Aalto EE Profile Magazine 1/2013 by Avidly Agency

MAGAZINE OF AALTO UNIVERSITY EXECUTIVE EDUCATION 1.2013

FROM EARLY WARNING TO EARLY ACTION CAN YOU PLAN SERENDIPITY? GO AHEAD AND JUMP!

Is your business about to evaporate? Technology is shaking the foundations of health care, banking and other industries. Are you safe? 14

Risks Ris Risk isk ks 1.2013

JUNNU LUSA

“There are known knowns; these are things we know we know. We also know there are known unknowns; that is to say we know there are some things we do not know. But there are also unknown unknowns – the ones we don’t know we don’t know.” That is a famous quote from Donald Rumsfeld when he was the U.S. Secretary of Defense under President George W. Bush. According to Rumsfeld, policymakers cannot afford to be paralyzed by a lack of information. These words are worth quoting as they are also the very topics we in the business world think about daily as we assess our actions and strategy and calculate risks. Humans tend to act even when there is little evidence to indicate what the consequences or results would be rather than live with ambivalence and Aalto EE’s websites, ambiguity. We seem to prefer biased vision and certainty to openFacebook page and blog mindedness and uncertainty. It is little wonder then that futurists are in ever-greater demand and keep you up to date on seem to be present at every conference, seminar and symposium. The the latest events. higher profile the event, the higher number of futurists invited to attend. Check out www.aaltoee.fi and www.aaltoee.sg. The elite seem willing to pay dearly for soothing words that promise at least sense of trajectories and outcomes when certainty cannot be delivered and promises cannot be kept. In this issue of Profile we discuss risk and uncertainty from several perspectives; how we frame the risks and how we randomly assign attribution. Human frailties are apparent and at work in the actions we take as business managers and leaders, just as they are in our private lives. It takes a proactive and serious effort to challenge preconceived beliefs and deeply held dogmas. When the cognitive fortresses are stormed and the walls fall, we are inevitably pushed outside our comfort zones into a cold wilderness. Dr. Pekka Mattila, Whether in our business or private lives, we need to be conscious of the trade-offs we make between D.Soc.Sc., Executive MBA; biased certainty and open ambiguity. From our perGroup Managing Director, spective as leaders the big challenge is to fulfill our Aalto University Executive obligations to create and sustain meaningfulness: how Education; Adjunct Professor to engage and empower employees in a world where of Practice, Aalto University there are fewer timeless truths to guide us. School of Business

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Aalto University Executive Education (Aalto EE) offers high-quality executive education services supported by the competence of Aalto University. Aalto EE’s mission is to build a better world through better leadership and to educate a new generation of leaders. The organization’s strengths lie in its global operating model and versatile offering. Aalto University brings to Aalto EE a multidisciplinary approach to executive development along with innovative learning methods. Aalto EE has two strongholds: the office in Helsinki coordinates operations in Europe and South Korea and the office in Singapore serves as a hub for the Asia Pacific rim. In addition to Finland and Singapore, Aalto EE offers education programs in Poland, South Korea, Taiwan, China, Indonesia, Russia and Sweden.

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FEAR

EXPLAINED

Don’t waste time fretting over failure. Hope for success instead.

Jyri Luomakoski

believes that slowing down creates a selffulfilling prophecy.

What have you learned about...

Aki Seeck

shares his experience of doing business in the Middle East.

The power of spirituality. Taking the plunge when still young.

SCIFI MEETS REALITY

DID YOU SEE THE SIGNS?

BLESS YOUR LUCKY STARS

Some say that computers will soon replace medical doctors. Will your industry be next?

What can businesses learn from the Red Cross Early Warning System?

Is there such a thing as planned serendipity? If so, what does it take to harness it?

5 6 7

Editor in Chief: Pekka Mattila, pekka.mattila@aaltoee.ﬁ Publisher: Aalto University Executive Education Ltd Mechelininkatu 3 C, 00100 Helsinki, Finland tel. +358 10 837 3700 www.aaltoee.ﬁ

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HISTORY REPEATED.

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Strandvägen 7A, 114 56 Stockholm, Sweden tel. +46 727 467 467, www.aaltoee.com Editorial office: Zeeland, www.zeeland.fi Producer: Annamari Typpö, annamari.typpo@maggie.fi Creative Director: Miikka Leinonen Printing: SP-Paino Oy, Nurmijärvi, ISSN 1458-2058 Address register: profile@aaltoee.fi

We ﬁlled the toolbox with tips on how to assess the risks you face in your life and your career. We also help you to make smart investments.

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Red Bull took a huge risk with the Stratos project. What if Felix Baumgartner’s space jump had ended badly?

FEAR

EXPLAINED “The greatest mistake stake you can an make make in life is to continually co ll be afraid you will make one.” Elbert lbert Hubbard (1856–1915) 1856–19 A ican writer, publisher, publishe artist and p American philosopher

I’m a loser a.k.a. FEAR OF FAILURE

Atychiphobia (from the Greek phóbos, meaning “fear” or “morbid fear,” and atyches meaning “unfortunate”) is the abnormal, unwarranted and persistent fear of failure. TEXT: RISTO PAKARINEN

LEARNING TO LIVE WITH THE FEAR of failure and humiliation, of losing face, is something you can practice. Renowned psychotherapist, Albert Ellis, was a shy teenager who forced himself to talk to a hundred women in one month. He failed to get a date – but he overcame his fear of being rejected by women. Ellis instructed Oliver Burkeman, author of The Antidote, a book on the advantages of negative thinking, to go to the New York City subway and yell out the name of each station. “I did it in London instead, and people did look at me like I was crazy.” Burkeman said it wasn’t fun, but it reduced his anxieties to a manageable level. “I realized it really wasn’t the end of the world.” Some people fight a fear of failure by setting detailed goals for each week, month, and year. “If we can see failure as part of the learning process – as a point along the path towards our true goals – just maybe failure won’t seem so humiliating,” writes Robert Kelsey, author of What’s ANOTHER WAY TO COPE WITH THE FEAR of Stopping You? failure is to avoid competition altogether, like Then again, Burkeman points out that an ostrich burying its head in the sand when overpursuing goals is not good, either. In his studies fear strikes. SAMUEL BECKETT of successful entrepreneurs he found that if you are But we needn’t react this way. After all, comfortable enough with the lack of direction to act regardless, not even ostriches actually do – that’s a myth. In fact, they dig you will be open to far more fruitful opportunities in the long run. holes in the ground to make nests for their eggs. “What I feared most for myself at your age was not THE FLIPSIDE OF THE “FEAR OF FAILURE” is the “hope for poverty but failure,” said J.K. Rowling, the author of the wildly success.” Hope and her talent was what Rowling had when she successful Harry Potter books, in her commencement speech sat down in an Edinburgh café and wrote, “Mr and Mrs Dursley, to Harvard graduates in 2008. She was a single parent living on welfare. Her marriage had of number four Privet Drive, were proud to say that they were perfectly normal, thank you very much.” failed and her dreams of becoming a writer shattered. The finished manuscript was rejected by the first dozen or Rowling said that failure meant stripping away the so publishers to whom she submitted it, but we all know how the inessential. She stopped pretending to herself that she was story of her perseverance and refusal to fail ended. anything other than what she was, and was then able to focus Failure is our constant companion. We just need to learn to all her energy on finishing the only work that mattered to her. live with it. “I was set free because my greatest fear had been “Ever tried. Ever failed. No matter. Try again. Fail again. realized, and I was still alive. I still had a daughter Fail better,” wrote Samuel Beckett in Worstward Ho in whom I adored, an old typewriter, and a big idea. And 1983. so rock bottom became the solid foundation on www.youtube.com Fear to fail? Then do nothing! That surely wasn’t his first draft. which I rebuilt my life.”

ther than love, nothing has inspired poets, writers and other artists as much as failure – how to tackle it and how to live with it. Failure is an integral part of the human experience. After all, to err is human. The important point is not that we feel fear, but how we deal with it. John Atkinson introduced the concept of “fear of failure” in a paper published in 1966. In one study, he asked children to throw hoops around a peg. The farther they threw them, the greater reward they received. Atkinson observed that the kids had two different reactions. Some tried to maximize the reward, while others either went quite close to the peg to minimize the risk of failure or they positioned themselves so far away from the peg as to make hitting it practically impossible, thus setting themselves up for failure.

“EVER TRIED. EVER FAILED. NO MATTER. TRY AGAIN. FAIL AGAIN. FAIL BETTER.”

“Items at the top of our agenda include changes in the banking regulations, the price of oil and raw material components, and consumer conﬁdence.” What are the prime concerns of global business in these uncertain times? “The key is to be agile and fast, because one does not know how steeply we could fall in Europe. Business conditions in different countries vary from nearly normal to very tough. In our company we try to detect weak signals and adjust our operations accordingly. Slowing down creates a selffulfilling prophecy. Our strong balance sheet allows us to act proactively. In some countries that are less business proficient, we have stayed at the frontline even when the market has contracted. While some competitors have disappeared, our market share has increased. For example, in the U.S. we expect next year to be back to about the same volumes we had before the U.S. housing bubble burst. We are also analyzing our sales patterns weekly and have developed various tools, such as, rolling forecasting. Other items at the top of our agenda include changes in banking regulations, the price of oil and raw material components, and consumer confidence.”

top of my

How do you perceive the difference between uncertainty and risk? “Due to the financial crisis, we live in uncertain times. Businesses can have problems, yet some still do well. In uncertain times you can still reasonably expect possible outcomes to be within a foreseeable range, whereas when risks materialize, there is no floor nor ceiling for the outcome.”

What is your reaction when your company’s earnings forecasts vacillate? “In the morning I make coffee and sit down at my computer to read the latest business news. It really wakes you up. I feel it strongly if I see something that could have a negative impact on my company or the building market in general. Nevertheless, I cannot allow myself to become gloomy. Rather I need to ask myself what to do next and how to continue to navigate in these uncharted waters.”

Uncertain times keep the company agile. That is at the top of the agenda for President and CEO Jyri Luomakoski right now. His company, Uponor, is growing in the USA but facing declining markets in Europe. Uponor is a leading international provider of plumbing and indoor climate systems for the residential and commercial building markets. In the Nordic countries, Uponor also supplies pipe systems for infrastructure construction.

agenda Text: Katja Alaja, Photo: Uponor

t u o b a d e n r a le u o y e What hav idance

seeking spiritual gurisks, when dealing with

METROPOLITAN AMBROSIUS is the Bishop of the Diocese of Helsinki of the Finnish Orthodox Church. He has a deep interest in the business world. For 19 years, Metropolitan Ambrosius was a member of the board of Tulikivi Corporation, the world’s largest manufacturer of heat-retaining ﬁreplaces. Currently he is the Chairman of the Board of the Finnish Financial Ombudsman Bureau. He is also one of the contributors to Aalto EE’s new book on the sins of leadership.

Metropolitan Ambrosius? HOW DOES SPIRITUAL GUIDANCE HELP WHEN A LEADER IS TAKING MANY RISKS?

TEXT: KATJA ALAJA PHOTOS: JUNNU LUSA

I think that every leader should have a coach, mentor or father confessor who does not tell the leader what he should do, but rather helps him to see the problems from many angles. In my church, a person should meet with a spiritual counsellor. It is a continuous process of short or long talks which help the person to clarify his priorities in life. Everybody also needs a couple of close friends with whom they can talk freely.

WE ARE LIVING IN TURBULENT TIMES IN BUSINESS. HOW CAN A LEADER BEST COPE IN THIS SITUATION? Leaders need to have a clear identity and deep self-conﬁdence. The renowned Austrian philosopher and psychologist Viktor Frankl said that people who survived the concentration camps discovered a meaning for their lives. This sort of person ﬁnds opportunities to be creative and innovative even in uncertain times.

WHAT IS THE MEANING OF RISK? Risk helps a person to realize the limitations around him, which is half the battle. One should not fear problems that arise, but see them as opportunities to orientate in a new way. German philosopher Nietzsche said that crises are powerful stimulants in life. Society needs entrepreneurs and other risk-takers because they move the culture forward.

DOES RISK STRESS YOU? Even if I am sensitive by nature, I am not overwhelmed by pressure. I have a strong belief in providence and I have a lot of professional experience in coping with risks. Already at the age of 21 I worked as the rector of an adult education institute, and later on I borrowed a great deal of money to reconstruct the New Valamo monastery at Heinävesi, Finland and to acquire the Cultural Centre Soﬁa here in Helsinki.

EXPERIENCE/SHARED Aki Seeck works as Senior Advisor at Aalto EE. He explores business opportunities for Aalto EE in the Middle East. He has previously taught tactics at the National Defense University and promoted Finnish exports in Qatar.

GOOD TO KNOW WHEN DOING BUSINESS IN THE MIDDLE EAST... DON’T BE TOO EAGER. For example, if a potential partner from Qatar contacts them, the company should not immediately order flight tickets to Doha or send off dozens of product samples. This gives Arabs the impression of unprofessionality – the company is acting too hastily. One should take time to do some research first to see if there is a market for their product.

DID YOU THINK ABOUT THE RISKS WHEN YOU STARTED OUT AS A YOUNG ENTREPRENEUR? No, I was naive and jumped straight into the most competitive market in the world.

WHAT WAS THE BIGGEST RISK YOUR COMPANY TOOK? We did not talk enough with our customers and we developed DealDash based on too many assumptions. Our typical customer is a reasonably affluent retired female who lives in the countryside in the USA. Developing a service for her is different from what intuitively makes sense to me. Based on customer feedback we have, for example, developed No Jumper auctions. They differ from regular auctions in that new bidders are not allowed to join the auction once the price goes over 5 U.S. dollars. This makes winning easier. We also test every DealDash feature on 5–10% of users for a couple of weeks before deciding whether to roll it out to the general public.

HOW DO YOU SEE YOUR COMPANY’S RISKS NOW? There are a lot of risks, but we have a solid and open approach to dealing with them. We have internal auditing processes which follow our key numbers on a daily basis and detect any major changes in customer behavior or procurement patterns. We tackle and follow up risk factors at board and audit committee meetings. We have grown our cash reserves as a buﬀer in case unexpected diﬃculties arise.

WHAT HAVE YOU LEARNED ABOUT LEADERSHIP FROM YOUR MENTORS? I try to embrace a data driven approach to being a leader. It is up to me to give targets and facilitate my team in achieving them. However, one has to realize that not even the opinions of a hundred experts or CEOs are worth as much as one test using accurate data.

ut o b a d e n r a le u o y e v a h t W ha in g n u o y a g in e b f o s k e ris

WILLIAM WOLFRAM founded his ﬁrst company at the

age of 13. He is now 20 and heads DealDash, a fast-growing e-commerce company. DealDash auction site encourages bidders to interact and compete against each other to buy products at a fair price. If a bidder fails to win a product, he can buy it at a fair price and his bids will be refunded. Between 2010 and 2011, the turnover of the company grew by over 300% to 6.2 million euros. Wired magazine has featured DealDash as one of the leading European startups.

BE PREPARED FOR INTERRUPTIONS. The company should be aware that business negotiations can end abruptly. The potential partner may have found a better product and does not feel an obligation to explain this to the prospective partner. Oﬀset agreements can be another reason for the negotiations to hit the rocks.

entrepreneur,

William Wolfram?

HIRE AN AGENT. For example, companies that sell kitchens and bathrooms, saunas, garden tiles and home alarm systems could form a consortium and hire an agent who works in one of the countries or in the region. The agent represents the companies, researches the market, becomes familiar with the culture, networks with stakeholders and potential partners and helps set the priorities. It may turn out that just one of the companies in the consortium can penetrate the market while the others will have to bide their time and wait their turn. 7

Feature 1

Will your industry disappe ar?

In a w i r e faster t d, “ﬂat ” world h ,g years, y an ever. Some loba l change i p o s average ur cell phone w redict that in a d How do octor in maki ill outperform few n t c – let a lo ompanies and g routine diag he n n landsca e thrive – in th leaders sur viv oses. e p i adaptin e? And what a s shifting re the r g? isks of n TEXT: T HOMAS ot FREUN DLIC H, ILLU

STRAT IO

NS: AR

I MART

TINEN

POWERING THE PEOPLE. Is it all science ﬁction? Not necessarily. Provocative hype from investors looking to publicize their portfolio companies? Perhaps. But set aside for the moment even the fact that the iPad 2 has as much processing power as a Cray-2 supercomputer from the 1980s, and look at what is happening elsewhere. The New Media Medicine group at the MIT Media Lab in Cambridge, Massachusetts in the U.S. researches technologies to “enable radical new collaborations between doctors, patients and communities, to catalyze a revolution in human health.” If anything, their mission statement goes beyond even Vinod Khosla. Despite amazing advances in medicines and medical technology over the past 50 years, health care is in crisis. Costs are skyrocketing, health outcomes are uneven, and the patient experience is unacceptable. We believe that people, working together in creative new ways, can succeed where the medical establishment has failed. The research projects at MIT’s New Media Medicine range from enabling care coordination through mobile devices to automated pre-visit interviews, all under the banner of bringing about a “powershift in health care.” Commentators and experts are far from unanimous on what the future holds for the medical industry, but one thing is certain: something is happening and the risks to the health care industry are real.

ilicon Valley investor and Sun Microsystems co-founder Vinod Khosla made waves in the medical community last autumn by predicting that in a few years technology would replace 80% of doctors. According to Khosla, machines, powered by unprecedented processing capacity and feeding on vast data sets, would be not only cheaper but also more accurate than human doctors. In a recent article for TechCrunch, Khosla writes, “Eventually, we won’t need the average doctor and will have much better and cheaper care for 90–99% of our medical needs. We will still need to leverage the top 10 or 20% of doctors (at least for the next two decades) to help that bionic software get better at diagnosis.” Khosla says that eventually our priority will be to produce “doctors like Gregory House (from the TV show “House”) who solve biomedical puzzles beyond our best input ability.” Thanks to the tireless help of Dr. Algorithm (Khosla’s catchy term for technologically assisted diagnosis), he envisions these top practitioners having more time for the uniquely human aspects of patient care. Khosla sees transformative innovation in the health care sector coming from entrepreneurs outside the industry, but it is not a view shared by all. Some feel this scenario is outlandish, while others see it as obvious to the point one wonders why it took so long to come up with the idea. Certainly the risks to the industry itself are a real possibility and need to be considered. Examples of this change include AliveCor, a clinical-quality low-cost ECG heart monitor for the iPhone, and 23andMe, a DNA analysis service that allows people to research their own genes and is available as an online subscription for $299. Hundreds of start-up companies are looking to change the face of health care in the coming years. 10

DR. ALGORITHM WILL SEE YOU NOW. In his 2009 book, Shop Class as Soulcraft, motorcycle mechanic and philosopher Matthew B. Crawford points out that in today’s global information economy, any job that can be encapsulated in a set of instructions – an algorithm – is a prime target to be the ﬁrst to be outsourced to a country with cheaper labor, and eventually delegated to a computer. Like it or not this is becoming a fact of our modern day world. We must keep in mind that there are safe jobs that will not be outsourced to another country or to a computer, primarily in the trade and service industries. But there are many other highly skilled, expert professions, such as medicine, that just might be. The question must be asked: if medical doctors face a real pos-

Hundreds of start-up companies are looking to change the face of health care with technology applications. One example is AliveCor, an aﬀordable ECG heart monitor for the iPhone.

“What is needed is not only agility, but also resilience.” sibility of being replaced to a large extent by computers in the coming decades, who might be next? The risks are real. We all face them. How can we cope?

Lost industries

SEEING AROUND CORNERS. If the prospect of dealing with con-

stant, radical change feels scary or overwhelming, take heart. It’s a universal human tendency to see the world as static and seeing change as an anomaly. For centuries, change came relatively slowly, but today change is constant and fast. The good news is that successfully dealing with change is also a skill set that can be taught and learned. Nick Horney, Ph.D. is a principal and founder of Agility Consulting and Training, LLC and a specialist in helping individuals, teams and organizations successfully respond to change and deal with the risks involved. After a career leading diving and explosive ordnance disposal teams for the U.S. Navy, he received a Ph.D. in organizational psychology from the University of South Florida. “In our work, we borrow a term from the Department of Defense, saying that we live in a very VUCA world – Volatile, Uncertain, Complex and Ambiguous. And it is not going to slow down. So health care and other industries need to come to terms with constant change, whether it is driven by technology or other factors,” Dr. Horney says. Dr. Horney says that research indicates that seeing changes coming down the pipeline does not come naturally to most people and organizations. “We tend to be great firefighters, but leaders are seldom equipped to anticipate change. What is needed is not only agility – the ability to pre-empt and respond quickly – but also resilience, the capability to spring back.” Thankfully, these ideas can be practiced and integrated into leadership models. Sometimes inspiration can even come from areas far afield from one’s own. Dr. Horney draws an analogy from his own background, noting that businesses can learn a great deal from Navy Special Operations teams. “Agile teams do not need everything to go perfectly. They need the team to be ready for when things do not go as planned due to the turbulence in the world we live in.” Speed and out-of-the box thinking are also key factors. “Special Ops teams are trained to think creatively based on the situation and their past experience. Successful business teams also exhibit innovation and creativity, especially if they are chartered to come up with creative solutions.” Horney says that no matter what the situation, traditional leadership skills still count. “Leaders need to both generate confidence and engage their teams, keeping each employee aware of their contribution to the whole.” Of course, team leaders don’t need Navy SEAL training to succeed in today’s business world. Regardless the field, embracing the concept of agility and facing the very real risks to an industry and adapting can help ride out that next change wave with more skill and confidence. “A corporate executive we work with always tells his teams that they should be constantly looking around corners. It’s about anticipating and identifying patterns as they are developing,” Dr. Horney concludes. y

The ice trade ﬂows to

I N DI A We may be in the middle of an unprecedented period of change in the global economy, but industries disappearing almost overnight are nothing new. Businesses have always looked for that small asymmetry, the leverage that allows them to thrive in a rapidly developing world. As strange as it may seem today, for a few decades in the early 19th century, exporting ice from America to India was a profitable trade. Horse-driven plows were used to cut large blocks of ice from frozen lakes in Massachusetts. The blocks were loaded onto ships, insulated to reduce melting, and transported to southerly ports, such as Calcutta, where ice was an expensive luxury item. From the mid-1830s to the late 1860s, the Boston-based Tudor Ice Company reaped hundreds of thousands of dollars in annual profits with ice shipments to India. The advent of steam-powered refrigeration and the founding in 1878 of the Bengal Ice Company, India’s first artificial icemaker, rapidly sealed the fate of this once successful business model.

BUZZWORD OF THE DAY:

BIG DATA IG DATA REFERS to the scientiﬁc or commercial utilization of vast amounts of data collected and stored as part of our everyday interactions in the world, in data sets that are so large, varied and complex they defy analysis or processing by traditional means. According to IBM, every day we create 2.5 quintillion bytes of data — so much that 90% of the data in the world has been created in the last two years alone. Typically, this data is not generated for research, but can be turned to this purpose. An example would be utilizing cell phone usage and location data for health care applications. César A. Hidalgo, assistant professor at MIT Media Lab, employs three criteria to deﬁne big data: “Three times big.” It can’t be about 10, 100 or 1,000 people. It has to be about millions of people or entities.

The ﬁve characteristics needed for organizations to be able to anticipate and respond to changing demands and adapting to new requirements in real time. ANTICIPATE CHANGE: interpret the potential impact of business turbulence and trends along with the implications to the enterprise.

go to slideshare.net/ AaltoEE

“You have to be able to use the data to understand things other than the purpose for which it was gathered.”

GENERATE CONFIDENCE: create a culture of conﬁdence and engagement of all associates into eﬀective and collaborative teams.

Want to share these theses?

INITIATE ACTION: provide the fuel and the systems to make things happen proactively and responsively at all levels of the organization.

Source: Agility Consulting and Training, LLC

BIG IN RESOLUTION. Data has to have high spatial resolution, high resolution and high typological resolution. Averages are not enough; speciﬁc detail is essential. Big in scope. You have to be able to use the data to understand things other than the purpose for which it was gathered – in other words, to understand things about the world. Big data is related to the concept of data-driven science, a term used to describe new forms of research that are based on handling data on a previously unimaginable scale. Utilizing these vast resources of data – whether for scientiﬁc, social or commercial purposes – will bring about many new questions about privacy and data access that will need to be considered and addressed in 21st century societies.

THE AGILE MODEL

LIBERATE THINKING: create the climate and conditions for fresh solutions by empowering, encouraging and teaching others to be innovative. EVALUATE RESULTS: keep the focus and manage the knowledge to learn and improve from actions.

Feature 2

Living Risks

TEXT: JOANN

A SINCLAIR

Businesses have nothing on the International Federation of Red Cross and Red Crescent Societies when it comes to risk management. Many commercial organizations take a hit every time something out of the ordinary happens. ProďŹ le spoke to Ben Gilad, Mark Chussil and Henri Schildt about risk, early warning systems and how to turn early warning into early action. 13 13

efore we turn our attention to the gentlemen, let us start with a quote from a lady. Margareta Wahlström, Head of the UN Office for Disaster Risk Reduction and Special Representative of the Secretary-General for Disaster Risk Reduction, often speaks about the crucial role of early warning systems. In a recent guest column for The Independent, Wahlström noted, “Just as the most expensive hospital is the one that collapses in an earthquake, so the most expensive disaster management plan is the one that fails to tackle the root causes of recurring disasters.” Wahlström’s point is also trenchant for the business world. One of the central ways to manage risk is to incorporate an early warning system – and make sure it is both useful and put into practice. We are still coping with the aftermath of the global credit crunch, which was neither predicted nor prevented, although numerous early warning systems were in place for banks at the national, regional and global levels. The question is, why? As Barrel et al. (2010) put it, early warning systems for OECD country banks were not looking at the right indicators. Banks, possibly, can ﬂirt with bankruptcy knowing that governments are likely to bail them out. Businesses have a slightly harsher reality. For industry it is wiser to try to stay in business on their own.

here are various ways to construct a business early warning system. Ben Gilad is a pioneer in the ﬁeld of Competitive Intelligence. He is a former Strategy Professor at Rutgers University School of Management, author of Business Blindspots and Business War Games, and founder of the largest competitive-intelligence training institute in the world (ACI). Gilad’s Strategic Early Warning system is about limiting surprises in the business world. Philip Kotler has said that it is one of the most effective tools management can use in managing chaotic environments. Why does it work? “Strategic early warning is about anticipating market developments before everyone and their mother

“Early Warning has no eﬀect without early action.” – Early Warning, Early Action – a handbook developed by the International Federation of Red Cross and Red Crescent societies

know about them. So when it works, it makes the organization more proactive, it decreases the damage from strategic threats and lowers the price paid for fantastic opportunities,” Gilad says. Gilad says there are many examples where early warning could have made a world of difference – and saved countless jobs. He says that if Kodak had initiated the shift to digital cameras instead of being dragged into it, it might have been able to avoid bankruptcy, as Xerox and IBM did by changing their strategies in time, and if Yahoo had anticipated the change in the market from edited content to individuals doing their own search, it could have bought out Google for peanuts in 2000. “If a company is proactive, turmoil gives it an edge, for example, Apple. If it is reactive but agile, turmoil can be controlled, for example, Samsung. If it is simply late, turmoil can be serious trouble, for example,” says Gilad and here he politely stops in deference to his Finnish audience.

or organizations involved in disaster relief early warning and preparedness is useless without early action. It is paramount to empower all those who need to take action to act according to plan, minimize damage and save lives. As the Red Cross and Red Crescent puts its task, “Routinely taking humanitarian action before a disaster or health emergency happens, making full use of scientiﬁc information on all time scales.” In the business context, this approach could save companies from bad strategies, predict risk and prevent crises. Mark Chussil is Founder and CEO of Advanced Competitive Strategies and a pioneer in quantitative business war games and advanced strategy simula-

Business War Games tors. He has thirty-five years’ experience in competitive strategy, one patent and another pending on simulation technology, and has worked with dozens of Fortune 500 companies on six continents. A sought after public speaker, Chussil has a ready answer when asked how organizations should make sure they turn Early Warning into Early Action – but he suggests that one might want to take his answer with tongue in cheek. “It sounds harsh, but one of the main lessons companies should learn is how to be less human. The problem is that all managers are humans, and humans have a variety of unconscious biases that interfere with our ability to make good decisions about risk.” Chussil says, “People don’t make bad decisions on purpose – and they don’t make bad decisions by accident or because they don’t care. Smart strategists choose bad strategies because they think they are good strategies.” He says that such factors as overconfidence, cognitive dissonance, vivid and recent experience, fear and assumptions can all have an impact on our decision making and strategy formulation. Chussil asks, for example, why are we still using spreadsheets, an accounting tool, to make strategy decisions. “Tools are flawed if they are the wrong tool for the problem, and to me it is quite clear that using an accounting-based spreadsheet to answer a strategy question is ludicrous. To give just one reason, spreadsheets completely leave out competition. They only use information on your own company. Your strategy looks precise and infallible because the tool leaves out anything that challenges it.” One way to ensure Early Action is for a company to collect and utilize appropriate Competitive Intelligence. With this information at your disposal, you are more likely to actually get up and do something – bridge the gap between knowing and doing. Gilad says, “Performance depends crucially on what other players – including customers – are doing. If you believe no one can derail your plan, and everyone will just die to get your product or services, you don’t need Competitive Intelligence at all. Competitive Intelligence is never just about competitors. It covers competition, all the players, rules, regulations, and change drivers.” “Today, competitive advantage lies not in collecting reams of useless data, but in having star analysts identify major industry changes before your competitors or new competitors find out,” Gilad affirms.

he Red Cross and Red Crescent and other nonprofit organizations have a number of advantages over corporations. They focus on creating a mission that works rather than one that sounds good or makes the leaders look good – and they find the best ways to reach people, even if it is outside their comfort zone. For example, The Red Cross and Red Crescent used Twitter and Facebook to communicate with earthquake victims in Haiti in 2010. Businesses could take a page out of that notebook – to keep the business running in difficult times it should be flex-

Business War Games are one of the best bets a company has for ensuring it is fit for future success and able to tackle disasters should they strike. Simulations allow companies to test their plans before taking action, empower people to act, and reveal unrealistic assumptions that unconsciously guide actions. “Companies need conscious, deliberate processes that ask tough questions, such as what could make our strategy fail. Business War Games offer a solution,” says Mark Chussil. Chussil explains that his war games work in two stages. In the first round, participants play according to their own prior knowledge and experience. Then, when the first results are in, the game takes a time out. “We look at what happened and then we turn back time. Start again, armed with the experience. Round two shows amazing results. Simulations allow people to see their own biases and learn from their mistakes by doing. I have seen Fortune 500 companies immediately change their strategy 180º as a result of such war games, with extremely successful results,” Chussil says. “War Games are by far the cheapest and quickest way to save millions and avoid a competitive disaster. They allow a company to stress test its strategy or initiative at a very low cost before it throws millions at them – and they teach managers how to compete,” Ben Gilad points out. “Companies spend millions on team work and assessment tools and just assume every manager can compete intuitively. By the time they discover the manager is lousy at competing, they have lost their shirt,” Gilad says. Chussil and Gilad both indicate the same underlying dilemma which prevents many organizations from fully realizing their aspirations: corporate strategy is always based on assumptions. A crucial step for any company is realizing what these underlying assumptions are and what must occur for their strategy to be successful. Business War Games are an eye opener in this sense. “In Business War Games you can make mistakes that are fast, cheap, and educational, and most importantly, with no real jobs on the line,” Chussil concludes.

Mark Chussil and Ben Gilad are both foremost experts in their ﬁeld. They work together through SYNC, a joint venture of Advanced Competitive Strategies, Inc. (ACS) and the Academy of Competitive Intelligence, Inc. (ACI).

Simulation is the best practice

“Early warnings are irrelevant if they are not received, understood and trusted by those who need to act.” Early Warning, Early Action – a handbook developed by the International Federation of Red Cross and Red Crescent societies

ible and use whatever works to reach people. Yet, many companies still resist social media because they do not understand it or fear it. Henri Schildt is Professor of Strategic Management at Aalto University specializing in industry change and management of strategic change. Like Chussil and Gilad, Schildt looks to the human factor. Attitude is key to adapting. “We should not mix up risk and uncertainty. Uncertainty makes people make mistakes and act irrationally – risks, however, can be calculated, assessed, predicted to an extent and companies can at times make risks work in their favor,” Schildt says. He says that research has shown that if an organization sees something new as an opportunity, people at all levels are empowered to take on the challenge and try to make something out of the novel situation. Yet,when a new situation is seen as a threat, responsibility and decision making are often solely left in the hands of top management. When top management takes charge of a situation, there is often very little room for innovation or for an entrepreneurial, passionate attitude towards the change to develop. “Culture and the manner in which top management labels issues can have a far reaching impact.” Schildt says that a company’s best information regarding changes in the environment usually comes from the customer interface, at the grassroots level. “These employ-

5 questions to test your company’s early warning system. By Clayton Christensen and Richard N. Foster.

go to slideshare.net/ AaltoEE

ees could identify creeping catastrophes – if they are not pressed to focus solely on day to day business in the name of efficiency, without an outlook to the future,” he asserts. Like the Red Cross and Red Crescent Early Warning – Early Prevention system, Schildt also feels that timely, accurate information must reach the population at risk. In the business world, risk often has to do with the future competitiveness of the company. “It would be wise for a company to communicate the vulnerable points and prerequisites of its strategy to the entire staff. This way everyone knows what could be the strategy’s downfall. Everyone would understand the importance of drawing attention to the first weak signals.” Schildt says that a company must have a culture of involvement to enable this and the power distances cannot be too great. “If a company masters this, their entire staff can be empowered to work together as an early warning system.” Gilad reminds us, “Every member of the firm that comes in touch with the outside world is a ‘sense organ’ or an intelligence source.” Chussil picks it up from there, “I know a professor at Harvard who said the difference between a crisis and an emergency is whether or not you are prepared. That pretty much sums it up.” “From where I stand, one of the main things businesses should learn from disaster relief organizations such as the Red Cross and Red Crescent is recognizing that unplanned and unwanted, even seemingly disastrous things can happen. The first move is admitting that there is no foolproof plan. You are never fully ready. Nobody ever is – but you can look at what might happen. That’s what makes strategy strategy, not a blind march in a straight line. Make sure your crew is better prepared to act than the competition.”

WORKING WITH

KNOWLEDGE â&#x20AC;&#x153;True knowledge exists in knowing that you know nothing.â&#x20AC;? Socrates

When the secret sauce fails â&#x20AC;&#x153;I have seen this before, I know what to do,â&#x20AC;? a senior team member says triumphantly. Suddenly the comments end, and none dare question the old sage. value experience highly and with good reason as it speeds up analysis and decisionmaking. Often complex decisions and operations become routine over time and it is hard to track the exact process that took us in a certain direction. There is also a darker side to experience. It can narrow our vision, making us myopic and eventually blind, rather than making us more alert and eager for new ideas. We come to rely too heavily on our superior track record and experience â&#x20AC;&#x201C; we believe our own press so to speak.

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WE CAN BECOME IMPATIENT and dismissive of the advice of others. Arrogance can lubricate a journey gone astray. What could they know? Experience provides a ready fallback position when pressures mount. The higher the emotional and time pressures, the higher the odds that we will get it all wrong. :KHQ VWUHVVHG ZH VHH ZKDW ZH ZDQW WR VHH ORRNLQJ WR FRQÂżUP hard-wired beliefs and turning to auto-pilot and mechanical processing. As Walter Lippman EOXQWO\ SXW LW Âł:H GR QRW ÂżUVW VHH DQG WKHQ GHÂżQH ZH GHÂżQH ÂżUVW DQG WKHQ VHH Â´ ITâ&#x20AC;&#x2122;S LIKE A FRIDAY when guests are coming for dinner and plans to leave work early go out the window when work turns nightmarish in the afternoon. Do we then opt for the new dishes we have been wanting to try or fall back on our standard 3-course menu? I guess most of us choose the well-trod path, at least if we are not aggressive risk-seekers. Most dangerous for those with a wealth of experience is holding on to long-held knowledge without ever questioning it. It PLJKW HYHQ VHHP XQGLJQLÂżHG WR TXHVWLRQ WKH ROG VDJH 2I FRXUVH then we wouldnâ&#x20AC;&#x2122;t know if his secret of success was genius, mere gut feeling, or an act of cognitive bias. WHAT MESSAGE SHOULD WE TAKE AWAY? We should be careful, even wary, when tapping into experience, except when the work is repetitive and without great variance. As Nobel laureate Daniel Kahneman VDLG ÂżUHÂżJKWHUVÂś UHSHDWHG SUDFWLFH LQ ZHLJKLQJ WKH ULVNV SRVHG E\ VSHFLÂżF W\SHV RI ÂżUHV DQG WKHLU H[SHULHQFH

LQ H[WLQJXLVKLQJ WKRVH ÂżUHV JLYHV WKHP DQ XQULYDOOHG DELOity to read a situation intuitively and identify crucial causal patterns. %XW IHZ RI XV DUH ÂżUHÂżJKWHUV 0RVW RI XV GHDO ZLWK D frustrating variety of situations. Thus, we shouldnâ&#x20AC;&#x2122;t rely WRR PXFK RQ VHDVRQHG H[SHUWV LQ ÂżHOGV ZKHUH FKDOOHQJHV vary greatly, luck can determine success and feedback may come late. There may be no take-away or learning for future reference. BACK TO OUR SAGE. If the unlikely becomes reality and a junior team member dares to make a proposal, saying, â&#x20AC;&#x153;I agree with what you said but how about approaching it from D QHZ SHUVSHFWLYH"Â´ WKLV FRXOG LGHDOO\ EH WKH VWDUWLQJ SRLQW for fruitful interaction and co-creativity. Too often, though, it would be brushed aside and result in a choleric note, â&#x20AC;&#x153;We tried it once in a similar situation and it just didnâ&#x20AC;&#x2122;t work, so why waste time and energy now when ZH NQRZ EHWWHU Â´ ([FHSW WKDW LW ZDV \HDUV DJR

Dr. Pekka Mattila, Group Managing Director of Aalto EE, is a specialist in strategic marketing and change management. He is an acknowledged advisor and coach for both Finnish and international corporations, public sector organizations and NGOs. Over the last years he has published actively on marketing management, change management and leadership.

Are you feeling lucky?

Feature 3

When we think of an entrepreneur we think of a creative, passionate, visionary, determined, hardworking, competitive risk-taker. But what combination of characteristics leads to outstanding success? Is it a combination of personality and a certain amount of serendipity, good old-fashioned luck? TEXT: AMANDA THURMAN, ILLUSTRATIONS: GETTY IMAGES

That hard work, dedication, creativity, good business sense, and the heart of a gambler are some of the traits of a successful entrepreneur is clear, but there is also an element of luck and serendipity at play. Successful people are able to react to life’s uncertainties and maximize events that come their way. What combination of the right traits and luck does it take to be a success and what can we learn from these “lucky” people? GET LUCKY: How to Put Planned to be optimistic and willing to take the ﬁrst risky steps to Serendipity to Work for You and develop a new product or brand, as he and his company did Your Business (Jossey-Bass, 2012), with Gavio, their digital lifestyle electronics brand. He adds, Thor Muller and Lane Becker set “Work should be what we love. I was born to be an entrepreout eight essential skills to teach us neur and I am happy working as an entrepreneur.” how to generate a greater number of Tiong also believes in the need to be prepared for the serendipitous opportunities. For Muller and Becker, success unexpected. “According to a Chinese belief, we need 30% is far more about process than personality – it’s what they luck and 70% hard work to succeed,” says Tiong. “Hard work call planned serendipity. can only take you so far – successful people seize and make Mike Tiong and Jane Ní Dhulchaointigh are two full use of opportunities that come their way. The oppordynamic, creative, risk-taking entretunities presented are ‘luck,’ but the preneurs in different parts of the world ability to discover opportunities in who exemplify a combination of traits everyday life is what makes people needed for success and an element of successful.” serendipity that gives them a decisive Tiong feels it all comes down to edge. self-belief. The degree to which you Mike Tiong, Group CEO of McCoy feel lucky or unlucky will shape your Holdings and Aalto EE alumnus, is success. Feeling lucky opens you up so a success by any measure. McCoy that you are able to take advantage of Holdings and its wholly owned subpropitious events that come your way. sidiaries, McCoy Components, McCoy Gavio is a good example of how Bespoke, and McCoy Consumers, offers McCoy Holdings turned luck into suca wide array of renowned partner and cess. The Gavio WRENZ speaker, in-house brands across the technology, shaped like a small bird, was launched digital lifestyle, health, and education in Korea, Hong Kong, Singapore, industries. Headquartered in Singapore MIKE TIONG, Group CEO of McCoy Germany, the USA, and Japan, but and with operations across Asia, its success in Korea and Hong Kong Holdings and Aalto EE alumnus the company has won the Emerging wasn’t anticipated. Tiong says it was Enterprise Award 2008 and the SME1 the element of luck that helped generEntrepreneur Award 2012. ate the success. “Our initial ‘test market’ product launch made us number CREATE YOUR OWN LUCK. one and the fastest growing earphone In Tiong’s opinion, all successful entresupplier in HMV stores in Hong Kong.” preneurs share certain traits, “the most Gavio took off on the Hong Kong common of which are tough-minded and Korean markets, garnered sevoptimism, a willingness to take risks eral awards, including the Singapore and advocate change, and a focus on the Prestige brand award 2012, IF Design positive. We all have a deﬁned purpose award 2011, and Stuff Gadget for 2011 or vision, are willing to work under any and 2012, which made it known globalconditions, and are highly disciplined.” ly. “We got so much press coverage for He adds that it is also important it – and I think this is something very

“The opportunities presented are ‘luck,’ but the ability to discover opportunities in everyday life is what makes people successful.”

lucky,” says Tiong, who is clearly proud of his product. Another consumer favorite developed by McCoy is the Biounme laundry ball, an environmentally-friendly product that saves water, electricity, detergent and time on each wash and has been the number one selling laundry ball in Singapore for the last four years. “It is the ability to minimize and manage risk in our business model that defines our success. We were the first to launch a laundry ball, taking on the giant detergent and washing powder suppliers,” says Tiong, “and against the odds became the number one selling laundry ball for the past four years – we even outsell the Chinese imitations.” THE SERENDIPITY FACTOR. Jane Ní Dhulchaointigh is the founder and CEO of Sugru, the high-growth startup company that makes the moldable, self-setting, multipurpose adhesive that sticks to almost any surface. With over 155,000 customers in more than 100 countries and all seven continents, sugru has become a worldwide phenomenon. Ní Dhulchaointigh is an Irish fine artist who accidentally became a materials scientist. Thor Muller cited her story in his article for TechCrunch in 2012 as a lesson in how great entrepreneurs systematically create their own good luck. He says that hard work, training and process may be the foundation of success, but serendipity is where the magic happens. To Thor Muller her amazing success is the result of mastering the skills of planned serendipity. In 2003, Ní Dhulchaointigh, a sculptor, returned to the Royal College of Art in London to study commercial product design. With a strong interest in solving design problems and how things are used once they are made, combined with her experience with sculpting, she began to play around with new materials to see if she could find a better way to ‘hack things.’ She began looking for material that would be easy to mold, durable, and adhere to as many surfaces as possible. “It started as a random experiment and a simple idea,” she says. Ní Dhulchaointigh mixed silicone adhesive and inventor sawdust into small balls that looked like wood but of sugru bounced when thrown on the floor. She became fascinated with the possibilities of what she could make. She began using leftovers from batches of the rubbery material around the house, modifying a knife handle to be more comfortable, and enlarging a sink plug that was too small. Unconsciously she had come up with a product that was a natural fit with her belief in repairing her things instead of buying a replacement – she hated waste. When her boyfriend pointed out how she had been using her ‘funny rubber’ to repair or customize things, she saw an opportunity and grabbed it. An artist with no business training, Ní Dhulchaointigh faced innumerable technical problems to make her product work. To turn sugru into a success, she would have to rethink her career path. She began telling everyone about it and created enough press attention and public interest to receive a grant from Nesta, National Endowment for Science, Technology and the Arts. She then trained as a technician, set up her own lab and gathered together a group of scientists to work on it. It was risky, but she says, “I’m naturally quite comfortable with taking risks because 20

I think things through carefully and seek a lot of advice from people who know more than me about whatever I’m working on.” To her, risk is part of the creative process: being experimental allows lateral ideas to emerge. Two years of painstaking experimenting later, sugru was patented under the name Formerol. The name sugru comes from “súgradh,” the Irish word for play. Initially Ní Dhulchaointigh was urged to launch sugru on the mainstream DIY market, but this route didn’t translate into success. She then realized she could create a brand designed to spark people’s imagination and allow them to create their own uses for it. The company’s slogan would become ‘Hack things better.’ In 2008, five years after she first came up with the idea, with a product almost ready to launch, she found herself close to running out of money as promised investments from major manufacturers failed to materialize. With her small team of partners, they decided to go it alone and build their own ‘little cottage industry factory.’ It was picked up by a tech blogger and the result was an instant hit. The first 1,000 packs, made with the help of friends and family, sold out in just six hours to customers in 21 countries.

Risk is part of the creative process: being experimental allows lateral ideas to emerge. NTIGH,

OPENNESS AND COMMUNITY. In November 2010, TIME magazine listed sugru number 22 in their 50 best inventions of 2010 – the iPad was number 34. At the heart of the product’s success is the online sugru community. More than 100,000 people in over 100 countries come together on the website to show how they have used sugru to ‘hack things better.’ The site focuses more on community creativity than on the product itself and some of the many standout hacks have become part of the product story. Ní Dhulchaointigh says, “I think it’s an amazing opportunity that is particular to our times that people can get that engaged with a product or a brand – and it is so much more fun for everyone! It is my favorite part of what we do.” Entrepreneurs Mike Tiong and Jane Ní Dhulchaointigh are risk-takers who share many of the characteristics of successful out-of-the-box thinkers, including the ability to harness planned serendipity. The Roman poet Ovid wrote, “Luck affects everything. Let your hook always be cast; in the stream where you least expect it there will be a ﬁsh.” As Lane and Becker suggest, what was true then is true now: keep your options open, have the right attitude, and be receptive – luck will ﬁnd you. y

VISIT THE SUGRU COMMUNITY: SUGRU.COM

[Common skills] of lucky people Thor Muller and Lane Becker describe their book, Get Lucky, as “a manual for serendipity.” In it they explore eight essential skills that help create the right state of mind and working environment to lead to “planned serendipity.” Planned serendipity may sound like a contradiction in terms, but there do seem to be ways you can encourage, recognize, and seize creative new opportunities in your organization. The skills they have identified as commonly used by ‘lucky people’ are motion, preparation, divergence, commitment, activation, connection, permeability, and attraction. Motion encourages you to shake things up and break out of your routine in order to encounter as many new ideas in as many contexts as possible. Office layouts, for example, should be arranged so that we encounter different people as we go about our day – in corridors, getting coffee, or at the water cooler. The skill of preparation shows the importance of linking seemingly unrelated concepts, information, and people to help you spot what others might miss. After all, fortune favors the prepared mind. The authors call this “developing your geek brain,” suggesting you should encourage an obsessive curiosity in your area of interest and get lost in exploring it. Divergence and commitment may at first seem antithetical. Divergence teaches us to be willing to try something different. We should travel along alternative paths, receptive to serendipitous chance events and people we may encounter. Commitment, on the other hand, urges us to have a sense of purpose. We should be able to choose which way to

go from all the options with a clear idea of the ultimate goal, and be passionate and visionary enough to steer toward it. We must concentrate on what is important and not allow novelty to slow us with indecision. The balance is to ﬁnd an idea wide enough to give us alternatives, but narrow enough to let us focus. Activation releases us from learned routines, so we should change our usual surroundings to open ourselves up to new ways of thinking. Connection shows us that we need to optimize the number of meaningful and productive connections we have – new blood will often mean new ideas. The skill of permeability demonstrates the importance of letting ideas ﬂow in and out of your business, rather than maintaining a defensive front. Finally, attraction teaches us to project our passion out into the world in order to attract serendipitous encounters and opportunities toward us. With these skills, maybe risk does not need to be so risky after all.

The skill of preparation shows the importance of linking seemingly unrelated concepts, information, and people to help you spot what others might miss. 21

FRANKLY SPEAKING, THE GLOBAL MARKET IS NOT LOOKING VERY GOOD AT THE MOMENT. The world is falling ever deeper into

TEXT: SATU RÄMÖ

debt. The United States, Japan and Europe are trying to reinvigorate their economies to avoid an even bigger economic crash. Central banks are printing money and nominal interest rates are close to zero. Many developed countries are heavily indebted and the debts are rising by the month. “In times like these it doesn’t pay to be passive. To the contrary, if you have the right kind of investment portfolio, you may be able to generate some great revenue,” says Vesa Puttonen, Professor of Finance at the Aalto University School of Business. Exceptional times in the market mean exceptional opportunities: it is now possible to accrue wealth in ways other than through inheritance. “My advice at the moment would be not to invest in treasury bonds. Revenues are close to zero, countries are heavily indebted and when inﬂation expectations rise so do interest rates, and that decreases the value of treasury bonds,” says Puttonen. He also emphasises the importance of analyzing the content of each investment asset. Don’t buy just ‘stocks.’ Puttonen says that there are expenFore more iinvestment nvestment tips tips, i che check h ckk out sive stocks and there are cheap stocks Puttonen’s latest book, Velka tikittää and the same goes for real estate markets. – hyödy siitä!, published in Finnish in December 2012 by Aalto University “Real estate in Germany is a better investExecutive Education. ment just now than real estate in France www.aaltoee.ﬁ/en/shop or Spain,” he says.

LIFE IS A RISKY BUSINESS

Risky times, good investments

We face crossroads every day with more and more options to choose from. Find out where you are, decide the direction and start making the moves. Risk equals potential.

1*5$,66'(0 4(+54(/<0 4:05+<

VESA PUTTONEN GIVES AN EXAMPLE OF AN INVESTMENT PORTFOLIO IN THE CURRENT MARKET SITUATION. t Government bonds 0% Low yields with high risk. t Corporate bonds 20% Relatively attractive yields, companies can adjust their operations better than governments. t Money market investments 10% It is a good idea to keep some cash. t Gold 10% Gold does not have any cash ďŹ&#x201A;ow and its price is hard to predict. However, I would not dare buy gold, so I would say 10%. t Commodities 20% When inďŹ&#x201A;ation begins to rise, raw material prices will go up. t Equities 30% Companies are more ďŹ&#x201A;exible in adjusting their operations than governments.Â International American and European companies are strong in general. Select the stocks carefully, do not buy overpriced stocks.

AALTO EE STARTED PUBLISHING its own series of business books and case studies in 2012. The ďŹ rst book to come out was on leadership and management, titled Johtajuuden seitsemĂ¤n syntiĂ¤ (The Seven Sins of Management). Currently, all publications are in Finnish only, but in the future Aalto EE will also be bringing out works in English.

Before you start planning your personal investment strategy, you have to have an idea of your risk tolerance.

By matching your portfolio risk to your personal tolerance for risk, you can sleep at night without stressing over your investments. Knowing your risk tolerance and sticking to investments that donâ&#x20AC;&#x2122;t exceed it should keep you from total ďŹ nancial ruin.

Take this quiz and ďŹ nd out where you stand: njaes.rutgers.edu/ money/riskquiz/

t Real estate 10% In Germany, for example, real estate prices are relatively low at the moment.

Tips for your investment portfolio You can use Toolbox materials at work or when giving a presentation, link them to your blog or forward the entire Toolbox to your colleagues. The background ideas are available in a variety of web sources.

The quiz was developed by two personal ďŹ nance professors, Dr. Ruth Lytton at Virginia Tech and Dr. John Grable at Kansas State University.

Find out your ďŹ nancial risk tolerance As slides: www.slideshare.net/AaltoEE In pdf format: www.scribd.com/AaltoEE

The whole magazine: aaltoee.ďŹ /proďŹ le

VIRTUALIZATION, CLOUD COMPUTING, SOCIAL MEDIA, MOBILE DEVICES, THE RISE OF EMERGING MARKETS, THE FINANCIAL CRISIS, OFFSHORING… Information security faces many rapidly accelerating challenges. “In too many companies, information security and risk management is like putting out a ﬁre. There is a lack of long term commitment, security management and measuring,” says Antti Herrala, Ernst & Young’s IT Risk & Assurance Leader in Finland. However, it is often said that the weakest link in information security processes is the human element. According to Ernst & Young’s newly published 2012 Global Information Security Survey, 37% of respondents think the threat that has most increased their organization’s risk exposure is careless or unaware employees. In addition, the number of real incidents caused by inadvertent employee data loss has risen by 25% in the last year. “No matter how good and detailed information security systems a company has, they can be destroyed in no time.” Herrala gives a few simple but vital guidelines that everyone should follow in their workplace to minimize the risk of information leaks: t Read the company’s information security policies and guidelines. t Put thought and eﬀort into passwords. A password on a Post-it is an absolute no-no. t Work computers are for work use only. Do not, for example, try to download any applications on to your work computer. Have a separate computer for home use. t Be careful when sharing employer-related information on social media. Inventive companies have social media guidelines that show what work and employerrelated issues can and cannot be published on the Internet.

Avoid being the weakest link

The Signal and the Noise: Why So Many Predictions Fail – But Some Don’t? (Penguin) was named Amazon’s #1 Best Book of 2012.

IT PAYS OFF TO IMPROVE ONE’S ABILITY TO FORECAST BETTER: when something is predictable, it is also designable. There is a lot of data out there. But what does it all mean? Random patterns are not always meaningful, claims statistician, political forecaster and contributor to The New York Times Magazine, Nate Silver. Statistics are only as good as the people who apply them. According to Silver’s recently published book, The Signal and the Noise, those who are good at predicting have at least one thing in common: they recognize that their knowledge of the world is imperfect. We take in much more information than our brains can process. Biases based on expectations or self-interest aﬀect our analyses. The best way to understand the world is to take in new information as it comes and reﬁne your own perceptions accordingly.

A book that will teach you how to forecast and look to the future better

WOULD YOU LIKE TO KNOW how your company’s key performance indicators stack up against your peers?

A benchmarking tool, Startup Compass, combines scientiﬁc study of the way start-ups operate with tools which help start-up founders improve their chances of success.

6 BEHAVIOURAL ECONOMIST DAN ARIELY has an interesting weekly podcast called ‘Arming the Donkeys’. These podcasts are chats with researchers in the social and natural sciences. Short podcasts give you fresh ideas and help you make better decisions. Why doesn’t willpower work? Are we more likely to cheat after doing something good? Why do we not save more? How is it we keep fooling ourselves? Listen and learn.

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YOU ARE NOT PURSUING YOUR PASSION, answers Larry Smith, a Professor of Economics at the University of Waterloo in Canada. The most important thing in having a great career is to ﬁnd your passion and follow it. “And passion is not the same as interesting. You don’t go to your loved one and say, marry me, you are interesting!”

8 CHECK OUT

Looking for passion (and a great career): http://bit.ly/donotfail

Why do you fail to have a great career?

Start-up founder, predict your success 25

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MORE UPDATED INFORMATION www.aaltoee.ﬁ, www.aaltoee.sg

Aalto EE’s goal to become the preferred partner for international companies in Northern Europe and Asia has gained more traction as good rankings come in from Finland and abroad. LAST FALL, AMBA, the London-based Association of

MBA’s, re-accredited Aalto University Executive Education for ﬁve years. As Aalto EE also holds accreditations from the other two top accreditation associations, AACSB and EQUIS, it will continue to be one of only 58 tripleaccredited business schools in the world. The only other Triple Crown school in the Nordic countries is the Copenhagen Business School in Denmark. Aalto EE’s Triple Crown status is backed by the school’s success in several education rankings published in 2012. In October, the Financial Times ranked the Aalto Executive MBA Program as the best in the Nordic countries for the second consecutive year. The result is based on FT’s annual evaluation of the 100 leading global Executive MBA programs. Some 3,000 EMBA programs are offered around the world, and Aalto EE ranked 86th overall. In the Financial Times’ executive education rankings Aalto EE was placed 44th worldwide in 2012. The total number of business schools offering business degree pro-

grams worldwide is 13,670. In Finland, Aalto EE was tops in two separate surveys in 2012. In the Education 2012 survey carried out by Add Value Research for the business magazine Talouselämä, Aalto EE was rated as the best provider of management education services in Finland. Respondents found Aalto EE to be particularly competent, reliable and consistent over the long term. They also thought it had the best trainers and the most effective teaching methods, as well as an ability to reinvent itself. Aalto EE also earned the top overall rating in a corporate image survey conducted by the Finnish market research company Taloustutkimus. The survey covered 26 organizations that provide education and training in the Greater Helsinki region. Aalto EE achieved an overall rating of 8.3, while the sector average was 7.68. Respondents gave Aalto EE the highest rating in employee expertise, product and service quality and the level of teaching material. Aalto EE also came ﬁrst in service development, service range and future outlook categories. E AT ”Our investments in quality, expertise READ MOR EE.FI O and the development of new programs have WWW.AALT produced results. We are also systematically building a platform for future success,” comments Dr. Pekka Mattila, Group Managing Director of Aalto EE.

Aalto EE and The Economist in Digital Horizons 2013 AALTO EE IS ENGAGED in The Economist’s Digital Horizons 2013 conference in Stockholm, Sweden in June. The event will gather together leading innovators, researchers, entrepreneurs, futurists and policy makers from Northern Europe to discuss the opportunities, challenges and threats in the digital future, focusing on current trends and their impact in the next 5 to 30 years. How will technology change the way companies compete and consumers behave? How will digitalization impact the ways we learn, play, socialize, consume and maintain our health? What will be needed for Northern Europe, a hub of innovation in the past, to ensure that digitalization supports growth, transparency and competition? The event will also touch on the eﬀects of technology on democracy, political engagement, security and the ethical questions of right and wrong.

UPDATE

Aalto EE climbs the ladder of success

SCOOPING FOR CHANGE AALTO EE AND BEN & JERRY’S ICE CREAM have joined forces to ﬁnd innovative start-ups whose business models balance social, environmental and economic factors. The Join Our Core Competition will run across Europe this spring, with participants from Finland and eight other countries. The judges will pick one winner from each country. Each winner will be awarded a €10,000 Judges Cup Prize as well as six months of mentoring from Ashoka, a trip to Vermont, U.S., and their name on a tub of Ben & Jerry’s. For more information, please visit www.joinourcore.com. This year’s competition will be launched on March # 4th.

HISTORY LESSON

“Why not go out on a limb? That’s where the fruit is.” Will Rogers (1879–1935) American cowboy, humorist, social commentator, vaudeville performer and actor

Let’s jump! Red Bull took a huge risk with the Stratos project – but the risk paid off. Felix Baumgartner’s space jump yielded close to 100 million euros in exposure for the brand. TEXT: RISTO PAKARINEN

Lance Armstrong (Nike), or a famous football player charged JUST BEFORE FELIX BAUMGARTNER LEAPT OUT with murder like O.J. Simpson (Hertz). of the balloon in his special suit in an attempt to break Sponsorship is always about standing behind somethe sound barrier, Gawker, the media and celebrity blog thing, a sports team, art project or an athlete that burnishes famous for its ironic style, ran a story under the headline, the company’s brand. But how, for example, do people who “Red Bull to Murder Innocent Man in Heartless Marketing don’t like the team the company sponsors react? Will they Stunt.” Twenty minutes later, the story was updated, “Felix also boycott the sponsor’s products? Some do. In the earBaumgartner has survived.” The headline captures what ly 1990s, I conducted a study among the members of fan could have been Red Bull’s worst nightmare, but also clubs of two Helsinki ice hockey teams on their attitudes on reveals the rewards of risk-taking. beer brands: members of each group said they boycotted For a company that promises wings for people who the brand that sponsored the other team. imbibe its energy drink, the demise of Baumgartner would That pales, however, in comparison to sponsoring a cold have been devastating. front that kills 100 people across Europe. That is just what It was not your regular sponsorship deal where a happened to BMW in Germany when its ad agency spent a sponsor slaps a sticker on a car or an athlete’s sweater, mere 300 euros to buy the name of the third cold front of the and then, if a scandal breaks out, quietly slips two steps year in one of marketing’s great mishaps. “Cooper” (named back. Red Bull financed the scientific team, including forafter the Mini Cooper) turned out to be one the most vicious mer NASA engineers, skydiving experts and other experts cold fronts to sweep across the continent in 100 years. in the aerospace industry, and worked years to get Felix Surely everyone understood that BMW wasn’t responto 39 kilometers and back down safely. Red Bull was in charge of the project from start to finish, or shall we say, to sible for the deaths in Ukraine, Poland and Serbia. That is what Jon Christoph Berndt, Managing Director of Munich risk-taking success! branding consulting firm Brandamazing, thinks. He According to Giles Fraser, co-founder of Brands2Life, called it a clever marketing ploy, especially one of Europe’s leading PR and digital agencies, few since it cost so little. companies would have dared to risk so much on an “People are so inundated with marevent that “could have gone very wrong.” keting messages, it’s increasingly dif“Had the jump been unsuccessful, for any reaficult to connect them to a brand in a son, I have no doubt the amount of exposure and new and creative way,” he said. return would have been similar but not necessar“His blood could boil. His lungs could ily positive,” said Ilsa Grabe, Business Unit Head over inflate. The vessels in his brain could at Carat, commenting on the Baumgartner jump in burst. His eyes could hemorrhage,” the Advantage Magazine. Associated Press wrote about the Baumgartner Instead, Red Bull saw the jump broadcast on more jump. than 40 networks across 50 countries with eight million That is what it felt like for the Red Bull marketpeople watching it live on YouTube and sending over three ing people watching it as well. But Red Bull’s thormillion tweets about it. According to media agency Carat, ough preparations for Baumgartner’s jump and willthe ten-minute jump has been calculated to yield almost ing risk-taking paid off. 100 million euros in return in exposure for the brand. Getting out on that limb Will Rogers Sponsorship is always a gamble. No company wants mentioned is often just what it takes to be a to be associated with suspicious behavWWW.REDBULLSTRATOS.COM success. ior or a lack of rectitude, whether it’s a philandering spokesperson like Tiger Woods Everything you might want to know about the Baumgartner jump. (Gatorade, AT&T), an exposed drug user like 27

Aalto EE publishes books and case studies in Finnish. In the future it will also bring out works in English.