The Future Of Management Dudi

THE FUTURE OF MANAGEMENT Gary Hamel, with Bill Breen Published by Harvard Business School Press, 2007 Summarized by Dudi Hidayat NPM 0706222580 1

Content of the Book (1) Part I 1. 2. 3.

Why Management Innovation Matters The End of Management The Ultimate Advantage An Agenda for Management Innovation

Part II Management Innovation in Action 4. 5. 6.

Creating a Community of Purpose Building an Innovation Democracy Aiming for an Evolutionary Advantage

2

Content of the Book (2) Part III Imaginaning the Future of Management 7. 8. 9.

Escaping the Shackles Embracing New Principles Learning from the Fringe

Part IV Building the Future of Management 9. 10.

Becoming a Management Innovator Building the Future of Management

3

Understandings that We will get from The Book   

  

The 21st century challenges that will determine competitive success in an age of relentless, head-snapping change. The toxic effects of the industrial age management beliefs that still predominate in most companies. The unconventional management practices that are generating breakthrough results in a handful of “modern management pioneers.” The radically new management principles that must become part of every company’s “management DNA.” The ways in which the Internet will turn traditional management roles upside down and inside out. The practical steps our company can start taking now to build its own 21st century “management advantage.”

4

Preface The Goal of the Book

5

For whom is this book?  

This is a book for dreamers and doers It’s for everyone  Who feels hog-tied by beraucracy  Who worries that the ‘system’ is stiffling inovation  Who secretly believes that the bottleneck is at the top of the bottle  Who wonders why corporate life has to be so dispirating  Who thinks that employees realy are smart enough to manage themselves  Who knows that ‘management’, as currently practiced, is a drag on success – and want to do something about it Preface

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Technology of management’s Role 



On Apollo 8 command modules’ journey back to earth (1968)  Question: “Who’s flying the spacecraft?”  Astronaut’ answer: “I think Sir Issac Newton is doing the most of the driving now” By the same token, on company management:  Question: “Who’s managing your company”  Answer: “To a large extent, your company is being manage rigth now by … 

theorist and practitioners who 



invented the rules and convention of “modern” management back in the early years of 20th century”

So pervasive is the influence of these patriachs that the technology of management varies only slightly from firm to firm

Preface

7

However, is there a need for a new model of management? 





Unlike the law of physics, the law of management are neither foreordained nor ethernal The 21st-century challenges are posing the limitation of management model. These challenges are:  Whiplash change  Fleeting advantages  Technological disruption  Seditious competitors  Fractured markets  Omnipotent customers  Rebellious share holders These raise the need for a new model of management Preface

8

Management is out of date 





Think about the great product breakthrough over the last decade or two:  Personal computer, mobile phone, digital music, e-mail, and online comunities Now, try to think of a breakthrough in the practice of management that has had a similar impact in the realm of business, anything that has dramatically change the ways large companies are run  Not easy, is it?  Management is out of date  Like the combustion engine, management is a technology that has largely stopped evolving

Preface

9

The goals of the book 

To help the reader become a 21st-century management pioneer  To equip the reader to reinvent the principles, processes and practices of management for post modern age, by 





Outlining the steps the reader must take to first imagine and then invent the future of management giving the reader the thinking tools that will allow him to build his own agenda for management innovation

Not to predict the Future of Management, but to help the reader to imagine it, and then invent it

Preface

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Chapter 1 The End of Management?

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Management in Kauffman’s fitness landscape 







Francis Fukuyama’s “the end of history”:  liberal democracy is the final answer to humankind’s long quest for political determination By the same token, maybe modern management, as it has evolved over the last century  is the final answer to the age-old question of how to most effectively aggregate human effort Or, maybe not  What if management hasn’t reached the apogee of effectiveness and  given the challenges that lies ahead, it isn’t even climbing the right hill? Hamel: Having evolved rapidly in the first half of the 20th century, the technology of management has now reach a local peak [of Kaufhman’s fitness landscape] The End of Management?

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Management’s S-learning curve 





It was the invention of industrial management at the dawn of the 20th century that turned enlightened policy and scientific discovery into global prosperity Now, think back over the last 20 or 30 years of management history  Can you identify a dozen of innovations on the scale of those that laid the foundations of modern management?  Hamel: I can’t  Industrial management model is languishing out at the far end of the S-curve, and  Maybe reaching the limits of improvability  Need to jump to a new S-curve?

The End of Management?

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High Price for Management’s Successes 

Successes    





Breaking complex tasks into small, repeatable steps Enforcing adherence to standard operating procedures Measuring cost and profits to the penny Coordinating the efforts of tens of thousands of employees Syncronizing operations in a global scale

Yet, these succeses have come at a heavy price

The End of Management?

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Management has given much, but it is has taken much in return 







It gets fractious, opiniated, and free-spirited human beings to conform to standards and rules, but  in so doing, it squanders prodigious quantities of human imagination and initiative It brings discipline to operation, but  it imperils organizational adaptability It multiplies the purchasing power of consumers the world over, but  also enslaves millions in quasi-feudal, top-down organization It has helped to make businesses dramatically more efficient, but  there is little evidence that it has made them more ethical The End of Management?

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Transcending Management’s Trade-off 

How to coordinate the efforts of thousands of individuals, 



How to keep a tight rein on costs 



Without creating a burdensome hierarchy of overseers Without strangling human imagination

How to build an organizations where discipline and freedom are not mutually exclusive

The End of Management?

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Accelerated changes

Plummeting communication costs

Reduced barriers to entry

21st Century Challenges to management

Shrinking Strategy life cycles

The End of Management?

Increasing Internet power

Uncontrollable Ecosystem

Digitization of many things

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21st Century Challenges to management: In Conclusion 

To thrive in an increasingly disruptive world 





Companies must becomes a strategically adaptable as they are operationally efficient To safeguard their margins,  they must become gushers of rule-breaking innovation If they’re going to out-invent and outthink a growing mob of upstarts,  they must learn how to inspire the employees to give the very best of themselves every day

The End of Management?

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Unfortunately, We are limited by Our DNA 

Expecting large organizations to be strategically nimble, restlesly innovative, or highly engaging places to work (or anything else than merely efficient) 

is like expecting a dog to do a tango, 





dog are quadrapeds; dancing is not in their DNA

Likewise, the managerial DNA of large companies makes some things easy, others virtually impossible. Things that are entirely consistent with the genetic proclivities of large companies: 



Reengineering, cost-cutting, continuous improvement, outsourcing and offshoring They are all about better, faster, quicker and cheaper

The End of Management?

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Our current DNA  

Management is a paradigm Thomas Kuhn: a paradigm is 







A criterion for choosing problems that … can be assumed to have solutions. To a great extent these are the only problems that the community will … encourage its members to undertake. Other problems are rejected as metaphysical … or sometimes as just too problematic to be worth the time

Managers are captive of a paradigm that place the pursuit of efficiency ahead of every other goal

The End of Management

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Our attempt to innovate management is limited by Our DNA 

Many of the 21st century’s new management challenges have been acknowledged in boardrooms and executive suites, and 





here and there one finds a truly serious attempt at management innovation

Yet, our progress to date has been constrained by our efficiency-centric, beraucracy-based managerial paradigm. Most of us are still thinking like dogs The End of Management?

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Therefore, The Revolutionary Imperative 

Kuhn’s central thesis is incontestable: real progress demands a revolution   

You can’t shuffle your way onto the next S-curve You have to leap You have to vault    



over over over over

your preconcieved notions everyone else’s best practices the advice of all the experts your own doubts

Taylor: scientific management required nothing less than a mental revolution The End of Management?

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Therefore, the Revolutionary Imperative 

Could the practice of management change as radically over the first two or three decades of this century as it did during the early years of the 20th century? 

Hamel: I believe so. More than that, I believe we must make it so.

The End of Management?

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Therefore, the Revolutionary Imperative 

Admittedly, there’s not much in    



the average MBA curriculum, management best seller, or leadership development program that would sugest there are radical alternatives to the way we lead, plan, organize, motivate and manage right now.

 That’s why this book!!! The End of Management?

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Chapter 2 The Ultimate Advantage

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The stack of innovation Management innovation Strategic innovation Product/service innovation Operational innovation The Ultimate Advantage

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What is management innovation 

Anything that 

substantially alters the way in which the work of management is carried out,

or 

significantly modifies customary organizational forms,

and, by so doing, 

advances organizational goals

The End of Management

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Management innovation is a new way of doing work of managament        

Setting and programming objective Motivating and aligning effort Coordinating and controlling activities Developing and assigning talent Accumulating and applying knowledge Amassing and allocating resources Building and nurturing relationship Balancing and meeting stakeholder demands The End of Management

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Management innovation encompasses also valuecreating changes to organizational structures and roles 

A new way of connecting those entities that are parts of- or related to company       



Business units Departments Work groups Communities of practice Suppliers Partners Lead customers

Example: InnoCentive = a new ways of aligning effort, coordinating activities, and applying knowledge 



A global market for scientific expertise that allows company to bid out tough technical challenges to a network of more than 70,000 scientists around the world Within three years, it has channeled more than $1 million

The End of Management

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Target of Management innovation as compared to target of operational innovation 

Operational innovation      

Procurement Manufacturing Marketing Order fulfillment Customer service Etc.



Management innovation         

The End of Management

Strategic planning Capital budgeting Project management Hiring and promotion Training and development Internal communication Knowledge management Periodic business review Employee assessment and compensation

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Why management innovation 

Because management innovation pays 

When compared with other sorts of innovation, it has an unmatched power to create dramatic and enduring shifts in competitive advantage

The End of Management

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The power of management innovation      

General Electric: Managing science DuPont: Allocating capital – ROI concept Procter & Gamble’s: Managing intangible assets – formalized aproach to brand management Toyota: Capturing the wisdom of every employee Visa: Building a global consortium Napoleon Bonaparte: new ways of motivating, staffing and training, and deploying warriors

The End of Management

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Management innovation is hard to imitate 

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. 





If given the right tools and training, they could be problemsolvers, innovators, and change agents. Toyota saw within its workforce the necessary genius for neverending, 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.

The End of Management

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Caveats 





Not every management innovation creates a competitive advantage  Some are incremental; Some are wrong headed; Many never pay off Management innovation follows a power law:  for every 1,000 oddball ideas, only 100 will be worth experimenting with;  out of those, no more than 10 will merit a significant investment, and  only 2 or 3 will ultimately produce a bonanza No single management innovation will pay competitive dividends forever

The End of Management

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Management myopia 

Appearance of the term in business magazine over the last 70 years 





“Technology innovation” and “Technical inovation” appeared in 52,000 articles Strategic innovation (“business inovation” and “business model innovation”) appeared in more than 600 articles Management innovation (“management inovation”, “managerial innovation”, “organizational innovation” and “administrative innovation”) covered by only less than 300 articles

The End of Management

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Three reasons why management myopia 





Most managers don’t see themselves as inventors Many executives doubt that bold management innovation is actually possible Most managers see themselves as pragmatic doers, not starry-eyed dreamers

The End of Management

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Chapter 3 An Agenda for Management Innovation

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What distinguishes our age from every other? It is not the world-flattening impact of communication  It is not the economic ascendance of China and India  It is not the degradation of our climate  It is not the resurgence of ancient religious animosities  Rather, it is a frantically accelerating pace of change  Hence, the most critical question: Are we changing as fast as the world around us? 

An Agenda for Mangement Innovation

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Three of the most formiddable challenges 





Dramatically accelerating the pace of strategic renewal in organizations large and small Making innovation everyone’s job, every day Creating a higly engaging work environment that inspires employees to give the very best of themselves

An Agenda for Mangement Innovation

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Too much exhortation, too little purpose

Too much management too little freedom

No Slack

Denial or ignorance

Impediment to management innovation

Old Mental Model

An Agenda for Mangement Innovation

A dearth of new strategic options

Allocational rigidities

Creative apartheid

Factors contribute to strategic inertia 

The tendency of management teams to deny or ignore the need for a strategy reboot



A dearth of compellig alternatives to the status quo, which often leads to strategic paralysis



Allocational rigidities that make it difficult to redeploy talent and capital behind new initiatives

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How to remove strategic inertia 

Impediment #1: Denial 



Impediment #2: A dearth of new strategic options 



How do you ensure that discomforting information isn’t ignored or simply “explained away” as it moves up the hierarchy?

How do you build a management process that continually generates hundred of new strategic options?

Impediment #3: Allocational rigidities 

How do you accelerate the redeployment of resources from legacy programs to future-focused initiatives?

An Agenda for Mangement Innovation

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How to Make innovations everyone’s job 





Impediment #4: Creative apartheid  How can you enroll every individual within your company in the work of innovation, and equip each one with creativity-boosting tools? Impediment #5: The drag of old mental models  How can you ensure that top management’s hallowed beliefs don’t strightjacket innovation, and that heretical ideas are given the chance to prove their worth? Impediment #6: No slack  How can you create the time and space for grassroot innovation in an organization that is running flat out to deliver today’s results?

An Agenda for Mangement Innovation

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How to Create a Community of purpose:where everyone gives their best 

Impediment #7: Too much management too little freedom 



How do you broaden the scope of employee freedom by managing less, without sacrificing focus, discipline and order?

Impediment #8: Too much exhortation, too little purpose 



How can you create a company where the spirit of community, rather than the machinery of bureaucracy binds people together? How can you enlarge the sense of mission that people feel throughout your organization in a way that justifies extraordinary contribution?

An Agenda for Mangement Innovation

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Chapter 4 Creating a Community of Purpose

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Creating a Community of purpose: where everyone gives their best Management Innovation Whole Foods’ Distinctive Challenge Management Practices How do you empower people by managing less, while retaining discipline and focus?







Creating a Community of Practice

Give employees a large dose of discretion Provide them with the information they need to make wise decision, and then Hold them accountable for results

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Creating a Community of purpose: where everyone gives their best Management Innovation Whole Foods’ Distinctive Challenge Management Practices How do you create a company where the spirit of community binds people together?







Creating a Community of Practice

Manage as if you really believe that the interest of stakeholders are interdependent Create a high degree of financial transparancy Limit compensation disparity

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Creating a Community of purpose: where everyone gives their best Management Innovation Whole Foods’ Distinctive Challenge Management Practices How do you build an enlarge sense of purpose that merits extraordinary contribution?

Creating a Community of Practice



Make the pursuit “Whole Foods, Whole People, Whole Planet” as real and tangible to employees as the pursuit of profits

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Chapter 5 Building an Innovation Democracy

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Building an Innovation Democracy: Making innovations everyone’s job Management Innovation W.L. Gore’s Distinctive Challenge Management Practices How do you enroll everyone in your company as an innovator?

 



Building an Innovation Democracy

Do away with hierarchy Continually reinforce the belief that innovation can come from anyone Collocate employees with diverse skills to facilitate the creative process

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Building an Innovation Democracy: Making innovations everyone’s job Management Innovation W.L. Gore’s Distinctive Challenge Management Practices How do you make sure that  Don’t make “management” approval a prerequisite for top management’s hallowed initiating new projects beliefs don’t strangle  Minimize the influence of innovation? hierarchy 

Creating a Community of Practice

Use a peer-based process for allocating resources

51

Building an Innovation Democracy: Making innovations everyone’s job Management Innovation W.L. Gore’s Distinctive Challenge Management Practices How do you create the time  Carve out 10 percent of staff time for projects that and space for grassroot would otherwise be “off innovation when everyone’s budget” or “out of scope” working flat out? 

Allow plenty of percolation time for new ideas

Creating a Community of Practice

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Chapter 6 Aiming for an Evolutionary Advantage

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Aiming for an Evolutionary Advantage: Building Company that is as Nimble as Change Itself Management Innovation Google’s Distinctive Challenge Management Practices  Open up the strategy process – How do you guard against make sure it isn’t dominated by the old guard the dangers of hubris and  Keep the hierarchy flat – don’t denial? insulate top management from the



Aiming for an Evolutionary Advantage

views of front-line employees who are in the best position to see the future coming Encourage dissent

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Aiming for an Evolutionary Advantage: Building Company that is as Nimble as Change Itself Management Innovation Google’s Distinctive Challenge Management Practices Make it easy for folks to experiment with new How do you create a steady ideas – give them time (the “20 percent” rule) and minimize the number of approval levels flow of new strategic Build a “just try it” culture – emphasize “test and learn” instead of “plan and excecute” options? Create outsized rewards for individuals who 







Aiming for an Evolutionary Advantage

come up with game-changing ideas Don’t truncate the business definition

55

Aiming for an Evolutionary Advantage: Building Company that is as Nimble as Change Itself Management Innovation Google’s Distinctive Challenge Management Practices How do you accelerate the reallocation of resources from legacy projects into new initiatives?





Aiming for an Evolutionary Advantage

Encourage people to work on “out of scope” projects – formalized with the 70/20/10 rule Give people the freedom to do market experiments so they can build a solid case for their ideas

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Goal of showing 3 cases 



Not to hold them (Wholefood, Gore and Google) up as paragons of “excellence” or “greatness” The 3 cases demonstrate 



That it really is possible to defy management ortodoxy and still run a successful business That you can flout conventional management wisdom and still ship product on time, satisfy exacting customers, and deliver mouthwatering results 57

The 3 cases shows that: 



We haven’t reached the end of management We really can reinvent the way big companies are structured and run

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Chapter 7 Escaping the Shackles

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How to escape the Shackels 

Going to war with the Precedent   



Uncovering Shared Beliefs      



The Outsider’s Advantage Questioning Our Inheritance Temporary Truths

Getting at the Why Asking the Right Questions Separating the What from the How Exposing Self-interest Distinguishing Choices and Consequencies The Value of Persistence

Contrarian to the Core Escaping the Shackles

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Chapter 8 Embracing New Principles

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21st century management principles 

Life  Variety    



Experimentation beats planning All mutations are mistakes Darwinian selection doesn’t need SVPs The broader the gene pool, the better

Markets  Flexibility   

Markets are more dynamics than hierarchies Build the market and the innovators will come Operational efficiency ≠ strategic efficiency

Embracing New Principles

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21st century management principles 

Democracy  Activism   



Faith  Meaning  



Leaders are accountable to the governed Everyone has a right to discent Leadership is distributed The mission matters People change for what they care about

Cities  Serendipity   

Diversity begets creativity You can organize for serendipity Pigeonholes are for pigeons, not people

Embracing New Principles

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The coexistance of 20th and 21st century management principles 



Creating and maintaining a healthy tension between the control-oriented principles of the 20th century and the adaptability-enhancing principles of 21st, isn’t going to be easy There’s every reason to believe that the contrasting creeds of modern management and post-modern management really can coexist in one company

Embracing New Principles

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Chapter 9 Learning from the Fringe

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Learning from the weird 



For inspiration on our management innovation journey Hamel urges us to “look some place weird, some place unexpected, far beyond the boundaries of ‘best practice’” Because “uncommon insights usually come from uncommon places”; 

for example, from people like Mary Parker Follett, whose observations from a career of organizing urban community centers are far more relevant today than those of her contemporaries in early industrial management.

Learning from the Fringe

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Learning from the weird

“You can’t see the future if you’re standing in the mainstream.” Learning from the Fringe

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Learning from the Fringe: the Web 



Creating a democracy of ideas:  Compare the typical corporate autocracy with the “thoughtocracy” of the Internet.  How might your organization find ways to encourage a similarly open exchange? Amplifying human imagination:  Interner reinforce the human propensity for mindful, joyful creativity.  So, “What has your company done to help all these ingenious people become fully empowered business innovators?” Learning from the Fringe

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Learning from the Frange: Silicon-valley 

Dynamically reallocating resources – Silicon-valley: 



Create a market to connect “out there” ideas with small doses of experimental capital from multiple potential funding sources—a sort of internal Silicon Valley.

Aggregating collective wisdom: 

Improve executive decision making by tapping on-the-ground intelligence that exists throughout the organization.

Learning from the Fringe

69

Learning from the Fringe: Nokia’s lose to Samsung; Open source 

Minimizing the drag of old mental models – Nokia’s los to Samsung: 



Make sure that executive influence is informed by foresight rather than history.

Giving everyone the chance to opt-in – Open soure community: 

Create an open source system so that people can choose where to make their best contributions.

Learning from the Fringe

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Chapter 10 Becoming a Management Innovator

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Rules for Managament Innovators 1.

2.

3.

To solve a systemic problem, you need to understand its systemic roots At least initially, it’s easier, and safer, to supplement an existing management process than supplant it Commit to revolutionary goals, but take evolutionary steps

Becoming a Management Innovator

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Rules for Managament Innovators 4.

5.

6.

Be clear about the performance metrics your innovation is design to improve Start by experimenting in your “own back yard”, where the political risks are the lowest Whenever possible rely on volunteers

Becoming a Management Innovator

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Rules for Managament Innovators 7.

8.

9.

Diffuse potential objections by keeping your experiments fun and informal Iterate: experiment, learn, experiment, learn Don’t give up: Innovators are persistent

Becoming a Management Innovator

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Chapter 11 Forging Management 2.0

75

Dimension of Management Effectiveness Amplifying effort Passion Creativity

Management Innovation

Initiative Intellect Diligence Obidience Forging Management 2.0

Aggregating effort

Hamel bets that Management 2.0 are like the Web        

Everyone has a voice The tools of creativity are widely distributed It’s easy and cheap to experiment Capability counts for more than credentials and titles Commitment is voluntary Power is granted from below Authority is fluid and contingent on valueadded The only hierarchies are “natural” hierarchies Forging Management 2.0

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Hamel bets that Management 2.0 are like the Web 

  

 

Communities are self-defining. Individuals are richly empowered with information Just about everything is decentralized Ideas compete on an equal footing It’s easy for buyers and sellers to find each other Resources are free to follow opportunities Decision are peer-based

Forging Management 2.0

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Final Remark: Fit for the Future 



Technology of management must be reinvented, and will be reinvented The only question is: 



Who’s going to do the reeinventing

Deeper, nobler reasons to take on the challenge of management innovation: 

This is your opportunity to build a 21st century management model that truly elicits, honors, and cherises human initiative, creativity, and passion.

Forging Management 2.0

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Critical Questions for Us: 





Hamel only discusses company management. How it can be adopted in Public organization is still a big question! Hamel Assumes the prevalent of modern management practices (Management 1.0).  How about public organizations in developing coutries that are hardly practicing modern management, will it be possible that they can be a pioneer in building a 21st management practice (Management 2.0)?  This is a very huge challenge! Hamel assumes the prevalent of ingenious high-qualified employees  To what extent is this the case in our public organizations?

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