Guest blog from Paul Manikas, Industry Market Development Manager, High Tech & Electronics Industry group

Gary Hamel, best-selling author on business management, was the keynote speaker at the recent Microsoft Global High Tech Summit. The subject of Gary’s talk was The Future of Management, also the title of his latest book. Hamel’s main premise is that the challenges facing business in the 21st century require an innovation in management. Most businesses follow a management philosophy that was developed during the Industrial era, a period of history when improving operational efficiency and standardizing work processes were the priorities. While a command-and-control management approach brings standardization and discipline, it also squanders creativity and initiative. A survey 86,000 employees from 16 countries by Towers Perrin showed that less than 20% of employees are truly engaged in their work. Employees are frustrated by their lack of control and unwillingness of management to listen. The way we manage our resources (i.e., people) actually makes them less resourceful, and hence constrains progress.

The challenges of the 21st century are markedly different than what faced business when the current management practices were established. Change is accelerating at an unprecedented rate. Competition is intensifying (especially from low-cost countries). Barriers to entry are much lower. Differentiation between products is diminishing. Customer expectations and bargaining power are increasing. These 21st century challenges have exposed the limitations of current management practices which are primarily focused on fixing inefficiency.

To thrive in the 21st century, companies need to become strategically adaptable while remaining operationally efficient. This will require an innovation in management. In his book, Hamel defines innovation in management as “anything that substantially alters the way in which work of management is carried out, or substantially modifies customary organizational forms, and by so doing, advances organizational roles.” While companies focus on product innovation or business model innovation to secure a competitive advantage, these forms of innovation do not provide long-term advantages. It’s become too easy to copy them. Callaway Bug Bertha irons and Walmart’s discount retailing model are examples of innovations that were copied.

By comparison, management innovations often lead to “significant shifts in competitive position” and provide sustainable advantages. Management innovations challenge dogmas that are deeply engrained, hard to see and harder to change. They often span multiple management processes so they are difficult for others to replicate. Or they are part of an ongoing program of innovations that compounds over time, and hence competitors struggle to catch up. Examples include Whirlpool’s commitment to innovation and GE’s executive development system.

The goal is to create a sense of purpose so that your workers bring their best to work every day compared to treating them as commodities. Since change is the only constant, success depends on building an adaptable organization that is capable of continuous self-renewal as opposed to waiting for a crisis to make changes. In an era of hyper-competition, low barriers to entry, web-empowered customers, and shrinking product life cycles, innovation needs to be everyone’s job versus something you relegate to R&D. Examples of successful companies that exhibit these principles include Whole Foods, WL Gore, Ubisoft and Rite-Solutions.

It’s certainly easier to put these new principles in place when you are starting with a clean sheet of paper, and quite challenging when business has been operational for a long time and management has a stake in the status quo. GE, P&G and Whirlpool have shown that even established companies can reengineer their “management DNA”. The future holds promise for companies that have the courage to question existing practices, embrace these new principles and reinvent management for the 21st century. These times represent a tremendous opportunity for those companies willing to take on the challenge of management innovation. We invite you to talk to us about how Microsoft’s Innovation Process Management solution enables everyone in your organization to participate in innovation.