From the Edi­tor

Rotman Management Magazine - - ROTMAN MANAGEMENT - Karen Christensen, Edi­tor-in-chief edi­tor@rot­man.utoronto.ca Twit­ter: @Rot­man­mgmt­mag

— 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.

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