In Parts 1-3, I recounted the Pull Replenishment saga of how a small team started a bottom-up movement that generated millions of dollars in profit, improved shipping performance to the customer, and dramatically created employee engagement. In this chapter, I would like to explain the “art” of using Management 2.0 levers, Web 2.0 technologies and processes to achieve Management 2.0 ends. I call the entire process “semi-spontaneous molecular formation.”

This idea came from a discussion I had many years ago with someone from the pharmaceutical industry. He explained that the pharma business model is to create, patent, and market new “molecules.” Being the simpleton I am, I said something dumb about “I thought you were just trying to make new ‘pills.’” To which my friend responded, “These pills are composed of ‘molecules’ where the active agent reacts with the target and produces a desired outcome: reducing cholesterol, increasing sexual arousal, blocking pain.” Wow! Pharma companies create molecules!

I modified this idea of creating new molecules toward how I lead our business transformation initiative.

The underlying idea is REALLY simple. Conventional management wisdom says things like “strategy follows structure.” Therefore, you see lots of organizational redesign as part of a typical business turnaround. Would you believe we had NO CHANGE in organization to accomplish our initiative, and yet our initiative accommodated hundreds of people’s efforts? How did this work?

If I go back to the Pharma analogy and molecule creation, think of this as forming teams. You bring the right raw materials, combine them in the right conditions in the presence of certain reagents and voila, you have a new molecule. In our initiative, we did the same thing. Essentially, my task was to create the conditions for success so that semi-spontaneously, teams would form to tackle problems. We created a safe, trusting, and empowering environment, teed up the tasks at hand and watched people spontaneously organize to handle the “just do its” all the way to projects.

My role was to bring people to the table. Like a chemist, I would hypothesize on which basic molecules (people) needed to come together. I would invite them to a meeting and present a problem. The ad-hoc team would start hypothesizing on solutions and someone would say, “O.K. Kim and I will work with Ben to solve this.” They would solve their particular problem, like aligning SAP to support our new operational processes. Once they would finish their tasks, I would give them their Starbucks cards as instant recognition. This created a positive virtuous process. Remember the phrase, “those that can, do?” In our case, those that could, organized themselves as self-directed teams and executed.

The process of self-selection occurred subconsciously. Those that couldn’t were not part of any action teams and slowly I would stop inviting them to meetings. No teams were permanent. Everyone had a day job. So, I had to get people’s engagement on the increment by giving them the autonomy to execute on their own and recognize their efforts (read Daniel Pink’s book DRIVE on Motivation 2.0.) How did I find the people to invite? Simply put, I had to ask around. Different managers or team members would volunteer themselves or their colleagues.

How do Web 2.0 technologies fit into this? The beauty of the Internet is in this idea of “information liquidity,” that is, taking transaction cost out of getting the right information to the right player. We devised a 15-minute daily stand up where dozens of people across functions, geographies, and boundaries would participate in our operations meeting. We would flag what open orders were getting close to being late due to material issues, capacity issues, distribution issues, etc. We posted on our SharePoint all information regarding thousands of sales orders daily in a manner that made it easy to identify shipments at risk. People updated our SharePoint daily so that we had a real-time Pareto of defects. This allowed again the right players to “semi-spontaneously” find each other and solve problems. Contrast this to when I used to be a finance manager and would have to spend hundreds of hours analyzing data, interviewing people, and extracting the Pareto of root causes to our profit problems. We used a Web 2.0 philosophy, where hundreds of people collaborate and update a database real time, shortcuts the long data analysis cycle.

Now although I love the Promised Land of Management 2.0 that Gary Hamel is leading us toward, let me say quite openly that I still use Management 1.0 levers. And that’s not a bad thing. For example, when small teams form to solve problems, I still track actions, names, and due dates on a spreadsheet and follow-up, follow-up, follow-up. That’s very management 1.0 but I believe necessary. I still hold management readouts where the team briefs the executive committee on project status, very Management 1.0. We still carefully create KPI’s that support our ROIC value-creation levers, very McKinsey-esque, very Management 1.0. I believe for the foreseeable future things like strategy formation and asset allocation will still follow the old tried and true management 1.0 path.

However, where I believe Management 1.0 fails and needs an extreme makeover is on employee engagement and execution. The 1.0 process is dang slow. You devise a strategy. You change structure. You modify goals and compensation. You cascade goals and write them into performance plans. You form project teams. You go through a very long process of justifying to finance and obtaining resources. Etc., etc. In our initiative the path we followed was devise a strategy, find a leader, form a 70% plan, let the team execute, cheerlead, recognize accomplishments. Repeat. We did not have to justify CAPEX to Finance incremental resources because we used none. No capital spending, no new FTE’s, no consultants. In a previous posting, I wrote about this as “OODA looping.” This is the manner in which fighter pilots kill their opponent in dogfights. Management 1.0 does not allow for OODA looping. The review, reallocate resource cycles are too slow and predictable. “Semi-spontaneous molecular formation” allows a continuous readjustment of a very basic plan and very aggressive, fast execution. Truly, in the 21^st Century, the fast will eat the slow.

We have used this very basic approach to scale up our initiative and extend it into our value-chain to include suppliers, VARs and distributors. We are now transforming our new product introduction (NPI) process with Pull Replenishment faster than we can create annual goals in our annual operating cycle.

Now I used a fancy term that was inspired by observing the pharmaceutical industry, but what I described is also done on a larger scale in Silicon Valley. Think about it. You have an ecosystem of thought leadership, talent, and capital. Through semi-spontaneous means, individuals (component molecules) come together to form new molecules, start-ups. What happens in Silicon Valley is far more sophisticated but one sees that the concept scales up and down. The key is what Colin Powell calls, “the right people, at the right place, at the right time.”

So, I hope that although I used a couple of academic sounding terms to describe our management 2.0 methodology, you Mr./Miss. Management 2.0 Change Agent can follow our simple, but elegant approach. Or, just give me a shout at david.choe@te.com and I’ll be happy to break it down for you.

Cheers and good luck!

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