The Need for Management Innovation

You win big, not by betting big, but by betting often — and by staying at the table long enough to collect the winnings


Strategy lifecycles are shrinking. Companies must be as strategically adaptable and relentlessly innovative as they are operationally efficient. Innovation takes time — time to dream, time to think, time to learn, time to invent, and time to experiment. That’s a big ask when knowledge workers are still being managed based on the labour theory of value.

The challenge of managing is, of course, to coordinate the efforts of others without creating a heavy hierarchy of supervisors, to keep control of costs without strangling imagination, and to build organisations where discipline and freedom aren’t mutually exclusive.

Drucker defines the practice of management to include:

  • setting and programming objectives
  • motivating and aligning effort
  • coordinating and controlling activities
  • developing and assigning talent
  • accumulating and applying knowledge
  • amassing and allocating resources
  • building and nurturing relationships
  • balancing and meeting stakeholder demands

I’m not a fan of the role of Manager because it has conflated the act of managing with authority and power. I’ve always believed that basic managerial skills are a schoolyard requirement for life — it starts with being able to manage your own time and dependencies and therein your reputation and reliability. I deeply value proficient management skills. Without a basic ability to manage it’s difficult to be truly responsible.

Management is an area ripe for innovation. We hear about management theory. We see the effect of MBA-qualified managers. We don’t hear much about management innovation. For me management innovation means systemic and empirical experimentation, quick-fire invention and the continuous improvement of management principles and methods in practice, compounding effectiveness over time to significantly advance an organisation’s objectives and enhance its performance. The aim being:

  • to dramatically accelerate the pace of strategic renewal in organisations large and small.
  • to make innovation everyone’s job.
  • to create a highly engaging work environment that inspires people to give the very best of themselves.

Battling strategic inertia

Many factors contribute to strategic inertia, but three pose a threat to timely renewal.

  1. The tendency of managers (and executives) to deny or ignore the need to revisit, even reboot strategy.
  2. A scarcity of compelling alternatives to the status quo leading to strategic myopia or paralysis, and ultimately more of the same.
  3. Bureaucracy and organisational rigidities make it difficult to redeploy people and capital behind new initiatives.

How do you ensure that discomforting information isn’t ignored or simply explained away as it moves up the hierarchy? How do you create a management process that continually generates hundreds of new ideas strategic options? How do you accelerate the redeployment of people and resources from legacy programs to initiatives focused on the future?

Every business is successful until it’s not. What’s worrying is how often top management is surprised when the “not” finally arrives. Belated recognition of dramatically changed circumstances means that the work of renewal can be dangerously delayed. Disquieting developments are at first dismissed as implausible or inconsequential, then they’re rationalised away as an outlier (a mere blip outside the norm) or something that can’t be fixed. Eventually they might be grudgingly mitigated through defensive actions but rarely are they honestly confronted. Executives and senior managers are not close enough to the bleeding edge of change to sense for themselves the growing risks to a long-venerated business model and then respond with meaningful actions. In the absence of their own corroborating evidence, they’re unlikely to give credence to distant alarms from people out in an organisation’s hinterlands.

Innovation suffers when ironclad assurances of future success and certainty about costs, timelines, and profits are demanded by executives before investing even small amounts in new ideas. Every CEO knows that you have to invest in the future. Yet many companies risk forfeiting their future by funding legacy programs year after year while letting new initiatives go begging. The pressure to deliver quarter-by-quarter earnings growth makes managers wary of backing projects that have long-odds or a drawn out payback. Consequently, they over invest in “what is” at the expense of “what could be”.

What most impedes innovation in large companies isn’t an aversion to risk. Big companies take big and often ill-considered risks every day. What kills innovation is old mental models and the emotional capital invested in the existing business strategy. When it comes to innovation, a company’s legacy beliefs are a much bigger liability than its costs. Few companies have a systematic process for challenging deeply held assumptions.

Organising for innovation

It’s tough to plan innovation. It’s totally possible to organise for innovation. It can come from anywhere so collocate people with diverse skills in a working environment configured to create serendipitous encounters that might spur innovation. Just because an accountant’s yardstick can’t easily measure the value of collocation, autonomy and harmony doesn’t mean these things have no value. Intangible doesn’t mean inconsequential.

Hierarchies are very good at aggregating effort and coordinating the activities of many people, but they’re not good at mobilising effort and inspiring people to get out of their comfort zones or go above and beyond. When it comes to mobilising human capability, communities outperform bureaucracies.

In a bureaucracy, the basis for exchange is contractual — you get paid for doing what is assigned to you. In a community, exchange is voluntary — you give your labour in return for the chance to make a difference or exercise your talents. In a bureaucracy, you’re a factor of production. In a community, you’re a partner in a common cause. In a bureaucracy, loyalty is a product of economic dependency. In a community, dedication and commitment are based on your affiliation with the group’s aims and goals. When it comes to supervision and control, a bureaucracy relies on multiple layers of management and a web of policies and rules. Communities depend on norms, values, and personal integrity and peer pressure to drive accountability. Individual contributions tend to be silo’ed in a bureaucracy — marketing people work on marketing plans while finance people run the numbers. In a community, competency (i.e. skills plus experience) and disposition are more important than credentials and job descriptions in determining who does what. Where rewards offered by a bureaucracy are mostly financial, in a community they’re mostly emotional.

Imagine having to compete with a company that not only has a compelling business concept but is a community on a mission with an egalitarian management philosophy.

Under new management

What matters most is not a company’s competitive advantage at a single point in time, but it’s evolutionary advantage over time. You win big, not by betting big, but by betting often — and by staying at the table long enough to collect the winnings. That’s the most fundamental premise of iterative development and sustainable pace.

A lot of top-down discipline isn’t necessary when you have a working environment that weaves Deep Democracy with discipline, trust with accountability, and community with internal competition. Give frontline people a large dose of discretion with the freedom and information to do the right thing for customers, matched by a high level of accountability for results and the incentive to do the right thing for profits. They will use their discretionary decision-making power in ways that drive business forward. Accountability ensures autonomy doesn’t produce chaos. Internal competition ensures a strong sense of community doesn’t degenerate into complacency.

Perhaps the best motivation to innovate comes from the combination of clarity of purpose (or mission) and the joy that people find in their work, given revolutionary goals and the confidence and tenacity to keep taking evolutionary steps. The only way to build a company fit for the future is to build one that’s fit for people, which elicits and cherishes initiative, creativity, and passion.

Ref. The Future of Management by Gary Hamel