Friday, January 15, 2010

The Decade in Management Ideas

Tis the season for "year's best" lists — and even, this year, for "decade's best" lists — and who are we to resist the urge? A few of us HBR editors (Gardiner Morse and Steve Prokesch helped especially) took the opportunity to look back on the past ten years of management thinking and are ready to declare our choices for the — well, why not say it — most influential management ideas of the millennium (so far).
Shareholder Value as a Strategy. The notion of producing attractive returns for investors is as old as investing, but this was a decade when the pursuit of shareholder value eclipsed too much else. Increasingly sophisticated tools and metrics for value-based managementpushed the consideration of stock price effects deep into operational decision-making, and made sure everything pointed toward bonus day. By 2009, even the man most known for focusing on value was saying it was a dumb idea. "Shareholder value is a result, not a strategy," Jack Welch proclaimed. "Your main constituencies are your employees, your customers and your products."
IT as a Utility. The current mania for cloud computing is the latest step in a long process by which enterprises have dispensed with their proprietary glass houses and begun buying computing capabilities as services. One impetus was the Y2K scare, which forced attention onto those onerous legacy systems as the new millennium dawned.
The Customer Chorus. Through a range of technical and social developments, customers' voices grew louder (whether collectively in ratings systems like Amazon's, or individually through viral kvetches like Dave Carroll's "United Breaks Guitars") and companies found ways to listen. It's a true megatrend: the steps along the way have felt gradual and natural, but collectively they change everything.
Enterprise Risk Management. Sounds crazy right now to say that the last decade was notable for risk management. But especially after 9/11, companies saw the sense of bringing the many and various pockets of it under the same umbrella. Newly empowered chief risk officers looked for trouble spots on a landscape ranging from financial hedging to pirates on the open sea.
The Creative Organization. The decade saw a general revolution in the way many organizations came to view their source of competitive advantage, and a commitment to finding ways to produce creative output more reliably. Even before they embraced "design thinking," managers were encouraging collaboration, drawing on diverse perspectives, and engaging whole workforces in "ideation."
Open Source. Purist geeks will be quick to point out that the term open source and some very substantial achievements came in the late 1990s, but here we pay homage to the spread of that model beyond software code. Was it only in 2001 that Wikipedia was born? And how many things have been wiki'ed since?
Going Private. Cheap debt reignited the LBO scene just as post-Enron reforms created real disincentives to operate as a public company. As the decade wore on, private equity's playbook for turning around businesses was increasingly held up as best-practice management. Now, ideas like, ahem, leveraging up don't seem so wise, but private equity's devotion to strategic focus and demanding governance might endure.
Behavioral Economics. Okay, by now, you're all shouting "that's definitely older than 10 years" and you're right. But talk about a set of ideas whose time has come. In the prior decade, can you remember when someone with Steven Levitt's profile had a breakout bestseller? Or when someone modifying the word economist with "rogue" (or "rock star") could keep a straight face?
High Potentials. Consulting firms and other deeply knowledge-based businesses knew this all along, but in the past decade the rest of the corporate world woke up to the fact that some managers are more equal than others. Formal programs were established to identify, cultivate, and retain "hi-po's". Executive coaching, a perk often provided for the anointed, experienced explosive growth as an industry.
Competing on Analytics. Decades of investment in systems capturing transactions and feedback finally yielded a toolkit for turning all that data into intelligence. Operations research types, long consigned to engineering realms like manufacturing scheduling, got involved in marketing decisions. Managers started learning from experiments that were worthy of the name.
Reverse Innovation. The bigger story here is the maturation of the concept of globalization, particularly with regard to emerging economies. Most big corporations in 2000 saw them primarily as a source of natural resources and, increasingly, cheap labor. Then, as rising employment fueled the development of middle classes, cities in India and China came to represent valuable markets. Now, these non-US consumers are coming to the foreground. Firms like GE and Microsoft are doing R&D in emerging markets, optimizing on those preferences and constraints, and then bringing the results back home.
Sustainability. More than anything, the first ten years of the 21st century will be remembered as the decade that businesses went green — if only in their marketing to a public highly attuned to Al Gore's inconvenient truth. We're not cynical on this point, however. The efforts we see by companies large and small to reduce their carbon footprints and other environmental impacts are sincere and effective, as far as they go. But ten years from now, as we revisit this exercise, forgive us if we declare 2010-2020 to be the decade of sustainability. "The idea was in the air before 2010," we can picture ourselves writing. "But this was the decade when it really took hold."
http://blogs.hbr.org/hbr/hbreditors/2010/01/the_decade_in_management_ideas.html

Select Comments:
You have missed out on a main idea that developed in the decade - outsourcing. It is much less about cost arbitration and much more about what CK Prahlad called 'R=g' (Resources are global) The structuring of outsourcing had undergone a complete change from merely leasing equipment and contract manufacturing within a limited geographic space into a strategic option to leverage not only cost, but also skill, time etc. I wd call that Outsourcing 2.0.

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Julia, indeed an impressive recount of managment ideas in evolution. Besides new ideas, this decade also made some ideas possible with support from growing digitization, global integration, collaborative approach to innovation and need for redefining survival strategies.
Birth of Value Networks: The decade clearly withnessed the transition of firms desiging independent strategies to deliver customer values to firms seeing themselves as part of value creating networks that create value for the customer, by all partners collaborating in strategy design and execution.
Focus on Strategy-Execution: Economic swings exposed the limitations of opportunitic approach to business as much as rigid strategy based approach. The idea of Strategy-execution, has emerged beyond tools (eg. balance scorecard frameworks)to be part of regular management folklore.
Enhanced Stakeholders' Importance: Corporations have started focusing on ensuring strakeholders' permission to grow and do business in a certain way, in a structured proactive manner.
Communities as alternatives to teams: Increasingly management ideas are foucssed on leveraging the power, wisdom and productivity asspociated with commiunities and gain advantage over traditional work teams.
Among the already pointed out ideas, the idea of taking developing ccoutries innovations to developed world is another form of reverse innovation, and one of the newly institutionalised traits of creative organisations is agility.

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I would add to "the customer chorus", with regard to companies listening more to their customers. The environment of sales has shifted from sales centric to serve centric. The shift back to a very high level of customer service is slowly beginning to happen. Companies that cut back in that area and abandoned a dedication to customer retention were very short sighted. WE do not want to be speaking to people outside our country who don't have a clue where we are, or what the product or service is from their script. As online as we have become, data shows we still want to be able to pick up a phone and talk to someone who might actually know how to handle us and our questions. There are many "doing it right" now.

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Great food for thought to start the new year, thank you. Immediately after reading your piece you made me think, what is likely to change on these topics during the next decade. Here are my first crack at the Changes to Management Ideas over the Next Decade . (I have kept your original numbering and titles).
1. Shareholder Value as a Strategy
Shareholder value will incorporate a measure of ecological footprint. During this decade some of the most front-edge tech companies like Apple, or GE, will somehow incorporate in their shareholder value calculation their ecological footprint.
2. IT as a Utility.
Over the this decade, no self-respecting company (big or small) will kepp IT departments reporting to Finance. IT as concept will die, and we will see the emergence of a new concept that encompasses all digital data creation, storage, access. Also, ‘clouding’ will be become ubiquitous.
3. The Costumer Chorus. We won’t think of costumers any more without also thinking of them as producers, designers, do-ers. Prostumer?
4. Enterprise Risk Management. Individuals (employees, consumers, passangers,…) become to key unit to understand, measure, report risk. Enterprise Risk Management transfers from a corporate assessment activity to an individual enabler role.
5. The Creative Organization.A few science/tech-based companies will steer away from functional silos (R&D, Finance, HR,…) and will re-organize themselves in nodes of innovation.
6. Open Source.Concepts that represent new applications of open source will emerge or go mainstream: ‘open source innovation,’ ‘genetic open source,’ …
7. Going Private.Pendullum will swing back towards the middle (public - private)
8. Behavioral Economics.Emotional Behavior Drivers. Designing, manufacturing, advertising products and services will increasingly respond to emotional decision drivers.
9. High Potentials.This trend will continue accelerating to the point that ‘everyone’ in a ‘successful’ organization is a ‘hi-po’ then the term will morph to something like ‘pro-no’ (productive-node), or something like that.
10. Competing on AnalyticsMost critical change to how investment and resource allocation will be done in large companies will be ‘prototyping.’ 80/20 gives way to 20/80 – prototype twenty times and you will get a solution that will give you at least 80% of the value, or something like that. Many smaller and faster iterations. The formal consulting industry will be especially transformed due to prototyping.
11. Reverse InnovationR&D become T&C-D, testing and co-development. This is the result of the combination of points 3, 4 and 10.
12. SustainabilityWellness is the new Green. A new type of influential consumer segment will emerge, the eco-healthy citizen; he/she cares for their ecological footprint as well as for the impact of their health level (wellness) on their community, society, economy.
(on this last point, a new post in fromatcgtobioeconomy2.0)

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CR as strategy: My vote for the most impactful management idea that will come out of the past decade will be driven by consumer expectations of the changing role of the company - the emergence of strategic Corporate Responsibility. Since Porter and Kramer formally introduced the idea in 2006, it has been gaining momentum and the financial crisis most likely accelerated the shift. Leading companies (IBM, GE, Walmart, P&G, Unilever, to name a few) have already added CR as a key driven of brand and business, some would argue they were always there. Management in many companies has woken up to the potential, even if they have not already taken action. The consequences of the management ideas you have listed above, combined with explosion of social networks and the ability for buyers to leverage their power will cause companies to change the way to they conduct business in order to stay competitive.

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Good collection of management ideas!
But I would like to remind the author Julia Kirby and other readers that ideas are not only positive. These can be negative also, as may have been conceived intentionally or unintentionally. Although negative ideas are also part of management ideas, but we can safely term them as DAMAGEMENT IDEAS.
For example 2008 saw the great DAMAGEMENT IDEAS of some great top managers that lead to the tragic disaster of the world economy with the doom of Fannie Mae and Freddie Mac of the US. The irony of fate is that Freddie Mac, standing on crutches, still boasts to be a working mother 100 best company!
The main idea should be to keep a vigil on such management (damagement) ideas at all the top to bottom levels of the management.
— PS Dhingra, Management & Educational Consultant

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great list! I missed:
a. distributed leadership (create global communities around common causes)
b. adaptive strategies (google's inductive theorizing in adsense: let the data define the framework)
c. demonetarization (try to not bill your customers, so that you can cut costs)
d. skimming the cream strategies (do not maximize profits, minimize them, so that the community will grow).
Philipp Mueller
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Firstly insightful consolidation of the evolution of some of the game changing ideas during the last decade. My memory of start of the new decade goes back to Enron debacle and then we saw closing of the decade with perhaps the biggest economic crisis ever seen globally. Several of the big global organizations cease to exist and / or struggling to create "stakeholder value".
The organizations which have prospered during the last decade have leveraged several of the 'most influental management ideas' as shared by Julia. Some of other enabler elements, we have observed
Consolidation Focus - Perhaps the biggest decade for M & A activities. Across industries, across geographies we saw a fury of consolidation to seek "Economies of Scope and Scale" like never before.
Execution Focus - Similar to what Tushar mentioned, the decade saw shift of paradigm from 'having a good strategy' to 'executing the strategy' as fast as possible. "Organizational Agility", "Speed" and "Flexibility" have truly become a differentiator.
People's Focus - Organizations seeking holistic excellence strive for creating a balance between the strategic needs of an organization and the personal expectations and aspirations of the people to gain their committment and engagement.
— Chander Nagpal

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A few ideas I didn't see in Julia's list or in the commenters' additions :
- VoIP (Voice over IP) as a communication tool. Skype, launched in 2003, alone is believed to have over half a billion users - that's nearly 10% of all the people in the world ! Even allowing for some exaggeration in the numbers, there can scarcely be any doubt that VoIP has dramatically changed the telecommunications landscape, and has played a significant role in lowering voice communication costs (which will tend to near-zero in the next 2 or 3 years).
- Low cost carriers (discount airlines) - although these have been around for several decades, they really hit the big time in the post-2001 era. Airline after leading airline either started an LCC as a separate subsidiary, or effectively transformed itself into an LCC.
- the Flat (or flattening) world, and the notion of 'emerging economies'. For several centuries it was taken as an article of faith that the primary actors shaping the global business and economic landscape would always be the developed countries. It is only in the last 5- 6 years that the emerging economies have begun to be recognized as forces to reckon with that will influence the global economy. (Immelt's notion of Reverse Innovation, mentioned in Julia's list, partially captures this, but the emerging economy phenomenon is far wider).
V P Kochikar

1 comment:

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