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Selling Power (SP): Where do you think [management consultant] Peter Drucker’s view of management left off and yours begins?
Gary Hamel: I would refer to that as the difference between Management 1.0, which is based on a set of principles around standardization, specialization, hierarchy, alignment, control, and the use of extrinsic rewards, and Management 2.0. That Management 1.0 model, or the management model that is based on those principles, was invented about 100 years ago. In Management 2.0, things have shifted to a management environment of highly adaptable, innovative, and engaging places to work.
SP: What are the reasons behind this management shift?
Hamel: Management 1.0 essentially was invented to solve the problem of efficiency. The challenge was to drive variability out of production, product, and all processes so you ensure conformance to standards, which is a very important problem to solve. That management model is called bureaucracy.
I would say there are three broad challenges to supplanting the old model. The first is building organizations that change ahead of the curve. By the time Bill Gates understood that Google was a serious competitor and Microsoft better worry about search, it was already game over. By the time the top guys at Intel realized that mobile devices were going to be a far bigger market than PCs and they’d need a completely different kind of process or architecture, it was already there. To meet the sheer increase in competitive intensity worldwide, the only way to outgrow competitors or the economy is to outinnovate everyone else. Historically, you could rely on capital barriers, technology barriers, customer inertia, distribution monopolies – a whole variety of things – to protect margins without having to constantly worry about reinventing the game.
The second is getting really serious about innovation, to make innovation a systemic capability by which every management process across the company facilitates, rather than frustrates, experimentation, creativity, and new thinking. Go down to the sales force, the people in the call centers, the administrative assistants, people in the warehouses, and ask if they’ve been trained as innovators, if the company ever invested in their innovation skills. If they have an idea, ask how long it would take or how much bureaucracy they would have to go through to get the CEO’s time and a couple thousand dollars to start experimenting with an idea. Finally, would anybody notice if they don’t innovate? Does [innovating] affect compensation or job reviews? Is there an expectation that employees will be innovating, or is the expectation mainly just to do the job?
The third challenge is that knowledge itself is becoming commoditized at an accelerating pace. If you look at the data across many different sources, you discover that fewer than 20 percent of workers around the world are truly engaged in their work. But in the “creative economy,” in which the next idea can come from literally anywhere, you can’t have an organization in which most people do not feel motivated to bring their unique gifts to work.
I think most managers still see their job as, “How do I get the people who work for me to serve the organization’s goals?” rather than, “How do I build a working environment and a sense of purpose that is so compelling and energizing that people willingly bring me these gifts?” We have to look at the organization as the vehicle through which people accomplish their dreams.
SP: Where do you think the corporate world is moving to in the future?
Hamel: We are moving to a world where everything is in some way configurable by the ultimate consumer. Or, as it’s sometimes said, every industry is being reinvented from the customer backward. My argument has been for a long time that consumers are getting better at finding exactly what they want than advertisers are at predicting what they want. I don’t care how much data you give [advertisers], it is still a very poor representation of what is going on in the customers’ heads right now. So now with the Web, companies don’t need to get in front of consumers. They don’t need to know you are there. When they need you, they’ll find you. It’s that simple.
SP: What about the feelings customers have about a company?
Hamel: As our economy becomes more of a service economy, value gets created in the interaction between the employee and customer. So either you have people who are excited and turned on and empathetic with the customer or not. I think a lot of the challenge in building a deeply customer-centric company is being very attentive to the dozens of small ways that companies can piss customers off.
And moreover, a lot of service businesses are now so standardized and procedural that somebody locally can’t even run an experiment and say, “Let’s try this without getting a lot of permission.” It is interesting how long we’ve been talking about becoming more customer focused, and yet in most industries there is still a long, long way to go.
SP: Can enlightened, innovative, collaborative, and (continued on page 2)
– Selling Power Editors
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