{"id":276,"date":"2021-10-27T08:33:52","date_gmt":"2021-10-27T06:33:52","guid":{"rendered":"https:\/\/blog.iese.edu\/family-business\/?p=276"},"modified":"2023-01-09T10:19:03","modified_gmt":"2023-01-09T09:19:03","slug":"nobel-laureate-bengt-holmstrom-we-see-signs-of-a-tsunami","status":"publish","type":"post","link":"https:\/\/blog.iese.edu\/family-business\/2021\/nobel-laureate-bengt-holmstrom-we-see-signs-of-a-tsunami\/","title":{"rendered":"Nobel laureate Bengt Holmstr\u00f6m: \u201cWe see signs of a tsunami\u201d"},"content":{"rendered":"

In early October, IESE\u2019s Madrid campus welcomed scholars and guests \u2013 both in person and online \u2013 to the 2021 IESE-ECGI Corporate Governance Conference<\/a>, an annual event that gathers some of the foremost experts in management and economics. On the first day of the conference, I had the great honor of moderating a panel session with Sophie L\u2019H\u00e9lias, founder and president of LeaderXXchange<\/a>, and Bengt Holmstr\u00f6m, an MIT professor of economics and winner of the 2016 Nobel Prize in Economics<\/a>.<\/p>\n

In his session, Prof. Holmstr\u00f6m warned us of a data-driven tsunami that promises to radically change how businesses will need to formulate their corporate strategy and consequently structure their governance. Below are a few key takeaways from his presentation, followed by some of my own observations on how they might impact family-owned firms.<\/p>\n

An approaching data tsunami<\/span><\/strong><\/h2>\n

A massive wave of data-driven innovations \u2013 artificial intelligence, blockchain, sensors and machine learning, among others \u2013 is dramatically altering the strategic landscape for companies by creating new value propositions.<\/p>\n

When we compare the 2008 and 2020 lists of the world\u2019s Top 10 most valuable companies, the shift is easy to see: in 2008, only 1 of the 10 companies had a platform model: it was Microsoft. Today, that number is 7, starting off with Apple, Amazon, Microsoft, Facebook and Google, which are each valued at around $1 trillion.<\/p>\n

Unicorns are another example: of the 100 largest unicorns \u2013 privately held start-ups valued at least $1 billion \u2013 70 to 80% are platform businesses. In the words of Prof. Holmstr\u00f6m, concerning the theory of the firm, \u201cPlease don\u2019t ask \u2018what is new.\u2019 Everything is new!\u201d<\/p>\n


\nInformation is the new collateral<\/strong><\/span><\/h2>\n

This constellation of new technologies and access to massive amounts of data are changing the competitive landscape. From online marketplaces to fintechs, the market abounds with new players that squeezed traditional firms and intermediaries out of the equation.<\/p>\n

Airbnb is perhaps the most notable example: launched in 2008, today it is worth more than the largest three hotel chains combined. If data are the new capital, information is the new collateral. This is particularly relevant for developing economies.<\/p>\n

Narrowing gaps between industries<\/strong><\/span><\/h2>\n

The data explosion is triggering another major shift by narrowing the proximity among industries. As a former member of Nokia\u2019s board, Prof. Holmstr\u00f6m offered a cautionary tale of what happens when firms are unable to correctly read industry shifts.<\/p>\n

In 2005, Olli-Pekka Kallasvuo was named CEO of Nokia, the largest smartphone maker in the world at the time. In a 2009 meeting with Steve Jobs, Kallasvuo was shocked when Apple\u2019s CEO told him Nokia wasn\u2019t considered a relevant competitor since they lacked a proprietary software platform. And the rest is history.<\/p>\n


\nSurround yourself with good people
\n<\/strong><\/span><\/h2>\n

Apple would go on to dominate the smartphone market but their success offers another important lesson: Steve Jobs didn\u2019t act alone. In fact, Apple would have never opened up its platform to third-party apps if it weren\u2019t for other voices on the executive board. Fortunately for Apple, Jobs heeded their advice despite his reservations.<\/p>\n

Apple\u2019s experience underlines the need for top-quality boards, or as Gilson and Gordon described<\/a>, \u201ccorporate boards 3.0\u201d with \u201cthickly informed, well-resourced, and highly motivated directors.\u201d<\/p>\n

As mentioned in a previous post<\/a>, the digital tsunami Prof. Holmstr\u00f6m describes represents unique challenges for family-run companies. Long-established family firms might need to strike a difficult balance between traditional business models and disruptive technologies, yet their ability to attract the best tech talent to guide this change isn\u2019t easy.<\/p>\n

Top-tier leadership is also paramount: the CEOs in most family-owned firms have longer tenures compared to listed companies. While this offers some advantages, it may be an obstacle when it comes to leading a digital revolution.<\/p>\n","protected":false},"excerpt":{"rendered":"

In early October, IESE\u2019s Madrid campus welcomed scholars and guests \u2013 both in person and online \u2013 to the 2021 IESE-ECGI Corporate Governance Conference, an annual event that gathers some of the foremost experts in management and economics. On the first day of the conference, I had the great honor of moderating a panel session […]<\/p>\n","protected":false},"author":954,"featured_media":277,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[981],"tags":[434,117523,89769,117522],"class_list":["post-276","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-leadership","tag-competitiveness","tag-corporate-governance","tag-digitalization","tag-holmstrom"],"acf":[],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/blog.iese.edu\/family-business\/wp-json\/wp\/v2\/posts\/276","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/blog.iese.edu\/family-business\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blog.iese.edu\/family-business\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blog.iese.edu\/family-business\/wp-json\/wp\/v2\/users\/954"}],"replies":[{"embeddable":true,"href":"https:\/\/blog.iese.edu\/family-business\/wp-json\/wp\/v2\/comments?post=276"}],"version-history":[{"count":10,"href":"https:\/\/blog.iese.edu\/family-business\/wp-json\/wp\/v2\/posts\/276\/revisions"}],"predecessor-version":[{"id":313,"href":"https:\/\/blog.iese.edu\/family-business\/wp-json\/wp\/v2\/posts\/276\/revisions\/313"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/blog.iese.edu\/family-business\/wp-json\/wp\/v2\/media\/277"}],"wp:attachment":[{"href":"https:\/\/blog.iese.edu\/family-business\/wp-json\/wp\/v2\/media?parent=276"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blog.iese.edu\/family-business\/wp-json\/wp\/v2\/categories?post=276"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blog.iese.edu\/family-business\/wp-json\/wp\/v2\/tags?post=276"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}