To maximize the chances of a management breakthrough, you need to start with a problem that is both consequential and soul stirring.
First, what are the tough trade-offs that your company never seems to get right? Management innovation is often driven by the desire to transcend such trade-offs, which can appear to be irreconcilable. Open source development, for example, encompasses two antithetical ideas: radical decentralization and disciplined, large-scale project management. Maybe you believe that your organization has become less and less agile as it has pursued the advantages of size and scale.
Second, what are big organizations bad at? This question should produce a long list of incompetencies. Third, what are the emerging challenges the future has in store for your company? Try to imagine them: An ever-accelerating pace of change. Rapidly escalating customer power. Near instant commoditization of products and services. Ultra-low-cost competitors.
A new generation of consumers that is hype resistant and deeply cynical about big business. These discontinuities will demand management innovation as well as business model innovation. Any problem that is pervasive, persistent, or unprecedented is unlikely to be solved with hand-me-down principles. More recently, scientists eager to understand the subatomic world have been forced to abandon the certainties of Newtonian physics for the more ambiguous principles of quantum mechanics.
That was certainly true for Visa. The ensuing chaos threatened the viability of the fledgling business.
Modern management practice is based on a set of principles whose origins date back a century or more: specialization, standardization, planning and control, hierarchy, and the primacy of extrinsic rewards. Generations of managers have mined these principles for competitive advantage, and they have much to show for their efforts.
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But after decades of digging, the chance of discovering a gleaming nugget of new management wisdom in these well-explored caverns is remote. Your challenge is to uncover unconventional principles that open up new seams of management innovation. And what is it that imbues those exemplars with their enviable qualities? You know that in a world of accelerating change, continuous strategic renewal is the only insurance against irrelevance.
Specialization, for all its benefits, limits the kind of cross-boundary learning that generates breakthrough ideas.
The quest for greater standardization often leads to an unhealthy affection for conformance; the new and the wacky are seen as dangerous deviations from the norm. Elaborate planning-and-control systems lull executives into believing the environment is more predictable than it is. A disproportionate emphasis on monetary rewards leads managers to discount the power of volunteerism and self-organization as mechanisms for aligning individual effort.
Deference to hierarchy and positional power tends to reinforce outmoded belief systems. So where do you look to find the design principles for building a highly adaptable organization? You look to systems that have demonstrated their adaptability over decades, centuries, even aeons. For more than 4 billion years, life has evolved at least as fast as its environment.
Nature inoculates itself against the risks of environmental change by constantly creating new genetic material through sexual recombination and mutation. Variety is one essential principle of adaptability. Markets, too, are adaptable. Over the past 50 years, the New York Stock Exchange has outperformed virtually every one of its member companies. Competition is a hallmark of both markets and evolutionary biology.
On the NYSE, companies compete to attract funds, and investors are free to place their bets as they see fit. Decision making is highly distributed, and investors are mostly unsentimental. As a result, markets are very efficient at reallocating resources from opportunities that are less promising to those that are more so.
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In most companies, however, there are rigidities that tend to perpetuate historical patterns of resource allocation. Executives, eager to defend their power, hoard capital and talent even when those resources could be better used elsewhere. Legacy programs seldom have to compete for resources against a plethora of exciting alternatives. The net result is that companies tend to overinvest in the past and underinvest in the future. Hence, competition and allocation flexibility are also important design principles if the goal is to build a highly adaptive organization.
Constitutional democracies rank high on any scale of evolvability. In a democracy, there is no monopoly on political action. Social campaigners, interest groups, think tanks, and ordinary citizens all have the chance to shape the legislative agenda and influence government policy. Whereas change in an autocratic regime comes in violent convulsions, change in a democracy is the product of many small, relatively gentle adjustments. If the goal is continuous, trauma-free renewal, most large corporations are still too much like monarchies and too little like democracies.
To reduce the costs of change in your organization, you must embrace the principles of devolution and activism. Whatever big management challenge you choose to tackle, let it guide your search for new principles. For example, maybe your goal is to build a company that can prevail against the steadily strengthening forces of commoditization—a problem that certainly demands management innovation.
Around the world, companies are outsourcing and offshoring business processes to vendors that provide more or less the same service to a number of competing firms. Businesses are collaborating across big chunks of the value chain, forming partnerships and joining industrywide consortia to share risks and reduce capital outlays.tafimefurco.ml
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Add to this a worldwide army of consultants that has been working overtime to transfer best practices from the fast to the slow and from the smart to the not so clever. As once-distinctive capabilities become commodities, companies will have to wring a whole lot of competitive differentiation out of their ever-shrinking wedge of the overall business system.
Surprisingly, scholars have paid little attention to the process of management innovation. First we identified significant management innovations from to To whittle this list down to the most important advances, we evaluated each innovation along three dimensions: Was it a marked departure from previous management practices?
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Did it confer a competitive advantage on the pioneering company or companies? And could it be found in some form in organizations today? In light of these criteria, here are a dozen of the most noteworthy innovations. To beat back the forces of commoditization, a company must be able to deliver the kind of unique customer value that can only be created by employees who bring a full measure of their initiative, imagination, and zeal to work every day.
The machinery of bureaucracy was invented in an age when human beings were seen as little more than semiprogrammable robots. Bureaucracy puts an upper limit on what individuals are allowed to bring to their jobs. Where do you find organizations in which people give all of themselves? You might start with Habitat for Humanity, which has built more than , homes for low-income families since Share a beer with a few of the part-time hackers who have churned out millions of lines of code for the Linux operating system.
Each of these organizations is more of a community than a hierarchy. People are drawn to a community by a sense of shared purpose, not by economic need. Control is more peer based than boss based. Emotional satisfaction, rather than financial gain, drives commitment. For all those reasons, communities are amplifiers of human capability. Whole Foods, you will remember, long ago embraced the notion of community as an overarching management principle. To fully appreciate the power of a new management principle, you must loosen the grip that precedent has on your imagination.
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Painful as it is to admit, a lot of what passes for management wisdom is unquestioned dogma masquerading as unquestionable truth. How do you uncover management orthodoxy? Pull together a group of colleagues, and ask them what they believe about some critical management issue like change, leadership, or employee engagement.
For example, if the issue is strategic change, you may find that most of your colleagues believe that. Empirically, these beliefs seem true enough, but as a management innovator, you must be able to distinguish between what is apparently true and what is eternally true. And yes, just about every story of corporate renewal is a turnaround epic with the new CEO cast as corporate savior. But is this the only way the world can work? Why, you should ask, does it take a crisis to provoke deep change?
For the simple reason that in most companies, a few senior executives have the first and last word on shifts in strategic direction. It usually takes a crisis to motivate deep change. As a management innovator, you must subject every management belief to two questions. Second, can you imagine an alternative to the reality the belief reflects?
Take the typical assumption that the CEO is responsible for setting strategy.