A Better Way to Bring Science to Market

Learned a lot lending an editorial hand here:

MIT Sloan Management Review, Feb. 28, 2018

by Joshua S. Gans

In 2012, when the Creative Destruction Lab (CDL) at the University of Toronto’s Rotman School of Management was launched, the audacious target of this seed-stage program for massively scalable, science-based companies was $50 million in equity creation in five years. In 2017, CDL companies surpassed $790 million in equity creation. Such is the power of a market for judgment.

A market for judgment is a nexus between science and technology. By science, I mean the kind of knowledge that is produced in academic institutions and research labs. By technology, I mean the commercial application of that knowledge. A market for judgment is a place, like CDL, where the producers of knowledge meet and mingle with businesspeople and investors.

Markets for judgment are necessary and valuable because science and technology are mismatched in several ways. They are mismatched in geographic terms: Science is concentrated in universities, which are located all over the world; technology aggregates in a few places, such as California’s Silicon Valley and Cambridge, Massachusetts, in the U.S. The landscape of science is the gently undulating Great Plains whereas the landscape of technology spikes like Mount Olympus.

The distribution of scientific and technological talent is also mismatched. I think that may be because of the antithetical nature of the two jobs. Scientists are supposed to go down fruitless paths; it’s part of their process. Technologists are supposed to go down fruitful paths; in their process, fruitless paths are decidedly unwelcome and potentially destructive.

In short, although science and technology are supposed to go hand in hand, they usually can’t get that close. CDL was designed to determine if we could bring science and technology closer together by building a market for judgment. Read the rest here.

How to Get Time on Your Side

strategy+business, Feb. 21, 2018

by Theodore Kinni

The vagaries of time can be bewildering. One day, you drive through heavy traffic as if in a perfectly choreographed dance number; the next, it feels as if you’ve entered a demolition derby. One day, you’re brimming with ideas; the next, your creativity well is as dry as Death Valley. Timing is everything, right?

Actually, no. That’s what Daniel Pink declares in the last sentence of his illuminating and often surprising new book, When: The Scientific Secrets of Perfect Timing. “I used to believe that timing is everything,” he writes. “Now I believe that everything is timing.”

What Pink means is that there are predictable oscillations present in the days of our lives, and in individual and group work, that affect the outcomes we are working toward. In When, he argues that we can improve our chances of success in work and life if we simply recognize these oscillations and use them to our advantage. This may seem akin to casting runes, but in his trademark style, Pink supports his thesis with a convincing and nuanced reading — and synthesis — of a wide variety of scientific research.

Much of the research that Pink offers stems from the application of big data and analytics. Take, for instance, the study of 26,000 earnings calls from 2,100 companies over a span of six and a half years conducted by three business professors. They discovered that the tenor of calls and their effects on stock price are related to the hour in which they are held. Calls made first thing in the morning tended to be positive. Call results declined until lunchtime, when there was a small bounce, and then declined again until after the closing bell. (What time is your next earnings call?) Read the rest here

The Power of a Free Popsicle

Insights by Stanford Business, Feb 19, 2018

by Theodore Kinni

Los Angeles boasts plenty of terrific hotels. At this writing, the top three on TripAdvisor are the Beverly Hills Hotel, Hotel Bel-Air, and the Peninsula Beverly Hills. If you can get a room at any of them for under $700 per night, TripAdvisor says you’re getting a “great value.”

The fourth name on the list is the Magic Castle Hotel. You can snag a room there for $199, but TripAdvisor doesn’t call that out as a great rate. The Magic Castle Hotel, as Chip Heath, the Thrive Foundation for Youth Professor of Organizational Behavior at Stanford Graduate School of Business, describes it, “is actually a converted two-story apartment complex from the 1950s, painted canary yellow … [with] a pool that might qualify as Olympic size, if the Olympics were being held in your backyard.”

How does the Magic Castle Hotel maintain such an enviable TripAdvisor ranking among the 355 hostelries it lists in LA? In their new book, The Power of Moments, Heath and his brother, Dan Heath, a senior fellow at Duke University’s CASE Center, trace it to the hotel’s ability to create “defining moments.” These moments, they say, are ones that bring meaning to our lives and provide fond memories.

One of those defining moments is the Popsicle Hotline. Visitors at the hotel’s pool can pick up a red phone on a poolside wall to hear, “Hello, Popsicle Hotline.” They request an ice-pop in their favorite flavor, and a few minutes later, an employee wearing white gloves delivers it on a silver platter, no charge. It’s a small defining moment that doesn’t cost much to produce, but has paid off for the Magic Castle Hotel.

In The Power of Moments, the Heath brothers identify four metatypical defining moments. Elevation moments transcend ordinary experience, like the arrival of an ice-pop on a silver platter. Insight moments rewire our understanding of the world, like George de Mestral pulling burrs from his clothes after a hike and getting the idea for a new kind of fastener that he named Velcro. Moments of pride accompany achievement, which is why employee recognition is such a powerful tool. And moments of connection — like weddings, graduations, and retirements — strengthen relationships. Read the rest here.

The End of Scale

Learned a lot lending an editorial hand here:

MIT Sloan Management Review, Feb. 9, 2018

by Hemant Taneja with Kevin Maney


For more than a century, economies of scale made the corporation an ideal engine of business. But now, a flurry of important new technologies, accelerated by artificial intelligence (AI), is turning economies of scale inside out. Business in the century ahead will be driven by economies of unscale, in which the traditional competitive advantages of size are turned on their head.

Economies of unscale are enabled by two complementary market forces: the emergence of platforms and technologies that can be rented as needed. These developments have eroded the powerful inverse relationship between fixed costs and output that defined economies of scale. Now, small, unscaled companies can pursue niche markets and successfully challenge large companies that are weighed down by decades of investment in scale — in mass production, distribution, and marketing.

Investments in scale used to make a lot of sense. Around the beginning of the 20th century, the world was treated to a technological surge unlike any in history. That was when inventors and entrepreneurs developed cars, airplanes, radio, and television, and built out the electric grid and telephone system.

These new technologies ushered in the age of scale by enabling mass production and offering access to mass markets. Electricity drove automation, allowing companies to build huge factories to churn out a product in massive quantities. Radio and TV reached huge audiences, which companies tapped through mass marketing. The economies of scale governed business success.

Scale conferred an enormous competitive advantage. It not only lowered fixed costs — it also created a forbidding barrier to entry for competitors. Organizations of all kinds spent the 20th century seeking scale. That’s how we ended up with giant corporations, and universities with 50,000 students, and multinational health care providers.

Today, we’re experiencing a new tech surge. This one started around 2007, when mobile, social, and cloud computing took off with the introduction of the iPhone, Facebook, and Amazon Web Services (AWS), respectively. Now, we’re adding AI to the mix. AI is this century’s electricity — the technology that will power everything.

AI has a particular property that supplants mass production and mass marketing as a basis of competitive advantage. It can learn about individuals and automatically tailor products for them at scale. This is how the GPS navigation app Waze gives you a route map tailored to your destination at a specific moment in time — a map that probably won’t work for anyone else or at any other time and doesn’t need to. AI enables mass customization for increasingly narrow markets. If a product is custom built specifically for you, you’ll probably prefer it to a product that’s built for millions of people who are only kind of like you.

This is the basis of economics of unscale. The winning companies in today’s tech surge are companies that profitably give each customer exactly what he or she wants, not companies that give everyone the same thing.

There is another, equally important way in which the current tech wave is propelling economies of unscale. Because companies can stay nimble and focused by easily and instantly renting scale, they can adjust more quickly to changing demand and conditions at much lower cost and with far less effort.

Thus, scaled companies find themselves beleaguered by unscaled competitors. Stripe is an unscaled financial services company based in San Francisco that is challenging the big banks. Airbnb, also based in San Francisco, is an unscaled hotel company that is taking customers away from the big chain hotels. Warby Parker is a New York City-based unscaled eyewear company that is threatening the big eyewear brands.

If economies of unscale will rule in this new world of business, how can a corporation, which, by definition is a large, scaled-up enterprise, compete and thrive? Read the rest here