daily dispatches from the management vanguard
The Management 2.0 Challenge
Over the last decade, the Internet has had a profound impact on business. It has spawned a slew of new business models and has helped make operating models vastly more efficient. By contrast, the Web’s impact on management models has been relatively modest.
While blogs, Wikis, and online communities have made management more efficient (by reducing the costs of communication and coordination), the Web hasn’t yet dramatically changed the way in which organizations are managed and led. (See exhibit.) Nevertheless, over the next few years the emerging “social technologies” of Web 2.0 are likely to transform the work of management root and branch.
Why? Because organizations face a set of challenges that lie outside the performance envelope of management-as-usual. These include a rapidly accelerating pace of change, a growing swarm of unconventional rivals, crumbling entry barriers, a rapid transition fromthe “knowledge economy” to the “creative economy,” intensifying competition for talent and a profusion of new stakeholder demands.
To tackle these challenges, organizations will need to become far more adaptable, innovative, inspiring and accountable than they are right now. This will require a fundamental re-tooling of traditional management practices—around Web-derived principles.
Unlike most businesses, the Internet is already adaptable, innovative, and inspiring. It is also a powerful tool for holding organizations accountable for their social impact. While the typical corporation is based on a center-to-end architecture, in which decision-making authority is heavily concentrated at the top, the Web is built on an end-to-end architecture, where power is highly distributed.
The management model that predominates in most organizations has its roots in the early 20th century. At that time, management innovators were focused on the challenge of achieving efficiency at scale. Their solution was the bureaucratic organization, with its emphasis on standardization, specialization, hierarchy, conformance, and control. These principles comprise the philosophical foundations of Management 1.0, and are deeply baked into management mindsets and processes. In virtually every organization, one finds that power cascades down, that strategies get set at the top, that tasks are assigned and not chosen, that supervisors review subordinates rather than the other way around, that control is imposed, and that senior executives allocate resources.
Before the Web, it was hard to imagine alternatives to management orthodoxy. But the Internet has spawned a Cambrian explosion of new organizational life forms where coordination occurs without centralization, where power is the product of contribution rather than position, where the wisdom of the many trumps the authority of the few, where novel viewpoints get amplified rather than squelched, where communities form spontaneously around shared interests, where opportunities to “opt-in” blur the line between vocation and hobby, where titles and credentials count for less than value-added, where performance is judged by your peers, and where influence comes from sharing information, not from hoarding it.
Of course, the Web has its limits. Online collaboration, in its current state, is not a very good substitute for the sort of unscripted, face-to-face interactions that are critical to producing genuine breakthroughs. And complex coordination tasks, like those involved in the design of a new aircraft, still require a dense matrix of “strong ties” among critical contributors, rather than the “weak ties” that are typical of web-based communities.
Nevertheless, for the first time in a century, we have a viable alternative to the status quo. Thanks to the Web, we can imagine organizations that are large but not bureaucratic, that are focused but not myopic, that are specialized but not balkanized, that are efficient but not inflexible and, best of all, that are disciplined but not disempowering. Without doubt, we have cause to be hopeful. If we can find ways of transplanting the Internet’s DNA into our organizations—the interwoven values of transparency, collaboration, meritocracy, openness, community, and self-determination—we may have the chance, at last, to overcome the design limits of Management 1.0
To that end we are launching the Management 2.0 Challenge, the first leg of the Harvard Business Review/McKinsey M-Prize for Management Innovation. We are seeking to highlight progressive practices and innovative ideas that illustrate how the principles and tools of the Web can be used to make our organizations more adaptable, innovative, inspiring and accountable.
Now it’s up to you. By sharing a bleeding edge case study or contributing a pioneering idea, you can help to reinvent management for a new age. The ultimate prize? Organizations that are as fully human as the people who work within them.