The MIT Sloan Fellows Program has educated some of the world's most influential leaders. With this blog we look to share the collective wisdom of our global community of alumni and faculty. Stay tuned to find out what's happening on the international frontier of business and industry.
Innovation for its own sake is not necessarily innovative. If you want to start a successful business, says Jag Gill, SF’13, solve a problem. Gill, founder and CEO of Sundar, a global apparel startup, created her business because no efficient platform existed to connect the apparel industry to suppliers and manufacturers. “A clever idea is neither practical nor executable if it doesn’t solve an existing problem or fill a gap.”
Gill says that when she mentors budding entrepreneurs, she asks them to drill down on their motivations. “What’s your secret sauce? What’s unique in what you bring to the table? And what societal need are you meeting? A new business should never be a solution in search of a problem.”
Nadia Shalaby, SF ’10, a serial entrepreneur and CEO of ITE Fund, agrees. “Understand the market for your product before you ever begin. Who needs what you are planning to provide? How will you reach them? Are there enough consumers to make your product or service viable?”
You’re a founder of a new enterprise and one of your top priorities is social and environmental responsibility. Your management team, however, can’t think of anything but the balance sheet. By year’s end, your bottom line is healthy, but you don’t feel your new enterprise has contributed much to society.
It’s a common dilemma that comes down to a core disconnect that many founders don’t think to look for when pulling together their C-suites. But compatibility surrounding worldview, ethical issues, and dedication to social responsibility can be as important to the success of a business as professional qualifications.
Gustavo Mamão, SF ’11, founder of the Brazilian startup Flourish, which guides entrepreneurs in the creation of mission-driven organizations, has always focused on businesses that demonstrate how a company dedicated to a better world can also be profitable. But it’s an ethic, he says, that the whole management team must get behind. “The extent to which a business embraces sustainability and environmental goals is something that should be decided among founders and investors in the earliest days of the enterprise.”
Surround yourself with like-minded people. Bring in as many different perspectives as you can. Fuel creativity by promoting tensions. It seems that every expert who weighs in on the composition of the perfect management team offers up a different recipe. We polled a number of entrepreneurial gurus and asked them to tell us who should be at your right hand when you’re about to launch a new enterprise.
A diverse mix, says Greentown Labs CEO Emily Reichert, PhD, SF ’12. She says the head of a startup needs to entertain a steady stream of different perspectives. If your management team is diverse, she believes, you’ll have a better chance of generating fresh ideas and solutions. “The strongest teams are those that represent multiple cultural and professional perspectives—technical, managerial, marketing. That way, all facets of your business are being addressed during the decision-making process.”
Jag Gill, SF ’13, founder and CEO of Sundar, a global apparel startup, notes that many investors value CEOs who are outside the industry in which the enterprise operates. Although she had advised clients in the world of apparel and had exposure to the industry, Gill herself had a background in finance before launching Sundar. “One thing that someone from outside the industry brings to the table is an impulse to ask why. They haven’t become comfortable with the status quo, so they don’t just accept things the way they’ve always been. They are always asking, ‘Why do we do things this way?’ That reality check is exactly what a business needs to compete and stay healthy.”
Will the calm, cool, and collected applicant turn out to be a better employee than the person who exhibits stress? Traditionally, companies have tended to think so. In fact, many industries conduct stress tests with current and prospective employees to see how they perform under pressure. Those who remain calm during the simulations are commonly seen as the best fit for stressful on-the-job situations.
MIT Sloan professors Juan Pablo Vielma and Tauhid Zaman and graduate student Carter Mundell beg to differ with the conventional wisdom. By measuring galvanic skin response (GSR) over the course of an increasingly difficult exam, the three researchers came to the conclusion that those who perform best under duress actually exhibit some degree of stress when the stakes are lower.
Lie detector technology predicts success
GSR, which is used in polygraph tests, measures changes in skin resistance owing to sweat—a relatively easy way to measure stress, as the body’s sweat glands are connected to the central nervous system. In their paper “Predicting Performance Under Stressful Conditions Using Galvanic Skin Response” Vielma, Zaman and Mundell note that, in the past, the study of stress has focused on understanding it as opposed to predicting it. “Everyone else was looking at, ‘Why are you stressed now?’ We stumbled on whether they would be stressed in 10 minutes.”
The founding father of artificial intelligence Marvin Minsky once said that his ultimate goal was not so much to build a computer he could be proud of as to build one that would be proud of him. MIT Sloan Professor Andrew Lo mentioned this anecdote in a recent piece about financial advisers in TheWall Street Journal. In essence, he poses the question: Can a robot do the job?
Lo says that while tech-savvy millennials would be just as happy interacting with an app as with a human adviser, robo advisers can’t take into account the emotion of investors. “When the stock market roils, investors freak out,” Lo explains. “They need comfort and encouragement.” During the recent stock-market rout, he notes that Vanguard Group was so besieged with calls from jittery investors it had to pull staff from across the company to handle the call volume. “Investing is an emotional process,” Lo says, and “robo advisers don’t do emotion.” At least not right now.
Integrating human feeling into the digital advising process is probably the greatest challenge of financial technology. Lo likens the present state of digital financial advising to a rotary phone in an iPhone world. He points out that investing is much more complex and nuanced than tasks like driving, “which is why driverless cars are already more successful than even the best robo advisers.”
Augmented reality (AR)—a cousin to virtual technology—is quickly making itself indispensable in fields like medicine, architecture, industrial design, and entertainment, especially gaming. For those interested in leveraging the possibilities of AR, MIT’s annual Augmented Reality Summit is the center of the known universe.
AR in Action takes place at the MIT Media Lab January 17 and 18, 2017. The summit convenes the top minds in the augmented reality ecosystem, a diverse group of renowned thought leaders, visionaries, Fortune 100 executives, futurists, technologists, and AR practitioners, including Ethernet inventor Bob Metcalf and personal computer pioneer Alan Kay. Together, they will explore the challenges and opportunities that face inventors, integrators, investors, and other innovators working to bring the benefits of AR to the world.
“From the air traffic control system to 3-D printers, from the software that companies use to manage their supply chains to the simulations nations use to understand climate change, the world in which we live today was made possible by Jay’s work.” MIT Sloan Professor John Sterman is talking about legendary system dynamics pioneer Jay Forrester, who died November 16 at the age of 98. [Read the full tribute in MIT News.]
A mid-century invention, system dynamics (SD) is the analysis and redesign of any interdependent social, managerial, economic, or ecological system. SD has gained legions of adherents over the decades, and Forrester worked to develop new iterations almost up to the time of his death.
The dynamic Midwesterner arrived at MIT in 1939 with a degree in electrical engineering from the University of Nebraska and quickly grew to become a key actor in the development of digital computing and the national air defense system. He also led Project Whirlwind, a pivotal digital computing project, which led him to invent magnetic core memory, an early form of RAM. Forrester joined MIT Sloan in 1956 with the goal of applying his background in science and engineering to the essential issues that determine the success or failure of organizations.
“To me, Jay was MIT,” MIT Sloan Professor Nelson Repenning observed in a recent MIT Sloan tribute to Forrester. “He showed up to work on gunsights and radar mounts for the U.S. military, ended up playing a pioneering role in digital computing, and suddenly became a social scientist. I can’t imagine that happening anywhere else. It was the perfect match of a unique person [and institution].”
Forrester’s initial SD investigations were calculated by hand. He assembled a team of graduate students to interview employees in a company about how they made decisions at their individual operating points. “By tapping the wealth of information people possessed in their heads,” Forrester said, “we were able to build a model that revealed overall organization behaviors that resulted from the interconnected actions of many local decision-making individuals.”
In the late 50s and early 60s, Forrester and his students began building their simulation models with computers. By translating the policies, information flows, and interconnections of a company into computer instructions, they were able to create a model that could act out individual roles at each decision point. The computer would then feed the results of those actions into other connected decision points, allowing the model to generate the basis for its next round of simulated decision-making. The technology enabled the team to create a laboratory replica of a company that could be used to observe the behavioral consequences of company policies. “What we showed,” explained Forrester, “was that the policies believed to be the solution to the company’s problems were, instead, the cause of those problems.”
The working models that made sense for post-World War II employees do not necessarily work for the employees of today, and MIT Sloan Professor Thomas A. Kochan believes it’s about time those models were updated to fit a dramatically altered world. In his latest book, Shaping the Future of Work, Kochan outlines the steps that business, government, and academic leaders must take so that workers can perform their best work and prosper. These steps, he contends, are necessary for companies to realize positive outcomes and national economies to thrive.
Kochan’s goal is to inspire the creation of more productive businesses that provide good jobs and successful careers, resulting in a more inclusive economy and more broadly shared prosperity. But to revamp the system, he says, workers must acquire new sources of bargaining power and business, labor, government, and educational leaders must work together to meet the challenges and opportunities facing the next generation workforce.
In a recent interview with MIT Sloan News, Kochan raised the example of the Market Basket grocery store chain, where workers staged a successful walkout two years ago after the pro-worker CEO was fired. “It’s going to require a massive effort on the part of the public to do what we saw at Market Basket—to say, ‘This is the kind of company we expect to have competing here in the United States.’”
Venture capitalists and entrepreneurs lean toward immediate gratification. So does the pharmaceutical industry and, for that matter, society as a whole. Unfortunately, inventions that require a long lead time to develop are often overlooked in favor of projects that promise a quicker pay-off—a phenomenon that may well be holding back disease cures and energy solutions. MIT is stepping up to address this issue with a pioneering new enterprise called The Engine, which will provide funding, expertise, and physical space to innovators studying breakthroughs that may take a bit longer to commercialize.
MIT President L. Rafael Reif announced the initiative in late October 2016 at The Engine’s headquarters in Central Square, Cambridge. He noted that many innovations never leave the lab because companies have difficulty finding financing. The Engine, he said, will power a grid of innovation networks, supporting startup companies working on scientific and technological breakthroughs that have the potential for transformative societal impact.
“If we hope for serious solutions to the world’s great challenges,” Reif said, “we need to make sure the innovators working on those problems see a realistic pathway to the marketplace. The Engine can provide that pathway by prioritizing breakthrough ideas over early profit, helping to shorten the time it takes these startups to become ‘VC-ready,’ providing comprehensive support in the meantime, and creating an enthusiastic community of inventors and supporters who share a focus on making a better world. We believe this approach can offer exponential growth to regions that pursue it successfully — and we want Greater Boston to lead the way.”
Rubber bumpers, airbags, shatterproof windshields—such were the hallmarks of vehicular safety before the advent of the driverless vehicle. For the passenger in a driverless car, however, it’s the software, first and foremost, that must be crash-proof. In a recent editorial in Xconomy, Lou Shipley, a lecturer at the Martin Trust Center for Entrepreneurship at MIT Sloan, cautions that in the production of autonomous vehicles, the management of software supply chains must be as reliable as the rigorously tested supply chains for mechanical parts.
“Beyond being efficient, software providers for driverless cars will surely face requirements to certify that the code they deliver is free of security vulnerabilities that, if exploited, could enable a hacker to seize control of the vehicle,” Shipley says. “A faulty spark plug is one thing. Suddenly having your steering, acceleration, and braking hijacked is quite another.” He points out that many software fixes will take place remotely, the way that an Apple technician in Cupertino can now patch an iPhone in Sri Lanka—via cyberspace.
Bottom line, Shipley says, the success of autonomous vehicles will depend on whether drivers feel comfortable giving up the wheel. “Motorists’ willingness to hand over that control to software will depend largely on carmakers’ ability to gain their trust.” He notes that consumers have already shown some comfort with automated transportation. “Airline passengers today don’t seem to worry about automatic pilots guiding airplanes through the sky and even landing them when visibility is poor.”