Wednesday, July 16, 2008

The Future of Management

I heard strategy theorist Gary Hamel speak at the AACSB conference.  Hamel said management schools are doing everything wrong.  I found more detail about Hamel’s views in his book The Future of Management (Harvard Business School Publishing, Boston, Massachusetts ©2007).

In my classes, I (Fred) have been teaching that the most successful companies have made innovation systematic.  Hamel goes further; he says innovation must be systemic, permeating the daily activities and attitudes of every employee – and not just in R&D or product development departments.  Fear of change has been banished, the potential of every employee to contribute ideas and energy has been nurtured and realized, and organizational charts and structures change at the drop of a hat.

In this regard, Hamel likes Whirlpool, Toyota, Google, and a few others.  Here are key passages from his book: 

(p.31) While Whirlpool's innovation efforts have been widely reported, a competitor would find it hard to duplicate what is now a deeply engrained innovation system – for the same reasons it would be difficult to pick apart Toyota's multifaceted management advantage.


(p.34) Management innovation follows a power law: for every truly radical idea that forever changes the practice of management there are dozens of others that are less valuable and less influential. But that's no excuse not to innovate. Innovation is always a numbers game: the more of it you do, the better your chances of reaping a fat payoff.


(p.36) Many executives doubt that bold management innovation is actually possible. Strangely, managers are unsurprised when science advances by leaps and bounds, yet seem unperturbed when the practice of management fails to do the same.


(p.38) If management innovation has been mostly incremental in recent years, it may be due to a lack of daring in the choice of problems to tackle. Ask yourself, has your company ever taken on a management challenge that was truly unprecedented, where you couldn't rely on another company's experience as a guide? General Electric has. In 2006, chairman Jeff Immelt set his colleagues the goal of growing GE's top line at twice the rate of global GDP growth, net of acquisitions. No company of GE's size has ever managed this sort of growth, yet that didn't deter Immelt from taking on the challenge. If the problem is big enough, progress of any sort will be valuable, even if you never find a "solution." I once heard former U.S. Secretary of State George Shultz draw a distinction between "probems you can solve" and "problems you can only work at." As a seasoned diplomat, Shultz knows that some problems, like ethnic strife, global poverty, and terrorism, defy once-and-for-all solutions. Yet he also understands that when you're up against problems of this scale and significance, even modest advances can yield big dividends.


(p.102) What makes Google unique, though, is less its Web-centric business model than its brink-of-chaos management model. Key components include a wafer-thin hierarchy, a dense network of lateral communication, a policy of giving outsized rewards to people who come up with outsized ideas, a team-focused approach to product development, and a corporate credo that challenges every employee to put the user first.


(p.103) [Google top execs] Brin and Page understand that in a discontinuous world, what matters most is not a company's competitive advantage at a single point in time, but its evolutionary advantage over time. Hence their desire to build a company that is capable of evolving as fast as the Web itself.

Hamel’s oft-quoted aphorism: Organisations used to require intelligence, obedience and diligence from an employee – but they could get that from a cocker spaniel. Today’s organizations need employees to display passion, creativity and initiative.

I liked Hamel’s book, despite some bloopers:

  • Hamel appeals to Francis Fukuyama’s largely discredited “end of history” notion.
  • His reference to the “college student who spends less on an airline ticket to Fort Lauderdale than he'll spend on booze over spring break” is sadly out of date…
  • His statement that “the law of diminishing returns kicks in and at some point the ratio of progress to effort starts to sag” doesn’t accord with learning theory as I understand it – and as Hamel notes, organizational learning is what it’s all about.

The main take-away for management educators is that we should be teaching how to create corporate culture.  A good idea, but most new MBA grads are in no position to create culture.  On the contrary, they tend to be overwhelmed by the prevailing corporate culture two weeks after starting their new jobs, or the second time their passionate, creative initiative is punished, whichever comes first.  In this regard, Hamel’s advice is reminiscent of the Microsoft helicopter joke.  (If you haven’t heard it, ask me.)

Still, it’s food for thought.  And at least, business schools might seek out companies that are sympathetic to this new view, and point our grads in their directions.  Or, we might emphasize Hamel’s ideas in executive ed courses.  I look forward to discussing these ideas with you; enter your comments on this page.  

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