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Emerald Group Publishing Limited
Copyright © 2008, Emerald Group Publishing Limited
Gary Hamel's clarion call to radically rethink management
Article Type: The strategists bookshelf From: Strategy & Leadership, Volume 36, Issue 3.
The Future of Management
Gary Hamel (with Bill Breen)Harvard Business School Press, 2007, 211 pp.
I dream of organizations that are capable of spontaneous renewal, where the drama of change is unaccompanied by the wrenching trauma of a turnaround. I dream of businesses where an electric current of innovation pulses through every activity, where the renegades always trump the reactionaries. I dream of companies that actually deserve the passion and creativity of the folks who work there, and naturally elicit the very best that people have to give.
These dreams of Gary Hamel’s, presented in the preface to his new book, The Future of Management, are not entirely new, nor have the challenges that they pose gone unnoticed up to now. Back in the 1970s, the late Peter Drucker didn’t pull his punches when he berated managers for being “fond of saying our greatest asset is our people,” while knowing “perfectly well” that “little of the human potential of any organization is tapped and put to work.” In the early 1980s Tom Peters and Robert Waterman, continued to see too many companies held back by impoverished management models that left most of their people “waiting for motivation,” while in the late 1990s, Sumantra Ghoshal and Chris Bartlett could still bemoan the persistence of traditional management models in which “thousands of capable individuals” continued to be “crushed and constrained by the very organizations created to harness their energy and expertise.”
But aspirations such as these are now “more than dreams,” according to Hamel. They are fast becoming “do or die challenges for any company that hopes to thrive in the tumultuous times ahead,” he warns, and they “can now only be surmounted with inspired management innovation.” And when Hamel sounds the alarm, his credentials require business leaders to respond. He has advised major firms worldwide and authored or co-authored several classic books on strategic management. A Visiting Professor of Strategic and International Management at London Business School, he is currently leading a project to build the world’s first “Management Innovation Lab.”Hamel organizes The Future of Management into four sections: why management innovation matters; management innovation in action; the principles of management innovation; and getting started.
Hamel begins by raising the central issue around which the rest of the book revolves Why management innovation matters, and, especially, why now?
He asks us to consider whether management as we have come to know it might now be reaching the “limits of its improvability.” Not that he’s denigrating the historical significance of modern management, which he credits for being “the most important innovation” of the 20th century. Rather he suggests that it may now be a “maturing technology.” Modern management was originally a social technology developed primarily “to solve the problem of inefficiency,” and this is no longer the most pressing concern. In a context in which “the pace of change” continues to accelerate, companies will in future have to learn how to become “as strategically adaptable as they are operationally efficient.”
As Hamel points out, modern management is more than just “a suite of tools and techniques”; it is “a paradigm.” So nothing less than a paradigm shift is now required. The ideas of Taylor, Weber and the other management pioneers on which the current paradigm is based were radical in the early decades of the last century. Can the practice of management undergo revolutionary transformation over the first two or three decades of this century? Hamel believes that it can, and must.
According to the author, management innovation is not just an imperative now, but also offers huge opportunity for early pioneers. He theorizes that a radical management innovation will tend to yield significant competitive advantage when:
The innovation is based on a novel management principle that challenges some long-established orthodoxy.
The innovation is systemic and extends well beyond one or two discrete processes or methods.
It is part of an ongoing program of innovation, where “progress compounds over time.”
In fact, he argues that management innovation may be the most significant of all in terms of potential competitive impact, resting at the top of what he terms “the innovation stack,” in which operational innovation, product/service innovation, strategic or business model innovation and management innovation all sit in ascending order.
At the book’s outset Hamel draws up a bold agenda for management innovation. In Hamel’s view the three “most formidable challenges” facing companies now are:
Dramatically accelerating the pace of strategic renewal in organizations large and small.
Making innovation everyone’s job, every day.
Creating a highly-engaging work environment that inspires employees to give the very best of themselves.
Taken together, these will be the defining challenges for 21st century management. In the case of the first of them, trying to build a company that can “change as fast as the world around us,” the three main impediments to progress are denial by leaders, the lack of ability to generate a range of new strategic options, and allocation rigidities. “Creative apartheid,” or the tendency to treat the capacity for innovation as if it were narrowly distributed, along with the drag of old mental models or “legacy beliefs,” and insufficient respect for experimentation are all seen as major in inhibitors to meeting the second challenge. The major pathologies to be redressed when tackling the third challenge are: “too much management, too little discretion,” “too much hierarchy, too little community” and “too much exhortation, too little purpose.”
These three challenges are clearly interdependent, and finding effective ways to address the third may well be the key to solving the others as well. A recent international survey involving 86,000 employees found that less that 15 percent of them considered themselves to be highly engaged in their work, while nearly a quarter felt almost totally disengaged, prompting the author to offer his own “Hierarchy of Human Capabilities.” In ascending order, in terms of percent of relative contribution to value creation, these are: Obedience (0); Diligence (5); Intellect (15); Initiative (20); Creativity (25); and Passion (35). Hamel points out that capabilities like obedience, diligence and even intellect, are fast becoming global commodities, while those with the greatest potential to differentiate a company like initiative, creativity and passion are “benefactions which employees choose, day-by-day and moment-by-moment to give or withhold.” Creating the kind of organizational model that will deserve these gifts is the essential management innovation challenge for the times ahead.
Central to the argument being advanced in The Future of Management is that any organizational model reflects a set of underlying management principles and beliefs, and that new principles will be needed to guide the evolution of the high-engagement organizational model that is now urgently needed. What are these new foundation principles, and where can we look to see them in action? As yet, there is no complete exemplar of future best practice, but there are several pioneering efforts already operating. Hamel chooses three to offer an early glimpse of the likely future face of management Whole Food Markets, W.L. Gore and Google. Whole Food Markets, the less-well known of the three, is a fast-growing enterprise in the relatively mature US food retailing sector built around the proposition that people will pay a premium for high quality organic/locally produced food.
As the author points out, “it would be hard to find three companies less alike.” Yet each, in its own way, “is a modern management pioneer.” Taken together they help to underline how “radical deviations from management orthodoxy” can have a very significant commercial impact. Cases such as these can point the way to answers to the kinds of questions that underpin the capstone challenges, such as:
How you empower people by managing less while retaining discipline and focus?
How you create a company with the spirit of a community that binds people together?
How you build an enlarged sense of purpose that merits extraordinary contributions?
How you enroll everyone in your company as an innovator?
How you make sure that management’s hallowed beliefs don’t strangle innovation?
How you create time and space for innovation?
How you guard against the dangers of hubris and denial?
How you create a steady stream of new strategic options?
How you accelerate the reallocation of resources from legacy projects to new initiatives?
These three cases form an empirical bridge between the three capstone challenges highlighted in the opening section and the author’s own attempt to identify the new management principles for the foundations of a new organizational model in the book’s third section. While a methodology for breakthrough management innovation can never be “fully scripted,” it should be possible to identify some key ingredients to help improve the odds for success, and the author offers and examines three: a disciplined approach for unearthing and challenging the long standing management orthodoxies that constrain creative thinking; new management principles with the power to illuminate new approaches, and insights drawn from the practices of “positive deviants.”
In his chapter on how to “escape the shackles” of legacy thinking Hamel highlights the need to distinguish between concepts that are time-bound and those that are timeless. For example, is the empirical finding that strategic renewal tends to require crisis and a change of leadership to bring it about a timeless or time-bound relationship? Could orthodoxy like this now present a very promising target for would-be management innovators? Hamel offers some insights of his own into how the powerful concepts of “positive deviance” and the “wisdom of crowds” might be harnessed in the search for “uncommon ideas from uncommon sources.” As he observes: “In management as in science, it’s anomalies that point us toward new truths.”
The centerpiece of the third section of the book is the author’s identification of the principles he believes will be key to the future of management. Hamel argues that modern management is based on “a small nucleus of core principles” standardization, specialization, hierarchy, goal alignment, planning and control, and the use of extrinsic rewards to shape human behavior. These were developed to solve the problem of “how to maximize operational efficiency and reliability in large-scale organizations,” and “this is still the only problem that modern management is fully competent to address.” When it comes to the challenge of how to create organizations that are highly adaptable and engaging, these principles are “insufficient and often toxic.” So where should we look for new ones? Hamel draws inspiration from five diverse domains and literatures Life, Markets, Democracy, Faith and Cities. From Life he distills the principle of “variety” and from Markets “flexibility,” while Democracy yields up “activism,” Faith “meaning” and Cities “serendipity.”
Being true to his own dictum of looking out for “unusual ideas from unusual sources,” the least familiar of these to an executive audience will be the literature on cities and how it might have come to inspire inclusion of the principle of serendipity. “Cities are resilient,” explains the author, and he had often wondered why street life was “so much more interesting and energizing than corporate life.” From looking at the writings of new urbanists, like Richard Florida and Jane Jacobs, we can learn how great cities contribute to the generation of “new pools of economic use” through enabling diverse people to interact and discover opportunities to trade information, goods and ideas, and how, at least in part, cities are “able to reinvent themselves because they make it easy for individuals to reinvent themselves.” Great cities also show us how “you can organize for serendipity.”
The final part of the book is devoted to getting started. Here, the insights are more tentative. The author starts with the observation that while over the last ten years or more, “just about every company on the planet has been hard at work reinventing its business processes,” few to date have devoted anything like “a similar degree of energy and imagination to reinventing their management processes.” There have of course been a number of well-known exceptions General Electric, Procter & Gamble and Whirlpool among the most notable. Hamel draws on the examples of IBM and its EBO (Emerging Business Opportunities) initiative was aimed at radically improving the company’s capacity to incubate new businesses, and experiments at Best Buy into using “wisdom of crowds” insights to improve their forecasting process, to illustrate what can be done and how to go about it.
The book concludes by acknowledging that there is “no well-thumbed manual” to help a company to become “a serial management innovator,” but there are some essential building blocks. These include having the courage to lead, generating an ever-widening management innovation conversation that will bring more and more people into the process and focusing on causes, not symptoms. Perhaps the surest signpost yet to how the future will evolve may be the Internet, the “most adaptable, innovative and engaging thing that human beings have ever created” and in many ways “the new technology of management.” Why? Because the Internet gives everyone a voice, distributes the tools of creativity widely, allows ideas to compete on an equal footing, decentralizes just about everything and encourages resources to follow opportunities.
In terms of how it’s put together and argued, this is not the author’s strongest book to date, especially when judged against his own high standards. Yet in terms of its overall message it still may prove to be one of his most important. At times it reads like more collage than synthesis, and does not always pack the same strength of argument as some of his previous offerings. Yet for all this, there is still much in The Future of Management that is thought-provoking. By putting “Management Innovation” firmly on the agenda in a way that no one else has done before, he may indeed have made an invaluable contribution to the future of management. The concept of management innovation may well provide to key to unlocking the enormous potential value still remaining trapped within conventional management and organizational models. For this alone The Future of Management seems worthy of inclusion on the strategist’s bookshelf.
Brian LeavyAIB Professor of Strategic Management at Dublin City University Business School (email@example.com) and a Strategy & Leadership contributing editor.