In this paper I shall discuss what I see as some major implications for management practices when it comes to several key trends, which indeed might be seen as representing clear breaks from the past. I shall further briefly examine what might be implications from all of this, particularly when examining recent evolutions of key agents for management change, not only business schools, management consultants or key employees, but also other management practice influencers such as banks or the public sector.
Let me however first examine what I see as these major trends, for then to highlight some of the implications for management practice when it comes to these developments.
A short discussion is necessary at this point. While not empirically valid through large sample testing, all of the issues to be discussed have been successfully tested on my wholly owned investment company (turnover ca. 300M CHF) (Lorange). There seems to be evidence that the trends hereto discussed have a consequence in practice, and that the various new management practices stemming from these are worthwhile. And, while the content of this is probably relevant for all businesses, I am particularly concerned with how these trends might impact family businesses and the portfolios of independent investors.
The brutal Corona virus pandemic of course has an effect on my writing. While I have attempted not to over-stress various impacts from this, I readily admit that the Corona virus context may have led to unintended biases.
One important caveat should be made at this point. This brief article is intended solely as an overview vehicle. For more in-depth discussions of the topics identified, I am referring to the specific references given.
Advances in communication-related technology, and working from home (WFH)
We have seen a revolution when it comes to advances in these areas. Computers themselves represent a case-in-point, but we also see dramatic developments when it comes to mobile technology, videoconferences, etc. Perhaps the most significant advances have come in the software side.
There are of-course several fundamental implications from all of this. I shall here merely point out three areas.
- The age of virtual communication is here. This has opened up for the possibility to communicate effectively without physically being together. While we have had traditional telephony for a long time, we might now also benefit from video conferencing, mobile telephony, easy messaging, and so on. The modern organization clearly looks differently today than before – less hierarchy, more globally spread. Marketing becomes different (Lorange and Rembiszewski) and so does the innovation process (Christensen).
- Two-way as well as multiple-way remote interaction has now become a reality. We see the emergence of blogs, APPs, new platforms. etc. Individuals can post comments, ask questions, engage in dialogues without being together physically. This is virtual and is indeed also often, but not limited to, one-to-one.
- It now seems to become the trend that basic learning increasingly might take place based on the computer. This then opens up for more workshop-like exchanges, say, around key dilemmas, either face-to-face, or now increasingly also virtually (Lorange). The traditional university, with business schools included, may no longer so much be based on lectures by professors, in traditional classroom settings, but rather take place through networks built around computers and learning software (Wilson). We are seeing a rise in online masterclasses, seminars, learning labs and other formats, both synchronous and asynchronous.
- The way we work, and working from home (WFH). One of the most interesting effects from the corona crisis, stemming from governmental regulation that most of us should have to go into self-isolation and, thus, de facto have had to work from home, is the fact that this mode of working seems to function quite well. We are indeed able to conduct effective one-to-one meetings, engage in project meetings, with say six to eight different persons, or as noted, taking part in webinars, with large numbers of people. And, many of us are finding that all of this has led to us becoming more effective, in that we now can avoid unnecessary waste of time, and non-essential travel costs (save money!). We tend to be more concentrated and focused!
It goes without saying that effective virtual communication shall always be based on an element of trust, which needs to be existing among those who interact virtually. So, perhaps, some physical meetings shall therefore also be needed, although fewer than before. And, social activities in connection with such meetings, say business lunches or dinners, may not be that ineffective, after all.
Large data analysis
We now see the emergence of large data analysis and so-called “cloud” computing, i.e., based on the new reality of undertaking non-parametric data “manipulation” on large data sets (both online and offline) and with powerful computer driven systems. Here too, we see several implications, all having to do with becoming able to identify patterns which, until now, may have escaped us. (For a book that gives a good, but non-technical overview of big data analysis and cloud computing, see Schmiedel). We are also at a point in time where maintaining a holistic view of data is becoming more critical, as well as creating clear priorities when it comes to predictive data. Let us point out some implications:
- Political election campaigns. It is now possible to segment electorates much more finely, based on large bases of demographic and socio-economic data. We have observed dramatic results from this. Perhaps recent US Presidential campaigns might provide particularly good examples. We definitely see a change in the way democratic election processes are being handled. Campaign inputs that are tailored to specific sub-segments of the voters are becoming the norm (O’Neil).
- Marketing and “route-to-market”. With the ability to analyze large consumer-based data sets, say, from cash register receipts in retail stores, one might be able to identify new routes to market (Marmara). The discipline of marketing is thus changing. As an example, take the Swiss-based retail chain Migrolino. Here, based on cloud computing-based analysis undertaken by McKinsey, four distinct store ache-types were identified, each with their own distinctive profiles, serving different customer groups: grocery shoppers, lunch/snack shoppers, commuters and “night crawlers” as well as fresh goods buyers.
More generally we see how leading retailers such as Alibaba, Yahoo or Amazon.com are now going for much more tailored promotional campaigns based on a more explicit understanding of what might be key preferences of key customer sub-groups. Many companies are now starting to use data analysis to build special customer stories as well as to revisit their prioritization of KPIs. The creative role of analyzing “super users” may be increasing in importance during crisis times, given that the faithful customers or those who keep ordering more can be approached for referral revenues and uphill revenues. Additionally, companies who are either growing during the crisis or maintaining their businesses, are often digging deep into all data points, looking at smaller scale data, “getting into the weeds” and getting raw data to get better quality insights.
- The stock market. We are witnessing the emergence of so-called algorithmic stock trading, again based on large data analysis of corporate performance. Here the basic premise is to model customers’ stock trading preferences around key characteristics of given corporations. So far, these approaches for investing seem to do rather well (Mayer-Schonberger and Ramge).
Advances in behavioral science
Human cognition is now being studied on an ever-broader basis than before. Even key phenomena from nature are now being analyzed, to search for added insights regarding cognition. The result from all of this is that the field of cognition has now started to yield significant new results. And, new disciplines, such as behavioral finance, are emerging. Let me point out three areas, in particular, where increased understanding of cognition seems to be playing critical new roles:
- How do we deal with risk and uncertainty? In particular, it seems as if ongoing success, and its impact on risk-assessment, seems to lead to increased confidence, and a resulting lessening of careful assessment of risk (Kahneman), a quite disturbing insight! Our over-confidence might take over!
- During downward periods, i.e. when things are deteriorating, many actors seem to become “paralyzed”, perhaps hoping that things shall eventually be turning around, leading to a recuperation of what might have been lost. Others, however, may perhaps be better at squarely facing up to such realities, perhaps by practicing more diligent stop-loss policies (Kahneman). We might see cultural differences in play here. U.S-based management teams might perhaps tend to be acting more promptly than Europeans when it comes to cutting losses. In general, we saw during the Corona crisis, that speed and resoluteness seemed to be of the essence for cutting losses at an early stage. PETER: Perhaps here it is worth discussing flight, freeze and fight and also treating culture as a separate point (since the topic is quite broad)?
- The winning effect. As already noted, we often can observe that success might lead to added confidence, perhaps over-confidence. Bets might be doubled and doubled again until eventually all might go wrong and thus be lost. In nature it has, for instance, been observed that eagles might initially succeed in protecting their territories, which in turn might lead them to go further with their expansion of said territories. Eventually, however, this increasing confidence might then tend to lead to the death of these eagles – they are more easily becoming prey to other animals. Over-confidence seemed to have a tragic consequence!
In business we see this perhaps most clearly in cases where entrepreneurs might take on additional debt to be able to expand even faster. From such over-confidence the break-even point may become out of control in cases of crises. Interest payments and rents are indeed coming due!
Some implications for actors
Let us now discuss four implications from all of this, which perhaps might impact business leaders particularly directly:
- Business executives. It is now feasible to run a business operation more or less as a network, i.e. without having large groups of executives co-located in corporate headquarters or divisional offices. Virtual communication allows for faster execution and better follow-up. There will be less traveling, and also considerable cost savings! There will be a premium on those executives who are able to work well in such virtual settings. The age-old emphasis on years of job experience is likely to become less critical. What matters now is for executives to be comfortable with this new way of working.
- Business schools. We have already briefly touched on this, in the sense that computer-assisted self-learning may now be a reality, which then, in turn, might open up for more discussion-oriented workshops regarding cutting-edge dilemmas. The professors’ roles are changing: more listening, more synthesis, two-way communication. The student’s role is changing too, now being able to both work in his/her job and study at the same time, none the least due to the added flexibility of learning processes that now have become a reality. The traditional auditorium may also be gone. Now, sitting around round tables in flat rooms may represent the new learning reality, allowing for better interaction. Even the traditional black board may be gone. Now paper postings on the walls may be it, then to be photographed by the participant with their mobile phones for then to be entered directly into their computers.
Clearly, the curriculum shall be changing too. Fields such as statistics, marketing and finance are now in rapid development, driven by the three mega-trends just discussed. They are becoming relevant and interesting to study, no longer boring!
- Traditionally, we have seen leading consultants being located in specific markets. Global firms, such as McKinsey or BCG for instance, are located in a multiplicity of cities, world-wide. This might be quite analogous to the location of traditional cement makers, i.e. in the local markets! Now, however, the global consulting firm might be located in one site, “the global meeting place”, as modern communication opens up for projects that can be run from anywhere. There is no longer a need to be located locally, on the contrary, a global location, in one site, might open up for more powerful cultural understanding, allowing inspirations from all over the world to come together in one given office location. A “global meeting place”.
- Management practice providers. We see the emergence of global providers such as Bloomberg (TV), The Economist (News), and others. Specialist , data focusing experts are emerging in different areas, all with global focus (Marsoft – Shipping Markets). We see that these providers are now able to entice their customers to subscribe, rather than outright purchase. The so-called subscription economy is taking over (Kellman Baxter). We might expect to see more of this in the future.
We have seen that fundamental trends in technology and scientific insights may have profound implications for the expansion of the field of management. We have highlighted three such areas of innovations, namely advances in computing / communication, large data analysis and enhanced insights regarding behavioral science. And, we have seen profound consequences from these developments when it comes to agents and processes.
Perhaps the most profound change is the change to a so-called subscription economy, which takes us away from traditional producing! Access to a good or service is no longer dependent on us actually owning. Rather, it is now a matter of subscribing.
Perhaps a key underlying challenge for business shall be that they shall have to break with these traditional working modes to be able to address the issues raised in this paper. This may be particularly hard for tradition-bound family businesses and idiosyncrasy-dominated private investors.
About the Author
Dr. Peter Lorange, after having sold his shipping company in 2006, has been a successful entrepreneur and owner of a highly diversified family office. He has been regarded as one of the world’s foremost business school academics, holding the position of President at IMD, Lausanne for 15 years, as well as several positions on shipping company boards. His entrepreneurial journey spans across key areas such as education, shipping, investments, and pre-dominantly Family Businesses. Peter founded the Lorange Network, a digital learning and networking platform, in 2017. Peter is Norwegian, residing in Küssnacht am Rigi, Switzerland.
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