Sparking Innovations in Management

Abstract

Gary Hamel defines management innovation as a marked departure from traditional management principles, processes, and practices (or a departure from customary organizational forms that significantly alters the way the work of management is performed). He deems it the prime driver of sustainable competitive advantage in the twenty-first century.

In a Word Gary Hamel defines management innovation as a marked departure from traditional management principles, processes, and practices (or a departure from customary organizational forms that significantly alters the way the work of management is performed). He deems it the prime driver of sustainable competitive advantage in the twenty-first century.

Celebrating a Century of Management

The Economist’s Guide to Management Ideas and Gurus (Hindle 2008) enumerates 103 management concepts that have impacted companies over the past century and the 56 more influential people behind them.¹ The Guide to the Management Gurus honors 45 key thinkers (Kennedy 2002). There are many other handbooks on the topic: in The Handy Guide to the Gurus of Management, the British Broadcasting Corporation (2010) offers students a pithy and accessible selection of a dozen important figures.

On the other hand, Hamel (2007) argues provocatively in The Future of Management that management is a maturing technology that has witnessed few genuine breakthroughs since Frederick Winslow Taylor² and Max Weber³ set the ground rules 100 years ago in the wake of the upheaval caused by the industrial revolution and subsequent need for rationalization. From their work and influence, as well as the innovations of contemporaries such as Henri Fayol,⁴ grew standardized job descriptions and work methods, protocols for production planning and scheduling, cost accounting and profit analysis, exception-based reporting and detailed financial controls, incentive-based compensation schemes and personnel divisions, capital budgeting, the fundamental architecture of multidivisional organizations, and early principles of brand management. These Knowledge Solutions promote Gary Hamel’s ideas, researched and promulgated also by the “Management Lab” that he and Julian Birkinshaw founded to accelerate the evolution of management knowledge and practice.

The Poverty of Management

Gary Hamel (2002) is known for his work on core competencies⁵ and strategic intent.⁶ Yet, his ambitions promise more. Advancing from earlier insights, he concludes in The Future of Management that it is innovation in management that is most likely to create sustainable competitive advantage in the twenty-first century.

This is not to say that there have been no original ideas: the evidence in guides to management thinkers refutes that argument. (For example, Michael Mol and Julian Birkinshaw (2008) identify 50 important changes categorized under process, money, people management, internal structures, customer and partner interfaces, innovation and strategy, and information efficiency .) However, most innovations—often formulated in purpose-built research and development departments—have been first and foremost in operations, then in products and services, and to a far lesser extent in strategies; they have rarely been in management itself.⁷

The paucity of significant breakthroughs should not surprise: after all, management was invented 100 years ago to solve the problem of inefficiency in organizations.⁸ Therefore, to this day, management operates primarily through routine functions, e.g., planning, organizing, commanding, and controlling. Synthesizing a century of management theory, Gary Hamel suggests that the practice of management continues to entail

It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so.

—Mark Twain

• Setting goals and objectives and laying out plans;

• Amassing and allocating resources;

• Identifying, developing, and assigning talent;

• Motivating and aligning effort;

• Coordinating and controlling activities;

• Acquiring, accumulating, and applying knowledge;

• Building and nurturing relationships; and

• Understanding, balancing, and meeting stakeholder demands.

Of course, all these tasks are central to the accomplishment of purpose, hence the common focus of innovation on operations, products and services, and strategies. The typical processes for control, discipline, precision, stability, and especially reliability ⁹ that claim the lion’s share of attention, and were themselves one-time management innovations , are

• Strategic planning ,

• Return on investment analysis and capital budgeting,

• Project management,

• Research and development,

• Brand management,

• Leadership development,

• Recruitment and promotion,

• Learning and development,

• Internal communications,

• Knowledge management,

• Periodic business reviews, and

• Employee performance assessment and compensation.

Naturally, the public sector is not exempt. In 2000, a study¹⁰ of public management innovation in the United States and Canada examined (i) the characteristics of public sector innovations, (ii) where in the organization innovations originated, (iii) whether innovations came about as a result of planning or groping, (iv) the obstacles to change innovators faced and how they overcame them, (v) the results achieved by these innovations, and (vi) whether these innovations were replicated. The study, from which the following text quotes, found that (i) the dominant characteristic of public management innovations is that they were holistic, e.g., systems approaches to problems, coordinating activities, with second-magnitude characteristics being the use of new information technology as well as and process improvement, e.g., partnerships with the private sector, new management philosophies, and empowerment; (ii) the most frequent initiators of public management innovations were local heroes, visionary middle-level and frontline public servants who took risks despite disincentives; (iii) innovations were a result of both comprehensive planning and incremental groping; (iv) the most frequent obstacles to innovations were internal to the bureaucracy; (v) obstacles to change were most frequently overcome by persuasion or accommodation; (vi) innovative programs produced results such as increased demand, reduced costs, and improved service, morale, and productivity; and (vii) innovative programs received substantial media attention and were widely replicated.

My interest is in the future because I am going to spend the rest of my life there.

—Charles Kettering

Managing with Imagination

Management innovation would concern itself with changing these processes, which govern daily managerial work. With globalization, the conditions that existed in the past are less likely to lead to successful prediction: resources have been redefined, networks thrive, options abound, opportunity reigns, people want to achieve, adaptation and foresight are a must, and speed is required. In a sense, since change is the order of the day, what is happening is not new but a logical extension of what has happened before. Naturally, there is now much greater appreciation of the impact of uncertainty on models and behaviors.

Yet, as if to prove that Henri Fayol holds sway even now, the primary role of management in most organizations is still to ensure that resources are obtained and used effectively and efficiently in the accomplishment of the organization’s objectives. (The perception that good management equates—or is closely linked—to good measurement runs deep.) We desire consistent, replicable outcomes, making perhaps marginal improvements. Cybernetic systems such as thermostats certainly have advantages; but they can also go too far when applied, for example, to individuals and organizations.

Innovation is not the product of logical thought, although the result is tied to logical structure.

—Albert Einstein

Treating organizations as well-oiled machines makes robots out of personnel. At the very least in so-called developed countries but increasingly elsewhere, what among other factors has changed since Frederick Winslow Taylor’s days is the rise of the knowledge worker. (We can, and should, learn more about why talent is attracted to start-ups.) A result can be consistent if we obtain from it what we seek, and hope to replicate, but it may not be valid in the sense that it delivers the value we really need. In thinking about organizations, it is enlightening to consult Kenneth Boulding’s¹¹ classification of systems, which permits a possible arrangement of “levels” of theoretical discourse. At the level of social organizations , the complexity is overwhelming.¹² We cannot know what we miss if we do not know what it is that we do not know. However, we will not create it if we cannot imagine it.¹³ This calls for abductive logic .¹⁴

Table 1 Table. General systems theory

Sparking Management Innovation

Personnel is more often than not dissatisfied with managers.¹⁵ (Mark the interest in 360-degree feedback to improve their performance.¹⁶) Functional management is an artifact of the twentieth century. In anachronistic organizations that stick to what they can measure instead of imagining the future, managers plead forgiveness for being prisoners of a reality they work to reinforce each day. But frustration about the very roles they play is also growing and signals a future in which management is performed less and less by managers.

Just as energy is the basis of life itself, and ideas the source of innovation, so is innovation the vital spark of all human change, improvement, and progress.

—Theodore Levitt

Gary Hamel defines management innovation as a marked departure from traditional management principles, processes, and practices (or a departure from customary organizational forms that significantly alters the way the work of management is performed). To be clear, that is innovation in management principles and processes that ultimately change the practice of what managers do and how they do it. This distinguishes it from innovation in operations, products and services, and strategies. Hamel (2006) picks out 12 innovations that shaped modern management:

Innovation! One cannot be forever innovating. I want to create classics.

—Coco Chanel

• Scientific management (time and motion studies),

• Cost accounting and variance analysis,

• The commercial research laboratory (the industrialization of science),

• Return on investment analysis and capital budgeting,

• Brand management,

• Large-scale project management,

• Divisionalization,

• Leadership development,

• Industry consortia (multicompany collaborative structures),

• Radical decentralization (self-organization),

• Formalized strategic analysis, and

• Employee-driven problem solving.

The process that drove the 12 innovations listed was dissatisfaction with the status quo (the motivation phase), inspiration from other sources, invention, and internal and external validation—after which the innovations were copied by other organizations and spread across entire industries and countries. High-performance organizations take measures to mainstream ad hoc and incremental management innovation and accelerate its process. According to Birkinshaw and Mol (2006), essential steps are to:

• Become a conscious management innovator, able to examine management innovations from various perspectives, e.g., institutional, fashion, cultural, and rational;

• Create a questioning, problem-solving culture;

• Commit to big problems;

• Search for new principles;

• Deconstruct management orthodoxies;

• Seek analogies and exemplars from different environments;

• Build a capacity for low-risk experimentation;

• Make use of external change agents, e.g., academics, consultants, media organizations, management gurus , and former personnel, to test the organization’s new ideas; and

• Become a serial management innovator.

Never before in history has innovation offered promise of so much to so many in so short a time.

—Bill Gates

There are elements of destructive creation to this: for each relevant management process, key questions are:

• Who owns the process?

• Who has the power to change it?

• What are its objectives?

• What are the success metrics?

• Who are the customers of this process?

• Who gets to participate?

• What are the data or information inputs for this process?

• What analytical tools are used?

• What events and milestones drive this process?

• What kind of decisions does this process generate?

• What are the decision-making criteria?

• How are decisions communicated, and to whom?

• How does this process link to other management systems?

Visions of the Present

Three forces should drive management innovation in the 2010s: (i) the unremitting development of the Internet¹⁷ (and the communities and networks of interest and practice it has spawned); (ii) globalization (and the new attitudes toward work and the way it is performed that collaboration and competition, mostly encouraged by the Internet, are engendering); and (iii) workforce demographics (as Generation X¹⁸ then Generation Y¹⁹ come of corporate age). High-performance organizations will push management innovation to meet challenges, rather than having it pulled from them.

In The Future of Management, Gary Hamel envisions a time when the goal of management is to build nimble, lattice-based organizations that energize and demand, that may be big yet personal. In nimble organizations , there is more freedom and self-management. Personnel—partners and volunteers all, share a sense of purpose and commitment (not assignment) and have no need for exhortation from senior leaders. There is less hierarchy but plenty of leaders.

In nimble organizations, innovation is everyone’s responsibility, especially where it humanizes work. Nimble organizations deploy considerable efforts to ensure that personnel is connected and collective wisdom is harnessed through continuous, companywide conversations that build trust and understanding. Generally unmonitored time as well as “elbow room” in terms of human and other resources enable people to think, take measured risk, and innovate freely through rapid, low-cost experimentation. Personnel operates in small, self-managing teams that senior leaders sponsor and referee, with authority given to the teams to recruit, develop, and dismiss members. Individuals can redesign their jobs or relocate themselves in the organization. Freedom travels hand in hand with accountability: performance is rewarded at all levels, both individual and collective.