He concludes that corporations cannot prosper for long, as they did in the 20th Century, merely by becoming more efficient at delivering products and services and pushing them at passive consumers through sales campaigns and advertising.
“Now firms must understand, anticipate and meet the needs, wants and whims of customers who are well-informed, empowered and interacting among each other.
They must learn to do what the 20th Century corporation was constitutionally incapable of accomplishing: delighting the people who use their products and services through continuous, disciplined, transformational innovation. They must continuously deliver “better, faster, cheaper, smaller, lighter, more convenient and more personalized.
The good news is that we know how to do this. The practices are becoming increasingly well established. There is a constellation of principles that has been articulated in what I have called a canon of radical management literature. There are different terms in use. I call it radical management. Haydn Shaughnessy calls “the elastic enterprise”. Dan Pontefract calls it “the flat army”. John Seely Brown and John Hagel call it “the power of pull”. There are more than a score of recently published books that talk about it, often using different labels but basically talking about the same set of phenomena. And the literature is growing by the day. If you analyze these books in depth, you can see that they describe five simultaneous shifts now under way.
- These shifts affect the goals of the organization,
- They affect the structure of work within the organization.
- They affect the way work is coordinated.
- They affect the values of the firm.
- They affect the way people communicate.
In the end, these shifts affect pretty much everything. They constitute a new canon of management. Let me summarize quickly the five main principles.
- First the organizational goal: What’s the purpose of the firm? Here we are seeing a shift from an inward-looking goal of making money and maximizing shareholder value to an outward-looking goal of profitably delighting customers. Innovation and transformation are no longer options: they are now imperatives. The firm must orient everyone in the organization and everything it does to profitably delivering “better, faster, cheaper, smaller, lighter, more convenient and more personalized.” This must become the obsession of everyone in the firm.
- Second, the organizational structure: we are looking at a shift from a world where managers are controlling individuals to a world where the manager’s role becomes that of enabling collaboration among diverse self-organizing teams, networks and ecosystems. The reason for this shift is that when you have managers controlling individuals, you can’t unleash the creativity that you need from the workforce to deliver “better, faster, cheaper, smaller, lighter, more convenient and more personalized.” So you have structure work differently so you can unleash this talent and initiative. Firms that don’t make this shift simply won’t be able to innovate quickly enough.
- Third, how work is coordinated: Here we are looking at a shift from coordinating work by hierarchical bureaucracy with its roles, its rules, its plans and its reports to dynamic linking, that is, a world where work is coordinated with iterative approaches to development and direct feedback and interaction with customers, networks and ecosystems. In the first instance this kind of coordination happens within the team itself. But then it spreads to whole networks and even ecosystems outside the firm. This is the world of Agile, Lean, Kanban and so on. It’s a world that is increasingly familiar to software developers but it is still largely a secret for general managers. I believe for instance that there has never been a single article in Harvard Business Review devoted to it. And yet it’s the way of the future. It’s a different way of coordinating work and for various reasons, it’s very hard for traditional managers to understand.
- Fourth, values: We are looking at a shift from a single-minded preoccupation with efficiency and predictability to an embrace of values that will grow the firm and the accompanying ecosystems, particularly radical transparency, continuous improvement and sustainability. Hierarchical bureaucracies can be very efficient and very predictable. But they are not very transparent. There are a lot of reports going up and down the chain, but it can be hard to figure out what’s going on, particularly in a world of rapid change. Those reports are often about what people want to hear, not what people need to know. That’s not good enough for a firm that is desperately trying to deliver “better, faster, cheaper, smaller, lighter, more convenient and more personalized.” And they are delivering that to customers who are unpredictable and inscrutable and who themselves don’t know what they want or need. Radical transparency suddenly becomes something not just nice to have, but a requirement of survival.
- Finally, communications: We are looking at a shift from top-down directives to multi-directional conversations. Instead of telling people what to do, leaders need to be able inspire people to work together on common goals, even across organizational boundaries, even beyond the firm, in related networks and ecosystems. Telling people what to do doesn’t get the job done anymore. In part that’s because the managers aren’t in control because people are outside their organization boundaries. Control isn’t possible. In part it’s because managers don’t have “the answer.” Managers can’t tell people what to do because they just don’t know. Nor do the workers. Or even the customers themselves. The answers lie in the interaction between networks and ecosystems of customers, workers and managers. This is not like an equation puzzle to be solved, or an algorithm to be applied: it’s more like unraveling a mystery or a voyage of mutual discovery. So to succeed, communications have to become much more multi-dimensional and interactive than in Traditional Management.
When you look at these five shifts or principles, none of them individually is new. What is new is implementing all of the principles together as a system in a coherent and consistent way.
The core principles fit together as an interacting set of organizational possibilities. Implementing only one or two of the principles is not sustainable: the organization will slide back into the old mode.”
I (Richard) have been considering the fact that the traditional KPI’s in my business, and many of my clients businesses, do not support some of the change that is required – the KPI’s are still based around the traditional operating models and systems. A lot of businesses get the change that is required, they talk about it, bring in new people or consultants to help change the business, culture and the people. The people all get it, because we all listen to our customers and are customers of other businesses ourselves. But in short we need to change our KPI’s, measures and remuneration models to motivate our people to do what is required now not in the past – even if that disadvantages decision makers in the short-run. Perhaps I have focused too much on this point and missed something in the process but I have done so because it is a real issues from where I sit in my business and as a Advisor to others.
Steve if you ever read this post – good work!