Disrupting the Management Model

Do you expect your company to prosper for the next year, five years and well into the future? For any CEO or business owner, that question is always on your mind. So, how exactly are you going to adapt to your changing environment and re-invent your company multiple times to stay ahead of the competition?

That question cuts to the core of your culture and how the business is managed. It’s the essence of your management model.

What comes to mind when you think about your management model? I am sure you want to be more efficient in everything you do. Maybe that’s driving your emphasis on lean (1). The organization chart and hierarchy might come to mind, or the power structure in the business.

If you are the CEO or owner, you probably believe you are responsible for setting strategy, and those below need to implement your brilliant ideas without question. Perhaps it’s your HR policies and how you manage employee compensation and performance evaluation. The annual performance review ritual was always one of my most favorite activities, both as a manager and employee, as I am sure it is yours as well.

It was always very motivating, don’t you think? What about all the processes that you have in place to control the business, such as budgeting, the endless procedures and policies? Above all else, achieving your quarterly numbers and the predictably of those numbers keeps you up at night, especially if you are a public company.

These concepts we all take for granted constitute the traditional management model. The fact is, how companies are managed has been around since the beginning of the 20th century. Prior to about 1890, 90 percent of the population was involved in agriculture.

Manufacturing consisted of self-employed artisans, maybe involving 2-3 people. That all changed as the industrial revolution unfolded and the need to manage large groups of employees in order to efficiently manufacture mass-produced products that was the hallmark of the early 1900’s. Thus was born the management model as we know it.

Above all else, efficiency was the name of the game. It permeates our organizations to this day. Even if you have never heard of Frederick Winslow Taylor who published “The Principals of Scientific Management”, you are influenced by his theories. Other aspects of the traditional management model include for instance standardization, specialization, hierarchy, alignment of goals and the use of extrinsic rewards to motivate behavior (2).

There are signs all around us today that the traditional management model, built for the industrial age, is under attack. It will not survive, and organizations that continue to rely on its basic tenets will likewise not survive.

Examples are abundant. Consider the DJIA. How many of the companies that make up that index were around 10, 20, or 50 years ago? Consider WL Gore. This private, +$3B company has a unique management model that emphasizes distributed decision making, small business units and relies on peer-pressure to motivate and engage employees. The traditional hierarchy common in most organizations is de-emphasized at Gore. Think about the accelerating nature of business model innovation as exemplified by companies such as Uber.

What about Carnival’s new cruise line called Fathom that sends the 710-person ship Adonia on “voluntourism” trips to the Dominican Republic? What exactly is this business? How about Linux and the open software movement? And the list goes on…

So what is causing this disruption? In my opinion, the internet and the digital revolution is the primary cause. It has obviously impacted every aspect of our economy and society in general. Second, we are living in a time of exponential change. The traditional management model was built for a time when change happened more slowly. Look at any factor, from CO2 emissions to the number of mobile devices: changes are coming fast and furious, and the pace accelerating. Third, we live in a world of hyper-competition.

Barriers that used to protect companies are crumbling. No company is immune from global competition and every company has to become more adaptable. Next, knowledge has now become a commodity. Ideas and people flow seamlessly around the globe. And finally, a social awareness of our limited resources and the impact of our organizations on employees is changing our understanding of the purpose of our business organizations. Do they exist just to make a profit, or is there some higher purpose?

What does this mean to you? How will the management model need to change in order for your company to be more adaptable and prosper long-term? First, you need to shift your focus on the source of competitive advantage. Products and business models can be easily duplicated today. The management model and culture, however, can be a source of true, sustainable competitive advantage. It’s why you just cannot “be like Apple”. The point is that you should be spending as much if not more time on how you will change your management model and culture as you do on new products, innovation and improving efficiency.

Other key insights include re-thinking the purpose of your organization (3), using the internet as a model of a distributed decision making network to replace the traditional hierarchy, embracing the Millennials and the skills they bring to the organization (4), managing for serendipity as a way to create knowledge, and finally realize that your organization must focus on creating knowledge.

Many organizations become too comfortable relying on their existing knowledge. It manifests itself in incremental projects and an emphasis on efficiency as opposed to disrupting your business and creating new knowledge, which is more risky.

How are you going to disrupt your management model? Change is never easy. Wait long enough, and change will come. It will just not be the way you envision.

Notes:

(1) See this article for my thoughts on how the lean methodologies are abused: Abusing Lean Methodologies
(2) Gary Hamel has written extensively on the subject of disruption of the management model, including: Gary Hamel, The Future of Management (Boston, MA: Harvard Business School Publishing, 2007)
(3) An interesting example is DisplayIt and their “corporate purpose”. I purchased some products from this company and interacted with the CEO on his company’s purpose. It illustrates that this is happening not strictly in large, public consumer companies, but even in SME, B2B companies as well.
(4) An excellent source of information on the impact of Millennials: Jamie Notter & Maddie Grant, When Millennials Take Over (Interpress Publishing, 2015)

Bio

Jeff Groh is President of New Product Visions located in Flat Rock, NC. New Product Visions helps companies improve their innovation management practices. We focus on processes, organization, management engagement and culture. Services include consulting, Innovation Coach™ Workshops and software enablers. Mr. Groh spent 30+ years in industry in a variety of management roles in sales, manufacturing and new product development prior to starting New Product Visions. He is particular passionate about the role of senior management and the culture that supports innovation success. For additional information or a no-cost on-line assessment of your company’s innovation management practices, email Jeff at jgroh@newproductvisions.com or by phone at (302)-367-3160. Available for select speaking engagements.