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gary-hamel's picture

Three Forces Disrupting Management

Most of the industrial pioneers who created “modern” management—individuals like Frederick Taylor, Frank Gilbreth, Henry Ford, Alfred Sloan, and Donaldson Brown—were born in the 19th century. These bold thinkers would no doubt be surprised to learn that their inventions, which included workflow optimization, variance analysis, capital budgeting, functional specialization, divisionalization, and project management, are still the cornerstones of large-scale management systems.

It is difficult for contemporary observers to appreciate the profound impact these revolutionary breakthroughs had on the organization of economic life in the early decades of America’s industrial revolution. In 1890, nine out of ten white males worked for themselves, and the ones who didn’t were referred to disparagingly as “wage slaves.” At the time, the average manufacturing company had four employees, and few factories had more than 100 laborers. Yet within a generation, Ford Motor Company would be making half a million cars a year, Sears, Roebuck & Company would be operating a continental-scale distribution system, and US Steel would be able to boast of a billion-dollar market value.

This transition from an agrarian and craft-based society to an industrial economy required an epical re-socialization of the work force. Unruly and independent-minded farmers, artisans and day laborers had to be transformed into rule-following, forelock-tugging employees. And 100 years on, this work continues, with organizations around the world still working hard to strap rancorous and free-thinking human beings into the strait-jacket of institutionalized obedience, conformance, and discipline.

But now, for the first time since the early 20th century, we may be on the verge of another management revolution, and it may turn out to be just as unsettling as the one that spawned the industrial age. There are three forces at work that make such a metamorphosis likely; three discontinuities that may end management as we know it.

The first of these is a bundle of dramatic changes that have made the business environment substantially less forgiving. Companies around the world are struggling to cope with a wildly accelerating pace of change, an onslaught of new, ultra-low-cost competitors, the commoditization of knowledge, rapidly increasing customer power, and an ever-lengthening menu of social demands. Traditional management models that emphasize optimization over innovation and continuity over change simply can’t cope with these unprecedented challenges.

The second driver is the invention of new, Web-based collaboration tools. For the first time in centuries, human beings have a new way of organizing themselves, via online, distributed networks. Markets and hierarchies, heretofore the two principle technologies for coordinating human effort, finally have a robust new competitor. In the coming decades, we can expect the Web to transform organizational life every bit as dramatically as it has already transformed life outside the workplace.

The third driver is the mash-up of new expectations that Generation Facebook will bring to work in the years ahead. If you’re part of the first generation in history to have grown up on the Web, you don’t think of the Internet as something “out there”—a tool you employ to reserve a hotel room, buy a book, or send a note to grandma. Rather, the Web is something you’re perpetually in—as ubiquitous and transparent as water is to fish. As a child of the digital age, the Web is the operating system for your life, the indispensable and unremarkable means by which you learn, play, share, flirt, and connect.

Over the coming decades, these forces will mostly destroy management as we know it.

Readers, are there any other big trends that you think might compel a comprehensive overhaul of our legacy management practices? If so, please briefly describe these forces and the impact you believe they’ll have on the way we lead, manage and structure our companies.

Note: This post was originally published as a Management 2.0 column in The Wall Street Journal in March 2009.

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n-g-sreejith's picture
One big paradigm shift is how consumers are viewing products from the societal angle. They are asking questions, if the product is 'green' enough or what is the carbon footprint of the product. Or is it produced using 'fair' means etc.  As Porter & Kramer have put it, the new strategic paradigm could be "Shared Value", where the corner stone of strategy is meeting unmet needs of marginalised sections or of niche enlightened customers and not CSR as an afterthought.
andrew-armour's picture
Great article. My only build to the list  (and I am biased) is the increasing demand and challenge of corporate collaboration in markets, products, channels and technology. Traditional marketers and managers really struggle workign within a spirit of partnership rather than transaction and being creative with the kind of value exchange. From the very small to the very large, the challenge will increasingly be who organisations partner with, what the deal looks like and how they manage the 121 and process relationships. Even massive traditional players such as as Microsoft have to form complex relationships with the likes of Nokia and as announced this week, with RIM - for Blackberry Tablets. Samsung, is working with Seat to create in-car stereos using Spotify. To make these kind of deals work requires a business sensibility that appreciates more than just win-lose games, profit and loss, market share pie-charts and short termism. Get it right, and they offer massive collaborative advantage - that is difficult if not impossible to replicate. Get it wrong - and you end up helping your industry rivals better compete. The old Scottish saying advises; 'marry in haste - repent at leisure'.
victoria-bennett's picture
Great article Gary.  I would like to add to your third point; the internet generation is also the gaming generation.  If you grew up kicking a football around, or baseball for the US readers, there was a clear win or lose, with computer games with practice you can always succed.  If you try one route and it doesn't work then you can either be creative or you can practice and practice until you succeed.  When the gaming generation enter the workforce, they are creative problem solvers who always believe there is a solution. 

I managed one person recently who always had facebook and twitter open, she often rolled in late, in her performance review I made it clear that I was aware of this, but as long as it didn't affect the quality and quantity of her work I was fine with it.  Her appreciation rewarded me with a very loyal employee who always went above and beyond.

ken-carroll's picture

Gary,

 This is a typically clear summary. What I think you could add is how our psychological orientation will have to change in line the institutional changes that are coming at us. I see the psychological challenge, not so much as a trend, but as one of the biggest issues that we have to face.

 Historically, all institutions were predicated on the disempowered individual. From a school system that hasn’t changed for centuries, to top-down, and command-and-control management, our society has always tried to protect us from true autonomy and true responsibility for ourselves. We accept these things because it seems unthinkable not to.

But when power devolves from the center to the edges, the individual gains more control, relative to political, social, commercial institutions. In order to deal with the new power, we will need to take much greater control over our own lives and demarcate much more clearly where our real autonomy lies.

 Our fundamental ideas about autonomy and freedom cannot remain static in a world that is hurtling towards such radical change in every other field. I believe we’ve largely solved the issue of ‘external freedoms’ – political, social, and legal freedoms, in the West, but we’ve done little to solve the issue of  psychological freedom, or reach an understanding of the true meaning of autonomy and particualry how that plays out in institutions like work.

 In my view, most managers are almost comically lacking in self-awareness. Even the most fundamental questions of how we would manage our own moods or mental energy are profound mysteries to us. But what you don’t own, you don’t control and soon you’re enslaved to our own feelings or whatever else erupts internally.  That isnlt freedom in the psychological sense.

 We must become much better students of human nature. Until we learn to develop some levels of self-mastery, or to become what I call, self-directed, we will be directed by other things – ego, chaos, distraction, anxiety, events around us, or of course by institutions. You cannot lead others until yiu have some degree of self-mastery.

 I’m not at all sure that we’re ready for the freedoms that are coming at us, but the new management will have to build around human psychology, not the other way around as has historically been the case. And nothing is more human than to be in control of your own destiny.

Ken Carroll