The End of Management - Wall Street Journal

Summary:

• The Wall Street Journal is calling for a dramatic shift in how business is managed
• Most corporations are designed for the industrial age, and thus not well suited for today's competition
• Change is happening more quickly, and organizations must become more agile
• CEOs today are concerned about dealing with rapid, chronic change - and obsolescence
• Resource deployment, from financial to people, must be tied more closely to market needs and not defending historical strengths

A FANTASTIC article in the Wall Street Journal entitled "The End of Management" by Alan Murray, If you have time, I encourage you to click the link and read the entire thing.  Below are some insightful quotes from the article I hope you enjoy as much as I did:

• Corporations, whose leaders portray themselves as champions of the free market, were in fact created to circumvent that market. They were an answer to the challenge of organizing thousands of people in different places and with different skills to perform large and complex tasks, like building automobiles or providing nationwide telephone service.
• the managed corporation—an answer to the central problem of the industrial age.
• Corporations are bureaucracies and managers are bureaucrats. Their fundamental tendency is toward self-perpetuation... They were designed and tasked, not with reinforcing market forces, but with supplanting and even resisting the market.
• it took radio 38 years and television 13 years to reach audiences of 50 million people, while it took the Internet only four years, the iPod three years and Facebook two years to do the same.
• It's no surprise that fewer than 100 of the companies in the S&P 500 stock index were around when that index started in 1957.
• When I asked members of The Wall Street Journal's CEO Council... to name the most influential business book they had read, many cited Clayton Christensen's "The Innovator's Dilemma." That book documents how market-leading companies have missed game-changing transformations in industry after industry
• They allocated capital to the innovations that promised the largest returns. And in the process, they missed disruptive innovations that opened up new customers and markets for lower-margin, blockbuster products.
• the ability of human beings on different continents and with vastly different skills and interests to work together and coordinate complex tasks has taken quantum leaps. Complicated enterprises, like maintaining Wikipedia or building a Linux operating system, now can be accomplished with little or no corporate management structure at all.
• the trends here are big and undeniable. Change is rapidly accelerating. Transaction costs are rapidly diminishing. And as a result, everything we learned in the last century about managing large corporations is in need of a serious rethink. We have both a need [for]... a new science of management, that can deal with the breakneck realities of 21st century change.
• The new model will have to be more like the marketplace, and less like corporations of the past. It will need to be flexible, agile, able to quickly adjust to market developments, and ruthless in reallocating resources to new opportunities.
• big companies... failed, not... because they didn't see the coming innovations, but because they failed to adequately invest in those innovations. To avoid this problem, the people who control large pools of capital need to act more like venture capitalists, and less like corporate finance departments... make lots of bets, not just a few big ones, and... be willing to cut their losses.
• have to push power and decision-making down the organization as much as possible, rather than leave it concentrated at the top. Traditional bureaucratic structures will have to be replaced with something more like ad-hoc teams of peers, who come together to tackle individual projects, and then disband
• New mechanisms will have to be created for harnessing the "wisdom of crowds." Feedback loops will need to be built that allow products and services to constantly evolve in response to new information. Change, innovation, adaptability, all have to become orders of the day.

Well said.  Traditional management best practices were designed for the industrial age.  For bringing people together to efficiently build planes, trains and automobiles.  This is now the information age.  Organizations must be more agile, more flexible, and tightly aligned with market needs - while eschewing focus on "core" capabilities. 

Companies must understand Lock-in, and how to manage it.  Instead of planning for yesterday to continue, we must develop future scenarios and prepare for different likely outcomes.  We have to understand competitors, and how quickly they can move to rob us of sales and profits.  We have to be willing to disrupt our patterns of behavior, and our markets, in order to drive for higher value creation.  And we must understand that constantly creating and implementing White Space teams that are focused on new opportunities is a key to long-term success.

With an endorsement for change from nothing less than the stodgy Wall Street Journal, perhaps more leaders and managers will begin moving forward, implementing The Phoenix Principle, so they can recapture a growth agenda and rebuild profitability.

Comments

[Craig Reid - The Process Ninja]

Well pointed out. This crushing industrial revolution thinking has constrained us for years. The org chart and the organisational silos it represents narrows companies ability to think innovatively. The purpose of management is simply to enable and support staff to achieve successful customer outcomes - but a monster of bureaucracy has been created in its place. Companies need to adapt - or die!

[Dan Hornseth - E.G. Insight]

Great post, Adam!

See how Rhonda Sunnarborg of E.G. Insight interpreted the same Wall Street Journal article:

"Listening with an Ear For Innovation"
http://www.eginsight.com/news/2010/08/listening-with-an-ear-for-innovation/

[Jeremy Harris]

This sounds a lot like the type of management Steve Denning is talking about in his books. Are you familiar with his writings Adam?