nd change things outside ourselves than to change ourselves.Inanimate objects are not filled with the beliefs, opinions, emotions, and paradigms each person carries with them. This is what makes management innovation an area of focus that offers exciting opportunities to propel an organization far ahead of competitors in a relatively short time.
Imagine your organization placing a focus on the ‘how’ of management practices, making it their sole area of innovation focus for just one year, ceasing all other R&D – what might happen?
Consider this article as you dream up new ways to lead, train, and manage employee groups in your organization.
Gary Hamel is visiting professor of strategic and international management at the London Business School, and director of the Woodside Institute. California-based Hamel is also a consultant to a number of major companies, and chairman and founder of Strategos, a worldwide strategic consulting company.
The Economist called Hamel “the world’s reigning strategy guru.” Peter
Senge of MIT describes him as “the most influential thinker on strategy in the Western world.”
Since 1985, Hamel has published 13 articles in the
Harvard Business Review. Four of his articles have received the prestigious McKinsey prize for excellence. He is the most reprinted author in the history of the Harvard Business Review. Hamel has also written several cover stories for Fortune magazine. He is co-author of Competing for the Future and, more recently, Leading the Revolution (2000).
Des Dearlove spoke to Hamel at London Business School where he is opening a laboratory for management innovation.
What is “management innovation”?
Management innovation is innovation in management principles and processes that ultimately changes the practice of what managers do, and how they do it. It is different from operational innovation; which is about how the work of transforming inputs into outputs actually gets done.
How is it different?
Think of a company as a set of business processes that turn inputs into outputs. Business processes that turn labor and capital into services and products, for example. It is the business processes that govern the work flow. Things such as logistic systems, order processing, call centers, customer support, and manufacturing.
Surrounding the work of transforming inputs to outputs, however, is
everything the managers do: pulling resources together, setting priorities, building teams, nurturing relationships, and forming partnerships. And it is innovation within this sphere that I’m interested in.
Could you give an example of management innovation in the workplace?Toyota’s lean manufacturing. At one level, you can say that lean manufacturing is predominately an operational innovation. But what sits a level or two above the operational changes is the radical management idea that there could be a positive return on investment through using the problem-solving skills of your employees.
A few decades ago, if there was an efficiency or quality problem in the business, companies sent in staff xperts. They studied the system, and then rewrote the standard operating procedures. And the employees
were asked to conform to those procedures.
The idea that a company would actually give its employees the
responsibility for making those changes, that was just unthinkable. So, what looks like a purely operational innovation through one lens, actually turns out to stem from a radical new management principle.
How do you encourage management innovation in a firm?
In a big company you can’t change what managers do in any direct way. You can only change it by changing the processes
that govern their work.
Look at domestic appliance firm Whirlpool. The company has trained thousands of people to be innovators; they have many great new ideas. The challenge for the company is that the people running the core brands, like Kitchen Aid, Whirlpool, and other international brands; those people really are not very interested in this innovation.
Why is that?
They do not want to put engineering or marketing resources behind these new ideas. It is easier for them to crank one more dollar of earnings out of doing exactly what they are already doing. Whirlpool acknowledged that while it had created a supply of innovative ideas, it had not created a corresponding demand from the senior executives to nurture those ideas. So the organization implemented a number of measures to remedy the
situation. For a start it earmarked 15 per cent of its capital budget for
projects that were truly innovative.
What effect did that have?
It sent a very clear message to individual managers: if you do not bring us
innovative projects then we will starve you of capital. Wall Street, the City, the financial markets, these hold Whirlpool to certain standards for growth, for margins, and other metrics. So why shouldn’t the organization apply metrics to its managers to encourage them to develop innovative management practices.
How important is management innovation?
If you look at a hundred year period of industrial history, and
typically it is management innovation that has allowed organizations to reach new performance thresholds — more than any other kind of innovation. The challenge is instilling management innovation
into organizations. Often, the technology you need to do new things is there long before you change the management processes in a way that allows you to use that technology.
So management innovation lags behind technology
innovation?
Look at something like Open Source development. It is made
possible by communication technology, collaborative technology. Technology has made it easy for people to collaborate.
Yet much of the technology used, such as the internet or Lotus notes, has been around for sometime.
The technology is available, yet, in many companies, it has done little to change the way power and information is distributed. Most companies are exploiting the web in ways that build on existing practice, moving more information to the center, for example. They celebrate the fact that we have the global, digital dashboard. Now an organization can tell how many widgets it sold in Pyongyang the previous day.
Organizations use the new technology to reinforce the
old management habits?
Yes. But eventually a company like Google, or an organization like the Open Source movement, breaks those habits and through management innovation uses the technology to allow things to be done in a different way.
In your research, looking back through management
history, what important management innovations have you identified?
Brand management is a good example. By 1929, Proctor and Gamble was already codifying its brand management knowledge. It recognized that, as you moved into a mass consumer society, the mere ability to produce a product and distribute it, would become less and less important to the consumer.
Before this simply making something that was 99.9 per cent pure, was a manufacturing marvel in itself. What Proctor and Gamble could see was that, increasingly, competition would encompass more than the physical attributes of the product, and the ability to deliver it, but it would include intangible aspects as well. What used to be brand management has
today mushroomed into corporate image consultants, managing IP, and a host of other things. But the whole thread of how to create value out of non-physical, intangible things starts with Proctor and Gamble. They were the pioneers. Although I suspect Unilever might have something to say about that.
I understand you are opening a management
innovation lab?
The management innovation lab is an experiment in itself. For the sake of simplicity, there are two hypotheses.
The first is that we can invent a methodology that will allow us to be much more purposeful about management innovation, and that will allow us to dramatically accelerate the evolution of management itself.
The second hypothesis is that we can help organizations learn how to experiment with new management principles and processes in ways that won’t disrupt current success. In the same way that companies experiment with a new product, or with a new technology in a lab, we
can bring that same experimental mindset to management itself.
Will there be a physical lab?
The London Business School has given us a dedicated space. It is a setting that is built to encourage management innovation, to
encourage the creative questions, to encourage learning from other disciplines, to allow really close experimental partnerships between what I would call scholar inventors, and progressive organizations.
When you consider the ability to innovate in how you work WITH people, you radically alter the purpose and scope of innovation. By reaching out to the people inside the organization you will inspire them to reach out the people beyond the organization. This is more than word of mouth, it is about creating a working environment that is so effective and powerful, every employee is compelled to sing its praises. This type of innovation will outlast even the most advanced widget, no matter what it is.
Check out our instructor-led training courses on how to create an environment of innovation in your organization. These courses are ready to download, print, and train.
Four Types of Innovation - 90 minutes People Make Innovation Possible - 90 minutes
Reinvent Partnerships Through Innovation - 90 minutes
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