How Industrial Age Management Is Killing Entrepreneurship
Over the past fifty years, the concept of management has hardened into a model that prevails in large corporations. It has been steadily refined and perfected over this period. It has many strengths. It’s a consistent and consistent way to run a big business. He was very successful in making money. And he is highly respectable: he taught in all the best business schools. However, it has a killer flaw: it kills innovation and entrepreneurship.
The Resilience of Industrial Age Management
One of the main strengths of industrial age management is its resilience. It functions as a complex adaptive system that resists efforts to modify or undermine it. While clumsy leaders and crazed managers may thrive for a while, industrial age management bends but does not break. Ultimately, these efforts to push the company in strange new directions fail. This resilience is not captured in a traditional organizational chart that focuses on static reporting relationships in the hierarchy (Figure 1). It can be depicted in an alternative image of the interactive functions of a business, as shown in Figure 2.
Thus, the functional characteristics of industrial age management are well known. The company’s objective is to make money and maximize value for its shareholders and managers, that is, to prioritize shareholder value; This goal leads to principles and processes that emphasize stable structures that control people, control costs, and increase revenue and profit. So the principles are generally hierarchical work structures with individuals reporting to bosses; and the key indicators being short-term earnings and current stock price.
These principles generate process like top to bottom leadership; strategy who is backward and defensive; innovation which primarily protects the existing business; Sales that encourage customers to buy; HOUR who controls workers as resources of the enterprise; operations which achieves production objectives at the lowest cost; a budget treat it is a battle for resources between silos; and compensation where the gains go mostly up. It integrates as an interactive, cohesive and internally consistent system that supports each other, as shown in Figure 2.
Managers of this system tend to think of themselves as solving the equivalent of familiar puzzles. If they can put the pieces together in the right pattern, they could mine and take their due value.
The Disastrous Impact of Industrial Age Management on Innovation
One of the negative effects of this type of management is that it kills innovation and entrepreneurship. At lower levels of the company, it is impossible to escalate ideas through multiple levels and the chain of command, in which any level could veto a new idea. Any great idea was inevitably risky and anyone in the hierarchy could veto a new idea. At the top levels, leaders are largely compensated for short-term gains in the current stock price, so it’s only natural that this is what they primarily focus on. Innovation and long-term added value are well down on the list of management priorities. Indeed, senior executives are paid not to innovate.
This weakness of Industrial Age management has long been recognized and wonderful innovation processes have been developed to overcome it, including Curt Carlson’s NABC methodology developed at SRI International, Discovery Driven Planning by Rita McGrath , and. “blue ocean strategy” developed by Chan Kim and Renée Mauborgne. The hope of these new process owners was that the innovation practices they recommended would spread throughout the business, as shown in Figure 3.
What’s really going on
Yet, as Rita McGrath points out, this is often not what happens in many large corporations still in the grip of industrial age management. First there is the strategic process. When done well, it’s a portfolio of strategic options, drawing you into the future and creating a shared sense of where we’re going here. Yet the strategic function is often a set of hard choices, which include the pet projects of individual executives, even former CEOs, more than a realistic portfolio of strategic options.
The reforms of the budget process have been around for over 20 years, but the budget process at most large companies is still a battle between silos for resources. It anchors the company in the past. This is where internal politics and all organizational anti-organisms come in, because everyone has their share of the flow of resources that they want to cling to.
Then the innovation process itself is often completely disconnected from strategy or budgets. It is run by a different group of people. It operates according to its own logic. And if you lift the hood and look at the company’s portfolio, it’s a mess. Meanwhile, there are urgent mission-critical issues that no one is working on.
And then there is the rewards process by which people feel that they are going to move on. And it has everything to do with power and politics and navigating through it, more than the purpose of the business.
The reality in most cases is that the hopes of these wonderful innovation processes are mostly dashed. The firm acts like the autoimmune system of the human body. It turns out that these practices are at odds with everything going on in the business and have limited progress, as shown in Figure 4.
Can a Consiglier help you?
Kim and Mauborgne. recognize the problem and address it briefly in blue ocean change, where they say, “Is your organization dysfunctional? Ridiculously bureaucratic? Or highly political so that getting things done feels like walking through a minefield? Large, older organizations can feel this. The same goes for government entities. In these situations, in addition to building the team and selecting the right team leader, you also want to think about hiring a consigliere…. As a respected insider, he or she can advise the team and provide air cover to potential detractors, as well as garner support from individuals who might otherwise wish to thwart the initiative either actively or through passive aggression.
The idea is for the change team to appoint a consigliere, who will magically resolve all the tensions created by the other principles and processes of the company: inconsistent objective, bureaucratic structure of work, vertical hierarchy, transactional leadership, control of RH, short circuit. long-term financial guidance, antiquated risk management, and more. All of these principles and processes will work at odds with the task of creating a blue ocean strategy, making its success questionable, no matter how brilliant.
Part 2 of this article will show how Industrial Age management affects other managerial change efforts, such as humanocracy, digital transformation, HR reform, and budget reform.
Part 3 of this article will show how to overcome these challenges with the complete digital age management solution.
And also read:
The four keys you need to achieve strategic agility
How to re-imagine European capitalism: the case of Michelin