business agenda and paying attention to broader social ecosystems. To thrive in this environment, leaders must master the art of shaping systems, rather than just operating within them. Those who embrace this shift can create value not just for their organizations — but for the societies in which they are embedded.