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06/17 Agility is Resilience is a “Joiners” are (L)earned Prerequisite for Agility Vital to Innovation
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06/17
The theme of this ESMT Update is analog are at the forefront of this new management
style. Daimler, for instance, launched its in-
to the ESMT Annual Forum: agility. This ternal program “Leadership 2020” in January
broad topic covers many different areas 2016, focusing on eight leadership principles
of business and technology. Rooted in to redefine processes, become more flexi-
ble, and remain relevant. Agility is one of the
programming methods of IT, the scope of eight principles defined.
agility has grown tremendously to include As large corporations promote agility as a
part of a new corporate culture, small organi-
leadership, HR, and industrial processes, zations, especially startups, embrace the no-
such as supply chain management. As tion from the beginning – because they have
to. ESMT Berlin works together with multi-
“just in time” was the buzzword of the national corporations, with companies from
1990s, agility expresses a core need of all the “Mittelstand,” and with startups, learn-
ing from and with them, and supporting lead-
organizations today: flexible structures and ers from all types of organizations to meet
processes that nurture change and growth the challenges that come with our acceler-
ated world. We have placed a distinct focus
in a disruptive environment. on digitalization – including digital strategy,
EDITORIAL When I think of agility, I often picture great
football strikers of the past. For example, Jür-
transformation, and cybersecurity – offer-
ing executive development and tracks in our
gen Klinsmann brought not only his energy degree programs to enable leaders to under-
and flexibility on the pitch but also his agility stand and manage change, drive agility, and
as a trainer. When coaching the German na- promote innovation, to name but a few areas.
tional team, he implemented change against We as a business school must also strive
much resistance, thus catapulting the team for agility. Within the framework of a larg-
back onto the global stage. This is the type er strategy, we continuously redefine our
of agile and innovative leadership needed in short-term goals. We are still a relatively
today’s organizations, and some companies young organization, and leaders within ESMT
benefit from being allowed to make autono-
mous decisions and act quickly. As the first
part of our mission states: “ESMT develops
entrepreneurial leaders who think globally,
act responsibly, and respect the individual.”
And entrepreneurial leaders must be agile –
promoting creative ideas, flexible structures,
and cross-organizational functions.
I invite you to turn the page and take a closer
look inside this ESMT Update.
Jörg Rocholl
President, ESMT Berlin
ESMT Update 06/17 3
Table of Contents
ESMT Update
06/17
03
Editorial
08
Insight
Knowledge Architects Wanted
by Tammi L. Coles
10 28
The role of specialist knowledge
is widely recognized. But as
Gianluca Carnabuci, associate In Pictures
professor of organizational
behavior at ESMT Berlin sees it, 16
architectural knowledge is what Innovation, Technology, and Growth
makes organizations agile. ESMT Open Lecture
with Christine Lagarde
International Monetary Fund
Features
24
26
05 Russia in Europe:
Agility is (L)earned Yesterday, Today, Tomorrow
by Christoph Burger, Bianca Schmitz, ESMT Open Lecture
Jens Weinmann with Mikhail Khodorkovsky
Executives must rethink their Open Russia
approach to innovation.
In the News
10 26
Resilience is a Prerequisite 18 Inside ESMT
for Agility Can Germany’s Mittelstand
by Martin Schallbruch Solve China’s Economic Challenge?
EU data and security regulation by Olaf Plötner 28
will strengthen digital markets. Alumni at Large
23
12 Global Business Education
“Joiners” are Vital to Innovation is the Best Antidote to Economic
with Dr. Henry Sauermann Nationalism Imprint
Autonomy and risk-affinity with Global Network for Advanced Editorial: Tammi L. Coles, Digital Editor,
tammi.coles@esmt.org.
characterize entrepreneurial Management Contributors: Molly Ihlbrock, Head of
Corporate Communications and Marketing;
employees. Victoria Gieseking, Corporate Marketing
and Brand Manager; Tina Rettschlag, Public
Conversations
Relations Manager.
Creative Design:
STOCKMAR+WALTER Kommunikationsdesign.
Printing: Elch Graphics.
Photography: Images used under license
15 from Shutterstock.com, Stocksy.com and
“Success is not gender neutral.” by permission from ESMT Berlin faculty, staff,
alumni, and students.
with Laura Guillén Postmaster: Send changes and corrections
12
to ESMT Berlin, Corporate Communications
and Marketing, Schlossplatz 1, 10178 Berlin,
21 Germany; newsletter@esmt.org.
Copyright: ©2017 ESMT Berlin.
“Innovation success is overrated.” Published biannually. Printed in Germany.
with Xu Li
4 ESMT Update 06/17
Feature
Agility is (L)earned
Executives must rethink
their approach to innovations.
A
gile leadership is the survival of a firm. With no investments in in-
corporate answer to cre- novation, legacy markets may be served for
ative destruction. Joseph a couple of years to come, but blue oceans
Schumpeter coined this (uncontested market spaces) will be left un-
catchphrase to char- tapped. However, driven by digitalization and
acterize market-based globalization, not only does the “how much?”
economies more than count but also the “how?”
100 years ago, but the Fortunately, corporate decision-makers
acceleration of today’s product cycles and so- can draw today on an entire toolbox of meth-
cial practices, in particular in the field of com- ods and practices to enhance innovation
munication, neatly confirms Schumpeter’s within their firms. With open innovation and
observation. Both in terms of creation and crowdsourcing, the boundaries and silos of
of destruction, executives seem exposed to
increasing uncertainty about the future. How
can they engrain a culture of “fail fast, learn
fast” in their companies? How can they de-
velop sustainable business models? How can ppointing a visionary and
A
they create an attractive workplace for the
generation of millennials and digital natives,
charismatic leader is helpful, but
as well as for an aging workforce overbur- does not (immediately) change
dened with the challenge of life-long learn- the corporate DNA.
ing?
In this dynamic market environment, in-
novation shifts into the spotlight of corporate conventional, internal R&D units can be per-
strategy. The creation of “Chief Innovation Of- forated. For example, a scientist in a research
ficers” in many companies may be interpret- lab in Nairobi may work on a type of concrete
ed as an attempt to formalize this change in that a construction company in Switzerland
mindset on an organizational level. Appoint- needs for reinforcing its bridges. Similarly,
ing a visionary and charismatic leader to that corporate accelerators and incubators may
position is certainly helpful, but does not (im- breed internal ideas or draw inspiration from
mediately) change the corporate DNA. Rather, outside sources. Startups that have neither
a cultural shift has to trickle down from top failed nor survived on their own, for example,
management to everyone in the company. are sometimes integrated into larger firms,
We want to share three observations, with their ideas being absorbed by the corpo-
based on our own experiences frequently rate innovation funnel.
teaching in large and medium-sized firms as In our experience, while multinational
well as from interviews with executives that companies have understood the necessity
we conducted over the last three years. for change, their efforts often evaporate in
an “Innovation Theater,” as serial entrepre-
neur Steve Blank calls it – a marketing effort
Embracing new forms of innovation without lasting consequences for their cur-
rent and future business lines. Many German
First, the size of investments that top man- “hidden champions” have realized that they
agement allocates for innovation is of course can (and have to) complement their tradi-
a major determinant of the capabilities of tional revenue streams by offering service
ESMT Update 06/17 5
solutions related to their products. They have Customer-centricity: from “push” to “pull”
established innovation labs in places like Ber-
lin, where they can attract a different crowd Our second observation is that even fairly
of employees and join a larger startup eco- traditional industries move from “technology
system. Some of them have launched incu- push” to “market pull,” as one representative
bators composed by representatives from the of a large chemical company described it to
“old world,” internal innovators, and external us. In his industry’s old world, a “technology
specialists bringing in a different mindset and push” consisted of a new, superior product
experiences. that typically became the basis of a new mar-
By contrast, smaller companies venture ket. According to him, existing technologies
more slowly into the global, digital innova- and chemicals can now cover almost every-
tion space. They could greatly benefit from thing that is needed. Instead of chemicals,
expanding into new types of innovation, for future revenues will be generated by chem-
example, via the thriving market of special- istry – a fundamentally different business
ized providers of innovation services. It does model than just selling tons of substances.
not stretch a company’s budget excessively Understanding the market implies coming
to become part of a consortium that spon- closer to clients; hence his company’s trend
sors an accelerator, or to employ trend scouts scouts actively search for new ideas on all
in key world markets who can report back to continents.
headquarters what they observe, or to orga- The move from “push” to “pull” no lon-
nize a hackathon, say, with the objective of ger stops at the doorstep of an executive’s
developing an app for its products or services. office. Methods such as Design Thinking are
used to train managers across hierarchies in
a more customer-centric view. For example,
how can a 50-year-old sales director of an
To support companies insurance company know the mentality of a
in spurring their millennial, and why might representatives of
innovation capabilities Generation Y be uninterested in taking out
towards an agile insurance? An inconvenient but efficient way
organization, to explore this puzzle is to leave desk and of-
ESMT Berlin and HPI fice behind to speak directly with millennials.
Academy join forces In our experience, middle managers especial-
to offer open programs ly struggle when we ask them to leave their
for executives. comfort zone and enter the “learning zone”
by walking in the streets and interviewing
6 ESMT Update 06/17
Feature
people they would never have contact with in methodology within the organization, he also
their private or professional lives. But those launched the Hasso Plattner Institute to pro-
who are most skeptical and hesitant at the vide a platform for teaching, practice, and re-
beginning of the exercise often return with search, similar to the famous d.school at Stan-
plenty of stories and empathy for the inter- ford University and its spin-offs.
viewees they encountered. Especially in traditional manufacturing in-
The customers may not always be found dustries, we have observed that innovations
in the streets – they can also be internal staff. have a high likelihood to cross the “chasm of
For example, if a company suffers from too death” between pilot stage and successful
high employee turnover, a long questionnaire commercialization if they are very early an-
may provide statistical evidence but will chored in an existing business unit. That type
hardly generate “customer journeys,” that is, of ownership stimulates identification and
real enquiries into an individual’s narrative of commitment, and the innovation evolves in
how the working environment is perceived close coordination with those who will later
and could potentially be improved. To gener- use it.
ate in-depth knowledge about a person’s mo- Our last finding deserves a word of cau-
tivations, Design Thinking serves as a toolkit tion: We recommend an incremental imple-
for these qualitative insights and provides mentation of new innovation practices within
instruments such as “shadowing,” where an organizations, in particular via a dual oper-
employee is accompanied by an observer over ating system. Unless markets have turned
a certain time period. Emotionally engaging a company’s business model entirely upside
with the “customer” is a prerequisite for in- down, the willingness to change is likely to
novation. remain limited among the bulk of employees.
Implementing a full-fledged Design Thinking
process to enhance customer-centricity or
Networks of like-minded agents imposing a Scrum process on an entire busi-
of change ness unit outside the IT sector is doomed to
fail under most circumstances.
Third, in our experience the most difficult But no one can prevent you – as an agent
part of innovation is its implementation in of change – from personally cherry-picking
daily corporate practices. After a crash course some features of these methods and testing
in Design Thinking, fully enthusiastic exec- them with your team. The nucleus of creative
utives return to their offices and are quite destruction is not your company’s Chief Inno-
often confronted with ignorance, organiza- vation Officer, it is you!
tional inertia, and arrogance vis-à-vis the
newly acquired skills. Under these adverse
circumstances, it greatly helps to establish a
network among equal-minded innovators. As
John Kotter claims in his book XLR8 (Acceler-
ate), formal hierarchies can be circumvented
by creating a parallel organization within the
firm, a structure which he calls a “dual oper-
ating system.” For example, virtual exchange
platforms and real meetups can be estab-
lished to discuss organizational and men-
tal barriers that are encountered during the
change process. Alliances can be established
beyond silos, and coalitions can be formed.
In hierarchical organizations, it definitely
helps to obtain high-level approval and support Christoph Burger Bianca Schmitz Jens Weinmann
for these initiatives. One of the most promi- Senior Lecturer and Program Director and Program Director
nent examples of German multinationals with Senior Associate Dean Head of International of Executive Education,
an innovative DNA is software giant SAP. One of Executive Education, Executive Education ESMT Berlin
of the company’s five founders, Hasso Plat- ESMT Berlin Relationships,
tner, not only promotes the Design Thinking ESMT Berlin
ESMT Update 06/17 7
Today’s fast-paced digitalization and
Organizations that embrace increasingly turbulent global mar-
kets mean that the ability of an or-
cross-domain knowledge ganization to renew itself, adapt,
and succeed is more important than
can attain sustainable agility. ever. The effectiveness with which
a company is able to respond to the
increasing variability of markets and
technologies is what we commonly
understand as agility – its ability to
8 ESMT update 06/17
Insight
adapt and swiftly reconfigure inter- Where specialization fails Carnabuci brings it to the point:
nal processes and resources to meet “Because architectural knowledge is
new challenges. Organizations are complex systems often hard to gauge, management
Back in 2006, researchers Ste- that need all parts to work well to- approaches that promote architec-
fano Brusoni and Andrea Prencipe gether. According to Prof. Carnabu- tural knowledge are systematically
wrote a case study for Organization ci, for this to happen, they need to overlooked because they appear in-
Science called “Making Design Rules: develop two kinds of organization- efficient and poorly motivated. But if
A Multidomain Perspective.” In fo- al knowledge. The first – specialist managers continue to reward, train
cus was the Italian multinational tire knowledge – pertains to the orga- and recruit specialist knowledge
manufacturer Pirelli, who in the late nization’s distinctive competence alone, they sacrifice organizational
1990s introduced MIRS, the Modu- areas, such as logistics, marketing, agility.”
lar Integrated Robotized System. At or production. The second – archi-
the time of that introduction, the tectural knowledge – pertains to the
tire industry was struggling with interdependencies that exist across Knowledge architects are key
the dramatic potential of robotics those areas.
in product development and manu- “Most organizations recognize As Brusoni and Prencipe note in their
facturing processes. Pirelli was in an the value of specialist knowledge research, Pirelli succeeded with MIRS
especially difficult position, noted and are well equipped to develop by recognizing, valuing, and further-
the researchers – caught between it,” says Carnabuci. “For example, ing the cross-domain connections of
the high expectations of carmakers HR departments are often charged knowledge architects. Yes, the com-
that required customized tires and with recruiting and training person- pany recruited those with specialized
its own low innovation trend. If Pire- nel to fulfill competence gaps within skills, such as tire designers and soft-
lli wanted to continue to meet the a company’s competence areas. This ware engineers. But the introduction
needs of customers in the medium to is a widely accepted strategy, yet of robotics demanded an integrated
high-end market segments, however, there is a problem – it is architectur- approach, say the researchers, so
innovation would be required. al knowledge rather than specialist that such specialists could contribute
After Pirelli’s bid to acquire a ma- knowledge that makes an organiza- their knowledge to the development
jor competitor failed, MIRS was the tion agile.” of whole other areas of organization-
company’s last hope to defend its If building agile organizations ne- al competence. Such radical innova-
reputation as a market supplier for cessitates architectural knowledge, tion would have been otherwise im-
high-quality tires. For Prof. Gianluca why do many organizations fail to possible.
Carnabuci, associate professor of or- develop architectural knowledge? Knowledge architects are import-
ganization behavior at ESMT Berlin, There are three related reasons, ex- ant because they can help the orga-
the MIRS strategic choice illustrates plains Carnabuci. nization adapt and swiftly reconfig-
how radical innovation paired with • First, architectural knowledge is ure internal processes and resources
architectural knowledge can navigate mainly tacit, hence hard to detect. to meet new challenges. Companies
a company through organizational It resides in the minds of those who aiming to become agile should ac-
change. have it but it is difficult to see by knowledge, reward, and facilitate the
“Organizational agility tends to (or communicate to) those who do role of knowledge architects as lubri-
get slower as companies mature,” not. cants of the organization. “This may
says Carnabuci. “This is not a phe- • Second, the value of architectural require rethinking existing human
nomenon of just traditional manu- knowledge tends to become vis- resource strategies,” says Carnabuci,
facturing companies – all organiza- ible only when it is too late, that “but it is vital for businesses aiming
tions, without exceptions, tend to is, when changing the organiza- to thrive in environments that de-
such inertia. What top management tion’s resource configuration gen- mand constant change.”
is challenged to do, then, is to design erates cascades of unanticipated,
organizational processes and human cross-competence problems be-
resource (HR) systems that can make cause no one really understood
an organization sustainably agile. their deep interdependencies.
Knowledge architects are wanted • Third, HR systems and manageri-
and needed.” al attention are still largely geared
towards appreciating specialist
knowledge. Tammi L. Coles
Digital Editor,
ESMT Berlin
ESMT update 06/17 9
Resilience
is a Prerequisite
for Agility
New EU data and security regulation will
ultimately strengthen our digital markets.
O
n the basis of will have a positive impact on European digi-
the Digital Single tal innovation and competitiveness.
Market Strategy In 2016, the European Parliament and
adopted in 2015, the Council concluded two major legislative
Europe has taken proposals: the EU’s General Data Protection
a number of mea- Regulation (GDPR) and the EU Directive on
sures to enhance Network and Information Security (NIS Di-
the digital single rective).
market, facilitate the supply of and access to The GDPR replaces the previously nation-
digital services, and remove market barriers. ally regulated data protection laws with new
This includes various regulatory measures, of rules that apply throughout Europe. When
which regulation on data protection and cy- the Regulation enters into force in May 2018,
bersecurity is of particular importance. Since all companies that do business in the Euro-
2013, the protection of digital markets from pean single market are subject to uniform
manipulation and spying has become a key data protection standards. The market loca-
political issue. Edward Snowden’s disclosures tion principle provided for in the Regulation
of the activities of the NSA, alleged cases of ensures that non-European service providers
Chinese economic espionage, and the nu- – especially global platforms such as Google,
merous data leaks in the electoral sphere, Apple, Facebook, and Amazon – must also
presumably by Russian actors, have consid- comply with European law.
erably intensified the discussion. In recent
years, many foreign companies from South
America, Asia, and the Arab regions reacted Data protection compliance
to these revelations by moving their virtual
services to Europe – a trend we can expect to Many of the new rules are based on the well-
accelerate. It is precisely because IT security known (and high) German standard. Of most
and data protection are increasingly vital to significance, the GDPR tightens compliance
today’s business models that EU regulations pressure. Companies need to do much more
10 ESMT Update 06/17Feature
to ensure and prove that the data protection Germany will fall under the tightened law as
rules are observed. The reporting obligation early as the summer of 2017.
for data protection violations has been made
considerably harder. Both the supervisory au-
thority and, in serious cases, affected persons Averting disaster, welcoming opportunity
must be informed promptly if data breaches,
hacker attacks, or malpractice have resulted Issues of data protection and IT security are
in data protection violations. The rights of often central issues for infrastructure digita-
data protection officers are strengthened. lization and for digital business models. This
Above all, however, sensitive fines are intro- applies, for example, to the digitalization of
duced. Up to 4% of the company’s global an- payment transactions and the handling of
nual turnover must be paid in the event of a customer data therein.
serious breach of the data protection law. Take, for example, the digitalization of en-
The GDPR also recognizes and strength- ergy supply. At the core of planning for a more
ens the importance of technology for compli- decentralized and flexible energy supply with
ance with data protection. The requirements a much higher share of renewable energies is
for the security of the systems used for the the installation of digital meters (“smart me-
processing of personal data are increased, ters”) in private households. Whether these
“privacy by design” is prescribed, and fol- devices could be hacked and who has rights
low-up assessments must be carried out and to access their generated data are issues that
submitted in certain cases. play a significant role in the social and regu-
latory debate.
A comparable situation has emerged with
Infrastructure protection the digitalization of the health care sector, in
which a multitude of highly sensitive data is
The NIS Directive follows a similar regulato- generated and collected. How this can pos-
ry strategy. It was originally drafted primarily itively contribute to the delivery of health
to protect critical infrastructure from digital care services is undeniable. Yet the possibili-
attacks. Operators of such infrastructures – ty of externally manipulated medical devices
from energy supply to hospitals, from food – from pacemakers to insulin pumps – is nev-
wholesalers to banks and insurance com- ertheless a terrifying scenario. Unsurprising-
panies – must meet considerable technical ly, eHealth initiatives and health care start-
requirements. Here, too, there is a duty to ups are facing particularly stringent security
report security incidents to the authorities, requirements under European legislators.
including the imposition of fines for insuffi- Much has been said about the value of Big
cient security measures. Data and the major innovations made pos-
In addition to critical infrastructures, Eu- sible by digital networks. And Europe is un-
ropean legislators have also decided to reg- doubtedly the market leader for secure and
ulate certain particularly important digital trustworthy digital services. Yet uniform data
services. This addresses the “critical infra- protection and IT security rules will ensure
structure of the digital space”: online search that network operators become even more
engines such as Google, online marketplaces resilient. Despite higher compliance require-
such as eBay or Amazon, and the cloud ser- ments and related implementation costs for
vices that all the major platforms offer. These companies, the new rules open up opportu-
services must also adopt technical measures nities for the single market. An overall sig-
that are “state of the art,” report incidents nificantly increased level of security and data
and, if in doubt, expect high fines. Unlike the protection strengthens Europe’s importance
GDPR, the NIS Directive is not directly appli- as a digital market in the competition of glob-
cable, but must be transposed into national al markets.
law by the Member States by May 2018. Be-
cause of its forthcoming Bundestag elections,
Germany was the first country to do so. Its Martin Schallbruch
IT security law, adopted in 2015, had already Deputy Director and Senior Researcher of Cyber
been changed to meet the requirements of Innovation and Cyber Regulation, Digital Society
European law, so that companies operating in Institute (DSI), ESMT Berlin
ESMT Update 06/17 11Feature
“Joiners” Are Vital
to Innovation
A discussion with Henry Sauermann
T
he POK Pühringer PS Chair ups, joiners often provide essential capabil-
in Entrepreneurship has ities, be it in technology, marketing, finance,
been filled by Henry Sau- or other critical functions. But many found-
ermann, who joined ESMT ers face challenges in building their startup
Berlin as associate profes- teams – after all, it is important to not just
sor of strategy in May. Pri- find people who can do certain types of jobs,
or to coming to Berlin, Dr. but employees who are a good fit with the
Sauermann was an asso- startup environment.
ciate professor of strategy and innovation at In work with my colleague Mike Roach at
the Scheller College of Business at the Geor- Cornell, I have studied a large cohort of sci-
gia Institute of Technology (USA) and he is ence and engineering PhD students to un-
currently a research associate at the US Na- derstand their career goals and job market
tional Bureau of Economic Research (NBER). transitions. One question was how exactly
“joiner types” – individuals who prefer to
work in startups – differ from individuals who
want to be founders or employees in estab-
lished firms. Among others, we find that join-
oiner types care much more
J er types care much more about factors such
as autonomy than employees in established
about factors such as autonomy firms, and they are more willing to bear the
than employees in established risk that comes with working for a young and
firms. small firm. But joiners also differ from found-
ers – among others, they are less interested
in management.
Similar differences emerge in related work
His research in innovation and entrepreneur- I have done using a large sample of scientists
ship has been published in a wide range of and engineers working in US firms. Most
academic journals including Management notably, employees working in startups are
Science, Organization Science, Research Policy, less concerned about job security than those
Proceedings of the National Academy of Sciences, working in established firms (even though job
and Science. security is lower in startups!).
We spoke with Dr. Sauermann about his
research on “joiners,” and why they are im-
portant members of every entrepreneurial How will joiners change the startup scene
effort. (in Berlin and elsewhere) and affect older,
more established firms?
Tell us more about “joiners” and what Joiners have always been around, and many
makes them special. startups would not be able to function with-
out them. However, the public discussion has
Joiners are individuals who work in entrepre- failed to recognize that joiners differ from
neurial startups but who did not found these other types of employees, and we don’t real-
firms – they “joined” founders in new ven- ly know yet what roles they play in startups.
tures. Especially in technology based start- One question we are currently studying is
12 ESMT Update 06/17what benefits startups get from hiring “joiner
types,” that is, individuals who have a strong
preference for working in a startup rather
than in other types of firms. We conjecture
that joiner types may be willing to join start-
ups for less compensation than other individ-
uals, and that they are also less likely to quit
and search for jobs in established firms.
Another important question is whether
joiner types are more productive than others.
In forthcoming work using data from the US,
I find that scientists and engineers working
in startups are more innovative than those
in established firms, and some of this advan-
tage is explained by their greater willingness
to take risks.
But research on joiners also matters for
large corporations. Most obviously, it is im- Henry Sauermann
portant for established firms to understand
how startups “tick” since startups are of- projects, we find that the crowd contributes
ten the competitors who disrupt existing hundreds of thousands of hours of work, and
business models or introduce radical inno- many projects would not have been feasible
vations into the market. At the same time, without the help of the crowd.
many established firms benefit from work- However, there are also distinct challeng-
ing with startups as collaborators, and these es: Many individuals contribute only for a few
partnerships can be more effective if both minutes and do not return, and crowd sci-
sides understand differences in culture and ence projects can easily run out of help if they
in employees’ motives. Perhaps most inter- fail to constantly attract new participants
estingly, our study of science and engineer- through word of mouth or media attention.
ing PhDs shows that a large share of “join-
er types” – individuals who would prefer to
work in startups – end up working for large
firms. While we are still in the process of un-
derstanding why, it may well be that these oiners are a critical resource
J
joiner types are a critical resource that large
firms can tap into when trying to become
that large firms can tap into when
more innovative and to foster “corporate en- trying to become more innovative.
trepreneurship.”
What about your recent work on crowd As such, “free help” from the crowd sounds
science and innovation contests? exciting, but organizers need to be aware of
the significant work that is required to man-
I am fascinated by the question of how or- age such projects and need to be smart about
ganizations – whether startups, established recruiting and retaining participants.
firms, or universities – can become more In a new project in the context of medi-
innovative. One approach is to draw on hu- cine, my collaborators and I study how orga-
man capital from outside the organization’s nizers can push the boundaries even further.
boundaries, such as the larger “crowd” of Most existing crowd science projects use the
people. Reaching out to the crowd can yield crowd to collect data, process information,
valuable inputs such as ideas and knowledge or solve problems that have already been
but also effort. Some professional scientists defined by the organizers. Our new research
try to use help from the crowd to make sci- asks: How can the crowd help identify what
entific research more efficient. Using data problems we should be tackling in the first
from a large platform of such “crowd science” place?
ESMT Update 06/17 13Der Businessclub des manager magazins
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WWW.MA N A G E R -LOUNGE. COM www.leadersnetwork.deConversations
Success is not
gender neutral.
There are many studies that show that
when working women are seen to be
ambitious they suffer a backlash. My
own research with Margaret Mayo of
IE Business School and Natalia Karelaia
of INSEAD confirmed that in addition
to confidence, women must show that
they care about others if they want to
succeed. When women display these
pro-social behaviors, they are liked again
and offered opportunities to progress.
Men, on the other hand, are getting
a different message: “Don’t worry about
being pro-social. If you perform, you
will get ahead anyway.”
If we want to create diverse organizations,
we have to make an explicit decision as
to whether being social should be a job
requirement, and punish or reward men
and women equally accordingly.
Laura Guillén
Assistant Professor of Organizational Behavior, ESMT Berlin
ESMT Update 06/17 15Innovation,
Technology,
and Growth
ESMT Open Lecture
with Christine Lagarde,
Managing Director,
International Monetary Fund
Tuesday, April 11, 2017
16 ESMT Update 06/17In Pictures
Martin Muhleisen, Deputy Director, Office of the Managing Director
Christine Lagarde, Managing Director, IMF
Andreas Dombret, Member of the Executive Board of the Deutsche Bundesbank
Georg Garlichs, Chief Financial Officer, ESMT Berlin
I agree that the technological transformations
that we’re seeing at the moment pose a real
challenge, especially for those that were
accustomed to the old way of doing things. But
as economists we also see the opportunity to
grow global income in a way that allows everyone
to benefit, securing a more peaceful future
for the next generation.
ESMT Update 06/17 17In the News
Can Germany’s
Mittelstand Solve China’s
Economic Challenge?
Germany’s manufacturing model poses
a sustainable alternative to Chinese
foreign direct investment strategies in
the US and Europe.
The ballpoint pen. While a seemingly There is no denying that this Chinese investment in Germa-
unremarkable product, its manufac- decrease in growth reflects an eco- ny alone has been notable. In 2012,
ture was being hailed as a “break- nomic revolution, however. Having the Weichai Power unit of Shandong
through,” because it is everything committed decades to attracting Heavy Industry Group invested a
but unremarkable for the Chinese Western manufacturers to the coun- whopping €738 million to take a con-
marketplace. One of China’s premier try’s low-cost producers, China has trolling stake in Kion, Germany’s pre-
manufacturers of steel had finally had to abandon “cheap” for “bet- mier manufacturer of forklifts. That
succeeded – after five long years – ter.” Labor costs (especially in man- was the biggest foreign investment
to domestically produce the kind of ufacturing) have tripled in the last deal in Germany until just last year,
high-grade steel that it has been im- 10 years, driving business interest to when another Chinese manufactur-
porting for ballpoint pens from Ger- cheaper producers in Vietnam and er – appliance maker Midea – paid
many, Switzerland, and Japan. India. Production costs have also in- a record €1.2 billion for a controlling
In China, that steel has been a creased – due in part to increasing stake in Kuka, a German robotics
120-million-yuan annual blow to the public dissatisfaction with low air company. According to a study by the
nation’s sense of self. How can the quality and manufacturing’s subse- Mercator Institute for China Stud-
quality and innovation of something quent real costs under better envi- ies and the Rhodium Group, in 2016
as simple as a ballpoint pen have ronmental governance. Germany alone drew in €11 billion of
evaded Chinese manufacturing for so That is to say that, yes, China’s the €180 billion that China invested
long? And what does that say about key competitive advantage – cheap abroad – more than any other single
the future of Chinese investment in costs – have been fading away for a country.
businesses at home and abroad? number of years. The Chinese gov- While the “go out” policy has
ernment and many companies are flipped the table, such that China
therefore pursuing a new course. The makes more FDI than it takes, it re-
“Go out” policy gone wild strongest evidence of this – the coun- mains to be seen whether buying
try’s switch to quality and innovation quality and innovation abroad can
Much has been said in the last year in manufacturing – is the Communist yield the same results for Chinese
about China’s fall from double-dig- Party of China’s latest Five-Year Plan manufacturing as creating it directly.
it growth to its current single-digit (the thirteenth), in which the slogan
slump. The popular media picture is “Made in China 2025” takes center
misleading, however. For while Chi- stage. Made in China via Germany?
na’s gross domestic product (GDP) Troubling, however, is how China
growth is now at 6.7%, the nation’s has entered the quality and innova- Perhaps that is why the story of Tai-
economy remains among the world’s tion marketplace. While not the only yuan Iron and Steel’s ballpoint pen
strongest – in absolute figures, Chi- strategy, heavy foreign direct invest- success has resonated so strongly
nese GDP growth is twice as big as ment (FDI) in the US and Europe has with the Chinese public. Indeed, if
the GDP of a country like Austria. become a key element. “Made in China 2025” will be suc-
18 ESMT Update 06/17cessful, it may have to take the with Mittelstand companies for de- are there. China’s leadership may be
“Made in Germany” approach – a cades and are as committed to qual- challenged to reconsider the impact
national commitment to the “Mittel- ity outcomes as their employers. of its FDI strategy and to embrace a
stand” (German; small and medium The result is that Germany’s Mittel- model where domestic champions –
manufacturing enterprises) that has stand brands – the so called “hidden Taiyuan Iron and Steel, among oth-
driven quality, innovation, and eco- champions” – are worldwide leaders ers – are called to move the economy
nomic growth for generations. in their market segments. forward. China’s push for quality and
As a professor at ESMT Berlin, Chinese students at ESMT come innovation may find real and sustain-
I have witnessed an influx of Chi- to learn that what Germany counts able value therein.
nese executives who are interested on is that such a quality- and loyal-
in learning the characteristics and ty-driven manufacturing strategy
strategies that have made the Ger- serves as the ever-burning engine of
man Mittelstand so successful. These true economic sustainability.
include certain traits that seem Will the FDI strategy of buying
wholly contradictory to the “go out” quality and innovation be too high a
mandate. These often family-owned cost for China, especially given pub-
and unrenowned Mittelstand com- lic pushback? Foreign political re-
panies prioritize quality over all else. sistance to Chinese FDI may be less
They typically forego big mergers and threatening in the long-run than the
acquisitions to instead invest heavily implication of a heavy FDI strategy Olaf Plötner
in research and development. They itself – namely, the idea that quality Professor
do not focus on short-term financial and innovation can be merely gob- and Dean of
wins, but instead enjoy a leadership bled up abroad. Executive
culture that wins employee loyal- The alternative insights to be de- Education,
ty. Indeed, many employees remain rived from the German Mittelstand ESMT Berlin
#YOU ARE
THE ONE
WHO CHANGES
BUSINESS
THE BUSINESS SCHOOL
FOUNDED BY BUSINESS. www.esmt.berlinTo me, Berlin’s major asset is its
ecosystem of founders, entrepreneurs,
startups and investors.
www.berlin-sciences.com
Prof. Joe Peppard
Practice Group Information
and Communications Technologies
ESMT European School of
Management and TechnologyConversations
Innovation success
is overrated.
Industry insiders make much of
innovation. A word of caution
is nevertheless warranted. Working
with Freek Vermeulen, an associate
professor at the London Business
School, I investigated the impact
of drug innovation on the profitability
of firms in the Chinese pharmaceutical
industry over a period of 10 years.
What we found is that, on average,
non-innovators actually significantly
outperformed innovators.
The observation bias – our desire to
assign success to all innovators because
of the successes of some – runs
counter to what we teach of business
strategy. The bottom line: Not all
strategies are right for all outcomes.
Not in all industries and not at all times.
Xu Li
Assistant Professor of Strategy, ESMT Berlin
ESMT Update 06/17 21Asian Institute of Management
The Philippines
EGADE Business School,
Tecnológico de Monterrey
Mexico
ESMT Berlin Germany
FGV Escola de Administração de
Empresas de São Paulo Brazil
Fudan University School of
Management China
Haas School of Business,
University of California
Berkeley USA
NOW WHAT?
HEC Paris France
Hitotsubashi University,
Graduate School of International
Corporate Strategy Japan
Hong Kong University
of Science and Technology
Business School China
IE Business School Spain
IMD Singapore, Switzerland
INCAE Business School
Costa Rica, Nicaragua
Indian Institute of Management
Bangalore India
INSEAD France, Singapore, UAE
Koç University Graduate School
of Business Turkey
Lagos Business School,
Pan-Atlantic University Nigeria
London School of Economics
and Political Science,
Department of Management
United Kingdom
National University of Singapore
Business School Singapore
Pontificia Universidad
Católica de Chile School of
Business Chile
Now what? More frictions and Renmin University of China
School of Business China
daunting challenges from rising Saïd Business School, University
of Oxford United Kingdom
nationalism and populism, UBC Sauder School of Business
Canada
but still a global economy with Seoul National University
Business School South Korea
huge opportunities. The Global Technion-Israel Institute of
Network for Advanced Management
Technology Israel
UCD Michael Smurfit Graduate
leverages the expertise from
Business School Ireland
University of Cape Town
29 business schools in 26 countries
Graduate School of Business
South Africa
to navigate the new global
University of Ghana Business
School Ghana
economy. Connect with us at Universitas Indonesia Faculty
of Economics Indonesia
globalnetwork.io. Yale School of Management
USAIn the News
Global business education
is the best antidote
to economic nationalism
ESMT Berlin, as a member of the Global inquiries into major issues including
sustainability and the obstacles fac-
Network for Advanced Management, ing women in management roles.
has joined 28 other international business Faculty have collaborated on in-
schools in the release of a statement ternational entrepreneurship, urban
resilience, and social enterprise.
advocating international exchange and Member schools have co-authored
protesting economic nationalism. case studies on palm oil in Indonesia,
banking in Ireland, manufacturing in
China, agriculture in Mexico, and im-
Other participating business schools of their country of origin or religious pact consulting in Ghana. We do this
include Yale School of Management beliefs. Ongoing global engagement because of our unwavering commit-
(USA), Haas School of Business, Uni- and exchange are paramount. ment to developing leaders who can
versity of California Berkeley (USA), Today, Global Network member work successfully across boundaries,
and Saïd Business School, University schools join in a commitment to: who are prepared to address pressing
of Oxford (United Kingdom). • understand the manifest challenges global issues, and who can perform
The Global Network for Ad- that market economies face given at the highest levels in diverse and
vanced Management, a network of the changes in political sentiment; complex contexts.
29 leading international business • deliver on our responsibility to de- As deans of Global Network mem-
schools dedicated to driving inno- velop principled leaders who create ber schools, we recognize that the
vation and creating value through value and access to opportunities; fundamental drivers of global busi-
exchange and engagement, will cel- • support the rights of our students, ness are not changing. Technology
ebrate its fifth anniversary in April. faculty, alumni, and knowledge will continue to advance and dis-
Today, the principles on which the partners to freely engage in our rupt markets and societies, and the
network was founded are more im- programs and work; and transfer of innovations and expertise
portant than ever. • advocate for the positive impacts across borders will continue. We be-
The world is currently experienc- that global exchange, in education lieve that countries that retrench will
ing an upsurge in populism, econom- and in business, have on society. harm themselves and their citizens.
ic nationalism, and anti-globalization The power of the Global Network Therefore, we redouble our commit-
rhetoric. Despite such sentiment, we lies in its ability to harness diverse ment to collaborative learning across
recognize that the global economy is insights to address important global countries and cultures, and to gain
more interconnected than ever be- issues. The Global Network connects and leverage the insights of the best
fore. Business operations are increas- students, faculty, and alumni from and brightest throughout the world.
ingly global, with ideas, products, around the world, allowing them to In this way, we continue to improve
capital, and teams moving across bor- increase their effectiveness by un- educational outcomes and profes-
ders. At the same time, big challeng- derstanding differences and com- sional development of our students,
es – from climate change to financial monalities in their economies and deliver innovations that benefit busi-
stability and the fight against debili- societies. ness and society, and contribute to a
tating diseases – are global in nature In its brief history, more than better world.
and cannot be addressed without the 5,000 master-level students and
private sector. Business cannot deliv- faculty have participated in Global February 7, 2017
er for all its stakeholders if borders Network courses, exchanges, and
are closed or certain groups are pre- cross-school virtual team projects.
vented from crossing them because The network has conducted global
ESMT Update 06/17 23Russia
in Europe:
Yesterday,
Today,
Tomorrow
ESMT Open Lecture
with Mikhail Khodorkovsky,
Founder, Open Russia
Monday, March 20, 2017
24 ESMT Update 06/17In Pictures
Konstantin Korotov,
Associate Professor of
Organizational Behavior and
Director of the Center for
Leadership Development
Research (CLDR), ESMT Berlin
Amb. John Kornblum,
Senior Counselor, Noerr LLP,
and Chairman, John F.
Kennedy Atlantic Forum
Mikhail Khodorkovsky,
founder of the Open Russia
movement, businessman,
and former head of YUKOS
Jörg Rocholl,
President, Professor of
Finance, and EY Chair in
Governance and Compliance,
ESMT Berlin
We are the people who are convinced that
Russia is Europe, even if it might be another
Europe. Russian culture is a part of European
culture; Russian history is an integral part of
European history. Russia has no other way
to go than together with the rest of Europe.
ESMT Update 06/17 25ESMT Sustainable
Business Roundtable
Inside ESMT Berlin
“Sustainable Innovation”
April 27-28, 2017
School, faculty, and research
announcements of note
Scholarships available for women in
IT leadership
To address the underrepresentation of wom-
en in IT leadership, ESMT is offering two par-
ESMT is now among the global Top 10 tial scholarships for the business school’s IT
ESMT Berlin placed 8th globally in the 2017 Fi- Leadership Program (ITL), each valued at EUR
nancial Times Executive Education combined 4,450. One of the scholarships is provided in
ranking of open enrollment and customized cooperation with the 30% Club, a worldwide
programs (2016: 12th). ESMT has been the initiative for gender equality aiming to in-
highest ranked business school in Germany crease the number of women in management
since entering the rankings in 2010. positions.
Annual figures demonstrate positive ESMT welcomes digitalization with
growth bitcoin and VR
ESMT’s annual figures for 2016 document the ESMT remains committed to integrating dig-
continued successful development of the in- italization initiatives throughout the school
ternational business school. Earnings in 2016 system. Evidencing this commitment, in De-
increased to € 29.3 million. A total of 361 cember ESMT became the first German uni-
students were enrolled in degree programs versity to accept bitcoin as a payment meth-
throughout 2016, and 3,114 participants took od. The school also launched a new Virtual
part in executive education programs. ESMT Reality (VR) program to offer prospective stu-
has recorded a positive net income for seven dents virtual lectures and 360-degree videos
consecutive years. of the Berlin campus.
26 ESMT Update 06/17Inside ESMT
AACSB re-accredits ESMT Berlin Dahlander, associate professor of strategy
The international accrediting body for busi- at ESMT Berlin, to its 2017 Best 40 Under 40
ness schools AACSB (Association to Advance Professors list. The journal acknowledged,
Collegiate Schools of Business) has extended among others, Dahlander’s contribution
ESMT’s accreditation for five years, recog- to distributed innovation as a new field of
nizing ESMT contributions to the interests academic inquiry and his award-winning
of global management education. Only nine scholarly work on the future of open innova-
schools in Germany have ever been awarded tion.
AACSB accreditation.
Henry Sauermann joins ESMT
ECGI appoints President Rocholl as The POK Pühringer PS Chair in Entrepreneur-
member ship has been filled by Henry Sauermann,
The European Corporate Governance Insti- who joined ESMT Berlin as associate profes-
tute (ECGI), an international non-profit as- sor of strategy in May. Prior to coming to Ber-
sociation focusing on corporate governance, lin, Dr. Sauermann was an associate profes-
has appointed ESMT Berlin President Jörg Ro- sor of strategy and innovation at the Scheller
choll as a research member. The ECGI works College of Business at the Georgia Institute
to reinforce corporate governance by creating of Technology (USA) and he is currently a Re-
an interdisciplinary network of experts and search Associate at the US National Bureau
by presenting the latest research. of Economic Research (NBER). His research
in innovation and entrepreneurship has been
Linus Dahlander ranks among Best 40 published in a wide range of academic jour-
Under 40 Professors nals including Management Science, Organiza-
In March, the graduate business education tion Science, Research Policy, Proceedings of the
online journal Poets&Quants named Linus National Academy of Sciences, and Science.
Reading Room
Selected reading from published ESMT research
Adverse incentives in Evaluating novelty: The role LeChatelier-Samuelson
crowdfunding of panels in the selection of principle in games and
Thomas Hildebrand, Manju Puri, R&D projects pass-through of shocks
Jörg Rocholl Paola Criscuolo, Linus Dahlander, Alexei Alexandrov,
Management Science 63(3): 587–608 Thorsten Grohsjean, Ammon Salter Özlem Bedre-Defolie
Academy of Management Journal Journal of Economic Theory
Bitstream Fault Injections 60(2): 433–460 168(March): 44–54
(BiFI) – Automated fault attacks • 2016 Jürgen Hauschildt Award,
against SRAM-based FPGAs Wissenschaftliche Kommission Replication data collection
Pawel Swierczynski, Georg Becker, für Technologie, Innovation und highlights value in diversity
Amir Moradi, Christof Paar Entrepreneurship im VHB of replication attempts
IEEE Transactions on Computers • Best-Paper-Award “Innovation K. Andrew DeSoto,
PP(99): 1–13 Management” 2016, EBS Universi- Martin Schweinsberg
tät für Wirtschaft und Recht Scientific Data 4(170028)
How do brokers broker?
Tertius gaudens, tertius Information security of highly Sustainability lessons from
iungens, and the temporality critical wireless networks the front lines
of structural holes Maurizio Martellini, Stanislav Abai- CB Bhattacharya, Paul Polman
Eric Quintane, Gianluca Carnabuci mov, Sandro Gaycken, Clay Wilson Sloan Management Review
Organization Science Cham: Springer International 58(2): 71–78
27(6): 1343–1360 Publishing
ESMT Update 06/17 27You can also read
