369. A New Type of Firm for the Digital Age feat. Karim R. Lakhani

Dec 21, 2023

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In the 20th century, the multidivisional firm was born. It quickly redefined business strategy and the way our world runs. Now, as the digital age advances and AI continues to become more and more critical to the way industries operate, a new kind of firm is emerging.

Karim R. Lakhani is a professor of business administration at the Harvard Business School and co-founded the Digital, Data, and Design Institute (D^3) at Harvard. His book, co-authored with Marco Iansiti, Competing in the Age of AI: Strategy and Leadership When Algorithms and Networks Run the World, looks at the ways corporations have attempted to restructure in the digital age.

Karim and Greg discuss what it takes to adapt a business model to the age of AI successfully, some of the missteps companies have made when trying to go digital, and what should be deemed proprietary knowledge when it comes to AI.

*unSILOed Podcast is produced by University FM.*

Episode Quotes:

Rethinking the multi-divisional model

06:02: Over the last hundred years, the multi-divisional firm has enabled this built environment that we live in, right? All the accoutrements of, I'm using such a technical term, accoutrements. All the features of the modern world, what we take for granted: the fact that our plumbing works, our electricity works, our subway systems work, our transportation systems work mostly. But the modern world we live in, the built environment that we live in, has come about because the multi-divisional firm, the firm was established; the multi-divisional firm was established, and we were able to marshal capital, technology, and people to do productive things. And so this is a massive achievement, right? And the shadow of that lives on today. Most of us live in these multi-divisional, siloed firms.

Is your organization mirroring your technology?

03:21: The mistake that most incumbent companies make—the companies that aren't coming from Silicon Valley or aren't born natively digital—is that they think it's just an add-on. They just think, "We'll just sprinkle this on top, and it'll be business as usual." When, in fact, Conway's Law basically says there's a mirroring hypothesis, right? The structure of the technology mirrors the structure of the organization. And if you're going to have a new architecture for your technology, you need a new architecture for your organization.

Is innovation still an afterthought?

24:31: Innovation was often an afterthought in most organizations because, once you figure it out, you've stumbled into something good and just milk the heck out of it for a while. And then you were like, okay, let's acquire something else, right? And because the rate of change was very slow, while there were lots of innovation scholars back in the fifties and sixties writing stuff, it wasn't viewed as a core strategic imperative for most organizations.

Balancing openness and advantage in the data age

51:40: Now that this new tool is available, why would we stop it from being available? But you can imagine the discussions in the dean's offices, the provost's offices, and the board of directors for these presses about, oh my god, all of our knowledge is being stolen. The same dilemma is going to happen inside and outside of companies. And what is your data strategy? What will you select and reveal? What will you keep private? What will give you an advantage or not?

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Guest Profile:

Faculty Profile at Harvard Business School
Digital, Data, and Design Institute (D^3)

His Work:

Competing in the Age of AI: Strategy and Leadership When Algorithms and Networks Run the World

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