Forget Everything You Know

“Innovation doesn’t happen by spontaneous combustion. You must set yourself on fire.”

A big thanks to my colleague Taavo who pressed me to read Gary Hamel’s The Future Of Management. Previously I’ve posted here about the importance of product innovation, as defined by Michael Treacy, or business model innovation, as described by Clayton Christensen, or operational innovation a la Michael Hammer. I’m here to testify in the wake of reading Gary Hamel’s The Future of Management, I’m converted. I’m a true believer in the importance, value and urgency of what he calls management innovation. As Hamel writes it, management innovation is the killer app, the ultimate competitive advantage and I’m inclined to believe he could be right.

Early in the book he outlines the “innovation stack” as consisting of – from the ground up in ascending order of competitive value

  • Operational innovation – mostly the leveraging of short-lived replicable IT capabilities to optimize processes. IT advantages are time-sensitive and can be quickly and ubiquitously deployed and replicated and offer no proprietary long-term advantage.
  • Product or service innovation – while a true product innovation can no doubt propel a company from obscurity to market competitor (he cites Dyson’s bagless vacuum cleaners), again even with patent protection, product and service innovation isn’t a barrier to market entry. Witness Whirlpool who, within eighteen months, had a competitive product to Dyson, which they were able to distribute on a scale Dyson can’t compete.
  • Strategic innovation – a.k.a. business model innovation, which can produce true game-changing disruptors. For example, while the music industry first ignored online piracy, then enacted draconian scare-tactics (e.g. lawsuits against undergrads), and finally DRM-laden music products, Apple walked right through an open opportunity door with iTunes. Remember Apple went from never being in the music retail business to being the most powerful player around. It’s all catch-up now for Microsoft, RealPlayer and others.

Toyota has enjoyed a decade-spanning market-dominating run owing to management innovation. That’s right – I said the key is/was management innovation beyond all other identifiers. In a telling anecdote Gary Hamel describes a dinner with a group of U.S. automaker executives in which they had just completed their twentieth annual Toyota benchmarking study and Hamel inquired what, pray tell, did they learn this year that they couldn’t figure out over the past twenty years. Only now have other automakers acknowledged the innovative management practices at Toyota which empower each front-line employee to be “problem-solvers, innovators, and change agents.” In stark contrast Henry Ford once quipped, “Why is it, whenever I ask for a pair of hands, a brain comes attached.” Such is the management legacy and culture asked to compete against a market foe that believes innovation and solutions are welcome and expected at all levels of the org chart.

Hamel argues that only management innovation can produce the lasting and ultimate competitive advantage to protect your business from certain paradigm-shifting challenge. As Gary puts it, without question, “…sometime over the next decade your company will be challenged to change in a way for which there is no precedent.” And the way to be ready is to institute management innovation which is endemic, not crisis-based. While Gary would certainly laud Gerstner’s efforts at IBM, or Anne Mulcahy’s stern hand at Xerox, he argues these seismic change efforts are short, crisis-based, and built on out-moded command-and-control tactics in which senior tiers set agendas and execute effectively in a cascading manner.

Straight from the pages of The Future of Management, Gary offers a few questions to help start your journey:

  • What’s the tomorrow problem that you need to start working on now?
  • What are the tough balancing acts that your company never seems to get right?  What values does your company espouse yet have the hardest time living up to?
  • What are you indignant about in your company? What are the frustrating incompetencies that plague your company and other organizations like it?

If you read this and feel like you’re lost in the beaucracy and lack the power to initiate change, pick up Hamel’s book – he has immediate recipes to help you be a change agent.  Beware – he will ask you to be bold!  Enjoy the journey!