The End of Management – Wall Street Journal

by | Aug 31, 2010 | Current Affairs, Defend & Extend, In the Whirlpool, Innovation, Leadership, Lock-in, Quotes


Summary:

  • The Wall Street Journal is calling for a dramatic shift in how business is managed
  • Most corporations are designed for the industrial age, and thus not well suited for today’s competition
  • Change is happening more quickly, and organizations must become more agile
  • CEOs today are concerned about dealing with rapid, chronic change – and obsolescence
  • Resource deployment, from financial to people, must be tied more closely to market needs and not defending historical strengths

A FANTASTIC article in the Wall Street Journal entitled “The End of Management” by Alan Murray, If you have time, I encourage you to click the link and read the entire thing.  Below are some insightful quotes from the article I hope you enjoy as much as I did:

  • Corporations, whose leaders portray themselves as champions of the free
    market, were in fact created to circumvent that market. They were an
    answer to the challenge of organizing thousands of people in different
    places and with different skills to perform large and complex tasks,
    like building automobiles or providing nationwide telephone service.
  • the managed corporation—an answer to the central problem of the industrial age.
  • Corporations are bureaucracies and managers are bureaucrats. Their
    fundamental tendency is toward self-perpetuation… They were designed and tasked, not with
    reinforcing market forces, but with supplanting and even resisting the
    market.
  • it took radio 38 years and television 13 years to reach audiences of 50
    million people, while it took the Internet only four years, the iPod
    three years and Facebook two years to do the same.
  • It’s no surprise that
    fewer than 100 of the companies in the S&P 500 stock index were
    around when that index started in 1957.
  • When I asked members of The Wall Street Journal’s CEO Council… to name the most influential business book they had read,
    many cited Clayton Christensen’s “The Innovator’s Dilemma.” That book
    documents how market-leading companies have missed game-changing
    transformations in industry after industry
  • They allocated capital to the innovations that promised the largest
    returns. And in the process, they missed disruptive innovations that
    opened up new customers and markets for lower-margin, blockbuster
    products.
  • the ability of human beings on different continents and with vastly
    different skills and interests to work together and coordinate complex
    tasks has taken quantum leaps. Complicated enterprises, like maintaining
    Wikipedia or building a Linux operating system, now can be accomplished
    with little or no corporate management structure at all.
  • the trends here are big and undeniable. Change is rapidly accelerating.
    Transaction costs are rapidly diminishing. And as a result, everything
    we learned in the last century about managing large corporations is in
    need of a serious rethink. We have both a need [for]… a new science of
    management, that can deal with the breakneck realities of 21st century
    change.
  • The new model will have to be more like the marketplace, and less like
    corporations of the past. It will need to be flexible, agile, able to
    quickly adjust to market developments, and ruthless in reallocating
    resources to new opportunities.
  • big companies… failed, not…
    because they didn’t see the coming innovations, but because they failed
    to adequately invest in those innovations    . To avoid this problem, the
    people who control large pools of capital need to act more like venture
    capitalists, and less like corporate finance departments… make lots of bets, not just a few big ones, and… be willing
    to cut their losses.
  • have to push power and decision-making down the organization as much as
    possible, rather than leave it concentrated at the top. Traditional
    bureaucratic structures will have to be replaced with something more
    like ad-hoc teams of peers, who come together to tackle individual
    projects, and then disband
  • New mechanisms will have to be created for harnessing the “wisdom of
    crowds.” Feedback loops will need to be built that allow products and
    services to constantly evolve in response to new information. Change,
    innovation, adaptability, all have to become orders of the day.

Well said.  Traditional management best practices were designed for the industrial age.  For bringing people together to efficiently build planes, trains and automobiles.  This is now the information age.  Organizations must be more agile, more flexible, and tightly aligned with market needs – while eschewing focus on “core” capabilities. 

Companies must understand Lock-in, and how to manage it.  Instead of planning for yesterday to continue, we must develop future scenarios and prepare for different likely outcomes.  We have to understand competitors, and how quickly they can move to rob us of sales and profits.  We have to be willing to disrupt our patterns of behavior, and our markets, in order to drive for higher value creation.  And we must understand that constantly creating and implementing White Space teams that are focused on new opportunities is a key to long-term success.

With an endorsement for change from nothing less than the stodgy Wall Street Journal, perhaps more leaders and managers will begin moving forward, implementing The Phoenix Principle, so they can recapture a growth agenda and rebuild profitability.

In Good Company – Innosight and IBM

by | Dec 3, 2009 | Books, Current Affairs, In the Swamp, Innovation, Leadership, Lock-in

Seizing the White Space is a new book being launched by HBS Press (and being pre-sold on Amazon.com.)  I'm very glad to read about others who are taking up the message of Create Marketplace Disruption – which first published the critical role of White Space in successfully managing any business (published in 2008 by Financial Times Press and also available on Amazon.com). 

The author, Mark Johnson, is Chairman of Innosight, a consulting firm he co-founded with Clayton Christenson who's on the Harvard Business School faculty (and author of The Innovator's Dilemma also on Amazon.com).  Innosight primarily focuses on consulting businesses to identify Disruptive innovations.  Now the Chairman is starting to realize that implementation is as important as identifying the implementation – and he's linked it to WHITE SPACE.  Great!!!

You can read his insights to how IBM and some of his other large clients have used White Space in an Harvard Business Publishinng Blog "Is Your Company Brave Enough For Business Model Innovation?" You'll quickly see that he applies The Disruptive Opportunity Matrix from chapter 10 of Create Marketplace Disruption – which is how companies have been shown to reach new businesses using White Space.  It's so gratifying to read somebody else who's applied your research and come to the same conclusions!

I'm looking forward to the book.  Readers please let me know what you think of the author's blog post – and the book when it comes out.

Post-script to yesterday's blog about the CEO of GM:

"Cat's Owens, Deere's Lane on short list of CEO candidates" is the AP article appearing on Crain's Chicago Business about the search for a new leader at GM.  As I predicted yesterday, recruiters seem to think the ideal candidate for the job needs to be from another big industrial company.  And preferably, an auto company "to understand the industry complexities."  Not only is there no incentive for these highly paid executives to take a similar job, at a lot less pay, in a government funded organization — but investors shouldn't want it!  GM needs change.  And more change than trying to make GM into John Deere, or CAT.

John Deere has had weak results for decades.  The company has been wedged between other equipment manufacturers so badly that most of its profits now come from yard tractors homeowner's buy from Home Depot.  Just because the company is big, and one of the few left making equipment for which there is declining demand, is no reason to want the CEO at a turnaround like GM.  Likewise, CAT is under intense competition from Komatsu, Volvo and other manufacturers who are squeezing it from all sides – jeapardizing revenues and profits.  Only acquistions have kept CAT growing the last 10 years, and margins have plummeted.  That leadership is not what's needed at GM either.

When will somebody speak up for the investors and start a search in the right direction?  GM needs leadership that thinks entirely differently.  Unwilling to accept old-fashioned industrial notions about how to lead a company.  Like I recommended, go somewhere entirely different.  Maybe recruit somebody from Dell or HP or Cisco that understands rapid design cycles.  Or someone from Wal-Mart or Target that understands how to sell things – cheaply.  Or someone from Oracle or Mozilla or Google that understands the value of software – and that the product is a lot more than the iron – so you can capture the right value.  It's so disappointing to read how the "recruiting industry" is just as Locked-in as GM. 

If one of you readers knows somebody on the GM Board, maybe you should send them this blog (and yesterday's) to see if they can consider searching in the right place for new leadership!

Don't miss the recent ebook, "The Fall of GM"  for a
quick read on how easily any company (even the nation's largest employer) can be
easily upset by market shifts.  And learn what GM could have done to avoid
bankruptcy – lessons that can help your business grow! http://tinyurl.com/mp5lrm