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gary-hamel's picture

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.                       

 

 

 

 

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malcolm-ryder_1's picture

May 31, 2011

Paradigms of Management 2.0

Gary Hamel, rightly esteemed for many reasons, created a summary outline of what the future discipline of "management" will need to both rely upon and exploit. Within his essay, a particular characterization of management goes as follows:

"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."

In this vision, Hamel basically equates "organization" and "community", in a way that may in fact prove to be prescient but to date is probably more just emotionally appealing in its potential to get past conventional and vexing old problems. In devil's advocate mode, let's compare, but not devalue, the terms of that imagined organization against a harder set of terms.

1. Large: a matter of scale. But reach and scale are not the same thing.

2. Focused: a matter of goals. But interests and goals are not the same thing.

3. Specialized: a matter of competencies. But intents and competencies are not the same thing.

4. Efficient: a matter of resources. But commitments and resources are not the same thing.

5. Disciplined: a matter of compliance. But affinity and compliance are not the same thing.

Web-based communities are far more like "markets" than they are like organizations, and they have fundamentals of structural coherency that are not the same as "organizations". It may be, yes, that we can view and study both organizations and markets for their innate "chemistry" and "physics" -- but in so doing, it is the viewing perspective that is the same (consistent) across both markets and organizations, not the subjects that are necessarily actually similar to each other.

Lying behind this comparison of terms is a notion perhaps strongly dissimilar to Hamel's: management does not create organizations; rather, organizations create management. Although Hamel provides a great list of characteristic actions and responsibilities of traditional management right up front in his article, these are by and large things that organizations ask and/or need managers to do for one dominant reason: to provide a certain kind (not amount) of accountability for Form.

In large part, the conventional view of management has the pronounced characteristic of fusing, if not confusing, "accountability" with "form" itself, with a kind of "progressive" slant to evolving from accounting as "control" to accounting as "influence" -- evolving from restriction to persuasion. The analog of web life, where groups form around attractions instead of within boundaries, is therefore provocative, but if it is instructive then the type of instruction it provides needs to be dispassionate. Dispassionately: we already know how to run things differently, but who is it that cares?

On the terms of reach, interests, intents, commitments and affinities, it is not surprising that communities have the ability to form and reform themselves so spontaneously and dynamically. But the main purpose of a community is not to "act out" -- rather, it is to "bring together". Conventional management is highly intolerant of acting out unless it is in a prescribed direction; and except in the name of innovation or escape it is too anxious to just settle for "bringing together" (which after all actually has the sole function of creating pre-conditions, not causing other effects). Communities want to benefit from togetherness, of course; but communities know that they and/or their members can come and go mainly at their own expense -- that in fact, they are naturally ephemeral.

The real dynamics of communities is done a disservice by applying the popular notion "self-organizing" to them; and it's that "organizing" part that allows managers to be seduced by the idea that the "self"-ness can somehow be appropriated into an externally-directed technique called Management 2.0 or whatever...

Seeing past the seduciton, it is marketing that is the most obvious paradigm for managing on the basis of the terms of communities. With that notion, the analogous future "managed organization" would be a market of work moreso than an organization of labor. As an irresistible segue from that observation: in this future it would not be an organization that is capturing value from labor, but instead it would be work that is driving the market to value.

Having said that, the real challenge surfaces. Namely, how do investors latch on to value in such circumstances? Why would they invest? Who can be that kind of investor? The most probable outcome of a search for Management 2.0 is not that some newly discovered management will supplant an earlier one; instead, an other additional kind of management will increase as a natural consequence of cultural change stimulated by the new pervasiveness of experience on the web.

john-doe_2's picture
Why are there posts back from 2010? Is this challenge part of an ongoing effort? Do you need to do anything besides submit a hack?
john-bernard's picture
Gary:
 
Great essay, great video. I have a book coming out in November from Wiley titled BUSINESS AT THE SPEED OF NOW. It covers in an amazingly similar fashion what you covered on MIXtv, and goes on to prescribe the anecdote, leveraging social media, cloud computing, and the Millennial mindset into great management that strikes the balance between order and freedom needed to create massive levels of ingenuity.
 
Your work is inspiring. Thanks for such great thinking!
 
John