From Publishers Weekly
Though this authoritative examination of today's static corporate management systems reads like a business school treatise, it isn't the same-old thing. Hamel, a well-known business thinker and author (Leading the Revolution), advocates that dogma be rooted out and a new future be imagined and invented. To aid managers and leaders on this mission, Hamel offers case studies and measured analysis of management innovators like Google and W.L. Gore (makers of Gore-Tex), then lists lessons that can be drawn from them. He doesn't gloss over how difficult it will be to reinvent management, comparing the new and needed shift in thinking to Darwin's abandoning creationist traditions and physicists who had to look beyond Newton's clockwork laws to discover quantum mechanics. But the steps needed to make such a profound shift aren't clearly outlined here either. The book serves primarily as an invitation to shed age-old systems and processes and think differently. There's little humor and few punchy catchphrases—the book has less sparkle than Jeffrey Pfeffer's What Were They Thinking?—but its content will likely appeal to managers accustomed to b-school textbooks and tired of gimmicky business evangelism. (Oct.)
Review
If companies now innovate by creating new products or new business models...why can t they do the same in how they manage organizations? --The New York Times, December 30, 2007
Review
Like many great inventions, management practices have a shelf life...Gary Hamel explains how to jettison the weak ones and embrace the ones that work. --Fortune, September 19, 2007
Review
There's much here that will resonate with forward-thinking managers. --BusinessWeek, October 8, 2007
Product Description
What fuels long-term business success? Not operational excellence, technology breakthroughs, or new business models, but management innovation—new ways of mobilizing talent, allocating resources, and formulating strategies. Through history, management innovation has enabled companies to cross new performance thresholds and build enduring advantages.
In The Future of Management, Gary Hamel argues that organizations need management innovation now more than ever. Why? The management paradigm of the last century—centered on control and efficiency—no longer suffices in a world where adaptability and creativity drive business success. To thrive in the future, companies must reinvent management.
Hamel explains how to turn your company into a serial management innovator, revealing:
Practical and profound, The Future of Management features examples from Google, W.L. Gore, Whole Foods, IBM, Samsung, Best Buy, and other blue-ribbon management innovators.
About the Author
Gary Hamel is Visiting Professor of Strategic and International Management at the London Business School and Director of the Management Innovation Lab. He is the author of Leading the Revolution and coauthor of Competing for the Future
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GARY HAMEL’S latest book, “The Future of Management” (Harvard Business School, $26.95), comes at a time when American companies face a new avalanche of competition from China and India, as well as entrenched competition from Japan and Western Europe. Mr. Hamel, a co-founder of the Management Innovation Lab, offers a way for business leaders to face this onslaught through what he calls “the technology of management.”
If companies now innovate by creating new products or new business models, he asks, why can’t they do the same in how they manage organizations? Might not a more modern approach to management be just the ticket to keep American companies ahead of their global competitors? This would entail moving from a century-old command-and-control model to a more latticed, networked style of organization.
If industrialization and world wars created one model of management hierarchy shared by business and the military, perhaps the next set of management ideas should be spawned by the Internet and the upheaval it has prompted in how humans think about information and community.
Mr. Hamel, who wrote this book with Bill Breen, critiques three companies that he argues may be harbingers of the future: Whole Foods Market, W. L. Gore & Associates (a privately held company that invented Gore-Tex, among other products) and Google.
Whole Foods has organized itself into roughly eight teams at individual stores, all of whom have the mission of improving the food that Americans eat. These teams, which have the right to hire and fire their own members, are given wide latitude about what to stock on the shelves and how to manage their stores as a whole.
But their performance numbers are open to all to behold, and their compensation is strongly linked to team, not individual, performance. “Unlike so many other companies, front-line employees at Whole Foods have both the freedom to do the right thing for customers, and the incentive to do the right thing for profits,” Mr. Hamel writes.
The fact that front-line employees are empowered to respond to the changing tastes of finicky shoppers is powerful. “In a more hierarchical company,” Mr. Hamel argues, “top management only sees problems once they’ve become pervasive and, therefore, expensive to fix.”
At Gore, which was founded by a former DuPont executive in Newark, Del., teams that are small, focused and self-managing have wide latitude to pursue new ideas. Their products have shown up in things as diverse as surgical meshes implanted in medical patients and space suits worn by NASA astronauts. Employees have “dabble time” to pursue their own ideas and are given permission to push back against those in power above them.
Mr. Hamel writes that companies organized in this way challenge the very notion that a manager is “above” in the hierarchy and that a researcher is “below.”
As has been widely reported, Google also creates small teams of bright people who are encouraged to pursue seemingly wild ideas. It embraces the 70-20-10 rule — that the company should devote 70 percent of its engineering resources to its base business, 20 percent to services that might expand from that core and 10 percent to “fringe” ideas.
To his credit, Mr. Hamel doesn’t fall completely for the Googlemania dominating headlines these days. “Despite its innovation-friendly management model, Google’s fortunes are still tied to one business: search-driven advertising,” he says. “Odds are, Google will never find another Google, since truly revolutionary, global-scale business models don’t come along every day, or even every decade.”
Whatever shortcomings Google may have, Mr. Hamel argues that these innovative companies realize that employees should not be treated like 13-year-olds who need clear boundaries on their freedom. Employees are on the front lines and are often closest to customer needs. As a result, they should have power to reveal to their hierarchies what products and services are needed, and they should be involved in deciding how the company’s time and money are spent. Moreover, they should be pursuing a passion or a mission, not just quarterly profits.
The implication of all this is that we don’t need as many managers in organizations. Yes, we still need some managers and some centralized processes to prevent an organization from spinning wildly in all directions. But the best organizations will be those whose employees have the power to innovate, not just follow orders from on high, Mr. Hamel says. In such an environment, the notion of a whole class of managers evaluating and re-evaluating each action of those below them in a vertical hierarchy becomes nonsensical.
Some major companies are already experimenting with these ideas. I.B.M., for example, had an online “innovation jam” in 2006 in which 100,000 employees, customers, consultants and others sought to communicate their views to Samuel J. Palmisano, the chief executive. Top management gave funding to the best ideas. I.B.M. also encourages its researchers to make decisions about what projects to pursue, without being ordered to do so.
If American companies could achieve the right balance between grass-roots initiative and centralized control, between the pursuit of noble missions and quarterly profits, the results could be a management system that would be very hard for competitors to copy. Chinese companies, for example, would find it much harder, if not impossible, to adopt management models that challenge their own brand of top-down management, a cross between Confucius and Mao.
As insightful as Mr. Hamel’s book is, it’s surprising that it has attracted so little attention since being published in October. One part of the explanation is that it represents an assault on business schools, which obviously specialize in training managers who go on to enjoy rich salaries. Mr. Hamel has the audacity to point out that some of the best, most innovative ideas in business these days are not coming from business schools, but from people who never went to B-school. Every hierarchy, it seems, scorns fresh thinking.
- the new york times December 30, 2007
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Part 1 : Management Innovation
When we think of innovation, we think of products. The Segway, the iPod, the Roomba, the hot cellphone of the quarter. It's not surprising: they make good copy, and they can be photographed.
But, according to Gary Hamel, in his new book "The Future of Management," product innovations are a short-lived form of competitive advantage. A highly-successful new product gives you only a few years of excess profits before imitators and, yes, more innovative products commoditize it. (Doesn't it seem that the RAZR's heyday was a thousand years ago?)
What about business model innovations? Examples cited by Hamel include Zara ("chic but cheap couture") and Southwest's low-fare airline model. While more sustainable than product innovations, global consulting firms and the ever-growing practice of outsourcing allow new business models to spread rapidly across industries.
Finally, for companies desiring long-term advantage, Hamel points to management innovation. These are entire new ways of organizing, orienting, incenting and acculturating staff and leadership. Significant management innovations are rare, but they can provide decades of value. Hamel cites historical examples such as DuPont's development and utilization of return on investment, Procter & Gamble's brand-management approach, and Toyota's use of each employee's ability (see how Toyota describes its approach here). In each case, the companies achieved advantages that lasted decades.
Why are management innovations so sustainable? Here's Hamel's explanation:
Amazingly, it took nearly 20 years for America's carmakers to decipher Toyota's advantage. Unlike its Western rivals, Toyota believed that first-line employees could be more than cogs in a soulless manufacturing machine [JC note: ironically, the result of a much earlier management innovation--Frederick Taylor's division-of-labor model]. If given the right tools and training, they could be problem-solvers, innovators, and change agents. Toyota saw within its workforce the necessary genius for never-ending, fast-paced operational improvement. In contrast, US car companies tended to discount the contributions that could be made by first-line employees, and relied instead on staff experts for improvements in quality and efficiency. (p. 29)
In other words, management innovation is hard to imitate because it goes against the training, experience and culture that a company has developed over its recent history. It means rewriting tacit rules that have gone unquestioned and that in most cases have led to the company's success in the past.
This, of course, means that establishing management innovation is terribly hard work, full of complexity and requiring learning and development on the part of all staff. But most importantly it requires unflagging commitment of the leadership, since they have the most invested in the status quo.
Part 2 : Why do we need a new management model?
What's wrong with today's style of management, anyway? It's earned trillions of dollars of profits. It's slimmed-down, delayered and re-engineered thousands of companies. It supports hundreds of graduate schools emitting newly-minted MBAs every year (including your author).
It's also led countless companies into turnaround hell.
Hamel discusses this at length in "The Future of Management." He writes:
Nearly all accounts of deep change...are stories of turnarounds.... Sadly, [deep change] is rarely opportunity-led, continuous, and a product of the organization's intrinsic capability to adapt. (p.42)
A turnaround is a transformation tragically delayed. (p.43)
It seems that after two-and-a-half thousand years, we are still unable to follow this simple advice from the Tao te Ching:
Act before there is a problem.
Bring order before there is disorder.
Countless management books recommend creating a crisis environment to push through needed changes. Hamel asks, why is this necessary? Why isn't it possible to create a corporate environment that taps the ability to change that we all have inside us?
Our management model prevents us from doing that. The words "command and control" encapsulate what's so limiting about the way we've organized ourselves. In an organization of any size, commands from the top have a limited effect on what people do every day at the bottom. And the ability to "control" employees only seems possible when it's what you've been taught as a manager to try to do. (The only thing that's controlled at most companies is information, and that's a very very important problem with management today, an issue that Hamel takes up later in his book.)
I coach six- and seven-year-olds at soccer. Practice, unless it's fun and engaging, quickly deteriorates into chaos--spitting competitions, staring at the sky, a pig-pile. I can no more control my kids than I can control the weather. The best approach is to keep the games coming, and from time to time to ask them what they want to do. And mostly just let them play.
But when I managed lots of people, I did try to exert control. That's what I'd been taught, and what was valued in the organizations I worked for. (I enjoyed it, too.) It worked better than with my soccer team--these were professionals, after all. But how much fun was it, for me or them?
What would have happened if I had tried to organize the work to be more fun and engaging? What if I had asked the team what they wanted to do, or how they wanted to meet our objectives?
Part 3 : Making innovation everyone's job
"Making innovation everyone's job" is a section heading in "The Future of Management." The question is why isn't this done? Hamel (and his co-writer Bill Breen; I've been negligent in not crediting him earlier) give three reasons:
Creative Apartheid - the belief that only special people can be creative, so most people are not allowed to innovate.
The Drag of Old Mental Models - a.k.a. the trap of past success. The authors bring up Dell, a perfect example. Their direct-selling model had been so successful for so long, the company was very slow to catch onto the shift of PCs as a business product to a consumer product--making a retail sales model advantageous. And the move from desktops to laptops, which allowed less customization--a Dell specialty.
No Slack - this is one of the most interesting observations in the book. By increasing efficiency and making sure directly-measurable output was optimized, executives and their consultant enablers squeezed out time for people (including themselves) to be innovative. Innovation requires clear thinking and reflection, and who can do that when they have to close eight trouble tickets this hour, or bill forty-five hours this week, or do twenty performance reviews this month?
Writes Hamel:
Every day brings a barrage of emails, voice mails, and back-to-back meetings [sound familiar?]. In this world, where the need to be "responsive" fragments human attention into a thousand tiny shards, there is no "thinking time." And therein lies the problem. However creative your colleagues may be, if they don't have the right to occasionally abandon their posts and work on something that's not mission critical, most of their creativity will remain dormant. (p.55)
Part 4 : Learning from highly-adaptable systems
After lengthy case histories of some new-management examples (W.L. Gore, Whole Foods Market and Google), Hamel gets down to helping us imagine what the new management model might look like. In Chapter Eight of "The Future of Management," "Embracing New Principles," he lays out models for highly-resilient, self-organizing systems, so that by example we could create some rules and practices for new corporate managment. The systems are:
Life - by its limitless diversity, life has adapted to every calamity and catastrophe that has befallen the earth in the last billion years or more. It's instructive that most life "experiments" are failures--virtually all species become extinct, most mutations don't survive. Yet the overall results are anything but a failure.
Markets - they rapidly incorporate information from buyers and sellers, and set prices without any ultimate authority. Investment abandons poor investments quickly to seek higher potential or lower risk, and there are numerous sources from which to raise money.
Democracy - gives each citizen a stake in his governance. By giving voices to many, dissent is prevalent. Which leads to slower, but sounder, decision-making. And, transparency of information is the rule--which tends to create a more egalitarian environment and one where citizens feel empowered to protest what they see as injustice or inequity (you should have seen the uproar when this news was published in my local paper).
Faith - gives meaning to people's everyday lives, and allows them to persevere through tragedy and heartbreak.
Cities - they reinvent themselves continuously by taking on the character of their inhabitants--usually a highly-diverse, creative, enterprising group--and providing variety and space for self-expression. By their layouts, they "increase the odds for serendipity" by allowing people from different viewpoints and areas of expertise to collide, dialogue and perhaps collaborate.
The question Hamel poses in this section is: are any of these traits found in your company? The answer will be, for the vast majority of us, no.
Corporate hierarchies don't allow for many failures to find the one great success; they don't move quickly to defund bad ideas, and are terrible at speculation; they aren't democratic in the least; a higher mission or calling is rare (certainly a deeply-felt mission); they are laid out to reduce costs, not increase the environment to collaborate.
All of this points to the fact that (a) instituting such change will be difficult and (b) those who can do it will achieve outsized rewards, for imitating it will be a challenge.
Ending again with a quote:
Indeed, the more one learns about what it is that makes things adaptable, the more one is tempted to question the very foundations of modern management theory. After all, when compared to large companies, the most adaptable things on the planet are either under-managed or, Mon Dieu, un-managed.
Part 5 : Final thoughts
Hamel talks frequently in the book of enrolling the entire company in innovation. Among all the obstacles to achieving this--the lack of democracy, the weight of inertia--the biggest one in my view is the information gap. Comparing the volume and depth of information I had access to when I was a senior executive to the paucity I had in any other position--the difference was staggering. (Note: you can find excerpts of "The Future of Management" here.)
It's no wonder that people can't or won't contribute meaningful ideas for the future when they don't know what the strategy of the company is, or what the core competencies are, or what happy customers like and angry customers hate about the company.
And companies simply won't share enough information for employees to be a valuable part of the innovation process. (If the guy in the printing department is limited to knowledge and context of printing, he's not going to be able to contribute as much as he could.) Perhaps it's concern for confidential information leakage, or for PR fallout, or that management simply doesn't trust in the employees' ability to add value to innovation. At any rate, there isn't nearly enough information sharing with the rank and file.
So where does this leave us, at the end of "The Future of Management"? For one, with a feeling that the top-down, hierarchical, command-and-control model of management is in decline. But also that the next model has yet to be even devised, never mind perfected.
It will certainly be technology-driven. It will be more collaborative, and less proprietary (like P&G's open innovation process). It will be more engaging and rewarding for most employees. There'll be even less job security, and few places to hide if you want to skate for a while (and get paid for doing so).
But will companies look like Google, which for all its innovation still relies on hordes of internal staff; or like movie studios, which form and reform teams of independent contractors for each project; or like open-source communities, which solicit volunteers and manage via a peer-review process and offer of public recognition?
Will people be paid a salary, a price per innovation, or in equity?
What will managers do? Collect and distribute data, perhaps? Administer the market-making systems? Or vanish entirely?
Over the next twenty or twenty-five years, we shall see. It will be an interesting journey.
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