Intelligent Artificiality: Algorithmic Microfoundations for Strategic Problem Solving

Mihnea  Moldoveanu

Working Paper | HBS Working Paper Series | 2019

Intelligent Artificiality: Algorithmic Microfoundations for Strategic Problem Solving

Abstract

This paper introduces algorithmic micro-foundations for formulating and solving strategic problems. It shows how the languages and disciplines of theoretical computer science, ‘artificial intelligence’ and computational complexity theory can be used to devise a set of heuristics, blueprints and procedures that can help strategic managers formulate problems, evaluate their difficulty, define ‘good enough solutions’ and optimize the ways in which they will solve them in advance of attempting to solve them. The paper introduces both a framework for the analysis of strategic problems in computational terms, and a set of prescriptions for strategic problem formulation and problem solving relative to which deviations and counter-productive moves can be specified and measured.

Keywords: Problems and Challenges; Analysis; Strategy; Framework; Management Analysis, Tools, and Techniques; Mathematical Methods;

Language: English

Format: Print

61 pages

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Citation:

Moldoveanu, Mihnea. "Intelligent Artificiality: Algorithmic Microfoundations for Strategic Problem Solving." Harvard Business School Working Paper, No. 19-072, January 2019. (Revised February 2019.)

Even as the demand for managerial skills continues to grow, executive education worldwide has entered a period of disruption caused by the digitalization of content, connectivity, and communication. The current offerings of many executive education program providers fall short of creating new skills in executives and developing fresh capabilities for organizations. Based on a study of all the programs offered by the business schools, consultancies, corporate universities, and online education providers, we analyze the advantages, and the constraints, of the existing programs. We also map the vehicles for skill development—such as case discussions, lectures, simulations, coaching sessions, live projects, etc.—in terms of their potential to develop executives for the future. We then examine the impact of the forces of digital disruption—the disaggregation and disintermediation of activity chains and the decoupling of the sources of value in education programs—on the future of executive education.

I introduce algorithmic and meta-algorithmic models for the study of strategic problem solving, aimed at illuminating the processes and procedures by which strategic managers and firms deal with complex problems. These models allow us to explore the relationship between the complexity of an environment, the sophistication of the problem-solving processes and procedures used to optimally map problem statements into strategic actions, and the organizational structures that are best suited to implementing solutions. This approach allows us to distinguish among levels of sophistication in the strategic management of complex predicaments, specifically among rational, irrational, quasi-rational and super-rational problem-solving processes and responses of strategic managers and organizations. It highlights a set of dynamic search and adaptation capabilities that can be studied via the algorithmic and computational properties of the problems they are meant to solve and the efficiency and reliability by which they search a solution space. It points to several new components of competitive advantage that are linked to the complexity adaptation of a firm: “offline problem solving” and “simulation advantage” emerge as key strategic differentiators for firms facing complex problems.

Executive development programs have entered a period of disruption catalyzed by the digitalization of content, connectivity, and communication and are driven by renewed demand for high-level executive and managerial skills. Unlike other segments of higher education, the executive education market is heavily subsidized by the organizations employing the executives that participate in them. To understand the ongoing transformation of the industry, we use a large database of interviews with participants in executive development programs at HBS—and executives in their sponsoring organizations—to map out the (multidimensional) objective functions of executive participants and their organizations and show how the trio of disruptive forces (disintermediation, disaggregation, and decoupling) that have figured prominently in other industries disrupted by digitalization (media, travel, publishing) are likely to reshape the structure of demand for executive development.

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Intelligent Artificiality: Algorithmic Microfoundations for Strategic Problem Solving

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