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The Future of Management - Book Review

1 June 2008
Dr. Moria Levy
book cover

I noticed that most professional books typically have titles and subtitles. The main title, an enticing name, encourages the reader to pick up the book, purchase it, and potentially delve into its contents. Gary Hamel's book, "The Future of Management", deviates from this convention by lacking a subtitle, which is regrettable. This doesn't diminish its value, but the primary title might be misleading. The book's essence revolves around the assertion that the management methods taught in business schools and practiced today originated in the 19th century. According to Hamel, the latest techniques, developed somewhere in the 20th century, necessitate managerial innovation. While the book is intriguing, seeking a comprehensive guide to all facets of 21st-century management could be misleading. If I were to propose a subtitle, it might be: "Managerial Innovation – The Engine for the Successful Organizations of the Future." Nevertheless, it remains a highly commendable book for CEOs and senior managers.


The book addresses the following topics:

  • Organizational Challenges in the 21st Century

  • Why existing management methods fall short

  • What constitutes managerial innovation?

  • Components of managerial innovation

  • Field examples

  • Strategies for steering an existing company towards innovation


This summary serves solely as a teaser, aiming to inspire readers to explore the source material. Happy reading!


Organizational Challenges in the 21st Century

21st-century organizations find themselves in a competitive race, grappling with challenges that surpass those of previous years or addressing them in a significantly diminished manner. The primary challenges include:

  1. Rapid shifts in the market landscape, where organizations accustomed to securing top positions may, within a quarter, find themselves on the other side of the barricade. Innovations from one company can swiftly alter the market dynamic, rendering other companies obsolete quickly.

  2. Various trends are lowering the entry threshold for new competitors.

  3. Structural changes like outsourcing reduce organizations' control over their assets.

  4. Companies and organizations are becoming increasingly knowledge-intensive. The prevalence of "free" knowledge and rapid transfer/copy capabilities threaten knowledge-intensive companies. Additionally, the ease with which employees can move between positions risks organizational knowledge (ML).

  5. Power is shifting towards customers, leading to a decrease in customer loyalty.

  6. The life cycle of implementing strategies, products, and ideas is becoming shorter.

  7. Globalization introduces numerous players into the scene, often including cost-effective options. Organizations must exhibit strategic flexibility and operate with maximum operational efficiency to navigate this new reality. Managerial preparedness is essential to cope with this evolving landscape effectively.


Why existing management methods fall short

The management foundations can be traced back to Taylor, who aimed to transform governance into a science by defining individuals' tasks and determining the most cost-effective means of execution. However, this perspective overlooks a fundamental consideration: we deal with people, not machines. Weber, another influential figure in management history, advocated for the absolute division of responsibilities among functionaries within an organization, emphasizing the efficacy of hierarchies and strict adherence to clear rules with comprehensive controls, essentially promoting bureaucracy.


Such an approach aligns with the different challenges outlined below. From an external standpoint, these management methods resemble the mindset of production workers more than that of knowledge workers. The contemporary landscape demands responsiveness to the power held by employees, customers, and competitors and the agility required to implement changes swiftly. Consequently, it's unsurprising that a reevaluation of management methods is imperative to adapt to this new era.


Management methods underwent a significant transformation approximately a century ago, and given the multitude of contemporary changes, it only makes sense to contemplate another makeover. The success of the management revolution in the past suggests that a similar triumph is achievable today. This is a feasible task, provided we decide to initiate the process.


What constitutes managerial innovation?

Managerial innovation, as defined in the book, encompasses any substantial change that alters how management is conducted or significantly modifies the customary organizational structure, thereby enhancing the achievement of organizational goals. In simple terms, managerial innovation involves transforming management methods to improve organizational performance.


To comprehend the scope of management, it is essential to pause and analyze its components. Management entails goal setting, incentivizing and directing efforts, coordinating and controlling activities, talent development, knowledge accumulation and application, resource allocation, relationship nurturing, and balancing and adapting to shareholder requirements. Any innovation that enhances these aspects constitutes managerial innovation.


Managerial innovation stands higher than the familiar innovations we have encountered. While we are acquainted with operational innovation (streamlining and reducing inputs), innovation in products or services (creating new and increased outputs), and even strategic innovation, managerial innovation operates at the highest level. It influences how society thinks, breathes, and progresses, representing a superior level because it impacts the capacity for innovation at other levels, not vice versa.

Surprisingly, there is a scarcity of managerial innovation in the field. A cursory internet search for innovation at various levels yields thousands and tens of thousands of results, while a search specifically for managerial innovation (utilizing multiple keywords, not just the concept itself) produces fewer than 300 items. This fact prompts contemplation on the scarcity of focus in this area.


Components of managerial innovation

  1. Company Mission (beyond the financial objective of shareholder satisfaction): The mission holds significance.

  2. Establishing innovation as a mission and fostering a mindset across all employees, not just a select group, is achievable. Creating a workplace where each employee contributes his or her best fosters a collective commitment to innovation. Passion drives innovation.

  3. Granting independence to employees: Innovation does not thrive on discipline alone. Freedom, creativity, and passion are key contributors. Encourage work in small teams with high autonomy.

  4. Recognizing and overcoming inhibiting factors: It is crucial to acknowledge that, as managers, we can impede managerial innovation for three main reasons: a) Denial or disregard for the necessity of strategic changes, struggling to keep pace with evolving trends. b) Difficulty internalizing that only a tiny percentage of innovative ideas will warrant examination, and even fewer will result in significant success. c) Inflexibility and clinging to existing dogmas, especially in managerial examples.

  5. Embracing flexibility: Opt for maximum flexibility and constant adaptability. Encourage experimentation and avoid rigid adherence to initial plans.

  6. Valuing diversity among employees: The tendency to hire individuals similar to ourselves hinders creativity and innovation.

  7. Encouraging decision democracy whenever feasible: The organization benefits from the collective wisdom of the masses and the growing desire of employees to contribute.

  8. Consistently learning from positive margins and adopting ideas from there: Innovative concepts are often found outside mainstream thinking.

  9. Ensuring broad access to knowledge bases and databases for company employees, encompassing company, market, and competitive information.

  10. Cultivating community and reducing hierarchies through flat structures: This approach acknowledges, in addition to the philosophical aspect, that management cannot oversee all details or identify imminent problems; these insights often emerge from the field. Therefore, transferring control and decision-making authority to the field is a valuable factor.


Field examples

The book highlights examples of various companies effectively managing managerial innovation, including IBM, GE, and others. Here are some steps, values, and methods adopted by these companies:


Whirlpool (part of GE):

  • Gradual integration of innovation components, with a focus on leadership development programs.

  • Significant allocation of resources to innovative projects.

  • Requirement for marketing innovation in every product development.

  • Training over 600 innovation mentors to foster innovation within the company.

  • Participation of each employee in an innovation course.

  • Incorporation of innovation as a significant component in managers' bonus programs.

  • Quarterly discussions to analyze the innovation performance of each unit.

  • Establishment of an innovation steering committee to evaluate promising ideas.

  • Creation of an innovation portal providing access to innovation tools, data on the overall innovation plan, and a channel for proposals.

  • Development of metrics for tracking innovation.


Whole Foods Market (natural food supermarket chain; 30,000 employees):

  • Emphasis on unique ideologies: freedom and responsibility for each store, maximum transparency, trust, a sense of community, shared purpose (natural food ideology), and shared values (love, community, autonomy, transparency, equal rights).


W.L. Gore (Industry 8,000 employees):

  • Adoption of a network-based organizational structure instead of a hierarchical one.

  • Absence of managers; leaders chosen by peers.

  • Broad job definitions with employees determining their best contributions.

  • Permission to experiment and voluntary commitment taking instead of assigned tasks.

  • Emphasis on broad feedback filled by colleagues.

  • Maintenance of a personal aspect despite company size.

  • Focus on specific areas without defining a core business.

  • Embrace a few risks, managing innovation to assess feasibility.


Google:

  • Management concept reflecting Internet behavior.

  • Values include the 70-20-10 rule (70% working on existing businesses, 20% on critical new services, and 10% on ideas "from the margins") at the company and individual employee levels.

  • The work environment is designed like a college/university.

  • Shared ambition to change the world.

  • Exceptional quality personnel.

  • Radically decentralized democratic management.

  • Small teams operating independently.

  • Emphasis on quick and inexpensive experiments.

  • Recognition and rewards are based on the size of contributions.

  • Dialogue throughout the entire company.

  • No strict definition of the core business, allowing for expansive pursuits.


The book also mentions IBM, Semco, and Best Buy, each with unique innovation and success stories.


Strategies for steering an existing company towards innovation

Most of the companies mentioned earlier were innovative from their inception. However, even veteran and traditional companies like GE have been recognized for their unique leadership. The million-dollar question is how to guide an existing company toward managerial innovation, considering this is the starting point for most of us. Here are several guiding tools to facilitate this transition (not necessarily sequential):

  1. Need: To initiate managerial innovation, it's crucial to identify a need or a managerial challenge related to the anticipated future. This could involve addressing management methods the organization doesn't execute optimally, revealing a gap between theory and practice. Managerial innovation is particularly effective in addressing such challenges.

  2. Analysis of the Challenge: Thoroughly analyze the challenge by clarifying "core beliefs" and determining which ones are worth pursuing or disrupting. Ask "why?" at each managerial belief and inquire about the "how?" to ensure alignment. An additional valuable question is, "Who benefits from this?"

  3. Personal and Volunteer Approach: In the initial stages, focus on personal efforts and then expand to involve others. Start with volunteers to maintain an informal spirit and a sense of fun.

  4. Gradual Flexibility: Introduce flexibility gradually. Instead of instructing the organization to become flexible, take small steps, such as local flexibility of thought, creating space for experimentation, and establishing a framework for unplanned events. Reinforce the idea repeatedly, emphasizing that mistakes are part of learning.

  5. Joint Decision-Making: Identify decisions that can be made collectively and democratize these decisions. Gradually expand the scope of common decision issues. Look for topics where voluntary work is possible rather than assigning tasks.

  6. Learning from Other Industries: Draw inspiration from the operations of cities, the functioning of the Internet, the dynamics of the economy and stock market, open systems, and more. Learning from industries that resonate with the changing organization is essential.

  7. Embrace Web 2.0: Gradually adopt social networks, wikis, and blogs within the organization to enhance openness and innovation. This can significantly contribute to creating a conducive environment for new ideas.

  8. Evolutionary Implementation: Follow the principle that you can be evolutionary in ideas but must be evolutionary in gradual implementation. Acknowledge that this process is neither easy nor fast. It may take years for an organization to generate true innovation. Few business schools teach such methods, and only a handful of organizations have successfully embraced managerial innovation. However, those who have ventured into managerial innovation have achieved significant success.


For the first time since the Industrial Revolution, there's an opportunity to create management patterns based on human values rather than machine-like efficiency. This presents a chance to construct a management model for the twenty-first century that values, appreciates, and respects individuals, encourages creative contributions, and fosters a positive passion for work. It requires courageous managers willing to volunteer and join the revolution.

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