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Why Management Innovation is So Hard

by Gary Hamel on July 20, 2010


gary-hamel's picture

Why Management Innovation is So Hard

Bold innovations often take time. That’s why progress must be judged both in relation to the starting point as well as the final destination. For example, in America’s space program, the first successful docking of two orbiting spacecraft, the Gemini VIII capsule and the unmanned Agena target vehicle, took place on March 16, 1966. While this was an important milestone, it was still just an intermediate step in the long journey to land a human being on the moon. While the commander of Gemini VIII, Neil Armstrong, would ultimately walk on the moon, that wouldn’t happen until 1969.

In my experience, fundamental management innovation is also a multi-stage, multi-year process. This is true for several reasons. First, in a company that has been around for a while, it’s impossible to start from scratch and hazardous to move too quickly. Innovators in a decades-old company don’t have a clean sheet of paper. Moreover, they have to make sure that the business keeps running while they’re developing and testing their new management practices. That’s why the transformation at HCL is still a work in progress, and needs to be judged as such.

Second, radically-minded management innovators don’t have the benefit of a roadmap. If you want to do a six-sigma rollout, you can buy a manual; but if you want to invert the pyramid, for example, you’ll have to venture off the well-trod path of management orthodoxy. When you’re tramping through unexplored terrain you’ll occasionally get stuck in the mud—and no one should be surprised when this happens. It often takes several iterations before a bold, new policy initiative actually produces the hoped-for results.

And finally, we’re talking about human beings and not widgets. On any given day some of us will be selfish, grumpy, egotistical or mendacious. And in every organization there are a few people who are most of these things most of the time. There will always be jerks, but in an organization that has committed itself to becoming more transparent and less hierarchical, there should be fewer of them over time.

So while I believe an extreme management makeover is possible (like the one Jack Welch initiated at GE in the 1980s), I don’t believe it can be done overnight or without occasional setbacks. When it comes to management innovation, the new doesn’t instantly and magically supplant the old. Even after years of diligent effort, vestiges of the old, legacy model will remain. Here and there one will find overbearing bosses, under-loved employees and petty turf wars. Again, though, over time these should become more the exception than the rule.

I’ve seen this movie before. A decade ago, when Dave Whitwam, then chairman of Whirlpool, committed himself to turning his hundred-year old industrial company into an innovation powerhouse, employees and shareholders were openly skeptical. But Dave, and his successor, Jeff Fettig, persevered. They knew that deep, systemic change takes time—and that reality often lags the dream. But what’s the alternative—to embrace the status quo merely because change is hard and sometimes comes in halting steps rather than in great, bounding leaps?

Vineet Nayar and his team have had the guts to commit HCL to a goal—reverse accountability—that is both excruciatingly difficult and eminently worthwhile. I’ve been tracking the company since 2006 when my friend, David Kirkpatrick, then Fortune magazine’s top tech writer, profiled the company in an piece entitled: The World’s Most Modern Management—In India. More recently, HCL has been the focus of a series of Harvard Business School case studies.

So here’s the bottom line: It took decades to build the managerial foundations of the modern industrial enterprise, back in the late 19th and early 20th centuries—and it’s going to take time for today’s management pioneers to lay the groundwork for Management 2.0. These trailblazers need our constructive criticism and encouragement, and we should take time to provide it—because we all have a stake in their success.

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geoffrey-morton-haworth's picture
Hi Gary

I think you are just saying that management innovation is hard because it is hard.

  • It takes a long time. Yes, “big things move slowly”.
  • There is no roadmap. Yes, “change is something else”.
  • It’s about people not widgets. Yes, management is not engineering.

However, there are deeper reasons why management innovation is hard.

First is the old chestnut that “sunk costs are sunk costs” with the rider “but it’s hard to see this.” Every economist knows it. Nevertheless, accounting institutionalizes sunk cost as capital employed, blinding everyone to the obvious. Thus CEOs insist that their managers still deliver a return on those investments, however worthless they are once the technology changes. This was the message of Dick Foster’s “The Attacker’s Advantage” (1986), rewritten ten years later by Clayton Christensen as “The Innovator’s Dilemma” (1997). The title is a giveaway, don’t you know.

Next, you ought to mention CEOs’ obsession with quarterly earnings as a major barrier to innovation. My golly, even the HBR got this one right, describing it as “… the cause of short-term, even fraudulent, behavior”. “The Earnings Game: Everyone Plays, Nobody Wins” in the Harvard Business Review June 2001 notes: “The fetishistic attention to an almost meaningless indicator [quarterly earnings] might be cause for nothing more than amusement, except for one thing: the earnings game does actual harm. It distorts corporate decision-making. It reduces securities analysis and investing to a guessing contest. It compromises the integrity of corporate audits. Ultimately, it undermines the capital markets.” Moreover, “SEC chairman Arthur Levitt, has called earnings management a ‘widespread but too little challenged custom.’ Empirical data appear to support Levitt’s position. A 1999 study of thousands of corporate earnings… found that quarterly earnings reports that meet analysts’ expectations exactly or exceed them by just a penny per share occur far more frequently than would be likely in a random statistical distribution… ‘It’s hard to find corporations that don’t pump up their earnings’.”

Even more darkly, you could suggest a look at the processes of organizational socialization, highlighted by folks like MIT’s Ed Schein and John Van Maanen. Practices, such as up-or-out, that ensure homogeneity of thought and bolster the pyramid economics of professional service firms, systematically weed out the creative. As I have said here and there on the MIX.

And so on.

By the way, are you paying attention to what is going on there?  Wouldn’t it be a thrill for guys like Jamal Ghamari (Barrier: Problems and Priorities) if Gary Hamel posted a question… even if it was only to ask Jamal to clarify his concerns.

Kind regards

Geoffrey Morton-Haworth